TaxTMI Updates e-Newsletter
Oct 07,2024

Input Tax Credit - blocked credits - plant or machinery v. plant and machinery - functionality test - non-obstante clause - works contract - scope of supply under Schedule II - reasonable classification under Article 14

Plant or machinery v. plant and machinery - non-obstante clause - Meaning of the expression "plant or machinery" in Section 17(5)(d) and applicability of the explanation defining "plant and machinery" - HELD THAT: - The Court held that the expression "plant or machinery" in Section 17(5)(d) cannot be read as identical to the defined expression "plant and machinery" in the explanation to Section 17. The legislature's deliberate use of the disjunctive "or" in clause (d) must be respected; the explanatory definition, which expressly excludes land, building or civil structures, applies to the compound expression "plant and machinery" used elsewhere in Chapters V and VI but not to the singular/disjunctive expression in clause (d). The Court therefore declined the revenue's invitation to read "or" as "and" or to import the explanatory definition into clause (d), emphasising the principle that courts should not supply deficiencies in taxing enactments or rewrite plain statutory language. [Paras 42, 43, 44, 45, 65]

The expression "plant or machinery" in Section 17(5)(d) is distinct from the defined expression "plant and machinery" and the explanation to Section 17 does not apply to the former.

Functionality test - scope of supply under Schedule II - Input Tax Credit - Whether an immovable property (such as a shopping mall, warehouse or other building) can be treated as a "plant" under Section 17(5)(d) - HELD THAT: - The Court applied the established functionality/essentiality test: whether on facts the building has been planned and constructed to serve special technical requirements such that it functions as an essential tool of the business. If so, the building may qualify as a "plant" for the purposes of clause (d) and would not fall within the blocked-credit exception. The Court observed that this is a question of fact to be determined case-by-case in light of the business of the registered person and the role of the building in that business. The Court refused to decide the factual question of whether the particular mall before the High Court satisfied the functionality test and directed that such factual determination be made by the High Court. [Paras 52, 53, 55, 66, 67]

Whether a building is a "plant" under Section 17(5)(d) is a factual question to be decided by applying the functionality test; the matter is remanded for limited factual determination.

Blocked credits - reasonable classification under Article 14 - Input Tax Credit - Constitutional challenge to clauses (c) and (d) of Section 17(5) and to Section 16(4) of the CGST Act - HELD THAT: - Applying the settled principles governing review of taxation statutes, the Court held that the classification effected by clauses (c) and (d) is based on intelligible differentia (immovable property/creation of immovable property and the break in tax chain) and bears a rational nexus to the legislative objective, including respect for State competence over land and buildings. The Court rejected arguments of arbitrariness, under inclusiveness and violation of Articles 14, 19(1)(g) and 300A. Similarly, the temporal bar in Section 16(4) (as amended) was not found to be arbitrary. Given that ITC is a statutory entitlement, the Court emphasised the legislature's wide latitude in fiscal classification and declined to read down or strike down the provisions. [Paras 59, 60, 63, 64, 65]

Clauses (c) and (d) of Section 17(5) and Section 16(4) are constitutionally valid; reading down is not warranted.

Final Conclusion: The appeals are partly allowed: the High Court's order is set aside insofar as it read down Section 17(5)(d); the Court construed "plant or machinery" as distinct from the defined phrase "plant and machinery", held clauses (c) and (d) of Section 17(5) and Section 16(4) constitutionally valid, and remanded the writ petitions to the High Court of Orissa for limited factual determination whether the mall (or other impugned immovable property) qualifies as a "plant" under the functionality test, failing which the blocked credit rule will apply.

Summary order. Delay condoned; notice issued to the respondent; learned counsel accepted notice on behalf of the respondent.

Limitation in tax appeals under Section 107 of the GST Act - Exclusion of Section 5 of the Limitation Act in special fiscal statutes - Condonation of delay beyond the period prescribed in the GST appellate provisions - Applicability of administrative notification for extension of limitation for GST appeals - Requirement of willful intent for prosecution under Section 74 of the GST Act

Limitation in tax appeals under Section 107 of the GST Act - Exclusion of Section 5 of the Limitation Act in special fiscal statutes - Condonation of delay beyond the period prescribed in the GST appellate provisions - Validity of dismissal of the appeal on the ground of limitation - HELD THAT: - The Court held that Section 107 of the GST Act prescribes a complete and self-contained limitation regime for filing appeals and, being a special fiscal statute, implicitly excludes the operation of Section 5 of the Limitation Act. Relying on earlier decisions of this Court, the appellate authority's power to condone delay is confined to the limited extension expressly provided by the GST appellate provisions; consequently delay beyond the condonable period cannot be cured by invoking the Limitation Act. In the facts of the petition, the appeal was filed beyond the period that could be condoned under the GST appellate scheme and therefore dismissal on the ground of limitation was valid. [Paras 9, 10, 11]

Dismissal of the appeal on the ground of limitation was justified and sustainable.

Applicability of administrative notification for extension of limitation for GST appeals - Requirement of willful intent for prosecution under Section 74 of the GST Act - Whether the notification dated 02.11.2023 applied to the petitioner's appeal and whether the absence of recorded willful intent under Section 74 affected the limitation issue - HELD THAT: - The Court examined the notification relied upon by the petitioner and found it applied only to orders passed on or before 31.03.2023; the impugned order in this case was passed on 20.07.2023 and therefore the notification did not assist the petitioner. Although the petitioner argued absence of a finding of willful intent under Section 74, the challenge did not alter the threshold limitation question; the Court did not decide the merits of the Section 74 contention because the appeal was dismissed as time-barred. [Paras 6, 7]

The notification dated 02.11.2023 was inapplicable to the impugned order and does not save the time-barred appeal; the Court did not adjudicate the merits of the Section 74 contention in view of dismissal on limitation grounds.

Final Conclusion: The writ petition is dismissed; the appellate authority's dismissal of the petitioner's appeal as barred by limitation is upheld because the statutory limitation regime under the GST Act governs condonation and the administrative notification relied upon does not apply to the impugned order.

Communication versus service of order - interpretation of service and communication under section 169 of the GST Act - deemed service under subsection (2) of section 169 - making order available on the common portal - limitation for filing appeal - stay of coercive action on deposit

Communication versus service of order - making order available on the common portal - deemed service under subsection (2) of section 169 - limitation for filing appeal - Whether an order made available on the common portal under clauses (c) and (d) of subsection (1) of section 169 is to be treated as 'served' for the purposes of subsection (2) and when the order is to be treated as 'communicated' for the purpose of computing limitation - remanded for fresh consideration - HELD THAT: - Petitioner contended that the impugned order was neither communicated nor served and that the word "communicated" in section 107 must be distinguished from the modes of "service" listed in section 169(1); that making the order available on the common portal (clauses (c) and (d) of section 169(1)) does not ipso facto amount to communication and is not covered by the deeming provision in section 169(2). The High Court did not decide the legal question on merits. Instead the Court recorded that the matter requires consideration and directed the State to file a counteraffidavit specifically averring how and in what manner the deeming of service under clauses (c) and (d) of section 169(1) can be said to fall within subsection (2) of section 169. The Court therefore remitted the controversy for adjudication after such factual and legal pleadings are placed before it.

Remanded for fresh consideration; respondents to file counteraffidavit within four weeks specifying how clauses (c) and (d) of section 169(1) amount to deemed service under section 169(2), and the question of when the order is 'communicated' for limitation to be decided thereafter.

Stay of coercive action on deposit - limitation for filing appeal - Provision of interim relief staying coercive action pursuant to the impugned order on specified deposit conditions - HELD THAT: - While the substantive legal dispute was kept for consideration, the Court granted interim protection to the petitioner from coercive steps taken pursuant to the impugned order. The protection is conditional: the petitioner must deposit 30% of the disputed tax amount in accordance with law within two weeks, and any amount already deposited is to be adjusted against this deposit. This interim direction preserves the petitioner's position pending adjudication on the remanded issue.

No coercive action shall be taken pursuant to the impugned order provided the petitioner deposits 30% of the disputed tax amount within two weeks; earlier deposits to be adjusted.

Final Conclusion: The challenge to dismissal of the appeal as timebarred is left open for adjudication after respondents file the directed counteraffidavit explaining the applicability of deemed service under section 169; meanwhile coercive action is stayed on deposit of 30% of the disputed tax amount within the stipulated period.

Curative and clarificatory amendment - regularisation of GST liability on reinsurance - effect of GST Council recommendation and departmental circular - quashing of demand created by adjudicating authority

Curative and clarificatory amendment - regularisation of GST liability on reinsurance - effect of GST Council recommendation and departmental circular - Whether the amendments to the exemption notification and the subsequent GST Council decision and departmental circular regularising GST liability on reinsurance services operate so as to preclude the demand contained in the impugned order dated 20.12.2023 for the period 01 July 2017 to 25 July 2018. - HELD THAT: - The Court noted that Entry 36A was introduced and later amended to include Serial No.40 of the original exemption notification, and that a doubt arising from the omission was subsequently addressed by the GST Council. The Council, in its meeting on 22 June 2024, approved the Fitment Committee's recommendation to regularize GST liability on reinsurance of government-paid-premium insurance schemes for the period 01.07.2017 to 26.07.2018 on an 'as is where is' basis, and the Department issued a clarificatory Circular on 15 July 2024 clarifying and regularising the position. Having regard to the conscious decision of the GST Council and the departmental clarification, the Court held that the stand subsequently taken by the respondents renders the demand in the impugned order unsustainable for the period in question. [Paras 13, 14, 15, 16, 17]

The impugned order dated 20.12.2023 creating a demand for the period 01 July 2017 to 25 July 2018 is quashed and the petitioner is entitled to consequential reliefs.

Final Conclusion: Writ petition allowed; impugned Order dated 20.12.2023 quashed in view of the GST Council's recommendation and the Department's clarificatory Circular regularising GST liability on reinsurance for the period in dispute; consequential reliefs granted.

Cancellation of GST registration - show cause notice - non-application of mind - limitation - suspension of registration

Show cause notice - non-application of mind - The show cause notice dated 23.03.2023 was deficient and demonstrated non-application of mind. - HELD THAT: - The Court examined the show cause notice and found that it did not clearly specify the violation committed by the petitioner; the notice merely recited that registration is liable to be cancelled for failure to file returns without explaining the specific grounds or particulars. The absence of clarity in the notice led the Court to conclude that the notice reflected a pure non-application of mind by the issuing authority. [Paras 5]

The show cause notice dated 23.03.2023 is deficient for want of application of mind.

Cancellation of GST registration - revocation of registration - The cancellation order dated 06.04.2023 was set aside. - HELD THAT: - On review of the adjudicating order, the Court noted that the order relied on non-filing of GSTR-3B returns but did not reflect a proper examination justifying cancellation; further, the order recorded amounts purportedly payable as "zero", indicating that no concrete determination of liability was made and reinforcing the conclusion of non-application of mind. In view of these infirmities the Court set aside the cancellation order passed by the Adjudicating Authority. [Paras 6, 8, 9]

Order dated 06.04.2023 cancelling GST registration is set aside.

Limitation - appeal - The appellate order dated 20.06.2024 dismissing the petitioner's appeal on the ground of limitation was set aside. - HELD THAT: - The Appellate Authority dismissed the petitioner's appeal as time-barred without addressing the merits. Given the Court's findings regarding the defective show cause notice and infirmities in the adjudicating order, the appellate order which declined to examine merits on limitation grounds was set aside to avoid perpetuating an outcome based on defective proceedings. [Paras 7, 9]

Impugned appellate order dated 20.06.2024 is set aside.

Show cause notice - opportunity of hearing - Liberty granted to respondents to issue a fresh show cause notice and proceed as per law. - HELD THAT: - Having set aside both the adjudicating and appellate orders for the reasons stated, the Court permitted the respondents to issue a fresh show cause notice if so advised and to proceed in accordance with law. The Court also clarified that the petitioner may challenge any future order before the appropriate forum as provided by law. [Paras 10, 11]

Respondents granted liberty to issue fresh show cause notice and proceed as per law; petitioner retains right to challenge future orders.

Final Conclusion: Both the adjudicating order cancelling GST registration and the appellate order dismissing the appeal on limitation grounds have been set aside for want of application of mind and other infirmities; respondents may issue a fresh show cause notice and proceed in accordance with law, and the petitioner may challenge any future order before the appropriate forum.

Duty to give reasons - natural justice - administrative orders must be supported by reasons - order quashed for absence of reasons - remand for de novo consideration

Duty to give reasons - order quashed for absence of reasons - administrative orders must be supported by reasons - Impugned orders rejecting the statutory appeal and cancelling registration were unsustainable as they did not assign reasons. - HELD THAT: - The Court found that the appeal filed by the petitioner had been rejected by the impugned order dated 10.09.2024 which did not assign any reason (see para 6). Relying on the settled principle that reasons are the "heartbeat" of every conclusion and that both judicial and administrative orders must be supported by recorded reasons, the Court held that absence of reasons violates the rule of natural justice and renders the impugned orders unsustainable (paras 7-9). The Court therefore quashed the impugned orders for want of reasons (para 10). [Paras 7, 8, 9, 10, 11]

Impugned orders quashed for absence of reasons; writ petition allowed.

Remand for de novo consideration - natural justice - Whether the matter should be remitted for fresh adjudication and, if so, the manner of such remand. - HELD THAT: - Having quashed the impugned orders for lack of reasons, the Court remitted the matter to the appellate authority for fresh consideration. The appellate authority is directed to proceed de novo, to give the petitioner an opportunity of hearing, and to pass an appropriate, reasoned and speaking order. The Court prescribed a timeline of three months within which the appellate authority must decide the matter (para 12). [Paras 12]

Matter remanded to appellate authority to decide de novo with opportunity of hearing and a reasoned speaking order within three months.

Final Conclusion: The impugned orders, including the rejection of the statutory appeal and the cancellation of registration, are quashed for want of reasons; the matter is remanded to the appellate authority to decide de novo after hearing the petitioner and to pass a reasoned, speaking order within three months.

Show Cause Notice under Section 73 - Summary of Show Cause Notice (Form GST DRC-01) as additional requirement under Rule 142(1)(a) - Statement of determination of tax under Section 73(3) distinct from Show Cause Notice - authentication by Proper Officer through digital/e-signature under Rule 26(3) - opportunity of hearing mandated by Section 75(4) and principles of natural justice - Proper Officer's exclusive authority to issue notice, statement and order - exclusion of period for limitation computation under Section 73(10) pending service of certified copy

Show Cause Notice under Section 73 - Summary of Show Cause Notice (Form GST DRC-01) as additional requirement under Rule 142(1)(a) - Whether issuance of a Summary of the Show Cause Notice in GST DRC-01 without a separate Show Cause Notice suffices to initiate proceedings under Section 73 - HELD THAT: - Section 73 requires a Show Cause Notice to be issued by the Proper Officer specifying the reasons and circumstances that set the provision in motion; Rule 142(1)(a) mandates that a summary in Form GST DRC-01 be issued in addition to the notice. The Court held that the statutory Scheme distinguishes the Show Cause Notice and the Statement of determination and that the summary in DRC-01 is only collateral to, and does not substitute for, the mandatory Show Cause Notice. Reliance on precedents holding that a summary cannot replace a proper notice was noted. Consequently initiation under Section 73 without issuance of a proper Show Cause Notice is impermissible. [Paras 16, 17, 18, 19, 29]

Summary in GST DRC-01 is not a substitute for the Show Cause Notice; initiation without a proper Show Cause Notice is bad in law and interfered with.

Statement of determination of tax under Section 73(3) distinct from Show Cause Notice - authentication by Proper Officer through digital/e-signature under Rule 26(3) - Proper Officer's exclusive authority to issue notice, statement and order - Whether the attachments to the summaries (statement of determination and orders) could be treated as valid Show Cause Notices or Orders where they lacked authentication by the Proper Officer - HELD THAT: - Section 73 contemplates that the Show Cause Notice, the Statement under Section 73(3) and the Order under Section 73(9) are to be issued by the Proper Officer as defined by the Act. Rule 26(3) prescribes issuance electronically by the Proper Officer through digital signature or e-signature (though the sub-rule expressly appears in Chapter III, the Court applied the authentication principle to demand and recovery proceedings absent a filling of the void by rule or Board notification). The attachments in the present cases were unsigned or bore only 'Sd-Proper Officer' without portal authentication; the Court treated lack of proper authentication as rendering the documents ineffective. The Statement under Section 73(3) cannot be conflated with the Show Cause Notice. [Paras 21, 22, 23, 24, 29]

Attachments without authentication by the Proper Officer are ineffective; the statement attached to the summary cannot substitute for a Show Cause Notice or authenticated order.

Opportunity of hearing mandated by Section 75(4) and principles of natural justice - Proper Officer's exclusive authority to issue notice, statement and order - Whether orders under Section 73(9) complied with Section 75(4) and principles of natural justice where no opportunity of hearing was afforded - HELD THAT: - Section 75(4) mandates opportunity of hearing when a written request is made by the person chargeable with tax or when an adverse decision is contemplated. The record showed that in at least two cases the petitioners had opted for personal hearing in their replies but were not granted a hearing; summaries uploaded left hearing particulars blank or marked 'NA'. The Court accepted authorities emphasizing that statutory mandates for hearing are to be honoured and held that passing adverse orders without affording the mandated opportunity would render Section 75(4) porous and is contrary to natural justice. [Paras 25, 26, 27, 28, 29]

Impugned orders violate Section 75(4) and principles of natural justice for failure to afford an opportunity of hearing.

Final Conclusion: The impugned orders in the listed writ petitions are set aside and quashed for want of a statutory Show Cause Notice, lack of requisite authentication by the Proper Officer, and for failure to afford the opportunity of hearing mandated by Section 75(4); respondent authorities are granted liberty to initiate de novo proceedings under Section 73 if fit, and the period from issuance of the summaries to service of a certified copy of this judgment is excluded for computing the time under Section 73(10).

Cancellation of GST registration - Retrospective cancellation - Requirement of reasoned order and application of mind - Opportunity of being heard / natural justice - Section 29 CGST - grounds for cancellation - Consequences of retrospective cancellation on input tax credit and liabilities

Retrospective cancellation - Requirement of reasoned order and application of mind - Section 29 CGST - grounds for cancellation - Opportunity of being heard / natural justice - Validity of the order cancelling the petitioner's GST registration with retrospective effect from 28/09/2017 - HELD THAT: - Section 29(2) permits cancellation of registration from a retrospective date in specified circumstances, but the power to cancel retrospectively must be exercised on demonstrable reasons and not mechanically. The order of cancellation must reflect the reasons which weighed upon the authority and demonstrate application of mind, particularly because retrospective cancellation has deleterious consequences (including effects on input tax credit and liabilities). Mere conferral of power under Section 29 does not justify routine or robotic invocation of retrospective cancellation; satisfaction to cancel retrospectively must be based on objective criteria. The impugned order failed to assign rudimentary reasons for choosing a retrospective effective date and did not demonstrate the considerations that warranted retrospective revocation. The authority's failure to provide reasoned findings and to indicate the basis for retrospective cancellation rendered the order unsustainable. The Court relied on the principles articulated in earlier decisions addressing similar defects in show-cause notices and cancellation orders ([Ramesh Chander vs Assistant Commissioner of Goods and Services Tax, Dwarka Division, CGST Delhi & Anr.] and Delhi Polymers vs Commissioner, Trade and Taxes & Anr.), which hold that retrospective cancellation cannot be ordered without proper reasons and a proper opportunity to contest the retrospective aspect, and where those foundational defects exist the cancellation must be set aside. Applying these principles, the Court concluded that the impugned cancellation order could not be sustained and was liable to be quashed, while leaving the department free to initiate fresh proceedings in accordance with law. [Paras 5, 8, 9]

Impugned cancellation with retrospective effect is unsustainable for want of reasoned application of mind and is quashed; respondents may proceed afresh in accordance with law.

Final Conclusion: Writ petition allowed; order dated 25 July 2023 cancelling GST registration with retrospective effect from 28/09/2017 is quashed, without prejudice to the respondents' right to initiate fresh proceedings in accordance with law.

Adjudication under Section 74 - quashing of adjudication order - condonation of delay - appeal within extended/condonable period (3+1 months) - limitation - mandatory pre-deposit of 10% - reconsideration on merits - remand for fresh consideration

Adjudication under Section 74 - quashing of adjudication order - The adjudication order dated 31.08.2023 passed under Section 74 for the assessment year 2018-19. - HELD THAT: - The High Court examined the adjudication order passed by the Assistant Commissioner of Commercial Taxes (Audit)-4, Shivamoga and concluded that interference was warranted. Having found other defects in the appellate process (notably the erroneous finding on limitation and non-consideration of the affidavit for condonation), the Court set aside the impugned adjudication order and remitted the matter for fresh consideration as directed below. [Paras 6]

Impugned order dated 31.08.2023 is set aside.

Condonation of delay - appeal within extended/condonable period (3+1 months) - limitation - Whether the appellate authority was correct in holding the appeal to be barred by limitation and whether delay in filing the appeal should be condoned. - HELD THAT: - The Court reviewed the filing date of the appeal (29.12.2023) against the maximum condonable/extendable period of four months (3+1) and found that the appeal was filed within that period. The appellate authority's conclusion that the appeal was barred by limitation proceeded on a factually incorrect premise and the affidavit seeking condonation was not considered. In consequence, the High Court condoned the delay and directed that the appeal not be treated as barred on that ground. [Paras 2, 4, 7]

Delay in filing the appeal is condoned; the finding that the appeal was barred by limitation is set aside.

Mandatory pre-deposit of 10% - reconsideration on merits - remand for fresh consideration - The correctness of the appellate authority's dismissal of the appeal for non-payment of the mandatory pre-deposit of 10% and the requirement to decide the appeal on merits. - HELD THAT: - The Court held that the appellate authority's finding on non-payment of the mandatory 10% pre-deposit requires fresh consideration in accordance with law. The matter is remitted to the appellate authority to reconsider the appeal on merits and the question of pre-deposit after taking into account the condonation of delay and any materials or submissions properly placed before it. [Paras 5, 7]

Appellate authority to reconsider the question of pre-deposit and decide the appeal on merits; matter remitted for fresh consideration.

Final Conclusion: The petition is allowed: the adjudication order dated 31.08.2023 for AY 2018-19 is set aside; delay in filing the appeal is condoned; the matter is remitted to the appellate authority for fresh consideration of the appeal on merits and the issue of mandatory pre-deposit of 10% in accordance with law.

Mismatch between GSTR-3B and GSTR-1 - denial of opportunity / notice not received - input tax credit eligibility - remand for fresh consideration - conditional interim relief - opportunity of personal hearing

Mismatch between GSTR-3B and GSTR-1 - denial of opportunity / notice not received - input tax credit eligibility - Impugned order imposing tax liability was set aside on account of the petitioner not receiving notice and having materials to contest the alleged mismatch and ITC denial. - HELD THAT: - The Court found that although notice was issued, the petitioner did not receive it and had produced a prima facie case that documents existed to show there was no mismatch and that the input tax credit claimed was correctly availed. In view of these circumstances and having regard to consistency with an earlier decision dealing with similar facts, the Court concluded that the impugned order could not be allowed to stand without affording the petitioner an opportunity to be heard. The Court therefore set aside the impugned order and directed a conditional course of action to enable fresh adjudication after the petitioner is put on terms. [Paras 5, 6]

Impugned order dated 20.12.2023 set aside; matter remanded for fresh consideration after compliance with court-imposed condition.

Remand for fresh consideration - conditional interim relief - opportunity of personal hearing - Matter remanded to respondent for fresh consideration on specified conditions, with directions for filing reply, issuance of fresh notice, personal hearing and timelines. - HELD THAT: - The Court remitted the matter to the respondent for a fresh decision without adjudicating the merits of the alleged mismatch. The remand was subject to the condition that the petitioner deposit 20% of the disputed tax within four weeks; upon such deposit the petitioner must file reply/objection with relevant documents within two weeks, after which the respondent shall issue fresh notice, afford personal hearing and pass final orders within three months. If the condition is not complied with, the impugned order will stand revived automatically. These procedural directions were imposed to balance the petitioner's right to be heard and the revenue's interest. [Paras 6]

Remanded to respondent for fresh consideration on compliance with conditional directions (deposit, filing of documents, fresh notice, hearing and final orders within prescribed timelines); automatic revival if condition not complied with.

Final Conclusion: Writ petition allowed: impugned order dated 20.12.2023 set aside and matter remanded to the respondent for fresh consideration on the specified conditional terms and timelines; no costs.

Rectification of mistake apparent on record - interpretation of effective date of subordinate legislation - prospective application of a notification - refund of integrated tax on exports - consequential correction of adjudicatory findings

Interpretation of effective date of subordinate legislation - prospective application of a notification - Notification No. 54/2018 is effective from 9th October, 2018 and not from 23rd October, 2017. - HELD THAT: - The Court found a mistake apparent on record in the CAV judgment which had recorded that Notification No. 54/2018 came into effect from 23rd October, 2017. On examination of the Central Goods and Services Tax (Twelfth Amendment) Rules, 2018 the Court held that Notification No. 54/2018 came into force on the date of its publication, i.e., 9th October, 2018, and therefore the earlier recording of an effective date of 23rd October, 2017 was incorrect. The CAV judgment is accordingly corrected to record that Notification No. 54/2018 is applicable prospectively with effect from 9th October, 2018 and not retrospectively from the inception of Rule 96(10). [Paras 33, 34, 35]

The CAV judgment is rectified to state that Notification No. 54/2018 is effective from 9th October, 2018.

Refund of integrated tax on exports - consequential correction of adjudicatory findings - Petitioner is entitled to refund of IGST (or ITC balance) for the period 23rd October, 2017 until 9th October, 2018 to the extent Notification No. 39/2018 had effect during that period. - HELD THAT: - Having corrected the effective date of Notification No. 54/2018 to 9th October, 2018, the Court held that Notification No. 39/2018 (which substituted Rule 96(10) with effect from 23rd October, 2017) remains in force for the intervening period. Consequently, the petitioner who availed the benefit under Notification No. 39/2018 during 23rd October, 2017 to 9th October, 2018 would be entitled to the refund of IGST paid or the unutilised input tax credit balance for that period, and the CAV judgment is amended to reflect that entitlement and the corresponding substitution of relevant paragraphs dealing with refund entitlement. [Paras 36]

Notification No. 39/2018 remains effective from 23rd October, 2017 until 9th October, 2018 and the petitioner is entitled to refund of IGST/ITC balance for that period as reflected by the corrected judgment.

Rectification of mistake apparent on record - consequential correction of adjudicatory findings - Paragraph 8.15 of the CAV judgment is deleted because Notification No. 16/2020 (inserting an Explanation to Rule 96(10)) was not in existence when arguments concluded and the order was reserved. - HELD THAT: - The Court found that paragraph 8.15 of the CAV judgment had referred to Notification No. 16/2020-CT dated 23rd March, 2020, an amendment which came into existence after oral arguments were concluded and after the matter was reserved on 5th February, 2020. The reference to that Notification in the CAV judgment was therefore a mistake apparent on record. The Court directed deletion of paragraph 8.15 and held that Notification No. 16/2020 could not have been considered as part of the CAV judgment reserved prior to its issuance. [Paras 37]

Paragraph 8.15 is deleted from the CAV judgment as Notification No. 16/2020 was not available at the time arguments concluded and the order was reserved.

Final Conclusion: The High Court allowed the review application to the limited extent of correcting mistakes apparent on the record: Notification No. 54/2018 is held to be effective from 9th October, 2018; consequential corrections are made to the CAV judgment including substitution of specified paragraphs and recognition that Notification No. 39/2018 governed the period 23rd October, 2017 to 9th October, 2018 (entitling the petitioner to refund for that period); paragraph 8.15 is deleted; the CAV judgment is rectified and the rule made absolute to that extent.

Prohibition on recovery during statutory appeal where deposit under Section 107 of the CGST Act has been made - Invalidity of attachment and garnishee proceedings after compliance with appeal-deposit requirement - Duty to withdraw coercive measures upon formation of a statutory bar to recovery

Prohibition on recovery during statutory appeal where deposit under Section 107 of the CGST Act has been made - Invalidity of attachment and garnishee proceedings after compliance with appeal-deposit requirement - Continuation of attachment in FORM GST DRC-22 dated 03.11.2022 and garnishee notice in FORM GST DRC-13 dated 20.04.2023 was impermissible after the petitioner filed an appeal and deposited 10% as required under Section 107 of the CGST Act. - HELD THAT: - The court found that the petitioner had preferred an appeal against the assessment order and had paid 10% of the disputed tax as mandated by Section 107 of the Central Goods and Services Tax Act, 2017. Once the statutory condition for stay of further recovery is fulfilled, no further tax can be lawfully recovered pursuant to the assessment which is the subject of the appeal. Consequently, continuation of the attachment and garnishee proceedings in aid of recovery was held to be contrary to the protection afforded by the statute and therefore impermissible. The court exercised its jurisdiction to prevent the petitioner from being required to seek a futile administrative determination of a fact which was already established by compliance with the statutory deposit requirement, and accordingly quashed the coercive orders. [Paras 6, 8]

Order of attachment dated 03.11.2022 and garnishee notice dated 20.04.2023 set aside; no order as to costs.

Final Conclusion: Writ petition allowed: attachment and garnishee orders quashed because the petitioner had challenged the assessment and paid the 10% deposit under Section 107 CGST, thereby precluding further recovery while the appeal is pending.

Ultra vires - requirement of GST Council recommendation for executive notification - force majeure as condition for temporal extension of limitation - state adoption of central notifications - interim protection from coercive action

Ultra vires - requirement of GST Council recommendation for executive notification - force majeure as condition for temporal extension of limitation - Prima facie validity of Notification No.56/2023 dated 28.12.2023 under Section 168A of the Central GST Act, 2017 and its compatibility with limitation provisions - HELD THAT: - The Court recorded the petitioners' contention that Notification No.56/2023 was issued without the mandatory recommendation of the GST Council and therefore may be ultra vires Section 168A of the CGST Act, 2017. The petitioners further contended that Section 168A permits temporal extensions only on grounds amounting to force majeure, which, they submitted, is not established by lack of manpower or by the post-COVID circumstances relied upon. The respondents acknowledged absence of a GST Council recommendation, asserted reliance on a recommendation of the GST Implementation Committee and indicated steps towards later ratification. The Court observed that, prima facie, the impugned notification does not appear to be in consonance with Section 168A and that, if invalid, consequential actions founded on it would also be unsustainable. The Court also noted the contention regarding the limited power of the State under its adoption provision to accept central notifications, and that no corresponding extension under the Assam GST regime had been issued for the relevant years. As the matter raised substantial questions regarding the competence to extend limitation periods and the factual/legal basis for invoking force majeure, the Court confined itself to prima facie appraisal and did not decide the merits.

On prima facie consideration the notification appears not to conform to Section 168A and raises substantial legal questions; the Court granted interim protection and restrained coercive action based on the impugned assessment order dated 23.04.2024 pending further orders.

Final Conclusion: Notice issued; respondents directed to file affidavits and, pending further hearing, no coercive action shall be taken on the basis of the impugned assessment order dated 23.04.2024, the Court having prima facie found that Notification No.56/2023 raises serious questions as to its validity under Section 168A of the CGST Act, 2017.

Non speaking order - non application of mind - right to be heard - speaking order - remand for fresh adjudication - treating an order as a show cause notice

Non speaking order - non application of mind - Impugned assessment suffers from non application of mind and is a non speaking order requiring setting aside. - HELD THAT: - The court found that the assessing authority passed the impugned order without adequately dealing with the detailed objections filed by the petitioner and without assigning reasons for rejecting those objections. The judgment highlights illustrative instances where the authority rejected elaborate replies in one line and adopted inconsistent figures across defects, demonstrating haste and lack of application of mind. For these reasons the assessment order could not be sustained. [Paras 5, 6]

Impugned order of assessment dated 30.06.2023 is set aside on the ground that it is non speaking and suffers from non application of mind.

Right to be heard - speaking order - remand for fresh adjudication - treating an order as a show cause notice - Whether the assessment should be remitted for fresh consideration and the manner in which it should be reopened. - HELD THAT: - Respondent accepted the need to re do the assessment. The court directed that the set aside assessment order be treated as a show cause notice and afforded the petitioner an opportunity to appear and file objections with supporting documents. The respondent is directed to consider any objections filed and pass a speaking order in accordance with law after giving reasonable hearing to the petitioner, thereby ensuring compliance with the duty to consider material and provide reasoned conclusions. [Paras 8, 9]

Assessment set aside and to be treated as a show cause notice; petitioner to appear on 03.10.2024 and file objections; respondent to consider objections, rehear and pass a speaking order in accordance with law.

Remand for fresh adjudication - Consequences for the separate writ petition challenging the rectification order in view of the setting aside of the assessment order. - HELD THAT: - Since the principal assessment order which was the subject matter of the rectification petition has been set aside and remitted for fresh consideration, there is no longer any live controversy in the writ petition challenging the rectification order. Both parties so conceded before the court. [Paras 10]

Writ Petition challenging the rectification order is closed as nothing survives for adjudication.

Final Conclusion: The assessment order dated 30.06.2023 is set aside as non speaking and remanded for fresh adjudication; it shall be treated as a show cause notice, the petitioner shall file objections on 03.10.2024 and the respondent shall consider them and pass a reasoned speaking order after hearing. The separate writ challenging the rectification order is closed as infructuous.

Procedure of reassessment of income chargeable to tax which has escaped assessment - Introduction of TOLA into the Income Tax Act - extension of limitation by TOLA - proviso to Section 149(1)(b) (retrospective limitation protection) - sanction by specified authority under Section 151 - legal fiction created in Ashish Agarwal (deeming s.148 notices to be s.148A(b) show-cause notices) - exclusion of stayed period and time allowed to assessee under third proviso to s.149 - scope and limits of Article 142 in tax matters

Reading of TOLA into the Income Tax Act - proviso to Section 149(1)(b) (retrospective limitation protection) - extension of limitation by TOLA - principle of harmonious construction - Whether TOLA and the notifications issued under it apply to reassessment proceedings after 1 April 2021 - HELD THAT: - The Court held that TOLA, being a free standing statute enacted to relax time limits for actions falling between 20 March 2020 and 31 March 2021, continues to apply to the Income Tax Act after 1 April 2021 where an action under the substituted provisions falls for completion in that TOLA period. The first proviso to Section 149(1)(b) of the substituted scheme must be read with TOLA: Section 3(1) of TOLA (which contains a non obstante clause) relaxes only the time limit for completion or compliance (including issuance of notices) and does not revive the old regime wholesale. The Income Tax Act as amended (by Finance Act 2021) must be read with TOLA and the notifications extending TOLA (including those up to 30 June 2021) so that the surviving time available to the Revenue to proceed in respect of deeds falling within TOLA is preserved. Consequently, for assessment years whose limitation expiry falls within the TOLA period, the extended dates provided by TOLA/notifications are available to the Revenue when applying the substituted provisions. [Paras 64, 68, 69, 71, 114]

TOLA applies to the Income Tax Act after 1 April 2021 for actions falling for completion between 20 March 2020 and 31 March 2021; Section 3(1) of TOLA relaxes the time for issuance of reassessment notices and must be read with the proviso to Section 149(1)(b).

Legal fiction created in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] (deeming s.148 notices to be s.148A(b) show-cause notices) - exclusion of stayed period and time allowed to assessee under third proviso to s.149 - sanction by specified authority under Section 151 - scope and limits of Article 142 in tax matters - Whether reassessment notices issued under Section 148 of the new regime between July and September 2022 are valid - HELD THAT: - The Court examined the effect of the legal fiction created in Ashish Agarwal by which s.148 notices issued under the old regime (1 April-30 June 2021) were deemed to be s.148A(b) show cause notices. That fiction stopped the limitation clock from the date of the deemed notice until the supply of material directed by this Court and the period given to the assessee to reply. Under the third proviso to s.149 the time excluded (the stayed period and the time allowed to the assessee) must be deducted when computing the surviving limitation. The assessing officer thereafter had to obtain the appropriate sanction under s.151 of the substituted regime and issue any s.148 notice within the surviving period (as extended by TOLA where applicable). If a reassessment notice issued in July-September 2022 was beyond the surviving time available after accounting for the exclusions and/or was issued without the sanction prescribed by the substituted s.151 applicable to the surviving period, it is time barred and invalid. Applying these principles to the present batch, all reassessment notices issued beyond the surviving period are liable to be set aside. [Paras 106, 108, 111, 114, 116]

Reassessments under s.148 issued pursuant to the deemed s.148A(b) notices had to be issued within the surviving limitation (after exclusion of the stayed period and the time allowed to the assessee) and with the sanction required by s.151; notices issued beyond that surviving period or without requisite sanction are time barred and invalid.

Final Conclusion: The High Court judgments disallowing reassessment notices are set aside to the extent indicated. TOLA extends the time for completion of actions falling between 20 March 2020 and 31 March 2021 and must be read with the substituted reassessment regime; the legal fiction in Ashish Agarwal stopped the limitation clock until material was supplied and time given to assessees, and reassessment notices issued thereafter had to be within the surviving period and with proper sanction. Appeals by the Revenue are allowed; appeals by assessees shall be governed by the reasons in this judgment.

Validity of notice under Section 148 when issued without complying with Section 151A faceless scheme - Applicability of faceless scheme under Section 151A to proceedings under Section 148A - Non-compliance with subordinate legislation (Notification dated 29 March, 2022) vitiates proceedings - No requirement to prove prejudice where authority acts contrary to law

Validity of notice under Section 148 when issued without complying with Section 151A faceless scheme - Non-compliance with subordinate legislation (Notification dated 29 March, 2022) vitiates proceedings - No requirement to prove prejudice where authority acts contrary to law - Notices and orders under Section 148A and Section 148 issued by the Jurisdictional Assessing Officer without following the faceless scheme under Section 151A are invalid - HELD THAT: - The Court found that the impugned notices dated 3 January 2024 (Section 148A(b)), the order under Section 148A(d) dated 29 February 2024 and the consequent notice under Section 148 dated 29 February 2024 were issued by the Jurisdictional Assessing Officer and not by a Faceless Assessing Officer as required by the scheme notified under Section 151A. The Notification dated 29 March 2022 implements a faceless mechanism which, read with Section 151A, governs issuance of notices and prior steps under Section 148A as well as notices under Section 148. Reliance was placed on the Division Bench decision in Hexaware which held that the automated faceless allocation and the Scheme are mandatory and that concurrent jurisdiction of JAO and FAO for issuance of notices under Section 148 is impermissible. The Court reiterated that when an authority acts contrary to such statutory scheme and subordinate legislation, the act is to be quashed without the assessee having to prove further prejudice, since non-compliance with the prescribed procedure itself causes prejudice to the assessee. Applying these principles, the Court held the impugned proceedings to be vitiated by non-compliance with Section 151A and the notified Scheme. [Paras 3, 5, 11]

Impugned notices and order issued in violation of Section 151A and the Notification dated 29 March 2022 are quashed and set aside.

Applicability of faceless scheme under Section 151A to proceedings under Section 148A - Non-compliance with subordinate legislation (Notification dated 29 March, 2022) vitiates proceedings - Proceedings relating to central charges are not excluded from the applicability of the faceless scheme under Section 151A and the Notification dated 29 March 2022 - HELD THAT: - The revenue's contention that cases falling under central charges are excluded from the Scheme by earlier orders dated 31 March 2021 and 6 September 2021 was considered and rejected. The Court followed its prior decisions (including Hexaware, Kairos Properties and Abhin Anilkumar Shah) and held that the orders relied upon pertain to assessment orders and do not operate to exclude the scheme notified under Section 151A. The scheme under Section 151A and the Notification dated 29 March 2022 apply to proceedings under Section 148A and issuance of notices under Section 148, including cases said to be central or international charges, and it would be impermissible to read into the Scheme an exclusion not expressly provided for by the Central Government. [Paras 6, 7, 8]

The contention that central charges fall outside the scope of the faceless scheme is rejected and the Scheme under Section 151A is held applicable.

Final Conclusion: Writ petition allowed: the notices and order issued under Section 148A and Section 148 for A.Y. 2017-18 are quashed for non-compliance with Section 151A and the Notification dated 29 March 2022; no opinion expressed on other issues.

Principles of natural justice - notice and opportunity to explain - distinction between Section 68 and Section 69A - assessee must be put on notice before imposing addition on a fresh ground - remand with direction to afford hearing and opportunity to respond

Distinction between Section 68 and Section 69A - principles of natural justice - notice and opportunity to explain - Final assessment order treated an addition under Section 69A though show cause notice invoked Section 68; whether absence of specific notice under Section 69A vitiates the assessment. - HELD THAT: - The Court noted that Sections 68 and 69A are independent provisions with distinct statutory triggers: Section 68 applies where a sum is found credited in the books and is unexplained, whereas Section 69A applies where the assessee is found to be owner of unaccounted money or valuables not recorded in books. The show cause notice (and the petitioner's response) was limited to unexplained cash credits under Section 68, but the final assessment added the sum as unexplained money under Section 69A without having put the petitioner on notice of that ground prior to passing the order. Reliance was placed on the proposition that when the revenue intends to take a fresh ground not reflected in the show cause notice, the assessee must be put on notice and given an opportunity to reply so as not to be taken by surprise. The Court held that the failure to afford an opportunity to explain in respect of the addition under Section 69A amounted to a breach of principles of natural justice and rendered the determination unsustainable. [Paras 7, 8, 9, 10]

Assessment order dated 20th March, 2024 is vitiated insofar as it adds the amount under Section 69A without prior notice; the addition cannot stand without affording the petitioner an opportunity to explain.

Remand with direction to afford hearing and opportunity to respond - assessee must be put on notice before imposing addition on a fresh ground - Appropriate remedial course where the assessment is vitiated for want of notice and opportunity. - HELD THAT: - Treating the impugned assessment order as a show cause, the Court directed that the Faceless Assessing Unit may raise additional grounds if so advised but must serve any such addendum notice to the petitioner within 15 days. The petitioner is to respond to the assessment order (treated as show cause) within two weeks, with seven additional days if an addendum is served. The portal must be activated for submission and a personal hearing by video link afforded before any final decision. The entire exercise is to be completed within eight weeks from communication of the order. These directions follow the principle that where fresh grounds are to be taken, the assessee must be put on notice and given an opportunity before a final order is passed. [Paras 10, 11]

Order dated 20th March, 2024 to be treated as show cause; respondents to serve any addendum, permit response, provide portal access and video hearing, and complete reconsideration within the prescribed timelines.

Final Conclusion: The assessment order of 20th March, 2024 is quashed insofar as it imposes an addition under Section 69A without prior notice; the matter is remitted to the Faceless Assessing Unit to treat that order as a show cause, serve any additional grounds with notice, allow the assessee to respond and be heard (including by video link), and complete the exercise within the timelines directed by the Court.

Compensation for termination of contract - capital receipt - loss of source of income - characterisation of receipt as revenue or capital - addition on account of unproved creditors under section 68 of the Income Tax Act - disallowance of purchases by way of ad hoc percentage

Compensation for termination of contract - capital receipt - loss of source of income - characterisation of receipt as revenue or capital - Characterisation of sums received under the settlement agreement as capital receipts not exigible to tax under the taxing provisions relied upon by Revenue. - HELD THAT: - The Tribunal examined the settlement agreement dated 23 December 2006 and held that the payments received by the assessee from Coca Cola entities were by way of compensation consequent to termination/settlement of the contractual relationship which, in substance, resulted in the loss of the assessee's source of income. Applying the principle in Oberoi Hotels (as cited), the Tribunal found that where cancellation or termination impairs the trading structure or results in loss of what may be regarded as the source of income, the compensatory payment is a capital receipt. The Tribunal noted the terms of the settlement read as a whole (including abandonment of purchase orders, transfer of assets and waiver of remedies) and corroborated the conclusion from subsequent financial statements; it therefore held that the impugned amounts represent capital receipts and directed deletion of the additions made by the Assessing Officer. [Paras 25]

The compensation received was capital receipt representing loss of source of income and the additions made by the AO in respect thereof were to be deleted.

Addition on account of unproved creditors under section 68 of the Income Tax Act - onus of proof in respect of creditors - Deletion of addition on account of creditors (including creditors for goods) as accepted by the appellate authorities and sustained by the Tribunal. - HELD THAT: - CIT(A) had accepted the assessee's documentary evidence and allowed liabilities including creditors for goods and capital goods; the Tribunal, on review of materials and findings, sustained the appellate conclusion. The Tribunal's dismissal of Revenue's appeal left the deletions effected by the CIT(A) intact, indicating that the factual record and documents furnished met the requirements to rebut the AO's addition in relation to those liabilities.

The deletions of additions relating to creditors (including creditors for goods) as recorded by the lower authorities were upheld.

Disallowance of purchases by way of ad hoc percentage - requirement for documentary basis for disallowance - Reduction of the ad hoc disallowance in respect of purchases from 20% to 10% (partial deletion) and rejection of AO's purely ad hoc disallowance in absence of a scientific basis. - HELD THAT: - The Tribunal observed that while the assessee bore the onus to substantiate claims, the Assessing Officer had made an ad hoc disallowance without undertaking an evidentiary or scientific basis (such as circumstantial analysis or comparable metrics). The Tribunal accepted the CIT(A)'s approach of giving partial relief to the assessee on the record and held that ad hoc disallowances not founded on a rational basis are impermissible; consequently, Revenue's challenge was dismissed. [Paras 34]

The AO's ad hoc disallowance was held impermissible in full measure; the CIT(A)'s partial relief to the assessee was sustained.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal sustained the deletions/partial deletions made by the CIT(A) - holding the contested compensation receipts to be capital in nature (being for loss of source of income), upholding allowance of proved creditors, and rejecting the AO's unsupported ad hoc disallowance of purchases.

Profits in lieu of salary - capital receipt - taxability of severance/termination compensation - prospective operation and non-applicability of Section 56(2)(xi) to AY 2018-19

Profits in lieu of salary - capital receipt - taxability of severance/termination compensation - prospective operation and non-applicability of Section 56(2)(xi) to AY 2018-19 - Whether the severance compensation of Rs. 15,50,905/- received on termination of employment is a capital receipt not chargeable to tax as "profits in lieu of salary" under Section 17(3) of the Income-tax Act, 1961 for A.Y. 2018-19. - HELD THAT: - The Tribunal examined the nature of the payment received on account of termination for redundancy and observed that the compensation was paid for loss of employment and was not tied to past services. Reliance was placed on precedents favouring the view that voluntary severance payments, where the employer had no contractual obligation to make further payments on termination, are capital in nature and not taxable as salary. The Tribunal further noted that the amendment by insertion of Section 56(2)(xi) w.e.f. 1-4-2019 applies from AY 2019-20 and therefore has no application to AY 2018-19. Applying these principles, the Tribunal held that the severance compensation in the present case is a capital receipt and does not fall within the scope of "profits in lieu of salary" under Section 17(3) for the relevant assessment year. Consequential tax consequences founded solely on the disallowed addition were also considered: with the addition set aside, the concomitant interest and penalty proceedings based on that addition could not survive. [Paras 7]

Severance compensation treated as a capital receipt and not taxable under Section 17(3) for A.Y. 2018-19; addition deleted and consequential interest and penalty do not survive; appeal allowed.

Final Conclusion: The Tribunal set aside the addition treating the severance payment as "profits in lieu of salary", held the payment to be a capital receipt not chargeable under Section 17(3) for A.Y. 2018-19, and deleted the consequential interest and penalty; the assessee's appeal is allowed.

Real income principle - pass-through funds - consistency of accounting policy - requirement of independent verification by assessing officer - inadmissibility of notional income without factual basis

Real income principle - pass-through funds - consistency of accounting policy - requirement of independent verification by assessing officer - inadmissibility of notional income without factual basis - Deletion of addition of Rs. 2,00,98,747/- made by AO by treating 15% of decentralized grants as income of the assessee - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the amount in dispute related to grants of Rs. 13,39,91,645/- which were routed through the assessee to District Collectors and other implementing agencies and remained pass-through in nature. The assessee, a wholly government owned nodal agency, applied a consistent accounting policy in earlier years and charged 15% on grants actually utilized by it as authorized by the Government Resolution dated 27.05.1998. The AO made the addition relying solely on the statutory auditor's observation without conducting independent enquiries or obtaining corroborative evidence from the Government of Gujarat to establish that the said decentralized grants were utilized by the assessee. Applying the settled principle that only real, accrued income is taxable and not hypothetical or notional receipts, the Tribunal found the AO's addition to be based on assumption and conjecture and therefore unsustainable. The Tribunal accepted the CIT(A)'s reasoning that, in the absence of factual foundation showing utilization by the assessee, the 15% charge could not be imposed on amounts merely passed through to other government agencies. [Paras 7]

Addition of Rs. 2,00,98,747/- deleted and CIT(A) order upheld; Revenue appeal dismissed.

Final Conclusion: The Assessing Officer's addition treating 15% of decentralized grants as income was set aside for want of independent verification and factual foundation; the CIT(A)'s deletion is upheld and the Revenue's appeal is dismissed.

Penalty under Section 271(1)(c) for furnishing inaccurate particulars of income - Bonafide belief defence to penalty - Ad-hoc disallowance/estimation not a ground for automatic penalty - Duty to consider submissions filed before imposition of penalty - Distinction between genuineness of claim and production of vouchers

Penalty under Section 271(1)(c) for furnishing inaccurate particulars of income - Bonafide belief defence to penalty - Ad-hoc disallowance/estimation not a ground for automatic penalty - Duty to consider submissions filed before imposition of penalty - Whether the penalty under Section 271(1)(c) could be sustained where additions were made by estimation for lack of vouchers, the assessee had a bona fide belief in the allowance of the claim and had filed explanations before the penalty order which were ignored by the Assessing Officer. - HELD THAT: - The Tribunal found that the assessee, engaged in purchasing agricultural land, had claimed land development expenses relating to 1995-2005 in the relevant year and the Assessing Officer disallowed the claim for want of bills and vouchers. The CIT(A) granted partial relief by allowing 25% and sustaining a 75% disallowance by way of estimation. In penalty proceedings the AO imposed penalty under Section 271(1)(c) on the ground that the assessee furnished inaccurate particulars and had not replied to the show-cause notice, whereas the assessee had filed explanations through the ITBA e-Portal prior to the penalty order. The Tribunal held that an ad-hoc disallowance reached by estimation and the mere absence of supporting vouchers do not automatically attract penalty, particularly where the AO did not doubt the genuineness of the expenditure and the assessee advanced a bona fide belief in the claim. The Tribunal emphasised the duty to consider submissions which were filed before imposition of penalty and applied the principle that penalty cannot be sustained where additions arise from estimation or where there is a bona fide belief in the correctness of the claim. Relying on the ratios of earlier authorities cited in the order, the Tribunal concluded that the penalty could not be sustained on the facts and circumstances of the case. [Paras 8, 9]

Penalty under Section 271(1)(c) deleted and the appeal allowed.

Final Conclusion: The Tribunal set aside the CIT(A)'s confirmation of penalty and directed deletion of the penalty imposed under Section 271(1)(c), allowing the assessee's appeal.

Residential status - Centre of vital interests - Tie breaker rule under DTAA - Permanent home available - Taxability of global income under Section 5 - Article 4(2)(a) of Indo US DTAA

Centre of vital interests - Tie breaker rule under DTAA - Permanent home available - Article 4(2)(a) of Indo US DTAA - Determination of the assessee's residence under Article 4(2)(a) of the Indo US DTAA by applying the tie breaker test of centre of vital interests where a permanent home is available in both States. - HELD THAT: - The Tribunal applied the tie breaker rule in Article 4(2)(a) because the assessee claimed residency in both India and the United States and had permanent homes in both States. The Court examined personal relations (nucleus family residing in India with one child studying in the US, extended family in the US) and economic relations (active involvement in an Indian company where the assessee is a director, attends board meetings, provided substantial director loans and business activity; passive investments and rental income in the US). It emphasised that determination of centre of vital interests is a fact sensitive inquiry giving greater weight to nucleus family and active economic connections (place of business/administration and active involvement) over passive investments. On overall appraisal the personal and economic ties tilt more towards India than the US. Applying Article 4(2)(a), the Tribunal held the assessee to be a resident of India for the period in question. [Paras 22, 23, 24, 25, 26]

Assessee is a resident of India in terms of Article 4(2)(a) of the Indo US DTAA for AY 2013 14.

Taxability of global income under Section 5 - Residential status - Whether income arising in the United States is chargeable to tax in India once the assessee is held to be resident of India, and availability of foreign tax credit. - HELD THAT: - Having determined that the assessee is resident of India, the Tribunal held that the assessee's worldwide income, including income sourced in the United States (dividends, interest, capital gains, rental income), is taxable in India under Section 5 of the Income tax Act. The Tribunal noted that the assessee's US return did not show any tax paid in the United States for the relevant items, and therefore no credit was available against Indian tax liability. The Tribunal thus upheld the Assessing Officer's computation of income and the conclusion of the lower authorities to tax the US sourced income in India. [Paras 27, 28]

Income derived in the US is chargeable to tax in India under Section 5; no foreign tax credit is available in absence of tax paid in the US.

Final Conclusion: On facts and applying the DTAA tie breaker test, the Tribunal held the assessee to be a resident of India for AY 2013 14, upheld the taxation of his US sourced income in India under Section 5, found no entitlement to foreign tax credit in the absence of tax paid in the US, and dismissed the appeal.

Right to reasonable opportunity of hearing - audi alteram partem - ex parte dismissal for non prosecution - duty to pass a speaking order under section 250(6) of the Act - scope of appellate power under section 251(1)(a) of the Act - remand for de novo adjudication

Right to reasonable opportunity of hearing - audi alteram partem - ex parte dismissal for non prosecution - Whether the impugned ex parte dismissal by the National Faceless Appeal Centre denied the assessee a reasonable and effective opportunity of hearing - HELD THAT: - The Tribunal found that the Ld. NFAC issued two successive notices dated 01/05/2024 and 09/05/2024 allowing the assessee less than seven days to comply, which amounted to only a paper opportunity rather than a real, reasonable and effective opportunity. Reliance was placed on precedents holding that a few days' time to furnish material can amount to denial of real opportunity. In view of these findings the Tribunal concluded that the appellant was prima facie deprived of the right to be heard and that the ex parte dismissal on account of non prosecution was therefore unjustified. [Paras 6, 7, 8]

Impugned ex parte dismissal set aside on the ground of denial of reasonable opportunity and remanded for fresh consideration.

Duty to pass a speaking order under section 250(6) of the Act - scope of appellate power under section 251(1)(a) of the Act - remand for de novo adjudication - Whether the Ld. NFAC was authorised to dismiss without adjudicating the merits and whether it was obliged to record points of determination and reasons under section 250(6) - HELD THAT: - The Tribunal noted that clause (a) of sub section (1) of section 251 requires the CIT(A) to adjudicate by confirming, annulling, reducing or enhancing additions and that section 250(6) mandates stating the point of determination, decision and reasons. The NFAC, while dismissing in limine for non prosecution, failed to adjudicate on the merits on the basis of material on record and did not comply with the requirement of a speaking order. The Tribunal applied the principle that where a statute prescribes a manner of decision making it must be followed, and held that the impugned order was also vitiated for failure to comply with statutory obligations. [Paras 9, 10]

Impugned order set aside for failure to adjudicate on merits and to pass a speaking order; matter remanded for de novo adjudication in accordance with law.

Final Conclusion: The appeal is partly allowed: the order of the National Faceless Appeal Centre is set aside and the matter is remanded for de novo consideration after affording the assessee not less than three effective opportunities of hearing and for passing a speaking order in terms of section 250(6) of the Act.

Deduction under section 80P(2)(a)(i) - interest income as business income of a credit co-operative society - Deduction under section 80P(2)(d) - interest from investments in other co-operative societies/banks - Surplus-fund theory inapplicable to credit co-operative societies - Characterisation of cooperative banks as cooperative societies for purpose of 80P(2)(d)

Deduction under section 80P(2)(a)(i) - interest income as business income of a credit co-operative society - Surplus-fund theory inapplicable to credit co-operative societies - Allowability of deduction under section 80P(2)(a)(i) in respect of interest earned on fixed/term deposits placed by a credit co-operative society. - HELD THAT: - The Tribunal found that the assessee, a registered credit co-operative society engaged in providing credit facilities to its members, accepted deposits in the course of its principal business and invested liquid funds in fixed/term deposits with other financial institutions. Interest generated from such liquid investments was held to form part of the business income because it arose in the course of carrying on the business of providing credit facilities to members and was used to service interest liabilities on member deposits. Consequently, the surplus-fund theory (as applied in Totagars Co-op. Sale Society in contexts other than credit co-operative societies) does not apply to credit co-operative societies which operate under regulatory supervision and maintain liquid funds as business funds. The Tribunal therefore concluded that the impugned interest satisfied the test of section 80P(2)(a)(i) and was deductible. [Paras 5]

Interest on fixed/term deposits placed by the credit co-operative society is business income qualifying for deduction under section 80P(2)(a)(i).

Deduction under section 80P(2)(d) - interest from investments in other co-operative societies/banks - Characterisation of cooperative banks as cooperative societies for purpose of 80P(2)(d) - Allowability of deduction under section 80P(2)(d) in respect of interest earned from investments made with other co-operative banks/societies. - HELD THAT: - The Tribunal alternatively examined section 80P(2)(d) and held that interest and dividend income derived by one co-operative society from investments in other co-operative societies is eligible for deduction. The decisive factor is that the interest be earned from investments made with a co-operative society registered under the law, irrespective of its nomenclature. A co-operative bank, being essentially a co-operative society operating with a banking licence, falls within this ambit. Having regard to precedent(s) and consistent reasoning of coordinate benches, the Tribunal held that interest earned by the assessee from investments in other co-operative banks qualifies for deduction under section 80P(2). [Paras 6, 7]

Interest income earned from investments in other co-operative banks/societies qualifies for deduction under section 80P(2)(d).

Deletion of disallowance and appellate relief - Extent of relief to be granted on appeal following acceptance of the assessee's claim for deduction under section 80P(2). - HELD THAT: - Having accepted that the interest income qualified for deduction under section 80P(2) (either under sub-clause (a)(i) or (d)), the Tribunal concluded that the residual disallowance retained by the first appellate authority could not be sustained. The Tribunal therefore directed the assessing officer to delete the disallowance in its entirety. [Paras 8]

The balance disallowance is vacated and the assessing officer directed to delete the disallowance in full.

Final Conclusion: The appeal is allowed: the interest income earned by the assessee-credit co-operative society on its investments with other co-operative banks/societies is deductible under section 80P(2) (on the principal finding that such interest is business income for a credit co-operative society and, alternatively, under 80P(2)(d)), and the disallowance upheld below is deleted in entirety.

Principles of natural justice - opportunity of being heard must be real, reasonable and effective - ex-parte dismissal for want of cogent evidence - reopening of assessment after recording reasons and obtaining prior approval - addition as unexplained cash deposit under section 69A - remand for de-novo adjudication by the appellate authority

Principles of natural justice - opportunity of being heard must be real, reasonable and effective - Whether the first appellate authority afforded the assessee a sufficient and effective opportunity of hearing before dismissing the appeals ex parte. - HELD THAT: - The Tribunal found that the appellate authority issued two bullet notices in each case calling for compliance and production of documents with less than seven days' time in each instance. Such short intervals were characterized as only a paper opportunity and not a real, reasonable or effective opportunity to be heard. The Tribunal applied the established principle that denial of reasonable time to confront documents or to place evidence amounts to a violation of natural justice and renders the adjudication unjustified. On that basis the Tribunal concluded that the ex-parte dismissals suffered from insufficiency of reasonable opportunity to enable the assessee to adduce evidential material and effectively represent his grounds of appeal. [Paras 6, 8]

The ex-parte dismissals are vitiated for want of a real and reasonable opportunity of hearing and constitute a breach of natural justice.

Remand for de-novo adjudication by the appellate authority - speaking order on merits after effective hearing opportunities - What remedial direction should be issued in view of the violation of natural justice. - HELD THAT: - Having found the appellate proceedings defective on account of inadequate opportunity, the Tribunal declined to examine the merits and held that the proper course is to set aside the impugned orders and remit the matters to the appellate authority for fresh consideration. The Tribunal directed the appellate authority to hear the matters de novo, to afford the assessee three effective hearing opportunities, and to pass separate speaking orders under the relevant provision governing appellate disposal. The remand was for fresh adjudication on merits and compliance with principles of natural justice, not for limited quantification alone. [Paras 9, 10]

Impugned orders set aside and matters remitted to the first appellate authority for de-novo disposal with directions to grant three effective hearing opportunities and to pass separate speaking orders.

Final Conclusion: The appeals are partly allowed for statistical purposes; the Tribunal set aside the ex-parte appellate orders for breach of natural justice and remitted the cases to the first appellate authority for fresh, de-novo adjudication with directions to afford three effective hearing opportunities and to pass separate speaking orders.

Limitation under section 153C of the Income Tax Act - date for computing limitation - satisfaction note vis-a -vis date of search - validity of satisfaction note for assumption of jurisdiction under section 153C - requirement of nexus between incriminating material and specific assessment year

Limitation under section 153C of the Income Tax Act - date for computing limitation - satisfaction note vis-a -vis date of search - Validity of assessment for A.Y. 2011-12 under section 153C being barred by limitation - HELD THAT: - The Tribunal held that for the purpose of limitation under section 153C the relevant date is the date on which the satisfaction note/requisition was recorded and acted upon, and not merely the date of search; insofar as the satisfaction note in the present matter was drawn on 25.09.2018, the limitation window of six years preceding the relevant assessment year excludes A.Y. 2011-12. On that basis the assumption of jurisdiction and the assessment for A.Y. 2011-12 were found to be time-barred and thus a nullity. The Tribunal accepted the assessee's contention and the reasoning of the coordinate bench in similar facts, and held that the assessment order under section 153C could not stand as it was barred by limitation. [Paras 10, 11]

Assessment for A.Y. 2011-12 under section 153C quashed as barred by limitation; cross objection allowed.

Validity of satisfaction note for assumption of jurisdiction under section 153C - requirement of nexus between incriminating material and specific assessment year - Legality of the satisfaction note and whether additions/disallowances were based on incriminating material attributable to A.Y. 2011-12 - HELD THAT: - The Tribunal examined the satisfaction note and found it to be generic and non-descriptive, covering A.Y. 2011-12 to 2017-18 without identifying incriminating material attributable to each specific year. In the absence of particulars linking seized material to A.Y. 2011-12, the satisfaction could not support assumption of jurisdiction under section 153C nor legitimize additions claimed to arise from incriminating material. Further, the impugned additions were held to be routine estimates or book-entry disallowances lacking nexus with any seized incriminating material as mandated by the statutory scheme; accordingly the Revenue's appeal challenging the appellate order was dismissed. [Paras 13, 14]

Satisfaction note held vague and unsustainable; additions/disallowances not shown to arise from incriminating material attributable to A.Y. 2011-12 - Revenue's appeal dismissed.

Final Conclusion: Cross objection of the assessee allowed by quashing the assessment for A.Y. 2011-12 as time-barred under section 153C; Revenue's appeal dismissed on the further ground that the satisfaction note was vague and the additions lacked nexus with incriminating material.

Credit of tax deducted at source - treatment of TDS where rent cheques are dishonoured and recovery proceedings are pending - application of consistent view between co-owners and prohibition on the Department taking divergent positions in identical cases - procedure under Section 199 and Rule 37BA

Credit of tax deducted at source - treatment of TDS where rent cheques are dishonoured and recovery proceedings are pending - application of consistent view between co-owners and prohibition on the Department taking divergent positions in identical cases - procedure under Section 199 and Rule 37BA - Whether the TDS credit of Rs. 75,000/- in respect of rental income for AY 2018-19 is to be allowed to the assessee despite dishonour of rent cheques and pending recovery proceedings, having regard to identical treatment granted to the co-owner - HELD THAT: - The Tribunal noted that the facts in the present case are identical to those of the co-owner, whose appeal was allowed by the CIT(A) following the decision in Yashpal Sahni (as relied upon by the CIT(A)), and that the assessee had placed on record bank statements showing deposit and dishonour of rental cheques and that recovery proceedings had been initiated. The CIT(A) in the co-owner's case directed verification and observed that tax credits reflected in Form 26AS and payment of taxes in the name of the trust could be given to the appellant, subject to the procedure under Section 199 read with Rule 37BA and thorough verification. Given the identical circumstances, the Department could not take a different view in the present case. The Tribunal therefore set aside the CIT(A)'s order which had rejected the claim for lack of confirmation from the tax deductor, and directed the Department to allow the TDS credit and consequential relief, while implicitly recognising that the statutory procedure for giving credit (including verification) is to be followed as applicable. [Paras 5, 6]

Tribunal allowed the appeal, set aside the CIT(A)'s order and directed the Department to allow TDS credit of Rs. 75,000/- with consequential relief.

Final Conclusion: Appeal allowed; the TDS credit in respect of rental income for AY 2018-19 is to be granted to the assessee, the CIT(A)'s order is set aside and the Department is directed to allow the credit and consequential benefits, subject to the prescribed verification procedure.

Penalty under Section 271AAB(1A) - undisclosed income (Explanation to Section 271AAB) - requirement of admission recorded under section 132(4) - search under section 132 and assessment under section 153A - discretionary imposition of penalty and extenuating circumstances

Penalty under Section 271AAB(1A) - requirement of admission recorded under section 132(4) - Penalty under Section 271AAB(1A) could not be sustained in absence of prerequisites required by that provision. - HELD THAT: - The Tribunal found that the statutory preconditions for invoking clause (a) of Section 271AAB(1A) were not satisfied. The Assessing Officer did not place on record any statement recorded under section 132(4) showing an admission of undisclosed income, which is the central basis for penalty under that clause. In the absence of such admission, imposition of penalty at 30% under clause (a) is not justified. The finding rests on the statutory structure of Section 271AAB(1A) and the factual absence of any recorded admission during the search. [Paras 11, 12]

Penalty under Section 271AAB(1A) deleted for want of the required admission under section 132(4).

Undisclosed income (Explanation to Section 271AAB) - search under section 132 and assessment under section 153A - Income declared as long-term capital gains and bank-routed cash receipts did not constitute 'undisclosed income' within the Explanation to Section 271AAB. - HELD THAT: - The Tribunal held that the LTCG and cash receipts disclosed in the return were not of the kind contemplated as 'undisclosed income' in the Explanation to Section 271AAB. The assessee, an individual not required to maintain books, had declared LTCG supported by contract notes and routed through banking channels, with advance tax paid; the cash receipts were accepted by the Assessing Officer as explained and not taxed as unexplained cash. There was no material to show that these were unrecorded or false entries discovered by the search, and therefore they did not fall within the statutory definition of undisclosed income. [Paras 13]

Declared LTCG and bank-routed cash receipts are not 'undisclosed income' for purposes of Section 271AAB.

Discretionary imposition of penalty and extenuating circumstances - Tribunal declined to interfere with CIT(A)'s deletion of penalty, applying discretion in light of facts and co-ordinate bench precedent. - HELD THAT: - Having found the statutory prerequisites for Section 271AAB were not met and that the declared incomes were not undisclosed, the Tribunal observed that imposition of penalty under Section 271AAB is discretionary and not automatic. In the circumstances of the case, and noting that a Co-ordinate Bench in an identical factual matrix (the assessee's wife) affirmed deletion of penalty, the Tribunal concluded extenuating circumstances justified exoneration from penalty and refused to interfere with the appellate authority's order. [Paras 14, 15]

Revenue's appeal dismissed and CIT(A)'s deletion of the penalty affirmed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the penalty imposed under Section 271AAB for Assessment Year 2021-22.

Ad hoc disallowance - employee training expenses - printing and stationery expenses - transfer pricing adjustments - dispute resolution panel directions - treatment of returned income vis-a -vis intimation under section 143(1) - credit for tax deducted at source - benchmarking of interest on delayed receivables - arm's length price - LIBOR + 200 basis points

Ad hoc disallowance - employee training expenses - printing and stationery expenses - dispute resolution panel directions - Whether the ad hoc disallowances made in respect of employee training and printing and stationery expenses were sustainable - HELD THAT: - The Tribunal found that the DRP did not engage with the assessee's substantive explanations and documentary material showing that employee training expenses were a small proportion of total other expenses and turnover, that turnover and profits had correspondingly increased, and that sample invoices and ledger details had been produced. The DRP's brief conclusion that evidence was not furnished was held to be inadequate without appreciating the comparative percentages, supporting ledger entries and the assessee's alternative contention that, on a cost plus captive service model, any excessive expenses would inure to revenue through higher taxable income. For these reasons the Tribunal concluded that the ad hoc disallowances could not be sustained without a fresh, reasoned consideration of the assessee's main and alternative submissions. [Paras 9, 10]

Matter restored to the Assessing Officer for fresh adjudication after considering all main and alternative arguments and the evidence submitted by the assessee.

Dispute resolution panel directions - treatment of returned income vis-a -vis intimation under section 143(1) - Whether the Assessing Officer should treat the income as returned income or as determined by intimation under section 143(1) - HELD THAT: - The DRP had directed that the Assessing Officer consider the determination of income as per the return of income instead of the intimation under section 143(1). The Tribunal observed that the Assessing Officer must follow the DRP's specific direction and gave effect to that conclusion. [Paras 11]

Assessing Officer directed to consider the determination of income as per the return of income in accordance with the DRP's directions.

Credit for tax deducted at source - Whether the assessee is entitled to the claimed credit for TDS as per law - HELD THAT: - The Tribunal did not adjudicate the TDS credit on merits but directed the Assessing Officer to examine the claim afresh and decide the issue in accordance with law, thereby leaving the factual and legal determination to the AO. [Paras 12]

Assessing Officer to examine and decide the TDS credit claim in accordance with law.

Benchmarking of interest on delayed receivables - arm's length price - LIBOR + 200 basis points - Appropriate rate to benchmark notional interest on outstanding receivables from associated enterprises - HELD THAT: - Following the Tribunal's coordinate bench decisions and its own prior decision in the assessee's case for AY 2017-18, the Tribunal held that LIBOR plus 200 basis points is the appropriate rate to determine the arm's length interest on delayed recoveries from associated enterprises. The Tribunal observed that LIBOR as a benchmark, with the specified upward adjustment, suitably addresses the nature of the transaction between the assessee and its AE for delayed recoveries and directed the Assessing Officer to apply that rate without further adjustment. [Paras 13, 14]

Assessing Officer directed to benchmark the interest on receivables by applying LIBOR + 200 basis points.

Final Conclusion: Appeal allowed in part: (a) ad hoc disallowances in respect of employee training and printing and stationery expenses set aside and matter remitted to AO for fresh consideration; (b) AO directed to treat income as per return in accordance with DRP directions; (c) TDS credit claim remitted to AO for adjudication as per law; and (d) interest on delayed receivables to be benchmarked at LIBOR +200 basis points.

Summary order. Special Leave Petition dismissed for delay of 238 days in preferring the petition; pending application disposed of.

Extinguishment of claims on approval of resolution plan - binding effect of approved resolution plan on creditors including the Central Government - non-lodgement of claim during corporate insolvency resolution process (CIRP) - continuation of corporate debtor as a going concern under the Insolvency and Bankruptcy Code - inapplicability of Rule 22 of the CESTAT (Procedure) Rules where resolution plan is approved

Extinguishment of claims on approval of resolution plan - binding effect of approved resolution plan on creditors including the Central Government - non-lodgement of claim during corporate insolvency resolution process (CIRP) - The revenue's demand which was not claimed before the resolution professional and was not part of the approved resolution plan has stood extinguished and cannot be continued. - HELD THAT: - The Court accepted the factual position that CIRP proceedings were initiated against the corporate debtor and a modified resolution plan was approved by the NCLT, with the revenue having not lodged any claim before the IRP during the CIRP. Applying the binding principle in Ghanshyam Mishra and the subsequent Ruchi Soya decision, the Court held that once a resolution plan is duly approved the claims not included in the plan stand frozen and extinguished; consequently no proceedings in respect of such claims can be continued. The Court thus concluded that the customs demand which was neither part of the resolution plan nor claimed during CIRP has abated and is extinguished. [Paras 11, 14, 16]

Demand not part of the approved resolution plan and not lodged during CIRP has stood extinguished and cannot be pursued.

Continuation of corporate debtor as a going concern under the Insolvency and Bankruptcy Code - inapplicability of Rule 22 of the CESTAT (Procedure) Rules where resolution plan is approved - Rule 22 of the CESTAT (Procedure) Rules could not be invoked to hold that the appeal abated where the resolution plan had been approved and the company continued as a going concern. - HELD THAT: - The Court examined Rule 22 which addresses abatement upon death, insolvency or winding up, and contrasted it with the IBC scheme where approval of a resolution plan contemplates continuation of the company's business as a going concern. Since the resolution plan was approved and the corporate debtor was not wound up, Rule 22's abatement provision was held inapplicable. Therefore the Tribunal erred in treating the appeal as abated on the basis of Rule 22 when the IBC approval had the effect of preserving the corporate entity under new management. [Paras 20]

Tribunal erred in invoking Rule 22; Rule 22 is not attracted where a resolution plan has been approved and the company continues as a going concern.

Final Conclusion: The appeal is allowed: the CESTAT order is set aside, the Miscellaneous Applications are allowed, and the customs demand which was not part of the approved resolution plan and was not claimed during CIRP has abated and stood extinguished.

Judicial review of foreign sovereign acts - MoU binding effect on domestic registration procedure - limited role of Central Bureau of Narcotics in contract registration - absence of jurisdiction to adjudicate foreign contractual disputes - requirement of tangible evidence for allegations of fraud and cartelization - regulatory power to impose quantitative restrictions and country caps - scope of judicial interference in economic and trade policy

Requirement of tangible evidence for allegations of fraud and cartelization - judicial review of foreign sovereign acts - Allegations of fraudulent practices, cartelization and monopolisation in the Turkish registration/allocation process are unproven and speculative. - HELD THAT: - The Court found that the Petitioners relied on assertions of fraudulent conduct by Turkish exporters (including an alleged 30% allocation) without producing any documentary proof or official communications from the Turkish Ministry of Commerce or the TMO to substantiate those assertions. In the absence of corroborative evidence, the allegations remained conjectural and could not justify judicial intervention. The Court therefore declined to entertain claims of cartelization or monopolistic practices based solely on the Petitioners' averments. [Paras 5, 6]

Allegations of fraud/cartelization dismissed for lack of tangible evidence.

Limited role of Central Bureau of Narcotics in contract registration - MoU binding effect on domestic registration procedure - The Central Bureau of Narcotics (CBN) has a confined role to register contracts reflected on the TMO portal and cannot control or review the internal registration/allocation processes of the TMO. - HELD THAT: - The Court examined the MoU and the impugned guidelines and concluded that the CBN's function is limited to registering sales contracts that have been registered by the TMO and to verify advance remittances as per the domestic guidelines. The registration and allocation exercised by the TMO are matters governed by Turkish procedures under the MoU and lie outside the operational control of Indian authorities. Consequently, CBN does not possess jurisdiction or authority to intervene in disputes arising from the TMO's registration or allocation process. [Paras 5, 7, 10]

CBN's role is limited; it cannot adjudicate or control TMO's internal registration/allocation procedures.

Absence of jurisdiction to adjudicate foreign contractual disputes - judicial review of foreign sovereign acts - Disputes between Indian importers and Turkish exporters concerning contract forwarding, payment and registration are private contractual matters to be pursued in appropriate fora and not within the remit of Indian authorities under the impugned regime. - HELD THAT: - The Court held that disagreements over the conduct of Turkish exporters and the forwarding/registration of contracts on the TMO portal constitute private contractual disputes or matters to be pursued before Turkish authorities or other appropriate dispute-resolution mechanisms. Indian authorities, particularly the CBN, are neither privy to nor in control of the TMO's registration process; therefore, reliefs seeking intervention against Turkish exporters or directions to alter TMO registrations are beyond the Court's competence under the existing MoU and guidelines. [Paras 7, 11]

Petitioners must pursue contractual remedies or seek redress in Turkey; Indian authorities cannot be compelled to remedy such private foreign disputes.

Regulatory power to impose quantitative restrictions and country caps - scope of judicial interference in economic and trade policy - The Impugned Guidelines and Public Notice issued under the MoU and the foreign trade policy are not shown to be arbitrary, discriminatory or mala fide and do not warrant judicial interference. - HELD THAT: - Relying on precedent and statutory prerogatives, the Court observed that the guidelines implement the MoU and aim to regulate imports, prevent market manipulation and ensure bona fides of importers. The Petitioners failed to demonstrate manifest arbitrariness, mala fide or violation of statutory or constitutional rights. Given the limited scope of judicial review in matters of economic and trade policy, and consistent authorities upholding similar guidelines, the Court found no ground to strike down or interfere with the impugned guidelines or the country-cap fixation. [Paras 12, 16]

Impugned Guidelines and Public Notice upheld; challenge dismissed for lack of arbitrariness or mala fides.

Final Conclusion: The writ petition is dismissed. The Court finds the Petitioners' allegations unsubstantiated by evidence, holds that the CBN's role is confined to registering contracts reflected on the TMO portal, that disputes with Turkish exporters are private/foreign contractual matters, and that the impugned guidelines and public notice do not suffer from arbitrariness or mala fide warranting judicial interference.

Customs valuation - transaction value of contemporaneous import - use of domestic supplier price versus import price for valuation - deductive method under the Customs Valuation (Determination of Value of Imported Goods) Rules - remand for redetermination of assessable value

Customs valuation - transaction value of contemporaneous import - use of domestic supplier price versus import price for valuation - deductive method under the Customs Valuation (Determination of Value of Imported Goods) Rules - remand for redetermination of assessable value - Appropriate method for determination of assessable value of bunker fuel consumed during coastal run and whether IOCL domestic supply price could be adopted as transaction value. - HELD THAT: - The Tribunal examined competing contentions: the revenue's reliance on the domestic IOCL supply price and the appellant's contention that contemporaneous import values or valuation under the Customs Valuation Rules should be applied. The Commissioner (Appeal) found that IOCL price per se could not be adopted but directed use of a contemporaneous Bill of Entry as the basis for valuation. The Tribunal observed that the Commissioner (Appeal) did not satisfy whether the selected Bill of Entry represented a true contemporaneous import price independent of IOCL pricing. The Tribunal noted the facility notice and practice of using NIDB/contemporaneous import data for such provisional/final assessments, and acknowledged practical difficulties in obtaining NIDB data for small quantities. Given the absence of a clear transaction value, the Tribunal held that the assessing authority may apply the deductive method under the Customs Valuation Rules and make appropriate adjustments (including for differences in quantities) or otherwise use bona fide contemporaneous import data where available. For these reasons the Tribunal modified the Commissioner (Appeal) order and remanded the matter to the original adjudicating authority for fresh determination of assessable value consistent with the Customs Valuation Rules and the observations recorded. [Paras 4, 5]

Order modified; matter remanded to the original adjudicating authority to redetermine assessable value of the bunker consumed by applying contemporaneous import data or, where appropriate, the deductive method under the Customs Valuation Rules with adjustments for quantity differences.

Final Conclusion: Appeal allowed in part by way of remand: the Tribunal directed fresh assessment of the bill of entry to determine the assessable value of bunker fuel consumed during the coastal run in accordance with the Customs Valuation framework, permitting use of contemporaneous import data or the deductive method with necessary adjustments.

Exemption from countervailing duty for Gum Arabic - True description of imported goods - Limitation under section 27 of the Customs Act, 1962 - Payment under protest proviso to section 27 - Self-assessment as an order of assessment - Modification/appeal of self-assessment under Section 128 - Doctrine of unjust enrichment

Exemption from countervailing duty for Gum Arabic - True description of imported goods - Entitlement to exemption from CVD under CBEC clarification dated 28.06.2007 in respect of imports described as 'Natural gum' and consequent right to refund. - HELD THAT: - The CBEC clarification dated 28.06.2007 exempts imported "Gum Arabic" in raw form from levy of CVD. The appellants' Bills of Entry described the imports generically as 'Natural Gum' (e.g. Natural Gum siftings/ Natural Gum rejected/ Natural Gum No. 3 rejected) and did not establish that the imported goods were specifically 'Gum Arabic'. The tribunal relied on earlier holdings that natural gums comprise several distinct varieties with different market identities and values, and that exemptions available to 'Gum Arabic' do not extend to 'Natural Gum' generically. In absence of evidence that the consignments were actually Gum Arabic, the appellants failed to establish entitlement to the exemption and therefore had no basis for refund of the self-assessed CVD. [Paras 5, 6]

Claim for exemption/refund under the CBEC clarification rejected; entitlement to exemption not established.

Limitation under section 27 of the Customs Act, 1962 - Payment under protest proviso to section 27 - Self-assessment as an order of assessment - Modification/appeal of self-assessment under Section 128 - Doctrine of unjust enrichment - Whether the refund claim was barred by limitation and/or by the principle of unjust enrichment, and whether the proviso to section 27 (payment under protest) applied. - HELD THAT: - Section 27 requires refund applications to be filed within one year from the date of payment of duty, except where duty was paid under protest. The tribunal found that the impugned CVD was self-assessed and paid at the time of clearance between October 2011 and September 2014, and no protest was filed contemporaneously; subsequent protest letters were held irrelevant for the proviso. The tribunal applied the legal position that self-assessment constitutes an order of assessment (as amended and interpreted), and that refund proceedings cannot be used to reopen or modify a self-assessment - modification must be sought through appropriate proceedings or appeal (including under Section 128). Because the self-assessments were not modified and the refund claim was outside the one-year period, the claim was time-barred. Separately, on unjust enrichment, the tribunal held there was no evidence that the appellants had not passed on the burden of the duty; permitting refund in such circumstances would result in unjust enrichment of the importer at the expense of others. Reliance was placed on Supreme Court precedent establishing the doctrine and the procedural limits on refund claims. [Paras 9, 10, 11, 16]

Refund claim is barred by limitation and is also precluded by the doctrine of unjust enrichment; the proviso to section 27 does not apply as there was no contemporaneous protest and the self-assessments were not modified.

Final Conclusion: The Tribunal upheld the orders below: the appellant failed to prove that the imported goods were 'Gum Arabic' and thus was not entitled to exemption or refund of the self-assessed CVD; further, the refund claim was time-barred under section 27 and prevented by the doctrine of unjust enrichment, and could not be entertained in absence of modification/appeal of the self-assessment.

Priority of secured creditors - Overriding effect of the SARFAESI Act in favour of secured creditors - Priority under Section 26E of the SARFAESI Act - Concurrent application of Section 31B of the Recovery of Debts and Bankruptcy Act

Priority of secured creditors - Priority under Section 26E of the SARFAESI Act - Concurrent application of Section 31B of the Recovery of Debts and Bankruptcy Act - Overriding effect of the SARFAESI Act in favour of secured creditors - Whether the attachment dated 06.03.2023 by the Tax Recovery Officer is subordinate to the earlier mortgage in favour of the petitioner and therefore liable to be quashed. - HELD THAT: - The petition was allowed on the undisputed factual foundation that respondent No.3 mortgaged the subject property in favour of the petitioner in 2013-14, prior to the search/attachment proceedings initiated by respondent Nos.1 and 2. The Court applied the statutory principle embodied in Section 26E of the SARFAESI Act and the parallel provision in Section 31B of the Recovery of Debts and Bankruptcy Act, holding that debts due to a secured creditor after registration of security interest are to be paid in priority over all other debts and government dues. Relying on the reasoning of higher and coordinate courts, the Court concluded that the later tax attachment could not prevail over the pre-existing security interest because the SARFAESI/RDBI provisions operate with an overriding effect vis-a -vis competing enactments. The Court further observed that because the mortgage preceded the Revenue's proceedings, the Tax Recovery Officer lacked jurisdiction to sustain the attachment in respect of the mortgaged property, and that setting aside the attachment would not prejudice the secured creditor's rights which remain enforceable under SARFAESI/RDBI. Applying these legal principles to the recorded facts, the Court concluded that the impugned order of attachment was impermissible and deserved to be quashed. [Paras 6, 10, 11]

Impugned attachment order dated 06.03.2023 quashed insofar as it relates to the subject property mortgaged in favour of the petitioner; petition allowed.

Final Conclusion: The High Court quashed the Tax Recovery Officer's attachment of the subject property on the ground that the petitioner's secured interest created in 2013-14 has priority under Section 26E of the SARFAESI Act (and Section 31B of the RDBI Act), which operate with overriding effect over subsequent recovery/attachment proceedings by the Revenue.

Default bail under Section 167(2) Cr.P.C. - completeness of prosecution report/charge sheet under Section 173(2) Cr.P.C. - effect of further or supplementary investigation on the validity of a charge sheet - cognizance and its bearing on the right to default bail - power to undertake further investigation under Section 173(8) Cr.P.C. - right to personal liberty under Article 21 in relation to default bail

Default bail under Section 167(2) Cr.P.C. - completeness of prosecution report/charge sheet under Section 173(2) Cr.P.C. - right to personal liberty under Article 21 in relation to default bail - Whether the petitioners were entitled to default bail under Section 167(2) Cr.P.C. on the ground that the prosecution Complaint filed within 60 days was incomplete. - HELD THAT: - The Court held that the complaint filed by the Enforcement Directorate on 27.07.2022 was within the statutory 60 day period and, on its contents, disclosed all necessary ingredients of the offence. Reliance on precedents explaining Section 173(2) shows that a report is "complete" if it contains the prescribed details and accompanying materials sufficient to enable the Court to enquire into the offence. While the proviso to Section 167(2) entitles an accused to default bail where no charge sheet is filed and investigation is kept pending, that right ceases once a charge sheet/complaint disclosing the offence is filed. The petitioners' generalized allegation that investigations continued after filing did not demonstrate how the complaint failed to disclose the commission of offence against them. Incidental or supplementary investigations (for example, for forensic reports or production of additional documents) do not render a complaint incomplete where the material before the Court suffices to take cognizance. In view of these principles, the Court found no default in filing and declined to grant default bail. [Paras 23, 25, 33, 38, 39]

Default bail under Section 167(2) Cr.P.C. was refused as the complaint filed within the statutory period was held to be complete in disclosing the ingredients of the offence.

Effect of further or supplementary investigation on the validity of a charge sheet - power to undertake further investigation under Section 173(8) Cr.P.C. - cognizance and its bearing on the right to default bail - Whether the fact that further investigations (including summonses, F.S.L. reports or verification of documents) continued after filing of the complaint prevents the Court from treating the complaint/charge sheet as complete and thereby entitles the petitioners to default bail. - HELD THAT: - The Court reiterated that an investigating agency may, even after filing a charge sheet, undertake further investigation under Section 173(8) Cr.P.C.; such further or supplementary inquiries do not ipso facto vitiate the earlier charge sheet nor revive the right to default bail. Jurisprudence cited establishes that pendency of additional investigations relating to other facets or other accused, or the need to verify certain documents, does not convert a charge sheet into an incomplete report for the purpose of Section 167(2). The Court observed that cognizance is taken of the offence on the material produced and that cognizance itself does not deprive the investigating agency of the ability to carry out supplementary inquiries; but where the material produced is sufficient for cognizance, supplementary evidence intended only to support the main charge sheet will not make the complaint incomplete. Applying these principles to the facts, the Court found that ongoing supplementary investigations did not entitle the petitioners to default bail. [Paras 34, 35, 36, 37, 38]

Continuation of supplementary or further investigations after filing of the complaint did not render the complaint incomplete and did not entitle petitioners to default bail.

Final Conclusion: The petitions for grant of default bail were dismissed: the Court held that the ED's complaint filed within 60 days disclosed the ingredients of the offence, that supplementary/further investigations did not render the complaint incomplete, and therefore the petitioners were not entitled to default bail; their right to seek regular bail on merits remains open.

Provisional attachment validity and lapse after 180 days - exclusion of COVID-19 period (15.03.2020-28.02.2022) in computing statutory timelines - effect of In re: Limitation and subsequent clarifications on termination periods - limited enjoyment of attached property despite provisional attachment - operation of pension bank account notwithstanding provisional attachment

Provisional attachment validity and lapse after 180 days - exclusion of COVID-19 period (15.03.2020-28.02.2022) in computing statutory timelines - effect of In re: Limitation and subsequent clarifications on termination periods - Whether the provisional attachment lapsed for non-confirmation within 180 days or the COVID-19 exclusion applies to the computation of the 180-day period - HELD THAT: - The Tribunal examined Section 5(1) and 5(3) of the PMLA which prescribe that a provisional attachment shall cease to have effect after 180 days unless confirmed. Noting the impact of the COVID-19 pandemic and the Supreme Court's orders in In re: Limitation (and its subsequent clarification restoring the exclusion period up to 28.02.2022), the Tribunal applied the reasoning of higher courts (including the Telangana High Court and the Supreme Court in Prakash Corporates) that the period from 15.03.2020 to 28.02.2022 is to be excluded in computing statutory time-frames where those time-frames operate as outer limits for termination of proceedings. The Tribunal rejected arguments relying on S. Kasi and related decisions which were confined to personal liberty and police-investigation time-limits, distinguishing them from timelines that operate as termination points for proceedings under special statutes. On the facts, because the provisional attachment order dated 23.12.2020 fell within the COVID-excluded interval, the period for computing the 180 days is to be computed excluding the interval 15.03.2020-28.02.2022, and therefore the Adjudicating Authority's confirmation dated 09.11.2021 did not result in lapse of the provisional attachment. [Paras 16, 17, 18]

The COVID-19 exclusion (15.03.2020-28.02.2022) applies in computing the 180-day period under Section 5(3) of the PMLA; the provisional attachment did not lapse and the confirmation stands.

Operation of pension bank account notwithstanding provisional attachment - limited enjoyment of attached property despite provisional attachment - Whether the appellant should be permitted to operate the bank account receiving his pension despite the provisional attachment - HELD THAT: - The Tribunal accepted the submission that attachment of a bank account in which pension credits are received should not operate to deprive the appellant of his pensionary benefit. Relying on the statutory scheme which permits limited enjoyment of attached property, the Tribunal directed that the appellant be allowed to operate the pension account to receive and withdraw pension amounts, while preserving the balance already lying in the account (the appellant agreed not to withdraw the existing balance). This remedy was granted without disturbing the impugned confirmation order otherwise.

The appellant is permitted to operate the bank account into which pension is credited, subject to the condition that the existing balance up to the date shall be maintained as agreed; the confirmation order is not otherwise disturbed.

Final Conclusion: The appeal is partially allowed: the Adjudicating Authority's confirmation of provisional attachment is sustained because the COVID-19 exclusion (15.03.2020-28.02.2022) is to be excluded in computing the 180-day period under Section 5(3) of the PMLA; separately, the appellant is permitted to operate the bank account receiving his pension subject to maintaining the existing balance as agreed.

Attachment of property involved in money laundering - proceeds of crime - likelihood of concealment or transfer - Section 5(1)(b) of the Prevention of Money Laundering Act, 2002

Attachment of property involved in money laundering - Section 5(1)(b) of the Prevention of Money Laundering Act, 2002 - likelihood of concealment or transfer - Validity of provisional attachment under Section 5(1)(b) when the same property (cash seized) is under seizure by a CBI Court - HELD THAT: - Section 5(1)(b) permits provisional attachment only where the Director or authorised officer has recorded reasons to believe, based on material, that proceeds of crime are likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings. In the present case the sum said to be proceeds of crime had been seized and was under the custody of the CBI pursuant to an order of the CBI Court. The respondent was unable to demonstrate any material establishing a likelihood that the seized amount could be concealed, transferred or dealt with so as to frustrate confiscation. Prior attachment/seizure by the CBI Court removed the factual basis for concluding a present likelihood of concealment or transfer. Reliance upon authorities permitting attachment in other contexts was examined and distinguished because the specific contention under Section 5(1)(b) was not raised or considered in those decisions. Applying the statutory embargo in Section 5(1)(b), the Tribunal found that reasons to believe were recorded without the requisite application of mind and material to satisfy clause (b) was lacking. [Paras 5, 6, 8, 9]

The provisional attachment was made in ignorance of the mandate of Section 5(1)(b) and is set aside; liberty granted to reattach the amount if it is released by the CBI Court and material then exists to justify attachment.

Final Conclusion: The Tribunal set aside the orders confirming provisional attachment of the seized sum for failure to satisfy the requirement of Section 5(1)(b) of the PMLA, 2002, while permitting the respondent to pass a fresh attachment order if the amount is released by the CBI Court and the statutory prerequisites are then met.

Seizure and retention of property pending investigation - interim preservation order pending trial - proceeds of crime and property listed for confiscation - right to obtain copies of relied upon seized material - application for release of un relied seized documents - prosecution under the Prevention of Money Laundering Act and consequential preservation

Seizure and retention of property pending investigation - interim preservation order pending trial - proceeds of crime and property listed for confiscation - prosecution under the Prevention of Money Laundering Act and consequential preservation - Validity of continued seizure/freeze of bank accounts, lockers, vehicle and other seized material by ED until conclusion of investigation/trial - HELD THAT: - The Tribunal upheld the Adjudicating Authority's interim order permitting the Enforcement Directorate to continue retention/seizure and freezing of documents, digital records, bank accounts, lockers, vehicle and other material. The court noted that investigation had been carried out, a prosecution complaint under PMLA filed naming the appellants as accused, and that the properties in question were included in the list of properties for possible confiscation upon conviction. The retention was characterised as an interim protective step to preserve material relevant to investigation and trial and to protect assets which are alleged to be proceeds of crime. On these grounds the appeal seeking release of the seized/ frozen material was dismissed as devoid of merits. [Paras 4, 5]

Appeals against the retention/seizure are dismissed; interim preservation of the seized material is justified until conclusion of proceedings.

Right to obtain copies of relied upon seized material - application for release of un relied seized documents - Entitlement of appellants to copies of relied upon documents and to apply for release of un relied seized materials - HELD THAT: - Although the appeals challenging retention were dismissed, the Tribunal held that once prosecution complaint is filed the appellants are entitled to copies of all documents relied upon by the prosecution. Further, the appellants have the right to apply for release of any seized material that is not relied upon and not required for further investigation; such applications can be considered by the competent authority. This relief was granted without affecting the interim preservation of material required for trial. [Paras 4]

Appellants entitled to copies of relied upon seized material and may apply for release of un relied documents; such procedural rights do not disturb the interim retention order.

Final Conclusion: The appeals are dismissed; the interim retention/seizure of the challenged bank accounts, lockers, vehicle and other material is upheld as a protective step pending conclusion of criminal proceedings under the PMLA, subject to the appellants' entitlement to copies of relied upon material and to seek release of any un relied seized documents.

Seizure and retention of documents and bank accounts under PMLA - freezing and defreezing of bank accounts - restraint on bank releasing further credit against secured accounts - entitlement of accused to copies of relied-upon seized material and application for release of un-relied documents

Freezing and defreezing of bank accounts - restraint on bank releasing further credit against secured accounts - Direction to defreeze the appellant's Credit Accounts (CC & BC) while keeping saving and current accounts frozen and restraining the bank from releasing further credit against the secured collateral. - HELD THAT: - The Tribunal directed the respondent ED to defreeze the appellant's Credit Accounts (CC & BC) and permitted the appellant to clear its outstanding loan liability, subject to a prohibition on disposing of the properties securing the CC Accounts. Karnataka Bank was restrained from releasing additional credit into the said CC Account. The Tribunal concurrently ordered that the saving and current accounts remain frozen until final disposal of the criminal trials. These directions balance the appellant's ability to meet secured liabilities while preserving the availability of collaterals and continuing restraints necessary for the ongoing criminal proceedings. [Paras 4]

Credit Accounts (CC & BC) defreezed for repayment of liabilities; saving and current accounts to remain frozen; bank restrained from advancing further credit against secured CC accounts.

Entitlement of accused to copies of relied-upon seized material and application for release of un-relied documents - seizure and retention of documents and bank accounts under PMLA - Right of the appellant (if arrayed as an accused) to obtain copies of relied-upon seized material and to apply for release of un-relied documents not required for further investigation. - HELD THAT: - Observing that a prosecution complaint has been filed, the Tribunal held that the appellant, if formally arrayed as an accused, is entitled to copies of all documents and seized material relied upon by the prosecution. Further, the appellant has the right to apply for release of any un-relied documents, provided such material is not required for further investigation. This preserves the accused's procedural rights in relation to the seized material while allowing the investigative process to continue where necessary. [Paras 4]

Appellant (if arrayed as accused) entitled to copies of relied-upon seized material and may apply for release of un-relied documents not required for further investigation.

Seizure and retention of documents and bank accounts under PMLA - freezing and defreezing of bank accounts - Final disposal of the appeal and preservation of non-prejudice to the prosecution under PMLA. - HELD THAT: - After issuing the operative directions regarding bank accounts and seized materials, the Tribunal dismissed the appeal. It disposed of pending applications and expressly clarified that nothing in its order affects the merits of the prosecution under the Prevention of Money Laundering Act, 2002. The dismissal thus concludes the appellate dispute over interim relief while leaving the substantive criminal proceedings intact. [Paras 5]

Appeal dismissed; pending applications disposed; order without prejudice to the merits of the PMLA prosecution.

Final Conclusion: The Tribunal granted limited interim relief by defreezing the appellant's Credit Accounts to permit repayment of liabilities while keeping certain accounts frozen and restraining the bank from advancing further credit against secured accounts; affirmed the appellant's procedural entitlement to copies of relied material and to seek release of un-relied documents; and dismissed the appeal without affecting the merits of the ongoing PMLA prosecution.

Eligibility of Cenvat Credit - nexus between input service and output service - works contract versus infrastructure development service - initial setting up exclusion from definition of input service - invocation of extended period of limitation - onus of proof under Rule 9(6) of the Cenvat Credit Rules - penalty for erroneous availment of Cenvat credit

Works contract versus infrastructure development service - eligibility of Cenvat Credit - Demand of Cenvat credit of Rs. 17,01,848/- on infrastructure development service - HELD THAT: - The show cause notice specifically proposed denial of credit on the ground that the service was in the nature of a works contract (excluded from input service). The Adjudicating Authority, however, confirmed demand on a different ground (lack of nexus/common service). The Revenue failed to establish that the service involved transfer of property in goods so as to make it a works contract under the statutory definition. Since the demand was sustained on a ground not pleaded in the show cause notice and the foundational allegation of works contract was not established, the demand is not sustainable and is set aside. [Paras 9, 15]

Demand set aside; confirmation based on a different ground than the show cause notice is not tenable

Initial setting up exclusion from definition of input service - eligibility of Cenvat Credit - Demand of Cenvat credit of Rs. 4,86,242/- (and amounts of Rs. 13,050 and Rs. 7,109) alleged to be for initial setting up of factory - HELD THAT: - The Department's show cause notice denied these credits on the basis that they related to initial setting up (a category excluded after amendment). The Adjudicating Authority confirmed the demand on the different premise of non nexus. Confirmation on a ground other than that in the show cause notice is impermissible. Consequently, the demands in respect of the amounts specified are not sustainable and are set aside. [Paras 10, 11, 15]

Demands set aside for having been confirmed on grounds different from those alleged in the show cause notice

Nexus between input service and output service - eligibility of Cenvat Credit - Demand of Cenvat credit of Rs. 84,044/- on maintenance and up keep of roads and landscape - HELD THAT: - The adjudicating findings establish that these services were provided outside the assessee's premises and the appellant failed to prove that such services had requisite nexus with the output service (renting of immovable property). There was no evidence that rentals represented rent for buildings as well as land; the services therefore lacked the necessary connection to the output service. The Commissioner (Appeals) rightly upheld the demand. [Paras 12, 15]

Demand sustained and recoverable; appellant did not contest this demand

Eligibility of Cenvat Credit - Rule 9(6) of the Cenvat Credit Rules - Demand of Cenvat credit of Rs. 6,917/- (invoice in name of SEZ unit) - HELD THAT: - The invoice in the name of the SEZ unit rendered the credit ineligible under the relevant Cenvat Credit Rules. The demand was correctly confirmed; the appellant has not contested this demand and has reversed the credit which has been appropriated by the Department. [Paras 15, 16]

Demand sustained; credit reversed and appropriated

Eligibility of Cenvat Credit - negative list (trading) and admissibility of credit - Demand of Cenvat credit of Rs. 2,98,630/- on input services received exclusively for trading - HELD THAT: - Services received for trading of goods fall within the negative list and cannot be treated as input services for provision of output service. The Commissioner (Appeals) rightly upheld the confirmation of demand in respect of these trading related credits; the appellant did not contest this demand and has reversed the amount which has been appropriated. [Paras 15]

Demand sustained and recoverable; appellant accepted and reversed this credit

Invocation of extended period of limitation - onus of proof under Rule 9(6) of the Cenvat Credit Rules - Validity of invocation of extended period of limitation for recovery of denied credits - HELD THAT: - Appellant's contention that regular filing of ST 3/ER 1 precludes invocation of extended period was rejected. The Tribunal observed that the assessee is under a statutory obligation to ensure correct availment of credit and to maintain records; the ST 3 returns did not disclose the nature of specific input services. In view of the failure to furnish particulars and the burden of proof under Rule 9(6), invocation of the extended period was held to be justified in the facts of this case. [Paras 13, 14]

Extended period of limitation held invokable against the appellant given non disclosure/absence of requisite records

Penalty for erroneous availment of Cenvat credit - eligibility of Cenvat Credit - Imposition of penalty consequent to confirmed demands - HELD THAT: - Penalty imposed in respect of demands that were set aside (those confirmed on grounds different from the show cause notice) is not sustainable and is to be cancelled. Conversely, penalty imposed in respect of demands that have been found sustainable (relating to lack of nexus, SEZ invoice and trading credits) is justified; the Tribunal declined interference with penalty insofar as it relates to sustained demands. Amounts already paid and appropriated are to be adjusted against the total sustainable demand. [Paras 16, 17]

Penalty set aside for demands that were quashed; penalty upheld for demands sustained

Final Conclusion: Appeal partly allowed. Certain demands (infrastructure development service and credits held to be for initial setting up / confirmed on different grounds than the show cause notice) are set aside; demands relating to lack of nexus, SEZ invoice and trading related credits are sustained and recoverable. Extended period of limitation was held properly invoked on the facts; penalties are set aside insofar as they relate to quashed demands and upheld for the demands found sustainable. Consequential reliefs to the appellant to follow as per law.

Applicability of statutory limitation for refund claims under Section 11B of the Central Excise Act as applied to Service Tax - refund of tax paid twice / double payment of tax - distinction between mistake of law and mistake of fact for refund claims - creature of statute principle - authority confined to statutory power to entertain refund claims

Applicability of statutory limitation for refund claims under Section 11B of the Central Excise Act as applied to Service Tax - distinction between mistake of law and mistake of fact for refund claims - Whether refund claims filed beyond the statutory period are barred by limitation even where tax was paid under a mistake of law or fact. - HELD THAT: - The Tribunal held that claims for refund of Service Tax are governed by the statutory scheme (Section 11B as made applicable to Service Tax) and the time-limit prescribed therein applies even where tax was paid mistakenly. The Court relied on the majority view in Mafatlal Industries and subsequent High Court decisions that have treated remedy for mistaken payment (whether of law or fact) as to be pursued within the statutory framework. Several decisions cited by the appellant were examined and found distinguishable or per incuriam for not considering the majority view; recent High Court and Tribunal decisions were held to support the applicability of limitation. The adjudicating authorities' rejection on limitation grounds was therefore upheld as legally sustainable. [Paras 11, 17, 20]

Refund claims filed after the statutory period are time barred and therefore not maintainable even if the tax was paid under misconception or mistake.

Refund of tax paid twice / double payment of tax - creature of statute principle - authority confined to statutory power to entertain refund claims - Whether the Appellant had established on merits that Service Tax was paid twice and was therefore entitled to refund. - HELD THAT: - The Original Authority examined the substantive claim and found insufficient evidence to establish that the service provider had discharged 100% of the Service Tax and that the Appellant had thus paid tax twice. The Commissioner (Appeals) did not express a contrary view on merit but examined the matter on limitation; the Tribunal found no substantive ground to interfere with the Original Authority's finding on the evidence produced by the Appellant. The Tribunal reiterated that even where double payment is alleged, the claim must be adjudicated within the statutory provisions and on the basis of evidence; absent proof of double payment, the merit-based claim fails. [Paras 3, 12, 13]

The claim of double payment was not established on the record and the rejection on merits by the Original Authority stands.

Final Conclusion: Appeals dismissed; refund claims rejected as time barred and, on the record, not established on merits.

Services by way of transportation of goods by road - negative list activity under section 66D(p) - Goods Transport Agency and requirement of consignment note - exemption under Notification No. 25/2012 ST (Entry No.21 / Entry No.22) - reverse charge mechanism / person liable under Section 68(2) read with Rule 2(1)(d) and Notification No.30/2012 ST - evidentiary value of belated ST 3 returns and financial statements - invocation of extended period of limitation under Section 73 (suppression requirement)

Services by way of transportation of goods by road - Goods Transport Agency and requirement of consignment note - negative list activity under section 66D(p) - Whether the disputed turnover could be taxed as services by a Goods Transport Agency (GTA) in the hands of the appellant. - HELD THAT: - The Tribunal found that the revenue treated the disputed turnover as value of services by way of transportation of goods by road and applied the GTA abatement, but failed to produce contemporaneous and crucial evidence in the form of consignment notes to establish that the services fell within the exception to clause (p) of section 66D. The statutory scheme makes transportation of goods by road a negative list activity except when provided by a GTA, and the definition of GTA requires presence of consignment notes. The show cause notice and adjudication did not demonstrate issuance or existence of consignment notes by the appellant for the amounts in dispute, nor did the revenue bring corroborative counter evidence. In the absence of such evidence, the turnover taken from the balance sheet could not be attributed as GTA services and clause (p) could not be excluded from levy under section 66B. The Tribunal followed earlier CESTAT and Supreme Court conclusions on the point and applied the preponderance of probabilities in favour of the appellant. [Paras 4]

Disputed turnover cannot be taxed in the appellant's hands as services by a GTA for lack of consignment notes; therefore clause (p) of section 66D applies and the levy under section 66B is not sustainable.

Exemption under Notification No. 25/2012 ST (Entry No.21 / Entry No.22) - Whether the appellant was entitled to exemption under Notification No. 25/2012 ST in respect of certain transport services. - HELD THAT: - On examination of sample consignment notes produced by the appellant, the Tribunal observed that many consignments showed values at or below the threshold qualifying for exemption under Entry No.21 of Notification No.25/2012 ST. The revenue produced no contrary contemporaneous evidence to rebut the authenticity or applicability of those documents. Given the absence of disproving evidence, the appellant's claim of exemption on the basis of the available samples was accepted. [Paras 4]

Appellant entitled to exemptions under Notification No.25/2012 ST for the transactions supported by the sample consignment notes; such part of the demand is unsustainable.

Reverse charge mechanism / person liable under Section 68(2) read with Rule 2(1)(d) and Notification No.30/2012 ST - Whether, assuming taxability, the tax was recoverable from the appellant or was liable to be discharged by the recipients under reverse charge. - HELD THAT: - Section 68(2) and the notified reverse charge framework require identification of the person liable to pay tax. The show cause notice and impugned order lacked any detailed findings identifying recipients or establishing they did not fall within the notified categories liable under reverse charge. The appellant produced sample registration certificates, Form ST 2 extracts, Form 26AS confirmations and recipient letters showing that recipients were the persons liable to pay tax. The revenue did not produce contemporaneous counter evidence to displace this material. On the preponderance of probabilities the Tribunal held that the appellant was not the person liable to pay service tax for the disputed turnover under Section 68(2) and relevant notifications/rules. [Paras 4]

Tax, if leviable, was not recoverable from the appellant because revenue failed to identify recipients liable under the reverse charge mechanism; the appellant cannot be held the person liable to pay tax.

Evidentiary value of belated ST 3 returns and financial statements - Whether the demand based on comparative difference between turnover in the balance sheet and ST 3 returns filed after commencement of inquiry was sustainable. - HELD THAT: - The Tribunal held that demands cannot rest solely on financial statements or belated returns. The ST 3 returns were filed after initiation of inquiry and without payment of the late fee prescribed by rule 7C; therefore they lacked evidentiary value for purposes of investigation and adjudication. The show cause notice relied primarily on turnover shown in the balance sheet without contemporaneous incriminating evidence to establish taxability. Precedents were followed to the effect that mere entries in accounting software or financial statements cannot substitute for affirmative evidences required to sustain a demand. Consequently the demand and related claim of CENVAT credit recovery premised on such returns and balance sheet comparison were unsupportable. [Paras 4]

Demand based on balance sheet versus belated ST 3 returns is unsustainable; belated ST 3 returns filed after initiation of inquiry (and without late fee) carry no evidentiary weight, and the resultant CENVAT credit demand is liable to be set aside.

Invocation of extended period of limitation under Section 73 (suppression requirement) - Whether the extended period of limitation was rightly invoked by the revenue in issuing the show cause notice. - HELD THAT: - The Tribunal found that invocation of the extended period was mechanical and unsupported by cogent evidence of suppression, fraud or collusion. Applying settled principles, mere disagreement on classification or belated filing without proof of deliberate suppression does not attract extended limitation. Given the absence of positive evidence of suppression and the appellant's bona fide claim of non taxability under the negative list, the extended period could not be validly invoked. As the show cause notice proceeded on the extended period, the entire demand stood outside limitation. [Paras 4]

Extended period of limitation was incorrectly invoked; demand is time barred and therefore invalid.

Final Conclusion: The Tribunal allowed the appeal, held that the revenue failed to establish taxability of the disputed turnover as GTA services for lack of consignment notes, accepted the applicability of available exemptions and reverse charge material on the preponderance of probabilities, rejected demands premised on balance sheet comparisons and belated ST 3 returns (and related CENVAT credit recovery), found extended limitation inapplicable, and set aside the service tax, CENVAT credit, interest and penalties confirmed in the impugned order with consequential relief.

Trading of goods - exempted service - CENVAT credit reversal - investment in mutual funds not constituting a service - extended period of limitation under proviso to section 73(1) - suppression of facts - burden of proof for invoking extended limitation

Trading of goods - exempted service - CENVAT credit reversal - Redemption and subscription of mutual fund units constitute 'trading of goods' and thus an exempted service requiring proportionate reversal of CENVAT credit - HELD THAT: - The Tribunal examined the nature of subscription and redemption of mutual fund units against the essential ingredients of trading - existence of two parties and a market, transfer of right/title to a buyer, and sale at a fixed price. It held that on redemption mutual fund units cease to exist and are not transferred to a third party; therefore subscription/redemption are investment/management activities and not sale and purchase of securities. Reliance was placed upon earlier Tribunal decisions which reached the same conclusion. Consequently the activity does not fall within the scope of 'trading of goods' and cannot be characterised as an exempted service under the negative list so as to trigger proportionate reversal of CENVAT credit under rule 6. [Paras 14, 15, 17, 18, 19]

Subscription and redemption of mutual fund units are not 'trading of goods' and do not constitute an exempted service; proportionate reversal of CENVAT credit was not required.

Investment in mutual funds not constituting a service - CENVAT credit reversal - Whether investment in mutual funds amounts to a 'service' under the Finance Act so as to attract reversal provisions - HELD THAT: - For an activity to be an 'exempted service' it must first qualify as a 'service' under section 65B(44) of the Finance Act, which requires an activity carried out by a person for another for consideration. The Tribunal found that the department did not demonstrate any service-provider/service-recipient relationship in the appellant's investment in mutual funds. The activity of investment/redemption was held not to amount to a 'service' under the statutory definition, and therefore could not be treated as an exempted service for purposes of rule 6. [Paras 20]

Investment in mutual funds is not a 'service' within the meaning of the Finance Act and hence cannot attract reversal under rule 6 as an exempted service.

Extended period of limitation under proviso to section 73(1) - suppression of facts - burden of proof for invoking extended limitation - Whether the Department could invoke the extended five-year period by alleging suppression of facts to sustain recovery for the period April 2015-March 2016 - HELD THAT: - The Tribunal analysed the proviso to section 73(1) and the precedent requiring deliberate suppression of facts akin to fraud, collusion or wilful mis-statement. The department bore the burden of proving suppression with intent to evade tax. The appellant had acted under a bona fide belief that investment in mutual funds did not constitute an exempted service, filed returns and had been subject to earlier audits. The Tribunal further noted that discovery by audit does not, by itself, establish suppression and that the statutory scheme places primary responsibility on the officer to scrutinise returns. Reliance was placed on Supreme Court authority and Tribunal precedent which hold that bona fide disputes of legal interpretation do not justify invoking extended limitation. [Paras 26, 29, 30, 31, 33]

Extended period of limitation could not be invoked; the Department failed to prove suppression of facts with intent to evade payment, so the extended five-year limitation was not applicable.

CENVAT credit reversal - interest and penalties - Validity of the demand including interest and penalties confirmed by the Commissioner (Appeals) - HELD THAT: - Having held that subscription/redemption of mutual funds are not an exempted service and that extended limitation could not be invoked, the Tribunal concluded that the assessments and consequent demands confirmed by the Commissioner (Appeals) lacked foundation. The impugned order's invocation of reversal, interest and penalties rested on the characterisation of the activity as exempted service and on the extended limitation; both foundations were rejected by the Tribunal. [Paras 21, 22, 34]

The demand, interest and penalties confirmed by the Commissioner (Appeals) were set aside.

Final Conclusion: The appeal is allowed: subscription and redemption of mutual fund units do not constitute 'trading of goods' or a 'service' attracting reversal of CENVAT credit; the extended period of limitation under the proviso to section 73(1) was not invokable; accordingly the impugned demand, interest and penalties are set aside.

Binding effect of an approved resolution plan - extinguishment of claims not part of the resolution plan - claims frozen on approval of resolution plan - non-survivability of unstated claims where no claim lodged with IRP - Rule 22 of the CESTAT (Procedure) Rules, 1982 inapplicable where resolution plan approved - distinction between resolution process and liquidation under the IBC

Extinguishment of claims not part of the resolution plan - non-survivability of unstated claims where no claim lodged with IRP - binding effect of an approved resolution plan - Demand of Rs. 5,09,15,106/- challenged in appeal has abated and stood extinguished because the revenue did not file a claim before the IRP and the modified resolution plan was approved by the NCLT. - HELD THAT: - The Court applied the legal principles laid down by the Supreme Court in Ghanshyam Mishra and in Ruchi Soya Industries Ltd., holding that once a resolution plan is duly approved by the adjudicating authority the claims provided in the plan stand frozen and those not part of the plan stand extinguished. The undisputed facts show that CIRP was initiated and a modified resolution plan was approved, the revenue did not lodge any claim before the IRP for the demand of Rs. 5,09,15,106/-, and the demand under challenge in the CESTAT appeal related to that sum. Consequently the claim could not survive post-approval and the demand could not be continued. [Paras 14, 16]

The demand of Rs. 5,09,15,106/- has abated and stood extinguished.

Claims frozen on approval of resolution plan - non-survivability of unstated claims where no claim lodged with IRP - Assessee is not entitled to a refund of the amount appropriated by the revenue pursuant to the Order-in-Original. - HELD THAT: - Although the Order-in-Original confirmed an aggregate duty and the revenue appropriated a sum prior to initiation of CIRP, the appeal before the CESTAT challenged the demand of Rs. 5,09,15,106/-, which the revenue did not claim before the IRP. By reason of the extinguishment principle applied to claims not part of the approved resolution plan, the Court held that the appropriated amount is not refundable to the assessee under the present proceedings. The Court therefore clarified that the assessee will not be entitled to seek refund of the appropriated amount. [Paras 17]

No refund of the appropriated sum is allowed to the assessee in the present proceedings.

Rule 22 of the CESTAT (Procedure) Rules, 1982 inapplicable where resolution plan approved - distinction between resolution process and liquidation under the IBC - CESTAT erred in holding that the appeal abated under Rule 22 of the 1982 Rules once the corporate debtor underwent CIRP and a change in management occurred. - HELD THAT: - The Court examined Rule 22 alongside the scheme of the IBC, noting that Rule 22 addresses abatement on death, insolvency or winding up. The IBC contemplates a resolution process that permits the corporate debtor to continue as a going concern when a resolution plan is approved; winding up arises only on liquidation. As the modified resolution plan was approved and the company continued its business (not wound up), Rule 22 was not attracted. Hence the Tribunal's reliance on Rule 22 to declare the appeal abated was unsustainable. [Paras 21]

The CESTAT's conclusion that the appeal abated under Rule 22 was erroneous.

Final Conclusion: The appeal is allowed: the CESTAT order is set aside; the demand of Rs. 5,09,15,106/- (relating to the period 14.7.2009 to 26.8.2011) is held to have abated and stood extinguished because the revenue did not lodge a claim before the IRP and the resolution plan was approved; however, the assessee is not entitled to a refund of the amount appropriated by the revenue pursuant to the Order in Original; and the Tribunal erred in invoking Rule 22 of the 1982 Rules.

Reverse charge mechanism for manpower recruitment or supply agency - payment of tax under a mistake of fact or law - refund of amounts paid without authority - applicability of limitation under Section 11B of the Central Excise Act, 1944 - lack of authority to levy or retain amounts paid

Reverse charge mechanism for manpower recruitment or supply agency - payment of tax under a mistake of fact or law - refund of amounts paid without authority - Whether the respondent was obliged to pay service tax under the reverse charge mechanism for manpower recruitment or supply agency and whether the amounts deposited could be retained by the Department - HELD THAT: - The Court proceeded on the conceded factual foundation in the impugned order and the CESTAT's reliance on appellate authority that where tax is paid under a mistake of fact or law there is a complete lack of authority in the Revenue to demand or retain such payment. Consistent decisions of several High Courts, as adverted to by the CESTAT, hold that a payment made in the absence of authority to levy does not acquire the character of a tax payment and therefore is refundable. Applying that principle, the deposit made by the respondent under a mistaken understanding was not a tax exigible in law and could not be treated as a payable duty, nor could the Department lawfully retain it. The contest over liability under the reverse charge mechanism was therefore resolved by treating the deposit as having been made by mistake, entitling the respondent to refund.

The respondent was not obliged to pay the service tax under the reverse charge mechanism in the circumstances, and the amounts deposited by the respondent could not be retained by the Department.

Applicability of limitation under Section 11B of the Central Excise Act, 1944 - payment of tax under a mistake of fact or law - Whether the refund claim was barred by the limitation period under Section 11B of the Central Excise Act, 1944 - HELD THAT: - The CESTAT and the High Court precedents cited by it establish that Section 11B, which prescribes limitation for refund of duties, is inapplicable where the payment was made without any colour of authority - that is, where the payment was made under a mistake of fact or law and there was no jurisdictional basis to demand the tax. In such cases the payment is not a duty or service tax payable in law, and therefore the limitation regime of Section 11B does not operate to bar the refund claim. The Court found no reason to depart from this consistent line of authority.

Section 11B does not bar the refund claim in respect of amounts paid under a mistake of fact or law; the limitation under Section 11B is inapplicable in such circumstances.

Final Conclusion: The appeal is dismissed. The deposits made by the respondent under a mistaken belief regarding liability under the reverse charge mechanism were not exigible taxes and are not retainable by the Department; consequently the limitation in Section 11B does not bar the refund claim.

Sufficiency of original and duplicate invoice as proof of export - requirement of quadruplicate invoice - proof of export - duplicate copy retained by revenue as primary evidence - bank certificate/remittance in freely convertible currency - necessity where payment in Indian rupees under bilateral arrangement - clarificatory effect of subsequent amendment - benefit of export under Notification No. 45/2001-CE (NT)

Sufficiency of original and duplicate invoice as proof of export - requirement of quadruplicate invoice - proof of export - duplicate copy retained by revenue as primary evidence - benefit of export under Notification No. 45/2001-CE (NT) - Production of original and duplicate copies of the invoice, duly endorsed, is sufficient proof of export for availing benefit of the notification and non-production of the quadruplicate copy alone did not justify rejection of proof of export. - HELD THAT: - The notification prescribes a four copy invoice procedure at land customs stations, with the duplicate copy remaining with revenue and the original and quadruplicate copies generally remaining with the exporter. Given that the duplicate copy is retained and endorsed by customs and thus constitutes the most conclusive evidence of export, failure to produce the quadruplicate copy - which is only a supporting document - did not warrant rejection of export proof where the duplicate endorsed invoice was produced. The revenue could have verified missing quadruplicate copies with the port authorities instead of rejecting the claim. Prior administrative decisions accepting original and duplicate copies were noted and the adjudicating authorities' inconsistent rejections were not justified. The Tribunal therefore held that original and duplicate endorsed invoices constitute adequate proof to claim exemption under the notification. [Paras 4]

Original and duplicate endorsed invoices suffice as proof of export; non-production of quadruplicate copy does not invalidate claim.

Bank certificate/remittance in freely convertible currency - necessity where payment in Indian rupees under bilateral arrangement - benefit of export under Notification No. 45/2001-CE (NT) - No requirement to produce a bank certificate evidencing receipt of payment in freely convertible currency where payment was received in Indian rupees pursuant to the Indo Bhutan trade arrangement and the nature of the project allowed rupee remittances. - HELD THAT: - The Board circular relied upon by the appellant clarifies that, in view of the Indo Bhutan trade and transit arrangements, payments may be received in Indian rupees and there is no necessity to produce a certificate for receipt in freely convertible currency as a precondition for claiming export benefit under the notification. Where the export related to a hydro electric project funded by India and payment norms permitted rupee settlement, insisting on foreign currency remittance documentation was unnecessary. Consequently, the ground based on non production of a bank certificate did not survive. [Paras 4]

Bank certificate/remittance in freely convertible currency not required where payments were legitimately received in Indian rupees under the bilateral arrangement.

Clarificatory effect of subsequent amendment - benefit of export under Notification No. 45/2001-CE (NT) - An amendment made after the exports is to be treated as clarificatory where it merely records or confirms the position that payments could be received in Indian rupees for the project in question. - HELD THAT: - The Tribunal noted that the hydro electric project was funded by India with provisions permitting payment in Indian rupees; therefore, the amendment effected after the export date operates as a clarification of the pre existing legal position rather than as a substantive change detrimental to the appellant. The amendment thus does not defeat the appellant's entitlement. [Paras 4]

The post export amendment is clarificatory in nature and does not affect entitlement to the export benefit.

Final Conclusion: All impugned orders rejecting the export claim were set aside: original and duplicate endorsed invoices were held sufficient proof of export and no bank certificate evidencing foreign currency remittance was required where payments were legitimately received in Indian rupees; appeals allowed.

Validity of assignment of trade mark/brand name despite non-registration - consideration by way of services as valid consideration - eligibility for small scale exemption/notification benefit where goods cleared under assigned brand name - penalty under proviso to Section 11AC read with Rule 25 - requirement of suppression and mens rea - precedential reliance on Vikshara line of authorities

Validity of assignment of trade mark/brand name despite non-registration - consideration by way of services as valid consideration - eligibility for small scale exemption/notification benefit where goods cleared under assigned brand name - precedential reliance on Vikshara line of authorities - Whether the appellants were entitled to benefit of the small scale exemption Notification despite the deed of assignment of the brand name being unregistered and consideration not in monetary form. - HELD THAT: - The Tribunal found that the controversy turned on the legal effect of the assignment of the brand name to the appellants and whether lack of registration or absence of monetary consideration defeated that assignment. The appellants demonstrated that the brand was assigned to them and that consideration was provided in the form of long standing marketing services rendered to the brand owner; consideration need not be monetary. Reliance was placed on the Vikshara line of decisions as explained in Jepika Paint and followed in Tribunal precedents (Que Pharma; Sadana Foods) which hold that where assignment is factually established and not seriously disputed, non-registration of the deed does not invalidate the assignment for the purpose of SSI/notification benefits. Applying that principle, the Tribunal held that mere non-registration of the deed of assignment could not be a ground to deny the small scale exemption when the facts showed assignment and exclusive use within agreed territory; accordingly the benefit of the Notification could not be denied to the appellants. [Paras 4]

Benefit of the small scale exemption Notification was held to be admissible to the appellants notwithstanding the unregistered assignment and consideration in the form of services.

Penalty under proviso to Section 11AC read with Rule 25 - requirement of suppression and mens rea - Whether the penalty imposed on Shri Sureshbhai Jivrajbhai Sakariya under the proviso to Section 11AC read with Rule 25 was sustainable. - HELD THAT: - Having held that the appellants were entitled to the notification benefit on the merits of the assignment and consideration, the Tribunal addressed the penalty. It accepted the appellants' contention that there was no suppression of information nor any intention to evade duty. In view of the absence of deceit or suppression, imposition of penalty under the proviso to Section 11AC read with Rule 25 was not warranted. [Paras 5]

Penalty imposed on Shri Sureshbhai Jivrajbhai Sakariya was set aside.

Final Conclusion: Appeals allowed: the appellants are held entitled to the small scale exemption benefit notwithstanding the unregistered assignment and consideration by services; consequentially the penalty imposed on Shri Sureshbhai Jivrajbhai Sakariya is set aside.

Reversal of CENVAT credit on write off of input or capital goods - Applicability of Rule 3(5B) of the CENVAT Credit Rules, 2004 - Recovery of CENVAT credit by invoking Rule 14 - Absence of recovery machinery prior to amendment dated 01.03.2013

Reversal of CENVAT credit on write off of input or capital goods - Applicability of Rule 3(5B) of the CENVAT Credit Rules, 2004 - Demand for amount equivalent to CENVAT credit under Rule 3(5B) where goods are not shown as written off in the books - HELD THAT: - The Tribunal examined Rule 3(5B) as amended w.e.f. 01/03/2011 which renders a manufacturer liable to pay an amount equivalent to CENVAT credit where input or capital goods have been written off fully or partially or a provision for such write off is made in the books. The appellate authority found that reversal under Rule 3(5B) is triggered only when goods are shown to be fully or partially written off in the accounts. Revenue did not prove that the goods had been written off; they were only categorised as non moving/obsolete. In absence of evidence of a write off or a provision in the books, the conditions for reversal under Rule 3(5B) were not satisfied and the demand and interest based on that provision could not be sustained. [Paras 4]

Demand under Rule 3(5B) cannot be sustained because revenue failed to prove that the goods were written off or a provision for write off was made in the books

Recovery of CENVAT credit by invoking Rule 14 - Absence of recovery machinery prior to amendment dated 01.03.2013 - Whether amounts payable under Rule 3(5), (5A) and (5B) could be recovered by invoking Rule 14 for periods prior to 01/03/2013 - HELD THAT: - The Tribunal considered the explanatory amendment effected by Notification No. 3/2013 CE(NT) dated 01.03.2013 which expressly provided that amounts payable under sub rules (5), (5A) and (5B) shall be recoverable in the manner provided in Rule 14. Prior to that amendment there was no provision to recover such amounts under Rule 14. In view of the absence of a recovery machinery before 01.03.2013, the order of recovery of CENVAT credit and interest for the impugned period (which falls prior to 31/03/2012) could not be sustained. The Tribunal relied on the reasoning in earlier Division Bench decisions to the same effect and set aside the recovery to the extent it related to the period before the recovery provision was introduced. [Paras 4, 5]

Recovery of amounts under Rule 3(5)/(5A)/(5B) by invoking Rule 14 is not permissible for periods prior to 01/03/2013; the recovery for the impugned period is set aside

Final Conclusion: The impugned order of recovery of CENVAT credit and interest is set aside: (i) because revenue failed to establish that the goods were written off or a provision for write off existed, hence Rule 3(5B) was not attracted; and (ii) because there was no statutory machinery to recover such amounts under Rule 14 prior to the amendment of 01/03/2013. The appellant is entitled to consequential relief if any.

Continuance of proceedings after omission of statutory provision - lack of jurisdiction resulting from omission of the charging provision and machinery rules - saving clause and effect of omission/repeal on pending proceedings - ultra vires - mandatory penalty without discretion - violation of Articles 14 and 19(1)(g) and Article 265 of the Constitution

Continuance of proceedings after omission of statutory provision - lack of jurisdiction resulting from omission of the charging provision and machinery rules - saving clause and effect of omission/repeal on pending proceedings - Whether adjudication and confirmation of demands under the compounded levy scheme could be validly made after omission of Section 3A of the Central Excise Act, 1944 and omission of Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944 in absence of any saving clause - HELD THAT: - The Tribunal accepted the consistent view of the High Court and co-ordinate Benches that Rules 96ZO, 96ZP and 96ZQ were omitted with effect from 01.03.2001 and Section 3A was omitted with effect from 11.05.2001 without any saving clause. Rules 96ZO/ZP/ZQ are machinery provisions while Section 3A constituted the charging provision; when the charging section itself was omitted without a saving clause, there remained no statutory basis to continue or conclude proceedings under the compounded levy scheme. The notification omitting the rules protected only actions already done while the rules were in force but did not permit initiation of new proceedings after omission, and, where Section 3A was omitted, pending proceedings not concluded before omission could not be validly concluded thereafter. Applying these principles to the appeals, the Tribunal held that adjudication orders rendered after the omission/repeal were without authority of law and therefore could not be sustained.

Adjudication and confirmation of compounded-levy demands after omission of Section 3A and the relevant rules, without any saving clause, were without jurisdiction and the impugned orders are not sustainable; appeals allowed and orders set aside.

Ultra vires - mandatory penalty without discretion - violation of Articles 14 and 19(1)(g) and Article 265 of the Constitution - Whether clause (ii) of sub rule (5) of Rule 96ZQ - mandating a penalty equal to outstanding duty (or Rs.5,000 whichever is greater) for default at month end - is constitutionally and statutorily valid - HELD THAT: - The Tribunal recorded and followed the High Court's reasoning that clause (ii) of Rule 96ZQ(5) is mandatory and prescribes an equal, non discretionary penalty irrespective of the extent or circumstances of delay. That provision treats materially different situations alike and imposes a disproportionate penalty even for trivial delays, whereas the parent Act contemplates limited rule making power to prescribe penalty not exceeding Rs.5,000 and provides for mitigating provisions (e.g., Section 11AC). Consequently, the High Court held Rule 96ZQ(5)(ii) to be beyond rule making power and violative of Articles 14, 19(1)(g) and 265 of the Constitution. The Tribunal applied that settled position in concluding that challenged demands based on the compounded levy scheme and its penal machinery could not be sustained.

Clause (ii) of sub rule (5) of Rule 96ZQ is ultra vires Articles 14, 19(1)(g) and 265 and cannot support imposition of the penalty; reliance on that provision to sustain the impugned demands is inappropriate.

Final Conclusion: Applying settled rulings of the Gujarat High Court and co ordinate benches, the Tribunal held that in absence of any saving clause the omission of Rules 96ZO/96ZP/96ZQ (w.e.f. 01.03.2001) and of Section 3A (w.e.f. 11.05.2001) deprived authorities of power to initiate or to conclude proceedings under the compounded levy scheme thereafter; the impugned orders were therefore without authority of law and are set aside, and the appeals are allowed.

Arbitrariness - Article 14 - equality and non arbitrariness in award of contracts - Judicial review of government contracts - limited to decision making process - Mandatory qualification criteria in tender - compliance and objectivity - Power of Attorney - validity and effect under Power of Attorney Act, 1882 - Submission of shortfall documents vs. replacement of bid documents - Wednesbury reasonableness - Fairness, transparency and non discrimination in tender evaluation

Power of Attorney - validity and effect under Power of Attorney Act, 1882 - Mandatory qualification criteria in tender - compliance and objectivity - The rejection of the Appellant's Technical bid on the ground that the Power of Attorney was notarised after the bid documents were signed was unjustified. - HELD THAT: - The Court found that the NIT did not require the Power of Attorney to be notarised prior to the signing of bid documents; Part 1/Cover I required scanned copies (self certified and notarised/certified) to be uploaded before the last date but did not stipulate notarisation having to precede signature. The Appellant's Board resolution and Power of Attorney were executed in the prescribed format and the notarised POA, along with other required documents, were uploaded before the last date for submission. Applying Section 2 of the Power of Attorney Act, 1882, the Court held that actions taken by the donee under the authority conferred by the donor are effective in law, and there was therefore no legal basis to treat the Appellant's signatory as lacking authority. On these findings the Technical bid of the Appellant could not be validly rejected for the reason stated by the Tender Committee. [Paras 11, 15, 18, 19]

The Appellant's technical bid was wrongly rejected on the stated ground relating to notarisation timing of the Power of Attorney and the rejection was unjustified.

Mandatory qualification criteria in tender - compliance and objectivity - Submission of shortfall documents vs. replacement of bid documents - Fairness, transparency and non discrimination in tender evaluation - The acceptance of Respondent No.8's Technical bid despite non submission of mandatory audited annual reports at the time of bid submission, and permitting post opening submission upon clarification, was arbitrary and unjustified. - HELD THAT: - Clause 10 of the NIT expressly required scanned copies of audited annual reports for the chosen three financial years to be submitted online as confirmatory documents for financial capacity. Respondent No.8 had not uploaded the audited balance sheets before the last date and only furnished them on 17.04.2024 after a clarification was sought post opening of technical bids. The Tender Committee failed to justify how a bid lacking these mandatory documents could be accepted while rejecting another bidder for alleged non compliance with the same Clause. The Committee's approach in allowing Respondent No.8 to make up essential qualification documents after technical evaluation amounted to selective and inconsistent treatment, contrary to the requirement of objective compliance and equal treatment of bidders. [Paras 12, 15, 16, 17, 20]

The acceptance of Respondent No.8's technical bid despite non compliance with mandatory Clause 10 and permitting post opening supplementation was arbitrary and unlawful.

Article 14 - equality and non arbitrariness in award of contracts - Judicial review of government contracts - limited to decision making process - Wednesbury reasonableness - Fairness, transparency and non discrimination in tender evaluation - The Tender Evaluation Committee's decision was vitiated by arbitrariness and discrimination, warranting quashing of the decision and setting aside of consequential acts, including the agreement; fresh procurement proceedings were directed. - HELD THAT: - While judicial interference in award of government contracts is limited to examination of the decision making process and courts do not act as contract making authorities, that restraint does not protect actions that are arbitrary, mala fide, or discriminatory. Applying settled principles (including the tests in Jagdish Mandal and related precedents), the Court held that BCCL's selective treatment of bidders and acceptance of a bid not complying with mandatory eligibility requirements, while rejecting a compliant bid on extraneous grounds, violated Article 14 and the requirements of fairness and transparency. Consequently, the impugned decision dated 06.05.2024 and any actions or agreements pursuant thereto were set aside, and BCCL was permitted to initiate a fresh tender in accordance with law. [Paras 21, 22, 26, 29, 30]

The impugned decision was arbitrary and violative of Article 14; it is set aside and BCCL may recommence the tender process in accordance with law.

Final Conclusion: The appeal is allowed: the rejection of the Appellant's technical bid was unjustified, the acceptance of Respondent No.8's non compliant bid was arbitrary and unlawful, the impugned decision and consequential agreement are set aside, and BCCL is directed to initiate fresh tendering proceedings in accordance with law.

Quashing of criminal proceedings under inherent jurisdiction - settlement between victim and offender as basis for quashing - offences having overwhelmingly and predominantly civil character - possibility of conviction remote and bleak - prevention of abuse of process of court

Quashing of criminal proceedings under inherent jurisdiction - settlement between victim and offender as basis for quashing - offences having overwhelmingly and predominantly civil character - possibility of conviction remote and bleak - prevention of abuse of process of court - Whether the criminal proceedings in C.C. No. 16 of 2014 ought to be quashed in view of the One Time Settlement between the bank and the accused, having regard to the nature of offences and the principles laid down by this Court. - HELD THAT: - The Court examined the undisputed settlement between the respondent Bank and the borrowers by way of OTS and the closure of the loan account, and applied the settled principles in this Court's precedents (including Gian Singh and its progeny) that the High Court in exercise of its inherent jurisdiction under Section 482 CrPC may quash criminal proceedings where the dispute predominantly bears a civil character, continuation of prosecution would be an abuse of process or would lead to extreme injustice, and the possibility of conviction is remote and bleak. The Court noted that the FIR and chargesheet relate to a loan transaction and a dispute between the Bank and the borrowers which 'predominantly had overtures of a civil dispute'; that the Bank had received substantial payments (including under the OTS) and closed the account; and that the appellants before the Court were arraigned only as wives of principal accused with no active role attributed in the chargesheet. Applying the Gian Singh guidance-requiring regard to nature and gravity of the crime, likelihood of conviction, and whether continuation would be oppressive-the Court concluded that continuation of the criminal proceedings would be futile, oppressive and prejudicial, and hence the High Court ought to have exercised its inherent jurisdiction to quash the proceedings. The Court therefore allowed the appeal and quashed the High Court's order and the criminal proceedings against the appellants. [Paras 34, 35, 36, 37, 39]

The appeal is allowed; the High Court order dated 1st September 2017 is set aside and the criminal proceedings in C.C. No. 16 of 2014 as against the appellants are quashed.

Final Conclusion: The Supreme Court allowed the appeal and, applying the established principles governing quashing in cases where the dispute predominantly bears a civil character and the possibility of conviction is remote, quashed the High Court's order and the criminal proceedings in C.C. No. 16 of 2014 against the appellants.

Recall and restoration of withdrawn criminal complaint - inadvertent withdrawal - laches and delay in seeking recall - exercise of inherent jurisdiction under Section 482 CrPC - settlement and mediation - execution of arbitral award as alternative remedy - territorial jurisdiction

Recall and restoration of withdrawn criminal complaint - inadvertent withdrawal - exercise of inherent jurisdiction under Section 482 CrPC - Petition for recall and restoration of Complaint No. 469088/2016 was not maintainable and was dismissed. - HELD THAT: - The Court examined the petitioner's claim that Complaint No. 469088/2016 was withdrawn inadvertently when the petitioner intended to withdraw the other complaint. The Court found no satisfactory evidence of inadvertence: payments had been received and only a specific sum was recorded as outstanding in the trial court's order-sheet; the petitioner delayed taking corrective steps and pursued execution of an arbitral award instead. In view of the petitioner's conduct and surrounding circumstances the Court was not persuaded to exercise its inherent jurisdiction under Section 482 CrPC to recall and restore the withdrawn complaint. [Paras 15, 17, 18]

Petition for restoration of the withdrawn Complaint No. 469088/2016 dismissed.

Laches and delay in seeking recall - settlement and mediation - Petitioner's delay and conduct (including mediation proceedings and late application under Section 362 CrPC) negatived any claim of inadvertence. - HELD THAT: - The Court noted that the petitioner did not promptly seek rectification after the alleged mistake: the Section 362 CrPC application was filed about six months later and was dismissed; mediation was undertaken and no consensus was reached but the petitioner did not act expeditiously to correct the alleged error. Further, original documents for the second complaint were not collected promptly and the complaint was not filed in Faridabad. These facts collectively led the Court to conclude that the petitioner's conduct was inconsistent with an inadvertent mistake and demonstrated laches. [Paras 16]

Delay and conduct of the petitioner preclude recall; claim of inadvertence rejected.

Execution of arbitral award as alternative remedy - Petitioner's revival and pursuit of execution proceedings of the arbitral award showed an alternative remedy and undercut the claim for criminal remedy restoration. - HELD THAT: - The Court observed that the petitioner had revived execution proceedings on the Arbitration Award and chose to pursue recovery through execution rather than by re-prosecuting the withdrawn complaints. This fact weighed against granting relief to reopen the criminal complaint and indicated an alternative avenue being actively pursued by the petitioner. [Paras 13, 17]

Revival and pursuit of execution of the arbitral award militates against restoration of the withdrawn criminal complaint.

Final Conclusion: The petition under Section 482 CrPC seeking restoration of Complaint No. 469088/2016 was dismissed: the Court found no inadvertence, recorded inordinate delay and laches on the part of the petitioner, and noted that the petitioner had pursued execution of the arbitral award as an alternate remedy.

Maintainability of complaint under Section 138 for dishonour due to 'account frozen' - magistrate's inability to recall cognizance or drop proceedings after issuance of process - 'insufficient funds' as a genus embracing species like account closed, payment stopped, signature mismatch - onus on drawer/accused to prove absence of knowledge of account freezing and that dishonour was beyond his control

Magistrate's inability to recall cognizance or drop proceedings after issuance of process - Whether the Revisional Court was right in holding that the Trial Court wrongly dismissed the application for dropping of proceedings after taking cognizance and issuing process. - HELD THAT: - The Revisional Court's observation that the Trial Court should have allowed recall or dropping of proceedings is contrary to settled law that a Magistrate, having taken cognizance and issued process, has no provision under the Code of Criminal Procedure to review or recall that order. The appropriate remedy for an aggrieved accused in such circumstances is to invoke inherent jurisdiction under Section 482 of the Code, not a Magistrate's self-review. Reliance on the principle in Adalat Prasad v. Rooplal Jindal indicates that a subordinate criminal court lacks power to rehear or overturn its cognizance/order by way of internal review. Accordingly, the Revisional Court erred in holding the Trial Court wrongly dismissed the application for dropping proceedings. [Paras 12]

The Revisional Court was not right in returning the finding that the Trial Court had wrongly dismissed the application for dropping the proceedings.

Maintainability of complaint under Section 138 for dishonour due to 'account frozen' - 'insufficient funds' as a genus embracing species like account closed, payment stopped, signature mismatch - onus on drawer/accused to prove absence of knowledge of account freezing and that dishonour was beyond his control - Whether a complaint under Section 138 is maintainable where the cheque was dishonoured with the banker's endorsement 'Account Frozen'. - HELD THAT: - Section 138 criminalises dishonour where a cheque is returned unpaid because the account has insufficient funds or exceeds an agreed arrangement. Judicial precedent recognises that the statutory phrase 'insufficient' is a genus and includes species such as account closed, payment stopped, signature mismatch or similar causes which produce dishonour. Where the record does not show when the account was frozen or whether sufficient funds were available at issuance or presentation of the cheque, it is premature to quash proceedings at the threshold. The onus lies on the accused to prove that he lacked knowledge of freezing, that freezing occurred for reasons beyond his control, and that sufficient funds were available; such matters are to be gone into at trial. In the absence of material before the Revisional Court to establish these facts, the complaint cannot be dismissed summarily merely because the memo records 'Account Frozen'. [Paras 13, 14]

The complaint under Section 138 is maintainable even if the cheque was dishonoured with the endorsement 'Account Frozen'; the matter requires full trial to determine facts such as timing of freezing and sufficiency of funds.

Final Conclusion: Petition allowed; order of the Revisional Court dated 09.05.2018 is set aside, the Trial Court's order is restored and the matter is remanded to the Trial Court for proceedings in accordance with law.