TaxTMI Updates e-Newsletter
Oct 10,2024

Condonation of delay - transitional credit (TRAN-1) - finality of earlier adjudication / issue estoppel - non-application of mind - maintainability of writ where alternate remedy exists - interim protection against coercive recovery

Condonation of delay - Application for condonation of 107 days' delay in filing the intra Court appeal - HELD THAT: - The Court found that sufficient grounds had been shown for the delay and was satisfied with the reasons furnished for not preferring the appeal within the limitation period. Exercising discretion, the application for condonation (CAN 1 of 2024) was allowed and the delay in filing the appeal was condoned. [Paras 1]

Delay of 107 days in filing the appeal is condoned and the condonation application is allowed.

Finality of earlier adjudication / issue estoppel - transitional credit (TRAN-1) - non-application of mind - maintainability of writ where alternate remedy exists - Whether the writ petition challenging the adjudication on TRAN 1 credit should be restored for fresh adjudication despite earlier dismissal on the ground of alternate remedy - HELD THAT: - The Court analysed that the adjudication impugned concerned the same subject matter as an earlier order dated 03.07.2018 in which the authority of the same rank had determined the eligible TRAN 1 credit and the assessee had complied by reversing the differential amount. The appellant raised a preliminary objection that the subsequent proceedings ought not to have been initiated on the same facts, and contended that the later adjudicating order did not address the effect of the earlier order. The High Court concluded that these questions did not require full re opening of disputed factual inquiries by the writ court but did require consideration of the legal effect of the earlier order and whether the later order reflected non application of mind. The writ petition had been dismissed solely on the availability of an alternate remedy; however, because the preliminary contention implicates the effect of the earlier order and whether the later proceeding was maintainable, the matter ought to be heard afresh. Consequently the order dismissing the writ petition was set aside and the writ petition was restored for hearing after the respondent files affidavit in opposition. [Paras 3, 4, 5, 6]

Order dismissing the writ petition is set aside; the writ petition is restored for fresh hearing on merits after affidavit in opposition is filed.

Interim protection against coercive recovery - Whether coercive recovery action against the assessee should be restrained pending adjudication of the restored writ petition - HELD THAT: - In view of restoration of the writ petition for fresh consideration of the effect of the earlier adjudication and the challenges to the later demand, the Court directed that the Department shall not initiate any coercive action for recovery of the amount mentioned in the adjudication until the writ petition is adjudicated afresh. This interim protection accompanies the order restoring the petition and is conditional on the course fixed for filing of affidavits and listing of the matter. [Paras 7]

Respondent Department directed not to initiate any coercive recovery action against the appellant in respect of the adjudicated amount pending fresh hearing.

Final Conclusion: The application for condonation of delay is allowed; the order dismissing the writ petition is set aside and the writ petition is restored for fresh hearing after the respondent files an affidavit in opposition; and the Department is restrained from initiating coercive recovery of the adjudicated amount pending such hearing.

Pre-decisional hearing - Rule 86A - reasons to believe - borrowed satisfaction - requirement of recording reasons in writing - draconian power and doctrine of proportionality - quashing of administrative order for being cryptic, laconic and non-speaking

Pre-decisional hearing - Rule 86A - reasons to believe - requirement of recording reasons in writing - Validity of the impugned order blocking the Electronic Credit Ledger under Rule 86A in the absence of pre-decisional hearing and independent/cogent reasons to believe - HELD THAT: - The Court applied the Division Bench's authoritative exposition in K-9-Enterprises that Rule 86A is a drastic provision which can be invoked only after (i) material on record objectively constituting 'reasons to believe' and (ii) recording of reasons in writing following proper application of mind. The impugned order was examined and found to lack a pre-decisional hearing and to be founded on reports/communications from other officers rather than an independent analysis by the authorising officer. Reliance on such outsourced or 'borrowed satisfaction' without independent inquiry was held impermissible. The Court emphasized that blocking the ECL affects a taxpayer's substantive right to avail input tax credit and therefore the statutory prerequisites-objective material, independent satisfaction and reasons recorded-must be strictly complied with; mechanical invocation based on another officer's findings, or absence of cogent reasons, vitiates the order. [Paras 3, 5, 6]

Impugned order blocking the Electronic Credit Ledger under Rule 86A is unlawful for want of pre-decisional hearing and for proceeding on borrowed satisfaction without independent, recorded reasons.

Borrowed satisfaction - draconian power and doctrine of proportionality - quashing of administrative order for being cryptic, laconic and non-speaking - Whether the impugned order met the tests of proportionality and formation of opinion required for exercising draconian powers affecting taxpayer's rights - HELD THAT: - Relying on the Division Bench's discussion (and precedents cited therein) the Court held that extraordinary measures (such as blocking ECL or provisional attachment) must bear a proximate, live nexus to the purpose of protecting revenue and be supported by tangible material showing necessity; mere apprehension of future tax demands or reliance on third party field reports is insufficient. The impugned order was found to be cryptic, unreasoned and not to record why the petitioner would defeat any demand; it thus failed the proportionality and formation of opinion tests and could not stand. [Paras 5, 6]

Impugned order fails the proportionality and formation of opinion requirements applicable to draconian revenue powers and is therefore invalid.

Quashing of administrative order for being cryptic, laconic and non-speaking - Relief to be granted in consequence of the illegality of the impugned order - HELD THAT: - Given the illegality found-absence of hearing, absence of independent reasons, reliance on borrowed satisfaction and failure to satisfy proportionality-the Court exercised its writ jurisdiction to quash the impugned order. The Court directed immediate unblocking of the petitioner's Electronic Credit Ledger to enable filing of returns, while preserving liberty of the revenue to proceed in accordance with law and the principles laid down by the Division Bench in K-9-Enterprises. [Paras 7]

Impugned order quashed and respondents directed to unblock the petitioner's Electronic Credit Ledger forthwith; liberty reserved to the respondents to proceed in accordance with law.

Final Conclusion: The writ petition is allowed: the order blocking the petitioner's Electronic Credit Ledger is quashed for want of pre decisional hearing, independent recorded reasons and for being founded on borrowed satisfaction; the ledger is to be unblocked immediately, with liberty to the revenue to act further in accordance with law and the Division Bench precedent cited.

Value of taxable supply - transaction value as consideration for supply - inclusion in value under Section 15(2)(b) of the CGST Act, 2017 - free supplies by service recipient not includable in consideration - valuation of Goods Transport Agency (GTA) services - nexus between amount charged and service provided - input tax credit neutrality

Value of taxable supply - inclusion in value under Section 15(2)(b) of the CGST Act, 2017 - free supplies by service recipient not includable in consideration - valuation of Goods Transport Agency (GTA) services - Whether the value of free diesel supplied by the service recipient on FOC basis is includable in the transaction value of GTA service for levy of GST - HELD THAT: - The Court held that the value of fuel supplied free of cost by the service recipient cannot be added to the freight consideration charged by the petitioner-transporter. The determinative ratio is that GST valuation is governed by the transaction value which must be the price actually charged as consideration for the taxable service; an item not charged by the supplier and having no nexus as consideration for the taxable service cannot be added to the contract price. The Court applied Section 15(1) read with Section 15(2)(b) of the CGST Act, 2017 and concluded that where the contract expressly provides that fuel will be supplied and borne by the recipient, the cost of such free supplies does not constitute consideration payable to the supplier and therefore is not includable in the value of the GTA service. The Court relied on the consistent pronouncements of the Supreme Court that valuation for service tax/GST must be the gross amount charged 'for such service' and authorities cannot go beyond the contract value to include items not charged by the service provider (see Commissioner of Service Tax & others Vs Bhayana Builders Private Limited & others ; Union of India Vs Intercontinental Consultants and Technocrafts Private Limited ; and subsequently followed authorities). The Court also noted that allowing exclusion does not prejudice revenue because GST paid by the transporter on freight would be available as input tax credit to the recipient, preserving net exchequer neutrality. Consequently, the findings of the Advance Ruling and Appellate Authority that the free diesel must be added to the GTA transaction value were set aside. [Paras 25, 26, 27, 28, 29]

Value of free diesel supplied by the service recipient on FOC basis is not includable in the transaction value of the GTA service and cannot be subjected to GST by adding its value to the freight charged by the transporter.

Final Conclusion: Writ petition allowed; the Appellate Authority for Advance Ruling's order upholding inclusion of free diesel in the GTA transaction value is set aside, holding that free supplies by the service recipient which are not charged by the supplier are not includable in the value of the taxable GTA service.

Export of services - location of the supplier of services - receipt of payment by the supplier - separate registration and treatment of establishments as distinct persons - refund of unutilised Input Tax Credit

Export of services - receipt of payment by the supplier - Whether denial of refund of ITC on the ground that remittance was credited to a bank account of a different establishment defeats the characterisation of the supply as an export of services under the IGST Act - HELD THAT: - The Court held that the sole objection to the refund related to remittances having been channelled to a bank account of the Bangalore office, whereas the services were provided by the Delhi branch. The Court noted that Section 2(6)(iv) of the IGST Act requires that payment for the service be received by the supplier but does not tie receipt to a particular bank account. The factual disclosures showed mapping of the Bangalore bank account to the Delhi registration and that the remittances were connected to services rendered by the Delhi establishment. The respondents' objection was characterised as overly technical and unsustainable where the supplier and export status of the services were not disputed. [Paras 4, 8, 9, 10, 11]

Refund could not be denied merely because payment was credited to a bank account situate at Bangalore; this did not negate export character where the supplier was the Delhi establishment and remittances related to its supplies.

Location of the supplier of services - export of services - Whether the location of the supplier for determining export of services is to be identified with the place of business which made the supply and whether receipt of payment in another place alters that location - HELD THAT: - Relying on Section 2(15) of the IGST Act, the Court explained that the location of the supplier is determined by the place of business for which registration has been obtained or the establishment most directly concerned with provision of the supply. The Court found that, on the facts, the Delhi branch was the establishment most directly concerned and thus the location of the supplier. Receipt of payment in a bank account at another establishment did not alter the statutory test for location of the supplier and therefore did not affect the export determination. [Paras 11, 12, 13, 14]

Location of the supplier is the place of business which effected the supply (the Delhi BO); receipt of payment at a different establishment does not change that determination.

Separate registration and treatment of establishments as distinct persons - refund of unutilised Input Tax Credit - Whether subsections (4) and (5) of Section 25 of the CGST Act, which treat multiple registrations as distinct persons, preclude treating the branch which made the supply as the supplier for export/refund purposes - HELD THAT: - The Court observed that subsections (4) and (5) of Section 25 reflect the statutory scheme acknowledging multiple establishments for tax administration, but this does not negate the statutory method for identifying the location and identity of the supplier for a given supply. The CGST Act's definition of the location of the supplier (Section 2(71)) similarly points to the place of business for which registration has been obtained and which effected the supply. Consequently, the administrative possibility of treating establishments as distinct persons for some purposes does not justify denying refund where the supply and export character are established to have been made by the registered Delhi establishment. [Paras 7, 14, 15]

The provisions treating establishments as distinct for registration do not override the statutory test locating the supplier in the establishment that effected the supply; they do not warrant denial of refund on the facts.

Final Conclusion: Writ petition allowed; the Order in Appeal dated 07 June 2022 and the Order in Original dated 29 June 2021 are quashed and the petitioner's refund claim is to be processed and disposed of with due expedition.

Notices issued to a deceased person - void ab initio - violation of principles of natural justice - ex parte orders - remitted for fresh consideration - right to be heard / personal hearing - initiation of recovery proceedings

Notices issued to a deceased person - void ab initio - violation of principles of natural justice - ex parte orders - Validity of notices, assessments and recovery proceedings initiated in the name of a deceased assessee - HELD THAT: - The Court found that the Proprietor/assessee had died on 07.05.2022 but notices, assessment orders and recovery steps were issued and taken in his name thereafter. Those proceedings were ex parte and taken without giving an opportunity to the legal heir; hence they suffer from a breach of the principles of natural justice. Proceedings and orders founded on notices issued to a person who is no more are treated as void ab initio. In view of this defect the impugned orders cannot stand and are liable to be set aside. [Paras 7, 8]

Impugned orders of assessment and consequential recovery proceedings issued in the name of the deceased are set aside.

Remitted for fresh consideration - right to be heard / personal hearing - Further course of action after setting aside the impugned orders - HELD THAT: - The Court remitted the matters to the respondent for fresh consideration. The petitioner, as legal heir (the wife), was directed to file replies to the DRC-01 notices (dated 27.09.2023 and 07.02.2024) within four weeks of receipt of a certified copy of the order. On receipt of the reply/objection the respondent is to consider it, issue a clear 14 days notice fixing a date for personal hearing, and thereafter pass appropriate orders after hearing the petitioner in accordance with law, expeditiously. The remand is for fresh adjudication after affording opportunity of hearing and not for mere quantification alone. [Paras 8]

Matters remitted to the respondent with directions to permit filing of reply by the legal heir, to give a 14 days notice fixing personal hearing, and to pass fresh orders after hearing.

Final Conclusion: Writ Petitions allowed: impugned assessment and recovery orders issued in the name of the deceased are set aside; matters remitted for fresh consideration with directions to afford the legal heir an opportunity to file replies and be heard before fresh orders are passed.

Requirement to record reasons in adjudication orders - right to personal hearing - speaking order requirement - remand for fresh consideration - adjudication under the WBGST Act, 2017

Requirement to record reasons in adjudication orders - speaking order requirement - adjudication under the WBGST Act, 2017 - Adjudication order dated April 29, 2024 was set aside for failing to consider the assessee's reply and for not recording reasons; matter remanded for fresh consideration. - HELD THAT: - The Court found that the adjudicating authority, as the first fact-finding forum, was obliged to consider the reply filed by the assessee and to record reasons where the reply was rejected. The impugned order consisted of a single-line rejection that did not state why the reply was unsatisfactory. That absence of reasoning rendered the adjudication legally deficient. Consequently the adjudication order passed under section 73 of the WBGST Act, 2017 was set aside and the proceedings remitted. The adjudicating authority is directed to grant personal hearing to the authorised representative, consider oral submissions, the written reply and all documents, address the decisions relied upon by the assessee, and pass a speaking order on merits in accordance with law. [Paras 3, 4, 5, 6]

Adjudication order dated April 29, 2024 set aside; matter remanded for fresh consideration with directions to afford personal hearing, consider submissions and documents, and pass a speaking order.

Remand for fresh consideration - right to personal hearing - Interim order in the writ petition was set aside and the writ petition was allowed insofar as the adjudication order was set aside and remanded. - HELD THAT: - The Court allowed the appeal, set aside the interim order that had required security by bank guarantee, and allowed the writ petition by quashing the adjudication order. The remand is for full reconsideration on merits after affording opportunity of personal hearing and consideration of all material and authorities placed before the adjudicating authority. [Paras 1, 4, 5, 6]

Interim order set aside; writ petition allowed; adjudication order quashed and remitted for fresh consideration with liberty to place authorities.

Final Conclusion: Appeal allowed; the adjudication order dated April 29, 2024 passed under section 73 of the WBGST Act, 2017 is quashed for want of reasons and remitted to the adjudicating authority to grant personal hearing, consider the assessee's replies and documents, deal with relied decisions, and pass a speaking order in accordance with law; no costs.

Reimbursement of differential Goods and Services Tax - application of enhanced GST rate from 01.01.2022 - classification of government entity liability for GST - maintainability of writ petition under Article 226 - alternative remedy under Arbitration Act - interest for delayed payment

Reimbursement of differential Goods and Services Tax - application of enhanced GST rate from 01.01.2022 - classification of government entity liability for GST - interest for delayed payment - Respondent No.2 to reimburse the petitioner the additional 6% GST paid on invoices issued between 01.01.2022 and 30.09.2022, failing which interest shall accrue. - HELD THAT: - The court found that the GST rate was enhanced from 12% to 18% w.e.f. 01.01.2022 and that the petitioner had paid GST at the enhanced rate while respondent No.2, a public enterprise classified as a government entity, had been reimbursing only at the earlier 12% rate. There were no disputed questions of fact and respondent No.2 had accepted liability to pay the additional 6% but awaited State approval. The State GST Department corroborated that the rate enhancement applied and that respondent No.2 was liable to pay the difference. In view of these findings, respondent No.2 was directed to pay the differential GST for the period 01.01.2022 to 30.09.2022 within three months of receipt of the certified copy of the order, and in default the petitioner is entitled to interest at 6% per annum from the date of entitlement. [Paras 3, 4, 5, 8, 9]

Respondent No.2 directed to pay the 6% GST differential for 01.01.2022 to 30.09.2022 within three months, failing which interest @ 6% p.a. shall be payable.

Maintainability of writ petition under Article 226 - alternative remedy under Arbitration Act - Writ petition under Article 226 is maintainable and the petitioner is not required to be relegated to the contractual dispute resolution forum or arbitration. - HELD THAT: - Respondents Nos.2 and 3 contended that the petition was not maintainable and that an alternative remedy under the Arbitration Act or the agreement's dispute resolution mechanism ought to be availed. The court observed that the controversy involved no disputed questions of fact and concerned a legal entitlement to reimbursement of statutory tax differential by a government entity. Consequently, the petitioner could not be relegated to the dispute resolution forum provided under the agreement and the writ was entertained and decided on merits. [Paras 6, 7]

Objection based on maintainability and availability of alternative remedy under the Arbitration Act rejected; writ petition entertained.

Final Conclusion: Writ petition allowed to the extent that respondent No.2 is directed to reimburse the petitioner the additional 6% GST for the period 01.01.2022 to 30.09.2022 within three months of receipt of certified copy of the order, with interest at 6% per annum in case of default; maintainability objections overruled and petition disposed accordingly.

Natural justice - opportunity of personal hearing - service of notice via GST portal - remand for fresh consideration - interim relief conditional on payment - attachment of bank account - lifting of attachment

Natural justice - service of notice via GST portal - opportunity of personal hearing - remand for fresh consideration - interim relief conditional on payment - Impugned demand order dated 29.12.2023 (and consequential GST DRC-13 dated 19.06.2024) set aside and remanded for fresh consideration subject to conditions. - HELD THAT: - The court found that the show cause notice and the impugned order were uploaded on the GST portal and, according to the petitioner, the petitioner was unaware of the issuance and had not received the physical notices. The impugned order was therefore held to have been passed without affording the petitioner a personal hearing, violating the principles of natural justice. In view of that violation, the court set aside the impugned orders and remanded the matter to the first respondent for fresh consideration. The remand is subject to the petitioner paying 10% of the disputed tax within four weeks of receipt of the order, after which the setting aside will take effect; the petitioner must thereafter file reply/objections with supporting documents within two weeks; the authority must give a clear 14-day notice fixing a date for personal hearing and then decide the matter on merits expeditiously and in accordance with law. [Paras 8, 9]

Set aside and remanded for fresh consideration on conditions including payment of 10% of disputed tax, filing of reply, and affording personal hearing.

Attachment of bank account - lifting of attachment - Attachment of the petitioner's bank account ordered to be lifted. - HELD THAT: - Because the impugned orders were set aside, the court held that the bank attachment could not subsist. The court directed the second respondent to defreeze the petitioner's bank account immediately on production of a copy of this order, if the account was attached. [Paras 9]

Bank attachment lifted; account to be defrozen on production of the order.

Final Conclusion: The writ petition is allowed in part: the impugned demand orders are set aside and remitted for fresh consideration subject to payment of 10% of the disputed tax and procedural directions to enable personal hearing; the bank attachment is lifted and the account is to be defrozen on production of this order. No costs.

Condonation of delay - limitation for filing appeal - mandatory pre-deposit - opportunity of personal hearing - assessment for mismatch between GSTR-3B and GSTR-1

Condonation of delay - limitation for filing appeal - mandatory pre-deposit - Validity of dismissal of the appeal as barred by limitation and whether delay should be condoned so that the appeal may be adjudicated on merits - HELD THAT: - The first respondent dismissed the appeal on the ground that it was filed beyond the condonable period and observed that there was no provision under the Act to condone the delay (finding recorded at para 7). The assessment order imposing liability for a mismatch between GSTR-3B and GSTR-1 was communicated on 08.12.2023; the statutory limitation and the additional one-month period for showing sufficient cause expired before the date on which the petitioner filed the appeal on 04.06.2024. The petitioner, who had made the prescribed 10% pre-deposit, contended that no opportunity was afforded before passing the assessment order (para 3, 4, 8). Exercising discretionary jurisdiction in writ jurisdiction, the High Court found it appropriate to afford the petitioner an opportunity to have the appeal adjudicated on merits and therefore set aside the impugned dismissal and condoned the delay (para 8-9). The Court directed that the first respondent shall take the appeal on file, issue notice, afford personal hearing and pass final orders within three months from receipt of the order (para 9). [Paras 7, 8, 9]

Impugned order dismissing the appeal for delay is set aside; delay in filing the appeal is condoned and the appeal is directed to be taken on file, notice issued, personal hearing afforded and final orders passed within three months.

Final Conclusion: Writ petition allowed; impugned order dated 09.07.2024 set aside, delay in filing the appeal condoned and the matter remitted to the first respondent to decide the appeal after notice and personal hearing within three months.

Quashing and remand of assessment order - Conditional relief by deposit of disputed tax from Electronic Cash Ledger - Treatment of impugned order as addendum to show cause notice - Opportunity to be heard and fresh adjudication on merits - Limitation and laches in invoking writ jurisdiction

Quashing and remand of assessment order - Opportunity to be heard and fresh adjudication on merits - The impugned order dated 14.10.2023 was quashed and the matter remitted to the respondent for fresh adjudication on merits, subject to conditions. - HELD THAT: - The High Court, after noting the respondent's contention as to limitation and laches, exercised its discretion to grant relief by setting aside the impugned order and directing the respondent to pass a fresh order on merits. The Court afforded the petitioner an opportunity to ventilate grievances before the respondent and required the petitioner to file a consolidated reply within thirty days. The respondent was directed to hear the petitioner and pass a final order on merits and in accordance with law, preferably within three months from receipt of the reply. The Court made clear that failure by the petitioner to comply with the conditional directions would entitle the respondent to proceed as if the writ petition had been dismissed in limine.

Impugned order quashed and matter remitted for fresh adjudication on merits on the terms stated.

Conditional relief by deposit of disputed tax from Electronic Cash Ledger - Treatment of impugned order as addendum to show cause notice - Grant of interim/conditional relief by requiring deposit of 25% of disputed tax from Electronic Cash Ledger and treatment of the impugned order as an addendum to earlier show cause notices. - HELD THAT: - As a condition for permitting fresh adjudication, the Court directed the petitioner to deposit 25% of the disputed tax confirmed by the impugned order from the Electronic Cash Ledger within thirty days of receipt of the order's copy. The Court further directed that the quashed impugned order shall be treated as an Addendum to the Show Cause Notices in DRC 01A dated 06.04.2022 and DRC 01 dated 20.07.2023, thereby integrating the impugned findings into the earlier proceedings for reconsideration. The Court emphasized that the petitioner must be heard before the final order is passed and that non-compliance with the deposit or filing of reply permits the respondent to act as if the writ petition had been dismissed.

Petitioner to deposit 25% from Electronic Cash Ledger and impugned order to be treated as addendum to the specified show cause notices for fresh consideration.

Final Conclusion: Writ petition allowed: the impugned assessment order dated 14.10.2023 is quashed and the matter remitted for fresh adjudication on merits on the stated conditional terms; no costs.

Advance ruling admissibility where question is pending in any proceedings under the Act (first proviso to Section 98(2)) - proceedings under the CGST Act - investigation/inquiry as proceedings - summons under Section 70 deemed to be judicial proceedings within the meaning of sections 193 and 228 IPC - non-admissibility of advance ruling where identical issue is already under investigation

Advance ruling admissibility where question is pending in any proceedings under the Act (first proviso to Section 98(2)) - investigation/inquiry as proceedings - summons under Section 70 deemed to be judicial proceedings within the meaning of sections 193 and 228 IPC - Application for advance ruling rejected as inadmissible because proceedings in respect of the same question were already pending against the applicant. - HELD THAT: - The Authority examined admissibility under the first proviso to Section 98(2) and construed the undefined term 'proceedings' in the CGST Act expansively to include inquiries and investigations that precede issuance of a show cause notice. The judgment analyses the usage of 'proceedings' across the Act (including references to assessment, recovery, special audit, adjudication and confiscation provisions) and concludes that investigation commenced by summons under Section 70 activates proceedings for the purposes of Section 98(2). The factual matrix shows summons issued to the applicant and statements recorded on 18.04.2022 and 14.06.2022, furnishing details of fees collected for the period 01.07.2017 to 31.03.2022, and an Incident Report dated 24.06.2022 by DGGI pointing to non-payment of GST on those fees. Those investigatory steps preceded filing of the advance ruling application on 28.06.2022 and relate to the same question raised in the application. In view of the foregoing, admitting and pronouncing an advance ruling would conflict with ongoing proceedings and potentially vitiate adjudicatory action, and therefore the application must be rejected under the first proviso to Section 98(2). [Paras 8, 9]

Application for advance ruling rejected as not admissible because proceedings concerning the same issue had already been initiated and were pending against the applicant.

Final Conclusion: The Authority rejects the applicant's advance ruling application under the first proviso to Section 98(2) of the CGST/TNGST Acts, 2017, on the ground that investigatory proceedings by DGGI relating to the same question were already pending at the time of filing.

Proceedings - investigation/inquiry under summon procedure - first proviso to Section 98(2) - admissibility of advance ruling - summons under Section 70 deemed judicial proceedings under IPC

Proceedings - investigation/inquiry under summon procedure - admissibility of advance ruling - first proviso to Section 98(2) - Whether the advance ruling application was admissible when an investigation by DGGI involving the same question was pending at the time of filing. - HELD THAT: - The Authority examined the scope of the undefined term 'proceedings' in the CGST Act and concluded that it is a comprehensive term embracing inquiries and investigations which may precede issuance of a show cause notice. In particular, Section 70(2) deems inquiries to be 'judicial proceedings' for limited IPC purposes, but that deeming does not restrict such inquiries from being proceedings under the CGST Act. The Act uses 'proceedings' in varied contexts (e.g., recovery proceedings, assessment proceedings, special audit) including stages that precede adjudication, and the phrase 'in any proceedings in the case of an applicant under any of the provisions of this Act' in the first proviso to Section 98(2) is broad and all-encompassing. Applying these principles, the Authority found that the DGGI summons and subsequent investigative steps constituted proceedings on the same issue as the advance ruling application. The material shows summons dated 30.11.2022 and 20.12.2022 (and related disclosures/statements) preceded the online filing of the application on 30.12.2022, and the investigation covered the same question-whether GST is payable on various fees collected by the Council. Consequently, the application fell within the exclusion in the first proviso to Section 98(2) and could not be admitted. [Paras 8]

Application for advance ruling is not admissible and is rejected under the first proviso to Section 98(2) because proceedings (investigation pursuant to summons) on the same issue were pending prior to filing.

Final Conclusion: The Authority rejects the advance ruling application as inadmissible under the first proviso to Section 98(2) of the CGST/TNGST Acts, 2017, because an investigation by DGGI on the same issue had commenced prior to filing the application.

Supply of services - job work - treatment or process applied to another person's goods - classification under Heading 9988 / Service code 998881 (Motor vehicle and trailer manufacturing services) - distinction between GST registered and un registered principal - applicable GST rate for job work and manufacturing on inputs owned by others (Entry No.26(ic) and 26(iv)) - binding nature of advance ruling

Treatment or process applied to another person's goods - supply of services - job work - classification under Heading 9988 / Service code 998881 (Motor vehicle and trailer manufacturing services) - distinction between GST registered and un registered principal - Classification of body building on chassis supplied by others as supply of services and whether it constitutes job work - HELD THAT: - The Authority accepted that Schedule II (Para 3) treats any treatment or process applied to another person's goods as a supply of services and relied on CBIC Circular No.52/26/2018 clarifying that fabrication of body on chassis provided by the principal merits classification as a service. The Authority further observed that the statutory definition of 'job work' in Section 2(68) requires the goods to belong to a registered person; therefore body building on chassis supplied by a GST registered principal qualifies as job work, whereas the same activity on chassis owned by an un registered person does not qualify as job work. Irrespective of registration status of the principal, the activity falls within manufacturing services on physical inputs owned by others and is classifiable under Heading 9988 and Service code 998881 (Motor vehicle and trailer manufacturing services). The Authority noted supporting CBIC FAQs and subsequent clarifications distinguishing entries at item (id) and (iv) of Notification No.11/2017 to the same effect. [Paras 7]

Body building on chassis supplied by others is a supply of services and is classifiable under Heading 9988 / Service code 998881; it constitutes job work only when the chassis belongs to a GST registered principal.

Applicable GST rate for job work and manufacturing on inputs owned by others (Entry No.26(ic) and 26(iv)) - supply of services - Applicable GST rate for the body building service when classified as job work or as manufacturing on inputs owned by others - HELD THAT: - The Authority held that where the activity is a supply of services (whether as job work for a registered principal or as manufacturing services on inputs owned by an un registered principal), the rate of tax is 9% CGST plus 9% SGST as provided respectively under Entry No.26(ic) (for job work) and Entry No.26(iv) (for services on inputs owned by un registered persons) of Notification No.11/2017 CT (Rate) read with the corresponding State notification. The Authority therefore applied the same 9% + 9% rate in both scenarios in view of the classification and the notifications and circulars relied upon. [Paras 7]

The applicable rate is 9% CGST and 9% SGST (i.e., 18% GST) whether the chassis is provided by a GST registered person (Entry 26(ic)) or by an un registered person (Entry 26(iv)).

Supply of goods - HSN 8707 (Bodies for motor vehicles) - Applicability of classification as supply of goods under HSN 8707 - HELD THAT: - The Authority observed that Question No.3 (whether the activity should be regarded as supply of goods under HSN 8707 attracting 28% GST) need not be answered because the primary question on classification as supply of services was decided in favour of the applicant; having held the activity to be a supply of services, the issue of classification as supply of goods fell away. [Paras 7]

Query on classification as supply of goods under HSN 8707 was not answered as it ceased to exist after holding the activity to be a supply of services.

Final Conclusion: The Authority ruled that body building on chassis supplied by others is a supply of services and is classifiable under Heading 9988 / Service code 998881; it amounts to job work only when the chassis belongs to a GST registered principal. The applicable tax is 9% CGST and 9% SGST in both cases. The query on classification as supply of goods under HSN 8707 was left unanswered as unnecessary.

Substantial question of law - scope of appellate review - reliance on factual reappraisal in appellate proceedings - Whether the Court would permit re-examination of factual contentions not raised before the Tribunal in an appeal confined to a substantial question of law?

HELD THAT:- We are not inclined to interfere with the impugned judgment passed by the High Court2024 (5) TMI 1474 - DELHI HIGH COURT. Hence, the Special Leave Petition is dismissed.

Applicability of CBDT circulars to pending appeals - retrospective application of administrative circulars - exceptions to departmental appeals in low tax effect cases - acceptance of revenue audit objections as exception to withdrawal - maintainability of departmental appeals in light of enhanced monetary limits - circulars issued under Section 268A of the Act

Applicability of CBDT circulars to pending appeals - retrospective application of administrative circulars - maintainability of departmental appeals in light of enhanced monetary limits - Whether Circular No.9 of 2024 applies to pending SLPs/appeals/cross objections/references and thereby makes the enhanced monetary limits and retained exceptions applicable to pending appeals. - HELD THAT: - Circular 9 of 2024 expressly states that the modifications shall come into effect from the date of issue and that the Circular "shall also apply to the SLPs/appeals pending before Supreme Court/High Court/Tribunal, which may accordingly be withdrawn." Circular 9 enhanced the monetary limits provided in Circular 5 of 2024 and retained the exceptions contained in Paragraphs 3.1 and 3.2 of Circular 5. Earlier circulars (Instruction No.5 of 2008; Instructions No.3 of 2011 and No.5 of 2014; Circular No.21 of 2015; Circular No.3 of 2018 and Circular No.17 of 2019) varied in retrospective application, but the plain language of Paragraph 5 of Circular 9 makes it applicable to both appeals to be filed henceforth and appeals pending at the time of issuance. The Court rejected the departmental contention that Paragraph 5 gives retrospective effect only to the enhanced monetary limits and not to the exceptions retained from Circular 5; accepting that contention would amount to adding words to the clear language of Paragraph 5. Circular 3 of 2018 was superseded by Circular 5 of 2024, and the exceptions in Circular 5, as retained and the monetary limits as enhanced by Circular 9 of 2024, govern pending appeals. [Paras 15, 16, 17, 18, 19]

Circular No.9 of 2024 is applicable to pending appeals and makes the enhanced monetary limits and the exceptions retained from Circular No.5 of 2024 applicable to pending appeals.

Exceptions to departmental appeals in low tax effect cases - acceptance of revenue audit objections as exception to withdrawal - maintainability of departmental appeals in light of enhanced monetary limits - Whether the departmental reliance on the exception in Circular No.3 of 2018 (acceptance of revenue audit objection) can sustain filing of the appeal despite the monetary limits and exceptions in Circulars 5 and 9 of 2024. - HELD THAT: - Circular 3 of 2018 had an exception permitting appeals where a Revenue Audit objection had been accepted (Para 10(c)) and applied retrospectively to pending appeals. However, Circular 3 of 2018 was subsequently superseded by Circular 5 of 2024, which did not retain the audit-objection exception and which was itself made applicable prospectively to appeals to be filed from its date. Circular 9 of 2024 later enhanced monetary limits and expressly applied to pending appeals while retaining the exceptions contained in Circular 5 of 2024 (not those of Circular 3 of 2018). Therefore the department cannot rely on the audit-objection exception from Circular 3 of 2018 once Circular 5 (as carried forward by Circular 9) governs pending appeals. [Paras 10, 14, 15, 19]

Reliance on the revenue audit-objection exception in Circular No.3 of 2018 is not sustainable; appeals must be judged by the exceptions retained in Circular No.5 of 2024 as made applicable to pending appeals by Circular No.9 of 2024.

Final Conclusion: The departmental appeals are non-maintainable under Circular No.9 of 2024 which applies to pending appeals, and the appeals are dismissed; proposed substantial questions of law are kept open.

Revision under Section 263 of the Income Tax Act - order erroneous and prejudicial to the interests of the Revenue - Explanation 2 to Section 263 - inquiry or verification which should have been made - unexplained investment under Section 69 - taxability under Section 115BBE - survey under Section 133A - where two views are possible AO adopting one permissible view is not erroneous

Revision under Section 263 of the Income Tax Act - order erroneous and prejudicial to the interests of the Revenue - Explanation 2 to Section 263 - inquiry or verification which should have been made - where two views are possible AO adopting one permissible view is not erroneous - Whether the Principal Commissioner was justified in invoking revisional jurisdiction under Section 263 by holding that the assessment order was erroneous and prejudicial to the interests of the Revenue for lack of inquiry/verification. - HELD THAT: - The Court applied the twin-condition test from Malabar Industrial Co. Ltd. and subsequent precedent: both error and prejudice to revenue must co-exist to invoke Section 263. The PCIT's conclusion rested on a finding of non-application of mind and lack of inquiry. However, the AO had issued a specific show-cause notice, considered the assessee's detailed reply that excess stock found in the survey was duly recorded as business income and accepted that explanation except for a minor addition, thereby adopting one of the permissible views. Where two views are possible and the AO has taken a view sustainable in law, that cannot be characterised as an erroneous order prejudicial to revenue. In the facts, the AO conducted inquiry and took a view which the ITAT upheld as tenable; hence the twin conditions for exercise of revisional power were not satisfied and Section 263 was not attracted. [Paras 14, 15, 16, 17, 18]

PCIT was not justified in invoking Section 263; the AO's order was not shown to be erroneous and prejudicial to revenue.

Unexplained investment under Section 69 - taxability under Section 115BBE - survey under Section 133A - where two views are possible AO adopting one permissible view is not erroneous - Whether the excess stock surrendered during survey of Rs. 2,25,75,951/- ought to have been treated as unexplained investment under Section 69 and taxed under Section 115BBE. - HELD THAT: - The AO had served a specific show-cause notice asking why the excess stock should not be treated as unexplained investment and taxed under Section 115BBE. The assessee replied that the excess stock comprised business inventory recorded in books and supported by documentary explanation verified during survey; the AO accepted that explanation except for a limited addition. The ITAT relied on precedents holding that surrendered undisclosed business income, properly recorded as business income, does not attract Section 115BBE, and upheld the AO's view. Given that the AO adopted a permissible view after inquiry, the revisional authority could not overturn it merely because an alternative view was available. [Paras 14, 15, 16, 17]

Excess stock was rightly treated as business income by the AO; Section 69/115BBE were not attracted on the material on record.

Final Conclusion: The substantial question is answered in favour of the assessee and against the Revenue: the Revisional Officer was not justified in invoking Section 263 since the AO had made inquiries and taken a tenable view that the excess stock represented business income; the ITAT rightly set aside the revision and restored the assessment order. The appeal is dismissed.

Foreign Tax Credit - Form No.67 - Directory versus mandatory nature of Rule 128 - Rectification under Section 154 read with Section 143(1) of the Income Tax Act - Reassessment for consideration of foreign tax credit

Foreign Tax Credit - Form No.67 - Rectification under Section 154 read with Section 143(1) of the Income Tax Act - Impugned intimation under Section 143(1) rejecting the Foreign Tax Credit claimed by the petitioner despite filing Form No.67 with the return - HELD THAT: - The petitioner filed the return for AY 2022-2023 on 31.12.2022 along with Form No.67 claiming Foreign Tax Credit. The intimation under Section 143(1) did not grant such credit and subsequent rectification filed to have the Form No.67 considered was rejected without addressing the claim. The High Court found that the rejection was made in a mechanical manner without considering the material filed with the return. Relying on precedents referenced in the judgment, the Court held that the claim filed by the petitioner in Form No.67 ought to be considered and that the impugned order disallowing the Foreign Tax Credit could not stand without adjudication on the claim. [Paras 7, 8]

Impugned order dated 02.01.2024 is set aside to the extent of disallowing the Foreign Tax Credit; matter remitted to the 1st respondent to reassess and give due credit to the petitioner's foreign tax claim by considering Form No.67.

Directory versus mandatory nature of Rule 128 - Form No.67 - Whether filing of Form No.67 under Rule 128 is mandatory for claiming Foreign Tax Credit - HELD THAT: - The Court noted prior authority of this Court and the Supreme Court's approach as discussed in the judgment, concluding that filing of Form No.67 (and compliance with Rule 128) is directory and not mandatory in the circumstances of this case. Consequently, the mere fact of any procedural non-compliance could not justify outright rejection of the Foreign Tax Credit claim where the Form No.67 had in fact been filed with the return and the claim required adjudication on merits. [Paras 7]

Filing of Form No.67 is directory in nature and cannot be a ground for refusing to consider the Foreign Tax Credit claim where the claim and Form were before the assessing authority.

Final Conclusion: Writ petition allowed in part; impugned order dated 02.01.2024 set aside insofar as it disallowed the Foreign Tax Credit. The matter is remitted to the assessing officer to reassess and decide the claim made in Form No.67 and give due credit within four weeks; no order as to costs.

Reassessment under Section 147/148 of the Income Tax Act - Fixed place permanent establishment (PE) - Dependent agent permanent establishment (DAPE) - Attribution of profits to a permanent establishment - Reason to believe test for reopening assessments - Arm's length remuneration and transfer pricing in attribution - Estimation of escaped income by reference to prior years and Rule 10(iii) - Finality/consistency of prior adjudication in tax proceedings

Reassessment under Section 147/148 of the Income Tax Act - Reason to believe test for reopening assessments - Finality/consistency of prior adjudication in tax proceedings - Validity of initiation of reassessment proceedings for AY 2009-10 under Section 147/148 - HELD THAT: - The Court held that the reassessment notices for AY 2009-10 were validly issued. The AO had material from a survey and related enquiries indicating that the assessee had not disclosed offshore sales and that expatriates and support staff in India were engaged in activities for GE group entities; those materials furnished a prima facie reason to believe that income had escaped assessment for the year under consideration. The Court observed that the assessee failed to show any factual change distinguishing AY 2009-10 from the years earlier adjudicated and that challenge to the initiation of reassessment is limited to jurisdictional error at the threshold; on that standard the Tribunal's view that sufficient material existed was unimpeachable. The Court therefore refused to interfere with commencement of reassessment.

Reassessment for AY 2009-10 under Section 147/148 was lawfully initiated; challenge dismissed.

Fixed place permanent establishment (PE) - Finality/consistency of prior adjudication in tax proceedings - Existence of a fixed place permanent establishment in India for the assessee - HELD THAT: - The Court relied on the detailed earlier adjudications answering similar questions for related assessment years, which had become final between the parties. Those earlier findings-examining the nature of activities carried on from the Indian premises, involvement of GE India in proposal development, negotiation and finalisation of contracts, and the substantive commercial role played by on ground personnel-were held applicable to AY 2009-10. The assessee did not point to any facts showing a fundamental alteration in the factual matrix for 2009-10 that would require a fresh inquiry. In that factual and legal setting the Tribunal and the AO were entitled to treat the fixed place PE findings as applicable and the Court found no error in so doing.

Finding of a fixed place PE in India is upheld for AY 2009-10; appeal on this point dismissed.

Dependent agent permanent establishment (DAPE) - Attribution of profits to a permanent establishment - Arm's length remuneration and transfer pricing in attribution - Whether the assessee had a dependent agent PE in India - HELD THAT: - The Court upheld the Tribunal's conclusion that GE India (including expatriates and GE India Industrial Pvt. Ltd.) performed activities that brought the assessee within the scope of an agency/ dependent agent PE under the DTAA. The prior findings-on agents negotiating and concluding essential elements of contracts, habitually securing orders, and carrying out core marketing and negotiation activities-were held germane and applicable to AY 2009-10. The Court noted that the assessee failed to establish that on the facts for the year under consideration the agents were independent in the treaty sense or that there had been any material change warranting different treatment.

Dependent agent PE established for AY 2009-10; finding sustained.

Attribution of profits to a permanent establishment - Estimation of escaped income by reference to prior years and Rule 10(iii) - Arm's length remuneration and transfer pricing in attribution - Approach and quantum of attribution of profits to the PE (including the Tribunal's adjustment of rate) - HELD THAT: - The Court accepted the two stage attribution methodology applied by revenue authorities (estimating total profit from sales and then attributing a portion to marketing/PE activity). In the circumstances-absence of party wise offshore sales data, refusal or failure to furnish necessary details, and reliance on prior years' figures-the AO's use of a deemed/proxy profit rate and estimation under Rule 10(iii) was held permissible. The Court also approved the Tribunal's fact based reassessment of the share attributable to PE (reducing the AO's applied 3.5% of sales to 2.6% on the Tribunal's evaluation), observing that attribution is case specific and that prior authorities and the Tribunal's comparative analysis furnished adequate material for the estimate. The contention that arm's length remuneration to the local service provider precluded any further attribution was rejected on the facts, the Court observing that transfer pricing compliance does not automatically negate need for attribution where functions/risks/assets of the PE remain unaccounted for.

Tribunal's methodology and its attribution figure for profits to the PE are upheld; no interference.

Finality/consistency of prior adjudication in tax proceedings - Challenge to the Tribunal's refusal to recall/rectify its consolidated order (miscellaneous application) and the connected writ - HELD THAT: - The Court found no merit in the challenge to the Tribunal's rejection of the miscellaneous application seeking reconsideration. The Tribunal had dealt with attribution and related grounds and the assessee failed to show any new material or legal basis warranting recall. Given the prior adjudications and absence of distinguishing facts for the year under consideration, the Court affirmed the Tribunal's refusal to reopen its consolidated conclusions.

Miscellaneous application and connected writ petition dismissed; Tribunal's order stands.

Final Conclusion: The appeal is dismissed and the writ petition is dismissed. The Court upheld the validity of the reassessment for AY 2009-10, sustained the findings of a fixed place PE and a dependent agent PE in India, and affirmed the Tribunal's fact based approach to attribution of profits (including its adjustment of the attribution percentage).

Taxability of live feed as royalty - bifurcation of licence fee between live and non-live content - Explanation 2 to section 9(1)(vi) - distinction between copyright and broadcast/right in live telecast - Explanation 6 to section 9(1)(vi) - transmission by satellite and the meaning of 'process' - primacy of Double Taxation Avoidance Agreement over domestic statute - reassessment under section 148/148A for escaped income

Taxability of live feed as royalty - Explanation 2 to section 9(1)(vi) - distinction between copyright and broadcast/right in live telecast - Income derived from transmission of 'live feed' does not fall within the definition of 'royalty' under Explanation 2 to section 9(1)(vi) and is not a 'work' within the meaning of the Copyright Act for that purpose. - HELD THAT: - The court followed and applied the reasoning in CIT v. Delhi Race Club and related precedents (as discussed in Fox Network) to hold that live telecast/broadcast is not a 'work' capable of copyright; broadcast rights are distinct from copyright and a live transmission lacks the 'minimum requirement of creativity' to qualify as a copyrightable work. Consequently, revenue attributable to live feed cannot be treated as royalty under clause (v) of Explanation 2 to section 9(1)(vi). The court also rejected contentions seeking to recharacterise live feed as 'scientific work' or otherwise within clause (v), noting those grounds were neither pleaded nor established on the facts before the authorities. [Paras 8, 12, 17]

Live feed income is not taxable as 'royalty' under Explanation 2 to section 9(1)(vi).

Bifurcation of licence fee between live and non-live content - reassessment under section 148/148A for escaped income - The Assessing Officer's rejection of the contractual bifurcation (95% live, 5% non-live) and consequent initiation of reassessment under section 148/148A was unsustainable. - HELD THAT: - The agreement expressly allocated the licence fee between live transmissions and non-live programming (95% and 5% respectively) and set out payment instalments accordingly. In light of the contractual stipulation and the legal position that live feed is not royalty, the officer's view that no basis existed for the bifurcation was perverse. Therefore the reassessment proceedings premised on the alleged escaped income lacked justification. [Paras 9, 10]

The reassessment action predicated on refusal to accept the contractual bifurcation is quashed.

Explanation 6 to section 9(1)(vi) - transmission by satellite and the meaning of 'process' - primacy of Double Taxation Avoidance Agreement over domestic statute - Explanation 6 (clarifying that 'process' includes transmission by satellite/cable/etc.) did not render the respondent's receipts from live feed taxable where the actual transmission was undertaken by a third party, and reliance on Explanation 6 did not advance the Revenue's case. - HELD THAT: - Explanation 6 is directed at transmission activities (e.g., satellite up-linking/down-linking). Here the petitioner admitted that the actual transmission was carried out by SIPL, not by the petitioner; accordingly Explanation 6 does not bring the petitioner's receipts within clause (i) of Explanation 2. Further, principles recognising the primacy of applicable DTAA provisions over domestic law (as noted in New Skies Satellite BV) were relevant and militated against the Revenue's alternate contention. [Paras 15, 16, 17]

Explanation 6 does not render the petitioner's live-feed receipts taxable on the facts; the Revenue's Explanation 6 argument fails.

Final Conclusion: Writ petitions allowed. Orders under section 148A(d) and the consequential notices under section 148 dated May 26, 2022 and July 29, 2022 (as applicable to the three challenged assessment years) are quashed.

Most Appropriate Method - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Arm's Length Price - Rule 10B(2) comparability factors

Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Rule 10B(2) comparability factors - Arm's Length Price - Whether TNMM could be accepted as the most appropriate method for determining ALP for sales of Paclitaxel and Disodium Pamidronate instead of CUP. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the TPO had relied on mere price comparisons from database sources without satisfying the stringent comparability requirements encapsulated in Rule 10B(2). The CIT(A) recorded that the TPO failed to reconcile essential comparability factors - customer profile, pricing terms (discounts, return policy), geographic pricing effects and product quality differences - and had not performed accurate adjustments required for CUP. The assessee had applied TNMM and produced segmental net margin analysis (UK branch) showing higher net margins on the relevant products (14.10% v. 10.90%), and the CIT(A) found this analysis persuasive. In the absence of material before the Court to impeach those findings, the ITAT found no reason to interfere with the acceptance of TNMM as the most appropriate method and deletion of the transfer pricing adjustment.

TNMM accepted as the most appropriate method for the sales of Paclitaxel and Disodium Pamidronate; transfer pricing additions deleted and the CIT(A)/ITAT orders upheld.

Most Appropriate Method - Comparable Uncontrolled Price (CUP) method - Arm's Length Price - Whether the transfer pricing adjustment in respect of Methylene Chloride Soluble (MCS) - specifically the cost per kg claimed by the assessee - could be overturned. - HELD THAT: - The TPO had invoked CUP and computed a cost per kg for MCS much lower than the cost certificate presented before the CIT(A). Although the assessee produced a cost certificate stating a higher cost (Rs. 4648 per kg) before the CIT(A), the TPO doubted its veracity. The assessee did not point to any material before the CIT(A) that would cast doubt on the claimed cost, nor did it challenge the veracity of the certificate before the ITAT. The High Court treated the matter as essentially one of factual finding based on evidence placed before the CIT(A) and found no substantial question of law warranting interference with the factual conclusions recorded by the tribunals.

The factual findings regarding the cost per kg for MCS are sustained; no interference with the TPO/CIT(A)/ITAT conclusions and the transfer pricing adjustment stands as adjudicated by the lower authorities.

Final Conclusion: No substantial question of law arises; the High Court declines to interfere with the ITAT's order upholding the CIT(A)'s acceptance of TNMM for the specified drug sales and the factual findings on MCS, and the appeal is dismissed.

Rejection of books of account under section 145(3) - unexplained credit charged under section 68 - unexplained money/investment under section 69A - special tax rate under section 115BBE on additions u/s 68/69/69A - entries in books of account as relevant evidence - prohibition on double taxation/double addition of same receipts - co-terminous powers of the first appellate authority

Rejection of books of account under section 145(3) - entries in books of account as relevant evidence - co-terminous powers of the first appellate authority - Validity of CIT(A)'s rejection of the assessee's books of account by invoking section 145(3) - HELD THAT: - The Tribunal held that invocation of section 145(3) requires satisfaction that the accounts are incorrect or incomplete, or that the prescribed method/standards of accounting have not been regularly followed, and that assessment in such cases must be made under section 144. On the facts the Assessing Officer had not rejected the books, had examined them and found no general defect; CIT(A) issued a show cause and rejected books without identifying the statutory ingredients required under section 145(3) or conducting the verification envisaged (including requisite inquiry under section 144). The Tribunal observed it is impermissible to accept part of identical sales as genuine and, on the same record, reject part as unauthenticated and thereby reject the books. Reliance on principles that books regularly maintained and audited are prima facie relevant was noted; absent cogent material pointing to manipulation, mere deposit of demonetised notes did not justify rejection of accounts. For these reasons the Tribunal allowed the ground and held the rejection under section 145(3) unsustainable. [Paras 15]

Rejection of books of account by CIT(A) under section 145(3) set aside; ground allowed.

Unexplained credit charged under section 68 - unexplained money/investment under section 69A - special tax rate under section 115BBE on additions u/s 68/69/69A - prohibition on double taxation/double addition of same receipts - Whether the cash deposited in demonetised currency could be treated as unexplained money/credit and taxed afresh under sections 69A/68 and 115BBE - HELD THAT: - The Tribunal found that the disputed cash deposits arose from cash sales recorded in the assessee's audited books (sale ledgers and cash book) and that the revenue could not accept part of identical sales as explained and treat the remainder as unexplained on the sole basis that deposits were in demonetised notes. The court relied on the principle that amounts reflected in regular books of account are prima facie relevant and, absent cogent material showing fabrication, cannot be treated as undisclosed income by a second addition. Applying those principles and the Rajasthan High Court precedent (Smt. Harshila Chordia), the Tribunal held that amounts credited in the books as sales could not be recharacterised as unexplained credit or unexplained money and taxed again; consequently the addition under sections 69A/68 with taxation under section 115BBE could not be sustained in the circumstances. Therefore the appellate relief granted reduced the returned business income correspondingly and disallowed the double addition; ground allowed. [Paras 16]

Addition treating cash deposits as unexplained income under sections 69A/68 and taxing under section 115BBE set aside; amounts derived from recorded cash sales cannot be subjected to double taxation on these facts.

Final Conclusion: The appeal is allowed: CIT(A)'s rejection of the assessee's books under section 145(3) is quashed, and the addition treating cash deposits from recorded sales as unexplained income (and taxed under section 115BBE) is set aside; the Tribunal directed that the same receipts not be taxed again as unexplained credits on the materials before it.

Unexplained cash credit - burden of proof on assessee to explain nature and source of deposits - assessment under section 144 of the Income-tax Act, 1961 - taxation of specified unexplained income under section 115BBE of the Income-tax Act, 1961 - non-filing of return and ex-parte assessment - entitlement of educational institutions to accept special bank notes during demonetisation

Unexplained cash credit - burden of proof on assessee to explain nature and source of deposits - entitlement of educational institutions to accept special bank notes during demonetisation - assessment under section 144 of the Income-tax Act, 1961 - taxation of specified unexplained income under section 115BBE of the Income-tax Act, 1961 - Validity of addition treating difference between opening cash/SBN balance and SBN deposited as unexplained cash credit and taxation thereof - HELD THAT: - The Tribunal found that the assessee, a trust running 'Sai Institute of Engineering And Technology', was registered with AICTE as an unaided private institution and not a Central or State Government college. The assessee failed to file a timely return and did not discharge the onus to explain the nature and source of the cash/SBN deposits with corroborative evidence; the belated return was treated as ineffective and the AO proceeded to assess ex parte under section 144. In these circumstances, and having regard to the settled principle that the claimant assessee bears the burden to prove that deposits do not constitute income, the addition of the unexplained amount was sustainable. The Tribunal also relied on the principle in the cited Apex Court authority that where the assessee fails to satisfactorily explain deposits, the Revenue is entitled to treat them as unexplained income and tax them accordingly; the claim that the amounts represented fees accepted under demonetisation authorisation failed on record because the assessee produced no documentary evidence or certificate establishing entitlement to accept SBN as a Government college. On these findings the addition brought to tax under the specified provision was upheld. [Paras 7, 8, 9, 10]

Impugned addition upheld; appeal dismissed.

Final Conclusion: The Tribunal upheld the assessment made ex parte and sustained the addition treating the difference as unexplained cash credit taxed under the specified provision, dismissing the assessee's appeal for AY 2017-18.

Cessation or remission of trading liability - section 41(1) of the Income Tax Act - onus on the assessing officer to prove cessation - unilateral entry in books not sufficient for deemed income - reliance on creditors' confirmations and subsequent payments - penalty under section 271(1)(c) premature

Cessation or remission of trading liability - section 41(1) of the Income Tax Act - onus on the assessing officer to prove cessation - unilateral entry in books not sufficient for deemed income - reliance on creditors' confirmations and subsequent payments - Validity of addition of Rs. 3,17,55,786 as deemed income under section 41(1) on account of unproved sundry creditors - HELD THAT: - The Tribunal examined whether the conditions of section 41(1) were satisfied - namely that an allowance or deduction had been made earlier and that subsequently the assessee obtained an amount or benefit by way of remission or cessation of the trading liability. The authorities below treated 17 sundry creditors as non-existent because notices/summons issued under section 133(6)/131 could not be served and some confirmations were undated or prima facie unreliable. The assessee, however, maintained the liabilities in its books, produced purchase invoices, confirmations and banking evidence showing payments in subsequent years, and demonstrated recurring transactions with the parties across assessment years. Applying settled precedent, the Tribunal held that mere non-response by creditors or the age of liabilities does not establish remission or cessation; the onus is on the Revenue to prove that the liability ceased or that a benefit accrued to the assessee in the year under consideration. A unilateral entry in the books is not, by itself, sufficient to invoke section 41(1). In these facts - liabilities continued to stand in books, corresponding sales were accepted, and significant payments were recorded in subsequent years - the addition could not be sustained and was deleted.

Addition of Rs. 3,17,55,786 made under section 41(1) is deleted and ground no.1 is allowed.

Penalty under section 271(1)(c) premature - Maintainability of penalty proceedings initiated under section 271(1)(c) - HELD THAT: - The Tribunal observed that initiation of penalty under section 271(1)(c) was premature at the stage of the assessment challenged in the appeal. Given the deletion of the addition under section 41(1) and the factual circumstances, the Tribunal did not adjudicate the penalty merits and treated the ground as not requiring separate adjudication at this stage.

Ground challenging initiation of penalty proceedings is dismissed as premature and does not require adjudication.

Final Conclusion: The appeal is allowed by deleting the addition of Rs. 3,17,55,786 made under section 41(1); the challenge to penalty proceedings under section 271(1)(c) is held premature and not adjudicated further. Order pronounced in open court on 01/10/2024.

Assessment as unexplained cash credit under section 68 - genuineness of share transactions evidenced by demat entries, contract notes and banking trail - reliance on generalized investigation report to impugn transactions - requirement of linking the assessee to price rigging/exit operators to sustain addition

Assessment as unexplained cash credit under section 68 - genuineness of share transactions evidenced by demat entries, contract notes and banking trail - reliance on generalized investigation report to impugn transactions - requirement of linking the assessee to price rigging/exit operators to sustain addition - Whether long term capital gains declared on sale of shares can be assessed as unexplained cash credit under section 68 where the assessee has produced documentary evidence of purchase, dematerialisation, sale through stock exchange and receipt of sale proceeds through banking channels, but the Assessing Officer relies on a generalized investigation report alleging price manipulation in the scrips. - HELD THAT: - The Tribunal held that the AO's conclusion was premised primarily on a generalized Investigation Wing report regarding modus operandi in certain penny stocks, without producing material linking the assessee's transactions to the alleged rigging. The Tribunal noted that the assessee had (a) paid consideration through banking channels, (b) dematerialised the shares and recorded entries in the demat account, (c) sold the shares on the stock exchange platform, and (d) received sale consideration through banking channels. The AO had not pointed to defects in the documentary evidences produced by the assessee nor shown that SEBI had enquired into the assessee's transactions. A statement attributed to an operator (Shri Rajkumar Kedia) was relied upon by the AO but was not supplied to the assessee for rebuttal and there was no material proving the assessee acted in connivance with entry/exit operators. Applying the principle that mere conjecture, weak fundamentals of the company or generalized allegations of price manipulation are insufficient to displace documentary evidence of genuine market transactions, and having regard to binding and persuasive decisions of the Bombay and other High Courts and the Tribunal on identical facts, the Tribunal found no basis to treat the declared capital gains as unexplained cash credit under section 68. [Paras 8, 9, 13, 14]

Deletion of the addition; the long term capital gains cannot be assessed as unexplained cash credit under section 68.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the addition and dismissed the Revenue's appeal, holding that generalized investigation findings without material connecting the assessee to price rigging and in the face of unimpeached documentary evidence of genuine demat and bank transactions do not justify assessment of declared long term capital gains as unexplained cash credit under section 68.

Deeming provisions of Section 68 - unexplained cash credits - theory of human probabilities - abatement and consequences under Section 153A - acceptance of earlier assessment year treatment as estoppel - books of account and bank deposits as evidentiary source - statements and confirmations recorded under Section 131

Deeming provisions of Section 68 - books of account and bank deposits as evidentiary source - Invocability of Section 68 for cash deposited into bank account and whether bank passbook being not a 'book of account' precludes addition under Section 68. - HELD THAT: - The Tribunal rejected the contention that deposits in a bank account cannot be assessed under Section 68 merely because a bank passbook is not a 'book' under Section 2(12A). Substance and context govern, and choosing an incorrect head does not nullify an addition when the facts point to an unexplained credit. The Tribunal therefore proceeds to examine the source of deposits on their evidentiary merits rather than accepting the technical objection urged by the assessee (para 13). [Paras 13]

Assessee's argument that Section 68 cannot apply to bank deposits because bank passbook is not a book of account is rejected.

Abatement and consequences under Section 153A - acceptance of earlier assessment year treatment as estoppel - Effect of the abated assessment for AY 2016-17 (filed under Section 153A) on the adjudication of sources relied upon in AY 2017-18. - HELD THAT: - The Tribunal held that where an assessment is abated and a return is furnished under Section 153A treated as a return under Section 139(1), the assessee may make all claims and the AO can accept those claims in the abated assessment. The AO had accepted advances and the closing cash balance for AY 2016-17; consequently, the AO cannot, in the subsequent assessment year, disbelieve those same sources merely because the books were prepared after the search. Reliance was placed on the principle that sufficient closing cash in the preceding year to cover subsequent deposits precludes addition as unexplained money (para 14). [Paras 14]

Acceptance of advances and cash balance in AY 2016-17 precludes treating the same amounts as unexplained credits in AY 2017-18; additions on that basis cannot be sustained.

Statements and confirmations recorded under Section 131 - books of account and bank deposits as evidentiary source - Genuineness of advances from seven parties (amounts recorded in books for FY 2015-16 / AY 2016-17) and whether the AO was justified in rejecting them because the parties filed returns belatedly. - HELD THAT: - The Tribunal found that the assessee furnished confirmation letters, financial statements of the creditors and that the creditors admitted giving advances in statements recorded under Section 131. Mere belated filing of returns by creditors, when permitted by statute, does not render transactions non-genuine. The AO's rejection based solely on absence of mention during search and belated returns was held incorrect; the evidence established the advances from six parties and their recording in the books for FY 2015-16 (paras 15, 18). [Paras 15, 18]

Advances from six parties (explaining Rs. 14.60 crores) are held genuine and the corresponding addition is directed to be deleted; the advance of Rs. 0.81 crore from one party is not satisfactorily proved and that addition is confirmed.

Theory of human probabilities - statements and confirmations recorded under Section 131 - Applicability of the theory of human probabilities to disbelieve the advances and other evidentiary material. - HELD THAT: - The Tribunal reiterated that the theory of human probabilities is applicable where there is inconsistency in the evidence. In the present case there was no inconsistency: the creditors confirmed the advances in statements and documentary evidence was filed. Applying human probability to reject such established documentary and testimonial evidence is impermissible. Accordingly, the AO's reliance on that theory to make additions was found to be contrary to law (para 16). [Paras 16]

Theory of human probabilities cannot be applied to reject the advances and cash-balance explanations in the absence of inconsistency; AO's use of that theory is disapproved.

Books of account and bank deposits as evidentiary source - Whether cash withdrawals and accumulated cash balance as recorded in books (Rs. 4.63 crores) constitute a valid source for bank deposits during the demonetization period. - HELD THAT: - The Tribunal noted that the assessee's books, maintained under Section 44AA and audited under Section 44AB, showed cash withdrawals aggregating the impugned amount across AYs 2013-14 to 2016-17. The AO did not point to any specific discrepancy or prove that the books were unreliable or that cash had been otherwise utilised. Mere preparation or audit of books after search does not warrant rejection absent findings of incorrectness. The ld.CIT(A)'s conjecture that cash withdrawals would have been spent was unsupported by evidence. Therefore the explanation based on past withdrawals and cash balance is accepted (para 19). [Paras 19]

Addition relating to cash withdrawals/accumulated cash balance of Rs. 4.63 crores is deleted.

Final Conclusion: The Tribunal partly allowed the appeal: additions under Section 68 sustained only to the extent of the unexplained advance from one creditor; additions aggregating to the amounts attributable to six proven advances and to the explained cash withdrawals were deleted. The orders of the AO and ld.CIT(A) were modified accordingly.

Agricultural land within the meaning of section 2(14) - measurement of aerial distance for determining agricultural land - reliability of official certificates and survey reports - deduction under section 54B and 54F - entitlement to claim relief during assessment and appellate power to entertain additional claims

Agricultural land within the meaning of section 2(14) - measurement of aerial distance for determining agricultural land - reliability of official certificates and survey reports - Status of agricultural land at Manpur Nangalia, Sanganer as not falling within exceptions in section 2(14) and consequent chargeability to capital gains - HELD THAT: - The Tribunal examined competing distance certificates from the Tehsildar and the A.O.'s reliance on a reply under section 133(6) which recorded a different (7 km) aerial distance than the certificate produced by the assessee. The Tribunal found that the two differing statements by the Tehsildar called for enquiry and that the A.O. should not have preferred the post hoc reply over the certificate produced by the assessee merely because it was a photocopy. The Tribunal noted that aerial measurement must be scientific and supported by map evidence and that the A.O. had not undertaken appropriate verification. On that basis the Tribunal concluded there was no justification to sustain the addition made treating the land as a capital asset and deleted the addition relating to the Manpur Nangalia land. [Paras 5]

Addition sustained by AO/CIT(A) in respect of Manpur Nangalia land deleted; land held to be agricultural and not chargeable to capital gains.

Agricultural land within the meaning of section 2(14) - reliability of official certificates and survey reports - measurement of aerial distance for determining agricultural land - Status of agricultural land at Rampura, Tehsil Chaksu as agricultural land (beyond 2 km) and not a capital asset - HELD THAT: - The Tribunal considered the RGDC/Survey of India remand report obtained in proceedings involving adjoining and identical land of the assessee's husband, which certified the distance from Jaipur Municipal limit as substantially greater (minimum 18.4 km). The Tribunal found that the Survey of India report is authentic, reliable and scientifically acceptable and applies equally to the assessee's adjoining parcels. Relying on that authoritative report, the Tribunal held that the Rampura land is situated beyond the municipal limit threshold and therefore falls within the definition of agricultural land under section 2(14) and is not a capital asset. Consequently, the capital gain assessed by the A.O. on that sale was held to be unjustified and deleted. [Paras 5]

Addition sustained by AO/CIT(A) in respect of Rampura, Chaksu land deleted; land held to be agricultural and not chargeable to capital gains.

Deduction under section 54B and 54F - entitlement to claim relief during assessment and appellate power to entertain additional claims - Admissibility of deductions under section 54B and 54F though claimed during assessment proceedings and not in the original return - HELD THAT: - The Tribunal reviewed the assessee's factual position that exemption/deductions under sections 54B and 54F were claimed before the A.O. during scrutiny and supported by purchase deeds placed on record in assessment proceedings. The A.O. had denied the claim solely because it was not made in the original or a revised return, relying on Goetze (India) Ltd. The Tribunal observed that the authorities and judicial decisions permit appellate authorities and, in appropriate cases, the A.O. to consider claims supported by material on record even if not included in the original return; the Tribunal cited precedent and administrative guidance to the effect that officers should assist taxpayers to secure reliefs where due. Applying those principles and having found the claims supported by records, the Tribunal allowed the exemptions/deductions under sections 54B and 54F. [Paras 5]

Deductions under sections 54B and 54F allowed; the AO's denial for want of revised return set aside.

Final Conclusion: The Tribunal allowed the appeal: additions treating the two parcels as capital assets were deleted (lands held to be agricultural) and the claimed deductions under sections 54B and 54F were allowed, resulting in the appeal being allowed in favour of the assessee.

Interest on partner's capital - partnership deed as an enabling clause not creating mandatory obligation

Interest on partner's capital - partnership deed as an enabling clause not creating mandatory obligation - Deletion of addition made on account of interest on partner's capital confirmed by the lower authorities. - HELD THAT: - The Assessing Officer added interest on the assessee's capital in the partnership firm and the CIT(A) confirmed the addition. The partnership deed merely provided that the firm "may" pay interest at the maximum allowable rate, which is an enabling provision and does not compel the firm to pay interest. The assessee neither paid nor claimed such interest. Reliance on consistent jurisdictional High Court decisions holding that clauses permitting interest are not mandatory led the Tribunal to conclude there was no justification for treating the enabling clause as creating an automatic liability to pay interest. Consequently, the addition on account of interest on partner's capital was deleted. [Paras 6]

Addition of interest on partner's capital deleted.

Final Conclusion: The appeal is allowed: the addition of interest on the assessee's capital is deleted; the question of validity of reopening was rendered academic by the substantive allowance on merits.

Addition to income - discounted export bill recovery - contingent liability in audited financials - foreign exchange realization and accounting treatment - deletion of assessment addition

Addition to income - discounted export bill recovery - contingent liability in audited financials - Deletion of the addition of Rs. 34,34,000 made in the assessment in respect of the export sales bill recorded as discounted by the bank and shown as contingent liability, where the foreign remittance was subsequently realized and the amount had been offered to tax. - HELD THAT: - The Tribunal examined the ledger, export invoice and audited financials which showed that an export invoice (invoice No. SSL 1920/Ex 101) for Rs. 38,77,055/- was raised and discounted by the bank, which credited Rs. 34,34,000/- to the assessee's account. The discounted amount was disclosed in the audit report as a contingent liability for bill discounted and, on 15.04.2020, the foreign remittance in respect of that invoice was realized and the bank adjusted its earlier credit and remitted the balance. The realized receipt had been offered to tax in the return. In these circumstances the Tribunal held that the addition made in the intimation/rectification could not be sustained, because the transaction was properly reflected in accounts as a contingent liability and the remittance had been realized and offered to tax, rendering the impugned addition unsupportable. [Paras 7, 8]

Impugned addition of Rs. 34,34,000/- deleted and the appeal allowed.

Final Conclusion: On the facts the Tribunal deleted the addition relating to the discounted export bill shown as a contingent liability and subsequently realized, allowed the assessee's appeal and set aside the impugned addition.

Priority of secured creditors over government dues - overriding effect of the SARFAESI Act over Central Excise and Customs enactments - absence of statutory first charge for excise/customs dues prior to specific enactments - maintainability of recovery proceedings by secured creditor before DRT notwithstanding pending writ stay that rendered earlier notices infructuous

Maintainability of recovery proceedings - infructuousness of earlier auction notice - Writ Petition No.2218 of 2006 rendered infructuous and not maintainable for lack of substantiation of excise dues and by reason of subsequent recovery proceedings initiated by the bank. - HELD THAT: - The Court found that Annexure P/1 did not bear the seal or signature of any competent authority and no orders of the Assistant Commissioner were placed on record to substantiate the claimed excise recoveries. Independently, the notice dated 12.03.2014 (auction notice) had been overtaken by events because the Dena Bank (now Bank of Baroda), as part of a consortium (including MPSIDC), had initiated and obtained recovery before the Debt Recovery Tribunal (award dated 17.08.2010), thereby superseding the earlier auction notice; moreover the earlier stay prevented its implementation. In view of absence of documentary proof of excise recovery proceedings and the subsequent DRT recovery steps, the writ petition seeking to restrain the auction was rendered infructuous. [Paras 8]

Writ Petition No.2218 of 2006 is rendered infructuous.

Priority of secured creditors over government dues - overriding effect of the SARFAESI Act over Central Excise Act - reliance on binding Apex Court precedents - Writ Petition Nos.2241 of 2014 and 1480 of 2024 are liable to be dismissed because the bank's recovery proceedings before the DRT were permissible and the secured creditor's claim has priority in light of binding precedent. - HELD THAT: - The High Court held that the question is no longer res integra in view of Apex Court decisions (including Punjab National Bank v. Union of India and Industrial Development Bank of India v. Superintendent of Central Excise and Customs) which have ruled that, absent a statutory first charge in the Central Excise/Central Acts prior to specific amendments, secured creditors enforcing their security under SARFAESI/DRT enjoy priority over central excise/customs dues. The Court noted that Section 11-E and similar provisions do not negate the overriding operation of SARFAESI and related statutory schemes as expounded by the Supreme Court. Applying those precedents, the DRT did not err in rejecting the objection raised by the company and in proceeding with execution of the recovery award in favour of the bank. [Paras 9, 10, 11, 12]

Writ Petition Nos.2241 of 2014 and 1480 of 2024 are dismissed; the DRT's proceedings and rejection of the company's objection are upheld.

Final Conclusion: The petitions are dismissed: Writ Petition No.2218 of 2006 is held to be infructuous for want of substantiation and by reason of subsequent DRT recovery proceedings; Writ Petition Nos.2241 of 2014 and 1480 of 2024 are dismissed as the DRT rightly proceeded and settled precedents establish the secured creditor's priority under SARFAESI/related law.

Bail in offences under the Customs Act - seizure and search under section 102 of the Customs Act - statements recorded under section 108 of the Customs Act - possession of smuggled foreign-origin gold - distinction between prohibited and restricted goods and consequence of confiscation/fine

Bail in offences under the Customs Act - possession of smuggled foreign-origin gold - Whether the petitioner should be released on bail in connection with the DRI case alleging possession and smuggling of foreign-origin gold - HELD THAT: - The Court considered the prosecution case of interception at Patna Railway Junction, recovery of foreign-origin gold bullions from the petitioner, and recorded statements under section 108 of the Customs Act in which the petitioner admitted ownership. The petitioner contested the allegations, asserted legitimate business dealings in gold and urged false implication; it was noted co-accused had earlier obtained bail. Balancing the nature of allegations, the period of custody and the material on record, the Court exercised its discretionary jurisdiction to grant bail. The Court did not undertake a final adjudication on evidentiary disputes or on ancillary contentions such as competence of the officer who prepared the seizure list, but treated the factual matrix and custody period as relevant for the bail exercise and imposed conditions to ensure presence for trial. [Paras 6, 7]

Petitioner enlarged on bail on furnishing bond with two sureties and subject to condition of physical presence in the trial court on each date, with cancellation consequence for absence on two consecutive dates.

Final Conclusion: Bail petition allowed; petitioner released on bail on specified bond and surety conditions and directed to remain physically present before the trial court, failing which the bail bond is liable to be cancelled.

Merchandise Exports from India Scheme - Electronic Data Interface - failure to mark shipping bill - inadvertent omission in shipping bill declaration - treating EDI submission as 'Yes' for fresh examination - personal hearing - speaking order

Merchandise Exports from India Scheme - Electronic Data Interface - failure to mark shipping bill - inadvertent omission in shipping bill declaration - treating EDI submission as 'Yes' for fresh examination - personal hearing - speaking order - Re-examination of 185 EDI shipping bills for entitlement to MEIS rewards and direction to proceed treating the petitioner's submissions as 'Yes', with opportunity for personal hearing and requirement to pass a speaking order. - HELD THAT: - The Court found that the petitioner had applied for rewards under the Merchandise Exports from India Scheme but, due to inadvertent omission by the customs broker, the relevant entry in the EDI shipping bills was left blank and the system recorded a 'No'. The respondents had not examined the petitioner's cases on merits because the EDI indicated 'No'. In view of this admitted inadvertent error and the absence of examination on merits, the Court directed the respondents to re-examine the 185 EDI shipping bills afresh, treating the petitioner's submissions as a 'Yes'. The petitioner or its authorised representative is to be given an opportunity for personal hearing and to place relevant documents and clarifications. The respondents are directed to pass a reasoned or speaking order deciding entitlement in accordance with law within 12 weeks, and to communicate that order to the petitioner within one week by acknowledged post and e-mail. The Court left all substantive rights and contentions of the parties open for determination during this fresh consideration. [Paras 8, 9]

Respondents to re-examine the 185 shipping bills treating submissions as 'Yes', grant personal hearing, pass a speaking order within 12 weeks, and communicate it within one week.

Final Conclusion: The petition is disposed of by directing fresh examination of the 185 EDI shipping bills for MEIS entitlement, with a personal hearing and a reasoned decision to be rendered within the specified timeframe; all other rights and contentions are left open.

Transaction value - customs valuation - proforma invoice/quotation as basis for valuation - sequential application of Rules 4 to 9 of the Customs Valuation Rules, 1988 - reliance on third-party acceptance of enhanced value - confiscation and penalty consequent upon misdeclaration of value

Transaction value - proforma invoice/quotation as basis for valuation - sequential application of Rules 4 to 9 of the Customs Valuation Rules, 1988 - reliance on third-party acceptance of enhanced value - Enhancement of declared customs value on the basis of supplier quotations/proforma invoices and the acceptance of an enhanced value by another importer in a later transaction. - HELD THAT: - The Tribunal identified two stages in valuation redetermination: rejection of the declared value and then sequential application of Rules 4 to 9 of the Customs Valuation Rules, 1988 to arrive at an alternative value. The Original Authority rejected the declared value relying on quotations from the supplier and then adopted prices in those quotations because a later importer (M/s. Evergreen Enterprises) had accepted an enhanced value. The Tribunal held that a proforma invoice or quotation is in the nature of an offer and cannot, by itself, constitute a legally sustainable basis for enhancement of the value of imported goods. It followed the decision of a Division Bench in Commissioner of Customs, Chennai Vs Sahara Enterprises , applying the principle that a later, unrelated transaction or a later importer's acceptance of a proposed enhanced value cannot be used as third party data to substitute for the transaction value in the absence of mutual consent or evidence that the importer actually paid the higher price. The Tribunal emphasized that transaction value must be proved in the particular import and that reliance on a later acceptance in another importer's case deprives the accused importer of any opportunity to test the foundation of that third party data. Consequently, the Department had not established probative value for the enhanced figure adopted by the Original Authority. [Paras 5, 6, 7, 8]

Enhancement based on supplier quotations and on the later acceptance by another importer is not a legally sustainable basis for redetermining the transaction value; the impugned valuation is set aside.

Confiscation and penalty consequent upon misdeclaration of value - customs valuation - transaction value - Sustainability of confiscation of goods and imposition of penalty that followed the redetermined value. - HELD THAT: - Confiscation under section 111(m) and penalty under section 112(a) were grounded on the Original Authority's finding of misdeclaration and on the redetermined value. Having found the valuation enhancement to be legally unsustainable because it was founded on quotations and a later third party acceptance, the Tribunal concluded that the consequential measures predicated on that valuation (confiscation and penalty) could not stand. As the foundational determination of value was set aside, the measures dependent on that determination fall with it and the appellant is entitled to consequential relief, if any, under law. [Paras 8, 9]

Confiscation and penalty imposed in consequence of the unsustainable valuation are quashed by setting aside the impugned order; appellant entitled to consequential relief.

Final Conclusion: The impugned order is set aside: valuation enhancement based on supplier quotations and a later importer's acceptance is unsustainable, and consequential confiscation and penalty cannot be upheld; appeal disposed of with liberty to claim consequential relief as per law.

Refund of 4% Special Additional Duty (SAD) - curable defect in documentary proof - Chartered Accountant's certificate and correlation sheet requirement - endorsement requirement under para 2(b) of Notification No. 102/2007-Cus - absence of duty mention in commercial invoice as affirmation of no credit - no allegation of fraud or misrepresentation

Curable defect in documentary proof - Chartered Accountant's certificate and correlation sheet requirement - Whether rejection of the SAD refund claim was justified on account of the Chartered Accountant not certifying the sales invoices in the correlation sheet and discrepancies in invoice endorsement - HELD THAT: - The Tribunal found that the appellant had submitted sales invoices, VAT/CST paid challans/returns and a Chartered Accountant's certificate with a correlation sheet identifying commercial invoice numbers forming part of the tax invoices. The failure of the CA to certify the invoices in the correlation sheet was treated as a curable defect which could have been verified by the original authority rather than forming a ground for outright rejection. The Tribunal further observed that the rate at which CST was discharged was immaterial so long as tax had been correctly paid. There was no allegation of fraud or misrepresentation warranting rejection. On these bases the Tribunal held that rejection of the refund claim on the said documentary ground was not warranted. [Paras 5, 6]

Rejection of the refund claim on account of the CA not certifying the invoices in the correlation sheet was not justified; the defect was curable and the claim could not have been rejected on that ground.

Endorsement requirement under para 2(b) of Notification No. 102/2007-Cus - absence of duty mention in commercial invoice as affirmation of no credit - Whether the invoice endorsement did not comply with para 2(b) of Notification No. 102/2007 and thus disentitled the appellant from refund of SAD - HELD THAT: - Relying on the Larger Bench decision in Chowgule & Company Pvt. Ltd., the Tribunal accepted that where a commercial invoice shows no details of the duty paid, the question of availment of any credit does not arise and such non-mention itself operates as an affirmation that no credit is available. Applying that reasoning, the Tribunal held that the condition under clause (b) of para 2 of Notification No.102/2007 was satisfied despite the invoice endorsement not following the exact wording argued by the department. There being no fraud or misrepresentation, the deficiency in endorsement did not justify denial of refund. [Paras 6]

The requirement under para 2(b) of Notification No.102/2007 is effectively met where the commercial invoice does not mention duty; therefore non-conforming endorsement on the invoice did not disentitle the appellant to refund.

Final Conclusion: The impugned order rejecting the SAD refund claims is set aside; the appeal is allowed and the refund claim is to be dealt with accordingly, the documentary defects being curable and the endorsement requirement under the notification being satisfied in the circumstances.

Refund of Special Additional Duty (SAD) - unjust enrichment - Chartered Accountant's certificate corroborating ledger accounts and invoices - compliance with Notification No. 102/2007 - right to personal hearing - invoice endorsement denying credit of additional duty

Right to personal hearing - Whether the Commissioner (Appeals) erred in passing the impugned order without granting a personal hearing to the appellant - HELD THAT: - The Tribunal found that the Commissioner (Appeals) did not grant a personal hearing to the appellant despite a request. The absence of a personal hearing was treated as a procedural lapse that was fatal to the revenue's case. This procedural deficiency formed a basis for interfering with the impugned order. [Paras 4]

The impugned order is set aside insofar as it was passed without giving the appellant a personal hearing.

Refund of Special Additional Duty (SAD) - unjust enrichment - Chartered Accountant's certificate corroborating ledger accounts and invoices - compliance with Notification No. 102/2007 - invoice endorsement denying credit of additional duty - Whether the refund of SAD claimed in respect of the four specified Bills of Entry should be rejected on merits for unjust enrichment or otherwise - HELD THAT: - On the merits the Tribunal accepted the appellant's explanation and documentary evidence that duty for the four Bills of Entry was initially debited in DEPB script on 31.05.2011 and the remaining duty was paid subsequently; these facts were verifiable from the documents. The Tribunal noted there was no dispute that VAT was paid on the goods and that the local invoices bore an endorsement that no credit of the additional duty would be availed. The Chartered Accountant's certificate corroborated ledger accounts and sales invoices, supporting the conclusion that the 4% SAD had not been passed on to customers. In the light of these documents and the absence of material to disbelieve the CA certificate, a case of unjust enrichment was not established and the conditions of Notification No. 102/2007 were held to have been satisfied. The Tribunal also relied on the High Court's approach that, where documentary evidence and a CA certificate support the claim and there is no allegation of fraud, the adjudicating authority should not disbelieve such certification without material basis. [Paras 4, 6]

The rejection of the refund claim in respect of the four Bills of Entry is set aside and the refund is allowed on merits.

Final Conclusion: The appeal is allowed. The impugned order rejecting the refund claims in respect of the four Bills of Entry is set aside for both procedural deficiency (absence of personal hearing) and on merits; consequential relief to follow as per law.

Discretion to refuse admission of appeal under Section 129A proviso (admission threshold of amount involved) - finality of appellate order - limitation exclusion: general exclusion of period 15.03.2020 to 28.02.2022 - recovery of erroneously granted refund/double payment

Discretion to refuse admission of appeal under Section 129A proviso (admission threshold of amount involved) - finality of appellate order - Whether the Bench should admit the Department's appeal against the Commissioner (Appeals) in respect of a refund-recovery order involving an amount below the admission threshold and where an earlier Commissioner (Appeals) order had attained finality - HELD THAT: - The Bench noted competing contentions: the Department contended that the earlier Commissioner (Appeals) order treating the refund claim as time barred had attained finality and could not be reopened, while the importer relied on subsequent Supreme Court pronouncement excluding the period 15.03.2020-28.02.2022 for computation of limitation, which would render the refund claim timely. The Bench found that both sides raised substantial legal points and that the matter involved legal consequences of a refund/recovery. Having considered the unique facts and exercising the discretionary power available under the proviso to Section 129A to refuse admission in respect of matters where the amount involved does not exceed the prescribed threshold, the Bench declined to admit the Department's appeal in the interest of justice. The Bench expressly kept all questions of law open, thereby not adjudicating the merits or resolving the conflict between finality of the earlier order and the effect of the limitation exclusion. [Paras 8, 9]

The appeal of the Department was not admitted in exercise of the Bench's discretion; questions of law were left open

Final Conclusion: The Department's appeal was refused admission under the Bench's discretionary power (proviso to Section 129A) in view of the facts and amount involved; the merits and all questions of law remain undecided.

Revocation of customs broker license - forfeiture of security deposit - penalty under Customs Broker Licensing Regulations - due diligence by customs broker - verification of IEC and GSTIN - supervision of employees and vicarious liability - misdeclaration and overvaluation for ineligible IGST refund

Due diligence by customs broker - verification of IEC and GSTIN - supervision of employees and vicarious liability - misdeclaration and overvaluation for ineligible IGST refund - revocation of customs broker license - forfeiture of security deposit - penalty under Customs Broker Licensing Regulations - Whether the appellant contravened the duties under the Customs Broker Licensing Regulations, 2018 (Regulations 10(a), 10(e), 10(n), 10(o) and Regulation 13(12)), and whether the revocation of licence, forfeiture of security and penalty should be upheld. - HELD THAT: - The Tribunal examined admissions by the appellant's G card/Power of Attorney holder that he cleared exports without verifying authorisations, KYC, IECs, GSTINs or test reports, and that documents were accepted from an intermediary (Shri Sitaram Jadhav) rather than the exporters. The record shows failure to produce KYC and other verification documents despite promises to do so. Independent material including the Radioactivity Measurement Laboratory report and enquiries revealed the exported consignments were ordinary rotten cement bricks misdeclared as specialised high value articles, and several exporters' declared premises and IECs were bogus. The G card holder's admissions, the laboratory findings and other investigative material supported the conclusion that the broker failed to exercise required due diligence and supervision of his employee, and thus is responsible for the acts/omissions of the G card holder under Regulation 13(12). The Tribunal also noted an earlier decision concerning the appellant's non compliance, reinforcing the finding of habitual breach. In view of these determinative findings, the adjudicating authority's conclusion that Regulations 10(a), 10(e), 10(n), 10(o) and 13(12) were violated was upheld, and the consequential measures of revocation, forfeiture and penalty were sustained. [Paras 9, 10]

Findings of contravention of Regulations 10(a), 10(e), 10(n), 10(o) and 13(12) are affirmed; revocation of licence, forfeiture of security deposit and imposition of penalty are upheld.

Final Conclusion: Appeal dismissed; Order in Original No. 07/2022 dated 25.02.2022 revoking the customs broker licence, forfeiting the security deposit and imposing penalty is upheld.

Rejection of transaction value under Rule 12 - re-determination of assessable value under Rules 4 and 5 - extended period of limitation for willful misstatement under section 28(4) - re-assessment under section 17(4) - confiscation under section 111(m) - penalty under section 114A for willful misstatement and suppression - penalty under section 114AA for mis-declaration - finality of earlier adjudication / issue attaining finality

Finality of earlier adjudication / issue attaining finality - re-determination of assessable value under Rules 4 and 5 - penalty under section 114A - confiscation under section 111(m) - Validity of rejection of declared transaction value and re-determination of value, confiscation and penalties in respect of goods already adjudicated in Bill of Entry dated 16.2.2018 which were the subject matter of earlier proceedings upheld by the Tribunal and the Supreme Court. - HELD THAT: - The Tribunal found that several of the goods imported in the seven challenged Bills of Entry were identical to goods imported under Bill of Entry dated 16.2.2018. The reasons for rejecting the declared values, the comparison of model features and the basis for re-determination in respect of those goods are the same as were examined by this Tribunal in its Final Order dated 29.9.2022 and upheld by the Supreme Court by judgment dated 15.3.2024. Given those concurrent and subsequent final adjudications, the issue in respect of these goods has attained finality and the conclusions reached in the earlier proceedings bind the present adjudication. Accordingly, the parts of the impugned order dealing with rejection of transaction value, re-determination of assessable value, confirmation of differential duty, interest, confiscation and imposition of penalties insofar as they relate to goods already finally adjudicated stand upheld. [Paras 5, 6, 13, 14]

Uphold the rejection, re-determination, demand, confiscation and penalties insofar as they relate to goods covered by Bill of Entry dated 16.2.2018 which have attained finality.

Rejection of transaction value under Rule 12 - re-determination of assessable value under Rules 4 and 5 - market enquiry under Rule 7 - penalty under section 114A - penalty under section 114AA - Sustainability of rejection of transaction value, re-determination of value, demand of differential duty, confiscation and penalties in respect of goods not covered by the earlier final order (goods listed in Table 2). - HELD THAT: - For the goods not covered by the earlier Final Order (Table 2), the impugned order identifies only invoice numbers or mentions market enquiry but fails to record reasons for rejecting the declared transaction values under Rule 12, and does not give particulars of the contemporaneous Bills of Entry or a feature-by-feature comparison between the imported goods and the consignments relied upon for re-determination. The absence of any discussion demonstrating why the declared transaction values were vitiated, and the lack of comparative analysis of model features, renders the rejection and consequent re-determination unsustainable. In the circumstances the Tribunal found that demands of differential duty, interest, confiscation and mandatory penalty under section 114A cannot be upheld in respect of the Table 2 goods. The Tribunal therefore set aside those aspects of the impugned order and remanded the matter to the Principal Commissioner solely for computation. Separately, the Tribunal exercised its discretion to moderate the penalty under section 114AA to rupees four lakhs. [Paras 16, 17, 18, 19]

Set aside rejection, re-determination, differential duty, interest, confiscation and mandatory penalty under section 114A in respect of goods in Table 2; reduce penalty under section 114AA to rupees four lakhs; remand to Principal Commissioner for calculation only.

Final Conclusion: The appeal is partly allowed: the impugned order is upheld insofar as it applies to goods already finally adjudicated in Bill of Entry dated 16.2.2018; in respect of the remaining goods listed in Table 2 the rejection of transaction value, re-determination, demand of differential duty, interest, confiscation and mandatory penalty under section 114A are set aside, penalty under section 114AA is reduced to rupees four lakhs, and the matter is remanded to the Principal Commissioner for computation.

Effect of striking off company on pending civil proceedings - Continuance of suit for realisation of amount due - Section 250 - company deemed to continue for realisation of dues - Proviso to Section 248(6) and Section 248(7) - liabilities enforceable despite striking off - Interpretation of "due" in Section 250 - Order VII Rule 11 CPC - rejection of plaint

Effect of striking off company on pending civil proceedings - Order VII Rule 11 CPC - rejection of plaint - Whether striking off the name of the plaintiff company from the Register of Companies invalidates the pending civil suit and warrants rejection of the plaint under Order VII Rule 11 CPC. - HELD THAT: - The Court examined the statutory scheme under Section 248 read with Section 250 of the Companies Act, 2013 and concluded that striking off a company's name and consequent dissolution does not automatically render a pending civil suit incompetent or non-maintainable. The provisions (including the proviso to Section 248(6) and Section 248(7)) specifically preserve the company's existence to the extent necessary for realisation of amounts due and for payment or discharge of liabilities. Applying the ordinary grammatical meaning of the words used in Section 250, the Court held that the company remains capable of pursuing legal remedies to realise its dues and that a plaint filed before the striking-off is not vitiated merely because the company's name was later struck off. On that basis the learned Trial Court's dismissal of the Order VII Rule 11 application was upheld. [Paras 8, 9, 10, 13]

The striking off did not invalidate the suit; the Order VII Rule 11 application was properly dismissed and the suit remains maintainable.

Interpretation of "due" in Section 250 - Continuance of suit for realisation of amount due - The meaning and scope of the expression 'amount due' in Section 250 and whether it is limited to crystallised or admitted debts. - HELD THAT: - The Court considered precedent and the statutory text and rejected the submission that 'due' must be limited to an 'admitted' or 'crystallised' debt. While recognising authorities which distinguish between damages and debt, the Court emphasised the plain and ordinary meaning of 'due' in Section 250, observing that the provision unconditionally preserves the company's capacity to realise amounts due and to have liabilities discharged even after striking off. Thus 'amount due' encompasses quantified amounts legally recoverable as well as claims for realisation that may require adjudication; it is not confined only to already crystallised or admitted debts. [Paras 10, 11, 12]

The term 'amount due' in Section 250 is not confined to crystallised or admitted debts; the struck-off company continues to be entitled to realize its dues and pursue remedies.

Final Conclusion: The civil revision petition is dismissed. The High Court held that striking off the plaintiff company's name does not automatically invalidate a suit filed prior thereto; the company remains competent to prosecute claims for realisation of amounts due and for discharge of liabilities under Section 250 and the proviso to Section 248(6)/Section 248(7). The Court expressed no opinion on the merits of the underlying suit.

Impartiality of insolvency professional - verification of creditor claims - constitution and reconstitution of Committee of Creditors - setting aside of CoC resolutions - abuse of office by Interim Resolution Professional - direction to incoming Resolution Professional for verification - disciplinary action by Insolvency & Bankruptcy Board of India

Impartiality of insolvency professional - constitution and reconstitution of Committee of Creditors - setting aside of CoC resolutions - Validity of the Adjudicating Authority's order replacing the Interim Resolution Professional and setting aside the resolutions passed in the second CoC meeting - HELD THAT: - The Tribunal examined the chronology and records and found that the IRP admitted and gave effect to a late claim in a manner that reconstituted the CoC while the claims were still under 'verification', thereby altering the CoC composition to his advantage after having been voted out in the first CoC meeting. The IRP's conduct in admitting the claim post the claim submission deadline, reconstituting the CoC without due verification, putting previously rejected agenda items to vote and securing his reappointment through the newly constituted single-member CoC amounted to biased, non bona fide and authoritarian behaviour. Such conduct was held to be in breach of the duties of neutrality and impartiality expected of an IRP, and amounted to an abuse of position undermining the objectives and procedural integrity of the Code. The Tribunal therefore found no infirmity in the AA's intervention to protect the CIRP process and to set aside the resolutions passed in the second CoC meeting. [Paras 41, 42, 43, 44, 47]

The AA's decision to set aside the resolutions passed in the second CoC meeting and to replace the appellant as IRP is upheld; the appeal insofar as seeking reinstatement is dismissed.

Verification of creditor claims - constitution and reconstitution of Committee of Creditors - Further course regarding the disputed claim of Asha Apartments and the functioning of the CoC pending verification - HELD THAT: - The Tribunal endorsed the Adjudicating Authority's approach of keeping the disputed financial creditor's claim under verification and directing the incoming Resolution Professional to take a final decision on that claim within a specified timeframe. Until the incoming RP completes verification and, if required, reconstitutes the CoC, the CoC as initially constituted shall function and any business transacted at subsequent CoC meetings (not properly constituted) shall not be given effect to. The Tribunal declined to decide the merits of Asha Apartments' claim at this stage and left the matter for determination by the incumbent RP in accordance with law. [Paras 25, 55]

The claim of Asha Apartments is to be finally decided by the incoming Resolution Professional within thirty days and the CoC shall function as originally constituted until verification and any reconstitution is complete.

Abuse of office by Interim Resolution Professional - disciplinary action by Insolvency & Bankruptcy Board of India - Whether regulatory investigation into the conduct of the outgoing IRP should be initiated - HELD THAT: - On the material before it the Tribunal recorded that the IRP's conduct displayed lack of neutrality and appeared to involve premeditated steps to secure reappointment by prematurely admitting and relying upon a late claim. Given these findings and the adverse effect on the integrity of the CIRP, the Tribunal directed that the matter be brought to the attention of the Insolvency & Bankruptcy Board of India for appropriate investigation and action under the IBC and relevant regulations. [Paras 58, 59]

Registry to send a copy of the order to the Chairperson, IBBI, and IBBI is directed to investigate the role of the appellant and take necessary action as per law.

Final Conclusion: The Tribunal dismissed the appeal, upheld the Adjudicating Authority's order replacing the IRP and setting aside the second CoC meeting resolutions, directed the incoming Resolution Professional to verify the disputed claim within thirty days and reconstitute the CoC if necessary, and directed that the IBBI investigate the conduct of the outgoing IRP.

Reconstitution of Committee of Creditors - admission of claim by Resolution Professional - classification as financial creditor versus operational creditor - related party under Section 5(24) of the IBC - proof of financial debt under Regulation 8 of the CIRP Regulations - liability of guarantor vis-a -vis principal borrower - forensic/transaction audit of claims - claim as secured creditor-fresh consideration

Reconstitution of Committee of Creditors - admission of claim by Resolution Professional - Validity of the Adjudicating Authority's order directing reconstitution of the CoC by excluding the Appellant and others - HELD THAT: - The Appellate Tribunal examined the impugned NCLT order which directed the RP to reconstitute the CoC after excluding the Appellant and certain unsecured creditors on account of unsustainable admission of claims. The Tribunal noted that the claim form filed by the Appellant (Form-C) itself evidenced actual disbursements substantially lower than the admitted claim and that the RP admitted the entire claimed amount without adequate verification. The Tribunal agreed with the Adjudicating Authority that admission of the Appellant's claim for the full amount claimed was unsustainable on the face of the record and that the Adjudicating Authority did not commit error in ousting the Appellant from the CoC. Accordingly, the NCLT order dated 02.08.2024 directing reconstitution of the CoC was not interfered with. [Paras 25, 42, 73]

The order directing reconstitution of the CoC is upheld and not interfered with.

Classification as financial creditor versus operational creditor - liability of guarantor vis-a -vis principal borrower - proof of financial debt under Regulation 8 of the CIRP Regulations - Whether the Appellant qualified as a Financial Creditor entitled to the admitted claim amount - HELD THAT: - The Tribunal applied the statutory definitions and precedents on financial debt and financial creditor, noting that a financial debt involves disbursement against consideration for time value of money and requires documentary proof of amounts committed being drawn by the corporate debtor. Regulation 8(2) requires evidence such as financial contracts supported by financial statements or records showing amounts committed were drawn by the corporate debtor. The Appellant's Form-C and annexures demonstrated that actual disbursements on which interest was calculated amounted to approximately the lower sum reflected in Annexure-C, not the total sanctioned facility. The Tribunal held that liability of a guarantor arises only if the principal borrower is liable and that where the purported full disbursement to the principal borrower is not established, admission of the full claimed amount against the guarantor was unsustainable. On this basis the Tribunal endorsed the Adjudicating Authority's conclusion that the RP's admission of the entire claimed amount was callous and unjustified. [Paras 20, 24, 25]

The Appellant did not establish entitlement to the full claimed amount as a Financial Creditor; admission of the full claim was unsustainable.

Related party under Section 5(24) of the IBC - forensic/transaction audit of claims - Whether the Adjudicating Authority's finding that the Appellant was a 'related party' was sustainable - HELD THAT: - The Tribunal examined the NCLT's factual findings recorded in paragraph 79 regarding alleged relationships and engagements between the Appellant's partners and the Corporate Debtor. The Tribunal found that the Adjudicating Authority did not specify under which sub-clause of Section 5(24) the Appellant was held to be a related party and that the material findings were insufficiently specific to sustain that conclusion. Consequently, the Tribunal declined to endorse the related party finding at this stage but upheld the direction for a transaction/forensic audit to verify transactions. The Tribunal granted liberty to the parties to seek fresh adjudication before the Adjudicating Authority on related party status after receipt of the audit report. [Paras 14, 41, 79]

Finding of 'related party' is not sustained at this stage; matter remitted for consideration in light of the transaction audit report and parties may file fresh application.

Forensic/transaction audit of claims - claim as secured creditor-fresh consideration - Appropriateness of directing a transaction/forensic audit and the entitlement of the Appellant to claim secured creditor status - HELD THAT: - The Tribunal found it appropriate that the Adjudicating Authority directed a forensic/transaction audit to examine the nature of transactions, timing of documents, flow of funds through the escrow account and other aspects relevant to admission of claims. The Tribunal observed that the question whether the Appellant can be treated as a secured creditor was neither fully raised nor adjudicated below; accordingly, it granted liberty to the Appellant to file a fresh application to establish secured creditor status based on materials that may emerge from the transaction audit. The Tribunal clarified that observations recorded by the Adjudicating Authority will not fetter fresh consideration of such applications. [Paras 33, 34, 43]

Transaction audit direction is appropriate; parties given liberty to file fresh applications on related party status and secured creditor claim after audit report.

Final Conclusion: The Tribunal declined to interfere with the NCLT order dated 02.08.2024 directing reconstitution of the CoC. The Tribunal found the admission of the Appellant's full claimed amount unsustainable on the face of the claim documents and upheld the need for transaction/forensic audit; it declined to sustain the related party finding at this stage and granted liberty to the parties to seek fresh adjudication on related party status and on the Appellant's claim as a financial/secured creditor after receipt of the audit report. Parties to bear their own costs.

Prohibition under Section 10A of the Insolvency and Bankruptcy Code - minimum default threshold for initiation of CIRP - acknowledgement/one time settlement (OTS) and its effect on date of default - continuous default - inclusion of interest in 'debt' only where contractually agreed - doctrine of accord and satisfaction - abuse of the insolvency process by inflating claims

Prohibition under Section 10A of the Insolvency and Bankruptcy Code - minimum default threshold for initiation of CIRP - Exclusion of amounts which fell due during the Section 10A prohibited period from computation of default for initiating CIRP - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that defaults which fell due during the Section 10A period (25.03.2020 to 25.03.2021) cannot be counted for the purpose of initiating CIRP. The license fees that became due and remained unpaid during that prohibited period were correctly excluded from the Appellant's claim. Having recalculated the outstanding license fees after excluding the portion attributable to the Section 10A period, the remaining default fell below the statutory threshold required to maintain a Section 9 petition. The Tribunal distinguished authorities relied upon by the Appellant where the factual matrix showed a pre 10A default that merely continued into the prohibition period, noting that in the present case obligations (monthly license fees) arose during the prohibited period itself and thus were protected by Section 10A. [Paras 52, 54, 61, 62, 63]

Amounts falling due during the Section 10A prohibited period were correctly excluded and cannot be included in computing the default for initiation of CIRP.

Inclusion of interest in 'debt' only where contractually agreed - Claim for interest at 18% per annum as part of the operational debt - HELD THAT: - The Tribunal affirmed the Adjudicating Authority's conclusion that interest cannot be included in the claim unless there is an agreement between the parties providing for such interest. The registered Leave & License agreement contained no provision for interest on delayed payments and no binding agreement was shown to exist otherwise. Reliance on the NCLAT principle in Krishna Enterprises was endorsed to reject the claimed interest component as not forming part of the actionable debt. [Paras 49, 50, 51, 61]

Interest at 18% claimed by the Appellant was rightly excluded from the computation of default in the absence of a contractual agreement to that effect.

Acknowledgement/one time settlement (OTS) and its effect on date of default - continuous default - Whether the letters dated 29.08.2021 and 10.03.2023 constituted a binding OTS resetting the date of default to 31.03.2023 - HELD THAT: - The Tribunal examined the correspondence relied upon by the Appellant and agreed with the Adjudicating Authority that those communications did not constitute a one time settlement that would shift the date of default. The Tribunal observed that acknowledgements and temporary modifications (including Covid related rent reductions) do not, by themselves, alter the original default date unless they establish a binding agreement to that effect. The record did not show that the purported OTS extinguished or superseded earlier defaults; consequently, the Appellant could not artificially shift the date of default to circumvent Section 10A protection. The Tribunal also treated the Appellant's attempt to characterise acknowledgements as altering the default date as inconsistent with the factual matrix and prior admissions. [Paras 55, 56, 57, 58]

The letters relied upon did not constitute a binding OTS and therefore did not shift the date of default to 31.03.2023.

Abuse of the insolvency process by inflating claims - Veracity and admissibility of claimed reimbursements and other additions to the debt - HELD THAT: - The Tribunal concurred with the Adjudicating Authority's detailed scrutiny of the Appellant's claimed reimbursements and other additions, finding them unsubstantiated. Debit notes and asserted reimbursements were not supported by bills, receipts or proof of service upon the Corporate Debtor; the evidence did not demonstrate that such expenses were incurred by the Operational Creditor and recoverable. The Tribunal accepted that the Appellant's inclusion of arbitrary reimbursements and inflated figures resulted in an artificial augmentation of the claimed default, amounting to an attempted circumvention of the statutory threshold. [Paras 38, 59, 61]

Claims for other expenses/reimbursements were not established and were correctly excluded from the default computation.

Minimum default threshold for initiation of CIRP - Whether, after excluding amounts falling under Section 10A, unjustified interest and unsubstantiated reimbursements, the remaining default met the statutory threshold to maintain a Section 9 petition - HELD THAT: - The Tribunal approved the Adjudicating Authority's recalculation which deducted (i) amounts falling within the Section 10A prohibited period, (ii) interest not contractually agreed, and (iii) unsubstantiated reimbursements from the Appellant's claimed sum. The net outstanding default so computed was below the Rs 1 crore threshold required under the Code for initiation of CIRP. Given that the Petition thus failed to satisfy the statutory monetary threshold, the Section 9 application was not maintainable. The Tribunal also recorded that the manner in which the Appellant had compiled its claim demonstrated an attempt to inflate figures to meet the threshold. [Paras 41, 63, 66]

After exclusions, the outstanding default was below the threshold and the Section 9 petition was not maintainable.

Final Conclusion: The Tribunal dismissed the appeal, holding that the Adjudicating Authority correctly excluded amounts falling within the Section 10A prohibited period, rightly disallowed interest not contractually agreed and unsubstantiated reimbursements, and correctly found that the recalculated default did not meet the statutory threshold to admit the Corporate Debtor into CIRP.

Pre-existing dispute - existence of a dispute disqualifies initiation of CIRP - operational debt - operational creditor - initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code - threshold of Rs. 1 crore for maintainability

Pre-existing dispute - existence of a dispute disqualifies initiation of CIRP - initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code - Whether a pre-existing dispute existed between the parties at the time of filing the Section 9 petition thereby rendering the petition non-maintainable. - HELD THAT: - The Tribunal examined the pleadings and documentary material placed before the Adjudicating Authority and found communications, police complaints and correspondence predating the Section 8 notice which evidenced disputes about possession of the leased premises and payment obligations. The Adjudicating Authority had recorded facts showing offer of possession, correspondence about notice periods and divergent claims on rent and GST. Applying the established principle that the existence of a pre-existing dispute-so long as it is a plausible contention requiring investigation and not a spurious or illusory defence-disentitles an Operational Creditor from invoking Section 9, the Tribunal held that the disputes demonstrated in the record were substantial and pre-existing. In consequence the Adjudicating Authority rightly declined to proceed with the petition without going into other contested matters. While other contentions (such as whether the claimed dues meet the statutory threshold) were noted, the Tribunal concluded that the presence of a pre-existing dispute alone sufficed to dismiss the Section 9 petition as non-maintainable. [Paras 24, 26, 27, 28, 31]

The Tribunal upheld the Adjudicating Authority's finding of a pre-existing dispute and dismissed the appeal, thereby affirming the non-maintainability of the Section 9 petition.

Final Conclusion: The appeal is dismissed; the Impugned Order dated 01.03.2024 of the Adjudicating Authority is upheld and the Appellant is directed to bear the costs of the appeal.

Retracted statements and independent corroboration - illegality of search and admissibility of seized evidence - handwriting expert report as corroborative evidence - right to cross examination and prejudice - contravention of Section 3(a) of FEMA, 1999 - judicial discretion in reduction of penalty

Retracted statements and independent corroboration - Recorded statements of the appellant, though retracted later, could be relied upon when substantially corroborated by independent evidence. - HELD THAT: - The Tribunal found that the Adjudicating Authority properly considered the recorded statements of the appellant together with seized documents which the statements themselves described. The statements contained details which could be known only to the maker and explanatory of the seized material; the appellant repeatedly affirmed the voluntariness of earlier statements before later denying them. The Tribunal applied the principle from Vinod Solanki and other authorities that a retracted confession may be acted upon only when corroborated by independent and cogent evidence and concluded that such corroboration existed here in the form of the seized documents and the overall material placed before the authority. [Paras 11, 12, 14, 15]

The recorded statements, though retracted, were appropriately acted upon in view of independent corroborative documents and support the finding of unauthorized foreign exchange transactions.

Illegality of search and admissibility of seized evidence - Alleged irregularities in the conduct of the search did not render the seized documents inadmissible or vitiate their evidentiary value. - HELD THAT: - Relying on precedent, the Tribunal observed that illegality in the method, manner or initiation of a search does not necessarily require that seized material be discarded; the authority must be cautious in dealing with such evidence. The Adjudicating Authority examined the circumstances of the search, considered objections about timing and presence of panch witnesses, and found no reason to exclude the seized documents. The Tribunal endorsed that approach and rejected the submission that mid night search timing or purported shortcomings in panch presence automatically nullify the evidentiary value of what was seized. [Paras 13]

Search irregularities, if any, did not vitiate the seized documents which were admissible and could be relied upon.

Handwriting expert report as corroborative evidence - right to cross examination and prejudice - The handwriting expert's report was accepted as corroborative evidence and the denial of cross examination of certain witnesses did not cause prejudice to the appellant. - HELD THAT: - The Tribunal noted that the Adjudicating Authority accepted the Government Examiner of Questioned Documents' conclusion that the handwriting on seized documents was that of the appellant. Although the appellant contended that the panch and the expert were not examined on oath and were not cross examined, the record showed opportunity was given to cross examine at least one panch and the investigating officer; there was no request recorded for cross examination of the other panch or the expert during adjudication. Applying principles that disclosure of documents and an opportunity to rebut them can satisfy natural justice, the Tribunal held that absence of formal cross examination did not operate to the appellant's prejudice in view of independent corroborative evidence. [Paras 11, 16]

The expert report was rightly relied upon and absence of cross examination of some witnesses did not vitiate the proceedings or cause prejudice.

Contravention of Section 3(a) of FEMA, 1999 - judicial discretion in reduction of penalty - The appellant was held to have contravened Section 3(a) of FEMA, 1999 for unauthorized purchase/sale of foreign currency during 09.07.2002 to 24.07.2002; the penalty was reduced in exercise of judicial discretion. - HELD THAT: - Having upheld the admissibility and corroboration of statements and seized material, the Tribunal agreed with the finding that the appellant, with his employee, transacted in foreign currency without RBI permission in the specified period. The appellant's plea for mitigation based on efforts to keep the licensed business free of illegality and that no incriminating material was recovered from business premises was considered. In view of those mitigating circumstances, the Tribunal exercised its discretion to reduce the monetary penalty imposed by the Adjudicating Authority. [Paras 7, 17, 18]

Contravention for the period 09.07.2002 to 24.07.2002 is affirmed and the penalty is reduced as a matter of discretion.

Final Conclusion: The appeal is partly allowed: the findings of unauthorized foreign exchange transactions are sustained on the basis of recorded statements and corroborative seized documents (and accepted expert opinion), search irregularities and limited non examination of witnesses did not vitiate the evidence, and the penalty imposed is reduced in exercise of discretion.

Contravention of Section 18(2) of FERA - realization of export proceeds - genuine GR issuance by Customs - certificate of clearing agent - reasonable efforts to recover export proceeds

Contravention of Section 18(2) of FERA - realization of export proceeds - genuine GR issuance by Customs - certificate of clearing agent - reasonable efforts to recover export proceeds - Liability of the appellant for non-realization of export proceeds under Section 18(2) of the Act, 1973, and the sufficiency of documentary/material proof relied upon by the appellant to rebut such liability. - HELD THAT: - The Tribunal examined whether the appellant had discharged the burden to show that exports were not made against all GRs issued and whether he had made reasonable efforts to recover proceeds. The record established that Customs had issued 10 GRs in favour of each of the two firms and had confirmed those GRs to be genuine. The Adjudicating Authority found that the certificate produced by the appellant purportedly from M/s. Jayshree Clearing Forwarding and Shipping Agents Pvt. Ltd. was not corroborated by other material - the GR forms bore the signature of M/s. Neptune Clearing Agency, not the certificate's issuer. The Bank manager's statement recorded non-realisation of export proceeds for specified GRs and the manager disclaimed personal knowledge of physical exports. There was no material on record to show withdrawal of goods from the bonded area or cancellation of the GRs. The Tribunal afforded the appellant opportunity to produce evidence of withdrawal from Customs/bonded area but no record was produced. Further, apart from limited admissions of export against some GRs, the appellant failed to demonstrate reasonable or sufficient efforts to recover the admitted export proceeds. In light of these findings, the factual foundation for the appellant's claim that exports were made only against fewer GRs did not stand, and the finding of contravention of Section 18(2) of the Act, 1973 against the appellant was upheld. [Paras 9, 10, 11]

The appellant has failed to prove that exports were made only against fewer GRs and failed to show adequate efforts to recover proceeds; the finding of contravention of Section 18(2) of the Act, 1973 is sustained and the appeal is dismissed.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's finding of contravention of Section 18(2) of the Act, 1973 for non-realisation of export proceeds, rejected the appellant's documentary and factual pleas, and dismissed the appeal.

Confiscation under section 13(2) of FEMA - contravention of Section 3(a) of FEMA - proceeds of illegal foreign exchange transactions - recovery and seizure

Confiscation under section 13(2) of FEMA - proceeds of illegal foreign exchange transactions - recovery and seizure - Whether the seized Indian currency of Rs. 10,57,000/- was liable to confiscation under section 13(2) of FEMA - HELD THAT: - The Tribunal examined the statements recorded under Section 37 of FEMA which established that the seized Indian currency was collected from passengers in exchange for tickets and foreign currency, and formed part of an organised scheme of illegal purchase and sale of foreign exchange operated from the office of Safar International Tours and Travels. The material showed that the respondents jointly engaged in buying foreign exchange from the local market and selling it to departing passengers, with documented accounts, coded entries, and arrangements with third parties to procure foreign currency. Having regard to these findings and the conclusion that the seized Indian currency constituted sale proceeds arising from illegal foreign exchange transactions, the Tribunal held that a sufficient link existed between the contravention and the seized Indian currency to justify confiscation. The Tribunal therefore intervened in the adjudicating authority's decision not to confiscate the Indian currency and ordered its confiscation under section 13(2) of FEMA. [Paras 6, 7, 8, 9, 10]

Confiscation of the seized Indian currency of Rs. 10,57,000/- ordered under section 13(2) of FEMA; revision petition allowed.

Final Conclusion: The appeal is allowed insofar as the adjudicating authority refrained from confiscating the seized Indian currency; the Tribunal orders confiscation of the seized Indian currency under section 13(2) of FEMA and disposes of the revision petition/appeal.

Retracted statement and corroboration rule - burden of proof on enforcement authority - contravention of Section 3(c) of FEMA - admissibility of electronic/mobile call records as corroborative evidence - confiscation and adjustment of seized amounts towards penalty - judicial reduction of penalty quantum in exercise of appellate power

Retracted statement and corroboration rule - burden of proof on enforcement authority - Reliance placed on retracted statements relied upon by the Adjudicating Authority and Special Director (Appeals). - HELD THAT: - The Tribunal applied the settled principle that retracted statements, if retracted within a reasonable time, should not be relied upon unless corroborated by other evidence. The Court examined the record and found that the impugned orders did not rest solely on the retracted statements. The enforcement authorities produced additional material including computerized accounts, seized papers indicating payments to named persons and printouts of the appellant's mobile showing frequent calls to Abdulla of Abu Dhabi. In that factual matrix the Tribunal held that the retracted statements could not be treated as the sole basis for conviction; rather they formed part of a composite of evidence which included independent corroboration. [Paras 3, 4, 12]

Retracted statements could not be the sole basis for the order but reliance on them was permissible to the extent they were corroborated by other material on record.

Contravention of Section 3(c) of FEMA - admissibility of electronic/mobile call records as corroborative evidence - Whether the appellant had contravened Section 3(c) of FEMA by receiving payments at the instance of a person residing outside India. - HELD THAT: - The Tribunal reviewed the search results, seized currency, seized papers showing payments to various persons, statements of third parties and the appellant's own admissions (later retracted), as well as mobile phone printouts evidencing frequent calls to Abdulla in Abu Dhabi. The appellant failed to substantiate the asserted gold business and did not satisfactorily explain the frequent communications with the foreign person. On the cumulative appraisal of evidence the Tribunal found sufficient material to sustain the finding of contravention of Section 3(c) of FEMA. [Paras 9, 11, 12, 13]

Contravention of Section 3(c) of FEMA by the appellant was established on the record.

Judicial reduction of penalty quantum in exercise of appellate power - confiscation and adjustment of seized amounts towards penalty - Appropriate quantum of penalty and adjustment of amounts already seized/deposited towards satisfaction of the penalty. - HELD THAT: - Although the Special Director (Appeals) had reduced the penalty from the Adjudicating Authority's imposition, the Tribunal exercised its appellate jurisdiction to further moderate the penalty. Having found contravention established, the Tribunal nevertheless reduced the penalty from Rs. 5,00,000 to Rs. 1,50,000 in view of the overall circumstances. It directed that the Rs. 1,00,000 already deposited as pre-deposit together with the Rs. 50,000 remaining with the Enforcement Directorate after confiscation of part of the seized currency be taken into account towards the penalty imposed. [Paras 6, 12, 13]

Penalty reduced to Rs. 1,50,000 and amounts already deposited/lying with the ED to be appropriated towards satisfaction of the penalty; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: while the finding of contravention of Section 3(c) of FEMA is upheld on the basis of cumulative and corroborative material, the penalty is reduced to Rs. 1,50,000 and amounts already deposited and lying with the ED are to be adjusted towards that penalty.

Forfeiture of property acquired from illegal earnings - proof of ownership versus tenancy in forfeiture proceedings - use of Income tax assessment to infer source of funds - presumption arising from failure to reply to show cause notice - reliance on investigative material and conduct of parties

Forfeiture of property acquired from illegal earnings - reliance on investigative material and conduct of parties - Validity of the forfeiture order of the premises and guest house - HELD THAT: - The Tribunal held that the Competent Authority was entitled to forfeit the properties after issuance of the show cause notice and on the material that Dawood Ibrahim had been detained under the Act of 1974 and was an affected person. Investigative material and prior adjudications forfeiting properties acquired by Dawood Ibrahim in the names of relatives, together with the conduct of parties and absence of satisfactory explanation for the investment, were treated as sufficient basis for the Competent Authority to conclude that the property was attributable to illegal earnings and to confirm forfeiture. The Tribunal noted that no effective reply was filed within the prescribed period and that the detention order had neither been revoked nor set aside, allowing the Authority to proceed on the available material. [Paras 16, 18, 25]

The forfeiture order of the property and guest house was upheld.

Proof of ownership versus tenancy in forfeiture proceedings - presumption arising from failure to reply to show cause notice - Effect of appellant's claim of tenancy (and alleged ownership by K.M. Pardawala) on the forfeiture - HELD THAT: - The Tribunal observed that the deceased appellant repeatedly described herself as a tenant and did not claim title, yet the Competent Authority relied on material indicating occupation and investment linked to Dawood Ibrahim. The Authority placed weight on the fact that the alleged owner, K.M. Pardawala (or his legal heirs), had not challenged the forfeiture, while the person before the Authority asserted only tenancy. The Tribunal found that a tenancy claim by a person who was not shown to be the owner did not negate the material relied upon for forfeiture, particularly where the appellant failed to satisfactorily explain the substantial investment and where documentary rent receipts produced late were treated as untrustworthy. [Paras 17, 21, 22]

The contention of mere tenancy and alleged ownership by K.M. Pardawala did not overthrow the finding that the property was forfeitable.

Use of Income tax assessment to infer source of funds - reliance on investigative material and conduct of parties - Permissibility of relying on the Income tax assessment (Assessment Year 1990-1991) estimating investment to infer illegal source of funds - HELD THAT: - The Tribunal accepted the Competent Authority's reliance on the Income tax assessment order dated 18.12.1996 for Assessment Year 1990-1991, which had estimated an investment and added it to Dawood Ibrahim's income in the absence of disclosed sources. The assessment's findings about occupation, transfer and estimated investment were treated as relevant material from which the Competent Authority could draw inference that the investment was out of illegal earnings. The appellant's failure to provide an alternative source of the investment supported that inference. [Paras 10, 20, 21]

The Income tax assessment was appropriately relied upon to infer that the investment in the property derived from undisclosed/illegal sources.

Proof of ownership versus tenancy in forfeiture proceedings - Credibility of rent receipts produced late in the proceedings - HELD THAT: - The Tribunal examined the rent receipts produced by the appellant's legal heirs and recorded concerns about inconsistent signatures, unsigned receipts and cash payments. The receipts, produced at the final stage, were described as not inspiring confidence. The Tribunal did not adjudicate forgery but permitted the respondents to pursue criminal investigation into the authenticity of the receipts and directed preservation of those documents by the Registry for that purpose. [Paras 13, 23, 24]

The late-produced rent receipts were regarded as unreliable for overturning the forfeiture; respondents were permitted to investigate their authenticity.

Final Conclusion: The Tribunal found the Competent Authority's reliance on investigative material and the Income tax assessment justified, rejected the appellant's contention of mere tenancy/third party ownership as insufficient to upset the forfeiture, treated belated rent receipts as untrustworthy and permitted further criminal investigation, and accordingly dismissed the appeal and confirmed the forfeiture order.

Reporting requirement for FDI within 30 days - Penalty for delayed reporting under FEMA and subordinate regulations - Effect of repeal/omission and saving under the General Clauses Act - Section 47(3) saving of pre-existing RBI regulations - Technical default versus penal liability - Reasonableness of penalty

Reporting requirement for FDI within 30 days - Penalty for delayed reporting under FEMA and subordinate regulations - Appellant failed to report receipt of FDI within the prescribed 30-day period and thereby violated the reporting obligation under the applicable FEMA regulations, attracting penal consequences. - HELD THAT: - The Tribunal found on the facts that the appellant received the FDI on 21.04.2016 and reported the same only on 13.06.2016, a delay of 24 days. Para 9(1)(A) of Schedule I to Regulation 5(1) of the 2000 Regulations required submission of the ARF within 30 days of receipt of consideration. The factual failure to report within the statutory period constituted non-compliance of the reporting requirement. The appellants' plea of teething/technical problems with the online reporting system was rejected because online reporting had been operational well before it was made compulsory and no substantive material was placed on record to substantiate systemic difficulties; the Tribunal also noted prior instances of delayed reporting by the appellant relevant to assessment of bonafides. The Tribunal therefore sustained liability for delayed reporting and the power to impose a penalty under the statute and regulations was held to be properly invoked. [Paras 25, 26, 27, 28, 29]

Violation of the reporting obligation was established and the appellant was liable to penal consequences for delayed reporting.

Effect of repeal/omission and saving under the General Clauses Act - Section 47(3) saving of pre-existing RBI regulations - Omission/repeal of Section 6(3)(b) did not preclude initiation and continuation of proceedings based on the earlier regulations; the saving and continuance principles under the General Clauses Act and Section 47(3) preserve the applicability of pre-existing RBI regulations until amended or rescinded by the Central Government. - HELD THAT: - The Tribunal analysed the interplay between the omission of Section 6(3)(b) w.e.f. 15.10.2019 and the preservation of regulatory obligations. It applied the reasoning in Fibre Boards Pvt. Ltd., holding that express omission/repeal does not necessarily extinguish rights, obligations or proceedings created under the earlier enactment where saving provisions apply. Section 47(3) of FEMA (as amended) was held to save regulations made by the RBI on capital account transactions until the Central Government amends or rescinds them; consequently the reporting obligations contained in the earlier Regulations remained operative through subsequent regulatory frameworks (2017 and 2019 Regulations) and continued to support action for delayed reporting. The Tribunal rejected the contention that omission ipso facto nullified liability, finding no legal infirmity in invoking the earlier regulatory obligations for the period in question. [Paras 33, 34, 35, 36, 37]

Omission of Section 6(3)(b) did not bar proceedings; the earlier RBI regulations continued to govern reporting obligations by virtue of Section 47(3) and principles in the General Clauses Act as interpreted in Fibre Boards (supra).

Technical default versus penal liability - Reasonableness of penalty - Delay in reporting was not accepted as a sufficient technical excuse to avoid penal consequences, but the quantum of penalty imposed by the Adjudicating Authority was found to be excessive and was reduced as a matter of reasonableness. - HELD THAT: - The Tribunal held that permitting blanket immunity for 'technical' delays would undermine statutory reporting mandates; hence the appellant's plea of mere technical default did not justify nullifying penal consequences. Nevertheless, penalties must be reasonable. Having considered facts including the amount involved, the period of delay, prior defaults by the appellant, and the need for proportionality, the Tribunal interfered with the quantum. The Adjudicating Authority's original penalties were substituted with reduced amounts as being fair and reasonable in all circumstances while otherwise upholding the legal and factual conclusions of liability. [Paras 29, 38, 39]

Penalty liability sustained but quantum reduced for reasonableness; original penalty set aside to the extent indicated and substituted by lesser amounts.

Final Conclusion: The appeal is allowed in part: the finding of liability for delayed reporting is upheld; the legal challenge to proceedings based on the omission of Section 6(3)(b) is rejected (proceedings valid in view of saving/continuance principles and Section 47(3)); the imposed penalties are moderated by the Tribunal as a matter of reasonableness and the appeal is otherwise disposed of accordingly.

Natural justice - Right to cross-examination - Discretionary power to allow cross-examination - Reliance on seized documents and statements as evidence - Penalty under Section 9(1)(f)(i) of FERA, 1973 - Pre-deposit and reduction of penalty in the interest of justice

Natural justice - Right to cross-examination - Discretionary power to allow cross-examination - Denial of opportunity to cross-examine did not vitiate the adjudication proceedings. - HELD THAT: - The Tribunal held that the Adjudicating Authority afforded multiple opportunities to the Appellant and his representatives to participate in the proceedings but those opportunities were not availed. The adjudicating authority had supplied the statements and seized documents relied upon (Annexure A to the SCN) and thereby discharged its obligation under principles of natural justice. The authority may, in the exercise of its discretion, allow cross-examination selectively; an absolute right to cross-examination in every case does not exist. The factual circumstances, including non-attendance at hearings and the Calcutta High Court's finding about non-participation, support the conclusion that denial of cross-examination did not cause prejudice warranting reversal. [Paras 5, 7, 8, 10]

No violation of principles of natural justice arising from refusal to permit cross-examination; refusal did not vitiate the order.

Reliance on seized documents and statements as evidence - Penalty under Section 9(1)(f)(i) of FERA, 1973 - Evidence on record sufficed to sustain imposition of penalty under Section 9(1)(f)(i) of FERA, 1973 on the Appellant. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that seized documents from Shri Keshav Bangur's residence, explanations thereof, and corroboratory statements of co-noticees (including Shri Prakash Khaitan and Shri AK Jain) constitute clinching and contemporaneous evidence. The Appellant's partial admissions in statements regarding related transactions and the corroboration by other statements meant the denial of arranging foreign exchange did not absolve him. On these factual and evidentiary bases the Tribunal found no reason to disturb the finding of violation of Section 9(1)(f)(i). [Paras 11, 12]

Findings of the Adjudicating Authority that the Appellant violated Section 9(1)(f)(i) of FERA, 1973 are sustained.

Pre-deposit and reduction of penalty in the interest of justice - Penalty reduced to the amount pre-deposited in view of the appellant's death, prolonged pendency and attenuating circumstances. - HELD THAT: - Noting the Appellant's death, substitution by his widow, the fact of a pre-deposit of 20% already made pursuant to earlier directions, and the exceptional delay of nearly 19 years in disposal of the appeal despite reservation of orders, the Tribunal exercised its discretion in the interest of justice to reduce the penalty to the pre-deposited amount. [Paras 13, 14]

Penalty reduced to the pre-deposit amount (Rs. 10,00,000/-) and the appeal is partly allowed and disposed of.

Final Conclusion: The Tribunal upheld the adjudicating findings on violation of Section 9(1)(f)(i) of FERA, 1973 and found no miscarriage of natural justice in refusal to allow cross-examination, but in view of the appellant's death, prior pre-deposit and inordinate delay the penalty was reduced to the pre-deposited amount and the appeal was partly allowed and disposed of.

Availability of statutory alternative remedy under Section 5(5) of the Prevention of Money Laundering Act, 2002 - entertainability of writ petition during pendency of statutory 30 day period - provisional attachment order and its provisional nature pending adjudication under Section 8 - exceptions to exhaustion of statutory remedy: lack of jurisdiction, violation of natural justice, abuse of process - judicial restraint and relegation to alternative statutory forum

Availability of statutory alternative remedy under Section 5(5) of the Prevention of Money Laundering Act, 2002 - entertainability of writ petition during pendency of statutory 30 day period - Whether the High Court should entertain the writ petition against the Provisional Attachment Order before the expiry of the statutory 30 day period prescribed by Section 5(5) of the 2002 Act. - HELD THAT: - The Court held that the petitioner admits availability of the statutory remedy under Section 5(5) and Section 8, which requires the officer to file a complaint before the Adjudicating Authority within 30 days and provides for an adjudicatory process including service of show cause notice, opportunity to produce evidence, and final decision by the Adjudicating Authority within the scheme of the Act. The Supreme Court's exposition of Section 5 in Vijay Madanlal Choudhary was relied upon to emphasise that the 2002 Act contains sufficient safeguards (formation of reasons, forwarding to the Adjudicating Authority, limited tenure of 180 days, statutory opportunity to be heard, appellate remedies) making the statutory forum adequate. In view of these statutory safeguards and the admitted availability of the alternative remedy, it was inappropriate to entertain the writ petition before the 30 day period had elapsed, save in rare and exceptional cases. [Paras 1, 3]

Writ petition not entertained at this stage; petitioner relegated to statutory remedy under Section 5(5) and Section 8 of the 2002 Act.

Exceptions to exhaustion of statutory remedy: lack of jurisdiction, violation of natural justice, abuse of process - judicial restraint and relegation to alternative statutory forum - Whether any exception to the rule of exhaustion of statutory remedy was made out so as to justify immediate writ relief. - HELD THAT: - The Court applied the three recognised exceptions (order without jurisdiction, breach of natural justice, abuse of process) as carved out in State of Himachal Pradesh v. Gujarat Ambuja Cements. The petitioner did not contend that the PAO was without jurisdiction, violative of natural justice, or an abuse of process. Further, the PAO remained provisional and subject to confirmation by the Adjudicating Authority within the statutory scheme. Reliance on earlier precedents was examined and distinguished on the ground that those cases involved orders not amenable to alternative statutory remedy; no such circumstance exists here. [Paras 3]

No exceptional circumstance shown; rule of exhaustion applies and writ relief is inappropriate prior to statutory adjudication.

Final Conclusion: Writ petition dismissed at admission stage and petitioner relegated to pursue its objections before the Adjudicating Authority under the 2002 Act; no comment was made on merits and the Adjudicating Authority is directed to expedite consideration.

Offence of money laundering - predicate offence - standalone offence under PMLA - benefit of acquittal or quash of predicate offence - quashing of proceedings - disputed questions of fact not amenable to quashing

Offence of money laundering - predicate offence - benefit of acquittal or quash of predicate offence - quashing of proceedings - Maintainability of ECIR No. KLZO/16/2017 and the PMLA proceedings against the petitioner where the petitioner was not an accused in the predicate CBI FIR RC0102017A0021 but was only a witness and the predicate case remained pending. - HELD THAT: - The Court examined the ratio in Vijay Madanlal Choudhary and subsequent decisions and recognised the established propositions that (a) a person proceeded against under the PMLA need not be an accused in the predicate offence, (b) the PMLA offence is distinct and standalone from the predicate offence, and (c) if the predicate offence is finally quashed or the accused is acquitted, the accused in the PMLA may derive the same benefit. Applying these principles, the Court found that the predicate CBI case RC0102017A0021 had neither been quashed nor closed and therefore the line of authority relied upon by the petitioner (to the extent it applies when predicate proceedings are quashed or accused are acquitted) did not afford him relief. The Court further observed that material collected by the Enforcement Directorate (including seizures and alleged disproportionate assets) and the existence of an investigation linking the petitioner to the alleged racket present matters of substance for trial. Given these facts and the distinctiveness of PMLA offences, the petition for quashing could not be allowed at the interlocutory stage. [Paras 7, 8, 10, 11, 12]

Application for quashing of ECIR No. KLZO/16/2017 and related PMLA proceedings dismissed for lack of merit.

Standalone offence under PMLA - predicate offence - quashing of proceedings - Effect of closure/quashing of a subsequent CBI investigation (RC0102018A0012) concerning disproportionate assets on the continuance of the PMLA proceedings arising from the earlier predicate case. - HELD THAT: - The Court noted that a separate CBI inquiry into disproportionate assets (RC0102018A0012) had been closed, but held that such subsequent dropping of an independent proceeding against the petitioner did not automatically affect the PMLA proceeding that originated from the earlier predicate CBI FIR RC0102017A0021. The PMLA proceeding under ECIR KLZO/16/2017 was tied to the first predicate investigation which remained pending; therefore the closure of a later, independent CBI inquiry would have little bearing on the PMLA case. The Court observed that the precise roles, money trail and connections alleged were matters for the trial court to determine, and could not be resolved by quashing at this stage. [Paras 9]

Closure of the subsequent CBI case did not justify quashing the PMLA proceedings arising from the earlier predicate case.

Final Conclusion: The petition for quashing of ECIR No. KLZO/16/2017 and related PMLA proceedings was dismissed; the petitioner's objections may be agitated before the trial court at the appropriate stage.

Seizure and retention of documents and bank accounts - entitlement to copies of relied documents - release of un-relied seized material - prosecution complaint filed - Prevention of Money Laundering Act

Seizure and retention of documents and bank accounts - Prevention of Money Laundering Act - The appellant's challenge to the retention/seizure of documents, digital records and bank accounts was rejected and the appeal was dismissed. - HELD THAT: - The Tribunal considered the rival submissions and the allegations of involvement of the appellant in the fraudulent creation of bank liabilities by way of SWIFT/Buyers Credit messages. Having regard to those allegations and the fact that a prosecution complaint has been filed, the Tribunal found the plea of non-involvement to be without merit and concluded that the impugned order permitting retention/seizure should not be disturbed. The Tribunal expressly left open the merits of the prosecution under the Prevention of Money Laundering Act by clarifying that nothing in its order affects the prosecution case. [Paras 4, 5]

Appeal dismissed; retention/seizure upheld and prosecution's merits unaffected.

Entitlement to copies of relied documents - release of un-relied seized material - prosecution complaint filed - The appellant is entitled to obtain copies of all documents relied upon by the prosecution and may apply for release of any seized material not relied upon and not required for further investigation. - HELD THAT: - While rejecting the appellant's challenge to the seizures, the Tribunal acknowledged the procedural right of an accused where a prosecution complaint has been filed. The appellant must be furnished copies of the material on which the prosecution relies, and he retains the right to apply for release of seized documents or other material that the prosecution does not rely upon or which are not required for further investigation. The Tribunal directed that such applications may be made and considered accordingly. [Paras 4]

Entitlement to copies of relied documents affirmed; right to apply for release of un-relied seized material recognised.

Final Conclusion: The appeal under Section 26 PMLA challenging seizure and freezing of accounts/documents is dismissed; the appellant shall be furnished copies of relied material and may seek release of un-relied seized items, without prejudice to the merits of the prosecution under the Prevention of Money Laundering Act.

Proceeds of crime - seizure and freezing of bank accounts and documents - retention of seized property under section 17(4) of the Prevention of Money Laundering Act, 2002 - innocent recipient / unjust enrichment - onus on recipient to demonstrate legitimate transaction by production of invoices or proof of consideration

Proceeds of crime - seizure and freezing of bank accounts and documents - innocent recipient / unjust enrichment - onus on recipient to demonstrate legitimate transaction by production of invoices or proof of consideration - retention of seized property under section 17(4) of the Prevention of Money Laundering Act, 2002 - Whether the sum of Rs. 6.05 Crores received by M/s RAP Events from M/s Prenda Creations constituted proceeds of crime and whether the respondent Directorate of Enforcement was justified in seizing/freezing/retaining the appellant's bank account and funds. - HELD THAT: - The Tribunal found on the material before it that Rs. 6.05 Crores were admittedly received by the appellant from M/s Prenda Creations. The appellant did not produce invoices, bills or documentary proof that goods were supplied or services rendered to account for the receipt. In the absence of such proof, the Tribunal concluded that the amount formed part of the proceeds of the predicate offences under investigation and that the Directorate of Enforcement was entitled to retain/seize/freeze the said funds and related bank account under the powers invoked in the Original Application filed under Section 17(4) of the PMLA. The Tribunal rejected the contention that absence of the appellant's name in any charge-sheet or prosecution complaint disentitled the respondent from freezing the account, reasoning that mere non-inclusion in prosecution documents does not entitle an alleged innocent recipient to unjust enrichment where no evidence is furnished to show legitimate consideration for the remittance. [Paras 5, 6]

The seizure/freezing/retention of the appellant's bank account and the sum of Rs. 6.05 Crores was upheld as valid; the appeal is dismissed.

Final Conclusion: Appeal dismissed; the Tribunal upheld the Adjudicating Authority's order permitting the Directorate of Enforcement to retain/seize/freeze the appellant's bank account and funds received from M/s Prenda Creations on the ground that the appellant failed to establish that the receipt was a legitimate transaction rather than proceeds of crime.

Provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - reason to believe standard based on material in possession - second proviso to Section 5(1) - immediate attachment where non-attachment is likely to frustrate proceedings - prima facie satisfaction for provisional attachment - attachment of property as proceeds of crime or of equivalent value

Provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - second proviso to Section 5(1) - immediate attachment where non-attachment is likely to frustrate proceedings - reason to believe standard based on material in possession - Validity of the provisional attachment under the second proviso to Section 5(1) of the Act of 2002 - HELD THAT: - The Tribunal examined whether the Adjudicating Authority lawfully invoked the second proviso to Section 5(1) to provisionally attach properties before the forwarding of a report under Cr.P.C. It observed that the proviso allows immediate attachment where the authorised officer has recorded reasons, on the basis of material in possession, that non-attachment is likely to frustrate proceedings under the Act. The Tribunal held that the requirement does not demand proof of an overt preparatory act of transfer; rather, where there is a realistic likelihood of alienation following registration of FIR/ECIR and arrest, immediate attachment is permissible. The Tribunal found that it may be impossible to produce material showing explicit preparations to transfer and that the statutory standard is satisfied by material demonstrating a likelihood of frustration of proceedings if attachment is not made immediately. On that basis the Tribunal upheld the invocation of the second proviso and the provisional attachment as lawful. [Paras 20, 21, 22, 23]

Provisional attachment under the second proviso to Section 5(1) was validly invoked and lawfully made.

Prima facie satisfaction for provisional attachment - attachment of property as proceeds of crime or of equivalent value - reason to believe standard based on material in possession - Whether there was sufficient material to form a prima facie belief that the appellants' properties were proceeds of crime or derived therefrom - HELD THAT: - The Tribunal reviewed the evidentiary material relied upon by the respondent: FIRs and charge-sheets implicating the appellant in multiple offences, recorded statements (including the appellant's admission of association with the main accused and business links), third-party statements describing threats and diversion of supplies, and bank transactions showing receipts and transfers between the appellant's partnership concern and entities controlled by the main accused. The Tribunal also noted the appellant's declared meagre income and failure, along with his wife, to produce documentary evidence substantiating claimed loans or lawful sources for acquiring properties. Applying the prima facie standard applicable to provisional attachment (not the final trial standard), the Tribunal concluded that the material on record sufficed to form the requisite reason to believe that the properties were proceeds of crime or of equivalent value and that attachment was warranted. [Paras 15, 16, 17, 18, 19]

There was sufficient material to form a prima facie belief that the properties were proceeds of crime or of equivalent value; the provisional attachment was justified.

Final Conclusion: The appeals are dismissed; the Tribunal affirms the Adjudicating Authority's confirmation of provisional attachment of the properties on the grounds recorded and the prima facie material relied upon under Section 5(1) of the Act of 2002.

Limitation - extended period of limitation - suppression of facts - service tax on construction of residential complex service - filing of returns - interest and penalty

Extended period of limitation - suppression of facts - filing of returns - limitation - Whether the demands of service tax confirmed by the authorities are barred by limitation because the extended period could not be invoked in the absence of suppression of facts. - HELD THAT: - The Tribunal found that the appellant obtained registration on 15.06.2016 and filed S.T.-3 returns for earlier periods on 13.01.2017 and 14.01.2017; the Department became aware of the appellant's activities after registration and filing. The Show Cause Notice dated 27.09.2019 was issued beyond thirty months from the date of filing of those returns. The information concerning advances was drawn from the balance sheet and reconciliation statements provided by the appellant to the Department, and no evidence was placed on record to establish an intention to evade tax by suppression of facts. In these circumstances the Tribunal held that invocation of the extended period was not sustainable and relied upon the Tribunal's earlier observation in Maa Kalika Transport Pvt. Ltd. v. Commissioner of C.G.S.T. & Central Excise, Rourkela and the Supreme Court's reasoning in Ugam Chand Bhandari v. CCE regarding the necessity of establishing suppression or deliberate concealment before extending limitation. Consequently the demands confirmed by the lower authorities were held to be hit by limitation. [Paras 7, 8]

Demands confirmed in the impugned order are set aside as barred by limitation for want of proof of suppression; reliance on extended period is rejected.

Interest and penalty - limitation - Whether interest and penalty can be demanded or imposed once the principal demand is held to be time-barred. - HELD THAT: - The Tribunal held that since the substantive demands were set aside on the ground of limitation, there was no basis to sustain the demand for interest or to uphold the imposition of penalty. The consequence of quashing the demand on limitation grounds is that ancillary claims for interest and penalty fall away. [Paras 9, 10]

Interest and penalty demands are unsustainable and do not arise once the underlying demand is set aside on limitation grounds.

Final Conclusion: The appeal is allowed; the service tax demands confirmed by the adjudicating authorities (as specified in paragraph 3 of the impugned order) are set aside as time barred for want of established suppression, and consequent interest and penalties are not sustainable.

Business auxiliary service - manufacture as defined in Section 2(f) of the Central Excise Act, 1944 - exclusion of activities amounting to manufacture from service tax - production or processing of goods for or on behalf of the client - essential processes making goods marketable (sizing and packaging) - conflict between classification as service and characterization as manufacture resolved by statutory definition of manufacture

Manufacture as defined in Section 2(f) of the Central Excise Act, 1944 - business auxiliary service - essential processes making goods marketable (sizing and packaging) - Whether the activities of segregation, sizing and packaging undertaken by the appellant constitute 'manufacture' and thereby fall outside the definition of 'business auxiliary service', rendering the service tax demand unsustainable. - HELD THAT: - The Tribunal examined the statutory definition of 'manufacture' under Section 2(f) of the Central Excise Act, 1944, which includes processes incidental or ancillary to completion of a manufactured product and specifically covers packing or other treatment that renders a product marketable. The appellant's activities of sizing and packaging were found to be essential processes required to make the final products (Fe Mn/Fe Si Mn/HCFC) marketable. Since such processes create the change in the product that the definition of 'manufacture' contemplates, the activities fall squarely within Section 2(f). The definition of 'business auxiliary service' expressly excludes any activity that amounts to manufacture; accordingly, classification of the appellant's work as 'business auxiliary service' liable to service tax is unsustainable. Because the primary demand was held unsustainable, consequential demands for interest and penalties also do not survive. [Paras 7, 8, 9]

The activities constitute 'manufacture' within Section 2(f) and are excluded from 'business auxiliary service'; the service tax demand, interest and penalties are unsustainable and set aside.

Final Conclusion: The appeal is allowed; the demands confirmed in the impugned order (service tax, interest and penalties) are set aside as the activities in question amount to 'manufacture' and thus fall outside the definition of 'business auxiliary service'.

CENVAT credit - reverse charge mechanism - transition of credit under Section 142(3) of the CGST Act, 2017 - refund in cash under transitional provisions - Rule 9(1)(e) of the CENVAT Credit Rules, 2004 - Rule 9(1)(bb) of the CENVAT Credit Rules, 2004 - penalty under section 78 of the Finance Act, 1994 - suppression of facts with intent to evade tax

Rule 9(1)(e) of the CENVAT Credit Rules, 2004 - Rule 9(1)(bb) of the CENVAT Credit Rules, 2004 - reverse charge mechanism - Availability of CENVAT credit / entitlement to refund where service tax was paid by the recipient under reverse charge after audit objections and after implementation of GST - HELD THAT: - The Tribunal held that where tax is paid under the reverse charge mechanism, the relevant provision for availing CENVAT credit is Rule 9(1)(e) of the CENVAT Credit Rules, 2004 and not Rule 9(1)(bb) which applies to supplementary invoices issued by a provider of output service. The appellant, being a recipient liable to pay under Rule 2(1)(d) of the Service Tax Rules, 1994, could avail credit under Rule 9(1)(e). Consequently, denial of credit on the basis of applicability of Rule 9(1)(bb) was incorrect. The Tribunal relied on the reasoning in the cited precedents that Rule 9(1)(bb) is not applicable to a recipient paying tax under reverse charge and that credit cannot be denied on that ground. [Paras 4]

Credit not deniable on the basis of Rule 9(1)(bb); Rule 9(1)(e) governs credit where tax is paid under reverse charge.

Penalty under section 78 of the Finance Act, 1994 - suppression of facts with intent to evade tax - Validity of imposition of equal penalty under section 78 for alleged suppression of facts and intent to evade tax - HELD THAT: - The Tribunal found that invocation of penalty under section 78 for 'suppression of facts with intent to evade tax' requires proof of deliberate non-declaration with the intention to escape tax. The facts showed that the appellant paid the tax together with interest when audit pointed out omissions; mere omission to pay, or assumptions of intent, cannot be equated with deliberate suppression. The small unpaid amount relating to cafeteria licence fee likewise did not attract a finding of evasion. In absence of evidence of deliberate intention to evade, the imposition of equal penalty was set aside. [Paras 5]

Penalty under section 78 set aside for lack of deliberate suppression or intent to evade tax.

Transition of credit under Section 142(3) of the CGST Act, 2017 - refund in cash under transitional provisions - Whether amount of CENVAT credit / service tax paid after the appointed day but not carried forward as TRAN-1 can be refunded under Section 142(3) of the CGST Act, 2017 - HELD THAT: - The Tribunal observed that Section 142(3) permits disposal of refund claims relating to amounts paid under the existing law and mandates that any amount accruing shall be paid in cash, notwithstanding other provisions except section 11B(2) of the Central Excise Act. Although the appellant could not carry forward the credit as TRAN-1 because payment occurred after the TRAN-1 cutoff date, Section 142(3) and Section 142(8)(b) contemplate refund in cash where, pursuant to assessment or adjudication under the existing law, an amount becomes refundable. The tax paid under RCM was not tainted by fraud, collusion or suppression; hence the appellant's right to refund under Section 142(3) survives despite inability to avail TRAN-1 credit, and refund in cash is allowable. [Paras 6, 7]

Refund in cash under Section 142(3) allowed even though TRAN-1 carry forward was not possible, since the tax paid was refundable and not vitiated by fraud or suppression.

Transition of credit under Section 142(3) of the CGST Act, 2017 - CENVAT credit - Applicability of precedent relied upon by Revenue (Rungta Mines) to the facts of this case - HELD THAT: - The Tribunal distinguished Rungta Mines where the taxpayer had wrongly taken credit in ST-3 and had not followed prescribed procedure to avail transitional credit, thereby losing the right. In the present case the appellant had not illegally taken credit but had rectified an omission by paying tax with interest after audit. The Tribunal also noted authorities holding that transitional credit is a vested right and cannot be taken away on procedural or technical grounds. Therefore Rungta Mines was found inapplicable. [Paras 8]

Revenue's reliance on Rungta Mines rejected; the precedent does not apply to the facts here.

Final Conclusion: The impugned order rejecting the refund claim and imposing penalty is set aside. The appellant is entitled to refund of the CENVAT credit/service tax paid under reverse charge in cash under Section 142(3) of the CGST Act, 2017, and the penalty under section 78 of the Finance Act, 1994 is quashed; the appeal is allowed with consequential relief.

Services in relation to serving of food or beverages by a canteen maintained in a factory - benefit of exemption under Notification No. 14/2013-S.T., Sr. No.19A where canteen has air-conditioning - application of exemption where facts of registration under the Factories Act, 1948 and presence of air-conditioning are undisputed - precedential effect of tribunal and Supreme Court decisions

Services in relation to serving of food or beverages by a canteen maintained in a factory - benefit of exemption under Notification No. 14/2013-S.T., Sr. No.19A where canteen has air-conditioning - application of exemption where facts of registration under the Factories Act, 1948 and presence of air-conditioning are undisputed - Validity of adjudicating authority's decision to drop show cause proceedings by applying exemption under Sr. No.19A of Notification No.14/2013-S.T. to canteen services rendered by the respondent in factory premises having air-conditioning - HELD THAT: - The notification inserted Sr. No.19A exempts services provided for serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948, which has air-conditioning or central air-heating at any time during the year. The show cause notice did not dispute that the factories where the respondent provided canteen services were registered under the Factories Act, 1948, nor that the canteens had air-conditioning. In these circumstances the adjudicating authority correctly applied the exemption and dropped proceedings. The Tribunal noted that this issue is settled by earlier Tribunal orders and that the Tribunal's decision in a leading case was upheld by the Supreme Court, reinforcing that the exemption applies where the statutory conditions are satisfied. Having regard to the undisputed factual foundation and binding precedents, no interference with the adjudication was warranted. [Paras 4, 6]

Show cause proceedings rightly dropped by applying the exemption; appeal by Revenue dismissed.

Final Conclusion: The Tribunal dismissed the appeal of the Revenue and upheld the adjudicating authority's conclusion that canteen services provided in factory premises having air-conditioning attract the exemption under Sr. No.19A of Notification No.14/2013-S.T.; cross-objection disposed of.

Service tax on erection, commissioning and installation services - sale of goods excluded from definition of service - incidental or ancillary activity to manufacture - works contract service - extended period of limitation for tax demand - assessable value to include erection and installation charges - determination of service portion under Rule 2A

Service tax on erection, commissioning and installation services - sale of goods excluded from definition of service - incidental or ancillary activity to manufacture - Whether the activities of assembling, erection, installation and commissioning performed in relation to Draw Texturizing Machines amounted to a taxable service or formed part of the sale of excisable goods. - HELD THAT: - The Tribunal found as fact that the appellants are manufacturers who cleared very large machines in parts and that the buyer contracts were for supply of the machines. The appellants had paid Central Excise duty on the entire invoice value and no separate consideration was charged or recovered for erection/installation. The definition of 'service' excludes a transfer of title in goods; where erection and installation are integral to completion and delivery of excisable goods and no separate consideration is received, those activities are incidental or ancillary to manufacture and sale and cannot be subjected to service tax. The Board clarification and earlier Tribunal and High Court precedents show that where excise duty has been paid on the full value (including installation/erection) the same value cannot be again made basis for service-tax demand. Applying these principles to the contracts and invoices on record, the Tribunal concluded that the impugned service-tax demands were not sustainable and set aside the orders confirming demand and penalties. [Paras 4, 5]

Erection, assembly, installation and commissioning in the present transactions formed part of the sale of excisable goods and, in absence of separate consideration, did not attract service tax; impugned demands and penalties set aside.

Extended period of limitation for tax demand - Whether the extended period of limitation could be invoked for issuing the show cause notices demanding service tax. - HELD THAT: - The Tribunal noted that the appellants had notified the Central Excise Department about clearance of machines in parts in terms of the prescribed trade notice and had paid excise duty on the entire contract value. There was no material to demonstrate willful mis-statement or suppression with intent to evade tax. Given disclosure to the department and payment of excise on the full value, invocation of the extended period was unjustified. The Tribunal therefore held the extended-period demand to be time-barred and unsustainable on facts. [Paras 4, 18]

Invocation of the extended period of limitation was not justified; demands for the extended period are time-barred.

Determination of service portion under Rule 2A - works contract service - Whether, if any service portion were taxable, the adjudication correctly quantified the taxable service value and applied appropriate abatement/deduction. - HELD THAT: - The Tribunal observed that even on the Revenue's alternate approach the value of the service portion should be determined under Rule 2A(i) by deducting the value of goods from the gross contract value. Where such identification is possible, the service portion must be calculated accordingly. Failing that, Rule 2A(ii)(A) would permit applying a 60% abatement so that only 40% of the gross would be chargeable as service portion. The impugned order, which confirmed service tax on an ad hoc 60% of contract value without following Rule 2A(i)/(ii) correctly, erred in computation. [Paras 15, 16, 17]

Quantification under the impugned order was incorrect; service portion, if any, should be determined in accordance with Rule 2A(i), or alternatively by applying the abatement in Rule 2A(ii)(A).

Final Conclusion: The Tribunal held that the appellants' activities were predominantly manufacture and sale of excisable goods, with erection/installation incidental thereto and no separate consideration; accordingly service-tax demands and penalties were set aside, the invocation of extended limitation was held unjustified, and the Revenue's quantification of any service portion was found incorrect.

Levy of service tax on works contract service - Classification as Works Contract Service - Inclusion of value of materials supplied free by customers in taxable value - Payment of service tax on advances and discharge at final billing - Extended period of limitation for recovery of service tax

Classification as Works Contract Service - Levy of service tax on works contract service - Whether service tax was leviable on the appellant's activities of commercial/industrial construction and construction of complex services during 16.06.2005 to 31.03.2006 - HELD THAT: - The Tribunal found on the material on record and the appellant's own pleadings that the services rendered during the relevant period were in substance Works Contract Service. The Tribunal noted that for the subsequent period the appellant's case had already been decided by the Tribunal in favour of the appellant on the same characterisation of services. Applying that factual and legal conclusion to the period in question, and having regard to the binding judicial ruling relied on by the appellant regarding valuation of materials, the Tribunal held that the impugned demand insofar as it sought to tax the appellant for providing commercial/industrial construction and construction of complex services for the stated period could not be sustained. The Tribunal therefore set aside the adjudicating authority's order confirming the demand. [Paras 6]

Impugned order set aside; demand for service tax on the stated services for 16.06.2005 to 31.03.2006 quashed.

Inclusion of value of materials supplied free by customers in taxable value - Reliance on precedent concerning valuation of materials - Whether the value of materials supplied free by customers used in provision of the service was exigible to service tax for the period 16.06.2005 to 31.03.2006 - HELD THAT: - The Tribunal accepted the appellant's reliance on the Supreme Court authority addressing inclusion of free-supplied materials in taxable value and concluded that the adjudicating authority's demand on this head was not maintainable. Having applied that precedent to the facts, and in conjunction with the finding that the contract was in nature a works contract, the Tribunal held that the addition made on account of value of materials supplied by customers could not be sustained. [Paras 6]

Demand on account of inclusion of value of materials supplied free by customers set aside.

Payment of service tax on advances and discharge at final billing - Extended period of limitation for recovery of service tax - Whether the allegation of non-payment of service tax on advances received during the relevant period justified invoking the extended period of limitation - HELD THAT: - The appellant contended that service tax on advances was discharged at the time of final billing and that ST-3 returns filed reflected payment; the adjudicating authority itself recorded that tax had been discharged while settling final bills. The Tribunal accepted that the appellant had paid service tax in respect of advances at finalisation of bills and, coupled with the classification of the activity as works contract service and the precedent on valuation, found no merit in invoking the extended period to sustain the demand. In consequence, the extended period-based demand on the advances was not sustained. [Paras 6]

Demand based on non-payment of service tax on advances and invocation of extended period set aside.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudicating authority's order dated 23.07.2010 and quashed the confirmed demands (including on advances and on value of materials supplied by customers) for the period 16.06.2005 to 31.03.2006, granting consequential relief as per law.

Availability of Cenvat credit on inputs used in manufacture - goods having no relationship whatsoever with manufacture of final product - reversal/debit entry equivalent to credit not having been taken - recovery under Rule 14 of the Cenvat Credit Rules, 2004 - penalty under Section 11AC/Rule 15 where fraud, suppression or intent to evade is established - remand for verification of documentary evidence of reversal and interest

Availability of Cenvat credit on inputs used in manufacture - goods having no relationship whatsoever with manufacture of final product - Whether the appellant was eligible to avail Cenvat credit on Aluminium Rod, Aluminium Wire and PVC Compound - HELD THAT: - The Tribunal examined the definition of "input" under the Cenvat Credit Rules, 2004 and the material on record. The impugned order records that the said goods were not declared as raw materials in the appellant's Central Excise registration and had no relationship with the manufacture of the final products (General Fabrication and Transformer Tank). Applying the statutory definition, the Tribunal held that these goods did not qualify as inputs and the appellant was not eligible to avail credit on them. [Paras 6]

The appellant had incorrectly availed Cenvat credit on the specified goods and such availment was not admissible.

Reversal/debit entry equivalent to credit not having been taken - recovery under Rule 14 of the Cenvat Credit Rules, 2004 - Effect of reversal (debit entry) of Cenvat credit made at the time of clearance 'as such' on the demand for wrongly availed credit - HELD THAT: - Relying on the settled principle in Chandrapur Magnet Wires and subsequent Tribunal decisions, the Bench noted that a debit entry reversing credit before removal is equivalent to not having taken the credit. The appellant contended that the credits were reversed on clearance 'as such' and that interest had been paid. The Tribunal accepted the legal principle that reversal negates the claim for recovery and consequent demand cannot be sustained, subject to verification of documentary proof of such reversal. [Paras 7]

Where credit availed is debited/reversed prior to removal, the demand for such Cenvat credit cannot be sustained; consequently the demand is set aside subject to verification of documentary evidence of reversal.

Penalty under Section 11AC/Rule 15 where fraud, suppression or intent to evade is established - Whether penalty under Section 11AC/Rule 15 is leviable where the Cenvat credit has been reversed - HELD THAT: - The Tribunal observed that if the credit is held to have been reversed and thus treated as not taken, levy of mandatory penalty under Section 11AC (and corresponding provisions of the Cenvat Credit Rules) is not warranted. The Department's case on suppression/fraud was not adjudicated finally because documentary proof about reversal and earlier conduct needed verification. In the absence of an established finding of fraud, collusion, wilful mis-statement or suppression with intent to evade duty, penalty cannot be sustained. [Paras 7]

No penalty is leviable where the Cenvat credit is found to have been reversed; penalty cannot be sustained without proof of fraud or suppression.

Remand for verification of documentary evidence of reversal and interest - Whether the matter should be remanded for fresh adjudication to verify production of ER-1/other documentary evidence and correctness of interest appropriation - HELD THAT: - The Tribunal noted the adjudicating authority's observation that the appellant had not produced signed ER-1/ER-6 returns or contemporaneous documents during pre-consultation or hearing, and that the charts produced lacked signatures and required reconciliation. Given the appellant's claim of reversal and payment of interest, the Bench held that fairness required an opportunity for the appellant to place signed documentary evidence before the adjudicating authority. The adjudicating authority is directed to decide afresh on the basis of documents, including verification of interest appropriated by the impugned order. [Paras 7]

The impugned order is set aside and the matter is remanded to the adjudicating authority for fresh decision after verification of documentary evidence of reversal and correctness of interest.

Final Conclusion: The appeal is allowed in part: the Tribunal held that the specified goods were not admissible as inputs, but, following settled law, reversal of credit by a debit entry before removal operates as if credit was not taken; accordingly the demand and penalty cannot be sustained if such reversal and payment of interest are proved. The impugned order is set aside and the matter is remanded to the adjudicating authority for fresh adjudication on production and verification of documentary evidence and interest computation.

CENVAT credit admissibility on Goods Transport Agency services beyond the place of removal - place of removal doctrine in relation to 'point of sale' and FOR destination contracts - burden of proof under Rule 9(5) of the CENVAT Credit Rules, 2004 - application of Board circulars on place of removal and CENVAT credit (Circulars rescission and guidance) - remand for verification and de novo determination

Burden of proof under Rule 9(5) of the CENVAT Credit Rules, 2004 - Validity of the adjudicating authority's reliance on Rule 9(5) to uphold denial of CENVAT credit on the ground that the assessee failed to discharge the burden of proof - HELD THAT: - The Tribunal found that Rule 9(5) places the burden of proof regarding admissibility of CENVAT credit on the manufacturer or service provider who takes such credit. However, the impugned order erred in treating the appellant's failure to place material before the authority as a basis for denial without first seeking verification or requiring production of records, particularly when Board circulars bearing on ascertainment of 'place of removal' and admissibility were available. The Tribunal held that the approach of simply confirming denial for want of onus discharged by the appellant was misdirected; instead, the adjudicating authority should have called for and verified relevant documents before reaching a final conclusion. [Paras 4, 14, 15, 16, 17]

The impugned reliance on mere non-production was held to be misplaced and the adjudicating authority ought to verify records; the matter cannot be sustained on that ground.

CENVAT credit admissibility on Goods Transport Agency services beyond the place of removal - place of removal doctrine in relation to 'point of sale' and FOR destination contracts - application of Board circulars on place of removal and CENVAT credit (Circulars rescission and guidance) - Whether the credits denied relate to GTA services and, if so, whether such CENVAT credit is admissible having regard to 'place of removal', FOR contracts, and export exceptions - HELD THAT: - The Tribunal accepted that the central controversy required factual verification: whether the disputed amounts represent GTA services or other services, and whether the services were used up to the 'place of removal' so as to be admissible. Noting the Board circulars and Supreme Court rulings cited therein, the Tribunal observed that (i) the place of removal is to be determined with reference to the manufacturer's premises/point of sale subject to exceptions for FOR destination sales and export-specific treatments, and (ii) the Supreme Court has held that post amendment input services are restricted 'up to the place of removal' such that credit for transport beyond that point may be inadmissible. Because the appellant produced a chart suggesting some amounts related to export/port removals and other non GTA services, the Tribunal concluded these are verifiable facts requiring fresh consideration in light of the circulars and case law. [Paras 4]

The question whether the disputed credits are in respect of GTA services and whether they are admissible under the place of removal doctrine is remitted to the original authority for de novo verification and determination in light of the Board circulars and relevant Supreme Court decisions.

Remand for verification and de novo determination - Appropriate remedy and procedural direction where factual verification is necessary in view of available Board circulars and the appellant's records - HELD THAT: - Having found that material issues of classification and admissibility required examination and that the adjudicating authority had not considered the Board circulars in its reasoning, the Tribunal directed that the matter be remanded to the original authority for fresh adjudication. The Tribunal instructed the original authority to call for and verify documents, take the Board circulars into account, and decide the matter afresh. The Tribunal further directed that, given the age of proceedings, the adjudicating authority should complete de novo proceedings within three months of receipt of the order. [Paras 4, 5]

Appeals allowed in part; matter remitted to the original authority for de novo determination with directions to consider the observations in para 4.4 and the Board circulars, and to decide within three months.

Final Conclusion: The Tribunal allowed the appeals in part, held that the adjudicating authority erred in denying credit solely on the basis of non-production without verification, and remitted the matter to the original authority for de novo adjudication on whether the disputed credits relate to GTA or other services and on admissibility under the place of removal doctrine, directing finalization within three months.

Presumption under Section 139 of the Negotiable Instruments Act - presumption of consideration under Section 118 of the Negotiable Instruments Act - reverse onus and burden to raise a probable defence - cheque issued as security attracts liability under Section 138 - dishonour by endorsement "account closed" attracts offence under Section 138 - service of demand notice by registered post deemed served when returned "refused" - scope of interference in appeals against acquittal - appellate restraint but correction where trial court misapplies legal presumption

Presumption under Section 139 of the Negotiable Instruments Act - presumption of consideration under Section 118 of the Negotiable Instruments Act - reverse onus and burden to raise a probable defence - Effect of admitted signature on the cheque and consequent legal burden - HELD THAT: - The Court held that once the issuance/signature on the cheque is admitted, statutory presumptions under Sections 118 and 139 operate and the evidential burden shifts to the accused to rebut that the cheque was issued in discharge of a debt or liability. The accused need only raise a probable defence on the preponderance of probabilities; he is not required to discharge the prosecution's case beyond reasonable doubt. The Trial Court erred in requiring the complainant to prove the existence of a legally enforceable debt after the presumption arose and by not testing whether the accused had discharged the rebuttal burden. [Paras 19, 21, 26, 27, 46]

The presumption under Sections 118 and 139 applied; the burden lay on the accused to rebut it and the Trial Court's contrary approach was erroneous.

Cheque issued as security attracts liability under Section 138 - reverse onus and burden to raise a probable defence - Whether a signed blank cheque said to be given as security prevents invocation of Section 138 - HELD THAT: - The Court reaffirmed that a cheque described as being given 'as security' is not rendered incapable of attracting liability under Section 138. If on the date of the cheque a subsisting debt or liability exists, presentation and dishonour may give rise to penal consequences. A drawer who signs and parts with a cheque remains liable unless he adduces evidence to rebut the presumption that it was issued for discharge of a debt; mere assertion that the cheque was a security, without cogent evidence, does not rebut the statutory presumption. [Paras 29, 30, 31, 32]

Issuance of a blank or 'security' cheque does not preclude liability under Section 138 where a subsisting debt/liability existed and the accused failed to rebut the presumption.

Dishonour by endorsement "account closed" attracts offence under Section 138 - Legal consequence of cheque dishonour endorsed 'account closed' - HELD THAT: - Relying on precedent, the Court held that dishonour on the ground 'account closed' is a species of the genus 'insufficient funds' and falls within the mischief of Section 138. Closure of the account indicates there was no amount to honour the cheque at presentation and therefore the dishonour attracts penal liability under Section 138. [Paras 40, 41, 42]

Dishonour with endorsement 'account closed' satisfies the dishonour requirement of Section 138 and attracts penal liability.

Service of demand notice by registered post deemed served when returned "refused" - Validity of demand notice service and effect of refusal endorsement - HELD THAT: - The Court accepted that the registered notice returned with the postal endorsement 'refused' must be presumed served under the statutory presumption (Section 27/G.C. Act principles). The complainant also produced evidence that the UPC dispatch was not returned. Moreover, the accused did not pay the cheque amount within 15 days of his appearance before the Court, and therefore could not rely on non-receipt of the notice to defeat the complaint. [Paras 43, 44, 45]

Demand notice was deemed served; accused's failure to pay within 15 days of appearance disentitled him from claiming non-service.

Scope of interference in appeals against acquittal - appellate restraint but correction where trial court misapplies legal presumption - Whether the High Court should interfere with an order of acquittal in the facts of this case - HELD THAT: - Applying the settled appellate principles, the Court emphasised that interference with an acquittal is permissible where the trial court's view is illegal, perverse, or founded on a misapprehension of law. Here the Trial Court materially erred by misconstruing the effect of Sections 118 and 139 and by shifting the onus onto the complainant; such misapplication justified interference despite the general restraint in appeals against acquittal. [Paras 12, 13, 46]

The High Court was justified in interfering with the acquittal because the Trial Court misapplied the statutory presumptions; the acquittal was set aside.

Final Conclusion: The appeal is allowed: the Trial Court's acquittal is set aside for misapplication of the presumptions under Sections 118 and 139 and related law; the accused is convicted under Section 138 of the Negotiable Instruments Act and is to be produced for hearing on sentence.