TaxTMI Updates e-Newsletter
Aug 24,2023

Input Tax Credit - Eligibility and conditions for taking input tax credit - no entitlement to input tax credit unless tax charged has been actually paid to the Government - burden of proof on claimant to satisfy statutory conditions for ITC - statutory benefit / concession - remedy against defaulting supplier - double taxation

Input Tax Credit - Eligibility and conditions for taking input tax credit - no entitlement to input tax credit unless tax charged has been actually paid to the Government - burden of proof on claimant to satisfy statutory conditions for ITC - remedy against defaulting supplier - Claim for Input Tax Credit where the seller collected tax from the purchaser but failed to remit it to the Government - HELD THAT: - The Court examined Section 16(1) and (2) of the BGST Act and held that the entitlement to Input Tax Credit is subject to the conditions in clauses (a), (b) and (c) read together. Clause (c) requires that the tax charged in respect of the supply must have been actually paid to the Government, either in cash or by utilization of admissible input tax credit. The statutory scheme therefore places a burden on the purchasing dealer claiming ITC to satisfy that the supplier has paid the tax to the Government. Decisions under earlier VAT regimes and some High Court orders were considered, but the Court emphasised that those precedents do not override the express requirement in Section 16(2)(c) of the BGST Act. The Court rejected the contention of impermissible double taxation, observing that unless the collected tax has been paid into the public exchequer there is no satisfaction of the statutory liability. While the statute provides remedies for recovery from a defaulting selling dealer (and the State may also proceed against the seller), such remedies do not confer ITC on the purchaser in the absence of actual payment by the supplier; if the State later recovers the tax, the purchaser may have a claim for refund, but until payment to the Government is shown, no credit arises in the purchaser's electronic credit ledger and the claim for ITC must be denied. [Paras 8, 10, 13, 15]

The claim for Input Tax Credit cannot be sustained because the supplying dealer, though having collected tax from the purchasing dealer, did not pay the tax to the Government; the purchaser is not entitled to ITC in those circumstances.

Final Conclusion: Writ petition dismissed; purchaser's claim to Input Tax Credit denied where supplier has not paid collected tax to the Government, and the State may proceed against the defaulting supplier while the purchaser's remedy lies in recovery or refund procedures as applicable.

Blocking of Input Tax Credit under Rule 86A - Ineligible Input Tax Credit - Reason to believe / speaking order requirement - Initiation of recovery proceedings under Section 73 or 74 - Liberty to approach Appellate Authority

Blocking of Input Tax Credit under Rule 86A - Ineligible Input Tax Credit - Reason to believe / speaking order requirement - Validity of the respondents' blocking of the petitioner's input tax credit of Rs.67,75,144/- under Rule 86A of the TNGST Rules, 2017 - HELD THAT: - The Court found no prima facie ground to interfere with the impugned intimation blocking the petitioner's input tax credit. The respondents' action was supported by information that the supplier, M/s. Kiran Distributors, was a non-existent entity which had passed on ineligible input tax credit to numerous taxpayers, and therefore the blocking under Rule 86A was sustainable on the material on record. The Punjab and Haryana High Court decision relied on by the petitioner was held distinguishable on facts because, unlike that case, the intimation here specifically recorded that the supplier had not conducted business at the registered address and was implicated in passing ineligible ITC. The Court therefore did not accept the submission that the order was without reasons or a non-speaking order warranting interference. [Paras 8, 9]

No interference with the impugned blocking of input tax credit; writ petition dismissed on this ground.

Initiation of recovery proceedings under Section 73 or 74 - Liberty to approach Appellate Authority - Whether the respondents should proceed to recover any ineligible input tax credit and whether the petitioner has remedy of appeal - HELD THAT: - The Court directed the respondents to initiate appropriate proceedings under Section 73 or Section 74 of the Act, as may be applicable, to recover the ineligible input tax credit availed by the petitioner. Concurrently, the Court granted the petitioner liberty to challenge the impugned order before the Appellate Authority, preserving the statutory appellate remedy. [Paras 10, 11]

Respondents directed to initiate recovery proceedings under Section 73 or 74; petitioner granted liberty to challenge the impugned order before the Appellate Authority.

Final Conclusion: Writ petition dismissed; impugned blocking of input tax credit upheld on the facts that the supplier was a non existent entity passing ineligible ITC, respondents directed to initiate recovery proceedings under Section 73 or 74, and petitioner given liberty to pursue appellate remedy.

Detention, seizure and release of goods and conveyances in transit under Section 129 - requirement of issuance of credit note on return of goods under Section 34 - e-way bill and documentary compliance under Rule 138A - voluntary payment and conclusion of proceedings under Section 129(5) and Rule 142(3)

Detention, seizure and release of goods and conveyances in transit under Section 129 - requirement of issuance of credit note on return of goods under Section 34 - e-way bill and documentary compliance under Rule 138A - Validity of detention and the notice issued under Section 129(3) in respect of goods re-transported to the supplier where e-way bills for return were generated and no credit note had been issued - HELD THAT: - The Court found that the goods dispatched to the consignee were not accepted and were re-transported to the petitioner with e-way bills generated for return. Section 34 permits issuance of credit notes where goods are returned, but a credit note is intended for adjustment of tax liability and need not accompany goods in transit; issuance of credit note arises on the supplier's declaration in returns and only after a return has occurred. The e-way bills for return were on record and were not seriously disputed. Consequently, treating the return movement as movement without prescribed documents solely because a credit note had not been issued was unsustainable. The detention under Section 129 and the notice invoking penalty were therefore held to be illegal and unwarranted in the facts of this case. [Paras 31, 32, 33, 34, 35]

Impugned notice dated 30.12.2022 under Section 129(3) set aside and detention/penalty proceedings quashed.

Final Conclusion: Writ petition allowed; the detention/penalty notice issued under Section 129(3) in respect of the goods returned to the petitioner was quashed on the ground that the goods were being returned with e-way bills and issuance of a credit note under Section 34 is for tax-adjustment and not a precondition for lawful return; no costs.

Deemed withdrawal of assessment order upon compliance with prescribed conditions - failure to issue mandatory notice under assessment procedure - non-compliance with statutory procedural requirements for assessment - requirement to pay interest and late fee for withdrawal to take effect

Deemed withdrawal of assessment order upon compliance with prescribed conditions - requirement to pay interest and late fee for withdrawal to take effect - Impugned assessment orders were set aside and deemed withdrawn subject to payment of interest and late fee in terms of the Government notification, provided the petitioner complies with its conditions within the time directed by the Court. - HELD THAT: - The Court noted the Government notification (G.O.Ms.No.38) declaring that certain assessment orders issued on or before 28.02.2023 shall be deemed to have been withdrawn if the registered person furnishes the return and pays interest and late fee as specified. Taking into account the petitioner's submission that returns have been filed and accepted, and the respondent's contention that payment of interest and late fee had not been shown, the Court granted relief by setting aside the impugned assessment orders and treating them as withdrawn only on the condition that the petitioner pays the interest due under the relevant provision and the late fee as required by the notification. The Court directed that such payment be made within two weeks from receipt of the order, thereby making the notification's conditional benefit operative only upon compliance with its payment requirement. The Court recorded that the GST Council had decided to extend the period for compliance, but imposed a two week timeline for the petitioner to pay as a condition for withdrawal in these petitions. [Paras 4, 7, 8]

Impugned assessment orders set aside and deemed withdrawn on condition that petitioner pays the specified interest and late fee within two weeks; writ petitions allowed.

Failure to issue mandatory notice under assessment procedure - non-compliance with statutory procedural requirements for assessment - Allegation of non-issuance of a mandatory notice and non-compliance with procedural requirements did not lead to outright quashing without adherence to the conditional scheme in the notification; relief was granted subject to the notification's conditions rather than on a separate finding of procedural invalidity. - HELD THAT: - The petitioner contested the impugned orders on the ground that mandatory notice under the assessment procedure was not issued and that statutory requirements were not complied with. The Court did not decide the contention by independently quashing the assessments on that ground; instead it resolved the petitions by applying the relief mechanism laid down in the Government notification, which makes withdrawal conditional on filing returns and payment of interest and late fee. Thus, while the petitioner's procedural complaints were part of the narrative, the Court's operative relief was governed by the notification's conditional withdrawal and the petitioner must comply with its payment condition to obtain the benefit. [Paras 3, 4, 7]

Procedural complaints noted but not separately adjudicated to quash assessments; relief granted through conditional deemed withdrawal under the notification, subject to payment of interest and late fee.

Final Conclusion: The High Court allowed the writ petitions and set aside the impugned assessment orders for AYs 2017-18, 2018-19 and 2019-20 by deeming them withdrawn under the Government notification, subject to the petitioner paying the interest and late fee prescribed by the notification within two weeks; connected petitions closed, no costs.

Attachment of bank account - garnishee notice - limited attachment to amount of demand - service tax assessment and penalty - proof of service - modification of interim order

Attachment of bank account - limited attachment to amount of demand - garnishee notice - service tax assessment and penalty - Whether the interim attachment of the appellant's bank account should be modified so that the account may be operated in amounts exceeding the demand raised in the assessment order dated 28.03.2022. - HELD THAT: - The Court considered the appellant's contention that the attachment impeded business operations, including payment of salaries, and the respondents' stance defending recovery by garnishee notice based on the assessment order dated 28.03.2022. Having regard to the facts and submissions of both sides, the Court concluded that the attachment need not extend beyond the quantified demand arising from the assessment (including penalty) and that commercial hardship occasioned by freezing the entire account justified permitting operation of the account to the extent of funds in excess of that demand. The Court therefore exercised its supervisory jurisdiction to modify the interim order of the Single Judge, limiting the scope of attachment to the amount specified in the assessment order while leaving the attachment otherwise in place to secure the demand.

The interim attachment is modified so that attachment continues only to the extent of the demand in the order dated 28.03.2022 (including penalty), and the appellant is permitted to operate the bank account in amounts exceeding that demand.

Final Conclusion: Writ appeal disposed by modifying the Single Judge's interim order: attachment of the appellant's bank account is confined to the demand in the assessment order dated 28.03.2022 (including penalty), and the appellant may operate the account in excess of that amount; no costs.

Parallel proceedings - intelligence based enforcement action - summons under Section 70 of the CGST Act - administrative assignment of assessee - notification dated 05.10.2018

Parallel proceedings - intelligence based enforcement action - administrative assignment of assessee - Validity of parallel proceedings by Central and State tax authorities where the Central authority had issued summons in respect of the same transactions - HELD THAT: - The Court examined whether the existence of summons issued by the Central Tax Officer precluded the State Tax Authority from initiating proceedings in relation to transactions connected with a supplier under investigation. The Central summons produced by the petitioner was issued under Section 70 of the CGST Act to summon documents and persons and related to an investigation against the supplier M/s D.S. Bitumix. The Court noted the distinction between intelligence based enforcement action (which the Notification of 05.10.2018 contemplates may be completed by the authority that initiates it) and a summons under Section 70 directed at third parties for production of documents. The proceedings before the Central Authority were against a different assessee (the supplier), whereas the State proceeding was directed at the petitioner for alleged inadmissible input tax credit claimed on purchases from that supplier. Because the actions were distinct and taken against different assessees, the State Authority's proceedings were not precluded by the Central summons. The Court further observed that while the policy in the Notification seeks to avoid duplication where both authorities pursue the same enforcement action, only one assessment can be made on the same transaction and ordinarily the authority which first initiates action should continue; that consideration was inapplicable here since the Central action related to the supplier and the State action related to the petitioner.

Proceedings initiated by the State Tax Authority were not rendered impermissible by the Central summons; the writ petitions challenging parallel proceedings fail.

Notification dated 05.10.2018 - summons under Section 70 of the CGST Act - Scope and effect of the Central Board notification dated 05.10.2018 vis-a -vis initiation and continuation of enforcement proceedings by Central or State authorities - HELD THAT: - The Court considered the Notification issued by the Central Board clarifying that a Central or State authority initiating intelligence based enforcement action may complete the investigation even if the assessee is administratively assigned to the other authority, and that transfer to the administratively assigned authority is not required. The Court held that the Notification does not create an absolute bar on the other authority initiating proceedings in all circumstances; rather it contemplates that the authority which initiates intelligence based enforcement action may continue. In the present matters the Central action was intelligence/investigation directed at the supplier, while the Notification did not preclude the State Authority from proceeding against a different assessee on the distinct question of input tax credit claimed. Consequently the Notification did not prevent the State proceedings.

The Notification of 05.10.2018 does not operate to preclude State proceedings in the factual matrix where the Central action is against a different assessee and the State action concerns the petitioner's claimed input tax credit.

Final Conclusion: Writ petitions dismissed in limine; State proceedings may continue as the Central summons related to the supplier and did not preclude distinct proceedings against the petitioner for the stated tax periods.

Profiteering - benefit of input tax credit - pass on by way of commensurate reduction in prices - Section 171(1) of the CGST Act, 2017 - investigation under Rule 133(5) of the CGST Rules, 2017 - dropping of proceedings

Profiteering - Section 171(1) of the CGST Act, 2017 - benefit of input tax credit - investigation under Rule 133(5) of the CGST Rules, 2017 - Whether the Respondent had executed projects other than 'ATS Rhapsody' during the investigation period and whether Section 171(1) of the CGST Act, 2017 was attracted in respect of any such projects requiring passage of ITC benefit to recipients. - HELD THAT: - The DGAP, pursuant to the NAA Order directing further investigation under Rule 133(5), examined the period 01.07.2017 to 30.09.2022. The DGAP issued notices and verified the Respondent's assertions through: (a) the UP RERA online project registrations which showed no project other than 'ATS Rhapsody'; and (b) correspondence with the jurisdictional State Tax Commissionerate, which recorded the Respondent's reply that no other project had been executed. On this basis the DGAP concluded that no construction project other than 'ATS Rhapsody' was undertaken by the Respondent during the relevant period and therefore there was no occasion for the Respondent to pass on the benefit of input tax credit in relation to other projects. The Commission has considered the DGAP report and the supporting material, accepted the factual finding that no other projects were executed, and held that Section 171(1) is not attracted in respect of any other project of the Respondent. [Paras 5, 6, 7, 8]

The Commission accepted the DGAP's finding that no other projects were executed by the Respondent in the examined period, held that Section 171(1) of the CGST Act, 2017 is not attracted in respect of other projects, and dropped the present proceedings.

Final Conclusion: The Commission, having accepted the DGAP's investigation that the Respondent did not execute any project other than 'ATS Rhapsody' during 01.07.2017 to 30.09.2022, concluded that the obligation under Section 171(1) to pass on the benefit of input tax credit did not arise for any other project and accordingly dropped the proceedings.

Profiteering under Section 171 of the CGST Act, 2017 - investigation under Rule 133(5) of the CGST Rules, 2017 - verification of projects with Maharashtra RERA records - no profiteering found in the investigated project - dropping of proceedings where no other projects exist for investigation

Investigation under Rule 133(5) of the CGST Rules, 2017 - verification of projects with Maharashtra RERA records - Whether the DGAP, as directed by the NAA, investigated other projects of the Respondent under the same GSTIN and whether any other project exists for investigation. - HELD THAT: - Pursuant to the NAA direction, the DGAP issued notices and examined the Respondent's projects under the GSTIN. The DGAP verified the Respondent's project list against the Maharashtra RERA website and found only one other project, "Godrej Elements", under the same GSTIN. The DGAP reported that "Godrej Elements" had already been investigated and that no other projects were registered under the GSTIN which could be investigated further. The Commission has considered the DGAP report and the material on record and accepts the DGAP's verification and findings. [Paras 5]

The DGAP duly investigated other projects under the GSTIN and verified via MRERA that only "Godrej Elements" exists apart from the already examined project.

Profiteering under Section 171 of the CGST Act, 2017 - no profiteering found in the investigated project - dropping of proceedings where no other projects exist for investigation - Whether the provisions of Section 171(1) of the CGST Act, 2017 are attracted in respect of the Respondent's other projects and the consequent course of action. - HELD THAT: - The DGAP's report established that the only other project under the GSTIN had already been investigated with no finding of profiteering and that no further projects exist for inquiry. In these circumstances there is no basis to proceed under Section 171(1) of the CGST Act, 2017 against other projects of the Respondent. The Commission, applying the DGAP's factual findings about the absence of additional projects and the negative result of the prior investigation, concluded that the statutory provision is not attracted in respect of other projects. [Paras 6]

Proceedings under Section 171(1) of the CGST Act, 2017 in respect of other projects of the Respondent are not attracted and are therefore dropped.

Final Conclusion: The Commission accepts the DGAP's investigation and verification that no other projects exist for enquiry under the GSTIN and, finding that Section 171(1) is not attracted to any other project, directs that the proceedings in respect of other projects be dropped; copies of the order are to be sent to the Respondent and the DGAP and the case file consigned.

Revision u/s 263 - non-service of notice as agitated in first round of litigation - Tribunal confirmed gross violation of principles of natural justice deciding issue in favour of assessee - as decided by HC [2022 (6) TMI 1421 - CALCUTTA HIGH COURT] revenue seeks to convert HC as if it is a second appellate Court over the findings of the tribunal, thus no substantial question of law arises - HELD THAT:- There is delay of 316 days in filing the special leave petition.

We find no merit to interfere with the judgment and order impugned in this petition.

Revision u/s 263 by CIT - Estimation of income - Addition u/s 69C - Tribunal has elaborately examined this issue, and allowed assessee appeal - As decided by HC [2022 (7) TMI 1453 - CALCUTTA HIGH COURT] no discrepancy was found between the purchase shown by the assessee and the sales decline, thus assumption of jurisdiction by the PCIT u/s 263 was erroneous - HELD THAT:- There is delay of 286 days in filing the special leave petition.

The special leave petition is dismissed both on the ground of delay as well as on the merits.

TP Adjustment - selection of comparable - Treatment of forex gain/loss - HELD THAT:- As stated at the Bar that this Appeal has been rendered infructuous and could be disposed of in view of order of full and final settlement of tax arrears being passed u/s 5(2) r.w.s. 6 of the Direct Tax Vivad Se Vishwas Act, 2020 and the Direct Tax Vivad Se Vishwas Rules, 2020.

The submission of Additional Solicitor General appearing for the appellant and learned counsel for the respondent is placed on record.

Accepting the aforesaid submission, the Civil Appeal is disposed of as having been rendered infructuous.

Income chargeable to tax - distinction between income and gross sale consideration - reopening assessment under Section 148 - conduct of inquiry and show-cause under Section 148A - time-limit and extended limitation under Section 149 where income exists as an asset

Income chargeable to tax - distinction between income and gross sale consideration - Whether the amount of Rs.7205084/- relied upon by the Revenue constitutes 'income chargeable to tax' for the purpose of reopening assessment. - HELD THAT: - The Court held that 'income' as defined in Section 2(24) is an inclusive concept and 'income chargeable to tax' denotes the taxable quantum after permissible deductions, which is ordinarily less than gross receipts. The impugned proceedings treated the entire sale consideration of 16 scooters as 'income chargeable to tax' without computing taxable income; the assessee's reply and supporting particulars demonstrated that the amount was gross sale consideration and not income chargeable to tax. Several High Court precedents (including the cited Karnataka decision) were relied upon to conclude that the entirety of sale consideration does not ipso facto constitute 'income chargeable to tax' for the purposes of Sections 148/149. Consequently, the Assessing Officer's approach of equating gross receipts with income chargeable to tax was incorrect and vitiated the decision to issue notice under Section 148. [Paras 6, 9]

The amount of Rs.7205084/- is not shown to be 'income chargeable to tax' and the reopening based on treating the gross sale consideration as taxable income is unjustified.

Conduct of inquiry and show-cause under Section 148A - reopening assessment under Section 148 - Whether the order under Section 148A(d) and the consequential notice under Section 148 were passed in accordance with law. - HELD THAT: - The Court noted that Section 148A was inserted to ensure transparent and non-frivolous invocation of reopening powers and requires the Assessing Officer to consider whether it is a fit case to issue notice on the basis of material and the assessee's reply. Here the Assessing Officer, despite receiving the assessee's detailed reply showing the amount to be sale consideration and providing computation, adopted a casual and perfunctory approach and failed to distinguish gross receipts from taxable income. The impugned order under Section 148A(d) and the subsequent notice under Section 148 therefore lacked proper application of the statutory test mandated by Section 148A. [Paras 6, 7, 9]

The order under Section 148A(d) and the notice under Section 148 were not passed in accordance with law and are quashed.

Time-limit and extended limitation under Section 149 where income exists as an asset - Whether the Revenue can rely on Section 149(1)(b) (extended limitation where escaped income is represented as an asset) when the material does not show the amount as an asset or other specified form. - HELD THAT: - The Court observed that Section 149(b) permits extended limitation only where the income chargeable to tax that has escaped assessment is represented in specified forms (such as an asset) and amounts to fifty lakh rupees or more. In the present case neither the Section 148A notice nor the order indicates that the alleged sum represents an asset (immovable property, shares, loans, deposits, etc.). The Assessing Officer did not demonstrate that the escaped taxable income existed in any of the forms contemplated by Section 149(b). Hence reliance on extended limitation was misplaced. [Paras 6, 8]

Section 149(1)(b) could not be invoked on the material before the Assessing Officer because the amount was not shown to be represented as an 'asset' or other specified form.

Right to challenge reopening despite non-filing of return - Whether the assessee's failure to file a return for the relevant assessment year prevents him from challenging the reopening proceedings. - HELD THAT: - The Court rejected the Revenue's contention that non-filing of return extinguishes the assessee's right to challenge the impugned order. The statutory scheme of Sections 147 to 151 does not preclude an assessee from taking advantage of procedural safeguards or from contesting the validity of reopening merely because he did not file a return for the assessment year. Accordingly, non-filing did not bar consideration of the petitioner's challenge. [Paras 6]

Non-filing of return for the relevant assessment year does not prevent the assessee from challenging the reopening under Sections 148A/148.

Final Conclusion: The order dated 25.03.2023 under Section 148A(d) and the consequential notice under Section 148 for Assessment Year 2016-2017 are quashed; Revenue remains at liberty to invoke Section 148A subject to compliance with law; costs of Rs.25,000/- awarded (part directed to a local association and part to the petitioner).

Taxability of past investments in subsequent assessment year - unexplained investment under section 69 of the Income tax Act - charging of interest under Sections 234A and 234B on assessed tax versus returned tax - effect of retrospective amendments (Finance Act, 2001 and Finance Act, 2006) on computation of interest - doctrine of per incuriam

Taxability of past investments in subsequent assessment year - unexplained investment under section 69 of the Income tax Act - Whether the Assessing Officer could treat the entire sale consideration of shares as unexplained investment under section 69 or was he limited to taxing the long term capital gain earned during AY 2015 16 - HELD THAT: - The Court found on the material on record that the assessee had shown the investment in the books in earlier year(s) (balance sheet as on 31.03.2014) and the purchase was out of past earnings and savings. There were no findings by the Assessing Officer that the purchase transactions were bogus. Consequently, the Assessing Officer erred in treating the entire sale proceeds as unexplained investment; only the long term capital gain arising in AY 2015 16 was exigible to tax. The Tribunal correctly directed deletion of the investment component from the addition under section 69. [Paras 9]

Addition reduced by deleting the investment amount; only the LTCG for AY 2015 16 taxable (question decided for the assessee)

Charging of interest under Sections 234A and 234B on assessed tax versus returned tax - effect of retrospective amendments (Finance Act, 2001 and Finance Act, 2006) on computation of interest - doctrine of per incuriam - Whether interest under Sections 234A and 234B for AY 2015 16 is chargeable on the tax as returned or on the tax as assessed/determined by the Assessing Officer - HELD THAT: - The Court reviewed the legislative history and relevant decisions and held that the Finance Act, 2001 (with retrospective effect from 1.4.1989) and the later amendments by Finance Act, 2006 (w.e.f. 01.04.2007) altered the position so that interest under Sections 234A and 234B is to be computed on the assessed tax (tax on total income as determined under section 143 or on regular assessment subject to specified reductions) and not on the tax as declared in the return. The coordinate Division Bench decision in Ajay Prakash Verma (relying on pre amendment Full Bench decisions) did not consider these amendments and therefore, insofar as it directed that interest be levied only on returned income, was held to be per incuriam. Applying the provisions as in force for AY 2015 16, interest is chargeable on assessed tax. [Paras 16, 20, 21]

Interest under Sections 234A and 234B for AY 2015 16 is to be computed on the assessed tax and not on the returned income; questions in favour of the revenue

Final Conclusion: Appeal partly allowed: the Tribunal's deletion of the investment amount from the section 69 addition (leaving only LTCG taxable for AY 2015 16) is upheld; however, the Tribunal's direction to compute interest under Sections 234A/234B on returned income is reversed and interest must be computed on the assessed tax as applicable for AY 2015 16.

Reopening of assessment under Sections 147/148 of the Income Tax Act - Reason to believe based on tangible material - Change of opinion not a reason to reopen - Assessing Officer's independent satisfaction - Audit objection cannot substitute AO's own reasons - Consideration of query during original assessment precludes reopening - Non-application of mind vitiates reasons for reopening

Reopening of assessment under Sections 147/148 of the Income Tax Act - Change of opinion not a reason to reopen - Non-application of mind vitiates reasons for reopening - Validity of the notice dated 27th March 2021 reopening assessment for Assessment Year 2016-17 - HELD THAT: - The Court found the reasons recorded for reopening demonstrate that the Assessing Officer has merely changed his earlier view on allowance of depreciation on goodwill and therefore the reopening is founded on a change of opinion. The reasons themselves show defects indicative of non-application of mind (for example, reference to unspecified "above mentioned provisions"), undermining the sufficiency of the recorded reasons. Relying on settled principles that a change of opinion does not constitute a "reason to believe" that income has escaped assessment, the Court held the notice is unsustainable and must be quashed. [Paras 13, 14, 21]

Notice dated 27th March 2021 reopening the assessment quashed as it rests on change of opinion and exhibits non-application of mind.

Audit objection cannot substitute AO's own reasons - Assessing Officer's independent satisfaction - Reason to believe based on tangible material - Whether objections raised by the audit party can alone justify initiation of reassessment proceedings - HELD THAT: - The Court recorded that although the reopening was prompted by audit objections, the Assessing Officer must form his own independent reason to believe based on law and tangible material. An audit party's opinion cannot colour or replace the AO's independent evaluation. The material on record must be such that it leads the AO himself to form a prima facie belief; merely replicating audit objections without independent application of mind is insufficient. [Paras 15, 16, 17]

Reopening cannot be sustained where it proceeds solely on audit objections without the Assessing Officer's independent, reasoned satisfaction.

Consideration of query during original assessment precludes reopening - Change of opinion not a reason to reopen - Whether enquiries and submissions made and considered during the original assessment proceedings preclude reopening on the same material - HELD THAT: - The Court accepted that where a query is raised during original assessment and the assessee furnishes a response which the AO considers, the matter is treated as having been considered for purposes of the assessment even if the assessment order does not expressly record the consideration. Applying the authorities cited, the Court held that when the primary facts were fully and truly disclosed and were considered during assessment, the AO cannot reopen the assessment on the same material merely to take a different view. [Paras 10, 20, 21]

Since the claim for depreciation on goodwill was queried and addressed during original assessment, reopening on the same material is impermissible and constitutes a change of opinion.

Final Conclusion: Writ petition allowed; the notice dated 27th March 2021 under Section 148, the subsequent scrutiny notice and the order rejecting objections dated 24th January 2022 are quashed and set aside.

Addition under Section 68 of the Income Tax Act, 1961 - triple test (identity, genuineness and creditworthiness) - absence of reasons / non-speaking order - speaking order - remand for fresh enquiry - de novo hearing - direction to Assessing Officer to examine afresh

Absence of reasons / non-speaking order - speaking order - Whether the Tribunal misdirected itself by reversing the CIT(A)'s reasoned conclusion without recording reasons and by issuing a non-speaking order. - HELD THAT: - The Tribunal's order was examined and found to contain no reasoning explaining why it disagreed with the CIT(A)'s detailed, reasoned conclusion. The Tribunal merely reproduced parties' assertions, extracted portions of the CIT(A)'s order and, in a single paragraph, stated disagreement and remanded the matter without identifying which aspects of the CIT(A.'s) reasoning were unsustainable. The Court held that such a reversal, made without articulating the basis for disagreement, is unsatisfactory; a tribunal must state reasons if it chooses not to accept a reasoned order of the appellate authority. For these reasons the impugned order was set aside and the matter remanded to enable the Tribunal to deliberate afresh and articulate its reasoning in a speaking order. [Paras 22, 23, 24, 26, 27]

Impugned Tribunal order set aside for lack of reasons; matter remanded for fresh consideration with a requirement that the Tribunal give reasons if it disagrees with the CIT(A).

Addition under Section 68 of the Income Tax Act, 1961 - triple test (identity, genuineness and creditworthiness) - remand for fresh enquiry - direction to Assessing Officer to examine afresh - de novo hearing - Whether the Tribunal was justified in directing a fresh inquiry into the addition under Section 68, in circumstances where the CIT(A) had found that the assessee satisfied the triple test. - HELD THAT: - The record showed the AO had made an addition under Section 68 in respect of amounts received as share capital and premium, and the CIT(A) concluded that the assessee had satisfied the triple test of identity, genuineness and creditworthiness of the investors. The Tribunal reversed that conclusion but did not identify the specific defects in the CIT(A)'s reasoning nor indicate what further inquiries the AO should undertake. The High Court declined to decide the merits of the triple test finding; instead, because the Tribunal's reversal lacked explanation and the remand contained no guidance as to the scope of fresh inquiry, the Court remanded the matter to the Tribunal for a de novo hearing so that the Tribunal may apply its mind, state reasons and, if necessary, specify the matters the AO should examine afresh. [Paras 16, 17, 18, 21, 28]

Question of the validity of the addition under Section 68 and the triple test not finally decided on merits; matter remitted to the Tribunal for de novo hearing and for specifying the scope of any further enquiry.

Final Conclusion: The Tribunal's order, being non-speaking and reversing a reasoned CIT(A) order without explanation, is set aside. The question of law is answered in favour of the assessee; the matter is remitted to the Tribunal for a de novo hearing and for issuance of a speaking order specifying the scope of any fresh inquiry.

Jurisdictional requirement for reopening assessment - notice under Section 148 addressed to a deceased person - void ab initio of proceedings taken against a dead person - inapplicability of Section 292B and Section 292BB to notices issued to dead persons - quashing of assessment notice and consequent assessment order

Notice under Section 148 addressed to a deceased person - jurisdictional requirement for reopening assessment - void ab initio of proceedings taken against a dead person - Validity of the notice issued under Section 148 when addressed to the deceased assessee - HELD THAT: - The Court held that the sine qua non for acquiring jurisdiction to reopen an assessment is that the notice under Section 148 must be issued to a correct and living person. Proceedings initiated by issuing a jurisdictional notice in the name of a deceased person are non est and amount to a failure to fulfil the jurisdictional requirement under Section 148. Consequently, initiation of reassessment proceedings in the name of the dead person is illegal and the orders passed pursuant to such a notice are vulnerable. Applying these principles to the present matter, the impugned notice issued in the name of the deceased assessee rendered the proceedings and the resulting assessment order liable to be quashed. [Paras 5]

Notice issued under Section 148 addressed to the deceased assessee was invalid and the consequential proceedings were quashed.

Inapplicability of Section 292B and Section 292BB to notices issued to dead persons - no cure for absence of notice by Sections 292B/292BB when notice is to a non-existent person - Whether the defects in service by reason of issuing notice to a deceased person can be cured under Sections 292B or 292BB - HELD THAT: - The Court examined the scope of Sections 292B and 292BB and the authorities distinguishing cases of clerical errors or mistakes of name from issuance of notices to non-existent or dead persons. It concluded that Sections 292B/292BB address infirmities in manner or timing of service and mistakes capable of being treated as non-substantive defects, but do not apply where the notice is addressed to a dead person and jurisdiction was never validly invoked. Therefore, the statutory provisions cannot cure the fundamental absence of jurisdiction that results when a notice is issued to a deceased assessee. On the facts of this petition the Court held these provisions inapplicable and that the defect was not a curable technicality. [Paras 4, 5]

Sections 292B and 292BB do not validate a notice issued to a deceased person; those provisions are inapplicable and cannot cure the jurisdictional defect.

Quashing of assessment notice and consequent assessment order - Relief to be granted consequent upon invalid notice and proceedings - HELD THAT: - Having found the notice under Section 148 and the subsequent proceedings to be void for want of jurisdiction, the Court granted certiorari relief by quashing and setting aside the impugned notice and the order passed under the Income-tax Act. The Court applied settled precedents of this Court and other High Courts treating proceedings initiated against a dead person as nullities and directed that the impugned notice and the assessment order be set aside. [Paras 5]

The impugned notice and the assessment order are quashed and set aside; writ is allowed.

Final Conclusion: The writ petition is allowed: the notice under Section 148 and the consequential assessment order (impugned order under Section 143(3)) addressed to the deceased assessee for AY 2016-17 are void for want of jurisdiction and are quashed; direct service permitted and no order as to costs.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Bar on continuation or institution of proceedings against a corporate debtor during moratorium - Dismissal of pending appellate proceedings in view of statutory moratorium

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Bar on continuation or institution of proceedings against a corporate debtor during moratorium - Dismissal of pending appellate proceedings in view of statutory moratorium - Effect of NCLT-declared moratorium on continuation of the Revenue's appeal related to Assessment Year 2015-16. - HELD THAT: - The Tribunal noted that the National Company Law Tribunal admitted an application under the Insolvency and Bankruptcy Code and by order dated 09/06/2023 declared a moratorium. In terms of Section 14 of the IBC, the moratorium operates to prohibit the institution or continuation of suits, proceedings or execution against the corporate debtor. Applying that statutory bar, the Tribunal held that the present appeal filed by the Revenue could not be continued and therefore dismissed the appeal. The order preserved the Department's right to approach the Tribunal later if any necessity arises on any cause of action touching the issues involved in this appeal. [Paras 3, 5]

Appeal dismissed in view of the NCLT-declared moratorium under Section 14 IBC, with liberty to the Department to approach the Tribunal if required.

Final Conclusion: The Revenue's appeal concerning Assessment Year 2015-16 is dismissed on account of the moratorium declared by the NCLT under the Insolvency and Bankruptcy Code, 2016; the Department is granted liberty to approach the Tribunal subsequently if necessary.

Interest on late deposit of TDS - sufficient cause for delay in deposit of TDS - interim injunction by High Court restraining remittance - application under section 154 read with section 200A

Interest on late deposit of TDS - sufficient cause for delay in deposit of TDS - interim injunction by High Court restraining remittance - application under section 154 read with section 200A - Whether interest charged for late deposit of TDS for AY 2011-12 is leviable where an interim order of the High Court restrained remittance and the assessee remitted the deducted amount only thereafter. - HELD THAT: - The Tribunal found that an interim injunction granted by the Hon'ble Madras High Court on 29/03/2011 restrained respondents from deducting Tax at source in respect of the pension scheme optees and directed that the tax element should not be disbursed until further orders. Given that the interim order was in operation when the TDS was deducted and the remittance to the Revenue was affected only on 10/04/2013, the Tribunal held that the assessee had sufficient cause for non-remittance within the original time. The Assessing Officer and the CIT(A) erred in charging interest for late deposit without giving effect to the operative interim order and without treating the interim judicial restraint as excusing the delay. Applying the rationale to the assessee's application under section 154 read with section 200A, the Tribunal concluded that interest levied was not justified and ought to be deleted. [Paras 7, 8]

Interest of Rs. 1,69,962/- charged for late deposit of TDS is deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2011-12, holding that the interim injunction of the Madras High Court constituted sufficient cause for delayed remittance of TDS and deleting the interest levied by the revenue.

Rejection of books of account under section 145(3) - estimation of income by best judgment assessment under section 144 - reliance on unproduced investigation reports as basis for estimation - treatment of cash found on search in light of cash book explanation - requirement of specific defects before rejecting accounts

Rejection of books of account under section 145(3) - requirement of specific defects before rejecting accounts - Validity of the Assessing Officer's rejection of the assessee's books of account and consequential estimation - HELD THAT: - The Tribunal examined whether the AO validly invoked the power to reject books under section 145(3) by pointing out defects that render the accounts incorrect or incomplete or the accounting method irregular. The AO's reasons were assessed against the statutory prerequisites and factual material on record. The assessee was a private limited company with statutory audits under the Companies Act and tax audit under section 44AB; no adverse qualifications were recorded by the statutory or tax auditors. The AO's contentions relied on alleged anomalies (cement consumption, supplier confirmations, labour contractors, vehicle hires, sub-contractor transactions and deduction adjustments) but did not place specific, reliable material on record to demonstrate that the books were not correct or complete or that the accounting method was not regularly followed. The Tribunal found that many suppliers and contractors had furnished confirmations, documentary evidence and bank records; VAT/other authorities had not drawn adverse inference; several investigatory reports relied upon by the AO were not produced or confronted to the assessee; and the AO himself continued to utilize figures from the books in framing additions, undermining the purported rejection. The Tribunal held that mere suspicion or a lower profit rate, without concrete defects or reliable evidence, cannot justify rejection; the power under section 145(3) must be exercised judicially and with specific defects recorded. [Paras 32, 33]

The rejection of the books of account was not justified; the books are to be accepted and the AO's grounds for rejection are dismissed.

Estimation of income by best judgment assessment under section 144 - reliance on unproduced investigation reports as basis for estimation - Sustainability of the AO's estimation of income at specified percentages on CWG and non-CWG receipts after purported rejection of books - HELD THAT: - Having held that the books were not validly rejected, the Tribunal considered the AO's estimation which was premised on various reports and alleged unusually high profitability. The AO failed to produce or confront the assessee with the reports he purportedly relied upon; the reports were not traceable and were not placed on record despite directions. The AO gave no industry comparable, past consistent basis, or proper material to justify estimating income at the rates applied. Moreover, where books are rejected, any estimation should follow the methodology of a best judgment assessment under section 144; here the AO neither followed that established methodology nor relied on admissible evidence. The assessee's declared net profit (15.26%) was supported by audited accounts and consistent with prior years accepted by the AO; the AO's arbitrary adoption of much higher rates was therefore unsustainable. [Paras 35, 36, 37, 38, 41]

The estimations of income at the impugned percentages are arbitrary and unsupported; the estimations are deleted and the declared income on the books is accepted.

Treatment of cash found on search in light of cash book explanation - Whether the addition on account of unexplained cash found during search (Rs. 6.25 lakhs) was warranted - HELD THAT: - The Tribunal reviewed the cash found during search against the assessee's cash book extracted and submitted. The AO did not doubt the genuineness of the cash book; the opening cash balance as per the cash book on the date of search exceeded the total cash found. The AO's conclusion that the assessee could not satisfactorily explain the cash was therefore erroneous, particularly since the assessee had furnished the cash book and explanations during assessment proceedings. Where the cash book is not doubted and the ledger balance reconciles with or exceeds the cash found, addition for unexplained cash is not called for. [Paras 42, 45, 47]

The addition for unexplained cash is deleted; the assessee's explanation and cash book are accepted.

Final Conclusion: The Tribunal dismissed the Revenue's appeal. The rejection of the assessee's books was held to be unjustified; the AO's estimations of income for CWG and non-CWG receipts were quashed for lack of evidentiary basis; and the addition for unexplained cash was deleted. The assessee's declared income for AY 2011-12 is accepted.

Time-barred assessment - prohibitory order under section 132(3) as restraint, not seizure - last Panchnama for reckoning limitation - binding effect of CBDT instructions under section 119 - admissibility of electronic evidence under section 65B of the Indian Evidence Act - invalidity of certificate under section 65B for failure to satisfy section 65B(2) and 65B(4)

Prohibitory order under section 132(3) as restraint, not seizure - last Panchnama for reckoning limitation - time-barred assessment - Whether the assessment(s) are time barred because the Panchnama dated 6/8/2020 was only a revocation of the restraint order (no seizure) and the Panchnama of 31/1/2020 must be treated as the last Panchnama for computing limitation. - HELD THAT: - The Tribunal found on the material before it that the search was temporarily closed on 31/1/2020 by placing certain loose sheets under a prohibitory order and that the Panchnama dated 6/8/2020 recorded no seizure and merely effected revocation of the restraint order. Section 132(3) permits a restraint order only where seizure is impracticable; where items were practicable to seize, a restraint order cannot be used to extend limitation. Precedents of High Courts and this Court establish that a Panchnama that records no fresh seizure and only revocation cannot be treated as a Panchnama that continues the search for limitation purposes. Applying those authorities to the facts, the Tribunal held that the period of limitation commenced from 31/1/2020 (and, after TOLA extension, expired on 30/09/2021) and that the assessment order dated 31/3/2022 was therefore barred by limitation and bad in law. [Paras 15, 16, 21, 31, 36]

Panchnama dated 6/8/2020 is only a revocation (no seizure) and cannot extend the period of limitation; assessment completed on 31/3/2022 is time barred and set aside.

Binding effect of CBDT instructions under section 119 - time-barred assessment - Whether the CBDT Instruction (3/7/2002) requiring prompt lifting of restraint orders is binding on departmental authorities and whether failure to comply renders the subsequent Panchnama invalid for limitation computation. - HELD THAT: - The Tribunal observed that CBDT Instructions issued under section 119 are binding on income tax authorities and can mitigate rigour of law for administrative fairness. The restraint order in this case was released on 6/8/2020, beyond the period specified in the Instruction; the Tribunal held that non compliance with the Instruction (and the consequent delayed revocation) meant the revocation Panchnama could not be treated as valid for extending the limitation period. On that basis the limitation was reckoned from 31/1/2020 and the assessment was held time barred. [Paras 22, 23, 26, 27]

CBDT Instruction is binding on the department; delayed revocation on 6/8/2020 is not effective to extend limitation and supports conclusion that assessment is time barred.

Admissibility of electronic evidence under section 65B of the Indian Evidence Act - invalidity of certificate under section 65B for failure to satisfy section 65B(2) and 65B(4) - Whether the certificate and seized pendrive satisfy the conditions of section 65B(2) and (4) and, if not, whether the electronic material is inadmissible and cannot sustain additions in the assessment. - HELD THAT: - The Tribunal reviewed the requirements of section 65B(2) and (4) and the CBDT Digital Evidence Investigation Manual. It found the certificate produced did not identify the primary system, did not describe the manner of production in the terms required, and did not satisfy the cumulative conditions prescribed by section 65B(2) and the particulars required by section 65B(4). Reliance on Supreme Court and High Court authorities established that non compliance renders electronic records inadmissible. The Tribunal therefore held that the certificate was invalid, the contents of the seized pendrive were inadmissible, and additions based on that material could not be sustained. [Paras 40, 41, 43, 46]

Certificate under section 65B is invalid for non compliance with section 65B(2) and (4); electronic material seized on the pendrive is inadmissible and cannot sustain the assessment.

Time-barred assessment - admissibility of electronic evidence under section 65B of the Indian Evidence Act - Relief and consequential effect on grounds challenging jurisdiction, additions and computation for the listed assessment years. - HELD THAT: - Because the Tribunal held (i) the assessments were time barred as the last Panchnama for limitation purposes was 31/1/2020 and the assessments were completed after the limitation expired, and (ii) the electronic evidence relied upon was inadmissible for failure to comply with section 65B, the Tribunal set aside the impugned assessment orders. Where other grounds depended on the validity of those assessments or on the seized electronic material, they were rendered academic or resolved in favour of the assessee; accordingly, identical grounds in the other assessment years were allowed mutatis mutandis. [Paras 36, 46, 47, 94]

Impugned assessment orders for AY 2012 13 to AY 2020 21 are set aside/allowed for the assessee on the grounds of limitation and inadmissible electronic evidence; consequential grounds need no separate adjudication.

Final Conclusion: The Tribunal allowed the consolidated appeals for AY 2012 13 to AY 2020 21: it held the Panchnama of 6/8/2020 recorded no seizure and could not extend the limitation (the relevant Panchnama is 31/1/2020), CBDT instructions are binding and their breach rendered the delayed revocation ineffective for limitation purposes, and the certificate under section 65B was invalid for non compliance with section 65B(2)/(4); consequently the assessments completed on 31/3/2022 were held time barred or unsustainable and the assessment orders were set aside.

Exemption under Section 96 of RFCTLARR Act - Exclusion of Fourth Schedule enactments under Section 105(1) of RFCTLARR Act - Limited applicability of First, Second and Third Schedules to Fourth Schedule under Section 105(3) of RFCTLARR Act - Power to remove difficulties under Section 113 of RFCTLARR Act - CBDT OM dated 06.06.2019 - Revision of assessment under Section 263 of the Income-tax Act - Exemption under Section 10(37) of the Income-tax Act limited to individual and HUF

Exemption under Section 96 of RFCTLARR Act - Exclusion of Fourth Schedule enactments under Section 105(1) of RFCTLARR Act - CBDT OM dated 06.06.2019 - Revision of assessment under Section 263 of the Income-tax Act - Validity of the Pr. CIT's revision under Section 263 in setting aside the assessment on the ground that compensation received for land acquired under the NHAI Act (a Fourth Schedule enactment) was not eligible for exemption under Section 96 of the RFCTLARR Act. - HELD THAT: - The Tribunal held that Section 105(1) of the RFCTLARR Act excludes application of its provisions to enactments specified in the Fourth Schedule, subject only to the limited exception in Section 105(3) which makes applicable the provisions relating to determination of compensation (First Schedule), rehabilitation and resettlement (Second and Third Schedules) where a notification is issued. The CBDT OM dated 06.06.2019 was held to clarify that, for acquisitions under Fourth Schedule enactments, no provisions of the RFCTLARR Act other than those relating to the First, Second and Third Schedules would apply, and consequently the exemption under Section 96 (no income tax on awards/agreements under the RFCTLARR Act) would not be applicable to cases where acquisition is under a Fourth Schedule enactment. The facts show the assessee's land was acquired under the NHAI Act (a Fourth Schedule enactment). On that basis, the AO's acceptance of the assessee's claim of exemption under Section 96 was found to be legally incorrect; the Pr. CIT therefore rightly invoked Section 263 to set aside the assessment as erroneous and prejudicial to the revenue and directed fresh adjudication after appropriate enquiries and opportunities to the assessee. [Paras 15, 16, 18, 20, 40]

The Pr. CIT's exercise of jurisdiction under Section 263 was upheld; the assessment order was held to be erroneous in law for having accepted Section 96 exemption in respect of land acquired under the NHAI Act, and the set aside was sustained.

Exemption under Section 10(37) of the Income-tax Act limited to individual and HUF - Whether the assessee company could claim exemption under Section 10(37) of the Income-tax Act. - HELD THAT: - The Tribunal agreed with the Pr. CIT that Section 10(37) provides exemption only to individuals and Hindu Undivided Families and not to a private limited company. Further, the statutory precondition that the land must have been used for agricultural purposes by the assessee (or specified relatives) during the two years immediately preceding transfer was not satisfied on the record. The assessee also contended it had not claimed relief under Section 10(37); regardless, the legal position is that a company cannot claim exemption under that provision. [Paras 4, 19]

The assessee company is not entitled to exemption under Section 10(37); that ground does not assist the assessee.

Final Conclusion: The Tribunal dismissed the appeals for A.Y. 2017-18, upholding the Pr. CIT's revision under Section 263; it held that compensation for lands acquired under the NHAI Act (a Fourth Schedule enactment) is not eligible for exemption under Section 96 of the RFCTLARR Act in light of Section 105(1)/105(3) and the CBDT OM dated 06.06.2019, and that Section 10(37) of the Income-tax Act is not available to a company.

Unexplained cash credit under section 68 - onus on assessee to prove identity and creditworthiness of subscribers - first proviso to section 68 - requirement for subscriber to explain source of funds - adverse inference for evasive conduct by assessee or subscribers - investigative commission under section 131(1)(d) and reliance on DDIT(Inv.) report - admission of belated documents in appellate proceedings in aid of justice (Aurangabad principle)

Unexplained cash credit under section 68 - first proviso to section 68 - requirement for subscriber to explain source of funds - Addition of share application money/premium treated as unexplained cash credit under section 68 was sustainable. - HELD THAT: - The Tribunal upheld the view of the Assessing Officer and the CIT(A) that the amounts credited as share application money/premium could be treated as unexplained cash credits. The post-amendment statutory regime (first proviso to section 68) cast a heavier onus not only on the assessee to explain the nature and source of the credit but also required the subscriber companies to explain the source of the funds. The record showed that the subscriber companies did not provide the requisite explanations; field inquiries and the DDIT(Inv.) report indicated doubtful credentials, non-compliance with summons and features of shell/paper companies. Mere production of PAN, ROC data, bank statements and audited accounts on paper, without the subscribers appearing to explain the source of funds or otherwise dispelling adverse findings, did not satisfy the double-faceted statutory burden. Reliance on judicial precedents was considered but distinguished on facts and because many pre-dated the proviso. Applying the principles in Pr. CIT v. NRA Iron & Steel and related authorities, and on the totality of the evidence, the Tribunal found no infirmity in treating the entire share subscription amount as unexplained cash credit under section 68. [Paras 30, 31, 32, 33, 41]

Addition of the share application money/premium as unexplained cash credit under section 68 is upheld.

Onus on assessee to prove identity and creditworthiness of subscribers - adverse inference for evasive conduct by assessee or subscribers - investigative commission under section 131(1)(d) and reliance on DDIT(Inv.) report - Whether the assessee discharged the evidentiary onus by production of documents and by seeking summons - held not discharged. - HELD THAT: - The Tribunal concluded that the assessee had not discharged the primary onus. The Assessing Officer had issued a commission under section 131(1)(d) to verify identity and creditworthiness; the DDIT(Inv.) report recorded that many subscriber companies had doubtful credentials, failed to comply with summons, and bore indicia of paper/shell companies. The assessee neither produced the subscribers for examination nor placed before the AOs and appellate authorities irrefutable documentary evidence sufficient to dispel the adverse findings. The Tribunal rejected the contention that furnishing PAN/ROC entries, bank statements and copies of returns on paper alone sufficed, particularly in the face of investigatory findings and non-compliance. The assessee's alleged inability to produce witnesses and its expectation that the Department summon them was not an acceptable compliance with the statutory burden; evasive conduct warranted adverse inference. [Paras 25, 26, 27, 28, 29]

Assessee failed to discharge the onus to prove identity, creditworthiness and genuineness; adverse inference drawn and addition sustained.

Admission of belated documents in appellate proceedings in aid of justice (Aurangabad principle) - Rule 18 of the ITAT Rules - procedure for paper books - Whether belated written submissions/affidavit filed after hearing could be admitted - held admissible for consideration but without effect to alter outcome. - HELD THAT: - The Tribunal examined Rule 18 and the requirement of prior service and indexing of paper books, initially noting non-compliance. Applying the Aurangabad principle, the Tribunal admitted the appellant's belated synopsis/written submissions/affidavit for consideration to avoid technical defeat of justice. However, the admitted material lacked an annexure referenced therein and did not demonstrate that the assessee had before lower authorities or the Tribunal produced the decisive documentary evidence to discharge the statutory onus. Admission was therefore procedural and did not change the conclusion on merits. [Paras 17, 19, 20, 21, 22]

Belated documents were admitted under the Aurangabad principle but they did not establish facts sufficient to discharge the onus; the admission did not alter the outcome.

Adverse inference for evasive conduct by assessee or subscribers - onus on assessee to prove identity and creditworthiness of subscribers - Whether the CIT(Appeals) denied reasonable opportunity of hearing - held no denial; order was speaking and the assessee was represented. - HELD THAT: - The Tribunal found that the CIT(Appeals) had heard the assessee's authorised representative, considered written submissions and passed a reasoned speaking order. The factual finding that the assessee's representative argued the matter and filed submissions before the CIT(A) negated the claim of denial of reasonable opportunity. The plea that documents were not considered was negatived by the absence of those documents before the CIT(A) or the Tribunal and by the record of representation. [Paras 43]

Ground alleging denial of reasonable opportunity is dismissed; no breach of natural justice found.

Final Conclusion: The Tribunal dismissed the appeal. It sustained the addition of share application money/premium as unexplained cash credit under section 68 for A.Y. 2014-15, holding that the assessee failed to discharge the statutory onus (including the requirement under the first proviso that subscribers explain the source of funds), that adverse inferences were justified in view of investigatory findings and evasive conduct, and that belated appellate filings admitted in the interest of justice did not alter the merits; the claim of denial of hearing was rejected.

Stay of recovery - statutory condition of deposit or furnishing of security under section 254(2A) of the Act - power of the Tribunal to grant stay subject to statutory conditions - attachment as protection of revenue - conditional stay and compliance obligations of the assessee

Power of the Tribunal to grant stay subject to statutory conditions - statutory condition of deposit or furnishing of security under section 254(2A) of the Act - Whether the Tribunal may grant an absolute stay on recovery in contravention of the deposit/security condition prescribed by section 254(2A) of the Act. - HELD THAT: - The Tribunal held that section 254(2A) must be read as imposing a statutory condition that stay of recovery may be granted only where the assessee deposits not less than 20% of the disputed amount or furnishes security of equal amount, and that the Tribunal cannot disregard this condition. The power to grant stay must be exercised within the framework of the statute; reading the provision otherwise would render the statutory condition nugatory. Earlier decisions permitting blanket stays cannot be applied to override the express legislative requirement introduced by the first proviso to section 254(2A). Consequently, the Tribunal declined the assessee's contention that it could grant an absolute stay in the teeth of the statutory condition, and reaffirmed that conditional stays consonant with section 254(2A) are the permissible exercise of its jurisdiction. [Paras 4]

Tribunal cannot grant blanket stay in disregard of the deposit/security condition prescribed by section 254(2A); stay must ordinarily be subject to those statutory conditions.

Attachment as protection of revenue - stay of recovery - conditional stay and compliance obligations of the assessee - Whether, on the facts, the Tribunal could grant a stay of recovery for AY 2018-19 without requiring immediate deposit or security because existing attachments secured the revenue, and what conditions should govern such stay. - HELD THAT: - Applying the statutory principle to the facts, the Tribunal found that specified bank accounts/fixed deposits of the assessee had been provisionally attached by income-tax and Enforcement authorities and that such attachments (including overlapping attachments aggregating a sum greater than the disputed demand for AY 2018-19) presently secured the interest of the revenue in respect of the quantified demand. In that factual situation the Tribunal held that so long as those attachments remain in place, the assessee need not make further deposit or furnish additional security; however, if the attachments are vacated, revoked, modified or disturbed by any order, the assessee must within two weeks deposit or furnish security of not less than 20% of the outstanding liability for AY 2018-19. The Tribunal imposed further conditions: the stay is for a limited period (180 days or until disposal of the appeal, whichever is earlier), the assessee must cooperate in expedition of the appeal and not seek unnecessary adjournments, and any dilatory conduct will lead to automatic vacation of the stay. [Paras 4]

Stay of recovery for AY 2018-19 granted on condition that existing attachments continue to secure the revenue; if attachments are disturbed the assessee must deposit or furnish security of at least 20% within two weeks; stay limited to 180 days (or till disposal) and subject to co-operation and non-dilatory conduct.

Final Conclusion: Stay application allowed: the Tribunal granted a conditional stay of recovery for AY 2018-19 for a period of 180 days (or till disposal of the appeal), holding that the statutory deposit/security condition in section 254(2A) governs the power to grant stay but, on the facts, existing provisional attachments presently protect the revenue so no further deposit/security is required while those attachments subsist; if the attachments are vacated the assessee must within two weeks deposit or furnish security of not less than 20% of the outstanding liability, and the stay is subject to the assessee's cooperation and non-dilatory conduct.

Prohibited goods - smuggling - option to pay fine in lieu of confiscation (Section 125) - import subject to conditions / restricted import - burden of proof under Section 123 - treatment of restricted imports as prohibited when conditions not complied with

Prohibited goods - import subject to conditions / restricted import - treatment of restricted imports as prohibited when conditions not complied with - Meaning and scope of "prohibited goods" under Section 2(33) of the Customs Act - HELD THAT: - Section 2(33) is to be read to include goods the import or export of which is subject to any prohibition under the Act or any other law, and also to cover goods where import is subject to conditions or restrictions and those conditions have not been complied with. A prohibition may be absolute or subject to conditions; restrictions or regulatory measures may, by their breach, render goods "prohibited" within Section 2(33). A conjoint reading of Section 2(33) with Section 11 of the Customs Act and Section 3 of the FTDR Act shows that orders or notifications which restrict or regulate imports (including foreign trade policy and ITC(HS) provisions making import "subject to RBI regulations" or nominational agency routes) fall within the statutory concept of prohibition for the purposes of confiscation and other consequences under the Act. The court rejected the narrow contention that only items specifically placed on a negative list by a Section 11 notification can be "prohibited". The statutory scheme, policy instruments (FTP/ITC(HS)) and RBI/DGFT/CUSTOMS notifications and circulars that make gold import matter of regulated/restricted entry are relevant to identify prohibition. [Paras 33, 34, 36, 138, 146]

Section 2(33) includes goods imported or exported in breach of conditions or restrictions imposed under the Customs Act, the FTDR Act or subordinate measures; therefore breach of such conditions will bring goods within the "prohibited goods" category.

Smuggling - prohibited goods - burden of proof under Section 123 - Whether gold, when imported in breach of applicable conditions (including by clandestine concealment / non declaration), is to be treated as a prohibited article and/or smuggled goods - HELD THAT: - The importation of gold is a highly regulated activity under the FTP/ITC(HS), RBI circulars and Customs baggage rules; although gold is not per se an absolute prohibition item by a stand alone Section 11 notification, bulk or unauthorized importation in breach of those regulatory conditions amounts to smuggling and falls within the definition of prohibited goods. Smuggling is any act or omission rendering goods liable to confiscation under Section 111; when gold is clandestinely brought in, not declared and/or conditions for lawful import are not met, it is smuggled and may be characterised as "prohibited" for statutory purposes. The person from whose possession goods are seized bears the statutory burden to prove they are not smuggled under Section 123; failure to discharge that burden supports confiscation and denial of redemption. [Paras 35, 36, 51, 69, 70]

Gold imported in violation of the regulatory/conditional regime (including clandestine, non declared importation) is smuggled and falls within the scope of "prohibited goods" under the Act; the statutory burden to prove non smuggling lies on the person from whose possession the goods were seized.

Option to pay fine in lieu of confiscation (Section 125) - discretionary power of adjudicating authority - treatment of prohibited goods v. other goods - Scope and effect of Section 125 - when redemption is mandatory and when it is discretionary - HELD THAT: - Section 125(1) distinguishes between (a) goods the importation or exportation of which is prohibited under the Act or any other law (for which the adjudicating officer "may" give an option to pay a fine in lieu of confiscation) and (b) other goods (for which the officer "shall" give the option). Thus redemption on payment of fine is mandatory for non prohibited goods but discretionary for prohibited goods. Where goods are deemed prohibited because conditions for lawful import are not met (including smuggling), the adjudicating officer retains discretion to refuse redemption; that discretion must be exercised according to law, guided by reasonableness, fairness and relevant considerations, and not mechanically. The court held that redemption of smuggled/illegally imported gold is not an automatic right and lies within the adjudicator's informed discretion. [Paras 37, 38, 70, 156]

Redemption under Section 125 is mandatory for non prohibited goods but discretionary for prohibited goods; illegally imported or smuggled gold (treated as prohibited) does not entitle the claimant to automatic release and redemption is subject to the adjudicating officer's lawful exercise of discretion.

Exercise of discretion guided by reasonableness - prevention of smuggling and public interest - release/redemption on payment of fine - Standards for exercise of the adjudicating authority's discretion when deciding release/redemption of confiscated goods - HELD THAT: - When discretion under Section 125 is engaged (i.e., in relation to prohibited goods), its exercise must be guided by legal norms - reasonableness, rationality, fairness, impartiality and consideration of relevant public interest factors (including economic impact and prevention of smuggling). The discretion may be declined where imports are not bona fide, involve mens rea to evade duty, or threaten public interest/economic consequences; conversely, redemption may be allowed where facts justify leniency. The court emphasised that authorities must exercise discretion transparently and judiciously and that inconsistent or arbitrary treatment by customs may be challenged, but precedent of other lenient decisions does not automatically entitle a litigant to relief. [Paras 156, 164, 176, 179]

The adjudicating authority must exercise Section 125 discretion rationally, fairly and with regard to public interest; it may refuse redemption of prohibited/smuggled goods where facts and circumstances justify absolute confiscation.

Application of FTDR Act and notifications - interaction between FTP/ITC(HS)/RBI circulars and Customs Act - Role of FTDR, FTP/ITC(HS), RBI/DGFT/Central notifications and circulars in determining prohibition and the legality of gold import - HELD THAT: - Orders, notifications and policy instruments under the FTDR Act (including the FTP and ITC(HS)) and RBI/DGFT/CUSTOMS circulars are relevant and operative legal measures that regulate gold import. Section 3(2) FTDR authorises prohibition, restriction or regulation of imports by order; Section 3(3) deems such orders to be prohibition under Section 11 of the Customs Act. The FTP and ITC(HS) that made gold import "subject to RBI regulations" and subsequent DGFT/RBI/CUSTOMS measures that channelled import through nominated agencies and imposed conditions therefore form part of the legal regime which can render non compliance a prohibition. The court rejected the argument that only a Section 11 notification is effective and held that the cumulative statutory and subordinate measures bear on whether an import is lawful or prohibited. [Paras 46, 48, 139, 141]

FTDR/FTP/ITC(HS) measures and RBI/DGFT/CUSTOMS notifications/circulars are legally operative; non compliance with those regulatory conditions can render gold imports "prohibited" for purposes of the Customs Act.

Final Conclusion: The writ petitions are dismissed. The Court held that the statutory concept of "prohibited goods" embraces imports made in breach of conditions or restrictions imposed under the Customs Act, the FTDR Act and relevant policy/circular measures; gold imported in contravention of that regulatory regime (including clandestine, non declared imports amounting to smuggling) may be treated as prohibited and is liable to confiscation, and redemption under Section 125 is discretionary in such cases (mandatory only for non prohibited goods). The adjudicating authority must exercise its Section 125 discretion reasonably, transparently and in light of public interest considerations.

Absolute confiscation - re-export of detained imported goods - redemption fine - penalty under Section 112 of the Customs Act, 1962 - non-declaration under Section 77 of the Customs Act, 1962 - bona fide owner - exercise of revisional power

Bona fide owner - re-export of detained imported goods - redemption fine - penalty under Section 112 of the Customs Act, 1962 - exercise of revisional power - Whether the respondents were justified in refusing to release the confiscated gold after the Revisional Authority permitted re export on payment of a redemption fine and upheld the penalty, where the petitioner complied with the Revisional Authority's conditions (payment of penalty within time and payment of redemption fine with a 15 day delay) and the Revisional Authority's order was not challenged by the Revenue. - HELD THAT: - The Revisional Authority recorded that the petitioner was the bona fide owner of the impugned goods, accepted that no baggage declaration could be filed because the goods were intercepted before the green channel, and allowed re export of the goods on payment of a redemption fine while upholding the penalty. The Revisional Authority's direction constituted an exercise of revisional power permitting re export subject to specified payments. The petitioner complied with the Revisional Authority's directions by paying the penalty within time and paying the redemption fine albeit with a 15 day delay, and the Revenue did not challenge the Revisional Authority's order in a higher forum. In those circumstances the continued refusal by the Customs authority to release the goods was held to be harsh, arbitrary and illegal. The Court therefore directed release of the goods and allowance of re export in accordance with the Revisional Authority's order within a stipulated period.

Writ petition allowed; respondents directed to release the gold and permit re export as per the Revisional Authority's order dated 10 October 2019 within 30 days.

Final Conclusion: The High Court set aside the respondents' refusal to release the gold and directed compliance with the Revisional Authority's order permitting re export on payment of the prescribed redemption fine and the penalty, the petitioner having complied with those conditions and the Revisional Authority's order remaining unchallenged.

Detention and seizure of goods - provisional attachment of bank accounts to protect revenue - jurisdiction to detain goods sold in open market and held by bona fide third party purchasers - power to seize or detain goods under Section 110(1) of the Customs Act - provisional attachment of property under Section 28-BA of the Customs Act - criminal liability under Section 135 for dealing with goods liable to confiscation - right of bona fide purchaser / third party purchaser - inspection and unsealing of premises in presence of representatives

Detention and seizure of goods - jurisdiction to detain goods sold in open market and held by bona fide third party purchasers - power to seize or detain goods under Section 110(1) of the Customs Act - Detention of the goods described in Table A of the panchanama dated 26 July 2023 was without jurisdiction and illegal. - HELD THAT: - The court held that the respondents admitted the goods originally imported by M/s ST Electricals had been cleared for home consumption and subsequently sold in the open market, and that the goods detained from the petitioner were not the same goods as those imported but only of a similar description. On that admission the respondents had no material to show that the petitioner was not a bona fide third party purchaser or that the detained goods were the very goods subject to investigation. Section 110(1) permits seizure where the proper officer has reason to believe goods are liable to confiscation, and the proviso permits restraint where seizure is impracticable; but there was no prima facie material to connect the detained goods to the import under investigation. Allowing detention of goods in the hands of subsequent purchasers in such circumstances would lead to anomalous consequences. Reliance on Section 110 and on recovery provisions in Section 28 was misconceived where there was no demand, notice or proceedings against the petitioner and no evidence of connivance or non bona fides. Accordingly the detention was declared illegal and ordered to be revoked, and documents detained in Table B were directed to be returned. [Paras 19, 20, 21, 23, 28]

Detention of the goods in Table A was illegal and revoked on production of this order; documents in Table B to be returned.

Provisional attachment of bank accounts to protect revenue - provisional attachment of property under Section 28-BA of the Customs Act - provisional attachment of bank accounts under Section 110(5) of the Customs Act - requirement of a demand or proceedings before attachment - Attachment (freezing) of the petitioner's bank accounts was without jurisdiction and unlawful and the Savings Account was to be defreezed. - HELD THAT: - The court observed that provisions relied upon by the respondents, including Section 28, Section 110(5) and Section 28-BA, do not justify attachment of a third party's bank account in the absence of any demand, notice or ongoing proceedings against that third party. The respondents produced no material to show that attachment was necessary to protect revenue or to prevent smuggling in relation to the petitioner, nor did they show service of any notice under the relevant recovery provisions. The affidavit reliance on communications from Jaipur authorities was not supported by annexures and the respondents could not show they had applied independent mind. On these facts, provisional attachment of the petitioner's bank accounts could not be sustained and the Savings Account was ordered to be defreezed and the bank informed. [Paras 21, 22, 25, 26, 28]

Attachment of the petitioner's bank accounts was illegal; Savings Account to be defreezed and respondents to intimate the bank.

Final Conclusion: The petition is allowed: the detention of goods listed in the panchanama is declared illegal and revoked; documents detained are to be returned; the petitioner's Savings Account is to be defreezed and the bank informed; the petitioner must cooperate with ongoing proceedings against M/s ST Electricals. Observations are confined to the present proceedings.

Validity of Export Obligation Discharge Certificate issued by DGFT - Authority of Customs to proceed against alleged breach of EPCG conditions despite EODC - Use of imported vehicles for fulfillment of EPCG export obligation - Requirement of registration as tourist vehicle for EPCG-imported cars - Attribution of foreign exchange earned from allied services to use of imported vehicle - Pre-emption of licensing authority by adjudicating/customs authority

Validity of Export Obligation Discharge Certificate issued by DGFT - Pre-emption of licensing authority by adjudicating/customs authority - Whether Customs could sustain a demand and confiscation for alleged non-fulfilment of EPCG conditions after the DGFT issued Export Obligation Discharge Certificate (EODC). - HELD THAT: - The Tribunal examined earlier decisions holding that once the licensing authority (DGFT) has certified discharge of export obligation by issuing EODC, the customs authorities cannot ignore that certification and proceed to recover duty or otherwise treat the imports as ineligible. The reasoning emphasises that the licensing authority is vested with the final responsibility to determine fulfilment of the licence conditions and that an adjudicating authority under the Customs Act must not pre-empt that statutory function. Applying those precedents to the facts, where EODC had been issued in respect of the EPCG licence, the Tribunal found that the department could not sustain demands or confiscation premised on contrary findings made without awaiting or obtaining the licensing authority's determination. [Paras 12, 14]

Demand, confiscation and penalties based on alleged non-fulfilment were not sustainable in view of the EODC; the impugned order was upheld and the departmental appeals dismissed.

Use of imported vehicles for fulfillment of EPCG export obligation - Attribution of foreign exchange earned from allied services to use of imported vehicle - Whether export obligation under the EPCG scheme must be discharged exclusively by foreign exchange earned directly from hire/use of the imported vehicle. - HELD THAT: - The Tribunal followed binding and persuasive authorities which held that the EPCG licence does not require that export obligation be fulfilled solely by amounts collected directly by use of the imported vehicle. Where the imported cars are used for hotel/tourism purposes and such use is instrumental in attracting foreign exchange-by facilitating bookings, sightseeing, accommodation or related services-those foreign exchange earnings can be treated as earned by use of the vehicle for purposes of discharge of the obligation. Applying that principle and prior tribunal and high court decisions, the Tribunal found no legal requirement for exclusivity of earnings from direct vehicle hire. [Paras 12]

Foreign exchange earned from allied services, when the vehicle is used for hotel/tourism operations, can be counted towards EPCG export obligation; the allegation of exclusive earning requirement failed.

Requirement of registration as tourist vehicle for EPCG-imported cars - Validity of post-import re-registration and DGFT relaxation - Whether failure to register the imported vehicle immediately as a tourist vehicle destroyed eligibility under the EPCG notification when the vehicle was later re-registered as a tourist vehicle in accordance with DGFT guidance. - HELD THAT: - The Tribunal noted the DGFT circular and prior rulings which permitted conversion/registration of vehicles as tourist vehicles within the prescribed timelines and recognised relaxations for past cases. Where the vehicle had been re-registered as a tourist vehicle prior to issuance of EODC and within the applicable regulatory scheme, the Tribunal treated the re-registration and DGFT's supervisory role as sufficient to cure the initial registration status. Consequently, non-registration at the very outset did not, on the facts, justify denial of the notification benefit. [Paras 12]

Re-registration as a tourist vehicle in accordance with DGFT position and prior to EODC did not vitiate the benefit; the contention of invalid registration was rejected.

Final Conclusion: Following earlier tribunal and judicial precedents and having regard to the issuance of EODC by DGFT and the scope of EPCG obligations (including attribution of allied-service foreign exchange and permitted re-registration as tourist vehicle), the Tribunal dismissed the departmental appeals and sustained the impugned order in favour of the respondent.

Revocation of authorization of courier - forfeiture of security deposit - vicarious liability of employer for acts of employee - obligation to obtain consignee authorization and exercise due diligence - import of prohibited/undeclared goods and confiscation

Revocation of authorization of courier - vicarious liability of employer for acts of employee - obligation to obtain consignee authorization and exercise due diligence - Whether the revocation of the appellant's registration as an authorized courier was justified - HELD THAT: - The Tribunal found that the clandestine manipulation of the appellant's import manifest and the false clearance of consignments were carried out by an individual employee (Sri Naveen Kumar) and his associates without the knowledge or involvement of the appellant company. The employee admitted responsibility and was subsequently terminated. The show cause notice and impugned order did not establish any overt act by the appellant or allege corporate complicity beyond the failure to obtain consignee authorization. Having regard to these findings, and the appellant's cooperation with the investigation, the Tribunal concluded that revocation of the appellant's authorization was not sustainable. The determination distinguishes between individual employee misconduct and corporate culpability, and declines to impute vicarious liability sufficient to warrant revocation where no agency or managerial participation by the employer is established. [Paras 13]

Order of revocation of registration set aside; revocation quashed.

Forfeiture of security deposit - obligation to obtain consignee authorization and exercise due diligence - Whether forfeiture of the appellant's security deposit was warranted and, if so, the quantum - HELD THAT: - The Tribunal accepted that the appellant failed to obtain the requisite consignee authorization and therefore breached obligations under the Courier Regulations to exercise due diligence. In view of that regulatory lapse, some penalty is appropriate. However, the original forfeiture of the entire security deposit was held to be excessive in the facts of the case where the wrongful clearance was effected by an individual employee without the appellant's knowledge and where the appellant cooperated with inquiries and terminated the employee. Exercising its discretion, the Tribunal reduced the forfeiture to an amount it considered adequate and proportionate to the regulatory failure. [Paras 13, 14]

Forfeiture upheld in principle but reduced to Rs.5,00,000; balance of security deposit to be restored if applicable.

Final Conclusion: The appeal is partly allowed: the revocation of the appellant's license is set aside, but forfeiture of a security deposit is confirmed in reduced measure (Rs.5,00,000).

Condonation of delay - sufficient cause - substantial justice over technicality - limitation under Section 128 of the Customs Act, 1962 - remand for decision on merits - principles of natural justice

Condonation of delay - sufficient cause - substantial justice over technicality - remand for decision on merits - principles of natural justice - Whether the Commissioner (Appeals) was justified in refusing to condone the delay of 23 days in filing the appeal and dismissing the appeal on the ground of limitation. - HELD THAT: - The Appellate Tribunal found that the sole reason given in the impugned order for refusing condonation - that the appellant's explanation was "flimsy and casual" and that the appellant had admitted payment of excess duty - did not justify dismissal without permitting adjudication on merits. Relying on the settled judicial approach that courts and tribunals should adopt a liberal, justice-oriented view in cases of delay, the Tribunal noted authority to the effect that refusal to condone delay may result in denial of substantial justice and that the expression "sufficient cause" must be interpreted flexibly. The judgment refers to Municipal Corporation, Gwalior vs Ramcharan and to Kothari Sugars And Chemicals Ltd in support of the principle that delay ought to be condoned where substantial justice requires and that matters should, where appropriate, be decided on merits rather than defeated on technical grounds. Applying those principles, the Tribunal concluded that the Commissioner (Appeals) ought to have condoned the 23-day delay and afforded the appellant an opportunity to have the appeal heard on merits in accordance with the rules of natural justice; accordingly the matter was remanded to the Appellate Authority for fresh decision on merits after hearing the parties.

Delay of 23 days in filing the appeal is condoned and the matter is remitted to the Appellate Authority for decision on merits after affording opportunity of hearing in accordance with the principles of natural justice.

Final Conclusion: The Tribunal allowed the appeal to the extent of condoning the delay of 23 days and set aside the dismissal for limitation, directing that the appeal be heard and decided on merits by the Appellate Authority after affording the parties a proper opportunity of hearing.

Related party valuation - enhancement of declared invoice value - commercial level / volume of imports as relevant to valuation - comparison with sporadic imports not permissible for valuation enhancement - acceptance of invoice value where no under invoicing established

Related party valuation - commercial level / volume of imports as relevant to valuation - comparison with sporadic imports not permissible for valuation enhancement - enhancement of declared invoice value - Whether the Adjudicating Authority was justified in enhancing the declared invoice values by comparing the assessee's bulk/regular imports with sporadic imports of other importers and treating the overseas exporter (a related party) as having influenced prices. - HELD THAT: - The Commissioner (Appeals) examined factual material and applied established principles that recurrent contractual obligations and differences in import volumes affect commercial levels and pricing; therefore simple invoice-to-invoice comparison with sporadic third party imports of dissimilar quantities is not a reliable basis to conclude that prices charged by a related overseas exporter were influenced. The Commissioner (Appeals) held that where no under invoicing is shown and where the assessee's imports were in substantially larger and regular consignments as compared to the sporadic, smaller imports relied upon by the Department, enhancement of value on that basis is unjustified. The Tribunal noted that the Revenue did not raise any specific point to impeach the reasoned findings recorded by the Commissioner (Appeals) and, on that footing, declined to interfere with the appellate authority's conclusions. [Paras 3, 4, 7]

Enhancements made by the Adjudicating Authority were set aside to the extent challenged; the Commissioner (Appeals) reasoning that price comparisons with sporadic, smaller imports were inappropriate was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal dismissed the Department's appeal and upheld the considered findings of the Commissioner (Appeals) that enhancement of the declared invoice values based on comparison with sporadic, smaller third party imports was not justified; the appeal was therefore dismissed and the cross objection disposed of.

Mis-declaration of quantity to evade customs duty - theoretical standard weight basis - absence of mala fide / mens rea - confiscation of goods - penalty and redemption fine in lieu of confiscation - discharge of differential customs duty

Mis-declaration of quantity to evade customs duty - theoretical standard weight basis - absence of mala fide / mens rea - confiscation of goods - penalty and redemption fine in lieu of confiscation - discharge of differential customs duty - Whether the excess actual weight discovered at examination amounted to a deliberate mis-declaration attracting confiscation and penalty, or was a bona fide discrepancy arising from invoicing on a theoretical weight basis - HELD THAT: - The Tribunal found on the material that the number of plates imported matched the invoice and only the weight varied because the invoice disclosed weight computed on a standard theoretical basis for the particular plate sizes. The appellant had neither altered the number of plates nor under invoiced on value; the invoicing practice used a theoretical standard weight which can produce minor differences with actual weighed quantity. Further, the appellant paid the invoice value and also discharged the differential customs duty after the excess weight was found. In these circumstances the Tribunal concluded there was no intention to evade duty (no mala fide) and therefore the excess weight did not constitute a mis declaration warranting confiscation or imposition of penalty and redemption fine. The Tribunal disagreed with the findings of the lower authorities and set aside the orders of confiscation, redemption fine and penalty. [Paras 4, 5]

Appeal allowed; impugned order set aside and orders of confiscation, redemption fine and penalty quashed.

Final Conclusion: The Tribunal held that variance between theoretical invoiced weight and actual weight, where number of plates matched and differential duty was paid, did not constitute deliberate mis declaration; therefore confiscation, redemption fine and penalty were set aside and the appeal allowed.

Amendment to Rule 8A - reasonableness of legislative classification - Article 14 - judicial restraint in economic policy - administrative directions for corporate governance - formation of High Power Committee - deregistration of shell companies - provisions for fraud and SFIO - E-FORM INC-22A (ACTIVE) - remedies by representation or appropriate proceedings

Amendment to Rule 8A - reasonableness of legislative classification - Article 14 - judicial restraint in economic policy - Validity of the amendment to Rule 8A increasing the paid-up capital threshold for mandatory whole-time company secretary from Rs.5 crores to Rs.10 crores and whether the amendment is arbitrary or violative of Article 14. - HELD THAT: - The Court held that the increase in the paid-up capital threshold is an adjustment to nullify the effect of inflation and to further objectives such as ease of doing business and reduction of compliance burden. Such policy decisions involve technical, commercial and administrative considerations and ordinarily call for judicial restraint. The amendment is not shown to be ex facie arbitrary, capricious or bearing no nexus to the object sought to be achieved; accordingly it cannot be struck down under Article 14 on the material placed before the Court. Reliance was placed on the principle that courts should not substitute their judgment for expert administrative or policy choices unless arbitrariness is demonstrated.

Challenge to the amendment to Rule 8A is rejected; the amendment is not declared arbitrary or violative of Article 14.

Administrative directions for corporate governance - formation of High Power Committee - Prayers seeking issuance of guidelines for enforcement of corporate governance and constitution of a High Power Committee to examine lapses leading to closure of companies. - HELD THAT: - The Court regarded these prayers as far-fetched and not requiring detailed judicial consideration in the present petition. No substantive directions or formation of such a committee were ordered by the Court in this proceeding.

Prayers for issuance of guidelines and formation of a High Power Committee are not accepted and were not entertained for detailed adjudication.

Deregistration of shell companies - provisions for fraud and SFIO - Whether the Government's steps to de-register paper/shell companies and the existing statutory machinery (including SFIO and penalty provisions) justify relief to defaulting companies. - HELD THAT: - The Court noted the counter-affidavit describing measures taken to de-register companies engaged in wrongful activities and observed that the Companies Act, 2013 contains provisions to deal with fraud and related misconduct, with the Serious Fraud Investigation Office empowered to act and stringent penalties provided. Given this statutory framework and the misconduct of defaulting companies, no relief can be granted to such entities, as that would amount to relief to parties approaching the Court with unclean hands.

No relief is available to defaulting/paper companies; the existing statutory machinery and enforcement steps suffice for the purposes of this petition.

E-FORM INC-22A (ACTIVE) - remedies by representation or appropriate proceedings - Petitioner's grievance regarding non-issue/non-compliance of E-FORM INC-22A (ACTIVE) and the appropriate course of action. - HELD THAT: - The Court made no comment on the grievance itself but indicated that the petitioner, if advised, may make a representation or initiate appropriate proceedings, which will be decided in accordance with law. The Court did not entertain or adjudicate the substantive grievance in the present petition.

No adjudication on the INC-22A grievance; petitioner may pursue representation or appropriate proceedings.

Final Conclusion: The writ petition is dismissed for lack of merit; the challenge to the amendment of Rule 8A is rejected, the ancillary prayers for guidelines and a High Power Committee are not entertained, no relief is granted to defaulting companies given the statutory machinery, and the petitioner's grievance regarding INC-22A is left to be pursued by representation or appropriate proceedings; pending applications stand disposed of.

Prohibition on extinguishment of secured creditor's right to proceed against personal guarantor under Section 30(2)(e) - resolution plan may provide for satisfaction or modification of security interest under Regulation 37 - commercial wisdom of the Committee of Creditors - approval of resolution plan binding under Section 31 but not ipso facto discharge of guarantor - moratorium inapplicable to personal guarantors

Resolution plan may provide for satisfaction or modification of security interest under Regulation 37 - approval of resolution plan binding under Section 31 but not ipso facto discharge of guarantor - prohibition on extinguishment of secured creditor's right to proceed against personal guarantor under Section 30(2)(e) - commercial wisdom of the Committee of Creditors - Whether a resolution plan can contain a clause extinguishing personal guarantees given to financial creditors and thereby deal with such security interests. - HELD THAT: - The Tribunal held that a resolution plan can deal with security interests and may, subject to the terms of the plan and the process set out in the Code and Regulations, provide for relinquishment or satisfaction of rights arising from personal guarantees. Regulation 37 expressly contemplates satisfaction or modification of any security interest and information regarding personal guarantees is required to be placed before the CoC. Supreme Court authorities recognise that approval of a resolution plan is binding under Section 31 but do not lay down a blanket rule that personal guarantees can never be discharged; rather they indicate that guarantees are not ipso facto discharged by operation of law. Where the CoC, after deliberation and with necessary information, takes a considered commercial decision (here by 78.04% voting share) to allocate value towards extinguishment of personal guarantees, that commercial wisdom is to be given weight. The Tribunal distinguished authorities which preclude consuming a guarantor's property without appropriate proceedings, noting that the present plan did not purport to directly appropriate guarantor property but provided for relinquishment of guaranties as part of the resolution consideration. Accordingly, the Adjudicating Authority erred in rejecting the plan solely because it contained a clause for extinguishment of personal guarantees. [Paras 22, 23, 28, 29, 30]

The resolution plan's clause to extinguish personal guarantees, after deliberation by the CoC and allocation of value, did not contravene the Code and was not a valid ground for rejection.

Commercial wisdom of the Committee of Creditors - prohibition on extinguishment of secured creditor's right to proceed against personal guarantor under Section 30(2)(e) - Whether the Adjudicating Authority's order rejecting approval of the resolution plan should be set aside and the matter remitted for fresh consideration. - HELD THAT: - Having found that the Adjudicating Authority was not correct in holding that the plan could not contain a provision for extinguishment of personal guarantees, the Tribunal set aside the impugned order dated 06.01.2023. The Tribunal directed the Adjudicating Authority to proceed to pass a fresh order on IA No.190 of 2021 in accordance with law and to endeavour to do so within three months from production of the copy of the Tribunal's order. This is a remand for fresh adjudication consistent with the legal conclusions reached by the Tribunal. [Paras 29, 30]

Order dated 06.01.2023 is set aside; matter remitted to the Adjudicating Authority to pass a fresh order on the application for approval of the resolution plan within three months.

Final Conclusion: Appeal allowed. The Tribunal held that a resolution plan may validly provide for satisfaction or modification (including relinquishment) of rights arising from personal guarantees where such treatment was part of the informed commercial decision of the CoC; the Adjudicating Authority's rejection of the plan on the ground that personal guarantees could not be extinguished was set aside and the matter remitted for fresh disposal by the Adjudicating Authority within three months.

Review of judgment - Recall of judgment - Failure to consider material submissions - Distinct statutory regimes for goods and services - Tagging and clubbing of appeals - Stay of coercive recovery pending disposal of appeal - Service tax on renting of immovable property

Review of judgment - Failure to consider material submissions - Distinct statutory regimes for goods and services - Service tax on renting of immovable property - The review petition against the judgment dated 10 April 2023 was allowed and the earlier judgment recalled. - HELD THAT: - The Court found that the judgment under review recorded the CESTAT's view and adverted to certain High Court decisions but did not record or consider substantial submissions advanced by the Union of India, including the contention that the statutory regime applicable to goods is distinct from the regime applicable to services (and later IGST), a point which could materially affect the outcome. Given the potential for large consequential ramifications and the failure to consider those submissions in the judgment under review, the Court considered it appropriate to permit review and recall the earlier order so that the issues may be expeditiously and properly considered on the merits. [Paras 12, 13, 14]

Review allowed; the judgment dated 10 April 2023 is recalled and Civil Appeal No. 2753 of 2023 is restored to the file for final disposal.

Tagging and clubbing of appeals - Recall of judgment - Stay of coercive recovery pending disposal of appeal - The restored appeal was ordered to be tagged with identified companion appeals and a prohibition on coercive recovery was directed pending final disposal. - HELD THAT: - The Court noted the existence of multiple pending appeals raising the same or closely related questions (as set out in the tabulated statement) and observed the request to tag and club these matters so they can be heard together by a single Bench. In the exercise of case management and to ensure coherent adjudication of the common issue, the Court directed that the restored civil appeal be tagged with the listed appeals and that the Registry obtain administrative directions for clubbing and expeditious hearing. As an incidental but necessary protective measure while the appeal is pending restoration and final disposal, the Court directed that no coercive steps shall be taken for recovery of the dues. [Paras 15, 16, 19]

Civil Appeal No. 2753 of 2023 restored and tagged with the listed appeals for clubbing and hearing by one Bench; no coercive recovery pending disposal of the appeal.

Final Conclusion: The review petition is allowed; the earlier judgment dated 10 April 2023 is recalled, Civil Appeal No. 2753 of 2023 is restored and tagged with the identified companion appeals for clubbing and expedited hearing, and no coercive steps for recovery shall be taken pending final disposal of the appeal.

Service tax as an indirect/consumption tax to be borne by the service recipient - right of the service provider to recover service tax from the recipient under Section 83 read with Sections 12A and 12B (legislation by incorporation) - construction of lease covenants relating to 'property tax, municipal tax and all other outgoings' and 'future increment in taxes' - pendency/pendente lite interest for deprivation of use of money

Service tax as an indirect/consumption tax to be borne by the service recipient - right of the service provider to recover service tax from the recipient under Section 83 read with Sections 12A and 12B (legislation by incorporation) - construction of lease covenants relating to 'property tax, municipal tax and all other outgoings' and 'future increment in taxes' - Liability for service tax payable in respect of rent for the lease period and the entitlement of the lessor to recover it from the lessee - HELD THAT: - The Court held that the controversy is governed by consistent decisions of this Court which treat service tax as an indirect, value added/consumption tax ultimately borne by the user of the service, even though the provider is statutorily liable to pay to the exchequer. By application of Section 83 (making Sections 12A and 12B of the Central Excise Act applicable), there is statutory recognition that incidence of such tax may be passed on and a legal right exists in the service provider to recover the tax from the recipient. The Court examined the lease covenants and accepted the Trial Court's construction that, although service tax was not envisaged when the deeds were executed, the parties agreed that the lessor would bear existing property related taxes while the lessee would bear future increments; on that basis and having regard to prior decisions of this Court, the Bank (lessee) was held liable to reimburse the service tax paid by the Plaintiff (lessor) for the period in question. The Supreme Court's decision in Bengal Shrachi was considered but did not displace the consistent Delhi High Court line of authority in the factual matrix where the leases predated the levy and the parties contemplated only existing taxes. [Paras 15, 23, 24]

Decree for recovery of service tax from the Bank is upheld; the lessor is entitled to recover the service tax paid by him from the lessee for the lease period.

Pendency/pendente lite interest for deprivation of use of money - Entitlement to pendente lite interest on the decretal service tax amount and the period for which it is awarded - HELD THAT: - The Court held that a party wrongly deprived of the use of its money must be compensated and that pendente lite interest is appropriate where the defendant has retained money belonging to the plaintiff without legal authority. Because the suit was filed on 06.12.2013, the plaintiff could not claim pendente lite interest prior to that date. The Court therefore awarded interest at 12% per annum for the period 06.12.2013 to 30.05.2015, modifying the Trial Court's decree which had declined pendente lite interest. [Paras 25, 26]

Plaintiff entitled to pendente lite interest @12% p.a. from 06.12.2013 to 30.05.2015; decree otherwise upheld.

Final Conclusion: Appeal by HDFC Bank (RFA No.59/2021) dismissed; appeal by the Plaintiff (RFA No.196/2021) partly allowed to the extent of awarding pendente lite interest @12% p.a. from 06.12.2013 to 30.05.2015; the Trial Court's decree for recovery of service tax is otherwise upheld.

Business Auxiliary Service - Business Support Service - classification of services by agreement - nomenclature in books not decisive - adequacy of show cause notice

Business Auxiliary Service - Business Support Service - classification of services by agreement - nomenclature in books not decisive - Whether the services rendered by the appellants fall under Business Auxiliary Service (taxable during the impugned period) or under Business Support Service (not taxable during the impugned period). - HELD THAT: - The Tribunal examined the agreements and offer letter and found no specification that the appellants performed administrative tasks such as payroll maintenance, attendance records, office supplies management, meeting planning or appointment scheduling as claimed by the appellants. The contractual documents, including the Tiger Logistics offer letter and the Color Bar "Business Support Agreement", describe appointment of the appellants to manage distribution and logistics and to act as facilitator for promotion, processing of orders, tracking deliveries and related functions, and provide for remuneration as a percentage of revenue/billing. The Tribunal held that the nature of services must be discerned from the contract (oral or written) and not from mere nomenclature in books of account; since the contracts indicate services rendered in relation to the principals' distribution and logistics functions, the services are properly classifiable as Business Auxiliary Service for the impugned period and not as administrative Business Support Service which, in any event, is not chargeable during the period in dispute. [Paras 9]

The services rendered by the appellants are held to be Business Auxiliary Service; the impugned order confirming demand is upheld.

Adequacy of show cause notice - Whether the show cause notice was inadequate for failure to specify the sub heading or otherwise infirm so as to vitiate the proceedings. - HELD THAT: - The Tribunal considered the content of the show cause notice and the appellants' replies. It observed that the notice and related communications sufficiently informed the assessee of the Revenue's contention that the commission receipts arose from services rendered on behalf of the principals in relation to management of distribution and logistics. The Tribunal rejected the contention that absence of a specific sub heading rendered the notice invalid, holding that the object of a show cause notice is to inform the assessee so that relevant facts can be placed on record and that this purpose was met. [Paras 7, 9]

The show cause notice is not rendered invalid; it was adequate to inform the assessee of the Revenue's case.

Final Conclusion: The appeal is dismissed; the demand confirmed by the lower authorities is upheld, the services are classified as Business Auxiliary Service for the period 01.04.2005 to 31.03.2006, and the show cause notice was held to be adequate.

Extended period of limitation under Section 73(1) of the Finance Act, 1994 - suppression of facts requires intent - mens rea requirement for invoking extended limitation (fraud, collusion, wilful misstatement, suppression, violation with intent) - self-assessment regime does not by itself constitute wilful suppression - Rule 6(5) of the Cenvat Credit Rules, 2004 - full credit where input services are not exclusively for exempted services - onus on the assessing officer to scrutinise returns and make best judgment assessment under Section 72

Extended period of limitation under Section 73(1) of the Finance Act, 1994 - suppression of facts requires intent - mens rea requirement for invoking extended limitation (fraud, collusion, wilful misstatement, suppression, violation with intent) - self-assessment regime does not by itself constitute wilful suppression - Validity of invocation of extended period of limitation to recover alleged irregularly availed CENVAT credit - HELD THAT: - The Tribunal examined whether the proviso to Section 73(1) permitting reopening beyond the normal limitation could be invoked. The court held that the proviso permits extended limitation only where one of the specified conditions involving mens rea (fraud, collusion, wilful misstatement, suppression of facts or violation of the Act/Rules with intent to evade) is established. Suppression of facts must be deliberate and intentional; mere omission or a difference of opinion between the assessee and Revenue does not amount to suppression with intent. Operating under a self-assessment regime, depositing disputed amounts during audit, failing to seek departmental clarification, or not disclosing invoice-level details in ST-3 returns (which do not require such particulars) cannot, without more, be treated as wilful suppression. The statutory scheme places responsibility on the assessing officer to scrutinise returns and make best judgment assessments under Section 72; shortcomings in departmental scrutiny or CBEC's policy on selective detailed scrutiny do not convert ordinary escapes into cases warranting extended limitation. Applying these principles, the Tribunal found no evidence of the requisite mens rea and therefore concluded that extended period of limitation was not rightly invoked for the demands except insofar as admitted by the appellant. [Paras 15, 16, 20, 25, 26]

Extended period of limitation under Section 73(1) cannot be invoked; finding in favour of the appellant and setting aside the impugned order insofar as it invokes extended limitation, except as conceded.

Rule 6(5) of the Cenvat Credit Rules, 2004 - full credit where input services are not exclusively for exempted services - onus on the assessing officer to scrutinise returns and make best judgment assessment under Section 72 - Admissibility of CENVAT credit and recovery for the period 2011-12 in respect of architectural services - HELD THAT: - Having decided the limitation point in favour of the appellant, the Tribunal did not examine the merits of the bulk of the CENVAT credit demand. However, it recorded that the appellant conceded that CENVAT credit of architectural services for 2011-12 was not available (an exclusion introduced w.e.f. 31.03.2011) and therefore allowed recovery of that portion and interest. The Tribunal thus upheld denial of CENVAT credit and recovery for the admitted architectural services for 2011-12, while disposing of the remainder of the demand as time-barred. [Paras 6, 26, 27]

Impugned order set aside except insofar as it denied CENVAT credit of Rs.1,45,724 for architectural services for 2011-12 (and interest/recovery), which was upheld.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the impugned remand order insofar as it invoked the extended period of limitation for recovery of alleged ineligible CENVAT credit for the period 2007-08 to 2011-12, holding that mens rea for extended limitation was not established; only the denial and recovery of CENVAT credit in respect of architectural services for 2011-12 (as admitted) and attendant interest was upheld.

Transfer of CENVAT credit under Rule 10 of the Cenvat Credit Rules, 2004 - Change in ownership / transfer of factory - Transfer of capital goods and inputs along with factory - Transfer of liabilities limited to factory premises - No requirement of prior permission for transfer (pre Amendment w.e.f. 02.02.2017) - Correlation of invoices with RG 23C not a mandatory precondition - Rule 3 (removal of capital goods) not attracted where factory premises and capital goods remain in situ - Remand for quantification/valuation of admissible CENVAT credit

Transfer of CENVAT credit under Rule 10 of the Cenvat Credit Rules, 2004 - Change in ownership / transfer of factory - Transfer of capital goods and inputs along with factory - Respondent entitled to transfer the unutilized CENVAT credit lying in the books of Vivin Laboratories to the respondent under Rule 10 of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal found that there was a change of ownership of the factory premises and that capital goods were transferred to the respondent by invoices contemporaneous with the sale deed. The Range Officer's verification recorded that no inputs were lying in stock and that capital goods were installed at the premises taken over. On a combined reading of Rule 10(1) and (3), and having considered the documents produced (sale deed, invoices, RG 23C extracts and Project Implementation Agreement), the Tribunal held that the transfer of accumulated CENVAT credit was permissible where the factory ownership changed and the capital goods/inputs on which credit had been availed were transferred and duly accounted for to the satisfaction of the proper officer. The Tribunal therefore upheld the Commissioner (Appeals) conclusion that the respondent was legally entitled to take over the CENVAT credit of the transferor. [Paras 9, 48]

Transfer of the unutilized CENVAT credit to the respondent under Rule 10 allowed; appeal dismissed on this ground.

No requirement of prior permission for transfer (pre Amendment w.e.f. 02.02.2017) - Transfer of CENVAT credit under Rule 10 of the Cenvat Credit Rules, 2004 - Prior application/permission to the Assistant/Deputy Commissioner was not a legal precondition for transfer of CENVAT credit under Rule 10 for the relevant period. - HELD THAT: - The Tribunal noted that the statutory requirement for filing an application and a time limit for decision was introduced only by the 2017 amendment to Rule 10. For the period under dispute no provision required prior sanction; the rule contemplated transfer where conditions in Rule 10(1) and (3) were satisfied and did not mandate prior permission as a condition precedent. The respondent therefore could not be faulted for having taken credit prior to a formal allowance by the original authority during the pre amendment period. [Paras 13, 48]

No prior permission was required under Rule 10 for the relevant period; taking of credit by respondent did not by itself defeat entitlement.

Correlation of invoices with RG 23C not a mandatory precondition - Transfer of capital goods and inputs along with factory - Absence of a granular correlation between items in the transferor's RG 23C and the invoices is not a fatal defect preventing transfer of CENVAT credit where capital goods and inputs have been transferred and duly accounted for. - HELD THAT: - The Tribunal rejected the Department's contention that transfer must be denied because the invoices and RG 23C entries did not precisely correlate. Rule 10 does not prescribe a particular documentary format or that transfer must be effected by a single instrument; separate documents for land and for plant/machinery are permissible. The decisive inquiry is whether the capital goods/inputs on which credit was availed were transferred and accounted for to the satisfaction of the proper officer, not hyper technical matching of each line item. [Paras 16, 17, 18, 48]

Lack of strict co relation between invoice annexures and RG 23C did not preclude transfer of CENVAT credit.

Transfer of liabilities limited to factory premises - Change in ownership / transfer of factory - The requirement of 'specific provision for transfer of liabilities' in Rule 10(1) is to be understood with reference to liabilities pertaining to the factory premises transferred; there were no outstanding liabilities on the premises as at transfer. - HELD THAT: - The Tribunal observed that the term 'factory' and its precincts must be read in context and the liabilities relevant for Rule 10 are those attaching to the premises (e.g., encumbrances, liens) rather than all corporate liabilities. The sale deed and accompanying schedule represented that no outstanding liabilities in respect of the property existed on the date of transfer, and the respondent furnished an undertaking to discharge any future liabilities arising from acquisition of the premises. On these facts the Tribunal held the 'transfer of liabilities' condition was satisfied. [Paras 25, 31, 32, 48]

Condition as to transfer of liabilities satisfied in relation to the factory premises; no bar to transfer of credit.

Rule 3 (removal of capital goods) not attracted where factory premises and capital goods remain in situ - Rule 3 of the Cenvat Credit Rules (governing removal) is not applicable where capital goods remain at the same premises and only ownership changes. - HELD THAT: - The Tribunal accepted the respondent's submission that there was no 'removal' of capital goods; they remained installed in the same factory premises and only ownership changed by sale. Consequently the provisions governing removal did not apply and the correct provision to govern transfer of the unutilized credit was Rule 10, relating to change of ownership. [Paras 48]

Rule 3 not applicable; Rule 10 governs and permits transfer in the facts of this case.

Remand for quantification/valuation of admissible CENVAT credit - The quantum of CENVAT credit admissible to be transferred was not finally quantified by the Appellate Authority and the matter was remanded to the original authority for quantification based on documents. - HELD THAT: - While upholding the legal entitlement to transfer, the Commissioner (Appeals) directed that the appellant furnish all records/documents for quantification and remitted the matter to the original authority to quantify the admissible credit. The Tribunal noted that the Commissioner (Appeals) had identified the quantification as the only remaining issue and had given scope for verification by the original authority; accordingly, quantification remains to be completed by the Assistant/Deputy Commissioner on the materials directed to be produced. [Paras 37, 38]

Matter remanded to the original authority for quantification of the admissible CENVAT credit.

Final Conclusion: The appeal by Revenue is dismissed. The Tribunal holds that on the facts and documents produced the respondent is entitled to the transfer of the unutilized CENVAT credit of the transferor under Rule 10 of the Cenvat Credit Rules, 2004; Rule 3 is not attracted, no prior permission was required for the relevant period, and the only outstanding act is quantification of admissible credit which is remanded to the original authority.

Assessable value - stock transfer - transaction value - additional consideration - dutyability of separately stated charges in invoices - penalty for non payment of duty - evidentiary burden to rebut inclusion in transaction value

Assessable value - stock transfer - transaction value - dutyability of separately stated charges in invoices - additional consideration - evidentiary burden to rebut inclusion in transaction value - Liability to central excise duty on 'Terminalling Charges' shown in invoices when goods were stock transferred from Refinery to Marketing Division and ultimately sold by the Marketing Division. - HELD THAT: - The Tribunal held that transfers from the Refinery to the Appellant's Marketing Division were stock transfers and not sales between distinct parties; the ultimate sale occurred at the Marketing Division at a transaction value which, according to the Appellant, included the 'Terminalling Charges'. Mere separate notation of 'Terminalling Charges' in stock transfer invoices does not by itself render those charges exigible to excise duty at the Refinery stage. The Department failed to produce evidence to rebut the Appellant's assertion that the final transaction value charged to customers by the Marketing Division incorporated the said charges. In absence of such evidence, the elements of additional consideration relied upon by Revenue could not be added to the assessable value at the Refinery. Accordingly, the demand of duty on 'Terminalling Charges' was not sustainable. [Paras 6, 7]

Demand of duty on 'Terminalling Charges' in respect of stock transfer from Refinery to Marketing Division set aside.

Penalty for non payment of duty - interest on duty - Sustainability of interest and penalty imposed along with the duty demand. - HELD THAT: - The Tribunal held that since the primary demand of duty was unsustainable for lack of proof that 'Terminalling Charges' were excluded from the transaction value at which the Marketing Division sold the goods, the consequential imposition of interest and penalty could not stand. Where duty itself is not sustainable, penalties predicated on that demand fall away. [Paras 7]

Interest and penalty confirmed in the adjudicating order set aside as unsustainable.

Final Conclusion: The impugned order demanding duty, interest and penalty in respect of 'Terminalling Charges' charged on stock transfers from Refinery to the Appellant's Marketing Division is set aside and the appeal is allowed.

Beneficial notification rule - classification and interpretation of tariff entries - conflict between notifications - beneficial construction - specific description rule (Rule 3(a) of the General Rules to the First Schedule) - exemption under Notification No. 6/2006-CE (Sr. 82) - chargeability under Notification No. 4/2006-CE (Sr. 87)

Exemption under Notification No. 6/2006-CE (Sr. 82) - chargeability under Notification No. 4/2006-CE (Sr. 87) - beneficial notification rule - classification and interpretation of tariff entries - Whether bagasse-based plain and pre-laminated boards manufactured and cleared by the respondent are exempt under Notification No. 6/2006-CE (Sr. 82) or liable to duty under Notification No. 4/2006-CE (Sr. 87). - HELD THAT: - The Tribunal found no material produced by the Department to displace the undisputed fact that the respondent manufactures bagasse board. The Department's selection of Notification No. 4/2006-CE rested solely on a superficial match of description; there was no evidence showing the goods could not be called bagasse board covered by Sr. 82 of Notification No. 6/2006-CE. Precedent and settled principle permit an assessee to claim the notification more beneficial to it where two notifications operate simultaneously. The Tribunal noted the High Court has held pre-laminated bagasse board entitled to exemption under Notification No. 6/2006-CE and observed that pendency of a special leave petition does not negate the High Court's binding effect in the absence of contrary conclusive material. Applying these principles, and in absence of proof to the contrary, the goods qualify for exemption under Notification No. 6/2006-CE (Sr. 82) and the respondent cannot be compelled to accept a notification entailing a higher duty liability. [Paras 4, 5]

The respondent's bagasse-based plain and pre-laminated boards are entitled to exemption under Notification No. 6/2006-CE (Sr. 82); the Revenue's appeal is dismissed and the impugned order is upheld.

Final Conclusion: The impugned adjudicatory order holding the respondent eligible for exemption under Notification No. 6/2006-CE (Sr. 82) is affirmed; the Revenue's appeal is dismissed and the cross-objection disposed of.

Cenvat credit on sugar cess - Sugar Cess as duty of excise - Applicability of Cenvat Credit Rules to sugar cess / CVD - Exemption Notification S.O.102(E) dated 07.01.2009 - Revenue neutrality - Extended period of limitation - Recovery under Section 11D and interest under Section 11DD of the Central Excise Act

Cenvat credit on sugar cess - Sugar Cess as duty of excise - Applicability of Cenvat Credit Rules to sugar cess / CVD - Entitlement to Cenvat credit on sugar cess paid as countervailing duty (CVD) on import of raw sugar. - HELD THAT: - The Tribunal confined the controversy to whether the appellant was entitled to take Cenvat credit of sugar cess paid at the time of import. The Tribunal relied on the decision of the Hon'ble Karnataka High Court in the appellant's own matter, which held that sugar cess is a duty of excise under the Sugar Cess Act and that the provisions of the Central Excise Act and its rules, including the Cenvat Credit Rules, apply to such duty. The Karnataka High Court reasoning (reproduced in the order) explains that Section 3 of the Sugar Cess Act characterises the cess as a duty of excise and that Rule 3 of the Cenvat Credit Rules entitles a manufacturer to credit of duty of excise paid; further that CVD paid on import (where like excise is leviable in India) qualifies for Cenvat credit under the Rules. Applying that binding precedent in the appellant's favour, and noting that the appellant had paid the sugar cess (through accumulated Cenvat credit) on import, the Tribunal held that the appellant was legally entitled to take Cenvat credit on sugar cess paid on import of raw sugar. The Tribunal observed that Section 11D (recovery) can be invoked only where duty has been collected but not paid, whereas here the duty was discharged, and that the existence of an exemption notification did not preclude the assessee from exercising the option to take credit and discharge duty through credit. [Paras 36, 37, 38]

Appeal allowed; appellant entitled to Cenvat credit on sugar cess paid on import of raw sugar and impugned order set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that sugar cess is a duty of excise to which the Cenvat Credit Rules apply and that the appellant is entitled to Cenvat credit of sugar cess paid as CVD on import of raw sugar; the order under challenge was set aside.

Pre-deposit as condition precedent to entertainment of appeal under Section 35F - distinction between filing an appeal and entertaining/considering an appeal - conditional right to appeal - remand for decision on merits

Pre-deposit as condition precedent to entertainment of appeal under Section 35F - distinction between filing an appeal and entertaining/considering an appeal - Whether dismissal of the appeal on ground that pre-deposit was made after filing but before consideration was improper. - HELD THAT: - The Tribunal held that Section 35F bars the Tribunal or Commissioner (Appeals) from entertaining an appeal unless the prescribed pre-deposit is made, but the provision does not prohibit filing of the appeal. The phrase "shall not entertain any appeal" operates at the stage of consideration; hence compliance with the pre-deposit requirement any time before the appellate authority takes up the appeal satisfies the statutory condition. The Tribunal relied on the factual finding recorded by the Commissioner (Appeals) that the pre-deposit was made on 12.12.2019 and noted that the impugned order dismissing the appeal was passed on 22.06.2020. On that basis the Tribunal concluded that the Commissioner (Appeals) erred in dismissing the appeal for delay in pre-deposit since the statutory condition for entertainment was fulfilled prior to consideration. The Tribunal also referred to the principle recognised by the High Court of Orissa that Section 35F's requirement is for "entertainment of appeal" and does not operate as a bar on filing unless the statute expressly so provides; where the legislature intended a bar on filing it did so expressly. Accordingly the impugned order was found to be result of improper appreciation of the phrase "entertain the appeal." [Paras 5, 6]

Impugned order dismissing the appeal for pre-deposit made after filing was set aside and the matter remanded for hearing on merits.

Final Conclusion: Appeal allowed; impugned order set aside. Matter remanded to Commissioner (Appeals) to hear the appellant on merits and pass a reasoned order within three months from receipt of this order.

Admissibility of computer printouts under Section 36B - procedure under Section 9D for admitting statements recorded under Section 14 - corroboration requirement for establishing clandestine removal of goods - ownership and authenticity of electronic evidence (pen drives) - onus on Revenue to prove procurement of raw materials and transportation to sustain clandestine removal - penalty liability under Rule 25 read with Section 11AC and under Rule 26

Ownership and authenticity of electronic evidence (pen drives) - The Revenue failed to establish that the Appellants owned the two pen drives or that the computer printouts taken from them existed as claimed. - HELD THAT: - The adjudication rested largely on computer printouts said to be retrieved from two pen drives recovered on 17.07.2014. A Forensic Report dated 05.07.2021 - obtained by the department - showed that no printouts were taken on the three dates when printouts were claimed to have been made and disclosed files inconsistent with the companies' period of production. The adjudicating authority did not record any findings on that Forensic Report. The pen drives were floating devices; one was found in the pocket of an employee who stated others also used the relevant computer. No certificate or responsible official authentication was produced identifying the computer as belonging to or regularly used by the Appellants. In those circumstances the Tribunal held Revenue did not discharge the burden of proving ownership and authenticity of the pen drives or the printouts. [Paras 11]

Ownership and authenticity of the two pen drives and the computer printouts were not established; the answer is negative.

Admissibility of computer printouts under Section 36B - anvar/65B principle applied pari materia to Section 36B - Computer printouts from the pen drives could not be relied upon as evidence because the conditions of Section 36B were not satisfied. - HELD THAT: - Section 36B prescribes conditions for admissibility of computer printouts (regular use of the computer, supply of the kind of information, proper operation, and a certificate by a responsible official). The record showed no identification of any computer owned or regularly used by the Appellants, no certificate as mandated by Section 36B(4), and discrepancies noted in the Forensic Report. The Tribunal applied controlling authorities (including the principles in Section 65B/Anvar line) to hold that electronic evidence is especially susceptible to tampering and must meet statutory safeguards. Absent compliance and corroboration, the printouts alone could not support the duty demand. [Paras 12]

The computer printouts are inadmissible for the purpose of demanding duty; the conditions of Section 36B are not satisfied.

Procedure under Section 9D for admitting statements recorded under Section 14 - Statements recorded under Section 14 could not be relied upon because the mandatory procedure in Section 9D was not followed and many witnesses retracted their statements on cross examination. - HELD THAT: - Section 9D requires that statements recorded during investigation be admitted in evidence only if the maker is examined as a witness before the adjudicating authority (unless clause (a) circumstances apply) and the authority forms a reasoned opinion to admit the statement. The adjudicating authority allowed selective cross examination, did not examine makers as required, and disregarded retractions as afterthoughts. Citing appellate and High Court authority, the Tribunal emphasised that retracted inculpatory statements lose evidentiary value unless corroborated, and that the statutory procedure under Section 9D is mandatory. Consequently, the statements could not sustain the demand. [Paras 13]

Statements recorded under Section 14 were not admissible evidence for confirming duty because Section 9D's procedure was not complied with and retracted statements lacked independent corroboration.

Corroboration requirement for clandestine removal - onus on Revenue to prove procurement of raw materials and transportation to sustain clandestine removal - Allegations of clandestine clearance of finished goods could not be sustained in the absence of corroborative investigation at the recipients' end and independent evidence of procurement/transportation of raw materials. - HELD THAT: - The Tribunal examined seized pink slips, private records and other material relied on by Revenue. It found no contemporaneous inquiries of named buyers or transporters, no identification of scribes of private documents, no evidence of shortages in stocks that would follow large clandestine removals, and no interception of vehicles despite alleged frequent clandestine dispatches. The authorities did not investigate supplier/railway/transport records to show unaccounted procurement of major inputs. Citing precedent, the Tribunal reiterated that clandestine removal requires tangible, corroborative evidence (unaccounted raw material, production/consumption proof, transportation and receipt by buyers, receipt of sale proceeds, excess electricity/labour etc.). Those elements were absent and therefore the clandestine removal findings could not be sustained. [Paras 14]

Allegations of clandestine clearance are not sustainable without corroborative investigations at recipients' end and independent evidence of input procurement and transportation.

Onus on Revenue to prove procurement of raw materials and transportation to sustain clandestine removal - Demands premised on alleged clandestine manufacture and clearance were unsustainable in the absence of evidence of procurement of major raw materials (iron ore, coal, etc.) in unaccounted form. - HELD THAT: - The Tribunal analysed charts showing the input requirements for the quantities alleged to have been clandestinely produced and found no investigation or evidence that raw materials were purchased or transported clandestinely in the required proportions. Governmental controls and statutory procedures (Forms L/I, mine permits, railway receipts, FSAs for coal) reduce the scope for unaccounted procurement, and only two small cash scrap messages (accounted in books) were relied upon by Revenue - an insufficient basis to infer clandestine sourcing of inputs for the massive alleged production. Authorities failed to establish the necessary link between alleged finished goods removals and unaccounted receipt/consumption of inputs. [Paras 15]

Demands based on alleged clandestine clearance are not sustainable absent evidence of clandestine procurement/transportation of major raw materials.

Penalty liability under Rule 25 read with Section 11AC and under Rule 26 - Penalties imposed on the two units under Rule 25/Section 11AC and on the Director under Rule 26 were not sustainable because the underlying duty demands were not proved. - HELD THAT: - Because the Tribunal set aside the duty demands for lack of admissible electronic evidence, failure to comply with Section 9D, absence of corroboration and absence of proof of unaccounted procurement/transportation, the consequential interest and penalties could not stand. As to the Director, the adjudicating authority's finding that he aided clandestine activity rested on the same infirm evidence and on vague assertions about non appearance for summons; the Tribunal found no credible evidence linking the Director to clandestine procurement or clearance and observed that summons details were not proved. Thus, penal liability could not be sustained. [Paras 17]

Penalties on the companies and on their Director are set aside as unsustainable in light of failure to prove the underlying duty demands.

Final Conclusion: All three appeals are allowed. The confirmed demands of duty, interest and the penalties imposed in the impugned order against M/s Jai Balaji Industries Ltd. (Unit III and Unit IV) and Shri Aditya Jajodia are set aside for want of admissible electronic evidence, non compliance with statutory procedures for admitting statements, absence of required corroboration of clandestine removal and failure to establish clandestine procurement of raw materials.

Condonation of delay - Requirement of satisfactory explanation for delay - Dismissal for delay and laches - Precedent on condonation and laches

Condonation of delay - Requirement of satisfactory explanation for delay - Delay of 390 days in filing the Special Leave Petition (now converted into Civil Appeal) was not condoned. - HELD THAT: - The Court examined the period between the impugned order and the steps taken to initiate the appeal process and found no satisfactory narration for the elapsed time. The sole explanation that the file was 'mixed up' and was noticed much later was held to be neither convincing nor legally sufficient. In consequence, the application for condonation of the 390-day delay failed the test of providing a satisfactory explanation required to permit extension of time.

Application for condonation of the 390-day delay is dismissed.

Dismissal for delay and laches - Precedent on condonation and laches - Whether the appeal should be dismissed on account of consistent and unexplained delays, including an earlier unexplained delay of 647 days before the High Court. - HELD THAT: - The Court noted a pattern of unexplained, substantial delay by the appellant - specifically a 647-day delay in filing the revision petition before the High Court which was not condoned there, followed by the 390-day delay before this Court. Having found the explanations inadequate, the Court applied established precedents on condonation and laches to conclude that the appeal could not be entertained. The consistent, unexplained delay prejudiced the interest of finality and justified dismissal on grounds of delay and laches.

Civil Appeal is dismissed on the ground of delay and laches.

Final Conclusion: The Court dismissed the application for condonation of delay in filing the Special Leave Petition and consequently dismissed the Civil Appeal on the ground of unexplained delay and laches, having regard to the consistent, substantial delays in earlier proceedings and established precedents on condonation.

Mandatory time-limits for processing refunds under Section 38(3)(a)(ii) - adjustment of refundable amount only against an enforceable demand under Section 38(2) - stay of enforcement of demand upon filing objections under Section 35(2) - refund claimed in the return vs. separate claim in Form DVAT-21 (Rule 34) - pre-deposit for prosecuting appeal does not partake the character of tax - entitlement to interest on withheld refund under Section 42 where refund accrues

Mandatory time-limits for processing refunds under Section 38(3)(a)(ii) - adjustment of refundable amount only against an enforceable demand under Section 38(2) - Claim for refund embedded in the revised return dated 31 March 2015 became payable within two months (by 31 May 2015) and could not lawfully be adjusted thereafter against demands that were not then enforceable. - HELD THAT: - The Court held that the refund claim embodied in the revised return of 31 March 2015 crystallised for payment by the expiry of the two month period prescribed by Section 38(3)(a)(ii). There was no issuance of notices under Sections 58 or 59 between 31 March 2015 and 31 May 2015; consequently the Department could not initiate fresh demands post that period so as to defeat the statutory timeframe. Section 38(2) permits adjustment only against amounts that are due and recoverable; a demand that is not enforceable at the relevant point cannot be treated as an "amount due" for the purpose of withholding a refund. The Court relied on its consistent precedents emphasising the mandatory, time bound scheme of Section 38 and rejected the respondents' attempt to justify post expiry adjustments. The impugned adjustments made after 31 May 2015 were found to be untenable and contrary to the statutory mandate. [Paras 40, 41, 42, 44, 46]

The Department acted in contravention of Section 38 by adjusting the refund after 31 May 2015 against non enforceable demands; the petitioner is entitled to the refund and interest.

Refund claimed in the return vs. separate claim in Form DVAT-21 (Rule 34) - No separate filing of Form DVAT-21 was required where the refund was claimed in the return; Rule 34 excludes from Form DVAT-21 claims already made in a return. - HELD THAT: - The Court interpreted Rule 34(1)-(2) of the DVAT Rules and concluded that Form DVAT-21 is mandated only for claims not included in a prior return. Once a refund is embodied in the return, the assessee has no additional obligation to file Form DVAT-21. This construction aligns with earlier decisions of the Court which the judgment cites and applies to the facts here, where the refund was part of the revised return of 31 March 2015. [Paras 37]

The respondents were not justified in insisting upon a separate Form DVAT-21 for the refund claimed in the return.

Pre-deposit for prosecuting appeal does not partake the character of tax - Pre-deposit made under Section 73(1) (third proviso) is not a tax payment and could not be appropriated or adjusted by the respondents against the refund claim. - HELD THAT: - Applying the consistent line of authority, the Court held that a pre deposit paid to pursue appellate remedies does not amount to payment of tax or duty and therefore cannot be treated as an available tax balance for adjustment. The respondents' retention and use of the petitioner's pre deposit of Rs. 1,00,00,000 for adjustment was arbitrary and legally untenable. The Court relied upon precedents establishing that pre deposits are refundable when the appeal succeeds and that interest is payable from the date the refund rightly accrues. [Paras 38]

The respondents were not entitled to retain or adjust the pre deposit; it must be refunded (with interest as applicable).

Stay of enforcement of demand upon filing objections under Section 35(2) - Objections lodged online before the Objection Hearing Authority invoked the statutory stay under Section 35(2) and, insofar as the refund claim related to periods whose objections were pending or disposed in favour of the petitioner, the Department could not lawfully effect set offs. - HELD THAT: - The Court observed that once objections were properly filed (including online filings which the respondents did not contest as not having been made), Section 35(2) operates to suspend enforcement of the demand. The respondents' inability to trace certain physical filings did not negate the effect of objections validly submitted online. Given that objections relating to FY 2012 13 and April 2013-December 2013 had been allowed by the OHA (and others were pending online), the Department had no legal basis to adjust the refund amounts; several adjustments made while objections remained alive were therefore arbitrary. [Paras 33, 34, 42, 44]

Online objections sufficed to trigger the stay under Section 35(2); the respondents could not lawfully adjust the refund against demands subject to such objections.

Final Conclusion: Writ petition allowed: impugned order dated 31 May 2022 quashed; respondents directed to refund Rs. 6,62,74,405/- (being the total refund pending) with interest from the date it fell due, and to effect payment within three weeks of the decision.

Luxury tax on goods versus tax on activities - exemption notification issued pursuant to a higher court decision - unjust enrichment - burden to prove non passing of tax incidence - remand for fresh consideration and show cause on retention of tax

Luxury tax on goods versus tax on activities - exemption notification issued pursuant to a higher court decision - Validity of the assessment levying luxury tax on petitioner in view of the Government notification dated 29.12.2004 and the Supreme Court's decision in M/s. Godfrey Phillips India Limited - HELD THAT: - The amendment imposing luxury tax on jewellery items was considered by the Supreme Court in M/s. Godfrey Phillips India Limited, which construed Entry 62 of List II as referring to activities of indulgence and held statutes taxing goods as impermissible. Following that decision, the State issued G.O.Ms.No.201 dated 29.12.2004 exempting stockists of gold, silver, platinum jewellery and precious stones from payment of luxury tax. The impugned assessment dated 17.08.2015 determined tax for sales in Assessment Year 2002-2003 despite the exemption notification and the Supreme Court ruling. The Court found that, in light of the exemption notification issued pursuant to the higher court decision, the petitioner was not liable to pay tax as assessed and that the assessment demanded tax contrary to the legal position established by the Supreme Court and the State notification. [Paras 7]

Impugned assessment set aside insofar as it levies luxury tax on the petitioner for the period covered, and the matter is not to be sustained without further consideration of consequential issues.

Unjust enrichment - burden to prove non passing of tax incidence - remand for fresh consideration and show cause on retention of tax - Whether the State is entitled to retain amounts paid under the impugned order without enquiry into unjust enrichment, and the procedure to be followed for refund/retention - HELD THAT: - The Court observed that the Supreme Court's decision in M/s. Godfrey Phillips India Limited addressed unjust enrichment and that assessees must satisfy that there was no unjust enrichment. Reliance was placed on authoritative precedent that the department should not retain tax not due. The High Court held that the respondent ought to have called upon the petitioner to show cause as to why amounts paid pursuant to the impugned assessment should not be refunded, having regard to whether the petitioner had passed on the incidence of tax to its customers. In the absence of such an inquiry, the Court remitted the matter to the respondent to pass fresh orders after issuing a show cause and considering the petitioner's evidence on non passing of tax, and to apply Paragraphs 97 and 98 of the Supreme Court's decision and the principles in Mafatlal/Unichem as applicable. [Paras 21, 22, 23, 24, 25]

Matter remitted to respondent to call for a show cause, examine evidence on non passing of tax and unjust enrichment, and pass fresh orders consistent with the cited Supreme Court authorities.

Final Conclusion: Writ petition allowed; the assessment is set aside and the matter is remitted to the respondent to issue show cause, determine whether tax incidence was passed on (unjust enrichment), and pass fresh orders in accordance with the Supreme Court decisions and the State notification; no order as to costs.

Appellate Authority cannot enhance penalty in absence of specific statutory power - Enhancement of penalty without jurisdiction - Appellate power under Central Civil Services (Classification, Control & Appeal) Rules, 1965 - No Objection Certificate distinct from Vigilance Clearance - Office Memorandum on vigilance clearance not a bar to issuance of NOC

Appellate Authority cannot enhance penalty in absence of specific statutory power - Enhancement of penalty without jurisdiction - Validity of appellate order enhancing minor penalty imposed by the disciplinary authority - HELD THAT: - The Court examined the appellate order dated 16.12.2022 passed under the Central Civil Services (Classification, Control & Appeal) Rules, 1965 and found no provision empowering the Appellate Authority to enhance the quantum of penalty imposed by the original authority. The respondents failed to point to any statutory provision conferring such power. Reliance was placed on a Division Bench decision holding that absent express legislative power an appellate authority cannot pass an order more burdensome than the order appealed against. Applying that principle, the Court concluded that the enhancement of penalty effected by the Appellate Authority was without jurisdiction and liable to be quashed. The petitioner did not challenge the original penalty quantum and the Court therefore expressed no opinion on that penalty itself. [Paras 7, 8]

Impugned appellate order dated 16.12.2022 enhancing the penalty is quashed as being beyond the Appellate Authority's jurisdiction.

No Objection Certificate distinct from Vigilance Clearance - Office Memorandum on vigilance clearance not a bar to issuance of NOC - Whether issuance of No Objection Certificate (NOC) to enable petitioner to join another department could be withheld by reliance on the Office Memorandum clause relating to vigilance clearance - HELD THAT: - The Court considered Clause VII of paragraph 2 of the Office Memorandum dated 28.09.2022, which prescribes a withholding period for vigilance clearance after imposition of penalty (three years for minor penalty, five years for major penalty). The Court observed that the clause specifically concerns vigilance clearance and not a NOC for joining another department. The petitioner sought NOC disclosing the fact of penalty; he did not seek to conceal the penalty. Consequently, the Office Memorandum provision relied upon by respondents was found inapplicable to the petitioner's request for a NOC. In view of the quashing of the appellate enhancement and the inapplicability of the vigilance-clearance clause to a NOC, the Court directed issuance of the NOC within a short timeframe. [Paras 9, 10, 11]

Respondents directed to issue the No Objection Certificate within one week; reliance on the vigilance-clearance clause to deny NOC is misplaced.

Final Conclusion: The appellate enhancement of penalty dated 16.12.2022 is quashed for want of jurisdiction; respondents are directed to issue the No Objection Certificate to the petitioner within one week, petition disposed accordingly.

Pendente lite interest - statutory rate of interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 - limited grounds of interference under Section 34 of the Arbitration and Conciliation Act, 1996 - absence of judicial power to modify arbitral awards under the 1996 Act - exercise of Article 142 jurisdiction as exception

Pendente lite interest - statutory rate of interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 - limited grounds of interference under Section 34 of the Arbitration and Conciliation Act, 1996 - absence of judicial power to modify arbitral awards under the 1996 Act - Whether the High Court was justified in reducing the interest awarded by the arbitrator from 18% compound interest to 9% simple interest. - HELD THAT: - The arbitrator passed the award on 21.01.1999 in proceedings that commenced after the Arbitration and Conciliation Act, 1996 came into force; the pre-amended text of Section 31(7)(b) contemplates that a sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of 18% per annum from the date of the award to the date of payment (para 11). Shahi & Associates establishes that where the arbitrator does not specify a different rate, the statutory rate of 18% applies; the present arbitration falls within the 1996 Act and is governed by that statutory prescription (para 12-13). The jurisdiction of courts under Section 34 is narrowly circumscribed and does not include a general power to modify the rate of interest awarded; Parliament omitted the broader modification powers present in the old Act when enacting the 1996 Act, and this Court's precedents delimit judicial interference to the limited grounds in Section 34 (para 13, 15). Decisions in which this Court reduced interest did so either under special circumstances or by exercising Article 142 (for example where two decades had elapsed or parties left the matter to the court), and are therefore distinguishable (para 14). Applying these principles, the High Court's reduction of the arbitrator's rate from 18% to 9% was not justified and amounted to impermissible modification of the award; the modification is therefore set aside and the arbitrator's 18% per annum rate is reinstated (para 16). [Paras 11, 13, 14, 15, 16]

The High Court's reduction of the rate of interest is set aside; the arbitrator's award of 18% per annum (on Claim No. 9) is reinstated and the respondent state directed to pay accordingly within eight weeks.

Final Conclusion: The appeal is allowed to the extent indicated: the High Court's modification of the interest rate is quashed and the arbitrator's 18% per annum interest award is restored; the respondent state is directed to pay the dues within eight weeks. The balance of the High Court's decision remains undisturbed.

Retrenchment without notice or compensation - reinstatement and payment of back wages - regularization of casual workers - entitlement under Section 25F of the Industrial Disputes Act, 1947 - voluntary implementation of an award and consequent estoppel - doctrine of approbate and reprobate - change of position and laches in challenging compliance

Reinstatement and payment of back wages - procedural limitation on grounds of appeal - Whether the management of FCI could press in this Court the challenge to the Tribunal's directions for reinstatement and payment of 75% back wages when it had not assailed that part of the Award before the Division Bench. - HELD THAT: - The Division Bench recorded that the management did not assail the Award insofar as it directed reinstatement and payment of 75% back wages (para 12). Having expressly confined its grounds before the Division Bench to the question of regularization, the management cannot now raise those unpressed objections before this Court. On that short ground the appeal filed by the management was dismissed (para 9). [Paras 9, 12]

Management's appeal in respect of reinstatement and 75% back wages dismissed as those grounds were not assailed before the Division Bench.

Regularization of casual workers - entitlement under Section 25F of the Industrial Disputes Act, 1947 - voluntary implementation of an award and consequent estoppel - doctrine of approbate and reprobate - change of position and laches in challenging compliance - Whether the Tribunal's direction to reinstate and regularize the casual workmen should be sustained in view of the management's implementation of the Award and subsequent absorption of the workmen in service. - HELD THAT: - Although the Tribunal's and the learned Judge's findings on entitlement under Section 25F support reinstatement, the decisive legal question was whether the management could now repudiate regularization after it voluntarily implemented the Award and absorbed the workmen. The management had conditional interim protection in the writ petition but chose to reinstate and then issue a corrigendum treating the workmen as 'absorbed' (Office Order and Corrigendum dated November 2000) and thereafter allowed the position to prevail for about 18 years (paras 11-13). This conduct invoked the principle that a party cannot approbate and reprobate; having accepted and benefitted from the Award and permitted the workmen to alter their position, the management is estopped from taking a contrary stand. The learned Judge correctly declined to disturb the Award in view of the long acquiescence and hardship that would result from upsetting the status quo; the Division Bench's contrary correction of regularization overlooked these facts (paras 14-16). Consequently, the Court restored the Award and the learned Judge's order upholding it (para 17). [Paras 13, 14, 15, 16, 17]

The Award directing reinstatement and regularization is restored; the management is estopped from denying regularization having voluntarily implemented and benefited from the Award over a prolonged period.

Final Conclusion: The appeal on behalf of the workmen is allowed and the Division Bench judgment dated 17.12.2020 is set aside; the learned Judge's order and the Tribunal Award dated 18.03.1997 are restored (subject to prior observations in Contempt Petition), while the management's appeal is dismissed; parties to bear their own costs.

Professional misconduct of statutory auditors - disciplinary proceedings under the Chartered Accountants Act, 1949 - non-reporting of violations in statutory audit reports - surrender and cancellation of certificate of practice - effect of long pendency and laches on disciplinary action - undertaking restraining use of professional designation - administrative closure of disciplinary reference

Professional misconduct of statutory auditors - non-reporting of violations in statutory audit reports - effect of long pendency and laches on disciplinary action - surrender and cancellation of certificate of practice - undertaking restraining use of professional designation - administrative closure of disciplinary reference - Whether further action should be taken in the Reference against Respondent No.2 or the proceedings should be disposed in view of the nature of the charges, the long pendency, and respondent's surrender/cancellation of certificate of practice and undertaking. - HELD THAT: - The Disciplinary Committee had found guilt on three counts limited to non-reporting in the annual reports of Canbank Mutual Fund for the financial year 1991-92; there was no finding that the respondent personally engaged in violative transactions, caused the losses, or committed direct lending/underwriting. The information was received in 1995 and the Disciplinary Committee report dates from 2002, resulting in an extended pendency approaching three decades, which the Court treated as a material factor weighing against continuing punitive action. The respondent retired and surrendered his certificate of practice with its cancellation effective 20 June 2017, and furnished an undertaking that he will not seek a certificate of practice again and will not use the designation or letters indicating fellowship for six months. There is no clear material before the Court about any criminal prosecution or similar misconduct before or after the period in question. In these circumstances the Court held that, having regard to the limited nature of the charges, the passage of time, absence of evidence of recurrence, and the respondent's surrender and undertaking, no further action was necessary and administrative closure of the Reference was appropriate.

Proceedings are to be filed by the Institute and the Reference is disposed; no further action to be taken against Respondent No.2.

Final Conclusion: Reference disposed against Respondent No.2 by administrative closure in view of the limited findings of non-reporting, prolonged pendency, respondent's retirement, surrender and cancellation of certificate of practice and undertakings; no order as to costs.