TaxTMI Updates e-Newsletter
Sep 02,2019

Availability of statutory remedy by way of appeal - Challenge to order passed under Section 129 of the CGST Act and KSGST Act - Denial of opportunity of personal hearing - Mandatoriness of deposit pre-condition for maintaining appeal under Section 107(6) - Encashment of Bank Guarantee and interlocutory stay pending appeal

Availability of statutory remedy by way of appeal - Encashment of Bank Guarantee and interlocutory stay pending appeal - Whether the writ petition was maintainable in view of the statutory remedy of appeal and what interim protection (if any) should be afforded regarding encashment of the Bank Guarantee - HELD THAT: - The Single Judge correctly observed that a statutory appeal lay against the order passed under Section 129 of the CGST Act and the KSGST Act and therefore dismissed the writ petition without adjudicating the merits, leaving open all grounds for the appellant to raise before the Appellate Authority. The High Court declined to entertain the merits (including alleged denial of personal hearing) on writ review, holding that such grounds are available to be agitated in the statutory appeal. The Court modified the interlocutory position recorded by the Single Judge: having regard to the fact that the disputed liability is secured by a Bank Guarantee, the Court ordered that encashment of the Bank Guarantee shall be kept in abeyance until the disposal of a validly constituted appeal, provided the appellant files such an appeal within one month and keeps the Bank Guarantee valid until disposal. If those conditions are fulfilled, the department shall not take steps for recovery pending disposal of the appeal. The Court expressly refrained from adjudicating the contention regarding waiver or exoneration from the deposit pre-condition under Section 107(6), noting that the point was not urged before the Single Judge and no statutory appeal had yet been filed; that issue was left open for consideration before the Appellate Authority or other appropriate forum. [Paras 2, 3, 6, 7]

Writ petition dismissed as remedy by statutory appeal exists; encashment of the Bank Guarantee stayed until disposal of a valid appeal if filed within one month and the Bank Guarantee is kept alive; merits (including denial of personal hearing and request to waive Section 107(6) deposit) not decided and left open for the Appellate Authority or appropriate forum.

Final Conclusion: The writ appeal is disposed of by leaving the appellant free to file the statutory appeal; the court has directed that, if the appellant files a valid appeal within one month and keeps the Bank Guarantee alive, the respondents shall not encash the Bank Guarantee or pursue recovery until the appeal is disposed, while all substantive grounds are left to be agitated before the Appellate Authority.

Seizure and detention of goods and vehicles under the Central Goods and Service Tax Act, 2017 - confiscation proceedings under the Central Goods and Service Tax Act, 2017 - release of seized goods and vehicles upon deposit of determined tax and penalty - continuation of confiscation proceedings subject to final adjudication of writ petitions

Release of seized goods and vehicles upon deposit of determined tax and penalty - Release of vehicles and goods seized by tax authorities was ordered upon deposit of the amount determined as tax and penalty. - HELD THAT: - The Court recorded that in Special Civil Application No.14364 of 2019 the amount determined towards tax and penalty for Vehicle No. MH18BG5051 had been deposited but the authority had declined release and issued a notice under confiscation provisions; the Court directed immediate release of that vehicle and the goods while clarifying that confiscation proceedings would continue. For the other writ petitions, the Court recorded the amounts due for respective vehicles and ordered that where the requisite amount towards tax and penalty is deposited with the authority, the vehicles and goods shall be released at the earliest. The direction for release is conditional upon deposit of the determined tax and penalty to the satisfaction of the authority and is without prejudice to the ongoing statutory proceedings. [Paras 3, 10]

Vehicles and goods to be released promptly upon deposit of the determined tax and penalty; in the one instance where deposit was already made, release was ordered forthwith.

Confiscation proceedings under the Central Goods and Service Tax Act, 2017 - continuation of confiscation proceedings subject to final adjudication of writ petitions - Proceedings initiated for confiscation may continue notwithstanding the Court's direction for release, subject to the final outcome of the writ petitions. - HELD THAT: - The Court noted conflicting submissions about whether a notice under the confiscation provisions had been issued, but held that if confiscation proceedings under the Act have been initiated, they may continue pending final adjudication of the writ petitions. The direction to release seized property on deposit was given without staying or finally determining those statutory proceedings; the statutory process for confiscation remains intact and will be adjudicated in due course. [Paras 3, 6]

Confiscation proceedings permitted to continue subject to the final outcome of the writ applications; court's release directions are without prejudice to those proceedings.

Final Conclusion: The High Court directed immediate release of the seized vehicles and goods upon deposit (or where already deposited) of the amounts determined as tax and penalty, while permitting any confiscation proceedings under the Act to continue subject to the final disposal of the writ petitions.

Writ of Mandamus - Writ of Certiorari - Prematurity of petition - Exhaustion of alternative administrative remedy - Nodal Officer, GST - Technical breach in GST portal

Prematurity of petition - Exhaustion of alternative administrative remedy - Nodal Officer, GST - Petition dismissed as premature for failure to first approach the Nodal Officer, GST as directed in the endorsement. - HELD THAT: - The court found that the grievance raised by the petitioner concerned a technical breach on the GST common portal and that the competent authority had expressly directed the petitioner to approach the Nodal Officer, GST to set right the technical defect. Rather than availing the administrative remedy, the petitioner instituted the present writ petition seeking mandamus and certiorari. The court observed that reliance on an earlier decision was of no assistance because that matter had itself advanced to a later stage. Since the petitioner had not followed the instruction in the endorsement and had not approached the Nodal Officer as required, the petition was premature and not maintainable at this stage.

Petition dismissed as premature; petitioner granted liberty to approach the Nodal Officer, GST in terms of the endorsement.

Final Conclusion: The writ petition was dismissed as premature for non-exhaustion of the prescribed administrative remedy; liberty was reserved to the petitioner to approach the Nodal Officer, GST as directed in the endorsement.

Permission for dispensation with his personal appearance before the trial Court - age of the petitioner is 70 years - Section 362 of Cr.P.C. - HC refused to interfere - The issue involved Whether prosecution can be launched where penalty has been reduced from 300% to 100% by the CIT(A) as per section 279(1A) ?- HELD THAT:- Issue notice, returnable within four weeks.

Reopening of assessment under Section 147 - notice under Section 148 - reason to believe - tangible material forming basis of belief - application of mind by Assessing Officer - change of opinion - reasons recorded under Section 148(2)

Notice under Section 148 - reasons recorded under Section 148(2) - reason to believe - Validity of the notice issued under Section 148 for reopening assessment for A.Y.2012-13 - HELD THAT: - The Court examined whether the reasons recorded by the Assessing Officer for reopening-viewed through the statutory lens that validity is to be tested by the reasons recorded under Section 148(2)-demonstrated a live link between the information available and a belief that income had escaped assessment. Applying settled principles, the Court held that the Assessing Officer had applied his mind to the material received from the Investigation Wing and the return, and did not act on merely vague or unspecific information. The reasons, read as a whole, referred to statements and material gathered during investigation (including admissions attributed to the provider of alleged accommodation entries), the unexplained unsecured loans in the return, and the absence of documentary explanations from the assessee; these furnished sufficient tangible material to justify a prima facie belief that income had escaped assessment. The Court emphasized that the sufficiency of material is not to be finally adjudicated at the threshold and confined review to whether a bona fide belief existed as reflected in the recorded reasons.

The notice under Section 148 was valid and the reopening for A.Y.2012-13 is not quashed.

Application of mind by Assessing Officer - tangible material forming basis of belief - change of opinion - Whether the Assessing Officer merely relied on the Investigation Wing's report or reached an independent satisfaction - HELD THAT: - The Court considered whether the Assessing Officer's reasons were a mere reiteration of the Investigation Wing's findings or demonstrated independent application of mind. It found that the Assessing Officer had verified the return (noting unsecured loans), considered statements and investigation extracts identifying the provider of accommodation entries and specific companies, and noted the assessee's failure to furnish documentary explanations. On that basis the Court concluded there was an independent and objective satisfaction sufficient to form the requisite reason to believe; the reopening was not a mechanical or fishing exercise despite reliance on investigative material, and a post hoc affidavit or order could not be treated as substituting the recorded reasons.

The Assessing Officer applied his mind and formed an independent belief; reliance on investigative material did not render the reopening invalid.

Final Conclusion: Writ petition dismissed; impugned notice and proceedings under Section 148 for A.Y.2012-13 are upheld and no interference is warranted.

Penalty under Section 271(1)(c) of the Income Tax Act - concealment of income - furnishing inaccurate particulars of income - burden of proof in penalty proceedings - assessment findings as evidence but not conclusive in penalty proceedings - fresh consideration of penalty on material before penalty authorities

Penalty under Section 271(1)(c) of the Income Tax Act - assessment findings as evidence but not conclusive in penalty proceedings - burden of proof in penalty proceedings - concealment of income - furnishing inaccurate particulars of income - Whether the Tribunal was justified in deleting the penalty imposed under Section 271(1)(c) despite the addition in the assessment/quantum proceedings being sustained - HELD THAT: - The Court held that penalty under Section 271(1)(c) can be imposed only if it is established that the assessee has concealed particulars of income or furnished inaccurate particulars, and that Explanation 1 requires either a false explanation or an explanation not substantiated and not shown to be bona fide. It reiterated the proposition that findings in assessment proceedings are good evidence in penalty proceedings but are not conclusive; the penalty authority must consider the matter afresh with the burden of proof rested on the Revenue. Applying these principles, the Court found that the Assessing Officer had not recorded any finding that the return itself was incorrect or false and had primarily disbelieved the gifts on human probability and doubts as to donors' creditworthiness. The Tribunal, however, had examined the documentary evidence and donors' statements and recorded findings of identity, creditworthiness and genuineness of the gifts which the Assessing Officer had not appreciated. On that basis the Tribunal concluded that Revenue failed to establish concealment or furnishing of inaccurate particulars. The High Court agreed that the Tribunal was entitled to delete the penalty, since the penalty could not be levied solely on the basis of the assessment order and required independent satisfaction of the ingredients of Section 271(1)(c). [Paras 23, 24, 25, 26, 27]

Tribunal rightly deleted the penalty imposed under Section 271(1)(c); appeals dismissed.

Final Conclusion: Appeals dismissed. The question of law is answered in favour of the assessee: penalty under Section 271(1)(c) could not be sustained merely on the basis of the assessment order; Revenue failed to prove concealment or furnishing of inaccurate particulars and the Tribunal correctly deleted the penalty.

Revisionary power under Section 263 - Erroneous order prejudicial to the interests of revenue - Application of mind and inquiry by the Assessing Officer - Bar on exercise of Section 263 while appeal is pending (Explanation 1(c)) - Scope of 'record' in Explanation 1(b) to Section 263 - Remand to Assessing Officer v. setting aside revisional order

Application of mind and inquiry by the Assessing Officer - Erroneous order prejudicial to the interests of revenue - Whether the Commissioner was entitled to invoke Section 263 where the Assessing Officer had issued notices, elicited documents and passed the assessment after considering the material on land development expenses. - HELD THAT: - The Court held that the Assessing Officer had required production of documents, received the material and considered it before passing the assessment order dated 18.11.2010. Reliance was placed on authorities which establish that mere brevity of an assessment order or absence of elaborate discussion does not establish that no application of mind was made. Since the AO had made inquiries, called for and examined records and accepted the assessee's books except for a small disallowance later set aside by the CIT(A), the Commissioner had no basis to treat the AO's order as erroneous and prejudicial to revenue. Invocation of Section 263 cannot be resorted to for every mistake or differing view; both conditions of error and prejudice must co-exist and were not shown here. [Paras 16, 17, 18, 23]

Tribunal correctly held that recourse to revisional power under Section 263 was not warranted as the AO had applied his mind and the order was not shown to be erroneous and prejudicial to revenue.

Bar on exercise of Section 263 while appeal is pending (Explanation 1(c)) - Revisionary power under Section 263 - Whether the Commissioner could remand/revise the assessment under Section 263 while an appeal before the Commissioner (under Section 250/CIT(A)) was pending. - HELD THAT: - The Court observed that Clause (c) of Explanation 1 to Section 263 bars exercise of the Commissioner's jurisdiction where the order of the Assessing Officer is the subject matter of an appeal pending before the Commissioner; powers extend only to matters not considered and decided in such appeal. In the present facts, the Commissioner remanded the matter on 25.3.2013 while the appeal was pending and thus proceeded contrary to the statutory bar. Consequently the remand and exercise of revisional jurisdiction were improper. [Paras 9, 25, 28]

Exercise of jurisdiction by the CIT under Section 263 was barred while the appeal before the Commissioner was pending; the remand was therefore improper.

Scope of 'record' in Explanation 1(b) to Section 263 - Revisionary power under Section 263 - Whether the Commissioner may rely on assessment material or fresh orders made by the AO after the Commissioner's examination when invoking Section 263. - HELD THAT: - The Court held that the term 'record' in Clause (b) of Explanation 1 to Section 263 means the record available at the time the Commissioner examines the proceedings. Material or fresh orders passed by the AO after the Commissioner has examined the record (or after the remand) cannot be treated as part of the record for justifying invocation of Section 263. Therefore the Department's reliance on the subsequent assessment order dated 7.3.2014 for supporting the earlier exercise of revisional power was not permissible. [Paras 13, 26]

Evidence or orders produced/subsequent to the Commissioner's examination cannot be relied upon to validate an earlier exercise of Section 263; 'record' is limited to what was before the Commissioner at that time.

Remand to Assessing Officer v. setting aside revisional order - Revisionary power under Section 263 - Whether the ITAT erred in setting aside the Commissioner's order under Section 263 instead of remitting the matter to the Assessing Officer for fresh adjudication. - HELD THAT: - The Court noted that the Commissioner himself, while disposing of the appeal under Section 250 on 5.6.2013, had set aside the assessment order only to the limited extent of the small disallowance and that the Tribunal's jurisdiction in the appeal from the Commissioner's order was confined to examining whether the CIT's exercise of power under Section 263 conformed to law. Given the statutory bar on exercise of Section 263 during the pendency of the appeal and the factual finding that the AO had already examined the material, the Tribunal was justified in setting aside the CIT's revisional order rather than merely remanding the matter. [Paras 24, 27]

ITAT correctly set aside the CIT's order under Section 263; remand to the AO was not required given the illegality of the revisional action and the factual findings.

Final Conclusion: The appeal is dismissed. The High Court affirms the Tribunal's conclusion that the Commissioner's exercise of revisional jurisdiction under Section 263 was improper because the Assessing Officer had inquired into and considered the material, the statutory bar in Explanation 1(c) precluded exercise of Section 263 while an appeal was pending, and the Commissioner could not rely on material produced after his examination; accordingly the CIT's remand/order under Section 263 was set aside.

Reopening of assessment under Section 147 - notice under Section 148 - reason to believe - tangible material - information from the Investigation Wing - accommodation entries / bogus loans - change of opinion - full and true disclosure of material facts - proviso to Section 147 - four years

Reopening of assessment under Section 147 - notice under Section 148 - reason to believe - tangible material - information from the Investigation Wing - accommodation entries / bogus loans - change of opinion - full and true disclosure of material facts - Validity of reopening the assessment for A.Y.2011-12 by issuing notice under Section 148/147 on the basis of information about unsecured loans from certain Kolkata companies. - HELD THAT: - The Court examined whether the Assessing Officer had a bona fide "reason to believe" that income chargeable to tax had escaped assessment and whether that belief was supported by tangible material. Explanation 3 to Section 147 and relevant precedents were considered to determine the scope of reopening and the permissible relevance of information received from investigative authorities. The Court held that the report/information from the Deputy Director of Income-tax (Investigation), indicating that the lenders were shell entities providing accommodation entries by way of unsecured loans, constituted tangible material outside the original record which could give rise to a reasonable belief of escapement. The Assessing Officer applied his mind to that material and recorded reasons demonstrating a live nexus between the investigative information and the belief that income had escaped assessment; the reopening was not a mere mechanical adoption of the investigation report nor a prohibited change of opinion. The Court also noted that the sufficiency of reasons is not to be re-adjudicated on merits in writ jurisdiction, but the recorded reasons must show a rational connection to the belief; here that requirement was satisfied. Consequently, the reassessment notice and the order rejecting objections were held valid and the writ petition did not disclose grounds for interference. [Paras 48, 49, 50]

Reopening validated; the Assessing Officer had reason to believe based on tangible investigative material that income had escaped assessment, and the objection to the Section 148 notice is rejected.

Final Conclusion: Both writ petitions are dismissed. The notice under Section 148 is held to be valid; objections to reopening are rejected, the writ notices stand discharged and earlier interim relief is vacated.

Allowability of business expenditure by way of discounts and free distribution of goods - distinction between donation/diversion of funds and deductible business expense - evaluation of documentary evidence and credibility findings in assessment proceedings - appellate interference standard - perversity / no-evidence test

Allowability of business expenditure by way of discounts and free distribution of goods - evaluation of documentary evidence and credibility findings in assessment proceedings - distinction between donation/diversion of funds and deductible business expense - appellate interference standard - perversity / no-evidence test - Whether the discounts given and books distributed free of cost amounted to allowable business expenditure and whether the findings of the Commissioner and the Tribunal accepting the documentary evidence could be interfered with - HELD THAT: - The Assessing Officer disbelieved the assessee's case and treated the discounted and free distributions as diversion/donation, making trading additions. The Commissioner accepted the assessee's explanation - on the basis of documentary material including school recommendation letters, VAT returns and the remand report - and deleted substantial portions of the additions; the Tribunal upheld that view and granted further relief. The High Court examined the record and found that relevant material had been placed before the Assessing Officer and that the Commissioner and Tribunal had reasonably accepted that material. The Court held that the appellate authorities' concurrent conclusion was not perverse and was not a decision based on no evidence; consequently there was no legal ground to disturb those factual credibility findings. [Paras 10, 11]

The concurrent factual findings of the Commissioner and the Tribunal accepting the discounts and free distribution as supported by evidence are sustained and the appeals are dismissed.

Final Conclusion: Appeals dismissed; the High Court upheld the Commissioner and Tribunal's acceptance of the assessee's documentary evidence and declined to interfere with their factual conclusions that the discounts and free distribution were supported and not to be treated as diversion/donation.

Validity of assessment passed in breach of section 144C procedure - Draft order under section 144C is tentative and not final assessment - Issuance of notice of demand under section 156 culminates assessment - Issuance of demand/penalty at draft-order stage renders assessment void-ab-initio - Condonation of delay for filing cross-objections where delay due to erroneous legal advice

Condonation of delay for filing cross-objections - Condonation of the long delay in filing cross-objections by the assessee - HELD THAT: - The Tribunal considered the assessee's explanation that delay resulted from improper legal advice and noted jurisprudence where delays caused by such circumstances were condoned, particularly where the contested point was a pure legal issue going to the root of the matter. Having observed that the legal challenge raised in the cross-objections was fundamental and squarely covered in favour of the assessee by earlier orders, the Tribunal exercised its discretion to condone the delay and admitted the cross-objections for adjudication on merits. [Paras 5]

Delay in filing the cross-objections is condoned and the cross-objections are admitted for decision on merits.

Draft order under section 144C is tentative and not final assessment - Issuance of notice of demand under section 156 culminates assessment - Issuance of demand/penalty at draft-order stage renders assessment void-ab-initio - Validity of the assessment for A.Y. 2008-09 where notice of demand and penalty notice were issued along with the draft order - HELD THAT: - The Tribunal analysed the statutory scheme of section 144C and concluded that a draft order under sub-section (1) is only tentative; the assessment can be completed either under sub-section (3) (where no objections are filed) or under sub-section (13) after DRP directions. Relying on authoritative precedents that the process of assessment culminates in issuance of notice of demand under section 156 and that issuance of demand marks finality, the Tribunal found that the AO issued a notice of demand and initiated penalty proceedings at the stage of the draft order, thereby crystallising the assessment prematurely. Having regard to analogous decisions of the Bench and the High Courts which held that non-observance of the mandatory procedure under section 144C renders the assessment order void, the Tribunal held that the final assessment order was vitiated and could not stand; consequently the return income would be the final income. [Paras 10, 11, 12, 16, 18]

Assessment for A.Y. 2008-09 is declared null and void; income as returned by the assessee is accepted as final.

Draft order under section 144C is tentative and not final assessment - Issuance of notice of demand under section 156 culminates assessment - Issuance of demand/penalty at draft-order stage renders assessment void-ab-initio - Validity of the assessment for A.Y. 2009-10 where notice of demand and penalty notice were issued along with the draft order - HELD THAT: - On facts materially similar to A.Y. 2008-09, the AO computed tax and interest and directed issuance of demand notice and initiated penalty proceedings at the draft-order stage. Applying the same statutory analysis of section 144C and the proposition that issuance of notice of demand finalises assessment, the Tribunal concluded that the assessment was completed prematurely and accordingly vitiated. In consequence, the Tribunal set aside the assessment and held the returned income to be final for that year as well. [Paras 20, 21]

Assessment for A.Y. 2009-10 is declared null and void; income as returned by the assessee is accepted as final.

Final Conclusion: Cross-objections admitted by condoning delay. The assessments for A.Y. 2008-09 and A.Y. 2009-10 are set aside as void-ab-initio because the AO issued notice of demand and initiated penalty proceedings at the draft-order stage in breach of the mandatory procedure under section 144C; the incomes declared in the returns are therefore accepted as final and the Revenue's appeals dismissed.

Unabsorbed depreciation set off against any income - legal fiction of merger of brought forward depreciation with current year's depreciation under section 32(2) - preference to business loss in set-off under section 72(2)

Unabsorbed depreciation set off against any income - Brought forward unabsorbed depreciation is allowable to be set off against income under heads other than business (including capital gains, income from house property and income from other sources). - HELD THAT: - The Tribunal accepted the assessee's contention that post-amendment text of section 32(2) restores a liberal position permitting set off of unabsorbed depreciation against any income chargeable to tax. The bench relied on coordinate-bench precedent which analyzed the legislative history and concluded that deletion of the express phrase limiting set off to profits of business or profession indicates Parliament's intention to permit set off against other heads; earlier Supreme Court authority was held to remain applicable to the post-amendment regime. The Tribunal therefore disagreed with the CIT(A)'s restrictive construction and directed allowance of the set off. The decision in the coordinate-bench order relied upon refers to earlier authorities including Jaipuria China Clay Mines , Rajapalayam Mills , Virmani Industries Pvt. Ltd and Times Guaranty Ltd as forming part of the supporting jurisprudence. [Paras 8, 11, 14, 15]

Claim for set off of unabsorbed depreciation was allowed and the Assessing Officer was directed to permit the set off against the relevant non-business heads of income.

Legal fiction of merger of brought forward depreciation with current year's depreciation under section 32(2) - Brought forward unabsorbed depreciation merges with the current year's depreciation by virtue of the legal fiction created by section 32(2), and is therefore to be treated and allowed as current year's depreciation for set-off purposes. - HELD THAT: - The Tribunal explained that section 32(2) deems unabsorbed depreciation to be part of the allowance for depreciation of the following year, creating a legal fiction under which brought forward depreciation assumes the character of current year's depreciation. Once so merged, the same treatment applicable to current year's depreciation applies to brought forward depreciation. This reasoning formed part of the basis for permitting set off against non-business income. [Paras 11, 14]

Brought forward unabsorbed depreciation is to be treated as current year's depreciation and allowed accordingly for set-off.

Preference to business loss in set-off under section 72(2) - Application of section 72(2) gives preference to set-off of business loss where relevant, but does not prevent merged (current-year) depreciation from being set off against other heads when permitted by section 32(2). - HELD THAT: - The Tribunal noted that section 72(2) requires that effect be given to its provisions where an allowance is to be carried forward under section 32(2), and that business loss enjoys a first preference because of its limited carry-forward period relative to depreciation. Nevertheless, because brought forward depreciation is deemed to be current year's depreciation under section 32(2), and because the post-amendment statutory scheme and authoritative decisions support set off against any income, the preference accorded by section 72(2) does not preclude allowing the merged depreciation to be set off against other heads. [Paras 12, 13]

While section 72(2) gives statutory preference to business loss for set-off considerations, it does not defeat the treatment of brought forward depreciation as current-year depreciation nor bar its set off against other heads where section 32(2) so permits.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(A)'s restriction, and directed the Assessing Officer to permit the set off of brought forward unabsorbed depreciation in assessment year 2011-12 in accordance with the reasoning summarised above.

Penalty under section 271D read with section 269SS of the Income-tax Act - effect of Settlement Commission's acceptance on subsequent proceedings - contradictory treatment of the same sum as income and as loan - requirement of recording satisfaction before initiation of penalty proceedings - absence of lender-borrower relationship - double taxation of same income in the same assessment year

Effect of Settlement Commission's acceptance on subsequent proceedings - contradictory treatment of the same sum as income and as loan - double taxation of same income in the same assessment year - Whether penalty under section 271D read with section 269SS could be sustained where the same amount was treated as income of the assessee (and accepted/adjusted by the Settlement Commission) and thereafter sought to be treated as loan/deposit for invoking penal provisions. - HELD THAT: - The Tribunal held that the same sum cannot be taxed/treated in two different characters in the same assessment year. The Settlement Commission accepted the company's offer of additional income on account of inflated purchases and allowed telescoping of personal expenses of promoters/directors, which established that the cash was generated and spent by the company and had been offered for tax by the company. The Assessing Officer initially treated the telescoped personal expenses as income of the appellants, showing he had not conclusively recorded that the amounts represented cash loans or deposits accepted by the appellants. Having regard to the Settlement Commission's findings and the absence of cogent material establishing that cash had been accepted as loan/deposit by the appellants, the transaction was held to lack a lender-borrower relationship and could not be treated as cash loans attracting section 269SS/penalty under section 271D. The Tribunal relied on precedents holding that revenue cannot on one hand treat amounts as undisclosed income and on the other proceed under section 269SS/271D, and applied that principle to set aside the penalties. [Paras 27, 28, 30, 31, 33]

Penalty levied under section 271D read with section 269SS deleted as the amounts in question had been accepted as income/telescoped expenses of the company by the Settlement Commission and there was no cogent finding of cash loans/deposits to attract section 269SS.

Requirement of recording satisfaction before initiation of penalty proceedings - penalty under section 271D read with section 269SS of the Income-tax Act - Whether the penalty imposed under section 271D was sustainable in the absence of any recorded satisfaction by the Assessing Officer/penal authority for initiating proceedings. - HELD THAT: - The Tribunal found that the assessment order and the penalty order lacked any contemporaneous recording of satisfaction required for initiating penalty proceedings. The Assessing Officer initially treated the transaction as income and did not record a clear satisfaction that cash loans or deposits had been accepted in contravention of section 269SS. Reliance was placed on the Supreme Court's decision that penalty under the relevant provision cannot stand where it is without recorded satisfaction; where the foundational assessment order recording satisfaction has been set aside or where fresh orders do not contain such satisfaction, the penalty cannot survive. The Tribunal observed that the JCIT proceeded after noting the CIT(A)'s advisory remarks but there was no independent, cogent satisfaction recorded to justify the imposition of penalty under section 271D. [Paras 26, 34, 35, 36, 37]

Penalty under section 271D is invalid and is directed to be deleted for lack of requisite recorded satisfaction prior to imposition.

Final Conclusion: Applying settled principles that the same sum cannot be taxed/treated in two incompatible characters in the same assessment year and that penalty proceedings require independent recorded satisfaction, the Tribunal allowed the appeals and directed deletion of the penalties levied under section 271D read with section 269SS in respect of the appellants.

Payment based disallowance under section 43B - Disallowance for non deduction of tax at source under section 40(a)(ia) - Disallowance for expenditure in relation to exempt income under section 14A read with Rule 8D - Deductibility of employees' contributions under section 36(1)(va) - Admission of additional grounds of appeal in light of NTPC

Payment based disallowance under section 43B - Deletion of addition made towards service tax on the ground of section 43B - HELD THAT: - The Tribunal noted that deductions under section 43B are allowable only on actual payment and that an item not debited to profit & loss account is not claimed as an expenditure. The Assessing Officer in the present case had not disallowed an asserted expenditure but sought to bring to tax an amount which the assessee had not treated as an expense. Section 43B therefore does not operate to disallow an amount which the assessee did not claim as a deductible expenditure; consequently the addition made under section 43B could not be sustained.

Addition under section 43B in respect of service tax deleted.

Disallowance for non deduction of tax at source under section 40(a)(ia) - Treatment of disallowance under section 40(a)(ia) where recipients have offered the income and assessee was not held to be an assessee in default under section 201(1) - HELD THAT: - The Tribunal observed that the 2nd proviso to section 40(a)(ia) (w.e.f. 1.4.2013) and the proviso to section 201(1) operate to exclude disallowance where the assessee is not deemed an assessee in default and the recipient has offered the amount as income. The assessee was not treated as an assessee in default and the recipients had declared the receipts. Applying these principles and the precedents relied upon, the Tribunal held that disallowance under section 40(a)(ia) could not be sustained; the ground was allowed (recorded as for statistical purposes).

Disallowance under section 40(a)(ia) allowed in favour of the assessee (deleted / allowed for statistical purposes).

Disallowance for expenditure in relation to exempt income under section 14A read with Rule 8D - Deletion of disallowance computed under section 14A read with Rule 8D - HELD THAT: - The Tribunal accepted the assessee's contention that no exempt income was earned in the relevant year and relied on the decisions of higher and coordinate authorities (including Cheminvest Limited and Coordinate Benches of the Tribunal) holding that where no exempt income is earned or no direct nexus is established between interest and exempt income, disallowance under section 14A/Rule 8D is not called for. Following those precedents, the Tribunal found that the section 14A disallowance could not be sustained.

Disallowance under section 14A read with Rule 8D deleted.

Deductibility of employees' contributions under section 36(1)(va) - Deletion of disallowance of employees' contribution to ESI and PF under section 36(1)(va) where payment was made before filing return - HELD THAT: - The Tribunal noted that the assessee had remitted employees' contributions to statutory authorities before the due date for filing the return and followed coordinate bench decisions holding that such payments made before filing the return are allowable. On that basis, the Tribunal concluded the disallowance under section 36(1)(va) was not sustainable.

Disallowance under section 36(1)(va) in respect of ESI and PF contributions deleted.

Admission of additional grounds of appeal in light of NTPC - Admission and adjudication of additional grounds raised before the Tribunal - HELD THAT: - The Tribunal allowed admission of additional grounds of appeal relied upon as questions of law in view of the Supreme Court decision in NTPC v. CIT. The admitted grounds, being questions of law arising from facts on record, were examined and adjudicated on their merits as part of the appeal.

Additional grounds admitted and adjudicated.

Final Conclusion: The appeal for A.Y. 2012 13 is partly allowed: additions under section 43B (service tax), section 14A/Rule 8D, and section 36(1)(va) (ESI/PF) are deleted; the addition under section 40(a)(ia) is not sustained in view of the proviso and the fact that the assessee was not held to be an assessee in default and recipients had offered the receipts, and the additional grounds were admitted and decided.

Penalty under section 271(1)(c) for furnishing inaccurate particulars - Deletion of penalty where the underlying quantum addition is vacated by the appellate tribunal - Valuation of unsold inventory at lower of cost or market value and non-recognition of profit on closing stock

Penalty under section 271(1)(c) for furnishing inaccurate particulars - Deletion of penalty where the underlying quantum addition is vacated by the appellate tribunal - Whether the penalty imposed under section 271(1)(c) can be sustained when the quantum addition on which it is predicated is subsequently vacated by the Tribunal. - HELD THAT: - The Tribunal in the assessee's separate quantum appeal vacated the addition of Rs. 85,18,702/-, holding that the assessee had valued unsold flats at the lower of cost or market value in accordance with generally accepted accounting principles and that such valuation cannot be a source of profit. Having regard to that decision, the Tribunal's vacatur of the quantum finding removes the factual foundation for the penalty which had been imposed for furnishing inaccurate particulars in respect of that addition. The appellate bench therefore concluded that the penalty predicated on the vacated addition cannot be sustained and must be deleted. [Paras 8]

Penalty under section 271(1)(c) deleted as the underlying addition was vacated by the Tribunal; appeal allowed.

Final Conclusion: The penalty of Rs. 25,55,610/- imposed under section 271(1)(c) is deleted because the quantum addition on which it was based was vacated by the Tribunal; the assessee's appeal is allowed.

Depreciation on goodwill as an intangible asset - Existence of block of assets and written down value for claiming depreciation - Effect of impairment/write off in books of account on entitlement to depreciation

Depreciation on goodwill as an intangible asset - Existence of block of assets and written down value for claiming depreciation - Effect of impairment/write off in books of account on entitlement to depreciation - Whether depreciation on goodwill claimed for AY 2012-13 is allowable when goodwill was impaired and shown as nil in the books of account as on the last day of the previous year. - HELD THAT: - The Tribunal accepted that goodwill qualifies as an intangible asset for depreciation purposes. However, it applied the statutory requirement that depreciation is available only if the assessee is owner, the asset is used for business, and the block of assets exists - with depreciation computed on the written down value (WDV) of the block. The assessee had recorded an impairment/write off of goodwill and shown nil value for goodwill in the books as on 31/03/2012, and consequently did not claim depreciation in its accounts. The Tribunal held that where the WDV of the asset/block is reduced to zero or the block ceases to exist in the books on the last day of the previous year, no depreciation is allowable. Further, absence of any enduring benefit from the goodwill meant there was no existing asset on which depreciation could be claimed. The Tribunal distinguished an earlier Tribunal decision in the assessee's own case for a different year on the ground that the factual position in the year under consideration showed the goodwill ceased to exist in the books. [Paras 6]

Depreciation on the goodwill for AY 2012-13 disallowed; appeal dismissed.

Final Conclusion: Tribunal dismissed the assessee's appeal and upheld the disallowance of depreciation on goodwill for Assessment Year 2012-13 because the goodwill had been impaired and stood nil in the books as on the relevant date, so the block of assets did not exist for depreciation purposes.

Ex parte dismissal for non-prosecution - principles of natural justice - opportunity of hearing - restoration of appeal for fresh adjudication - penalty under Section 271(1)(c) of the Act

Ex parte dismissal for non-prosecution - principles of natural justice - opportunity of hearing - penalty under Section 271(1)(c) of the Act - restoration of appeal for fresh adjudication - Whether the ex parte dismissal of the assessee's appeal by the CIT(A) and confirmation of penalty could stand, and whether the appeal should be restored for fresh decision after affording hearing. - HELD THAT: - The Tribunal noted that the CIT(A) had dismissed the appeal as ex parte for non-prosecution though multiple hearing dates were issued. Although the CIT(A) went on to decide the penalty matter on merits, that decision occurred without hearing the assessee. The Tribunal applied the principle that an aggrieved party ought to be given a reasonable opportunity to be heard and that ex parte disposal requires compelling reasons for non-appearance which are beyond the control of the litigant. Having considered the assessee's contention that non-appearance was for reasons beyond its control, the Tribunal concluded that fairness required restoration of the appeal. Accordingly, the Tribunal set aside the ex parte disposal and directed the CIT(A) to decide the penalty afresh on merits after affording the assessee an opportunity of hearing, admonishing that the assessee shall attend without seeking further adjournments. [Paras 5, 6]

Appeal restored to the file of the CIT(A) for fresh adjudication on merits after affording the assessee an opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the ex parte disposal by the CIT(A), and restored the matter to the CIT(A) with a direction to hear the assessee and decide the penalty under Section 271(1)(c) on merits.

Deduction under section 80IB(10) - Definition of "built-up area" in relation to housing project approval - Applicability of statutory amendment made w.e.f. 01.04.2005 to pre approved projects - Effect of Sarkar Builders (Supreme Court) on eligibility under section 80IB(10) - Remand for fresh adjudication in light of binding precedent

Deduction under section 80IB(10) - Definition of "built-up area" in relation to housing project approval - Applicability of statutory amendment made w.e.f. 01.04.2005 to pre approved projects - Effect of Sarkar Builders (Supreme Court) on eligibility under section 80IB(10) - Entitlement to deduction under section 80IB(10) in respect of flats which were formed by combining smaller units resulting in a built up area exceeding 1000 sq. ft., where the housing project was approved prior to 01.04.2005. - HELD THAT: - The Tribunal noted that the assessee's housing project was approved on 19.07.2003, prior to the insertion of the statutory definition of "built up area" by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005. The assessee relied on the Hon'ble Supreme Court's decision in CIT-19, Mumbai v. Sarkar Builder, which held that the definition of "built up area" in clause (a) to section 80IB(14) is inextricably linked to approval and construction of a housing project and thus should not be enforced retrospectively against projects approved before the amendment. The Tribunal found substantial force in that contention but observed that the factual assertions made by the assessee (regarding applicability and measurements) required verification. In the circumstances, rather than deciding the entitlement on the existing record, the Tribunal set aside the matter and remitted it to the Assessing Officer for fresh adjudication, directing the AO to consider the Sarkar Builder ratio while verifying the factual position and determining eligibility under section 80IB(10). For the appeal in A.Y. 2009-10 the Tribunal applied the same view mutatis mutandis and directed similar remand for fresh adjudication. [Paras 9, 10, 11, 15]

Matter remanded to the Assessing Officer for fresh adjudication of entitlement to deduction under section 80IB(10) after verification of facts and in light of the Supreme Court's decision in Sarkar Builder.

Final Conclusion: Appeals for A.Y. 2010-11 and A.Y. 2009-10 are allowed for statistical purposes and the issue of entitlement to deduction under section 80IB(10) is remanded to the Assessing Officer for fresh adjudication in accordance with the Sarkar Builder (Supreme Court) decision.

Condonation of delay - power to condone delay under section 253(5) as expression "sufficient cause" - liberal construction of "sufficient cause" - ex parte assessment under section 144 - penalty under section 271(1)(c) - requirement of valid service of notice for reopening - remand for fresh adjudication on merits - imposition of costs when condoning delay

Condonation of delay - power to condone delay under section 253(5) as expression "sufficient cause" - liberal construction of "sufficient cause" - requirement of valid service of notice for reopening - ex parte assessment under section 144 - remand for fresh adjudication on merits - Delay in filing appeal against the assessment order for AY 2007-08 was to be condoned and the matter remitted to the first appellate authority for fresh adjudication on merits. - HELD THAT: - The Tribunal applied the established principle that the expression "sufficient cause" must be construed liberally and in favour of deciding matters on merits, having regard to authorities emphasising substantial justice over technical defeat. The assessee's factory premises had been under the control of the Excise authorities and the record shows non-receipt of assessment order until recovery proceedings in July 2018; the assessee thereafter obtained the director's DSC and filed the appeal. The Tribunal found procedural infirmities in the way the reopening/service issues were handled and observed that the AO, even in an ex parte assessment under section 144, ought to have exercised judgment by taking into account relevant material (including calling for details from the Excise Department) rather than treating gross production as undisclosed income. Balancing the conduct of the assessee and the AO's approach, and noting absence of evidence of deliberate mala fides, the Tribunal concluded that justice warranted condonation of delay and remand to the ld.CIT(A) to decide the assessment on merits after affording opportunity to the assessee. [Paras 11, 13, 14]

Delay in filing the appeal against the assessment order is condoned; the assessment order is set aside and remitted to the ld.CIT(A) for fresh adjudication on merits, subject to payment of costs.

Condonation of delay - power to condone delay under section 253(5) as expression "sufficient cause" - liberal construction of "sufficient cause" - penalty under section 271(1)(c) - remand for fresh adjudication on merits - imposition of costs when condoning delay - Delay in filing appeal against the penalty order for AY 2007-08 was to be condoned and the penalty matter remitted to the first appellate authority for fresh adjudication on merits, on payment of costs. - HELD THAT: - Applying the same principles on "sufficient cause" and liberal approach to condonation, the Tribunal accepted the assessee's explanation that the penalty order was first received in recovery proceedings and that the appeals could be filed only after obtaining a director's DSC because the company was non operational. The Tribunal noted that although the assessee's conduct warranted criticism, there was no evidence of deliberate concealment or mala fide delay that would justify refusing condonation. Bearing in mind the disproportion between alleged lapses and the quantum of tax and penalty imposed, and in the interest of substantial justice, the Tribunal condoned the delay in filing the penalty appeal and remitted the matter to the ld.CIT(A) for fresh decision on merits, while directing payment of costs to compensate the revenue for the delayed litigation. [Paras 13, 14, 15]

Delay in filing the appeal against the penalty order is condoned; the penalty order is set aside and remitted to the ld.CIT(A) for fresh adjudication on merits, subject to payment of costs.

Final Conclusion: Both appeals (assessment and penalty for AY 2007-08) are allowed for statistical purposes by condoning the delay in filing before the ld.CIT(A); the impugned orders are set aside and remitted to the ld.CIT(A) for fresh adjudication on merits, subject to deposit of costs of Rs. 50,000/- by the assessee and production of evidence of payment before the ld.CIT(A).

Date for determination of rate of duty - Presentation of bill of entry and entry inward as twin conditions - Self-assessment and reassessment under Section 17 - Emergency power to increase import duties under Section 8A - Retrospective application of delegated legislation/prohibition by delegated legislation - Electronic presentation on customs automated system

Date for determination of rate of duty - Presentation of bill of entry and entry inward as twin conditions - Electronic presentation on customs automated system - Determination of applicable rate of duty where goods entered India and bill of entry was presented on 16.02.2019 prior to issuance of Notification No.5/2019 - HELD THAT: - Section 15 prescribes that the rate of duty applicable to imported goods entered for home consumption is the rate in force on the date a bill of entry is presented, and where a bill of entry is presented prior to arrival, the date of entry inward of the vehicle is treated as the date of presentation; both entry inward and presentation are therefore requisite for determining the rate. The petitioners electronically presented bills of entry on 16.02.2019 during working hours and the goods had entered India on that date before Notification No.5/2019 was published at 20:46:58 hrs. Consequently the twin conditions under Section 15 were satisfied prior to issue of the impugned notification and the event determining the rate of duty was complete in departmental electronic records. Re-assessment powers under Section 17 do not permit applying a subsequently notified higher rate to these cases because the rate had been fixed by operation of Section 15 when both conditions were fulfilled. The Court analogous to Param Industries held that where the notification amending rates is published after working hours on the same date, it cannot be applied to bills of entry presented and goods entered earlier on that date. [Paras 7, 11, 12]

Petitioners liable to pay duty at the rate applicable on 16.02.2019 when both entry inward and bill of entry presentation occurred; Notification No.5/2019 cannot be applied to those imports.

Emergency power to increase import duties under Section 8A - Retrospective application of delegated legislation/prohibition by delegated legislation - Effect of Notification No.5/2019 (200% duty) as amounting to prohibition and its retrospective application to imports whose orders were placed and goods received prior to issuance of the notification - HELD THAT: - The impugned notification, by imposing a 200% rate even on items previously at nil or low rates, in practical effect operates as a prohibition on import from Pakistan. The Court agreed with the principle that delegated legislation which effectively prohibits imports cannot be given retrospective effect. Relying on the reasoning in Kanak Exports and the factual parity with Param Industries, the Court held that applying the higher rate retrospectively to imports ordered and received before issuance of the emergency notification is impermissible. The Court, however, did not undertake an adjudication on the vires of the notification in the abstract but refused its retrospective application in the facts before it. [Paras 13, 14]

Notification No.5/2019 cannot be applied retrospectively to imports which entered and for which bills of entry were presented before the notification was issued; goods to be cleared ignoring the impugned notification.

Final Conclusion: Without deciding the general vires of Notification No.5/2019, the Court held that where imported goods entered India on 16.02.2019 and bills of entry were presented electronically on that date prior to publication of the notification at 20:46:58 hrs, the rate of duty applicable is the rate in force at the time the twin conditions under Section 15 were satisfied; respondents directed to release the goods within seven days on payment of duty as declared and assessed, disregarding Notification No.5/2019.

Attribution of statements to a party - mens rea requirement for revocation of Customs House Agent licence - negligence and connivance as grounds for cancellation of CHA licence - standard of proof for imputing knowledge to a customs broker

Attribution of statements to a party - standard of proof for imputing knowledge to a customs broker - Whether the statement of Rajender @ Raju could be attributed to the appellant for the purpose of cancelling the CHA licence. - HELD THAT: - The Court examined the record and distinguished two different declarants: Rajendra Prasad (an employee of the appellant) and Rajender @ Raju (a distinct third person). The statement of Rajender @ Raju, recorded under Section 108, did not establish any direct or indirect relationship between him and the appellant or its employee Rajendra Prasad. There was no material to show that the appellant or its employees had made any conscious or deliberate misstatement on behalf of the importer, nor was there corroborative evidence linking the appellant to the acts described in Rajender @ Raju's statement. On that basis, the Tribunal erred in attributing the contents of Rajender @ Raju's statement to the appellant and treating it as a ground for revocation of the CHA licence. [Paras 4, 5, 6, 8]

The statement of Rajender @ Raju could not be attributed to the appellant and could not validly support cancellation of the appellant's CHA licence.

Mens rea requirement for revocation of Customs House Agent licence - negligence and connivance as grounds for cancellation of CHA licence - Whether negligence, knowledge or connivance of the appellant was proved to justify revocation of the CHA licence. - HELD THAT: - The Court applied the principle that revocation of a Customs House Agent's licence requires proof of an element of mens rea or active knowledge/connivance on the part of the CHA. Absent corroborative evidence showing that the appellant had information of, or connived in, forgery, mis-declaration or undervaluation, mere facilitation pursuant to importer instructions is insufficient to establish culpability. Reliance on precedents was noted to the effect that imposing punitive consequences on an innocent facilitator without proof of mens rea would be impermissible. On the facts, there was no finding of conscious or deliberate involvement by the appellant, and no material establishing negligence of the magnitude warranting revocation. [Paras 7, 8]

Negligence, knowledge or connivance on the part of the appellant was not proved; revocation of the CHA licence was not justified.

Final Conclusion: The orders cancelling the appellant's Customs House Agent licence and the CESTAT's affirmance were set aside for lack of proof attributing Rajender @ Raju's statement to the appellant and for absence of mens rea, leaving open any proceedings against the importer; the appellant may seek licence renewal.

Quashing of show cause notices for inordinate delay in adjudication - reasonableness of period for adjudication / lapsed show cause notice - retroactive application of amended provisions of Section 28(9) and (9A) of the Customs Act, 1962 - maintainability of writ under Article 226 in challenge to delayed adjudication - duty of authority to pass order within statutory/ reasonable period

Maintainability of writ under Article 226 in challenge to delayed adjudication - Writ petitions under Article 226 are maintainable to challenge prolonged non-adjudication of show cause notices and related questions of reasonable period of limitation. - HELD THAT: - The preliminary objection that petitioners had an alternate remedy was rejected. The court distinguished precedents cited by respondents as factually different and emphasised that challenges to the reasonableness of delay and limitations are mixed questions which may be entertained under Article 226. Reliance was placed upon the principle in State of Punjab v. Bhatinda District Co-op. Milk P. Union Ltd. that questions of reasonable period where no statutory period exists are amenable to writ jurisdiction, and the court accordingly proceeded to entertain the petitions. [Paras 6]

Preliminary objection overruled and writ petitions entertained.

Quashing of show cause notices for inordinate delay in adjudication - reasonableness of period for adjudication / lapsed show cause notice - duty of authority to pass order within statutory/ reasonable period - Show cause notices issued in 2009 and 2011 which remained pending without adjudication for a prolonged period were liable to be quashed as having lapsed for want of adjudication within a reasonable/statutory period. - HELD THAT: - Applying the Division Bench ratio in GPI Textile Ltd. and the court's earlier decision in Harkaran Dass Vedpal, the bench held that show cause notices cannot be permitted to remain pending beyond a reasonable period. The court noted that no adjudication or stay was in place and that the department had not availed itself of any statutory mechanism to extend the adjudication period. Having regard to settled authorities which treat prolonged pendency (and a five-year benchmark in related contexts) as unreasonable, the court concluded that notices pending for over a decade could not be sustained and must be quashed. [Paras 8, 12, 13, 16]

Impugned show cause notices quashed for inordinate delay in adjudication.

Retroactive application of amended provisions of Section 28(9) and (9A) of the Customs Act, 1962 - Amendment to Section 28(9) and insertion of Section 28(9A) w.e.f. 29.03.2018 is to be applied retroactively to pending show cause notices for the purpose of prescribing the time-limit for adjudication, and non-compliance with its requirements renders notices lapsed. - HELD THAT: - The court analysed the amended provisions which prescribe a one-year adjudication period (extendable by one year by a senior officer) and the deferment mechanism under subsection (9A). It held that although the amendment is not retrospective in the sense of changing past facts, it operates retroactively to pending proceedings by imposing the statutory limitation as if applicable from the amendment date. Since no extension under the proviso and no notice under subsection (9A) had been recorded, the department could not rely on the passage of time to continue pending adjudication; consequently the amended limitation regime resulted in lapsing of the pending notices. [Paras 14, 15]

Amended limitation provisions apply to pending show cause notices and, in absence of valid extension or deferment, the notices have lapsed.

Final Conclusion: The writ petitions were allowed: the High Court entertained the petitions under Article 226, applied its earlier ratios and the retroactive effect of the amended Section 28(9)/(9A), and quashed the impugned show cause notices for inordinate delay and lapsing under the amended limitation regime.

Summary order. Delay condoned; leave granted; matter tagged with Civil Appeal No. 7431 of 2012.

Summary order. Notice issued on the application for condonation of delay and on the appeal, returnable within four weeks; Dasti permitted; liberty to file additional documents.

Summary order. Appeal dismissed; delay in filing condoned.

Direction to reconsider administrative decision - fresh decision in accordance with law - liberty to file application - hearing before final disposal - prior communications not to influence reconsideration - no adjudication on merits

Direction to reconsider administrative decision - fresh decision in accordance with law - liberty to file application - Respondents No.1, 2 and 3 are directed to reconsider the applications for discharge/reception of cargo and decide afresh in accordance with law. - HELD THAT: - The Court, noting subsequent developments placed before the respondents and the parties' willingness to file or have filed applications, declined to adjudicate rival contentions on merits and instead directed the respondents to consider the material now placed before them. The petitioner and respondent No.4 were granted liberty to file detailed applications within 24 hours, and the respondents were directed to dispose of such applications on their receipt within 10 days. The Court emphasised that disposal must be in accordance with law and on merits, thereby mandating fresh administrative consideration rather than judicial determination of the substantive dispute. [Paras 7, 9, 11]

Respondents No.1, 2 and 3 to consider and decide the applications afresh in accordance with law within 10 days of receipt; petitioner and respondent No.4 to file applications within 24 hours.

Hearing before final disposal - prior communications not to influence reconsideration - no adjudication on merits - Respondents must afford hearing to the parties, and must not be influenced by the earlier impugned communications while reconsidering the matter; the Court has not decided the rival contentions. - HELD THAT: - The Court expressly required that the respondents give the petitioner and respondent No.4 an opportunity of hearing before final disposal and directed that earlier communications dated 23/07/2019 and 02/08/2019 should not influence the fresh consideration. The order clarifies that the Court has not adjudicated the substantive rival contentions, leaving them open for the respondents' decision on merits after hearing the parties. [Paras 11, 12, 13]

Parties to be heard before final decision; prior communications must not influence reconsideration; rival contentions remain undecided by the Court.

Final Conclusion: The petition is disposed by directing respondents No.1, 2 and 3 to consider fresh applications (to be filed by the parties within 24 hours) and to decide them on merits and in accordance with law within 10 days of receipt, after hearing the parties; the Court has not adjudicated the substantive contentions and there is no order as to costs.

Interest on erroneously paid drawback - Repayment prior to demand under Section 75A(2) of the Customs Act - Requirement of prior notice and hearing before levy of interest (principles of natural justice) - Invalidity of demand raised without specific show cause notice

Interest on erroneously paid drawback - Repayment prior to demand under Section 75A(2) of the Customs Act - Whether interest could be levied when the claimant repaid the erroneously paid drawback prior to any demand under Section 75A(2). - HELD THAT: - Section 75A(2) contemplates payment of interest where drawback has been paid erroneously and the claimant repays only after the expiry of the two month period from the date of demand; interest is to be calculated from the date after the expiry of that two month period until recovery. The petitioner repaid the excess drawback before any demand was made and therefore there was no statutory date from which Section 75A(2) envisages interest to run. In those circumstances the respondents were not empowered, on the statutory scheme as it then stood, to claim interest against the petitioner. The court therefore quashed the claim for interest on this ground. [Paras 7]

Interest claim under Section 75A(2) could not be sustained where repayment was made prior to demand; interest quashed on this ground.

Requirement of prior notice and hearing before levy of interest (principles of natural justice) - Invalidity of demand raised without specific show cause notice - Whether imposition of interest without a prior specific show cause notice proposing interest violated the principles of natural justice and rendered the levy invalid. - HELD THAT: - The impugned order imposed interest though the show cause notice did not make any specific demand for interest and only contained a general reservation of rights. The court applied the settled principle that a demand raised without notice or hearing is invalid and that a party must be afforded an opportunity to show cause in respect of the liability sought to be imposed. The court relied on earlier authorities to that effect, including Union of India and others v. Madhumilan Syntex Private Limited and Nirlon Limited v. Union of India , and held that levy of interest without prior show cause notice proposing interest offended natural justice. Consequently the levy of interest was held to be invalid for want of a specific prior notice and hearing. [Paras 8, 9]

Levy of interest without issuing a prior show cause notice specifically proposing interest violated principles of natural justice and was invalid; interest quashed on this ground.

Final Conclusion: The petition is allowed; the impugned order dated 12.05.2005 is quashed insofar as it imposes interest at the rate of 10% per annum and the levy of interest is set aside. No costs.

Registration of sales contracts - country cap - quantitative restrictions on imports - NDPS Act regulatory power - Foreign Trade Act quantitative restrictions - arbitrariness doctrine - invidious discrimination - memorandum of understanding - public interest in narcotics control

Registration of sales contracts - country cap - arbitrariness doctrine - invidious discrimination - public interest in narcotics control - Validity of the Central Bureau of Narcotics public notice dated 25th June 2019 prescribing guidelines for registration of sales contracts and country-specific caps for poppy seed imports from Turkey, as being arbitrary or violative of the petitioners' rights to trade. - HELD THAT: - The Court upheld the guidelines. It held there is no fundamental right to import without regulatory conditions and the petitioners failed to establish manifest arbitrariness or ex facie invidious discrimination. The guidelines operate pursuant to an MoU with Turkey and are based on specified criteria (stock and production data from Turkish authorities) rather than being ad hoc. The measures (registration of exporters and importers, limits per importer, crop-year timelines and procedural conditions) are directed to filter bona fide importers, prevent cartelization and protect the public interest in controlling narcotics-related activities. Absent any challenge to the statutory source of power, mere preference for the earlier lot-drawing system or assertions of sub-optimality do not suffice to invalidate the notification; no cogent data was produced to show patent arbitrariness and no other importer had complained while many had complied with the scheme. [Paras 8, 9, 12, 15, 17]

The challenge to the 25th June 2019 guidelines is rejected and the notification is upheld.

NDPS Act regulatory power - Foreign Trade Act quantitative restrictions - Whether the Central Government/CBN had power to frame the impugned guidelines and to impose quantitative restrictions or country caps in relation to poppy seed imports. - HELD THAT: - The Court recorded that statutory powers exist under the NDPS Act to permit, control and regulate import of opium-related substances and under the Foreign Trade (Development & Regulation) Act to impose quantitative restrictions after inquiry. The petition did not challenge the existence of these powers. The impugned guidelines were therefore a legitimate exercise of the statutory regulatory framework and a step to operationalise existing policy obligations and the MoU. [Paras 10, 11, 12]

The impugned guidelines fall within the statutory powers conferred under the NDPS Act and the Foreign Trade Act and are not ultravires for want of power.

Final Conclusion: The writ petition is dismissed; the CBN guidelines dated 25th June 2019 regulating poppy seed imports from Turkey are upheld as a valid exercise of statutory power aimed at implementing national policy and protecting public interest in narcotics control.

Quashing of criminal complaint for lack of jurisdiction - Summoning order in criminal proceedings - Transfer of investigation between DRI zonal offices - Withdrawal of prosecution - Notice under Section 108 of the Customs Act, 1962

Quashing of criminal complaint for lack of jurisdiction - Summoning order in criminal proceedings - Transfer of investigation between DRI zonal offices - Withdrawal of prosecution - Challenge to the complaint dated 25.04.2017 and the summoning order dated 25.04.2017 primarily on the ground of jurisdiction - HELD THAT: - The court recorded that the DRI's investigation relating to the export transactions of the private company was transferred to the Ludhiana Zonal Office, where the unit is situated, and that the company has since cooperated by producing the required documents. The petitioner sought quashing of the complaint and the summoning order on jurisdictional grounds. Counsel for the respondents (DRI) undertook before the Court to withdraw the complaint at Ahmedabad within one month in view of the transfer and the subsequent cooperation. Given this undertaking and the transfer of the investigation, the Court found that no further adjudication on the writ petition was necessary and disposed of the petition accordingly. The Court did not decide the merits of the jurisdictional challenge or pronounce on the substantive correctness of the summoning order; disposal was on the basis of the factual development and the respondents' undertaking.

Writ petition disposed of in view of transfer of investigation to Ludhiana and respondents' undertaking to withdraw the Ahmedabad complaint; no adjudication on the merits of the jurisdictional challenge.

Final Conclusion: The petition was disposed of without adjudication on the substantive jurisdictional question because the investigation was transferred to Ludhiana and the DRI undertook to withdraw the complaint at Ahmedabad; the respondents are bound by their counsel's undertaking.

Issuance of notice - period of limitation for issuing show cause notice - meaning of 'shall issue' in regulatory context - dispatch as date of issue - forgery of import documentation - revocation of customs broker licence - relevance of service versus issuance

Issuance of notice - meaning of 'shall issue' in regulatory context - period of limitation for issuing show cause notice - dispatch as date of issue - relevance of service versus issuance - Whether the show cause notice under Regulation 20(1) of CBLR, 2013 was issued within ninety days of receipt of the offence report. - HELD THAT: - The Tribunal examined the import of the expression "shall issue" in Regulation 20(1) and relied on authoritative definitions and precedent holding that a notice is "issued" when it is made out and placed in the hands of a person authorised to serve it or otherwise put into the process of dispatch with bona fide intent for service. Mere signing is not equivalent to issuance; the relevant date is when the issuing authority places the notice in the process of dispatch so that it is beyond its control. The notice in the present case was signed on 17/01/2018 and the departmental dispatch register showed the notice was sent out for posting on 17/01/2018. Once dispatched from the office of the Commissioner, it was out of the authority's control and therefore stood issued on that date. Service on the addressee on 07/02/2018 is not determinative of the date of issuance under the regulation. The Tribunal rejected the appellant's reliance on cases equating signing with issuance because, on the facts here, the Commissioner had effected dispatch within the limitation period and thereby ceased to have locus to alter the notice. [Paras 18, 19, 20, 21, 23]

The show cause notice dated 17/01/2018 was issued within ninety days of receipt of the offence report and is not barred by limitation.

Forgery of import documentation - revocation of customs broker licence - Whether the adjudicating authority was justified on merits in finding forgery and confirming revocation/penalty under the CBLR, 2013. - HELD THAT: - Although the appeal was confined to limitation, the Tribunal reviewed the record and noted that the proprietor's recorded statement acknowledged alteration of the bill of lading date to avoid the mandatory BIS requirement. That admission was corroborated by an employee's statement, confirmation from the EDI system and the shipping line, and the temporal relation to the DGFT notification making BIS certification mandatory. There was no retraction of the statements relied upon by the adjudicating authority. The Tribunal observed that equity cannot shield a status obtained by fraud and found no infirmity in the impugned adjudication on merits. [Paras 24, 25]

The finding of forgery and the consequent confirmation of revocation/penalty were justified; no merit is found in the challenge to the substantive order.

Final Conclusion: The Tribunal finds the show cause notice to have been issued within the prescribed ninety-day period and upholds the adjudicating authority's findings on forgery; the appeal is dismissed and the impugned order is affirmed.

Penalty under Section 117 of the Customs Act, 1962 - Misdeclaration of Prima Facie Market Value (PMV) - Acceptance of FOB value and grant of DEPB benefit - Confirmation of penalty by Commissioner (Appeals)

Penalty under Section 117 of the Customs Act, 1962 - Acceptance of FOB value and grant of DEPB benefit - Misdeclaration of Prima Facie Market Value (PMV) - Whether penalty imposed under Section 117 for alleged misdeclaration of PMV is sustainable where the adjudicating authority accepted the FOB value and allowed DEPB benefit. - HELD THAT: - The Tribunal noted that the adjudicating authority, while finalising assessment, accepted the FOB values declared by the appellant and allowed the DEPB benefit on those values. Given that the declared FOB values were accepted for assessment and benefit grant, the Tribunal held that imposition of penalty under Section 117 for misdeclaration of PMV was unwarranted. The Tribunal also observed the inconsistency in confirmation of a penalty higher than the maximum penalty mentioned by the Commissioner (Appeals), but the determinative point was that acceptance of FOB values and allowance of DEPB precluded sustaining the penalty for misdeclaration. [Paras 5]

Penalty imposed under Section 117 is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.

Final Conclusion: The Tribunal set aside the penalty imposed under Section 117 of the Customs Act, 1962 because the adjudicating authority had accepted the FOB values declared by the appellant and allowed DEPB benefit; the appeal is allowed with consequential relief as per law.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - withdrawal of application under Section 12A of the Insolvency and Bankruptcy Code, 2016 - proviso to sub-section (2) of Section 61 - limitation on Appellate Tribunal's power to condone delay - appeal barred by limitation

Proviso to sub-section (2) of Section 61 - limitation on Appellate Tribunal's power to condone delay - appeal barred by limitation - Appellate Tribunal's jurisdiction to condone delay in filing the appeal and consequence on maintainability - HELD THAT: - The Tribunal held that in view of the proviso to sub-section (2) of Section 61 the Appellate Tribunal has no jurisdiction to condone the delay in preferring the appeal filed after the prescribed period. Consequently the appeal, having been filed after a delay of 112 days, is barred by limitation and cannot be entertained by this Forum. The Bench therefore declined to express any opinion on the merits or on the impugned order dated 10th January, 2019 because it was precluded from condoning the delay and admitting the appeal. [Paras 4, 5]

The Appellate Tribunal has no jurisdiction to condone the delay under the proviso to sub-section (2) of Section 61; the appeal filed after 112 days is dismissed as barred by limitation.

Withdrawal of application under Section 12A of the Insolvency and Bankruptcy Code, 2016 - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Effect of pending or decided proceedings under Section 12A on future remedies if withdrawal is not entertained - HELD THAT: - The Tribunal recorded the appellant's contention that matters between other parties (HDFC Bank and certain home buyers) had been taken up and decided under Section 12A and a withdrawal was placed before the Adjudicating Authority. The Bench noted that it would not express any opinion on the impugned admission order, but observed that if the Adjudicating Authority does not entertain the Section 12A application, that circumstance may give the appellant a fresh cause of action to challenge the admission. This observation does not decide the merits of the Section 12A application but indicates that non-entertainment may revive substantive rights to seek relief. [Paras 3, 5]

No adjudication on the merits of the admission under Section 7 or on the Section 12A application; if the Adjudicating Authority refuses to entertain the Section 12A application that may provide a fresh cause of action to the appellant.

Final Conclusion: The appeal is dismissed as barred by limitation because the Appellate Tribunal is precluded by the proviso to sub-section (2) of Section 61 from condoning the delay; no adjudication is made on the impugned admission order, and the appellant may seek further remedy if the Adjudicating Authority declines to entertain the Section 12A application.

Continuance of proceedings after adjudication as insolvent - Abatement for failure to apply under Rule 22 - Prescribed sixty-day period for successor or liquidator to seek continuance - Application of Rule 22 of CESTAT (Procedure) Rules, 1982 regarding continuance after insolvency

Continuance of proceedings after adjudication as insolvent - Abatement for failure to apply under Rule 22 - Prescribed sixty-day period for successor or liquidator to seek continuance - Whether the appeals abate for non-compliance with Rule 22 of CESTAT (Procedure) Rules, 1982 after the company was adjudicated insolvent and a Resolution Professional appointed. - HELD THAT: - Rule 22 requires that where a company is adjudicated as insolvent or is being wound up the appeal shall abate unless an application for continuance is made by or against the successor-in-interest, receiver, liquidator or other legal representative, and that such application shall be made within sixty days of the occurrence of the event (subject to the Tribunal's discretion to allow further time for sufficient cause). In the present case insolvency proceedings were initiated and a Resolution Professional was appointed in 2017, but no formal application was filed to continue the proceedings before this Tribunal in compliance with Rule 22. The Tribunal found that, in the absence of any application by the successor or liquidator within the prescribed period (or any sufficient cause shown for extension), the statutory procedure for continuance was not followed and the appeals must therefore abate. [Paras 4]

Appeals abated for failure to file the requisite application under Rule 22 to continue proceedings after adjudication as insolvent.

Final Conclusion: Appeals dismissed by way of abatement for non-compliance with Rule 22 of the CESTAT (Procedure) Rules, 1982 where no application was filed by the successor-in-interest or Resolution Professional to continue the proceedings within the prescribed period.

Financial creditor - Financial debt - amounts advanced by an allottee/advance for real estate having the commercial effect of a borrowing - FEMA compliance and capital account transaction - insufficiently stamped instrument - curable defect - Corporate Insolvency Resolution Process - moratorium - Interim Resolution Professional

Financial creditor - Financial debt - amounts advanced by an allottee/advance for real estate having the commercial effect of a borrowing - The petitioner is a financial creditor and the amounts advanced constitute a financial debt owed by the corporate debtor. - HELD THAT: - The Tribunal found on the material before it, including the loan agreement, bank transactions and email admissions by the managing director, that amounts were advanced by the petitioner and utilized by the corporate debtor. The Tribunal relied on the definition of 'financial debt' and the explanation treating amounts raised from an allottee under a real estate project as having the commercial effect of a borrowing. Discrepancies in documentary form were treated as collateral to the core question of whether a debt exists; such formal defects do not negate the substance of the transaction which discloses an advance for which money is due. The state of the corporate debtor's finances, as reflected in the audited balance sheet, supported the conclusion that admitted liabilities remained unpaid and that the petitioner was a financial creditor entitled to seek initiation of CIRP under Section 7. [Paras 31, 33, 34]

Petitioner held to be a financial creditor and the claimed amounts treated as financial debt; petition is maintainable on this ground.

FEMA compliance and capital account transaction - borrowing in foreign exchange - The objection that the petition is not maintainable because the transaction is barred by FEMA/foreign exchange laws was not accepted as a basis to reject the insolvency petition. - HELD THAT: - The Respondent's contention that the advances constituted impermissible foreign exchange/ capital account transactions was noted, together with the statutory and regulatory framework cited by the Respondent. The Tribunal observed that the petitioner had placed material showing funds were brought in through banking channels and that any alleged contraventions of FEMA or related regulations would not, on the record before the Tribunal, defeat the petitioner's right to initiate CIRP. The Tribunal treated questions of FEMA compliance as matters for appropriate authorities or for the Resolution Professional to examine in the course of the CIRP, and held that alleged foreign exchange irregularities did not render the petition non-maintainable. [Paras 12, 26, 33]

FEMA-related objections do not bar admission of the Section 7 petition; maintainability upheld and such compliance issues left to be addressed during CIRP or by competent authorities.

Insufficiently stamped instrument - curable defect - The plea that the loan agreement is insufficiently stamped does not defeat the petition; stamping defects are curable and can be addressed by the Resolution Professional or appropriate authority. - HELD THAT: - The Tribunal considered the Respondent's submission under the Stamp Act regarding impounding and adjudication of duty. It referred to precedent indicating that courts may permit remittance of deficient stamp duty with penalty or forward the instrument for adjudication. The Tribunal held that any inadequacy in stamping or other formal infirmities in the loan agreement could be dealt with by the Resolution Professional and appropriate authorities and did not preclude admission of the petition under Section 7. [Paras 6, 28, 33]

Stamping objection rejected as a ground to refuse the petition; defects are curable and to be dealt with in the CIRP.

Corporate Insolvency Resolution Process - moratorium - Interim Resolution Professional - The petition under Section 7 is admitted; CIRP is initiated, an Interim Resolution Professional is appointed and moratorium is declared. - HELD THAT: - Having held the petitioner to be a financial creditor with a financial debt due and payable and having found the application filed in accordance with law and the proposed IRP to be qualified, the Tribunal exercised its powers under Section 7(5)(a) and other provisions to admit the petition. The Tribunal appointed the named insolvency professional as Interim Resolution Professional and directed compliance with statutory timelines and obligations, including public announcement and cooperation by the corporate debtor's board and staff. The moratorium provisions were declared in accordance with the Code. [Paras 35, 36]

Petition admitted; CIRP initiated, IRP appointed and moratorium declared.

Final Conclusion: The Tribunal admitted the Section 7 petition, held that the petitioner is a financial creditor with financial debt due from the corporate debtor (notwithstanding contentions regarding FEMA or stamp defects), appointed the named Interim Resolution Professional and directed the commencement of CIRP with declaration of the moratorium and related consequential directions.

Provisional Attachment - Proceeds of Crime - Prevention of Money Laundering Act, 2002 - Confirmation of Provisional Attachment by Adjudicating Authority - Security by Fixed Deposit Receipt - Pendency of Special Leave Petition

Pendency of Special Leave Petition - Provisional Attachment - Security by Fixed Deposit Receipt - Adjournment of the appeals pending outcome of the Special Leave Petition filed by the Enforcement Directorate and liberty to seek appropriate relief thereafter. - HELD THAT: - The Tribunal noted that the Enforcement Directorate has filed Special Leave Petition (Criminal) No. 9427 of 2018 against the High Court's order discharging the appellant, and that the Supreme Court has issued notice without staying the High Court order. In view of the pendency of the SLP, the Tribunal considered it appropriate to await the outcome of the Supreme Court's decision before adjudicating the appeals challenging confirmation of provisional attachments. Although the appellant offered to secure the respondent's interest by furnishing a Fixed Deposit Receipt and the Tribunal observed that similar prayers have been allowed in other appeals (with the respondent's consent in some), no interim modification of the provisional attachments was directed in these appeals. Consequently the appeals were adjourned sine die until the Supreme Court delivers its order, with liberty granted to the appellant to move an application after the Supreme Court's order is pronounced. [Paras 11, 13]

The appeals are adjourned sine die pending the decision in the Special Leave Petition filed in the Supreme Court; liberty granted to the appellant to move an application after the Supreme Court's order.

Final Conclusion: The Appellate Tribunal adjourned the appeals sine die pending the outcome of the Enforcement Directorate's Special Leave Petition in the Supreme Court and permitted the appellant to seek appropriate relief after that order is passed.

Acquittal effect on provisional attachment under PMLA - Provisional attachment and confirmation under Section 5 and Section 8 of PMLA - Ceasing of attachment on acquittal under Section 8(3) and (5) - Temporal application of provisions of a special statute - Obligation to challenge acquittal by State/ED for continuation of attachment

Acquittal effect on provisional attachment under PMLA - Ceasing of attachment on acquittal under Section 8(3) and (5) - Whether the provisional attachment of the appellants' properties under PMLA must cease following their acquittal for the scheduled offences and whether the Adjudicating Authority's confirmation/order should be set aside. - HELD THAT: - The Tribunal applied the statutory scheme in Section 8 read with Section 5 of the PMLA to the facts. Section 8(2) and (3) require the Adjudicating Authority to consider replies, hear parties and record a finding before confirming attachment; Section 8(3)(b) contemplates that attachment becomes final only after guilt is proved and the trial court's order becomes final, while Section 8(5) provides that on conclusion of a trial where the person is acquitted the attachment or retention shall cease to have effect. The appellants were acquitted by the Special Court and neither the State nor the Enforcement Directorate challenged that acquittal within the available time; the bank (a private party) is not a party to these proceedings and its pending challenge does not substitute for challenge by State/ED. The Tribunal noted that provisions of a special statute are to be considered with reference to relevant dates but, on the admitted facts of acquittal and absence of any challenge by prosecuting authorities, the statutory mandate in Section 8(5) operates to cause the attachment to lapse. Applying these legal conclusions to the material facts, the Tribunal held that the provisional attachment could not be allowed to continue and the impugned confirmation/order had to be set aside. [Paras 11, 14, 15, 16]

The provisional attachment of the two properties lapsed on account of the acquittal; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, held that attachment of the appellants' properties ceased upon their acquittal (and in the absence of any challenge by the State or ED), set aside the impugned order and directed that there be no costs.

Encashment of attached property - Transfer of units of mutual fund in favour of Director of Enforcement - Sub rule (4) of Rule 4 of the PMLA Adjudicating Authority Rules, 2013 - Status quo restoration - Interference with judicial process by altering status of attached property - Power to take possession after confirmation by the Adjudicating Authority - Court receiver principle and consequences of acting without leave of court

Sub rule (4) of Rule 4 of the PMLA Adjudicating Authority Rules, 2013 - Encashment of attached property - Transfer of units of mutual fund in favour of Director of Enforcement - Power to take possession after confirmation by the Adjudicating Authority - Legality of the Directorate of Enforcement's encashment/alteration of mutual funds after confirmation of provisional attachment and while an appeal was pending. - HELD THAT: - The Tribunal held that Rule 4(4) mandates transfer of shares/debentures/units of mutual fund or instruments in favour of the Director of Enforcement where the Adjudicating Authority confirms provisional attachment; it does not permit premature encashment or alteration of the status of the property. The ED encashed the mutual funds shortly after receipt of the confirmation order and while the CBI's appeal against the Special Court's de freezing order was pending before the High Court; the respondent also did not inform the Special Court or seek the High Court's permission before taking steps. Prima facie, the encashment amounted to action contrary to the sub rule and risked interfering with the judicial process. The Tribunal observed that, although the ED is entitled to take possession once the order is confirmed and statutory steps under Section 8(4) are complied with, sub rule (4) requires strict compliance in relation to movable property and any breach invites interference by the Appellate Tribunal. In view of these considerations, and without expressing any final opinion on merits of the underlying criminal proceedings, the Tribunal directed restoration of the mutual funds to the asset manager or, if restoration is not feasible, creation of a fixed deposit in the name of the assessee for the equivalent amount to preserve the status quo pending disposal of the appeals; further, the appellants were restrained from dealing with the amounts on maturity. [Paras 19, 21, 22, 23, 24]

Encashment set aside in part; mutual funds to be restored to Reliance Nippon Life Asset Management Ltd or, if not possible, an FD for equivalent amount to be prepared in the name of the appellant and kept with the respondent; status quo modified accordingly and to continue after compliance.

Interference with judicial process by altering status of attached property - Court receiver principle and consequences of acting without leave of court - Status quo restoration - Whether ED should have informed the High Court or sought leave before altering the status of mutual funds which were the subject matter of the Special Court's de freezing order and a High Court stay. - HELD THAT: - The Tribunal noted that the Special Court had de freezed the mutual funds subject to conditions and that the CBI had obtained an ex parte stay of that de freezing order from the High Court; the ED did not disclose these developments in its communications nor seek the High Court's directions before directing transfer/encashment. Relying on the principle that actions affecting property under judicial control taken without leave of the court are impermissible, the Tribunal found that the IO ought to have informed or approached the High Court or otherwise awaited adjudication rather than unilaterally altering the status of the movable property. For preservation of rights and to avoid prejudice pending adjudication of appeals, the Tribunal directed restoration or creation of an FD and imposed a restraint on dealing with the amounts. [Paras 6, 10, 21, 22, 23]

ED faulted for not informing/approaching the High Court; mutual funds to be restored or FD created and status quo maintained; appellants restrained from dealing with amounts.

Final Conclusion: Prima facie the Directorate of Enforcement's premature encashment/alteration of the mutual funds was contrary to the requirement of Sub rule (4) of Rule 4 and interfered with the judicial process; the Tribunal directed restitution of the mutual funds to the asset manager or, if not feasible, formation of a fixed deposit in the appellant's name for the equivalent amount, with the status quo to continue and the appellants restrained from dealing with the amounts pending disposal of the appeals.

Scope of writ court's observation - res judicata / issue estoppel - merits reconsideration on remand - relegation to appellate forum for fresh adjudication

Scope of writ court's observation - claim for refund - The High Court's decision in the writ petition filed by the assessee was confined to the rejected claim for refund and did not constitute an adjudication of the correctness of the adjudicating authority's order which was under appeal before the Appellate Tribunal. - HELD THAT: - The Court held that the subject matter before the High Court (W.P.(C) No.4861 of 2015 and connected matters) related only to the assessee's claim for refund which had been rejected by the department. Consequently, observations in the High Court's judgment must be understood in that limited context and cannot be treated as resolving the separate controversy concerning the adjudicating authority's order that was the subject of appeals filed by the department before the Customs Excise and Service Tax Appellate Tribunal.

High Court's observations were limited to the refund claim and did not decide the correctness of the adjudicating authority's order.

Res judicata / issue estoppel - relegation to appellate forum for fresh adjudication - merits reconsideration on remand - The Tribunal erred in dismissing the department's appeals on the ground that the issues had already been adjudicated by the High Court; the Tribunal's order was set aside and the appeals were remanded for fresh consideration on merits. - HELD THAT: - The Supreme Court concluded that the Appellate Tribunal relied on an incorrect premise that the High Court had adjudicated the matters raised in the department's appeals. Because the High Court's ruling was limited to the refund claim, the Tribunal's dismissal on that basis was unsustainable. The Court therefore set aside the impugned Tribunal order and directed that the appeals be reconsidered by the Appellate Tribunal on their own merits and in accordance with law, uninfluenced by the High Court's observations. The Supreme Court expressly left all substantive questions open and did not express any opinion on the merits of the appeals.

Impugned Tribunal order set aside; appeals remanded to the Appellate Tribunal for fresh, merits-based adjudication uninfluenced by the High Court's observations.

Final Conclusion: The Supreme Court allowed the appeals, set aside the Tribunal's order which had dismissed the department's appeals on the basis of the High Court's limited observations concerning a refund claim, and remanded the matters to the Appellate Tribunal for fresh consideration on merits; no opinion was expressed on the substantive contentions.

Equivalent penalty under section 78 - penalty under section 76 - suppression, wilful misstatement or fraud - EA-2000 audit and revenue audit - transitory provision under section 78B(1)(b)

Equivalent penalty under section 78 - penalty under section 76 - suppression, wilful misstatement or fraud - transitory provision under section 78B(1)(b) - Validity of confirming an equivalent penalty under section 78 where penalty under section 76 was imposed and paid, and whether facts established suppression or wilful misstatement to attract section 78. - HELD THAT: - The Tribunal found that the appellant accepted the audit finding, promptly discharged the service tax liability and, although seeking extension for payment of interest, did not evince any malafide intention to evade tax. The EA-2000 audit was held to be a participative verification process in which auditors discuss findings with the assessee, and the mere detection of omitted taxable receipts by audit does not, by itself, establish suppression or wilful misstatement. The records showed payments accounted on ACES and no cogent material of deliberate suppression was placed on record. Having regard to the distinction between section 76 (penalty for non-payment otherwise than by reason of fraud, collusion, wilful misstatement or suppression) and section 78 (penalty where such culpable conduct is established), and to the transitory provision in section 78B(1)(b) limiting overlap where orders under section 73(2) have not been passed, the Tribunal concluded there was no justification to impose an additional equivalent penalty under section 78 after imposition and payment of penalty under section 76. The Tribunal therefore set aside confirmation of the section 78 penalty. [Paras 5, 6, 7]

Confirmation of equivalent penalty under section 78 set aside; appeal allowed to the extent of deleting the section 78 penalty.

Final Conclusion: The appeal is allowed insofar as the equivalent penalty under section 78 confirmed by Commissioner (Appeals) is set aside, the Tribunal holding that audit detection and subsequent payment did not establish suppression or wilful misstatement warranting section 78 penalisation where section 76 penalty was imposed and paid.

Equivalent penalty under section 78 of the Finance Act, 1994 - cum-tax benefit - extended period under section 73(1) of the Finance Act, 1994 - failure to obtain service tax registration - ignorance of law is not excusable - suppression or misstatement with intent to evade tax

Equivalent penalty under section 78 of the Finance Act, 1994 - failure to obtain service tax registration - ignorance of law is not excusable - Imposition of equivalent penalty under section 78 of the Finance Act, 1994 on the appellant - HELD THAT: - The Tribunal examined the material on record and the finding of the Commissioner (Appeals) that the appellant had not filed ST-3 returns and had not followed statutory procedure. However, the Tribunal held that the ingredients of section 78 were not established against the appellant. Although the Commissioner (Appeals) noted that ignorance of law is not an excuse, the facts and evidence did not demonstrate suppression or misstatement with intent to evade tax necessary to sustain equivalent penalty under section 78. In view of the absence of positive evidence of culpable conduct, the imposition of equivalent penalty was set aside.

Imposition of equivalent penalty under section 78 set aside.

Cum-tax benefit - suppression or misstatement with intent to evade tax - extended period under section 73(1) of the Finance Act, 1994 - Denial of cum-tax benefit for the periods 2012-13 and 2013-14 - HELD THAT: - The Tribunal considered the statement of the principal assessee (PCL), the leaflet setting out terms of payment to agents, and the factual finding that the commission received by the appellant was inclusive of service tax. Reliance was placed on precedents where cum-tax benefit was allowed to agents in similar circumstances. Given this material, the Tribunal concluded that the appellant was entitled to cum-tax benefit for 2012-13 and 2013-14 and that denial of that benefit by the Commissioner (Appeals) was not sustainable. The invocation of extended period in the show cause notices did not alter the entitlement where the commission was demonstrably inclusive of tax.

Denial of cum-tax benefit for 2012-13 and 2013-14 set aside; appellant entitled to cum-tax benefit for those periods.

Final Conclusion: The appeals are partly allowed: the order of the Commissioner (Appeals) is set aside to the extent that equivalent penalty under section 78 and the denial of cum-tax benefits for 2012-13 and 2013-14 are annulled; other confirmed duty and interest liabilities accepted by the appellant remain unaffected.

Principles of natural justice - show cause notice as the foundation of adjudication - prohibition on travelling beyond grounds in the show cause notice - refund of service tax to SEZ units for services consumed in authorised operations - operative effect of SEZ legislation and notifications conferring exemption/ refund - overriding effect of SEZ law over other statutes in relation to tax immunity - entitlement to refund on evidentiary proof despite non inclusion in approved list

Principles of natural justice - show cause notice as the foundation of adjudication - prohibition on travelling beyond grounds in the show cause notice - Impugned orders rejecting refund claims were passed on grounds not raised in the show cause notices and whether such action violated principles of natural justice. - HELD THAT: - The Tribunal found that all show cause notices were confined to alleged non submission of specified documents and contained no allegation about non inclusion of the impugned services in the approved list. The original authority itself recorded that the appellant had furnished the required documents but ultimately rejected the refund claims on entirely new grounds which were not the subject of the show cause notices. Applying settled precedent that the Revenue cannot travel beyond the show cause notice, the Tribunal held that adjudication on new grounds not pleaded in the notice offended principles of natural justice and rendered the original orders unsustainable. [Paras 6]

Findings in the Orders in Original that reject refund claims on grounds not raised in the show cause notices are set aside as violative of principles of natural justice.

Refund of service tax to SEZ units for services consumed in authorised operations - operative effect of SEZ legislation and notifications conferring exemption/ refund - entitlement to refund on evidentiary proof despite non inclusion in approved list - overriding effect of SEZ law over other statutes in relation to tax immunity - Whether the appellant SEZ unit was entitled to refund of service tax in respect of input services used for authorised operations notwithstanding classification or non inclusion of certain services in the Unit Approval Committee's approved list. - HELD THAT: - The Tribunal examined the statutory scheme and relevant notifications and relied on earlier decisions which hold that the notifications provide procedural modalities for operationalising the immunity/exemption envisaged by the SEZ law and do not extinguish the substantive immunity. Where evidence establishes that services were consumed for authorised operations in the SEZ, denial of refund merely on account of classificatory entries or omission from an approved list is not justified. The impugned orders were therefore distinguishable from the revenue decisions relied upon and, having regard to the admitted consumption of input services for output services and the SEZ Act's exemption scheme, the Tribunal allowed the appeals and set aside the Orders in Original. [Paras 7]

Appellant entitled to refund in respect of the services consumed for authorised SEZ operations; the impugned orders rejecting parts of the refund claims are set aside.

Final Conclusion: The Tribunal allowed the appeals, set aside the Orders in Original insofar as they rejected the refund claims on grounds not raised in the show cause notices and held the appellant entitled to refund of service tax for services shown to be consumed in authorised SEZ operations.

Substantially false declaration under Voluntary Compliance Encouragement Scheme - rejection of VCES declaration - recovery under Section 73 (1) of the Finance Act, 1994 - interest under Section 75 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994

Substantially false declaration under Voluntary Compliance Encouragement Scheme - rejection of VCES declaration - Whether the Voluntary Compliance Encouragement Scheme (VCES) declaration made by the appellant for financial years 2009-2010 and 2010-2011 was substantially false and liable to be rejected. - HELD THAT: - The Tribunal found that the Department produced sufficient material to show that the appellant had not made full and candid disclosures in the VCES declarations for the years in question. The appellant asserted that part of the receipts reflected sales of software (non taxable/sale component) and that heavy rains had destroyed records, but did not produce invoices, sales tax/VAT returns or other documentary evidence to substantiate the claimed sales component. The appellant also admitted liability and deposited part of the tax after issuance of the show cause notice. On this basis the Tribunal concluded that the VCES declarations were materially incorrect and sustained the rejection of those declarations. [Paras 6]

VCES declarations for financial years 2009-2010 and 2010-2011 were correctly held to be substantially false and the rejection upheld.

Recovery under Section 73 (1) of the Finance Act, 1994 - interest under Section 75 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - Whether the demand, interest and penalties confirmed by the adjudicating authority for the period April 2009 to March 2014 were sustainable. - HELD THAT: - The adjudicating authority confirmed a demand under Section 73(1) for the period April 2009 to March 2014, directed recovery in terms of the proviso to Section 73(1), and ordered interest under Section 75. Penalties under Sections 77 and 78 were also imposed with a conditional reduction of the Section 78 penalty if tax and interest were paid within thirty days. The Tribunal, after considering the audit findings, the appellant's failure to substantiate claimed sales receipts and the appellant's partial admission and subsequent payment, found no infirmity in the adjudicating authority's conclusions and sustained the demand, interest and penalties as recorded in the order in original. [Paras 3, 6, 7]

Demand under Section 73(1), interest under Section 75 and penalties under Sections 77 and 78 for April 2009 to March 2014 were confirmed and upheld.

Final Conclusion: The impugned order in original confirming the demand, interest and penalties for the period April 2009 to March 2014 was sustained; the appeal is dismissed.

Denial of Cenvat Credit on account of supplementary invoice issued by service provider - fraud, collusion and suppression by service provider as bar to credit under Rule 9(1)(bb) - recipient's lack of mens rea and its irrelevance to applicability of Rule 9(1)(bb) - limitation and extended period for issuance of show cause notice

Denial of Cenvat Credit on account of supplementary invoice issued by service provider - fraud, collusion and suppression by service provider as bar to credit under Rule 9(1)(bb) - recipient's lack of mens rea and its irrelevance to applicability of Rule 9(1)(bb) - Rule 9(1)(bb) applies to deny Cenvat credit where a supplementary invoice is issued by the service provider after investigation into non-payment of service tax by the provider, irrespective of the service recipient's lack of mens rea. - HELD THAT: - The Court examined the wording of Rule 9(1)(bb) and held that the disqualification attaches to a supplementary invoice, bill or challan issued by the provider of output service where the additional tax became recoverable from the provider on account of non-levy, non-payment, short-levy, short-payment by reason of fraud, collusion, wilful mis-statement or suppression of facts by the provider. The provision thus addresses malfeasance by the service provider and not the state of mind of the service recipient. In the present case M/s. Datta Enterprises issued a supplementary invoice after an investigation had been initiated against them; accordingly the conditions of Rule 9(1)(bb) existing on the date the appellants availed credit were attracted. The appellants' contention that they had no mens rea and no control over the supplier did not alter the applicability of the Rule to deny credit where the supplier's conduct satisfies the disqualification contained in the Rule. [Paras 4]

Credit could be disallowed under Rule 9(1)(bb) because the supplier issued a supplementary invoice after departmental investigation into the supplier's tax defaults; the recipient's lack of mens rea does not negate applicability of the Rule.

Limitation and extended period for issuance of show cause notice - knowledge of departmental authorities and invocation of extended period - The show cause notice issued to the appellants was barred by limitation and the extended period could not be invoked on the facts; the impugned order was therefore set aside on limitation grounds. - HELD THAT: - The Tribunal found that the department was aware of the supplier's fraud/suppression (a show cause notice had been issued to the supplier earlier) and that the appellants were regularly filing ST-3 returns and had been audited prior to issuance of the show cause notice to the appellants. Given that the department knew of the supplier's supplementary invoice and the appellants had been audited before the SCN to them, no suppression by the appellants could be plausibly alleged to justify invoking the extended period. On these facts the SCN dated 31.12.2015 to the appellants was held to be beyond the limitation period and liable to be set aside. [Paras 5]

The show cause notice and the consequent order are set aside as barred by limitation; extended period cannot be invoked on the facts of the case.

Final Conclusion: The Tribunal held that while Rule 9(1)(bb) validly contemplates denial of credit where the service provider's supplementary invoice follows fraud by the provider, the departmental proceedings against the appellants were time-barred on the facts and therefore the impugned order is set aside with consequential relief.

Classification of services as Works Contract Services - Construction Services - benefit of Notification No.30/2012 ST dated 20.06.2012 - Body Corporate under clause (7) of Section 2 of the Companies Act, 1956 - apportionment of service tax liability between service provider and service recipient (50% 50%) - remand for verification of payment of disputed tax

Classification of services as Works Contract Services - Construction Services - Whether the appellant's services are classifiable as Works Contract Services and not as merely Construction Services for the purposes of levy. - HELD THAT: - The appellant accepted before the adjudicating authority that the services rendered to the Development Authorities are classifiable under Works Contract Services. Revenue's proceedings were premised on that classification and the Tribunal records no dispute on classification by the parties or the appellate authority. The decision treats the services as falling within works contract, and proceeds to determine entitlement to the notification applicable to such services rather than reopening classification. [Paras 2]

Services by the appellant are to be treated as Works Contract Services for the purposes of the dispute.

Benefit of Notification No.30/2012 ST dated 20.06.2012 - Body Corporate under clause (7) of Section 2 of the Companies Act, 1956 - apportionment of service tax liability between service provider and service recipient (50% 50%) - Whether the appellant is entitled to the benefit of Notification No.30/2012 ST (50% apportionment) in respect of services provided to Bhopal Development Authority and Greater Noida Development Authority. - HELD THAT: - The adjudicating and appellate authorities denied the notification benefit on the ground that the Development Authorities were not shown to be "Body Corporate" within clause (7) of Section 2 of the Companies Act, 1956 as required by the notification. The Tribunal examined the position and noted that both authorities have been held to be body corporate by earlier decisions relied upon, and that the Companies Act definition in clause (7) is inclusive with specified exclusions only by central notification. There is no contention or record that the two Development Authorities have been specifically excluded from the definition by any Central Government notification. In that factual and legal matrix, the Tribunal found no reason to uphold the denial of the notification benefit and accepted that, if the recipients are body corporate and not excluded, the appellant would be eligible for the 50% apportionment under the notification. [Paras 4]

Appellant entitled to the benefit of Notification No.30/2012 ST insofar as the service recipients are body corporate and not excluded; the denial on the stated ground cannot be sustained.

Remand for verification of payment of disputed tax - Whether the appellant has already paid the tax liability to the extent of 50% as claimed, and related quantification. - HELD THAT: - Although the Tribunal accepted entitlement to the notification benefit in principle, it did not undertake factual verification of payment. The record did not conclusively establish that the appellant had discharged the 50% liability, and the adjudicating authority must verify payment and computation of tax due in accordance with the entitlement recognized by the Tribunal. Consequently the matter is remanded to the original adjudicating authority for verification and quantification of payment and any remaining liability. [Paras 4, 5]

Matter remitted to the original adjudicating authority to verify whether the appellant has paid the 50% of duty claimed and to quantify any balance.

Final Conclusion: Appeals allowed in part: the Tribunal held that the services are works contract services and that the appellant, where the service recipients are body corporate not excluded by Central notification, is entitled to benefit of Notification No.30/2012 ST (50% apportionment). The question whether the appellant has paid the said 50% is remanded to the original adjudicating authority for verification and quantification; appeals disposed accordingly.

Service tax on discounted consideration - evidentiary value of auditor's certificate - service tax liability of subcontractor - single taxable event principle - erroneous accounting entries and taxability

Service tax on discounted consideration - evidentiary value of auditor's certificate - Levy of service tax on amounts shown as discounts allowed to customers - HELD THAT: - The Tribunal found that Revenue did not produce any evidence to displace the assessee's books of account showing discounts. The assessee's auditor furnished a certificate dated 11 November 2014 certifying that discounts were allowed to customers and that service tax would be charged on the net billed amount after discounts. The Commissioner disregarded that certificate without recording reasons and selectively relied on audited final accounts. In absence of contrary evidence, the Tribunal held the demand based on treating discounts as taxable consideration unsustainable and set aside the demand relating thereto. [Paras 4]

Demand of Rs. 4,99,802/- made by treating discounts as taxable consideration is set aside.

Service tax liability of subcontractor - single taxable event principle - Levy of service tax on amounts received by the appellant from the main contractor (treatment of subcontractor receipts) - HELD THAT: - The Tribunal accepted that the appellant received payments from the principal contractor who certified that it had charged and deposited service tax to the Government on the aggregate activity including services rendered by the appellant. Relying on the reasoning of the Hon'ble Patna High Court in Hindustan Dorr Oliver Pvt. Ltd. vs. State of Bihar concerning works contracts (one transaction/one sale), the Tribunal applied the like principle to services, observing that where the main contractor has charged tax on the overall transaction there cannot be two taxable transfers for the same transaction. On that basis the demand confirmed by reference to the departmental circular was set aside. [Paras 5]

Demand of Rs. 37,12,000/- raised on the receipts from the main contractor is set aside.

Erroneous accounting entries and taxability - Levy of service tax on amounts arising from inadvertent/erroneous credits made in the books of account - HELD THAT: - The Tribunal noted that duplicate journal entries were made in the service receipt account on 31 March 2011 for adjustment of 'Cenvat credit adjustment', which inflated service receipts though they did not arise from actual rendering of services. As these credits resulted from erroneous accounting entries and not from taxable receipt for services, the demand based on such inflated receipts was unsustainable and therefore set aside. [Paras 6]

Demand of Rs. 17,99,839/- based on inadvertent credits in the books is set aside.

Final Conclusion: All the grounds of appeal were allowed: the demands and corresponding penalties confirmed by the adjudicating authority in respect of discounts treated as taxable, receipts via the main contractor, and inadvertent accounting credits have been set aside; the appellant is entitled to consequential relief in accordance with law.

Taxability of sale versus service - Maintenance and Repair Services - scope of Section 66D of the Finance Act, 1994 - treatment of sale of goods as non-taxable activity - limitation

Taxability of sale versus service - treatment of sale of goods as non-taxable activity - scope of Section 66D of the Finance Act, 1994 - Whether receipts from supply of mud to M/s Imaging Enterprises constitute taxable service or sale of goods - HELD THAT: - The Appellate Tribunal examined the contract and the invoices. Although the work order referred to allotment of work @ Rs. 263/- per cubic-meter, the invoices issued by the appellant treated the transactions as sale and supply of mud. The Tribunal concluded that the activity of supplying mud could not be characterised as a service as envisaged under the relevant provision and therefore was not liable to service tax. The Appellate Authority's view that the contract did not specify quantity and hence was not a sale was rejected in light of the invoicing and the substance of the transactions. [Paras 4, 5]

Demand raised in respect of sale and supply of mud is not justified and cannot be sustained as service tax.

Taxability of sale versus service - treatment of sale of goods as non-taxable activity - Whether receipts from St. Anthony's Sr. Secondary School for supply of stationery and textbooks are taxable as services - HELD THAT: - The lower authorities disbelieved the appellant's claim that receipts from the school related to sale of stationery and textbooks and treated them as taxable receipts. The Tribunal noted that revenue produced no evidence that the amount represented payment for services. Sale of stationery and textbooks was held to be a transaction in goods and not a service liable to service tax. [Paras 6]

Demand confirmed by lower authorities in respect of stationery receipts is not sustainable; such receipts do not constitute taxable services.

Limitation - Whether the demand is barred by limitation - HELD THAT: - The Tribunal observed that the show cause notice for the relevant periods was issued on 27.02.2017 while the receipts related to earlier years. Having regard to the period covered by the notice and the years in issue, the Tribunal found the demand to be time-barred. [Paras 7]

The demand is barred by limitation.

Final Conclusion: Impugned order set aside; appeal allowed and demand deleted with consequential relief to the appellant.

Delay in adjudication - reasonable time for adjudication - violation of principles of natural justice - call book transfer - quash and set aside - alternative remedy - binding precedent

Delay in adjudication - reasonable time for adjudication - call book transfer - Whether prolonged inaction and unexplained delay in adjudication vitiated the show cause proceedings and the Order-in-Original. - HELD THAT: - The Court found that the show cause notice dated 14-8-2006 remained pending for an inordinate period and, even after retrieval from the Call Book on 28-9-2009, no adjudication concluded until 24-5-2018. The petitioner was not responsible for the delay and had not sought the Call Book placement. The Department failed to explain or justify the prolonged delay. Reliance was placed on the settled principle that adjudicatory proceedings must be completed within a reasonable time and that unexplained, inordinate delay renders the proceedings arbitrary and vitiates the resulting order. Applying that principle to the facts (including the long dormancy after retrieval from the Call Book and absence of satisfactory explanation), the Court held the show cause notice and the Order-in-Original to be unsustainable on account of delay in adjudication. [Paras 6]

Show cause notice and the Order-in-Original quashed and set aside for unexplained and unreasonable delay in adjudication.

Violation of principles of natural justice - alternative remedy - Whether the petition should be rejected on the ground that an alternative remedy exists and whether alleged service defects required further enquiry. - HELD THAT: - Although the Department asserted service of personal hearing notices and relied on its affidavit, the Court chose not to probe further into the factual dispute over service because it concluded the impugned order must be quashed on the separate ground of delay. Consequentially, the respondent's submission that the petitioner should be relegated to an alternative remedy was rejected since the proceedings themselves were held vitiated by delay; there was no need to remit or require exhaustion of alternative remedies. [Paras 6]

Argument as to alternative remedy rejected; no relegation to alternative remedy as proceedings are vitiated by delay.

Final Conclusion: The petition is allowed: the show cause notice dated 14-8-2006 and Order-in-Original No.13/AC/CGST/2018-19 dated 25-5-2018 (issued 30-5-2018) are quashed and set aside on the ground of unexplained and inordinate delay in adjudication; rule made absolute with no order as to costs.

Summary order. Civil appeal dismissed; delay condoned.

Summary order. Notice issued in the civil appeal and in the application for condonation of delay; matters listed for 29th April, 2019; Dasti permitted.

Failure of natural justice - remand for fresh adjudication - retention of pre-deposit pending appeal - requirement to plead and establish prejudice - casual or perfunctory remand impermissible - scope of appellate jurisdiction to interfere on procedural grounds

Failure of natural justice - remand for fresh adjudication - requirement to plead and establish prejudice - casual or perfunctory remand impermissible - Whether CESTAT was justified in setting aside the Adjudicating Authority's orders and remanding the matters on grounds of alleged failure of natural justice - HELD THAT: - The High Court examined the CESTAT's two stated grounds for remand - (a) refusal of an adjournment to clients of one senior advocate on one occasion; and (b) non reference in the adjudication orders to tallying of credit entries in the RG 23 register with invoices. The Court found no clarity or particularisation about the adjournment (no date, scope or demonstrated prejudice) and noted CESTAT itself recorded extensive examination by the Adjudicating Authority and that non tallying was at best a minor deviation. Applying the settled principle that complaints of breach of natural justice must be precise and that the complainant must plead and show consequent prejudice, the Court held that neither ground was sufficient to vitiate the adjudication or to justify remand. A remand cannot be ordered casually or perfunctorily where the tribunal records that fair hearing was afforded and substantive findings of fraudulent misuse of exemptions and wrong availment of credit stand unchallenged on the merits. Consequently, interference with the Adjudicating Authority's orders on those procedural grounds was unwarranted. [Paras 18, 22, 23, 25, 28]

CESTAT's setting aside of the Adjudicating Authority's orders and remand on the stated grounds was unjustified; impugned CESTAT order set aside and appeals restored to CESTAT for fresh consideration on merits.

Retention of pre-deposit pending appeal - scope of appellate jurisdiction to interfere on procedural grounds - Whether CESTAT had jurisdiction and was justified in directing retention of the pre deposit amount after setting aside the Adjudicating Authority's orders and remanding the matters - HELD THAT: - The Court observed that the question of CESTAT's power to direct retention of pre deposit after remand arose only if the remand was justified. Having answered the primary issue against the Commissioner (i.e., in favour of restoring the appeals to CESTAT), the Court held there was no necessity to decide the second substantial question and therefore did not adjudicate the correctness of CESTAT's direction for retention of pre deposit. The Court, however, noted the CESTAT relied on certain High Court decisions supporting partial pre deposit directions in appropriate cases, but expressly refrained from deciding the point since the principal ground for remand was set aside. [Paras 26, 27]

Left undecided by the High Court; no determination made on the legality of CESTAT's direction to retain the pre deposit following remand.

Final Conclusion: The High Court allowed the revenue appeals, set aside the CESTAT's common order of 30th November 2010 insofar as it remanded the matters on the procedural grounds found unsustainable, and restored the appeals to the CESTAT for fresh decision on merits; the question on retention of pre deposit was not decided and the Assessees' appeals were dismissed; no costs.

Jurisdictional limitation under Section 11A of the Central Excise Act - proviso to Section 11A and willful suppression of relevant facts - reconciliation of contradictory findings on fraudulent availment and non-utilisation of credit - reduction of penalty by appellate authority - remand for fresh adjudication

Jurisdictional limitation under Section 11A of the Central Excise Act - proviso to Section 11A and willful suppression of relevant facts - reconciliation of contradictory findings on fraudulent availment and non-utilisation of credit - The CESTAT failed to consider the jurisdictional limitation defence under Section 11A; its order is set aside and the matter remanded for fresh consideration of limitation and related factual findings. - HELD THAT: - The assessee raised and argued that the assessment proceedings were barred by the limitation prescribed under Section 11A. The High Court finds that CESTAT did not give any sufficient consideration to this crucial jurisdictional issue. The record shows the assessee applied for rectification and recall pointing out the omission, but those remedies were dismissed without adjudicating the limitation point. CESTAT must reconcile its internal observations (where it both characterises the availment as fraudulent and elsewhere notes non-utilisation of the credit) and examine any correspondence by which the assessee informed the department of its procedure, since the proviso to Section 11A applies only where there is willful suppression of relevant facts. Because the limitation question is jurisdictional and was not addressed, the impugned order cannot stand and requires fresh adjudication on limitation and attendant factual matters. [Paras 12, 13, 14, 15, 18]

Set aside CESTAT's order and remand the appeals to CESTAT for fresh adjudication on the limitation issue and related factual findings in accordance with law.

Reduction of penalty by appellate authority - remand for fresh adjudication - The CESTAT's reduction of penalty must be set aside for reconsideration; the Department's appeal is technically allowed to the extent of setting aside the impugned order on penalty and remitting the matter. - HELD THAT: - The High Court accepts the Department's contention that, given CESTAT's findings of fraudulent availment, reduction of the penalty from the original amount to a lesser amount required reconsideration. Because the primary adjudication (including limitation and factual findings) has been set aside and remanded, the question of penalty cannot be finally determined at this stage. The Department's appeal is therefore allowed in a technical sense to set aside the impugned order so that CESTAT may re-examine and determine penalty in the light of its fresh findings on limitation and merits. [Paras 9, 16, 17, 18]

Impugned reduction of penalty set aside; penalty to be reconsidered by CESTAT after fresh adjudication of limitation and merits.

Final Conclusion: Both appeals allowed; the CESTAT judgment and order dated 06.12.2007 is set aside and the matters remanded to CESTAT for fresh adjudication on limitation, merits and penalty in accordance with law; parties to appear before CESTAT on the stated date and the Tribunal is directed to decide the appeals expeditiously (within six months after filing an authenticated copy of this order); parties to bear their own costs.

SSI exemption - aggregation of clearances and stock transfers - inclusion of traded goods in manufacturing turnover - question of fact versus question of law - remand for verification - admissibility of fresh grounds and documents on appeal - verification of invoices and documentary evidence

Remand for verification - aggregation of clearances and stock transfers - verification of invoices and documentary evidence - Validity of the Commissioner (Appeals)'s remand to the original adjudicating authority for verification whether stock transfers from the Delhi unit were included in the Bhiwadi unit(s)' clearances and whether the clubbing of clearances was correct - HELD THAT: - The Tribunal found that the adjudication had clubbed clearances of two Bhiwadi units and there was a separate show cause for the Delhi unit. A verification report during original proceedings did not support inclusion of Delhi stock transfers in the Bhiwadi unit's clearances, but Commissioner (Appeals) sought further investigation and observed documents (invoices) were lacking to substantiate the appellant's claim. Given the outstanding documentary deficiencies and that the Commissioner (Appeals) obtained additional reports and afforded the appellant an opportunity to be heard, the remand for limited verification was justified. The Tribunal held that these factual verifications fall within the competence of the original authority and remand was appropriate for resolution of the outstanding evidentiary issues.

Order of Commissioner (Appeals) remanding the matter for limited verification of inclusion of stock transfers and clubbing of clearances is upheld and the matter is remitted for fresh consideration.

Inclusion of traded goods in manufacturing turnover - question of fact versus question of law - admissibility of fresh grounds and documents on appeal - Whether the Tribunal should entertain for the first time the appellant's contention that the Bhiwadi units' turnover includes traded (purchased) finished goods and exclude such value from manufacturing turnover - HELD THAT: - The Tribunal accepted that the legal principle that traded goods' value should not be included in assessable value of manufactured goods is settled law. However, it held that the appellant's new contention that it was also a trader of similar finished goods is a question of fact requiring evidentiary scrutiny. The VAT 47 forms and other documents relied upon by the appellant were factual material which could not be entertained for the first time before the Tribunal without prior scrutiny at the original adjudicatory stage. Accordingly, the Tribunal directed that this factual plea and the supporting documents be considered by the original authority on remand, and should not be decided afresh by the Tribunal in the first instance.

The appellant's fresh plea concerning trading activity and exclusion of traded goods from manufacturing turnover is not admissible before the Tribunal for the first time and is remitted to the original adjudicating authority for consideration and verification.

Final Conclusion: The appeal is dismissed: the Commissioner (Appeals)'s remand for limited factual verification is upheld and the matters, including the appellant's contention of trading activity, payment of interest and imposition of penalty, are directed to be considered afresh by the original adjudicating authority for the periods 2010-11, 2011-12 and 2012-13.

Manufacturer under Central Excise - job worker as independent manufacturer - manufacture versus processing - clubbing of clearances for SSI exemption - entitlement under Notification No. 08/2003-CE - Circular No. 56/56/94-CX - limitation and extended period of limitation in absence of fraud

Job worker as independent manufacturer - manufacture versus processing - manufacturer under Central Excise - clubbing of clearances for SSI exemption - Circular No. 56/56/94-CX - entitlement under Notification No. 08/2003-CE - Clearances of goods manufactured and cleared by job workers whether liable to be clubbed with the appellant's clearances so as to deny SSI exemption - HELD THAT: - The Tribunal applied the statutory definition of "manufacture" and the settled jurisprudence distinguishing mere processing from manufacture, observing that where transformation results in a new commercially distinct commodity manufacture occurs and the manufacturer is liable to duty. The facts show raw material was supplied by the appellant but the job workers carried out manufacturing in their own premises without control or supervision of the appellant and cleared goods from their premises. In the absence of financial control, agency, dummy status or any undertaking by the appellant to pay duty, the relationship was held to be on a principal-to-principal basis. Circular No. 56/56/94-CX was applied to hold that a job worker carrying out independent manufacturing activity is the manufacturer. Consequently the clearances by the job workers could not be included in the appellant's clearances for computing SSI exemption limits and the adjudicating authority erred in clubbing those clearances with that of the appellant. [Paras 5, 6, 8, 9, 10]

Job workers were independent manufacturers; their clearances cannot be clubbed with the appellant's clearances for denial of SSI exemption.

Limitation and extended period of limitation in absence of fraud - Validity of the show cause notice dated 25.04.2011 objecting to clearances for the period April, 2007 to August, 2009 - HELD THAT: - The Tribunal noted the show cause notice related to clearances from April 2007 to August 2009 and was issued beyond one year. There was no finding of fraud, suppression or deception by the appellant; the denial of SSI benefit was held to be legally incorrect. In absence of any element of deception or malpractice the extended period of limitation could not be invoked and recovery beyond one year was held unsustainable. [Paras 11, 12]

The show cause notice is time-barred; extended period cannot be invoked in absence of deception or suppression.

Penalty - limitation and extended period of limitation in absence of fraud - Sustainability of penalty imposed in consequence of the confirmed demand - HELD THAT: - Having held that the appellant had no liability for the job workers' clearances and that the show cause notice was barred by limitation in absence of fraud or suppression, the Tribunal found no basis for imposing penalty. The factual and legal errors in characterising the relationship and clubbing clearances removed any justification for penalty. [Paras 12]

Penalty is not sustainable and is set aside.

Final Conclusion: The Tribunal set aside the impugned order: job workers were held to be independent manufacturers and their clearances could not be clubbed with the appellant's clearances for SSI exemption; the show cause notice was time barred in absence of fraud or suppression and the penalty was unsustainable; the appeal is allowed.

Interest on delayed payment as compensatory relief - REP licences constituting goods - effect of interim stay on assessability and timing of interest - interest payable from date of judicial determination of liability - retrospective validation of levy of interest on additional sales tax

Interest on delayed payment as compensatory relief - interest payable from date of judicial determination of liability - Liability to pay interest under Section 24(3) in respect of tax levied on REP licences and the appropriate commencement date for such interest. - HELD THAT: - The Court held that although the petitioner had paid the tax after revision within the time allowed following the revision, the levy of interest was justified from 01.05.1996 - the date the Hon'ble Supreme Court decided that REP licences are goods. The liability to tax on REP licences existed during the original assessment period; it was the interim orders of the Supreme Court that restrained the Assessing Officer from finally determining and confirming the proposal earlier. Given that the final judicial determination revived the department's right to recover tax, interest commencing from the date of that decision was proper. The Court examined and distinguished precedents relied upon by the petitioner (including M/s. J.K. Synthesis and EID Parry) in light of the factual matrix of interim stays and judicial pronouncements, and relied on the principle that interest is compensatory for loss of use of tax amounts and therefore may be payable once the liability is judicially established. [Paras 10, 16, 17, 19, 21]

The interest levied by the revisional authority from 01.05.1996 in respect of tax on sales of REP licences is justified and sustainable.

REP licences constituting goods - effect of interim stay on assessability and timing of interest - Whether REP licences were assessable as goods during the relevant assessment years and whether the pendency of proceedings before the Hon'ble Supreme Court precluded the department from later levying tax. - HELD THAT: - The Court found that the legal position treating REP licences as goods had crystallised in decisions of the Karnataka High Court and was followed by this Court in P.S. Apparels; the Hon'ble Supreme Court ultimately affirmed that position in M/s. Vikas Sales Corporation. The Assessing Officer's inability to proceed earlier was attributable to interim stay orders; that restraint did not extinguish the underlying liability. Once the Supreme Court decided the issue, the department's right to assess and recover tax revived. The revisional authority correctly proceeded on this legal foundation to re-determine turnover and levy tax. [Paras 10, 15, 16]

REP licences are taxable as goods and the department was entitled to assess and recover tax after the judicial determination, notwithstanding earlier interim stays.

Retrospective validation of levy of interest on additional sales tax - interest on delayed payment as compensatory relief - Whether interest can be levied on additional sales tax and whether the Validation/Amendment provisions sustain retrospective levy of such interest. - HELD THAT: - The Court rejected the petitioner's contention that interest on additional sales tax could not be levied in absence of express provision prior to amendment. It noted the subsequent amendment to the Tamil Nadu Additional Sales Tax Act inserting a provision for interest on additional sales tax and the Validation Act which retrospectively validates earlier actions and the levy of interest. Relying on the principle in Indodan Industries Ltd. that the Validation Act gives retrospective effect to such provisions and treats interest as compensatory in nature (recovering revenue lost during the interregnum), the Court held that levy of interest on additional sales tax is sustainable. [Paras 22, 23, 24]

Levy of interest on additional sales tax is valid in view of the statutory amendment and retrospective validation; the petitioner's challenge on this ground fails.

Final Conclusion: The writ petitions are dismissed; the revisional orders dated 10.05.2005 upholding assessment and levy of interest (from 01.05.1996) and validating interest on additional sales tax are sustained. Connected petition closed; no costs.

Condonation of delay in statutory deposit for preferring appeal - appeal filed within limitation but statutory deposit paid belatedly to be decided on merits - restoration of appeal - direction for expeditious disposal of restored appeal

Condonation of delay in statutory deposit for preferring appeal - appeal filed within limitation but statutory deposit paid belatedly to be decided on merits - restoration of appeal - Validity of the Appellate Deputy Commissioner's rejection of the appeal on the ground of delayed deposit of the statutory 12.5% and the consequent restoration of the appeal for adjudication on merits. - HELD THAT: - The High Court held that the Appellate Deputy Commissioner was incorrect in law to dismiss the appeal solely because the statutory deposit of 12.5% of the disputed tax was not paid within the prescribed time, where the appeal itself had been filed within the limitation period. The court applied the legal position expounded by the Supreme Court in M/s.S.E.GRAPHITES PRIVATE LIMITED , which recognised that the earlier decision in ANKAMMA TRADING COMPANY stood impliedly overruled by the Supreme Court's decision in M/s.INNOVATIVES SYSTEMS , and that if an appeal is filed within time but the deposit is made belatedly, the delay in compliance ought to be condoned so that the appeal is adjudicated on merits. Applying that settled position, the High Court set aside the appellate order rejecting the appeal for delayed deposit and restored the appeal to the file of the Appellate Deputy Commissioner for hearing on merits. [Paras 2, 3]

Appellate order rejecting the appeal on account of delayed deposit set aside; appeal restored for adjudication on merits.

Direction for expeditious disposal of restored appeal - Temporal direction for disposal of the restored appeal. - HELD THAT: - In accordance with the Supreme Court's direction in M/s.S.E.GRAPHITES PRIVATE LIMITED , the High Court directed that the Appellate Deputy Commissioner shall dispose of the restored appeal within thirty days from the date of receipt of this order, thereby imposing an expedited timeframe for final adjudication on merits. [Paras 3]

Appellate Deputy Commissioner directed to decide the restored appeal within thirty days.

Final Conclusion: Writ petition allowed to the extent that the appellate order rejecting the appeal for delayed deposit is set aside, the appeal is restored to the Appellate Deputy Commissioner for disposal on merits, and the appellate authority is directed to decide the appeal within thirty days; other pending petitions closed and no order as to costs.

Pre-deposit - treatment of departmental refund as pre-deposit - revival of appeal - hearing and decision on merits by First Appellate Authority - stay of coercive recovery

Pre-deposit - treatment of departmental refund as pre-deposit - Whether the condition of pre-deposit imposed by the Tribunal could be satisfied by treating the departmental refund lying to the credit of the assessee as the pre-deposit and whether the appeals should be permitted to proceed on that basis. - HELD THAT: - The Court observed that a sum of refund in excess of the amount required for pre-deposit was withheld by the department and that the assessee sought to treat that refund as the pre-deposit directed by the Tribunal. Rather than adjudicating the merits of the assessment, the High Court directed a procedural remedy: the assessee was to make an application to the First Appellate Authority seeking revival of the First Appeals and an order treating the departmental refund (around the amount directed as pre-deposit) as the required pre-deposit. The Court accepted the submission that the withheld refund was virtually the appellant's money and thus could, for the limited purpose of enabling prosecution of the appeals, be treated as pre-deposit if so ordered by the First Appellate Authority. [Paras 5]

Assessee to apply to the First Appellate Authority to treat the departmental refund as the pre-deposit and thereby enable revival of the First Appeals.

Revival of appeal - hearing and decision on merits by First Appellate Authority - stay of coercive recovery - Whether the First Appellate Authority should revive and decide the First Appeals on merits once the refund is treated as pre-deposit, and whether recovery should be stayed pending such decision. - HELD THAT: - The High Court directed that upon the assessee making the application, the First Appellate Authority shall revive the First Appeals and hear and decide them on merits treating the refund amount as pre-deposit. In the interim, until the First Appeals are finally heard and disposed of, the Court ordered that there shall be no coercive recovery of the tax demand. The direction constitutes a remand to the First Appellate Authority to undertake fresh consideration and adjudication on merits subject to the procedural condition of treating the refund as pre-deposit. [Paras 5]

First Appellate Authority to revive and decide the First Appeals on merits treating the departmental refund as pre-deposit; coercive recovery stayed until final disposal of the First Appeals.

Final Conclusion: The Tax Appeals are disposed of by directing the assessee to apply to the First Appellate Authority to treat the departmental refund (around Rs. 20,00,000/-) as the pre-deposit; the First Appellate Authority shall revive and decide the First Appeals on merits, and no coercive recovery shall be effected until those appeals are finally disposed of.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Confirmation of conviction in revisional jurisdiction - Sentence by way of fine and compensation

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Conviction under Section 138 of the Negotiable Instruments Act sustained - HELD THAT: - The trial court found, on the complainant's evidence (PW1) and documents (Exts. P1-P4), that the accused executed Ext.P1 cheque in discharge of a legally enforceable debt. The accused did not adduce evidence. The presumption arising under Section 139 of the Act was not rebutted by the accused. On scrutiny of the judgments of the trial and appellate courts, the High Court found no impropriety, illegality or error warranting interference in revisional jurisdiction and concluded that the courts below properly appreciated the evidence and reached the correct conclusion to convict under Section 138. [Paras 7]

Conviction under Section 138 of the N.I. Act is confirmed.

Sentence by way of fine and compensation - Confirmation of conviction in revisional jurisdiction - Sentence in the form of fine confirmed and time granted for payment - HELD THAT: - Both courts below imposed sentence by way of fine and directed that any realisation be given as compensation to the complainant. The High Court found no sufficient ground to interfere with the sentence. On application by the accused for time to remit the fine, considering the facts and circumstances, the Court exercised limited indulgence and granted a period of three months from the date of the order for remittance of the fine in the lower court. [Paras 8]

Sentence by way of fine is confirmed; three months' time granted to remit the fine.

Final Conclusion: The revision petition is dismissed; conviction under Section 138 of the Negotiable Instruments Act and the fine-based sentence imposed by the courts below are confirmed, with three months allowed for remittance of the fine in the lower court.

Applicability of Section 143-A of the Negotiable Instruments Act to pending complaints - Prospective operation of penal/statutory amendment - Distinction between substantive and procedural legislation for retrospectivity - Creation of new liability and use of state coercive recovery mechanisms - Reliance on precedent regarding retrospectivity of amendments

Applicability of Section 143-A of the Negotiable Instruments Act to pending complaints - Prospective operation of penal/statutory amendment - Creation of new liability and use of state coercive recovery mechanisms - Section 143-A does not apply to complaints under Section 138 where the offence was committed before Section 143-A came into force on 01.09.2018. - HELD THAT: - The Court found that the complaint in the present case was lodged on 21.01.2016 and that Section 143-A was inserted and brought into force w.e.f. 01.09.2018. Applying the principles governing retrospectivity, the Court observed that Section 143-A imposes an interim liability (power to order payment of up to 20% of the cheque amount before adjudication) and provides coercive recovery machinery treating such interim compensation as arrears of land revenue. Because the provision creates a new disability and exposes an accused to coercive recovery methods prior to conviction, it affects substantive rights and obligations and must be held prospective in operation. The Court relied on the reasoning in the Supreme Court's decision in G.J. Raja v. Tejraj Surana which held that Section 143-A is prospective for these reasons and distinguished earlier authorities where the amendment was procedural or relied on existing recovery machinery. Applying that precedent, the Court concluded that Section 143-A cannot be invoked in respect of offences committed prior to 01.09.2018 and therefore the trial court and revisional orders directing interim compensation under Section 143-A cannot stand. [Paras 6, 7, 8, 9, 11]

Impugned orders directing interim compensation under Section 143-A are set aside because Section 143-A is prospective and not applicable to offences committed before 01.09.2018.

Final Conclusion: The petition is allowed; the trial court order dated 26.12.2018 and the revisional order dated 20.02.2019 directing interim compensation under Section 143-A are set aside as Section 143-A is prospective and does not apply to offences under Section 138 committed prior to 01.09.2018.