TaxTMI Updates e-Newsletter
Oct 05,2024

Requirement to record reasons in administrative orders - Principle of natural justice - duty to give reasons - Reasoned and speaking order - Quashing for non-application of mind - Remand for de novo consideration

Requirement to record reasons in administrative orders - Principle of natural justice - duty to give reasons - Quashing for non-application of mind - Impugned appellate orders that reject an appeal without assigning reasons are unsustainable and liable to be quashed. - HELD THAT: - The Court found on perusal of the record and instructions that the appeal filed by the petitioner was rejected by the appellate authority without any recorded reasons; a mere reference to delay in filing did not demonstrate application of mind. The Court reiterated that reasons constitute the rule of natural justice and are required to substitute subjectivity with objectivity; administrative and tribunal orders are obliged to give reasons. Reliance was placed on earlier decisions cited in the judgment: Assistant Commissioner, Commercial Tax Department, Works Contract & Leasing, Kota Vs. Shukla & Brothers and M/s Travancore Rayon Ltd. v. Union of India to underline that absence of reasons renders an order amenable to judicial interference. In the facts of these petitions, the absence of any recorded reasoning led to the conclusion that the impugned orders could not be sustained. [Paras 8, 9, 10, 11]

Impugned orders rejecting the appeal without reasons quashed.

Remand for de novo consideration - Reasoned and speaking order - Opportunity of hearing - Time-bound direction - Matter remanded to the appellate authority for fresh de novo adjudication with a direction to pass a reasoned and speaking order after affording the petitioner an opportunity of hearing within a specified time frame. - HELD THAT: - Given the quashal of the impugned orders for want of reasons, the Court directed that the appellate authority shall proceed de novo and pass an appropriate reasoned and speaking order. The authority must give the petitioner an opportunity of hearing before passing the fresh order. The Court imposed a time-bound mandate, directing completion of the de novo exercise within three months from the date of the order. [Paras 13]

File remitted for de novo consideration; appellate authority to hear the petitioner and pass a reasoned speaking order within three months.

Final Conclusion: Both writ petitions allowed; impugned appellate orders quashed for failure to record reasons and the matter is remitted to the appellate authority for fresh de novo consideration, with a direction to afford hearing and to pass a reasoned and speaking order within three months.

Outward suppression of taxable turnover - Assessment and penalty under Section 74 of the TNGST Act - Principles of natural justice and non-speaking order - Remand for fresh consideration with opportunity of personal hearing - De-freezing of bank account as interim relief

Outward suppression of taxable turnover - Assessment and penalty under Section 74 of the TNGST Act - Principles of natural justice and non-speaking order - Validity of confirmation of tax, interest and equal penalty in respect of Defect No.8 based on alleged suppression of turnover for the pandemic years - HELD THAT: - The assessments in respect of Defect No.8 were founded on a comparison showing decreased taxable turnover in 2020-21 and 2021-22 vis-a -vis 2019-20 while electricity consumption remained substantially the same. The petitioner explained, with supporting documents, that COVID-19 lockdowns caused shutdowns and storage of manufactured job-work products in deep freezers (continuous running for storage at -20 C), producing higher EB consumption that is not directly linked to sales. The respondent did not produce contrary evidence to substantiate suppression and, having failed to take the petitioner's explanation and records into account, passed the impugned orders without adequate consideration of that vital aspect. The Court found the assessment on Defect No.8 to be non-speaking in material respects and observed that the principles of natural justice required fresh consideration after affording the petitioner an opportunity to file further replies and to be heard personally. [Paras 6, 8, 9]

Impugned orders dated 25.06.2024 are set aside insofar as they relate to Defect No.8; the matter is remanded to the assessing authority for reconsideration after permitting additional reply and holding a personal hearing, and interim relief of de-freezing the petitioner's bank account is to be implemented.

Final Conclusion: Writ petitions allowed in part: the tax demand, interest and penalty confirmed in respect of Defect No.8 are set aside and remitted to the respondent for fresh consideration with directions to permit additional reply within the specified time, to issue a clear notice fixing a personal hearing, to decide thereafter in accordance with law, and to de-freeze the petitioner's bank account forthwith.

Violation of principles of natural justice - opportunity of personal hearing in adjudication proceedings - quashing of order passed without personal hearing - self-imposed bar of alternative remedy - remand for fresh reply, hearing and reasoned order

Violation of principles of natural justice - opportunity of personal hearing in adjudication proceedings - quashing of order passed without personal hearing - self-imposed bar of alternative remedy - remand for fresh reply, hearing and reasoned order - Impugned adjudication order passed under Section 74 of the Uttar Pradesh GST Act was in gross violation of natural justice and was liable to be quashed; the matter is to be remanded for fresh opportunity to file reply, personal hearing and a reasoned order. - HELD THAT: - The Court held that the factual matrix mirrors a coordinate Bench decision which emphasised that before passing any adverse adjudication order personal hearing must be offered to the noticee, and that procedural practices such as recording 'N.A.' for hearing date/time or fixing dates so that reply is not prior to personal hearing are impermissible. Where a noticee has not been afforded a proper opportunity of personal hearing (absent a valid waiver or where the noticee has not availed the hearing), the order passed in such circumstances cannot stand as it offends fundamental principles of natural justice. The self-imposed bar of alternative remedy cannot be allowed to validate an order tainted by such denial of hearing. Applying those principles to the present record, the impugned order dated 29.4.2024 was quashed. The Court directed that the officer concerned grant the petitioner a fresh opportunity to file a reply, thereafter fix a date for personal hearing and pass a reasoned order, completing the exercise within two months from the date of the order. [Paras 4, 5]

Impugned order quashed; matter remanded to allow fresh filing of reply, personal hearing and passage of a reasoned order within two months.

Final Conclusion: The writ petition is allowed to the extent that the order dated 29.4.2024 is quashed and set aside; respondent-officer is directed to permit a fresh reply, afford a personal hearing and thereafter pass a reasoned adjudication order within two months. The petition is disposed of.

Restriction on use of electronic credit ledger under Rule 86B - Suspension and restoration of GST registration - Requirement of proper compliance and recording of payment in FORM DRC-03 - Validity of grounds in Show Cause Notice - Saving of power to initiate independent proceedings for cancellation or recovery

Restriction on use of electronic credit ledger under Rule 86B - Suspension and restoration of GST registration - Whether suspension of the petitioner's GST registration was liable to be revoked on the basis that the petitioner had deposited the amount required to meet the 1% cash component mandated by Rule 86B. - HELD THAT: - The Show Cause Notice relied solely on non-compliance with Rule 86B, which caps utilisation of input tax credit for discharge of output tax at 99%, thereby necessitating a minimum cash payment of 1% of the output tax liability. The petitioner produced a challan evidencing payment of the requisite amount and undertook to record the payment in the relevant form. Suspension of GST registration has far-reaching commercial consequences and must be exercised only after due consideration. Given that the only ground stated in the SCN was non-compliance with Rule 86B and that the petitioner has deposited the necessary amount (and agreed to regularise the formal recording), the court found it appropriate to direct immediate restoration of registration subject to the petitioner completing the formalities within the time stipulated by the court. [Paras 8, 11]

Petitioner's GST registration to be restored forthwith, on basis that the requirement under Rule 86B stands satisfied by the deposit and pending formal recording.

Requirement of proper compliance and recording of payment in FORM DRC-03 - Whether the deposit evidenced by challan satisfied the procedural requirement or whether recording via FORM DRC-03 was necessary for revocation of suspension. - HELD THAT: - The respondents submitted that the payment was by challan and not recorded through FORM DRC-03. The court directed the petitioner to ensure that the deposit is recorded in the relevant form or that the necessary forms are furnished for due recording of the payment within two working days. The direction recognises the distinction between substantive compliance (payment of required amount) and procedural compliance (proper recording), and conditions restoration on the petitioner completing the procedural formalities within the specified time. [Paras 9, 10]

Petitioner to record the payment in the relevant form or furnish required forms within two working days; restoration permitted subject to this compliance.

Validity of grounds in Show Cause Notice - Suspension and restoration of GST registration - Whether alleged inclusion of the petitioner's name in a list of fake firms, not mentioned in the SCN, could justify continued suspension of registration. - HELD THAT: - Respondents relied on an assertion that the petitioner's name featured in a list of fake firms, but no such allegation was contained in the Show Cause Notice. The court held that an unpleaded contention cannot sustain continued suspension; where the SCN does not set out a particular ground, that ground cannot be relied upon to justify the adverse action without providing the taxpayer opportunity to meet it. Accordingly, the purported ground could not be used to continue suspension in the absence of its mention in the SCN. [Paras 9, 10, 11]

Allegation of inclusion in list of fake firms, not pleaded in the SCN, cannot justify continued suspension.

Saving of power to initiate independent proceedings for cancellation or recovery - Whether the order restoring registration precludes the respondents from initiating further statutory proceedings. - HELD THAT: - The court expressly clarified that restoration of registration pursuant to satisfaction of the Rule 86B requirement does not bar the respondents from initiating any statutory proceedings, including for cancellation of registration or recovery of dues, in accordance with law. The direction to restore registration is limited and does not operate as an adjudication on other potential statutory violations or liabilities. [Paras 12]

Restoration without prejudice to respondents' right to initiate appropriate proceedings in accordance with law.

Final Conclusion: Writ petition allowed; petitioner's GST registration restored forthwith on finding that payment satisfying Rule 86B had been made and subject to the petitioner recording the payment in the prescribed form within two working days; restoration is without prejudice to respondents' right to pursue any other statutory action in accordance with law.

Principles of natural justice - setting aside of an order passed without affording opportunity - opportunity of personal hearing - remand for fresh consideration on condition - payment of a portion of disputed tax as condition precedent - revival of order on non-compliance with conditional direction

Principles of natural justice - setting aside of an order passed without affording opportunity - opportunity of personal hearing - Whether the impugned demand order was passed in violation of principles of natural justice and therefore liable to be set aside and reconsidered - HELD THAT: - The Court found that notices had been issued but the petitioner's case was handled by a consultant who did not attend the personal hearing and the petitioner was unaware of the demand order. The petitioner produced a prima facie case that documents existed to rebut the alleged mismatch of input tax claims. In these circumstances the Court concluded that the impugned order suffered from a procedural defect for want of adequate opportunity and, to secure compliance with principles of natural justice, set aside the order and directed remand for fresh consideration. The remand was ordered subject to conditions to balance the parties' interests and to prevent delay in final adjudication. [Paras 8, 9]

Impugned order dated 12.07.2023 set aside and matter remanded for fresh consideration after affording personal hearing.

Remand for fresh consideration on condition - payment of a portion of disputed tax as condition precedent - revival of order on non-compliance with conditional direction - Terms on which remand was ordered, including conditional payment, filing of objections, timeline for fresh notice and final order, and consequence of non-compliance - HELD THAT: - The Court imposed a conditional scheme: the petitioner must pay 10% of the disputed tax amount within four weeks; upon such payment the petitioner shall file reply/objection with supporting documents within two weeks; the respondent shall then issue fresh notice, afford personal hearing and pass final orders within three months. The Court specifically provided that failure to comply with the payment condition would automatically revive the impugned order. These directions were imposed to ensure an effective and time-bound reconsideration while preserving the respondent's enforcement rights in case of non-compliance. [Paras 9]

Remand ordered on the stated conditional terms; non-payment within the stipulated time will revive the impugned order automatically.

Final Conclusion: Writ petition allowed: impugned demand order dated 12.07.2023 set aside and remitted for fresh consideration on the specified conditional scheme (payment of 10% within four weeks, filing of objections, fresh notice, personal hearing and final order within three months); non-compliance with the condition will revive the order.

Bar on initiation of proceedings under the CGST Act where State GST proceedings on the same subject matter have been initiated - application of Section 6(2)(b) of the CGST Act preventing parallel/dual proceedings - consequence of initiation/conclusion of proceedings under Sections 73/74 on penalty proceedings under Section 122 - quashing of show cause notice as being without jurisdiction

Bar on initiation of proceedings under the CGST Act where State GST proceedings on the same subject matter have been initiated - application of Section 6(2)(b) of the CGST Act preventing parallel/dual proceedings - Whether the show cause notice issued under Section 122 of the CGST Act was barred by prior initiation and adjudication under the Karnataka GST Act on the same subject matter. - HELD THAT: - The material on record, including the show cause notice dated 15.09.2022 and the State adjudication order dated 09.11.2022, demonstrate that both proceedings relate to the same transactions between the petitioner and M/s Crystal Hardware. A plain reading of Section 6, in particular sub-section (2)(b), shows that where proceedings on a subject matter have been initiated under the State Goods and Services Tax Act, no proceedings on the same subject matter shall be initiated under the CGST Act. Applying that statutory prohibition, the Court concluded that the CGST authorities' initiation of parallel/dual penalty proceedings in respect of the same subject matter was impermissible and the impugned show cause notice was therefore liable to be quashed on this ground. [Paras 6, 8]

The show cause notice issued under Section 122 of the CGST Act was barred by Section 6(2)(b) because State GST proceedings on the same subject matter had been initiated, and the notice was quashed on this ground.

Consequence of initiation/conclusion of proceedings under Sections 73/74 on penalty proceedings under Section 122 - quashing of show cause notice as being without jurisdiction - Whether proceedings under Section 122 of the CGST Act are barred or deemed concluded once proceedings under Section 73 or Section 74 have been initiated or concluded. - HELD THAT: - Section 74(11) and its Explanation 1 were considered. Explanation 1 indicates that where proceedings under Section 73 or Section 74 are initiated, payment in accordance with Section 74(11) results in all proceedings in respect of that notice being deemed concluded for the purposes of Sections 73 and 74, and that such proceedings do not include certain other provisions only as specified. The Court held that, by virtue of these provisions, penalty proceedings under Section 122 in respect of the same notice are deemed to be concluded and that initiation of a separate Section 122 show cause notice in the circumstances was thereby illegal, arbitrary and without jurisdiction. [Paras 9, 10]

Proceedings under Section 122 in respect of the same subject matter were barred/ deemed concluded by the initiation/conclusion of proceedings under Sections 73/74, rendering the impugned Section 122 show cause notice illegal and liable to be quashed.

Final Conclusion: Writ petition allowed; the show cause notice dated 15.09.2022 issued under Section 122 of the CGST Act is quashed as barred by prior State GST proceedings under Section 6(2)(b) and by the effect of initiation/conclusion of proceedings under Sections 73/74.

Natural justice / opportunity of personal hearing - service of notice via GST portal - remand for fresh consideration on condition - revival of order on non-compliance of condition - proceedings under Section 74 for interest on belated GSTR-3B

Natural justice / opportunity of personal hearing - service of notice via GST portal - remand for fresh consideration on condition - revival of order on non-compliance of condition - Impugned proceedings under Section 74 were set aside on ground of insufficient opportunity and matter remanded for fresh adjudication subject to specified conditions. - HELD THAT: - The Court found that notices in the adjudication were only uploaded on the GST portal and the petitioner did not in fact receive effective notice or an opportunity to participate in the proceedings. The impugned order imposing interest for belated filing was therefore passed without affording sufficient opportunity to the petitioner, thereby engaging the principle of natural justice / opportunity of personal hearing. In the interest of consistency with the Court's approach in a comparable matter, the order was set aside and the matter remitted to the respondent for fresh consideration. The remand is conditional: the petitioner must deposit 10% of the total demand within four weeks, failing which the original order shall be revived automatically. Upon compliance, the petitioner is directed to file reply/objections with relevant documents within two weeks, after which the respondent shall issue fresh notice, afford a personal hearing and pass final orders within three months. [Paras 7, 9]

Impugned order dated 29.11.2023 set aside; matter remanded for fresh adjudication on payment of 10% of the demand within four weeks, with further procedural timelines and automatic revival on non-compliance.

Final Conclusion: Writ petition allowed; impugned order quashed and matter remitted for fresh consideration on the stated conditional terms; no costs.

Quashing of notice issued in purported exercise of power under Section 61 of the JGST Act read with Rule 99(1) - liberty to respond to a second show-cause/assessment notice and consideration thereof in accordance with law - judicial relief under Article 226 by way of quashing/setting aside of administrative notice

Quashing of notice issued in purported exercise of power under Section 61 of the JGST Act read with Rule 99(1) - liberty to respond to a second show-cause/assessment notice and consideration thereof in accordance with law - Disposition of the writ petition by reference to an earlier order granting liberty to the petitioner to respond to the second show-cause notice and directing the authority to consider the explanation in accordance with law. - HELD THAT: - The Court observed that the present case is squarely covered by the order dated 28.08.2024 passed in W.P.(T) No.4733 of 2024, wherein the petitioner was permitted to explain the grounds raised in the second show-cause notice within two weeks and the authority was directed to consider the explanation and take follow-up action in view of the mandate of Section 61 of the JGST Act. The respondents did not oppose disposal in terms of that earlier order. In light of that precedent and the absence of contest by the State, the Court disposed of the present petition by applying the same relief - namely, permitting the petitioner to respond to the notice and directing the authority to consider the response in accordance with law - rather than adjudicating the merits of the challenge to the notice itself.

Writ petition disposed of in terms of the earlier order dated 28.08.2024 in W.P.(T) No.4733 of 2024, granting liberty to the petitioner to respond to the second show-cause notice and directing the authority to consider the same in accordance with law.

Final Conclusion: The petition is disposed of by following the order in W.P.(T) No.4733 of 2024: the petitioner is granted liberty to explain the grounds raised in the second show-cause/assessment notice within the timeframe directed previously, and the assessing authority is directed to consider that explanation and take action in accordance with law.

Violation of principles of natural justice - opportunity of hearing - setting aside of adjudication order for reconsideration - treating an assessment order as a show cause notice - deposit as pre-condition for reopening/consideration - revival of order on non-compliance

Violation of principles of natural justice - opportunity of hearing - setting aside of adjudication order for reconsideration - The impugned assessment order was set aside on the ground that the petitioner was denied a fair opportunity to participate in the adjudication proceedings. - HELD THAT: - The Court accepted the petitioner's submission that notices and hearing intimations uploaded on the GST portal were not accessed by the petitioner and that technical difficulties and adaptation to e-mechanism contributed to the non-participation. In view of the failure to afford a reasonable opportunity to the petitioner to respond to notices and to be heard, the Court found the impugned order liable to be set aside and furnished the petitioner with a final opportunity to present objections before the adjudicating authority. [Paras 5]

Impugned order dated 19.06.2023 set aside and the petitioner given a final opportunity to be heard.

Deposit as pre-condition for reopening/consideration - treating an assessment order as a show cause notice - reconsideration of assessment on merits - revival of order on non-compliance - The Court directed conditional relief: deposit of 25% of the disputed tax within two weeks, treating the impugned order as a show cause notice, filing of objections within four weeks, reconsideration after hearing, and revival of the order if conditions are not met. - HELD THAT: - As a condition for granting relief, the Court required the petitioner to deposit 25% of the disputed tax within two weeks of receipt of the order. Upon such deposit, the impugned assessment order would be treated as a show cause notice and the petitioner would have four weeks to file objections with supporting materials. The respondent was directed to consider the objections and pass orders in accordance with law after affording a reasonable opportunity of hearing. The Court clarified that failure to make the deposit or to file objections within the stipulated periods would result in the impugned assessment order standing revived. [Paras 5, 6]

Conditional direction issued: deposit 25% within two weeks; on compliance, impugned order to be treated as show cause notice and objections to be considered after hearing; non-compliance will revive the assessment order.

Final Conclusion: Writ petition disposed by setting aside the impugned assessment order on grounds of denial of natural justice, subject to the petitioner depositing 25% of the disputed tax and following the specified timeline for filing objections; failure to comply will revive the assessment order.

Violation of principles of natural justice - cancellation of GST registration - show cause notice requiring particulars and reasonable opportunity - rejection of revocation application on fresh grounds - reinstatement/restoration of GST registration subject to compliance

Violation of principles of natural justice - show cause notice requiring particulars and reasonable opportunity - Validity of the cancellation of GST registration in view of inadequate particulars in the show cause notice and denial of reasonable time for reply and personal hearing. - HELD THAT: - The show cause notice dated 02.02.2024 alleged that the petitioner obtained registration by fraud, willful misstatement or suppression of facts but did not furnish necessary particulars or details supporting those allegations. The notice afforded the petitioner an extremely short period - until 11.00 a.m. the next day - to submit a reply and appear for personal hearing. Having regard to absence of particulars and the denial of a reasonable opportunity of hearing, the cancellation order dated 16.02.2024 is violative of principles of natural justice. The Court therefore interferes with and sets aside the cancellation order on this ground.

The cancellation order is quashed as violative of principles of natural justice for lack of particulars in the show cause notice and denial of reasonable opportunity.

Violation of principles of natural justice - effect of arrest on ability to comply with procedural timelines - Whether the petitioner's arrest, which prevented submission of reply to the show cause notice, vitiates the cancellation order. - HELD THAT: - The material on record shows the petitioner was arrested on 22.01.2024 and, as a consequence, was unable to respond to the show cause notice dated 02.02.2024 within the very short timeframe prescribed. This circumstance further militates against the validity of the cancellation: the inability to submit reply attributable to arrest compounds the denial of a reasonable opportunity and justifies setting aside the cancellation order.

The cancellation order is also set aside on the additional ground that the petitioner's arrest prevented him from availing the limited opportunity afforded by the notice.

Rejection of revocation application on fresh grounds - republication of grounds and fresh opportunity - Validity of the order rejecting the revocation application which relied upon grounds not disclosed in the original cancellation order. - HELD THAT: - The order dated 17.04.2024 rejecting the revocation application assigns new grounds and reasons which were not disclosed in the earlier cancellation order. The introduction of fresh grounds at the stage of rejecting revocation, without having earlier formed part of the cancellation reasoning or afforded to the petitioner for response, vitiates the rejection order. The Court therefore quashes the rejection but grants liberty to the respondent to issue a fresh show cause notice, disclose the grounds, and provide a sufficient and reasonable opportunity, including personal hearing, so that the proceedings may be conducted in accordance with law.

The rejection of the revocation application is quashed; respondent may issue fresh show cause notice and afford reasonable opportunity for hearing.

Reinstatement/restoration of GST registration subject to compliance - Whether the petitioner's GST registration should be reinstated and on what terms. - HELD THAT: - Having quashed the cancellation and the rejection of revocation for breaches of natural justice and for introducing new grounds, the Court directs restoration of the petitioner's GST registration. The restoration is ordered to take effect immediately upon the petitioner paying due tax and filing returns, thereby placing the parties in a position to permit any fresh proceedings to be carried out lawfully thereafter.

GST registration is to be reinstated/restored immediately upon the petitioner paying tax and filing returns; respondent may thereafter issue fresh show cause notice and proceed in accordance with law.

Final Conclusion: Petition allowed; impugned orders cancelling registration and rejecting revocation are quashed. Registration is to be restored upon the petitioner paying tax and filing returns. Respondent is permitted to issue a fresh show cause notice and to afford sufficient and reasonable opportunity, including personal hearing, before proceeding further.

Violation of principle of natural justice - failure to notify date of personal hearing - quashing of orders passed without hearing - direction for fresh personal hearing - application of precedent

Violation of principle of natural justice - failure to notify date of personal hearing - quashing of orders passed without hearing - Orders passed pursuant to the show cause notice dated 25th November, 2020 were vitiated for want of notice of date of personal hearing and are liable to be set aside. - HELD THAT: - The Court found that the petitioner filed a reply to the show cause notice and that the authority did not notify any date or time for a personal hearing before passing consequential orders. The absence of notification of a personal hearing amounted to a breach of the principle of natural justice. The revenue conceded that no date and time for personal hearing was intimated. In view of these findings and the Court's earlier order relied upon, the impugned orders passed pursuant to the show cause notice cannot stand and must be quashed. [Paras 1, 3, 4]

Impugned orders passed pursuant to the show cause notice are set aside and quashed for breach of natural justice.

Direction for fresh personal hearing - application of precedent - The matter is remitted to the authority to notify the petitioner of a date for personal hearing and to proceed afresh in accordance with law. - HELD THAT: - Having quashed the earlier orders for failure to afford a personal hearing, the Court directed that the petitioner be notified of a date for personal hearing in the proceedings arising from the show cause notice dated 25th November, 2020. The direction follows the Court's earlier decision relied upon by the petitioner and the concession by the revenue. The authority is to reconsider the matter after affording the petitioner the opportunity of a personal hearing and decide in accordance with law. [Paras 4]

Proceedings remitted to the authority with a direction to notify the petitioner of a personal hearing and to decide afresh in accordance with law.

Final Conclusion: Writ petition allowed as per the Court's order dated 23rd July, 2024; orders passed pursuant to the show cause notice dated 25th November, 2020 are quashed and the authority is directed to notify the petitioner of a date for personal hearing and decide the matter afresh in accordance with law.

Advance ruling under Section 97(2) - Scope of matters entertainable by Authority for Advance Ruling - Maintainability of application for advance ruling - Power to reject application not raising questions specified in Section 97(2)

Advance ruling under Section 97(2) - Scope of matters entertainable by Authority for Advance Ruling - Maintainability of application for advance ruling - Whether the applicant's questions fall within the matters enumerated in sub-section (2) of section 97 of the GST Act and whether the application for advance ruling is maintainable. - HELD THAT: - The Authority examined the application and the questions framed by the applicant and compared them with the list of matters which may be the subject of an advance ruling under sub-section (2) of section 97. The applicant had selected clause (b) of sub-section (2) in the application form but did not produce or rely upon any notification to bring the matter within that clause. The Authority recorded that the questions raised by the applicant are not covered by any of the clauses of section 97(2). The applicant was afforded an opportunity at personal hearing to address this deficiency but failed to demonstrate that a notified provision or any other enumerated matter under section 97(2) was in issue. In view of that, the Authority concluded that the application does not seek a ruling on any matter specified in section 97(2) and therefore is not maintainable before the Authority. [Paras 1]

Application rejected as not raising questions covered under sub-section (2) of section 97 of the GST Act; application therefore not maintainable.

Final Conclusion: The Authority dismissed the application for advance ruling on the ground that the questions raised by the applicant do not fall within the matters specified in section 97(2) of the GST Act; the applicant retains the right to prefer an appeal as provided by the statute.

Electronic commerce operator - electronic commerce - services supplied through - liability under section 9(5) of the GST Act - radio taxi

Electronic commerce operator - electronic commerce - Applicant fits within the definition of an electronic commerce operator under section 2(45) of the GST Act. - HELD THAT: - The Authority examined the statutory definitions of electronic commerce and electronic commerce operator and the admitted facts that the applicant owns, operates and manages the Yatri Sathi digital platform which enables supply of transport services by connecting drivers and passengers. The applicant also provides use of the digital platform to drivers for consideration (subscription fees). On the conjoint reading, the applicant satisfies the requirement of owning/operating/managing a digital facility for electronic commerce and therefore falls within the definition of an electronic commerce operator. [Paras 4]

Applicant qualifies as an electronic commerce operator under section 2(45) of the GST Act.

Services supplied through - liability under section 9(5) of the GST Act - Supply of passenger-transport services by drivers through the Yatri Sathi App is not a supply made by the applicant; the services are not supplied "through" the applicant for purposes of section 9(5). - HELD THAT: - Having held that the applicant is an electronic commerce operator, the Authority turned to section 9(5) which makes an ECO liable where specified services are supplied "through" it. The Authority analysed the meaning and implications of the word "through" and considered the applicant's business model and contractual terms: drivers contract directly with passengers, determine fares as per State notifications, collect payments directly, issue invoices themselves, and the applicant only provides a subscription-based platform and disclaims control over service quality, fare determination, invoicing and payment collection. These features show that the supply of transport services is independent in nature and not effected by the applicant acting as more than a passive facilitator. On that basis, the Authority concluded that the necessary condition of the service being supplied "through" the electronic commerce operator, as envisaged by section 9(5), is not satisfied in the present facts. [Paras 4]

Supply by drivers through the App does not amount to supply by the applicant and therefore is not a supply "through" the electronic commerce operator for section 9(5) purposes.

Liability under section 9(5) of the GST Act - services supplied through - Applicant is not liable to collect and pay GST under section 9(5) of the GST Act for the drivers' passenger-transport services supplied via the App. - HELD THAT: - Because the Authority found that the supply of passenger-transport services by drivers is not made "through" the applicant in the sense required by section 9(5), the statutory deeming and attendant tax liabilities imposed on an electronic commerce operator by notification under section 9(5) do not arise. The applicant therefore does not satisfy the conditions for discharging tax liability as an electronic commerce operator in respect of the drivers' services. [Paras 4]

Applicant is not the person liable to discharge tax under section 9(5) of the GST Act in respect of the drivers' passenger-transport services.

Final Conclusion: The Authority ruled that the applicant qualifies as an electronic commerce operator but, on the facts and contractual model before it, the passenger-transport services provided by drivers via the Yatri Sathi App are not supplied "through" the applicant for the purposes of section 9(5); consequently the applicant is not liable to collect and pay GST under section 9(5) in respect of those services.

Classification of goods - HSN 6307 - Other made up textile articles - Tariff classification - GST rate based on sale value threshold

Classification of goods - HSN 6307 - Other made up textile articles - Tariff classification - Classification of the product 'Baby Carrier with hip seat' for GST purposes. - HELD THAT: - The Authority examined the product description, materials and manufacturing process and found that the main material used is textile/fabric with foam and moulding, and the finished article is without wheels and is not a vehicle. Chapter 63 (Other made up textile articles; sets; worn clothing and worn textile articles; rags) and, in particular, heading 6307 (Other made up articles, including dress patterns) is wide enough to cover articles such as the applicant's baby carrier with hip seat. The Authority noted the absence of any specific mention of 'baby carrier with hip seat' in the illustrative list under Heading 6307 but, on a purposive reading of the heading and sub heading 6307.90, held the product to be classifiable as a made up textile article rather than as a vehicle or a part/accessory of a motor vehicle. The Authority relied on analogous reasoning in the cited decision concerning car covers, where goods made of textile material were held classifiable under Heading 6307.90 and not as parts of motor vehicles, to support the classification of the instant item under sub heading 6307.90. [Paras 4]

Supply of Baby Carrier with hip seat as manufactured by the applicant is classified under HSN 6307.90 (sub heading of 6307).

GST rate based on sale value threshold - Schedule I and Schedule II rates - Applicable GST rate on supply of the classified product. - HELD THAT: - Having classified the product under Chapter 63/Heading 6307, the Authority examined the Notification No. 01/2017 Central Tax (Rate) and the entries relating to Chapter 63. Items under Chapter 63 are included in Schedule I (entry 224) and Schedule II (entry 171) of the notification, prescribing differential rates based on sale value per piece. The Authority applied these schedule entries to the classified product and held that the rate depends on the sale value per piece as specified in the notification. [Paras 4]

Tax applies at 5% where the sale value per piece does not exceed Rs. 1,000 and at 12% where the sale value per piece exceeds Rs. 1,000.

Final Conclusion: The Authority ruled that the applicant's 'Baby Carrier with hip seat' is classifiable under HSN 6307.90 as an other made up textile article and will attract GST at 5% where the sale value per piece does not exceed Rs. 1,000 and at 12% where the sale value per piece exceeds Rs. 1,000.

Composite supply - outdoor catering together with renting of premises - restriction on input tax credit where composite supply taxed at concessional rate - specified premises determined by declared tariff - treatment of bundled services under composite versus mixed supply rule

Outdoor catering together with renting of premises - composite supply - event-based and occasional nature - Composite supply of catering service within the club premises along with renting of premises falls within 'outdoor catering' together with renting of premises. - HELD THAT: - The Explanation to the rate Notification defines 'outdoor catering' as supply of food or drink at events that are event-based and occasional in nature. The applicant's supplies of food at event-based functions in the club qualify under that definition. The club's banquet provision involves naturally bundled elements (renting of premises and supply of food) which, when supplied in conjunction, have the essential character of outdoor catering together with renting of premises. The Authority relied on the ordinary meaning in the Explanation, the concept of 'naturally bundled' supplies as explained in the CBEC Education Guide, and factual finding that the services are event-based and occasional to hold that the supply is a composite supply covered by the entry for outdoor catering together with renting of premises. [Paras 4]

Yes; the composite supply within the club premises qualifies as 'outdoor catering together with renting of premises'.

Concessional rate for composite supply - restriction on input tax credit - Notification entry for outdoor catering together with renting of premises - The composite supply (outdoor catering together with renting of premises) is liable to GST at the concessional rate of 5% without input tax credit, subject to the prescribed condition on ITC and specified premises. - HELD THAT: - Entry No. 7(v) of the rate Notification provides a concessional rate for composite supply of outdoor catering together with renting of premises, conditional upon non availment of input tax credit and that the supply is provided at premises other than 'specified premises'. Applying that entry to the composite supply found above, the Authority ruled that GST is payable on the whole consideration at 5% and the restriction on taking input tax credit applies. The Authority expressly applied the condition that the concessional rate is subject to the supplier not being located in or providing services at 'specified premises'. [Paras 4]

GST payable on the composite supply at 5% on the whole consideration without input tax credit, subject to the condition regarding specified premises and ITC restriction.

Specified premises determined by declared tariff - seasonal/declared tariff governs classification - rate change when declared tariff exceeds threshold - Where the club's declared tariff for accommodation is Rs. 7,500 or above (i.e., the club is a 'specified premises') the composite supply attracts GST at 18% with input tax credit; when declared tariff is below that threshold the concessional 5% without ITC applies for the period the lower tariff is declared. - HELD THAT: - The Notification and its Explanation define 'specified premises' by declared tariff of accommodation. The Authority accepted the applicant's reliance on the CBIC clarification that the tariff declared for the season or period in which the service is provided governs classification. Consequently, the tax treatment depends on the declared tariff at the time of supply: when the declared tariff per unit per day is Rs. 7,500 or more the supply falls within the higher taxable category and attracts 18% with ITC; when the declared tariff is below Rs. 7,500 the concessional 5% without ITC applies for that period. [Paras 4]

Concessional 5% without ITC applies when declared tariff is below Rs. 7,500; when declared tariff is Rs. 7,500 or above the supply is taxable at 18% with input tax credit for the period the higher tariff is declared.

Final Conclusion: The Authority ruled that the club's banquet/banquet plus catering supplies are a composite supply falling within 'outdoor catering together with renting of premises' and are taxable at 5% on the whole consideration without input tax credit, unless the club is a 'specified premises' by virtue of a declared accommodation tariff of Rs. 7,500 or more, in which case the supplies attract 18% with input tax credit for the period the higher tariff is declared.

Delay and laches in filing appeal - Maintainability of appeal - Condonation of delay - Binding effect of precedent

Delay and laches in filing appeal - Maintainability of appeal - Binding effect of precedent - Whether the ITA is maintainable despite a delay of more than three years in filing - HELD THAT: - The Court recorded that the impugned order was passed in 2020 while the ITA was filed in 2023, resulting in a delay exceeding three years. On that basis the Court concluded that the appeal suffers from delay and laches. Relying on the High Court's earlier decision in State of Odisha v. Surama Manjari Das, which was affirmed by the Apex Court on 05.04.2023, the bench was not inclined to condone the delay or entertain the belated appeal. The Court therefore treated the delay and laches as fatal to the maintainability of the ITA and declined to exercise jurisdiction to admit the appeal at the belated stage. [Paras 2, 3, 4]

The ITA is not maintainable on account of delay and laches and is dismissed.

Final Conclusion: The High Court dismissed the ITA as barred by delay and laches, refusing to condone a filing delay of over three years and applying the precedent affirmed by the Apex Court.

Reopening of assessment - petitioner was a beneficiary of accommodation entries - Delay filling SLP - as decided by HC [2022 (12) TMI 1460 - GUJARAT HIGH COURT] action of reopening by the AO was bad in law, mainly for the reason that it was passed on a mere change of opinion on the same set of facts, which was disclosed and considered by the assessing officer during previous AY - HELD THAT:-There is gross delay of 489 days in filing this Special Leave Petition. The reasons assigned for explaining the said delay are neither satisfactory nor sufficient in law to be condoned. Hence, the application seeking condonation of delay is dismissed.

Consequently, the Special Leave Petition also stands dismissed.

Revision under Section 263 of the Income Tax Act - Explanation 2(a) to Section 263 - order passed without making inquiries or verification - Assessing Officer's obligation to verify material facts concerning taxability of transfer of immovable property - Taxability of capital gains on transfer of immovable property where consideration remains unpaid/dishonoured

Revision under Section 263 of the Income Tax Act - Explanation 2(a) to Section 263 - order passed without making inquiries or verification - Assessing Officer's obligation to verify material facts concerning taxability of transfer of immovable property - Whether the CIT was justified in treating the assessment order as erroneous and prejudicial to revenue for failure of the AO to verify the dishonour and non-receipt of part of the sale consideration in relation to a purported transfer of immovable property. - HELD THAT: - The Court recorded that the sale deed was executed and part consideration was paid, while two cheques aggregating to the balance were subsequently dishonoured. The audit report accepted by the AO was dated prior to the dates of those cheques and therefore could not have commented on their dishonour. The assessment order contains no indication that the AO made inquiries or verification regarding the alleged non-receipt/dishonour of the balance consideration. Under Explanation 2(a) to Section 263 the CIT may deem an order erroneous and prejudicial to revenue where it is passed without making inquiries or verification which should have been made. Applying that test, the Court agreed with the CIT and the Tribunal that the AO had failed to make the necessary enquiries and verification, thereby satisfying Explanation 2(a). [Paras 11]

The CIT's revision under Section 263 was justified on the ground that the assessment was passed without requisite inquiries or verification; the Tribunal's dismissal of the assessee's challenge was upheld.

Final Conclusion: The appeal is dismissed; the High Court upholds the CIT's exercise of revision under Section 263 (Explanation 2(a)) because the Assessing Officer did not make necessary inquiries or verification regarding the dishonour/non-receipt of part of the sale consideration in Assessment Year 2015-16.

Block Assessment -prosecution with regard to undisclosed income for block assessment - Offence Committed u/s 276C(1), Section 277 read with Section 278B - Immunity from penalty and prosecution for block assessment for raids between 1.7.1995 and 1.1.1997 - block assessment as a distinct unit separate from regular assessment - quashing of criminal complaint in income-tax prosecutions - sanction under Section 279(1) -

HELD THAT:- We are not inclined to interfere with the impugned judgment/order of the High Court [2023 (3) TMI 1057 - GUJARAT HIGH COURT]. Accordingly, the Special Leave Petition is dismissed.

Reopening of assessment under Section 147 of the Income Tax Act, 1961 - Notice under Section 148 of the Income Tax Act, 1961 - Reason to believe - Information from search and seizure / statements under Section 131(1A) - Change of opinion - Assessment under Section 143(1) vis-a -vis assessment under Section 143(3)

Reopening of assessment under Section 147 of the Income Tax Act, 1961 - Reason to believe - Information from search and seizure / statements under Section 131(1A) - Validity of the notice dated 27.03.2018 issued under Section 148 for reopening assessment for Assessment Year 2011-12 - HELD THAT: - The Court found that the Assessing Officer had articulated contemporaneous reasons based on information arising from search and seizure proceedings in respect of another concern (M/s Spaze Group) and on statements recorded under Section 131(1) of the Act, particularly the statement of Shri Anand Singh of M/s JMD International, indicating that the firm was used for providing accommodation entries. The record showed payments from M/s JMD International to the petitioner in the financial year 2010-11, and on a prima facie reading it could not be said that all such receipts had been brought to tax earlier. In these circumstances the AO possessed a sufficient reason to believe that income chargeable to tax for AY 2011-12 had escaped assessment, and issuance of the impugned notice could not be faulted as devoid of reasons. [Paras 3, 4]

The reopening notice under Section 148/147 was validly issued as there existed prima facie material from search-linked information and statements to constitute a reason to believe that income for AY 2011-12 had escaped assessment.

Assessment under Section 143(1) vis-a -vis assessment under Section 143(3) - Change of opinion - Whether prior availability of the assessee's books and explanations (processed under Section 143(1)) precluded reopening or rendered the impugned notice a mere change of opinion - HELD THAT: - The Court applied the principle that a return processed under Section 143(1) and resulting intimation is a self-assessment and does not amount to an assessment framed under Section 143(3) for the purposes of the first proviso to Section 147. Reliance was placed on this Court's earlier decision to the effect that where the initial return is only processed under Section 143(1), the requirement of failure to disclose all material facts (in the first proviso) does not arise. Given that the AO had not completed an assessment under Section 143(3) for AY 2011-12, the fact that certain books or explanations were available to the AO earlier did not convert the reopening into an impermissible change of opinion. [Paras 5, 6]

Availability of books/explanations processed under Section 143(1) does not by itself preclude reopening; the impugned notice was not vitiated as a mere change of opinion.

Final Conclusion: The petition challenging the notice to reopen assessment for Assessment Year 2011-12 was dismissed: the AO had prima facie reasons arising from search-related information and statements to believe income had escaped assessment, and prior processing under Section 143(1) did not bar reopening; the Court made no observation on the merits of any assessment to be framed.

Time limit for passing final assessment under Section 144C(4) - requirement to forward draft order and filing of objections under Section 144C(1)&(2) - validity of assessment order passed beyond statutory period - effect of assessee's belated filing of objections on limitation

Time limit for passing final assessment under Section 144C(4) - validity of assessment order passed beyond statutory period - Final assessment order dated 27.12.2022 passed beyond the period prescribed under Section 144C(4) is liable to be set aside. - HELD THAT: - The draft assessment order was forwarded on 04.03.2022, triggering the thirty-day period for the assessee to file objections under Section 144C(2). Although the assessee filed objections on 06.04.2022 beyond thirty days, Section 144C(4) mandates that the Assessing Officer must pass the assessment order within one month from the end of the month in which the period for filing objections under subsection (2) expires. Thus, the limitation for passing the final order ran from 30.04.2022, and the AO was required to complete the assessment within one month thereafter. The final order was, however, passed on 27.12.2022, well beyond the statutory period. The Tribunal correctly held that the assessment order was beyond the period prescribed by Section 144C and set it aside accordingly. [Paras 7, 8, 9, 10, 11]

Assessment order dated 27.12.2022 is beyond the period prescribed by Section 144C(4) and is liable to be set aside.

Effect of assessee's belated filing of objections on limitation - no estoppel for the Revenue where statutory time-limit is clear - Assessee's failure to file objections within thirty days does not validate a final assessment passed after the statutory period; the Revenue cannot take advantage of the delay in filing by the assessee to escape the statutory time-limit. - HELD THAT: - The Revenue urged that the assessee should not be permitted to benefit from its own delay in filing objections beyond thirty days. The Court rejected this contention as insubstantial, observing that subsection (4) of Section 144C prescribes an unambiguous deadline for the AO to pass the final assessment order irrespective of the assessee's delayed filing. Since the statutory language leaves no room for extension or qualification based on the assessee's conduct, the clear statutory limitation governs the validity of the assessment order. [Paras 8, 11, 12]

Belated filing of objections by the assessee does not cure or validate an assessment order passed after the statutory period; the AO must still comply with Section 144C(4).

Final Conclusion: The appeal is dismissed; the ITAT's decision setting aside the final assessment order for being beyond the period prescribed under Section 144C is upheld and no question of law is entertained.

Reassessment notice under Section 148 - Maintainability of notice issued against a deceased person - Escapement of income - Unexplained cash credits and applicability of Section 68 - Fitness to reopen assessment

Unexplained cash credits and applicability of Section 68 - Escapement of income - Whether there was escapement of income in respect of the loan transactions and whether the ingredients of Section 68 were attracted. - HELD THAT: - The court examined the bank statements on record which show that the amount of Rs. 3,25,00,000 was received by the deceased on 04.09.2014 from Mr. Hardik Parekh and on the same day was advanced by NEFT to Ms. Darshana Doshi, and that the amount was returned on 19.09.2015 by Ms. Darshana Doshi to the deceased and thereafter returned to Mr. Hardik Parekh. On these facts the assessee did not retain or appropriate the amount so as to constitute unexplained cash credit. The Assessing Officer's conclusion of escapement of income therefore lacks sustainment as the asserted source and movement of funds are explained by the bank transactions and the ingredients requisite for invoking Section 68 are not satisfied. [Paras 6]

There is no escapement of income and the ingredients of Section 68 are not attracted.

Reassessment notice under Section 148 - Maintainability of notice issued against a deceased person - Fitness to reopen assessment - Whether the reopening of assessment by issuance of notice under Section 148 was justified and maintainable. - HELD THAT: - Since the court found no escapement of income on the basis of the bank records, the foundational reason relied upon by the Assessing Officer to treat the case as fit for reopening is absent. The original notice had been issued in the name of the deceased and was later rectified, but substance controls: absent any unexplained credit or escapement, the Assessing Officer could not have validly concluded that the assessment ought to be reopened under Section 148. The rationale for reopening is therefore unsustainable. [Paras 6, 7]

The reopening was not justified and the notice issued under Section 148 is quashed.

Final Conclusion: The petition is allowed; the notice dated 30.07.2022 under Section 148 and consequential actions for Assessment Year 2015-16 are quashed and set aside.

Powers under section 264 of the Income tax Act - scope of revisionary jurisdiction of the Commissioner - obligation to consider merits and grant personal hearing in section 264 revision - remand for de novo consideration - rectification under section 154 of the Income tax Act

Powers under section 264 of the Income tax Act - scope of revisionary jurisdiction of the Commissioner - obligation to consider merits and grant personal hearing in section 264 revision - remand for de novo consideration - rectification under section 154 of the Income tax Act - Whether the Commissioner was justified in rejecting the assessee's revision application under section 264 and the rectification application under section 154 without considering the merits and granting opportunity of personal hearing, and whether the impugned orders required quashing and remand. - HELD THAT: - The Court held that the Commissioner under section 264 is required to apply his mind to the merits of a revision petition and the power conferred is wide enough to correct errors or grant relief where the law permits. The mere fact that the assessee is a private limited company did not permit rejection of the revision on the ground that a director was ill; the Commissioner could not decline to consider substantive submissions on that basis. Reliance on precedents establishing that section 264 proceedings are intended to prevent miscarriage of justice and to enable the Commissioner to examine all relevant material was accepted. In view of these principles, the impugned orders under section 264 and the rectification order under section 154 were quashed and set aside and the matter remanded to the Principal Commissioner for de novo consideration. The Commissioner is directed to afford personal hearing (with at least five working days' notice) and to decide the revision petition on merits in a reasoned order within the stipulated timeframe. [Paras 8, 9, 10, 11, 12]

Impugned orders under Section 264 and Section 154 quashed and set aside; matter remanded to the Principal Commissioner for de novo consideration with personal hearing and a reasoned order to be passed within twelve weeks.

Final Conclusion: The writ petition is allowed to the extent that the orders dated 24.03.2021 (under Section 264) and 12.08.2021 (under Section 154) are quashed and set aside and the matter is remitted to the Principal Commissioner to decide the revision petition on merits after affording personal hearing within twelve weeks; no costs.

Allowability of expenses incurred for soliciting NRI/FCNR deposits - head office expenses under section 44C - permanent establishment profits computed as if a distinct and separate enterprise - taxability of fees/commission arising from credit card transactions issued by foreign branches

Allowability of expenses incurred for soliciting NRI/FCNR deposits - head office expenses under section 44C - permanent establishment profits computed as if a distinct and separate enterprise - Deductibility of expenditure incurred abroad to solicit foreign currency deposits for the Indian branches/PE. - HELD THAT: - The Tribunal's finding that expenses incurred abroad to open off-shore NRI counters and solicit foreign currency deposits were incurred solely for the business of the assessee in India was upheld. The funds mobilised abroad were brought to India and deployed for the Indian business and the benefits thereof were accounted as Indian income. Such expenditure cannot be treated as head office expenses under section 44C so as to be disallowed where they are exclusively and directly for the Indian business; alternatively, if treated as head office expenses, corresponding adjustments can be made to avoid double relief. The Court found no reason to interfere with the Tribunal's direction to allow deduction of the actual expenditure, subject to necessary verification and adjustment of any deduction under section 44C previously allowed. [Paras 4]

Expenses incurred abroad for soliciting FCNR/NRI deposits for the Indian branches are deductible in computing Indian business income; the Tribunal's order is upheld and the Assessing Officer directed to allow actual expenditure with necessary adjustments.

Taxability of fees/commission arising from credit card transactions issued by foreign branches - Whether commission/fees from credit card transactions relating to cards issued by foreign branches are taxable in India. - HELD THAT: - The Tribunal held, and the Court concurred, that where the credit cards were issued by foreign branches the credit was given and the debt arose outside India. Although merchants in India may receive payment, they merely receive charges for goods or services; the fees for providing the credit line are received by the foreign branch and the debt is incurred outside India. On these facts, the charges/fees in respect of such transactions are not taxable in India and the Tribunal's deletion of the addition was correctly sustained. [Paras 6]

Fees/commissions in respect of credit card transactions arising from cards issued by foreign branches are not taxable in India; the Tribunal's deletion is upheld.

Deduction for payments to an approved pension fund - Deduction in respect of payments made to an approved pension fund (question not finally adjudicated). - HELD THAT: - The appeals raising questions relating to deduction for payments made to an approved pension fund were not decided on merits in this order. Those appeals (ITA Nos. 496/2018 and 388/2019) have been de-tagged for separate hearing and are to be called again for consideration on the listed date. [Paras 9]

Issue de-tagged for fresh consideration; appeals to be called again on 28.10.2024.

Final Conclusion: The Tribunal's conclusions that (i) expenses incurred abroad to mobilise FCNR/NRI deposits for the Indian branches are deductible for computing Indian business income, and (ii) fees/commission from credit-card transactions issued by foreign branches are not taxable in India, are upheld and the appeals dismissed; separate questions regarding deduction to an approved pension fund have been de-tagged for fresh hearing.

Faceless assessment under Section 144B of the Income tax Act, 1961 - validity of notices issued under Section 148 and Section 148A - limits on administrative circulars and instructions to override statutory provisions - exercise of powers under Sections 119 and 120 of the Income tax Act, 1961

Faceless assessment under Section 144B of the Income tax Act, 1961 - validity of notices issued under Section 148 and Section 148A - Notices and consequential proceedings initiated without conducting faceless assessment as envisaged under Section 144B were contrary to the statutory scheme and liable to be set aside. - HELD THAT: - Relying on the coordinate bench decision in Jasjit Singh (CWP No.21509 of 2023) and following the reasoning thereon, the Court held that where the statutory procedure of faceless assessment under Section 144B is mandatorily envisaged, initiation of proceedings by issuing notices under Section 148/148A without complying with that procedure is inconsistent with the Act. Administrative instructions or circulars cannot be used to circumvent or render statutory provisions otiose; legislative enactments having financial implications must be followed strictly. Applying that principle to the present petition, the Court found the notices dated 09.08.2024 (148A(b)), 31.08.2024 (148A(d)) and 31.08.2024 (148) and consequential proceedings to be issued in breach of the statutory procedure and therefore set them aside, while leaving the revenue free to proceed in accordance with law and the prescribed procedure if so advised. [Paras 3, 4]

Notices issued without conducting faceless assessment and consequential proceedings are set aside; revenue may proceed only by following the statutory procedure.

Final Conclusion: Writ petition allowed; notices issued by the jurisdictional assessing officer under Sections 148A(b), 148A(d) and 148 and consequential proceedings set aside for want of jurisdiction for failure to follow the faceless assessment procedure, with liberty to the revenue to proceed in accordance with the Act.

Principles of natural justice - personal hearing through video conferencing - opportunity of hearing under Section 144B(1)(vii) - quash and set aside for breach of natural justice - remand for fresh de novo assessment after personal hearing

Principles of natural justice - personal hearing through video conferencing - opportunity of hearing under Section 144B(1)(vii) - Whether the impugned assessment order was vitiated by breach of principles of natural justice because the petitioner was not afforded the scheduled personal hearing through video conferencing. - HELD THAT: - The petitioner was granted a personal hearing by video conferencing scheduled for 28.03.2022 and logged into the portal, and has placed on record an immediate communication (pages 42-44) stating that the video conference did not commence from the respondent's side. The Assessing Officer recorded that the petitioner failed to log in at the appointed time, but did not address the petitioner's contemporaneous communication that nobody appeared to host the meeting. In view of the entitlement to a personal hearing under the scheme of Section 144B(1)(vii) and the documentary material on record showing the petitioner's attempt to join and the absence of a hearing from the respondent, there was a breach of the principles of natural justice in passing the assessment order without giving the petitioner the scheduled opportunity of video-conferencing personal hearing. The Court therefore refrained from examining the merits and ordered vacatur of the assessment and remand for fresh consideration with an opportunity of hearing. [Paras 5, 7, 8]

Impugned assessment order dated 29.03.2022 quashed and set aside; matter remanded to the Assessing Officer to pass a fresh de novo order after affording personal hearing to the petitioner through video conferencing in accordance with law within 12 weeks.

Final Conclusion: The petition succeeds: the assessment order is quashed for breach of principles of natural justice and the matter is remitted for fresh de novo assessment after giving the petitioner a personal hearing by video conference in accordance with law within the time directed.

Application of Section 56(2)(viib) of the Income Tax Act to transactions between holding company and wholly owned subsidiary - deeming fiction - taxation of share premium as income - remand for fresh consideration

Quashing of administrative directions - remand for fresh consideration - Quashing of the Dispute Resolution Panel's direction dated 29 June 2024 and remittance of the matter to the DRP for fresh examination. - HELD THAT: - The Court recorded that the respondents accepted the legal position enunciated by the Income Tax Appellate Tribunal in the cited decisions construing the ambit of the deeming provision and agreed to act accordingly. In view of that concession, the Court found it unnecessary to adjudicate the broader challenge to the validity or scope of the provision. Consequently, the Court set aside the DRP direction dated 29 June 2024 and remitted the matter to the DRP to examine the issue afresh bearing in mind the Tribunal's decisions, leaving all other rights and contentions on merits open for determination on reconsideration. [Paras 6, 7]

Direction of the DRP dated 29 June 2024 quashed; matter remitted to the DRP for fresh consideration in light of the Tribunal decisions; other rights and contentions kept open.

Application of Section 56(2)(viib) of the Income Tax Act to transactions between holding company and wholly owned subsidiary - deeming fiction - Whether the Court would determine the constitutional and substantive challenge to Section 56(2)(viib). - HELD THAT: - The Court declined to decide the constitutional validity or wider applicability of Section 56(2)(viib) because the respondents represented that they would adhere to the Tribunal's enunciations on the limited question of transactions between holding companies and wholly owned subsidiaries. Given that stand by the respondents, the Court refrained from adjudicating the provision's validity or scope and instead required the DRP to reconsider its directions in light of the Tribunal authorities. [Paras 6]

Court did not adjudicate the constitutional or substantive challenge to Section 56(2)(viib); declined to decide the issue and left it to be considered afresh by the DRP in light of Tribunal rulings.

Final Conclusion: Writ petition allowed in part: the DRP direction dated 29 June 2024 is quashed and the matter is remitted to the DRP for fresh examination in light of the Tribunal decisions; the Court did not decide the constitutional or substantive challenge to Section 56(2)(viib) and left other rights and contentions open.

Right to personal hearing under Section 148A(b) - vitiation of order for denial of statutory hearing - remand for fresh personal hearing by the jurisdictional Assessing Officer - setting aside subsequent notice as academic on vacatur of antecedent order

Right to personal hearing under Section 148A(b) - order under Section 148A(d) vitiated by denial of hearing - Denial of personal hearing before passing an order under Section 148A(d) vitiates that order and requires remand for fresh hearing. - HELD THAT: - The court observed that Section 148A(b) confers on the assessee a statutory right to be provided an opportunity of hearing. The jurisdictional Assessing Officer decided the show cause without affording the petitioner a personal hearing and, because the right to personal hearing is embedded in the statute, such denial vitiates the order passed under Section 148A(d). The court therefore set aside the order dated 20th March, 2024 and remanded the matter to the Assessing Officer with a direction to give the petitioner an opportunity of personal hearing and to hear the matter afresh. Other challenges to the validity of the show cause notice were left open for determination by the Assessing Officer on remand. [Paras 8, 9, 10, 11, 12]

Order dated 20th March, 2024 under Section 148A(d) is set aside and the matter is remanded to the jurisdictional Assessing Officer to grant a personal hearing and decide afresh.

Setting aside subsequent notice as academic on vacatur of antecedent order - Notice issued under Section 148 dated 21st March, 2024 is set aside as academic consequent to setting aside the Section 148A(d) order. - HELD THAT: - The court held that because the order under Section 148A(d) (dated 20th March, 2024) has been set aside, the notice issued under Section 148 becomes academic. The court therefore set aside the Section 148 notice dated 21st March, 2024 without adjudicating the substantive challenge to that notice. [Paras 13]

Notice dated 21st March, 2024 under Section 148 is set aside as academic; challenge to the notice not decided on merits.

Final Conclusion: Writ petition disposed by setting aside the order dated 20th March, 2024 under Section 148A(d) and remanding the matter to the jurisdictional Assessing Officer for fresh adjudication after affording personal hearing; the subsequent notice dated 21st March, 2024 under Section 148 is set aside as academic; other challenges left open.

Section 263 revisional jurisdiction - application of mind by the Commissioner before initiating revision - treatment of government grants for charitable trusts under Section 11 - accumulation of income under Section 11(1)(a) - principle of consistency in successive assessments

Section 263 revisional jurisdiction - application of mind by the Commissioner before initiating revision - Whether the order initiating proceedings under Section 263 was valid where the Principal Commissioner acted on a proposal from the Assessing Officer without independent application of mind. - HELD THAT: - The Tribunal found on the record that the proposal to initiate revision under Section 263 originated from the Assessing Officer and that the Principal CIT did not call for office records or independently apply his mind before initiating proceedings. Reliance was placed on precedents requiring the Commissioner to form an independent satisfaction after examining the record before invoking revisional jurisdiction. The High Court accepted the Tribunal's conclusion that the order under Section 263 revealed no independent application of mind by the Principal CIT and was therefore liable to be set aside. [Paras 10]

Order under Section 263 set aside for want of independent application of mind by the Principal CIT.

Treatment of government grants for charitable trusts under Section 11 - accumulation of income under Section 11(1)(a) - principle of consistency in successive assessments - Whether the disallowance of exemption for government grant receipts was sustainable on merits in view of earlier acceptance of similar grants and the doctrine of consistency. - HELD THAT: - The Tribunal observed that the assessee had received similar government grants in earlier and subsequent years and that the Revenue had accepted those receipts as eligible for accumulation under Section 11. Noting absence of any change in facts, the Tribunal applied the principle of consistency and held that the same issue should not be re agitated. The High Court endorsed the Tribunal's factual finding that, in light of earlier acceptance and no change in facts, the assessment could not be said to be erroneous or prejudicial to the Revenue. Consequently, no substantial question of law arose from the impugned order on merits. [Paras 9, 11, 12]

Disallowance of exemption on the government grant was not sustained; principle of consistency and earlier acceptances precluded treating the assessment as erroneous.

Final Conclusion: The appeal is dismissed: the Tribunal correctly set aside the Section 263 order for lack of independent application of mind by the Principal CIT and, on merits, rightly upheld the assessee's treatment of government grants in light of earlier acceptance and the principle of consistency.

Revision under Section 264 of the Income Tax Act - Limitation for filing revision - Duty to consider revision petition on merits - Powers of the revisionary authority under Section 264(1) - Reconsideration and remand for disposal in accordance with law

Limitation for filing revision - Duty to consider revision petition on merits - The revision petition was filed within the statutory period and, being within limitation, required consideration on merits by the revisional authority. - HELD THAT: - The assessment order under challenge was dated 23.09.2022 and the revision application was filed on 26.12.2022. Under sub-section (3) of Section 264 the revision application must be made within one year from the date on which the relevant order was communicated; on the facts the application was therefore within time. Once a petition under Section 264 is filed within the prescribed period, the authority receiving it is obliged to consider and dispose of the petition on merits rather than reject it solely on the ground that no appeal was filed. Sub-section (1) of Section 264 confers wide powers on the revisional authority to pass orders either suo motu or on application, and those powers must be exercised by examining the merits of the revision petition when filed within time. [Paras 5]

Revision petition held to be within limitation and required to be considered on merits by the revisional authority.

Powers of the revisionary authority under Section 264(1) - Reconsideration and remand for disposal in accordance with law - The impugned order rejecting the revision petition was set aside and the matter remanded for fresh reconsideration on merits and in accordance with law. - HELD THAT: - The High Court found that the revisional authority had not examined the revision application on merits and had rejected it for reasons which did not negate the obligation to decide the application substantively. Given that the application was within time and sought revision of the assessment order (where, according to the petitioner, the entire expenditure was disallowed), the proper course was to remit the matter to the revisional authority for reconsideration on merits. The revisional authority is directed to re-examine the revision petition and dispose of it in accordance with law. [Paras 6]

Impugned order set aside; matter remanded to the revisional authority for reconsideration on merits and disposal in accordance with law.

Final Conclusion: The order dated 14.03.2024 rejecting the revision petition is set aside; the revision petition (filed 26.12.2022 against the assessment order dated 23.09.2022 for Assessment Year 2020-2021) is remitted to the revisional authority for reconsideration on merits and disposal in accordance with law; writ petition disposed without costs.

Stay of demand - Interim relief - Deposit of amount as condition for stay - Notice served

Stay of demand - Deposit of amount as condition for stay - Interim relief - Grant of interim stay of the demand subject to deposit of the amount payable by way of duty within three months. - HELD THAT: - The Court, on hearing counsel and observing that notice had been served though no one appeared for the respondent, granted interim relief by staying the demand. The stay was expressly made conditional upon the appellant depositing the amount payable by way of duty with the respondent within three months from the date of the order. The application for interim relief was disposed of by recording this conditional stay.

Interim stay granted on condition of deposit of the duty within three months; application disposed of.

Final Conclusion: The Court allowed interim relief by staying the demand provided the appellant deposits the amount payable by way of duty with the respondent within three months; the application is disposed of.

Summary order. Civil Appeals dismissed; pending applications disposed of.

Summary order. Notice issued on the application for condonation of delay and on the Civil Appeal.

Monetary threshold for filing appeal to the Supreme Court - tax effect - disposal of appeals where tax effect is below threshold

Monetary threshold for filing appeal to the Supreme Court - tax effect - disposal of appeals where tax effect is below threshold - Civil Appeals and Special Leave Petition dismissed/ disposed of as the tax effect falls below the revised monetary threshold for filing an appeal to the Supreme Court. - HELD THAT: - The Revenue Division, Judicial Cell (Central Board of Indirect Taxes & Customs) issued a Circular dated 6 August 2024 raising the monetary threshold of the tax effect for filing an appeal to the Supreme Court from Rupees two crores to Rupees five crores. The Additional Solicitor General recorded that the tax effect in the present matters is less than Rupees five crores. On that basis the Court disposed of the Civil Appeals and the Special Leave Petition. The Court expressly left open any questions of law arising from the appeals and disposed of pending applications, if any. [Paras 1, 2, 3]

Appeals and SLP disposed of because the tax effect is below the revised threshold; questions of law left open; pending applications disposed of.

Final Conclusion: In view of the Circular of 6 August 2024 raising the monetary threshold to Rupees five crores and the statement that the tax effect in these matters is below that threshold, the Civil Appeals and Special Leave Petition were disposed of; substantive legal questions were not decided and remain open.

Compounding of offences - Discretionary determination of compounding fee - Application of Rule 5(5) of the Customs (Compounding of Offences) Rules, 2005 - Judicial review under Article 226 of the Constitution of India

Compounding of offences - Discretionary determination of compounding fee - Judicial review under Article 226 of the Constitution of India - Whether the impugned order granting compounding of offence subject to specified compounding fees suffers from any legal infirmity warranting interference under Article 226 - HELD THAT: - The Court examined the impugned order of the Chief Commissioner of Customs compounding offences for illegal carriage of foreign currency and the amounts fixed under Rule 5(5) of the Customs (Compounding of Offences) Rules, 2005. The petitioners' counsel could not point to any legal ground invalidating the exercise of the compounding power. The Court recorded that the amounts determined represent only a small fraction of the currency seized or handled by the petitioners and noted no substantive illegality in the manner the compounding fees were fixed. Applying the scope of judicial review under Article 226, the Court found no warrant to interfere with the discretionary determination made by the compounding authority. [Paras 4, 5, 6]

Impugned compounding order affirmed; no interference under Article 226.

Compounding of offences - Discretionary determination of compounding fee - Grant of additional time to deposit the compounding amounts and furnish proof of payment - HELD THAT: - Although the Court declined to set aside or interfere with the compounding order, it exercised its equitable discretion to afford the petitioners additional time for compliance. The compounding authority's direction for payment within thirty days was extended by a further period of thirty days from the date of this order, and the petitioners were directed to furnish proof of payment to the Compounding Authority in terms of the Rules. [Paras 7]

Petitioners granted a further thirty days to deposit the determined compounding amounts and to furnish proof of payment.

Final Conclusion: The petition is dismissed; the compounding order of the Chief Commissioner of Customs is upheld, and the petitioners are granted an additional thirty days to deposit the compounding fees and furnish proof of payment to the Compounding Authority.

Customs classification - finalization of provisional assessment - Regulation 6(3) of the Customs (Finalization of Provisional Assessment) Regulations, 2018 - Section 18 of the Customs Act, 1962 - speaking order - uniformity in classification

Customs classification - Regulation 6(3) of the Customs (Finalization of Provisional Assessment) Regulations, 2018 - Section 18 of the Customs Act, 1962 - speaking order - uniformity in classification - Whether the respondent was required to pass a fresh speaking order on classification under Regulation 6(3) of the Customs (Finalization of Provisional Assessment) Regulations, 2018 read with Section 18 of the Customs Act, 1962 and to afford the petitioner an opportunity of hearing - HELD THAT: - The petitioner declared the imported goods as UPVC profiles classifiable under Customs Tariff Heading 3916 2019, and the Check List dated 17.04.2021 records that stand. The respondent has not produced documents demonstrating that the petitioner accepted reclassification under CTH 3925 2000. An identical import by the petitioner at Gujarat Pipavav Port was assessed under CTH 3916 2019. In these circumstances the Court found that the respondent must exercise the power of finalization under Regulation 6(3) by passing a reasoned order after hearing the petitioner rather than relying on an asserted prior acceptance. Accordingly the matter was directed to be reconsidered on merits by passing a fresh speaking order in accordance with Regulation 6(3) (and Section 18 insofar as provisional assessments are concerned), with opportunity of hearing to the petitioner. [Paras 10, 11, 12, 13]

Respondent directed to pass a fresh speaking order on merits under Regulation 6(3) of the Customs (Finalization of Provisional Assessment) Regulations, 2018 (read with Section 18 where applicable) within six weeks after hearing the petitioner.

Final Conclusion: Writ petition disposed directing the respondent to pass a fresh, reasoned order under Regulation 6(3) within six weeks after hearing the petitioner; no costs.

Mens rea for imposition of penalty under the Customs Act - liability of Customs House Agent for importer's classification - burden of proof on Revenue to establish tariff classification - requirement of specific invocation of statutory sub clause in show cause notice - inapplicability of penalty provision directed at fraudulent exporters to bona fide CHAs

Mens rea for imposition of penalty under the Customs Act - liability of Customs House Agent for importer's classification - Whether penalty could be imposed on the appellant CHA for alleged wrong classification made by the importer. - HELD THAT: - The Tribunal held that mere mis classification by the importer does not automatically attract penalty against the CHA in absence of evidence of deliberate or intentional mis declaration by the CHA. Authorities were applied to distinguish innocent or bonafide mistakes from intentional mis declaration, and the presence of mens rea was treated as a necessary condition for imposing penalty under the Customs Act. The record contained no material showing that the appellant acted with knowledge or intent to evade duty or that the appellant derived any benefit; communications from the appellant seeking clarification from the importer were noted. Accordingly, penalty could not be imposed on the CHA on the basis of the importer's mis classification alone. [Paras 5]

Penalty set aside as there was no evidence of mens rea on the part of the CHA and the CHA cannot be held liable merely because the importer misclassified the goods.

Requirement of specific invocation of statutory sub clause in show cause notice - Whether the adjudication imposing penalty was vitiated by failure to invoke the specific sub clause of the penal provision in the show cause notice. - HELD THAT: - The Tribunal observed that the Show Cause Notice did not specify the particular sub clause of the penal provision relied upon, and relied on precedent that penal provisions or particular clauses not invoked in the SCN or specified in adjudication cannot later be invoked to sustain penalty. For this reason, the order imposing penalty was held to be without jurisdictional and procedural foundation and thus liable to be set aside. [Paras 6]

Order imposing penalty set aside for failure to invoke the specific sub clause in the Show Cause Notice.

Inapplicability of penalty provision directed at fraudulent exporters to bona fide CHAs - Whether penalty under the provision introduced to deter fraudulent exporters (section introduced by Parliamentary Committee) could be imposed on the CHA in the facts of the case. - HELD THAT: - The Tribunal examined the legislative purpose of the provision (introduced to deal with fraudulent paper exports) and held that it is aimed at penalising fraudulent exporters who show exports only on paper and do not actually export goods. On that basis and on authority of earlier Tribunal decisions, the provision was held not to be appropriately invoked against the CHA in the absence of any finding that the CHA participated in or facilitated fraudulent export conduct. [Paras 7]

Penalty under the provision aimed at fraudulent exporters was wrongly invoked against the CHA and is set aside.

Burden of proof on Revenue to establish tariff classification - Whether the Revenue discharged the burden of proving correct tariff classification of the imported product. - HELD THAT: - The Tribunal reiterated that the burden to prove that a product is classifiable under a particular tariff heading lies on the Revenue and must be discharged, including by evidence such as technical expert report or proof of common parlance. Noting absence of any technical expert report and that the importer voluntarily paid differential duty, the Tribunal held that such voluntary payment cannot substitute for proof against the CHA, and the Revenue did not meet its burden to justify penalties against the CHA. [Paras 8]

Revenue failed to discharge burden of proof on classification; absence of requisite proof militates against imposing penalty on the CHA.

Final Conclusion: For the reasons stated, the order imposing penalties on the appellant Customs House Agent was set aside and the appeal was allowed.

Classification of goods - anti-dumping duty - pre-sensitized aluminium plates (PS) - CTCP printing plates - reliability of outsourced test reports - General Rules of Interpretation - Rule 1 and Rule 3(c) - HSN explanatory notes as interpretative guide - preference for specific heading over general heading - penalty under customs law (Section 112(a) and Section 114AA)

Anti-dumping duty - CTCP printing plates - pre-sensitized aluminium plates (PS) - reliability of outsourced test reports - Imported plates were not proved to be CTCP plates attracting Notification No.51/2012; but were pre-sensitized aluminium plates liable to anti-dumping duty under Notification No.25/2014. - HELD THAT: - The department relied on a private laboratory report (M/s. Don Bosco) to characterise the goods as CTCP plates; earlier government laboratory reports were withdrawn or not furnished on account of outsourced testing. The Tribunal agreed with the Commissioner (Appeals) that the private laboratory had itself outsourced CTCP machine testing and that no independent details of that machine testing were placed on record. In absence of reliable evidence, the goods could not be held to be CTCP plates covered by Notification No.51/2012. Independently, the record shows the imported plates are pre-sensitized aluminium plates of origin China and thickness 0.27 mm and the relevant anti-dumping Notification No.25/2014 extending anti-dumping duty on PS aluminium plates (effective 10.03.2014 to 09.03.2019) therefore applies to the impugned Bill of Entry dated 25.02.2015. The original adjudicating authority's quantum must be recomputed in accordance with the rate in Notification No.25/2014 (.22 USD per kg) and anti-dumping duty is recoverable accordingly. [Paras 6]

No proof of CTCP plates; anti-dumping duty under Notification No.25/2014 is payable on the imported pre-sensitized aluminium plates and is to be recovered at the applicable rate.

Classification of goods - Chapter heading 3701 versus Chapter heading 8442 - preference for specific heading over general heading - General Rules of Interpretation - Rule 1 - HSN explanatory notes as interpretative guide - The imported pre-sensitized aluminium plates are classifiable under CTH 3701 and not under CTH 84425020 as declared. - HELD THAT: - Comparison of chapter headings shows Chapter 8442 relates principally to machinery, apparatus and equipment for preparing printing components, whereas Chapter 3701 specifically describes sensitized photographic plates and film in the flat. Chapter notes and explanatory notes exclude sensitized plates from Chapter 8442. The Commissioner (Appeals) erred in directly invoking Rule 3(c) of the General Rules of Interpretation; Rule 1 and chapter/heading notes must be applied first. Reliance on HSN explanatory notes and the principle that a more specific heading governs classification supports allocation to CTH 3701. In consequence, the demand for differential basic customs duty based on classification under CTH 3701 is sustainable. [Paras 7]

Imported plates are classifiable under CTH 3701; differential basic customs duty is payable.

Final Conclusion: The Commissioner (Appeals) order is set aside. Anti-dumping duty pursuant to Notification No.25/2014 (.22 USD per kg) is recoverable on the imported pre-sensitized aluminium plates (Bill of Entry dated 25.02.2015); the goods are classifiable under CTH 3701 and the differential basic customs duty and interest are recoverable; penalties under Section 112(a) and Section 114AA as imposed in the original order are restored. The department's appeal is allowed.

Enforcement of security interest under the SARFAESI Act - Invocation of personal guarantee - Maintainability of Section 94(1) application by a personal guarantor - Prematurity of CIRP initiation against personal guarantor where guarantee not invoked - Filing of recovery proceedings under RDB Act is not equivalent to invocation of guarantee

Enforcement of security interest under the SARFAESI Act - Invocation of personal guarantee - Maintainability of Section 94(1) application by a personal guarantor - Whether the Section 94(1) application by the personal guarantor was maintainable when the guarantee was not shown to have been invoked and only SARFAESI notices addressed to the corporate debtor were on record. - HELD THAT: - The Tribunal found that the application by the personal guarantor did not annex the Deed of Guarantee and the documents on record comprised SARFAESI Demand and Possession Notices directed to the corporate debtor for enforcing security interest created by the corporate debtor. Those notices were issued under Section 13(2) and Section 13(4) of the SARFAESI Act for enforcement of security interest and, on the facts, were not shown to have been issued to the applicant in her capacity as guarantor nor was there material to show that the bank had taken steps to recover from the guarantor by sale of her personal assets. The Tribunal noted that filing of recovery proceedings under the RDB Act against the principal borrower and other guarantors does not ipso facto amount to invocation of a guarantee, and there was no recovery certificate from the DRT against the applicant. Relying on the reasoning in the NCLAT decision reproduced in the order, the Tribunal concluded that initiation of insolvency proceedings against a personal guarantor under Section 94 is premature where the creditor has not invoked the guarantee or taken recovery steps against the guarantor; on these facts the Section 94 application lacked foundation and was premature.

Application under Section 94(1) dismissed as premature for want of invocation of the personal guarantee, with liberty.

Final Conclusion: The Section 94(1) petition filed by the personal guarantor was dismissed as premature because the creditor had not invoked the guarantee or undertaken recovery action against the guarantor; SARFAESI notices directed to the corporate debtor and a pending RDB Act proceeding did not suffice to show invocation of the personal guarantee.

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Commercial wisdom of the Committee of Creditors and non-justiciability - Effect of attachment of assets by enforcement agencies on the CIRP - Appointment of liquidator under Section 34 of the Code - Cessation of moratorium upon commencement of liquidation - Public announcement and conduct of liquidation under IBBI (Liquidation Process) Regulations, 2016

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Commercial wisdom of the Committee of Creditors and non-justiciability - Effect of attachment of assets by enforcement agencies on the CIRP - Whether the Corporate Debtor should be liquidated under Section 33 of the Code in view of attachments by enforcement agencies and the CoC's resolution. - HELD THAT: - The Tribunal found on the record that the Corporate Debtor's assets were under attachment by the Directorate of Enforcement and multiple investigations were ongoing, materially diminishing the prospects of a successful resolution. The CoC, by the requisite voting majority (90.16%), resolved in its 6th meeting that a resolution plan was unlikely and authorised the Resolution Professional to file for liquidation. Applying the principle that decisions of the CoC based on commercial wisdom are largely non-justiciable (as noted with reference to the Supreme Court's decision in K. Sashidhar), the Tribunal exercised only limited judicial review and accepted the CoC's commercial determination. In view of the attachments, ongoing investigations, and the CoC's vote, the Tribunal concluded that liquidation under Section 33 was necessary. [Paras 11, 13, 14]

M.A. No.1876 of 2019 is allowed and the Corporate Debtor is ordered to be liquidated under Section 33(2) of the Code.

Appointment of liquidator under Section 34 of the Code - Replacement of Resolution Professional as liquidator - Appointment of the liquidator and substitution of the Resolution Professional who declined to act as liquidator. - HELD THAT: - The Resolution Professional informed the CoC that, for personal reasons, he could not act as liquidator. The CoC resolved in its subsequent meeting to appoint an alternative liquidator in the manner envisaged by the Code. The Tribunal noted the CoC's resolution and the placed written consent of the proposed appointee, and appointed Mr. Santanu T. Ray as the liquidator to conduct the liquidation process in accordance with the Code and the IBBI (Liquidation Process) Regulations, 2016. [Paras 12, 14]

Mr. Santanu T. Ray is appointed as Liquidator and shall complete the liquidation in terms of the Code and applicable IBBI Regulations.

Cessation of moratorium upon commencement of liquidation - Liquidator's duty to make public announcement and notify authorities - Consequences of the liquidation order including cessation of moratorium and duties of the liquidator. - HELD THAT: - The Tribunal directed that the liquidation shall be effective from the date of the order and that the moratorium declared at the CIRP stage shall cease with commencement of liquidation. The liquidator was directed to make the public announcement as prescribed by Regulation 12 of the IBBI (Liquidation Process) Regulations, 2016, to notify government departments and trade unions likely to have claims, and to assume the powers previously vested in the board and key managerial personnel. The CoC was directed to contribute to any shortfall in liquidation costs, and the liquidator was authorised to pursue interlocutory applications pertaining to avoidance transactions, subject to the Code. [Paras 14]

The moratorium ceases from the date of the liquidation order; the liquidator shall make the requisite public announcement, notify concerned authorities, assume vesting of powers, and follow the Code and IBBI Regulations in conducting the liquidation.

Final Conclusion: The Tribunal allowed the application for liquidation, holding that in the circumstances of attached assets and ongoing investigations the CoC's commercial decision to liquidate was entitled to deference; it appointed Mr. Santanu T. Ray as liquidator, directed cessation of the CIRP moratorium from the date of liquidation, and issued consequential directions for conduct of the liquidation under the Code and IBBI Regulations.

Fraudulent trading - Section 66 of the Insolvency and Bankruptcy Code - high degree of proof / fraudulent intent - rebuttable presumption in favour of erstwhile directors - insufficiency of transaction audit alone - conversion of share application money - investments in related parties - unaccounted rental income - unjustified salary withdrawals

Conversion of share application money - Fraudulent trading - Section 66 of the Insolvency and Bankruptcy Code - Whether the conversion of share application money into unsecured loans constituted fraudulent trading under Section 66 of the Code - HELD THAT: - The Tribunal found that while it was admitted that funds received as share application money were retained and no shares were ultimately issued, the mere conversion of that infusion of capital into debt did not, on the materials before the Adjudicating Authority, establish fraudulent trading. The Resolution Professional relied primarily on the Transaction Audit report, which this Tribunal found to be inconclusive and insufficient to prove fraudulent intent. The statutory scheme and the requirement to establish fraudulent purpose under Section 66 demand material and cogent evidence of intent to defraud; such evidence was not produced to rebut the presumption in favour of the erstwhile directors. Consequently, the conversion could not be held to be a fraudulent transaction under Section 66 on the record before the Tribunal. [Paras 31]

Conversion of share application money to debt was not held to be fraudulent trading under Section 66.

Investments in related parties - Fraudulent trading - insufficiency of transaction audit alone - Whether the Corporate Debtor's investments in related parties amounted to fraudulent trading under Section 66 of the Code - HELD THAT: - The Tribunal observed that the respondents furnished accounts and explanations for the investments, and the Transaction Auditor itself suggested a need for a consolidated group-level forensic audit to draw definitive conclusions. The investments were found to have been made in a manner which, on the available material, could not be concluded to be prejudicial to the creditors or to have been made with fraudulent intent. Given the high degree of proof required to establish fraudulent trading and the absence of unimpeachable corroborative material, the Tribunal was not satisfied that Section 66 was attracted in respect of these investments. [Paras 32]

Investments in related parties were not established to be fraudulent trading under Section 66.

Unjustified salary withdrawals - Fraudulent trading - high degree of proof / fraudulent intent - Whether unusually large salary payments constituted fraudulent trading under Section 66 of the Code - HELD THAT: - The Tribunal noted anomalous cash salary payments in March 2016 but recorded that no disbursements in the name of salary were made after 2016. While the timing might raise suspicion, suspicion alone does not satisfy the statutory threshold for fraudulent trading. In the absence of material demonstrating that the payments were made with an intent to defraud creditors or that they were part of a scheme to siphon funds, the Tribunal declined to characterise the salary withdrawals as fraudulent under Section 66. [Paras 33]

The alleged unjustified salary payments were not proved to be fraudulent trading under Section 66.

Unaccounted rental income - Fraudulent trading - insufficiency of transaction audit alone - Whether the alleged unaccounted rental income and related loan cum lease agreements amounted to fraudulent trading under Section 66 of the Code - HELD THAT: - The Tribunal examined the claimant's allegation that rental receipts had not been correctly reflected and considered the loan cum lease agreements relied upon by respondents. It concluded that the agreements appeared bonafide on the available record and that the Resolution Professional failed to produce material establishing that the agreements or rental transactions were entered into for the purpose of defrauding creditors. The Transaction Audit repeatedly recorded lack of adequate information and recommended further forensic inquiry; the Tribunal held that the Auditor's tentative observations and the RP's suspicions were inadequate to prove fraud under Section 66. [Paras 34]

The allegations of unaccounted rental income and impugned lease agreements were not proved to constitute fraudulent trading under Section 66.

Final Conclusion: The application under Section 66 was dismissed. The Adjudicating Authority held that the Resolution Professional failed to meet the high standard of proof required to establish fraudulent trading; reliance on the Transaction Audit without corroborative, material evidence was insufficient to rebut the statutory presumption in favour of the erstwhile directors, and no relief under Section 66 was granted.

Bail is the rule and jail is the exception - twin conditions under Section 45 PMLA - presumption of innocence - Article 21 right to personal liberty - economic offences and bail - investigation complete and chargesheet filed - risk of tampering and flight risk considerations

Twin conditions under Section 45 PMLA - Article 21 right to personal liberty - bail is the rule and jail is the exception - investigation complete and chargesheet filed - risk of tampering and flight risk considerations - Grant of regular bail to the applicant under Section 45 of the PMLA - HELD THAT: - The Court applied the special threshold under Section 45 PMLA requiring satisfaction of the mandatory twin conditions that the public prosecutor be given an opportunity to oppose and that the Court be satisfied there are reasonable grounds for believing the accused is not guilty and is not likely to commit an offence while on bail. Balancing the fundamental right under Article 21 and the presumption of innocence against the special nature of economic offences, the Court observed that investigations as to the petitioner were complete and a complaint/chargesheet had been filed, the applicant was not a flight risk, the evidence was essentially documentary and not likely to be tampered with, and the applicant had been in custody for a prolonged period. Reliance on recent authority affirming that prolonged pre-trial incarceration must be guarded against and that Article 21 remains a paramount consideration was noted. On these considerations the Court concluded that the twin conditions were met and that continued incarceration would cause grave injustice, warranting bail subject to conditions. [Paras 41, 42, 44, 45, 46]

Applicant admitted to bail under terms and conditions imposed by the Court

Final Conclusion: Bail application under Section 45 PMLA allowed; applicant released on furnishing bonds and compliance with specified conditions, Registry to communicate the order to the trial court and jail superintendent.

Attachment of property under Prevention of Money Laundering Act, 2002 - confirmation of provisional attachment - admissibility of statement under section 50 of the Act of 2002 - requirement to disclose source of proceeds - opportunity of hearing to produce evidence - reliance on bank statements and cash deposits as material

Attachment of property under Prevention of Money Laundering Act, 2002 - confirmation of provisional attachment - Validity of the Adjudicating Authority's order confirming attachment of Anil Marriage Hall - HELD THAT: - The Tribunal examined whether the Adjudicating Authority rightly confirmed the provisional attachment. The record shows an ECIR, earlier FIR and charge sheet, analysis of bank accounts revealing substantial cash deposits into the deceased appellant's account, and admissions in the appellant's statement. The Adjudicating Authority permissibly relied on the material placed on record, including bank statements and the appellant's statement, to confirm the attachment. No grave legal error or illegality in the confirmation order is made out warranting interference. [Paras 15, 16, 17]

The confirmation of the provisional attachment is sustained and the challenge to the attachment is rejected.

Requirement to disclose source of proceeds - opportunity of hearing to produce evidence - reliance on bank statements and cash deposits as material - Whether the appellant was denied a fair opportunity to disclose source of income and produce supporting documents - HELD THAT: - The Tribunal noted that notices were issued under the Act and the appellant was given opportunities before both the Investigating Officer and the Adjudicating Authority to produce documents (such as bank statements or CC loan documents) to substantiate the claimed source from M/s Anil Traders. Although the appellant contended he sought time before the IO, no such documents were produced before either forum. The bank statements filed with the appeal show large cash deposits for which no justification or source was furnished. In these circumstances the Tribunal found the contention of denial of fair opportunity unsubstantiated. [Paras 13, 14, 15]

The plea of deprivation of opportunity to disclose source and produce documents is rejected for lack of supporting material.

Admissibility of statement under section 50 of the Act of 2002 - reliance on bank statements and cash deposits as material - Whether the Adjudicating Authority could rely on the deceased appellant's statements under section 50 and on the bank account analysis - HELD THAT: - The Tribunal accepted that the statement recorded under section 50 is admissible and may be relied upon. Independent scrutiny of bank accounts revealed numerous cash deposits aggregating over Rs. 41 lakhs in the appellant's account without satisfactory explanation. The combined weight of the admissible statement and the documentary bank evidence supported the Authority's decision to issue and confirm the attachment. [Paras 15, 16]

The reliance on the section 50 statement and bank-account analysis was held to be lawful and properly exercised.

Requirement to disclose source of proceeds - Effect of alleged contradictions/variance in the figures of embezzled amounts on the validity of attachment - HELD THAT: - The Tribunal observed discrepancies in figures relied upon by the prosecution were pointed out by the appellant, but found that such variances did not negate the substantive material showing unexplained cash deposits and admissions. The presence of a charge sheet and corroborative bank analysis meant the minor contradictions in amounts did not vitiate the Authority's conclusion. [Paras 8, 16]

Variations in stated figures did not constitute a ground to set aside the attachment.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's order confirming the attachment of the property is upheld.

Interim retention orders under PMLA - interim preservation of assets pending trial for possible confiscation - attachment and freezing of bank accounts as proceeds of crime/money laundering - right of accused to copies of relied-upon seized material and application for release of unrelied material

Interim retention orders under PMLA - interim preservation of assets pending trial for possible confiscation - attachment and freezing of bank accounts as proceeds of crime/money laundering - Validity of the Adjudicating Authority's order permitting the respondent to retain/seize/freeze documents, digital records, bank accounts and properties seized during searches - HELD THAT: - The Tribunal held that the impugned order was an interim protective measure made to preserve assets and material listed for possible confiscation in the prosecution complaint under the Prevention of Money Laundering Act until conclusion of the trial. The prosecution complaint had been filed and the properties were included in the list of assets for the purpose of confiscation; accordingly the Adjudicating Authority's order was a permissible interim step to protect the subject matter of prosecution. No illegality was found in the Adjudicating Authority's order and the appellants' challenge to the retention/seizure/freeze was rejected. [Paras 5, 6]

Impugned interim order allowing the respondent to retain/seize/freeze the listed documents, accounts and properties is not illegal and the appeals are dismissed.

Right of accused to copies of relied-upon seized material - application for release of un-relied documents - Entitlement of the appellants to obtain copies of relied-upon seized material and to apply for release of un-relied seized material - HELD THAT: - While upholding the interim retention order, the Tribunal observed that, in view of the prosecution complaint having been filed, the appellants are entitled to obtain copies of all documents and material relied upon by the respondent. The Tribunal also recognised the appellants' right to apply for the release of any seized material not relied upon or not required for further investigation, leaving such applications to be considered on merits. [Paras 5]

Appellants entitled to copies of all relied-upon seized material and may apply for release of un-relied seized documents; such applications to be considered in accordance with law.

Final Conclusion: The appeals against the Adjudicating Authority's interim order permitting retention/seizure/freeze of documents, accounts and properties were dismissed for lack of merit; appellants nonetheless have a right to obtain copies of relied-upon seized material and may apply for release of any un-relied material.

Eligibility for exemption under Notification No. 01/2006-S.T. dated 01.03.2006 - commercial or industrial construction service - use of materials as determinative for exemption - extended period of limitation - mens rea / suppression of facts to evade tax - Technical Testing and Analysis service - Consulting Engineer Service - penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994

Eligibility for exemption under Notification No. 01/2006-S.T. dated 01.03.2006 - use of materials as determinative for exemption - commercial or industrial construction service - Remand for verification of use of materials in respect of Work Orders where benefit of Notification No. 01/2006-S.T. dated 01.03.2006 was denied - HELD THAT: - The Tribunal found that the adjudicating authority had allowed the benefit of the Notification in respect of some Work Orders but denied it for others. A document on record (extracted at para. 8.3) indicates that materials were used in a contract where exemption was denied. The appellant asserts it has evidence showing materials were used in all contested Work Orders and offered to produce those documents. In the interest of justice the Tribunal set aside the demands confirmed under the category of 'Commercial or industrial construction service' and remanded the matter to the adjudicating authority to verify, on production of documents by the appellant, whether materials were used in each remaining Work Order and to pass a speaking order on eligibility for the Notification accordingly. The verification is to be confined to the normal period of limitation (see para. 8.3-8.5 and 11(i)). [Paras 8, 11]

Demands under 'Commercial or industrial construction service' set aside and matter remanded for verification of use of materials in the remaining Work Orders; adjudication to be limited to the normal period of limitation

Extended period of limitation - mens rea / suppression of facts to evade tax - Invocation of extended period of limitation to demand Service Tax is not sustainable - HELD THAT: - The Tribunal observed that the appellant had not collected Service Tax from customers and believed it was eligible for exemption under the Notification because materials were used. There was no finding of suppression of facts with intent to evade tax or mens rea. Consequently, the extended period of limitation invoked by the adjudicating authority could not be sustained, and any further verification by the adjudicating authority must be restricted to the normal period of limitation (para. 9). [Paras 9]

Extended period invocation rejected; demand and further verification limited to the normal period of limitation

Technical Testing and Analysis service - Consulting Engineer Service - penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - Demands under 'Technical Testing and Analysis service' and 'Consulting Engineer Service' upheld; penalties in respect of these demands not imposable - HELD THAT: - The appellant did not contest the tax demands under these service categories. The Tribunal therefore upheld the demands of service tax with interest as confirmed in the impugned order. However, because no suppression with intent to evade tax was shown on the record in respect of these demands, the Tribunal held that penalties could not be imposed (paras. 10 and 11(ii)). [Paras 10, 11]

Service tax demands with interest under the two service categories upheld; no penalty imposed in respect of those confirmed demands

Final Conclusion: The Tribunal remanded the construction-service demands for verification of use of materials (limited to the normal period of limitation), rejected invocation of the extended period of limitation, upheld the tax demands for Technical Testing and Analysis and Consulting Engineer services but held that no penalties are imposable in respect of those demands; the appeal is disposed accordingly.

Appropriation of deposit towards time barred claim - payment under protest not acceptance of liability - time barred demand - extended period of limitation under proviso to section 73(1) of the Finance Act - suppression of facts must be wilful and with intent to evade - burden of proof on department to prove suppression with intent

Appropriation of deposit towards time barred claim - payment under protest not acceptance of liability - time barred demand - Appropriation by the Commissioner of the sum deposited by the assessee towards a demand that was time barred - HELD THAT: - The Tribunal's reasoning in A.S. Abdul Khader and the decision in Federation of Andhra Pradesh Chamber of Commerce and Industry were applied to hold that a deposit made during investigation, and specifically a payment made under protest, cannot be treated as acceptance of liability so as to validate appropriation towards a demand held to be time barred. The adjudicating authority had dropped the extended period demand for periods prior to 2012 13; accordingly the Commissioner could not appropriate the Rs. 11,00,000/- deposited by the appellant towards that time barred claim. Appropriation towards a demand invalidated on limitation grounds is not justified and refund (or disallowance of appropriation) follows where the deposit was made while contesting the liability. [Paras 9, 20]

Appropriation set aside; appeal by the assessee allowed to the extent of quashing the appropriation of the deposit towards the time barred claim.

Extended period of limitation under proviso to section 73(1) of the Finance Act - suppression of facts must be wilful and with intent to evade - burden of proof on department to prove suppression with intent - Whether the extended five year limitation under the proviso to section 73(1) could be invoked on the facts of the case - HELD THAT: - Section 73(1) grants an extended period where non levy or short levy arises by reason of fraud, collusion, wilful mis statement, suppression of facts or contravention with intent to evade tax. Applying the decisions in Pushpam Pharmaceuticals and Anand Nishikawa, suppression of facts in the proviso must be deliberate and accompanied by intent to evade payment; mere non furnishing or omission does not suffice. The department bore the burden to demonstrate a positive act of suppression with intent. The investigation, begun in October 2012, proceeded for about two years on the basis of records available and no new material came to light before issuance of the show cause notice in April 2014. The Commissioner correctly found that the department failed to substantiate wilful suppression or intent to evade, and that invocation of the extended period was therefore not justified; the normal eighteen month limitation therefore barred demands for periods up to 2011 12. [Paras 15, 18, 19, 21]

Extended period under the proviso to section 73(1) not invocable on the facts; departmental appeal dismissed.

Final Conclusion: The appeal filed by the assessee is allowed to the extent that the Commissioner's appropriation of the deposit towards a time barred claim is set aside; the departmental appeal challenging the Commissioner's holding that the extended period under the proviso to section 73(1) could not be invoked is dismissed.

CENVAT credit on input services - Distinction between input and input service - Break in the CENVAT chain - Admissibility of credit for services used in erection and commissioning of telecom towers/shelters - Destination test for input services - Limited scope of Bharti Airtel to inputs (not input services)

CENVAT credit on input services - Admissibility of credit for services used in erection and commissioning of telecom towers/shelters - Distinction between input and input service - Break in the CENVAT chain - Destination test for input services - CENVAT credit in respect of input services used for erection and commissioning of BTS towers/shelters deployed by a telecom service provider is admissible. - HELD THAT: - The Larger Bench held that the decision in Bharti Airtel is confined to eligibility of credit on tangible inputs (and capital goods) which merge into immovable property and, therefore, is not determinative of entitlement to credit of input services. The two sources (inputs and input services) stand in mutually exclusive contexts under the CENVAT Credit Rules, 2004: eligibility of tangible inputs is tested by their contribution to the taxable activity, whereas eligibility of input services is tested by their use in the hands of the recipient provider of taxable service (the destination test). Consequently, the finding that certain goods become part of immovable property and are ineligible as inputs does not ipso facto break the CENVAT chain for input services procured and used by the service provider. The Bench noted changes in the Rules over time and restricted Bharti Airtel to its factual matrix, thereby confirming that there is no inherent prohibition on credit of input services used for erection and commissioning of towers/shelters where those services are used by the provider in rendering the output service. On that basis the coordinate-bench decisions allowing such credit remain good precedent insofar as facts are similar. [Paras 8, 9]

Impugned Order-in-Original disallowing CENVAT credit on input services used for erection/commissioning of BTS towers/shelters is set aside and the appeal is allowed.

Final Conclusion: The Larger Bench held that Bharti Airtel is limited to ineligibility of inputs and does not negate entitlement to CENVAT credit of input services used by a telecom service provider for erection and commissioning of towers/shelters; accordingly the adjudication disallowing such credit is set aside and the appeal is allowed.

Pre-deposit - pre-deposit payment through DRC-03 challan - statutory mode of payment via CBIC GST e-payment portal/ICEGATE - payment under Section 35F - equitable relief in writ jurisdiction

Pre-deposit - pre-deposit payment through DRC-03 challan - statutory mode of payment via CBIC GST e-payment portal/ICEGATE - payment under Section 35F - Whether payment of statutory pre-deposit made by the appellant through DRC-03 challan at the time of filing appeal before Commissioner (Appeals) was admissible and could cure want of pre-deposit required under the statute. - HELD THAT: - The Tribunal observed that the payment of pre-deposit is statutory and must be made by the admissible mode prescribed by the Board's procedures. The record establishes that DRC-03 is not the challan generated on the CBIC-GST Portal/(ICEGATE) e-payment portal and therefore does not constitute payment in the prescribed mode. The Tribunal referred to earlier Bench decisions holding that payment through DRC-03 is not permissible under the statutory scheme governing pre-deposit (including decisions of the Principal Bench and the Tribunal's decision in Army Welfare Housing Organisation). While a High Court decision (Sodexo) granted relief on equitable grounds under writ jurisdiction, the Tribunal treated that decision as acknowledging absence of a proper provision to accept DRC-03 but providing relief on equity; the CBIC instruction of 28.10.2022 and Circular No.1070/3/2019 reinforce that the prescribed mode is the e-payment challan. As there was no valid pre-deposit at the time of filing the appeal before Commissioner (Appeals), the Commissioner (Appeals) was entitled to reject the appeal without any further mandate to issue a separate notice about the mode of payment, and subsequent payment of ten percent before the Tribunal (made after the impugned order) could not cure the defect in the earlier proceedings.

Payment by DRC-03 was held inadmissible for statutory pre-deposit; absence of valid pre-deposit justified rejection of the appeal by Commissioner (Appeals), and subsequent payment did not vitiate the order.

Final Conclusion: The Tribunal upheld the impugned order rejecting the appeal for non-payment of statutory pre-deposit by the prescribed mode and dismissed the present appeal.

Business Auxiliary Services - Export of services - Intermediary - Place of Provision of Services Rules, 2012 - application of Rule 3 and Rule 9 - Conditions for export under Service Tax Rules (Rule 6A)

Business Auxiliary Services - Export of services - Conditions for export under Service Tax Rules (Rule 6A) - Classification of services and entitlement to export benefit for the period up to 30.06.2012 - HELD THAT: - The services performed by Grant Thornton Advisory Pvt. Ltd. for development and promotion of the 'Grant Thornton' brand in India were examined against the definition of Business Auxiliary Services. The Commissioner found the activities to be essentially developmental and promotional and expressed difficulty in classifying them under the specific sub-clauses relied upon in the show cause notice. Irrespective of classification, the Commissioner held that the conditions for export under the Export of Service Rules were satisfied: the amendment w.e.f. 27.02.2010 removed the 'used outside India' requirement, and the payment was received in convertible foreign exchange. Consequently, the export benefit could not be denied and disciplinary proceedings were not maintainable. [Paras 25, 26, 27, 28, 29]

Proceedings dropped for the period up to 30.06.2012 as the services qualified for export of services.

Intermediary - Place of Provision of Services Rules, 2012 - application of Rule 3 and Rule 9 - Export of services - Whether the services are 'intermediary' services and, if not, whether they qualify as export of services for the period from 01.07.2012 - HELD THAT: - Under Rule 2(f) of the 2012 Rules an intermediary arranges or facilitates a provision of a main service between two or more persons and does not include a person who provides the main service on his own account. The agreement and its recitals do not indicate that Grant Thornton, India was to act as an intermediary; it was to provide brand development services on its own account (outsourcing certain tasks does not convert it into an intermediary). Therefore Rule 9 (place of supplier for intermediaries) does not apply; the default Rule 3 applies, making the place of provision the location of the service recipient (Grant Thornton, London) which is outside India. Payment in convertible foreign exchange being undisputed, the conditions under Rule 6A of the Service Tax Rules are satisfied and the services qualify as export of services. The Tribunal found no error in the Commissioner's conclusion and dismissed the department's contention that the services were intermediary services. [Paras 32, 33, 34, 35, 36]

Services are not intermediary services; under Rule 3 the place of provision is the recipient abroad and the services qualify as export of services for the period from 01.07.2012; proceedings dropped.

Final Conclusion: The Commissioner rightly dropped the proceedings under the show cause notice for the period 2010-2011 to 2014-15: the services rendered by Grant Thornton Advisory Pvt. Ltd. were held to qualify as export of services (not as intermediary services) and the appeal is dismissed.

Renting of immovable property service - management, maintenance and repair service - reimbursement of electricity as pure agent - limitation and extended period of limitation - CENVAT Credit admissibility where tax paid to the exchequer - interest and penalty contingent on sustainability of demand

Renting of immovable property service - limitation and extended period of limitation - Demand of service tax on car parking charges set aside - HELD THAT: - The Tribunal held that parking charges do not sustain service tax demand under the head 'renting of immovable property service' in view of binding judicial precedent and that, independently, the demand is barred by limitation. The Bench relied on the authority cited by the assessee, which concluded that parking is excluded from taxable service and noted that an earlier Show Cause Notice dated 31.12.2008 placed the department on notice so as to preclude invoking extended limitation thereafter. Applying the principle that a fresh notice cannot invoke extended limitation where the same issue was already the subject of notice, the demand confirmed by the adjudicating authority was found unsustainable. [Paras 8]

Demand of service tax on car parking charges set aside on merits and as barred by limitation

Management, maintenance and repair service - reimbursement of electricity as pure agent - Demand of service tax on reimbursement of electricity charges set aside - HELD THAT: - The Tribunal found that electricity charges collected on actual consumption and paid to the supplier by the assessee amounted to reimbursement where the assessee acted as a 'pure agent' and therefore were not subject to service tax. The Bench also treated the point as no longer res integra in light of this Tribunal's earlier decision in Choicest Enterprises Limited (Final Order No. 76299 of 2024), which held similarly that electricity supplied in the circumstances constituted sale of goods or otherwise did not attract service tax. Relying on that precedent and on the factual finding that the assessee paid amounts to CESC exceeding sums collected, the Tribunal set aside the demand confirmed by the Commissioner. [Paras 8]

Demand of service tax on reimbursement of electricity charges set aside

Management, maintenance and repair service - limitation and extended period of limitation - Demand of service tax on signage charges barred by limitation and set aside - HELD THAT: - The Tribunal observed that the collection of signage charges was within the department's knowledge and there was no established suppression with intent to evade tax. The Show Cause Notice issued on 06.01.2012 could not validly reach back to the entire period pleaded by the department where facts were already known; accordingly the demand for the period pleaded was held to be time-barred and unsustainable. [Paras 8]

Demand of service tax on signage charges held barred by limitation and set aside

CENVAT Credit admissibility where tax paid to the exchequer - Reversal of CENVAT credit of Rs.30,534/- held unsustainable - HELD THAT: - The Tribunal noted that the assessee had paid service tax on the full invoice value to the exchequer and therefore was entitled to avail the CENVAT credit despite having paid lesser amounts to the service providers in some instances. The fact that the assessee settled for a reduced payment with the provider did not negate entitlement to credit actually paid to the government; accordingly the confirmation of reversal under Rule 4(7)/Rule 14 was disallowed. [Paras 8]

Reversal of CENVAT credit set aside and claim allowed

Interest and penalty contingent on sustainability of demand - Interest and penalties set aside as consequential on setting aside demands - HELD THAT: - Because all substantive demands were set aside, the Tribunal held that neither interest nor penalties could be imposed. The Revenue's appeal seeking interest on the electricity reimbursement demand was rejected as the underlying demand itself was annulled. [Paras 9, 10]

Interest and penalty not leviable where the confirmed demands have been set aside; Revenue's appeal rejected

Final Conclusion: The Tribunal allowed the assessee's appeal, setting aside the confirmed demands for service tax on car parking charges, reimbursement of electricity charges and signage charges, and disallowing reversal of CENVAT credit; consequential interest and penalties were also quashed and the Revenue's appeal was dismissed.

Cenvat credit - reversal of Cenvat credit upon clearance - clearance on payment of excise duty - application of Rule 16 (duty paid goods) and Rule 3(5) of the Cenvat Credit Rules - limitation / time bar of show cause notice - payment through banking channel as evidentiary proof

Cenvat credit - reversal of Cenvat credit upon clearance - clearance on payment of excise duty - application of Rule 16 (duty paid goods) and Rule 3(5) of the Cenvat Credit Rules - Validity of denial of Cenvat credit where inputs were received under excise invoices, Cenvat credit was taken and subsequently reversed when goods were cleared on payment of excise duty. - HELD THAT: - The Tribunal found that the assessee had received MS Round, TMT Bars etc. under proper excise invoices, had taken Cenvat credit and had reversed the entire Cenvat credit at the time of clearance by discharging excise duty. The Department did not dispute receipt of goods in the factory or accounting in books, and the transactions including Cenvat taking and debiting were reflected in ER-1 returns. The Bench relied on earlier decisions holding that where duty-paid goods are taken as inputs and the Cenvat credit so taken is utilized and the end product is cleared on payment of excise duty (and where duty on clearance is equivalent to or exceeds the Cenvat availed), denial of Cenvat credit is not justified. Documentary evidence of payments through banking channels further supported the factual matrix. In these circumstances the Tribunal held the demand confirming denial of Cenvat credit to be unsustainable and set aside the impugned order on merits. [Paras 8, 9, 10, 12]

Impugned denial of Cenvat credit set aside and appeals allowed on merits.

Limitation / time bar of show cause notice - payment through banking channel as evidentiary proof - Sustainability of the demand in view of limitation where the Show Cause Notice was issued belatedly for transactions during 2008-10. - HELD THAT: - The Tribunal observed that the Show Cause Notice dated 30/09/2013 related to transactions during 2008-10 and that details of Cenvat availed and debited were part of ER-1 returns relied upon by the Department. There was no allegation or evidential basis of suppression by the assessee and no recovery of private records showing clandestine cash transactions. Earlier decisions of the Bench were held to support the view that, given the documentary records, payments through banking channels and statutory returns reflecting the transactions, the demand for the extended period was barred by limitation. Consequently the impugned order was set aside on the ground of time bar as well. [Paras 5, 11, 13, 14]

Impugned order set aside on account of limitation; appeals allowed on time-bar grounds.

Final Conclusion: The Tribunal allowed the appeals: the denial of Cenvat credit was set aside on merits because inputs were received under proper excise invoices, Cenvat credit was taken and reversed on clearance with payment of excise duty; the demand was also held time-barred as the Department failed to demonstrate suppression and the transactions were reflected in statutory returns, entitling the appellants to consequential relief as per law.

Admissibility of Cenvat credit on Goods Transport Agency service - place of removal - FOR destination sales - input service - transfer of ownership and risk - freight as integral part of price

Admissibility of Cenvat credit on Goods Transport Agency service - place of removal - FOR destination sales - input service - Whether Cenvat credit of service tax paid on GTA for outward transportation to the buyer's premises is admissible where sales are on FOR destination basis - HELD THAT: - The Tribunal held that, in FOR destination sales, the place of removal is the buyer's premises and therefore service tax paid on GTA for transportation up to that place is admissible as Cenvat credit. The conclusion is founded on Supreme Court precedents (Roofit Industries and EMCO) which require determining place of removal as the stage of transfer of ownership; subsequent authorities including Ultra Tech Cement, the Larger Bench decisions and Circular No.1065/4/2018-CX were considered to interpret and apply that principle. On the facts the appellant sold goods on FOR destination basis, paid excise duty which included freight, produced marketing circulars, sales contracts, invoices, lorry receipts, transporter bills, TR-6 challans and a Chartered Accountant's certificate showing ownership and risk remained with the seller until delivery at the customer's premises and that freight formed part of the price. The Revenue had admitted in the show cause notice that place of removal was customer premises. Applying the settled law and these factual findings, the Tribunal found the GTA service for delivery to buyer's premises to fall within the ambit of "input service" for claiming Cenvat credit and set aside the impugned order. [Paras 10, 11, 12, 14, 15]

The appeal is allowed and the appellant is entitled to Cenvat credit of service tax paid on GTA for transportation up to the buyer's premises in FOR destination sales; the impugned order is set aside.

Final Conclusion: On the settled legal tests and the appellant's uncontroverted facts showing FOR destination sales, transfer of ownership and risk at buyer's premises and freight as integral to price, the Tribunal allowed the appeal and held Cenvat credit for GTA up to the place of removal (buyer's premises) to be admissible.

Place of removal - CENVAT credit on Goods Transport Agency (GTA) services - FOR destination sale exception to Ultra Tech - Application of Roofit Industries and Emco judgments - Binding effect of Board Circular No.1065/4/2018-CX

Place of removal - CENVAT credit on Goods Transport Agency (GTA) services - FOR destination sale exception to Ultra Tech - Application of Roofit Industries and Emco judgments - Binding effect of Board Circular No.1065/4/2018-CX - Whether CENVAT credit of service tax paid on outward GTA services for transportation of final products to buyer's premises is admissible where sales are on FOR (destination) basis and the facts show that ownership and risk remained with the seller till delivery at buyer's premises. - HELD THAT: - The Tribunal examined the question in light of the Supreme Court decisions in Roofit Industries and Emco and the Board's Circular No.1065/4/2018-CX dated 08.06.2018, which summarised that the place of removal is ordinarily the manufacturer's premises but carved out an exception for FOR destination sales where ownership, risk in transit and right of disposal remain with the seller until delivery at the buyer's premises. The Original Authority's own factual findings (purchase orders, insurance, invoices and inclusion of freight in transaction value) established that the sale was on FOR destination basis and that ownership and responsibility remained with the appellant till delivery at the buyers' premises. The Original Authority and Commissioner (Appeals) nevertheless applied the later Supreme Court decision in Ultra Tech to deny credit, thereby departing from the remand direction to decide in light of Roofit/Emco and failing to apply the Board Circular which interpreted those decisions and identified the exception. Given that the facts fall squarely within the exception recognised by the Board Circular and the applicable Supreme Court precedents, no further remand was necessary and the impugned order was liable to be set aside. [Paras 5, 7, 8, 9, 10]

Impugned order set aside; appeal allowed and appellant entitled to consequential relief.

Final Conclusion: The Tribunal set aside the adjudication and appellate orders and allowed the appeal, holding that CENVAT credit on GTA outward services is admissible on the facts where sales were on FOR destination basis and the place of removal is to be treated as the buyer's premises in accordance with Roofit/Emco and Board Circular No.1065/4/2018-CX.

Exemption under Notification No. 4/2006-C.E. (Sl. No. 78) - plastic materials reprocessed in India out of the scrap or the waste of goods - classification of imported material as "waste and scrap" for exemption purposes - distinction between "waste and scrap of goods" and tariff heading 3915 - invocation of extended period - suppression of facts and time bar

Exemption under Notification No. 4/2006-C.E. (Sl. No. 78) - plastic materials reprocessed in India out of the scrap or the waste of goods - classification of imported material as "waste and scrap" for exemption purposes - Entitlement of re processed plastic granules to exemption under Sl. No. 78 of Notification No. 4/2006 C.E. - HELD THAT: - The Tribunal held that the exemption in Sl. No. 78 applies where the inputs are the "scrap or the waste of goods" falling within the listed chapters, and the critical phrase is "waste and scrap of goods" rather than a requirement that such inputs must be separately classified under Heading 3915. Documents produced by the appellant (supplier certificate and test report) and undisputed use of imported material as waste and scrap in the factory establish that the imported granules were waste/scrap of goods falling under Chapter 39. The Tribunal relied on a prior final order in the appellant's own case which analysed the same question and concluded that the imported material must be considered waste and scrap of Chapter 39 goods and is therefore entitled to the nil rate under the notification. In view of that reasoning, the impugned demand based on denial of exemption was set aside. [Paras 4, 5]

Re processed plastic granules cleared by the appellant are eligible for exemption under Sl. No. 78 of Notification No. 4/2006 C.E.; impugned orders denying exemption set aside.

Invocation of extended period - suppression of facts and time bar - declaration in ER 1 return and knowledge of Revenue - Validity of invocation of extended period for assessment/demand in view of alleged suppression of facts. - HELD THAT: - The Tribunal accepted the view in the earlier final order that the appellant had claimed the exemption in ER 1 returns and that the classification and claim were within the notice of the Revenue; there was no suppression of fact or mala fide on the part of the appellant. The Revenue could and should have examined the eligibility within the normal period. Accordingly, invocation of the extended period was held to be illegal and the demands for the longer period were not sustainable. This finding on limitation was applied in allowing the present appeals. [Paras 4, 5]

Invocation of extended period is illegal in the facts of the case; demands for the longer period are unsustainable and set aside.

Final Conclusion: The appeals are allowed; the impugned orders are set aside - re processed plastic granules are entitled to exemption under Sl. No. 78 of Notification No. 4/2006 C.E., and the extended period demands are not sustainable for the periods in dispute.

Self-credit under the refund scheme - recovery as if duty erroneously refunded - requirement to follow prescribed procedure for recovery - appropriation from sanctioned refund without a confirmed demand - restriction of refund to prescribed percentage under the amending notification - payment deemed to be payment in cash under rule 8

Self-credit under the refund scheme - requirement to follow prescribed procedure for recovery - Validity of rejection of the self-credit taken by the assessee without following the procedure prescribed under the notification - HELD THAT: - The Tribunal found that Para 2C of Notification No.19/2008 prescribes a specific procedure for availing self-credit and for recovery where credit is availed irregularly or in excess, namely intimation, verification and recovery as if duty erroneously refunded (including action under Section 11A). The authorities had not shown that they issued the statutory intimation/notice or proceeded under the prescribed recovery mechanism before rejecting the self-credit. Established principles require the authority to act only in the manner prescribed by statute or the notification; deviation is impermissible. Consequently, the Revenue could not simply reject the self-credit by treating it as if no effect had been given to it without following the procedure laid down in the notification for reversal or recovery. [Paras 9, 10]

Rejection of the self-credit was held legally incorrect and ineffective because the prescribed procedure for recovery under the notification was not followed; Appeal No. E/52756/2014 is allowed on this ground.

Restriction of refund to prescribed percentage under the amending notification - payment deemed to be payment in cash under rule 8 - Whether the appellants are entitled to full refund or are restricted to the maximum refundable percentage prescribed by the amending notification - HELD THAT: - While the Tribunal held that the departmental rejection of the cash refund derived from the self-credit was procedurally improper (because the excess self-credit had not been validly determined and recovered), it also applied the subsequent binding pronouncement of the Apex Court declining the broader High Court view. Therefore the appellants cannot be entitled to the entire differential refund claimed; their refund entitlement must be restricted to the percentage allowable for chapter 38 goods as prescribed by Notification No.19/2008 (i.e., the maximum 34%). The Tribunal directed that refund be released only to the extent calculated in terms of that notification. [Paras 10, 12]

Out of the claimed cash refund, the appellants are entitled to refund only as calculated in terms of Notification No.19/2008 (restriction to the prescribed 34%); Appeal No. E/52756/2014 is allowed to that extent.

Appropriation from sanctioned refund without a confirmed demand - recovery as if duty erroneously refunded - Legality of appropriation of an amount from the sanctioned refund in absence of a confirmed demand or show cause notice under the prescribed recovery procedure - HELD THAT: - The Tribunal examined the appropriation of a portion of the sanctioned refund by the adjudicating authority where there was no record of a prior notice or a confirmed demand issued in accordance with Para 2C(g) of the notification and Section 11A. Citing the requirement that recovery under the notification must follow the specified procedure, the Tribunal held that appropriation in the absence of a confirmed demand or statutory notice lacked legal basis. Reliance was placed on authorities recognising that a demand cannot be appropriated against a refund without due process. [Paras 11, 12]

Appropriation of the amount from the sanctioned refund was held to have no legal basis; Appeal No. E/52758/2014 is allowed.

Final Conclusion: The departmental rejection of self-credit and the rejection/appropriation of the related refund were held procedurally incorrect because the recovery mechanism prescribed by the notification was not followed; the appellants are however entitled only to refund computed in terms of Notification No.19/2008 (restriction to the prescribed percentage), and both appeals are allowed accordingly.

Deemed sale by transfer of property in goods involved in the execution of a works contract - Limitation for assessment under Section 24(5) of the PVAT Act - notice issued within limitation preserves jurisdiction - Exception permitting assessment within five years where input tax credit was wrongly availed or false documents produced

Deemed sale by transfer of property in goods involved in the execution of a works contract - Powder coating activity carried out by the assessee amounts to a works contract and involves transfer of property in the execution of the works contract. - HELD THAT: - The court, applying the inclusive definition of "works contract" in the PVAT Act and the relevant Supreme Court jurisprudence concerning Article 366(29-A) and works contracts, held that powder coating of components constituted processing/fabrication falling within the definition of works contract. Consequently, the transfer of property in goods involved in execution of that works contract is a deemed sale for levy of tax under Section 15(1) of the PVAT Act. The court expressly answered the substantial questions framed in favour of the Revenue and against the assessee on this point, relying on the statutory definition and the authorities explaining that goods involved in execution of works contracts fall within the scope of deemed sale under Article 366(29-A). [Paras 31]

Powder coating is a works contract involving transfer of property in goods; the assessee is liable to tax on that deemed sale.

Limitation for assessment under Section 24(5) of the PVAT Act - notice issued within limitation preserves jurisdiction - Exception permitting assessment within five years where input tax credit was wrongly availed or false documents produced - Assessment orders dated in December 2014 were not time-barred because notices initiating assessment were issued within three years from the end of the year to which the returns related. - HELD THAT: - The court applied settled principles that assessment proceedings are valid if the notice to initiate assessment is issued within the statutory limitation period, even if the final assessment order is passed later. Noting that notices were issued on 05.03.2011 for the relevant years, the court held those notices commenced assessment proceedings within the three-year period mandated by Section 24(5) of the PVAT Act; therefore the Assessment Orders dated in December 2014 were in time. The court also recorded the statutory exception in Section 24(6) permitting assessment up to five years where input tax credit was wrongly availed or false documents were produced, but its primary conclusion was that the initiating notices issued on 05.03.2011 preserved the assessing authority's jurisdiction. [Paras 35, 50, 51]

Notices dated 05.03.2011 commenced assessment within the three-year limitation; the assessment orders passed in December 2014 are valid and not time-barred.

Final Conclusion: Tax cases allowed: substantial questions answered in favour of the Commercial Tax Department - powder coating held to be works contract attracting deemed sale; assessments upheld as within limitation because initiating notices were issued within three years; connected petitions closed with no costs.

Pre-deposit requirement - revisional jurisdiction under Section 75 - absence of power to direct pre-deposit in Section 75 - quashing of order for non-compliance with pre-deposit direction - restoration of revision application

Pre-deposit requirement - revisional jurisdiction under Section 75 - absence of power to direct pre-deposit in Section 75 - quashing of order for non-compliance with pre-deposit direction - restoration of revision application - Validity of the VAT Tribunal's direction to the petitioner to make a pre-deposit as a condition to entertain a revision filed under Section 75 of the Gujarat VAT Act and the legality of dismissal for non-compliance with that direction. - HELD THAT: - The Court held that the question of the Tribunal's power to require a pre-deposit in proceedings under Section 75 is governed by the ratio in M/s. Laxmi Dye Chem (R/Special Civil Application No.10040 of 2023 and allied matter decided on 6th December 2023), which construed Sections 73, 74 and 75 of the GVAT Act and concluded that Section 75 does not provide for passing any order of pre-deposit analogous to Section 73(4). Applying that precedent to the present facts, and noting that the factual matrix is identical, the impugned direction of the VAT Tribunal dated 25th August 2023 insisting on a pre-deposit was beyond the scope of Section 75. Consequently the subsequent dismissal of the revision for non-compliance with that direction could not be sustained. The Court therefore quashed the pre-deposit direction and the consequential dismissal, and ordered restoration of the revision to the Tribunal file for decision in accordance with law. The Court expressly refrained from adjudicating the merits of the underlying assessment. [Paras 5, 7]

Impugned orders directing pre-deposit and dismissing the revision for non-compliance are quashed; the revision is restored to the Tribunal and remitted for determination in accordance with law within three months; merits not considered.

Final Conclusion: Petition allowed; VAT Tribunal's orders directing pre-deposit and dismissing the revision for non-compliance quashed and set aside; revision restored to the Tribunal for fresh decision in accordance with law within three months.

Quashing of criminal proceedings under Section 482 CrPC - compromise/one-time settlement in commercial and financial transactions as ground for quashing - continuation of criminal proceedings after repayment/OTS - oppression and prejudice where possibility of conviction is remote - exercise of inherent jurisdiction to give an end to criminal proceedings in private disputes

Compromise/one-time settlement in commercial and financial transactions as ground for quashing - oppression and prejudice where possibility of conviction is remote - Whether continuation of criminal proceedings against the two accused-women was justified after the borrowers and the Bank entered into a one-time settlement and the loan accounts were closed - HELD THAT: - The Court found the factual position to be undisputed that the borrowers and the Bank had settled their disputes by an OTS and the loan accounts were closed. Relying on its prior decision in a similar case, the Court reiterated that where offences arise out of commercial, financial, mercantile or like transactions and the parties have resolved the entire dispute, continuation of criminal proceedings would not be justifiable. In such private or personal wrongs the likelihood of conviction is remote and continued prosecution would cause oppression and prejudice to the accused; consequently the inherent jurisdiction under Section 482 CrPC ought to be exercised to bring the proceedings to an end. The Court further noted the limited involvement of the two accused-women and the death of other principal accused, and concluded that these considerations reinforced the appropriateness of quashing the proceedings against them. [Paras 14, 15, 16, 17]

Criminal proceedings against the two accused-women in T.R. No. 28 of 2002 were quashed.

Quashing of criminal proceedings under Section 482 CrPC - exercise of inherent jurisdiction to give an end to criminal proceedings in private disputes - Whether the High Court erred in declining to quash the criminal proceedings and in permitting the appellants to urge their pleas before the trial Court instead - HELD THAT: - The Supreme Court held that the High Court's disposition of the Section 482 petitions merely by permitting pleas to be urged before the trial Court was not appropriate in the facts of these cases. Given the settlement between the parties and the nature of the dispute (commercial/financial), the High Court should have exercised its inherent jurisdiction to quash the proceedings. For these reasons the impugned orders of the High Court were set aside. [Paras 2, 16, 17]

Impugned High Court orders dated 4th July 2023 in CRLMC Nos. 33 and 34 of 2022 were quashed and set aside.

Final Conclusion: The appeals are allowed; the impugned High Court orders are quashed and set aside and the criminal proceedings in T.R. No. 28 of 2002, insofar as they relate to the two appellants, are quashed.

Presumption under Section 139 - presumption under Section 118(a) - rebuttal of statutory presumption on preponderance of probabilities - probable defence - ingredients of offence under Section 138 of the Negotiable Instruments Act - role and admissibility of expert/FSL report under Section 293 CrPC - appellate interference with an order of acquittal

Presumption under Section 139 - presumption under Section 118(a) - rebuttal of statutory presumption on preponderance of probabilities - role and admissibility of expert/FSL report under Section 293 CrPC - ingredients of offence under Section 138 of the Negotiable Instruments Act - Whether the Trial Court rightly acquitted the respondents on the ground that the presumptions under Sections 118(a) and 139 of the NI Act were rebutted and the petitioner failed to prove existence of a legally enforceable debt and execution of the cheques. - HELD THAT: - The Trial Court accepted that Respondent No.2 consistently denied signing or issuing the cheques and ordered comparison by CFSL, the report of which indicated that Respondent No.2 was not the signatory. Having regard to the CFSL/FSL report placed on record under Section 293 CrPC and Respondent No.2's defence, the Trial Court found that the accused had raised a probable defence on a preponderance of probabilities and thereby dislodged the statutory presumptions under Sections 118(a) and 139. Once those presumptions disappeared, the burden returned to the complainant to prove as a matter of fact that (i) a legally enforceable debt existed as on the date of the post dated cheques and (ii) the cheques were drawn by the accused in discharge of that debt. The Trial Court noted absence of documentary evidence or oral testimony establishing when, how and by what mode the alleged loan of the stated amount was advanced, and observed that the complainant failed to prove any specific debt/liability as on the dates appearing on the cheques. The High Court, applying the principles in Rajesh Jain and Chandrappa, found no perversity in these findings: the FSL report legitimately supported the defence and the petitioner did not satisfactorily prove existence of debt on the cheque dates. [Paras 25, 26, 27, 28, 30]

The acquittal was justified: the presumptions under Sections 118(a) and 139 were rebutted by a probable defence supported by the FSL report, and the complainant failed to prove existence of debt and execution of the cheques as a matter of fact.

Appellate interference with an order of acquittal - appellate interference with an order of acquittal - Whether the High Court should interfere with the Trial Court's order of acquittal. - HELD THAT: - An appellate court has full power to reappraise evidence in appeals against acquittal but must bear in mind the double presumption of innocence and should not disturb an acquittal unless the appreciation of evidence is perverse or no reasonable conclusion supports the acquittal. Applying these principles to the record, the High Court found the Trial Court's findings to be a permissible appreciation: Respondent No.2's consistent denial, the FSL report, and the absence of cogent proof of debt on the cheque dates rendered the Trial Court's conclusion non perverse. The High Court observed that the Trial Court's acquittal did not rest on mere conjecture but on the failure of the complainant to discharge the burden once the presumptions were rebutted. [Paras 17, 18, 31, 32, 33]

No interference: the High Court declines to upset the order of acquittal as the Trial Court's appreciation of evidence is not perverse.

Final Conclusion: The leave petition is dismissed; the High Court upholds the Trial Court's acquittal because the accused successfully rebutted the statutory presumptions and the complainant failed to prove existence of a debt and execution of the cheques as on the cheque dates, and the Trial Court's appreciation of evidence is not perverse.