TaxTMI Updates e-Newsletter
Oct 14,2024

Principles of natural justice - blocking of electronic credit ledger - Rule 86A - Conditions of use of amount available in electronic credit ledger - Section 74 - Determination of input tax credit wrongly availed or utilised - statutory alternative remedy

Statutory alternative remedy - Rule 86A - Conditions of use of amount available in electronic credit ledger - Whether petitioners must be relegated to the remedy said to be available under sub rule (2) of Rule 86A instead of proceeding under Article 226. - HELD THAT: - The Court rejected the contention that petitioners must be relegated to the remedy under Rule 86A(2). Sub rule (2) does not prescribe any mode for preferring an application, appeal or representation, nor does it impose a corresponding duty on the authority to entertain and decide such a representation; therefore it cannot be treated as an effective statutory alternative remedy. Even assuming an application could be entertained, the impugned blocking did not disclose the factual particulars necessary for a meaningful representation. For these reasons the Court declined to refuse relief under Article 226 on the ground of availability of Rule 86A(2) remedy. [Paras 10, 11]

Petitioners need not be relegated to Rule 86A(2); writ jurisdiction under Article 226 is available.

Section 74 - Determination of input tax credit wrongly availed or utilised - principles of natural justice - Whether principles of natural justice are required to be observed before action is taken under Rule 86A. - HELD THAT: - A conjoint reading of Section 74 and Rule 86A shows that Section 74 expressly contemplates service of notice and furnishing of a statement containing necessary details where input tax credit is alleged to be wrongly availed by reason of fraud or suppression. Section 74, being a substantive provision, embodies statutory safeguards of natural justice which a rule made under the Act cannot nullify by necessary implication. Where literal construction of a rule would produce inconsistency or absurdity with the statute, the Court may adopt a construction that ensures harmonious and practical working of the scheme. Applying these principles and relying on established precedents, the Court held that the principles of natural justice must be read into Rule 86A and observed when invoking the power to block debit of electronic credit ledger. [Paras 15, 16, 18, 21, 26]

Principles of natural justice are to be read into and observed while taking action under Rule 86A.

Blocking of electronic credit ledger - principles of natural justice - Validity of the impugned action of blocking the petitioners' electronic credit ledger without disclosing reasons or following natural justice. - HELD THAT: - The impugned orders blocked the petitioners' electronic credit ledger without disclosing necessary details such as the identity of the supplier, date of cancellation, or other material on which the 'satisfaction' was based, and were issued without any show cause notice. The Court observed that the Department's own circular cautions against mechanical exercise of Rule 86A and requires reasons based on material evidence. Given the obligation to observe natural justice when invoking Rule 86A, the absence of adequate reasons and disclosure rendered the blocking orders unsustainable. The Court set aside the impugned actions but left open the Department's right to proceed in accordance with law. [Paras 14, 21, 34]

Blocking action without adequate reasons or observance of natural justice is set aside; Department may proceed in accordance with law.

Final Conclusion: The writ petitions are allowed: the Court holds that principles of natural justice must be read into Rule 86A, rejects relegation to Rule 86A(2) as an effective statutory remedy in the facts, and sets aside the blocking of the petitioners' electronic credit ledger for failure to disclose reasons and to follow natural justice; liberty is reserved to the Department to proceed in accordance with law.

Natural justice - opportunity of personal hearing - service of notice - remand for fresh consideration - input tax credit disallowance

Natural justice - opportunity of personal hearing - service of notice - Impugned order passed without affording the petitioner an opportunity of personal hearing, thereby violating principles of natural justice. - HELD THAT: - The Court found that the show cause notice and related proceedings were uploaded on the GST portal and that the petitioner was unaware of the issuance and was not furnished the original notice. In these circumstances the impugned order was held to have been passed without providing a personal hearing to the petitioner, violating the principles of natural justice. The Court concluded that the matter could not be allowed to stand in view of that violation and required fresh consideration of the case on merits after affording an opportunity to be heard. [Paras 7]

Impugned order set aside and matter remanded for fresh consideration due to breach of natural justice.

Remand for fresh consideration - input tax credit disallowance - service of notice - Procedural directions on filing of reply, issuance of clear notice fixing date for personal hearing, and reconsideration on merits. - HELD THAT: - The Court directed that the petitioner shall file its reply/objection with supporting documents within three weeks from receipt of a copy of the order. Upon receipt of such reply/objection, the respondent is to consider it and issue a 14 days clear notice fixing the date for personal hearing, and thereafter pass appropriate orders on merits and in accordance with law. These directions were given to ensure effective opportunity to contest the demand relating to alleged wrongful availing of input tax credit for the assessment period. [Paras 8]

Petitioner to file reply within three weeks; respondent to issue 14 days clear notice for personal hearing and thereafter pass fresh orders on merits.

Final Conclusion: Writ petition disposed by setting aside the impugned order dated 20.12.2023 relating to financial year 2017-2018 and remanding the matter to the respondent for fresh consideration after statutory opportunity to be heard; no order as to costs.

Right to seek release of detained goods under Section 129(1)(a) of the WBGST/CGST Act, 2017 - challenge to order under Section 129(3) and availability of alternative remedy - judicial restraint where an efficacious alternative remedy exists - obligation of expeditious disposal of applications for release of detained goods

Right to seek release of detained goods under Section 129(1)(a) of the WBGST/CGST Act, 2017 - obligation of expeditious disposal of applications for release of detained goods - Petitioners permitted to invoke Section 129(1)(a) for release of detained goods and respondents directed to decide any such application expeditiously. - HELD THAT: - The Court found that, notwithstanding availability of alternate remedies against the order under Section 129(3), the petitioners are entitled to seek release of the detained goods by invoking the statutory mechanism under Section 129(1)(a). The petitioners had not filed a formal application under that provision; accordingly the Court permitted them to file such application within 10 days. The respondents were directed to dispose of the application as expeditiously as possible, preferably within 10 days of filing. The Court expressly refrained from adjudicating the merits of the claim and left the respondent no.1 free to decide the application in accordance with law without being influenced by observations made in the order. [Paras 5, 6, 8]

Permission granted to petitioners to file a formal application under Section 129(1)(a); respondents to dispose of it expeditiously, preferably within 10 days of filing.

Challenge to order under Section 129(3) and availability of alternative remedy - judicial restraint where an efficacious alternative remedy exists - Writ petition not maintainable insofar as it challenges the order passed under Section 129(3) because an efficacious alternative remedy is available. - HELD THAT: - The Court observed that the petitioners have an alternative remedy in respect of the order under Section 129(3) and, therefore, there was no scope to entertain the writ petition on that challenge. The Court declined to adjudicate the substantive challenge to the Section 129(3) order, applying the principle of judicial restraint where an efficacious statutory remedy exists. [Paras 7]

Challenge to the order under Section 129(3) is not entertained by this Court on account of the availability of an alternative efficacious remedy.

Final Conclusion: Writ petition disposed: petitioners may file a formal application under Section 129(1)(a) within 10 days and respondents shall decide it expeditiously (preferably within 10 days); the challenge to the Section 129(3) order is not entertained by this Court due to availability of an alternative remedy; merits not considered.

Input Tax Credit - opportunity of hearing - show cause notice - remand for fresh adjudication - conditional deposit for interim relief - bank attachment

Input Tax Credit - opportunity of hearing - remand for fresh adjudication - show cause notice - Validity of the impugned assessment order rejecting ITC and requirement of fresh adjudication - HELD THAT: - The assessment order dated 28.04.2023 rejecting the claim of Input Tax Credit was set aside and directed to be treated as a show cause notice. The petitioner was granted a final opportunity to file objections with supporting documents within four weeks from receipt of this order. The respondent is directed to consider any such objections and pass appropriate orders in accordance with law after affording a reasonable opportunity of hearing. The Court did not adjudicate the merits of the ITC claim but remanded the matter for fresh consideration on the statutory record and after hearing the petitioner. The order also stipulates that if the petitioner fails to submit the objections within the prescribed period, the impugned assessment shall stand revived. [Paras 7]

Impugned order set aside and treated as show cause notice; matter remanded for fresh adjudication after petitioner files objections within four weeks and respondent affords a hearing.

Conditional deposit for interim relief - bank attachment - Interim relief in respect of attachment of the petitioner's bank account - HELD THAT: - The Court granted interim relief by directing that the bank attachment shall be lifted upon the petitioner depositing 25% of the disputed tax after adjusting the amount already paid by the petitioner (Rs. 1,00,000/-). The deposit is to be made within four weeks from receipt of the order. Compliance with this condition results in lifting of the bank attachment; failure to deposit within the stipulated time will result in revival of the impugned assessment order. [Paras 7]

Bank attachment to be lifted on deposit of 25% of disputed tax after adjusting earlier payment; non-compliance will revive the assessment order.

Final Conclusion: The writ petition is disposed by setting aside the assessment order dated 28.04.2023 and remanding the matter for fresh adjudication after the petitioner files objections within four weeks; interim relief granted by lifting the bank attachment on specified conditional deposit, failing which the impugned order will revive.

Assessment order set aside - treatment of assessment order as show cause notice - deposit as precondition for grant of opportunity - adjustment of earlier payments towards deposit - opportunity to file objections and fresh adjudication after hearing - revival of order on non-compliance

Assessment order set aside - deposit as precondition for grant of opportunity - adjustment of earlier payments towards deposit - Impugned assessment order was liable to be set aside and the petitioner granted conditional relief. - HELD THAT: - The Court accepted the petitioner's plea that technical difficulties in the GST portal and adaptation to the e-mechanism had impeded the petitioner from responding earlier, and noted the petitioner's willingness to deposit 25% of the disputed tax and that certain tax had already been paid. In view of these facts and the petitioner's request for a final opportunity, the Court set aside the impugned order and conditioned restoration of adjudicatory proceedings on the petitioner depositing 25% of the disputed tax within two weeks. The tax already paid by the petitioner in addition to what appears in the assessment was ordered to be adjusted towards the required 25% deposit. [Paras 6]

Impugned order set aside on condition that the petitioner deposits 25% of the disputed tax within two weeks, with earlier payments adjusted towards that deposit.

Treatment of assessment order as show cause notice - opportunity to file objections and fresh adjudication after hearing - revival of order on non-compliance - Assessment proceedings were remitted for fresh consideration after compliance, and directions given for filing objections and fresh adjudication. - HELD THAT: - Upon compliance with the deposit condition, the impugned assessment order was to be treated as a show cause notice and the petitioner was permitted to submit objections with supporting material within four weeks from receipt of the Court's order. The respondent was directed to consider any such objections and pass fresh orders in accordance with law after affording a reasonable opportunity of hearing. The Court further provided that failure to pay the deposit or to file objections within the stipulated periods would result in revival of the impugned order. [Paras 6]

Assessment treated as show cause notice; petitioner to file objections within four weeks; respondent to reconsider and pass orders after hearing; impugned order revived on non-compliance.

Final Conclusion: Writ petition disposed by setting aside the impugned assessment order on specified conditions: petitioner to deposit 25% of disputed tax (adjusting earlier payments) within two weeks and file objections within four weeks; on compliance the respondent to freshen adjudication after hearing; failure to comply will revive the assessment order.

Non-speaking order - violation of principles of natural justice - input tax credit - clerical error apparent on record - rejection of reply without reasons - opportunity of being heard / fresh consideration - rectification of error apparent on record under Section 161

Non-speaking order - violation of principles of natural justice - rejection of reply without reasons - Validity of the impugned assessment order dated 30.07.2024 in view of absence of reasons and alleged denial of opportunity to the petitioner. - HELD THAT: - The Court found that the impugned order was a non-speaking order which rejected the petitioner's reply by merely stating that the reply was not satisfactory, without assigning any reasons for such rejection. Such absence of reason amounted to a breach of the principles of natural justice because the petitioner was not furnished with a reasoned counter to his submission that the entry of Input Tax Credit was a clerical error. The Court therefore concluded that the assessment order could not stand in its present form and required reconsideration with an opportunity to the petitioner to be heard.

Impugned order set aside for being non-speaking and violative of natural justice; petitioner granted further opportunity to be heard.

Input tax credit - clerical error apparent on record - opportunity of being heard / fresh consideration - rectification of error apparent on record under Section 161 - Whether the petitioner should be granted a final opportunity for fresh consideration of the claim of Input Tax Credit purportedly entered in the wrong column due to a clerical error. - HELD THAT: - The Court accepted the petitioner's plea that the Input Tax Credit was inadvertently entered in column 4(A)(3) instead of 4(A)(5) and observed that the assessing authority had not dealt with that contention in reasoned manner. Rather than deciding the entitlement on merits, the Court directed that the impugned order be treated as a show-cause and granted the petitioner one final opportunity to appear before the respondent authorities with supporting materials on the specified date. The Court left open the respondents' power to consider rectification under the statutory provision for error apparent on record, but required them to consider the petitioner's submissions afresh in a reasoned order.

Matter remanded for fresh consideration; petitioner to be afforded final hearing and respondents to reconsider the Input Tax Credit claim and possible rectification in a reasoned order.

Final Conclusion: The assessment order dated 30.07.2024 is set aside for being non-speaking and in breach of natural justice; the petitioner is granted a final opportunity to be heard and the authority is directed to reconsider the Input Tax Credit claim and any rectification application and pass a reasoned order, failing which the impugned order shall stand revived.

Anonymous donations - Section 115BBC(1) anonymous donations tax - exception under Section 115BBC(2)(b) - certificate under Section 80G - mixed religious and charitable trust - factual finding of tribunal on nature of trust - statutory independence of Section 80G and Section 115BBC

Anonymous donations - Section 115BBC(1) anonymous donations tax - exception under Section 115BBC(2)(b) - mixed religious and charitable trust - factual finding of tribunal on nature of trust - Applicability of Section 115BBC(1) to anonymous "hundi" donations where the assessee is held to be a trust established for both religious and charitable purposes - HELD THAT: - The Court upheld the concurrent factual findings of the CIT(A) and the Tribunal that the Shree Sai Baba Sansthan Trust is a trust established for both religious and charitable purposes, having regard to the trust deed, the Sai Baba Trust Act and the nature of activities and objects of the trust. On that factual basis sub-section (2)(b) of Section 115BBC operates as an exception to sub-section (1), and anonymous donations received by a trust "created or established wholly for religious and charitable purposes" fall outside the charging provision in sub-section (1). The Court held that determination of the character of the trust is a question of fact to be drawn from its constitutive documents and statutory recognition, and where such factual conclusion is not shown to be perverse, the High Court must proceed on the Tribunal's findings. Applying this legal principle to the material, the Court concluded that the assessee satisfied the requirements of Section 115BBC(2)(b) and therefore anonymous hundi donations were not taxable under Section 115BBC(1). [Paras 31, 35, 36]

Anonymous hundi donations are not taxable under Section 115BBC(1) because the trust is a religious and charitable trust entitled to the exception in Section 115BBC(2)(b).

Certificate under Section 80G - statutory independence of Section 80G and Section 115BBC - Section 80G(5B) expenditure test - Whether registration or certificate under Section 80G precludes invocation of the exception in Section 115BBC(2)(b) - HELD THAT: - The Court rejected the Revenue's contention that possession of a certificate under Section 80G conclusively establishes the assessee as only a charitable institution and thereby ousts the availability of Section 115BBC(2)(b). The Court explained that Section 80G and Section 115BBC are distinct statutory provisions serving different ends: Section 80G confers donor deduction benefits and contains an expenditure-related deeming provision (Section 80G(5B)) permitting institutions with limited religious expenditure to qualify, whereas Section 115BBC(2)(b) turns on the nature of the trust as ascertained from its objects and constitution. The two provisions cannot be intermixed; registration under Section 80G does not ipso facto negate a factual finding that the trust is created or established for religious and charitable purposes and thus eligible for the Section 115BBC(2)(b) exception. [Paras 24, 25, 33]

Registration under Section 80G does not preclude a trust from claiming the exception under Section 115BBC(2)(b); the provisions are independent and subject to factual determination of the trust's nature.

Final Conclusion: The High Court dismissed the Revenue's appeals, upholding the CIT(A) and Tribunal's concurrent factual finding that the assessee is a religious and charitable trust and therefore entitled to the exception in Section 115BBC(2)(b); registration under Section 80G does not by itself negate that exemption. No substantial question of law arises and the appeals are rejected.

Attachment of debt - Garnishee proceedings - Cash credit/overdraft account not a debt - Debtor-creditor relationship - Bank overdraft facility - Power to attach bank accounts under Section 226(3) of the Income Tax Act

Cash credit/overdraft account not a debt - Attachment of debt - Debtor-creditor relationship - Power to attach bank accounts under Section 226(3) of the Income Tax Act - Whether accounts in the nature of Cash Credit/overdraft (OCC/CC/OD) can be attached under sub-section (3) of Section 226 of the Income Tax Act as money due to or held for the assessee. - HELD THAT: - Sub-section (3) of Section 226 enables garnishee-style notices to persons from whom money is due or who hold money for or on account of the assessee; to be attachable the sum must amount to a 'debt' which the judgment-debtor could enforce for his own benefit. Where a bank merely provides an overdraft or cash credit facility and the account is a borrowing arrangement, the bank does not stand as a debtor to the customer nor does it hold the customer's money on his account. The court applied this legal test and followed the consistent line of authority exemplified by K.M. Adam vs. The Income Tax Officer , Sangram Foods Pvt. Ltd. vs. State of Maharashtra , Jugal Kishore Das vs. Union of India and others , Kaneria Granitio Ltd. vs. Assistant Commissioner IT , and subsequent High Court decisions, which hold that an unutilized or running cash credit/overdraft limit does not convert the banker into a debtor and hence is not amenable to attachment under Section 226(3). On a meaningful reading of Section 226(3) and applying the debtor-creditor requirement, mere provision of an overdraft or cash credit facility does not create money 'due' or 'held' for the assessee which the Assessing Officer/Tax Recovery Officer may attach; only amounts actually in credit and payable would fall within the provision. The court found no contrary precedent relied upon by the revenue and saw no reason to depart from the consistent approach of the High Courts cited. [Paras 11, 13, 21, 22, 23]

Accounts in the nature of Cash Credit/overdraft cannot be attached under sub-section (3) of Section 226 of the Act where no debtor-creditor relationship exists and no money is actually due or held for the assessee; therefore the attachments in question are beyond the statutory power and unsustainable.

Final Conclusion: The writ petition is allowed. The communications of 08.07.2024 issued by respondent No.1 to the banks and the consequential communication dated 10.07.2024 are quashed and set aside; pending applications stand disposed of.

Reason to believe - reopening of assessment - preliminary satisfaction at reopening stage - bogus purchases / accommodation entries - role of investigation wing information - scope of Section 148A(d) and issuance of notice under Section 148 - no requirement of final adjudication at the reopening stage

Reason to believe - bogus purchases / accommodation entries - role of investigation wing information - scope of Section 148A(d) and issuance of notice under Section 148 - no requirement of final adjudication at the reopening stage - Assessing Officer had sufficient grounds to issue notice under Section 148 for AY 2020-2021 based on information of alleged bogus purchases from two suppliers. - HELD THAT: - The Court examined the Annexure to the Section 148A(b) notice and the AO's order which recorded information from the investigation wing that two supplier entities were non-existent and were used to provide accommodation entries, aggregating alleged bogus purchases. Although the assessee furnished invoices, e-way bills, lorry receipts and bank statement entries, no material was produced to establish the creditworthiness or physical existence of the suppliers. Relying on the established principle that at the stage of reopening the AO need only have a "reason to believe" and is not required to finally determine the controversy, the Court held that the information from the investigation wing and the absence of satisfactory explanation by the assessee constituted sufficient grounds to suggest escapement of income. The Court therefore upheld the AO's preliminary satisfaction recorded under Section 148A(d) and the consequent issuance of notice under Section 148, reserving substantive adjudication of the allegations to the reassessment proceedings. [Paras 7, 8, 9, 10, 11]

Writ petition dismissed; AO possessed sufficient grounds to reopen assessment for AY 2020-2021 and issue notice under Section 148.

Final Conclusion: The petition challenging the reopening for AY 2020-2021 is dismissed: the AO's reliance on investigation-originated information about alleged paper entities and the assessee's inadequate explanation furnished a prima facie reason to believe that income had escaped assessment, warranting issuance of notice under Section 148 and further reassessment proceedings.

Validity of notice under Section 148A and notice under Section 148 - Effect of dissolution of partnership firm on initiation of reassessment proceedings - Reopening of assessment only against proper taxpayer where information is correctly attributed - Quashing of notice and order issued in name of a dissolved entity - Application of settled precedent on issuance of reopening notices

Validity of notice under Section 148A and notice under Section 148 - Effect of dissolution of partnership firm on initiation of reassessment proceedings - Quashing of notice and order issued in name of a dissolved entity - Application of settled precedent on issuance of reopening notices - Impugned notice issued under Section 148A(b) and order passed under Section 148A(d) in the name of a partnership firm that had been dissolved are not tenable and are liable to be quashed. - HELD THAT: - The undisputed factual position established on record is that the partnership firm in whose name the Section 148A(b) notice and Section 148A(d) order were issued had been dissolved with effect from 31st March, 2016. The petitioner had brought the dissolution to the attention of the Assessing Officer in response to the notice. A reopening notice and consequential order issued in the name of a dissolved entity cannot be sustained. Applying the settled legal position as articulated by the Apex Court, the impugned notice and order are legally untenable and require quashing. The Court, while setting aside the impugned notice and order, left open the respondent's right to initiate proceedings against the correct person in accordance with law. [Paras 8, 9, 10, 11]

Impugned notice and order dated 20th March, 2023 issued in the name of the dissolved partnership firm are quashed and set aside; respondent may, if required, initiate proceedings against the petitioner in accordance with law.

Final Conclusion: Writ petition allowed; the impugned Section 148A(b) notice and Section 148A(d) order dated 20.03.2023 issued in the name of the dissolved partnership firm are quashed and set aside, subject to the respondent's liberty to initiate proceedings against the petitioner in accordance with law.

Maintainability of appeal under Section 260A - effect of Circular 9 dated 17.09.2024 on high-value tax appeals - non-filing of Form 10DA and entitlement to deduction under Section 80JJAA - distinction between tax not quantifiable and tax not quantified

Maintainability of appeal under Section 260A - effect of Circular 9 dated 17.09.2024 on high-value tax appeals - distinction between tax not quantifiable and tax not quantified - non-filing of Form 10DA and entitlement to deduction under Section 80JJAA - Whether the appeal under Section 260A is maintainable in view of Circular 9 dated 17.09.2024. - HELD THAT: - The Court considered the Department's submission and the respondent's contention that even on the Department's highest case the tax effect would be below the monetary threshold in Circular 9 of 2024, and that the matter fell within exceptions retained from Circular 5 of 2024. The Court held that there is an important distinction between 'tax not quantifiable' and 'tax not quantified' and applied Circular 9 accordingly. On the facts, the disallowance contended by the Department (if accepted) would produce a tax effect estimated by the parties to be approximately one crore, which falls below the threshold prescribed in Circular 9. Consequently, the appeal does not satisfy the maintainability criterion under the Circular. The Court therefore dismissed the appeal as not maintainable while noting that the proposed substantial question of law was left open for consideration.

Appeal dismissed as not maintainable under Circular 9 dated 17.09.2024; proposed substantial question of law kept open.

Final Conclusion: The appeal under Section 260A is dismissed as not maintainable in view of Circular 9 of 2024 because the tax effect falls below the prescribed threshold; the proposed substantial question of law is left open.

Reopening of assessment - Notice under Section 148 - Reason to believe for reassessment - Escapement of income - Jurisdictional validity of reopening - Application of disclosed information in forming belief

Reopening of assessment - Notice under Section 148 - Reason to believe for reassessment - Application of disclosed information in forming belief - Jurisdictional validity of reopening - Validity of the notice dated 31.03.2021 issued under Section 148 for reopening assessment for Assessment Year 2017-18 - HELD THAT: - The Court examined whether the Assessing Officer had jurisdiction to reopen the assessment when the material relied upon - substantial cash deposits in bank accounts - had already been disclosed in the books of accounts and furnished in response to summons under Section 133(1A). The reasons recorded by the Assessing Officer indicated reliance on information of cash deposits and a conclusion that income had escaped assessment. The Court held that where the purported material is already on record and was furnished to the department (including via survey and replies to summons), the Assessing Officer could not validly assume jurisdiction to reopen the assessment in the absence of fresh tangible material to demonstrate escapement. Applying this principle to the facts, the Court found that the deposits were disclosed in the partnership firm's accounts and in the response to the summons, and no new material was placed on record to justify a reopening. Consequently, the notice under Section 148 was held not tenable and liable to be quashed. [Paras 8, 9, 10]

Impugned notice dated 31.03.2021 under Section 148 for AY 2017-18 quashed and set aside.

Final Conclusion: Petition allowed; notice dated 31.03.2021 issued to reopen assessment for Assessment Year 2017-18 under Section 148 is quashed and set aside.

Appeal filed in paper form treated as invalid ab initio - treatment of paper-filed appeal as dismissed for statistical purposes - computation of delay for subsequently filed online appeal having regard to prior manual filing - judicial interference with administrative invalidation of appeals

Appeal filed in paper form treated as invalid ab initio - treatment of paper-filed appeal as dismissed for statistical purposes - judicial interference with administrative invalidation of appeals - Validity of the appellate authority's order treating the manually filed paper appeal as invalid ab initio and not adjudicating it on merits. - HELD THAT: - The High Court noted that the appellate order expressly treats the paper-filed appeal as invalid ab initio and records that, "For statistical purposes, it is treated as dismissed", which demonstrates that the authority regarded the appeal as invalidly filed and did not hear it on merits. On the material before the Court there was no basis to interfere with that administrative conclusion: the order shows the authority's intent to treat the paper filing as invalid and to record it as dismissed for statistical purposes, and the Court declined to set aside or disturb that determination. [Paras 8]

The order treating the manual paper appeal as invalid ab initio and treating it as dismissed for statistical purposes does not warrant interference and is left undisturbed.

Computation of delay for subsequently filed online appeal having regard to prior manual filing - judicial interference with administrative invalidation of appeals - Whether the appellate authority should be directed to treat the date of the manually filed appeal as relevant for computing delay in respect of a later-filed online appeal. - HELD THAT: - Although the paper appeal was treated as invalid and not decided on merits, the Court accepted the petitioners' apprehension that a subsequently filed online appeal might be rejected as belated. Observing that the underlying difficulty arose from technical problems beyond the parties' control, the Court considered the apprehension reasonable because delay can negate the right of appeal. In exercise of its supervisory jurisdiction the Court directed the appellate authority to take into consideration the date of filing of the manual appeal when calculating and appreciating the issue of delay in respect of the subsequently preferred online appeal, thereby preserving the petitioners' opportunity to have the delay question examined in that light. [Paras 9, 10]

Appellate authority is directed to consider the date of filing of the manual appeal for the purpose of computing and appreciating delay in respect of the subsequently filed online appeal.

Final Conclusion: Writ petition disposed by refusing to interfere with the order treating the paper appeal as invalid ab initio, and by directing the appellate authority to take the date of the manual filing into account when determining delay for the later-filed online appeal; pending applications closed; no costs.

Interest on refunds under Section 244A - Refund of self-assessment tax treated as refund 'in any other case' under clause (b) - Proviso to Section 244A(1) excluding interest where refund is less than ten per cent - Character of self-assessment tax loses identity after adjustment on regular assessment

Interest on refunds under Section 244A - Refund of self-assessment tax treated as refund 'in any other case' under clause (b) - Proviso to Section 244A(1) excluding interest where refund is less than ten per cent - Character of self-assessment tax loses identity after adjustment on regular assessment - Entitlement to interest on refund of self-assessment tax for the period January 2017 to October 2017 - HELD THAT: - The Tribunal held that self-assessment tax paid under section 140A, once adjusted against the tax determined on regular assessment, ceases to retain its character as self-assessment tax and assumes the character of tax paid in pursuance of assessment. Accordingly, the refund of that amount falls within the category governed by clause (b) of Section 244A(1) (i.e., 'any other case') and is not governed by clause (aa). The proviso to Section 244A(1) which denies interest where the refund is less than ten per cent of tax determined under section 143 applies only to clause (a)/(aa) and therefore does not operate to deny interest where the refund is of tax which, after adjustment on regular assessment, is a refund in 'any other case'. The Tribunal followed the reasoning in the cited ITAT/High Court precedents that the object of Section 244A is to compensate the assessee for wrongful retention of monies and that an assessee who paid self-assessment tax and thereafter obtains refund on appeal is entitled to interest for the period from adjustment (here, January 2017) to grant of refund (here, October 2017). On that basis the claim for interest on the refund of self-assessment tax was allowed. [Paras 12, 13]

Assessee entitled to interest on refund of self-assessment tax for the period January 2017 to October 2017; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the refund of self-assessment tax (AY 2013-14) was eligible for interest under Section 244A(1)(b) for the period January 2017 to October 2017, since the tax lost its character as self-assessment tax after adjustment in regular assessment and the proviso excluding interest did not apply.

Jurisdiction to reopen assessments under Section 147 of the Income tax Act - validity of reasons recorded under Section 148(2) of the Income tax Act - sanction/approval under Section 151 of the Income tax Act - mechanical or non speaking sanction vitiating reopening - reassessment quashed for lack of jurisdiction - consequence of quashed reassessment on penalty under Section 271(1)(c)

Jurisdiction to reopen assessments under Section 147 of the Income tax Act - validity of reasons recorded under Section 148(2) of the Income tax Act - sanction/approval under Section 151 of the Income tax Act - mechanical or non speaking sanction vitiating reopening - Reopening of assessment under Section 147 based on the reasons recorded and approval under Section 151 is unsustainable and the reassessment is quashed for want of jurisdiction. - HELD THAT: - The reasons recorded relied on information from DDIT(Inv.) Shimla alleging a difference between registered sale consideration and payment, but the AO himself described the difference as paid through "accounted income/cash", thereby contradicting escapement. There is no indication that the AO independently applied mind to the information or conducted enquiries before forming the requisite reason to believe. The approving authority granted sanction by referring to an erstwhile provision (Section 147(b)) and merely observed that it was a "fit case" for issuance of notice without assigning minimal reasons, indicating a mechanical, perfunctory approval. In these circumstances the reasons are defective and the sanction is non speaking; such defects are fundamental and incurable, rendering the assumption of jurisdiction under Section 147 invalid. Consequently the reassessment order is quashed and the tribunal did not consider the merits of the additions. [Paras 10, 11, 12, 13, 14]

Impugned reassessment order under Section 147 is quashed for want of jurisdiction.

Consequence of quashed reassessment on penalty under Section 271(1)(c) - reassessment quashed for lack of jurisdiction - Penalty under Section 271(1)(c) sustained on the basis of the reassessment is vacated as the reassessment order has been quashed. - HELD THAT: - The penalty order flowed from and rested upon the reassessment made under Section 147. Once the reassessment is held to be non est and quashed for want of jurisdiction, the foundational basis for imposition of penalty collapses. The tribunal accordingly set aside the penalty imposed under Section 271(1)(c). [Paras 15, 16, 17]

Penalty imposed under Section 271(1)(c) is vacated consequent to quashing of the reassessment.

Final Conclusion: Both appeals are allowed: the reassessment for AY 2007 08 under Section 147 is quashed for lack of jurisdiction due to defective reasons and mechanical sanction, and the penalty under Section 271(1)(c) is vacated as consequential to the quashed reassessment.

Reopening of assessment under Section 147/148 - Requirement of jurisdictional satisfaction that income has escaped due to failure to disclose fully and truly all material facts - Assessment completed under Section 143(3) - Validity of reassessment initiated after four years in absence of new material - Explanation 1 to Section 147-effect of earlier production of records on disclosure

Reopening of assessment under Section 147/148 - Requirement of jurisdictional satisfaction that income has escaped due to failure to disclose fully and truly all material facts - Validity of reassessment initiated after four years in absence of new material - Assessment completed under Section 143(3) - Explanation 1 to Section 147-effect of earlier production of records on disclosure - Reopening of assessment for A.Y. 2009-10 under sections 147/148 was invalid and additions made on that basis were deleted. - HELD THAT: - The Tribunal found that the original assessment for A.Y. 2009-10 was completed under section 143(3) after the assessee had produced account books and disclosed export incentive and foreign exchange fluctuation as "Other Income" in the profit and loss account. The Assessing Officer issued a notice under section 148 after more than four years, relying on the same material and audit objections which had been available during the original assessment and a subsequent section 154 notice (where no rectification was made). In the absence of any new tangible material discovered after the original assessment, the jurisdictional requirement for reopening-namely, that income had escaped assessment by reason of failure by the assessee to disclose fully and truly all material facts-was not satisfied. The Tribunal applied the principle that mere production of records in the original proceedings does not automatically translate into nondisclosure, and that the reasons for reopening must themselves indicate what material was not disclosed and how; here the reasons did not disclose any new material or demonstration of failure to disclose. Consequently the reassessment was held to be invalid and the additions made by the AO (and confirmed by the CIT(A)) were deleted. [Paras 11, 14, 15]

Reopening under sections 147/148 held invalid for lack of jurisdictional satisfaction and absence of new material; addition deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding the reassessment for A.Y. 2009-10 to be invalid for want of the requisite jurisdictional satisfaction and new material; the additions made by the AO and confirmed by the CIT(A) were deleted.

Principles of natural justice - ex parte adjudication - addition under section 69A of the Income-tax Act - cash deposits during demonetisation - remand for fresh verification and adjudication

Principles of natural justice - ex parte adjudication - addition under section 69A of the Income-tax Act - remand for fresh verification and adjudication - use of audited accounts, tax audit report and bank statements - Order of the Commissioner of Income-tax (Appeals) was set aside and the matter remanded to the Assessing Officer for fresh adjudication after opportunity to the assessee and verification of explanations and evidence relating to cash deposits. - HELD THAT: - The Tribunal found that the ld. CIT(A) merely reiterated the assessment order without considering material on record, including the assessee's audited financial results, Tax Audit Report and bank statements which were available to the Assessing Officer. Although adjournments had been sought and granted during appellate proceedings, the ld. CIT(A) ultimately decided the appeal in absence of any representative and did not apply his mind to the explanations and documents already on record. The assessee has now placed evidence before the Tribunal in support of the contention that the cash deposits during the demonetisation period were from business receipts and were utilised for business purposes. In the interest of justice and fair adjudication under the applicable law, the Tribunal directed that the issue be reopened and remanded to the Assessing Officer to examine and verify the explanations and evidence, and to decide the claim after giving the assessee a proper opportunity of hearing. [Paras 6, 7]

The appellate order is disturbed and the issue is restored to the Assessing Officer for fresh decision after verification and hearing; the appeal is allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and remitted the issue of unexplained cash deposits to the Assessing Officer for fresh consideration and verification after affording the assessee an opportunity of hearing; the appeal is allowed for statistical purposes.

Penalty under section 271(1)(c) - Penalty under section 271AAA - furnishing inaccurate particulars of income - estimation of income versus concealment - penalty not leviable where additions are based on differing estimations at appellate stages

Penalty under section 271(1)(c) - estimation of income versus concealment - penalty not leviable where additions are based on differing estimations at appellate stages - Cancellation of penalty levied under section 271(1)(c) for Assessment Year 2007-08 - HELD THAT: - The Tribunal found that the additions forming the basis for the penalty underwent material change at successive stages: the Assessing Officer applied gross profit on alleged suppressed sales, the Commissioner (Appeals) adopted net profit as per books on the alleged suppressed turnover, and the Tribunal ultimately restricted the addition to 1% of turnover as per audited accounts. Each appellate authority recorded reasons for substituting one estimate by another. In these circumstances, where the income determination is purely on estimate basis and different reasonable estimates have been adopted at different stages, the conduct does not disclose deliberate concealment or furnishing of inaccurate particulars such as would attract penalty. Reliance was placed on settled precedents holding that penalty cannot be sustained where differences arise from competing estimates and where appellate orders grant substantial relief. [Paras 9, 10]

Penalty under section 271(1)(c) for AY 2007-08 deleted and appeal allowed.

Penalty under section 271AAA - estimation of income versus concealment - penalty not leviable where additions are based on differing estimations at appellate stages - Cancellation of penalty levied under section 271AAA for Assessment Year 2008-09 - HELD THAT: - The Tribunal applied the reasoning from the decision on AY 2007-08: the addition for AY 2008-09 had similarly been modified at appellate stages (Assessing Officer's addition, Commissioner (Appeals)'s reduction, and Tribunal's further limitation to 1% of turnover). In the absence of identification of specific undisclosed assets or income and given that the surviving addition is an estimate adjusted on appeal, the imposition of penalty under section 271AAA could not be sustained. Consequently, the penalty was deleted following the same legal principle that estimation-based additions altered on appeal do not necessarily establish concealment warranting penalty. [Paras 12, 15]

Penalty under section 271AAA for AY 2008-09 deleted and appeal allowed.

Final Conclusion: Both appeals are allowed: the penalties levied under section 271(1)(c) for AY 2007-08 and under section 271AAA for AY 2008-09 are deleted, the appellate orders having substituted differing reasonable estimates and thereby negating a finding of concealment warranting penalty.

Capital reserve arising on amalgamation not taxable under the head 'Profits and gains of business or profession' - book-entry reserve created pursuant to scheme of amalgamation is capital in nature and not a benefit or perquisite - amalgamation qualifying under the definition of amalgamation in section 2(1B) including exception for shares already held by amalgamated company or its subsidiary - transactions covered by section 47(vi) are not transfers for the purposes of section 56(2)(x)(c)

Capital reserve arising on amalgamation not taxable under the head 'Profits and gains of business or profession' - book-entry reserve created pursuant to scheme of amalgamation is capital in nature and not a benefit or perquisite - interpretation and application of section 28(iv) - Addition of Rs.149.29 crores credited as capital reserve on amalgamation held taxable under section 28(iv) or not - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the capital reserve recorded pursuant to the sanctioned scheme of amalgamation is a capital entry arising from corporate reconstruction and a book entry required to balance accounts; it is not a benefit or perquisite arising from the business nor of a revenue character. The tribunal applied the statutory prerequisites of section 28(iv) - existence of a benefit or perquisite, arising out of business, and of revenue nature - and found the first two conditions absent: the appellant, being the ultimate holding company, merely acquired direct ownership of assets previously held through its subsidiary structure and did not become richer in a revenue sense. Reliance on precedents treating amalgamation reserves as capital in nature supported that such reserves are not taxable under section 28(iv). On that basis the addition made by the Assessing Officer was not sustainabl e and was deleted by the lower authority; the Tribunal found no infirmity in that deletion. [Paras 31, 32]

Addition under section 28(iv) deleted; capital reserve is not taxable as business income.

Amalgamation qualifying under the definition of amalgamation in section 2(1B) including exception for shares already held by amalgamated company or its subsidiary - transactions covered by section 47(vi) are not transfers for the purposes of section 56(2)(x)(c) - Whether the amalgamation falls outside the exemptions under section 47(vi) and therefore gives rise to income under section 56(2)(x)(c) - HELD THAT: - The Tribunal agreed with the CIT(A) that the scheme satisfied the conditions of 'amalgamation' as defined in section 2(1B), including the specific exception where shares of the amalgamating company are already held by the amalgamated company or its subsidiary; therefore the merger qualified as an exempt transfer under section 47(vi). On combined reading of section 47(vi) and the proviso to section 56(2)(x)(c), receipt of property pursuant to such an amalgamation is not a transfer attracting the section 56(2)(x)(c) charge. The Tribunal also distinguished decisions relied upon by the Revenue as inapplicable on facts or temporal scope. Consequently, the claim that the assessee received assets without consideration chargeable under section 56(2)(x)(c) was rejected. [Paras 7, 21]

Amalgamation qualifies under section 2(1B) and section 47(vi) applies; section 56(2)(x)(c) not attracted.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the addition: the amalgamation reserve of Rs.149.29 crores is capital in nature and not taxable under section 28(iv), and the amalgamation qualified under section 2(1B)/section 47(vi) so that section 56(2)(x)(c) does not apply.

Assessment under section 153A - completed/unabated assessments - search under section 132 - absence of incriminating material - reopening under sections 147/148

Assessment under section 153A - completed/unabated assessments - search under section 132 - absence of incriminating material - reopening under sections 147/148 - Whether additions could be sustained in assessments framed under section 153A in respect of completed/unabated assessment years when no incriminating material was found during search under section 132. - HELD THAT: - The Tribunal found no dispute on facts that no incriminating material was unearthed during the search under section 132 and that no assessment proceedings were pending at the time of the search, placing the years in the category of completed/unabated assessments. Relying on the Supreme Court decisions in Principal Commissioner of Income tax v. Abhisar Buildwell and Dy. CIT v. U. K. Paints (Overseas) Ltd., and the subsequent CBDT instruction for their implementation, the Tribunal applied the settled principle that in respect of completed/unabated assessments the Assessing Officer cannot make additions in proceedings under section 153A (or section 153C as held in related authority) where no incriminating material is found during the search. The Tribunal also noted that the Supreme Court saved the Assessing Officer's power to reopen assessments under sections 147/148 subject to the statutory conditions, but that saving does not permit sustaining additions in the 153A assessment in the absence of search found incriminating material. Having regard to these authorities and the undisputed facts, the Tribunal directed deletion of the additions confirmed by the CIT(A). As the deletions were directed on this legal ground, the Tribunal declined to adjudicate the merits of the additions which thus became academic.

Additions made in the assessments for the stated years under section 153A are deleted because no incriminating material was found during the search; Assessing Officer's power to reopen under sections 147/148 remains available subject to statutory conditions.

Final Conclusion: Appeals allowed for statistical purposes: additions confirmed by the CIT(A) are deleted for assessment year 2015-16 and assessment year 2016-17 as they are barred in completed/unabated assessments where no incriminating material was found during search; merits of additions left undetermined.

Addition under section 68 - discharge of onus under section 68 - explanation of identity and creditworthiness of creditors - genuineness of transactions - duty of assessing officer to verify and make inquiries under section 133(6) - disallowance of interest

Addition under section 68 - discharge of onus under section 68 - explanation of identity and creditworthiness of creditors - genuineness of transactions - duty of assessing officer to verify and make inquiries under section 133(6) - disallowance of interest - Deletion of addition made under section 68 in respect of alleged unsecured loans and deletion of disallowance of interest claimed on those loans. - HELD THAT: - The Tribunal found that the assessee, engaged in the saree business, furnished PANs, addresses, loan confirmations, books of account and tax-audit details explaining the nature and source of the alleged unsecured loans and the interest thereon, thereby discharging the primary onus under section 68. The assessing officer, having been provided with these particulars, was obliged to conduct verification and enquiries (including under section 133(6)) and record his satisfaction before making additions; no adverse material or discrepancy was established by the AO. The Tribunal applied the principle in CIT v. Orissa Corpn. (P.) Ltd. that where the assessee furnishes sufficient particulars, the revenue must pursue independent enquiries to displace the explanation, and followed its earlier decision in the assessee's own case holding that identity, creditworthiness and genuineness were satisfactorily proved. On this basis the Tribunal upheld the deletion by the CIT(A) of the impugned cash-credit additions and the related disallowance of interest. [Paras 8, 9, 10, 11, 12]

The additions under section 68 and the corresponding disallowance of interest were deleted; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the deletion of the impugned additions under section 68 and the deletion of the disallowance of interest, on the finding that the assessee discharged the primary onus and the AO failed to undertake requisite verification.

Waiver of export obligation and duty-saved amount - Export Promotion Capital Goods Scheme - consideration of representation by competent authority - speaking order - interim restraint on coercive action - Technical Development Assistance versus grant

Waiver of export obligation and duty-saved amount - Export Promotion Capital Goods Scheme - consideration of representation by competent authority - speaking order - Direction to the competent authority in the Customs Department to consider and decide the petitioners' claim for waiver of export obligation and duty-saved amount for bamboo processing machines imported under the EPCG Scheme - HELD THAT: - The Court found that the factual matrix regarding grant of benefits to the petitioners and prior recommendations in their favour were not disputed by the respondents. In view of the representations made, earlier communications (including a forwarding note by the Chief Commissioner indicating merit) and the parties' consensus that the case can be considered, the Court did not adjudicate the merits but directed the competent authority to consider the petitioners' claim and pass a reasoned (speaking) order. The authority is to undertake consideration in accordance with law and existing policy and record reasons for its decision. The Court afforded the authority a definite time-frame for such consideration. [Paras 16, 17]

The competent authority in the Customs Department is directed to consider the petitioners' claim and pass a speaking order within eight weeks from receipt of certified copy of this order.

Interim restraint on coercive action - consideration of representation by competent authority - Continuation of the interim order restraining respondents from taking coercive action until the competent authority decides the petitioners' representations - HELD THAT: - The Court recorded that it had earlier passed an interim order restraining coercive measures against the petitioners and, in view of its direction to the competent authority to decide the representations, it preserved the interim protection. The Court expressly declined to enter into merits or resolve disputed substantive pleas (including any contention based on promissory estoppel), leaving those issues open for future adjudication if necessary. [Paras 8, 17, 18]

The interim restraint against coercive action earlier granted shall remain operative until the competent authority renders its decision.

Final Conclusion: Writ petitions disposed by relegating the petitioners' claims for waiver under the EPCG / legacy scheme to the competent Customs authority for a reasoned decision within eight weeks; meanwhile the interim protection against coercive action continues; the Court has not decided merits and parties may pursue any substantive issues in future litigation.

Re classification based on use - opinion of third party employee as basis for tariff change - applicability of Bureau of Indian Standards requirements to 'knock down' imports - confiscation under section 111(d) of the Customs Act - duty demand under section 28 of the Customs Act - presumption of smuggling and burden of proof - rule 2 of General Rules for Interpretation of the Import Tariff

Re classification based on use - opinion of third party employee as basis for tariff change - Validity of re classification of imported monitors as television receivers and resultant demand of differential duty - HELD THAT: - The Tribunal found that the sole ground for re classification of the monitors after seizure was the opinion of an employee of another commercial concern that the monitors could be used as television receivers. It applied the settled principle that intended or possible use is not a criterion for tariff classification and that the uncorroborated view of a single individual does not justify altering classification merely to impose a higher rate of duty. In consequence, the re classification and the consequent demand of differential duty were held to be unsustainable. [Paras 5]

Re classification of the monitors as television receivers and the resulting differential duty demand set aside.

Applicability of Bureau of Indian Standards requirements to 'knock down' imports - rule 2 of General Rules for Interpretation of the Import Tariff - presumption of smuggling and burden of proof - confiscation under section 111(d) of the Customs Act - duty demand under section 28 of the Customs Act - Whether assembled Samsung television sets were liable to differential duty, confiscation and penalty on the basis of non compliance with BIS requirements or smuggling - HELD THAT: - The Tribunal accepted the appellant's case that the television sets were claimed to have been imported in 'knock down' condition and noted the technical advisory committee's clarification that BIS specifications need not be ascertained for goods imported in knocked down form. Customs' enforcement of BIS conformity is primarily at the point of sale once goods are assembled; at import the obligation to check certification applies differently. The Tribunal also held that there was no evidence of smuggling and that the presumption under section 123 does not operate beyond the goods specified therein; absent evidence of smuggling, the demand under section 28 failed. Given these conclusions, absolute confiscation under section 111(d) could not be sustained. The Tribunal therefore found the lower authorities' findings deficient. [Paras 6, 7]

Demand of differential duty and absolute confiscation of the assembled television sets set aside; confiscation and duty demand unsustainable for lack of evidence of smuggling and inapplicability of BIS requirement at import for knocked down goods.

Final Conclusion: Impugned order set aside and the appeal allowed: re classification and differential duty on monitors quashed; duty demand and absolute confiscation of assembled television sets set aside for lack of evidential foundation and inapplicability of BIS import stage requirements to knocked down imports.

Transaction value rejection under Customs Valuation Rules - Comparability and contemporaneous imports requirement for valuation - Admissibility and genuineness of documentary evidence in valuation proceedings - Application of Rule 9 of the Valuation Rules - Burden on Department to prove undervaluation - Finality of assessment and requirement to modify original assessment before raising demand - Penalty under Section 114AA of the Customs Act

Admissibility and genuineness of documentary evidence in valuation proceedings - Burden on Department to prove undervaluation - Whether the transaction value declared in the 130 Bills of Entry could be rejected on the basis of the email, the attached proforma invoice and the price list relied upon by the Department. - HELD THAT: - The Tribunal found that the Department failed to establish the genuineness and provenance of the email and the proforma invoice relied upon to reject the declared transaction values. The adjudicating authority did not record findings as to where or from whom these documents were recovered, and the documents showed indicia of fabrication (e.g., inconsistent formats and lack of authentication). The purported email and attached invoice therefore could not be used as reliable evidence to displace the declared transaction values. Similarly, the price list produced by a third party was neither authenticated nor shown to be comparable to the appellant's imports; it was typed on plain paper and unsupported by evidence of the declarant's connection to the supplier. Reliance on such unverified and non-comparable documents does not discharge the Department's burden to prove that the declared transaction values were incorrect. [Paras 6]

The transaction values could not be rejected on the basis of the email, the attached proforma invoice or the unauthenticated price list; those documents are not admissible or reliable to displace declared values.

Comparability and contemporaneous imports requirement for valuation - Application of Rule 9 of the Valuation Rules - Transaction value rejection under Customs Valuation Rules - Whether the Department validly applied the Valuation Rules (including Rule 9) and relied upon contemporaneous imports to re-determine assessable value. - HELD THAT: - The Tribunal emphasized that rejection of a declared transaction value requires cogent, comparable and contemporaneous material. The record did not disclose any contemporaneous bill(s) of entry for identical imports at higher value relied upon by the Department. The adjudicating authority ignored evidence produced by the appellant of identical or near-identical imports at similar or lower values and failed to explain or identify the higher-valued bills it purportedly relied upon. The manner in which Rule 9 was applied was unsystematic and did not establish comparability (parts, model, or valuation were not comparable), rendering the valuation re-determination legally unsound. The Tribunal reiterated established precedents that contemporaneous and comparable imports are essential to reject transaction value. [Paras 6]

Valuation under Rule 9 was improperly applied and, absent cogent and comparable contemporaneous imports, the transaction value could not be validly rejected.

Finality of assessment and requirement to modify original assessment before raising demand - Whether the demand for differential duty could be sustained without first challenging or modifying the original self-assessment orders. - HELD THAT: - All the relevant Bills of Entry had been assessed/re-assessed accepting the declared transaction values and those assessment orders were not challenged. The Tribunal applied the principle that a demand for differential duty cannot be sustained where the Department has not first modified or set aside the original assessment/self-assessment in accordance with law. Relying on the Supreme Court precedent cited in the impugned order, the Tribunal held that the impugned demand, being made without appropriate modification of the original assessments, is legally unsustainable. [Paras 7]

The demand for differential duty is not sustainable because the original assessments were final and were not modified before raising the demand.

Penalty under Section 114AA of the Customs Act - Whether the penalty imposed on Shri Sanjay Mehta under Section 114AA is sustainable. - HELD THAT: - The Tribunal examined the record and found that the statutory ingredients necessary to impose penalty under Section 114AA were not established in the present case. Given the failure of the Department to prove undervaluation and the defects in the impugned valuation exercise, the preconditions for attracting personal penalty upon the partner were absent. [Paras 8]

The penalty imposed on Shri Sanjay Mehta under Section 114AA is not sustainable and is set aside.

Final Conclusion: The impugned Order in Original confirming differential duty, interest and penalties is set aside; the appeals are allowed and the demands and penalties confirmed therein (including the penalty on Shri Sanjay Mehta) are quashed.

Refund of excess export duty - presumption under Section 28D and burden to rebut - FOB contracts and transaction value for export duty determination - Board Circular No.18/2008 and cum-duty price practice

Refund of excess export duty - presumption under Section 28D and burden to rebut - FOB contracts and transaction value for export duty determination - The appellant is entitled to refund of the excess export duty paid because the presumption under Section 28D was rebutted and the incidence of duty was not passed on to the overseas buyer. - HELD THAT: - The authorities below had sanctioned the refund but diverted the amount to the Consumer Welfare Fund on the finding that the appellant failed to discharge the burden under Section 28D to show that the incidence of duty was not passed on. The Tribunal examined the certified cost sheet, bank realisation records and the balance sheet entries and found that the export duty was shown separately in the cost computation and not included in the FOB value, and that the bank realisation tallied with the FOB invoice value. Having regard to these documents and to precedents dealing with FOB contracts, the Tribunal held that the presumption under Section 28D stood rebutted and that the excess duty paid was borne by the exporter and not passed on to the buyer. The impugned order directing transfer to the Consumer Welfare Fund was set aside and the appeal allowed with consequential relief. [Paras 7, 8, 9, 11]

Refund of the excess export duty is allowable to the appellant as the incidence of duty was not passed on and the presumption under Section 28D is rebutted.

Board Circular No.18/2008 and cum-duty price practice - FOB contracts and transaction value for export duty determination - Board Circular No.18/2008 (continuing the practice of treating FOB as cum-duty price for backward computation) is not applicable to the facts of this case. - HELD THAT: - The Tribunal noted that Circular No.18/2008 preserved the historical practice of computing assessable value on a cum-duty back-calculation basis only up to 31.12.2008 and that the practice was discontinued with effect from 01.01.2009. On the facts - where the documents established that the FOB value did not include the export duty and the transaction value (amount realised) corresponded to the FOB invoice - the circular relied upon by Revenue did not support the diversion of the sanctioned refund to the Consumer Welfare Fund. The Tribunal therefore rejected the Department's reliance on the circular in the present circumstances. [Paras 10]

Circular No.18/2008 is inapplicable to the facts and cannot justify withholding the refund.

Final Conclusion: The appellate order directing transfer of the sanctioned refund to the Consumer Welfare Fund is set aside; the appellant is entitled to the refund of the excess export duty paid, the presumption under Section 28D having been rebutted by the appellant's documents, and the Department's reliance on Circular No.18/2008 is rejected.

Condonation of delay in filing appeals - rejection of stay petition where appellate order is not ex-facie illegal - confiscation under Section 111(d) of the Customs Act, 1962 for import without valid licence - invocation of Section 111(m) requires a prior declaration (bill of entry) - redemption fine under Section 125 to be reasonable and not exceed market price; reduction of fine and penalty in the interests of justice

Condonation of delay in filing appeals - Delay in filing the appeals was condoned. - HELD THAT: - The Tribunal examined the explanation for delay tendered by the Revenue and found it satisfactory. Exercising its discretion, the Tribunal allowed the applications for condonation of delay and admitted the appeals for adjudication on merits.

Applications for condonation of delay are allowed and the appeals are admitted.

Rejection of stay petition where appellate order is not ex-facie illegal - Revenue's stay petitions against the Commissioner(A)'s orders were rejected. - HELD THAT: - On a prima facie perusal of the impugned orders of the Commissioner (Appeals), the Tribunal found no ex-facie illegality or lack of jurisdiction. The stay petitions, filed by the Revenue in a routine manner and lacking merit, did not warrant interim relief and were accordingly dismissed.

Stay petitions are rejected.

Confiscation under Section 111(d) of the Customs Act, 1962 for import without valid licence - invocation of Section 111(m) requires a prior declaration (bill of entry) - redemption fine under Section 125 to be reasonable and not exceed market price; reduction of fine and penalty in the interests of justice - Confiscation of the imported old and used clothing under Section 111(d) was upheld; redemption fine and penalty fixed at 10% and 5% respectively on the ascertained value were held sufficient. - HELD THAT: - Applying the Tribunal's earlier reasoning in Venus Traders Vs. Commissioner of Customs (Import), Mumbai , the court reiterated that invocation of Section 111(m) is not proper in the absence of a declaration (bill of entry), whereas confiscation under Section 111(d) is sustainable where import without the requisite licence under the Foreign Trade Policy is admitted. Given the admitted failure to obtain the prescribed licence, confiscation could not be faulted. Noting deficiencies in the original authority's ascertainment (and reliance on the precedent which reduced fines where margin ascertainment was defective), the Tribunal concluded that the redemption fine and penalty confirmed by the Commissioner (Appeals) at 10% and 5% of the assessed value adequately serve the ends of justice.

Confiscation under Section 111(d) upheld; redemption fine and penalty of 10% and 5% respectively are sufficient and confirmed.

Final Conclusion: Delay in filing the appeals is condoned; the Revenue's stay petitions are rejected; on merits, confiscation for import without licence is upheld and the redemption fine and penalty fixed at 10% and 5% of the assessed value are confirmed; the Revenue's appeals are dismissed.

Limitation for appeal under Section 61 of the Insolvency and Bankruptcy Code - computation of limitation from date of pronouncement - condonation of delay limited to fifteen days under proviso to Section 61(2) - exclusion of time for obtaining certified copy - rectification or modification of an order resulting in merger with subsequent order - typographical correction not amounting to modification of pronouncement

Limitation for appeal under Section 61 of the Insolvency and Bankruptcy Code - computation of limitation from date of pronouncement - condonation of delay limited to fifteen days under proviso to Section 61(2) - typographical correction not amounting to modification of pronouncement - Whether the Appeals filed after expiry of thirty days and with an alleged delay of sixteen days were liable to be condoned under the proviso to Section 61(2) of the IBC - HELD THAT: - The Tribunal held that the thirty-day limitation for filing an appeal under Section 61 of the IBC runs from the date the order is pronounced. The Adjudicating Authority pronounced the order on 13.05.2024; a subsequent entry on 14.05.2024 corrected a typographical error in the date of pronouncement and did not modify or alter the substantive order. Reliance on the Supreme Court's decision in V. Nagarajan establishes that limitation commences on pronouncement and that time taken to obtain a certified copy may be excluded where a certified copy is applied for within the thirty-day period, but that does not permit awaiting upload or later corrections to defer commencement of limitation. The Tribunal distinguished the decision in Ashok Tiwari, observing that in Ashok Tiwari the earlier order was substantively modified on rectification and therefore merged with the subsequent order; by contrast, no modification occurred here-only a clerical correction of the date. Because the appeals were filed on 28.06.2024, which is the sixteenth day after expiry of the thirty-day period (expiry being 12.06.2024), the delay exceeded the maximum fifteen days which this Tribunal may condone under the proviso to Section 61(2). Consequently the applications for condonation of delay were dismissed and the appeals rejected for non compliance with limitation. [Paras 8, 11]

Delay of sixteen days beyond the thirty-day limitation could not be condoned; delay condonation applications dismissed and appeals rejected.

Final Conclusion: The Tribunal dismissed the applications for condonation of delay and rejected the appeals because the appeals were filed sixteen days after expiry of the statutory thirty-day period and the Tribunal could not condone delay beyond the fifteen days permitted by the proviso to Section 61(2) of the IBC.

Limitation period for initiation of insolvency proceedings against personal guarantor - effect of acknowledgment in writing under Section 18 of the Limitation Act, 1963 - invocation of personal guarantee and notice requirement for a Section 95 application - suspension/extension of limitation during the COVID-19 period

Invocation of personal guarantee and notice requirement for a Section 95 application - Notice dated 26.05.2016 under Section 13(2) was an invocation of the personal guarantee. - HELD THAT: - The notice issued on 26.05.2016 by the consortium (which included Respondent No.1) expressly stated that the borrower had committed defaults, that the guarantors had become jointly and severally liable, and that the guarantee was being invoked with a demand to pay within 60 days. The guarantee deed contemplated service of a notice by the lenders to make the loan payable and the 26.05.2016 communication contains the requisite language of invocation and demand. The Tribunal noted inconsistent stands taken by the appellants before this Court regarding the character of that notice, but on the record the 26.05.2016 notice is to be treated as an invocation of the guarantee. [Paras 15, 16, 21, 26]

The 26.05.2016 notice qualifies as an invocation of the personal guarantee.

Limitation period for initiation of insolvency proceedings against personal guarantor - effect of acknowledgment in writing under Section 18 of the Limitation Act, 1963 - suspension/extension of limitation during the COVID-19 period - Application under Section 95 filed on 02.12.2021 was within limitation when reckoned having regard to the acknowledgment in the balance sheet dated 01.09.2017 and the COVID-19 suspension/extension of limitation. - HELD THAT: - Even if the guarantee was invoked on 26.05.2016, the appellants signed the balance sheet on 01.09.2017 which recorded and acknowledged the liability. Under Section 18 of the Limitation Act, 1963 an acknowledgment in writing signed by the debtor restarts the period of limitation from the date of such acknowledgment. Counting limitation from 01.09.2017, the three-year period expired on 31.08.2020. That date fell within the period for which the Supreme Court ordered suspension/extension of limitation in the COVID-19 period; consequently the limitation continued to be protected and the application filed on 02.12.2021 cannot be said to be time-barred. The Tribunal therefore did not err in admitting the Section 95 application in view of the acknowledged liability and the COVID-related relief on limitation. [Paras 27, 28, 29, 30]

The Section 95 application filed on 02.12.2021 was within the period of limitation.

Final Conclusion: The appeals are dismissed. The National Company Law Tribunal's admission of the Section 95 application is upheld: the 26.05.2016 communication amounted to invocation of the guarantee and, in any event, the appellants' written acknowledgment in the balance sheet dated 01.09.2017 restarted limitation which, when read with the COVID-19 suspension/extension orders, rendered the Section 95 application filed on 02.12.2021 within time.

Jurisdiction to substitute successful resolution applicant after CoC approval - jurisdiction to modify a resolution plan already approved by the CoC - requirement that a resolution applicant appear in the final list of prospective resolution applicants in the RFRP process - prohibition on post-approval modification of resolution plan except to cure non-compliance with Section 30(2) - non-interference with commercial wisdom of the CoC - compliance with CIRP Regulations relating to Request for Resolution Plan and Regulation 39(1)(B)

Section 61(3) appealability by an aggrieved person - Appellant's locus to challenge the impugned order - HELD THAT: - The Appellant, though an unsuccessful resolution applicant at the CoC stage, challenged subsequent procedural steps taken after the originally approved SRA became ineligible. The grounds pleaded fall within the scope of subsection (3) of Section 61, which permits appeals against orders approving a resolution plan on enumerated grounds including material irregularity in exercise of powers by the resolution professional and contravention of law. The Tribunal therefore rejected the Respondents' objection to locus and held the Appellant to be an aggrieved person entitled to prosecute the appeal. [Paras 15]

Objection to locus rejected; Appellant entitled to challenge the impugned order.

Jurisdiction to substitute successful resolution applicant after CoC approval - requirement that a resolution applicant appear in the final list of prospective resolution applicants in the RFRP process - compliance with CIRP Regulations relating to Request for Resolution Plan and Regulation 39(1)(B) - Whether the CoC/RP could substitute the successful resolution applicant (SRA) with an entity that had not been part of the CIRP process after the CoC had approved a resolution plan and the plan had been filed for approval before the Adjudicating Authority - HELD THAT: - The Tribunal found as a matter of statutory scheme and record that Respondent No.4 was never part of the list of Prospective Resolution Applicants and had not submitted a resolution plan in the CIRP; no provision in the RFRP permitted substitution of the SRA post approval. Regulation 39(1)(B) and the statutory framework require that a plan received from a person not in the final PRA list cannot be treated as the plan of that person. The CoC therefore had no jurisdiction to treat the modified plan as the plan of Respondent No.4 or to approve substitution of the SRA after the plan had been approved and filed. The Tribunal distinguished authorities relied on by the Adjudicating Authority and placed reliance on Supreme Court decisions establishing that postapproval modification of an approved plan is impermissible except narrowly to cure noncompliance with Section 30(2). [Paras 28, 29, 45, 48]

CoC had no jurisdiction to substitute the SRA with an entity not part of the CIRP; substitution and approval of the modified plan were contrary to the CIRP Regulations and IBC.

Prohibition on post-approval modification of resolution plan except to cure non-compliance with Section 30(2) - non-interference with commercial wisdom of the CoC - Whether CoC may modify a resolution plan already approved by it and submitted under Section 30(6) and the permissible exception, if any - HELD THAT: - The Tribunal held that the CoC lacks jurisdiction to modify an already approved resolution plan submitted under Section 30(6) of the IBC. A narrow exception exists where CoC may alter the plan to excise or amend elements that render it noncompliant with Section 30(2), to render the plan compliant; that exception was not engaged in the present facts. The Adjudicating Authority's reliance on doctrines protecting CoC's commercial wisdom did not answer the discrete legal question of postapproval substitution of the SRA. [Paras 42, 48]

CoC cannot modify an approved resolution plan except to make it compliant with Section 30(2); commercialwisdom principles do not permit substitution of SRA postapproval in these facts.

Remedial direction to re-initiate RFRP/Form G process - Remedial relief to be granted following setting aside of the Adjudicating Authority's approval - HELD THAT: - Given the illegality in substitution and continued CoC action after the CIRP period had expired, the Tribunal set aside the Adjudicating Authority's order approving the modified plan and directed a timebound fresh process. The Tribunal afforded one opportunity to invite fresh FormG and complete the CIRP process afresh within a specified period; if no resolution plan is approved, the RP may initiate liquidation proceedings under Section 33. [Paras 47, 48, 49]

Impugned order set aside; RP/CoC directed to issue fresh FormG and conclude the process within 90 days; if no plan approved RP may apply for liquidation.

Final Conclusion: Appeal allowed; impugned order dated 04.12.2023 approving a modified resolution plan that substituted a new SRA not part of the CIRP is set aside. CoC/RP lacked jurisdiction to substitute the SRA or to modify an approved plan except to cure Section 30(2) noncompliance. RP/CoC directed to issue fresh FormG and complete the CIRP process within 90 days; failing which RP may move for liquidation. Parties to bear their own costs.

Precedence of an application under Section 54C over an earlier Section 7 application - Interpretation of Section 11A(4) of the Insolvency and Bankruptcy Code - Disposal sequence between PPIRP initiation and insolvency applications filed earlier - Validity of initiation of Pre-Packaged Insolvency Resolution Process where a Section 7 petition was pending before commencement of the Amendment Act, 2021

Precedence of an application under Section 54C over an earlier Section 7 application - Interpretation of Section 11A(4) of the Insolvency and Bankruptcy Code - Whether an application under Section 54C filed after commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2021 can be given precedence for disposal over a Section 7 application that was filed and was pending before the commencement of the Amendment Act, 2021 - HELD THAT: - Section 11A sets out the mechanism for sequencing disposal of applications under Section 54C vis-a -vis applications under Sections 7, 9 or 10. Sub-sections (1)-(3) prescribe when a Section 54C application must be disposed of before, or after, a Section 7/9/10 application depending on relative filing times. Section 11A(4), however, operates as a temporal exception: the provisions of Section 11A do not apply where an application under Section 7, 9 or 10 is filed and pending as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2021. In the present facts the Section 7 petition was filed on 09.12.2020, the Amendment Act came into force w.e.f. 04.04.2021, and the Section 54C application was filed on 04.09.2022. Applying Section 11A(4) literally and purposively, the Court held that the regime created by Section 11A could not be invoked by a later-filed Section 54C application to displace a Section 7 application which was already pending on commencement of the Amendment Act. The Tribunal therefore erred in taking up and admitting the Section 54C application and initiating PPIRP despite the earlier pending Section 7 application; the initiation order was patently illegal and required setting aside. The Court consequently allowed the appeal and set aside the admission order in CP(IBPP) No. 01/MB-IV/2022 and, as a corollary, set aside the subsequent approval of the resolution plan predicated on those PPIRP proceedings. [Paras 24, 25, 26]

Section 11A(4) applies to exclude the operation of Section 11A where a Section 7 petition was filed and pending on commencement of the Amendment Act, 2021; the Tribunal erred in admitting the later Section 54C application and initiating PPIRP, and the admission order is set aside.

Final Conclusion: The appeal is allowed: the Tribunal's order admitting the Section 54C application and initiating the PPIRP is set aside as contrary to Section 11A(4), and consequentially the order approving the resolution plan is also set aside; both appeals succeed and no costs are awarded.

Performance Bank Guarantee requirement under the Request for Resolution Plan (RFRP) - non-compliance with obligations of a Successful Resolution Applicant - applicability and effect of Regulation 36B(4A) regarding performance security - Committee of Creditors' discretion to invite fresh Expression of Interest and not to oppose competing applications - principles of natural justice in CIRP proceedings

Performance Bank Guarantee requirement under the Request for Resolution Plan (RFRP) - non-compliance with obligations of a Successful Resolution Applicant - Whether the Adjudicating Authority was justified in refusing to approve the Appellant's Resolution Plan on account of non-deposit of the Performance Bank Guarantee as stipulated in the RFRP. - HELD THAT: - The RFRP expressly required the Successful Resolution Applicant to furnish a Performance Bank Guarantee equivalent to 20% of the bid consideration within two business days of issuance of the LoI. The record discloses multiple reminders from the Resolution Professional between 2018 and 2023, including formal communications warning of consequences for non-submission and providing last-chance deadlines. The Tribunal accepted the Adjudicating Authority's finding that the Appellant repeatedly failed to comply with the RFRP obligation and that such non-compliance rendered the Resolution Plan non-responsive. Given the elapsed period and the CoC's loss of confidence in the Appellant's ability to implement a large project, the Adjudicating Authority had no option but to reject the application for approval of the Plan. The Tribunal found no error in that conclusion. [Paras 10, 11, 15, 22]

Adjudicating Authority rightly rejected approval of the Resolution Plan due to the Appellant's failure to furnish the required Performance Bank Guarantee.

Applicability and effect of Regulation 36B(4A) regarding performance security - Performance Bank Guarantee requirement under the Request for Resolution Plan (RFRP) - Whether insertion of Regulation 36B(4A) after approval of the Plan affected the enforceability of the PBG requirement in the RFRP. - HELD THAT: - Regulation 36B(4A) was inserted after the RFRP was issued, but the RFRP itself independently provided for submission of a Performance Bank Guarantee within two business days. The Tribunal held there is no conflict between the subsequently inserted regulation and the RFRP's express stipulation; the later regulatory provision does not negate or excuse non-compliance with an existing contractual/process requirement contained in the RFRP. Consequently, the timing of insertion of Regulation 36B(4A) does not excuse the Appellant's failure to deposit the PBG. [Paras 9, 17]

Insertion of Regulation 36B(4A) after the RFRP does not vitiate the RFRP's independent PBG requirement; Regulation 36B(4A) has no bearing to absolve the Appellant of non-compliance.

Committee of Creditors' discretion to invite fresh Expression of Interest and not to oppose competing applications - Whether the Adjudicating Authority erred in permitting the State of Arunachal Pradesh and THDC to submit Resolution Plans and directing fresh invitation of EoI. - HELD THAT: - The Adjudicating Authority's directions to invite fresh EoI and to permit other applicants to submit plans flowed directly from rejection of the Appellant's plan for non-compliance. The CoC, after deliberation, chose not to object to the applications of the State and THDC in the interest of maximizing value and protecting the corporate debtor from liquidation. The Tribunal held that permitting these parties to participate pursuant to a fresh Form G issued under the order was consequential and legitimate; it did not amount to conferring rights on outsiders inconsistent with the CIRP, because their eligibility arises from the fresh EoI process ordered after rejection of the prior plan. [Paras 16, 19, 22]

No error in directing fresh EoI and permitting State and THDC to submit Resolution Plans as a consequence of rejecting the Appellant's non responsive plan.

Principles of natural justice in CIRP proceedings - Whether the Adjudicating Authority's order violated principles of natural justice by not hearing the Appellant's intervention application. - HELD THAT: - The application for approval of the Resolution Plan was heard and decided on merits; the intervention application filed by the Appellant became inconsequential once the main application for plan approval was rejected on account of the Appellant's own non-compliance. The Tribunal found no breach of natural justice because the rejection of the Appellant's main application rendered the intervention IA moot, and the Appellant had ample opportunity to present its case regarding non-submission of PBG. [Paras 21, 22]

No violation of natural justice; intervention application was rendered inconsequential by the decision to reject the Appellant's plan for non-compliance.

Final Conclusion: The appeal is dismissed. The Tribunal affirms the Adjudicating Authority's rejection of the Appellant's Resolution Plan for failure to furnish the Performance Bank Guarantee, upholds the order directing fresh invitation of EoI and permitting other applicants to submit plans, and finds no breach of natural justice; however, the Appellant is granted two weeks' liberty to submit a Resolution Plan to the Resolution Professional to be considered along with other plans.

Twin test under Section 45 of the PMLA - reasons to believe for arrest under Section 19 of the PMLA - proceeds of crime under Section 2(u) of the PMLA - predicate offence of possessing assets disproportionate / failure to satisfactorily account (PC Act) - incriminating custodial statements and Section 25 of the Evidence Act - preconceived idea of guilt - Bhajan Lal principle - bail where trial is unlikely to commence and prolonged incarceration

Reasons to believe for arrest under Section 19 of the PMLA - predicate offence of possessing assets disproportionate / failure to satisfactorily account (PC Act) - Applicant made out a prima facie case that his arrest on 27.06.2023 under the PMLA was not supported by objective material and was therefore unsustainable. - HELD THAT: - The Court examined the nature of the predicate offence (alleged possession of assets disproportionate to known sources of income) and noted that the CBI investigation into that offence was still pending and no chargesheet had been filed. Given that the predicate offence requires a determination whether the public servant can satisfactorily account for assets, the Court held that the ED could not, at the arrest stage, treat the entire quantum of assets recorded in the FIR as "proceeds of crime" and proceed on the basis of mere suspicion. The ECIR and remand papers showed that ED proceeded on the presumption that all assets alleged in the FIR were proceeds of crime; when arrest was effected the material available to ED was limited to the allegations in the FIR and did not satisfy the objective test required for reasons to believe under Section 19. Reliance on decisions requiring a credible objective basis for arrest under the PMLA supported the conclusion that the applicant had established a strong prima facie case that his arrest was in breach of the legal standard. [Paras 11, 12, 13, 16, 17]

Arrest was prima facie unsustainable as ED proceeded on impermissible presumption and without objective material to satisfy reasons to believe under Section 19 of the PMLA.

Proceeds of crime under Section 2(u) of the PMLA - predicate offence of possessing assets disproportionate / failure to satisfactorily account (PC Act) - ED could not treat the entire amount alleged in the FIR as "proceeds of crime" while the predicate investigation by CBI remained incomplete and the question of which assets, if any, were not satisfactorily accounted for was indeterminate. - HELD THAT: - The Court referred to the definition of "proceeds of crime" and observed that property qualifies as such only if derived as a result of criminal activity relating to the scheduled/predicate offence. Where the predicate investigation is incomplete and the accused may be able to satisfactorily account for all or part of the assets, it is premature for the ED to treat the entire alleged disproportionate assets as proceeds of crime. In the facts of this case, ED's presumption that the full extent of assets recorded in the FIR were proceeds of crime was, on a prima facie view, unsustainable and weakened the reliance placed on ED's investigational material in opposition to bail. [Paras 13, 16]

ED's presumption that all alleged disproportionate assets were proceeds of crime was prima facie unsustainable while the predicate CBI investigation remained pending.

Incriminating custodial statements and Section 25 of the Evidence Act - Statements recorded from the applicant after he was arrested could not be relied upon in opposition to the bail application as they would be hit by Section 25 of the Evidence Act to the extent they are incriminating. - HELD THAT: - The Court noted that the applicant's statement recorded by ED was given while he was already in custody and consequently, in light of binding authority, the contents of such custodial statements that are incriminating cannot be looked into for opposing bail. For similar reasons, statements of other persons recorded by ED after the arrest, when ED was effectively conducting its inquiry into whether the applicant could satisfactorily account for assets, could not be given weight in resisting bail in the present circumstances. [Paras 18]

Statements of the applicant recorded post-arrest are inadmissible for the purpose of opposing bail and cannot be relied upon by ED.

Twin test under Section 45 of the PMLA - bail where trial is unlikely to commence and prolonged incarceration - Applicant satisfied the stringent twin test under Section 45 of the PMLA and was entitled to bail; the application was allowed subject to conditions. - HELD THAT: - The Court found that the applicant had established a prima facie case on merits (first limb) by demonstrating that ED proceeded on an impermissible presumption and lacked objective material for arrest, and that the second limb was satisfied given the factual matrix: the predicate CBI investigation was incomplete, no chargesheet had been filed, and the applicant had already undergone more than 1 year and 3 months' incarceration with no reasonable prospect of trial commencing or concluding soon. The Court also considered Supreme Court decisions concerning prolonged incarceration and the need for bail where trial is unlikely to commence within a reasonable time, and directed conditional release on furnishing bond and sureties with reporting and cooperation conditions. [Paras 21, 22, 23]

Bail granted to applicant on conditions; release ordered in respect of the ED case subject to bond, sureties and reporting/cooperation conditions.

Final Conclusion: The High Court held that the applicant had made out a strong prima facie case that his arrest under the PMLA was unsustainable because ED had proceeded on an impermissible presumption that all assets alleged in the predicate FIR were proceeds of crime while the CBI's predicate investigation remained incomplete; custodial statements could not be relied upon; consequently the applicant satisfied the twin test under Section 45 of the PMLA and was released on bail subject to conditions, with observations confined to the bail disposal and the designated Court directed to proceed uninfluenced by those observations.

Evidentiary value of statements recorded under Section 14 of the Central Excise Act - Section 9D(1)(b) requirement of examination-in-chief and cross-examination - right to cross-examination as facet of principles of natural justice - invocation of Section 9D(2) requires formation of opinion based on material and reasons - presumption as to documents recovered under Section 36A of the Central Excise Act - remand for fresh adjudication to enable cross-examination

Evidentiary value of statements recorded under Section 14 of the Central Excise Act - Section 9D(1)(b) requirement of examination-in-chief and cross-examination - right to cross-examination as facet of principles of natural justice - remand for fresh adjudication to enable cross-examination - Whether the persons whose statements recorded during investigation and relied upon by the Department must be produced for cross-examination before the adjudicating authority/appeal authority and the consequent remedy if that opportunity was not afforded. - HELD THAT: - The Tribunal examined the interplay between statements recorded under Section 14 of the Central Excise Act and the evidentiary safeguards contained in Section 9D(1)(b) (as made applicable to service tax). Courts have held that previously recorded statements used against a party require opportunity for cross-examination of the maker where that person is available, failing which admission of such statements without cross-examination would infringe principles of natural justice. Invocation of Section 9D(2) must rest on an objective formation of opinion based on material and be supported by reasons and opportunity to the affected party. In the present proceedings the adjudicating authority had earlier dropped demand, and the Commissioner (Appeals) restored the demand relying on statements and documents recorded during investigation; there is no record that the appellant was afforded the opportunity to cross-examine the witnesses whose statements were relied upon. Given that cross-examination is a statutory right under Section 9D(1)(b) and a fundamental facet of fair adjudication, the Tribunal found it appropriate to remit the matter for fresh consideration so that the appellant may be given the opportunity to cross-examine all witnesses whose statements were relied upon and the Commissioner (Appeals) may re-adjudicate in the light of such examination and other available material. [Paras 6, 7, 8, 9]

Impugned order set aside and matter remanded to the Commissioner (Appeals) for re-adjudication after affording the appellant opportunity to cross-examine all witnesses whose statements were relied upon.

Final Conclusion: The appeal is allowed by way of remand: the impugned order is set aside and the matter is remitted to the Commissioner (Appeals) to permit cross-examination of the witnesses whose statements were relied upon and to re-adjudicate thereafter.

Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - provisional assessment - natural justice - show cause notice - related party transactions / transaction value - CBEC Circular 692/08/2003 CX dated 13 02 2003

Natural justice - show cause notice - Whether the original authority erred in finalising provisional assessment without issuing a show cause notice when it treated certain clearances as available transactions with unrelated persons - HELD THAT: - The Tribunal found that the original authority proceeded on an assumption that transactions with unrelated persons existed and thereby discarded the CAS 4 statement produced by the assessee without issuing any show cause notice. The court emphasised that any order adverse to the assessee must be preceded by a show cause notice so as to afford the assessee an opportunity to meet the reasons for disallowance; the absence of such notice rendered the finalisation procedurally defective. This finding formed the basis for setting aside the finalisation order and requiring further proceedings that comply with principles of natural justice. [Paras 6]

Original finalisation set aside for want of issuance of a show cause notice; assessment to be taken up afresh in accordance with natural justice.

Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - provisional assessment - related party transactions / transaction value - CBEC Circular 692/08/2003 CX dated 13 02 2003 - Whether the matter should be finalised under Rule 8 and the CBEC circular by the original authority after appropriate notice or whether the first appellate authority's direction to proceed under Rule 8 should be set aside - HELD THAT: - The Tribunal observed that the first appellate authority correctly concluded that the original authority ought to have proceeded in accordance with Rule 8 and the CBEC circular, given the dispute over whether transactions with unrelated persons were available to determine value. Rather than finally adjudicating the valuation question on the materials before it, the Tribunal found it appropriate in the interests of justice to remit the matter to the original authority for finalisation under Rule 8 after giving due notice to the assessee of non entitlement to valuation on the basis of the CAS 4 statement. The remand contemplates fresh consideration and compliance with the procedural steps mandated by Rule 8 and the circular. [Paras 6, 7]

Matter remanded to the original authority to finalise the provisional assessment under Rule 8 and the CBEC circular after issuing due notice to the assessee; the first appellate authority's setting aside of the original finalisation is upheld to this extent.

Final Conclusion: The appeal is disposed of by setting aside the original finalisation and remitting the assessment for 2012 13 to the original authority for finalisation under Rule 8 of the Valuation Rules and the CBEC circular after issuing appropriate show cause notice to the assessee; the first appellate authority's order directing such procedure is sustained and the matter is remanded for compliance with natural justice.

Cenvat credit - Input service - Advertisement or sales promotion - Manufacture and clearance of final products upto the place of removal - Admissibility of credit on sales commission

Cenvat credit - Input service - Advertisement or sales promotion - Admissibility of credit on sales commission - Whether cenvat credit of service tax paid on sales commission paid to oil companies/agents is admissible to the manufacturer for the stated periods. - HELD THAT: - The definition of "input service" in Rule 2(l) of the Cenvat Credit Rules, 2004 expressly included "advertisement or sales promotion" within the scope of input service for the relevant periods. Commissions paid under agreements/MOUs to market and sell the manufacturer's final products through distributors fall within marketing expenses which, as held by the Supreme Court, form part of activities relating to clearance of goods. Prior decisions of this Tribunal and High Courts recognising credit on sales promotion/commission agent services were applied. In light of the express inclusion of advertisement and sales promotion in the definition of input service and the characterisation of commission as marketing-related expenditure used in relation to manufacture and clearance of final products, the service tax discharged on such sales commission is eligible for cenvat credit. The Tribunal therefore found the adjudicating authority's denial of credit unsustainable and set aside the impugned orders. [Paras 7, 8, 9]

Impugned orders denying cenvat credit on service tax paid on sales commission are set aside and the appeals are allowed with consequential relief as per law.

Final Conclusion: The Tribunal held that service tax paid on sales commission, being within the ambit of "advertisement or sales promotion" as an input service used in relation to manufacture and clearance of final products, is admissible as cenvat credit for the periods under dispute; the impugned orders are set aside and appeals allowed with consequential relief.

Apportionment of Cenvat credit between exempted services and dutiable goods - exclusion of credit exclusively used in manufacture from "total Cenvat credit" for Rule 6(3A) computation - interpretation and retrospective application of amendment to Rule 6(3A) of the Cenvat Credit Rules - limitation under Section 73(1) and relevant date under Section 73(6)(i)(a) - proviso to Section 73(1) requiring positive suppression with intent to invoke extended period - penalty and interest not leviable where the primary demand is unsustainable

Exclusion of credit exclusively used in manufacture from "total Cenvat credit" for Rule 6(3A) computation - apportionment of Cenvat credit between exempted services and dutiable goods - interpretation and retrospective application of amendment to Rule 6(3A) of the Cenvat Credit Rules - Whether Cenvat credit availed on input services exclusively used in manufacture of dutiable goods must be included in the "total Cenvat credit" for apportioning common credit under Rule 6(3A). - HELD THAT: - The Tribunal held that for the purpose of the formula in Rule 6(3A) the "total Cenvat credit" means only the credit on input services that are common to both exempted services and dutiable goods and does not include credit on input services exclusively used in manufacture of dutiable goods. The court relied on a conjoint reading of Rule 6(1), (2) and (3) and on authorities applying the same interpretation, noting that inclusion of exclusively-used manufacturing credits would defeat the object of Rule 6 and result in disallowance of credit not contemplated by the Rules. The substitution to Rule 6(3A) by Notification No. 13/2016-CE (NT) dated 01.03.2016, and the TRU Circular clarifying retrospective application, reinforce that only common input service credit is to be considered for computing reversal. Applying these principles to the facts, the modality adopted by the appellant-reversing proportionately only from common input service credit-was held to be in accordance with Rule 6(3A), rendering the departmental demand unsustainable. [Paras 12, 15, 16, 17, 19]

Demand based on inclusion of exclusively-used manufacturing credits in the denominator for apportionment is incorrect; appellant's method of considering only common input service credit under Rule 6(3A) is upheld and the impugned demand set aside.

Limitation under Section 73(1) and relevant date under Section 73(6)(i)(a) - proviso to Section 73(1) requiring positive suppression with intent to invoke extended period - Whether the departmental demand for the period April 2010 to March 2013 is barred by limitation. - HELD THAT: - The Tribunal held that the SCN dated 22.07.2015 was issued beyond the normal 18-month period prescribed by Section 73(1) when calculated from the relevant date taken as the date of filing ST-3 returns for 01.10.2013 to 31.03.2014, and therefore the demand for April 2010 to March 2013 is time-barred. Invocation of the proviso to Section 73(1) requires proof of positive suppression of facts with intent to evade credit; no such suppression was found because the appellant had periodically intimated the department of its option to reverse credit under Rule 6(3A) and the amounts reversed, so the department had knowledge of the transactions. [Paras 22, 23, 24, 25]

The demand for the period April 2010 to March 2013 is barred by limitation and cannot be sustained; the proviso to Section 73(1) is not attracted in the absence of suppression with intent.

Penalty and interest not leviable where the primary demand is unsustainable - Whether penalty and interest can be imposed or recovered where the Cenvat credit demand itself is held unsustainable. - HELD THAT: - The Tribunal held that since the substantive demand for reversal of credit is not sustainable, imposition of penalty is not justified and consequently interest on the said demand is also not recoverable. The reasoning flows from the primary conclusion that the demand was based on an incorrect interpretation of Rule 6(3A). [Paras 26]

Penalty and interest are not imposable or recoverable where the demand for Cenvat credit reversal is set aside.

Final Conclusion: The appeal is allowed: the departmental demand and penalty founded on an incorrect interpretation of Rule 6(3A) are set aside; the demand for April 2010 to March 2013 is time-barred; consequential relief follows and no penalty or interest is payable.

Maintenance of separate accounts under Rule 6(2) of the Cenvat Credit Rules, 2004 - option to reverse credit under Rule 6(3) of the Cenvat Credit Rules, 2004 - presumptive 6% payment on value of exempted/traded goods under Rule 6(3) - effect of reversal of Cenvat credit and payment of interest on liability - invocation of extended period of limitation for suppression under Section 11A(4) - penalty under Section 11AC

Option to reverse credit under Rule 6(3) of the Cenvat Credit Rules, 2004 - presumptive 6% payment on value of exempted/traded goods under Rule 6(3) - effect of reversal of Cenvat credit and payment of interest on liability - Whether a demand equal to 6% under Rule 6(3) is sustainable where the assessee has reversed proportionate Cenvat credit attributable to exempted/traded goods and paid interest thereon - HELD THAT: - The Tribunal noted that the appellant had reversed the proportionate Cenvat credit attributed to trading (exempted) goods and had paid interest from the date of availment of credit until its reversal. On the undisputed factual position of reversal and interest payment, the Tribunal held that the demand equal to 6% under Rule 6(3) could not be sustained. The Tribunal relied on the principle established in earlier decisions (as cited in the order) that payment of the proportionate credit along with interest extinguishes the basis for a separate demand under Rule 6(3). Applying that legal position to the admitted fact of reversal and interest payment, the Tribunal found no sustainable ground for the impugned demand and hence set aside the same.

Demand equal to 6% under Rule 6(3) set aside as appellant had reversed proportionate credit and paid interest; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the demand computed under Rule 6(3) for the period March 2013 to December 2014, holding that reversal of proportionate Cenvat credit with payment of interest negates the sustainability of the 6% demand.

Works contract - transfer of goods in the form of goods - transfer of goods in some other form - loss of identity of goods upon incorporation in works contract - applicable rate of tax on goods transferred in course of works contract - clarificatory order under the Kerala Value Added Tax Act

Works contract - transfer of goods in the form of goods - loss of identity of goods upon incorporation in works contract - Whether the transfer of tread rubber in the course of tyre retreading amounts to transfer of goods in the form of goods or is a transfer in some other form because the goods lose their identity upon incorporation - HELD THAT: - The Court examined the nature of the retreading process as found in the record and in the authorities considered. The assessee manufactured tread rubber strips and incorporated them into customers' old tyres by processes including scraping/preparation of the tyre surface and affixation/fusion (and vulcanization) so that the tread rubber became inseparable and lost its original identity and shape. The Court accepted the view recorded by the First Appellate Authority and by the earlier clarificatory order of the Department that, on the material facts of these cases and for the processes used, the transfer of the tread rubber in execution of the retreading contract is not a transfer in the form of goods but a transfer in some other form because the goods cease to retain their separate identity when incorporated into the completed works contract. [Paras 8]

The transfer of tread rubber in the retreading works contracted by the assessee is a transfer in some other form and not a transfer of goods in the form of goods.

Applicable rate of tax on goods transferred in course of works contract - clarificatory order under the Kerala Value Added Tax Act - The appropriate rate of tax applicable to the transfer of tread rubber in the assessment years before the Court - HELD THAT: - Having held that the transfer was in some other form because the tread rubber lost its identity on incorporation into the tyres, the Court applied the departmental clarification that governed the assessment years in question. The earlier clarificatory order (dated 7.4.2016) and the findings on the nature of the process lead to the conclusion that the higher rates claimed by the Revenue apply for the periods under adjudication. The Tribunal's conclusion upholding the lower ad valorem rate for goods was therefore not sustainable for these assessment years. [Paras 8, 9]

For assessment year 2011-12 the rate of tax is 12.5% and for assessment year 2013-14 the rate of tax is 14.5%; the Tribunal's orders holding a 5% rate are set aside.

Final Conclusion: The Revenue's revisions are allowed; the Court holds that the tread rubber, as incorporated into retreaded tyres in these cases, ceased to be transferred in the form of goods and the appropriate rates are 12.5% for 2011-12 and 14.5% for 2013-14, thereby reversing the Tribunal's orders granting the 5% rate.

Classification of goods - chemicals - drugs and medicines - ores and minerals - unclassified goods - tax levied on finished goods (charging section)

Classification of goods - chemicals - composition vs finished product - Vitamins and minerals pre-mix do not fall under the Entry 29 category of "chemicals" in Schedule II of the Act, 2008. - HELD THAT: - The Court held that tax is leviable on the finished goods and not on the raw materials or chemical components used in their manufacture; items listed in Entry 29 are not the finished product before the Court. Even if the pre-mix is manufactured from chemical raw materials, the finished product "vitamins and minerals pre-mix" is a distinct good and cannot be treated as falling within Entry 29 merely because its constituents are chemicals. The charging principle in the Act requires classification of the product sought to be taxed, not its raw materials. [Paras 9, 10, 11]

Contention that the pre-mix is taxable under Entry 29 as a "chemical" is rejected.

Classification of goods - drugs and medicines - Vitamins and minerals pre-mix do not qualify as "drugs and medicines" under Entry 41 of Schedule II of the Act, 2008. - HELD THAT: - By reference to ordinary meanings of "drug" and "medicine" the Court observed that Entry 41 is directed to products used in treating, preventing or alleviating disease or symptoms thereof. No material was placed before the authorities or this Court to show that the pre-mix functions as a drug or medicine within that understanding. Absent such material, the product cannot be classified under the Entry which covers medicaments and allied preparations. [Paras 12, 13, 14]

Contention that the pre-mix is taxable as "drugs and medicines" is rejected.

Classification of goods - ores and minerals - Vitamins and minerals pre-mix do not fall under Entry 89 for "ores and minerals" in Schedule II of the Act, 2008. - HELD THAT: - The Court noted that Entry 89 contemplates raw ores and minerals; the entry does not mention or encompass a manufactured "pre-mix" of vitamins and minerals. The nature of the entry is limited to raw materials of the type described, and the finished pre-mix therefore cannot be classified within that entry. [Paras 15]

Contention that the pre-mix falls under "ores and minerals" is rejected.

Classification of goods - unclassified goods - The Tribunal and the Commissioner were correct in treating the product as an unclassified item liable to tax as unclassified goods. - HELD THAT: - Having rejected classification under chemicals, drugs and medicines, and ores and minerals, the Court found no infirmity in the authorities' conclusion that the product is an unclassified good and hence taxable as such under the Act. The judicial reasoning adopted by the Commissioner and the Tribunal on classification was upheld. [Paras 16]

Tribunal's and Commissioner's classification of the pre-mix as an unclassified item is upheld.

Final Conclusion: Revision dismissed; substantial questions of law decided against the revisionist and in favour of the revenue, upholding classification of the product as an unclassified good.

Presumption as to consideration under Section 118 of the Negotiable Instruments Act, 1881 - rebuttal of presumption by probabilising defence - onus shifting upon rebuttal of presumption - proof of consideration by preponderance of probabilities - circumstantial evidence to disprove consideration

Presumption as to consideration under Section 118 of the Negotiable Instruments Act, 1881 - rebuttal of presumption by probabilising defence - proof of consideration by preponderance of probabilities - circumstantial evidence to disprove consideration - Whether the trial Court was justified in invoking the presumption under Section 118 without considering the contradictions and circumstances which might rebut the presumption and thereby establish absence of consideration for the promissory note - HELD THAT: - The Court observed that Section 118 creates a rebuttable presumption of consideration once execution of a promissory note is admitted, but the defendant may displace that presumption by probabilising a defence showing the existence of consideration to be improbable, doubtful or illegal, either by direct evidence or by adducing surrounding circumstances and probabilities (relying on the principles in Bharat Barrel & Drum Manufacturing Co.'s case and related precedents). Applying that test to the evidence, the Court noted material features that weakened the plaintiff's case: the plaintiff's youth and lack of demonstrated means at the relevant time, failure to produce income tax returns or any documentary evidence of funds or part payments, contradictory testimony between PW1 and PW2 about the manner and timing of payments, and other inconsistencies in PW1's cross examination. These circumstances, held the Court, sufficiently probabilised the defendant's plea to rebut the statutory presumption and shifted the onus back on the plaintiff, who failed to produce additional evidence to improbabilise the defendant's case. The trial Judge therefore erred in mechanically applying the presumption under Section 118 without addressing the contradictions and surrounding circumstances which, on the whole, made the defence more probable and negatived the existence of consideration for the promissory note. [Paras 14, 15, 16, 17, 18]

The presumption under Section 118 was rebutted on the evidence; the trial Court erred in invoking the presumption without considering the contradictions and circumstances, and the plaintiff failed to prove passing of consideration.

Final Conclusion: Appeal allowed; the decree in O.S.No.109 of 2021 is set aside and the suit is dismissed.

Regular bail - grant of bail is the general rule - presumption of innocence - right to speedy trial - Article 21 of the Constitution - judicial discretion in bail - detention as an exception - criminal antecedents

Regular bail - right to speedy trial - presumption of innocence - grant of bail is the general rule - detention as an exception - judicial discretion in bail - Release of the petitioner on regular bail - HELD THAT: - The Court observed that the petitioner had been in custody for 10 months and 04 days, the complainant-material witness had turned hostile, the challan was presented on 24.11.2023 and charges were framed on 03.06.2024, and out of 17 prosecution witnesses only one had been examined, permitting an inference that conclusion of trial would be prolonged. The Court applied the established principle that grant of bail is the general rule and detention is the exception, relying on the reasoning in Dataram which emphasises the presumption of innocence, the need for humane exercise of judicial discretion, and avoidance of prolonged pre-conviction incarceration. The right to a speedy trial as part of Article 21 was held to weigh in favour of release. While recognising that criminal antecedents are a relevant consideration, the Court noted that such antecedents cannot, without more, justify continued incarceration where trial is likely to be protracted and other factors (hostile complainant, limited witness evidence adduced, co-accused granted bail) favour bail. The Court therefore concluded that continued detention for an indefinite period was not warranted and that bail should be granted subject to usual bonds. [Paras 4, 5]

Petitioner released on regular bail on furnishing bail and surety bonds to the satisfaction of the trial Court/Duty Magistrate.

Final Conclusion: Petition allowed; petitioner directed to be released on regular bail on furnishing bail and surety bonds to the satisfaction of the trial Court/Duty Magistrate; observations made are without prejudice to the merits of the case.