TaxTMI Updates e-Newsletter
Oct 11,2024

Summary order - requirement of a detailed order prior to summary recovery - exercise of power under Section 73 and 74 of the GST Act - void-ab-initio - quashing of administrative action - refund of amount paid under protest - remedy by writ of certiorari and mandamus under Articles 226 and 227

Summary order - requirement of a detailed order prior to summary recovery - exercise of power under Section 73 and 74 of the GST Act - Validity of the uploaded summary of order dated 13th August, 2019 in the absence of any detailed order under Sections 73 and 74 of the GST Act. - HELD THAT: - The Court recorded the uncontroverted admission by the respondents that no detailed order under Sections 73 and 74 of the GST Act exists on the record to support the summary uploaded on 13th August, 2019. The summary was the basis for initiating recovery proceedings (Form GST DRC-07) but there was no underlying order, no show cause notice, and no personal hearing recorded. Given that the summary purportedly effectuated action under the statutory scheme without any substantive order or procedural safeguards, the Court held that the summary cannot stand on its own and is legally ineffective. [Paras 5]

The uploaded summary order dated 13th August, 2019 is void-ab-initio and liable to be quashed.

Quashing of administrative action - void-ab-initio - refund of amount paid under protest - remedy by writ of certiorari and mandamus under Articles 226 and 227 - Relief consequent to quashing of the summary and the entitlement to seek refund of amounts paid under protest. - HELD THAT: - On the basis that the summary order was void-ab-initio, the Court allowed the petition and quashed and set aside the impugned summary. The petitioners were granted liberty to take consequential action for recovery of amounts paid (via Form GST DRC-03). The Court's order thus provides an effective remedy by quashing the unlawful administrative action and permitting the petitioners to pursue refund proceedings. [Paras 5]

Petition allowed; impugned summary quashed and petitioners permitted to pursue refund of the amount paid under protest.

Final Conclusion: The High Court allowed the writ petition, quashed the impugned summary order dated 13th August, 2019 as void-ab-initio for lack of any underlying order under Sections 73 and 74 of the GST Act, and granted the petitioners liberty to pursue refund of amounts paid under protest.

Opportunity of hearing - principles of natural justice - application of section 75(4) of the CGST Act - remand for de novo decision - dismissal on ground of limitation

Opportunity of hearing - principles of natural justice - application of section 75(4) of the CGST Act - Failure to grant an opportunity of hearing before passing the assessment order was contrary to section 75(4) and the principles of natural justice. - HELD THAT: - The Court found on the material placed before it that the managing partner, whose email ID was the sole channel of communication, was critically ill from March to August 2022 and that this fact was not controverted by the respondents. While the departmental record showed uploads of returns in March-May 2022, the Court held that, having regard to the illness and the petitioner's pleaded inability to reply to the show-cause notice dated 22.02.2022, the assessing authority ought to have granted an opportunity of hearing before passing the order dated 04.04.2022. The Court relied on the statutory mandate in section 75(4) that an opportunity of hearing shall be granted where an adverse decision is contemplated, and concluded that in the circumstances a fair chance was required to satisfy natural justice. [Paras 11, 12]

Impugned assessment order set aside and remitted for decision after affording opportunity of hearing.

Dismissal on ground of limitation - remand for de novo decision - Validity of the appellate order dismissing the appeal as barred by limitation and the appropriate remedy following the defect in the assessment proceeding. - HELD THAT: - Because the assessing order was quashed for failure to afford an opportunity of hearing and the matter required fresh adjudication, the appellate order dated 14.09.2022 dismissing the appeal on limitation could not stand. The Court did not enter into the merits of the tax liability but held that the correct course was to set aside both the assessment and the appellate orders and remit the matter to respondent No.1 for a fresh de novo decision after hearing the petitioner. The court directed completion of the exercise within twelve weeks from receipt of the order. [Paras 13]

Appellate order quashed; matter remanded for fresh de novo decision by the assessing authority after hearing the petitioner.

Final Conclusion: Both the assessment order dated 04.04.2022 and the appellate order dated 14.09.2022 are quashed; the matter is remanded to the assessing authority for fresh de novo adjudication after granting an opportunity of hearing to the petitioner, to be completed within twelve weeks.

Interpretation of levy notifications for GST classification - applicability of conditional description in tariff entries - applicability of 90% fly ash content condition - classification of goods for GST rate determination - quashing of advance ruling and appellate orders

Applicability of 90% fly ash content condition - interpretation of levy notifications for GST classification - Whether the condition of '90% or more fly ash content' applies to Fly Ash Bricks and Fly Ash Blocks or only to Fly Ash Aggregate. - HELD THAT: - The Court accepted the clarification issued by the Central Board of Indirect Taxes and Customs (Circular No. 179/11/2022 GST dated 03.08.2022) which records that the condition of 90% or more fly ash content was applicable only to Fly Ash Aggregate and not to Fly Ash Bricks or Fly Ash Blocks, and that the condition has been omitted with effect from 18.07.2022. On that basis the Court held that the interpretation applied by the Advance Ruling Authority and the Appellate Authority-that Fly Ash Bricks must contain 90% fly ash to attract the lower rate-was not sustainable in the light of the CBIC clarification. The Court therefore interpreted the description in the relevant notification in conformity with the GST Council recommendation and the CBIC circular, holding the 90% condition inapplicable to Fly Ash Bricks and Fly Ash Blocks. [Paras 6, 7, 8]

The 90% fly ash content condition applies only to Fly Ash Aggregate and not to Fly Ash Bricks or Fly Ash Blocks; the condition has been omitted w.e.f. 18.07.2022.

Classification of goods for GST rate determination - quashing of advance ruling and appellate orders - Whether the Advance Ruling Authority's and Appellate Authority's orders holding the petitioner's Fly Ash Bricks liable to 18% GST should be set aside and whether the petitioner's products are taxable at 5% under the relevant notification. - HELD THAT: - Applying the clarified construction of the notification (that the 90% condition does not apply to Fly Ash Bricks/Blocks), the Court held that Entry No. 225B of Notification No. 04/2018 Central Tax (Rate) dated 31.12.2018 covers Fly Ash Bricks and Fly Ash Blocks and prescribes the 5% GST rate for those products. Consequently, the factual basis for the Advance Ruling Authority's conclusion-that the petitioner's bricks fell outside the 5% entry because they contained less than 90% fly ash-no longer sustains. On this ground the Court quashed and set aside the orders of the Advance Ruling Authority and the Appellate Authority and declared that the petitioner's Fly Ash Bricks and Fly Ash Blocks are liable to GST at 5% as per the notification. [Paras 8, 9]

The orders of the Advance Ruling Authority and the Appellate Authority are quashed; the petitioner's Fly Ash Bricks and Fly Ash Blocks attract GST at 5% under the notification.

Final Conclusion: The petition is allowed: the CBIC clarification that the 90% fly ash content condition applies only to fly ash aggregate (and not to fly ash bricks/blocks) controls the classification; the advance ruling and appellate orders are quashed and the petitioner's Fly Ash Bricks and Fly Ash Blocks are held taxable at 5% GST under the applicable notification.

Cancellation of registration for want of reasoned order - violation of principles of natural justice for failure to provide opportunity of hearing - quashing and remand for fresh show-cause notice and speaking order - suspension of registration pending disposal of show-cause notice - limitation as ground for dismissal of appeal and effect on exercise of revisional power

Cancellation of registration for want of reasoned order - violation of principles of natural justice for failure to provide opportunity of hearing - Order cancelling registration upheld by the Appellate Authority was quashed for lack of reasons and for breach of principles of natural justice. - HELD THAT: - The Court found that the order of cancellation was passed without assigning reasons and without affording an opportunity of hearing to the petitioner, contrary to the guidelines in M/s. Aggrawal Dyeing & Printing. In consequence, the impugned cancellation order could not be sustained. The appellate order upholding the cancellation was also set aside because the appellate authority dismissed the appeal on limitation, which precluded the respondent from exercising revisional power under section 108 thereafter. The Court did not adjudicate the merits of the underlying allegations and confined its decision to procedural lapses and the consequent illegality of the orders impugned. [Paras 7, 8, 9]

Impugned orders cancelling registration and the appellate order upholding it are quashed and set aside for failure to give reasons and opportunity of hearing.

Quashing and remand for fresh show-cause notice and speaking order - suspension of registration pending disposal of show-cause notice - Matter remanded to the Assessing Officer for issuance/renewal of show-cause notice with detailed reasons, opportunity to reply and personal hearing, and for passing a speaking order within specified timelines; registration to remain suspended meanwhile. - HELD THAT: - Following the quashing of the orders, the Court remanded the matter to the Assessing Officer at the show-cause notice stage with specific directions: supply detailed reasons for proposed cancellation (or re-supply on request), permit the petitioner two weeks to file a written reply, afford a personal hearing, and decide the matter by a reasoned order after considering the petitioner's reply within four weeks of the hearing. The timelines were made binding on both parties and the registration was ordered to remain suspended until the show-cause notice is finally disposed of. The Court expressly refrained from deciding merits and directed compliance with the procedures laid down in the earlier coordinate-bench judgment. [Paras 7, 8, 9]

Proceedings remitted for fresh adjudication in accordance with specified directions; registration suspended until disposal of the show-cause notice.

Final Conclusion: Writ petition partly allowed: impugned cancellation and appellate orders quashed; matter remanded to the Assessing Officer for fresh show-cause notice, reasoned decision and opportunity of hearing in accordance with directions, with the petitioner's registration suspended until such disposal; merits not adjudicated.

Rule 86A - Conditions for blocking electronic credit ledger - Principles of natural justice / pre-decisional hearing - Reasons to believe - formation, recording and objective material - Borrowed satisfaction versus independent application of mind - Draconian/extraordinary nature of blocking ECL and proportionality

Principles of natural justice / pre-decisional hearing - Draconian/extraordinary nature of blocking ECL and proportionality - Whether a pre-decisional hearing was required before blocking the appellants' Electronic Credit Ledger under Rule 86A. - HELD THAT: - Although Rule 86A does not expressly provide for a pre-decisional hearing, the Court held that blocking the ECL for up to one year entails serious civil consequences and therefore the audi alteram partem principle must be read into Rule 86A. The Court applied settled authorities holding that where administrative action produces grave civil consequences and the statute does not expressly exclude prior hearing, a minimal but genuine pre-decisional opportunity must be afforded unless exceptional circumstances compel otherwise. The Court observed that post-decisional hearing is ordinarily no substitute for a pre-decisional hearing because once a decision is taken there is a tendency to uphold it and a representation may not be effective. Given the non-instantaneous manner in which ITC is utilized and the ability of revenue to supervise pending proceedings, the impugned blocking orders without prior hearing were unjustified and vitiated by failure to afford the appellants a pre-decisional hearing. [Paras 8]

Pre-decisional hearing should have been provided and failure to do so vitiated the orders blocking the ECL.

Rule 86A - Conditions for blocking electronic credit ledger - Reasons to believe - formation, recording and objective material - Borrowed satisfaction versus independent application of mind - Whether the respondents were justified in invoking Rule 86A to block the appellants' Electronic Credit Ledgers. - HELD THAT: - The Court reiterated that Rule 86A is a draconian power which can be exercised only by the Commissioner or an officer not below Assistant Commissioner and only upon 'reasons to believe' that ITC was fraudulently availed or is ineligible under specified grounds. The Court required that such reasons be based on objective material and a proper application of mind and recorded in writing, following the CBIC circular emphasizing non-mechanical exercise of the power. On the facts, the blocking orders were founded on communications/field reports of other officers without independent analysis by the competent officer - a 'borrowed satisfaction' - and lacked tangible material showing the ITC was fraudulently availed. The Court held that reliance on mere closure of a supplier's business at a later date, without verifying genuineness of earlier transactions, was not sufficient to constitute 'reasons to believe'. Consequently, the statutory prerequisites of Rule 86A were not satisfied and the orders were quashed. [Paras 9]

Invocation of Rule 86A was unjustified; the orders blocking the ECL were illegal and quashed for lack of independent reasons to believe and for being based on borrowed satisfaction.

Borrowed satisfaction versus independent application of mind - Draconian/extraordinary nature of blocking ECL and proportionality - Whether the Single Judge's common order required interference. - HELD THAT: - Having found that the respondents failed both to afford a pre-decisional hearing and to form an independent, recorded opinion based on objective material as required by Rule 86A and the CBIC circular, the Division Bench concluded that the Single Judge erred in upholding the blocking orders. The appeals required interference because the learned Single Judge did not appreciate that the orders were non-speaking, mechanical and based on borrowed satisfaction, and because the statutory and natural justice preconditions were unmet. In consequence, the writ petitions deserved allowance and the impugned orders quashed. [Paras 10, 11]

The Single Judge's order is set aside; the writ petitions are allowed and the impugned blocking orders are quashed.

Final Conclusion: The Division Bench allowed the appeals, set aside the Single Judge's order, and quashed the impugned orders blocking the appellants' Electronic Credit Ledgers under Rule 86A on grounds that pre-decisional hearing and independent recorded reasons based on objective material were not provided, and the orders were founded on borrowed satisfaction and were therefore unlawful.

Revision of orders under Section 264 - mandatory fee requirement for filing a revision application - interpretation of 'shall' as mandatory - regularization of belated fee payment - remand for fresh decision on merits

Mandatory fee requirement for filing a revision application - regularization of belated fee payment - consideration on merits - Validity of rejection of the revision application under Section 264 for non-payment of the prescribed fee at the time of filing where the fee was paid immediately after service of notice - HELD THAT: - The Court examined Sub section (5) of Section 264 which prescribes that every application for revision shall be accompanied by a fee. The respondent rejected the revision application solely because the fee of Rs.500 was not paid at the moment of initial filing and held that no condonation of delay in payment was permissible, relying on Tribunal precedents where no fee had been paid at all. The Court found that in the present facts the petitioner paid the fee on 04.02.2023 immediately after receipt of the notice dated 03.02.2023 and that such payment removes the defect complained of by the respondent. The Court held that the respondent misinterpreted the provision by treating the absence of payment at the exact time of filing as an absolute bar to maintainability where the fee was subsequently paid promptly and the revision application remained within the statutory limitation period if the date of payment is treated as the date of filing. Consequently, the Tribunal decisions relied upon were inapplicable as they dealt with cases of total non payment rather than prompt payment after notice; the respondent ought to have considered the application on merits instead of rejecting it on the technical ground of belated fee payment. The matter was therefore remitted for adjudication on merits after affording an opportunity of hearing. [Paras 7, 8, 9]

Impugned order rejecting the revision application for non-payment of fees is quashed and set aside; the matter is remanded to respondent No.1 to decide the revision application on merits after hearing the petitioner within 12 weeks.

Final Conclusion: The order dated 23.03.2023 rejecting the revision application under Section 264 for A.Y. 2020-21 is quashed and set aside; the matter is remitted to the Commissioner to decide the revision on merits after giving the petitioner an opportunity of hearing within 12 weeks.

Notice under Section 148 of the Income Tax Act - reason to believe - reopening of assessment - consideration of objections filed by assessee - non-application of mind - quashing of reassessment notice

Notice under Section 148 of the Income Tax Act - reason to believe - consideration of objections filed by assessee - non-application of mind - Validity of the notice issued under Section 148 for Assessment Year 2013-14 in view of the Assessing Officer's treatment of the objections filed by the assessee - HELD THAT: - The Court examined the reasons recorded for reopening which relied on information purportedly showing large turnovers on the NSEL platform through a particular broker. The assessee denied the factual basis of that information and filed objections with documentary material. The Assessing Officer's order rejecting the objections was limited to stating that the assessee's declared transactions were not reflected in the demat account and that he had material to form a belief that income had escaped assessment, without dealing with or applying mind to the detailed explanations and reconciliations furnished by the assessee. Relying on the principle that objections to a reopening notice are not a mere formality and must be considered in substance so as to enable the assessee to demonstrate absence of escapement, the Court found that the AO failed to form a bona fide reason to believe after objectively considering the objections. Consequently the notice under Section 148 was held to be untenable and liable to be quashed. [Paras 8, 9, 11, 12]

The notice dated 20th March, 2020 issued under Section 148 for Assessment Year 2013-14 is quashed and set aside as the Assessing Officer did not properly consider the objections and hence failed to form a valid reason to believe.

Final Conclusion: Writ petition allowed; impugned notice under Section 148 dated 20.03.2020 for Assessment Year 2013-14 quashed for failure of the Assessing Officer to consider the objections and to form a valid reason to believe; no order as to costs.

Charitable status as 'general public utility' under Section 2(15) - Applicability of Section 13(8) read with the first proviso to Section 2(15) - Power of revision under Section 263 of the Income tax Act - Binding and preclusive effect of High Court and Supreme Court decisions on contemporaneous assessments - Erroneousness and prejudiciality to the interest of Revenue as test for exercise of Section 263

Charitable status as 'general public utility' under Section 2(15) - Applicability of Section 13(8) read with the first proviso to Section 2(15) - Power of revision under Section 263 of the Income tax Act - Binding and preclusive effect of High Court and Supreme Court decisions on contemporaneous assessments - Erroneousness and prejudiciality to the interest of Revenue as test for exercise of Section 263 - Whether the order under Section 263 directing reassessment was justified where the jurisdictional High Court had held, and the Supreme Court had affirmed, that the assessee qualified as a charitable organisation providing general public utility services and thus the exclusion in section 11/12 was not barred by the first proviso to section 2(15). - HELD THAT: - The Court accepted the Tribunal's finding that at the time the Principal Commissioner initiated proceedings under Section 263 the jurisdictional Gujarat High Court had already held that the assessee constituted under the Gujarat Town Planning and Urban Development Act, 1976 provided general public utility services within the meaning of Section 2(15) and thus fell within the charitable category. The Supreme Court subsequently affirmed that view. Given those binding decisions, the Assessment Order could not be said to be erroneous or prejudicial to the revenue so as to justify exercise of the revisional power under Section 263. The Tribunal therefore correctly concluded that the Principal Commissioner erred in setting aside the assessment merely because Section 13(8) might prima facie apply; where higher judicial decisions contemporaneously favourable to the assessee exist, the prerequisite of an erroneous and prejudicial assessment under Section 263 was not established. [Paras 4, 5, 6]

Appeal dismissed; the Section 263 order was not sustainable as the assessing order was not shown to be erroneous or prejudicial in view of the High Court and Supreme Court decisions holding the assessee to be entitled to charitable status.

Final Conclusion: The High Court upheld the Tribunal's reversal of the Section 263 order: because the jurisdictional High Court had decided (and the Supreme Court had affirmed) that the assessee provided general public utility services within Section 2(15), the Principal Commissioner could not treat the assessment as erroneous or prejudicial and the tax appeal is dismissed.

Revisionary jurisdiction under Section 263 - Limited scrutiny under CASS - Notice under Section 143(2) as jurisdictional - Scope of notice under Section 142(1) - Requirement of prior approval for expanding limited scrutiny - Error apparent and prejudice to revenue test

Revisionary jurisdiction under Section 263 - Limited scrutiny under CASS - Notice under Section 143(2) as jurisdictional - Scope of notice under Section 142(1) - Error apparent and prejudice to revenue test - Validity of the Principal Commissioner of Income Tax's order under Section 263 setting aside the assessment passed under Section 143(3) in a case selected for limited scrutiny - HELD THAT: - The Tribunal examined whether the PCIT could validly invoke Section 263 to revise the assessment when the case was selected for limited scrutiny and the Assessing Officer had issued the statutory notice under Section 143(2) and proceeded with assessment after notices under Section 142(1). The Tribunal observed that the assessment proceedings addressed the matters raised in the statutory scrutiny notice and that the assessee had furnished detailed replies regarding large cash deposits and aspects of transfer/purchase of property. The PCIT's conclusion that the AO failed to verify the purchase valuation and should have applied stamp-duty-based fair market value could not, on the material on record, be treated as demonstrating an assessment order which was erroneous or prejudicial to the revenue. The Bench noted that the test for invoking Section 263 is not satisfied merely because the PCIT would have taken a different view on valuation; the AO had considered the relevant replies and the mere difference in valuation approach does not make the order per se erroneous and prejudicial. The Tribunal also recorded that expansion of limited scrutiny beyond issues in the Section 143(2) notice requires prescribed approvals, but on facts the AO had examined transfer-related aspects called in notices under Section 142(1). On these findings the PCIT's exercise of revisionary power was held unjustified. [Paras 8, 9]

Order passed by the Principal Commissioner of Income Tax under Section 263 is not sustainable and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the PCIT's order under Section 263, and held that the AO's assessment under Section 143(3) was not shown to be erroneous or prejudicial to the revenue on the record before the PCIT.

Admissibility of additions based on statements recorded during search - Requirement of corroborative material for sustaining additions under search - Applicability of provisions relating to unexplained cash and taxation of unexplained receipts (section 69A read with penal provision 115BBE) to an individual not maintaining books

Admissibility of additions based on statements recorded during search - Requirement of corroborative material for sustaining additions under search - Addition made u/s 69A r.w.s. 115BBE based primarily on pre-recorded statements and without corroborative material is not sustainable and is to be deleted. - HELD THAT: - The Tribunal examined the material on record and the findings recorded by the AO and CIT(A). No cash or gold was recovered from the assessee's premises and the assessment was founded on statements of third parties (notably Shri Mohit Garg) and investigative inferences. The Tribunal applied the settled principle that statements recorded during search operations, though of significant evidentiary value, cannot by themselves constitute conclusive material for making additions unless corroborated by independent material discovered during the search or other evidentiary material. The AO's conclusion rested on assumptions-including that the assessee must have removed alleged ill-gotten money prior to search and that bank staff operated beyond hours-rather than on tangible corroboration linking the seized material to the assessee. In view of the absence of supporting evidence discovered from the assessee's premises or other direct corroboration of the statements, the additions made under the impugned provisions were held unsustainable and liable to be deleted. [Paras 9, 10, 11]

The additions made under section 69A read with 115BBE, which were based primarily on pre-recorded statements without corroborative material, are deleted and the appeal is allowed on this ground.

Applicability of provisions relating to unexplained cash and taxation of unexplained receipts (section 69A read with penal provision 115BBE) to an individual not maintaining books - The contention that section 69A is inapplicable to an individual merely because he does not maintain books of account is rejected. - HELD THAT: - The assessee argued that section 69A could not be invoked against an individual who did not maintain books. The Tribunal noted the reference to the Delhi High Court decision in CIT vs. Hersh Washeser Chadha where the question was left open for another case, but on the facts before it found the contention untenable. The Tribunal therefore did not accept the assessee's submission that non-maintenance of books absolved him from the applicability of the provisions invoked by the AO. [Paras 8]

The plea that section 69A is not applicable to an individual for want of books of account is rejected.

Final Conclusion: The appeal is allowed: the additions sustained by the authorities under section 69A read with 115BBE, founded primarily on statements recorded during search and lacking independent corroboration, are deleted; the assessee's separate contention that section 69A is inapplicable for want of books is rejected.

Unexplained money under Section 69A - taxability of foreign remuneration under Section 5 - gift taxation under Section 56(2)(x) - requirement to prove source of the source

Unexplained money under Section 69A - requirement to prove source of the source - Deletion of addition of Rs. 25,00,000/- made as unexplained credit under Section 69A - HELD THAT: - The Tribunal found that the assessee furnished contemporaneous and credible documentary evidence-remittance receipt from the Economic Exchange Centre, employer's certificate and bank statements-showing AED 145,000 (equivalent) credited to the joint NRE account as a performance incentive of Mrs. Aashita P. Pancholi and subsequently transferred to the joint NRO account. The AO in his remand report accepted the authenticity and usual practice of the employer in effecting such remittances. Section 69A applies where no satisfactory explanation is offered; here the immediate source (remittance from employer) was fully documented and accepted by the AO. The Tribunal held that the Assessing Officer was not entitled to demand proof of the 'source of the source' once the immediate source was satisfactorily explained, and therefore the addition under Section 69A was unsustainable. [Paras 6]

The addition of Rs. 25,00,000/- under Section 69A is deleted as the source of the credit is satisfactorily explained.

Gift taxation under Section 56(2)(x) - Rejection of the DRP's alternate conclusion treating the remittance as a gift taxable under Section 56(2)(x) - HELD THAT: - The DRP hypothesised that the amount might be a gift from the employee who facilitated the remittance. The Tribunal examined the record-remittance receipt naming Mrs. Aashita P. Pancholi as payee, employer's certificate describing the sum as a performance incentive, company bank entries showing withdrawal instructions and a practice of such withdrawals-and found no evidence of a gratuitous transfer by the intermediary. The remittance was part of salary-related remuneration paid by the employer and merely facilitated by an employee; there was no element of transfer without consideration. Accordingly, the DRP's alternative treatment under Section 56(2)(x) was held to be without merit and rejected. [Paras 2, 6]

The alternative finding of the DRP treating the amount as a gift under Section 56(2)(x) is rejected.

Taxability of foreign remuneration under Section 5 - Whether the performance incentive remitted to India is taxable in India given the assessee and his wife were non-residents - HELD THAT: - The Tribunal noted that both assessee and his wife were non-residents during the relevant year, having been resident and employed in UAE for over ten years and present in India for only 77 days in the year. Under Section 5, a non-resident's global income is taxable in India only if received or deemed received in India or if it accrues or arises in India. The performance incentive was earned and accrued outside India and remitted to India through legitimate banking channels; the evidentiary record establishes it as foreign-sourced remuneration. Therefore the amount does not fall within the charging provision of Section 5 and is not taxable in India. [Paras 6]

The performance incentive was earned outside India by non-residents and is not taxable in India under Section 5.

Final Conclusion: The Tribunal allowed the appeal, deleted the addition of Rs. 25,00,000/- made under Section 69A, rejected the DRP's alternative finding under Section 56(2)(x), and held that the foreign-earned performance incentive is not taxable in India for A.Y. 2018-19.

Reopening of assessment - borrowed satisfaction - independent application of mind - reasons to believe - notice under section 148 and proceedings under section 147 - protective assessment versus substantive assessment - fishing enquiry

Reopening of assessment - borrowed satisfaction - independent application of mind - reasons to believe - notice under section 148 and proceedings under section 147 - protective assessment versus substantive assessment - fishing enquiry - Reopening of assessment was invalid as the reasons recorded amounted to borrowed satisfaction and lacked independent application of mind, and consequential reassessment was quashed. - HELD THAT: - The Tribunal found that the Assessing Officer issued notice under section 148 based solely on a letter from the Investigation Wing which reported large cash deposits in a third party's bank account and identified the assessee as an alleged beneficiary. The reasons recorded by the AO merely reiterated the information supplied by the Investigation Wing without any independent verification or enquiry to establish a live link between the material and formation of belief that income had escaped assessment. The AO did not explain how deposits in the third party's account constituted the assessee's income, and although the reopening was stated to be protective, the addition was made substantively. The Tribunal also noted that the bank statement showed huge deposits but only minimal withdrawals, undermining the AO's conclusion of withdrawals benefiting the assessee. Applying the principles in the cited authorities, the Tribunal held that reliance on untested information from the Investigation Wing, without application of mind and without material indicating non-genuineness, amounted to a fishing enquiry and constituted borrowed satisfaction; therefore the statutory requirement for valid reopening under section 147/148 was not satisfied. [Paras 8, 9]

Reopening notice and reassessment quashed; appeal allowed.

Final Conclusion: The reassessment proceedings initiated by notice under section 148 (AY 2012-13) were quashed as based on borrowed satisfaction without independent application of mind; the appeal is allowed.

Striking out the irrelevant limb in a penalty notice - penalty proceedings vitiated by failure to strike out alternate/irrelevant limb - penalty for concealment of income - penalty for furnishing inaccurate particulars of income - principles of natural justice in penalty proceedings

Striking out the irrelevant limb in a penalty notice - penalty proceedings vitiated by failure to strike out alternate/irrelevant limb - penalty for concealment of income - penalty for furnishing inaccurate particulars of income - Validity of penalty notice and order where the Assessing Officer issued a penalty notice invoking both limbs - concealment of income and furnishing inaccurate particulars - without striking out the irrelevant limb - HELD THAT: - The Assessing Officer's notice and order invoked both limbs of section 271(1)(c), namely concealment of income and furnishing inaccurate particulars, and failed to strike out the irrelevant limb in the notice. The Tribunal followed the Full Bench decision of the Hon'ble Bombay High Court in Mohammed Farhan A. Shaikh which holds that striking off the irrelevant limb is a mandatory requirement and that failure to do so vitiates the penalty proceedings. The Revenue's reliance on Veena Estates Pvt. Ltd. was distinguished on facts because, unlike that case, the assessee in the present matter had raised the defect before the first appellate authority and did not raise it belatedly for the first time before the High Court. Applying the mandatory requirement established by the Full Bench, the Tribunal concluded that the notice was null and void and the penalty could not be sustained. [Paras 8, 9]

Impugned penalty deleted and appeal allowed on this ground

Final Conclusion: The Tribunal allowed the appeal, holding the penalty proceedings vitiated because the Assessing Officer failed to strike out the irrelevant limb in the penalty notice; the impugned penalty was set aside and other grounds were rendered academic.

Tax Deduction at Source under section 194LBC - Excess Interest Spread (EIS) - Investor as defined in section 194LBC read with section 115TCA - Assessee in default under section 201(1) - Income from investment in securitization trust

Excess Interest Spread (EIS) - Tax Deduction at Source under section 194LBC - Investor as defined in section 194LBC read with section 115TCA - Income from investment in securitization trust - Whether TDS under section 194LBC was required to be deducted by the securitization trust on the Excess Interest Spread paid to the originator - HELD THAT: - The Tribunal accepted the first appellate authority's factual and legal conclusion that the EIS paid to the originator is a residual, contractual payment and not a committed return arising to an investor under the scheme of section 115TCA. The ld. CIT(A) had found, and the Tribunal upheld, that the originator had not subscribed to Pass Through Certificates and no investment by the originator was shown; accordingly the originator could not be treated as an 'investor' within the meaning of section 194LBC read with section 115TCA. Applying that characterization, the payment of EIS did not accrue or arise from an investment by the originator in the securitization trust and therefore did not fall within the charge that would attract deduction of tax at source under section 194LBC. The Tribunal further noted that coordinate-bench decisions dealing with identical factual matrices support the same view and found no infirmity in the ld. CIT(A)'s reasoning. [Paras 8, 9]

TDS under section 194LBC was not required to be deducted on the EIS paid to the originator

Assessee in default under section 201(1) - Tax Deduction at Source under section 194LBC - Whether the assessee trust could be held an assessee in default under section 201(1) for non-deduction of TDS on the EIS - HELD THAT: - Having held that section 194LBC did not apply to the EIS payments because the recipient was not an investor and the receipts did not arise from an investment, the Tribunal concluded that there was no default by the trust in deducting tax. The liability to be treated as an assessee in default under section 201(1) flows from a legally enforceable obligation to deduct tax; where no such obligation exists on the facts and in law, the deeming of default cannot be sustained. The Tribunal agreed with the ld. CIT(A)'s conclusion and declined to interfere. [Paras 8, 9, 10]

The assessee trust is not an assessee in default under section 201(1) for non-deduction of TDS on the EIS

Final Conclusion: The Revenue's appeal is dismissed; the order of the ld. CIT(A) is upheld that the EIS paid to the originator did not attract deduction under section 194LBC and the assessee trust is not an assessee in default for A.Y. 2017-18.

Maximum marginal rate - surcharge included in rate of income-tax - computation of surcharge as per income slab vs highest slab - taxation of private discretionary trust at maximum marginal rate - processing of return under section 143(1)

Maximum marginal rate - surcharge included in rate of income-tax - computation of surcharge as per income slab vs highest slab - taxation of private discretionary trust at maximum marginal rate - Whether the maximum marginal rate applicable to a private discretionary trust includes surcharge at the highest rate applicable to individuals or whether surcharge is to be applied according to the assessee's own income slab. - HELD THAT: - The Tribunal held that Section 2(29C) defines maximum marginal rate as the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual. The legislative wording therefore requires that both the highest rate of income-tax and the highest rate of surcharge (as applicable to the highest slab for individuals) be combined to compute the maximum marginal rate. Interpreting surcharge as leviable according to the assessee's income slab would render the express inclusion of surcharge in the definition redundant and would defeat Parliament's expressed intent to tax private discretionary trusts at a deterrent combined rate. The Tribunal also relied on the policy underlying the provision and on precedents and commentary supporting the view that trusts taxed at maximum marginal rate must bear the highest slab rates of tax and surcharge. For these reasons the assessee's contention that surcharge should be computed at the 10% slab (applicable to its income) was rejected and the surcharge computed at the highest rate was held correctly applied. [Paras 9, 10, 11, 12, 13]

Maximum marginal rate for the private discretionary trust includes surcharge at the highest rate applicable to individuals; the surcharge computed by CPC at the highest slab is correct.

Processing of return under section 143(1) - processing of return and power to compute correct tax - Whether the Central Processing Centre (CPC) can vary or correct the rate of surcharge while processing the return under section 143(1). - HELD THAT: - The Tribunal held that the CPC, while processing returns under Section 143(1)(b) and (c), has the statutory power to compute the correct amount of tax and sums payable, which includes applying the correct rate of surcharge. Consequently, the CPC was entitled to re-compute surcharge at the correct (highest) rate when issuing the intimation under section 143(1). [Paras 14]

CPC is empowered under section 143(1) to compute and, if necessary, vary the rate of surcharge so as to determine the correct tax liability.

Final Conclusion: The appeal is dismissed; the Tribunal affirms that a private discretionary trust is taxable at the maximum marginal rate which includes the highest rate of surcharge applicable to individuals, and that the CPC validly applied and computed that surcharge while processing the return under section 143(1).

Exemption under section 11 - exemption under section 10(23C)(iiiab) - conditions under section 12A(1)(b) and 12A(1)(ba) - effect of CBDT extension of return and audit filing date on compliance with section 12A conditions - prohibition under section 11(7) and first proviso (Finance Act, 2020)

Effect of CBDT extension of return and audit filing date on compliance with section 12A conditions - conditions under section 12A(1)(b) and 12A(1)(ba) - exemption under section 11 - Whether the assessee filed the income-tax return and Form No.10B within the extended time and thereby complied with the conditions of section 12A(1)(b) and 12A(1)(ba) so as to be entitled to exemption under section 11. - HELD THAT: - The Tribunal examined the CBDT order dated 27.09.2019 which extended the last date for filing the return and various audit reports for the assessment year 2019-20 up to 30.10.2019. The assessee filed the ITR and Form No.10B on 23.10.2019 and produced acknowledgements. Since filing was within the extended timeline allowed by CBDT, the basis relied upon by the ld. Addl./JCIT(A)-5, Chennai - namely belated filing leading to non-compliance with section 12A(1)(b) and 12A(1)(ba) - was incorrect. The Tribunal held that the absence of delay meant the assessee had not been disentitled from exemption under section 11 on that ground and that the JAO should delete the adjustment made by CPC. [Paras 8, 9]

Return and Form No.10B were filed within the CBDT-extended time; conditions of section 12A(1)(b) and 12A(1)(ba) stand complied and the denial of exemption under section 11 on account of belated filing is not sustainable.

Exemption under section 10(23C)(iiiab) - prohibition under section 11(7) and first proviso (Finance Act, 2020) - exemption under section 11 - Whether the alternate claim of exemption under section 10(23C)(iiiab) could be entertained and whether the assessment adjustment should be deleted. - HELD THAT: - The ld. Addl./JCIT(A)-5, Chennai had accepted the alternate plea and found that the institution satisfied the threshold of government funding as per rule 2BBB, and observed that the bars in section 11(7) (including the first proviso introduced by Finance Act, 2020) do not apply to institutions automatically eligible under clauses such as 10(23C)(iiiab). Having found the primary ground of disentitlement to be misplaced (because filing was within extended time), the Tribunal nonetheless directed deletion of the adjustment and granted relief to the assessee. In consequence, the alternate claim did not need to be relied upon for denying relief, and the Tribunal dismissed the Revenue's appeal. [Paras 9, 11, 12]

Adjustment of income deleted and relief granted to the assessee; the alternate claim under section 10(23C)(iiiab) was not impeded by section 11(7) insofar as such institutions are automatically eligible, and ultimately the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal allowed the assessee's cross objection, held that the return and Form No.10B were filed within the CBDT-extended time (thus satisfying section 12A conditions), directed deletion of the assessment adjustment, and dismissed the Revenue's appeal.

Disallowance under section 14A - Computation under Rule 8D - No disallowance in absence of exempt income - Investments made out of own funds and absence of interest expenditure - Precedential application of CIT vs. Chettinad Logistics

Disallowance under section 14A - No disallowance in absence of exempt income - Investments made out of own funds and absence of interest expenditure - Computation under Rule 8D - Validity of the Assessing Officer's disallowance under section 14A read with Rule 8D for assessment year 2016-17 - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the section 14A disallowance. It recorded that the assessee had not received any exempt income (no dividend) during the year and that the Assessing Officer did not rebut the assessee's claim that the investments were made out of its own funds and that no interest expenditure was attributable to those investments. The CIT(A) applied the Supreme Court decision in CIT vs. Chettinad Logistics and earlier appellate decisions in the assessee's own case for earlier assessment years, concluding that in the absence of exempt income no disallowance under section 14A could be sustained. The Tribunal found no infirmity in that reasoning, observed that the departmental representative did not controvert the factual position, and therefore affirmed the deletion of the disallowance made by the CIT(A). [Paras 6, 10]

The disallowance under section 14A read with Rule 8D for AY 2016-17 is not sustainable and is deleted; the CIT(A) order is upheld.

Final Conclusion: The Revenue's appeal is dismissed and the order of the CIT(A) deleting the section 14A disallowance for assessment year 2016-17 is upheld.

Section 56(2)(x) of the Income Tax Act - income on receipt/transfer of property for inadequate consideration - Fair market value determination by District Valuation Officer (DVO) - Binding nature of DVO report on the Assessing Officer - Admissibility of appellate re-evaluation of DVO valuation based on comparables

Section 56(2)(x) of the Income Tax Act - income on receipt/transfer of property for inadequate consideration - Fair market value determination by District Valuation Officer (DVO) - Binding nature of DVO report on the Assessing Officer - Admissibility of appellate re-evaluation of DVO valuation based on comparables - Whether the difference between sale consideration and the value estimated by DVO is taxable under section 56(2)(x), and what fair market value per square metre should be adopted for computing the addition. - HELD THAT: - The Assessing Officer invoked section 56(2)(x) after the Stamp Valuation Authority's registration value exceeded the sale consideration; a reference to the DVO resulted in a report dated 24.03.2021 estimating the land's value at Rs.155 per square metre, which the AO adopted and added the difference. The Tribunal noted that the DVO's report is binding on the Assessing Officer but that the appellate authority may examine the comparables relied upon. The DVO's comparables showed rates ranging from Rs.126 to Rs.222 per square metre with an average of about Rs.163.36 per square metre; given the spread among comparables and facts (including the DVO's description of the land on the date of inspection), the Tribunal found Rs.150 per square metre to be a reasonable estimation of fair market value for the purpose of computing the addition under section 56(2)(x). The Tribunal therefore directed recomputation of the addition by the Assessing Officer adopting Rs.150 per square metre. [Paras 6, 7]

The addition under section 56(2)(x) is confirmed in principle but reduced; the Assessing Officer is directed to adopt Rs.150 per square metre and compute the addition accordingly - appeal partly allowed.

Final Conclusion: The Tribunal partly allows the appeal: while section 56(2)(x) applies, the fair market value is fixed at Rs.150 per square metre for recomputation of the addition; other grounds were not pressed or are consequential.

Section 50 deeming fiction - deeming provisions limited to computation under sections 48 & 49 - treatment of capital gain as short-term capital gain - character of capital asset remains long-term capital asset - applicability of concessional tax rate under section 112(1) - non-obstante clause and its limited scope

Section 50 deeming fiction - treatment of capital gain as short-term capital gain - applicability of concessional tax rate under section 112(1) - deeming provisions limited to computation under sections 48 & 49 - character of capital asset remains long-term capital asset - Whether capital gains computed under section 50 on transfer of depreciable assets (though deemed short-term for computation) are chargeable at the rates applicable to short-term capital gains or at the concessional rate under section 112 applicable to long-term capital gains. - HELD THAT: - Section 50 is a special, non-obstante deeming provision that modifies the mode of computation under sections 48 and 49 and deems any excess on transfer of certain depreciable assets to be capital gains arising from transfer of short-term capital assets for the limited purpose of that computation. That legal fiction does not convert the underlying capital asset into a short-term capital asset for all purposes of the Act. Section 112(1) applies where income arises from the transfer of a long-term capital asset and such long-term capital gain is chargeable under the head 'Capital gains' and included in total income; it prescribes a concessional rate for such long-term capital gains. The jurisdictional High Court in Ace Builders (affirmed by the Supreme Court in Dempo) confines the deeming in section 50 to computation and to the exceptions in sections 48/49, and allows the protective application of other provisions (such as exemption or set-off provisions applicable to long-term capital gains). Applying these principles, the majority view holds that although the surplus has been computed in accordance with section 50 and characterised for that purpose as arising from a short-term capital asset, the underlying asset retains its long-term character for purposes where the statute refers to a 'long-term capital asset' (including the applicability of section 112). Consequently, the deeming in section 50 cannot be imported into section 112 to deny the concessional tax rate where the statutory conditions of section 112 are otherwise satisfied. [Paras 21, 24, 26, 33, 44]

Answered in favour of the assessee: the concessional rate under section 112 applies where the statutory conditions of section 112 are met, and the deeming fiction in section 50 is confined to computation under sections 48 and 49 and does not by itself displace application of section 112.

Final Conclusion: The referred question is answered in favour of the assessee for A.Y. 2000-01: where a depreciable asset forming part of a block is held for the long-term, the legal fiction in section 50 is confined to computation under sections 48/49 and does not preclude application of the concessional rate under section 112(1) (20% plus applicable surcharge) when the statutory conditions of section 112 are satisfied.

Penalty under Section 271(1)(c) for concealment or furnishing inaccurate particulars of income - deduction under Section 80IB(10) - proportional disallowance versus project wide disallowance - bonafide belief in a tenable tax position - penalty not automatic upon assessment addition or disallowance - requirement of factual inaccuracy or concealment to invoke Section 271(1)(c) - reliance on judicial precedents in determining applicability of penalty

Penalty under Section 271(1)(c) for concealment or furnishing inaccurate particulars of income - deduction under Section 80IB(10) - proportional disallowance versus project wide disallowance - bonafide belief in a tenable tax position - penalty not automatic upon assessment addition or disallowance - requirement of factual inaccuracy or concealment to invoke Section 271(1)(c) - Sustainability of penalty under Section 271(1)(c) where the assessee claimed deduction under Section 80IB(10) bona fide and similar claims in earlier years resulted in proportionate allowance. - HELD THAT: - The Tribunal found that the assessee adopted one of the possible views in law and had consistently claimed the deduction in earlier years where appellate orders directed proportionate disallowance rather than complete denial. The CIT(A) had itself directed proportionate disallowance in the quantum appeal and the assessee had filed revised return reflecting proportionate treatment. Relying on the principle that penalty under Section 271(1)(c) requires concealment of particulars or furnishing of inaccurate particulars and cannot be invoked for an incorrect claim of law made bonafide, the Tribunal held that imposition of penalty merely because an addition/disallowance was made is not automatic. The Tribunal applied the reasoning of higher judicial authorities that an incorrect claim in law does not ipso facto constitute furnishing inaccurate particulars and that bona fide differences of view attract no penalty. On these findings the Tribunal concluded that the penalty could not be sustained and directed its deletion.

Penalty under Section 271(1)(c) deleted; appeal allowed in favour of the assessee.

Final Conclusion: The Tribunal set aside the orders confirming penalty and directed deletion of the penalty under Section 271(1)(c), allowing the appeal of the assessee for A.Y. 2011-12.

Levy of IGST on ocean freight - Valuation of imported goods including cost, insurance and freight - Validity of Notification No. 10/2017 - IGST (Rate) - Application of Mohit Minerals judgment to FOB imports - Refund of IGST on ocean freight - Quashing of ex parte withdrawal of refund

Levy of IGST on ocean freight - Valuation of imported goods including cost, insurance and freight - Application of Mohit Minerals judgment to FOB imports - Validity of Notification No. 10/2017 - IGST (Rate) - Levy of IGST on ocean freight for imports made on FOB basis is not sustainable where Notification No.10/2017-IGST(Rate) has been struck down and IGST has already been paid on the value of imports. - HELD THAT: - The Court held that IGST is leviable on the value determined under the Customs law which, by the proviso to section 14 of the Customs Act and the proviso to section 5(1) of the IGST Act, includes cost, freight and insurance at the place of importation. Consequently, where IGST has been paid on the transaction value that includes freight, it makes no difference whether the contract is CIF or FOB. Having regard to the Supreme Court's decision in Union of India v. Mohit Minerals (which upheld the High Court's declaration striking down Notification No.10/2017) and consistent authority from the Bombay High Court, the notification cannot be invoked to levy IGST again on ocean freight in FOB transactions; the struck-down notification cannot sustain a separate levy of IGST on freight after tax has already been paid on the import value. [Paras 28, 29]

Levy of IGST on ocean freight in FOB imports is not valid where the notification permitting such levy has been struck down and IGST was paid on the value including freight.

Refund of IGST on ocean freight - Quashing of ex parte withdrawal of refund - Impugned appellate order passed ex parte withdrawing the refund of IGST on ocean freight was not sustainable and is quashed. - HELD THAT: - The petitioner had filed for and obtained refund of IGST paid on ocean freight following the authoritative judgment. The appellate authority proceeded to withdraw the refund by an ex parte order on the ground of non-appearance despite the petitioner having sought time and later submitting written respostas. The Court found the impugned ex parte withdrawal to be improper in the circumstances and, in view of the legal position on levy and the struck-down notification, set aside the order withdrawing the refund. [Paras 16, 30]

Impugned ex parte order withdrawing the refund is quashed and set aside.

Final Conclusion: Petition allowed: the Court held that IGST cannot be levied afresh on ocean freight for FOB imports where IGST has already been paid on the import value including freight and the Notification No.10/2017 enabling such levy has been struck down; the impugned ex parte order withdrawing the refund is quashed.

Compliance with Section 50 of the NDPS Act - Applicability of Section 50 to search of baggage vis-a -vis search of person - Effect of noncompliance with sampling procedure under Section 52A of the NDPS Act - Probative value of seized material versus vitiation of prosecution by procedural lapses - Commercial quantity and embargo on bail under Section 37 of the NDPS Act - Standard for grant of bail under Section 37 - reasonable grounds to believe accused is not guilty and not likely to commit offence

Compliance with Section 50 of the NDPS Act - Applicability of Section 50 to search of baggage vis-a -vis search of person - Whether Section 50 of the NDPS Act was attracted and whether non-compliance of its mandate vitiates the search and recovery in the present case. - HELD THAT: - The court considered the line of precedents on the scope of Section 50 and concluded that Section 50 applies to search of a person and not ordinarily to a search of baggage carried by a person. Applying the authorities that distinguish search of person from search of baggage, and having regard to the facts that the recovery was from the applicant's baggage in a public place and that a Section 50 notice was in any event served, the court held that Section 50 is not attracted on the facts of this case. The contention about the omission of the word "nearest" from the notice and other formal quibbles was held to be a matter for trial and not for determination at the bail stage. [Paras 43, 44, 45, 46, 48]

Section 50 does not apply to the facts of this case (search of baggage); alleged formal deficiencies do not justify bail and are matters for trial.

Effect of noncompliance with sampling procedure under Section 52A of the NDPS Act - Probative value of seized material versus vitiation of prosecution by procedural lapses - Whether the delay in sampling and the minor discrepancy in weight (9 grams) vitiate the seizure and require grant of bail. - HELD THAT: - The court noted that Section 52A does not prescribe a specific time-limit for sampling and that Standing Order 1/88 relied upon by the applicant has been repealed and replaced by later rules. Relying on precedent that procedural lapses in sampling may affect probative value but do not automatically invalidate prosecution, the court observed that a minor discrepancy in weight (9 grams in the context of 9,950 grams) can be attributable to environmental factors and is a trial issue. In view of settled law, mere non strict compliance or a minor delay does not, without demonstration of prejudice or failure of justice, entitle the accused to bail. [Paras 36, 37, 38]

The delay in sampling and the minor weight discrepancy do not vitiate the prosecution or warrant bail; these are matters to be examined at trial.

Commercial quantity and embargo on bail under Section 37 of the NDPS Act - Standard for grant of bail under Section 37 - reasonable grounds to believe accused is not guilty and not likely to commit offence - Whether the applicant is entitled to bail under Section 37 of the NDPS Act having regard to the quantity seized and the statutory test for bail. - HELD THAT: - The court found that the seized quantity (9,950 grams of heroin) amounts to commercial quantity, thereby attracting the embargo under Section 37. The statutory test requires the court to be satisfied on reasonable grounds that the accused is not guilty and is not likely to commit an offence while on bail; such satisfaction demands substantial probable cause beyond prima facie grounds. Considering the nature and quantity of contraband, the presence of independent witnesses and other materials on record, the court held that the applicant has not demonstrated reasonable grounds to believe he is not prima facie guilty or that he would not be a flight risk, particularly as a foreign national. Consequently, the statutory conditions for bail under Section 37 were not met. [Paras 51, 52, 53, 54, 55]

Embargo under Section 37 applies; the applicant has not shown reasonable grounds for being not guilty or not likely to offend, and bail is refused.

Allegation of false implication and pre-arranged file numbering - Whether the existence of a pre-printed file/case number on departmental documents demonstrates prior manipulation or false implication. - HELD THAT: - The court considered the explanation that an initial complaint number/file is generated whenever a suspect is intercepted and that files are closed where no contraband is found or pursued where recovery occurs. On the facts and the explanation furnished by the respondent, the court found that the presence of a case number on printed documents does not, by itself, demonstrate prior manipulation or false implication. The court held that the contention does not establish malafide or planted recovery at the bail stage. [Paras 32, 33, 34]

The presence of a file/case number on documents does not establish false implication; the contention is rejected at the bail stage.

Final Conclusion: The application for bail is dismissed. The court held that Section 50 is not attracted on the facts, the sampling delay and minor weight discrepancy do not vitiate the prosecution and are trial issues, the seizure is of commercial quantity attracting the embargo under Section 37 and the statutory test for bail is not satisfied; trial to be expedited.

Refund of Special Additional Duty (SAD) under Notification No. 102/2007 - description mismatch between Bill of Entry and sales invoices - deficiency memo - curable versus incurable deficiency - proof of payment of VAT/CST and CA's reconciliation certificate

Description mismatch between Bill of Entry and sales invoices - deficiency memo - curable versus incurable deficiency - Whether the mismatch in description/specifications between the import documents (Bill of Entry) and the sales invoices was a fatal, incurable defect warranting rejection of the refund claim. - HELD THAT: - The Tribunal examined the record and the findings of the Original Authority and the First Appellate Authority. The Original Authority issued a Deficiency Memo pointing to non-tallying of description between import documents and sales invoices and rejected the refund for non-fulfilment of the condition in Notification No. 102/2007. The Commissioner (Appeals) reviewed the documentary evidence and held that the discrepancies in description and specifications could not be construed as fatal, and therefore could not be a basis for rejection of the refund; however he purported to uphold rejection on the ground that non-reply to the Deficiency Memo could not be cured at the appellate stage. The Tribunal found that the only deficiency reflected in the Deficiency Memo related to the description in the invoice not tallying with import documents, and that the First Appellate Authority himself had held such discrepancies not to be fatal. There was no finding that VAT/CST were unpaid or that the CA certificate and reconciliation statement were deficient. Given these circumstances, the purported ground of incurability relied upon by the Commissioner (Appeals) was not a proper basis to sustain rejection where the underlying discrepancy had been treated as non-fatal on appeal. [Paras 4, 5]

The mismatch in description was not a fatal or incurable defect justifying rejection of the refund claim; the appellate rejection on the stated ground was unsustainable.

Final Conclusion: Impugned order rejecting the refund is set aside; the appeal is allowed and the refund claim succeeds with consequential relief as per law.

Transaction value - related party transactions - Rule 3(3) of Customs Valuation Rules, 2007 - NIDB data as contemporaneous value - acceptance of transaction value unless proven incorrect - burden on revenue to prove value incorrect

Transaction value - related party transactions - NIDB data as contemporaneous value - burden on revenue to prove value incorrect - Validity of re-determination of import value by adopting NIDB contemporaneous data after rejecting the declared transaction value of imports from a related supplier - HELD THAT: - The Tribunal found no dispute about the relationship between the importer and the overseas supplier and recorded that the original adjudicating authority had examined circumstances and accepted the declared transaction value as not influenced by the relationship. Applying Rule 3(3) of the Customs Valuation Rules, 2007, the decision holds that the transaction value must be accepted unless the Department adduces independent evidence showing that the invoice price is incorrect or influenced by the relationship. Reliance on NIDB data alone, without demonstrating comparability of goods in terms of quality, quantity, country of origin, commercial level and without communicating reasons to the importer for doubting the declared value, is insufficient to reject the transaction value. The Tribunal followed earlier precedents holding that contemporaneous/import data cannot be the sole basis for enhancement and that the Revenue bears the onus to first show the transaction value is incorrect before applying substitute values under the Rules. The Tribunal also noted that imports were under EOU exemption and enhancement produced no revenue consequence but this did not relieve the Department of the required evidentiary burden. [Paras 7, 9, 10, 11, 12]

The re-determination of value based solely on NIDB data is unjustified; the declared transaction value is to be accepted and the impugned order setting it aside is unsustainable.

Final Conclusion: The appeal is allowed: the order rejecting the declared transaction value and re-determining value on the basis of NIDB data alone is set aside and the declared transaction value is restored, with consequential relief as per law.

Entitlement of members of the suspended board of directors to copies of resolution plans and relevant documents - rights of ex directors/erstwhile directors in the CIRP - access to documents and inspection in CIRP proceedings - contents of notice for CoC meetings including copies of documents relevant to matters to be discussed - commercial wisdom of the Committee of Creditors - scope of adjudicating authority under Section 30(2) of the IBC in approving a resolution plan

Entitlement of members of the suspended board of directors to copies of resolution plans and relevant documents - rights of ex directors/erstwhile directors in the CIRP - access to documents and inspection in CIRP proceedings - contents of notice for CoC meetings including copies of documents relevant to matters to be discussed - Whether the appellant, who resigned as director prior to initiation of CIRP, was entitled to obtain copies of the resolution plan and other CIRP documents - HELD THAT: - The Tribunal applied the principle in Vijay Kumar Jain that Members of the suspended/erstwhile Board of Directors are entitled to copies of resolution plans and other documents where they fall within the category of participants addressed by the Code and Regulations (Regulation 21(3)(iii) and Section 24). The court distinguished that authority on the facts: the appellant had resigned well before initiation of CIRP and was therefore not a suspended director or an erstwhile director entitled to notice and documents under the statutory scheme. The Adjudicating Authority's finding that the applicant did not fall within the class protected by Vijay Kumar Jain and that the documents sought formed part of the public record (and that there was no entitlement to the relief prayed) was held to be correct. Accordingly, the Appellant's reliance on Vijay Kumar Jain did not entitle him to directions for inspection or supply of the Resolution Plan or to stay the CIRP/plan approval. [Paras 19, 25, 27]

Appellant not entitled to copy of the resolution plan or other CIRP documents as he was not a suspended/erstwhile director at the commencement of CIRP; I.A. No. 910/2024 rightly rejected.

Scope of adjudicating authority under Section 30(2) of the IBC in approving a resolution plan - commercial wisdom of the Committee of Creditors - access to documents and inspection in CIRP proceedings - Whether the Adjudicating Authority erred in rejecting the appellant's application challenging valuation/ alleged concealment of FDRs and in approving the Resolution Plan - HELD THAT: - The Tribunal examined the I.A. alleging undervaluation and non disclosure of fixed deposit receipts and other receivables. The Adjudicating Authority recorded that the RP had addressed the matter (including communications with the PWD) and that the Resolution Plan expressly accounted for cash/bank balances and receivables, while the CoC had approved the Plan with overwhelmingly majority support. The Tribunal held that valuation was carried out in accordance with the CIRP Regulations and that the Adjudicating Authority correctly found the I.A. to be devoid of merits; interference with the commercial wisdom of the CoC was unwarranted where the plan met the requirements of Section 30(2). [Paras 13, 14, 15]

I.A. No. 2519/2024 was correctly rejected and there was no ground to interfere with the Adjudicating Authority's approval of the Resolution Plan.

Final Conclusion: Both appeals are dismissed; the Adjudicating Authority did not err in rejecting the appellant's applications for documents and for inquiry into alleged undervaluation, and there is no reason to disturb approval of the resolution plan which met the requirements of Section 30(2).

Withdrawal of application under Section 12A of the Insolvency and Bankruptcy Code - Effect of liquidation commencement under Section 33 on existence and powers of the Committee of Creditors - Compromise or arrangement in liquidation under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 - Ineligibility under Section 29A and its impact on maintainability of applications supported by barred persons - Constitution and temporal applicability of Stakeholders' Consultation Committee (SCC) under Regulation 31A of the IBBI (Liquidation Process) Regulations - Clarificatory explanation to Regulation 31A and non-applicability to liquidation processes commenced prior to amendment

Withdrawal of application under Section 12A of the Insolvency and Bankruptcy Code - Effect of liquidation commencement under Section 33 on existence and powers of the Committee of Creditors - Compromise or arrangement in liquidation under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 - Ineligibility under Section 29A and its impact on maintainability of applications supported by barred persons - Application under Section 12A cannot be filed or allowed after commencement of liquidation; maintainability is barred where CoC ceases and statutory scheme contemplates withdrawal only during CIRP. - HELD THAT: - Section 12A permits withdrawal of an admitted application only with the approval of ninety per cent. of the voting share of the Committee of Creditors (CoC) during the continuance of CIRP. Once liquidation has been ordered under the statutory scheme (Section 33), the CoC ceases to exist in a manner that would enable it to approve withdrawal under Section 12A. The Liquidation Regulations provide for an alternative mechanism of compromise or arrangement under Regulation 2B, which governs proposals under Section 230 of the Companies Act within a limited timeframe, and thus the statutory framework does not contemplate post liquidation withdrawal under Section 12A. The Tribunal's earlier observation in V Navneetha Krishnan was reviewed and held to be inconsistent with the statutory text and scheme; accordingly, that observation cannot be extended to permit Section 12A applications during liquidation. Further, an application filed at the instance of, or supported by, a person barred under Section 29A (here, the former director) is not maintainable; the Adjudicating Authority therefore correctly noted the involvement of the barred promoter and the absence of CoC support. [Paras 10, 11, 12, 15, 16]

I.A. under Section 12A filed after commencement of liquidation is not maintainable and the Adjudicating Authority did not err in rejecting I.A. No. 336/2021.

Constitution and temporal applicability of Stakeholders' Consultation Committee (SCC) under Regulation 31A of the IBBI (Liquidation Process) Regulations - Clarificatory explanation to Regulation 31A and non-applicability to liquidation processes commenced prior to amendment - Regulation 31A requiring constitution of SCC does not apply to liquidation processes that commenced before the regulation's effective date; liquidator was not obliged to constitute SCC in this case. - HELD THAT: - Regulation 31A, inserted by notification effective 25.07.2019, mandates constitution of the Stakeholders' Consultation Committee within sixty days from the liquidation commencement date for liquidation processes commencing on or after the amendment. The explanation to Regulation 31A clarifies that the requirement applies only to liquidation processes commencing on or after the commencement of the Amendment Regulations, 2019. Where liquidation commenced prior to that date (here, 12.09.2017), the statutory requirement to constitute SCC within sixty days is inapplicable; the statute does not require performance of an impossible act. Consequently, the Liquidator's sale proceedings without constituting SCC in a liquidation that began before the amendment were not in breach of Regulation 31A. [Paras 17, 18, 19]

No obligation arose to constitute the SCC in respect of a liquidation that commenced on 12.09.2017; the Adjudicating Authority correctly dismissed challenges to the sale on this ground.

Final Conclusion: The Adjudicating Authority did not err in dismissing the applications: post liquidation withdrawal under Section 12A is impermissible and the SCC requirement under Regulation 31A is not applicable to liquidations commenced before the amendment; the appeals are dismissed.

Default and existence of financial debt - declaration of NPA and 'out of order' status under RBI guidelines - drawing power distinct from sanction limit - annual review/renewal of cash credit facilities as condition of sanction - bank's right to recall/withdraw facilities for breach of sanction conditions - Section 7 IBC: establishment of debt and default as threshold for CIRP

Default and existence of financial debt - Section 7 IBC: establishment of debt and default as threshold for CIRP - Default was established and the financial debt existed, permitting initiation of CIRP under Section 7. - HELD THAT: - The Tribunal found that cash credit facilities were sanctioned in 2013 and secured by loan documents, establishing the financial debt. The Corporate Debtor failed to pay accruing interest and thereby allowed amounts to become overdue. The Adjudicating Authority therefore correctly concluded that default had occurred; since debt was undisputed, the only determinative question was default, which the Tribunal upheld on the material before it. [Paras 28, 29, 54, 55]

Default existed and the Adjudicating Authority rightly admitted the Section 7 application.

Declaration of NPA and 'out of order' status under RBI guidelines - drawing power distinct from sanction limit - annual review/renewal of cash credit facilities as condition of sanction - Bank validly declared the account NPA and reduced drawing power to zero for non-compliance with sanction conditions and on the basis of RBI 'out of order' tests. - HELD THAT: - The sanction letter expressly required annual review/renewal and provided that drawing power could be made 'zero' if stipulated terms were not met. The Tribunal examined the sanction terms and RBI Master Circular definitions of NPA and 'out of order' status, noting that an account may be treated as 'out of order' where drawing power is not maintained or other specified conditions (no credits for 90 days or credits insufficient to cover interest) obtain. The Bank had repeatedly requested the Corporate Debtor to furnish renewal documents, conducted a visit and sent advocate's reminders, yet the Corporate Debtor failed to comply. Given the breach of the material condition of sanction and non-payment of interest, the Bank's action to classify the account as NPA and make drawing power zero was held to be within rights and in accordance with RBI guidance and the sanction terms. [Paras 46, 48, 51, 52, 53]

The declaration of NPA and reduction of drawing power to zero were justified by the sanction terms and RBI 'out of order' criteria; there was no irregularity in the Bank's conduct.

Requirement of particulars in Section 7 application - Omission of a specific 'date of default' in Part IV of the Section 7 application was not fatal where the application identified the amount and provided detailed computation as enclosure. - HELD THAT: - The Tribunal noted that Part IV of the Section 7 application set out the claimed amount and that a detailed working and particulars were supplied as Appendix A. On that basis the contention that absence of a specific date of default in Part IV rendered the Impugned Order unsustainable was rejected. [Paras 44]

The objection regarding non-disclosure of date of default in Part IV is unfounded; the particulars and computation furnished sufficed.

Final Conclusion: The Appellate Tribunal affirmed the Adjudicating Authority's admission of the Section 7 petition: the debt and default were established, the Bank was entitled to declare the account NPA and reduce drawing power for breach of sanction conditions and non-renewal, and the appeal is dismissed.

Admissibility and use of statements under Section 50 PMLA - Information-sharing under Section 66(2) PMLA and lodging of FIR - Maintainability of FIR where predicate prosecution complaint is quashed - Interference with FIR disclosing cognizable offence - Distinction between admission and confession for evidentiary purposes

Admissibility and use of statements under Section 50 PMLA - Distinction between admission and confession for evidentiary purposes - Whether statements recorded under Section 50 of the PML Act, 2002 could be relied upon to form the basis of the FIR lodged by the State after the ED's prosecution complaint was quashed - HELD THAT: - The Court held that statements recorded under Section 50 PMLA constitute material in the possession of the ED which may be transmitted to the competent agency and can be used to initiate or further investigations; such statements need not be treated as confessions and their use for triggering investigation or lodging an FIR is permissible, subject to the settled distinction between admissions and confessions and the safeguard that statements recorded for PMLA proceedings may not be admissible at trial in the same manner as confessions. The Court accepted that protection under Section 25 of the Evidence Act and related authorities require case-by-case assessment, but declined the broad contention that Section 50 statements can never be used to commence criminal proceedings; rather they may be used to initiate or advance an investigation though their trial-stage admissibility is a separate question. [Paras 27, 28, 29]

Statements recorded under Section 50 PMLA could validly form part of the material on which the ED communicated information and the State could act to lodge an FIR; such use for initiating or furthering investigation is permissible though admissibility at trial remains subject to legal safeguards.

Information-sharing under Section 66(2) PMLA and lodging of FIR - Maintainability of FIR where predicate prosecution complaint is quashed - Whether the communication sent by the ED under Section 66(2) PMLA on 28.7.2023 and the FIR registered on 30.7.2023 were valid notwithstanding that the ED's prosecution complaint was later quashed by the Supreme Court - HELD THAT: - The Court found that on 28.7.2023 the prosecution complaint was still extant and thus there was no illegality in the ED sending information to the State under Section 66(2) PMLA. Even after the subsequent quashing of the prosecution complaint, the information in ED's possession remained material which the concerned agency (here the State of Uttar Pradesh) was entitled to investigate. The Court accepted the ED's duty and power to share information under Section 66(2) and rejected the contention that the later quashing of the ED's prosecution complaint necessarily vitiated the FIR which was registered on the basis of information shared earlier. [Paras 24, 27, 29]

The ED's communication under Section 66(2) PMLA and the FIR registered on its basis were valid; subsequent quashing of the ED's prosecution complaint did not render the information impermissible for triggering a State investigation.

Interference with FIR disclosing cognizable offence - Maintainability of FIR where predicate prosecution complaint is quashed - Whether the FIR (Case Crime No.196/2023) discloses cognizable offences against the petitioners and whether the High Court should interfere with the FIR in the writ petitions - HELD THAT: - Applying settled precedents that courts should not interfere where a cognizable offence is prima facie disclosed, the Court examined the FIR and subsequent investigation material. It concluded that the FIR, on its face and in light of investigative material (including statements, WhatsApp chats and corroborative evidence), disclosed cognizable offences under the IPC and showed prima facie complicity of the named accused (including Anil Tuteja, Arun Pati Tripathi and Niranjan Das). Although the FIR as lodged contained verbatim reproduction of the ED communication, the State's counter-affidavit and investigation furnished incriminating material against the accused, including Anwar Dhebar, such that interference was not warranted at the writ stage. The Court noted available remedies for accused persons (bail/anticipatory bail) but declined to quash the FIR. [Paras 24, 25, 26, 30]

The FIR discloses prima facie cognizable offences and the writ petitions challenging the FIR are dismissed; the Court will not interfere with the FIR at this stage.

Final Conclusion: The writ petitions challenging FIR No.196/2023 and the ED's communication were dismissed: statements under Section 50 PMLA may be used to initiate or further investigation and to furnish information under Section 66(2) PMLA; the ED's communication of 28.7.2023 and the FIR of 30.7.2023 were valid in the circumstances; and the FIR discloses prima facie cognizable offences so judicial interference is declined (petitioners remain free to pursue bail remedies).

Article 21 right to personal liberty - bail is the rule and jail is the exception - twin conditions under Section 45 PMLA - special nature of the offence of money laundering - prolonged pre-trial incarceration as punishment without trial - economic offences constitute a class apart

Twin conditions under Section 45 PMLA - Article 21 right to personal liberty - bail is the rule and jail is the exception - Grant of regular bail to the applicant under Section 45 PMLA read with Section 439 Cr.P.C. - HELD THAT: - The Court applied the special statutory test in Section 45 PMLA, requiring satisfaction on the twin conditions that the public prosecutor be heard and that there are reasonable grounds for believing the accused is not guilty of the offence and is not likely to commit an offence while on bail. While acknowledging the special nature of money laundering and precedents treating economic offences as a distinct class, the Court balanced those considerations with the constitutional guarantee of personal liberty under Article 21 and the principle that prolonged pre trial incarceration must not become punishment without trial. The Court noted that investigations qua the petitioner were complete and the trial had not progressed for about two years, the evidence was largely documentary (not susceptible to tampering), and the applicant was neither a flight risk nor likely to influence witnesses. Reference was made to relevant Supreme Court authorities recognizing that long incarceration and voluminous records (including material requiring translation) are factors favouring bail. Applying these factors, the Court was satisfied that the twin conditions under Section 45 PMLA were met and that the applicant was entitled to bail subject to stringent conditions tailored to prevent interference with the investigation and ensure attendance at trial. [Paras 46, 47, 48, 49, 50]

Bail granted on furnishing personal bond and surety and on conditions restricting travel, contact with witnesses, and ensuring availability to the investigating agency and trial court.

Final Conclusion: The bail application under Section 45 PMLA and Section 439 Cr.P.C. is allowed; the applicant is admitted to bail on conditions specified by the Court, and the matter is remitted to the Trial Court for compliance with those conditions.

Provisional attachment of property - proceeds of crime - essential ingredients of provisional attachment under section 5(1) PMLA - reason to believe - nexus between attached property and proceeds of crime - status of bona fide receiver - continuation of attachment under section 8(3)(a) PMLA and temporal limitation - inclusion of leased property within definition of property - requirement of statutory procedure under sections 8(1) and 8(2) PMLA

Inclusion of leased property within definition of property - Non-joinder of the lessor (Government of Odisha) did not vitiate the attachment or its confirmation. - HELD THAT: - The Tribunal held that the statutory definition of "property" under the PMLA is inclusive and covers leased interests; the lease conveyed rights and liabilities for the lease period to the lessee (the trust) and those rights could be stepped into by the Central Government/ED if confiscation followed. Consequently, there was no legal necessity to implead the Government of Odisha as a party, and the appellant had not taken steps to implead the Government or shown that it had been notified. The contention that non-joinder rendered the order void was therefore rejected. [Paras 18]

Claim of invalidity for non-joinder of Government of Odisha rejected.

Essential ingredients of provisional attachment under section 5(1) PMLA - reason to believe - The Adjudicating Authority lawfully formed the requisite reason to believe and complied with the requirements to issue and confirm the Provisional Attachment Order under section 5(1). - HELD THAT: - On the record the Tribunal found admitted infusions by Shri Dash totaling the alleged proceeds which remained with the trust and had been applied to construction, salaries and payments to trustees; the PAO recorded subjective satisfaction in writing. Given these admitted facts and the PAO's recorded reasons, the essential ingredients of section 5(1) (and the proviso to section 5(1)(b)) were satisfied and the attachment's protective object until trial was justified. The ED had not ousted the trust from possession, and there was prima facie material to form the statutory satisfaction. [Paras 19]

Confirmation of the PAO upheld as meeting section 5(1) requirements.

Nexus between attached property and proceeds of crime - There existed a sufficient nexus between the attached land/building and the alleged proceeds of crime. - HELD THAT: - The Tribunal relied on the appellant's own admissions that substantial sums allegedly derived from criminal activity were infused into the trust while the donor was managing trustee and that those sums were used for construction and other institute purposes and were not returned. Those facts, recorded in the PAO and impugned order, were held to be prima facie sufficient to establish a link between the proceeds and the property, justifying attachment. [Paras 20, 25]

Nexus/link established; challenge rejected.

Status of bona fide receiver - The Appellant Trust's plea of being a bona fide receiver was rejected. - HELD THAT: - Because the donor (Shri Dash) was the managing trustee who infused the allegedly tainted funds and those funds were applied to the trust's activities during his control, and were not returned after his removal, the Tribunal found the trust could not be treated as an innocent bona fide receiver. The factual admissions regarding utilization of the funds undermined the trust's claim. [Paras 21]

Bona fide receiver defence not accepted.

Continuation of attachment under section 8(3)(a) PMLA and temporal limitation - The appellant's objection under section 8(3)(a) based on non-filing of prosecution within a prescribed limitation was negatived on the facts. - HELD THAT: - The Tribunal noted that the prosecution complaint including the attached property was filed on 31-3-2016, at a time when the statutory limitation now reflected in section 8(3)(a) (firstly 90 days, later 365 days) was not in force. Thus, the property was already part of the prosecution complaint before the later temporal limits were introduced; accordingly the appellant's plea for release on that ground was held inapplicable to these facts and rejected. [Paras 22]

Challenge based on section 8(3)(a) limitation dismissed.

Provisional attachment of property - Absence of the trust's name in FIR/ECIR or in initial charge-sheet did not by itself invalidate attachment of the property. - HELD THAT: - The Tribunal observed that proceedings before it concern attachment of tainted property derived or obtained by any person; even though the trust was not named in the FIR/ECIR, the attached property was included in the prosecution complaint. Given the admitted facts of infusion and use of alleged proceeds by the managing trustee, non-naming of the trust in earlier records did not disentitle the ED from attaching property demonstrably traceable to alleged proceeds. [Paras 23]

Non-naming in FIR/ECIR insufficient to set aside attachment.

Requirement of statutory procedure under sections 8(1) and 8(2) PMLA - The Adjudicating Authority complied with the statutory requirements under sections 8(1) and 8(2) while adjudicating the Original Complaint. - HELD THAT: - On review of the impugned order the Tribunal found that factual and legal issues were examined, appellant's submissions (including admissions) were considered, and reasons in the PAO/OC conveyed sufficiently what the appellant had to meet. The authority's analysis and findings (as recorded) met the statutory adjudicatory obligations and thus the challenge to procedural infirmity failed. [Paras 24]

Statutory procedure under sections 8(1) and 8(2) held to have been followed.

Final Conclusion: The Appellate Tribunal dismissed the appeal, upholding confirmation of the Provisional Attachment Order; the challenges based on non-joinder, lack of reason to believe, absence of nexus, bona fide receiver status, procedural non-compliance and limitation under section 8(3)(a) were all rejected on the facts and law set out in the impugned order.

Provisional attachment under PMLA - limitation for filing prosecution complaint under PMLA - commencement of statutory time limit - retrospective operation of statute - clarificatory versus substantive amendment

Limitation for filing prosecution complaint under PMLA - commencement of statutory time limit - retrospective operation of statute - provisional attachment under PMLA - Whether the amendments introducing a time limit for filing the prosecution complaint under Section 8(3)(a) of the PMLA applied so as to release attachments confirmed before the amendment and, if not, whether the Directorate complied with the time limit for filing the prosecution complaint. - HELD THAT: - The Tribunal examined the amendments made by the Finance Act, 2018 and the subsequent amendment in 2019 and noted the legislative purpose as recorded in the Notes on Clauses was to "allow Enforcement Directorate reasonable time to file prosecution" rather than to nullify past confirmed attachments. The amendment came into effect on publication of notification GSR 383(E) dated 19.04.2018. The Tribunal treated the temporal operation of the newly introduced limitation as commencing from the date the amendment came into force and not as causing automatic lapse of attachments confirmed prior to that date. Applying that position to the facts, the Directorate was required to file the prosecution complaint within 90 days from 19.04.2018. The prosecution complaint was filed on 16.07.2018, which the Tribunal found to be within the 90 day period. The Tribunal rejected the appellant's submission that the amendment was clarificatory and therefore must be read retrospectively to operate from the date of confirmation of attachment in 2015, holding that no pre amendment ambiguity made such a retrospective reading necessary. Reliance placed on authorities cited by the appellant was examined and distinguished: the Tribunal held the amendment was a substantive introduction of a time limit and was intended to provide reasonable time to ED going forward, so the appellant's contention that attachments confirmed earlier had lapsed was not accepted. [Paras 17, 20, 21, 22, 23]

The 90 day period under the 2018 amendment commences from 19.04.2018; the prosecution complaint filed on 16.07.2018 was within that period and therefore the provisional attachments as confirmed by the Adjudicating Authority did not lapse.

Final Conclusion: The appeal is dismissed. The Tribunal held that the limitation introduced by the 2018 amendment began on 19.04.2018, the Directorate filed the prosecution complaint within 90 days of that date, and there was no illegality in the continued provisional attachment of the properties.

Provisional attachment - confirmation of provisional attachment - prosecution complaint time limit under PMLA - retrospective operation of statutory amendment - locus standi to challenge adjudicating authority's order

Prosecution complaint time limit under PMLA - retrospective operation of statutory amendment - confirmation of provisional attachment - Whether the failure to file a prosecution complaint within a period prior to the 2018 amendment vitiated the confirmed provisional attachments, and from which date the statutory time limit applies - HELD THAT: - The Tribunal examined the amendments to Section 8 effected by the Finance Act, 2018 and the notification GSR 383(E) which brought the amendment into force on 19.04.2018. It held that Parliament's stated intention in the Finance Bill, 2018 was to "allow Enforcement Directorate reasonable time to file prosecution" and that this intention cannot be read as automatically nullifying provisional attachments earlier confirmed by the Adjudicating Authority. The Tribunal identified the temporal scheme: prior to 19.04.2018 no statutory time-limit existed; from 19.04.2018 to 19.03.2019 a 90-day limit applies; with effect from 20.03.2019 a 365-day limit applies. Counting from 19.04.2018, the Directorate filed the prosecution complaint on 16.07.2018 which fell within 90 days of the amendment coming into force. The Tribunal rejected the appellants' contention that the amendment should be treated as retrospectively operative so as to vitiate earlier confirmed attachments, finding no ambiguity in the pre-amendment provision that would require the amendment to be read as clarificatory; nor was there any legislative intention to render past confirmations void immediately upon commencement. Reliance placed by the appellants on authorities concerning retrospective application was considered distinguishable or inapplicable. Consequently, there was no illegality in the continued attachment of the properties during pendency of proceedings after the prosecution complaint was filed within the prescribed period from 19.04.2018. [Paras 25, 26, 27, 28, 29]

The 90-day period under the 2018 amendment is to be reckoned from 19.04.2018 and the prosecution complaint filed on 16.07.2018 was within that period; therefore the confirmed provisional attachments were not rendered invalid for want of timely filing.

Locus standi to challenge adjudicating authority's order - provisional attachment - Whether the appellants had locus to file the appeals against the Adjudicating Authority's order confirming provisional attachments - HELD THAT: - The Tribunal noted that the appellants had been made defendants in the Original Complaint filed before the Adjudicating Authority and that the Adjudicating Authority had recorded prima facie findings against the defendants (the appellants) that they had committed scheduled offences and generated proceeds of crime. Under Section 26 of the PMLA, any person aggrieved by an Adjudicating Authority order may prefer an appeal to the Appellate Tribunal. The Tribunal held that merely because none of the specific properties confirmed in the impugned order belonged to the appellants did not mean they lacked cause of action; the appellants were aggrieved by adverse findings and sought setting aside of the impugned order as a whole. Accordingly the respondents could not, after having included the appellants as defendants and secured adverse prima facie findings, contend that the appellants lacked locus to appeal. [Paras 30, 31, 32]

The appellants have locus to challenge the Adjudicating Authority's confirmation order and their appeals are maintainable.

Final Conclusion: The appeals are dismissed. The Tribunal held that the 90-day filing period under the 2018 amendment runs from 19.04.2018 and the prosecution complaint in this case was filed within that period; further, the appellants had locus to appeal the Adjudicating Authority's confirmation order.

Quashing of FIR - registration of FIR mandatory where information discloses cognizable offence - ECIR as internal document distinct from FIR - obligation to disclose under Section 66(2) of PMLA - power of arrest under Section 19 of PMLA - 'reason to believe' on material in possession - second FIR / duplicate prosecution doctrine - distinct offences test - scope of interference under inherent jurisdiction / Section 482 CrPC at investigation stage

Quashing of FIR - registration of FIR mandatory where information discloses cognizable offence - Validity of FIR No. 04/2024 registered by ACB/EOW, Raipur and whether it is liable to be quashed at investigation stage - HELD THAT: - The High Court held that the ACB FIR No. 04/2024 discloses prima facie cognizable offences and there is no ground to exercise extraordinary jurisdiction under Section 482 Cr.P.C. to quash the FIR at the initial stage of investigation. The Court applied settled law that where information ex facie discloses a cognizable offence the duty to register an FIR is mandatory and the merits must ordinarily be left to investigation and trial. The factual matrix and the contents of the disclosure (including alleged modularity of charging illegal commissions, use of duplicate holograms and organized sale of unaccounted liquor) warranted investigation; the State/ACB conducted independent verification before registration; the departmental enquiry relied upon by petitioners was self serving and not approved by competent authority and therefore of no legal consequence. In these circumstances interference at the threshold was declined and the petitions seeking quashment of FIR No. 04/2024 were dismissed. [Paras 38, 121, 151, 152, 153]

The FIR No. 04/2024 registered by ACB/EOW, Raipur is not liable to be quashed; investigation should proceed.

ECIR as internal document distinct from FIR - obligation to disclose under Section 66(2) of PMLA - power of arrest under Section 19 of PMLA - 'reason to believe' on material in possession - Validity of ED's actions in recording ECIR/RPZO/04/2024, disclosure to State agencies, and legality of arrest/remand of petitioners under PMLA - HELD THAT: - The Court upheld the ED's power to record an ECIR and to share information under Section 66(2) PMLA, observing that ECIR is an internal document distinct from an FIR and that disclosure to concerned agencies is an obligation when other offences are disclosed. The Supreme Court's earlier orders quashing a prosecution complaint did not render the ED's inquiry or ECIR void; the Supreme Court had quashed the complaint limitedly and had not barred the ED from recording a new ECIR based on a later FIR. On arrest, the Court found that reasons to believe were recorded on material in ED's possession and the remand courts had examined the file and validly remanded the arrestees; procedural safeguards of Section 19 PMLA and remand requirements were complied with. The High Court concluded there was no basis to declare ED's investigation, disclosure or arrests illegal or mala fide at this stage. [Paras 137, 139, 151, 152, 153]

Recording of ECIR/RPZO/04/2024, disclosures under Section 66(2) PMLA, and the arrests/remands under Section 19 PMLA are not shown to be illegal; the ED's investigation may continue.

Second FIR / duplicate prosecution doctrine - distinct offences test - scope of interference under inherent jurisdiction / Section 482 CrPC at investigation stage - Whether the FIR registered by Chhattisgarh is a prohibited 'second FIR' and hence liable to be quashed - HELD THAT: - Applying the settled tests from precedent, the Court held that the Chhattisgarh FIR and the prior UP FIR are distinguishable on allegations and scope: the Chhattisgarh FIR canvasses a larger, multi faceted conspiracy (illegal commissions, Part A/Part B/Part C scheme, use of holograms, loss estimate, involvement across State apparatus) that is broader than the Noida FIR. Where the later FIR implicates a different canvas and allegations, it is not a barred second FIR. The Court reiterated that interference to quash a second FIR is permissible only if both FIRs are in substance the same; that is not the case here. Consequently the plea that a second FIR invalidates subsequent investigation was rejected. [Paras 121, 140, 147, 151, 152]

The Chhattisgarh FIR is not a barred second FIR; separate investigation may lawfully proceed.

Final Conclusion: The High Court dismissed the batch of petitions: the ACB FIR No. 04/2024 and the ED's ECIR/investigative steps (including arrests and remands) were not found to be illegal or liable to be quashed at this stage; the investigations by the State/ACB and the ED may continue and interim orders, if any, were vacated.

Extension of time for compliance under a statutory amnesty scheme - modification of a statutory scheme by judicial order - requirement to strictly abide by terms and conditions of a benevolent one time scheme - prerogative of the Government to frame or amend a scheme - quashing or stay of recovery proceedings where scheme cut off not complied with

Extension of time for compliance under a statutory amnesty scheme - requirement to strictly abide by terms and conditions of a benevolent one time scheme - modification of a statutory scheme by judicial order - Whether the High Court could permit the petitioners to make payment after the scheme cut off date and thereby extend the time to avail benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. - HELD THAT: - The court held that the Scheme was a one time, benevolent statutory measure with a prescribed cut off for payment and was not an on going scheme. Allowing payment beyond the stipulated date would amount to modifying the Scheme, which is the prerogative of the government. Reliance on the Supreme Court decision in Yashi Constructions established that a person seeking benefit under a scheme must scrupulously comply with its terms and that judicial extension of time not provided by the Scheme would effectively modify it and is impermissible. The Madras High Court decision relied upon by the petitioners was held to be inapplicable in light of the later Supreme Court authority. Consequently, the court declined to extend the time for payment or to permit the petitioners to avail the Scheme despite their stated willingness to pay after the cut off.

The petitioners' request for extension of time to make payment and thereby to avail benefits under the Sabka Vishwas Scheme, 2019, was refused; the court will not modify the Scheme or extend the cut off date.

Quashing or stay of recovery proceedings where scheme cut off not complied with - prerogative of the Government to frame or amend a scheme - Whether the initiation of recovery proceedings by the revenue (letter dated 16.02.2021) could be quashed or stayed because the petitioners had sought additional time to pay under the Scheme. - HELD THAT: - Given the court's conclusion that the petitioners could not be permitted to pay after the Scheme's cut off, there was no basis to quash or stay recovery proceedings initiated for non payment within the Scheme timeline. The court observed that permitting such relief would amount to judicial modification of the Scheme. Accordingly, interference with the recovery action was not warranted.

The challenge to the recovery proceedings was rejected; the court declined to quash or stay the initiation of recovery.

Final Conclusion: The petition was rejected: the High Court refused to extend the payment cut off under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 or to quash/stay recovery proceedings, holding that judicial modification of the Scheme's timelines is impermissible and that claimants must comply strictly with the Scheme's terms.

Mandatory penalty under Rule 15(4) of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 - CENVAT credit availed prior to payment of service tax on reverse charge - extended period of limitation - suppression and mala fide intention for invoking penal provisions - payment of tax with interest during audit removes culpability - self-assessment obligations and compliance with CENVAT Credit Rules

Mandatory penalty under Rule 15(4) of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 - CENVAT credit availed prior to payment of service tax on reverse charge - suppression and mala fide intention for invoking penal provisions - payment of tax with interest during audit removes culpability - Whether imposition of mandatory penalty under Rule 15(4) CCR, 2004 read with Section 78 Finance Act, 1994 for irregular availing and utilisation of CENVAT credit prior to payment of service tax was justified. - HELD THAT: - The appellant availed and utilised CENVAT credit in April 2007 and November 2007 prior to payment of service tax on import of services on reverse charge basis, with delays of three days and seven days respectively (records show dates of credit availment and actual payment). On being pointed out in audit, the appellant paid the applicable interest. The Tribunal found no allegation or material establishing suppression, fraud or mala fide intention to evade tax; the irregularity arose from clerical error and involved short delays. Reliance was placed on precedents where payment of tax with interest during audit was held to remove culpability and disentitle revenue from imposing penalty. In view of absence of requisite mens rea or suppression and since interest was paid on audit objection, invoking the extended period and imposing the mandatory penalty under Rule 15(4) read with Section 78 was not justified. The Tribunal, however, left intact the recovery/appropriation of the tax and interest already paid. [Paras 6, 7, 8, 10, 11]

Mandatory penalty under Rule 15(4) CCR, 2004 read with Section 78 Finance Act, 1994 set aside; appropriation of tax and interest not disturbed.

Final Conclusion: Penalty imposed for brief clerical delays in availing CENVAT credit prior to payment on reverse charge was quashed given absence of suppression or mala fide intent and payment of interest upon audit; recovery/appropriation of tax and interest upheld and appeal allowed.

Transfer of technical know-how - consultancy service - service tax on royalty/technical know-how - licensor-licensee relationship - forward charge

Transfer of technical know-how - consultancy service - licensor-licensee relationship - service tax on royalty/technical know-how - Transfer of technical know-how under the MOU does not constitute a taxable service as a consulting engineer. - HELD THAT: - The Tribunal found on the terms of the MOU that the transaction was a transfer of technical know-how and sale-related consideration comprising a slump purchase price and a specified royalty for use of technical know-how for a defined period. There was no contractual obligation to render consultancy services and the appellants were described as licensor/licensee rather than service providers. Applying this factual and legal distinction, the Tribunal relied on consistent precedents where transfer of exclusive or non exclusive technical know-how and related proprietary process technology was held not to be exigible as consultancy service but to be a transfer of technology/licence . The fact that in some reported decisions service tax was sought to be imposed on an engineering consultancy follow up did not alter the position where the agreement itself manifests a transfer/licence of know how without any ongoing professional engineering consultancy. The Tribunal noted the present demand was on a forward charge basis but regarded the distinction from a prior reverse charge case as immaterial to the core finding on the nature of the transaction. For these reasons the revision order confirming service tax demand as a consulting engineer service was unsustainable and was set aside. [Paras 5, 6, 7]

Impugned order in revision confirming service tax demand as consulting engineer service is unsustainable and is set aside; appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that the agreement effected a transfer/licence of technical know how and not a taxable consulting engineer service, set aside the revision order confirming the demand and granted consequential relief as per law.

Cenvat credit availed prior to registration - interest liability under Rule 14 of the Cenvat Credit Rules - export of services - business auxiliary services / business support services - technical testing and analysis services - classification - export of services based on location of recipient under Rule 3(1)(iii) of Export of Services Rules, 2005 - extended period of limitation and penalty for suppression

Cenvat credit availed prior to registration - interest liability under Rule 14 of the Cenvat Credit Rules - Liability to pay interest on cenvat credit availed prior to obtaining registration - HELD THAT: - The Tribunal held that the law does not mandate obtaining registration prior to availing cenvat credit and that prior decisions in the appellant's own case and consistent Tribunal precedents recognise credits taken before registration as valid. The department had not challenged the eligibility of the credits on merits nor issued any demand for recovery of allegedly ineligible credit. In the absence of a valid demand and its adjudicatory confirmation, interest under Rule 14 read with Section 75 cannot be lawfully levied. The impugned interest demand, including its computation from the date of taking credit until registration, is therefore unsustainable. [Paras 7]

Demand of interest on cenvat credit availed prior to registration set aside.

Export of services - business auxiliary services / business support services - technical testing and analysis services - classification - export of services based on location of recipient under Rule 3(1)(iii) of Export of Services Rules, 2005 - Whether Clinical Research Management and Resourcing (CRM) services qualify as export of services - HELD THAT: - The Tribunal found that CRM services provided by the appellant consisted of supervision and reporting on clinical trials conducted by hospitals under separate arrangements with the client and that the appellant did not itself conduct testing or clinical trials. Such supervisory/support services are properly classifiable as business auxiliary services or business support services, and fall within the scope of export where the recipient is located outside India and foreign exchange is received. The impugned order's classification of the appellant's services as technical testing and analysis services was incorrect because the appellant did not undertake scientific testing or analysis of drugs. Even if characterised as testing/analysis, the services would qualify as export to the extent they are partly performed outside India by delivery of reports to the foreign recipient, in terms of Rule 3(1)(iii) of the Export of Services Rules, 2005. Further, the Commissioner confirmed demand for the entire turnover though only part of the turnover (Data Management services) had already been accepted as export and refunds granted; confirming the entire demand was therefore unsustainable. [Paras 8]

CRM services held to qualify as export of services; impugned classification as technical testing and analysis rejected; demand confirmed for entire turnover set aside to the extent inconsistent with accepted export treatment of Data Management services.

Extended period of limitation and penalty for suppression - penalty under Section 78 and under Rule 15(4) of the Cenvat Credit Rules - Sustainability of invocation of extended period and penalties for alleged suppression and incorrect availment of cenvat credit - HELD THAT: - The Tribunal found no suppression of material facts because the appellant had been regularly filing returns and obtaining refunds for Data Management services, and the department had not challenged the eligibility of the credits on merits. Given that availment of credit prior to registration was held valid and there was no demand for recovery of credit, invocation of the extended period and imposition of penalty under Section 78 and penalty under Rule 15(4) equal to the credit amount were not sustainable in law. [Paras 9]

Extended period invocation and penalties set aside; penalty under Section 78 and Rule 15(4) not sustainable.

Final Conclusion: The impugned order confirming service tax demand, interest and penalties is set aside: interest demand on credits availed prior to registration dismissed; CRM services held to qualify as export (and misclassified as testing and analysis rejected); extended period and penalties for suppression and incorrect availment of credit found unsustainable. Appeal allowed with consequential relief as per law.

Club or association service - Exemption of services by operators of common effluent treatment plant - Validation of retrospective exemption (notification deemed effective retrospectively) - Service tax liability on common effluent/hazardous waste treatment by member-run entities

Club or association service - Service tax liability on common effluent/hazardous waste treatment by member-run entities - Whether charges collected by the appellant from member industries for treatment of hazardous effluent/solid waste are liable to service tax - HELD THAT: - The Tribunal found on the facts that the appellant is a consortium/association of industrial units operating common treatment facilities and charging admission/membership and treatment charges. Reliance was placed on decisions of the Gujarat High Court and coordinate benches of this Tribunal which held that services provided by such member-run common treatment facilities fall within the concept of club or association service and, in light of subsequent judicial pronouncements and statutory developments, are not taxable. The Tribunal held that the settled position in these precedents is that charges collected by an entity operating a common effluent treatment facility for members are not leviable to service tax. [Paras 4]

Charges collected by the appellant from its member industries for treatment of hazardous effluent/solid waste are not liable to service tax.

Exemption of services by operators of common effluent treatment plant - Validation of retrospective exemption (notification deemed effective retrospectively) - Whether the Notification No. 08/2017 S.T. (and related validation/exemption provisions) exempts treatment of effluent by operators of common effluent treatment plants for the period 01.07.2012 to 31.03.2015 - HELD THAT: - The Tribunal examined Notification No. 08/2017 S.T., which directs that service tax payable on services by operators of common effluent treatment plants for the period 1 7 2012 to 31 3 2015 shall not be required to be paid. The Tribunal accepted that this notification, read with the legislative validation of earlier exemption notifications and the Finance Act, 2012 provisions, exempts the treatment of effluent by common effluent treatment plant operators for the specified period. Applying that exemption, the Tribunal held that the appellant's activities for the said period were not liable to service tax. [Paras 4]

The treatment of effluent by operators of common effluent treatment plants is exempt for the period 01.07.2012 to 31.03.2015 by Notification No. 08/2017 S.T., and service tax is not payable for that period.

Final Conclusion: The impugned adjudication confirming service tax, interest and penalty is set aside; the appeals are allowed as the charges collected by the appellant for treatment of hazardous effluent/solid waste by its member-run common facility are not leviable to service tax and, in respect of the period 01.07.2012 to 31.03.2015, are exempted by Notification No. 08/2017 S.T.

Refund of erroneously paid service tax - unjust enrichment - sanctioning of refund - revival of original order on setting aside appellate order - recovery consequent to a set aside order

Refund of erroneously paid service tax - unjust enrichment - revival of original order on setting aside appellate order - recovery consequent to a set aside order - Sustainability of the show cause notice and consequent recovery order in view of the Tribunal's setting aside of the Commissioner (Appeals) order and revival of the original refund sanction. - HELD THAT: - The appellant's refund claim, initially sanctioned by the original order dated 07.10.2016, was later set aside by the Commissioner (Appeals) by order dated 30.08.2017 on the ground of unjust enrichment

The order confirming recovery arising from the show cause notice is set aside and the appeal is allowed, thereby reviving the original refund sanction.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order of 30.08.2017 by its final order dated 22.12.2023, which revives the original refund sanction; consequently the show cause notice and the order confirming recovery dated 21.06.2018 are unsustainable and are set aside, and the appeal is allowed.