TaxTMI Updates e-Newsletter
Sep 20,2024

Summary order. Exemption from filing certified copy and official translation allowed; delay condoned; leave granted.

Appeal filed electronically under Section 107 - Rule 108 of CGST/UPGST Rules - requirement of self certified copy - limitation for filing appeal vis a vis procedural requirement of certified copy - technical defect doctrine - non submission of certified copy - remand for de novo adjudication and passing of reasoned order

Appeal filed electronically under Section 107 - Rule 108 of CGST/UPGST Rules - requirement of self certified copy - technical defect doctrine - non submission of certified copy - Whether an appeal electronically filed within the period prescribed can be dismissed as time barred solely because the self certified copy of the impugned order was not filed within the seven day period prescribed by the proviso to Rule 108. - HELD THAT: - The Court held that when an appeal is filed electronically on the common portal in FORM GST APL 01 within the statutory period under Section 107, the provisos to Rule 108(3) which prescribe filing of a self certified copy within seven days apply to cases where the decision is not uploaded on the portal. Following and applying the ratio in Visible Alpha Solutions India Private Limited and subsequent High Court decisions cited therein, the Court treated non submission of the certified copy within seven days as a procedural/technical defect which, in circumstances where the appeal was filed electronically within time and the order was available on the portal, should not justify dismissal of the appeal as time barred. The Court therefore concluded that dismissal solely on that ground was not sustainable and the question is no longer res integra. [Paras 9, 10]

Impugned dismissal of the appeal as time barred for delayed filing of the self certified copy quashed; non filing within seven days regarded as a technical defect not warranting dismissal where the appeal was electronically filed in time.

Remand for de novo adjudication and passing of reasoned order - What relief is to be granted consequent to quashing the impugned order? - HELD THAT: - In view of the conclusion that the appeal could not be dismissed solely on account of non filing of the certified copy within the seven day period, the Court directed that the matter be remitted to the appellate authority for fresh consideration. The authority is to decide the appeal afresh after hearing the parties and passing a reasoned and speaking order. The Court specified a timeline for completion of the exercise to ensure expeditious disposal. [Paras 10, 11]

Writ petition allowed; impugned order quashed and matter remanded to the authority to decide afresh after hearing stakeholders and passing a reasoned order within two months from production of certified copy of the order.

Final Conclusion: The High Court quashed the impugned order dismissing the appeal as time barred for delayed filing of the self certified copy under Rule 108, holding that non submission of the certified copy within seven days is a procedural/technical defect where the appeal was electronically filed in time; the matter is remanded for de novo hearing and a reasoned order within the stipulated time.

Provisional release of imported goods - deposit of enhanced duty as condition for release - quantification of duty by Customs within stipulated time - continuation of adjudication proceedings notwithstanding provisional release - consideration of waiver of demurrage charges

Provisional release of imported goods - deposit of enhanced duty as condition for release - Petitions allowed to secure provisional release of the imported second hand digital multifunction printing and copying machines on payment/deposit of the enhanced duty amount. - HELD THAT: - The Court directed that the petitioners may secure provisional release of the goods subject to payment or deposit of the enhanced duty amount. The order adopted in the earlier batch provided that on receipt of the enhanced duty amount paid by the petitioners, the goods shall be released within three weeks. This direction conditions provisional release upon the payment/deposit of the quantified enhanced duty and applies to the present writ petitions.

Goods to be released provisionally upon payment/deposit of the enhanced duty, release to occur within three weeks of payment.

Quantification of duty by Customs within stipulated time - Customs directed to quantify the enhanced duty forthwith within one week from receipt of a copy of the order to enable payment for provisional release. - HELD THAT: - The Court ordered that quantification of the duty payable for the purpose of provisional release shall be undertaken by the Customs authority within one week from receipt of a copy of the order. Upon receipt of such quantification, the petitioners are to make payment immediately and on receipt in entirety the goods shall be released within the outer limit of three weeks as directed.

Customs to quantify duty within one week; petitioners to pay immediately; goods released within three weeks after payment.

Continuation of adjudication proceedings notwithstanding provisional release - Provisional release does not preclude Customs from proceeding with adjudication or other statutory proceedings. - HELD THAT: - The Court clarified that the direction for provisional release is without prejudice to the Customs Department's statutory powers to continue with adjudication and further proceedings in accordance with law. The order explicitly states it will not stand in the way of the Department carrying out further proceedings including adjudication.

Customs may proceed with adjudication and other lawful proceedings despite provisional release.

Consideration of waiver of demurrage charges - Any application by petitioners for waiver of demurrage charges is to be considered and decided objectively by the Customs authorities. - HELD THAT: - The Court noted an earlier interim order directed that demurrage charges till date be considered for waiver. It directed that if petitioners file applications seeking waiver of demurrage charges, those applications shall be considered and decided by the respondents objectively, without prejudice to statutory proceedings.

Customs to consider and decide any application for waiver of demurrage charges on merits.

Final Conclusion: Writ petitions disposed of by directing provisional release of the imported machines on payment/deposit of quantified enhanced duty (quantification within one week; release within three weeks after payment), while permitting Customs to continue adjudication and requiring objective consideration of any demurrage waiver applications; no order as to costs.

Review under Order 47 Rule 1 CPC - Mistake or error apparent on the face of the record - Discovery of new and important matter or evidence - Review not to be an appeal in disguise - Writ jurisdiction under Article 226 - Premature interference in tax proceedings

Review under Order 47 Rule 1 CPC - Mistake or error apparent on the face of the record - Discovery of new and important matter or evidence - Review not to be an appeal in disguise - Maintainability of the review petition filed against dismissal of the writ petition under Order 47 Rule 1 CPC and Section 114 CPC. - HELD THAT: - The Court held that the review jurisdiction is confined to the grounds enumerated in Order 47 Rule 1 CPC - discovery of new and important matter or evidence not previously available despite due diligence, mistake or error apparent on the face of the record, or any other sufficient reason analogous to those grounds. A review cannot be used to re-argue or re-appreciate evidence or to substitute a different view; mere possibility of an alternative view does not justify review. The petitioner failed to show discovery of new material or an error that is self-evident on the record; the grievances raised in the review amounted to re-argument of points already considered. Reliance on authorities explaining that an error warranting review must be patent and not one requiring elaborate reasoning was accepted. Consequently, none of the statutory grounds for review were made out and review was not maintainable.

Review dismissed for want of any ground under Order 47 Rule 1 CPC and Section 114 CPC.

Writ jurisdiction under Article 226 - Premature interference in tax proceedings - Review not to be an appeal in disguise - Permissibility of raising a new plea of lack of jurisdiction in the review petition and the propriety of interfering with a reopening notice at a premature stage. - HELD THAT: - The Court noted that the petitioner did not raise the jurisdictional challenge in the original writ petition and sought to raise it for the first time in review. The High Court had earlier held that it would not interfere with preliminary or premature tax proceedings under Article 226 when statutory remedies remain available and no final order has been passed. The review petition could not be used to introduce new grounds that would re-open concluded consideration or to argue de novo; the proposition that writ courts should not ordinarily entertain challenges to the veracity or genuineness of material forming the Assessing Officer's opinion at a premature stage was affirmed. Thus, the attempted new plea of lack of jurisdiction in review was impermissible and did not constitute a ground for review.

New jurisdictional plea raised in review rejected; no interference with premature tax proceedings.

Final Conclusion: The review petition was dismissed for failure to establish any ground under Order 47 Rule 1 CPC/Section 114 CPC: no new matter or evidence was shown, no mistake apparent on the face of the record was demonstrated, and the review impermissibly sought to re-open or re-argue matters already adjudicated and to raise a jurisdictional plea for the first time; earlier decision declining premature interference with the reopening proceedings was affirmed.

Capital expenditure versus revenue expenditure - proximate nexus test for capitalisation - enduring benefit as criterion for capitalisation - deduction under Section 35D for IPO-related expenditure - no distinction between direct and indirect IPO expenses for revenue deduction

Capital expenditure versus revenue expenditure - proximate nexus test for capitalisation - enduring benefit as criterion for capitalisation - Whether consultancy and professional fees of Rs.75,70,000 paid to identify and secure private equity investors are capital in nature and not allowable as revenue expenditure. - HELD THAT: - The Court upheld the findings of the authorities below that the services rendered by the consultant were directed to securing a long term capital infusion into the company and conferred enduring benefits by enhancing the company's capital base. Having regard to the nature of the services (preparation of investor presentations and information memorandum, negotiation and coordination leading to execution of shareholder agreements and facilitation of substantial equity investment), the Court applied the proximate nexus/enduring benefit test and held that the expenditure was capital in character. Reliance placed on Brooke Bond India Ltd. and the line of authority treating similar outlays as capital was accepted, and no intervention was warranted. [Paras 3, 4, 9]

The consultancy and professional fees were held to be capital expenditure and not allowable as revenue deduction; question answered against the assessee.

Deduction under Section 35D for IPO-related expenditure - no distinction between direct and indirect IPO expenses for revenue deduction - capital expenditure versus revenue expenditure - Whether indirect expenses incurred in connection with the initial public offer (such as advertising, travelling, postage, market research) are allowable as revenue expenditure notwithstanding the statutory scheme under Section 35D. - HELD THAT: - The Court held that the impugned expenses related to an operation that resulted in a capital receipt/asset and therefore fell within the capital field. Section 35D provides for amortisation of certain specified direct expenses incurred in connection with a public issue; the Court rejected the appellant's contention that indirect expenses could nevertheless be claimed as revenue expenditure under Section 37. The classification of expenses as direct or indirect does not alter their capital character where they are incurred in relation to obtaining a capital asset/receipt. Having regard to this statutory scheme and the admitted fact that direct IPO expenses had already been allowed under Section 35D, the Court found no basis to permit separate revenue deduction of the remaining indirect expenses. [Paras 5, 9]

The claim for deduction of the indirect IPO-related expenses was disallowed; question answered against the assessee.

Capital expenditure versus revenue expenditure - treatment of employer's PF/ESI contributions under Section 43B - Whether employees' contribution to PF and ESI paid before the due date of filing the return were deductible (Question (c)). - HELD THAT: - The Court recorded that Question (c) was covered against the assessee by earlier precedent (cited in the judgment) and accordingly answered against the assessee. The appellate outcome on this point follows the cited authority, and the Court did not reopen that question on merits. [Paras 2, 10]

Question (c) answered against the assessee in favour of the revenue.

Final Conclusion: The appeal was dismissed insofar as Questions (a), (b), (c) and (d) are concerned: consultancy fees were held to be capital expenditure; indirect IPO expenses were disallowed as revenue deductions in view of Section 35D and the capital character of the outlays; Question (c) stood decided against the assessee by reference to precedent. Questions (e) and (f) were not answered as they no longer arose for consideration.

Distinction between capital and revenue expenditure - right to use trademark versus acquisition/ownership of trademark - amortisation of intangible asset leased for a limited period - application of depreciation under section 32 to intangible assets - written down value concept under section 43(6) - rule of consistency - revenue expenditure test under section 37

Right to use trademark versus acquisition/ownership of trademark - distinction between capital and revenue expenditure - amortisation of intangible asset leased for a limited period - application of depreciation under section 32 to intangible assets - Whether expenditure paid for a non exclusive, time limited (36 months) right to use trademarks was revenue expenditure and deductible by amortisation over three years rather than exigible to depreciation treatment under Section 32. - HELD THAT: - The court found the factual matrix undisputed: the assessee had only a contractual right to use the trademarks for 36 months. Reliance by the authorities on Sections 32(1) and 43(6) was misplaced because those provisions presuppose ownership or acquisition of the asset; they are therefore ex facie inapplicable to a limited contractual right to use. Applying the precedent that a payment for the right to use goodwill/trademark for a limited period constitutes revenue expenditure, the court held that the payment was properly amortised over the three year tenure and was not to be compulsorily brought into the block of assets for depreciation under Section 32. The tribunal's and revenue authorities' characterization to the contrary was unsustainable. [Paras 19, 23]

The expenditure for the limited (36 month) right to use the trademarks is revenue expenditure and the claim for amortisation over three years is allowable; the authorities' reliance on Sections 32 and 43(6) is rejected.

Rule of consistency - distinction between capital and revenue expenditure - revenue expenditure test under section 37 - Whether the rule of consistency barred the Revenue from denying the same deduction in AYs 2005 06 and 2006 07 when identical claims had been accepted in AYs 2003 04 and 2004 05. - HELD THAT: - The court rejected the submission that earlier acceptance of the claim estopped the Revenue from examining its correctness in subsequent years. The Commissioner correctly observed that an earlier erroneous allowance does not perpetually bind the Revenue; the assessing authority may rectify the earlier treatment and apply the correct legal characterisation. Thus the 'rule of consistency' could not salvage the tribunal's view where the earlier acceptance was not a legally sustainable view. [Paras 16, 17, 23]

The rule of consistency does not preclude the Revenue from disallowing the earlier mode of allowance when it is legally incorrect; nevertheless, on the facts the court held the payment to be revenue in nature and allowable as amortisation.

Revenue expenditure test under section 37 - distinction between capital and revenue expenditure - Whether deduction under Section 80JJAA was rightly disallowed by Revenue on the ground of employment for less than 300 days (substantial question of law No. iii was raised in relation to allowance under Section 80JJAA for permanent employees). - HELD THAT: - The court accepted the assessee's reliance on a coordinate bench decision (Texas Instruments India (P) Ltd.) and the revenue did not dispute applicability. Consequently, the substantial question relating to allowance under Section 80JJAA in respect of permanent employees employed for periods exceeding 300 days was answered in favour of the assessee in line with the cited precedent. [Paras 24, 25, 26]

Substantial question No. (iii) is answered in favour of the assessee and against the Revenue.

Final Conclusion: The appeal is allowed. The Tribunal's order dated 8.9.2016 and the orders of the authorities are set aside insofar as they relate to the substantial questions answered in favour of the assessee; the payments for the limited right to use trademarks are held to be revenue expenditure deductible by amortisation over the contractual period, and the Section 80JJAA issue is decided for the assessee.

Deduction under Section 10B - reopening of assessment - third proviso to Section 147 - bar on reassessment where matter is the subject matter of any appeal, reference or revision - reason to believe - assessing officer's jurisdictional preconditions for reassessment - new material discovered during pendency of appeal - change of opinion

Deduction under Section 10B - third proviso to Section 147 - bar on reassessment where matter is the subject matter of any appeal, reference or revision - reopening of assessment - Validity of reopening assessment for AY 2009-10 to revisit denial of deduction under Section 10B which was the subject matter of appeals before the Tribunal and this Court - HELD THAT: - The Tribunal had adjudicated and allowed the petitioner's claim for deduction under Section 10B after detailed consideration (including a site visit) and this Court admitted the Revenue's tax appeal concerning that claim. Fresh survey material discovered during the pendency of the tax appeal was sought to be relied upon to reopen the assessment. The third proviso to Section 147 bars reassessment of income "involving matters which are the subject matters of any appeal, reference or revision." Allowing reassessment on the same subject matter while the appellate proceedings remained pending (and thereafter, after this Court upheld the Tribunal) would result in the Assessing Officer effectively sitting in appeal over orders of the Tribunal and this Court. Consequently, the assumption of jurisdiction to reopen the assessment insofar as it sought to re-open the question whether the petitioner was entitled to deduction under Section 10B was without jurisdiction and unsustainable. [Paras 36, 37, 38, 40, 41]

Reopening of assessment for AY 2009-10 insofar as it sought to revisit the Section 10B deduction which was the subject matter of appeal is quashed as barred by the third proviso to Section 147.

New material discovered during pendency of appeal - reason to believe - assessing officer's jurisdictional preconditions for reassessment - reopening of assessment - Whether reopening on grounds of alleged under-invoicing and illegal mining (based on survey material) justified reassessment - HELD THAT: - The record showed prior consideration of the allegations of under-invoicing and illegality of mining: the CIT(A) had directed consideration of the SFIO report, the Assessing Officer later recorded there was no basis for under-invoicing in view of the SFIO supplementary report, and this Court has dealt with the issue of illegality of mining in earlier decisions. The Court found that insofar as the reopening relied upon these circumstances, such grounds did not sustain reassessment because they had been previously considered and in some instances judicially held not to furnish reason to believe. Thus those constituent grounds did not provide fresh, independent jurisdictional basis to reopen the assessment in the present case. [Paras 34, 35, 38]

Reopening of assessment insofar as it was predicated on alleged under-invoicing and illegal mining (as grounds for escapement) is not sustainable and does not furnish jurisdiction to reassess.

Final Conclusion: Writ petition allowed. The notice under Section 148 dated 16.07.2014 and the order dated 06.02.2015 disposing of objections are quashed and set aside insofar as they seek reassessment of AY 2009-10 on the issues held to be the subject matter of appeal and on the other untenable grounds; no costs.

Applicability of Section 258 Cr.P.C. to private complaint - Discharge application under Cr.P.C. - Liberty to approach trial court for filing discharge - Restoration of petition for further consideration

Applicability of Section 258 Cr.P.C. to private complaint - Discharge application under Cr.P.C. - Order granting liberty to the applicants to approach the Trial Court to file a discharge application was recalled/varied insofar as it proceeded on the premise that Section 258 Cr.P.C. applied to the complaint. - HELD THAT: - The Court accepted the applicants' submission that the material before the Magistrate constituted a complaint under Section 200 Cr.P.C. filed by an officer of the Income Tax Department and was not a chargesheet. On that basis, and following the decision of this Court in Unique Trading Company (supra), the Court held that the provisions of Section 258 Cr.P.C. do not apply to such a private complaint and therefore the earlier direction granting liberty to file a discharge application was inappropriate. For this reason the order dated 03.07.2024 required recall/variation.

Order dated 03.07.2024 recalled/varied to the extent it granted liberty to approach the Trial Court to file a discharge application premised on applicability of Section 258 Cr.P.C.

Restoration of petition for further consideration - Liberty to approach trial court for filing discharge - WPCR No. 45 of 2024 was restored for further consideration by the High Court and listed for hearing on a specified date. - HELD THAT: - Having recalled/varied the earlier disposal, the Court restored WPCR No. 45/2024 for further consideration and directed procedural steps to facilitate hearing. Notice to the Income Tax Department in the earlier proceeding was held to have been waived for present purposes; counsel for the applicants undertook to furnish copies of the petition and documents to the Department. The matter was posted for further consideration on the specified date.

WPCR No. 45/2024 restored and posted for further consideration; notice waived and applicants to supply copies to the respondent.

Final Conclusion: Review application allowed to the limited extent of recalling/varying the earlier order that granted liberty to seek discharge on the basis that Section 258 Cr.P.C. applied; WPCR No. 45/2024 restored for further consideration and listed for hearing, with procedural directions.

Compounding of offences under Section 279(2) of the Income Tax Act, 1961 - validity of compounding guidelines imposing limitation periods - statutory silence cannot be supplemented by guideline-imposed limitation - rejection of compounding application on ground of inordinate delay

Compounding of offences under Section 279(2) of the Income Tax Act, 1961 - validity of compounding guidelines imposing limitation periods - rejection of compounding application on ground of inordinate delay - The impugned order declining the petitioner's compounding application solely on the basis of the Central Board of Direct Taxes' Compounding Guideline dated 16 September 2022 is unsustainable. - HELD THAT: - The Court held that Section 279(2) does not prescribe any time limit for filing or consideration of an application for compounding. The Compounding Guideline, by prescribing time frames and treating prior filing of a complaint within a specified period as a ground to reject applications, travels beyond the statutory provision and erects a condition not contemplated by the Act. Relying on the reasoning in Vikram Singh (Division Bench), the Court emphasised that grounds enumerated in departmental guidelines are discretionary considerations and cannot be conflated with a statutory limitation; consequently, an application for compounding must be considered on its merits even if there has been delay, unless a permissible statutory or guideline-ground otherwise validly applies. Because the impugned order rejected the application solely on the impermissible basis of inordinate delay under the guideline, it did not satisfy the criteria for valid rejection and could not be sustained.

Impugned order set aside and rejection held unsustainable.

Remand for fresh consideration by Chief Commissioner - compounding application to be reconsidered afresh - The matter is remanded to the Chief Commissioner of Income Tax (TDS) for fresh consideration of the compounding application. - HELD THAT: - Having set aside the impugned order, the Court directed that the Chief Commissioner shall consider the petitioner's compounding application afresh, bearing in mind the observations that Section 279(2) does not prescribe time limits and that guideline-imposed limitation cannot validly supplant the statute. The remand requires reconsideration on merits without relying exclusively on the guideline ground which formed the basis of the original rejection. All other rights and contentions of the parties were left open for determination by the authority on fresh consideration.

Matter remanded for fresh consideration by the Chief Commissioner of Income Tax (TDS).

Final Conclusion: Writ petition allowed; order dated 18 January 2024 set aside and the compounding application remanded to the Chief Commissioner of Income Tax (TDS) for fresh consideration in light of the Court's observations that Section 279(2) does not prescribe limitation periods and that guideline-imposed time bars cannot supplant the statute; other contentions left open.

Investment in shares of an Indian subsidiary is a capital account transaction - escapement of income - invalidity of notices under Section 148/148A where only capital account transaction is alleged - reliance on preceding judicial decision as determinative of tax characterisation

Investment in shares of an Indian subsidiary is a capital account transaction - escapement of income - invalidity of notices under Section 148/148A where only capital account transaction is alleged - Whether allegations that the petitioner's equity investment in its Indian subsidiary constituted 'income' which had escaped assessment were valid so as to justify issuance of notices and initiation of reassessment proceedings under Sections 148A(b) and 148 of the Income Tax Act, 1961. - HELD THAT: - The Court held that the petitioner's equity infusion into its Indian subsidiary is a capital account transaction and does not give rise to 'income' for the purposes of escapement of income. The Court applied the principle articulated in Angelantoni Test Technologies (as recorded in the judgment) and the line of authority accepting that investment in shares of an Indian subsidiary cannot be treated as income. In view of that settled legal position, the fundamental premise for forming a reason to believe that income had escaped assessment - based solely on the investment - was without basis. Consequently, the impugned notices and the order issued under Sections 148A(b) and 148 were unsustainable. [Paras 3, 4, 5]

The notices dated 27.03.2023 and 01.05.2023 and the order dated 01.05.2023 under Sections 148A(b) and 148 were quashed and the writ petition allowed.

Final Conclusion: Writ petition allowed; reassessment notices and the impugned order issued under Sections 148A(b) and 148 quashed, as the investment in the Indian subsidiary is a capital account transaction and cannot amount to escapement of income.

Seizure and custody of cash - Requisition and transfer of seized property under Section 132A of the Income Tax Act - Availability of remedy before requisitioning authority (Income Tax Department) for release of seized property - Show cause notice and adjudication under Section 74(1) of the CGST/SGST Act - Consideration of reply to show cause notice before adjudication

Seizure and custody of cash - Requisition and transfer of seized property under Section 132A of the Income Tax Act - Availability of remedy before requisitioning authority (Income Tax Department) for release of seized property - Whether the High Court should order return of the cash seized by the respondents or direct the Income Tax Department to release the same - HELD THAT: - The State's statement records that the cash seized from the petitioners was kept in the District Treasury and subsequently handed over to the Income Tax Department pursuant to a requisition under Section 132A of the Income Tax Act. In view of that transfer, the court held that the appropriate remedy for securing release of the seized cash lies before the Income Tax Department which requisitioned and took custody of the cash. The writ petitions cannot be used to bypass the procedure before the requisitioning authority; petitioners are therefore directed to approach the Income Tax Department for release. [Paras 2, 4]

Petitions do not succeed insofar as they seek return of the seized cash; petitioners to pursue release before the Income Tax Department.

Show cause notice and adjudication under Section 74(1) of the CGST/SGST Act - Consideration of reply to show cause notice before adjudication - Whether the petitioners should be permitted further time to file reply to the adjudication notice issued under Section 74(1) of the CGST/SGST Act and how the adjudication should proceed - HELD THAT: - The adjudication notice (show cause notice in Form GST DRC-01A) issued on 05.03.2024 gave one month to reply, and no reply had been filed at the time of these petitions. The petitioners' counsel sought additional time to file the reply. The court granted a brief extension and directed that if the petitioners file their reply within the extended time the reply shall be considered, and that the adjudication proceedings shall thereafter be undertaken in accordance with law. This leaves the merits of the adjudication to be determined by the adjudicating authority upon consideration of the reply and applicable law. [Paras 2, 3, 4]

Petitioners granted one week further time to file reply (until 12.04.2024); on filing, the reply shall be considered and adjudication shall proceed in accordance with law.

Final Conclusion: Writ petitions disposed: no order for return of cash which has been handed over to the Income Tax Department-petitioners to seek release from that Department; petitioners granted one week (until 12.04.2024) to file reply to the Section 74(1) adjudication notice, which shall be considered and adjudication shall proceed as per law.

Bogus purchases - reopening of assessment and notice under Section 147 and Section 148 of the Income tax Act, 1961 - disallowance limited to profit element of bogus purchases - estimation of gross profit as a question of fact - evidentiary sufficiency of books, bills, bank payments and tax audit report

Bogus purchases - evidentiary sufficiency of books, bills, bank payments and tax audit report - Whether the Assessing Officer was justified in disallowing the entire expenditure on the ground of bogus purchases - HELD THAT: - The Court held that whether the purchases or suppliers were bogus is essentially a question of fact. The assessee had produced a tax audit report, profit and loss account, balance sheet, purchase bills, cheque payments to suppliers, ledger accounts, PAN details, bank statements and purchase confirmations. The AO rejected that evidence and made independent inquiries, but did not dispute the sales effected by the assessee. In these circumstances the appellate authorities were justified in treating the matter as one of factual determination and moderating the AO's entire disallowance. The Court found no infirmity in the ITAT's affirmation of the appellate conclusion and declined to interfere with the factual finding. [Paras 6, 7]

The AO was not justified in disallowing the entire expenditure; the factual finding of the authorities below was affirmed.

Disallowance limited to profit element of bogus purchases - estimation of gross profit as a question of fact - Whether the CIT(A) and ITAT were justified in restricting the disallowance to the profit element (estimated at 12.5%) despite suppliers being alleged non existent and absence of proof of delivery - HELD THAT: - The Court reiterated the established principle that where sales are not disputed, only the profit element embedded in alleged bogus purchases can be treated as income. The CIT(A) estimated gross profit at 12.5% after deducting VAT and other expenses and restricted the addition accordingly. The Court treated the correctness of that estimate as a question of fact, which the ITAT accepted. Given that the sales were not controverted and the appellate authorities gave reasoned findings on the extent of addition, the Court declined to disturb the estimate and the limited disallowance. [Paras 6]

The restriction of disallowance to the profit element (12.5% estimate) was upheld as a factual conclusion; no interference.

Final Conclusion: Appeal dismissed; the factual findings of the CIT(A) and ITAT limiting the addition to the profit element of the alleged bogus purchases (estimated at 12.5%) are sustained and the Assessing Officer's disallowance of the entire expenditure is not interfered with.

Non-duplication of tax incidence where undisclosed foreign income is assessed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of tax under the Income-tax Act - Administrative instruction to prevent double addition of the same undisclosed income in different statutory proceedings - Power of the Income Tax Settlement Commission to proceed notwithstanding pendency of writ proceedings

Non-duplication of tax incidence where undisclosed foreign income is assessed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of tax under the Income-tax Act - Administrative instruction to prevent double addition of the same undisclosed income in different statutory proceedings - Instruction dated 7 February 2022 records that if the impugned amount is included as undisclosed income under the Black Money Act, the same amount will not be added again in proceedings under the Income-tax Act. - HELD THAT: - The Court recorded the parties' submissions concerning the overlapping reach of proceedings under the Black Money (Undisclosed Foreign Income and Assets) Act and the Income-tax Act. The respondents placed on record an administrative instruction dated 7 February 2022 which takes the stand that where the amount is treated as undisclosed income under the Black Money Act, that same amount will not be subjected to a subsequent addition under the Income-tax Act. The Court noted this clarification as the operative position communicated by the investigating authority. The order does not undertake a detailed legal adjudication of the separate statutory powers of the authorities but records and accepts the stated administrative position preventing double addition of the same sum.

The instruction that the amount, if included under the Black Money Act, shall not be added again under the Income-tax Act is recorded and accepted as the operative position between the parties.

Power of the Income Tax Settlement Commission to proceed notwithstanding pendency of writ proceedings - Pendency of the writ petition shall not bar the Income Tax Settlement Commission from proceeding and passing a final order in accordance with law. - HELD THAT: - The petitioners had earlier approached the Income Tax Settlement Commission in respect of the same money and the Commission's proceedings were stayed by this Court. The Court clarified that despite the pendency of the writ petition, the Settlement Commission is not precluded from resuming and concluding proceedings. The Court afforded the Settlement Commission liberty to proceed and expressed a preference that a final order be passed within six months from communication of the Court's order, thereby directing expeditious disposal consistent with legal standards and without treating the writ petition as a bar to the Commission's jurisdiction.

Pendency of the writ petition will not bar the Income Tax Settlement Commission from proceeding; the Commission is directed to pass a final order, preferably within six months from communication of this order.

Final Conclusion: The High Court recorded the administrative clarification that an amount treated as undisclosed income under the Black Money Act will not be added again under the Income-tax Act, and directed that the Income Tax Settlement Commission may proceed with and conclude its proceedings notwithstanding the pending writ, preferably within six months.

Revisionary power under section 263 - erroneous and prejudicial order - Minimum Alternate Tax - computation of book profit under section 115JB - Effect of Companies Act winding up accounting on tax liability - ITR form proforma cannot override statutory obligation to compute book profit

Revisionary power under section 263 - erroneous and prejudicial order - Duty to make inquiries or verification before assessment - Validity of the Pr. CIT's exercise of jurisdiction under section 263 in setting aside the assessment order dated 22.02.2021 for AY 2018-19 - HELD THAT: - The Tribunal applied the established tests for exercise of section 263 jurisdiction and found that the ld. AO had not considered or made any enquiries on the applicability of section 115JB and had framed the assessment on returned income without verification. The Pr. CIT recorded satisfaction that the AO's order was erroneous and prejudicial to the interests of Revenue and invoked clause (a) of the Circular No.19/2015 mandate (order passed without making inquiries or verification which should have been made). The Tribunal held that non consideration of MAT applicability and absence of enquiry was an incorrect assumption of fact / non application of mind attracting section 263, and therefore the revision was validly initiated. [Paras 3]

The Pr. CIT's exercise of revisionary jurisdiction under section 263 was valid and is upheld.

Minimum Alternate Tax - computation of book profit under section 115JB - Effect of Companies Act winding up accounting on tax liability - ITR form proforma cannot override statutory obligation to compute book profit - Whether a company undergoing voluntary liquidation is exempt from computation of book profit and liability under section 115JB for AY 2018-19 - HELD THAT: - The Tribunal examined section 115JB(2) and the amendments aligning the MAT provision with Companies Act, 2013 terminology, and observed that the provision contemplates preparation of a "statement of profit and loss" in accordance with Companies Act rules but contains no exemption for companies in voluntary liquidation. The Tribunal rejected the contention that quarterly receipts & payments accounts required under winding up statutes displace the obligation to compute book profit, and held that the ITR proforma (ITR 6) or procedural exemptions in filing formats cannot override statutory mandate. The Tribunal also noted the assessee's own subsequent filings for later years established the practical possibility of determining profit and preparing a statement of profit and loss, further undermining the claim of impossibility. Absent any specific exclusion in section 115JB, the MAT provisions apply to the appellant. [Paras 3, 4]

Section 115JB applies to the assessee notwithstanding its voluntary liquidation; the plea that winding up accounting precludes computation of book profit is rejected.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the Pr. CIT's revision under section 263 and affirms that the assessee, a company under voluntary liquidation, is liable to compute book profit and be subject to section 115JB for AY 2018-19; the appellant's grounds challenging the revision and claiming exemption from MAT are rejected.

Reopening of assessment under Section 147 - reasons to believe - non-application of mind - live link between information and belief - quashing reassessment proceedings

Reopening of assessment under Section 147 - reasons to believe - non-application of mind - live link between information and belief - Validity of reassessment proceedings initiated under section 147/148 read with section 143(3) for AY 2012-13. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer which merely stated that information was received that the assessee had deposited cash of Rs. 10,00,000/- or more during the relevant year, without specifying bank branch, account number, dates or the exact amount and without any independent verification. The reasons therefore were general and vague and amounted to a reproduction of conclusions from the investigation report rather than an independent application of mind by the AO. Relying on consistent decisions of coordinate benches and the jurisdictional High Court, the Tribunal held that the statutory pre condition for reopening - a tangible material showing a link or 'live link' between the material and the formation of belief that income has escaped assessment - was not satisfied. The Tribunal concluded that the AO's satisfaction was a 'borrowed satisfaction' and that mere suspicion or unverified information cannot validate reopening; further inquiries or corroborative material were required before recording reasons to believe. For these reasons the reassessment proceedings were quashed. [Paras 8, 9, 10, 15]

Reassessment proceedings under section 143(3) read with section 147 for AY 2012-13 quashed; grounds 1 to 3 allowed.

Final Conclusion: The appeal is partly allowed: the reassessment initiated for AY 2012-13 is quashed for want of valid reasons to reopen (vagueness and non-application of mind); other issues were not adjudicated as academic.

Reopening of assessment under section 147 on account of undisclosed foreign assets - search under section 132 and incriminating material - statement recorded under section 132(4) as evidentiary material - assessment under section 153A and scope of total income computation - Explanation 2(d) to section 147 - deemed escapement for assets located outside India - reading bank statements in totality - consideration of credit and debit entries - onus of proof on assessee to explain credits in undisclosed foreign accounts - set off and carry forward of losses - requirement of timely return filing - treatment of additions under sections 68/69A and applicability of section 115BBE (no deduction)

Principle of natural justice - opportunity of being heard before assessment and appellate remand - Whether the assessee was denied sufficient opportunity of hearing in assessment and appeal - HELD THAT: - The Tribunal examined the timeline of notices, show-cause communications, provision of documents and the sequence of submissions before the Assessing Officer and the CIT(A). The AO furnished bank statements and other documents to the assessee on request and issued repeated notices and extensions; the assessee filed an affidavit disowning the foreign accounts and did not seek further time before passing of the assessment order. The CIT(A) admitted additional evidence, forwarded documents for remand and considered the rejoinder. On these facts the Tribunal found no breach of natural justice: sufficient opportunities were afforded at both assessment and appellate stages and the case law relied on by the assessee was inapplicable to the factual matrix. [Paras 21, 24, 25, 26]

Assessee's claim of violation of principle of natural justice rejected; ground dismissed.

Reopening of assessment under section 147 on account of undisclosed foreign assets - Explanation 2(d) to Section 147 - deeming escapement for foreign assets - retrospective application of amendment to limitation for reopening - Validity of reopening assessments (A.Ys. 2000-01 to 2009-10) by notice under section 148 - HELD THAT: - The AO recorded reasons based on information received from the FT&TR Division and contemporaneous material including the assessee's statement under section 132(4). Explanation 2(d) to section 147 (as amended w.e.f. 01.07.2012) treats income in relation to assets located outside India as deemed escapement; the Explanation expressly clarifies retrospective application to assessment years beginning on or before 1 April 2012. Applying that statutory Explanation and legislative memorandum, and following precedents on retrospective amendments, the Tribunal held that reopening up to 16 years was permissible in foreign asset cases. The recorded reasons were considered specific and not a mere borrowed satisfaction; quantification in the reasons and the applicability of clause (c) rendered further quantification unnecessary. [Paras 34, 36, 37, 50, 51]

Reopening of assessments valid; objections to reopening dismissed.

Search under section 132 and incriminating material - statement recorded under section 132(4) as evidentiary material - assessment under section 153A and scope of total income computation - Whether assessments for unabated/completed years could be completed in absence of incriminating material and whether statements under section 132(4) constitute incriminating material - HELD THAT: - The Tribunal applied the Supreme Court's decision in Abhisar Buildwell to hold that if incriminating material is found/unearthed, the AO can reassess the 'total income' for unabated/completed years under section 153A. The Tribunal analysed the material actually available: documents received from foreign authorities (CCPS, settlor forms), seized corroborative items (visiting cards, Barclays correspondence, pen-drive/mobile backups) and the assessee's admissions in statements under section 132(4). It held that such statements, when they confront the assessee with other incriminating materials and when corroborated by evidence found during search, constitute incriminating material. The AO therefore had jurisdiction to assess unabated years and to use the statements and other materials to compute total income. [Paras 57, 58, 61, 68, 74]

Assessee's plea that unabated/completed assessments could not be completed absent incriminating material rejected; statements under section 132(4) and corroborative materials held to be incriminating for purposes of section 153A.

Onus of proof on assessee for undisclosed foreign accounts - ownership of foreign bank accounts and credibility of affidavit - Whether the foreign bank accounts belonged to the assessee (settlor) or to his sister, and whether the affidavit claiming accounts belonged to sister sufficed to discharge onus - HELD THAT: - The Tribunal reviewed documentary evidence (company formation letters, CCPS, settlor profile forms), seizure material, bank statements, cheques drawn in the assessee's name deposited into the foreign accounts, visiting cards and the assessee's contemporaneous admissions. The assessee's shifting explanations and unverified self-serving affidavit were found insufficient. The documents received from foreign authorities identified the assessee and his wife as beneficial owners; cheques in the assessee's name deposited into the foreign account and other corroborative material established ownership. The Tribunal held that, being resident, the assessee bore the onus to explain the source of credits and failed to do so. [Paras 83, 84, 85, 88, 91]

Foreign bank accounts held to belong to the assessee and his wife; affidavit unsupported by evidence rejected; additions in their hands sustained on ownership ground.

Reading bank statements in totality - consideration of credit and debit entries - treatment of additions under sections 68/69A - Whether credit entries in foreign bank statements must be treated as income without considering debit/expense entries, and whether CIT(A) was right to consider debits for computing real income - HELD THAT: - The AO treated aggregate credits as unexplained income (section 68/69A). The CIT(A) considered both credit and debit entries and allowed deductions for expenses and contra entries, computing year wise net income. The Tribunal emphasised the principle that only real income is taxable and that bank ledgers (even if maintained by a bank) reflect the assessee's transactions. Many credit entries were dividends, interest and capital gains where expenses may be allowable. The Tribunal accepted the CIT(A)'s approach of reading the bank statements in totality and allowing deductions/contra entries where supported by the bank records. [Paras 92, 93, 95]

CIT(A)'s approach of considering debit entries and reading bank statements in totality upheld; Revenue's challenge dismissed.

Set off and carry forward of losses - requirement of timely return filing - computation of year-wise profit/loss from mutual fund transactions - Whether losses computed from foreign bank account transactions could be carried forward/set off and whether the year's MF profit/loss computation by CIT(A) was correct - HELD THAT: - The Tribunal noted statutory requirement (section 139(3)) that a return must be filed within due date to enable carry forward of business/capital losses. The assessee had not filed timely returns claiming those losses; hence carry forward was not permissible. Further, the Tribunal found the methodology adopted by the assessee/CIT(A) to compute mutual fund profits/losses (simple difference of purchases and sales) flawed because opening and closing stock of MF units were not considered, producing potentially inflated year wise losses/profits. Given inaccuracies, the Tribunal set aside quantification and directed a factual remand to the AO to compute year-wise profit/loss taking opening/closing stock into account and allowing the AO to obtain and confront necessary details. [Paras 98, 99, 100, 101, 102]

Loss carry forward denied for lack of timely return; quantification of MF profit/loss set aside and remanded to AO for fresh computation year-wise after giving opportunity to assessee.

Unexplained jewellery found during search - protective addition and declaration under Vivad se Vishwas - Whether protective addition in respect of jewellery in the hands of Smt. Manjulaben Patel should be sustained where substantive addition has been accepted/declared by another family member - HELD THAT: - Records showed that the substantive addition in respect of the jewellery had been finalized in the hands of Smt. Jigishaben Patel (including payment under Vivad Se Vishwas). The Tribunal verified the paperwork (Forms under VSVA and CIT(A) and AO orders) and accepted that substantive tax had been paid/declared in her hands. Given that, the protective addition of corresponding amount in the hands of Smt. Manjulaben Patel was no longer necessary. Conversely, in respect of jewellery found in a locker connected to the assessee, the assessee had given inconsistent explanations with no corroboration; that addition was sustained in the assessee's hands. [Paras 103, 104, 105, 106, 108]

Protective addition in respect of jewellery deleted in the hands of Smt. Manjulaben Patel as substantive tax accepted in hands of Smt. Jigishaben Patel; addition of Rs.10 lakhs in the hands of the (late) assessee confirmed.

Application of section 115BBE - no deduction/set off against income characterised as unexplained under sections 68/69A - Whether, once credit entries are treated as unexplained income under sections 68/69A (and covered by section 115BBE), expenditures/debits can be allowed as deductions - HELD THAT: - The Revenue argued that where additions are held to be unexplained money under sections 68/69A and taxed under the special provisions such as section 115BBE, no deduction or set off should be allowed. The Tribunal observed that many credit entries were shown in the statements as dividends, interest and capital gains for which expenses may legitimately be deductible; where the AO/CIT(A) had verified and allowed deductions based on bank records and the nature of entries, those adjustments were appropriate. The Tribunal therefore did not accept a blanket disallowance of all debits; treatment depends on the character of the entries and verification. [Paras 92, 93]

Blank application of section 115BBE to deny all deductions rejected; debits/expenses may be considered where supported by bank records and nature of entries - CIT(A)'s allowances upheld where justified.

Remand for quantification and verification - Whether quantification of mutual fund/share transactions should be remanded - HELD THAT: - Given defects in year-wise computations of profit/loss (absence of opening/closing stock adjustments and incomplete working), and the practical difficulties owing to the assessee's death and passage of time, the Tribunal directed remand to the AO. The AO is to compute year-wise profit/loss for mutual funds/shares after taking into account opening and closing stock, giving opportunity to the legal heirs, and, if necessary, apportion the net computed positive amount proportionately by year when primary data is unavailable. [Paras 100, 101, 102]

Matter remanded to AO for fresh factual computation and verification of year-wise mutual fund/share profit or loss; appeals deemed partly allowed for statistical purposes pending quantification.

Final Conclusion: The Tribunal dismissed the assessee's procedural objections and upheld reopening for the years 2000-01 to 2009-10; held that incriminating/materials (including statements under section 132(4) and seized corroborative documents) permitted assessment under section 153A; confirmed ownership of the foreign accounts by the assessees and sustained additions subject to adjustments. The CIT(A)'s approach of considering debit entries in bank statements was accepted; loss carry forward was disallowed for lack of timely return. Quantification of mutual fund/share profits/losses was set aside and remanded to the AO for fresh year wise computation; protective jewellery addition in Manjulaben's hands deleted as substantive tax was accepted by another family member, while the locker jewellery addition was sustained. Appeals and cross appeals were disposed as recorded in the order.

Disallowance under Section 14A in absence of exempt income - Computation of disallowance under Rule 8D - Prospective operation of Finance Act, 2022 amendment to Section 14A (nonobstante clause and Explanation) - Reliance on CBDT Circular No. 5/2014 regarding applicability of Section 14A where no exempt income

Disallowance under Section 14A in absence of exempt income - Computation of disallowance under Rule 8D - Reliance on CBDT Circular No. 5/2014 regarding applicability of Section 14A where no exempt income - Whether disallowance under Section 14A read with Rule 8D can be made in a year in which no exempt income has accrued, arisen or been received by the assessee. - HELD THAT: - The Tribunal examined the contention that in absence of any exempt income no disallowance under Section 14A/read with Rule 8D is sustainable. Relying on precedents of coordinate Benches and High Courts (as reproduced in the order) the Tribunal held that where no exempt income has been earned in the relevant year, invocation of Section 14A and consequential disallowance under Rule 8D is not warranted. The Tribunal noted that authorities have held that the CBDT Circular No. 5/2014 cannot override the judicial view that Section 14A is not attracted in a year with no exempt income; accordingly the addition made by the Assessing Officer was not sustainable and was deleted.

Addition made under Section 14A read with Rule 8D deleted and appellant succeeds on substantive grounds relating to the disallowance.

Prospective operation of Finance Act, 2022 amendment to Section 14A (nonobstante clause and Explanation) - Whether the Finance Act, 2022 amendment to Section 14A (inserting a nonobstante clause and an Explanation) applies retrospectively to assessment years prior to 1 April 2022. - HELD THAT: - The Tribunal considered the clarificatory amendment introduced by Finance Act, 2022 and the associated memorandum, and relied on the decision in Pr. CIT vs. Avantha Realty Ltd. to conclude that the amendment, including the nonobstante clause and Explanation, takes effect from 1 April 2022 and applies to assessment year 202223 and subsequent years. Consequently the amendment could not be applied to the assessment year under consideration in the present appeal.

The Finance Act, 2022 amendment to Section 14A was not applied to the year under appeal as it is prospective with effect from 1 April 2022.

Final Conclusion: The appeal is allowed; the disallowance made under Section 14A read with Rule 8D is deleted and the amendment by Finance Act, 2022 was not applied to the assessment year under consideration.

Condonation of delay - Section 14A disallowance - Rule 8D application - Requirement to record satisfaction when rejecting assessee's explanation - Reliance on coordinate bench decision - Interest under section 234B (consequential)

Condonation of delay - Delay in filing the appeal of four days was condoned and the appeal admitted. - HELD THAT: - The assessee filed a petition explaining the cause for four days' delay supported by affidavit and relied upon established Supreme Court authorities for condonation. The Tribunal examined the explanation, found sufficient cause and, exercising its discretion, condoned the delay to enable adjudication on merits rather than dismissal on procedural grounds. [Paras 3, 4]

Delay of four days condoned and appeal admitted for adjudication.

Section 14A disallowance - Rule 8D application - Requirement to record satisfaction when rejecting assessee's explanation - Reliance on coordinate bench decision - Disallowance under Section 14A read with Rule 8D confirmed by the authorities was set aside and deleted in computing normal income for AY 2017-18. - HELD THAT: - The AO applied Rule 8D to compute a substantial disallowance notwithstanding that the assessee had itself made a suo moto disallowance and had explained its computation. The Tribunal noted that the AO did not point out any defect in the assessee's basis nor record objective satisfaction as to why the assessee's explanation was untenable, and applied Rule 8D without establishing proximate connection between expenses and exempt income. The Tribunal followed a coordinate-bench decision in the assessee's own case and other precedents holding that in the absence of exempt income or where the AO fails to justify rejection of the assessee's computation, the higher disallowance cannot be sustained. For these reasons the addition confirmed by the CIT(A) was set aside and the AO directed to delete the addition. [Paras 7, 8]

Addition under Section 14A read with Rule 8D deleted; ground allowed.

Interest under section 234B (consequential) - Claim for reduction or deletion of interest under section 234B is consequential and was not separately adjudicated. - HELD THAT: - Grounds relating to interest were pleaded but treated by the Tribunal as consequential to the main relief granted on the disallowance under Section 14A. The Tribunal recorded that Ground No.2 is consequential in nature and did not require separate adjudication in view of the primary disposal. [Paras 9]

Interest contention left consequential to the main decision and not separately decided.

Final Conclusion: The Tribunal condoned the delay, allowed the appeal by setting aside and deleting the disallowance made under Section 14A read with Rule 8D for AY 2017-18, and treated the interest grievance as consequential without separate adjudication.

Refund on furnishing bank guarantee - retention and discontinuation of bank guarantee - prejudice from protracted litigation - conditional discontinuation subject to affidavit of undertaking - reference to High Court on applicability of precedent

Retention and discontinuation of bank guarantee - prejudice from protracted litigation - refund on furnishing bank guarantee - conditional discontinuation subject to affidavit of undertaking - Permission to discontinue the bank guarantee and direct refund of the bank guarantee amount subject to conditions - HELD THAT: - Pursuant to this Court's order dated 11.11.2002 the appellant furnished and has been maintaining a bank guarantee which, after renewal over about twenty-two years, has remained in force despite there being no conclusion of the lis. The prolonged retention of the bank guarantee has caused prejudice to the appellant who has been deprived of the amount for no fault of its own. Having regard to these facts and the continuing indecisiveness of the main proceedings, the Court set aside that portion of the impugned High Court order which refused discontinuation and permitted discontinuation of the bank guarantee and directed refund of the amount. The permission to discontinue is made subject to the appellant filing an Affidavit of Undertaking in the High Court within two weeks and is without prejudice to any decision that the High Court may make on the pending reference; if the appellant is ultimately unsuccessful or a demand is made, the appellant must make payment as directed by the High Court.

The appellant is permitted to discontinue the bank guarantee and the amount shall be refunded on compliance with the affidavit of undertaking; the appellant remains liable for any payment ultimately directed by the High Court.

Reference to High Court on applicability of precedent - Treatment of the Tribunal's order of reference to the High Court regarding the applicability of earlier precedents - HELD THAT: - The CESTAT, by its order dated 30.01.2023, recorded that an earlier Tribunal decision was reversed by the Bombay High Court and accordingly submitted a statement of case to the High Court. The Court observed that the question whether the High Court's reversal bears on the present reference is to be considered by the High Court and directed that the High Court decide the matter as expeditiously as possible. The present grant of permission to discontinue the bank guarantee is expressly made subject to the outcome of that reference and the High Court's determination.

The High Court shall consider and decide the reference submitted by CESTAT concerning the applicability of the reversed precedent; the present order permitting discontinuation is subject to that decision.

Final Conclusion: The appeal is allowed to the extent indicated: the appellant may discontinue the bank guarantee and obtain refund on filing an Affidavit of Undertaking in the High Court within two weeks, subject to the High Court's expeditious decision on the reference submitted by CESTAT; the appellant remains liable for any payment ultimately directed by the High Court.

Restoration of appeals after dismissal - functus officio doctrine - pre-deposit compliance for continuance of appeal - prompt compliance as ground for restoration - power of appellate tribunal to restore appeals where conditions are subsequently complied with

Restoration of appeals after dismissal - pre-deposit compliance for continuance of appeal - prompt compliance as ground for restoration - Whether appeals dismissed for non-compliance with pre-deposit directions could be restored where the appellants complied with the pre-deposit shortly after dismissal. - HELD THAT: - The Court examined the factual position that the appellants' appeals were dismissed on 27.08.2015 for non-compliance with pre-deposit directions and that the appellants pre-deposited the required amounts on 02.09.2015, within one week of dismissal, and promptly applied for restoration. The High Court observed that earlier Division Bench authorities relied upon by the appellants (including Classic Builders and Yes & Yes Hi-Tech Promoters) support restoration where the pre-condition is complied with and the application is made within a reasonable time. The Court distinguished the authority relied upon by the respondent, noting that in that case there was a long delay of years and no compliance with the pre-condition, which rendered the functus officio principle applicable. Applying these principles, the Court held that prompt compliance with the pre-deposit requirement after dismissal entitled the appellants to restoration of their appeals and thereby the Appellate Tribunal's refusal to restore on the sole ground of functus officio was not sustainable. [Paras 5, 8, 9]

Appeals are to be restored because the appellants promptly complied with the pre-deposit order shortly after dismissal; the Tribunal's refusal to restore solely on the basis of being functus officio is set aside.

Final Conclusion: The impugned dismissal orders are set aside; the CESTAT is directed to restore the specified appeals to its file and decide them on merits in accordance with law, the parties being at liberty to make submissions.

Refund of customs duty - requirement of original documents for refund - test of unjust enrichment - duty to afford fair procedure and opportunity to produce documents - remand for verification of original challans

Requirement of original documents for refund - refund of customs duty - test of unjust enrichment - Whether rejection of refund claims for want of original duty-payment documents was justified without giving the appellant an opportunity to produce originals. - HELD THAT: - The Tribunal found that the Original Authority had accepted that the appellant was eligible for refund but nonetheless rejected certain refund claims solely because original challans were not produced at the time of filing. The Tribunal emphasised that where substantive eligibility is indicated and the test of unjust enrichment is satisfied (the excess duty has not been passed on), a rigid insistence on procedural non-compliance without granting an opportunity to cure the defect is inappropriate. The Tribunal relied on the principle that procedure must serve substantive justice and not operate as a tyrant, and therefore concluded that the claims should not have been summarily rejected without affording the appellant a chance to produce the original documents. [Paras 5]

Rejection of refund claims for want of original documents without giving the appellant an opportunity to furnish the originals was not justified and cannot be sustained.

Remand for verification of original challans - duty to afford fair procedure and opportunity to produce documents - refund of customs duty - Directions on remand to the Original Authority for verification of original challans and further adjudication. - HELD THAT: - The Tribunal set aside the impugned order and remanded the matter to the Original Authority with specific directions: the appellant shall be permitted to submit the original duty-paid challans; if those originals are found to be correct the refund shall be sanctioned without delay; if discrepancies exist or the claim is to be varied or denied, a speaking order recording reasons must be passed within 90 days of receipt of this order after giving the appellant reasonable time for written submissions and hearing. The Tribunal also directed cooperative and expeditious conduct of proceedings and liberty to adduce necessary evidence. [Paras 6]

Matter remanded to the Original Authority to examine the original challans and proceed in accordance with the directions, including sanctioning the refund if documents are found correct or passing a speaking order within 90 days if not.

Final Conclusion: Impugned order set aside; appeals disposed by remanding the matters to the Original Authority to permit production and verification of original challans and to decide the refund claims in accordance with the Tribunal's directions within the stipulated time.

Classification under Chapter Heading 8467 8990 - mis-declaration/suppression to evade duty - differential duty and interest under Section 28(4) and Section 28AA - confiscation and redemption fine - penalty under Section 114A of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - penalty under Section 112 of the Customs Act, 1962

Classification under Chapter Heading 8467 8990 - Classification of the imported goods as Brush Cutters and their tariff classification. - HELD THAT: - The Tribunal followed its earlier decisions in M/s. Rathnagiri Impex Pvt. Ltd. and Hikoki Power Tools India Pvt. Ltd., which held that Brush Cutters are classifiable under Chapter Heading 8467 8990. The packages, catalogues and supplier material described the items as Brush Cutters, and the HSN Explanatory Notes for Chapter 8467 specifically cover portable brush cutters with self-contained motors. Applying that ratio to the present facts, the Tribunal upheld the classification under Chapter Heading 8467 8990. [Paras 6]

Classification of the goods as Brush Cutters under Chapter Heading 8467 8990 is upheld.

Mis-declaration/suppression to evade duty - differential duty and interest under Section 28(4) and Section 28AA - confiscation and redemption fine - penalty under Section 114A of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - penalty under Section 112 of the Customs Act, 1962 - Whether the appellant knowingly mis-declared the goods to evade duty and the consequential demand, confiscation and penalties. - HELD THAT: - The investigation materials - catalogues recovered from packages, user manual, supplier website and the appellant's own admission - established that the products were 'Brush Cutters' though documents were altered to show 'Power Operated Reapers' to obtain agricultural treatment and subsidy. The partner's statement that the supplier was asked to print 'Power Reaper' for subsidy purposes was not retracted. On these findings the Tribunal held that suppression and deliberate mis-declaration were proved. Consequently, the Tribunal sustained the demand of differential duty under Section 28(4) with applicable interest under Section 28AA and upheld confiscation. The Tribunal, however, exercised its discretion in modifying monetary consequences: it reduced the redemption fine and the penalty on the partner under Section 112, set aside penalties imposed under Section 114AA, and affirmed the imposition of equivalent penalty under Section 114A as per law. [Paras 7]

Suppression and deliberate mis-declaration established; demand of differential duty with interest and equivalent penalty under Section 114A upheld; confiscation upheld; redemption fine and certain penalties reduced or set aside as recorded.

Final Conclusion: The appeals are disposed of by upholding the classification of the imported items as Brush Cutters under Chapter Heading 8467 8990, sustaining the demand of differential duty with interest and an equivalent penalty for deliberate mis-declaration, upholding confiscation, and modifying the redemption fine and certain penalties as indicated in the order.

Restoration of appeal - dismissal for non-prosecution - cost as condition for restoration - waiver of costs - last opportunity / failure to appear

Restoration of appeal - cost as condition for restoration - waiver of costs - Prayer to waive the payment of the cost of Rs. 50,000 imposed as a condition for restoration of Customs Appeal No. 4129 of 2012 is rejected, but time is granted for compliance. - HELD THAT: - The Tribunal found that the matters relied upon and the appellant's submissions in the present application had already been considered while passing the miscellaneous order dated 22.03.2024 restoring the appeal subject to payment of costs. The appeal was originally dismissed for non-prosecution after repeated listings and a final opportunity, and the restoration on 22.03.2024 was expressly made conditional on payment of the stated cost. The appellant did not pay the cost and instead sought modification of that condition; the application merely reiterated previously considered facts and did not furnish any fresh or persuasive reason to alter the condition. In view of the appellant's conduct, absence on multiple listings and the earlier exercise of discretion by the Bench, there was no basis to waive the imposed cost. However, the Tribunal exercised its discretion to afford the appellant a further limited opportunity: one month from receipt of the order to pay the cost, failing which the appeal will remain dismissed as per the earlier order. [Paras 4, 7, 8, 9]

Prayer to waive the cost is dismissed; appellant given one month from receipt of this order to deposit the cost to obtain restoration of the appeal, failing which the dismissal shall stand.

Final Conclusion: Miscellaneous application dismissed insofar as waiver of the cost is sought; appellant granted one month to deposit the imposed cost for restoration of the appeal, otherwise the appeal will remain dismissed.

Eligibility for exemption notifications - liability to pay 4% special additional duty (SAD) consequent to omission from the First Schedule - strict interpretation of exemption notifications - self-assessment and alleged misdeclaration - extended period of limitation for deliberate suppression / deliberate default - burden of proof for mala fide conduct on Revenue - confiscation and penalty under the Customs Act

Eligibility for exemption notifications - liability to pay 4% special additional duty (SAD) consequent to omission from the First Schedule - strict interpretation of exemption notifications - Appellant not eligible for the benefit of the cited exemption notifications for the disputed period and liable to pay 4% SAD from the date of omission. - HELD THAT: - The Bench, following its earlier decision in Sewing Systems Pvt. Ltd., held that goods omitted from the First Schedule by the amendment dated 08.04.2011 could not be brought within the scope of the exemption Notifications. An exemption notification must be strictly construed and the amendment rendering specific chapter headings omitted makes the goods ineligible for the exemption. Consequently, the appellant is liable to pay 4% SAD for the period from the omission. [Paras 6, 7]

Demand for 4% SAD upheld on merits for the relevant period.

Self-assessment and alleged misdeclaration - extended period of limitation for deliberate suppression / deliberate default - burden of proof for mala fide conduct on Revenue - confiscation and penalty under the Customs Act - Extended period of limitation could not be invoked for alleged suppression; demand is restricted to the normal limitation period and confiscation and penalty are set aside. - HELD THAT: - The Tribunal found no material to show wilful mis-declaration or mala fide conduct by the appellant. The Ex-bond Bills of Entry, showing description, chapter headings and endorsements by customs officers, constituted assessments; mere claiming of exemption under self-assessment did not, without specific averments of deliberate default in the show-cause notice, justify invoking the extended limitation. The Revenue bears the burden to plead and prove deliberate suppression; absent such specific allegations and proof, the proviso permitting extended limitation does not apply. Following Sewing Systems Pvt. Ltd. and principles in Uniworth Textiles, the demand beyond the normal period was disallowed; confiscation under Section 111(m) and penalty under Section 114A were set aside for the reasons given. [Paras 6, 7, 9]

Extended period not invokable; demand confirmed only for the normal period with interest; confiscation and penalty quashed.

Final Conclusion: Appeal partially allowed: liability for 4% SAD confirmed for the normal period (as guided by earlier Bench decision) while invocation of the extended period for suppression is rejected; demand with interest sustained for the normal period and confiscation and penalty set aside.

Transaction value - High Seas Sale - treatment of notional commission in customs valuation - burden of proof for establishing High Seas Sale as international transfer - transaction value under Rule 4 of the Customs Valuation Rules, 1988

Transaction value - High Seas Sale - treatment of notional commission in customs valuation - burden of proof for establishing High Seas Sale as international transfer - Whether the declared High Seas Sale price paid by the importer is the transaction value to be adopted for assessment, rejecting adoption of the foreign seller's invoice value or imposition of a notional commission - HELD THAT: - The Tribunal examined the documents produced by the appellant evidencing payment at the declared High Seas Sale price and noted that there was no payment over and above that declared price. The authority relied upon by the appellant, including the departmental Circular No. 32/2004 dated 11.05.2004, clarifies that the actual High Seas Sale contract price paid by the last buyer is to be construed as transaction value under Rule 4 of the Customs Valuation Rules, 1988 and that inclusion of commission on a notional basis may not be appropriate. While the Apex Court in M/s Hyderabad Industries Ltd places the burden on the importer to prove that the High Seas Sale constituted an international transfer, the Tribunal found that the appellant had produced sufficient evidence to discharge that burden. The Tribunal further observed authorities where prices paid by the last buyer in High Seas Sale transactions were accepted as transaction value (see M/s Excel Glass Ltd , M/s Eternit Everest Ltd , and others relied on by the appellant). In the circumstances, the Adjudicating Authority's rejection of the declared value and its adoption of a 2% notional value for assessment was unsustainable. The determinative legal principle applied is that where the importer establishes the High Seas Sale transaction and the actual price paid, that price constitutes the transaction value for customs assessment and notional additions or adoption of the original supplier's higher invoice cannot be imposed in lieu thereof. [Paras 6, 7]

Declared High Seas Sale price paid by the appellant is the transaction value to be adopted for assessment; assessment on the basis of notional commission/2% notional value is set aside and the appeal allowed.

Final Conclusion: Appeal allowed: the declared High Seas Sale transaction value paid by the appellant is accepted for customs assessment and the order imposing differential duty on an enhanced value (by adopting notional commission/2% value) is set aside, with consequential relief as per law.

Compounding of contraventions under FEMA - Computation matrix in Master Direction - 300% cap on penalty - Opportunity of hearing - Bona fide purchaser defence

Compounding of contraventions under FEMA - Computation matrix in Master Direction - 300% cap on penalty - Validity of the compounding order and the manner of penalty computation - HELD THAT: - The Court examined the impugned compounding order levying a compounding fee under Section 13 of FEMA and the Master Direction on Compounding which prescribes a computation matrix. The compounding authority applied the Guidance Note's percentage slabs for duration of contravention, treated the amount of contravention as the acquisition value, considered both the purchase-related contravention and the mode of payment contravention, and computed an initial aggregate penalty. The authority then applied the ceiling that the amount imposed should not exceed 300% of the amount of contravention and reduced the penalty accordingly. The Court found that the computation followed the prescribed Master Direction and that the final penalty imposed was within the statutory/computed ceiling; no legal infirmity in the method of computation or in the application of the 300% cap was demonstrated by the petitioner. [Paras 11, 12]

The compounding order and the penalty computation are lawful and sustainable.

Opportunity of hearing - Bona fide purchaser defence - Whether the petitioner's plea of bona fide purchase and the hearing afforded vitiate the compounding order - HELD THAT: - The petitioner contended he bona-fidely purchased agricultural land and that the penalty was exorbitant despite subsequent compliance by transferring the property to an Indian citizen as directed. The record shows the RBI directed transfer and the petitioner complied; the petitioner was given opportunity of hearing in accordance with Rule 8(2) of the Compounding Rules but declined personal hearing. The Court observed that the compounding authority considered relevant factors including undue gain and the cash component, and concluded that the petitioner had been dealt with fairly. No legal ground was shown which would invalidate the order on account of bona fide purchase or lack of hearing. [Paras 6, 7, 12]

The plea of bona fide purchase and the circumstances of hearing do not invalidate the compounding order.

Final Conclusion: Writ petition dismissed; the compounding order dated 19.08.2024 imposing the specified compounding fee is upheld as having been computed and imposed in accordance with the Master Direction and rules, and after affording opportunity of hearing.

Ex-parte adjudication and principles of natural justice - retracted statements and requirement of independent corroboration - admissibility and probative value of seized documents and diaries - proof of contravention under FERA for receipt and distribution on order of person resident outside India - abetment liability under FERA - judicial discretion to mitigate penalty and effect of pre-deposit

Ex-parte adjudication and principles of natural justice - Impugned order passed ex-parte did not vitiate adjudication for breach of natural justice. - HELD THAT: - The Tribunal found that the Adjudicating Authority afforded multiple opportunities and issued successive call notices to the appellants, who repeatedly sought adjournments or failed to appear. Under those circumstances the Authority was not obliged to grant further adjournment immediately prior to passing the order and was entitled to decide the matter ex-parte. The Tribunal also noted that the replies filed by the appellants were considered by the Adjudicating Authority, and therefore there was no denial of hearing or other breach of natural justice affecting the validity of the impugned order. [Paras 5, 8]

No violation of principles of natural justice; ex-parte adjudication upheld.

Retracted statements and requirement of independent corroboration - Reliance on statements recorded from the appellants despite subsequent retractions was permissible because the Adjudicating Authority considered the retractions and the statements were corroborated by independent evidence. - HELD THAT: - The Tribunal applied the settled principle that a retracted confession may be acted upon only if it is voluntary and is substantially corroborated by independent and cogent evidence. It observed that the Adjudicating Authority addressed the subsequent retractions in its order and recorded reasons for rejecting them. Further, independent evidence obtained during further investigation (including statements of third persons and documents recovered from third parties) corroborated the inculpatory aspects of the appellants' statements, thereby furnishing adequate assurance for reliance on those statements. [Paras 9, 12]

Statements, though retracted later, were rightly relied upon after consideration of retraction and corroboration.

Admissibility and probative value of seized documents and diaries - proof of contravention under FERA for receipt and distribution on order of person resident outside India - Seized loose sheets, diaries and corroborative material furnished sufficient evidence to establish contraventions under Sections 9(1)(b) and 9(1)(d) of FERA by Shri Mustaq Mohd. Patel. - HELD THAT: - The Tribunal noted recovery of loose sheets and diaries from the residential premises of the appellants and panchnama records of seizure. The Adjudicating Authority found the handwriting admissions by the appellant and matching entries, and the Department's further inquiries produced statements and documents from persons named in the seized records who admitted receiving funds on instructions of relatives abroad. The Tribunal rejected the contention that the evidence was not independent, observing that documents and statements were recovered both from the appellants and from third parties referenced in the seized material. On that factual matrix the Adjudicating Authority's conclusion that the noticee received and disbursed amounts on orders of a person resident outside India was sustained. [Paras 7, 10, 11]

Contraventions by Shri Mustaq Mohd. Patel under Sections 9(1)(b) and 9(1)(d) of FERA established.

Abetment liability under FERA - Evidence established that Shri Mohammed Rafiq Ali Patel abetted the principal contravention and therefore was liable under Sections 9(1)(b), 9(1)(d) read with Section 64(2) of FERA. - HELD THAT: - The Tribunal recorded that diaries and other documents, seized from the residence of Shri Mohammed Rafiq Ali Patel, contained details of hawala payments and that the principal noticee had admitted engaging his cousin in disbursement. The noticee No.2's explanation of the coding in the diaries and his admitted assistance, corroborated by statements of recipients, satisfied the Adjudicating Authority that he was an associate in the hawala transactions. Although exact monetary benefit to him could not be ascertained from the record, his participation supported a finding of abetment. [Paras 6, 9]

Shri Mohammed Rafiq Ali Patel found guilty of abetment under the cited provisions of FERA.

Judicial discretion to mitigate penalty and effect of pre-deposit - Penalties were reduced to the amounts already pre-deposited by the appellants and the impugned order modified accordingly. - HELD THAT: - Having upheld the substantive findings of contravention, the Tribunal nevertheless exercised discretion in mitigation of penalty in view of the appellants' pleaded financial disability and earlier Tribunal directions reducing pre-deposit to 10% which the appellants later complied with. The Tribunal held that the ends of justice would be met by reducing the penalties to the amounts of pre-deposit already made and modified the impugned order to that extent. [Paras 14]

Penalty on Shri Mustaq Mohd. Patel reduced to the pre-deposit amount; penalty on Shri Mohammed Rafiq Ali Patel similarly reduced.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's findings of contravention and abetment under FERA based on seized documents, statements and corroborative evidence, rejected procedural and evidentiary challenges, but in exercise of discretion reduced the penalties to the amounts already pre-deposited and modified the impugned order accordingly.

Deemed liability of persons in charge of a company for contraventions under Section 42(1) of FEMA - proviso to Section 42(1) - knowledge and due diligence defence - application of Section 42(1) to a managing director - obligation of adjudicating authority to record findings on knowledge and due diligence

Deemed liability of persons in charge of a company for contraventions under Section 42(1) of FEMA - proviso to Section 42(1) - knowledge and due diligence defence - application of Section 42(1) to a managing director - obligation of adjudicating authority to record findings on knowledge and due diligence - Whether the Managing Director could be held liable under Section 42(1) of FEMA notwithstanding his plea that the contravention was without his knowledge and that he had exercised due diligence to prevent it, and whether the Adjudicating Authority erred in not dealing with that plea. - HELD THAT: - Section 42(1) of FEMA creates a deeming provision making every person who, at the time of contravention, was in charge of and responsible to the company for the conduct of its business liable for the contravention; the proviso, however, exempts such person if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it. The Appellant, who had been the Managing Director, specifically pleaded that compliance responsibility rested with the Principal Compliance Officer and that safeguards, policies and audits were in place evidencing due diligence. The Adjudicating Authority's order is silent and cryptic on these specific pleas and does not record any finding either rejecting the Appellant's contention of lack of knowledge or negativing his asserted exercise of due diligence. Where the statutory proviso is invoked, the adjudicatory body must examine and record reasons on whether the exemption is established; mere imposition of penalty without addressing the defence available under the proviso is impermissible. Having found that the Adjudicating Authority did not consider or decide the defence of absence of knowledge and due diligence, and that the material supports the Appellant's plea that compliance was entrusted to another and safeguards existed, the Tribunal concluded that the penalty could not stand. [Paras 12, 13, 14]

Impugned order imposing penalty set aside; Appeal allowed for failure of the Adjudicating Authority to consider and record findings on the Appellant's defence under the proviso to Section 42(1) of FEMA.

Final Conclusion: The Tribunal allowed the appeal, quashed the penalty imposed under Section 42(1) of FEMA, and set aside the Adjudicating Authority's order for having failed to consider and record findings on the Appellant's defence that the contravention occurred without his knowledge and that he exercised due diligence to prevent it.

Confiscation for contravention of conditions of licence issued by Reserve Bank of India - FFMC licence conditions and liability of company and director - admissibility and accounting explanation for seized cash - reliability of statement recorded under Section 37 of FEMA - imposition and payment of penalty under FEMA

FFMC licence conditions and liability of company and director - confiscation for contravention of conditions of licence issued by Reserve Bank of India - admissibility and accounting explanation for seized cash - Whether M/s Duggal Forex Pvt. Ltd. committed contravention warranting confiscation of Indian and foreign currency and imposition of penalty - HELD THAT: - The Appellate Tribunal examined the records produced by M/s Duggal Forex Pvt. Ltd. showing withdrawals and supporting bills for foreign currency transactions and found that the Adjudicating Authority had not considered those records and was silent on the explanations tendered. On the material placed before the Tribunal the company's accounts did not disclose irregularity or non compliance warranting confiscation. The Tribunal therefore concluded that the company had not committed the contravention alleged and that the seized Indian and foreign currency recovered from the company's premises had been wrongly confiscated. [Paras 5, 6]

Appeal of M/s Duggal Forex Pvt. Ltd. allowed; Indian and foreign currency seized from its premises directed to be released.

Reliability of statement recorded under Section 37 of FEMA - FFMC licence conditions and liability of company and director - imposition and payment of penalty under FEMA - Whether Shri Sumesh Duggal committed contraventions justifying confiscation and penalty and whether any additional penalty is payable - HELD THAT: - The Tribunal found that the evidence on record showed that Shri Sumesh Duggal personally engaged in sale of US dollars at premium to officials of the Nigerian High Commission and that his statements and corroborative material established his involvement in illegal dealings in foreign exchange. Having so found, the Tribunal dismissed his appeal. It also noted that Shri Sumesh Duggal had deposited the penalty of Rs.5,00,000 as pre deposit and therefore no further amount was payable by him. [Paras 5, 6]

Appeal of Shri Sumesh Duggal dismissed; no additional penalty payable in view of pre deposit.

Final Conclusion: The appeal of M/s Duggal Forex Pvt. Ltd. is allowed and the Indian and foreign currency seized from its premises is directed to be released. The appeal of Shri Sumesh Duggal is dismissed; his pre deposit of penalty discharges any further liability.

Jurisdiction of domestic penal/regulatory law over non-resident banks maintaining correspondent/Vostro accounts - abetment as an independent offence under Section 64(2) of FERA - application of Section 107 IPC (definitions of instigation, conspiracy and aiding) to establish abetment under FERA - admissibility and reliance on out-of-country correspondence and contemporaneous minutes for establishing instigation - presumption of culpable mental state under Section 59 of FERA and shifting burden of proof - vicarious/official liability of managerial officer under Section 68(1) of FERA - judicial moderation of disproportionate penalties

Jurisdiction of domestic penal/regulatory law over non-resident banks maintaining correspondent/Vostro accounts - FERA applies to the appellant bank notwithstanding its non-resident status because it maintained and operated correspondent/Vostro accounts in India and its acts abroad produced effects in India - HELD THAT: - The Tribunal upheld the Adjudicating Authority's conclusion that opening and operating a correspondent account in India by the appellant bank brought it within the territorial ambit of FERA. The Adjudicating Authority had complied with the earlier FERA Board direction and recorded that the appellants admitted the factual matrix; further, acts done abroad which produce effects in India are to be treated as done in India for the purpose of FERA. Given undisputed credits into the appellant's NRE/Vostro accounts in India and telex instructions emanating from the appellant, the Tribunal found it correct to subject the appellant to FERA jurisdiction and to proceed with adjudication. [Paras 16]

Jurisdictional objection rejected; FERA applies to the appellant bank in respect of the transactions in question.

Abetment as an independent offence under Section 64(2) of FERA - application of Section 107 IPC (definitions of instigation, conspiracy and aiding) to establish abetment under FERA - presumption of culpable mental state under Section 59 of FERA and shifting burden of proof - The charge of abetment under Section 64(2) read with relevant provisions of FERA is established against the appellant bank on the material before the Adjudicating Authority - HELD THAT: - The Tribunal accepted the Adjudicating Authority's application of the concepts in Section 107 IPC to determine abetment under Section 64(2) of FERA because FERA does not define abetment. The record showed repeated, closely timed credits into the appellant's NRE/Vostro accounts and telex communications from the appellant requesting recall and crediting of funds, which the Adjudicating Authority treated as instigation/aid. The Tribunal relied on the principle that acts done outside India whose effect is in India are actionable under FERA and noted Section 59's presumption of culpable mental state applicable to adjudication proceedings; on the totality of facts it held the burden on the appellant to rebut the presumption was not discharged and sustained the finding of abetment. [Paras 18, 20]

Abetment charge established against the appellant bank.

Admissibility and reliance on out-of-country correspondence and contemporaneous minutes for establishing instigation - The telex emanating from the appellant could be relied upon; the Minutes of the meeting, though admissible as a record forwarded by RBI, cannot stand if its author could not be cross-examined, but the case of abetment remains established on the total evidence even without admitting the Minutes as formal evidence - HELD THAT: - The Tribunal observed that the telex dated 21.06.1991 originated from the appellant and therefore its non production to the appellant at a later stage caused no prejudice. The Minutes of the meeting prepared by ANZ Grindlays' official could not be admitted as evidence to the extent they contained inferences by the author because the author was not available for cross examination; nevertheless, the Adjudicating Authority had identified the telex and other correspondence (Item No.18) as relied upon and the Tribunal examined whether the abetment finding survived without the Minutes. Considering the repeated credits and telex communications, the Tribunal concluded the abetment finding could stand. [Paras 17]

Reliance on the telex upheld; Minutes may not be admitted for the author's inferences but are not necessary to sustain the abetment finding.

Vicarious/official liability of managerial officer under Section 68(1) of FERA - Liability of the CEO under Section 68(1) of FERA is established because no evidence showed the contraventions occurred without his knowledge or that he exercised due diligence to prevent them - HELD THAT: - The Adjudicating Authority recorded absence of evidence that the contraventions took place without the CEO's knowledge or that he had exercised all due diligence; the CEO had paid a separate small penalty under the other adjudication and did not contest that order. On this basis the Tribunal affirmed the finding of individual liability for the contraventions in respect of the appeal before it. [Paras 21]

Charge against the individual appellant (CEO) under Section 68(1) established.

Judicial moderation of disproportionate penalties - Penalties imposed under the impugned order dated 09.07.2008 were disproportionate and are reduced to meet the ends of justice - HELD THAT: - While upholding the finding of contravention and abetment, the Tribunal found the quantum of penalties originally imposed to be excessive relative to the culpability found. Exercising its corrective jurisdiction, the Tribunal reduced the bank's penalty to Rs. 1,00,00,000 and the individual appellant's penalty to Rs. 5,00,000, as a proportionate measure which would meet the ends of justice. [Paras 22]

Original penalties reduced to a bank penalty of Rs.1,00,00,000 and individual penalty of Rs.5,00,000.

The appeal against the impugned order dated 11.02.2010 is dismissed - HELD THAT: - The Tribunal declined to interfere with the Adjudicating Authority's order of 11.02.2010 under which nominal penalties had been imposed; the appeal challenging that order was dismissed and disposed of. [Paras 23]

Appeal No. FPA-FE-07/MUM/2013 dismissed.

Final Conclusion: The Tribunal dismissed the challenge to the 11.02.2010 order and partly allowed the appeals against the 09.07.2008 order: it affirmed jurisdiction and the findings of abetment and individual liability but reduced the penalties to Rs.1,00,00,000 on the bank and Rs.5,00,000 on the individual and disposed of the appeals accordingly.

Presumption of misuse of foreign exchange under Section 8(4) of FERA - liability of a 'person' for foreign exchange contraventions irrespective of formal importer status - lifting the corporate veil to attribute control and liability - reliability of retracted statements as corroborative evidence - natural justice - disclosure of documents and denial of cross examination - authorization of an adjudicating authority by delegation under Section 5 of FERA - abetment liability under Section 64(2) of FERA

Liability of a 'person' for foreign exchange contraventions irrespective of formal importer status - presumption of misuse of foreign exchange under Section 8(4) of FERA - lifting the corporate veil to attribute control and liability - Contraventions of Sections 8(3) read with 8(4) and 9(1)(b) of FERA established against Shri R.K. Verma - HELD THAT: - The Tribunal held that the statutory language refers to a 'person' and does not require that the accused be the formal importer. Investigative statements, admissions by Shri R.K. Verma that he controlled and financed the firms, corroborative statements of employees and advisers, documentary entries of remittances in the firms' names, and evidence that no imports occurred collectively supported lifting the corporate veil to treat the firms as part of Verma's concern. The presumption under Section 8(4) that acquisition of foreign exchange for import which is not followed by corresponding import indicates misuse, combined with the evidence showing remittances to entities controlled by Verma and absence of actual imports, led to the conclusion that the contraventions were established against him. [Paras 12, 13, 14, 19, 20]

Contraventions of Sections 8(3) read with 8(4) and 9(1)(b) of FERA are established against Shri R.K. Verma; his appeal is without merit.

Abetment liability under Section 64(2) of FERA - reliability of retracted statements as corroborative evidence - Contraventions of Sections 8(3) read with 8(4), 9(1)(b) and 64(2) of FERA established against Shri R.A. Soni - HELD THAT: - The Tribunal found that Shri R.A. Soni, though a proprietor/importer in name, acted on behalf of and with knowledge of the scheme orchestrated by Shri Verma. Soni's inculpatory statements, his later denial of retraction, and independent corroboration by documents and statements of other co noticees demonstrated that he knowingly abetted the remittances. Applying precedent that retracted confessions may be acted upon if substantially corroborated, the Tribunal accepted the retracted/conflicting statements as part of the cumulative evidence establishing abetment under Section 64(2). [Paras 16, 17, 20]

Contraventions of Sections 8(3) read with 8(4), 9(1)(b) and 64(2) of FERA are established against Shri R.A. Soni; his appeal is dismissed.

Authorization of an adjudicating authority by delegation under Section 5 of FERA - Validity of Additional Director General (Systems), Customs and Central Excise acting as Adjudicating Authority - HELD THAT: - The Tribunal accepted the Respondent's submission and the notification under Section 5 of FERA delegating enforcement functions to officers of other departments. Having regard to the delegation issued by the Central Government, the Additional Director General (Systems), Customs and Central Excise, was held to be duly authorized to adjudicate the SCN in this case. [Paras 14]

The Adjudicating Authority was validly empowered to decide the matter.

Natural justice - disclosure of documents and denial of cross examination - Denial of cross examination did not vitiate the adjudication - HELD THAT: - The Tribunal observed that the SCN had been served along with the documents relied upon and that appellants were given opportunities to inspect and explain the material. Citing precedent, the Tribunal held that where documents are disclosed and opportunity to rebut is afforded, refusal to permit cross examination of witnesses producing those documents does not necessarily violate principles of natural justice, and no prejudice was shown. [Paras 15]

Denial of cross examination did not render the proceedings unfair.

Reliability of retracted statements as corroborative evidence - Admissibility and weight of retracted statements - HELD THAT: - Applying established authorities, the Tribunal held that a retracted inculpatory statement is not ipso facto involuntary and may be acted upon provided it is substantially corroborated by independent and cogent evidence. The Tribunal found such corroboration on the record and therefore did not exclude reliance on the retracted statements in reaching its conclusions. [Paras 16, 17]

Retracted statements were admissible as corroborative evidence and were appropriately considered.

Delay in issuing show cause notice and sufficiency of investigation - Allegation of undue delay in issuance of the SCN rejected - HELD THAT: - The Tribunal accepted that the investigation involved extensive marshalling of statements and records across many persons and bank employees. Given that the SCN followed such investigation and the last relevant statement was recorded in January 1994 with the SCN issued thereafter, the Tribunal did not find the delay complained of to be inordinate or to vitiate the proceedings. [Paras 2, 14]

No prejudicial delay in issuing the SCN was established.

Final Conclusion: On the evidence and applicable legal principles the Tribunal dismissed both appeals, upholding the adjudication that Shri R.K. Verma committed contraventions of Sections 8(3) read with 8(4) and 9(1)(b) of FERA and that Shri R.A. Soni committed contraventions of Sections 8(3) read with 8(4), 9(1)(b) and 64(2) of FERA; the authority and conduct of the adjudicatory process were sustained.

Contravention of Section 3(a) of FEMA - contravention of Section 3(d) of FEMA - confiscation and release of seized foreign currency - retention of foreign currency under Foreign Exchange Management (Possession & Retention of Foreign Currency) Regulations, 2000 (US$ 2000 per person) - presumption as to documents under Section 39 of FEMA - retracted confession and requirement of independent corroboration

Confiscation and release of seized foreign currency - retention of foreign currency under Foreign Exchange Management (Possession & Retention of Foreign Currency) Regulations, 2000 (US$ 2000 per person) - Whether confiscation of the seized foreign currency of value Rs. 2,99,000/- could be sustained and whether the seized Indian currency should be released. - HELD THAT: - The Tribunal found that Regulation 3(iii)(d) of the Foreign Exchange Management (Possession & Retention of Foreign Currency) Regulations, 2000 permits retention of unspent foreign currency up to US$ 2000 per person who travelled abroad. The appellant and three family members had travel stampings and produced receipts of purchase of foreign exchange from authorized dealers. The Adjudicating Authority's inference that the released amounts were too meagre to account for the appellant's stay abroad was held to be unsustainable because the question of how much money is required to stay abroad is subjective and the documentary evidence supported the appellant's claim. Consequently the confiscation of the foreign currency amounting to Rs. 2,99,000/- was set aside and the seized Indian currency, which had not been confiscated, was ordered released. [Paras 7, 18]

Confiscation of foreign currency of value Rs. 2,99,000/- set aside and ordered released; seized Indian currency of Rs. 9.29 lakh ordered released.

Contravention of Section 3(a) of FEMA - contravention of Section 3(d) of FEMA - retracted confession and requirement of independent corroboration - Whether contraventions of Sections 3(a) and 3(d) of FEMA were established and the quantum thereof. - HELD THAT: - The Tribunal accepted that the appellant traded in imported sunglasses and optical frames and coordinated supplies through his cousin in China. While rejecting one specific finding (the alleged illicit acquisition of US$ 16,000 inferred from a notebook entry), the Tribunal upheld that contraventions were established: contravention of Section 3(a) by the appellant for a reduced amount of US$ 99,770 (not US$ 1,15,770), and contraventions of Sections 3(a) and 3(d) in respect of credits of US$ 5,95,738.4 and RMB 5,78,079.8 reflected in the seized passbook. The Tribunal relied on the appellant's admissions, documentary recoveries (including e-mails and the passbook), and the principles requiring corroboration of retracted statements where applicable. [Paras 16, 18]

Contraventions established: Section 3(a) for US$ 99,770 and Sections 3(a) & 3(d) for US$ 5,95,738.4 and RMB 5,78,079.8.

Presumption as to documents under Section 39 of FEMA - retracted confession and requirement of independent corroboration - Whether the appellant's statements (including retracted portions) and documents/e-mails seized from his premises could be relied upon in the proceedings despite absence of cross-examination. - HELD THAT: - The Tribunal held that the appellant's statement under Section 37 of FEMA was voluntary and truthful in content and circumstances. The statement was corroborated by independent and cogent material recovered from his premises (passbook, e-mails, deposit slips), and the provisions of Section 39 of FEMA permit presumption of the truth of documents seized and tendered in proceedings unless contrary is proved. Given this corroboration, the absence of cross-examination of departmental witnesses did not cause prejudice to the appellant and did not render reliance on the seized material impermissible. [Paras 12, 13]

Appellant's statements and seized documents/e-mails are admissible and may be relied upon; absence of cross-examination did not prejudice appellant.

Proportionality of penalty - Whether the penalty imposed by the Adjudicating Authority was excessive and required reduction. - HELD THAT: - Having found the contraventions established (with adjustments to quantum), the Tribunal held that the consolidated penalty originally imposed was disproportionately high. Exercising its appellate power, the Tribunal reduced the consolidated penalty to Rs. 15,00,000/-. [Paras 19]

Consolidated penalty reduced to Rs. 15,00,000/-.

Final Conclusion: The appeal is partly allowed: confiscation of foreign currency of value Rs. 2,99,000/- set aside and released; seized Indian currency released; contraventions under Sections 3(a) and 3(d) of FEMA upheld in specified amounts (Section 3(a) for US$ 99,770; Sections 3(a) & 3(d) for US$ 5,95,738.4 and RMB 5,78,079.8); consolidated penalty reduced to Rs. 15,00,000/-; appeal disposed of accordingly.

Regular bail in PMLA cases - proceeds of crime - requirement of being "derived or obtained as a result of" scheduled offence - prima facie assessment at bail stage - duty of ED under Section 66(2) to share material with scheduled-offence agency - conditions for grant of bail in socio-economic offences

Regular bail in PMLA cases - prima facie assessment at bail stage - conditions for grant of bail in socio-economic offences - Grant of regular bail to the petitioner in ECIR Case No. 01 of 2024 under the PML Act - HELD THAT: - The High Court evaluated the materials placed on record, the nature of allegations, the documentary material relied upon by the petitioner to show lawful establishment and functioning of units, and the prosecution's quantification of alleged proceeds. Applying established principles governing bail (including considerations of seriousness, nature of material, risk of tampering or absconding and the public interest in socio-economic offences), the Court found that the balance of convenience favoured release. The Court noted that certain apparent discrepancies in registers prima facie appeared to be human errors and that the prosecution's computation of proceeds included the petitioner's investment figure which, on the face of the complaint, was described as "paid and purchase" and thus could not be readily equated with proceeds of crime. The Court accordingly exercised its discretion to grant regular bail subject to specified conditions concerning bail bonds, surrender of passport and non-tampering and appearance obligations. [Paras 35, 36, 37, 38, 39]

Petitioner released on regular bail on furnishing bond and sureties, with conditions including surrender of passport (unless released by trial court), prohibition on tampering with evidence or threatening witnesses, and attendance at trial.

Proceeds of crime - requirement of being "derived or obtained as a result of" scheduled offence - duty of ED under Section 66(2) to share material with scheduled-offence agency - Prima facie rejection of prosecution's treatment of the purchase amount as proceeds of crime and reminder of ED's obligation when other offences are indicated - HELD THAT: - The Court examined the prosecution complaint (para 8.2) which treated the total amount paid for coal and the alleged illegal gain as "proceeds of crime" aggregating the two figures. Applying the legal principle from Vijay Madanlal Choudhary that property qualifies as "proceeds of crime" only if derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, the Court observed that the amount described as "paid and purchase" cannot prima facie be treated as proceeds of crime. The Court also adverted to Prakash Industries (para 91) to note the ED's obligation to forward material to the competent agency under Section 66(2) where in the course of investigation evidence of other cognizable offences emerges; the judgment was noticed but no direction to remit was made. The Court treated these legal considerations as relevant to its prima facie assessment at the bail stage. [Paras 29, 30, 31, 33, 34]

On prima facie reading, the prosecution's characterisation of the purchase amount as proceeds of crime is unsustainable; the definition of "proceeds of crime" requires the property to be derived or obtained as a result of the scheduled offence, and the ED must share material with the scheduled offence agency where appropriate.

Final Conclusion: Bail application allowed: petitioner released on regular bail subject to bond, sureties and conditions. The Court recorded that, on a prima facie review, the prosecution's computation treating the purchase/investment amount as proceeds of crime is doubtful under the settled definition of "proceeds of crime", and noted the ED's duty under Section 66(2) to share material with the agency competent to investigate any cognizable scheduled offence identified during enquiry.

Extended period of limitation - Burden of proof on the revenue to establish nexus between consideration and taxable service - Service tax demand based on mismatch between balance sheet and ST-3 returns - Exemption for services to SEZ subject to submission of Form A-2 - Taxability of other operating income/recovery of bad debts

Extended period of limitation - Service tax demand based on mismatch between balance sheet and ST-3 returns - Whether the Show Cause Notice issued for the period April 2016 to June 2017 invoking the extended period is sustainable where the Department relied on discrepancies between balance sheet figures and ST-3 returns without proving intent to evade or establishing nexus of receipts to taxable services - HELD THAT: - The Tribunal found that the Department's case rested on alleged discrepancies between figures in the balance sheet and ST-3 returns but made no effort to correlate specific receipts in the balance sheet to particular taxable services or recipients. The onus to prove the nexus between consideration and the taxable service lies on the Department which issued the Show Cause Notice. No positive act, suppression or intent to evade on the part of the appellant was shown or evidenced; the appellants had filed returns and produced the documents called for. In such circumstances, invocation of the extended period of limitation is not permissible. The Commissioner (Appeals) erred in upholding the demand despite the appellants' explanations, affidavits and Chartered Accountant certificate which the Tribunal found to satisfactorily address the discrepancy.

Extended period cannot be invoked and the demand based on the mismatch between balance sheet and ST-3 returns is not sustainable.

Exemption for services to SEZ subject to submission of Form A-2 - Whether the demand of service tax on services rendered to SEZ developers is sustainable despite submission of Form A-2 copies and an affidavit explaining non-availability of original A-2 certificate - HELD THAT: - The appellants explained that the A-2 certificate was common to multiple service providers and the original could not be handed over by the SEZ authorities; a copy of the certificate and an affidavit were furnished. The Tribunal observed that the appellants had placed on record the requisite documentation and explanation, and the Department did not demonstrate any deficiency or malafide in those submissions. The Commissioner (Appeals) should not have disregarded the documents relied upon by the appellants.

Demand of service tax on services rendered to SEZ developers is not sustainable.

Taxability of other operating income/recovery of bad debts - Whether the demand of service tax on 'other operating income' arising from recovery of bad debts (relating to earlier periods on which service tax was already paid) is maintainable - HELD THAT: - The appellants explained that the impugned other operating income represented recovery of bad debts during November 2017 to February 2018 against bills originally raised in 2014-15 on which service tax had already been discharged. The Tribunal noted that the Department did not advance any convincing case on merits to rebut the appellants' explanation or to show that such recoveries gave rise to additional service tax liability. Commissioner (Appeals) erred in not accepting the documentary evidence and explanations furnished by the appellants.

Demand of service tax on other operating income is not maintainable.

Final Conclusion: The appeal is allowed; the Show Cause Notice and the impugned order are set aside as the Revenue failed to establish nexus or intent to evade and the appellants have satisfactorily explained and supported their claims with documents and affidavits.

Entitlement to cash refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - applicability of CENVAT credit/refund where exported goods attract nil rate of duty - requirement of execution of bond for export of nil-rated or exempted goods - precedential effect of Tribunal and High Court decisions on admissibility of CENVAT credit for exported exempted goods

Entitlement to cash refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - requirement of execution of bond for export of nil-rated or exempted goods - applicability of CENVAT credit/refund where exported goods attract nil rate of duty - The appellants are entitled to cash refund of accumulated CENVAT credit for exports of iron ore lumps and fines for the period April 2006 to March 2008 despite not executing a bond, as execution of bond is not required where the exported goods attract nil rate of duty. - HELD THAT: - The Tribunal considered whether the refund claims under Rule 5 CCR, 2004 could be rejected solely because no bond was executed when the exported iron ore lumps and fines attracted nil rate of duty. Relying on earlier decisions of the Tribunal and the High Court (including the reasoning in Jolly Board Ltd. and subsequent CESTAT and High Court authorities), it was held that Rule 6 and related requirements do not mandate execution of a bond for exports of goods that are exempted or chargeable to nil rate, and that CENVAT credit/refund is admissible in such cases. Applying these precedents to the facts of the present case, the Tribunal found no infirmity in allowing the refund despite absence of a bond and set aside the impugned rejection of the refund claims. [Paras 6, 7]

Impugned order rejecting the refund claims for failure to execute the bond is set aside and the appeals are allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that execution of a bond was not a precondition to grant cash refund of accumulated CENVAT credit for exported iron ore (lumps and fines) attracting nil duty for April 2006 to March 2008, and set aside the orders rejecting the refund claims.

Sub-contractor liability to pay service tax - time-bar/limitation of demand - taxability contingent on notification effective date - retrospective exemption for management and maintenance of roads - admission and concession to amounts payable - penalty set aside where principal demand is set aside - personal penalty against employee requiring distinct culpability

Sub-contractor liability to pay service tax - time-bar/limitation of demand - Confirmed demand in respect of services provided by the Appellant as sub-contractor (S.No.1 to 4) set aside on account of limitation though merits are against the Appellant in view of binding Larger Bench authority. - HELD THAT: - The Tribunal observed that while the Larger Bench in Melange Developers Pvt Ltd and this Bench in Akash Engineering Services hold that a sub-contractor is liable on merits, those decisions also addressed the question of extended period. Following the ratio of those precedents, the Tribunal held that the demands for the periods concerned are time-barred and therefore the confirmed demands in respect of services provided as sub-contractors are required to be set aside despite the merits being unfavourable to the Appellant.

Set aside the confirmed demand in respect of services provided by the Appellant as sub-contractor (S.No.1 to 4) on account of limitation.

Taxability contingent on notification effective date - Demand in respect of Site Formation services (S.No.5) set aside because the earthwork/excavation was completed before the service was brought into charge. - HELD THAT: - The Tribunal found that the Site Formation services relied upon were completed prior to the date on which the relevant service was notified as taxable. Tax liability depends on the effective date of notification; services completed before that date are not taxable. Applying that principle, the demand raised for Site Formation services was disallowed.

Set aside the demand relating to Site Formation services completed before notification (S.No.5).

Retrospective exemption for management and maintenance of roads - Confirmed demand in respect of Management, Maintenance or Repair Services (MMRS) for roads (S.No.6) set aside by applying the retrospective exemption under the statutory provision. - HELD THAT: - The Tribunal noted that statutory provisions grant exemption from service tax for management and maintenance of roads for the period specified and that retrospective effect was given to confer that benefit on service providers engaged in road maintenance. In view of the retrospective exemption, the confirmed demand for MMRS was set aside.

Set aside the confirmed demand in respect of MMRS for roads.

Admission and concession to amounts payable - Amounts conceded by the Appellant (Excavator rent, short payment and interest) held payable along with interest as admitted. - HELD THAT: - The Tribunal recorded that the Appellant did not contest the demands relating to excavator rent, identified short payment and interest. Where amounts are not contested, the Appellant is liable to pay those amounts together with applicable interest, and the Tribunal therefore upheld the requirement to pay them.

Excavator rent, the short payment and the interest admitted by the Appellant are payable along with interest.

Penalty set aside where principal demand is set aside - personal penalty against employee requiring distinct culpability - Penalties imposed on the Appellant company and on the employee (second Appellant) set aside. - HELD THAT: - The Tribunal reasoned that since the substantial portion of the principal demand has been set aside on various grounds, there is no justification for imposing penalty on the company. As to the penalty on the employee, the Tribunal observed that no specific role or distinct culpability was shown and that the provision for personal penalty was brought into effect later; coupled with the reduction of the principal demand, the penalty on the employee was not sustainable.

All penalties imposed on the company and the employee are set aside.

Final Conclusion: Appeals partly allowed: substantial demands set aside on grounds of limitation, non taxability prior to notification and retrospective exemption; amounts admitted by the Appellant remain payable with interest; penalties on the company and the employee are set aside; appeals disposed of accordingly.

Pre-deposit under Section 35F of Central Excise Act (amended w.e.f. 06.08.2014) - sufficiency of 10% pre-deposit for admission and hearing of appeals - remand to Commissioner (Appeals) for decision on merits - admission of appeal despite prior non-compliance with earlier stay directions

Pre-deposit under Section 35F of Central Excise Act (amended w.e.f. 06.08.2014) - sufficiency of 10% pre-deposit for admission and hearing of appeals - Whether the payment of 10% of the litigated amount, made pursuant to the amended Section 35F, suffices as pre-deposit for taking the appeal on record and for hearing on merits. - HELD THAT: - The Tribunal observed that Section 35F had been amended effective 06.08.2014 so as to require a reduced pre-deposit (maximum 10%) when the appeal is taken up before the Tribunal. The appellant furnished a challan showing payment of the 10% pre-deposit. Relying on precedents of this Tribunal and other fora where a lenient view was taken in post-amendment cases to admit appeals on a 10% pre-deposit, the Bench held that the amount deposited by the appellant is sufficient pre-deposit for purposes of hearing the appeal on merits. The Tribunal rejected the consequence of the Commissioner (Appeals) having dismissed the appeal for non-compliance with an earlier direction for 50% pre-deposit, insofar as the amended statutory scheme now permits the lesser deposit and the appellant has complied with that requirement. [Paras 3, 4, 5, 6]

The Tribunal held that the 10% pre-deposit made by the appellant is sufficient to admit the appeal and to proceed to adjudicate the matter on merits.

Remand to Commissioner (Appeals) for decision on merits - admission of appeal despite prior non-compliance with earlier stay directions - Disposition of the appeal in view of earlier dismissal by the Commissioner (Appeals) for alleged non-compliance with a 50% pre-deposit direction. - HELD THAT: - Having found the 10% pre-deposit sufficient under the amended Section 35F and noting that the Commissioner (Appeals) dismissed the appeal without examining its merits on account of non-compliance with the earlier 50% direction, the Tribunal set aside the impugned dismissal. The matter is remitted to the Commissioner (Appeals) with directions to take the appeal on record and decide the issues on merits afresh, applying the amended pre-deposit requirement where relevant. The Tribunal relied on analogous decisions where appeals were admitted on the basis of the amended provision and remanded them for adjudication on merits. [Paras 2, 5, 6]

Impugned order is set aside and the matter is remanded to the Commissioner (Appeals) to take the appeal on record and decide the issue on merits.

Final Conclusion: The Tribunal held that the appellant's deposit of 10% pursuant to the amended Section 35F is sufficient to admit the appeal; it set aside the Commissioner (Appeals) order dismissing the appeal for non-compliance with an earlier higher pre-deposit direction and remitted the matter to the Commissioner (Appeals) for fresh adjudication on merits.

CENVAT credit on input services - refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - admissibility of input services - nexus of input services with output services - precedential weight of Tribunal decisions

CENVAT credit on input services - admissibility of input services - nexus of input services with output services - refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - precedential weight of Tribunal decisions - Admissibility of CENVAT credit on specified input services and entitlement to cash refund of accumulated credit on account of export of services for the relevant periods - HELD THAT: - The Tribunal examined whether credit of CENVAT on a list of input services (including Real Estate Agent service, Management/Business Consultant service, Air Travel service, Credit/Debit Card services, Event Management service, Outdoor Catering service, Banking/Financial services, Club/Association membership fees, Design service, House Brokering service, Construction, Supply of Tangible Goods, Health Club & Fitness Centre, and Tour Operator service) was admissible and whether accumulated credit attributable to export of services for the stated periods was refundable under Rule 5. The Tribunal noted that each of the contested services had been held admissible as input services in earlier decisions of the Tribunal and other authoritative orders cited in the written submissions. Applying the principle that where input services are held to bear requisite nexus with the taxable output service, credit cannot be denied, the Bench concluded that the denial of refund in respect of these services could not be sustained. The Tribunal therefore modified the impugned orders to allow credit on the listed services and allowed the appeals to that extent.

Impugned orders modified to allow CENVAT credit on the specified input services and the appeals allowed to that extent, permitting refund of accumulated credit for the relevant periods.

Final Conclusion: The Tribunal allowed the appeals in part by holding that CENVAT credit on the specified input services is admissible and that the accumulated credit attributable to export of services for the listed periods is refundable; the impugned orders were modified accordingly.

Clubbing of clearances for determination of Central Excise duty - Mutuality of financial interest between related business entities - Re-appreciation of documentary and oral evidence by appellate authority - Perversity as ground for interference with findings of fact - Remand for fresh consideration

Clubbing of clearances for determination of Central Excise duty - Mutuality of financial interest between related business entities - Re-appreciation of documentary and oral evidence by appellate authority - Perversity as ground for interference with findings of fact - Remand for fresh consideration - Whether the value of clearances of M/s Mica Mold (MM) and M/s Mica Mold Pvt. Ltd. (MMPL) ought to be clubbed for determining Central Excise duty and whether the Tribunal erred in reversing the adjudicating authority's finding on mutuality of interest without re appreciating the documentary evidence - HELD THAT: - The High Court examined the adjudicating authority's finding in paragraph 10.1.2 that common documents (including stock registers), presence of MM documents in MMPL's declared office and oral testimony of Shri Arun Agrawal established common procurement, storage, manufacture and accounting indicating mutuality of interest between MM and MMPL. The Tribunal had reversed that finding by relying primarily on the separate legal identities of the entities (one a proprietorship and the other a private limited company) and on the familial relationship of the directors, without re appreciating the documentary and oral material relied upon by the adjudicating authority. The Court held that the question whether clearances should be clubbed for exemption cannot be resolved merely by noting distinct legal forms; it requires assessment of transactional realities on the basis of documents and evidence. Where the appellate forum ignores or fails to re appreciate relevant primary material and reaches a contrary conclusion, the High Court may intervene if the error is apparent on the face of the order or the conclusion is perverse. Applying these principles, the Court found the Tribunal's treatment of Issue No.1 to be unsatisfactory and quashed the impugned finding, directing that the matter be remitted to the Tribunal for fresh consideration and appreciation of the relevant documents on record. [Paras 7, 10, 47, 48, 49]

Finding recorded by the Tribunal in paragraph 7 is quashed and set aside; Issue No.1 is remitted to the Tribunal for fresh consideration/appreciation of the documentary and oral evidence on the record.

Final Conclusion: The High Court quashed the Tribunal's reversal of the adjudicating authority on the question of clubbing clearances of MM and MMPL, holding that the Tribunal failed to re appreciate relevant documents and that the matter (Issue No.1) is remitted to the Tribunal for fresh consideration; the appeal is disposed of with a direction to decide the appeal preferably within six months.

CENVAT credit utilization - sugar cess as duty of excise - interpretation and application of Rule 3(4) of the CENVAT Credit Rules, 2004 - distinction between sugar cess and Clean Energy Cess

CENVAT credit utilization - sugar cess as duty of excise - interpretation and application of Rule 3(4) of the CENVAT Credit Rules, 2004 - Utilization of CENVAT credit for payment of sugar cess for the period 2010-2011 - HELD THAT: - The Tribunal examined whether accumulated CENVAT credit on inputs, capital goods and input services could be utilised to discharge liability of sugar cess. It noted the Karnataka High Court decision in the appellant's own case holding that sugar cess is a duty of excise and therefore falls within the ambit of Rule 3 of the CENVAT Credit Rules, 2004. Since sub rule (4) of Rule 3 does not contain any restriction barring utilisation of CENVAT credit for payment of sugar cess, the Tribunal held that utilisation cannot be denied. The Tribunal distinguished decisions regarding Clean Energy Cess on the ground that Clean Energy Cess had been expressly excluded from the scope of sub rule (4) by a specific notification, a distinction absent in relation to sugar cess; accordingly those authorities were not applicable here. [Paras 8, 9, 10]

Allowed the appeals and held that sugar cess can be paid by utilising CENVAT credit; impugned orders set aside with consequential relief.

Final Conclusion: The appeals are allowed; the orders demanding recovery of sugar cess by disallowing utilisation of CENVAT credit are set aside and consequential relief granted as per law.

Testing charges reimbursed by customer - third party testing at customer's request - assessable value of excisable goods - optional/additional/pre-delivery inspection charges - reimbursement not includible in assessable value

Testing charges reimbursed by customer - third party testing at customer's request - assessable value of excisable goods - Testing charges paid to a third party at the specific request of the buyer and subsequently reimbursed by the buyer are not includible in the assessable value of excisable goods supplied on payment of duty. - HELD THAT: - The Tribunal examined the bill and the customer's letter evidencing that the testing was carried out at the specific request of the customer. Applying the settled legal position that additional or optional testing commissioned by the buyer and paid for by the buyer does not form part of the manufacturer's assessable value, the Tribunal relied on earlier authorities including Bhaskar Ispat Pvt. Ltd. (Larger Bench) which held that additional testing charges at the request of the customer and borne by the customer are not includible in assessable value. The Tribunal also noted the decision in Goyal M.G. Gases Pvt. Ltd. (upheld by the Supreme Court) and other Tribunal decisions such as Shree Pipes Ltd., CIMMCO Ltd. and Hindustan Development Corporation Ltd. which consistently distinguish compulsory manufacturer obligations from optional buyer-requested tests and exclude the latter from valuation. The Tribunal rejected the Revenue's attempt to treat the testing charges as part of manufacture or packing, finding on the material before it that the tests were optional and at the buyer's behest; accordingly the reimbursement could not be treated as part of the transaction value for excise duty purposes. The issue was treated as no longer res integra in light of these precedents and the factual documentary evidence of the buyer's request. [Paras 4, 5]

Impugned demand, interest and penalty to the extent based on inclusion of the testing charges in assessable value set aside; appeal allowed with consequential relief.

Final Conclusion: On the facts, testing carried out by a third party at the specific request of the customer and reimbursed by that customer is not includible in the assessable value of excisable goods; the impugned order sustaining duty, interest and penalty on such testing charges is set aside and the appeal is allowed.

Assessable value to be determined at the time and place of removal - abatement/deduction for sales tax in valuation - effect of subsequent change in law on previously determined assessable value - pre-payment at net present value does not convert deferred sales tax into additional consideration - binding effect of Board circulars on departmental practice

Assessable value to be determined at the time and place of removal - abatement/deduction for sales tax in valuation - effect of subsequent change in law on previously determined assessable value - Whether prepayment of deferred sales tax at its net present value or subsequent changes in sales tax law could be treated as additional consideration and disallowance of sales tax abatement for earlier clearances - HELD THAT: - The Tribunal held that assessable value for excise duty is fixed at the time and place of removal and must reflect permissible deductions (including sales tax) as they stood at that time. A later change in sales tax law-providing an option to discharge deferred sales tax by paying its net present value-does not alter the sales tax liability that was payable at the time of clearance nor convert the NPV payment into additional consideration for earlier transactions. The Tribunal reasoned that the 2002 amendment merely afforded an option to prepay the deferred liability; it did not reduce or extinguish the original deferred liability in a manner that would affect valuation at the earlier date. Reliance was placed on precedents establishing that subsequent fluctuations or legal changes affecting price or tax liability do not warrant re determination of assessable value already crystallised on removal. The Tribunal also noted that Board circulars consistently permit deduction of sales tax based on the amount chargeable under law at the time, and such instructions are binding on departmental authorities and undermine Revenue's contrary stance.

Demand for duty, interest and penalty based on treating the NPV prepayment or difference as additional consideration was set aside and the appeal allowed.

Pre-payment at net present value does not convert deferred sales tax into additional consideration - binding effect of Board circulars on departmental practice - Whether the departmental demand and penalties could be sustained when Board instructions and Tribunal precedents treat deferred sales tax and incentives as permissible abatement for valuation purposes - HELD THAT: - Applying decisions of this Tribunal (including Rational Engineers and Uttam Galva Steels) the Bench held that where the scheme permitted retention of collected sales tax and later permitted optional prepayment at NPV, what the State forewent was only the time value cost to the assessee and not an alteration in the character of the amount collected. The departmental contention that NPV prepayment amounted to additional consideration was contrary to consistent Board instructions and earlier Tribunal findings; further, the change in sales tax law post removal could not be invoked to reopen valuation already determined. In view of these precedents and the binding nature of Board circulars, the Revenue's demand and penalties could not be sustained.

Impugned order of demand and penalties set aside; appeal allowed.

Final Conclusion: Following Tribunal precedents and binding Board instructions, the claim for deduction of sales tax as per liability at the time of removal must be respected; subsequent option to prepay deferred tax at NPV does not convert that payment into additional consideration or justify re determination of assessable value, and the demand and penalties based on such recharacterisation are set aside.

Cenvat credit on inputs used for manufacture of sample/prototype exported for testing - testing as integral part of manufacturing - entitlement to Cenvat credit under Rule 3 of Cenvat Credit Rules, 2004 for inputs used in or in relation to manufacture - export of samples under Rule 19 of the Central Excise Rules, 2002 without payment of duty - penalty and interest consequential on unsustainable demand

Cenvat credit on inputs used for manufacture of sample/prototype exported for testing - testing as integral part of manufacturing - entitlement to Cenvat credit under Rule 3 of Cenvat Credit Rules, 2004 for inputs used in or in relation to manufacture - export of samples under Rule 19 of the Central Excise Rules, 2002 without payment of duty - penalty and interest consequential on unsustainable demand - Denial of Cenvat credit on inputs used in manufacture of sample vehicles exported for testing and the consequential confirmation of interest and penalty. - HELD THAT: - The Tribunal held that testing and analysis of sample vehicles exported to associated enterprises for testing is an activity integral to the manufacture of final products. Rule 3 of the Cenvat Credit Rules, 2004 entitles a manufacturer to avail credit of specified duties in respect of inputs or capital goods received in the factory for use in or in relation to the manufacture of final products. Export of sample vehicles under Rule 19 of the Central Excise Rules, 2002 on a letter of undertaking and without realization of export proceeds does not, by itself, disentitle the manufacturer from availing Cenvat credit where such export is part of the manufacturing process. The Tribunal relied on its earlier decisions in the appellant's own case and a catena of authorities holding that testing is intrinsic to manufacture and that credit cannot be denied merely because export proceeds were not realized or samples were destroyed after testing. Consequentially, demands based on denial of credit, and attendant interest and penalty, are unsustainable where the foundational denial is overturned. [Paras 6, 7]

Impugned orders denying Cenvat credit and imposing interest and penalty are set aside; appeals allowed with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeals, holding that inputs used in manufacture of sample vehicles exported for testing are eligible for Cenvat credit since testing is integral to manufacture; demands and attendant interest and penalty premised on denial of such credit were set aside.

Summary order. Interim stay of operation of the impugned order granted; matter listed for final disposal at 2 p.m. after four weeks; IA No. 189053/2024 disposed of.

Revival of time-barred debt by issuance of cheque - application of Section 25(3) Indian Contract Act as written acknowledgement - presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption and evidentiary burden in cheque dishonour cases - acknowledgement and fresh period of limitation under Section 18 of the Limitation Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption and evidentiary burden in cheque dishonour cases - Validity of the Trial Court's acquittal based on its finding that the debt was time-barred and therefore not a legally enforceable liability under section 138 NI Act - HELD THAT: - The High Court held that the Trial Court erred in acquitting the accused on the ground that the debt was time-barred. The statutory presumptions under Sections 118 and 139 of the NI Act favour the complainant and create a rebuttable presumption of a legally enforceable debt upon issuance of a cheque. The Trial Court's reliance on limitation without adequately testing or displacing those presumptions was misplaced. Whether a cheque was issued for a time-barred debt is a mixed question of law and fact and requires assessment of evidence; the Trial Court reached a definitive conclusion at the threshold which the High Court found unsustainable on the record. [Paras 18, 20, 24, 27, 30]

Acquittal set aside insofar as it proceeded on the conclusion that the debt was not legally enforceable due to limitation; the Trial Court's conclusion on time-bar is found to be erroneous.

Application of Section 25(3) Indian Contract Act as written acknowledgement - revival of time-barred debt by issuance of cheque - acknowledgement and fresh period of limitation under Section 18 of the Limitation Act - Whether issuance of the cheque operates as a written promise under Section 25(3) Indian Contract Act and thereby revives or renders the debt legally enforceable for the purposes of section 138 NI Act - HELD THAT: - The Court applied Section 25(3) of the Indian Contract Act and held that a cheque, being a written and signed instrument, can constitute a promise in writing to pay wholly or in part a debt, including a debt otherwise barred by limitation. Such an acknowledgment or written promise gives rise to a fresh cause of action and, where proved, reanimates the remedy so that the liability becomes 'legally enforceable' within the meaning of the explanation to Section 138. The Court rejected the Trial Court's view that mere historical payments established extinguishment of liability and observed that the drawer's issuance of a cheque in 2014 (and again in 2015) could amount to an acknowledgment restarting limitation under Section 18 of the Limitation Act. [Paras 21, 31, 32, 34, 37]

Issuance of the cheque can operate as a written promise under Section 25(3) ICA and may revive a time-barred debt, thereby rendering the debt legally enforceable for the purposes of prosecution under Section 138 NI Act.

Rebuttable presumption and evidentiary burden in cheque dishonour cases - credibility of accused's testimony - Assessment of the accused's testimony and the adequacy of the Trial Court's acceptance of his account that the cheque was not given for an existing liability - HELD THAT: - On scrutiny of the evidence, the High Court found the accused's testimony to be contradictory and inherently unbelievable on material points-particularly regarding payments alleged to have been made and the rationale for furnishing a new security cheque despite earlier repayments. The Trial Court's acceptance of the accused's explanation (that the cheque was issued only to resolve a 'family dispute' and not for a legally enforceable debt) was held to lack reasoned support given the contradictions and documentary material on record. Accordingly, the Trial Court's factual conclusions on extinguishment of liability were set aside. [Paras 15, 16, 17, 19, 28]

Trial Court's acceptance of the accused's account is discredited; the factual finding that the debt had been extinguished is set aside as not inspiring confidence.

Final Conclusion: The impugned order of acquittal dated 31 July 2021 is set aside. The matter is restored for further proceedings and listed for directions on the appointed date; the High Court held that the issuance of the cheque could revive a time-barred debt under Section 25(3) ICA and that the Trial Court erred in conclusively treating the liability as barred by limitation without proper appraisal of statutory presumptions and the evidence.

Anticipatory bail / bail on arrest - conditional bail subject to deposit - prima facie satisfaction on preponderance of documents - use of bank records, tax invoices and GST payments as indicia of legitimate business transactions - non-tampering and cooperation conditions

Anticipatory bail / bail on arrest - conditional bail subject to deposit - Grant of bail on arrest to the applicant subject to specified conditions including deposit, bond and sureties - HELD THAT: - The Court considered that the investigation by the Economic Offences Wing was nearly complete and that the material primarily comprised bank records. The applicant's trade in medical equipment and oxygen concentrators, issuance of tax invoices and payment of GST were noted as indicia that the received amount pertained to legitimate business transactions. One co-accused had already been granted bail and the applicant expressed willingness to deposit the sum in dispute to demonstrate bona fides. Having regard to these factors, the Court was prima facie satisfied to allow bail, but imposed protective conditions to secure the prosecution's interest and the integrity of the trial. The conditions require furnishing a PR bond with solvent sureties, deposit of the disputed amount in the trial Court (with no withdrawal until trial conclusion), prohibition on tampering with evidence or influencing witnesses, and cooperation with the investigation including reporting to the investigating officer and providing contact details. [Paras 8, 9]

Application allowed; in the event of arrest the applicant to be released on bail on furnishing PR bond and sureties, subject to deposit of the specified amount in the trial Court and compliance with non-tamper and cooperation conditions.

Use of bank records, tax invoices and GST payments as indicia of legitimate business transactions - prima facie satisfaction on preponderance of documents - Whether there is prima facie material to implicate the applicant or to justify custodial detention - HELD THAT: - The Court found prima facie material suggesting that the amount received by the applicant related to documented business transactions: payments were routed through the Bank, tax invoices were issued and GST was paid. There was no material before the Court indicating direct dealings with some co-accused or previous criminality by the applicant; further, two persons who deposited amounts into the applicant's account were not made accused. On this basis the Court concluded that custodial detention was not warranted at this stage and bail could be granted with safeguards. [Paras 8]

Prima facie material points to legitimate business receipts and does not justify continued custodial detention; attendant safeguards ordered.

Final Conclusion: Bail application allowed: the applicant, if arrested in CR No.811 of 2021, to be released on bail on furnishing PR bond and solvent sureties, subject to depositing the contested amount in the trial Court (not to be withdrawn until trial ends), and subject to conditions prohibiting tampering with evidence, requiring cooperation with investigation and reporting to the investigating officer.

Applicability of Order IX CPC in commercial suits - Appealability under the Commercial Courts Act, 2015 - Order XLIII CPC - appealable orders - Setting aside ex parte order

Applicability of Order IX CPC in commercial suits - Appealability under the Commercial Courts Act, 2015 - Order XLIII CPC - appealable orders - Setting aside ex parte order - Whether a petition under Order IX Rule 7 CPC to set aside an ex parte order is maintainable in a commercial suit despite the appeal regime in the Commercial Courts Act, 2015. - HELD THAT: - The Court examined Section 13 of the Commercial Courts Act, 2015 and the proviso which confines appeals to orders specifically enumerated under Order XLIII of the Code of Civil Procedure. Order XLIII does not provide for an appeal against an order setting aside an ex parte order under Order IX Rule 7 CPC (or an appeal from the order of setting ex parte under Order IX Rule 6(a)). The Commercial Courts Act does not expressly preclude the applicability of Order IX Rule 7 CPC to commercial suits. Consequently, in the absence of a statutory bar, a petition under Order IX Rule 7 CPC remains available to seek setting aside of an ex parte order in a commercial suit and the return of such a petition on the sole ground that only an appeal lies was impermissible. [Paras 5, 7]

Petition under Order IX Rule 7 CPC to set aside ex parte order is maintainable in the commercial suit; the return of the petition on the ground of maintainability was set aside.

Remand for disposal on merits - Setting aside ex parte order - Whether the returned petition in IA SR No.14260/2023 should be taken on file and decided on merits by the Principal District Judge, Chengalpattu. - HELD THAT: - Having held that Order IX Rule 7 CPC is available in the commercial suit, the Court set aside the impugned order of return and directed the learned Principal District Judge to take the petition on file. The Registry was also directed to return the original petition so that the trial court may consider and dispose of the petition on merits in accordance with law. [Paras 8]

Impugned return order set aside; trial court directed to take IA SR No.14260/2023 on file and dispose of it on merits; registry to return the original petition.

Final Conclusion: Civil Revision allowed; the order returning the petition under Order IX Rule 7 CPC was set aside and the Principal District Judge, Chengalpattu was directed to take the petition in IA SR No.14260/2023 on file and decide it on merits in accordance with law.