TaxTMI Updates e-Newsletter
Aug 25,2023

Service on advocate deemed service - computation of limitation from date of communication - appeal within three months from communication - reasonable cause for condonation of delay (counsel's mistake)

Service on advocate deemed service - computation of limitation from date of communication - appeal within three months from communication - Whether the first appeal was barred by limitation where the impugned order was served on the assessee's advocate on 28.03.2018. - HELD THAT: - The Court examined sections 107(1) and 169 of the UP GST Act and held that an appeal must be filed within three months from the date on which the decision or order is communicated to the person aggrieved. Section 169(1)(a) expressly permits service by giving the order to an advocate authorised to appear on behalf of the taxable person; such service is a mode of communication and is deemed service. The order dated 28.03.2018 was admitted to have been communicated to the petitioner's advocate on that date; accordingly the period of limitation for filing the appeal commenced then and expired within three months thereafter. The petitioner failed to explain how the petitioner first came to know of the order on 26.06.2019 or why the certified copy was sought only on that date; the memo in support of the appeal did not disclose any explanation. In these circumstances, and given the admitted communication to the advocate, the appellate authority rightly treated the appeal as time-barred and rejected the delay-condonation application. [Paras 10, 11, 12, 13]

The appeal was barred by limitation as the order was communicated to the petitioner's advocate on 28.03.2018 and the writ petition seeking interference was dismissed.

Reasonable cause for condonation of delay (counsel's mistake) - Whether the petitioner's contention that the counsel's failure to inform the client constituted a sufficient ground for condoning delay warranted interference. - HELD THAT: - The petitioner relied on a bona fide mistake by earlier counsel and argued that such mistake should be a ground for condonation of delay. The Court noted that the record admitted service of the order upon the petitioner's advocate and that no explanation was furnished in the supporting application explaining how the petitioner first gained knowledge of the order on 26.06.2019. Mere allegation that the earlier advocate did not inform the client, without any credible explanation or evidence as to when and how the petitioner became aware of the order, does not establish sufficient cause to condone the delay. In the absence of any satisfactory justification, the appellate authority's rejection of the delay-condonation application did not call for interference. [Paras 5, 12, 13]

The plea of counsel's mistake did not constitute sufficient cause to condone the delay; no interference with the appellate authority's order was warranted.

Final Conclusion: Giving effect to the statutory scheme of service and limitation under the UP GST Act, the Court held the appeal to be time-barred as the order was communicated to the petitioner's advocate on 28.03.2018; the writ petition was dismissed.

Opportunity of hearing - opportunity of personal hearing - adverse assessment order - natural justice - remand for fresh consideration - Section 75(4) of the U.P. GST Act, 2017

Opportunity of personal hearing - adverse assessment order - Section 75(4) of the U.P. GST Act, 2017 - natural justice - Assessing Authority was obliged to grant an opportunity of personal hearing before passing an adverse assessment order under Section 75(4) of the Act and the absence of such hearing vitiates the order. - HELD THAT: - The Court agreed with the view in Bharat Mint & Allied Chemicals that Section 75(4) mandates granting an opportunity of hearing where an adverse decision is contemplated, and the obligation is not made dependent on a written request by the person chargeable. A mere indication by the assessee of 'No' in a column regarding choice to avail personal hearing does not negate the statutory duty. In proceedings that create substantial civil liability, affording a real and minimal opportunity of hearing is required by the principles of natural justice and is necessary for the authority to pass an appropriate, reasoned order which also facilitates effective appellate scrutiny.

The assessment order was held vitiated for failure to afford the mandatory opportunity of personal hearing and cannot stand.

Remand for fresh consideration - opportunity of hearing - Impugned order set aside and the matter remitted to the Assistant Commissioner for issuance of fresh notice and affording personal hearing to the petitioner. - HELD THAT: - The Court set aside the order dated 21.03.2023 and directed that a fresh notice be issued within two weeks, with the petitioner to appear on the next date fixed so that proceedings may be concluded expeditiously. The remand is for fresh consideration after granting the mandatory opportunity of hearing so that the authority may examine the explanations and pass a reasoned order in accordance with law.

Order set aside and matter remitted for fresh notice, hearing and decision by the Assistant Commissioner.

Final Conclusion: Writ petition allowed; the assessment order for July 2017 to March 2018 is quashed for non compliance with the mandatory opportunity of personal hearing under Section 75(4) and the matter is remitted for fresh notice, hearing and decision.

Statutory right of appeal under Section 112 of the B.G.S.T. Act - stay of recovery on deposit under Section 112(8) and (9) of the B.G.S.T. Act - condition of deposit as pre requisite for stay (20% of remaining disputed tax) - consequence of non constitution of the Appellate Tribunal - limitation period to commence after President/State President of Tribunal enters office - release of bank attachment on compliance with deposit condition

Stay of recovery on deposit under Section 112(8) and (9) of the B.G.S.T. Act - condition of deposit as pre requisite for stay (20% of remaining disputed tax) - Petitioner entitled to statutory stay of recovery under Section 112(9) of the B.G.S.T. Act subject to deposit of 20% of the remaining disputed tax for each assessment period. - HELD THAT: - The Court held that because the respondent Authorities themselves failed to constitute the Appellate Tribunal, the petitioner cannot be deprived of the statutory benefit of stay available under Section 112(8) and (9). To balance equities, the Court directed that the stay shall be granted only if the petitioner deposits an amount equal to 20% of the remaining disputed tax (in addition to any earlier deposit under Section 107(6)). Upon such deposit, recovery and any steps taken pursuant to the demand shall be deemed stayed. The Court relied on parity with relief granted in a prior similar order and framed the deposit condition as the operative pre requisite for the stay. [Paras 6, 7]

Stay of recovery granted for the specified assessment periods on payment of 20% of the remaining disputed tax for each period.

Statutory right of appeal under Section 112 of the B.G.S.T. Act - consequence of non constitution of the Appellate Tribunal - limitation period to commence after President/State President of Tribunal enters office - Petitioner must file the appeal under Section 112 before the Tribunal once it is constituted; the limitation for preferring the appeal is to be treated in light of the Tribunal's constitution and entry of its President/State President. - HELD THAT: - The Court recognised the petitioner's entitlement to the statutory appellate remedy under Section 112 but observed that the present relief is being granted because the Tribunal was not constituted. To enable adjudication, the petitioner is required to present/file the appeal after the Tribunal is constituted and the President or State President enters office, observing statutory requirements then in force. This approach accords with the respondent State's notification under Section 172 which provides that the period for filing appeal shall start after the President/State President enters office. [Paras 5, 6]

The petitioner shall file the appeal under Section 112 after constitution and functioning of the Tribunal; the limitation period will be governed by the Tribunal's commencement as recognised by the State notification.

Proceedings if appeal not filed - If the petitioner does not file an appeal within the period to be specified once the Tribunal is constituted, the respondent Authorities are at liberty to proceed in accordance with law. - HELD THAT: - The Court made clear that the stay granted is not indefinite. It conditioned continuation of the stay on the petitioner filing the appeal within the time to be specified after constitution of the Tribunal; failure to do so permits the authorities to resume recovery and other proceedings as per law. [Paras 6]

Respondent Authorities may proceed further if the petitioner does not avail the appellate remedy within the stipulated period after Tribunal constitution.

Release of bank attachment on compliance with deposit condition - On compliance with the deposit of 20% of the remaining disputed tax, any bank attachment pursuant to the demand shall be released. - HELD THAT: - The Court directed that if the petitioner pays the prescribed 20% deposit for each assessment period, any attachment of the petitioner's bank account effected in consequence of the demand shall be released. This relief is contingent upon actual payment of the deposit ordered for obtaining the stay. [Paras 6, 7]

Bank attachment to be released upon payment of the stipulated deposit.

Final Conclusion: Writ petition disposed by directing grant of stay of recovery under Section 112(9) of the B.G.S.T. Act for the three specified assessment periods on deposit of 20% of the remaining disputed tax for each period; petitioner to file appeal before the Tribunal once constituted (with limitation to be governed accordingly); failure to file will permit authorities to proceed; bank attachments to be released on compliance.

Audit of registered person - show cause notice for audit - jurisdiction to conduct audit after cancellation of registration - assessment under Sections 73 and 74

Audit of registered person - jurisdiction to conduct audit after cancellation of registration - show cause notice for audit - assessment under Sections 73 and 74 - Validity of the show cause notice for audit issued under Section 65 after the petitioner's registration was cancelled. - HELD THAT: - Section 65 authorises the Commissioner or an authorised officer to undertake audit of a registered person for such period, frequency and in such manner as prescribed. The provision operates in relation to a "registered person" and contemplates periodical audit of records of persons who are registered. Where registration has ceased and the business is closed, issuance of an audit notice under Section 65 in respect of the closed/unregistered status cannot be sustained as a continuing exercise of audit jurisdiction under that section. That conclusion does not, however, oust the revenue of the power to examine past tax liabilities: proceedings for assessment under the provisions dealing with determination of tax not paid or short paid may be initiated (Sections 73 and 74). Applying these principles to the present case, the impugned show cause notice issued under Section 65 was quashed, with liberty to the respondent to initiate assessment proceedings under Sections 73 and 74 in respect of the relevant periods mentioned in the notice. [Paras 5, 6]

Impugned order dated 19.05.2023 issuing notice for audit under Section 65 quashed; liberty granted to the respondent to initiate assessment proceedings under Sections 73 and 74.

Final Conclusion: Writ petition allowed; the audit notice under Section 65 is quashed as not maintainable after cancellation/closure of registration, subject to the respondent's right to initiate assessment proceedings under Sections 73 and 74.

Violation of audi alteram partem - Quashing of order passed without hearing - Remand for fresh adjudication - Conditional interim relief subject to security deposit

Violation of audi alteram partem - Quashing of order passed without hearing - Impugned order passed without giving the petitioner an opportunity of hearing notwithstanding the petitioner's filed reply acknowledged by the portal. - HELD THAT: - The Court observed that the petitioner had uploaded a reply on 23.06.2023 which was acknowledged in Form GST DRC-06, but the impugned order was passed without affording an opportunity of hearing. In view of the absence of a hearing despite the timely reply being on record, the Court set aside the impugned order and directed that the matter be reconsidered afresh. The Court's decision rests on the principle that an order affecting rights should not be passed without giving the affected party an opportunity to be heard. [Paras 6, 8]

Impugned order set aside and the matter remitted for fresh consideration after affording hearing.

Remand for fresh adjudication - Conditional interim relief subject to security deposit - Procedure and conditions on which the matter is remitted for fresh adjudication, including requirement of a security deposit and timetable for fresh hearing and disposal. - HELD THAT: - The Court directed that the petitioner shall deposit a sum of Rs. 50,000 as security within 15 days as a condition for the grant of the relief of remand. Subject to such compliance, the respondent is required to issue a fresh notice of hearing and dispose of the matter afresh within 30 days thereafter. The amount paid under this order is to be treated as a deposit to be adjusted, appropriated or refunded in accordance with the final outcome of the fresh proceedings. The directions are procedural and intended to ensure expeditious re-adjudication on merits after affording the petitioner hearing. [Paras 8, 9, 10]

Matter remitted for fresh hearing and disposal on the conditions specified, including deposit of security and timetable for fresh proceedings; deposit to be treated as adjustable pending final outcome.

Final Conclusion: The writ petition is disposed by setting aside the impugned order for want of opportunity of hearing, remitting the matter for fresh adjudication subject to the petitioner depositing a security of Rs. 50,000 within 15 days; respondent to issue fresh notice and dispose the matter within 30 days thereafter, and the deposit shall be adjusted in accordance with the final outcome.

Penalty under section 271D - Penalty under section 271E - Requirement of assessment proceedings for initiation of penalty under Chapter XXI - Necessity of satisfaction recorded by the Assessing Officer before initiation of penalty proceedings - Limitation for imposition of penalty under section 275

Penalty under section 271D - Requirement of assessment proceedings for initiation of penalty under Chapter XXI - Necessity of satisfaction recorded by the Assessing Officer before initiation of penalty proceedings - Limitation for imposition of penalty under section 275 - Validity of penalty imposed under section 271D for A.Y.2008-09 in absence of assessment proceedings and recorded satisfaction - HELD THAT: - The Tribunal held that initiation and imposition of penalty under section 271D presuppose the existence of assessment proceedings or proceedings arising from an assessment order; limitation under section 275 is framed with reference to such assessment, revision or appeal proceedings. In the absence of any assessment proceedings against the assessee and without any satisfaction recorded by the Assessing Officer in the assessee's file, initiation of penalty proceedings was found to be invalid. Reliance was placed on the Supreme Court's decision in CIT v. Jain Laxmi Rice Mills and the coordinate Tribunal bench decision in Vijayaben G. Zalavadia v. JCIT, which support the proposition that satisfaction recorded in an assessment order (or existence of assessment proceedings) is a prerequisite for valid initiation of penalty under the provisions considered. Applying that ratio to the facts, the penalty levied under section 271D for A.Y.2008-09 was held not sustainable and was quashed. [Paras 9, 10, 11]

Penalty under section 271D for A.Y.2008-09 quashed.

Penalty under section 271D - Penalty under section 271E - Requirement of assessment proceedings for initiation of penalty under Chapter XXI - Necessity of satisfaction recorded by the Assessing Officer before initiation of penalty proceedings - Validity of penalties imposed under sections 271D and 271E for A.Y.2009-10 where no assessment proceedings were initiated - HELD THAT: - The facts for A.Y.2009-10 mirrored those for A.Y.2008-09: cash loan and repayment, no return of income filed and no assessment proceedings initiated by the Assessing Officer. Following the legal principle that penalty proceedings under sections 271D/271E require antecedent assessment proceedings or a recorded satisfaction in the assessment file, and having regard to the authorities cited by the Tribunal, the penalties under both sections for A.Y.2009-10 were held to be without jurisdiction and unsustainable. Consequently, the penalties were quashed on the same legal grounds applied to A.Y.2008-09. [Paras 12, 13]

Penalties under sections 271D and 271E for A.Y.2009-10 quashed.

Final Conclusion: Appeals allowed: penalty under section 271D for A.Y.2008-09 and penalties under sections 271D and 271E for A.Y.2009-10 set aside as invalid for want of assessment proceedings and recorded satisfaction required to initiate penalty proceedings under Chapter XXI.

Disallowance of Interest payable to Alimenta on the amount awarded - Confirmed liability or contingent liability -Mercantile system of accounting - accrual of liability for interest upon Award being made rule of court - effect of interim stay on operation of decree - deduction of interest expense while litigation is pending

As decided by HC [2017 (4) TMI 974 - DELHI HIGH COURT] with the Award having been made rule of the Court by a learned Single Judge of this Court, the mere fact that the said judgment and decree was stayed by a DB would not relieve NAFED of its obligation to pay interest in terms thereof to Alimenta. Such liability commenced in the previous year in which the said judgment and decree was passed by the learned Single Judge - HELD THAT:- Having heard learned Senior counsel for the petitioners at a considerable length and after carefully perusing the material available on record, we do not find any ground to interfere with the impugned Order passed by the High Court of Delhi at New Delhi.

Penalty u/s 271D / 271E - non-compliance of the provisions of Section 269-SS and 269-T - competent authority to levy the penalty - HELD THAT:- As petitioner submitted that what is impugned in this Special Leave Petition is the order of the High Court passed in a writ petition, filed by the petitioner. However, the petitioner has been successful before the CIT (Appeals) and as against the said order, no further appeal has been filed by the Revenue. Therefore, the Special Leave Petition may be disposed of leaving the question of law, if any, open.

Learned senior counsel appearing or the Revenue does not object to this submission.

In view of the aforesaid submission made by the learned counsel for the petitioner, which is accepted, the Special Leave Petition is disposed of, keeping open the question of law, if any, which arises in this matter.

Reopening of assessment under Section 147 - reason to believe - Validity of notice under Section 148 - Change of opinion as impermissible basis for reassessment - Funds Pending Utilization / earmarked funds - corpus versus income - Application of receipts for charitable purposes - 85% utilisation test - Revision under Section 263 and fresh assessment - Standard of perversity in appellate review

Reopening of assessment under Section 147 - reason to believe - Validity of notice under Section 148 - Change of opinion as impermissible basis for reassessment - Validity of reassessment notices under Section 148 where reopening was founded on a purported change of opinion regarding treatment of earmarked funds and alleged escapement of income. - HELD THAT: - The Tribunal found, and this Court accepted, that the Assessing Officer had considered the issue of earmarked funds (shown as "Funds Pending Utilization") during the original assessment proceedings, had raised specific queries and had formed an opinion in the assessment order; consequently the subsequent notice under Section 148 was based on the same material and amounted to a mere change of opinion. Relying on the principle in Kelvinator of India Limited and subsequent decisions, the Court held that reassessment under Section 147/148 can only be initiated where the Assessing Officer has a reason to believe that income has escaped assessment - not merely because the officer wishes to revisit a concluded view. Reopening on the same set of facts which were already in the Assessing Officer's knowledge and considered in the original assessment was therefore invalid, and the additions made on that basis were rightly deleted by the Tribunal. [Paras 11, 13]

Notice under Section 148 issued on the basis of a mere change of opinion was invalid; reassessment could not be sustained.

Funds Pending Utilization / earmarked funds - corpus versus income - Application of receipts for charitable purposes - 85% utilisation test - Whether earmarked or specific-purpose donations shown as 'Funds Pending Utilization' were to be treated as income for computing the 85% application threshold under the charitable exemption provisions. - HELD THAT: - The Tribunal and the CIT(Appeals) accepted the assessee's explanation and documentary evidence that the earmarked receipts were given for specific purposes and were treated as corpus/specific-purpose funds; these aspects had been examined during the regular assessment and no addition was made. On the facts, the authorities found that even if such funds were treated as voluntary contributions, the utilization exceeded the statutory threshold and there was no accumulation in excess of permissible limits. The High Court, after reviewing the findings, held that the Tribunal's factual conclusions were not assailed by any material showing perversity and that the assessee had in fact met the conditions for exemption under the relevant provisions. [Paras 11, 12, 19, 20, 21]

Earmarked 'Funds Pending Utilization' were properly treated on the basis found by the authorities; utilization satisfied the 85% requirement and no addition was warranted.

Funds Pending Utilization - accounting treatment and 'Fund Pending Utilization' concept - Application of receipts for charitable purposes - 85% utilisation test - Legitimacy of the assessee's accounting practice of showing 'Fund Pending Utilization' (including whether such funds need to be routed through income and expenditure account) and whether opening balances affected the requirement to apply subsequent receipts. - HELD THAT: - The Tribunal accepted the assessee's introduced concept of 'Fund Pending Utilization' as reflecting earmarked/specific-purpose receipts and corroborated the assessee's contention that such funds need not be routed through the income and expenditure account for the purpose of determining application to charitable purposes. The authorities also examined whether opening balances meant later receipts were to be spent only after exhausting earlier balances, and concluded on the material that overall utilization met statutory requirements. The High Court found no reason to upset these factual and accounting conclusions and held that the Tribunal's approach was not perverse. [Paras 12, 18, 19, 20, 21]

The Tribunal's acceptance of the 'Fund Pending Utilization' treatment and its finding that overall application satisfied the statutory threshold were upheld; no error or perversity shown.

Revision under Section 263 and fresh assessment - Standard of perversity in appellate review - Whether the Tribunal's upholding of the CIT(Appeals) findings (after revision under Section 263 and fresh assessments) was perverse or contrary to material on record. - HELD THAT: - The Court noted that assessment orders for certain years had been revised under Section 263 and fresh assessments were framed; however, the CIT(Appeals) and the Tribunal on consideration found that the assessee had applied funds for charitable purposes beyond the prescribed limit and that the Department had not produced material to demonstrate perversity in those findings. The High Court observed that the Revenue had not assailed the factual findings with evidence showing perversity and therefore there was no substantial question of law. The Tribunal's conclusions were accordingly held to be unimpeachable on the record before the Court. [Paras 17, 18, 19, 20, 21]

Findings of the CIT(Appeals) and Tribunal are not perverse and the appeals on the ground of perversity are dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeals in respect of assessment years 2004-05 to 2009-10, upholding the Tribunal's conclusions that reassessment notices based on a mere change of opinion were invalid, that earmarked 'Funds Pending Utilization' were properly treated as found by the authorities and that the assessee satisfied the statutory application threshold; no perversity or substantial question of law was made out.

Validity of notice under Section 148 of the Income Tax Act, 1961 - Requirement of recording reasons and obtaining sanction under Section 151 of the Income Tax Act, 1961 - Approval vitiated where reasons are not placed before the sanctioning authority - Re-opening of assessment invalid for want of application of mind in sanction

Validity of notice under Section 148 of the Income Tax Act, 1961 - Requirement of recording reasons and obtaining sanction under Section 151 of the Income Tax Act, 1961 - Approval vitiated where reasons are not placed before the sanctioning authority - Impugned notice under Section 148 and order rejecting objections were invalid because the sanction under Section 151 was granted without the requisite reasons being placed before the sanctioning authority. - HELD THAT: - The petitioner's case for AY 2017-18 showed that the copy of the approval under Section 151 supplied on the portal recorded the remark "As per Annexure" while the annexure itself was blank; the Department later supplied a reasons document not available on the portal and produced a Form indicating reasons recorded on an earlier date, creating inconsistency with the portal copy. The affidavit in reply did not deny that the annexure as available to the petitioner was blank and attempted to explain that reasons were provided subsequently. The Court found these facts demonstrative of the absence of reasons available to, and considered by, the sanctioning authority at the time of grant of approval, and was not persuaded that there had been proper application of mind by the Additional Commissioner when accorded approval. For these reasons the recording of reasons and the sanction required by Section 151 were held to be defective, rendering the notice under Section 148 and the consequential order of rejection of objections without jurisdiction.

Impugned notice dated 31.03.2021 under Section 148 and order dated 11.03.2022 rejecting objections quashed and set aside for want of valid sanction under Section 151.

Final Conclusion: Writ petition allowed; notice under Section 148 dated 31.03.2021 and the order on objections dated 11.03.2022 set aside for want of properly recorded reasons and valid sanction under Section 151.

Processing of tax deducted at source statements - limitation on departmental intimation under Section 200A - set-off of refund under Section 245 - circular cannot impose limitation beyond statute - Form 26B requirement under Rule 31A(3A)

Circular cannot impose limitation beyond statute - limitation on departmental intimation under Section 200A - set-off of refund under Section 245 - Whether a Board circular or the limitation on issuing intimation under Section 200A can bar or frustrate the assessee's claim for refund and the availability of set-off under Section 245 - HELD THAT: - The Court held that the question of applicability of Section 200A need not be determined because the proviso limiting departmental intimation under Section 200A is a limit on the department's right to issue an intimation and cannot be read so as to frustrate a valid refund claim of the assessee. A Board circular cannot prescribe a limitation period not found in the statute or rules and cannot override statutory provisions. Consequently, there is no statutory bar to the assessee making a refund claim; the department may process the statement filed under Section 200 and allow refund on a request by the assessee. Once a refund is directed, amounts refundable may be set off against outstanding demands in accordance with Section 245, and interest due on the refund must also be considered. The Court therefore directed that the department enable the filing of Form 26B or accept a physical refund claim based on the statement under Section 200 and, upon processing, set off the departmental demands evidenced in Annexure-7 series against the refund. [Paras 6, 8, 9]

The Court concluded that the circular cannot impose a limitation to defeat the refund claim and directed the department to permit the refund claim to be filed and to set off admitted demands against any refund.

Form 26B requirement under Rule 31A(3A) - processing of tax deducted at source statements - Whether the assessee must first satisfy departmental demands before being permitted to file Form 26B or make a refund claim - HELD THAT: - Recognising that sub-rule (3A) of Rule 31A and Form 26B were introduced only on 19.02.2013, the Court noted the assessee's readiness to file Form 26B but rejected the department's contention that filing must await satisfaction of outstanding demands. The Court directed the department either to enable electronic filing of Form 26B or to accept a physical refund claim based on the statement under Section 200, and thereafter to process the refund and effect set-off of the outstanding demands as part of the refund exercise, including payment of any interest legitimately payable on the refund. [Paras 7, 9]

The Court directed the department to enable filing of Form 26B or accept a physical refund claim and, after processing, set off the departmental demands against the refund.

Final Conclusion: Writ petition allowed; department directed to permit filing of Form 26B or accept a physical refund claim based on the TDS statement, to process the refund and set off admitted outstanding demands (as per Annexure-7 series) against the refunded amount, with appropriate consideration of interest.

Condonation of delay - protective additions - closure of appeals with caveat - liberty to reopen proceedings/take further steps

Condonation of delay - Condonation of delay of 38 days in filing the appeals was allowed. - HELD THAT: - The Court examined the applications filed by the appellant/revenue seeking condonation of a 38-day delay in filing the appeals and, having regard to the nature of the delay, exercised its discretion to condone the same. The order records that the Court is inclined to condone the delay and accordingly disposes of the applications allowing condonation subject to just exceptions. [Paras 3, 4]

Delay of 38 days in filing the appeals is condoned and the applications are disposed of.

Protective additions - closure of appeals with caveat - liberty to reopen proceedings/take further steps - The appeals were closed while noting that, because substantive additions are pending adjudication before the Tribunal, the revenue retains liberty to take further steps if deletions occur in the related proceedings. - HELD THAT: - The Court noted that substantive additions relating to the matters in question are pending adjudication before the Tribunal. It observed that one alternative was to keep the appeals pending, but the Tribunal disposed of the appeals with a caveat: in the event of any deletion in the hands of the co-ordinate party where substantial additions were made, the appellant/revenue would have liberty to take further steps against the assessee in accordance with law. The Court construed this caveat to mean that if the revenue fails in the related matter, it will have leave to reopen the appeal pending before the Tribunal and therefore closed the above-captioned appeals while preserving the revenue's right to act in accordance with law. [Paras 8, 9, 10, 11, 12]

Appeals are closed subject to the stated caveat that the revenue shall have liberty to take further steps or seek reopening if deletions occur in the related proceedings.

Final Conclusion: Applications for condonation of delay are allowed and the appeals (pertaining to AY 2012-13 and AY 2013-14) are closed, while preserving the revenue's liberty to take further steps or seek reopening of proceedings in accordance with the caveat recorded.

Scope for interference in concurrent finding of fact - addition on account of undisclosed liability - disallowance under section 40A(3) of the Income Tax Act - admission of additional evidence under Rule 46A of the Income Tax Rules - characterisation of differences in parallel books as undisclosed investment/expenditure

Scope for interference in concurrent finding of fact - addition on account of undisclosed liability - characterisation of differences in parallel books as undisclosed investment/expenditure - Whether the Tribunal's factual conclusion sustaining deletion of addition made by the Assessing Officer (including the deletion of the addition of Rs. 8,44,86,020/-) on account of amounts reflected in parallel books but not in audited books gives rise to any substantial question of law warranting interference by this Court. - HELD THAT: - The High Court examined the Tribunal's findings that the Assessing Officer had no material basis for treating the discrepancy between the assessee's audited books and the parallel books as undisclosed investment or expenditure, and that the material on record related only to liabilities and not to assets or expenditure. The Tribunal concluded that the AO's treatment was speculative and based on assumption. The Court treated these conclusions as concurrent findings of fact, observing that the Revenue sought interference with factual findings recorded after consideration of the remand report and evidentiary material. The Court held that the disputed determinations were essentially questions of fact as found by the Tribunal and CIT(A), and that no substantial question of law arose from those findings. [Paras 4, 5, 6]

Findings of the Tribunal and CIT(A) are factual; no substantial question of law arises; deletion of the addition upheld and interference by this Court is unwarranted.

Disallowance under section 40A(3) of the Income Tax Act - admission of additional evidence under Rule 46A of the Income Tax Rules - Whether the Tribunal erred in deleting additions/disallowances made by the Assessing Officer under section 40A(3) and in admitting additional evidence during appellate proceedings. - HELD THAT: - The Court noted that the Tribunal considered the AO's basis for disallowance under section 40A(3) and the material placed on record, and rendered factual findings on the probative value of evidence. The Revenue's submissions questioned the Tribunal's appraisal of the remand report and the admission of additional evidence, but the High Court treated those matters as factual evaluations committed to the Tribunal and CIT(A). In the absence of any legal infirmity in the approach adopted by the appellate authorities, the Court declined to reappraise the evidence or disturb concurrent factual findings. [Paras 4, 5, 6]

Tribunal's deletion of the disallowances under section 40A(3) and its approach to additional evidence are factual determinations; no legal error shown; no interference.

Final Conclusion: The appeal is dismissed. The High Court finds that the Tribunal and the CIT(A) rendered concurrent factual findings concerning discrepancies between audited and parallel books, the nature of the entries as liabilities (not undisclosed investment/expenditure), and the sufficiency of material for additions; no substantial question of law arises to warrant interference.

Power of rectification under section 254(2) - mistake apparent from the record - limits of Tribunal's powers on rectification - no rehearing on merits - acceptance of audit objection and applicability of CBDT Instruction Clause 10(c) - principles of natural justice before the Tribunal

Power of rectification under section 254(2) - mistake apparent from the record - limits of Tribunal's powers on rectification - no rehearing on merits - Scope and ambit of the Tribunal's power under Section 254(2) to rectify a mistake apparent from the record and whether the Tribunal lawfully exercised that power in the present case. - HELD THAT: - The Court recalled the settled principles that rectification under the provision is confined to correcting obvious and patent errors and does not permit re-hearing the appeal on merits or deciding debatable questions of law. Decisions cited establish that a mistake apparent from the record must be obvious and not the product of long-drawn reasoning or arguable points. Applying that test to the facts, the Court found that the Tribunal had overlooked an obvious error - namely the failure to recognise that the appeals were dismissed despite the case falling within the exception in Clause 10(c) of the CBDT Instruction - and that such a palpable omission justified rectification. Consequently, the exercise of rectification power by the Tribunal in this case was held to be within legal bounds. [Paras 4, 7]

Tribunal's rectification under Section 254(2) was within the limits of law since a palpable mistake apparent from the record was shown.

Acceptance of audit objection and applicability of CBDT Instruction Clause 10(c) - principles of natural justice before the Tribunal - limits of Tribunal's powers on rectification - no rehearing on merits - Whether the documentary proof of acceptance of the audit objection was on the Tribunal record and whether the Tribunal could rely on or call for fresh documents not previously on record in exercising rectification. - HELD THAT: - The Court inspected the Tribunal record and observed absence of any audit objection or acceptance on the files. Documents later produced (marked D-1 to D-4) were referred to by the Revenue, but the Court refrained from adjudicating their sufficiency or correctness. Instead, the Court directed that the question of whether those documents constitute foundational proof that the cases fall within the exception in Clause 10(c) of the CBDT Instructions must be considered afresh by the Tribunal. The Court emphasised that the Tribunal, as a judicial body, must adhere to principles of natural justice while entertaining and deciding such material and may examine the additional documents at its level rather than the High Court doing so in the writ. Accordingly, the matter was remitted for reconsideration and verification of the documentary foundation and for decision in conformity with natural justice and the limited scope of rectification. [Paras 6, 8, 9]

Issue remitted to the ITAT for fresh consideration of the documentary proof (D-1 to D-4), its sufficiency to show acceptance of the audit objection and applicability of Clause 10(c), and for decision in accordance with principles of natural justice.

Final Conclusion: The appeal is allowed in part: the ITAT order dated 27.05.2022 is set aside and the matters relating to Assessment Years 2009-10 and 2010-11 are remanded to the ITAT for reconsideration of the documentary foundation for the audit-objection exception and for decision consistent with the limited scope of rectification under Section 254(2) and principles of natural justice; records to be returned to the ITAT; no order as to costs.

Reopening of assessment after four years - failure to disclose fully and truly all material facts - change of opinion as not constituting a ground for reassessment - Explanation 1 to Section 147 - production of books/evidence and duty of Assessing Officer to apply due diligence - add-back of provision for bad and doubtful debts in computing book profit under Section 115JB - deduction under Section 35(2AB) and the role of Form 3CL submitted by the prescribed authority - power to reopen is distinct from power to review - Assessing Officer's obligation to identify undisclosed primary facts - requirement of application of mind for approval under Section 151

Reopening of assessment after four years - failure to disclose fully and truly all material facts - power to reopen is distinct from power to review - Assessing Officer's obligation to identify undisclosed primary facts - Validity of notice under Section 148 issued after four years where reasons relied on material already placed before Assessing Officer during original assessment - HELD THAT: - The Court applied the proviso to Section 147 and held that reopening after four years requires a failure by the assessee to disclose fully and truly all material facts necessary for assessment. The reasons recorded for reopening show reliance upon material that was furnished during the original assessment proceedings (accounts, ITR details, ledgers and responses to specific queries). The reasons do not specify which primary facts were not disclosed by the assessee and amount to a review of the original assessment rather than disclosure of newly discovered primary facts. The affidavit states that reassessment was prompted by audit objections, but the Assessing Officer must himself identify the undisclosed primary fact which justifies reopening; mere reliance on audit notes or a general averment of escapement is insufficient. The Court emphasised that Explanation 1 requires examination of the circumstances and the nature of materials produced and that production of books from which material could have been discovered by due diligence does not automatically constitute non-disclosure absent particularised omissions by the assessee. [Paras 14, 18]

Notice dated 23rd March 2021 under Section 148 and order dated 18th January 2022 rejecting objections quashed as reopening is barred by the proviso to Section 147.

Add-back of provision for bad and doubtful debts in computing book profit under Section 115JB - change of opinion as not constituting a ground for reassessment - Whether the provision for bad and doubtful debts (disclosed in ITR and audited accounts) justified reopening for add-back in book profit computation - HELD THAT: - The Court examined disclosures in ITR-6 (clause 40), Schedule MAT, Note 24 and Note 14 of the audited accounts, and letters filed during assessment showing that the provision of Rs. 15,64,902/- was disclosed and particulars furnished. The assessment order recorded receipt and consideration of these details and computed book profit accordingly. The reasons recorded for reopening merely assert that the provision is not an ascertained liability and should be added back, which reflects a change of opinion by the tax authorities rather than a failure by the assessee to disclose primary facts. A change of opinion does not satisfy the statutory threshold for reopening after four years. [Paras 14, 19]

Reopening on account of provision for bad and doubtful debts is impermissible; it amounts to change of opinion and does not meet the proviso to Section 147.

Deduction under Section 35(2AB) and the role of Form 3CL submitted by the prescribed authority - power to reopen is distinct from power to review - Whether alleged non-filing of Form 3CL justified reopening assessment in respect of deduction claimed under Section 35(2AB) - HELD THAT: - The Court noted that Rule 6(7A) contemplates the prescribed authority (Department of Scientific and Industrial Research) sending Form 3CL to the Income Tax Authorities and that there is no statutory obligation on the assessee to file Form 3CL. The claim under Section 35(2AB) was disclosed in the ITR-6 and Schedule ESR, and detailed particulars were called for and furnished during assessment (letters dated 17th December 2015 and 11th February 2016). The Commissioner's reliance on absence of Form 3CL from the prescribed authority cannot be converted into a ground to reopen where the assessee had properly disclosed and produced material in assessment. The Court also relied on precedent holding that failure by the prescribed authority to send the form does not defeat the assessee's claim. [Paras 15, 16]

Reopening on the basis of alleged non-receipt of Form 3CL or on re-examination of the previously furnished particulars is not permissible; the impugned proceedings amount to an impermissible review and are therefore invalid.

Loss on sale of asset disclosed in audited accounts and ITR - change of opinion - reopening as review is impermissible after four years - Whether the loss on sale of asset, which was disclosed in accounts and ITR and called for during assessment, justifies reassessment - HELD THAT: - The loss on sale of asset was specifically disclosed in Note 24 of the profit and loss account, included in ITR-6 at Item 38, and details were furnished in response to notices dated 1st and 28th December 2015. The assessing officer considered those details while making the assessment under Section 143(3), computing both regular income and book profit under Section 115JB. The reasons for reopening merely reflect disagreement with the earlier treatment (i.e., a change of opinion) rather than evidence of non-disclosure of primary facts; such a change of opinion cannot be the basis for reopening after four years. [Paras 17, 19]

Reopening on account of loss on sale of asset is impermissible as it is a change of opinion; the notice is invalid.

Requirement of application of mind for approval under Section 151 - Explanation 1 to Section 147 - nature of material produced and circumstances of production - Whether approval for reopening under Section 151 was vitiated by non-application of mind - HELD THAT: - The Court observed that the reasons recorded (noting the nature of expenditures and that they were not disallowed earlier) indicate non-application of mind by the Assessing Officer and by the approving authority. The reasons fail to identify the primary facts that were allegedly withheld and instead proceed on the basis of re-evaluating material that had been before the Assessing Officer. The approving authority's concurrence therefore lacked the requisite particularised reasoning showing why reopening was warranted in light of the statutory proviso. [Paras 11, 18]

Approval for reopening is infirm for want of proper application of mind; the reopening is therefore unsustainable.

Final Conclusion: The notices and order seeking reassessment for Assessment Year 2013-2014 were quashed and set aside because the reassessment was founded on material already disclosed and examined during the original assessment, the reasons do not identify any primary fact that was not fully and truly disclosed, and the reassessment amounts to an impermissible change of opinion; the approval for reopening also displayed non-application of mind.

Adjustment of refunds against disputed demand - limitation of adjustment to 20% of disputed demand under the Office Memorandum dated 29.02.2016 as amended - exception permitting retention above prescribed percentage only where reasons recorded under the OM (para 4B(a)) - intimation and requirement to apply mind and pass an order under Section 245 of the Income Tax Act, 1961 - release of amount in excess of permissible adjustment with applicable interest

Adjustment of refunds against disputed demand - limitation of adjustment to 20% of disputed demand under the Office Memorandum dated 29.02.2016 as amended - exception permitting retention above prescribed percentage only where reasons recorded under the OM (para 4B(a)) - release of amount in excess of permissible adjustment with applicable interest - Validity of adjustment of refund for AY 2022-23 against outstanding demands for AYs 2011-12, 2012-13 and 2014-15 to the extent it exceeded 20% of the disputed demand. - HELD THAT: - The Court held that, in ordinary course, the Office Memorandum dated 29.02.2016 as amended requires that not more than 20% of the disputed demand be adjusted against a refund where an appeal is pending. Retention beyond that ceiling is permissible only if the circumstances fall within the exception enumerated in para 4B(a) of the OM and the officer records reasons satisfying that exception. The respondents furnished no material to demonstrate that the petitioner's case fell within para 4B(a). The impugned adjustment, which exceeded the 20% threshold, was therefore contrary to the OM and unsustainable. Consequently the excess amount beyond 20%, subject to verification by the respondents, was to be released to the petitioner together with applicable interest. [Paras 9, 10, 11, 13]

Amount retained beyond 20% of the disputed demand was unlawful; respondents directed to ascertain the excess and release it with interest within four weeks.

Intimation and requirement to apply mind and pass an order under Section 245 of the Income Tax Act, 1961 - adjustment by intimation without providing time to respond - Whether adjustment effected by intimation under Section 245 without giving time to respond and without passing an appropriate order was lawful. - HELD THAT: - The Court observed that the assessing officer was required to apply his mind and pass an appropriate order when proposing adjustment under the statutory procedure; merely issuing an intimation and effecting adjustment on the same date, without giving the assessee time to respond and without a reasoned order, was improper. The petitioner had submitted responses on the designated portal and had drawn the AO's attention to pending appeals; notwithstanding this, the adjustment was effected on the date of intimation. The action was therefore held to be hasty and contrary to law, and the court directed corrective relief. [Paras 3, 6, 8, 9]

Adjustment by way of intimation without affording opportunity and without passing an order under Section 245 was unlawful; AO must apply mind and pass an appropriate order in accordance with law.

Final Conclusion: Writ petition allowed; respondents directed to calculate the amount retained in excess of 20% of the disputed demand for AYs 2011-12, 2012-13 and 2014-15 and to release that excess, along with applicable interest, to the petitioner within four weeks; adjustment made by intimation without a reasoned order was held contrary to law.

Reopening of assessment - jurisdiction to reopen assessment - change of opinion - reason to believe that income has escaped assessment - full and true disclosure of material facts

Reopening of assessment - change of opinion - full and true disclosure of material facts - jurisdiction to reopen assessment - reason to believe that income has escaped assessment - Validity of the notice dated 28.03.2019 under Section 148/147 for reopening assessment for AY 2012-13. - HELD THAT: - The Court found that the assessee had filed a return declaring the claim of deduction under Section 80-IA along with audited accounts, tax audit report and Form No.10CCB and that the Assessing Officer had issued notices and framed the original assessment on 30.01.2015 after considering the material furnished. The impugned notice dated 28.03.2019 was issued after the four-year period and the revenue's asserted reasons for reopening - that relevant material facts were embedded in accounts and could not be discovered by the AO with due diligence - were rejected on the facts. The Court held that where the assessee has fully and truly disclosed material facts and the AO had opportunity to examine the issue in original assessment, reopening merely because the AO forms a different opinion amounts to an impermissible change of opinion and does not constitute a valid "reason to believe" that income has escaped assessment. The Court applied the principle in Kelvinator (as cited) that the concept of change of opinion remains an in-built check against arbitrary reopening, and concluded that the reopening in the present case amounted to a mere change of opinion and was therefore without jurisdiction. [Paras 9, 10, 12, 14]

The notice dated 28.03.2019 issued under Section 148/147 for AY 2012-13 is illegal and is quashed; the consequential order disposing objections dated 27.09.2019 is also quashed.

Final Conclusion: The petition is allowed; the reassessment notice under Section 148 dated 28.03.2019 (and the order disposing objections dated 27.09.2019) are quashed on the ground that reopening after four years amounted to change of opinion despite full disclosure by the assessee for AY 2012-13.

Violation of principles of natural justice - opportunity of hearing under Section 274(1) - opportunity of hearing under Section 143(3) - jurisdiction to invoke Section 153C - reassessment under Sections 147 to 148 - remand for fresh consideration - Abhisar Buildwell precedent

Violation of principles of natural justice - opportunity of hearing under Section 274(1) - opportunity of hearing under Section 143(3) - remand for fresh consideration - Whether the penalty order and the assessment order must be set aside for failure to afford the statutory opportunity of hearing and remitted for fresh consideration. - HELD THAT: - The Court found that the impugned penalty order under Section 270A and the assessment order passed under Section 143(3) read with Section 153C were rendered without affording the mandatory hearing prescribed by law. Having noted the admitted violation of the principles of natural justice, the Court held that the appropriate remedy is to set aside the impugned orders and remit the matter for reconsideration. The authority was directed to afford personal hearing and to pass fresh orders after hearing the petitioner, thereby ensuring compliance with the procedural requirements prescribed under the Act. [Paras 5, 7, 8]

The penalty order at Annexure-H2 and the assessment order at Annexure-C are set aside and the matters are remitted to the authority for fresh consideration after affording personal hearing.

Jurisdiction to invoke Section 153C - reassessment under Sections 147 to 148 - Abhisar Buildwell precedent - Whether the authority rightly invoked Section 153C or whether proceedings ought to be under Sections 147 to 148; matter to be reconsidered in light of the law. - HELD THAT: - The petitioner contended that invocation of Section 153C requires recovery of incriminatory material and, absent such recovery, reassessment under Sections 147-148 would be the proper course. The Court did not decide the jurisdictional question on the merits but directed the authority to reconsider this contention while applying the legal principles laid down by the Apex Court in Abhisar Buildwell. The direction contemplates fresh adjudication on the jurisdictional issue after hearing the parties, rather than pre-emptive determination by the High Court. [Paras 6, 7, 8]

The question of jurisdiction to invoke Section 153C is remitted to the authority for fresh consideration in light of the Abhisar Buildwell decision and after affording the petitioner an opportunity of hearing.

Final Conclusion: Writ petition allowed: the penalty and assessment orders are set aside and the matters remitted to the assessing authority to grant personal hearing and to decide afresh, including the question of jurisdiction under Section 153C in light of the stated precedent.

Suppression of sales - appreciation of evidence - presumption versus proof - substantial question of law under section 260A - charge of evasion of royalty/tax

Suppression of sales - presumption versus proof - charge of evasion of royalty/tax - appreciation of evidence - Whether the Tribunal erred in upholding the deletion of the addition made by the Assessing Officer on account of alleged suppression of sales of iron ore. - HELD THAT: - The High Court examined the Tribunal's reasoning and noted that the Tribunal adopted findings from other assessment years and specifically found, based on the material before it, that there was no charge of evasion of royalty or tax. In that factual matrix the Tribunal concluded that the Assessing Officer's addition rested on presumption rather than on proof of suppression of quantity or sales. The Court treated those conclusions as findings on disputed facts and observed that such factual determinations do not, in the present record, give rise to any substantial question of law. On that basis the Court declined to entertain the Revenue's challenge to the Tribunal's appreciation of evidence and its deletion of the addition.

Appeal dismissed for want of any substantial question of law arising from the Tribunal's factual findings; deletion of the addition sustained.

Final Conclusion: The High Court declined admission of the Revenue's appeal under Section 260A, holding that the Tribunal's findings that the Assessing Officer's addition was based on presumption and that there was no charge of evasion of royalty/tax are factual determinations not raising a substantial question of law; the appeal is dismissed.

Reassessment under Section 147 r/w Section 144B of the Income Tax Act, 1961 - Principles of natural justice - Maintainability of writ under Article 226 against assessment order - Adjournment and right to be heard - Explanation for demonetisation-era cash deposit as justification - Statutory appeal to the Appellate Commissioner

Maintainability of writ under Article 226 against assessment order - Statutory appeal to the Appellate Commissioner - Whether the writ petition under Article 226 challenging the assessment order is maintainable in view of the availability of alternate statutory remedy. - HELD THAT: - The Court held that the petitioner sought to invoke jurisdiction under Article 226 on grounds of alleged violation of natural justice but had an alternate remedy by way of statutory appeal before the Appellate Commissioner. The exercise of jurisdiction under Article 226 was not countenanced where the statutory appellate remedy is available and appropriate. The Court accordingly declined to entertain the writ petition and granted liberty to the petitioner to pursue the statutory appeal, directing that the Appellate Commissioner consider the appeal on merits if filed within the stipulated time and that the petitioner be heard before any order is passed. [Paras 6, 8, 9]

Writ petition not maintainable; dismissed with liberty to file statutory appeal before the Appellate Commissioner within 30 days and for that authority to consider and decide the appeal on merits after hearing the petitioner.

Principles of natural justice - Adjournment and right to be heard - Explanation for demonetisation-era cash deposit as justification - Reassessment under Section 147 r/w Section 144B of the Income Tax Act, 1961 - Whether the impugned assessment under Section 147 r/w 144B could be set aside on the ground of violation of natural justice or for lack of adequate consideration of the petitioner's explanations regarding cash deposits made post-demonetisation. - HELD THAT: - On examination of the impugned order, the Court found that the petitioner had been called upon to explain large cash deposits made in the wake of demonetisation but did not furnish a satisfactory explanation for the sum deposited. The Court rejected the contention that the assessment was completed in a pre-emptive manner in violation of natural justice, noting that the Assessing Officer found the explanations inadequate and that the petitioner's request for adjournment had been rejected on record. The Court therefore upheld the Assessing Officer's exercise of jurisdiction to make additions under the reassessment proceedings. [Paras 6, 7]

The contention of violation of natural justice is rejected and the assessment sustained on the ground that the petitioner failed to adequately explain the demonetisation-era cash deposits.

Final Conclusion: Writ petition dismissed for lack of merit and on account of availability of alternate remedy; petitioner granted liberty to prefer statutory appeal to the Appellate Commissioner within 30 days, who is directed to consider the appeal on merits after hearing the petitioner.

Provisional release under Section 110A of the Customs Act, 1962 - fitness for human consumption as determined by FSSAI accredited laboratory - procedure for sample testing and referral under the Food Safety and Standards (Import) Regulation, 2017 - power of the Authorised Officer to refer second sample to Referral Laboratory - division of testing for customs classification and food safety determination

Division of testing for customs classification and food safety determination - fitness for human consumption as determined by FSSAI accredited laboratory - procedure for sample testing and referral under the Food Safety and Standards (Import) Regulation, 2017 - Validity of the Superintendent's course of seeking a further fitness for consumption opinion from CRCL (Referral Laboratory) after Anacon Laboratory, a FSSAI accredited laboratory, had reported the samples fit for human consumption and whether such reference complied with the Regulation of 2017 - HELD THAT: - The Court examined the distinct scope of the tests originally directed to CRCL and to Anacon Laboratory and found that CRCL's tests related to starch, impurities and additives relevant to classification, whereas Anacon's tests (being FSSAI accredited) specifically addressed fitness for human consumption. Regulation 9 of the Regulation of 2017 contemplates that where a sample sent to the Food Analyst is found safe, the remaining sample is returned to the importer, and only if the Food Analyst finds the sample unsafe may a second sample be referred to a Referral Laboratory. Regulation 10(9) permits referral to a Referral Laboratory only where the Authorised Officer has sufficient reason to believe the consignment poses a serious hazard to consumer safety. The Superintendent's communication of 30 11 2022 simply requested confirmation as to fitness for human consumption despite the clear Anacon report; it did not record the requisite satisfaction or sufficient reasons under the Regulations to warrant invoking the Referral Laboratory route. Consequently, the subsequent reference to the Referral Laboratory for fitness for consumption was not shown to be in consonance with the Regulations governing referral of samples. [Paras 7, 8, 9]

The Superintendent's request for a further fitness opinion from CRCL and the reliance thereon was not supported by the testing procedure mandated by the Regulation of 2017; the course taken was not shown to be justified.

Provisional release under Section 110A of the Customs Act, 1962 - fitness for human consumption as determined by FSSAI accredited laboratory - power of the Authorised Officer to refer second sample to Referral Laboratory - Validity of the CESTAT's direction to grant provisional release of the imported goods under Section 110A in the circumstances of divergent laboratory reports - HELD THAT: - The CESTAT relied on the fact that the decisive question of fitness for human consumption fell within the domain of the Act of 2006 and had been determined in favour of the importer by an FSSAI accredited laboratory. Given that the Superintendent's later request for referral did not satisfy the procedural requirements in the Regulation of 2017 for invoking the Referral Laboratory, the CESTAT did not act beyond jurisdiction in directing provisional release. The High Court found no substantial question of law arising from the CESTAT's order and observed that the Commissioner's refusal to grant provisional release lacked legal tenability in the circumstances where the FSSAI accredited report was favourable and the referral procedure was not properly invoked. [Paras 8, 9, 11]

The CESTAT's order directing provisional release under Section 110A was not interfered with; the appeal did not raise any substantial question of law.

Final Conclusion: The High Court dismissed the Customs Commissioner's appeal, upholding the CESTAT's direction for provisional release under Section 110A, concluding that the referral to the Referral Laboratory was not shown to comply with the testing and referral procedure in the Food Safety and Standards (Import) Regulation, 2017, and that no substantial question of law arose.

Obligation under Regulation 10(n) of CBLR to verify IEC, GSTIN and client identity and functioning by using reliable, independent, authentic documents, data or information - KYC norms and reliance on government issued documents as sufficient verification - Scope of Customs Broker's duty - limited to document/data verification and not to ensure realization of IGST or to conduct continuous physical surveillance - Suspension pending enquiry under Regulation 16(1) and revocation proceedings under Regulation 17(1) of CBLR - Requirement of prima facie evidence to infer collusion or active facilitation by a Customs Broker

Obligation under Regulation 10(n) of CBLR to verify IEC, GSTIN and client identity and functioning by using reliable, independent, authentic documents, data or information - KYC norms and reliance on government issued documents as sufficient verification - Requirement of prima facie evidence to infer collusion or active facilitation by a Customs Broker - Whether the appellant Customs Broker violated Regulation 10(n) of the Customs Brokers Licensing Regulations, 2018 in respect of the fifteen exporters and 121 shipping bills - HELD THAT: - The Tribunal held that Regulation 10(n) requires verification of correctness of IEC, GSTIN, client identity and functioning at the declared address by use of reliable, independent and authentic documents, data or information. The appellant produced government issued documents (IEC, GSTIN, PAN, Aadhaar, bank letters, authorization letters and other KYC material) which are the kind of independent, authentic records contemplated by the Regulation and by CBIC circulars. The adjudicating authority's inference of failure was founded on the subsequent finding that exporters were untraceable, and on conjecture of collusion; but absent any finding that the KYC documents were forged, unauthentic or that the broker had reason to doubt them, mere non existence of exporters at a later verification does not establish breach of Regulation 10(n). The Tribunal accepted authorities holding that a CHA/Custodian is a processing agent and is not required to sit in judgment over government issued registrations or to conduct exhaustive investigations; document, data or information sufficing under the Regulation need not include physical visits in every case. In consequence the Tribunal found no proven failure to discharge the verification obligation under Regulation 10(n).

Customs Broker did not violate Regulation 10(n) in respect of the fifteen exporters; findings of breach set aside.

Scope of Customs Broker's duty - limited to document/data verification and not to ensure realization of IGST or to conduct continuous physical surveillance - Suspension pending enquiry under Regulation 16(1) and revocation proceedings under Regulation 17(1) of CBLR - Whether the revocation of the Customs Broker's licence (and sustaining of the prior suspension) was justified and whether the broker can be held responsible for the alleged IGST loss arising from subsequent findings against exporters - HELD THAT: - The Tribunal held that neither the CBLR nor the regulatory framework casts on the Customs Broker a duty to ensure realization of IGST or to guarantee that government issued registrations remain valid at all times after filing. Suspension under Regulation 16(1) and revocation under Regulation 17(1) require basis in proved misconduct; here the adjudicating authority relied on surmise, absence of documentary proof of physical verification and inferences of collusion. Given that the broker had produced requisite KYC documents and no material established forgery or knowledge of their falsity, revocation could not be sustained. The Tribunal emphasised proportionality and the need for tangible evidence before attributing active facilitation or fraud to a broker and concluded that the order of revocation (and the confirmed suspension) must be set aside with consequential relief as per law.

Order revoking the licence (and confirming suspension) quashed; appeal allowed and consequential reliefs granted.

Final Conclusion: The Tribunal set aside the adjudicating authority's order of revocation (and the suspension confirmation), holding that the appellant Customs Broker complied with KYC/verification obligations under Regulation 10(n) by relying on independent government issued documents and that mere subsequent untraceability of exporters or revenue loss on account of IGST does not establish breach or collusion; the appeal is allowed with consequential relief as per law.

Undervaluation - computation of Additional duty of Customs (CVD) on MRP basis - finality of self-assessment - requirement to challenge original assessment before demanding differential duty - relevance of place of importation in determining MRP

Undervaluation - relevance of place of importation in determining MRP - computation of Additional duty of Customs (CVD) on MRP basis - Demand for differential duty on account of alleged undervaluation of imported cement was unsustainable on the facts. - HELD THAT: - The Tribunal found that different lots of cement from the same manufacturer were imported through different land ports by different importers and that MRP printed on consignments can legitimately vary because place of importation and other commercial factors affect MRP. There was no evidence that consignments bearing different MRPs were actually sold at the same (higher) price or that the declared MRPs were a device to suppress value. In absence of evidence showing sale above declared MRP or deliberate suppression, the price differences could not be attributed to undervaluation for the purpose of levying Additional duty (CVD) on MRP basis. Accordingly the demand based on comparison with MRPs on other consignments was held not sustainable. [Paras 9]

The demand for duty on the ground of undervaluation was rejected.

Finality of self-assessment - requirement to challenge original assessment before demanding differential duty - Demand for differential duty was also unsustainable because the department had not challenged the original self-assessment of the Bills of Entry. - HELD THAT: - The Tribunal applied the principle in ITC Ltd that a departmental demand for differential duty cannot be raised unless the original assessment or self-assessment is modified by following the appropriate statutory proceedings. The impugned orders had demanded differential duty without having challenged or set aside the original self-assessments; therefore the demands were held not sustainable on this legal ground as well. [Paras 10, 11]

The demands premised on reopening or revising unchallenged self-assessments were set aside.

Final Conclusion: Both appeals were allowed and the impugned orders demanding differential duty were set aside.

Penalty under Section 114A - first proviso to Section 114A - 25% payment within 30 days - liability of non-importing partner for penalty - confiscation under Section 111(m) - redemption fine - status of high sea purchaser and recognition of high sea seller as distinct person - penalty under Section 112(a)

Penalty under Section 114A - first proviso to Section 114A - 25% payment within 30 days - Whether the penalty equal to the adjudged duty and interest under Section 114A could be confirmed against the importer-appellant M/s Zuari Structural Works & Engineers notwithstanding deposit of duty with interest and payment of 25% of the penalty within 30 days. - HELD THAT: - The Tribunal held that Section 114A imposes liability for penalty equal to the duty determined where duty has been short-levied or not levied due to collusion or willful mis-statement or suppression. However, the first proviso to Section 114A bars further proceedings for confirmation of the equal penalty where the determined duty (with interest) is paid and 25% of the determined amount is paid within 30 days from communication of the adjudication order. In the present case the assessed duty with interest was paid during investigation and the reduced penalty amount (25%) was deposited within one month of the adjudication order. The Department did not dispute timely payment. Applying the proviso, the Tribunal concluded that the department could not proceed to confirm penalty equal to the adjudged duty and interest against M/s Zuari, and set aside the impugned confirmation of equal penalty to that extent. [Paras 4]

Confirmation of penalty equal to adjudged duty and interest under Section 114A against M/s Zuari Structural Works & Engineers set aside as the requirements of the first proviso were met.

Penalty under Section 114A - liability of non-importing partner for penalty - Whether Section 114A could be invoked to impose penalty on Shri Gurudas Kamat, a partner who was not the importer of the subject goods. - HELD THAT: - The Tribunal observed that Section 114A is attracted in respect of the person liable to pay duty in cases of short-levy or non-levy arising from collusion or willful mis-statement or suppression, and the provision operates in relation to the importer engaged in importation. Shri Gurudas Kamat was not the importer of the goods; he was a partner of the importing firm. Given that Section 114A had been invoked against the importer, the Tribunal held that the penal consequences under that provision could not be extended to a person who was not the importer in the transaction. Accordingly, the impugned order imposing penalty under Section 114A on Shri Gurudas Kamat was set aside. [Paras 5]

Penalty under Section 114A cannot be imposed on Shri Gurudas Kamat as he was not the importer; the impugned order on this ground is set aside.

Confiscation under Section 111(m) - redemption fine - status of high sea purchaser and recognition of high sea seller as distinct person - penalty under Section 112(a) - Whether the goods could be confiscated under Section 111(m) and a redemption fine imposed on the high sea purchaser-appellant where documents were submitted at assessment and the Department had recognised the high sea seller as a distinct person and had imposed penalty on that seller under Section 112(a). - HELD THAT: - The Tribunal found that the appellant was the high sea purchaser who filed the Bill of Entry and that all relevant documents were produced at the time of assessment. There was no mis-declaration of value by the purchaser. The Department had recognised M/s Mallesh & Co. as the high sea seller and treated it as a distinct person in the transaction, and the original authority had imposed penalty on that seller under Section 112(a). In these circumstances the Tribunal held that the appellant, being the high sea purchaser, could not be held responsible for mis-declaration by the seller nor subjected to confiscation under Section 111(m). Consequently, the redemption fine imposed on the appellant was unsustainable and was set aside. [Paras 6]

Confiscation of goods and redemption fine under Section 111(m) set aside as appellant was a high sea purchaser who had produced documents and could not be penalised for the seller's mis-declaration; penalty on the high sea seller under Section 112(a) was considered appropriate by the original authority.

Final Conclusion: The appeals are allowed in part: confirmation of equal penalty under Section 114A against M/s Zuari set aside due to compliance with the first proviso; imposition of Section 114A penalty on Shri Gurudas Kamat set aside as he was not the importer; and confiscation and redemption fine under Section 111(m) against the high sea purchaser set aside while recognizing the original authority's penalty on the high sea seller under Section 112(a).

Transaction value - undervaluation - burden of proof on revenue - contemporaneous import evidence - rejection of transaction value - exceptions under Rule 3(2) of the Valuation Rules - penalty for undervaluation - de-novo adjudication on remand

Transaction value - undervaluation - burden of proof on revenue - contemporaneous import evidence - rejection of transaction value - Whether the Department established undervaluation so as to justify rejection of the declared transaction value and re-determination of assessable value. - HELD THAT: - The Tribunal found that the Department failed to produce cogent evidence to displace the declared transaction value. The Adjudicating Authority had relied largely on statements and on proforma invoices/pricelists without properly appreciating contemporaneous import documents produced by the appellant. There was no evidence of repatriation of excess payments, no admission of undervaluation by the managing partner, and no demonstration that any of the exceptions permitting rejection of transaction value (as recognised under the Valuation Rules) applied. Applying settled principles (including the rule that the burden to prove undervaluation lies on the revenue and that transaction value cannot be rejected except under established exceptions), the Tribunal concluded that the Department did not satisfy the requisite standard to reject the transaction value.

The findings of undervaluation and the re-determination of value were not sustainable; the appeals are allowed on this ground and the demand of differential duty is set aside.

Contemporaneous import evidence - de-novo adjudication on remand - penalty for undervaluation - Whether the Adjudicating Authority complied with the Tribunal's remand directions and whether its de-novo adjudication reasonably examined contemporaneous import data and other evidence before imposing duty and penalties. - HELD THAT: - The Tribunal observed that its earlier remand required fresh appreciation of evidence, including contemporaneous import particulars. On de-novo adjudication the Authority did not call for or verify records from the data bank nor properly assess the contemporaneous import documents, and it summarily dismissed those documents as unauthenticated without adequate reasoning. The Authority also proceeded despite there being no enquiries or evidence regarding alleged overseas repatriation. While a full de-novo adjudication was within scope, the Authority was nonetheless required to address the Tribunal's findings and to verify contemporaneous import data before reaching conclusions. In the absence of such verification and reasoned appreciation, the Authority's confirmation of duty and imposition of penalties could not be sustained.

The Adjudication Authority erred in its de-novo adjudication by failing to properly verify and appreciate contemporaneous import evidence and by not addressing the Tribunal's directions; the penalties imposed are set aside with consequential relief.

Final Conclusion: The Tribunal held that the Department failed to discharge the burden of proving undervaluation or to justify rejection of the declared transaction value; the duty demand and penalties imposed were set aside and the appeals allowed.

Closure of CIRP - settlement agreement - breach of settlement and its effect on continuation of proceedings - application under Section 12A read with Regulation 30A for settlement and closure of CIRP - power of Adjudicating Authority under Rule 11 to close CIRP before constitution of Committee of Creditors - requirement of 90% approval of the Committee of Creditors for closure after constitution - existence of other creditors' claims and necessity of insolvency resolution

Settlement agreement - breach of settlement and its effect on continuation of proceedings - application under Section 12A read with Regulation 30A for settlement and closure of CIRP - Maintainability and merits of I.A. No. 1571 of 2023 seeking closure of CIRP on the basis of a settlement offer after the earlier Settlement Agreement had been breached and the assignee had refused to accept the offer. - HELD THAT: - The Tribunal held that the Settlement Agreement dated 27.09.2021 had been breached by the Corporate Debtor and expressly provided that on default the Operational Creditor could continue the existing proceedings and claim the full amount with interest. The offer made in I.A. No. 1571 was not in terms of the Settlement Agreement and was not accepted by the assignee (Respondent No.3). The Appellant's belated attempt to liquidate the debt came after dismissal of earlier challenges and after the Supreme Court left it open to move the Adjudicating Authority; such belated offer did not absolve the Corporate Debtor of prior breaches. Further, substantial admitted claims of other creditors and pending Section 7 proceedings by homebuyers evidenced the need for an insolvency resolution process. On these grounds the Adjudicating Authority was justified in rejecting the application for closure under Section 12A/Regulation 30A when there was no mutual settlement and the assignee did not consent. [Paras 11, 15, 16]

I.A. No. 1571 of 2023 was rightly rejected and CIRP need not be closed where the earlier settlement was breached, the assignee did not accept the offer, and substantial other creditor claims exist.

Power of Adjudicating Authority under Rule 11 to close CIRP before constitution of Committee of Creditors - requirement of 90% approval of the Committee of Creditors for closure after constitution - Whether the Adjudicating Authority could, prior to constitution of the Committee of Creditors, exercise its jurisdiction to close CIRP and whether that power was applicable in the facts of the present case. - HELD THAT: - The Tribunal observed that where a settlement is reached before constitution of the CoC, the Adjudicating Authority may exercise jurisdiction (including under Rule 11) to close the CIRP even if formal Section 12A/Regulation 30A procedure has not been completed. However, in the present case the CoC was constituted on 27.07.2023 and thereafter statutory requirement of 90% approval for closure applies. More importantly, given the breach of the prior settlement, non-acceptance by the assignee, and existence of other substantial creditor claims, the exercise of jurisdiction to close the CIRP at the earlier stage was not warranted. [Paras 14, 16]

Although the Adjudicating Authority has power to close CIRP prior to constitution of the CoC, closure was not appropriate in this case; after constitution of CoC the 90% approval threshold applies.

Final Conclusion: Appeals dismissed; the Adjudicating Authority did not err in refusing to close the CIRP where the prior settlement had been breached, the assignee did not accept the belated offer to liquidate, substantial other creditor claims exist, and statutory and prudential requirements for closure were not met.

Composition of adjudicating authority under Section 6 of the PMLA - single member bench competence - quorum non judis - bench constitution and transfer powers under Section 6(5)-(7) - adjudicating authority as civil/adjudicatory body (not criminal tribunal) - principles of natural justice in preliminary proceedings under Section 17(4) of the PMLA - allegation of bias and venue selection

Composition of adjudicating authority under Section 6 of the PMLA - single member bench competence - bench constitution and transfer powers under Section 6(5)-(7) - quorum non judis - Whether the adjudicating authority under Section 6 of the PMLA is competent to function and adjudicate by a single member bench when actual membership is less than three - HELD THAT: - The court held that the Central Government validly constituted the adjudicating authority by notification and that Section 6(5)(b) permits the Chairperson to constitute benches with one or two members. A combined reading of Section 6(1)-(2) (appointment and composition) and Section 6(5)-(7) (bench constitution, transfer and reference to larger bench) shows that single member benches are contemplated and competent to adjudicate. Vacancy in posts does not render the authority non existent or the Chairperson incompetent; to interpret otherwise would make the statute unworkable. Earlier decisions (including the Division Bench in J. Sekar) recognising single member benches under Section 6 were followed and the distinctions between tribunals under constitutional provisions and the PMLA adjudicating authority were noted. Consequently, the contention that the authority is quorum non judis to hear matters by reason of having fewer than three members was rejected. [Paras 24, 26, 27, 28, 29]

A single member bench of the adjudicating authority is competent under Section 6 to hear and decide matters; the adjudicating authority is not rendered quorum non judis by vacancies.

Principles of natural justice in preliminary proceedings under Section 17(4) of the PMLA - adjudicating authority as civil/adjudicatory body (not criminal tribunal) - Whether the conduct of the hearing under Section 17(4) (preliminary retention/continuation of seizure/freeze) offended principles of natural justice so as to vitiate the proceedings - HELD THAT: - The court observed that proceedings under Section 17(4) are of a preliminary/adjudicatory nature concerning retention/continuation of seized or frozen property and are time bound. On the facts recorded by the Single Bench, sufficient opportunity had already been afforded to the appellants and the next hearing date had been fixed. The court noted the statutory scheme and object of the PMLA emphasising prompt action against money laundering; expedition of proceedings by the adjudicating authority does not, by itself, establish a breach of natural justice. Having considered the procedural posture and the limited, preliminary character of the Section 17(4) hearing, no interference was warranted. [Paras 9, 11]

No violation of principles of natural justice was made out in the preliminary Section 17(4) proceedings; the hearing was not vitiated on that ground.

Allegation of bias and venue selection - principles of natural justice in preliminary proceedings under Section 17(4) of the PMLA - Whether apprehension of bias (including prior government employment of the Chairperson and selection of ED office as venue) justified quashing or restraint of the adjudicatory proceedings - HELD THAT: - The court rejected the allegation of bias. It found that the proceedings were at a preliminary stage, and mere selection of the Enforcement Directorate's office as venue or the Chairperson's prior government employment did not establish a clinching factor of bias. Allegations of undue haste were examined in the context of the Act's objects and the need for expeditious adjudication; expedition did not equate to bias. The Single Bench's finding that additional opportunity should be afforded before concluding interim applications was upheld, but no broader relief on bias grounds was granted. [Paras 10, 11]

Apprehension of bias and venue selection did not vitiate the proceedings; allegations of bias were rejected while directing further opportunity to be given before finalising interim matters.

Final Conclusion: The intra court appeal is dismissed. The High Court's conclusion that a single member bench of the adjudicating authority may validly hear matters under Section 6 of the PMLA, and that no breach of natural justice or disqualifying bias was shown in the preliminary Section 17(4) proceedings, is upheld; the Single Bench's direction to afford further opportunity before closing interim applications shall be complied with within three weeks.

Delay in adjudication of show cause notices - Quashing of show cause notices for inordinate delay - Obligation under Section 73(4B) and Section 73(1) regarding time-limits for adjudication - Prejudice to the assessee caused by prolonged pendency of adjudication - Proof of service of notice of hearing and option of ex-parte adjudication

Delay in adjudication of show cause notices - Obligation under Section 73(4B) and Section 73(1) regarding time-limits for adjudication - Quashing of show cause notices for inordinate delay - Proof of service of notice of hearing and option of ex-parte adjudication - Prejudice to the assessee caused by prolonged pendency of adjudication - The three show cause notices issued to the petitioner were quashed on account of almost ten years' unexplained delay in adjudication. - HELD THAT: - The Court found that the revenue failed to explain or justify the prolonged delay of nearly ten years in completing adjudication of the impugned show cause notices. The department did not produce proof of service of alleged notices of personal hearing in 2015 and 2017, and no explanation was given why adjudication could not have been completed earlier or proceeded ex-parte if the petitioner had in fact absented. The Court applied the statutory expectation of timely adjudication reflected in the time-limits embodied in Section 73(4B) (and the limitation framework in Section 73(1)), and the principles articulated in Coventry Estate and other precedents that inordinate administrative delay prejudices the noticee, undermines legal certainty, and may extinguish meaningful adjudication. Given the absence of any satisfactory explanation from the respondents and the demonstrable prejudice caused by the protracted pendency, the Court concluded that the impugned notices must be quashed for inordinate delay. [Paras 8, 9, 10, 11, 12]

Petition allowed; the three impugned show cause notices are quashed on the ground of inordinate and unexplained delay in adjudication; no order as to costs.

Final Conclusion: The writ petition was allowed and the three show cause notices relating to the tax periods April 2007 to November 2009, December 2009 to March 2010 and April 2010 to March 2011 were quashed for inordinate unexplained delay in adjudication; no costs.

Restaurant service taxable if air-conditioning facility exists - facility of air-conditioning as determining factor for service tax liability - exemption under notification dependent on absence of air-conditioning - suppression and wilful misstatement attracting extended period of limitation - penalty under sections 77(1)(a), 77(2) and 78 of the Finance Act, 1994

Restaurant service taxable if air-conditioning facility exists - facility of air-conditioning as determining factor for service tax liability - exemption under notification dependent on absence of air-conditioning - Services provided by the appellant fall within the definition of Restaurant service and are taxable because the establishment had air-conditioning facility during the relevant period and thus is not eligible for the exemption claimed. - HELD THAT: - The Tribunal examined the statutory definition of taxable "Restaurant service" and the evidence on record. The appellant had, in its application for State Excise licence, declared the restaurant as air conditioned; the State Excise authority confirmed verification of those declared facts and routine inspections; there was no documentary communication from the appellant purporting to have removed air-conditioning after grant of licence. The appellant's subsequent statement that air-conditioning was removed and replaced by air-coolers was not supported by substantive proof and was held to be a self-serving cover to avoid liability. The Tribunal found no perversity in the material relied upon by the adjudicating authority and concluded that the appellant failed to discharge the burden of proving entitlement to the exemption notification which requires absence of air-conditioning. [Paras 6, 7, 8, 11, 12]

The demand of service tax for the period 01.05.2011 to 31.03.2015 is upheld on the ground that the appellant's establishment had air-conditioning and therefore did not qualify for the exemption.

Suppression and wilful misstatement attracting extended period of limitation - penalty under sections 77(1)(a), 77(2) and 78 of the Finance Act, 1994 - Extended period of limitation is invokable and penalties are sustainable because the appellant suppressed material facts and wilfully misrepresented the existence of air-conditioning with intent to evade service tax. - HELD THAT: - The Tribunal accepted the revenue's finding that the appellant attempted to mislead both the State Excise and Central Excise authorities by denying the existence of air-conditioning despite earlier declarations and licence conditions indicating otherwise. That conduct evidenced intention to evade duty rather than a bona fide or inadvertent non-compliance. Given this suppression and wilful misstatement, the extended period for demand was held to be applicable and penalties under the specified provisions of the Finance Act were confirmed. [Paras 9, 10, 12]

Extended limitation applies and penalties under Section 77(1)(a), 77(2) and 78 of the Finance Act, 1994 are confirmed.

Final Conclusion: The appeal is dismissed; the impugned order is affirmed and the service tax demand together with penalties for the period 01.05.2011 to 31.03.2015 is upheld.

Valuation of taxable service - Abatement for wages, EPF and ESI - Pure agent - Ultra vires of valuation rule (Rule 5) vis-a -vis Section 67 - Extended period of limitation - Suppression with intent to evade

Valuation of taxable service - Abatement for wages, EPF and ESI - Pure agent - Service Tax (Determination of Value) Rules, 2006 - Section 67 of Finance Act, 1994 - Whether amounts paid as wages and contributions to EPF/ESI are includible in the value of taxable service or are excludible as reimbursable items when computing service tax under Section 67. - HELD THAT: - The Tribunal examined the contractual arrangement and the surrounding facts and held that amounts relating to wages and contributions towards EPF/ESI are in the nature of reimbursable disbursements and not part of the consideration for the service. The reasoning follows the Supreme Court's exposition that valuation must be confined to the consideration for the taxable service and that Rule 5 insofar as it purports to include other expenditures is repugnant to Sections 66 and 67; consequently, employer contributions to statutory funds and wages/allowances collected for disbursement to employees are excludible from the assessable value. The bench noted that PRTC had specified wages and statutory contributions and there was no dispute that such amounts were paid; on that basis, these items cannot be treated as expenditure incurred by the service provider in the course of providing the service and must be abated while computing taxable value.

Appellant entitled to abatement for wages and contributions to EPF/ESI; such amounts are not to be included in the taxable value under Section 67.

Extended period of limitation - Suppression with intent to evade - Whether the extended period for recovery could be invoked on the ground of suppression given the appellant's failure to register, file returns and pay service tax. - HELD THAT: - The Tribunal applied established authorities to hold that mere non-registration, non-filing of returns and non-payment of service tax do not ipso facto amount to suppression with intent to evade tax so as to justify invocation of the extended period. There must be evidence of a positive act of suppression or mis-statement with the requisite intent. The Revenue adduced no such specific evidence beyond the bare averment; accordingly, invocation of the extended period was held not justified in the facts of this case.

Extended period not invokable; appeal succeeds on limitation.

Final Conclusion: The impugned demand is set aside: appellants are entitled to exclude wages and employer contributions to EPF/ESI from the taxable value, and the extended period for recovery cannot be invoked on the facts; appeal allowed.

Construction of residential complex service - Taxability of advances for services rendered after levy - Effect of Board clarification/Circular on service tax liability

Construction of residential complex service - Effect of Board clarification/Circular on service tax liability - Whether the assessee is liable to service tax for construction of residential project (30 flats) for the period 2005-2006, including on receipts/advances received before 16.06.2005 but relating to services rendered after that date. - HELD THAT: - The Court noted that service tax on construction of residential complexes was introduced w.e.f. 16.06.2005. The assessee executed sale deeds in respect of 15 flats on dates between 30.03.2005 and 16.06.2005 and had not paid service tax on amounts received earlier on the ground that sale deeds were executed prior to the levy. Revenue alleged taxability on amounts relating to work done after 16.06.2005 and on advances received earlier but pertaining to services provided after levy. The Tribunal accepted the assessee's submission that the question of taxability no longer survives in view of the Board's Circular No. 151/2/2012-ST dated 10.02.2012 which clarified that there is no service tax liability under the head "Construction of Residential Complex service" for activities carried out prior to 01.07.2010. Reliance placed on a precedent of the Tribunal was noted. In light of the Circular, the previously confirmed demand, interest and penalty were set aside and the appeal allowed, with the assessee entitled to consequential benefits in accordance with law. [Paras 10]

Appeal allowed; impugned orders set aside as taxability for construction of residential complex prior to 01.07.2010 no longer exists in view of Board Circular No. 151/2/2012-ST dated 10.02.2012; consequential benefits granted.

Final Conclusion: The Tribunal allowed the appeal, holding that in view of Board Circular No. 151/2/2012-ST dated 10.02.2012 there is no service tax liability under "Construction of Residential Complex service" for the period prior to 01.07.2010 (including the disputed 2005-2006 receipts), and set aside the demand, interest and penalty with consequential reliefs.

Input service - activities relating to business - CENVAT credit - cost of production - services used in residential colony

Input service - activities relating to business - CENVAT credit - cost of production - services used in residential colony - Whether CENVAT credit is admissible on service tax paid for services used in the residential colony adjacent to the factory under the un-amended definition of "input service" where the cost of such services has been included in the cost of production and appropriate duty has been discharged on clearance of final products. - HELD THAT: - The Tribunal examined the un-amended Rule 2(l) definition of "input service", noting the inclusive phrase "activities relating to business" which brings within scope services indirectly used in or in relation to manufacture. The appellant established through the statement of its Dy. General Manager (Finance) and a Chartered Accountant's certificate that expenses for construction, repairs and maintenance of the residential colony were treated as business expenses, formed part of the cost of production and were reflected in the periodic cost statements on which central excise duty was discharged. The Tribunal also relied on its earlier decision in the appellant's own case and on the Division Bench reasoning that, where the cost of such services is taken as expenditure and absorbed in the cost of the final product, CENVAT credit is admissible. In light of these facts and precedents, the denial of CENVAT credit by the authorities below was held unsustainable.

Impugned order denying CENVAT benefit is set aside and the appeal is allowed; CENVAT credit on the said services is admissible with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal and held that CENVAT credit of service tax on services used in the residential colony adjacent to the factory is admissible for the period April, 2009 to March, 2011 where such costs were included in the cost of production and duty was discharged on clearance of final products.

Manpower supply service - reverse charge liability for cross-border manpower supply - secondment/loan of employees - extended period of limitation under proviso to sub-section (1) of Section 73 of Finance Act, 1994 - penalties under Sections 76, 77 and 78 of Finance Act, 1994 - application of precedent - remand for redetermination

Manpower supply service - reverse charge liability for cross-border manpower supply - application of precedent - extended period of limitation under proviso to sub-section (1) of Section 73 of Finance Act, 1994 - penalties under Sections 76, 77 and 78 of Finance Act, 1994 - remand for redetermination - Impugned order set aside and matter remitted to original authority to re-determine service tax liability, interest and penalties for the four show cause notice periods by applying the Supreme Court ruling in Northern Operating Systems Pvt. Ltd. - HELD THAT: - Both parties agreed that the Supreme Court's decision in Northern Operating Systems Pvt. Ltd. is directly applicable to the facts of this appeal. The original adjudicating authority did not have the benefit of that ruling when passing the impugned order. The Tribunal therefore set aside the order-in-original and remitted the matter to the original authority with a direction to apply the Supreme Court's ruling in letter and spirit and to re-determine, for each of the four show cause notice periods, (a) whether service tax is exigible under the reverse charge mechanism on the arrangement of secondment/loan of employees; (b) the interest payable; and (c) the penalties, if any, under the provisions invoked, including the question of extended period of limitation. The Tribunal noted that papers did not disclose the precise quantum consequences if the extended period challenge succeeds and accordingly left quantification and any consequential adjustments to the original authority on remand. [Paras 7, 8]

Impugned order-in-original set aside; matter remitted to the original authority to re-determine service tax, interest and penalties for the four specified periods in conformity with the Supreme Court's decision in Northern Operating Systems Pvt. Ltd.

Final Conclusion: Appeal disposed by setting aside the impugned order and remitting the matter to the original authority for fresh determination of service tax liability, interest and penalties for the four show-cause notice periods in accordance with the Supreme Court's ruling in Northern Operating Systems Pvt. Ltd.

Transaction value and additional consideration under Section 4 and Rule 6 - inclusion of value of moulds, tools and dies in assessable value - valuation of excisable goods for charging duty - irrelevance of export/ revenue neutrality to valuation requirement

Transaction value and additional consideration under Section 4 and Rule 6 - inclusion of value of moulds, tools and dies in assessable value - Amount recovered from buyers as mould charges forms additional consideration and must be included in the assessable value of excisable goods. - HELD THAT: - The Tribunal examined Section 4 of the Central Excise Act, 1944 read with Rule 6 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000, including the Explanation which expressly treats the money value of additional consideration and Explanation 1 which identifies moulds, tools and dies as value components to be included. The factual finding that the appellant recovered mould charges from buyers establishes that such amounts are additional consideration "flowing directly or indirectly" from the buyer. Consequently, those charges fall within the statutory concept of transaction value plus additional consideration and must be aggregated into the assessable value for levy of excise duty. [Paras 6, 8]

Mould charges collected from buyers form part of assessable value and must be included in valuation for excise duty.

Irrelevance of export/ revenue neutrality to valuation requirement - valuation of excisable goods for charging duty - Export of goods and the consequent prospect of refund or revenue neutrality does not excuse compliance with statutory valuation; assessable value must be determined in accordance with Section 4 and Rule 6 irrespective of export. - HELD THAT: - The Tribunal rejected the appellant's contention that inclusion of mould charges is unnecessary because exports would render the duty refund or the matter revenue neutral. It held that the statutory scheme requires that excisable goods be assessed in accordance with Section 4 read with Rule 6 at the time of clearance, whether for domestic consumption or export. The possibility of later refund or liquidation does not alter the legal obligation to include additional consideration in the assessable value at the time of assessment. [Paras 7, 8]

Export status or revenue neutrality does not relieve the appellant from including mould charges in the assessable value.

Final Conclusion: The Tribunal upheld the inclusion of mould charges in the assessable value under Section 4 read with Rule 6 and dismissed the appeals.

Manufacture - excisable goods - marketability as deeming fiction under the Explanation to section 2(d) - transformation into a new and different article having distinctive name, character or use - burden of proof on the Revenue to establish manufacture

Manufacture - transformation into a new and different article having distinctive name, character or use - Whether the export gas supplied by the appellant amounted to a 'manufactured' good liable to central excise - HELD THAT: - The Tribunal examined the nature of the top gas and the subsequent export gas and applied the settled test that 'manufacture' requires a transformation whereby a new and different article with a distinctive name, character or use emerges. Relying on precedent (including Delhi Cloth and General Mills, Ahmedabad Electricity, Indian Aluminium and related authorities), the Tribunal found that the top gas is a technological accident/ refuse (analogous to dross and skimmings) arising in the course of manufacture of Direct Reduced Iron and that mere removal of particulate matter and water to comply with environmental requirements or process design does not transform the refuse into a new article. The Commissioner did not record a finding that the top gas itself was manufactured, and the cleaning/scrubbing undertaken to meet environmental conditions and process-design mandates does not change the character of the gas into a manufactured product. Consequently, the process undertaken on the top gas did not amount to 'manufacture' of export gas and excise could not be levied on that basis. [Paras 43, 48, 51, 56, 71]

The export gas was not a 'manufactured' good; the processes of scrubbing/removal of impurities did not amount to manufacture.

Excisable goods - marketability as deeming fiction under the Explanation to section 2(d) - Whether marketability alone (after insertion of the Explanation to section 2(d)) suffices to render the gas excisable without a finding of manufacture - HELD THAT: - The Tribunal held that even after the Explanation to section 2(d) (which deems capable-of-sale articles to be marketable), excise liability under section 3 still requires that the goods be 'produced or manufactured' in India. Citing authoritative Supreme Court decisions and the reasoning in DSCL Sugar and related cases, the Tribunal concluded that the tests of manufacture and marketability must be satisfied conjunctively. The earlier Tribunal decision of JSW Steels addressed marketability but did not decide the separate question of manufacture and therefore does not bind on that issue. Consequently, marketability alone cannot substitute for the requirement of manufacture. [Paras 21, 24, 26, 27, 30]

Marketability under the Explanation does not obviate the need to establish 'manufacture'; both conditions are required for excise.

Burden of proof on the Revenue to establish manufacture - Whether the department discharged its burden to prove that export gas was manufactured - HELD THAT: - The Tribunal reiterated the legal position that the onus lies on the Revenue to prove that the goods sought to be taxed have gone through the process of manufacture. On the facts, the Revenue's findings were factually incorrect or unsupported (including misclassification of the gas as predominantly Carbon Monoxide and reliance on marketability). The Tribunal found that the department did not discharge the burden to show a transformational manufacture of the export gas and therefore the demand could not be sustained. [Paras 30, 63, 64]

The department failed to discharge the burden of proving that the export gas was manufactured; demand unsustainable.

Final Conclusion: The Tribunal set aside the impugned orders confirming excise demands for the period February 2009 to June 2012, holding that the export gas was not a manufactured product and that marketability alone (under the Explanation to section 2(d)) does not satisfy the requirement of manufacture; the Revenue failed to prove manufacture and the appeals are allowed.

Refund under Section 11D(2) - incidence of duty - relevant date for making application - public notice under Section 11D(2) - time-bar under Section 11B - unjust enrichment

Refund under Section 11D(2) - incidence of duty - relevant date for making application - public notice under Section 11D(2) - time-bar under Section 11B - Assessee entitled to refund of surplus deposited under Section 11D(1) pursuant to Section 11D(2) and claim not time-barred where filed within six months from the date of the public notice - HELD THAT: - The Tribunal construed Section 11D(2) to mean that where excess duty collected has been deposited with the Central Government under Section 11D(1), upon finalization of assessment any surplus after adjustment is to be refunded to the person who has borne the incidence of the amount, in accordance with Section 11B, and the relevant date for filing such refund claim is the date of the public notice issued by the Assistant Commissioner. On the admitted facts HSL had deposited the excess collected amount with the Government and it was not disputed that the respondent (ONGC) bore the incidence of the duty shown as surplus in the Finalization Order. The Tribunal also accepted the respondent's plea that the refund claim was filed within the six-month period from the public notice and that the post-2007 amendment to Section 11B was inapplicable to the present pre-amendment case. Applying the statutory scheme, the Tribunal found no error in the Commissioner (Appeals)'s conclusion that the respondent was entitled to refund of the surplus under Section 11D(2). [Paras 5, 6, 8]

Impugned Order-in-Appeal upholding entitlement to refund under Section 11D(2) is affirmed and the Revenue's challenge on time-bar and interpretation is rejected.

Unjust enrichment - Unjust enrichment issue remanded for determination by the adjudicating authority - HELD THAT: - The Commissioner (Appeals) had remanded the matter on the question of unjust enrichment. The Tribunal noted that the adjudicating authority could not have finally rejected the refund claim on the ground that the respondent had passed on the burden when the matter was the subject of appeal before the Commissioner (Appeals). Accordingly, the question of whether the respondent has passed on the burden (unjust enrichment) remains to be adjudicated in the remand proceedings in accordance with law. [Paras 7]

The matter of unjust enrichment is to be considered on remand by the adjudicating authority; the Commissioner (Appeals)'s remand on this issue stands respected.

Final Conclusion: The appeal is dismissed; the Commissioner (Appeals)'s order granting refund under Section 11D(2) is upheld, while the limited issue of unjust enrichment is to be examined on remand by the adjudicating authority.

Dropping of adjudication proceedings - exit from EOU Scheme to EPCG Scheme - payment of duty on opting out and confirmation by Deputy Commissioner - no dues certificate / duty clearance at time of de-bonding - fulfilment of export obligation and issuance of Export Obligation Discharge Certificate (EODC) - sustainability of recovery proceedings after subsequent compliance

Exit from EOU Scheme to EPCG Scheme - payment of duty on opting out and confirmation by Deputy Commissioner - no dues certificate / duty clearance at time of de-bonding - dropping of adjudication proceedings - Dropping of proceedings against the respondent in view of its opting out from EOU Scheme to EPCG Scheme and payment/confirmation of duty liability. - HELD THAT: - The Tribunal found that the respondent had applied for and obtained permission to exit the EOU Scheme and enter the EPCG Scheme, computed and deposited the duty liability in terms of the Foreign Trade Policy, and procedures before the Development Commissioner and Deputy Commissioner had been carried out including de-bonding. The adjudicating authority examined these developments and the payment of duty when considering the show-cause notice and therefore lawfully dropped the proceedings. The Tribunal recorded that these events were expressly considered by the adjudicating authority before it passed the order to drop proceedings. [Paras 6]

Proceedings were properly dropped having regard to the respondent's exit to the EPCG Scheme and payment/confirmation of duty liability.

Fulfilment of export obligation and issuance of Export Obligation Discharge Certificate (EODC) - sustainability of recovery proceedings after subsequent compliance - Whether recovery or adjudication proceedings remained sustainable after the respondent completed the export obligation and obtained EODC. - HELD THAT: - The Tribunal noted that subsequent to adjudication the respondent completed the export obligation and obtained the Export Obligation Discharge Certificate. On that basis the Tribunal held that no proceedings were sustainable against the respondent. The factual conclusion that export obligation was fulfilled and EODC issued led to the legal consequence that recovery proceedings could not be maintained. [Paras 7, 8]

After completion of export obligation and issuance of EODC, proceedings against the respondent were not sustainable.

Final Conclusion: The Revenue's appeal is dismissed and the cross-objection is disposed of; the adjudicating authority rightly dropped proceedings in light of the respondent's exit to the EPCG Scheme, payment/confirmation of duty liability, and subsequent fulfilment of export obligation evidenced by EODC.

Definition of "Timber" - converted timber - binding precedent - reference under Section 33(1) of the HPGST Act, 1968 - grace period under section 4(2) of the HPGST Act, 1968

Definition of "Timber" - converted timber - binding precedent - reference under Section 33(1) of the HPGST Act, 1968 - Validity of the Tribunal's reference on whether Khair wood is "timber" or "converted timber" and the proper course thereafter. - HELD THAT: - The Court held that the question whether Khair wood falls within the definition of "timber" or is "converted timber" has already been authoritatively considered by earlier Division Bench decisions of this Court and by the Supreme Court decisions cited in the Reference. Where the issue is covered by binding decisions, the Tribunal had no jurisdiction to make a fresh reference under Section 33(1) of the HPGST Act, 1968 in the manner presented. Consequently the Reference was rejected. However, the Court directed that the Tribunal is to re-consider the assessee's matter in light of the cited decisions and pass an appropriate order, thereby requiring the Tribunal to apply the established precedents to the facts of the case rather than refer the question again. [Paras 2, 3, 4, 5]

Reference rejected; Tribunal directed to re-consider and decide the assessee's case in light of the controlling precedents.

Grace period under section 4(2) of the HPGST Act, 1968 - Whether a 30 days grace period is available under section 4(2) of the HPGST Act, 1968. - HELD THAT: - The Court observed that this question falls within the Tribunal's jurisdiction and was not required to be answered by the High Court in the present proceedings. The Tribunal was therefore directed to decide the legal question concerning the availability of a 30 days grace period under section 4(2) of the HPGST Act, 1968 in accordance with law, applying relevant legal principles to the facts before it. [Paras 6, 8, 9]

Question remitted to the Tribunal for decision in accordance with law.

Final Conclusion: The Reference in STR No.4001 of 2013 is rejected and the Tribunal is directed to reconsider and decide the assessee's case applying the cited precedents; in STR No.1 of 2012 the question concerning the 30 days grace period under section 4(2) of the HPGST Act, 1968 is remitted to the Tribunal to be decided in accordance with law. Pending miscellaneous applications are disposed of.

Impounding of passport for submission of false particulars - legality of impounding without notice - vicarious liability for agent's fraud - disproportionality and reformatory principle in relief - grant of fresh application and administrative reconsideration subject to usual formalities

Impounding of passport for submission of false particulars - legality of impounding without notice - Validity of impugned impounding of the petitioner's passport and entitlement to a declaration of illegality - HELD THAT: - The Court found that the passport was impounded because false particulars had been submitted through an agent and that the petitioner did not challenge the fundamental factual and legal basis for the impugned action. The learned counsel for the respondent relied on the consequence flowing from submission of false particulars. Having considered the record, the Court held that the action of the Passport Authority in impounding the passport could not be faulted. Consequently the petitioner was not entitled to the declaratory relief sought. [Paras 5, 6]

The challenge to the impounding fails and the declaration that cancellation/impounding is illegal is refused.

Vicarious liability for agent's fraud - disproportionality and reformatory principle in relief - grant of fresh application and administrative reconsideration subject to usual formalities - Whether discretionary relief should be granted notwithstanding the proved irregularity, and the appropriate remedial direction - HELD THAT: - While the petitioner was held responsible for false particulars submitted by his agent, the Court applied a humane and reformatory approach, noting the prolonged deprivation of the passport for almost nine years and resulting hardship. Observing that eternal disqualification is disproportionate, the Court exercised equitable discretion to allow the petitioner an opportunity to seek fresh relief. The Court directed that if the petitioner files a fresh application and there is no other impediment, the Passport Authority shall consider it and issue a passport subject to fulfillment of the usual formalities. [Paras 7, 8, 9]

Petitioner permitted to submit a fresh application; respondent to consider and grant passport if no other impediment and usual formalities are satisfied.

Final Conclusion: Writ petition allowed in part: challenge to impounding dismissed, but petitioner granted leave to apply afresh and respondent directed to consider and, subject to no other impediment and completion of usual formalities, issue a passport. No costs.