TaxTMI Updates e-Newsletter
Sep 10,2024

Summary order. Special Leave Petition dismissed; delay condoned; pending application, if any, disposed of.

Provisional attachment to protect Government revenue - Requirement of recording reasons under Section 83(1) of the Central Goods and Services Tax Act, 2017 - Judicial review of executive opinion forming necessity for attachment

Requirement of recording reasons under Section 83(1) of the Central Goods and Services Tax Act, 2017 - Provisional attachment to protect Government revenue - Judicial review of executive opinion forming necessity for attachment - Validity of an order of provisional attachment under Section 83(1) where the order does not record the reasons for the Commissioner s opinion that attachment is necessary to protect Government revenue - HELD THAT: - The Court held that Section 83(1) mandates that the Commissioner must pass an order in writing when provisionally attaching property to protect revenue, and the written order must embody the reasons which weighed with the Commissioner in forming the requisite opinion. The requirement is mandatory because the provision visits the taxable person with penal consequences and the recorded reasons enable testing of the opinion in judicial challenge. The Court refused to treat an internal file note as a substitute for reasons recorded in the order itself and found that the produced note did not contain reasons in any event. For want of reasons in the impugned order, the Court concluded that the order could not be sustained. The order was therefore quashed and set aside, and the matter was remitted to the Commissioner to record reasons in writing if he deems it fit to pass a fresh order of provisional attachment.

Impugned provisional attachment order quashed for failure to record reasons; matter remitted to Commissioner to record reasons in writing if he again considers attachment necessary.

Final Conclusion: The petition succeeds: the provisional attachment order passed under Section 83(1) is quashed for failure to record reasons and the matter is remitted to the Commissioner for fresh consideration and recording of reasons in writing, if deemed necessary.

Show cause notice - opportunity of hearing - reasoned order - interim protection from coercive action - reference to nodal agency (NRIDA)

Show cause notice - opportunity of hearing - reasoned order - Direction to the assessing authority to permit submission of composite reply and to decide the show cause notice after hearing within a stipulated time-frame. - HELD THAT: - The Court directed that the petitioner shall file a composite reply to the Show Cause Notice dated August 9, 2024 within two weeks and shall be at liberty to rely upon all documents and points in his defence. Thereafter, respondent no. 3 was directed to issue a prior hearing notice of at least seven days to the petitioner and respondent no. 6, give them an opportunity of hearing, and pass a reasoned order in accordance with law. The Court prescribed a fixed timeline for completion of the exercise: respondent no. 3 to decide the matter within six weeks from receipt of the reply and to communicate the reasoned order to the petitioner within a further two weeks. The Court expressly refrained from adjudicating the merits of the petition and confined itself to procedural directions to ensure adjudication on merits by the authority. [Paras 10, 11, 12, 13]

Petitioner to submit reply within two weeks; respondent no. 3 to provide hearing and pass a reasoned order within six weeks of receipt of reply and communicate it within two additional weeks.

Interim protection from coercive action - show cause notice - Interim protection against coercive action pending completion of the authority's adjudication and communication of the reasoned order. - HELD THAT: - The Court ordered that no coercive step shall be taken against the petitioner in the meantime until two weeks after the reasoned order is communicated to him. This interim protection is limited in duration and tied to the authority completing the adjudicatory process as directed; it does not amount to a decision on the merits of the tax liability or on the contention regarding liability of respondent nos. 4 to 6 or NRIDA's pending consideration. [Paras 14]

No coercive action against the petitioner until two weeks after the reasoned order is communicated.

Reference to nodal agency (NRIDA) - Recognition of pendency of related claim before NRIDA and note that respondents 4 to 6 have raised the issue there; Court declined to adjudicate merits. - HELD THAT: - The Court recorded that the respondent nos. 4 to 6 have raised the question of liability before the nodal agency NRIDA and that the petitioner's name is listed for consideration before NRIDA. The Court noted these facts as background and observed that it has not gone into the merits of the writ petition, leaving the petitioner free to urge all points before the authority. The Court did not direct any dispositive relief on the basis of NRIDA's pendency. [Paras 6, 8, 13]

Pendency before NRIDA recorded; no adjudication on merits by the Court.

Final Conclusion: Writ petition disposed by directing the petitioner to file a composite reply within two weeks; respondent no. 3 to give prior seven-day hearing to the petitioner and respondent no. 6, decide the show cause notice by a reasoned order within six weeks of receipt of the reply and communicate it within two further weeks; no coercive action against the petitioner until two weeks after communication of that reasoned order; merits left open.

Natural justice - vagueness of show cause notice - retrospective cancellation of registration - input tax credit - denial of ITC due to supplier's non-deposit - statutory appeal and condonation of delay

Natural justice - vagueness of show cause notice - retrospective cancellation of registration - Validity of the impugned show cause notice and the order cancelling the petitioner's GST registration with retrospective effect - HELD THAT: - The Court found the impugned show cause notice to be defective and the consequent cancellation order to be vitiated by breach of principles of natural justice. The SCN neither fixed any date or time for hearing nor proposed retrospective cancellation of registration, and it failed to specify particulars of the alleged collection and non-deposit of tax, including amounts or transactions. For these reasons the SCN was held to be vague and cryptic, and the cancellation order passed pursuant thereto was set aside. [Paras 4, 5, 6, 7]

The impugned show cause notice and the order cancelling the petitioner's GST registration are set aside.

Input tax credit - denial of ITC due to supplier's non-deposit - statutory appeal and condonation of delay - Remedial direction regarding orders under Section 73 denying ITC and treatment of appeals beyond limitation - HELD THAT: - The impugned orders under Section 73 disallowed ITC on the ground that suppliers had not deposited tax on outward supplies. The Court noted that the petitioner has contesting material but also has an efficacious statutory remedy by way of appeal. The respondent conceded that if appeals are filed the appellate authority may be directed to decide them on merits notwithstanding any delay. Exercising supervisory jurisdiction, the Court directed that if the petitioner files appeals against the orders dated 26.12.2023 and 30.04.2024 within two weeks, the appellate authority shall consider them on merits without being influenced by the question of delay. [Paras 11, 12, 13, 14, 15]

If appeals are filed within two weeks, they shall be considered on merits by the appellate authority uninfluenced by delay.

Final Conclusion: The show cause notice and the cancellation order are quashed for breach of natural justice and vagueness; the petitioner is granted limited relief to file appeals against the Section 73 orders for the specified tax periods, which shall be adjudicated on merits despite any delay if filed within two weeks.

Violation of principles of natural justice - deficiency of show cause notice for lack of particulars - retrospective cancellation of GST registration - cancellation of registration obtained by fraud, wilful misstatement or suppression of facts - action pursuant to directions of another authority without independent satisfaction

Violation of principles of natural justice - deficiency of show cause notice for lack of particulars - Impugned show cause notice did not disclose sufficient particulars and thus violated principles of natural justice. - HELD THAT: - The show cause notice merely reproduced the statutory ground permitting cancellation where registration is obtained by fraud, wilful misstatement or suppression of facts, but did not set out any particulars of the alleged fraud, wilful misstatement or facts said to be suppressed. The notice therefore failed to furnish any factual basis capable of eliciting a meaningful response from the petitioner. A notice that provides no clue as to the allegations against the noticee is contrary to the purpose of a show cause notice and amounts to a breach of natural justice. [Paras 7, 8, 11]

The show cause notice was deficient and its issuance violated principles of natural justice.

Retrospective cancellation of GST registration - Cancellation with retrospective effect was not proposed in the show cause notice and therefore was not lawfully imposed. - HELD THAT: - The impugned show cause notice did not propose cancellation with retrospective effect, and the petitioner had no notice that retrospective cancellation would be sought. Imposing retrospective cancellation without having proposed such relief in the notice deprived the petitioner of an opportunity to meet that specific consequence and compounded the breach of natural justice. [Paras 8]

Retrospective cancellation was not proposed in the notice and cannot stand.

Action pursuant to directions of another authority without independent satisfaction - Cancellation order was passed by the proper officer merely pursuant to directions from another authority without independent satisfaction and without disclosing such direction in the notice. - HELD THAT: - The cancellation order was issued following a letter said to have been received from the Anti-Evasion Branch directing cancellation. That letter was neither mentioned in nor appended to the show cause notice, and there is no record of the proper officer forming an independent satisfaction on the grounds relied upon. Passing a cancellation order solely on directions from another authority, without independent reasoning and without disclosing the material in the notice, is impermissible. [Paras 6, 10, 11]

The cancellation was effected pursuant to another authority's directions without independent satisfaction and without disclosure, rendering the order unsustainable.

Final Conclusion: Petition allowed; impugned cancellation order set aside and the petitioner's GST registration restored forthwith; respondents free to initiate proceedings or recover dues in accordance with law.

Cancellation of GST registration with retrospective effect - principles of natural justice - requirement of reasons for administrative action - power to cancel registration under Section 29(2) of the CGST/DGST Acts - continuing liability notwithstanding cancellation of registration

Cancellation of GST registration with retrospective effect - principles of natural justice - requirement of reasons for administrative action - Impugned cancellation order cancelling GST registration retrospectively from 01.07.2017 set aside for want of reasons and breach of natural justice. - HELD THAT: - The Court recognised that while the proper officer has power under Section 29(2) of the CGST/DGST Acts to cancel registration, including with retrospective effect, such a step cannot be arbitrary or whimsical and must be informed by cogent reasons. The impugned cancellation order contains no reasons for making the cancellation retrospective and was further passed in breach of the principles of natural justice. For these reasons the order cancelling registration ab initio from 01.07.2017 was liable to be quashed. [Paras 9, 10, 11, 12]

Impugned cancellation order insofar as it operates from 01.07.2017 is set aside.

Power to cancel registration under Section 29(2) of the CGST/DGST Acts - requirement of reasons for administrative action - Effective date of cancellation re-fixed to 08.02.2021, being date of petitioner's application for cancellation, and petitioner remains liable to file returns up to that date. - HELD THAT: - Having set aside the retrospective operation to 01.07.2017, the Court determined that cancellation will operate from 08.02.2021, the date on which the petitioner applied for cancellation. The Court noted that although the petitioner claimed closure with effect from 30.11.2020, the application for cancellation was filed beyond the thirty-day period required for such relief; accordingly the petitioner is liable to furnish returns until 08.02.2021. The respondents' submission regarding the delayed application influenced fixing 08.02.2021 as the operative date. [Paras 13, 15]

Cancellation of GST registration will be operative from 08.02.2021; petitioner must furnish returns up to that date.

Continuing liability notwithstanding cancellation of registration - Respondents are not precluded from initiating proceedings for statutory non-compliance or recovery of dues despite cancellation. - HELD THAT: - The Court clarified that cancellation of registration does not absolve the taxpayer from statutory liabilities or non-compliances. The respondents remain entitled to initiate or continue proceedings, including recovery of dues, in accordance with law, notwithstanding the setting aside of retrospective cancellation. [Paras 14, 16]

Respondents may initiate or continue proceedings for statutory non-compliance or recovery of dues in accordance with law.

Procedural compliance for future correspondence - Petitioner directed to furnish addresses of all partners for future correspondence and proceedings. - HELD THAT: - As a condition of the order, the Court directed the petitioner to provide the addresses of all partners to the respondents for future correspondence and proceedings. The order is operative subject to the petitioner complying with this direction. [Paras 17]

Petitioner to provide addresses of all partners to the respondents; order operative subject to compliance.

Final Conclusion: The writ petition is allowed in part: the retrospective cancellation of the petitioner's GST registration from 01.07.2017 is set aside; cancellation is declared operative from 08.02.2021 (with the petitioner liable to file returns until then); respondents remain free to pursue statutory liabilities or recovery in accordance with law; petitioner to furnish partners' addresses; petition disposed of accordingly.

Search and seizure - due process of law - illegal access to electronic data - police investigation of impersonation - adjudication of show cause notice - affording opportunity of personal hearing

Illegal access to electronic data - police investigation of impersonation - Complaint that two unauthorised persons impersonating GST officers accessed and copied petitioner's computer data during the raid - HELD THAT: - The Court did not adjudicate the factual allegation on merits but recorded that the petitioner has made a complaint to the police regarding presence of two unauthorised persons during the search. The Court observed there is no reason to doubt that the police complaint will be processed in accordance with law and directed respondent no.2 to consider the petitioner's complaint and, if found merited, take appropriate action in accordance with law. The direction contemplates investigation and remedial action by the competent police authority rather than judicial determination of impersonation or criminal liability. [Paras 6, 7]

Directed respondent no.2 to consider the petitioner's police complaint and take appropriate action if merited; retained police to process complaint in accordance with law.

Illegal access to electronic data - search and seizure - Petitioner's CCTV footage showing unauthorised persons accessing and copying data to be supplied to respondent no.2 - HELD THAT: - The Court directed the petitioner to furnish a copy of the CCTV footage to respondent no.2 within one week from the date of the order so that the complaint alleging unauthorised access during the raid may be examined. This direction is procedural and intended to enable the investigating authority to verify the petitioner's allegation; the Court did not decide on admissibility or evidentiary weight of the footage. [Paras 7]

Petitioner directed to supply CCTV footage to respondent no.2 within one week to facilitate consideration of the complaint.

Adjudication of show cause notice - affording opportunity of personal hearing - Validity and adjudication process of the impugned Show Cause Notice dated 25.07.2024 - HELD THAT: - The Court noted that the impugned SCN sets out allegations to which the petitioner has responded. Rather than quashing the SCN, the Court directed the concerned officer to adjudicate the SCN after taking into account the petitioner's reply and after affording the petitioner an opportunity of personal hearing. The direction requires fresh, procedural compliance by the adjudicating authority and does not preclude full adjudication on merits by that authority. [Paras 8, 9]

Directed adjudicating officer to decide the impugned SCN after considering petitioner's reply and granting personal hearing.

Final Conclusion: The petition is disposed by directing the police authority to consider the petitioner's complaint (with the petitioner to supply CCTV footage within one week) and by directing the adjudicating officer to decide the impugned show cause notice after considering the petitioner's reply and affording a personal hearing; no substantive determination was made on the legality of the raid or the merits of the allegations.

Writ jurisdiction under Article 226 - Maintainability of writ in presence of alternative statutory remedy - Appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - Liberty to invoke statutory appeal and direction for expeditious disposal

Maintainability of writ in presence of alternative statutory remedy - Appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - Liberty to invoke statutory appeal and direction for expeditious disposal - Petition challenging demand and penalties under the CGST Act was not adjudicated on merits and was disposed for want of alternative remedy by way of statutory appeal. - HELD THAT: - The respondent raised a preliminary objection that the writ petition was not maintainable because an alternate remedy of appeal under Section 107 of the CGST Act, 2017 was available. The petitioner expressly declined to resist that preliminary objection. In view of the petitioner's concession, the Court did not consider the merits or the alleged violations of natural justice or the substantive contentions concerning input tax credit and liquidation of the supplier. Instead, the Court disposed the writ petition by granting the petitioner liberty to file the statutory appeal within two weeks from receipt of the order, and directed the concerned appellate authority to decide any such appeal within four weeks from receipt of the copy of the order, in accordance with law.

Writ petition disposed without adjudication on merits; petitioner granted liberty to prefer appeal under Section 107 within two weeks and directed that any such appeal be decided by the appellate authority within four weeks.

Final Conclusion: The writ petition was disposed of on the ground that an alternative statutory remedy was available; the petitioner was permitted to file an appeal within two weeks and the appellate authority was directed to decide it expeditiously within four weeks.

Availability of statutory appeal - requirement to serve/upload summary of order in FORM GST DRC-07 - compliance with departmental instruction circular for electronic portal upload - exclusion of time for filing appeal on account of prosecuting writ petition

Availability of statutory appeal - requirement to serve/upload summary of order in FORM GST DRC-07 - compliance with departmental instruction circular for electronic portal upload - Whether the writ petition challenging the impugned order should be entertained despite existence of an alternative statutory remedy by way of appeal and the contention that the order was not uploaded in prescribed form. - HELD THAT: - The Court noted that section 107 of the Odisha Goods and Services Tax Act, 2017 provides a time-bound statutory remedy of appeal against any decision or order within three months from the date of communication of the order. Although the petitioner alleged non-uploading of the order on the portal and non-use of prescribed form GST DRC-07 in light of the departmental instruction circular, the Court held that compliance with the circular and portal-upload procedures does not oust the statutory right of appeal. The writ petition therefore did not call for interference with the impugned order where an efficacious alternative remedy exists; the challenge to the department's adherence to its circular was not a matter for adjudication in the writ petition. [Paras 2, 4]

Writ petition not interfered with on merits; petitioner directed to avail statutory appeal.

Exclusion of time for filing appeal on account of prosecuting writ petition - Whether time spent in prosecuting the writ petition should be excluded for the purpose of computing limitation for filing the statutory appeal. - HELD THAT: - The Court allowed exclusion of the period during which the petitioner was engaged in prosecuting the writ petition, permitting that time to be excluded from the limitation period for filing the appeal. The petition was filed on 29th August, 2024, and the Court specified the exclusion period to enable the petitioner to proceed with the statutory remedy without prejudice caused by pursuing the writ. [Paras 5]

Exclusion of time granted from 28th August, 2024 till 3rd September, 2024 for computing limitation for filing the appeal.

Final Conclusion: Writ petition disposed of; petitioner directed to pursue the statutory appeal under section 107, with the period 28th August, 2024 to 3rd September, 2024 excluded from limitation.

Cancellation of registration - show cause notice - non speaking order - adequate reasons / reasoned order - right to be heard - revocation of cancellation - suspension of registration - opportunity of hearing

Cancellation of registration - non speaking order - adequate reasons / reasoned order - Validity of the order dated 13th September, 2023 cancelling the petitioner's registration - HELD THAT: - The Court found that the show cause notice and the cancellation order failed to disclose particulars of the alleged fraud, wilful misstatement or suppression and did not identify the signing authority; the cancellation order merely recorded reference to the show cause notice and the effective date, without reasons. An order of cancellation that produces adverse civil consequences must be supported by adequate reasons and by disclosure of particulars in the show cause notice so as to enable an effective response. In the absence of such disclosure, the cancellation order is vitiated and was set aside. [Paras 4, 5, 6]

Order dated 13th September, 2023 cancelling registration set aside for being vague and non speaking

Revocation of cancellation - right to be heard - show cause notice - Validity of the order dated 2nd January, 2024 rejecting the petitioner's application for revocation of cancellation - HELD THAT: - The rejection recorded that the petitioner had not replied to a later notice within the prescribed time. However, given the earlier deficiency in the show cause notice and the cancellation order (absence of particulars and identifying authority), the petitioner was effectively deprived of the ability to respond meaningfully. Consequently, the order rejecting revocation was set aside as a consequence of the invalidation of the underlying cancellation process. [Paras 5, 11]

Order dated 2nd January, 2024 rejecting revocation set aside

Show cause notice - opportunity of hearing - suspension of registration - Further course directed for fresh consideration of the show cause notice and interim status of registration - HELD THAT: - The Court directed respondents to furnish to the petitioner the basis and particulars upon which the show cause notice dated 7th August, 2023 was issued within two weeks. Thereafter the petitioner is permitted four weeks to respond. The adjudicating authority, after giving an opportunity of hearing, is to decide the show cause notice within eight weeks from communication of this order. Pending such decision, the cancellation stands suspended. If particulars cannot be furnished, the jurisdictional authority must activate the portal to permit filing of returns and payment of dues; upon compliance, the suspension shall be withdrawn. These directions remand the matter for fresh consideration consistent with the observations in the order. [Paras 7, 8, 9, 10, 11]

Respondents to furnish particulars within two weeks; petitioner given four weeks to reply; authority to decide within eight weeks after hearing; registration suspended till decision; contingency directions if particulars not furnished

Final Conclusion: The cancellation order dated 13th September, 2023 and the revocation rejection order dated 2nd January, 2024 are set aside; the authorities are directed to supply the particulars of the show cause notice, permit the petitioner to reply, decide the matter afresh after hearing within prescribed timelines, and keep the registration suspended until such decision, with specified contingency measures if particulars are not furnished.

Opportunity of hearing before imposition of interest and penalty - requirement against assessment in excess of show-cause proposal under Section 75(7) - scope of remand subject to conditional payment - reassessment of matters included in show-cause notice

Opportunity of hearing before imposition of interest and penalty - scope of remand subject to conditional payment - Validity of the writ Court's interference insofar as interest and penalty were imposed without specific proposal and the propriety of remand on terms - HELD THAT: - The High Court accepted the writ Court's conclusion that the detailed notice did not contain a specific proposal in respect of interest and penalty and that the petitioner therefore lacked an opportunity to respond on those components. The High Court upheld the remand but modified the condition agreed before the writ Court: instead of 10% of the disputed tax as security for remand, the appellant is to remit 7.5% within three months. On making such payment, the assessing authority shall proceed with reassessment as directed by the writ Court and decide finally after giving opportunity of hearing. Failure to comply permits the assessing authority to proceed and pass final orders on the available records.

Remand upheld with modification of the conditional payment to 7.5% of the disputed tax; reassessment to be completed after hearing; non-payment permits assessment on record.

Reassessment of matters included in show-cause notice - scope of remand subject to conditional payment - Whether the assessing authority limited itself at final assessment to only five of nine proposals contained in the show-cause notice - HELD THAT: - On examination of the show-cause notice and the final assessment order, the High Court found that all nine proposed heads had been mentioned and considered in the final order. The contention that the assessing authority confined itself to fewer issues and that the remand would improperly reopen matters not finally assessed was rejected as contrary to the record.

Contention that final order addressed only five of nine proposals is rejected; assessing authority had considered all nine heads.

Requirement against assessment in excess of show-cause proposal under Section 75(7) - Allegation that the final assessment violated the statutory prohibition on enhancing demand beyond the proposal under Section 75(7) - HELD THAT: - The Court examined the proposal figures across the nine heads and found that when aggregated they corresponded with the final figure arrived at by the assessing authority. Consequently, the appellant's contention that the assessment resulted in an impermissible enhancement in violation of the statutory requirement did not withstand scrutiny. The modification of the remand condition (payment of 7.5%) further disposed of the challenge.

Challenge under Section 75(7) that the final demand was impermissibly enhanced is dismissed.

Final Conclusion: The writ appeals are dismissed; the High Court affirms the remand ordered by the writ Court but reduces the conditional deposit for remand to 7.5% of the disputed tax to be paid within three months, upon which reassessment shall proceed with an opportunity of hearing; non-payment permits the assessing authority to decide on the basis of available records.

Cancellation of GST registration with retrospective effect - principles of natural justice - requirement of reasons for administrative action - restoration of GST registration for limited period to enable compliance - power to cancel registration

Cancellation of GST registration with retrospective effect - requirement of reasons for administrative action - principles of natural justice - Validity of the impugned cancellation order insofar as it cancelled the petitioner's GST registration retrospectively from 01.07.2017 - HELD THAT: - The Court held that although the proper officer is empowered to cancel GST registration, including with retrospective effect, such an exercise must be supported by cogent reasons and cannot be taken whimsically or arbitrarily. The impugned show cause notice did not propose retrospective cancellation and the impugned cancellation order likewise fails to set out any reasons for cancelling the registration ab initio. Consequently, cancellation with retrospective effect, without prior notice of such an adverse consequence and without reasons, violates the requirement of reasoned decision-making and the principles of natural justice. The Court noted that cancellation of GST registration has severe adverse consequences for the taxpayer and that an opportunity to remedy the cause of cancellation must be afforded before imposing retrospective annulment of registration. [Paras 11, 12, 13, 14]

Impugned cancellation order is invalid to the extent it effects retrospective cancellation without reasons or prior notice; such cancellation violates natural justice and is not sustainable.

Restoration of GST registration for limited period to enable compliance - power to cancel registration - Relief to be granted and further course of action following the defective retrospective cancellation - HELD THAT: - In light of the defective retrospective cancellation and the petitioner's stated readiness to furnish returns, the Court directed that the petitioner's GST registration be restored for a limited period of thirty days to enable filing of outstanding returns. The Court provided that if returns are filed within that period, the proper officer may then consider whether further action is necessary; if the officer deems further action warranted, a fresh show cause notice may be issued and a decision taken after affording the petitioner a personal hearing. The Court clarified that this order does not preclude the officer from taking any other action permissible under law for statutory violations. [Paras 16]

Registration restored for thirty days to permit filing of returns; matter remitted to the proper officer to consider further action after affording opportunity of personal hearing, including issuance of a fresh show cause notice if warranted.

Final Conclusion: The petition is disposed of by setting aside the retrospective cancellation insofar as it was effected without reasons or prior notice; the petitioner's GST registration is restored for thirty days to enable filing of returns and the proper officer is directed to consider further action, if any, after affording the petitioner a hearing.

Challenge to show-cause notice - invocation of writ jurisdiction against show-cause notice - right to file reply and right to be heard under Sections 73, 74 and 75 of the CGST Act - appealability of orders under the CGST Act - selective issuance of show-cause notice

Invocation of writ jurisdiction against show-cause notice - right to file reply and right to be heard under Sections 73, 74 and 75 of the CGST Act - appealability of orders under the CGST Act - Maintainability of writ petition challenging a show-cause notice issued under the CGST Act - HELD THAT: - The Court held that issuance of a show-cause notice by the tax authorities is not ordinarily amenable to challenge by way of writ petition because the assessee has statutory rights under the CGST Act to file a reply and to be heard before any adjudicatory order is passed. The availability of an opportunity of hearing under Sections 73, 74 and 75 and the existence of statutory appellate remedies weigh against entertaining pre-emptive writ relief. Reliance on precedent dealing with indirect tax regimes supports the proposition that a show-cause notice, standing alone, does not justify bypassing the statutory adjudicatory and appellate processes. [Paras 7, 8]

Writ petition challenging the show-cause notice is not maintainable; petition dismissed on this ground.

Selective issuance of show-cause notice - challenge to show-cause notice - Validity of issuing a show-cause notice to the petitioner when other similarly situated manufacturers were not issued notices - HELD THAT: - The Court found that the mere fact that the petitioner alone has been issued a show-cause notice while other similarly situated manufacturers have not been served does not, by itself, render the notice bad in law. Differential treatment in issuance of notices, without more, does not establish arbitrariness sufficient to invalidate the notice at the threshold. The appropriate forum to contest the merits and to seek redress is through reply, adjudication and the appellate mechanism prescribed under the CGST Act. [Paras 6, 7]

Selective issuance of the show-cause notice does not, in itself, vitiate the notice; this does not warrant interference by writ.

Final Conclusion: Writ petition dismissed; petitioner may file replies and representations and authorities are directed to act in accordance with law while considering them, with statutory adjudicatory and appellate remedies remaining available.

Deemed withdrawal of recovery order upon belated filing of return - condonation of delay in filing GSTR-3B - payment of late fee under Section 47 of the GST Act, 2017 - assessment and initiation of proceedings for tax shortfall - administrative discretion to secure statutory compliance

Deemed withdrawal of recovery order upon belated filing of return - condonation of delay in filing GSTR-3B - Validity of the order passed under Section 62 where the dealer filed the monthly GSTR-3B belatedly and sought quashing of the order on the ground of subsequent return-filing - HELD THAT: - The Court noted that the petitioner had failed to file the monthly return for the month of November, 2023 and that an order under Section 62 was passed after issuance of GSTR-3A. Although the return was filed after the period specified in Section 62(2), the Court declined to enforce the full rigours of that sub-section. Emphasising the Department's intent to secure statutory compliance rather than to impose disproportionate hardship on a small dealer, the Court exercised a lenient approach and treated the delay as condoned for the purpose of the impugned order. The petitioner was permitted to retain the benefit of belated filing subject to payment of the statutory late fee.

Delay in filing the GSTR-3B on 30.05.2024 is deemed condoned for the purpose of the impugned order; the challenge to the order is allowed on that basis, subject to payment of the late fee.

Payment of late fee under Section 47 of the GST Act, 2017 - assessment and initiation of proceedings for tax shortfall - Consequences following condonation of delay - whether the revenue may assess the belated return and initiate proceedings for any tax shortfall - HELD THAT: - Having condoned the delay and required payment of late fee under Section 47, the Court left intact the statutory regime for assessment and recovery. The respondent was directed to independently proceed to assess the returns filed by the petitioner and, if any shortfall in tax payment is detected, to initiate appropriate proceedings under the GST Act. The Court's order thus preserves the Department's power to investigate and recover unpaid tax while allowing the petitioner to regularise compliance by payment of late fees.

Respondent may assess the belatedly filed return and initiate proceedings for any shortfall in tax after the petitioner pays the late fee as directed.

Final Conclusion: Writ petition allowed to the extent of condoning the belated filing of the GSTR-3B for November, 2023 on payment of late fee under Section 47; the respondent is permitted to assess the returns and initiate proceedings for any tax shortfall. No costs.

Right to be heard - Opportunity of personal hearing - Setting aside assessment order for non-hearing - Remand for fresh consideration on payment condition - Dispute arising from mismatch between GSTR-3B and auto-populated GSTR-2A

Right to be heard - Opportunity of personal hearing - Setting aside assessment order for non-hearing - Assessment order passed without affording the petitioner a reasonable opportunity to be heard was liable to be set aside. - HELD THAT: - The court examined the impugned order and the procedural record and found that the assessment confirming the tax proposal was based on the petitioner's failure to reply to the show cause notice and non-participation in personal hearing despite two reminders. Because the petitioner was not heard before the order was issued, principles of natural justice required that the order be set aside and the matter reconsidered so that the petitioner may contest the tax demand on merits. [Paras 4]

Impugned order dated 15.12.2023 set aside for want of a reasonable opportunity to be heard; matter remanded for fresh consideration.

Remand for fresh consideration on payment condition - Dispute arising from mismatch between GSTR-3B and auto-populated GSTR-2A - Remand was ordered on specified terms including deposit and timelines to enable adjudication on merits. - HELD THAT: - The petitioner represented that the tax proposal related to a mismatch between GSTR-3B returns and auto-populated GSTR-2A and undertook to remit 10% of the disputed tax demand. The court directed that the petitioner must remit 10% of the disputed demand within two weeks of receipt of the order and be permitted to submit a reply to the show cause notice within the same period. Upon receipt of the reply and satisfaction of the deposit, the respondent must provide a reasonable opportunity, including personal hearing, and pass a fresh order within three months from receipt of the reply. These conditions operationalise the remand while preserving the right to adjudicate the merits. [Paras 5]

Matter remanded for fresh adjudication on condition that the petitioner remits 10% of the disputed tax demand within two weeks and is afforded a reasonable opportunity including personal hearing; respondent to pass fresh order within three months of receiving the petitioner's reply.

Final Conclusion: The assessment order dated 15.12.2023 is set aside for breach of the right to be heard; the matter is remanded for fresh consideration on condition of a 10% deposit within two weeks, submission of a reply, provision of a personal hearing and issuance of a fresh order within three months, writ petition disposed of on those terms.

Unexplained investment under section 69 of the Income Tax Act - ex parte assessment - remand for fresh adjudication - burden of proof and verification of source of funds

Unexplained investment under section 69 of the Income Tax Act - ex parte assessment - remand for fresh adjudication - burden of proof and verification of source of funds - Whether the addition of Rs.1,09,36,920 treated as unexplained investment could be sustained or required fresh adjudication. - HELD THAT: - The tribunal noted that the assessment was completed ex parte after the assessee did not file ITR or substantiate the source of cash payment for the property, and that the CIT(A) dismissed the appeal treating the assessee's explanations as afterthought. The assessee before the tribunal offered to furnish the details and evidence of source of funds. Considering that the primary assessment was ex parte and that the AO has not examined the submitted evidence on record, the tribunal did not decide the addition on merits. Instead, the tribunal directed that the matter be remanded to the Assessing Officer to decide the issue afresh on the basis of evidence and submissions to be filed by the assessee, subject to the condition that the assessee shall not seek frivolous adjournments and shall cooperate in proceedings. The tribunal clarified that this remand expresses no opinion on the merits and that the AO shall adjudicate independently in accordance with law. [Paras 7, 8]

Matter remitted to the Assessing Officer for fresh adjudication on evidence and submissions; appeal allowed for statistical purposes.

Final Conclusion: The addition treated as unexplained investment was not adjudicated on merits; the tribunal remitted the matter to the Assessing Officer for fresh consideration of evidence and source of funds and allowed the appeal for statistical purposes.

Revision under section 263 - taxability under section 56(2)(x)(b) - stock-in-trade versus capital asset - scope of Explanation 1(c) to section 263 where related appeal is pending

Taxability under section 56(2)(x)(b) - stock-in-trade versus capital asset - Whether the assessment-order was erroneous and prejudicial for not treating the impugned property as chargeable to tax under section 56(2)(x)(b) when a similar transaction for another property was taxed. - HELD THAT: - The Tribunal found that the assessee purchased two properties held as stock-in-trade, each acquired for consideration less than the stamp valuation. The Assessing Officer made an addition under section 56(2)(x)(b) in respect of one property but remained silent as to the impugned property despite no distinction in the transactions. This non-consideration amounted to an error in the assessment-order and was prejudicial to revenue. Consequently, the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 to address the omission. The Tribunal therefore upheld the conclusion that the assessment-order was erroneous and prejudicial for not considering the impugned property for taxation under section 56(2)(x)(b). [Paras 7]

The AO's omission in not taxing the impugned property under section 56(2)(x)(b) rendered the assessment-order erroneous and prejudicial, warranting revision under section 263.

Scope of Explanation 1(c) to section 263 where related appeal is pending - revision under section 263 - Whether Explanation 1(c) to section 263 barred the Principal Commissioner from taking revisionary action in respect of the impugned property when an appeal relating to another property was pending before the CIT(A). - HELD THAT: - Explanation 1(c) to section 263 permits the Principal Commissioner to revise matters that were not considered and decided in an appeal filed against the assessing officer's order. The pending appeal before the CIT(A) concerned the addition in respect of a different property and did not include the impugned property. As the impugned property was not the subject matter of the appeal, Explanation 1(c) did not preclude the Principal Commissioner from examining and revising the assessment insofar as the impugned property was concerned. The Tribunal therefore rejected the contention that the pendency of an appeal in respect of another transaction barred revision in this case. [Paras 8]

Explanation 1(c) does not bar revision by the Principal Commissioner in respect of the impugned property because that matter was not considered or decided in the appeal pending before the CIT(A).

Final Conclusion: The revision order under section 263 was upheld: the Assessing Officer's omission to tax the impugned property under section 56(2)(x)(b) was erroneous and prejudicial to revenue, and Explanation 1(c) did not bar revision since the impugned property was not the subject of the pending appeal; the appeal is dismissed and the assessee may press its stock-in-trade claim before the Assessing Officer during consequential proceedings.

Application of section 56(2)(vii)(b) where stamp duty valuation exceeds stated consideration - third proviso to section 50C and the tolerance band for variations between stamp duty valuation and stated consideration - retrospective effect of curative amendment to tax provisions - Departmental Valuation Officer (DVO) valuation as determinative for market value - non-invocation of anti-avoidance provision where variation is within tolerance band

Departmental Valuation Officer (DVO) valuation as determinative for market value - application of section 56(2)(vii)(b) where stamp duty valuation exceeds stated consideration - non-invocation of anti-avoidance provision where variation is within tolerance band - Validity of addition made under section 56(2)(vii)(b) in light of DVO valuation showing variation less than the tolerance band - HELD THAT: - The Tribunal examined the DVO report relied upon by the Assessing Officer and found that the DVO-determined FMV exceeded the assessee's stated purchase consideration by only 5.32%, which is less than the 10% tolerance band recognised by the Tribunal. In view of the proviso to section 56(2)(vii)(b) read with the third proviso to section 50C and the accepted principle that small, bona fide variations need not attract anti-avoidance treatment, the addition under section 56(2)(vii)(b) could not be sustained. The Tribunal therefore deleted the addition upheld by the Commissioner (Appeals). [Paras 5, 8, 9]

The addition under section 56(2)(vii)(b) is deleted as the variation between DVO FMV and stated consideration is within the tolerance band.

Third proviso to section 50C and the tolerance band for variations between stamp duty valuation and stated consideration - retrospective effect of curative amendment to tax provisions - application of section 56(2)(vii)(b) where stamp duty valuation exceeds stated consideration - Applicability and temporal effect of the tolerance band (curative amendment) in relation to invocation of anti-avoidance provisions - HELD THAT: - The Tribunal applied the ratio of coordinate-bench authority (as discussed in the judgment) holding that the insertion of the proviso to section 50C and the enhancement of the tolerance band to 10% are remedial/curative in nature and must be given retrospective effect from the date the related provision was introduced. Consequently, where the variation between stamp duty valuation and stated consideration falls within the tolerated percentage, the anti-avoidance provision should not be invoked for the period in question. The Tribunal relied on this principle to conclude that the present variation (as per DVO) did not justify invoking section 56(2)(vii)(b). [Paras 8, 9]

The Tribunal held that the tolerance band applies retrospectively and, accordingly, the anti-avoidance provision cannot be invoked where variation falls within that band.

Final Conclusion: The appeal is allowed; the addition sustained by the Commissioner (Appeals) under section 56(2)(vii)(b) is deleted because the DVO valuation showed the variation to be within the tolerated band and the curative proviso operates retrospectively.

Condonation of delay in filing appeal - rectification of mistake apparent from record - double taxation between heads of income - principles of natural justice - remand for decision on merits

Condonation of delay in filing appeal - remand for decision on merits - Whether the appeal dismissed by the Ld. CIT (A) as barred by limitation should be restored for adjudication by condoning the delay and remanding the matter for decision on merits. - HELD THAT: - The Tribunal recorded that the Ld. CIT (A) rejected the appeal as barred by limitation without deciding the merits (paragraph 6). Having considered the appellant's explanation regarding non-receipt of intimation of the rectification order and attempts to seek redressal through grievances, the Tribunal found that the Ld. CIT (A) did not decide the substantive controversy and that it would be in the interest of justice to afford the appellant an opportunity to have the merits considered. Consequently, the Tribunal directed that the matter be sent back to the file of the Ld. CIT (A) to decide, on merits, the grounds raised against the rectification order and to consider condonation of delay after providing reasonable opportunity of hearing to the appellant (paragraph 9). [Paras 6, 9]

Matter remitted to the Ld. CIT (A) to consider condonation of delay and decide the appeal on merits after affording the appellant a reasonable opportunity of hearing.

Rectification of mistake apparent from record - double taxation between heads of income - principles of natural justice - Whether the rectification order passed by the CPC under section 154 resulted in double taxation of the rental income and whether that order should be adjudicated on merits. - HELD THAT: - The Tribunal noted the factual position that the assessee had treated rental receipts as income from house property in the return, but the intimation/rectification proceedings resulted in the same amount being reflected as income under other sources leading to taxation twice (paragraphs 3-4). The Tribunal did not decide the substantive question of whether the rectification was correct or violative of principles of natural justice but held that this contention was not adjudicated by the Ld. CIT (A) due to dismissal on limitation grounds. For that reason, the Tribunal remitted the question to the Ld. CIT (A) to examine and decide the merits of the challenge to the rectification order after condoning delay, thereby enabling consideration of whether the rectification amounted to a mistake apparent from record or caused double taxation (paragraph 9). [Paras 3, 4, 9]

Challenge to the rectification order and allegation of double taxation remitted to the Ld. CIT (A) for adjudication on merits after condonation of delay and opportunity of hearing.

Final Conclusion: Appeal allowed for statistical purposes and remitted to the Ld. CIT (A) to decide, on merits and after affording reasonable opportunity of hearing, the appellant's challenge to the rectification order (including consideration of condonation of delay and the allegation of double taxation).

Bogus transaction doctrine and role of suspicion and surmise - allowability of business loss from share trading where transactions recorded in audited books of related entities - use of sister-concern demat account and effect on genuineness of transactions - allowability of expenses wholly and exclusively for business - double taxation concern arising from disallowance of remuneration already taxed in hands of recipients - deeming provision for computation of annual letable value and self-occupied property under section 23(2)

Bogus transaction doctrine and role of suspicion and surmise - allowability of business loss from share trading where transactions recorded in audited books of related entities - use of sister-concern demat account and effect on genuineness of transactions - Deletion of additions disallowing share trading loss and related expenses claimed by the assessee. - HELD THAT: - The Tribunal examined whether the Assessing Officer was justified in treating the loss and associated expenses as bogus merely because transactions were routed through the demat account of a sister concern and a demat account in assessee's name was not opened. The Tribunal accepted that day-to-day sale and purchase entries were recorded in the audited books of both the assessee and the sister concern, an agreement provided for remuneration to the sister concern (10% of profit), and the sister concern's assessment accepted a substantial loss on identical transactions. The Assessing Officer's conclusions rested on doubts, suspicion and the opinion that a prudent business would not transact through another entity; such surmises were held insufficient to impugn the genuineness of transactions where books were audited, an agreement existed, and the group as a whole incurred losses recognized in assessment. Consequently the Tribunal found no sound legal basis for the additions and deleted the disallowances. [Paras 22, 23]

Additions of Rs. 1,47,17,633/- (loss) and Rs. 8,77,743/- (direct expenses) deleted.

Allowability of expenses wholly and exclusively for business - double taxation concern arising from disallowance of remuneration already taxed in hands of recipients - bogus transaction doctrine and role of suspicion and surmise - Deletion of disallowance of various business expenses which were held to have been disallowed because share trading was treated as bogus. - HELD THAT: - The Assessing Officer disallowed a substantial part of expenses on the premise that the share-trading business was bogus. Having held that the share-trading arrangement was bona fide, the Tribunal concluded that the foundational reason for disallowing these expenses fell away. The Tribunal noted that remuneration to directors had been taxed in the hands of the directors and that routine business expenses (salaries, electricity, conveyance) were incurred in the course of the assessee's admitted businesses (hospitality and trading). On this basis, and because the disallowance was tethered to the now-rejected finding of bogus trading, the Tribunal allowed the ground and directed deletion of the addition. [Paras 28]

Addition of Rs. 1,04,16,353/- deleted.

Deeming provision for computation of annual letable value and self-occupied property under section 23(2) - annual letable value (ALV) for part-year ownership - Upholding of addition by computing notional income from house property for the period the assessee owned the property. - HELD THAT: - The Tribunal held that for computation of income from house property, the annual letable value is to be determined under the deeming provision of section 23. Clause (a) of section 23(2) (self-occupied property) is available only where the owner is in occupation of the property for his own residence. The assessee claimed the property was held for sale and was not in occupation for residence; clause (b) was inapplicable. As the assessee was the owner for part of the year and the property was not occupied as owner's residence, the CIT(A)'s restriction of the notional income to the 3 months' ALV was proper. The Tribunal found no error in upholding that limited addition. [Paras 34]

Addition of Rs. 1,17,200/- on account of annual lettable value confirmed.

Final Conclusion: Appeal partly allowed: additions disallowing share-trading loss and related expenses and the disallowance of various business expenses are deleted; the addition on account of annual lettable value of the sold residential property is confirmed.

Binding effect of approved resolution plan under Section 31 of the IBC - extinguishment of pre CIRP statutory dues - prohibition on initiation or continuation of proceedings in respect of claims not part of the resolution plan - resolution applicant starts with a clean slate - claims frozen upon approval of the resolution plan

Binding effect of approved resolution plan under Section 31 of the IBC - extinguishment of pre CIRP statutory dues - claims frozen upon approval of the resolution plan - Effect of an NCLT approved resolution plan under Section 31 of the IBC on tax claims and proceedings relating to the period prior to the CIRP - HELD THAT: - The Court held that upon approval of a resolution plan under Section 31(1) of the IBC the terms of the plan are binding on the corporate debtor and on the Central Government and its agencies, and that claims not provided for in the resolution plan stand extinguished. The reasoning follows Ghanshyam Mishra which explains that the legislative scheme-including the 2019 amendment-was intended to prevent surprise claims by tax and other authorities after approval of a resolution plan, to ensure the successful resolution applicant begins with a clean slate. The Revenue's contention that liabilities which have not crystallised prior to CIRP may be treated as future liabilities was rejected; continuation or initiation of proceedings in respect of operations prior to CIRP is prohibited and such liabilities cannot survive approval of the resolution plan. [Paras 12, 13, 14, 15, 16]

The approved resolution plan binds the Revenue and extinguishes statutory dues and proceedings in respect of the period prior to the approval of the resolution plan.

Prohibition on initiation or continuation of proceedings in respect of claims not part of the resolution plan - resolution applicant starts with a clean slate - Validity of the Impugned Proceedings (notices under Section 153C, Section 143(2), Section 142(1) and summons under Section 133(6)) issued to the petitioner - HELD THAT: - Applying the legal principle that pre CIRP claims not included in an approved resolution plan are extinguished, the Court found the Impugned Proceedings-initiated after approval of the petitioner's resolution plan but relating to operations and search proceedings predating the CIRP-to be misconceived and untenable. The Court observed that the Revenue did not demonstrate that the proceedings related solely to liabilities arising after CIRP approval and noted authorities of this Court following Ghanshyam Mishra which have quashed analogous reassessment and inquiry notices. Consequently, the notices and consequential actions impugned in the writ petition were quashed. [Paras 6, 16, 18, 19, 20]

All the impugned notices and related proceedings issued by the Revenue in connection with the specified assessment years are quashed and set aside.

Final Conclusion: Rule made absolute; the notices and communications issued by the Revenue in respect of AY 2013-2014 to AY 2018-2019 and AY 2019-2020 and all consequential proceedings are quashed and the writ petition is disposed of with no order as to costs.

Imposition of penalty under section 271AAB - Definition of "undisclosed income" under section 271AAB - Requirement of linking additional income to incriminating material found during search - Acceptance of return and completion of assessment on declared income

Imposition of penalty under section 271AAB - Definition of "undisclosed income" under section 271AAB - Requirement of linking additional income to incriminating material found during search - Acceptance of return and completion of assessment on declared income - Whether deletion of penalty imposed under section 271AAB was sustainable where Assessing Officer did not link the additional income disclosed in the return to incriminating material found during search - HELD THAT: - The Tribunal agreed with the CIT(A) that the Assessing Officer failed to bring on record any seized or incriminating material connecting the additional income declared by the assessee to the material found in the search. The assessment for AY 2021-22 was completed by accepting the return filed by the assessee, and the amounts in question were treated as part of declared income by the AO. Section 271AAB defines "undisclosed income" by reference to money, entries or documents found in the course of a search which (inter alia) were not recorded before the date of search or were false entries; where the assessee is an individual who does not maintain books of account, mere declaration after a search does not automatically convert declared income into "undisclosed income" under section 271AAB. The Tribunal held that, for levy of penalty under section 271AAB, the onus lies on the Assessing Officer to establish a direct link between the additional income disclosed in the return and the incriminating material discovered during the search; absent such linkage or seized material pointing to non disclosure, the penalty is not sustainable. The Tribunal found no material on record establishing that the declared share trading income or cash receipts were covered by the statutory definition of "undisclosed income" and therefore upheld the deletion of the penalty by the CIT(A). [Paras 9]

Deletion of penalty imposed under section 271AAB is upheld for AY 2021-22 as the Assessing Officer failed to link the additional income to incriminating material found during search.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) deleting the penalty under section 271AAB is upheld because the Assessing Officer did not adduce seized or incriminating material establishing that the additional income declared by the assessee was "undisclosed income" within the meaning of section 271AAB.

Registration under Section 80G - provisional registration and final registration timeline - limitation for filing Form 10AB under the first proviso to section 80G(5) - application for final registration within six months prior to expiry of provisional approval or within six months of commencement of activities, whichever is earlier - effect of CBDT circulars on time limits and remedial fresh filing - remand for fresh adjudication on merits

Limitation for filing Form 10AB under the first proviso to section 80G(5) - provisional registration and final registration timeline - Application for final registration filed on 04/09/2023 after provisional registration on 24/08/2023 was within the prescribed limitation period and not time-barred. - HELD THAT: - The Tribunal found that the assessee obtained provisional registration on 24/08/2023 and filed Form 10AB for final registration on 04/09/2023. The proviso requires that final-registration applications be made at least six months prior to expiry of provisional approval or within six months of commencement of activities, whichever is earlier. The Tribunal held that an assessee cannot apply for final registration before grant of provisional registration and therefore an application made soon after grant of provisional registration falls within the statutory timeline. The Tribunal relied on Coordinate Bench precedents which construed the proviso to permit filing for final registration after grant of provisional approval and rejected the view that prior commencement of activities precludes such filing; accordingly there was no delay in filing in the present facts. [Paras 8]

The application filed on 04/09/2023 is within limitation and not barred by time.

Application for final registration within six months of commencement of activities - provisional registration and final registration timeline - Requirement of filing within six months of commencement of activities did not apply where activities had commenced prior to provisional registration and the six month period had already expired before provisional registration was sought. - HELD THAT: - The Tribunal observed that the second limb (filing within six months of commencement of activities) is inapplicable when the assessee had commenced activities well before seeking provisional registration and the six month period had lapsed prior to grant of provisional registration. Reading the proviso purposively, the Tribunal held that date of commencement for the operative six month reckoning, insofar as it concerns post provisional approval filings, is to be construed with reference to activities undertaken after grant of provisional registration; consequently, commencement before provisional approval does not render the subsequent final registration application time barred. [Paras 8]

The six month-from commencement requirement did not bar the assessee's application in the facts of this case.

Effect of CBDT circulars on time limits and remedial fresh filing - remand for fresh adjudication on merits - Application, which was earlier rejected by the CIT(E) before issuance of CBDT Circular No.07/2024, deserves to be admitted and examined on merits; matter remitted to CIT(E) for fresh decision after giving opportunity to the assessee. - HELD THAT: - The Tribunal noted that CBDT Circular No.07/2024 permitted institutions whose applications were rejected solely for being filed after due date or under wrong section code to furnish a fresh Form 10AB within the extended time; although the extended filing window had lapsed, considering the intent and spirit of the circular and that the assessee's application was rejected before issuance of the circular, the Tribunal directed that the CIT(E) admit the application filed within the statutory period and decide it on merits. The revenue did not oppose remand; accordingly the Tribunal remitted the matter to the CIT(E) to examine the application afresh, providing reasonable opportunity and to do so expeditiously. [Paras 9, 10]

The matter is remitted to the CIT(E) to admit and decide the application on merits after affording opportunity to the assessee.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal held the final registration application filed after provisional registration was within limitation and not barred by prior commencement of activities; in view of CBDT Circular No.07/2024 and the circumstances, the matter is remitted to the CIT(E) to admit and decide the application on merits after giving the assessee a reasonable opportunity, expeditiously.

Capital treatment of consideration on transfer of trademark - self-generated trademark versus capitalised intangible asset - short-term capital gains on transfer of intangible capital asset - allowability of provision for employee leave encashment as a business liability - claim of capital loss on compulsory surrender of land and year of claim - penalty under section 271(1)(c) where assessment is on book profits under 115JB (effect of MAT on levy of penalty)

Capital treatment of consideration on transfer of trademark - self-generated trademark versus capitalised intangible asset - short-term capital gains on transfer of intangible capital asset - Taxability of Rs. 11 crores received on transfer of the trademark 'Rath' - capital receipt chargeable as capital gains or revenue receipt - HELD THAT: - The Tribunal found on the facts that the assessee had transferred and assigned the trademark 'Rath' together with related intellectual property and an undertaking (including a non-compete) to ITC for Rs. 11 crores. Although the assessee asserted that the trademark was self-generated and no cost was incurred, the Tribunal noted that the trademark had been registered (Registration No. 428273) and the assessee had claimed and written off registration/related expenditures in its accounts. Those expenditures having been treated as revenue in earlier years, the Tribunal concluded the trademark operated as a capital asset for the assessee and its transfer falls under the head capital gains. The Tribunal rejected the Revenue's characterisation of the receipt as a trading receipt merely because the non-compete affected future sales, observing that non-compete covenants are consequential to an intellectual property transfer and that the determinative question is the transfer of the intellectual property itself. On these findings the tribunal dismissed the assessee's ground seeking exclusion of the amount from taxable income and held the consideration chargeable to tax as capital gains (short-term to the extent relevant on the facts). [Paras 11, 12, 13]

Addition sustained: the Rs. 11 crores is chargeable as capital gains on transfer of the trademark; assessee's ground dismissed.

Allowability of provision for employee leave encashment as a business liability - actuarial valuation and current year deduction of business liability - Disallowance of provision for leave encashment of Rs. 9,16,000 - whether deduction allowable in the year of provision - HELD THAT: - The Tribunal held the matter squarely covered by the Supreme Court decision in Bharat Earthmovers Ltd. v. CIT: where a business liability has definitely arisen in the accounting year and is capable of being estimated with reasonable certainty, the deduction should be allowed though its quantification may occur later. The assessee had produced actuarial certification and disclosures; consequently the provision represented an in praesenti business liability rather than a contingent liability. Applying the settled principle, the Tribunal allowed the assessee's ground and set aside the disallowance made by the assessing officer. [Paras 17, 19, 20]

Assessee's ground allowed: provision for leave encashment is deductible in the year as a business liability.

Claim of capital loss on compulsory surrender of land and year of claim - effect of prior court directions on timing of transfer and year of allowance - Allowability in AY 2001-02 of capital loss claimed on surrender of land to DDA pursuant to Supreme Court directions - HELD THAT: - The Tribunal examined the factual matrix of court orders, the assessee's surrender letter of 25.05.2000 and subsequent possession by DDA, and the treatment of identical claims in AY 2004-05. Noting that the assessee had made the claim for the year under appeal (AY 2001-02) and that coordinate proceedings had led to inconsistent earlier treatment, the Tribunal accepted that the assessee had extinguished its rights in the land in compliance with Supreme Court directions and was entitled to claim the loss in the year in which the claim was made. In consequence, and having regard to previous adjudications and the factual surrender, the Tribunal directed the assessing officer to allow the claim in AY 2001-02. [Paras 21, 24, 27]

Assessee's ground allowed: direction to AO to allow the capital loss in AY 2001-02.

Clerical/typographical correction in assessment computations - Typographical error in taxable capital gains figure - remittance to AO for verification and correction - HELD THAT: - The Tribunal accepted the assessee's submission that the discrepancy in the taxable capital gains figure was typographical. Rather than adjudicating on the numerical correction itself, the Tribunal remitted the matter to the assessing officer to verify and correct the figure in accordance with law. [Paras 28]

Ground allowed for statistical purposes: matter remitted to AO for verification and correction.

Penalty under section 271(1)(c) and impact of computation under the book-profit regime - standards for levy of penalty where additions are debatable or disclosed - Validity of penalty under section 271(1)(c) imposed for alleged concealment/inaccurate particulars - HELD THAT: - The Tribunal sustained the Commissioner (Appeals)'s deletion of penalty. It agreed that the assessee's claims (treatment of trademark consideration, leave encashment provision, and capital loss on land surrender) were debatable and, in some respects, fully disclosed in the return/accounts. Further, where the assessment stood on book profits under the MAT regime (section 115JB) and the additions under the normal provisions did not affect tax liability under the book-profit computation, the imposition of penalty for 'tax sought to be evaded' could not be sustained. The Tribunal adopted the CIT(A)'s reasoning that the Assessing Officer had not established deliberate concealment or furnishing of inaccurate particulars warranting penalty. [Paras 29, 31, 35, 36]

Revenue's appeal dismissed: penalty under section 271(1)(c) deleted.

Final Conclusion: The assessee's appeal is partly allowed: the disallowance of leave-encashment provision is set aside and the capital loss on surrender of land is held allowable in AY 2001-02; the claim that the Rs. 11 crores receipt was not chargeable was rejected and treated as capital gains; a typographical discrepancy in capital gains computation is remitted to the AO for correction. The Departmental appeal against deletion of penalty is dismissed.

Credit of TDS - tax deduction at source under section 194H and 194Q - status of Kachha Arhtia (commission agent) and treatment of agent turnover - application of Rule 37BA / Rule 378A for adjustment of TDS credit - CBDT Circular No. 452 (1986) on turnover of Kachha Arhtia

Credit of TDS - tax deduction at source under section 194H and 194Q - status of Kachha Arhtia (commission agent) and treatment of agent turnover - application of Rule 37BA / Rule 378A for adjustment of TDS credit - CBDT Circular No. 452 (1986) on turnover of Kachha Arhtia - Allowability of the credit of TDS claimed by the assessee under sections 194H and 194Q where the assessee operates as a Kachha Arhtia (commission agent) and the assessing officer restricted credit by invoking the provisions of the Rules relating to adjustment of TDS credit. - HELD THAT: - The Tribunal examined whether the assessing officer correctly restricted TDS credit by invoking Rule 37BA/Rule 378A notwithstanding the assessee's plea and records that she is a registered Kachha Arhtia who purchases from farmers on behalf of buyers and shows only commission (Adat) as her gross receipt. The assessee's return, Form 26AS entries and sample invoices supported that sale invoices represent principal's sales matched by purchases from farmers and do not constitute the assessee's turnover. The Bench relied on CBDT Circular No. 452 dated 17-03-1986, which clarifies that for a Kachha Arhtia the turnover does not include sales effected on behalf of principals and only commission is to be considered for tax purposes. The Tribunal further noted a coordinate ITAT decision in identical circumstances holding that where both sections 194H and 194Q TDS have been deducted by the principal, the agent is entitled to credit of tax deducted under both provisions and is not required to include the principal's turnover in his own turnover. Applying these legal and factual findings, the Tribunal concluded that the AO erred in disallowing the TDS credit by applying the Rules to adjust credit without appreciating the assessee's agent status and supporting documents, and directed that full credit of TDS deducted under sections 194H and 194Q be allowed. [Paras 2, 3]

The appeal is allowed; AO directed to allow credit of TDS deducted under sections 194H and 194Q to the assessee.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2023-24, holding that as a registered Kachha Arhtia the assessee is entitled to full credit of TDS deducted under sections 194H and 194Q and directing the assessing officer to grant the credit; appeal allowed with no order as to costs.

Characterisation of Common Area Maintenance charges as payment for services - TDS under Section 194C (contractual payments for services) - TDS under Section 194I (rent for use of premises) - assessee-in-default under section 201(1)/201(1A) for short deduction of TDS - precedential weight of coordinate Benches of ITAT

Characterisation of Common Area Maintenance charges as payment for services - TDS under Section 194C (contractual payments for services) - TDS under Section 194I (rent for use of premises) - assessee-in-default under section 201(1)/201(1A) for short deduction of TDS - Whether TDS on CAM charges paid by the assessee for AY 2011-12 is chargeable under Section 194C as contractual payment for services and not under Section 194I as rent, and whether the assessee is an assessee-in-default under section 201(1)/201(1A). - HELD THAT: - The Tribunal held that CAM charges paid to the mall-owner were payments for separate and distinguishable services (security, housekeeping, repairs and maintenance) and not payments for use of the premises. The Tribunal followed consistent decisions of coordinate Benches of the ITAT which treated such CAM payments as contractual service charges liable to TDS at the rate applicable under Section 194C rather than as rent under Section 194I. The Tribunal noted that in the present case the value of CAM services was separately quantified and paid pursuant to specific invoices, and that the recipient had included such receipts in its business income and paid tax accordingly. Applying the said precedents and on parity of facts, the Tribunal concluded that the AO's treatment of CAM as part of rent and the consequent invocation of section 201(1)/201(1A) (assessee-in-default for short deduction) was erroneous; the correct provision for deduction of tax at source on CAM charges was Section 194C. [Paras 6, 10, 11]

CAM charges are taxable for TDS purposes as contractual payments for services under Section 194C, not as rent under Section 194I; therefore the finding of assessee-in-default under section 201(1)/201(1A) is set aside and the appeal is allowed.

Final Conclusion: On the facts and precedents relied upon, the Tribunal allowed the assessee's appeal for AY 2011-12, holding that CAM charges are liable to TDS under Section 194C and not under Section 194I, and setting aside the assessment treating the assessee as in default under section 201(1)/201(1A).

Addition on basis of impounded documents - memorandum/incomplete records - reliance on survey statement and evidentiary value of statements recorded during survey - requirement of corroborative evidence for additions based on admissions - remand report verification and reliance on bills, vouchers and bank evidence - distinction between statements under section 131 and section 133A and limits on use of survey statements

Addition on basis of impounded documents - memorandum/incomplete records - remand report verification and reliance on bills, vouchers and bank evidence - Whether the addition made by the AO on account of alleged excessive and bogus expenses shown in impounded loose papers is sustainable - HELD THAT: - The Tribunal upheld the CIT(A)'s detailed finding that the impounded sheet was a memorandum recording and that the final audited accounts, supported by bills, vouchers, bank statements and audit certification, were not rejected. The AO's own remand report (dated 19.12.2023) recorded verification of ledger entries, bank statements, third party ledgers and supporting vouchers and found that the disputed heads of expenditure were substantiated. The Tribunal noted the AO's internal contradiction that the loose papers matched the P&L figures and that the accounts were not rejected under section 145; in that factual matrix an increase in expenditure in final audited accounts could not be equated to undisclosed income. In absence of independent corroborative material showing that audited claims were bogus, the additions rested on suspicion and were unsustainable. Having independently examined the record, the Tribunal found no infirmity in the CIT(A)'s deletion of the addition and dismissed the Revenue's grounds on this aspect.

Revenue's challenge to the addition based on impounded documents is dismissed; the deletion of the addition is upheld.

Reliance on survey statement and evidentiary value of statements recorded during survey - distinction between statements under section 131 and section 133A and limits on use of survey statements - requirement of corroborative evidence for additions based on admissions - Whether admission(s) in statements recorded during survey could by themselves sustain the addition - HELD THAT: - The Tribunal agreed with the CIT(A) that while statements recorded during survey have evidentiary value, they are not conclusive. The Tribunal recalled the principle that an addition cannot be sustained solely on a survey statement unless corroborated by independent material. It accepted the view, reflected in the CIT(A)'s order and judicial precedents relied upon in the record, that statements under section 133A (and related survey proceedings) do not automatically have the same conclusive evidentiary effect as statements recorded under search provisions, and that statements must be weighed together with corroborative material. Given that the impugned corroborative material was satisfactorily explained and the AO's remand report verified supporting vouchers and bank transactions, the Tribunal found no basis to sustain additions merely on the basis of the survey statement recorded on oath.

Additions founded solely on survey statements are unsustainable; Revenue's grounds based on alleged admissions are dismissed.

Remand report verification and reliance on bills, vouchers and bank evidence - requirement of corroborative evidence for additions based on admissions - Whether the AO's remand verification reporting that vouchers, ledgers and bank evidence support the expenditure precludes the addition - HELD THAT: - The Tribunal placed weight on the AO's own remand report which recorded that the disputed expenditures were supported by bills/vouchers, banking channel payments and third party ledger confirmations. The remand report, read with the audited accounts (without adverse qualification) and the absence of enquiries contradicting those supporting materials, diminished the probative value of the loose impounded papers as a basis for additions. The Tribunal observed that such factual verification by the AO operates heavily against reopening or sustaining the addition based on suspicion, and that the CIT(A) correctly treated the corroborative material as explained.

The factual verification in the remand report defeats the basis for addition; the deletion is affirmed.

Distinction between statements under section 131 and section 133A and limits on use of survey statements - reliance on survey statement and evidentiary value of statements recorded during survey - Whether the recording of statement under section 131 (on oath) during survey makes such statement conclusive and alters its evidentiary weight - HELD THAT: - The Tribunal accepted the CIT(A)'s analysis that statutory provisions governing recording of statements differ in scope and effect and that recording under section 131 does not ipso facto make a survey statement conclusive against the assessee. The Tribunal noted that courts have drawn distinctions between statements recorded under search provisions and those recorded during survey under section 133A, observing that a survey statement is not by itself sufficient to sustain additions without corroboration. The Tribunal also observed that section 133A(6) permits invoking section 131 powers in limited circumstances and does not transform every survey statement into indisputable evidence. The CIT(A)'s legal treatment of these distinctions was endorsed.

Recording a statement under section 131 during survey does not render a survey statement conclusive; Revenue's contention on this point is rejected.

Allocation of disputed amounts to relevant assessment years - Whether the assessee's alleged statement accepting that the disputed amount related to a different assessment year constituted an admission binding for the year under appeal - HELD THAT: - The Tribunal observed that the AO had alternatively argued that if additions were sustained they pertained to another assessment year, but that such alternate argument cannot be treated as an acceptance by the assessee. The CIT(A) and the Tribunal found the Revenue's factual premise incorrect and noted that the assessee consistently disputed the additions; allocation of the matter to another year was an alternate pleading and not an admission. The Tribunal therefore found no merit in the Revenue's contention based on year allocation.

Revenue's ground that the assessee accepted the amount as pertaining to another year is dismissed.

Final Conclusion: The Tribunal concurs with the CIT(A)'s detailed factual and legal findings: the impugned additions, being founded on memorandum loose papers and survey statements, were satisfactorily explained by audited accounts, vouchers, bank evidence and remand verification; in absence of independent corroboration the additions could not be sustained. The Revenue's appeal is dismissed.

Income from other sources - business income - interest on income tax refund - interest under section 244A - classification of income by head for tax purposes

Income from other sources - business income - interest on income tax refund - interest under section 244A - Whether the addition of Rs. 4,88,959/- as interest on income tax refund treated as "income from other sources" and not business income was sustainable. - HELD THAT: - The Tribunal observed that the assessee had disclosed the interest amount of Rs. 4,88,959/- in the Profit and Loss Account for Financial Year 2016-17 under the sub-column "any other income" of the main column "other income" and that the interest was admittedly allowed under section 244A. Although the Assessing Officer and the CIT(A) treated the interest as not part of business income and made/upheld an addition, the Tribunal noted that the assessee had in any event paid tax on the said amount at the same rate despite classifying it under a different head. The Tribunal found that there was no loss to the revenue by reason of the assessee's head-wise classification and that the factual disclosure in the return and accounts supported deletion of the addition. Applying the principle that mere misclassification, when tax is paid and the amount is disclosed, does not justify sustaining an addition, the Tribunal held that the addition ought to be deleted. [Paras 10, 11, 12]

Addition of Rs. 4,88,959/- on account of interest on income tax refund is deleted and the appeal is allowed.

Final Conclusion: Appeal allowed: impugned part of the order confirming the addition of Rs. 4,88,959/- as income from other sources is set aside and the addition deleted.

Refund of revenue deposit - interest on deposited amount - pre-deposit collected during investigation - Section 11B and 11BB not applicable to revenue deposits - rate of interest at 12% per annum - unjust enrichment - Article 300A deprivation of property

Refund of revenue deposit - interest on deposited amount - pre-deposit collected during investigation - unjust enrichment - Article 300A deprivation of property - Appellant entitled to interest on amount deposited during investigation which was refunded as the collection was without authority and not a demand - HELD THAT: - The Tribunal found that the sum deposited by the appellant during investigation was collected prior to any show cause notice and no demand was ultimately confirmed, so the collection amounted to a revenue deposit which the department had no authority to retain. Reliance was placed on earlier decisions holding such collections to be exactions under ostensible authority of law and requiring refund with interest; the Court further noted that deposits not being duties do not fall within statutory refund schemes under Sections 11B/11BB and that withholding the deposit deprived the owner of property contrary to Article 300A. Consequently the deposited amount must be refunded with interest from the date of deposit until the date of refund. [Paras 5, 6, 12, 13]

Appellant entitled to repayment of the deposited amount with interest from date of deposit to date of refund

Rate of interest at 12% per annum - Section 11B and 11BB not applicable to revenue deposits - interest on deposited amount - Rate of interest on the refunded revenue deposit to be fixed at 12% per annum from date of deposit till date of refund - HELD THAT: - The Tribunal examined the notifications under various sections of the Central Excise Act showing a range of notified rates, and surveyed precedents including decisions of the Supreme Court and this Tribunal (notably Sandvik Asia Ltd., Kuil Fireworks and Parle Agro) which had awarded 12% where pre-deposits or wrongful collections were refunded. Observing that statutory provisions governing duty refunds (Sections 11B/11BB etc.) do not govern deposits collected without authority, and in view of settled precedents awarding 12% as an appropriate rate to compensate for unlawful withholding, the Tribunal held that interest at 12% per annum is to be awarded on the refunded amount from the date of deposit to the date of refund. [Paras 14, 15, 18, 19]

Interest to be paid at 12% per annum from date of deposit till date of refund

Final Conclusion: Appeal allowed: refund of the deposited amount upheld and interest awarded at 12% per annum to be calculated from date of deposit until date of refund.

Eligibility for SAD exemption under Notification No.21/2012-Cus - pre-packaged goods intended for retail sale - affixing of MRP on retail packages - post-clearance audit - absence of requirement to declare MRP in the Bill of Entry

Eligibility for SAD exemption under Notification No.21/2012-Cus - pre-packaged goods intended for retail sale - affixing of MRP on retail packages - absence of requirement to declare MRP in the Bill of Entry - post-clearance audit - Whether demand for SAD on the ground that MRP was not declared/affixed can be sustained where clearance was granted on the importer's declaration and no physical examination was made at that time - HELD THAT: - The Tribunal found on the record that the goods were cleared on the Bill of Entry and assessed as declared by the appellant. The post-clearance demand was raised after Audit on the sole basis that MRP details were not declared in import documents and therefore the 4% SAD exemption under Notification No.21/2012-Cus (applicable to pre-packaged goods intended for retail sale with MRP affixed) was inapplicable. The court observed there is no statutory requirement to declare MRP in the Bill of Entry; the Legal Metrology rules require affixing MRP on retail packages. In the absence of any finding that the goods did not fall within the class of pre-packaged retail commodities or that MRP was not affixed, a presumption that packages lacked MRP after clearance cannot be drawn merely from documentary verification during Audit. If the Revenue had reason to believe non-compliance at the time of clearance, proceedings should have been initiated then rather than raising a demand later on assumptions. The Tribunal therefore held the post-clearance demand unsustainable where it rests solely on documentary absence of MRP declaration in import papers and not on evidence of non-affixing or physical examination. [Paras 7]

Demand for short levy of SAD set aside and appeal allowed; consequential relief granted as per law.

Final Conclusion: The appeal succeeds: the post-clearance demand for SAD was quashed because absence of MRP declaration in import documents, without evidence that MRP was not affixed on the packages or that the goods fell outside the notified category, did not justify denial of the exemption under Notification No.21/2012-Cus.

Chargeability of integrated tax on imported goods - Goods and Services Tax compensation cess on import - determination of rate of duty under Customs Tariff Act, 1975 - jurisdictional competence of customs officers versus central tax officers - classification of goods and burden of proof on Revenue - interpretation of "personal use" in rate notifications - parity of tax treatment between import and domestic supply

Determination of rate of duty under Customs Tariff Act, 1975 - jurisdictional competence of customs officers versus central tax officers - Customs authorities do not have jurisdiction to re-determine the rate of 'integrated tax' prescribed under IGST law beyond the rates prescribed in the Customs Tariff Act and related tariff Schedules. - HELD THAT: - The Tribunal held that the levy of 'integrated tax' on imports is a distinct charge envisaged by section 3(7) of the Customs Tariff Act, 1975, but the rate itself is prescribed under the IGST statute and the Customs Tariff only incorporates those rates for collection by customs. The power to intrude into or re-determine the rate claimed in the bill of entry is not conferred on officers exercising customs assessment or recovery functions; such re-determination would trespass into a domain of central tax officers and their appellate structure. Given the legislative design that imports be treated on parity with domestic inter state supplies and the neutralisation mechanism available under GST, the Tribunal found no necessity or competence for customs authorities to reassign IGST rates beyond the ambit permitted by the Customs Tariff framework. [Paras 1, 2, 8, 11]

Customs authorities acted beyond jurisdiction in attempting to re-determine the IGST rate on import.

Interpretation of "personal use" in rate notifications - classification of goods and burden of proof on Revenue - The adjudicating authority's interpretation of 'personal use' in the rate notification and its classification of the imported helicopters as falling outside the lower rate entry was not sustainble; the Revenue failed to discharge the burden required for re-classification. - HELD THAT: - The Tribunal observed that 'personal use' is not defined in the rate notification or the IGST Act and that resorting to external regulatory classifications (such as DGCA registration categories) to construe the rate notification was inappropriate. The adjudicating authority did not follow the established rules of engagement for tariff classification: it sought to substitute entries in the IGST rate notification without demonstrating, by evidence, that the alternative entry was the appropriate and apt description. Reliance on the registration status or assessments made by other importers was held to be insufficient. Consistent with precedents cited, classification is a matter of chargeability where the onus lies on the Revenue to prove the aptness of an alternative tariff entry; that onus was not discharged in the show cause proceedings. [Paras 3, 4, 10, 13]

The interpretation of 'personal use' and resultant re-classification by the adjudicating authority failed for lack of jurisdictional competence and for want of evidence; the Revenue did not discharge its burden.

Parity of tax treatment between import and domestic supply - chargeability of integrated tax on imported goods - The legislative intent behind applying IGST to imports is parity with domestic inter state supply rather than an independent source of revenue to be enhanced by customs re classification; accordingly the adjudicating authority's consequential recovery, confiscation and penalty could not be sustained. - HELD THAT: - The Tribunal noted that the proviso in section 5 of the IGST Act and the framing of corresponding entries in the Customs Tariff indicate an intent to maintain continuity of the tax chain and parity with domestic supplies, not to create a separate avenue for augmenting exchequer receipts by re determination of IGST rates on import. Given this design, and the absence of a properly substantiated classification exercise by customs, the consequential actions - demand for differential duty, interest, confiscation and parallel penalties - lacked the necessary foundation. The Tribunal therefore found the confirmation of such liabilities and punishments unsupportable in law. [Paras 2, 8, 13, 14]

Consequential recovery, confiscation and penalty based on the re determination were set aside; appeal allowed.

Final Conclusion: The appeal is allowed: the order re classifying the imported helicopters, the consequential demand for differential IGST and related fiscal consequences, and the penalties and confiscation founded on that re classification were held unsustainable due to limits on customs' jurisdiction to re determine IGST rates and for failure of the Revenue to discharge the burden of proof under classification rules.

Provisional release of seized goods - Section 110A of the Act - validity of para 2 of Board Circular No. 35/2017 - eligibility and entitlement for provisional release

Provisional release of seized goods - Section 110A of the Act - validity of para 2 of Board Circular No. 35/2017 - Provisional release of the seized Multi Functional Digital Devices (MFDs) was granted and the Commissioner's rejection set aside. - HELD THAT: - The Tribunal examined the appellant's limited prayer for provisional release under the statutory scheme embodied in Section 110A of the Act. It observed that several judicial decisions, including those of higher courts and this Tribunal, have treated the impugned MFDs as not liable to absolute confiscation and that the matter has received consideration in the Supreme Court. The adjudicating authority had placed reliance on para 2 of Board Circular No. 35/2017 to deny provisional release. The Tribunal noted the view of the High Court of Delhi that para 2 of Circular 35/2017 is inconsistent with and thus void to the extent it excludes categories of goods from provisional release contrary to Section 110A, because executive instructions cannot supplant the statutory eligibility conferred by the parent provision. Applying that principle, and finding the appellant's request to be covered by Section 110A, the Tribunal set aside the impugned order and directed the adjudicating authority to effect provisional release in accordance with law within one month. [Paras 5, 6, 7]

Impugned rejection quashed; provisional release ordered to be effected by the adjudicating authority within one month.

Final Conclusion: Appeal allowed; impugned order rejecting provisional release is set aside and the adjudicating authority is directed to provisionally release the seized goods in accordance with law within one month.

Constitution of Disciplinary Committee - words in singular include the plural and vice versa (Section 13, General Clauses Act, 1897) - interpretation of 'members' to include a single whole time member - delegated legislation must conform to the parent statute - regulatory definition of Disciplinary Committee (Clause 2(1)(c), IBBI Regulations, 2017)

Constitution of Disciplinary Committee - interpretation of 'members' to include a single whole time member - regulatory definition of Disciplinary Committee (Clause 2(1)(c), IBBI Regulations, 2017) - words in singular include the plural and vice versa (Section 13, General Clauses Act, 1897) - delegated legislation must conform to the parent statute - A Disciplinary Committee under Section 220(1) of the Insolvency and Bankruptcy Code can consist of a single whole time member. - HELD THAT: - Section 220(1) empowers the Board to constitute a Disciplinary Committee and the proviso only prescribes that its members must be whole time members; it does not fix the number of members. Clause 2(1)(c) of the IBBI (Inspection and Investigation) Regulations, 2017 expressly defines "Disciplinary Committee" as a committee of whole time member(s), indicating either a single whole time member or more than one. The General Clauses Act, 1897 (Section 13) permits reading singular to include plural and vice versa where the context permits; there is nothing in Chapter VI of the Code or the Regulations repugnant to such an interpretation. While subordinate legislation must not travel beyond the parent statute, here the Regulations only clarify the permissible constitution of the Committee and do not introduce obligations or disabilities inconsistent with Section 220(1). The Court therefore accepts the interpretation that "members" in the proviso includes a singular whole time member and that a single member Disciplinary Committee is permissible. [Paras 8, 9, 10, 11, 12]

The petitioner's objection to the Disciplinary Committee consisting of a single whole time member is rejected and such constitution is held permissible.

Final Conclusion: Writ petition dismissed insofar as it challenges the validity of the impugned order on the ground that the Disciplinary Committee consisted of a single whole time member; further proceedings to be decided on merits with other contentions kept open; rule discharged with no order as to costs.

Bogus invoices - Section 9 application - operational creditor - reliance on income tax assessment order - initiating insolvency proceedings - imposition of costs under Section 65

Bogus invoices - Section 9 application - operational creditor - Validity of rejection of the Section 9 application on the ground that invoices relied upon by the operational creditor were found to be bogus by the Income Tax Authority. - HELD THAT: - The Adjudicating Authority rejected the Section 9 application after noting that the Income Tax Assessment order had recorded that the invoices on which the claim was based were bogus. The Appellate Tribunal examined the record, including the assessment findings relied upon by the Adjudicating Authority, and concluded that where the Income Tax Authority has found the invoices to be bogus, those invoices cannot be relied upon to initiate insolvency proceedings under Section 9. Having regard to the assessment orders brought on record, the Tribunal found no ground to interfere with the rejection of the Section 9 application.

Rejection of the Section 9 application on the ground that the invoices were found to be bogus is upheld.

Reliance on income tax assessment order - Assessment Year 2022-23 - Whether the Adjudicating Authority's reliance on Income Tax Assessment orders for earlier assessment years was misplaced because the disputed transactions related to a subsequent assessment year. - HELD THAT: - The appellant contended that the Adjudicating Authority erred in relying on assessment findings for Assessment Year 2021-22 as the invoices related to Assessment Year 2022-23. The Respondent placed on record that an Income Tax Assessment order for Assessment Year 2022-23 (covering the relevant invoices) was passed after hearing the promoters of the corporate debtor. The Tribunal accepted that the relevant assessment orders for Assessment Year 2022-23 are now available and reaffirmed the finding that the invoices are bogus. In those circumstances, the Tribunal found that the challenge to the reliance on earlier assessment orders is no longer tenable.

The argument that reliance on earlier assessment years was misplaced is rejected in view of the assessment order for Assessment Year 2022-23; the findings as to the invoices remain affirmed.

Imposition of costs under Section 65 - Section 65 costs/penalty - Appropriateness of the cost of Rs. One Lakh imposed upon the applicant under Section 65 by the Adjudicating Authority. - HELD THAT: - Although the Adjudicating Authority imposed a monetary cost to deter frivolous applications, the Appellate Tribunal considered the imposition of that cost in the facts of the present case and concluded that it was not appropriate to sustain the penalty. The Tribunal therefore deleted the cost while otherwise dismissing the appeal.

The imposition of costs in paragraph 29 is set aside and deleted.

Final Conclusion: The appeal is dismissed; the adjudicating authority's rejection of the Section 9 application on the ground that the invoices were found to be bogus is affirmed, the challenge to reliance on earlier assessment years is rejected in view of the Assessment Year 2022-23 order, and the monetary cost imposed by the Adjudicating Authority is deleted.

Effect of acknowledgment in writing - Section 18 of the Limitation Act - Extension of limitation by acknowledgement - Application under Section 95 of the Insolvency and Bankruptcy Code - Exclusion of limitation period pursuant to Suo Motu Writ Petition No. 3/2020

Effect of acknowledgment in writing - Section 18 of the Limitation Act - Extension of limitation by acknowledgement - Exclusion of limitation period pursuant to Suo Motu Writ Petition No. 3/2020 - Whether the letter dated 12.06.2017 from the appellant constituted an acknowledgment in writing under Section 18 of the Limitation Act thereby restarting the period of limitation so that the Section 95 application filed on 30.09.2021 was within time - HELD THAT: - The Tribunal examined Section 18 (effect of acknowledgment in writing) and precedent holding that an acknowledgement, if made before the prescribed period expires, restarts a fresh period of limitation computed from the date of such acknowledgement. The judgment relied on the principle in Laxmi Pat Surana that an acknowledgement by a guarantor or borrower operates to trigger a fresh three year limitation period from the date of the acknowledgement. The letter of 12.06.2017 was written in direct response to the Section 13(2) notice dated 01.06.2017, expressly referred to that notice and stated that the borrowers were at an advanced stage of discussions with lenders and requested time until 31.07.2017. Read in the context of the Section 13(2) notice, the Tribunal found that the letter constituted an admission of liability or an acknowledgment of the jural relationship and thus qualified as an acknowledgement within Section 18. Consequently, the fresh three year limitation period ran from 12.06.2017 and would expire on 11.06.2020. Applying the exclusion of the period directed by the Supreme Court in Suo Motu Writ Petition No. 3/2020 (from 15.03.2020 to 25.03.2021), the application filed on 30.09.2021 was within time. The Appellate Tribunal found no error in the Adjudicating Authority's conclusion and upheld the admission of the Section 95 application. [Paras 8, 9, 10, 12, 13]

Letter dated 12.06.2017 is an acknowledgement under Section 18 restarting the limitation period; the Section 95 application filed on 30.09.2021 was within time and the Adjudicating Authority rightly admitted the petition.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority correctly held that the 12.06.2017 letter amounted to an acknowledgment under Section 18, which restarted the limitation period and, after applying the exclusion directed in Suo Motu Writ Petition No. 3/2020, rendered the Section 95 application timely.

Treatment of operational creditors under a resolution plan - minimum payment to operational creditors not less than liquidation value - commercial wisdom of the Committee of Creditors and its limited judicial review - interference by Adjudicating Authority only when Section 30(2)(b) is violated

Minimum payment to operational creditors not less than liquidation value - treatment of operational creditors under a resolution plan - Whether approval of the resolution plan which proposed NIL payment to the operational creditor violated Section 30(2)(b) of the Code. - HELD THAT: - Section 30(2)(b) requires that a resolution plan provide for payment to operational creditors not less than the amount they would receive in the event of liquidation. The Tribunal computed notionally the liquidation distribution and found that operational creditors would receive NIL because the admitted claim of the sole financial creditor absorbed the available realisation. Applying the principle in Committee of Creditors of Essar Steel, differential treatment is permissible so long as the statutory minimum for operational creditors (not less than liquidation value) is met. On the facts, the plan proposing NIL to the operational creditor did not contravene Section 30(2)(b) because liquidation value for operational creditors was nil, and therefore the Adjudicating Authority did not err in approving the plan. [Paras 11, 16, 17]

Plan did not violate Section 30(2)(b); NIL proposal to operational creditor was permissible as liquidation value was NIL.

Commercial wisdom of the Committee of Creditors and its limited judicial review - interference by Adjudicating Authority only when Section 30(2)(b) is violated - Whether the Adjudicating Authority should have interfered with the Committee of Creditors' approval of the resolution plan (including reference to Hammond Power decision). - HELD THAT: - The Tribunal reiterated the principle from the Supreme Court decisions (Essar Steel, K. Sashidhar and related authorities) that the Adjudicating Authority's jurisdiction is circumscribed by Section 30(2) and that judicial review cannot substitute the commercial wisdom of the CoC so long as statutory requirements are satisfied. Hammond Power was a fact-specific decision where the CoC's record did not reflect consideration of stakeholders' interests and therefore remittal was ordered. By contrast, in the present case the determinative statutory test under Section 30(2)(b) was satisfied (liquidation value for operational creditors being nil), and there was no failure of the CoC to apply mind such as to warrant remand or interference. Accordingly, the Adjudicating Authority correctly declined to set aside the plan. [Paras 8, 9, 12, 14]

No interference warranted; Adjudicating Authority correctly upheld CoC approval as within its limited jurisdiction and not in breach of Section 30(2).

Final Conclusion: The Appeal is dismissed. The Adjudicating Authority's order approving the resolution plan is upheld as not violative of Section 30(2)(b) and within the limited scope of judicial review of the Committee of Creditors' commercial decision.

Alternative remedy of appeal - dismissal on account of availability of alternative remedy - entertainment of appeal on merits - consideration uninfluenced by limitation - penalty under Finance Act, 1994

Alternative remedy of appeal - dismissal on account of availability of alternative remedy - Petition seeking to challenge adjudicating authority's order was not entertained because an equally efficacious appellate remedy existed. - HELD THAT: - The High Court declined to exercise its jurisdiction to entertain the petition impugning the adjudicating authority's confirmation of demands and penalties, holding that the petitioner had an equally efficacious remedy by way of appeal. In consequence, the court dismissed the petition on the ground that the availability of the appellate remedy made adjudication by the writ jurisdiction inappropriate.

Petition dismissed for want of appropriate alternative remedy; writ jurisdiction declined.

Entertainment of appeal on merits - consideration uninfluenced by limitation - Direction to appellate authority to consider any appeal filed by the petitioner within a specified short period on merits without being influenced by limitation. - HELD THAT: - The court permitted the petitioner a limited opportunity to invoke the appellate remedy by directing that, if an appeal is filed within two weeks from the date of the order, the appellate forum shall consider the appeal on merits and shall not be influenced by any question of limitation. This direction is procedural and confined to the limited time-bound opportunity afforded to the petitioner, ensuring that the appellate authority adjudicates the appeal on substantive merits notwithstanding period of limitation.

If appeal filed within two weeks, appellate authority to decide on merits, uninfluenced by limitation.

Final Conclusion: The writ petition was dismissed as an effective alternative remedy of appeal existed; the petitioner was granted two weeks to file an appeal, which the appellate authority has been directed to decide on merits without regard to limitation.

Intermediary services - Export of services - Place of Provision of Service Rules, 2012 - definition of intermediary - Extended period of limitation under Service Tax law - Binding effect of Tribunal's decision on lower authorities

Intermediary services - Export of services - Place of Provision of Service Rules, 2012 - definition of intermediary - Whether the services rendered by the appellant are intermediary services or qualify as export of services. - HELD THAT: - The Tribunal applied the settled characteristics of an intermediary - arrangement or facilitation of a main supply between at least three parties, a subsidiary/supportive role (agent/broker), absence of provision of the main supply on one's own account, and separability of consideration for the ancillary agency service. Reliance was placed on the CBIC guidance and on precedents holding that where a supplier provides the main service on principal-to-principal basis or renders business-auxiliary/back-office services on its own account (cost-plus basis), the supplier does not fall within the definition of intermediary. The Tribunal noted its earlier final order in the appellant's own case for an earlier period, which held identical services to be exports and not intermediary services, and observed that the services and terms remained the same for the impugned periods. Having regard to the contracts, the nature of supply, the documentary position and consistent precedent, the Tribunal concluded that the appellant did not arrange or facilitate a main supply between two other parties and that the services qualify as export of services rather than intermediary services. [Paras 6, 13, 14, 15, 18]

The services are not intermediary services but qualify as export of services; demands on that count are unsustainable.

Extended period of limitation under Service Tax law - Binding effect of Tribunal's decision on lower authorities - Whether the extended period of limitation could be invoked to sustain the demand for the impugned periods. - HELD THAT: - The Tribunal observed that the departmental proceedings and knowledge of the appellant's activities in earlier periods had already been the subject of adjudication in the appellant's favour by the Tribunal in its earlier final order, which held the demand to be time-barred. Applying that earlier conclusion and noting the identity of facts and services for the impugned periods, the Tribunal held that invocation of the extended period of limitation in the present case was not sustainable. [Paras 14, 16]

Invocation of the extended period of limitation was not justified; the demands are barred by limitation.

Interest and penalties - Consequences of unsustainable tax demand - Whether interest and penalties could be sustained where the primary demand for service tax is held unsustainable. - HELD THAT: - The Tribunal held that because the primary demand of service tax for the impugned services was held to be unsustainable (being export of services and time-barred), there was no basis to sustain interest and penalties flowing from that demand. The Tribunal therefore concluded that interest and penalty could not survive the primary decision setting aside the tax demand. [Paras 17, 18]

Interest and penalties cannot be sustained once the primary service tax demand is held unsustainable.

Final Conclusion: Both appeals are allowed; the impugned order confirming service tax, interest and penalties is set aside for the periods April 2015 to March 2016 and April 2016 to June 2017, with consequential relief as per law.

Admissibility of third-party income tax data as basis for demand - Requirement of enquiry and analysis before confirming tax demand - Burden of proof on the revenue to establish taxability - Deficiency in show cause notice for lack of specific allegations and description of service - Presumption under Section 36A of the Central Excise Act inapplicable to external departmental communication

Admissibility of third-party income tax data as basis for demand - Requirement of enquiry and analysis before confirming tax demand - Demand confirmed solely on Income Tax Department data without independent enquiry is unsustainable. - HELD THAT: - The Tribunal found that the show cause notice and impugned orders proceeded to compute and confirm service tax liability solely on the basis of data provided by the Income Tax Department, without any discussion on the nature or taxability of the services rendered by the appellant and without conducting any independent enquiry or analysis. Reliance purely on third party income tax returns/Form 26AS and balance sheet data, without investigation into the character of the receipts or application of the relevant taxability tests, is deficient; precedents were held to require proper enquiry and analysis before a demand can be sustained. Consequently the demand based only on such third party information cannot stand. [Paras 5, 6, 7]

Demand set aside as it was confirmed solely on income tax data without proper enquiry or analysis.

Burden of proof on the revenue to establish taxability - Deficiency in show cause notice for lack of specific allegations and description of service - Department failed to discharge its burden of proof and the show cause notice was defective for not specifying the nature of services or the precise allegations. - HELD THAT: - The Tribunal emphasised the settled principle that the burden to prove the allegations in a show cause notice rests on the revenue. The show cause notice did not state the nature of services for which the appellant was registered nor identify the statutory provision or factual particulars by which the payments shown in the ITR would be held taxable. Absence of specific allegations and failure to give particulars denied the appellant a proper opportunity to meet the case; therefore the department did not discharge its burden to establish taxability. [Paras 5, 8, 9]

Show cause notice and consequent demand are invalid for want of specificity and failure of the revenue to prove taxability.

Presumption under Section 36A of the Central Excise Act inapplicable to external departmental communication - Admissibility of third-party income tax data as basis for demand - The letter relied upon from Directorate General (DGS & DM) could not be treated as admissible evidence under the presumption in Section 36A of the Central Excise Act. - HELD THAT: - The Tribunal observed that the document from the Directorate General was neither produced by the appellant nor seized from its possession or control. Consequently, the statutory presumption available under Section 36A does not apply to the external departmental letter used as the basis for the show cause notice. Because that document was not admissible in evidence for the purpose invoked, the foundational material for the demand failed, undermining the department's case. [Paras 10]

Reliance on the external departmental letter is impermissible under Section 36A and cannot sustain the demand.

Final Conclusion: The appeals are allowed: the service tax demand for Financial Year 2016-17, confirmed solely on Income Tax Department data and an external departmental letter without specific allegations, independent enquiry or admissible evidence, is set aside as the revenue failed to discharge its burden and the relied upon document was not admissible under the asserted presumption.

Penalty / liquidated damages not consideration for a service - Section 66E(e) declared service - agreeing to refrain from an act, or to tolerate an act or a situation, or to do an act - Section 65B(44) definition of "service" requiring an activity carried out for another for consideration - quid pro quo / consideration - late delivery charges and cheque dishonour charges not taxable as service

Penalty / liquidated damages not consideration for a service - Section 66E(e) declared service - agreeing to refrain from an act, or to tolerate an act or a situation, or to do an act - Section 65B(44) definition of "service" requiring an activity carried out for another for consideration - quid pro quo / consideration - late delivery charges and cheque dishonour charges not taxable as service - Whether amounts collected as cheque dishonour charges and late delivery/penalty charges constitute consideration for a taxable service under the definition of "service" and Section 66E(e). - HELD THAT: - The Tribunal applied settled precedent holding that recovery of penal sums or liquidated damages imposed upon breach or default in a contract do not constitute consideration for a service under the statutory definition. Section 65B(44) requires an "activity" carried out by one person for another for consideration; Section 66E(e) contemplates a declared service where the agreement itself provides consideration for agreeing to refrain from an act, to tolerate an act or situation, or to do an act. Penal clauses, including cheque dishonour charges and late delivery charges, are contractual safeguards to protect commercial interests and are not the purpose of the contract nor intended as consideration for toleration or active performance. The Tribunal followed prior decisions to the effect that such recoveries are compensatory/penal in nature and not consideration for any activity or service by the recovering party, and therefore do not fall within Section 66E(e) read with Section 65B(44). On that basis the impugned demand of service tax, interest and penalty on these amounts was held unsustainable.

Impugned order confirming demand of service tax, interest and penalty on cheque dishonour and late delivery charges set aside; appeal allowed.

Final Conclusion: Recoveries characterised as cheque dishonour charges and late delivery/penalty charges are not consideration for a taxable service under the statutory definition and Section 66E(e); the impugned demand is set aside and the appeal is allowed.

Exemption from service tax for services relating to transmission of electricity - scope of the expression "relating to" in exemption notifications - works contract service in relation to transmission of electricity - time bar/limitation in demand of service tax

Exemption from service tax for services relating to transmission of electricity - scope of the expression "relating to" in exemption notifications - works contract service in relation to transmission of electricity - Whether the appellant's works contract services rendered to GETCO for construction of CR building, foundation, cable trench, compound wall, etc., being in relation to transmission of electricity, are liable to service tax - HELD THAT: - The Tribunal found that the works contract services were provided to GETCO and were exclusively in relation to the recipient's overall activity of transmission of electricity. Notification No. 45/2010 ST and Notification No. 11/2010 ST exempt taxable services provided for or in relation to transmission of electricity. The expression "relating to" is of wide amplitude and covers infrastructure and activities having a direct and proximate nexus with the transmission function. Reliance was placed on previous Tribunal decisions holding that construction, erection and related activities for transmission infrastructure (including substations, foundations and towers) fall within the exemption. Applying that principle to the facts, the works contract services in question are covered by the exemption and are not liable to service tax; consequential penalties are not warranted where the substantive duty demand is unsustainable. [Paras 4, 5]

The works contract services for construction relating to transmission of electricity are exempt under the cited exemption notifications; the impugned demand is set aside and the appeal is allowed on merits.

Time bar/limitation in demand of service tax - Whether the show cause notice dated 22.04.2013 raising service tax demand for 2010-11 to 2011-12 is barred by limitation - HELD THAT: - The Tribunal recorded that there had been earlier conflicting governmental clarifications and judicial decisions on liability of sub contractors to service tax and that the matter was referred to a larger Bench, producing uncertainty. In the course of discussion the Tribunal observed that, in view of the prior conflicting position, demands beyond one year could be vulnerable to limitation pleas and that penalties should be set aside in the circumstances. However, having decided the appeal on merits in favour of the appellant under the exemption notifications, the Tribunal expressly stated it was not inclined to finally adjudicate the limitation issue and left the question of time bar open. [Paras 4, 5]

The Tribunal did not finally decide the limitation point; the question of whether the demand is time barred is left open for consideration.

Final Conclusion: The Tribunal allowed the appeal on merits, holding that the works contract services rendered to GETCO in relation to transmission of electricity are exempt under Notification No. 45/2010 ST and Notification No. 11/2010 ST and setting aside the impugned demand; the question of limitation was not finally decided and is left open.

Delay in adjudication of show cause notice - Quashing of show cause notice for inordinate delay - Violation of principles of natural justice due to belated adjudication - Departmental reorganisation/GST implementation cannot, without evidence, justify prolonged inaction - Preclusive effect of earlier Supreme Court decision on the same controversy - Exercise of Article 226 writ jurisdiction to quash administrative action

Delay in adjudication of show cause notice - Quashing of show cause notice for inordinate delay - Violation of principles of natural justice due to belated adjudication - Whether the show cause notice dated 5th May 2017 should be quashed on account of prolonged delay in adjudication causing prejudice and violation of principles of natural justice. - HELD THAT: - The Court found that the impugned show cause notice issued on 5th May 2017 remained undecided for almost six years and that such protracted inaction prejudices the noticee and undermines fairness and natural justice. Reliance was placed on this Court's consistent precedents holding that inordinate delay in adjudication may justify quashing of proceedings because lengthy pendency can cause irreparable prejudice, impair preservation of evidence and abridge substantive and appellate rights. In the present case the department conducted hearings in 2017 and received detailed submissions, so the assertion that the department was non-functional throughout is unsupported. The Court concluded that relegating the petitioner to further proceedings after such negligence would be unfair and an abuse of power, warranting quashing of the show cause notice. [Paras 10, 11, 12]

The show cause notice was quashed on the ground of inordinate delay and resultant violation of principles of natural justice.

Departmental reorganisation/GST implementation cannot, without evidence, justify prolonged inaction - Delay in adjudication of show cause notice - Whether the respondents' explanation that GST-related reorganisation justified the six-year delay in adjudicating the show cause notice is acceptable. - HELD THAT: - Respondents attributed the delay to overhaul of departmental functioning due to GST implementation. The Court rejected this justification as general and unsupported by evidence, noting that the department was operational after issuance of the notice (personal hearing on 18th September 2017 and subsequent submissions), and that respondents themselves admitted oversight. The Court observed that a bald assertion of reorganisation cannot excuse negligence in adjudication and that no evidence was filed to substantiate the claim that GST implementation prevented adjudication of the petitioner's notice. [Paras 8, 10, 11]

The departmental reorganisation/GST implementation plea was rejected as an insufficient and unproven justification for the prolonged delay.

Preclusive effect of earlier Supreme Court decision on the same controversy - Exercise of Article 226 writ jurisdiction to quash administrative action - Whether, in view of the Supreme Court's decision in the petitioner's own appeal, the respondents have controverted the applicability of that decision and whether that fact affects the present adjudication. - HELD THAT: - The petitioner relied on the Supreme Court's judgment dated 7th July 2023 in Civil Appeal No. 5700 of 2019 in the petitioner's own case, which held that when bought-out items do not enter the factory and no credit is claimed, their value ought not be added to assessable value. The respondents did not rebut the petitioner's contention that the Supreme Court decision covers the issue; their affidavit touched the merits but did not controvert the applicability of that decision. Given absence of any substantive contestation of the Supreme Court's finding, and coupled with the unacceptable delay, the Court found it unfair to require the petitioner to undergo further proceedings. [Paras 6, 9, 11]

The Court accepted that the issue is covered by the Supreme Court decision and noted respondents' failure to controvert it; this contributed to the conclusion to quash the show cause notice under Article 226.

Final Conclusion: The writ petition is allowed; the show cause notice dated 5th May 2017 is quashed and set aside for inordinate delay, unsupported departmental justification for delay, and in view of the Supreme Court decision covering the controversy.

CENVAT Credit - Input - Capital goods - Retrospective operation of amendment to Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 - Remand for fresh consideration

Input - Capital goods - Cement and TOR/TMT/CTD bars used in erection, foundation or support of plant and machinery - Claim for CENVAT credit in respect of cement and steel (TOR/TMT/CTD) used for erection/installation of plant and machinery - HELD THAT: - The Court noted that the question whether cement and steel used for laying foundations or for erection/support of plant and machinery qualify as 'input' or 'capital goods' has been the subject of divergent views in the Tribunal and various High Courts. A Larger Bench of the Tribunal in Manglam Cement allowed the claim after recording a factual finding that the materials were used for laying foundation for erection of capital goods. Several High Courts have taken similar views and the department has not successfully challenged the Larger Bench decision. Having regard to these authoritative determinations and the factual nature of the question (usage to which the materials were put), the Court did not decide the factual entitlement on merits but directed that the matter be examined afresh by the Tribunal with attention to the actual usage of the cement and steel in each case. [Paras 8, 9, 10]

Matter remitted to the Tribunal to decide afresh in accordance with law after considering the usage to which cement and steel were put.

Remand for fresh consideration - Setting aside Tribunal orders - Validity of the Tribunal orders which dismissed the claims without appropriate consideration - HELD THAT: - In view of the Larger Bench decision and the existence of consistent High Court views, the Court found it appropriate to set aside the impugned Tribunal orders. The appeals were disposed of by directing remand so that the Tribunal may examine the claims on the available facts and law, rather than permitting summary dismissal without appropriate consideration of submissions and factual usage. [Paras 10, 11]

Impugned orders of the Tribunal are set aside and the matters are remitted to the Tribunal for fresh adjudication; appeals disposed of.

Final Conclusion: Impugned Tribunal orders set aside and matters remitted to the Tribunal for fresh adjudication on the question whether cement and steel used for foundations/erection qualify as 'inputs' or 'capital goods', having regard to the usage; appeals disposed of.

Clandestine manufacture and clearance - third party private records as evidence - relevancy of statements under Section 9D - failure to conduct cross examination - principles of natural justice

Clandestine manufacture and clearance - third party private records as evidence - Whether the allegation of clandestine manufacture and clearance of finished goods against the appellant could be established solely on the basis of private records of a third party and ancillary material - HELD THAT: - The Tribunal found that the revenue's case rested entirely on alleged entries in private records recovered from a third party (TFCWRL's accountant) and on two blank invoices and statements recorded during investigation. There was no independent evidence from the appellant of receipt, manufacture, sale, transportation or receipt of sale proceeds in respect of the alleged quantity. In the absence of any evidence of buyers, payments or transport of the finished goods, the third party documents and untested statements were insufficient to establish clandestine manufacture or clandestine clearance by the appellant. The adjudicating authority therefore could not sustain the demand based solely on those materials. [Paras 4, 5, 6]

Revenue failed to establish clandestine manufacture and clearance on the basis of the third party private records and related material; the demand did not survive.

Relevancy of statements under Section 9D - failure to conduct cross examination - principles of natural justice - Whether the statements recorded during investigation could be relied upon without examination of the declarants before the adjudicating authority and without permitting cross examination - HELD THAT: - The Tribunal applied the statutory scheme of Section 9D and the settled jurisprudence holding that statements recorded by investigation officers become relevant in adjudication only if one of the contingencies in Section 9D(1)(a) applies or if the person is examined as a witness before the adjudicating authority and the authority records a reasoned opinion under Section 9D(1)(b). In the present case none of the contingencies under clause (a) applied and the declarants were not examined before the adjudicating authority nor afforded opportunity for cross examination. That failure amounted to a violation of the procedure mandated by Section 9D and of the principles of natural justice, rendering the statements inadmissible and incapable of supporting the revenue's case. [Paras 4, 5, 6]

Statements recorded during investigation could not be relied upon in adjudication because the declarants were not examined before the adjudicating authority and were not made available for cross examination; reliance thereon violated Section 9D and natural justice.

Final Conclusion: The impugned demand for duty based on alleged clandestine receipt of billets and clandestine manufacture/clearance of finished goods is unsustainable; the adjudicating order is set aside and the appeals are allowed with consequential relief.

Liability under Rule 6 of Cenvat Credit Rules for trading activity - reversal of proportionate Cenvat credit attributed to common input services - recoverability of 6% of difference between sale price and purchase price - interest liability under Rule 14 for wrongly taken or utilised Cenvat credit - verification of correctness of credit reversal by Revenue

Liability under Rule 6 of Cenvat Credit Rules for trading activity - recoverability of 6% of difference between sale price and purchase price - Demand under Rule 6 for 6% of the difference between sale and purchase price in respect of traded goods - HELD THAT: - The Tribunal found that the appellant had reversed the proportionate Cenvat credit attributable to the common input service used in the trading activity. Having regard to the authorities relied upon and the settled position that reversal of proportionate credit attributed to common input services negates the basis for invoking the 6% levy, the demand under Rule 6 is held not sustainable. The Tribunal therefore set aside the impugned order insofar as it confirmed the Rule 6 demand. [Paras 4, 5]

Demand under Rule 6 set aside; Rule 6 levy not sustainable once proportionate credit for common input services has been reversed.

Interest liability under Rule 14 for wrongly taken or utilised Cenvat credit - reversal of proportionate Cenvat credit attributed to common input services - Liability to pay interest under Rule 14 for belated reversal of proportionate credit where unutilised Cenvat balance exceeded the amount to be reversed - HELD THAT: - Rule 14 contemplates recovery with interest where Cenvat credit has been taken and utilised wrongly or erroneously refunded; interest is thus linked to utilisation as well as wrongful availment. The Tribunal recorded that the appellant, although belated in reversing the proportionate credit, maintained an unutilised Cenvat credit balance during the relevant time which exceeded the reversal amount and such balance was not utilised. Applying Rule 14 as then prevailing, the Tribunal held that interest is not payable in these circumstances. [Paras 4]

No interest payable under Rule 14 where unutilised Cenvat balance during the relevant period exceeded the reversal amount.

Verification of correctness of credit reversal by Revenue - Verification of correctness of the reversal of proportionate credit - HELD THAT: - Although the Tribunal found the Rule 6 demand unsustainable and accepted that reversal had been made, it noted that the correctness of the reversal (quantification and compliance) remains subject to verification by the Revenue. The Tribunal therefore permitted the Revenue to verify the correctness of the reversal without adjudicating further on that factual/quantitative aspect. [Paras 4]

Revenue authorised to verify correctness of the appellant's reversal of proportionate Cenvat credit.

Final Conclusion: The appeal is allowed: the Rule 6 demand is set aside as unsustainable once proportionate credit for common input services was reversed, interest under Rule 14 is not payable where the assessee maintained an unutilised Cenvat balance exceeding the reversal amount during the relevant period (January 2016 to February 2017), and the Revenue is directed to verify the correctness of the credit reversal.

Refund of allegedly overpaid interest - Sabka Vishwas (Legacy Dispute Resolution) Scheme settlement and effect on refunds - payment under protest - unjust enrichment - settlement of confirmed demand under SVLDRS not a basis for refund of legally paid dues

Sabka Vishwas (Legacy Dispute Resolution) Scheme settlement and effect on refunds - refund of allegedly overpaid interest - payment under protest - Whether the appellant is entitled to refund of interest paid where the demand was confirmed and thereafter settled under the SVLDRS scheme with issuance of a discharge certificate showing zero payable amount. - HELD THAT: - The Tribunal found that the demand in question related to interest which had been confirmed by the original Adjudicating Authority and subsequently settled under the SVLDRS. The Court held that SVLDRS is a scheme intended to recover unpaid dues and is not a mechanism to refund dues that were lawfully paid. Because the appellant had in fact paid the interest and the confirmed demand was settled under SVLDRS, the discharge certificate under the scheme does not operate to set aside the confirmed demand so as to give rise to a refund. The settlement under SVLDRS therefore does not create a right to refund of an amount that was the subject of a confirmed demand and had been paid. [Paras 4]

Refund claim dismissed insofar as it rests on settlement under SVLDRS and the discharge certificate; no refund admissible.

Unjust enrichment - refund of allegedly overpaid interest - Whether the authorities could reject the refund claim on the ground of unjust enrichment prior to holding that refund was admissible on merits. - HELD THAT: - The Tribunal observed that the question of unjust enrichment is only relevant if the authority first concludes that a refund is admissible on merits. It is impermissible to reject a refund claim on the ground of unjust enrichment at a stage where the authority has already held that refund is not admissible. The proper exercise is: decide admissibility of refund on merits; if refund is allowed, then examine whether the burden was passed on and, if necessary, direct transfer to the Consumer Welfare Fund. The impugned order erred in treating unjust enrichment as a freestanding ground to deny the refund when the authorities had concluded refund was not admissible. [Paras 2, 4]

Rejection of the refund claim on unjust enrichment was inappropriate where refund was otherwise held not admissible; unjust enrichment can only be considered after admission of a refund claim.

Final Conclusion: Appeal dismissed; refund claim denied because the interest demand had been confirmed and settled under SVLDRS, which does not entitle the appellant to a refund of amounts lawfully paid, and the invocation of unjust enrichment to reject the claim was procedurally misplaced.

Scope of the expression 'products' in paragraph 6.8 of the Foreign Trade Policy - interpretation of exemption notification issued under section 5A of the Central Excise Act - competence and exclusive role of the Development Commissioner in granting LoP approvals - cross jurisdictional difficulty between 'goods' (Customs/Excise) and 'products' (DGFT) - strict interpretation of exemptions - remand for fresh decision with reference to the competent authority

Scope of the expression 'products' in paragraph 6.8 of the Foreign Trade Policy - cross jurisdictional difficulty between 'goods' (Customs/Excise) and 'products' (DGFT) - competence and exclusive role of the Development Commissioner in granting LoP approvals - interpretation of exemption notification issued under section 5A of the Central Excise Act - Whether the adjudicating authority correctly interpreted paragraph 6.8 of the FTP and applied the LoP approval without referring to the Development Commissioner, and whether the order of recovery should be sustained or reconsidered. - HELD THAT: - The Tribunal found that the adjudicating authority approached the matter from a 'goods' centric Customs/Excise perspective and transposed that approach onto the FTP term 'products' without authoritative guidance. The Tribunal noted that paragraph 6.8's operation depends on the meaning of 'products' as used in the Letter of Permission and that the Development Commissioner, who grants and fixes entitlements under the LoP, is the appropriate authority to resolve such classification and entitlement questions. Reliance on the Tribunal's earlier observation in Ginni International Ltd was held to support the proposition that where permission under the FT P/notification is accorded by an authority outside the revenue adjudicating forum, the revenue should seek clarification from that authority rather than disallow clearance and demand duty. Given the absence of any consideration or reference to the Development Commissioner in the impugned order and the cross jurisdictional character of the issue, the Tribunal concluded that the matter required fresh adjudication after obtaining authoritative clarification from the Development Commissioner. [Paras 8, 9, 10]

Impugned order set aside and matter remanded to the adjudicating authority for fresh decision after reference to the Development Commissioner and reconsideration of entitlement under paragraph 6.8 of the FTP.

Final Conclusion: The appellate order sets aside the adjudicating authority's recovery and penalty order and remands the matter for fresh adjudication, directing that the Development Commissioner's approval and the proper construction of 'products' under paragraph 6.8 of the FTP be sought and considered before any demand is confirmed.

Refund of pre-deposit - Claim for interest on pre-deposit - Verification of pre-deposit payments - Requirement of a speaking order for refund verification - Burden of proof for deposit being related to the disputed demand - Section 11B refund procedure - Section 35FF interest on pre-deposit

Refund of pre-deposit - Verification of pre-deposit payments - Burden of proof for deposit being related to the disputed demand - Requirement of a speaking order for refund verification - Section 11B refund procedure - Whether the claim for refund of Rs.24,00,000 made as pre-deposit during investigation is admissible and, if not decided, the appropriate course of action. - HELD THAT: - The Tribunal found documentary evidence (TR-6 challans, letters to the Department, CA certificate and ledger entries) indicating payments totalling Rs.24,00,000 during the investigation, but also observed that those amounts do not appear in the show-cause notices or adjudication orders. The jurisdictional Range Officer had verified and certified the sanctioned refund of 25% of duty; however, no comparable verification was done in respect of the separate claim for Rs.24,00,000. Given the Department's duty to identify and record the specific basis on which a pre-deposit is treated as relating to a particular demand, and because the lower authorities had not undertaken a focused, documented verification or passed a reasoned/speaking order on that separate claim, the Tribunal held that the matter requires fresh fact-finding. Accordingly, the claim for refund of Rs.24,00,000 was not finally adjudicated on merits by the Tribunal but remitted to the original authority for de novo verification and a speaking order, with opportunity for personal hearing and cross-verification of documents. [Paras 7, 9]

Claim for refund of Rs.24,00,000 remanded to the original authority for de novo verification and passing of a speaking order after affording the appellant reasonable opportunity of personal hearing.

Claim for interest on pre-deposit - Section 35FF interest on pre-deposit - Section 11B refund procedure - Whether interest is payable on the sanctioned refund amount for the period from deposit till refund. - HELD THAT: - The Tribunal examined the time taken by the authorities and noted that the sanctioned refund of Rs.2,50,61,298/- was granted within the three-month period prescribed under the refund provisions (as applied by the authorities). In that factual context the Tribunal found no infirmity in the Commissioner (Appeals) upholding the denial of interest on the sanctioned refund amount. The Tribunal therefore did not disturb the decision rejecting interest on the refunded portion. [Paras 8]

Denial of interest on the sanctioned refund of Rs.2,50,61,298/- is upheld.

Final Conclusion: The appeal is modified only to the extent that the appellant's separate claim for refund of Rs.24,00,000 is remitted to the original authority for de novo verification and a speaking order after affording hearing; the sanction of refund of Rs.2,50,61,298/- stands and the rejection of interest on that sanctioned refund is upheld.

Maintainability of writ petition under Article 226 where statutory appellate remedy is available - availability of efficacious statutory remedy (Value Added Tax Appeal - VATA) - doctrine that writ will not lie in presence of alternative remedy - objection of limitation as a defence to be raised before the first appellate authority - power of High Court under Section 53(6)(a) and (6)(b) of the M.P. VAT Act to determine issues not decided or wrongly decided by the Appellate Board

Maintainability of writ petition under Article 226 where statutory appellate remedy is available - availability of efficacious statutory remedy (Value Added Tax Appeal - VATA) - doctrine that writ will not lie in presence of alternative remedy - Whether the writ petition under Article 226 is maintainable when the petitioner has an alternative statutory remedy in the form of VATA against the orders passed under the M.P. VAT Act. - HELD THAT: - The Court held that the writ petition was not maintainable because an efficacious statutory remedy in the form of Value Added Tax Appeal (VATA) was available to the petitioner against the impugned orders. Relying on the principle that a writ will not lie where an adequate alternative remedy exists, and having regard to the fact that the petitioner had availed the first appeal route before the appellate authority, the Court observed that the petitioner could prefer VATA before the High Court. Although the petitioner contended that it was precluded from raising limitation before the appellate forum because that point was not raised earlier, the availability of the statutory appeal itself made the writ an inappropriate remedy. The Court further noted the powers conferred on the High Court under Section 53(6)(a) and (6)(b) of the M.P. VAT Act to determine issues not decided or wrongly decided by the Appellate Board, underscoring that statutory appellate channels are the proper forum for such grievances. The settled principle in Hindustan Coca Cola Beverage (P) Ltd. was applied to reaffirm that where an efficacious remedy exists, discretionary relief under Article 226 is ordinarily refused. [Paras 11, 12, 13]

Writ petition dismissed as not maintainable in view of availability of efficacious statutory remedy (VATA).

Final Conclusion: The petition under Article 226 was dismissed on the ground of non maintainability because the petitioner had recourse to the statutory appellate remedy (VATA); the High Court observed its power under Section 53(6)(a) & (6)(b) but declined to exercise writ jurisdiction in light of the alternative remedy.