TaxTMI Updates e-Newsletter
Oct 20,2023

Detention, seizure and release of goods under section 129 - penalty under section 129(3) of the UPGST Act - intention to evade payment of tax - stock transfer within State - absence of taxable event - e-way bill Part B non-compliance and subsequent rectification

E-way bill Part B non-compliance and subsequent rectification - detention, seizure and release of goods under section 129 - intention to evade payment of tax - Validity of initiation and confirmation of penalty proceedings under section 129(3) in respect of goods in transit where Part B of the e-way bill was not filled initially but was filled up before seizure and where the consignment was a stock transfer between the assessee's units. - HELD THAT: - The Court found that the consignment was a stock transfer from the petitioner's Agra unit to its Mathura unit and was accompanied by stock transfer challan and consignment note; only Part A of the e-way bill was initially filled while Part B was not, and Part B was completed and produced along with the reply before the authority prior to passing the seizure/penalty order. In these circumstances the authority ought to have taken a lenient view because no intention to evade tax was demonstrated. The Court relied on the principle that proceedings under the provisions dealing with detention, seizure and related penalties require a finding of intent to evade tax and that mere procedural or technical non-compliance which is rectified without any evidence of evasive intent does not justify initiation and confirmation of penalty under section 129(3). The Court also noted that when goods are being moved by way of intra-State stock transfer and there is no taxable event or tax liability, the mere interception for a defect in the e-way bill (which was rectified) cannot sustain a penalty order. Having not been shown any provision or material establishing tax evasion in the facts, the impugned orders were vitiated and liable to be set aside. [Paras 9, 10, 11, 14, 15]

Impugned penalty and confirming orders set aside as there was no intent to evade tax and the procedural defect was rectified before seizure; authorities' proceedings under section 129(3) unsustainable.

Final Conclusion: Writ petition allowed; orders dated 16.05.2018 and 23.02.2019 quashed. Any fine/penalty deposited shall be refunded to the petitioner within one month of certified copy of the order, with interest at 8% per annum for delay, and authorities may recover such interest from the erring officer.

Transfer of tax deducted at source (TDS) from pre-GST to post-GST regime - transition of input tax credit under Section 140 of the TNGST Act - quashing of show cause notice - binding effect of High Court precedent on identical legal question

Transfer of tax deducted at source (TDS) from pre-GST to post-GST regime - transition of input tax credit under Section 140 of the TNGST Act - quashing of show cause notice - Validity of the show cause notice dated 29.09.2023 which denied transfer of TDS from the pre-GST era to the post-GST era and permitted only limited ITC conversion. - HELD THAT: - The Court examined the petitioner's entitlement to transfer TDS amounts captured under the erstwhile TNVAT regime into Input Tax Credit in the post-GST regime, relying on the earlier decision in DMR Constructions which interpreted Section 140 of the TNGST Act as permitting transition of such credits including TDS. The High Court recorded that the law as laid down in that precedent supports entitlement to transition of TDS and noted that the respondent accepted that legal position. In view of the binding precedent and the respondent's concession, the impugned show cause notice which denied the transfer of TDS was held to be contrary to law and therefore liable to be quashed. The court thus set aside the notice without deciding ancillary factual or evidentiary issues left open in earlier proceedings. [Paras 6, 7, 9]

Impugned show cause notice dated 29.09.2023 quashed as contrary to the law laid down by this Court regarding transition of TDS under Section 140.

Final Conclusion: Writ petition allowed; impugned show cause notice quashed and connected miscellaneous petition closed.

Conditions of use of amount available in electronic credit ledger - Rule 86-A of the CGST/MGST Rules - Authorization of officers of State Tax as proper officers for purposes of CGST Act - Delegation of powers to State Tax Officers by Commissioner under State Act - Right to be heard and restoration of debit under Rule 86-A(2)

Rule 86-A of the CGST/MGST Rules - Authorization of officers of State Tax as proper officers for purposes of CGST Act - Delegation of powers to State Tax Officers by Commissioner under State Act - Whether the State Tax Officer had jurisdiction to block the petitioner's input tax credit under the CGST Act invoking Rule 86-A. - HELD THAT: - The Court held that the powers conferred under the CGST Act and the MGST Act are to be read harmoniously and that officers appointed under the State Goods and Services Tax Act may be authorised to act for purposes of the CGST Act. Rule 86-A cannot be read to defeat or override the statutory scheme which, by Section 6 of the CGST Act, authorises officers appointed under the State Act to be proper officers for the CGST Act subject to notifications, and by Section 5 of the MGST Act empowers the Commissioner to delegate functions to subordinate State Tax Officers. The delegation order dated 24 January, 2020 by the Commissioner of State Tax (delegating powers under Rule 86A of the MGST Rules to Deputy/Assistant Commissioners and State Tax Officers) and the pari materia nature of Sections 5 and 6 of the respective Acts mean that it would be incongruous to hold that a State Tax Officer is precluded from exercising the blocking power under Rule 86-A in circumstances where he is authorised under the State scheme and Section 6 of the CGST Act contemplates such authorisation. For these reasons the contention that the State Tax Officer lacked jurisdiction to pass the impugned order was rejected. [Paras 6, 12, 13, 15, 16]

The Court upheld the competence of the State Tax Officer to block ITC under Rule 86-A in the facts of this case and rejected the petitioner's jurisdictional challenge.

Right to be heard and restoration of debit under Rule 86-A(2) - Conditions of use of amount available in electronic credit ledger - Whether the roznama order rejecting the petitioner's objections without addressing merits was sustainable and what relief should follow. - HELD THAT: - The impugned blocking order itself recorded that the petitioner could electronically submit a reply and would be heard and, under Rule 86-A(2), the officer authorised may allow debit upon being satisfied that the conditions for disallowing debit no longer exist. The petitioner submitted detailed objections by e-mail dated 28 March, 2023. The roznama order dated 10 April, 2023 purportedly considered the objection but was not communicated to the petitioner and on perusal did not address the petitioner's contentions on merits, merely noting the remedy of appeal. The Court found that the roznama order therefore failed to accord the opportunity contemplated by Rule 86-A(2) and was unsustainable. In consequence the Court quashed that roznama order, directed the State Tax Officer to hear the petitioner on the documents filed by email and to pass a reasoned order in accordance with law within the stipulated time. [Paras 18, 19, 20]

The roznama order dated 10 April, 2023 is quashed; the State Tax Officer is directed to hear the petitioner on the objections filed and pass a detailed reasoned order expeditiously (with timing directions given by the Court).

Final Conclusion: The High Court ruled that a State Tax Officer can, in the scheme of CGST and MGST enactments and delegated authority, block input tax credit under Rule 86-A; however the officer's subsequent roznama rejection of the petitioner's objections was quashed for want of a proper hearing on the merits and the matter was remitted for fresh consideration with directions to afford opportunity and pass a reasoned order.

Computation of period of limitation - exclusion of period for limitation due to COVID-19 - refund under Section 54 of the Central Goods and Services Tax Act, 2017 - rejection of refund claims as barred by limitation - order passed without application of mind

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - rejection of refund claims as barred by limitation - order passed without application of mind - Impugned order rejecting the petitioner's revised refund applications as barred by limitation was passed without considering the exclusion of the COVID-19 period and is liable to be set aside. - HELD THAT: - The petitioner filed original refund applications within the prescribed time and those applications were returned for defects, after which revised applications were filed. The first respondent rejected the revised applications on the ground of limitation. The Court examined the record and found that the impugned order did not take into account the exclusion for computation of limitation arising from the Supreme Court order and the Departmental notification which excluded the COVID-19 period for limitation reckoning. Because the exclusionary period was not considered, the rejection was rendered without application of mind to a determinative legal point relevant to limitation and refund eligibility under Section 54 of the Act. [Paras 7]

Impugned order set aside for failure to consider the exclusion of the COVID-19 period in computing limitation for refund claims.

Computation of period of limitation - exclusion of period for limitation due to COVID-19 - refund under Section 54 of the Central Goods and Services Tax Act, 2017 - Matter remitted for fresh consideration so that the revised refund applications are processed afresh applying the exclusionary period and giving the petitioner opportunity to be heard. - HELD THAT: - Having set aside the impugned order because the exclusionary period was not considered, the Court directed that the respondent-process the revised refund applications and pass appropriate orders after applying the Supreme Court's exclusion and the Departmental notification. The respondents were required to afford the petitioner an opportunity of being heard and to complete processing within a stipulated timeframe. [Paras 8]

Revised refund applications remitted for fresh processing and decision by the respondent in accordance with the Supreme Court order and Departmental notification, after giving opportunity to the petitioner.

Final Conclusion: The petition succeeds: the order rejecting the revised refund claims on limitation grounds is set aside and the respondents are directed to reprocess and decide the petitioner's revised refund applications taking into account the Supreme Court exclusion and the Departmental notification, after affording opportunity to the petitioner, within 30 days.

Grant of ad interim injunction - Application of Section 16(4) of the CGST Act - Effect of binding Supreme Court decision on tax treatment of salaries and other expenses

Grant of ad interim injunction - Application of Section 16(4) of the CGST Act - Effect of binding Supreme Court decision on tax treatment of salaries and other expenses - Interim relief in respect of show cause notices issued by revenue authorities was granted. - HELD THAT: - The petitioner challenged three show cause notices dated 05.08.2023, 06.10.2023 and 27.09.2023 contending that the authorities applied the provisions of Section 16(4) of the CGST Act without taking into account the Supreme Court's determinations that salaries and other expenses attract GST and that the petitioner had filed GST returns in light of those decisions. On hearing the petitioner on the question of grant of ad interim relief, the Court observed the factual position advanced and granted the interim order as prayed, staying the operation of the impugned notices until further orders. The respondents were left at liberty to seek vacation of the interim order. The Court also directed service of petition papers and called upon designated government counsel to accept notice for the respective respondents.

Ad interim order granted staying the impugned show cause notices until further orders; respondents permitted to seek vacation of the stay and directed to accept notice.

Final Conclusion: Interim relief granted in favour of the petitioner restraining operation of the three impugned show cause notices pending further orders; procedural directions issued for service and acceptance of notice.

Attachment of bank accounts under Section 83 of the Central Goods and Services Tax Act, 2017 - provisional attachment of assets - maintenance of appeal under Section 107 - deposit of 10% for maintaining appeal - right to be heard / natural justice - defreezing of bank account pending disposal of appeal

Attachment of bank accounts under Section 83 of the Central Goods and Services Tax Act, 2017 - defreezing of bank account pending disposal of appeal - maintenance of appeal under Section 107 - Respondents bound to take up the petitioner's appeal and lift the provisional attachment of the petitioner's bank account pending disposal of the appeal. - HELD THAT: - The petitioner challenged the impugned order which provisionally attached its bank account and had preferred an appeal under Section 107 after depositing 10% of the disputed amount. The respondents stated on record that the appeal would be listed on 19.10.2023 and that the order attaching the petitioner's bank account would be lifted. The Court disposed of the petition by binding the respondents to that statement and directing that the bank account (now numbered as A/c no. 26090200007725 with Bank of Baroda) be defreezed. The Court further directed the concerned bank not to interdict operation of the account on the basis of the freezing order dated 23.06.2023 pending disposal of the appeal. [Paras 6, 7]

The respondents are bound to take up the appeal on 19.10.2023 and to lift the provisional attachment; the Bank of Baroda shall not interdict operation of the petitioner's account on the basis of the earlier freezing order.

Final Conclusion: Petition disposed by directing respondents to implement their undertaking: the appeal shall be taken up on 19.10.2023 and the provisional attachment of the petitioner's bank account is to be lifted so that the bank shall not interdict the account pending disposal of the appeal.

Provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - non-operation of provisional attachment after one year - repeated orders of provisional attachment - direction to bank not to interdict account

Provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - non-operation of provisional attachment after one year - Whether any operative order currently exists for provisional attachment of the petitioner's bank accounts. - HELD THAT: - The Court recorded that the impugned order dated 14.07.2020 had ceased to be operative by virtue of the one year limitation in Section 83(2) of the CGST Act. Although subsequent orders were issued before expiry and another order dated 08.08.2022 was later made, the respondents represented that no order of provisional attachment is presently operative. On the basis of the factual position and the statutory non operation after one year, the petitioner's grievance about any current provisional attachment does not survive.

No operative order for provisional attachment of the petitioner's bank accounts exists at present; the challenge to provisional attachment therefore does not survive.

Direction to bank not to interdict account - provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - Relief to be granted to the petitioner regarding operation of the bank accounts. - HELD THAT: - Having found that there is no operative provisional attachment order, the Court directed that the concerned bank shall not interdict operation of the petitioner's specified accounts on the basis of the order dated 08.08.2022 or any prior order passed by the GST authorities. The direction is limited to interdiction of the accounts by the bank pursuant to those GST orders up to and including 08.08.2022.

The bank is directed not to interdict operation of the petitioner's specified accounts on the basis of the order dated 08.08.2022 or any earlier GST order; petition disposed accordingly.

Final Conclusion: The petition is disposed of: the Court found no presently operative provisional attachment of the petitioner's bank accounts and directed the bank not to interdict the specified accounts on the basis of the 08.08.2022 order or any earlier GST order.

Cross-empowerment of Central and State GST officers - proper officer - intelligence-based enforcement action - priority of proceedings initiated first under Section 6(2)(b) of the GST enactments

Cross-empowerment of Central and State GST officers - priority of proceedings initiated first under Section 6(2)(b) of the GST enactments - Whether simultaneous proceedings by Central and State GST authorities concerning the same assessee and same tax period can proceed concurrently, or whether the later-initiated proceeding must be kept in abeyance. - HELD THAT: - The Court examined the statutory scheme which authorises officers under one GST enactment to function as proper officer for the other enactment and harmonises cross-enforcement (paras 3-5). Section 6(2)(b) embodies the principle that where a proper officer authorised under one enactment initiates proceedings on a subject matter, the jurisdictional officer under the other enactment shall not initiate a proceeding on the same subject matter. The CBEC circular clarifies that an officer initiating an intelligence-based enforcement action may complete the entire process without transferring the case. Applying these principles to the facts, the Court found that the Central Authority had earlier issued summons under Section 70 (Annexures-2 and 3) covering 2017-18 (and subsequent years) and therefore the State Authority's audit notice for 2017-18 (Annexure-1), being later in point of initiation and overlapping for that year, must be kept in abeyance pending completion of the Central proceedings (paras 7, 9-11). [Paras 4, 5, 11]

Proceedings initiated by the State Authority for 2017-18 shall be kept in abeyance and the earlier-initiated Central proceedings shall continue.

Intelligence-based enforcement action - proper officer - Incidental directions regarding production and transmission of documents and compliance with summons where the Central Authority has earlier initiated intelligence-based proceedings. - HELD THAT: - Having held that the Central intelligence-based proceedings take priority for the overlapping year, the Court directed that any documents or materials already produced before the State Authority shall be transmitted to the Central Authority. The petitioner is required to appear before the Central Authority in compliance with the earlier summons (Annexure-3), reflecting the practical consequences of allowing the Central intelligence-based investigation to proceed to its logical conclusion (para 11). [Paras 11]

Documents produced to the State Authority shall be forwarded to the Central Authority and the petitioner shall comply with the Central summons.

Final Conclusion: Writ petition allowed: where both Central and State GST officers have initiated overlapping proceedings against the same assessee for the same year and the Central intelligence-based enquiry was initiated earlier, the State proceedings for that year are to be kept in abeyance, materials transferred to the Central Authority and the assessee directed to comply with the Central summons.

Writ petitions filed beyond statutory period for filing statutory appeal - Exercise of Article 226 subject to availability of alternative efficacious remedy - Assessment to best judgment under Section 62 of the TNGST Act - Adjustment of Input Tax Credit as per GSTR-2A - Deemed withdrawal of assessment on filing valid return within thirty days

Writ petitions filed beyond statutory period for filing statutory appeal - Exercise of Article 226 subject to availability of alternative efficacious remedy - Maintainability of the writ petitions filed after the expiry of the statutory period for preferring an appeal. - HELD THAT: - The High Court held that the writ petitions were filed beyond the statutory limitation prescribed for filing a statutory appeal under the relevant GST enactment and therefore were not maintainable. Reliance was placed on the Supreme Court's decision in Glaxo Smith Kline Consumer Health Care Limited which emphasises that the High Court should ordinarily not entertain challenges under Article 226 where an alternative efficacious statutory remedy exists and, if the writ is filed after the expiry of the statutory appeal period, the Court cannot disregard the legislative prescription. In view of the statutory scheme and authorities cited, the petitions filed beyond the limitation period had to be dismissed. [Paras 15, 16, 17, 18]

Writ petitions are not maintainable and liable to be dismissed as they were filed after the statutory period for appeal.

Assessment to best judgment under Section 62 of the TNGST Act - Adjustment of Input Tax Credit as per GSTR-2A - Deemed withdrawal of assessment on filing valid return within thirty days - Validity of the assessment orders passed under Section 62 and correctness of tax liability determined after adjustment of ITC. - HELD THAT: - The Court recorded that the petitioner had admitted tax liability, failed to file GSTR-3B returns for the relevant periods while having filed GSTR-1, and had not furnished satisfactory responses to departmental notices. The assessing authority assessed the tax to the best of its judgment under Section 62 based on inspection materials and available departmental records; the liability determined was net of ITC as reflected in GSTR-2A. The Court observed that had a valid return been furnished within thirty days of service of the assessment, the assessment would have been deemed withdrawn but interest and late fee liabilities would remain. Given these facts and that the assessment already reflected adjustment of ITC, there was no ground to interfere with the impugned assessment orders. [Paras 19, 24, 25, 26]

Impugned assessment orders under Section 62 are sustained; no interference warranted.

Final Conclusion: The writ petitions are dismissed as barred by limitation and there is no merit to disturb the assessments which were made to the best of the officer's judgment after adjustment of ITC; liberty granted to the petitioner to seek installment facility from the respondent for payment of tax liability.

Utilisation of excess input tax credit - reversal of excess ITC prior to utilisation - interest under Section 50 of the CGST Act - penalty for undue or excess claim of input tax credit - electronic credit ledger entries as evidence of utilisation

Utilisation of excess input tax credit - electronic credit ledger entries as evidence of utilisation - interest under Section 50 of the CGST Act - penalty for undue or excess claim of input tax credit - reversal of excess ITC prior to utilisation - Whether the petitioner had utilised Rs. 21,13,354/- out of the excess ITC entered in August 2017 and therefore was liable to pay interest and penalty. - HELD THAT: - The Court found as an accepted fact that the petitioner erroneously entered ITC of Rs. 14,05,78,663/- in August 2017 instead of Rs. 1,40,57,836/-, resulting in excess ITC of Rs. 12,65,20,827/-, and that the excess was reversed on 18.08.2018 and reflected in the GSTR-3B return. A review of the electronic credit ledger (Annexure P-5) showed that after discharging the July 2017 central tax liability the petitioner still had a balance of Rs. 81,95,564/-, and that the ledger balance never fell below the excess-ITC amount until its reversal in August 2018. On this material the Court held that the mere entry of excess ITC in the electronic ledger does not by itself establish utilisation; utilisation for purposes of Section 50(3) requires that the credit or part thereof be put to use. Applying the statutory scheme of Section 50 and the consistent authorities of this Court and coordinate Benches (Jagatjit Industries Ltd.; Grasim Bhiwani Textile Ltd.; M/s Commercial Steel Engineering Corporation), the Court concluded that where excess cenvat/ITC is reversed prior to utilisation, demand of interest and penalty is not sustainable. The appellate authority's finding that Rs. 21,13,354/- had been utilised was held to have overlooked the ledger balance and the proved reversal, and therefore was erroneous. [Paras 10, 11, 12]

The petitioner was not shown to have utilised Rs. 21,13,354/- out of the excess ITC; since the excess ITC was reversed before utilisation, the demand of interest and penalty under Section 50 is not tenable and the impugned order is set aside.

Final Conclusion: The appeal is allowed; the order imposing interest and penalty in respect of the excess ITC entered in August 2017 is quashed, the petitioner not being liable to pay interest or penalty as the excess ITC was reversed prior to utilisation.

Input Tax Credit - retrospective grant of registration - migration from VAT to GST - reasonableness of conditions for registration

Input Tax Credit - retrospective grant of registration - reasonableness of conditions for registration - Validity of the condition requiring the petitioner to forgo Input Tax Credit as a prerequisite for retrospective validation of GST registration from 01.07.2017. - HELD THAT: - The petitioner migrated from VAT to GST and sought retrospective validity from 01.07.2017 so as to avail Input Tax Credit (ITC). The respondents conditioned retrospective grant on the petitioner undertaking to forgo ITC. The Court observed that the petitioner was an assessee under the VAT regime and would possess records and evidence to substantiate any claim for ITC for the period 01.07.2017 to 31.05.2018. In those circumstances, imposing a blanket condition that the petitioner must forgo ITC if retrospective validity is granted is unreasonable. The Court held that ITC entitlement should be assessed on the basis of the details and evidence submitted by the petitioner rather than by a precondition of forfeiture. Consequently, the impugned order insofar as it directs the petitioner to forgo ITC is unsustainable.

The condition requiring forfeiture of Input Tax Credit is quashed; the petitioner shall furnish details of outward and inward supplies and output liability for 01.07.2017 to 31.05.2018, and the respondents shall consider the migration application and grant ITC based on submitted evidence.

Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 16.11.2022 is quashed insofar as it requires the petitioner to forgo Input Tax Credit; the petitioner to submit the specified details and the respondents to consider the migration and grant Input Tax Credit subject to verification of the evidence.

Deduction u/s 80IB - some of the flats constructed in Tower ‘A’ of its housing project had exceeded the area of 1000 sq.ft. -structural changes noticed in the building as on the date of survey - as decided by HC [2022 (11) TMI 1303 - BOMBAY HIGH COURT] conclusions drawn by the CIT (Appeals) based on the material on record goes to show that the view expressed and subsequently upheld by the Tribunal cannot be in any way said to be a view or a conclusion which is perverse. The question essentially involved in the case, which had to be established beyond any doubt by the Revenue, ought to have been that the respondent had not only built but also sold the residential units, in respect of which the benefit of 100% deduction was claimed with an area of more than 1000 sq.ft., which only then could have justified the action of the Revenue in denying the benefit of 100% deduction under the said provision, but in the present case, however, the revenue has failed to establish that fact.

HELD THAT:- SLP dismissed.

Exemption u/s 10(23C)(iv)/11/12 - whether activities of the respondent/assessee do not qualify for charitable purpose in view of the Proviso to Sec 2(15)? - as decided by HC [2022 (1) TMI 544 - DELHI HIGH COURT] mandamus is issued to the respondent to grant approval to the petitioner u/s 10(23C)(iv) - HELD THAT:- Special leave petition is dismissed on the ground of delay.

Remand versus setting aside of assessment - time-bar under Section 153(7) of the Income-tax Act - limitations for giving effect to appellate orders under substituted Section 153 - refund entitlement where fresh assessment is barred (CIT v. Shelly Products principle [2003 (5) TMI 4 - SUPREME COURT])

Remand versus setting aside of assessment - The ITAT's common order dated 31.03.2015 did not set aside or cancel the assessment orders for the three assessment years but directed limited reconsideration on specified aspects. - HELD THAT: - The ITAT's common order restored specific questions relating to disallowance of bad debts/advances and Section 14A to the Assessing Officer with directions to re-examine relevant facts, afford adequate opportunity of hearing and consider judicial pronouncements. The order therefore confined the AO to reconsideration of selected aspects rather than ordering a de novo fresh assessment which would imply complete cancellation of the earlier assessment orders. The Court so concludes after examining the ITAT's directions and consistent judicial pronouncements distinguishing remand for limited enquiry from setting aside for fresh assessment. [Paras 19, 20]

ITAT's order is a remand for reconsideration of specific aspects and not a setting aside or cancellation of the assessment orders.

Time-bar under Section 153(7) of the Income-tax Act - limitations for giving effect to appellate orders under substituted Section 153 - Proceedings to give effect to the ITAT's 31.03.2015 order stood lapsed as of 31.03.2017 and the impugned notices issued in November 2020 were impermissible. - HELD THAT: - Parliament substituted Section 153 to shorten timelines and provided specific periods for giving effect to appellate orders either within three months or twelve months depending on nature of action. For proceedings pending as of 01.06.2016 to give effect to orders under subsections (5) or (6), Section 153(7) mandates completion on or before 31.03.2017. The CBDT Explanatory Note and the statutory language confirm that the final timeline for such pending matters could not extend beyond 31.03.2017. Since the ITAT order was received before 01.06.2016 and the AO had not given effect by 31.03.2017, the time for the AO to act lapsed and issuance of notices in November 2020 was barred by Section 153(7). [Paras 22, 23, 24, 25]

Proceedings to give effect to the ITAT order lapsed on 31.03.2017; impugned notices issued thereafter are quashed.

Refund entitlement where fresh assessment is barred (CIT v. Shelly Products principle) - The petitioner is entitled to have its refund representations considered with interest under the principle that where fresh assessment is barred the return is deemed accepted and any excess tax must be refunded. - HELD THAT: - Applying the principle in CIT v. Shelly Products, when an assessing authority is precluded from making a fresh assessment, it is deemed to have accepted the return and must refund any tax paid in excess of the liability computed on the return. Given the Court's conclusion that the proceedings lapsed under Section 153(7), the AO cannot lawfully revisit the remanded issues; the petitioner's claims for refund (including interest) must therefore be considered and decided in accordance with the Shelly Products principle. The Court directed respondent authorities to consider the petitioner's representations for refund with interest within three months of receipt of certified copy of the order. [Paras 26, 27, 28]

Respondents must consider the petitioner's refund representations with interest in light of CIT v. Shelly Products and decide within three months.

Final Conclusion: The writ petitions are allowed in part: the notices issued in November 2020 are quashed as barred by Section 153(7) because the Assessing Officer failed to give effect to the ITAT's remand by 31.03.2017; the respondents are directed to consider the petitioner's refund representations (for AYs 2007-08, 2008-09 and 2009-10) together with interest in the light of CIT v. Shelly Products and decide the same within three months of receipt of a certified copy of this order.

Capital gains versus business income - revisionary jurisdiction under section 263 of the Income Tax Act - requirement of enquiries and verification by the Assessing Officer - conversion of capital asset into stock-in-trade - limited scrutiny selection under CASS

Capital gains versus business income - conversion of capital asset into stock-in-trade - requirement of enquiries and verification by the Assessing Officer - Whether the Principal Commissioner of Income Tax was justified in exercising jurisdiction under section 263 to set aside the assessment by treating the assessee's gains as business income instead of long term capital gains - HELD THAT: - The Tribunal held that the assessee's case was selected for a limited scrutiny concerning correctness of capital gains and that the Assessing Officer, after calling for details of sale and purchase transactions, verified the computation and documents furnished by the assessee and accepted net long term capital gains in the revised computation. The Tribunal found on the facts before it that the assessee had only sub divided the land to secure a higher price and had not altered the nature of the asset or converted it into stock in trade. Mere subdivision and sale to different buyers, without positive evidence that the transactions were in the nature of a systematic trading activity, does not convert ownership of land into trading; revenue must lead positive evidence to establish an adventure in the nature of trade. The Tribunal, relying on the decision of the Hon'ble Madras High Court in CIT vs. Kasturi Estates (P) and other precedents, concluded that there was no failure by the Assessing Officer to make necessary enquiries of a kind that would render the assessment erroneous and prejudicial; nor was there material to justify changing the character of income from capital gains to business income. Applying these principles, the invocation of section 263 to direct a fresh assessment was held to be unsustainable. [Paras 5, 6]

The order passed by the Principal Commissioner under section 263 setting aside the assessment is set aside and the appeal of the assessee is allowed.

Final Conclusion: The Tribunal held that the Assessing Officer had made necessary enquiries and verification, the assessee's subdivision of land did not convert the capital asset into stock in trade, and the Pr. CIT's invocation of section 263 to recharacterise the income as business income was unsustainable; the assessment sustained as framed by the AO and the appeal is allowed.

Registration under Section 12AB of the Income-tax Act - genuineness of charitable activities - submission of inconsistent / twin audit reports - maintenance of proper books of account - rejection of application where satisfaction is not reached and cancellation of registration - opportunity of being heard / principles of natural justice

Registration under Section 12AB of the Income-tax Act - genuineness of charitable activities - submission of inconsistent / twin audit reports - maintenance of proper books of account - Whether the application of the society for registration under Section 12AB could be declined because the society failed to substantiate the claimed charitable activities and filed materially inconsistent audit reports for F.Y. 2019-20 to F.Y. 2021-22. - HELD THAT: - The Tribunal noted that the assessee society, while asserting engagement in various charitable activities, produced two different sets of audited accounts for each of the financial years in question and failed to furnish a plausible explanation for the twin sets. The CIT(Exemption) had specifically called for nature-wise details of expenses and supporting documents after observing that the income and expenditure accounts initially filed showed no corresponding expenditure for the activities claimed. The assessee submitted revised audit reports which materially differed from the earlier reports, producing glaring mismatches in total income and expenditure. The Tribunal treated the existence of two inconsistent audit reports and the absence of proper maintenance of books as a valid basis for the revenue officer to be not satisfied about the genuineness and substantiation of the activities. Applying the satisfaction requirement under the statutory scheme for registration, the Tribunal held that the CIT(Exemption) was justified in declining registration where the records did not substantiate the claimed activities and revealed serious discrepancies.

Application for registration under Section 12AB was rightly declined because the assessee failed to substantiate its claimed charitable activities and produced inconsistent audit reports indicating improper maintenance of accounts.

Opportunity of being heard / principles of natural justice - rejection of application where satisfaction is not reached and cancellation of registration - Whether the rejection of the society's application was vitiated by failure to afford a proper opportunity of being heard. - HELD THAT: - The assessee contended that it was not afforded a proper hearing. The Tribunal examined the record and the proceedings before the CIT(Exemption), including the specific queries raised to the society and the society's responses (including revised audit reports). The Tribunal found no merit in the contention: the authority had called for explanations and documents, the society responded, but the explanations were inadequate and unsupported by satisfactory evidence. In these circumstances, the Tribunal concluded that there was no denial of natural justice that invalidated the order; rather the rejection flowed from the material deficiencies and inconsistencies in the assessee's record.

The plea of denial of opportunity of hearing was rejected; the order declining registration was not vitiated for failure to afford hearing.

Final Conclusion: The appeal is dismissed. The order of the Commissioner of Income-Tax (Exemption) declining the society's application for registration under Section 12AB for F.Y. 2019-20 to F.Y. 2021-22 is upheld on the ground that the assessee failed to substantiate its claimed charitable activities and produced inconsistent audit reports, and there was no defect of natural justice in the proceedings.

Applicability of corporate tax rate based on turnover threshold - determination of turnover for tax-rate eligibility - rectification under section 154

Applicability of corporate tax rate based on turnover threshold - determination of turnover for tax-rate eligibility - rectification under section 154 - Whether the CIT(A) was justified in confirming the rectification under section 154 charging tax at 30% on the assessee's total income for A.Y. 2018-19 on the ground that turnover exceeded Rs. 50 crores. - HELD THAT: - The Tribunal noted the undisputed record showing the assessee's turnover for the previous year relevant to A.Y. 2018-19 as Rs. 69,19,93,355/-, which exceeds the Rs. 50 crore threshold. Given this factual position, the applicable tax rate for the assessment year was correctly 30%. The Tribunal held that the claim of the assessee could not be characterised as an apparent error fit for exercise of rectification powers under section 154, because correcting the alleged mistake would require recomputing or disproving the turnover figure recorded in the filed Form 3CA/Form 3CD rather than correcting an obvious clerical or arithmetic slip. Since rectification under section 154 is not intended for substantive re-evaluation of facts or fresh computation of turnover, the CIT(A) was justified in confirming the rectification order passed by the Assessing Officer which applied the 30% tax rate.

The confirmation by the CIT(A) of the section 154 rectification charging tax at 30% for A.Y. 2018-19 was upheld.

Final Conclusion: The appeal is dismissed; the order of the CIT(A) confirming the rectification charging tax at 30% for Assessment Year 2018-19 is upheld.

Revision under section 263 of the Income tax Act - assessment passed without adequate verification/enquiry - genuineness, identity and creditworthiness of lenders under section 68 - limited scrutiny and the duty to examine bank/ledger evidence - direction to the Assessing Officer to make a de novo assessment

Revision under section 263 of the Income tax Act - assessment passed without adequate verification/enquiry - genuineness, identity and creditworthiness of lenders under section 68 - limited scrutiny and the duty to examine bank/ledger evidence - direction to the Assessing Officer to make a de novo assessment - Validity of the Principal Commissioner of Income tax's revisionary order setting aside the assessment as erroneous and prejudicial to the revenue and directing a de novo assessment. - HELD THAT: - The Tribunal examined whether the Assessing Officer had made the enquiries and verifications necessary before accepting large unsecured loans and advances in the scrutiny assessment. The records showed substantial increases in long term borrowings and loans/advances, discrepancies and inconsistencies between the assessee's ledger entries and the balance sheets of the alleged lenders, a one day large credit/debit in the lender's bank account, and production of only a one month ledger instead of year long particulars. Although notices under section 133(6) were issued to sister concerns, the Assessing Officer's order was brief and cryptic and accepted the returned income as nil without establishing the identity, creditworthiness or genuineness of the loan transactions as required by law. In those circumstances the Principal Commissioner was justified in holding the assessment to be erroneous and prejudicial to the interests of the revenue and in setting it aside under the revisionary power, following the principle relied upon from earlier precedent Shri Amitabh Bachhan . The Tribunal found no reason to interfere with the PCIT's conclusion and direction that the Assessing Officer should make a fresh de novo assessment after proper verification and opportunity of hearing to the assessee. [Paras 7, 8, 9, 10, 11]

Tribunal upholds the revisionary order; assessment set aside as erroneous and prejudicial and remitted for de novo assessment after proper verification.

Final Conclusion: Appeal dismissed; the Principal Commissioner's order under section 263 is upheld and the Assessing Officer is directed to recompute the assessment afresh after making requisite enquiries and affording the assessee opportunity of hearing.

Transfer pricing adjustment - transactional net margin method (TNMM) as most appropriate method - need, rendition and benefit tests for intra group services - benchmarking of reimbursement of expenses (pass through vs mark up) - remand for verification of tax credit and reconciliation of TDS records

Transfer pricing adjustment - transactional net margin method (TNMM) as most appropriate method - need, rendition and benefit tests for intra group services - Validity of transfer pricing adjustment in respect of technical knowhow fees paid to associated enterprise - HELD THAT: - The Tribunal found that the assessee, being part of a multinational network providing time sensitive parcel delivery, established the commercial necessity of the technical services (need test), that the services were rendered under a subsisting technology licence and support arrangements (rendition test), and that the assessee derived operational and financial benefits from use of the technology (benefit test). The services were intertwined with the assessee's core operations and supported by agreement terms, capital investment details and operational evidence, and the assessee demonstrated higher margins vis a vis comparables. On these facts the Tribunal held that TNMM was an appropriate method for benchmarking and there was no reason to sustain the TPO's adoption of the "other method" resulting in an ALP of nil. The Tribunal also observed that earlier decisions deleting similar adjustments were of limited persuasive value but that benchmarking must be assessed year by year on prevailing facts. Accordingly the transfer pricing adjustment was set aside and the ground allowed. [Paras 33, 36]

Transfer pricing adjustment in respect of technical knowhow fees deleted; ground number 1 allowed.

Benchmarking of reimbursement of expenses (pass through vs mark up) - agent/agency principle and commercial substance of reimbursements - Whether mark up was exigible on amounts paid by the assessee to third parties on behalf of associated enterprises (recovery of expenses) - HELD THAT: - The assessee contended, and furnished documentary evidence and an affidavit, that the payments were reimbursements/agency payments made for freight, export facilitation and similar items on behalf of associated enterprises and thus were pass through in nature. The Tribunal noted a series of coordinate bench decisions in the assessee's own case, which repeatedly held that no mark up was chargeable where the transaction was a genuine reimbursement/agency arrangement. In view of concurrent findings by coordinate benches and the factual record before it, the Tribunal followed those decisions and directed deletion of the ALP adjustment. The Tribunal further observed that even if TNMM benchmarking were applied, the assessee's margins exceeded comparables, and no adjustment would have been warranted on merits. [Paras 41, 43]

Adjustment on account of mark up on recovery of expenses deleted; ground number 2 allowed.

Non pressed grounds - Grounds 3 and 4 not pressed before the Tribunal - HELD THAT: - The Tribunal recorded that grounds 3 and 4 were not pressed by the assessee and accordingly dismissed them as not pressed. [Paras 44]

Grounds 3 and 4 dismissed as not pressed.

Remand for verification of tax credit - dividend distribution tax credit reconciliation - Claim for credit of dividend distribution tax and associated interest - HELD THAT: - The assessee had paid dividend distribution tax but the challan recorded an incorrect assessment year, resulting in non grant of credit and imposition of interest. The Tribunal observed that the error arose from the challan entry and directed that the issue be set aside to the assessing officer for verification after the assessee corrects the assessment year in the challan; thereafter the AO is to grant credit and adjust interest accordingly. The Tribunal did not adjudicate the substantive entitlement but remitted the matter for clerical correction and verification. [Paras 47]

Issue remitted to the assessing officer for correction of challan and verification; ground number 5 allowed with directions.

Remand for reconciliation of TDS - reconciliation with Form 26AS and grant of TDS credit - Short grant of tax deducted at source (TDS) credit - HELD THAT: - The issue of short TDS credit was not raised at the draft assessment stage. The Tribunal directed the assessee to reconcile its return with Form 26AS and remitted the matter to the assessing officer to verify the reconciliation and grant any due credit. No final adjudication on the quantum of credit was made; the matter was returned for administrative verification. [Paras 48]

Issue remitted to the assessing officer for reconciliation and verification; ground number 6 allowed with directions.

Final Conclusion: The appeal is partly allowed: the transfer pricing adjustment in respect of technical knowhow fees is deleted and the mark up on recoveries is set aside; grounds not pressed are dismissed; issues relating to dividend distribution tax credit and TDS shortfall are remitted to the assessing officer for correction/reconciliation and verification as directed.

Reopening of assessment - reason to believe - borrowed satisfaction - Annual Information Report (AIR) as trigger for reassessment - link between tangible material and formation of belief - reassessment under section 147/148 of the Income Tax Act, 1961 - genuineness, identity and creditworthiness of donors under section 68

Reopening of assessment - Annual Information Report (AIR) as trigger for reassessment - reason to believe - borrowed satisfaction - link between tangible material and formation of belief - reassessment under section 147/148 of the Income Tax Act, 1961 - Validity of reopening assessment under section 147/148 where the Assessing Officer recorded reasons based solely on AIR information without prior independent inquiry. - HELD THAT: - The Tribunal found that the reasons for reopening were recorded before the Assessing Officer had obtained any tangible material from the bank or otherwise and were based solely on AIR information. The Assessing Officer did not conduct any prior enquiry, did not have documents to correlate the cash deposits, and did not demonstrate a link between tangible material and formation of belief that income had escaped assessment. Reliance on AIR or investigation reports, without independent application of mind and further inquiry, amounts to a 'borrowed satisfaction' and is insufficient to constitute the legally required 'reason to believe' for initiating proceedings under section 147/148. Applying the precedents cited, the Tribunal held the reasons to be vague, uncorroborated and inadequate and consequently the reassessment initiated on that basis was bad in law. [Paras 11, 14]

Reopening of assessment under section 147/148 was quashed as the reasons recorded were insufficient, amounted to borrowed satisfaction and lacked requisite link between tangible material and the Assessing Officer's belief.

Genuineness, identity and creditworthiness of donors under section 68 - addition under section 68 - Whether the addition made by disbelieving gifts from the assessee's father-in-law and mother-in-law was sustainable on merits. - HELD THAT: - On merits, the Tribunal observed that statements of the donors recorded during reassessment confirmed gifts, and the donors were closely related to the assessee. The Assessing Officer's disbelief rested on minor discrepancies in gift deeds which were sought to be remedied by affidavits; the Assessing Officer did not deny that the donors possessed agricultural land. Given the close relationship of the donors and that sources were explained, the Tribunal concluded that the gifts could not be disbelieved and the addition was not sustainable. [Paras 15]

The addition disallowing the gifts was not sustained; the gifts were accepted and the addition was deleted.

Final Conclusion: The appeal is allowed: the reassessment initiated under section 147/148 was quashed for want of valid reasons to believe (borrowed satisfaction based only on AIR without independent inquiry), and on merits the addition disallowing gifts was deleted as the gifts were accepted.

Application of section 40A(2)(b) to payments between joint venture partners - estimation of income by applying a notional profit rate - treatment of joint venture as pass-through for contract execution - penalty under section 271G for failure to furnish transfer pricing documentation - requirement of a specific requisition under section 92D(3) before invoking section 271G - availability of defence of reasonable cause under section 273B

Application of section 40A(2)(b) to payments between joint venture partners - estimation of income by applying a notional profit rate - treatment of joint venture as pass-through for contract execution - Whether the Assessing Officer was justified in disallowing payments to the JV partner by applying a notional profit rate under section 40A(2)(b) and estimating the assessee-JV's income accordingly. - HELD THAT: - The Tribunal found that the JV had been formed only to secure and execute the contract, that the assessee-JV did not itself perform the work and merely passed on the work to its JV partner which executed and accounted for the receipts and paid tax. The AO did not reject the books, nor did he produce any comparable market data or material to show that the payments were excessive or unreasonable, yet applied a notional net profit rate of 8% on subcontract payments to disallow expenditure under section 40A(2)(b). The CIT(A) erred in substituting an arbitrary rate (3.78%) equal to the profit of one JV partner. On these facts the statutory provision is inapplicable: the payments were structured within the JV arrangement and the AO failed to demonstrate excessiveness with reference to fair market value. Reliance on precedents showing that such JVs may be treated as pass-throughs where partners distinctly perform allotted tasks supported the conclusion that neither the AO's nor the CIT(A)'s approach could be sustained. Accordingly the disallowance and income estimation made by the AO (and sustained in part by the CIT(A)) were set aside. [Paras 8, 9, 10]

Disallowance under section 40A(2)(b) and the AO's estimation of income by applying a notional profit rate set aside; the assessment on that basis is reversed.

Penalty under section 271G for failure to furnish transfer pricing documentation - requirement of a specific requisition under section 92D(3) before invoking section 271G - availability of defence of reasonable cause under section 273B - Whether the penalty imposed under section 271G for failure to furnish information or documents relating to specified domestic transactions is sustainable where no specific requisition under section 92D(3) was made. - HELD THAT: - The Tribunal observed that neither the AO during assessment nor the CIT(A) during appeal had requisitioned any particular information or documents under section 92D(3), and the penalty order itself did not identify which specific document or information (as contemplated by rule 10D) was called for and not furnished. Relying on the jurisdictional authority holding that a notice under section 92D(3) must specify the documents required before section 271G can be imposed, and on principles that penalty is discretionary and should not be imposed where there is reasonable cause or only technical/default breaches, the Tribunal held that the preconditions for levying section 271G were not satisfied. In consequence, and having regard to section 273B and the appellate authorities cited, the imposition of penalty under section 271G could not be sustained. [Paras 13, 17, 19, 20]

Penalty under section 271G deleted as unsustainable for lack of specific requisition and in view of reasonable cause/section 273B.

Final Conclusion: The appeals are allowed: the disallowance and income computation made under section 40A(2)(b) are set aside and the penalty imposed under section 271G is deleted.

Deemed annual value of house property - 7% of cost as annual value - self-occupied property - addition under section 68 of the Income Tax Act - interest deduction under section 24(b)

Self-occupied property - deemed annual value of house property - Allowability of treating Ambey Valley property as self-occupied and related treatment of annual value - HELD THAT: - The Tribunal found that the assessing officer did not entertain the assessee's claim because it was not made in the original return, while the CIT(A) partly allowed the appeal by treating the Ambey Valley property as self-occupied without giving reasons. Because the CIT(A) upheld the 7% of cost determination for annual value but did not record clear reasons on the claim that the property be treated as self-occupied under the relevant provision, the Tribunal restored the matter to the file of the CIT(A) for a clear finding and reasons whether the claim of the assessee to treat Ambey Valley as self-occupied is allowable, directing that the CIT(A) give the assessee and the AO an opportunity of hearing before deciding the issue. [Paras 9]

Issue remanded to the CIT(A) for fresh consideration with reasons and opportunity of hearing.

Deemed annual value of house property - 7% of cost as annual value - Validity of determining annual value of the properties at the rate of 7% of cost - HELD THAT: - The CIT(A) upheld the determination of annual value at 7% of the cost of the properties, following prior coordinate-bench decisions in the assessee's earlier years. The Tribunal noted the CIT(A)'s affirmation of the 7% rule and did not disturb that conclusion in the present appeal, while separately directing reconsideration only on the question of treating the Ambey Valley unit as self-occupied. [Paras 6, 9]

The determination of annual value at 7% of cost is sustained; the related self-occupation claim is remanded for fresh, reasoned consideration.

Addition under section 68 of the Income Tax Act - Addition made under section 68 treating difference between declared and market/sale consideration as unexplained income - HELD THAT: - The AO treated the discrepancy between the sale consideration shown in the original return and the sale agreement/market value as unexplained credit under the provision and made an addition. The CIT(A) held that the assessee's claim that the lower sale value was the correct consideration was not allowable because it was not made by a revised return. On appeal, having regard to the material before it (including the sale agreement and revised computation), the Tribunal set aside the issue to the file of the CIT(A) directing the assessee to substantiate that the actual sale consideration recorded in the books is only the lower amount and that no credit representing the larger sum appears in the accounts, so that the addition under section 68 may be reconsidered in the light of books of account and evidence. [Paras 10]

Issue remanded to the CIT(A) to verify books of account and allow reconsideration of the addition under section 68 if the lower sale consideration is substantiated.

Interest deduction under section 24(b) - Claim for interest deduction against deemed rental income - HELD THAT: - The assessee did not press the ground relating to disallowance of interest expenditure under section 24(b) before the Tribunal. As a result, that ground was not pursued in the hearing and stands dismissed. [Paras 8]

Ground dismissed as not pressed before the Tribunal.

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal sustained the 7% annual value determination but remanded the questions of treating the Ambey Valley property as self-occupied and the section 68 addition regarding sale consideration to the CIT(A) for fresh consideration with opportunity of hearing; the interest-deduction ground was dismissed as not pressed.

Document Identification Number (DIN) mandatory on face of departmental orders - Compliance with CBDT Circular mandating quoting of DIN as condition of validity - Orders passed without DIN are non est in law - Subsequent generation of DIN does not cure absence of DIN on the face of the order

Document Identification Number (DIN) mandatory on face of departmental orders - Compliance with CBDT Circular mandating quoting of DIN as condition of validity - Subsequent generation of DIN does not cure absence of DIN on the face of the order - Validity of assessment orders passed without quoting a DIN on their face and whether subsequent generation/issuance of a DIN cures that defect. - HELD THAT: - The Tribunal examined the impugned assessment orders and noted that they were passed manually without any mention of a Document Identification Number on the face of the orders and without any statement in the body explaining non-generation of a DIN. The Tribunal followed the reasoning in ITAT and High Court decisions cited in the record which construe the CBDT Circular as making the quoting of the DIN mandatory and treating communications not in conformity with the Circular as invalid. Applying those authorities, the Tribunal held that absence of the DIN on the face of the assessment order is not a curable irregularity. The Tribunal rejected the contention that a subsequently generated DIN (dated after the impugned order and after the limitation date) or an intimation containing a DIN can retrospectively validate an order which did not itself incorporate the DIN as required. Consequently, the impugned assessment orders were held to be non-est in law for non compliance with the binding CBDT Circular.

Impugned assessment orders passed without DIN are non-est in law and the subsequent generation/communication of DIN does not cure the defect; the assessments are quashed.

Final Conclusion: Both appeals are allowed to the extent indicated: the assessment orders for A.Y. 2016-17 passed without quoting a DIN on their face are held non-est in law for non compliance with the CBDT Circular and are quashed; the same conclusion applies to the parallel assessment order addressed in the second appeal.

Principle of mutuality - exemption under section 11 of the Income Tax Act - proviso to section 2(15) of the Act - allocation of income and expenditure between members and non members - tax rate determination under Section 164(2)

Principle of mutuality - exemption under section 11 of the Income Tax Act - proviso to section 2(15) of the Act - allocation of income and expenditure between members and non members - Non taxability of receipts from members for holding exhibitions and organising seminars on the basis of the principle of mutuality and direction to verify bifurcation of receipts and expenses - HELD THAT: - The Tribunal accepted the assessee's case that it is an association formed to promote the machine tool industry and that its Memorandum of Association and its section 25 status demonstrate that surpluses must be applied to the objects and not distributed to members. The AO had treated receipts from members as taxable on the ground that identical services were provided to non members and that identity between contributors and participators ceased. The Tribunal found no basis for the AO's conclusion that the assessee had claimed exemption under section 11; moreover, the assessee had separately accounted for receipts and apportioned expenses between members and non members. On these facts the Tribunal held that the principle of mutuality applies to receipts from members in respect of exhibitions and seminars and directed the AO to examine the assessee's allocation of income and expenditure and grant relief to the extent the income is earned from members in light of mutuality. Consequently the Revenue's grounds were partly allowed for statistical purposes. [Paras 13]

Receipts from members for exhibitions and seminars held to be non taxable by application of the principle of mutuality; AO directed to verify allocation and grant relief accordingly.

Tax rate determination under Section 164(2) - allocation of income and expenditure between members and non members - Remand for de novo adjudication on the rate of tax and related computation after acceptance of mutuality for members' receipts - HELD THAT: - Because the Tribunal found that the assessee had not claimed section 11 exemption and accepted that mutuality applies to members' receipts, it restored the assessee's grounds concerning the applicable rate of tax to the AO for fresh adjudication. The AO is directed to determine and apply the appropriate rate of tax as per law and to compute tax after examining the bifurcation of income and expenditure between members and non members. [Paras 14]

Assessee's grounds on rate of tax and computation remitted to the AO for fresh determination; assessee's appeal allowed for statistical purposes and Revenue's appeal partly allowed for statistical purposes.

Final Conclusion: The Tribunal upheld the applicability of the principle of mutuality to receipts from members for exhibitions and seminars and directed verification of the claimed bifurcation of income and expenditure; consequential questions of tax rate and computation were remitted to the Assessing Officer for de novo determination, with the assessee's appeal allowed and the Revenue's appeal partly allowed for statistical purposes.

Penalty under section 271D for contravention of section 269SS - transactions inter se between a company and its director not falling within the ambit of section 269SS - reasonable cause defence under section 273B - characterisation of advances as capital/equity versus loan/deposit

Penalty under section 271D for contravention of section 269SS - transactions inter se between a company and its director not falling within the ambit of section 269SS - reasonable cause defence under section 273B - characterisation of advances as capital/equity versus loan/deposit - Whether penalty under section 271D could be sustained for cash receipts from the director where the transactions between the company and its director were held to be genuine, utilised for acquisition of capital assets and explained, or otherwise capable of being treated as capital/equity. - HELD THAT: - The Tribunal found as an admitted fact that the company received cash sums from its director and that the amounts were disclosed in the books and used for purchase of land, with the director explaining the source of funds. The nature of the transactions had to be assessed in context to determine whether they fell within the statutory concept of loan/deposit under section 269SS. Applying reasoning from relevant precedents and statutory purpose, the Tribunal held that transactions inter se between a company and its director cannot, on the facts of this case, be treated as falling within the ambit of section 269SS/269TT in the same manner as transactions with third parties; analogies to partner/firm decisions were applied. Further, even if treated as advances, the amounts could legitimately be characterised as capital/equity (capital account) rather than loan/deposit, thereby placing them outside section 269SS. Independently, the Tribunal considered section 273B which permits relief where a reasonable cause exists for contravention; it concluded the explanation of business exigency (payment to remote sellers, purchases of land, disclosure in books, and source shown by the director) amounted to a reasonable and bonafide cause entitling the assessee to relief. Distinguishing cases relied upon by the Revenue (where third party financing, lack of explanation or cheque discounting arrangements existed), the Tribunal held those were not factually comparable. On these consolidated grounds the levy of penalty under section 271D was held to be unsustainable and was deleted. [Paras 9, 11, 12, 17]

Penalty levied under section 271D is deleted as the transactions between the company and its director were either outside the scope of section 269SS (being inter se/current account or capable of being treated as capital) and, alternatively, are covered by reasonable cause under section 273B.

Final Conclusion: The appeal is allowed: the Tribunal set aside the CIT(A)'s order and directed deletion of the penalty under section 271D for Assessment Year 2008-09, holding the transactions with the director to be bona fide and either outside the scope of section 269SS or covered by a reasonable cause under section 273B.

Incriminating material found during search - retracted statement - bogus purchases - rejection of books of account - manufacturing activity and entitlement to deduction under section 80-IB - assessment under section 153A of the Income-tax Act - corroborative post-search inquiries - precedential effect of CESTAT findings

Incriminating material found during search - retracted statement - assessment under section 153A of the Income-tax Act - corroborative post-search inquiries - precedential effect of CESTAT findings - Whether any incriminating material seized at the time of search was available and properly relied upon to uphold additions made under assessments framed u/s 153A. - HELD THAT: - The Tribunal found that the Assessing Officer did not rely upon any specific document seized during the search but primarily on retracted statements of two persons. The AO's order did not demonstrate material seized at search corroborating those statements; subsequent bank inquiries and related enquiries conducted during assessment were held to be corroborative and not to convert post-search inquiry material into independent incriminating material discovered during the search. Further, subsequent adverse findings of the CESTAT (accepting that purchases by the Jammu-based entities were genuine and that manufacturing activity was carried out) undermined the AO's case which was based on Central Excise investigation. In those circumstances the learned CIT(A)'s acceptance of the assessee's case was upheld and the AO's additions based on alleged incriminating material found at search were held to be unsustainable. [Paras 8, 9, 10, 11, 12]

Findings against Revenue: no admissible incriminating material seized at search was available to sustain the additions; the CIT(A)'s deletion of additions was upheld.

Manufacturing activity and entitlement to deduction under section 80-IB - bogus purchases - rejection of books of account - precedential effect of CESTAT findings - Whether the Assessing Officer proved that the assessee companies did not carry out manufacturing activity and were therefore not entitled to deductions and to have manufacturing expenses allowed. - HELD THAT: - The Tribunal accepted the coordinate findings of the CESTAT and earlier Tribunal orders which held that purchases by the Jammu-based suppliers were genuine and that the appellants were engaged in manufacturing. Once purchases and the genuineness of the suppliers were held to be genuine by the CESTAT, the foundational premise for holding the assessee's units to be non-manufacturing or merely pass-through collapsed. Consequently, the AO's disallowance of manufacturing expenses and denial of deduction under s.80-IB, premised on the alleged bogus nature of purchases and rejection of books, could not be sustained. The CIT(A)'s allowance of manufacturing expenses and deletion of disallowances was therefore affirmed. [Paras 8, 10, 11, 12]

Findings against Revenue: manufacturing activity and related deductions/expenses were held to be bona fide; disallowances were deleted and the CIT(A)'s orders were upheld.

Final Conclusion: The Tribunal dismissed the Revenue appeals: (i) there was no admissible incriminating material seized at search to sustain the AO's additions under assessments framed u/s 153A, and (ii) the AO failed to prove absence of manufacturing activity so as to deny manufacturing expenses and s.80-IB deduction; the CIT(A)'s deletions and allowances are sustained.

Exemption from customs duty subject to export obligation - positive Net Foreign Exchange condition - computation of duty and interest by reference to proportion of export obligation fulfilled - imputation of duty liability after allowing benefit for value attributable to exports

Exemption from customs duty subject to export obligation - Assessee entitled to benefit of exemption to the extent of exports actually performed. - HELD THAT: - The assessee had been granted 100% exemption from customs duty on imported capital goods subject to meeting export obligations and the restriction on sales outside the Domestic Tariff Area without achieving positive Net Foreign Exchange. The Court accepted that the export obligation was partly fulfilled to the extent of Rs. 3,89,87,054/-, and held that this performance entitles the assessee to the corresponding benefit of the exemption for that portion. The factual fulfillment of exports to that extent was not disputed and accordingly admitted in calculating relief. [Paras 5]

Benefit of exemption allowed pro tanto for the export value actually fulfilled (Rs. 3,89,87,054/-).

Computation of duty and interest by reference to proportion of export obligation fulfilled - imputation of duty liability after allowing benefit for value attributable to exports - Method of computing duty and interest: proportional computation based on export obligation fulfilled instead of deducting depreciated value of capital goods. - HELD THAT: - The impugned order had directed imputation of liability after taking into account the depreciated value of the capital goods. The Court modified this approach and directed that, for calculating duty and interest, a proportionate computation be worked out reflecting the extent of the export commitment actually fulfilled by the assessee. Thus, rather than applying depreciation of capital goods as the basis for relief, the duty and interest liability must be determined by applying a proportion corresponding to the ratio of exports performed to the export obligation. [Paras 6]

Instead of using depreciated value, duty and interest are to be computed by a proportionate working based on the export commitment actually fulfilled.

Final Conclusion: The appeal is partly allowed: the assessee is granted exemption relief to the extent of exports performed and the adjudicating authority is directed to compute duty and interest proportionately to the export obligation fulfilled rather than by deducting depreciated value; pending applications stand disposed of.

Obligation of customs broker under Regulation 10(n) to verify IEC, GSTIN, identity and functioning of client using reliable, independent and authentic documents, data or information - Scope of verification under Regulation 10(n) - no requirement of physical premises visit or continued surveillance - Evidentiary sufficiency of government-issued documents and KYC records to satisfy Regulation 10(n) - Power of appellate tribunal to examine compliance with licensing regulations without intruding into CGST adjudications - Requirement of independent reasons by an appellate forum when setting aside an order-in-original

Obligation of customs broker under Regulation 10(n) to verify IEC, GSTIN, identity and functioning of client using reliable, independent and authentic documents, data or information - Scope of verification under Regulation 10(n) - no requirement of physical premises visit or continued surveillance - Extent of the duty cast on a customs broker by Regulation 10(n) of the Customs Broker Licensing Regulations, 2018 and whether that duty requires physical verification or ongoing surveillance of the client - HELD THAT: - The Court accepted the Tribunal's construction of Regulation 10(n) that the customs broker's obligation is to verify correctness of IEC, GSTIN, identity and functioning at the declared address by using reliable, independent and authentic documents, data or information. The regulation does not mandate physical inspection of each client's premises or continued surveillance to ensure the client remains at the declared address. The Tribunal's reliance on co ordinate Tribunal decisions was held justified, and the formulation that authenticated documents issued by government authorities satisfy the verification requirement was endorsed. The Court distinguished precedents where different facts (for example, initiation of proceedings under the Customs Act or nature of goods necessitating greater vigilance) made additional steps necessary.

The duty under Regulation 10(n) is satisfied by verification through reliable, independent and authentic documents or data; physical visit or continuous monitoring is not required.

Evidentiary sufficiency of government-issued documents and KYC records to satisfy Regulation 10(n) - Whether the documents produced and verified by the customs broker amounted to full compliance with Regulation 10(n) - HELD THAT: - On the facts, the respondent produced KYC forms, GSTIN enquiry screenshots, PAN, Aadhaar, IEC certificate and related correspondence. The Department did not allege that these documents were false or fabricated. The Tribunal found, and this Court agreed, that where authentic, independent and reliable documents issued by governmental authorities are produced and there is no material to impugn their authenticity, the broker is entitled to rely on them and such production meets the verification obligation under Regulation 10(n).

The documents produced and verified by the broker were sufficient to discharge the verification obligation under Regulation 10(n).

Power of appellate tribunal to examine compliance with licensing regulations without intruding into CGST adjudications - Whether the Tribunal exceeded its jurisdiction by declining to give weight to GSTN reports about non existence or fictitious business places, given that proceedings under the CGST Act were not before it - HELD THAT: - The Court observed that no action under the Customs Act or show cause under Section 124 had been initiated against the exporters, and the Department had not alleged falsity of the documents. The Tribunal's examination focussed on whether the broker had complied with the regulatory verification duty; it did not adjudicate or interfere with separate CGST proceedings. Consequently, the Tribunal did not exceed its jurisdiction in assessing compliance with the licensing regulation on the basis of the material before it.

The Tribunal did not exceed jurisdiction in examining the broker's compliance with Regulation 10(n); it was not required to defer to or adjudicate CGST authority reports in the absence of separate proceedings.

Requirement of independent reasons by an appellate forum when setting aside an order-in-original - Whether the Tribunal was required to give independent reasons for setting aside the Order-in-Original revoking the broker's licence - HELD THAT: - The Court found that the Tribunal had articulated the scope of Regulation 10(n), considered the factual materials (including the verification documents produced by the broker) and applied relevant precedent to conclude that the broker had discharged its obligation. The Tribunal's reasoning addressed the determinative legal question and factual matrix; there was no shortcoming warranting interference. Thus the Tribunal's setting aside of the Order in Original was supported by independent reasons adequate for appellate adjudication.

The Tribunal furnished adequate independent reasons in support of setting aside the Order in Original.

Final Conclusion: The appeal is dismissed. The Tribunal correctly construed and applied Regulation 10(n): verification by reliable, independent and authentic documents suffices, there is no obligation of physical inspection or continuous surveillance, the broker's produced documents met the verification requirement and the Tribunal did not exceed its jurisdiction nor fail to give independent reasons for setting aside the order revoking the licence.

Redemption fine - personal penalty - minimum import price (MIP) as condition of import - valuation at declared transaction value - binding effect of earlier Tribunal precedent - repeat offender and deterrence as determinative factor in quantum of fine - remand for fresh quantification

Valuation at declared transaction value - minimum import price (MIP) as condition of import - binding effect of earlier Tribunal precedent - The admissibility of the declared import value and the effect of DGFT-prescribed MIP on assessable value. - HELD THAT: - The Tribunal recorded that the original adjudicating authority had revised assessable value to the DGFT-prescribed MIP but, on appeal, the Commissioner (Appeals) accepted the declared transaction value and set aside the revision. No appeal was filed by the Revenue against that acceptance. The Tribunal therefore held that, as no challenge to valuation was pursued by Revenue, the declared value stands accepted and no further adjustment to assessable value on account of MIP is to be made in these proceedings. [Paras 6, 7]

Valuation at the declared transaction value is final in these proceedings; Revenue did not prosecute an appeal against the Commissioner (Appeals) order on valuation.

Redemption fine - personal penalty - repeat offender and deterrence as determinative factor in quantum of fine - remand for fresh quantification - Whether the reduction of redemption fine and personal penalty by the Commissioner (Appeals) was justified having regard to repeated violations and the need for deterrence. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) followed earlier Tribunal orders reducing fine and penalty substantially. However, those earlier orders did not take adequate note of the factual distinction that the importer was a repeat violator and that the gravity and frequency of violations had increased. The Tribunal emphasised that the determinative factor in fixing quantum is its deterrent effect on repeat offending. Given the continuing pattern of violations and that the reduced quantum adopted earlier had not deterred the importer, the Tribunal held that the Commissioner (Appeals) erred in merely following prior orders without addressing the repeat-offender circumstance. Accordingly, the impugned order was set aside and the matter remanded to the original adjudicating authority to re-examine facts and quantify a redemption fine and penalty adequate to deter repetition of the offence. [Paras 10, 11, 12]

Impugned order reducing redemption fine and penalty is set aside; matter remanded to the original adjudicating authority for fresh quantification of fine and penalty with regard to deterrence and repeat violations.

Final Conclusion: The Tribunal upheld the acceptance of declared transaction value (no appeal by Revenue on valuation) but allowed the Revenue's appeal against the reduction of redemption fine and penalty, setting aside the impugned order and remanding the matter to the original adjudicating authority to quantify fine and penalty sufficient to deter repeated violations.

Classification of imported goods as plastic stickers versus plastic waste/scrap - Primacy of CIPET report over Customs House Laboratory report in analysis of plastic materials - Transaction value and related party valuation - Confiscation and penalties for mis declaration

Classification of imported goods as plastic stickers versus plastic waste/scrap - Primacy of CIPET report over Customs House Laboratory report in analysis of plastic materials - The goods cleared from the SEZ are plastic stickers classifiable under CTH 39199010 and not plastic waste/scrap under CTH 39151909; the CIPET report is to be preferred over the Customs House Laboratory report. - HELD THAT: - The Tribunal considered rival laboratory reports and the earlier remand direction which relied on the Gujarat High Court decision in Oswal Agricomm that CIPET reports should not be ignored and ordinarily have primacy for analysis of plastic materials. On remand the adjudicating authority relied on the CIPET test report which identified the samples as "cut pieces of clear film with paper stickers" and expressly accepted the description declared by the importers as plastic stickers. Applying the earlier authorities and the Tribunal's remand direction, the Court held that reliance can be placed on the CIPET report and no reliance can be placed on the Customs House Laboratory report. Consequently the goods must be classified in the form in which they were found (sticker) and are correctly classifiable under CTH 39199010 rather than as restricted plastic waste/scrap under CTH 39151909. [Paras 4]

Impugned classification of the goods as plastic waste/scrap is set aside; the goods are plastic stickers classifiable under CTH 39199010 and CIPET's report is to be accepted as determinative.

Transaction value and related party valuation - Confiscation and penalties for mis declaration - The declared transaction value is acceptable; there is no evidence of undervaluation or that the SEZ units and DTA buyers are related persons so as to warrant enhancement; consequential confiscation, duty demand and penalties are unsustainable. - HELD THAT: - Having accepted the classification and the CIPET finding that the goods were non hazardous plastic stickers, the Tribunal examined the adjudicating authority's enhancement of value on the ground of related party transaction. The Tribunal found that mere overlap of proprietorship/partnership does not establish that the SEZ unit and the buyer are related persons for the purpose of rejecting transaction value, and no evidence was produced to prove undervaluation. In absence of such evidence and having held the goods not to be restricted/hazardous, the transaction value as declared is a valid transaction value and additions/enhancements and attendant confiscation/penalties based on mis declaration and undervaluation cannot be sustained. [Paras 4]

Declared value accepted as transaction value; demand for enhanced value, and the penalties/confiscation founded on mis declaration/undervaluation are set aside.

Final Conclusion: The impugned adjudication is set aside: the goods are held to be plastic stickers correctly classifiable under CTH 39199010, the declared transaction value is accepted, and the demand, confiscation and penalties imposed by the adjudicating authority are quashed; appeals are allowed.

Limitation in review under section 129D(3) - date of communication or receipt of the adjudicating authority's order as the commencement point for computing review period - onus on the department to prove date of receipt of Order-in-Original by the Review Cell - suspect seal/fabricated document and interference with the administration of justice - obligation to record date of receipt in the review order

Limitation in review under section 129D(3) - date of communication or receipt of the adjudicating authority's order as the commencement point for computing review period - onus on the department to prove date of receipt of Order-in-Original by the Review Cell - Validity of dismissal of departmental appeal as time-barred for delay in passing the review order. - HELD THAT: - The Tribunal upheld the view that the three month review period prescribed under section 129D(3) runs from the date of communication/receipt of the adjudicating authority's order. The Commissioner (Appeals) found, on the material before him, that the review order was passed beyond the stipulated period by approximately eight days and that the department failed, despite repeated requests, to place on record evidence establishing the date on which the Order in Original was received by the Review Cell. The Tribunal noted earlier consistent conclusions in similar matters that when the date of receipt is not shown in the review order and the original files are not produced, the available inference is that the review was delayed. The bench also observed that a purported date seal on a photocopy annexed to the departmental appeal was suspect and that filing of fabricated or false documents to influence proceedings would amount to interference with the administration of justice. In the absence of admissible evidence from the department proving timely receipt, there was no ground to disturb the Commissioner (Appeals)'s conclusion that the appeals were time barred. [Paras 5, 6, 7]

The impugned order dismissing the departmental appeals as time barred is sustained and the departmental appeal is dismissed.

Final Conclusion: The Tribunal dismissed the departmental appeal, upholding the Commissioner (Appeals)'s finding of delay in passing the review order; the department failed to prove the date of receipt of the Order in Original, and the impugned orders are sustained.

Confiscation of seized goods and currency as proceeds of smuggled goods - burden of proof and evidentiary requirement under Section 123 Customs Act - admissibility of statements recorded during investigation and requirement of examination under Section 138B Customs Act - corroboration required for reliance on a co-accused's statement - imposition of penalty under Section 112(b) Customs Act

Confiscation of seized goods and currency as proceeds of smuggled goods - burden of proof and evidentiary requirement under Section 123 Customs Act - imposition of penalty under Section 112(b) Customs Act - corroboration required for reliance on a co-accused's statement - Whether the seized 1 kg gold bar and currency could be confiscated as smuggled goods/proceeds and penalty imposed on the appellant in absence of independent or corroborative evidence, having regard to the appellant's documentary evidence and the statutory burden under Section 123 Customs Act. - HELD THAT: - The Tribunal found that the appellant, immediately after seizure, produced invoices, cash ledger, gold stock ledger, balance sheet and trial balance which consistently showed legal acquisition, possession and accounting of the seized gold and cash. The stock ledger specifically recorded available gold stock from which the 1 kg bar was taken, and the cash records showed the seized amount as part of accounted "cash in hand". The Department failed to produce any direct evidence linking the seized bar to the alleged diverted duty-free imports: the markings on the seized bar did not match imports attributed to M/s Mahalaxmi Jewel Exports, no recovered material from that firm bore identical markings, and there was no ledger entry evidencing transactions between the appellant and the alleged diverting party. Apart from an uncorroborated statement of a co-noticee, no other witness or documentary material implicated the appellant. In these circumstances the Tribunal held that the appellant discharged the statutory burden envisaged by Section 123 and that confiscation under the provision relating to proceeds of smuggled goods (and consequent confiscation of currency) was unsustainable. Similarly, in absence of proof of wrongdoing or corroboration, imposition of penalty under Section 112(b) could not be sustained. [Paras 27, 28, 29, 33]

Confiscation of the gold bar and currency quashed and the penalty set aside; the appellant discharged the burden of proof and there was no corroborative evidence to justify confiscation or penalty.

Admissibility of statements recorded during investigation and requirement of examination under Section 138B Customs Act - corroboration required for reliance on a co-accused's statement - Whether the adjudicating authority could rely on the statement of Shri Prem Sagar Arora (a co-noticee) recorded during investigation without examining him before the authority and allowing cross-examination as per the procedure mandated under Section 138B. - HELD THAT: - The Tribunal held that the impugned order impermissibly relied on the statement of Prem Sagar Arora without complying with the procedural safeguards of examination before the adjudicating authority and offering the maker for cross-examination under Section 138B. The appellant had specifically sought cross-examination. The Tribunal relied on established precedents that a statement recorded during investigation cannot be admitted for proving its contents unless the statutory procedure for examination and admission is complied with, absent any statutory exception. Further, reliance on a sole uncorroborated statement of a co-noticee, without admissible evidence or corroboration, is insufficient to sustain findings of concealment, smuggling or to attract penalties. [Paras 31, 32]

The statement of the co-noticee could not be relied upon in the absence of examination and admission under Section 138B; reliance on such unadmitted and uncorroborated statement was impermissible.

Final Conclusion: The appeal is allowed: the confiscation of the seized gold bar and currency is quashed and the penalty imposed on the appellant is set aside; the impugned order insofar as it relates to the appellant is set aside and the appellant is entitled to consequential benefits as per law.

Liability of Customs House Agent for exporter s over-invoicing - abatement / abetting liability - penalty under Section 114(iii) of the Customs Act, 1962 - role limited to filing of documents - violation of CHA Regulations - over-invoicing / overvaluation for excess drawback - precedential application of Tribunal orders

Liability of Customs House Agent for exporter s over-invoicing - role limited to filing of documents - penalty under Section 114(iii) of the Customs Act, 1962 - violation of CHA Regulations - over-invoicing / overvaluation for excess drawback - Whether penalty imposed on the appellants (CHA and assisting agent) under Section 114(iii) for abetting improper export by over-invoicing was justified - HELD THAT: - The appellants acted as Customs House Agent and assisting agent whose role was confined to filing documents and clearing/forwarding formalities. The impugned order contains no finding that the appellants violated the CHA Regulations or committed irregularity in the documents they filed. The physical examination of the seized consignments matched the invoices and other shipping documents. Absent any allegation or finding of active participation in over-invoicing by the appellants, they cannot be held liable for the exporter s alleged overvaluation undertaken to secure excess drawback. The Tribunal also applied its earlier decisions in analogous matters where similar penalties imposed on CHA/agents were set aside, and followed that precedent in the present cases. [Paras 3, 4, 8]

Penalties imposed on the appellants under Section 114(iii) are set aside as no enforceable liability for abetting over-invoicing has been established against them

Final Conclusion: Appeals allowed; penalties imposed on the appellants set aside and consequential relief, if any, to follow as per law.

Exemption Notification 57/2000 - Validity of Circulars imposing additional conditions - Liability of a Nominated Agency for customs duty where exporter fails to realize export proceeds - Redemption fine and penalty under Section 112(a) and 114A of the Customs Act, 1962 - Doctrine that a Circular cannot introduce new conditions to a statutory Notification

Exemption Notification 57/2000 - Validity of Circulars imposing additional conditions - Liability of a Nominated Agency for customs duty where exporter fails to realize export proceeds - Doctrine that a Circular cannot introduce new conditions to a statutory Notification - Whether customs duty foregone can be demanded from the Nominated Agency for non-realisation of sale proceeds by the exporters when the Exemption Notification 57/2000 does not stipulate obtaining BRC within the prescribed period. - HELD THAT: - The Tribunal held that Notification 57/2000 prescribes the conditions for duty-free import by a Nominated Agency, notably executing a bond and exporting within the prescribed period, and does not require the Nominated Agency to ensure realization of foreign exchange or to obtain Bank Realisation Certificates from exporters within the stipulated period. A Circular (Customs Circular 28/2009) imposing the requirement of producing BRC cannot introduce a new condition inconsistent with the Notification. The Tribunal applied its earlier decision in the appellant's own case (2009 (233) ELT 260) and Supreme Court authority (Sandur Micro Circuits Ltd) to conclude that a Circular cannot whittle down or add to the conditions of a statutorily issued exemption notification. Matters concerning non-realisation of foreign exchange fall within the domain of FEMA or other authorities, and the Customs cannot, by reliance on a Circular, convert non-realisation into a ground to demand duty from the Nominated Agency where the Notification does not so provide. Consequently the demand of duty confirmed in the impugned order was held unsustainable and set aside. [Paras 11, 12, 15]

Demand of customs duty from the Nominated Agency on the ground of non-realisation of sale proceeds (for the specified import periods) is unsustainable and is set aside.

Redemption fine and penalty under Section 112(a) and 114A of the Customs Act, 1962 - Whether redemption fine and penalties under Section 112(a) and 114A could be imposed when the duty demand itself is held unsustainable. - HELD THAT: - The Tribunal found that since the foundational demand of customs duty was not sustainable, there was no basis for imposing a redemption fine or penalties under the cited provisions. Consequently, the departmental appeals seeking such imposition were rejected. [Paras 16]

Departmental appeals for imposition of redemption fine and penalties are rejected as the demand of duty is set aside.

Final Conclusion: Appeals filed by the Bank of Nova Scotia are allowed and the confirmed demands of customs duty are set aside; departmental appeals against non-imposition of redemption fine and penalties are rejected.

Classification by bill of entry - confiscation under section 111(d) of the Customs Act, 1962 - importability of second hand capital goods under the Foreign Trade Policy - Customs valuation - transaction value and related persons - rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rejection of declared value - sequential application of rules 4 to 9 for determination of value - acceptance of declared value under rule 3 where relationship did not influence price

Classification by bill of entry - importability of second hand capital goods under the Foreign Trade Policy - confiscation under section 111(d) of the Customs Act, 1962 - Whether the goods described in the bill of entry as 'plate leveler' could be re classified as 'scrap' and whether confiscation under section 111(d) of the Customs Act, 1962 was lawful - HELD THAT: - The appellant declared the imported items as 'plate leveler' in the bill of entry and did not at any stage plead that the declaration was an error or seek re classification to 'scrap'. Classification must follow the declaration in the bill of entry unless displaced by reasons recorded. The goods being of 1942 vintage did not render them non capital goods for the purpose of import control; paragraph 2.31 of the Foreign Trade Policy restricts second hand goods other than capital goods, and customs did not demonstrate that these items were not capital goods. In consequence, the statutory basis for confiscation under section 111(d) is absent where the imports are not barred by the policy, and the adjudicating authority has not shown justification to treat the declared description as incorrect or to apply confiscation. [Paras 5, 6, 7]

The description in the bill of entry must be respected; the goods are not shown to be non importable capital goods and confiscation under section 111(d) is without authority of law.

Customs valuation - transaction value and related persons - rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rejection of declared value - sequential application of rules 4 to 9 for determination of value - acceptance of declared value under rule 3 where relationship did not influence price - Whether the re determination of declared value by recourse to rule 9 (via rule 12) was valid when the importer and seller were related and whether the procedure mandated by rule 12 was followed - HELD THAT: - The valuation regime requires that the transaction value be accepted subject to rule 12 and rule 3(3)(a) unless there is justification to conclude the relationship influenced price. Rule 3 permits acceptance of transaction value where the circumstances indicate absence of influence or where comparisons closely approximate the declared value. Rule 12 provides the mechanism for rejecting declared value and mandates that doubts be raised with stated grounds, and that the importer be given a reasonable opportunity to be heard; rejection must be preceded by appropriate justification and the sequential application of rules 4 to 9. The adjudicating authority's order lacks any recorded finding that the relationship influenced price or any specified grounds under rule 12, and the show cause and orders do not reflect the procedural steps and enquiries mandated by rule 12 and its Explanation. Accordingly, the redetermination based on an adverse presumption and by relying on rule 9 (via rule 12) is invalid. [Paras 8, 9, 10, 11]

Redetermination of value by invoking rule 12 (and proceeding to rules 4-9) was not justified or carried out in accordance with the mandated procedure; the rejection of the declared value is invalid.

Final Conclusion: The impugned order is set aside and the appeal is allowed: the bill of entry description and declared value cannot be displaced without the justifications and procedural steps required by the Customs Valuation Rules, and the confiscation under section 111(d) is without lawful basis.

Execution of unreturned non-bailable warrants after filing of a complaint/chargesheet - Duty of the investigating agency to return unexecuted warrants to the Court at time of filing complaint - Validity of arrest effected pursuant to pre-existing non-bailable warrants where accused is not shown as absconder in the chargesheet - Scope of police remand under Section 167 CrPC in cases of arrest after filing of chargesheet - Interplay between the power of arrest under Section 19 of the PMLA and remand under Section 167 CrPC - Article 21 - requirement of procedure established by law to be fair, just and reasonable

Execution of unreturned non-bailable warrants after filing of a complaint/chargesheet - Duty of the investigating agency to return unexecuted warrants to the Court at time of filing complaint - Validity of arrest effected pursuant to pre-existing non-bailable warrants where accused is not shown as absconder in the chargesheet - Whether the execution of open-ended non-bailable warrants and the subsequent arrest of the respondent after filing of the prosecution complaint entitled the investigating agency to seek police custody and whether the Special Court erred in rejecting the remand application and releasing the respondent on interim bail. - HELD THAT: - The Court found that the non-bailable warrants issued on 12.01.2018 remained on the investigating agency's file and were not returned to the Trial Court at the time of filing the complaint; the complaint, however, did not show the respondent as an absconder nor mention issuance of those NBWs. The investigatory duty under the principles in Raghuvansh Dewanchand Bhasin requires the IO to inform the Trial Court about unexecuted NBWs at the time of filing the complaint; absent such action, execution of those warrants after charge-sheeting was not a just, fair or reasonable procedure under Article 21. The Court distinguished precedents allowing police remand where an accused is arrested during further investigation after being shown as an absconder in the chargesheet (e.g., Dawood Ibrahim Kaskar and related authority) and held that those authorities do not validate arrest in the present factual matrix where the accused was charge-sheeted without being shown as absconder and no steps had been taken earlier to execute or return the NBWs. The petitioning agency itself presented its remand application under Section 73(3) CrPC (i.e., by production under warrant) and did not assert arrest under Section 19 of the PMLA; the jurisprudence requires that where arrest is claimed under Section 19 PMLA, the Magistrate must verify compliance with Section 19 and Section 167 CrPC before remanding to ED custody. Given that the arrest here was effectuated pursuant to the unreturned NBWs and not on a recorded Section 19 arrest, and considering the mandate that procedure must be just, fair and reasonable, the Special Court correctly rejected the ED's application for police remand and released the respondent on interim bail. [Paras 21, 24, 25, 26, 28]

The execution of the unreturned non-bailable warrants and the arrest consequent thereto did not justify police remand; the Special Court did not err in rejecting the remand application and granting interim bail.

Final Conclusion: Writ petition under Section 47 PMLA challenging the Special Court's rejection of an application for police/ED remand and its grant of interim bail is dismissed. The High Court held that execution of pre-existing NBWs after a complaint was filed without returning the unexecuted warrants and without showing the accused as an absconder was unjustified; remand to ED custody required compliance with Section 19 PMLA and Section 167 CrPC which was not made out here. The Special Court's order dated 16.02.2023 is upheld.

Offence under Section 3 of the Prevention of Money Laundering Act is dependent on illegal gain arising from a scheduled offence - quashing of the predicate FIR extinguishes the scheduled offence and thereby precludes prosecution under the PMLA - proceedings under PMLA cannot be maintained where the predicate criminal case has been finally quashed - incidental relief of quashing of ancillary measures (Look Out Circular) upon quashing of underlying proceedings

Offence under Section 3 of the Prevention of Money Laundering Act is dependent on illegal gain arising from a scheduled offence - quashing of the predicate FIR extinguishes the scheduled offence and thereby precludes prosecution under the PMLA - Whether the complaint filed by the Directorate of Enforcement under Section 3 of the PMLA can survive after the predicate FIR/scheduled offence has been quashed. - HELD THAT: - The Court applied the principle that an offence under Section 3 of the PMLA is parasitic on the existence of a scheduled offence and on illegal gains derived therefrom. Where the predicate FIR has been quashed and that order has attained finality, the scheduled offence ceases to exist and no offence of money-laundering can be sustained against the accused or those claiming property linked to that scheduled offence. The Court relied on the settled position that PMLA proceedings cannot stand independently on a notional basis when the underlying criminal case has been finally quashed, and that appropriate recourse remains open to the prosecution to revive proceedings if the quashing order is set aside. Applying that principle to the facts, since the FIR underpinning the ECIR was quashed by a coordinate Bench and that order has not been challenged, the complaint and consequential PMLA proceedings could not be maintained. [Paras 14, 15]

The ED complaint under Section 3 of the PMLA and the proceedings arising therefrom were quashed as unsustainable in view of the prior quashing of the predicate FIR; the Look Out Circular issued in relation thereto was also quashed.

Final Conclusion: Petition allowed; ECIR and consequent PMLA proceedings quashed and ancillary Look Out Circular set aside, in view of the final quashing of the predicate FIR which extinguished the scheduled offence upon which the money laundering complaint was based.

Quashing of FIR - mootness / infiructuousness of proceedings - withdrawal of special leave petition - right to revive proceedings if quashing set aside

Quashing of FIR - mootness / infiructuousness of proceedings - withdrawal of special leave petition - Whether the special leave petition should be proceeded with after the predicate FIR was quashed. - HELD THAT: - The Court recorded that the FIR in the predicate offence had been quashed on 10.05.2023. Given that development, the petition no longer presented a live controversy and was therefore rendered infiructuous. On that basis the Court accepted the counsel's submission and treated the special leave petition as withdrawn.

The special leave petition is dismissed as withdrawn as having become infuructuous.

Right to revive proceedings if quashing set aside - Entitlement of the petitioner to revive proceedings if the quashing order is later overturned. - HELD THAT: - The Court expressly refrained from adjudicating on future contingencies but recorded that, insofar as the petitioner seeks to take steps in the event the quashing order is subsequently set aside by a superior forum, the petitioner shall be entitled to take such steps as are permissible under law. No substantive ruling was made on the merits of any future revival; the statement preserves the petitioner's procedural rights subject to legal limitations.

No comment on merits; petitioner entitled to pursue revival steps permissible in law if the quashing is overturned.

Final Conclusion: The special leave petition was dismissed as withdrawn because the predicate FIR had been quashed; the Court declined to rule on any future revival of proceedings but recorded that the petitioner may, if legally permissible, seek to revive proceedings should the quashing be set aside.

Breach of principles of natural justice (failure to afford hearing) - service tax liability on legal services - reverse charge mechanism for advocates - quashing of administrative order and remand for fresh consideration

Breach of principles of natural justice (failure to afford hearing) - quashing of administrative order and remand for fresh consideration - Impugned order dated 14th July 2023 was passed without affording the petitioner an opportunity of hearing and is liable to be set aside. - HELD THAT: - The Court accepted the petitioner's primary contention that the impugned order was passed in breach of the principles of natural justice because no opportunity of hearing was afforded before passing the order. Having regard to the respondents' fair stand that the designated officer can consider the matter afresh, the Court held that the correct course is to quash the ex parte order and remit the proceedings to the Assistant Commissioner for hearing and fresh decision. The Court directed that the fresh order be passed after hearing the petitioner and in accordance with law. [Paras 3, 7, 8]

Impugned order dated 14th July 2023 quashed; proceedings remanded to respondent no.1 for fresh hearing and decision in accordance with law.

Service tax liability on legal services - reverse charge mechanism for advocates - Claims regarding liability to pay service tax on legal services and applicability of the Department's Notification No.25/2012 (reverse charge) were not finally adjudicated on merits and are to be considered afresh by the designated officer after hearing the petitioner. - HELD THAT: - The petitioner contended that service tax was not leviable on the legal services provided by him relying on the reverse charge notification and relied on earlier High Court and other decisions. The Court did not resolve these substantive contentions on merits; instead, having found procedural infirmity, it remitted the matter to the Assistant Commissioner for fresh consideration of all contentions, including the claim of non-leviability under the reverse charge mechanism, after affording the petitioner an opportunity of hearing. [Paras 4, 5, 6, 7, 8]

Liability issue remanded for fresh adjudication by respondent no.1 after hearing the petitioner; no substantive determination by this Court.

Final Conclusion: The impugned order dated 14th July 2023 is quashed; the proceedings on the notice dated 30th December 2020 are remitted to the Assistant Commissioner, CGST, Mumbai South, for fresh decision after hearing the petitioner on all contentions and in accordance with law; no costs.

Extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - exclusion of limitation period by reason of COVID 19 orders, notifications and Ordinance - applicability of Supreme Court orders restoring and extending limitation relief (orders in Suo Motu Writ Petition (C) No.3 of 2020 and subsequent M.As) - effect of executive notifications and CBIC clarifications on limitation and filing dates - principle of natural justice - opportunity to reply to show cause notice

Extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - exclusion of limitation period by reason of COVID 19 orders, notifications and Ordinance - effect of executive notifications and CBIC clarifications on limitation and filing dates - applicability of Supreme Court orders restoring and extending limitation relief (orders in Suo Motu Writ Petition (C) No.3 of 2020 and subsequent M.As) - Validity of Show Cause Notice dated 28.04.2021 vis-a -vis limitation - HELD THAT: - The Court considered whether the Show Cause Notice issued on 28.04.2021 for Financial Year 2015-16 was time barred under the limitation regime in Section 73 read with provisos. It noted that the period of limitation for issuance of notices expired during the national lockdown caused by the COVID 19 pandemic and that the Central Government enacted the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 and issued notifications extending the excluded period. The Court also examined the sequence of Supreme Court orders in the Suo Motu Writ Petition (C) No.3 of 2020 and subsequent miscellaneous applications which restored and extended the exclusion of limitation (bringing the period up to 28.02.2022 by the order in M.A.No.21 of 2022). In that context, and having regard to the Government notifications and CBIC circulars referred to in the judgment, the Court held that limitation was saved for issuance of notices and passing of orders and therefore limitation did not provide a ground to set aside the impugned order confirming the demand. [Paras 17, 18, 19, 22, 23]

Limitation defence fails; Show Cause Notice of 28.04.2021 not liable to be set aside on limitation grounds.

Principle of natural justice - opportunity to reply to show cause notice - Whether the impugned order can be sustained despite non compliance with the principles of natural justice - HELD THAT: - Although the Court rejected the limitation challenge, it found that the impugned order was passed without affording the petitioner an opportunity to reply to the Show Cause Notice. The petitioner specifically asserted non receipt of the notice and that he was only called for personal hearing; the Court observed that the failure to afford an opportunity of furnishing a reply and to supply the Show Cause Notice to the petitioner vitiated the adjudicatory process. In consequence, the Court set aside the impugned order and directed remediation by way of fresh adjudication on merits after giving the petitioner the statutory opportunity to receive the notice and file a reply within specified timelines. [Paras 5, 6, 25, 26, 27]

Impugned order quashed on natural justice grounds and remitted for fresh decision on merits in accordance with law within six months; respondent to supply copy of the Show Cause Notice within 30 days and petitioner to file reply within 30 days thereafter.

Final Conclusion: Limitation challenge to the Show Cause Notice dated 28.04.2021 rejected in view of the COVID 19 exclusion orders, Ordinance and notifications; however, the impugned order confirming demand is set aside for breach of natural justice and the matter is remitted to the respondent for fresh adjudication on merits in accordance with law within six months, subject to the directions on supply of the notice and filing of a reply.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - acceptance of declaration under the category "litigation" sub-category "SCN involving duty pending" - effect of remand reviving proceedings - quashing of orders rejecting SVLDRS declarations - extension of relief to co-noticee by application of earlier High Court directions

Acceptance of declaration under the category "litigation" sub-category "SCN involving duty pending" - effect of remand reviving proceedings - quashing of orders rejecting SVLDRS declarations - extension of relief to co-noticee by application of earlier High Court directions - Orders rejecting the petitioner's declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 were liable to be quashed and set aside and the petitioner was entitled to the benefit of the earlier High Court directions issued in respect of the main noticee - HELD THAT: - The Court applied the reasoning and directions recorded in its earlier order in Special Civil Application No.23250 of 2019 (M/s Sunshine Corporation), wherein it held that an order of remand revives the matter from its inception and, consequently, the declaration ought to be accepted under the category "litigation" sub-category "SCN involving duty pending" with verification by the designated committee. The Revenue filed an affidavit undertaking that the petitioner's case would be considered on the same lines as the directions contained in the prior order. As the petitioner is a co-noticee of the matter decided in the earlier order, the benefit of those directions was held to extend to the petitioner; accordingly the impugned orders rejecting the declaration could not stand. [Paras 6]

The orders dated 05.12.2019 and 17.01.2020 rejecting the petitioner's SVLDRS declaration are quashed and set aside; the petition is allowed and the petitioner granted the benefit of the earlier High Court directions.

Final Conclusion: The petition succeeds; the rejection orders are quashed and the petitioner is entitled to have her SVLDRS declaration considered under the "litigation" - "SCN involving duty pending" category in accordance with the directions previously issued by this Court in the co-noticee's case.

Show cause notice as foundation of adjudication - no travel beyond the show cause notice - Rule 9(5) of CENVAT Credit Rules, 2004 - records for input/capital goods - Rule 9(6) of CENVAT Credit Rules, 2004 - records for input services - burden of proof for admissibility of CENVAT credit

Show cause notice as foundation of adjudication - no travel beyond the show cause notice - Rule 9(5) of CENVAT Credit Rules, 2004 - records for input/capital goods - Rule 9(6) of CENVAT Credit Rules, 2004 - records for input services - burden of proof for admissibility of CENVAT credit - Validity of rejection of CENVAT credit on a ground (Rule 9(6)) which was not invoked in the show cause notice (which invoked Rule 9(5)) and which was founded on mere possibility/presumption. - HELD THAT: - The Tribunal held that the allegations in the show cause notice constitute the foundation of the department's case and must be specific. The show cause notice issued to the appellant invoked Rule 9(5) (record-keeping for input/capital goods) and contended that the appellant failed to produce proof as per that provision. The first appellate authority, however, denied the CENVAT credit by relying on Rule 9(6) (records for input services) and by recording that the possibility of exempted activities from the premises could not be ruled out. The Tribunal observed that Rule 9(5) and Rule 9(6) address different subjects and are independent; therefore, raising a new ground not mentioned in the show cause notice amounts to travelling beyond the allegations on which the appellant was called upon to reply. Reliance on mere assumption or possibility, without that ground having been invoked in the show cause notice, is arbitrary and cannot sustain denial of benefit. The Tribunal applied the settled principle that adjudicating authorities cannot travel beyond the show cause notice and set aside the impugned order on that ground, rendering it unnecessary to decide other contentions such as suppression or extended period invocation. [Paras 3, 4]

Impugned order set aside and appeal allowed because the denial of CENVAT credit was based on a new ground (Rule 9(6)) and on mere possibility, which was not pleaded in the show cause notice (which invoked Rule 9(5)); authorities cannot travel beyond the show cause notice.

Final Conclusion: The first appellate order rejecting CENVAT credit is set aside and the appellant's appeal is allowed, with consequential reliefs as per law, because the denial rested on a ground and reasoning not raised in the show cause notice and on mere presumption.

Segregation of value between supply of goods and taxable service - rule of consistency - predictability of law - precedential effect of earlier orders - de novo adjudication - periodic demand under Section 73(1A) of the Finance Act, 1994 - conformation of demand

Periodic demand under Section 73(1A) of the Finance Act, 1994 - precedential effect of earlier orders - conformation of demand - rule of consistency - Validity of the three adjudication orders confirming Service Tax demands which were founded on an earlier de novo adjudication that has since been set aside - HELD THAT: - The Tribunal found that the three impugned orders of conformation proceeded on the footing that an earlier de novo adjudication had confirmed the demand in its entirety; paragraph 5.4 of the adjudicating officer's order reveals reliance on and adoption of that earlier conformation as the basis for quantification. Having set aside the earlier de novo adjudication in earlier proceedings, the Tribunal held that subsequent periodic demands and their confirmations which were founded on that antecedent conformation cannot stand. In the interest of consistency and predictability of adjudicatory outcomes, and to avoid perpetuating a prior order already set aside by the Tribunal, the three orders under challenge were liable to be set aside. [Paras 5, 8, 9]

The three orders of conformation of Service Tax demand are set aside.

Segregation of value between supply of goods and taxable service - de novo adjudication - predictability of law - Sustainability of the Commissioner's finding that segregation of material value from service value was not possible despite the assessee's accounting records and CA certificates - HELD THAT: - The Tribunal noted its earlier observation that the appellant maintained proper and adequate accounting records demonstrating segregation between the price of materials and the price for installation/commissioning; certificates by the Chartered Accountant were relied upon by the appellant and, contrary to that, the Commissioner concluded segregation was not possible, partly by treating the CA certificates as mechanically generated. The Tribunal found the Commissioner's approach to be prejudiced and insufficiently substantiated, particularly where its own earlier remand direction had required examination and differentiation of the components. Given the earlier finding in favour of the appellant on adequacy of records, denial of the declared value without proper substantiation could not survive judicial scrutiny. [Paras 6, 7, 8]

The Commissioner's conclusion that segregation was not possible is rejected as inadequately substantiated; the impugned confirmations founded on that conclusion cannot be sustained.

Final Conclusion: All three appeals are allowed; Order-in-Original No. 19/CGSTNM/Commr/KV/2017-18 dated 29.03.2018, Order-in-Original No. 64/CGST-NM/Commr/KV/2018-19 dated 05.02.2019, and Order-in-Original No. 40/CGST-NM/Commr/KV/2020-21 dated 28.01.2021 are set aside.

Extended period of limitation - suppression of facts - self-assessment and finality of ST-3 return - proviso to sub-section (1) of Section 73

Extended period of limitation - proviso to sub-section (1) of Section 73 - suppression of facts - Extended period under the proviso to sub section (1) of Section 73 is not invokable against the appellant for the period 01.10.2008 to 31.03.2013. - HELD THAT: - The show cause notice dated 12.03.2014 invoked the proviso to sub section (1) of Section 73. Prior to 14.05.2016 the normal limitation period was 18 months, which in the present records could at best cover 01.10.2012 to 31.03.2013. The appellant had filed ST 3 returns disclosing the relevant information and had paid service tax through self assessment. There was no finding of suppression or willful misstatement of material facts in the returns; therefore the condition for invoking the extended period was not satisfied. Revenue could, had it scrutinised the ST 3 returns in time, have issued a demand within the normal limitation window; failure to do so renders the extended period inapplicable and the show cause notice time barred. [Paras 4]

Extended period not invokable; show cause notice hit by limitation.

Self-assessment and finality of ST-3 return - Revenue cannot demand service tax already paid by the appellant by self assessment through ST 3 returns. - HELD THAT: - The record shows that the appellant had self assessed and paid service tax of the amount declared in ST 3 returns for the period in question. Once the normal period of limitation has expired after filing the ST 3 return, the self assessment stands finalised and is not open to fresh demand by Revenue on the same facts. Consequently, the demand in the show cause notice for service tax already paid through ST 3 is unsustainable. [Paras 4, 5]

Demand insofar as it relates to service tax paid by self assessment is not permissible and is set aside.

Final Conclusion: The appeal is allowed: the show cause notice dated 12.03.2014 is time barred as the extended period under the proviso to Section 73(1) is not invokable and the demand insofar as it seeks to recover service tax already self assessed and paid through ST 3 returns is unsustainable; the impugned order is set aside while leaving intact the tax paid by the appellant through ST 3.

Refund of Swachh Bharat Cess and Krishi Kalyan Cess - rebate of service tax under Notification No.41/2012-ST dated 29.06.2012 - treatment of SBC and KKC as service tax - application of Chapter V refund provisions to SBC and KKC - statutory construction to avoid exporting taxes - distinction from decision in Unicorn Industries

Refund of Swachh Bharat Cess and Krishi Kalyan Cess - rebate of service tax under Notification No.41/2012-ST dated 29.06.2012 - application of Chapter V refund provisions to SBC and KKC - Whether Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) paid as part of service tax are refundable under Notification No.41/2012 ST dated 29.06.2012 granting rebate of service tax on taxable services used for export of goods. - HELD THAT: - Notification No.41/2012 ST grants rebate of service tax paid on taxable services received by an exporter and used for export of goods (see para 12 and 13). Sections 119(2) and 119(5) of the Finance Act, 2015 and Sections 161(2) and 161(5) of the Finance Act, 2016 characterize SBC and KKC respectively as levied "as service tax" and provide that provisions of Chapter V of the Finance Act, 1994 relating to refunds shall, as far as may be, apply to SBC and KKC (paras 11, 14-16). Unlike other notifications which expressly referenced service tax leviable under Section 66/66B and thus required amendment to include SBC/KKC, Notification No.41/2012 ST did not confine the rebate to service tax under Section 66/66B and therefore required no amendment to cover SBC/KKC (paras 23-25). The tribunal distinguished the revenue's reliance on Unicorn Industries as relating to a different exemption scheme and different duties, and held that it is inapplicable to the factual and statutory scheme under Notification No.41/2012 ST (para 10). Construing the provisions consistently with the legislative policy against exporting taxes, SBC and KKC, having been elevated to the status of service tax and made subject to refund provisions, fall within the rebate granted by Notification No.41/2012 ST and are therefore refundable (paras 18-21). [Paras 19, 21, 23, 24, 25]

The rejection of refund of SBC and KKC was incorrect; SBC and KKC are refundable under Notification No.41/2012 ST and the impugned orders are set aside, appeals allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that Swachh Bharat Cess and Krishi Kalyan Cess, being levied and described as service tax and made subject to the refund provisions of Chapter V, are refundable under Notification No.41/2012 ST dated 29.06.2012; the impugned orders rejecting those refunds were set aside.

Mobilisation advance - point of taxation - valuation of taxable services - service tax liability on advances - interest under Section 75 of the Finance Act, 1994 - continuous supply of service - advance as loan/earnest money

Mobilisation advance - point of taxation - advance as loan/earnest money - interest under Section 75 of the Finance Act, 1994 - Whether interest for delayed payment of service tax could be demanded on mobilisation advances received during April 2009 to September 2013 on the basis that tax was exigible at the time of receipt of those advances. - HELD THAT: - The Tribunal accepted that the appellant had discharged service tax on the gross invoice value when invoices were raised on completion/stage-wise events. The Point of Taxation Rules provide that receipt of any advance attributable to taxable service ordinarily fixes the point of taxation at the date of receipt; however, in continuous supply contracts where provision of service is determined periodically on completion of contractually specified events, the date of completion of each event is the point of taxation. The mobilisation advances in these contracts were interest-bearing, secured by bank guarantees, accounted in the appellant's books as liabilities and functioned as financial accommodation to enable performance (i.e. they operated as loans/earnest money rather than immediate consideration for taxable service). The Tribunal followed earlier decisions holding that such mobilisation advances, being separate financial transactions and not linked to performance, do not attract service tax at receipt but become part of consideration when included in stage-wise invoices. The department did not show that invoices were raised and tax not paid at the stages when consideration was taken into account. Reliance on the Authority for Advance Ruling in Siemens was distinguished as addressing different transitional/GST issues. Applying the statutory formulation of point of taxation for continuous supplies and the facts that advances were secured loans adjusted through invoicing, the Tribunal found no merit in demanding interest under Section 75 for delayed payment based on receipt-dating of mobilisation advances. [Paras 4, 6, 7, 8]

Demand of interest for delayed payment of service tax on mobilisation advances received in the period April 2009 to September 2013 set aside and appeal allowed.

Final Conclusion: The Tribunal held that mobilisation advances treated and accounted for as secured loans/earnest money, adjusted through stage-wise invoicing in continuous supply contracts, did not attract service tax at the date of receipt for the purpose of imposing interest; therefore the demand of interest for April 2009 to September 2013 was set aside and the appeal allowed.

Business Auxiliary Service - Goods Transport Agency - Authorized Service Station - trade discounts - principle to principle basis - service tax liability

Trade discounts - service tax liability - Whether incentives and discounts received from Tata Motors Ltd. are taxable as Business Auxiliary Service or are trade discounts not chargeable to Service Tax. - HELD THAT: - The Tribunal found that the incentives and other sales-related receipts from Tata Motors are trading receipts in the nature of trade discounts attributable to the appellant's trading activity and do not contain the element of a service that would attract Service Tax under the category of Business Auxiliary Service. Consequently, such receipts cannot be treated as taxable value under Section 67 as alleged in the show cause notice. [Paras 13]

Incentives and discounts from Tata Motors are trade discounts and not taxable as Business Auxiliary Service; demand on this score set aside.

Business Auxiliary Service - principle to principle basis - service tax liability - Whether commission/incentives received from banks and financial institutions are taxable as Business Auxiliary Service. - HELD THAT: - The Tribunal held the relationship between the appellant and banks/financial institutions to be on a principle-to-principle basis, with each party promoting its own business. The appellant merely permitted use of premises or table space and no specific activity was identified as promoting the banks' business. The receipts from banks/financial institutions therefore do not amount to services rendered to them under BAS; at best they could be business support services, but that was not the case made out in the show cause notice. [Paras 13, 14]

Commission/ incentives from banks and financial institutions are not taxable as Business Auxiliary Service; demand on this score quashed.

Service tax liability - Whether hire-purchase/documentation charges received from vehicle buyers are taxable. - HELD THAT: - The Tribunal accepted that documentation, insurance and registration assistance are essential formalities under the Motor Vehicles Act and that the charges in question are collected from buyers for services rendered to them, not for promoting a third party's business. These receipts are therefore not chargeable to Service Tax as Business Auxiliary Service. [Paras 15]

Hire-purchase and documentation charges received from buyers are not taxable under BAS; demand on this score set aside.

Service tax liability - Whether repossession charges credited under 'other charges' are taxable as services to banks/financial institutions. - HELD THAT: - The Tribunal observed that repossessed vehicles are entrusted to the appellant for safekeeping and the amounts received are from vehicle owners as parking/safekeeping charges. These receipts arise on a principle-to-principle basis and do not reflect provision of service to banks/financial institutions; accordingly they are not taxable under BAS. [Paras 16]

Repossession charges received from vehicle owners are not taxable under BAS; demand on this score quashed.

Business Auxiliary Service - Authorized Service Station - service tax liability - Whether job work charges (servicing) are chargeable to Service Tax under Business Auxiliary Service or under Authorized Service Station. - HELD THAT: - The Commissioner himself treated the job work receipts as not taxable under BAS but under the Authorized Service Station category, a case not made out in the show cause notice. The Tribunal further held that servicing receipts in respect of commercial vehicles are not taxable under the Authorized Service Station category, while the appellant had already admitted and paid tax, if any, on services to non-commercial vehicles. Hence the demand insofar as based on BAS or on an incorrect classification as Authorized Service Station is untenable. [Paras 8, 17]

Demand of Service Tax on job work charges as BAS or as Authorized Service Station is not tenable; such demand set aside.

Goods Transport Agency - consignment notes - service tax liability - Whether freight received for transporting vehicles is taxable as services of a Goods Transport Agency. - HELD THAT: - The Tribunal noted that the essential ingredient of GTA-issuance of consignment notes-was absent. The appellant transported vehicles in its own trucks chiefly from factory/depot to its premises and did not issue consignment notes; therefore the receipts described as freight cannot be taxed under the GTA classification. [Paras 9, 17]

Freight receipts are not chargeable as GTA services in absence of consignment notes; demand on this score quashed.

Service tax liability - extended period - Whether invocation of extended period of limitation and penalties for suppression is justified. - HELD THAT: - The Tribunal observed that the impugned transactions were recorded in the appellant's books of account; there was no element of concealment or suppression warranting extended period invocation. The appellant's reliance on authority indicated in the show cause notice was accepted to the extent that extended period invocation was untenable. [Paras 10, 13]

Invocation of extended period and suppression-based penalties is not justified on the facts; the related demand and penalties are set aside.

Final Conclusion: The Tribunal allowed the appeal on merits, set aside the impugned adjudication and associated demands, interest and penalties in respect of the receipts contested for Financial Year 2011-12; the appellant is entitled to consequential benefits in accordance with law.

Double taxation - business auxiliary service - taxability of commission paid to distributors - service tax discharged by principal on gross MRP - verification of full taxable value by principal - exemption under Notification 25/2012-S.T. (entry for distributors/agents)

Taxability of commission paid to distributors - service tax discharged by principal on gross MRP - double taxation - business auxiliary service - verification of full taxable value by principal - exemption under Notification 25/2012-S.T. (entry for distributors/agents) - Whether a dealer/distributor of SIM cards is liable to pay service tax on commission received when the principal mobile company has discharged service tax on the gross MRP collected from the ultimate customer. - HELD THAT: - The Tribunal examined the commercial and legal character of transactions where the telecom operator collects the full amount at MRP from the customer, pays service tax on that gross MRP and thereafter pays commission to the distributor out of that realisation. Relying on earlier decisions of the Tribunal, the Bench held that where the principal has admittedly paid service tax on the full value recoverable from the customer (inclusive of the commission component), levying service tax again on the commission paid to the distributor would amount to double taxation. The Tribunal noted the Apex Court's classification that the essential nature of SIM-card transactions is provision of telecommunication service and observed that in the contractual model before it the distributor acts to promote and market the principal's service with payments flowing from the principal out of amounts already subjected to service tax. The Bench further observed that because the principal's discharge of service tax on the full taxable value is easily verifiable, imposing a secondary tax on the commission would result in taxing different values for the same telecom service contrary to precedent. Finally, the Tribunal observed that the issue has been largely overtaken for the future by the specific exemption in Notification 25/2012-S.T. (entry dealing with such distributors/agents). Applying these determinations, the Tribunal set aside the demand and allowed the appeal. [Paras 4, 5]

Demand of service tax on commission received by the dealer/distributor in the facts of this case is unsustainable; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal held that where the principal mobile company has discharged service tax on the gross MRP collected from the customer and the commission to the distributor is paid out of that amount, a demand for service tax on the distributor's commission is not sustainable (also noting the subsequent exemption under Notification 25/2012-S.T.); the impugned demand was set aside and the appeal allowed.

Conversion of foreign currency in tax computation - appropriation and calculation of service tax paid - levisability of service tax on tickets booked abroad for journeys commencing in India - onus of proof regarding tax payment and shortfall - remand for fresh adjudication

Conversion of foreign currency in tax computation - appropriation and calculation of service tax paid - onus of proof regarding tax payment and shortfall - Whether there was a shortfall in payment of service tax on the calculation sheet once the amounts shown in Japanese Yen were converted into Indian Rupees - HELD THAT: - The Tribunal examined the calculation sheet annexed by the appellant and noted that the figure of 13,93,06,059 was expressed in JPY and a conversion to INR at the stated rate (1.86) produced the rupee amount of Rs. 11,19,02,540 (approximately Rs. 11.19 crores). The show cause notice had treated the figures as though they were denominated in Indian rupees, thereby producing an apparent shortfall. The Adjudicating Authority's finding that the appellant had failed to explain how the JPY figure was arrived at was held to be irrelevant to the narrow question before the show cause notice, which concerned whether the deposited amount matched the converted INR equivalent of the JPY figures. On a proper reading of the calculation sheet and the appellant's reply, the Tribunal concluded there was no shortfall in payment as alleged in the show cause notice. [Paras 19, 20, 21, 22, 23]

The demand on account of an alleged shortfall was set aside - the Tribunal held the disputed figures were in JPY and, when converted, showed no shortfall in payment for the period specified.

Levisability of service tax on tickets booked abroad for journeys commencing in India - remand for fresh adjudication - Whether service tax was leviable on amounts received towards tickets booked from abroad for journeys commencing in India (matter not finally adjudicated by the Tribunal and remitted) - HELD THAT: - The Tribunal observed that the question of leviability of service tax on such bookings had not been genuinely contested before the Adjudicating Authority prior to the show cause notice and was not decided on merits by the Commissioner. Although the parties advanced competing submissions before the Tribunal, it declined to decide the substantive question of taxability in the first instance. The Tribunal directed that the Adjudicating Authority should examine the issue afresh after giving the appellant an opportunity to make submissions and the Department an opportunity to reply, and then take a considered decision on the aspect of leviability for the period and scope identified. [Paras 25, 26, 27, 28]

Issue remitted to the Principal Commissioner for fresh adjudication on the question of leviability of service tax on tickets booked from abroad for journeys commencing in India (from 01.05.2006 onwards); the appeal allowed to the limited extent of setting aside the demand and remitting the levy issue.

Final Conclusion: The Tribunal allowed the appeal in part: it set aside the demand based on the alleged shortfall after finding the calculation sheet's figures were in JPY and, when converted, showed no shortfall for the period 1.02.2010 to 31.01.2015; the substantive question whether service tax is leviable on tickets booked abroad for journeys commencing in India (from 01.05.2006) was remitted to the Principal Commissioner for fresh consideration after hearing the parties.

Dealership agreement vs agency - principal to principal transactions - business auxiliary service - classification of incentives/trade discounts vs commission - requirement of reasons in administrative order

Dealership agreement vs agency - principal to principal transactions - requirement of reasons in administrative order - The agreement between the company and the appellant is a dealership agreement on a principal-to-principal basis and not an agency agreement. - HELD THAT: - A conjoint reading of the agreement's terms shows that the Company granted the Dealer a non-exclusive right to purchase for resale, the Dealer placed orders and the Company sold products to the Dealer at net dealer prices, the Dealer was responsible for payment of applicable sales taxes and to issue sales tax declarations, and Clause 26 expressly states that the Dealer shall not be construed as the agent of the Company and transactions are on a principal-to-principal basis. The duties enumerated in Clause 16 do not convert the relationship into agency nor indicate rendering of "business auxiliary service." The Commissioner's contrary conclusion that the Dealer was an agent was reached without adequate reasoning and is therefore unsustainable. [Paras 17, 18]

The finding that the agreement reflected an agency relationship is set aside; the agreement is a dealership on a principal-to-principal basis.

Business auxiliary service - classification of incentives/trade discounts vs commission - The incentives/discounts received by the appellant in connection with sale of the Company's products cannot be treated as consideration for a service chargeable to service tax for the pre-negative period. - HELD THAT: - Following the Tribunal's decisions in Rohan Motors, the incentive amounts paid under the dealership arrangements are trade discounts/incentives received in the course of principal-to-principal sales and are for the mutual commercial benefit of the parties rather than payment for a service. Consequently, such amounts cannot be characterised as commission or as consideration for "business auxiliary service" and are not leviable to service tax for the pre-negative list period. [Paras 19, 20, 21, 22]

Demand of service tax on the incentives for the pre-negative period is unsustainable.

Business auxiliary service - classification of incentives/trade discounts vs commission - For the post-negative list period the incentive amounts likewise cannot be subjected to service tax; the Department cannot sustain a demand on such incentives for the post-July 2012 period. - HELD THAT: - The Tribunal further relied on subsequent orders (including a decision applying the ratio in Sai Service Station and later Rohan Motors orders) holding that trade discounts or incentives given in terms of a declared policy for achieving sales targets are not exigible to service tax even for periods after the negative list change. The Department is not entitled to take a different view in the present facts where the arrangement is a dealership and the incentives are trade discounts rather than service consideration. [Paras 21, 22]

Demand of service tax on the incentives for the post-negative list period is unsustainable.

Final Conclusion: The impugned order dated 05.01.2015 confirming demand is set aside. The appeal is allowed.

Mutuality - manpower recruitment or supply agency - club or association service - registered society / constituted under law - extended period of limitation

Mutuality - manpower recruitment or supply agency - Whether supply of manpower by the Appellant Association to its member stevedores is taxable service or falls outside the levy by reason of mutuality. - HELD THAT: - The Appellant is a society registered under the Societies Registration Act, constituted and managed by stevedores for their collective benefit. The Association created a common pool of gear boys and deck foremen drawn from and serving its members to perform auxiliary jobs incidental to stevedoring. The Tribunal found an element of mutuality: the association was formed for the mutual benefit of its subscribing members, membership is restricted to stevedores, and services rendered are effectively services to the members themselves rather than transactions between distinct service-provider and service-receiver. Applying the principle that services rendered by an association to its members pursuant to mutuality do not constitute a taxable service, and having regard to precedents treating constituted bodies as excluded from the club or association tax net where mutuality is present, the Tribunal held that the manpower supply activity is not taxable as a manpower recruitment or supply agency service during the material period.

Demand of service tax on manpower supply services was set aside on the ground of mutuality; the activity is not taxable as a manpower recruitment or supply agency service for the material period.

Mutuality - club or association service - registered society / constituted under law - Whether amounts collected by the Appellant from members fall within taxable club or association service or are excluded by mutuality and the association's constitutional character. - HELD THAT: - The Tribunal examined the objects, composition and management of the Association and observed that it is constituted and managed by its members for their mutual benefit, membership being confined to stevedores. The payments by members were held to meet administrative expenses and not for provision of services to unrelated third parties. On that basis, and following authorities that treat activities of constituted clubs/societies as service to themselves where mutuality exists, the Tribunal concluded there is no service-provider/service-receiver relationship that would attract club or association service tax.

Demand of service tax under the club or association category was held not tenable and set aside.

Extended period of limitation - Whether the extended period of limitation for issuing the show cause notice was rightly invoked. - HELD THAT: - The Tribunal did not pronounce finally on the question of extended limitation. The Appellant contended bona fide belief in non-taxability, long-standing public existence of the association and absence of cogent evidence of suppression; it also submitted that the normal one-year period from the relevant date would restrict recovery to a later portion of the SCN period. The Revenue urged applicability of extended period because the Appellant had not taken registration. The Tribunal expressly left the ground of limitation open and did not decide it on merits.

Left open for determination; extended period of limitation not finally adjudicated by the Tribunal.

Final Conclusion: The appeal is allowed: the demands of service tax on manpower supply and on club or association services for the stated period are set aside on the ground of mutuality and the Association's constituted character; the question of extended limitation was left open for further consideration.

Levy of service tax on mark-up earned by freight forwarder - Taxability of margin between master and house bill of lading transactions - Requirement of service for levy of service tax - Consideration for service versus profit from trading activity - Benefit of doubt in respect of charging section

Levy of service tax on mark-up earned by freight forwarder - Taxability of margin between master and house bill of lading transactions - Requirement of service for levy of service tax - Consideration for service versus profit from trading activity - Whether the mark-up earned by the appellant by purchasing cargo space from shipping lines and reselling it to exporters constitutes consideration for a taxable service liable to service tax. - HELD THAT: - The Tribunal's reasoning in Tiger Logistics, applied by the Court, establishes that service tax can be levied only where a service is rendered and the amount received is consideration for that service. The appellant buys space from shipping lines (contract evidenced by Master Bill of Lading) and resells space to exporters (contract evidenced by House Bill of Lading). The differential between the price paid to the shipping line and the price charged to exporters is a commercial margin arising from trading activity. This margin represents profit or loss incidental to buying and selling space and the market risk undertaken by the appellant, and is not consideration for a distinct taxable service. Where no service, as defined under the charging provisions, is rendered, levy of service tax is not permissible; moreover, any doubt regarding applicability of the charging section must be resolved in favour of the assessee. Applying these principles, the Tribunal held, and this Court follows, that the mark-up is not taxable as service tax.

The mark-up earned by the appellant on resale of cargo space is not consideration for a taxable service; demand of service tax is not sustainable.

Final Conclusion: The impugned orders confirming demand of service tax on the mark-up earned by the freight forwarder are set aside and the appeals are allowed.

Rebate of duty on inputs under Rule 18 of the Central Excise Rules, 2002 - Applicability of notification No. 41/2001-CE(NT) conditions (declaration and verification) - Removal and sale of waste/scrap and entitlement to rebate - Fixation and retrospective application of input output norms (SION) - Limitation and condonation of delay in statutory appeals

Limitation and condonation of delay in statutory appeals - Whether the initial statutory appeals filed by the petitioner were to be treated as time barred and whether the Court should interfere with that finding. - HELD THAT: - The Court noted that the Revisionary Authority had earlier set aside the Commissioner (Appeal)'s order and directed a decision on merits (order dated 04.12.2014) and that the subsequent revision order dated 27.09.2019 also declined to examine limitation. Those orders were not challenged by the department. In view of this, the Court declined to re open the disputed factual question whether the Orders in Original were served on the petitioner's representative on 21.08.2008 and found it unpersuasive to hold the initial appeals time barred. The determinative point was that the matter had been directed to be decided on merits by the Revisionary Authority and that factual dispute about service did not warrant interference by the writ court. [Paras 8]

The Court refused to hold the initial appeals time barred and declined to interfere with the prior direction to decide the matter on merits.

Removal and sale of waste/scrap and entitlement to rebate - Rebate of duty on inputs under Rule 18 of the Central Excise Rules, 2002 - Applicability of notification No. 41/2001-CE(NT) conditions (declaration and verification) - Whether removal or sale of waste/scrap arising in manufacture of exported S.S. utensils barred entitlement to rebate under Notification No. 41/2001-CE(NT) and whether the Revisionary Authority's conclusion that pre conditions were unfulfilled was sustainable. - HELD THAT: - The Court examined Rule 18 and Notification No. 41/2001 and observed that the notification requires a declaration including the input output ratio and permits verification by the Assistant/Deputy Commissioner. Paragraph 4(c) of the notification permits removal of waste arising from processing on payment of duty as if manufactured in the factory, and does not, by itself, prohibit or bar a rebate claim where waste is removed or sold outside the factory. The Court further noted Notification No. 10/2003 which exempts waste and scrap for specified items (including S.S. utensils) and the Commissioner of Central Excise's clarification dated 26.07.2005 reiterating applicable formulae. Applying these provisions, the Court found the Revisionary Authority's conclusion that mandatory pre conditions under Notification No. 41/2001 were unmet to be perverse in the light of the exemption and clarifications, and that the Authority had taken an unduly hyper technical view. [Paras 11, 12, 13, 14, 16]

The Court held that removal or sale of waste/scrap did not ipso facto bar rebate and that the impugned finding on pre conditions was unsustainable.

Fixation and retrospective application of input output norms (SION) - Rebate of duty on inputs under Rule 18 of the Central Excise Rules, 2002 - Whether the special input output norms communicated by the Assistant Commissioner on 18 March 2004 (fixing different SIONs) could be applied to the petitioner's rebate claims arising from exports made in the period in question, and whether the adjudicating authority properly addressed retrospective applicability. - HELD THAT: - The record showed a communication dated 18.03.2004 fixing input output ratios for goods manufactured out of different forms of stainless steel (including a 1.882:1 ratio for S.S. flats). The Court observed that the fixation of SIONs enables exporters to claim rebate, but noted factual gaps: the petitioner did not place on record its letter of 08.01.2004, it was unclear whether that letter sought fixation for past or future exports, and it was unclear from which date the norms became applicable. The Court held that ordinarily a norm fixed on 18.03.2004 could not be applied retrospectively, and recorded that the Adjudicating Authority had failed to make findings on these points. Consequently the question of applicability and retrospective operation required fresh consideration with factual determination. [Paras 9, 10, 11]

The Court remanded the issue of fixation and applicability of the input output norms to the Adjudicating Authority for fresh determination.

Final Conclusion: The impugned revision order dated 27 September 2019 was set aside insofar as it denied relief on the legal grounds identified; the Court held that removal or sale of waste/scrap did not automatically bar rebate and that the finding on pre conditions was unsustainable, declined to disturb the earlier remit to decide the matter on merits, and remanded the rebate claims to the Adjudicating Authority for fresh adjudication after affording a hearing, including determination of the correct input output norms and their temporal applicability.

Refund of duty paid under protest - unjust enrichment - recovery of duty from customers / passing on of duty - commercial invoice versus excise invoice - chartered accountant's certificate as evidence of non-recovery

Refund of duty paid under protest - unjust enrichment - chartered accountant's certificate as evidence of non-recovery - commercial invoice versus excise invoice - Whether the refund of duty paid under protest for the period February, 2000 to December, 2001 was barred by the doctrine of unjust enrichment or was payable to the appellant. - HELD THAT: - The Tribunal examined whether the department validly credited the sanctioned refund to the Consumer Welfare Fund on the ground of unjust enrichment. For the period prior to December, 2001 the appellant had issued commercial invoices (no duty shown) because they were not charging duty; they began issuing excise invoices only after they started paying duty under protest on the insistence of the department. The remand required the first appellate authority to consider the Chartered Accountant's certificate produced before the Tribunal which stated that the appellant had not received any amount over and above the amounts shown in the commercial invoices and that the duty amount of Rs.6,02,000/- had not been recovered from customers. The Tribunal applied the settled principle that where duty is paid post-clearance at the insistence of the department, unjust enrichment does not apply if the assessee has not passed on the duty to customers. The Commissioner (Appeals) was required simply to verify whether the CA certificate endorsed non-recovery; the certificate did so. On that basis the Tribunal concluded that the refund was not hit by unjust enrichment and was therefore payable to the appellant. The determinative reasoning is that the documentary evidence (commercial invoices and the CA certificate) established non-recovery of duty for the specified period and so the bar of unjust enrichment did not apply. [Paras 6, 7]

Refund of duty paid under protest for the period February, 2000 to December, 2001 allowed; unjust enrichment not attracted as the duty was not recovered from customers.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the refund claimed for the period February, 2000 to December, 2001 is found to be payable to the appellant as the duty was not recovered from customers.

Actual manufacturer - Liability of premises owner for clandestine manufacture - Burden of proof for recovery of duty - Evidentiary value of inconsistent statements - Penalty under Rule 26 of the Central Excise Rules, 2002 - Confiscation and release on redemption fine

Actual manufacturer - Liability of premises owner for clandestine manufacture - Burden of proof for recovery of duty - Whether Shri Krishna Kumar (owner of premises) can be held as the actual manufacturer and liable to pay the duty demanded. - HELD THAT: - The Tribunal examined the evidence and held that mere ownership of premises, without corroborative material linking the owner to the manufacture, purchase of machines or raw material, or to physical clearance of goods, is insufficient to conclude that the owner is the manufacturer. The lease agreement was found to be genuine on verification from the Notary. There is no evidence that machines or inputs were purchased in Shri Krishna Kumar's name or that he participated in manufacturing activity. The department's conclusion against him rested on presumption from ownership alone; in absence of direct or circumstantial evidence establishing his involvement, the demand of duty could not be sustained. The Tribunal therefore set aside the duty demand and the penalty imposed on Shri Krishna Kumar. [Paras 10, 11, 12, 13]

Demand of duty and penalty against Shri Krishna Kumar set aside for lack of evidence linking him to manufacture.

Evidentiary value of inconsistent statements - Confiscation and release on redemption fine - Whether the confiscation of goods and their release on payment of redemption fine in the impugned order should be sustained. - HELD THAT: - Although the identity of the person liable for duty was not established against the premises owner, the record shows seizure of goods and machinery pursuant to search. The Tribunal found that the confiscation order and the measure of releasing goods on redemption fine were independent consequences of the seizure and were not vitiated by the failure to sustain the duty demand against the owner. Accordingly, the Tribunal upheld the confiscation and the provision for release on redemption fine as recorded in the impugned order. [Paras 13, 15]

Confiscation and release of goods on redemption fine upheld.

Evidentiary value of inconsistent statements - Penalty under Rule 26 of the Central Excise Rules, 2002 - Whether Shri Suresh Prasad Sah is liable for penalty for clandestine manufacture and clearance. - HELD THAT: - Shri Suresh Prasad made multiple inconsistent statements, reducing their evidentiary weight; however he ultimately admitted involvement in manufacturing and introduced a non-existent person for executing the lease. The investigation indicated he claimed purchase of machines and admitted manufacture from specific dates, and his conduct established participation in clandestine manufacture and clearance. Even where statements are inconsistent, admissions and other material connecting him to the activity suffice to impose penalty. The Tribunal accordingly upheld the penalty imposed on Shri Suresh Prasad Sah under the relevant provision of the Central Excise Rules. [Paras 11, 14]

Penalty imposed on Shri Suresh Prasad Sah affirmed.

Final Conclusion: The appeal succeeds in part: the duty demand and penalty against the premises owner, Shri Krishna Kumar, are set aside for want of evidence linking him to manufacture; the confiscation and release on redemption fine are upheld; the penalty on Shri Suresh Prasad Sah for clandestine manufacture is affirmed. Appeals disposed accordingly.

Admissibility of electronic records / computer printouts - Section 36B of the Central Excise Act and parity with Section 65B of the Evidence Act - Floating nature of removable storage devices (pen drive) and need to identify source device - Mandatory procedure under Section 9D for relevancy of statements recorded during investigation - Need for independent corroborative evidence to establish clandestine manufacture and clearance - Electricity consumption as corroborative evidence - cannot be sole basis for inference of clandestine production - Liability of directors and imposition of penalty requires independent evidence of involvement

Admissibility of electronic records / computer printouts - Section 36B of the Central Excise Act and parity with Section 65B of the Evidence Act - Floating nature of removable storage devices (pen drive) and need to identify source device - Data retrieved from the pen drive and computer printouts cannot be relied upon as evidence in the absence of compliance with the statutory procedure for electronic records and without identification of the source device and author of entries. - HELD THAT: - The Tribunal held that the case was built primarily on data recovered from a pen drive and on subsequent statements; authenticity of such data is therefore crucial. Section 36B(2)/(4) (parimateria to Section 65B of the Evidence Act) prescribes conditions and a certificate by a responsible official to establish source and regular use. A pen drive is a floating device and, unless the computer from which the electronic record was produced is identified and the author of earlier entries is shown, the printouts lack the required evidentiary foundation. The computer operator who produced the printouts had joined shortly before seizure and could not vouch for earlier entries; no certificate or compliance with Section 36B was obtained. Following precedent, the Tribunal answered in the negative and held that the computer/pen drive printouts alone cannot sustain the duty demand without compliance and corroboration. [Paras 14]

Pen drive/computer printouts were inadmissible for proving clandestine clearances because statutory safeguards under Section 36B/65B were not followed and the source/author of earlier entries was not identified.

Mandatory procedure under Section 9D for relevancy of statements recorded during investigation - Statements recorded during investigation were not admissible as evidence of truth of their contents because the procedure under Section 9D was not followed. - HELD THAT: - The Tribunal found that statements recorded under Section 14 were relied upon by the adjudicating authority but were not tested in accordance with Section 9D. The makers of the statements (directors, accountant, computer operator) were not examined-in-chief before the adjudicating authority nor was clause (a) of Section 9D invoked with reasoned findings. The computer operator's statement was not voluntary or probative for earlier periods; the accountant denied providing data. In absence of the mandatory Section 9D procedure (or valid invocation of clause (a)), such statements lose evidentiary value for proving truth of their contents and cannot be relied on to sustain the demand. [Paras 15]

Statements recorded during investigation could not be used as evidence to prove clandestine clearances because Section 9D was not complied with.

Need for independent corroborative evidence to establish clandestine manufacture and clearance - Allegations of clandestine clearance were not substantiated because independent corroborative evidence was not obtained or produced. - HELD THAT: - The Tribunal emphasised that clandestine manufacture and removal must be proved by positive, tangible, independent evidence such as raw material receipts, evidence of utilization, transport/consignee verification, security gate/vehicle records, or financial receipts corroborated at the buyers' end. In this case, the investigation did not conduct appropriate inquiries with buyers despite names being available in records; only one customer verification was made and generalized to all cash transactions. Given the inadmissibility of the computer printouts and the absence of corroborative enquiries or material, the Tribunal held the Revenue failed to establish clandestine clearances of the alleged quantity. [Paras 16]

Demand based on alleged clandestine clearance was unsustainable for lack of independent corroborative evidence.

Electricity consumption as corroborative evidence - cannot be sole basis for inference of clandestine production - High electricity consumption alone is insufficient to infer clandestine manufacture and clearance and cannot be the sole basis of a duty demand. - HELD THAT: - The Tribunal observed wide variations in electricity consumption and accepted that consumption depends on multiple operational factors (raw material quality, load factor, machinery performance). Reliance solely on projected norms or on a project's projected units per MT, without factory specific validation and analysis, is impermissible. The Tribunal followed precedents holding that electricity consumption cannot be the only factor; norms are variable and tax cannot be levied on estimations unsupported by concrete evidence. Consequently, excess electricity consumption did not substantiate clandestine production. [Paras 17]

Excess electricity consumption does not, by itself, sustain an inference of clandestine manufacture or justify the duty demand.

Need for buyer end verification and proof of procurement of raw materials - Need for positive, tangible evidence of procurement and movement - Demands confirmed without thorough verification at buyers' end and without evidence of procurement of major raw materials (invoices) are not sustainable. - HELD THAT: - Revenue alleged significant cash sales based on registers, but conducted only a single verification at one buyer and extrapolated that finding to all cash entries. The Tribunal held that where buyer names and addresses exist, the investigation must verify those transactions at the buyers' end; failure to do so weakens the case. The Revenue also did not produce evidence of procurement of major raw materials absent invoices. Given the infirmities in the primary electronic evidence and lack of corroboration through buyer verification or raw material records, the demand could not be sustained. [Paras 18]

Without buyer end verification and evidence of raw material procurement, the demand for clandestine clearances is unsustainable.

Liability of directors and imposition of penalty requires independent evidence of involvement - Penalties imposed on the directors could not be sustained in absence of evidence establishing their involvement in clandestine manufacture and clearance. - HELD THAT: - The adjudicating authority imposed personal penalties on the directors on the premise they could not absolve themselves. The Tribunal found no independent evidence linking the directors to clandestine activity; the foundational evidence for clandestine clearance itself was held insufficient. In absence of material demonstrating directors' culpability, penalties under the Act and Rules were set aside. [Paras 19]

Penalties on the directors were set aside for want of evidence of their involvement.

Final Conclusion: All questions of law and fact raised by the appellants were answered against the Revenue: the electronic records and statements were inadmissible or uncorroborated, electricity consumption alone was insufficient, buyer end and raw material verifications were lacking, and penalties on directors were unsustainable. The impugned order confirming the duty demand, interest and penalties was set aside and the appeals were allowed.

CENVAT credit admissibility for inputs and input services - export under bond and exception under Rule 6(6)(v) of the CENVAT Credit Rules, 2004 - export without payment of duty under Rule 19 of the Central Excise Rules, 2002 - testing/prototype use as part of the manufacturing process (marketability-test of completeness of manufacture) - final products and marketability - invocation of extended period - suppression and bona fide doubt on law

CENVAT credit admissibility for inputs and input services - export under bond and exception under Rule 6(6)(v) of the CENVAT Credit Rules, 2004 - CENVAT credit claimed on inputs and input services used in manufacture of prototype vehicles exported for testing cannot be denied merely because export proceeds were not realized or the prototypes were destroyed during testing. - HELD THAT: - The Tribunal examined Rule 3, Rule 4, Rule 6 and specifically Rule 6(6)(v) of the CENVAT Credit Rules, 2004 and concluded that the Rules permit availment of credit where excisable goods are cleared for export under bond. There is no provision in the CCR or Central Excise Rules which disallows CENVAT credit solely because export proceeds were not realized or because the exported samples/prototypes were destroyed during testing. Reliance on precedents such as Repro India Ltd. and Same Deutz Fahr India Pvt. Ltd. supports the position that goods exported under bond do not attract the bar in Rule 6(1). The Department's argument that non-realisation of foreign remittance or destruction prevents classification as a clearance for export does not have legal basis to deny CENVAT credit; enforcement action for breach of bond conditions is a separate remedy and does not automatically operate to disallow credit. [Paras 9, 10, 11, 16]

Credit attributable to inputs and input services used in manufacture of prototype vehicles exported under bond is admissible and cannot be denied for non-realisation of export proceeds or destruction during testing.

Testing/prototype use as part of the manufacturing process (marketability-test of completeness of manufacture) - final products and marketability - Testing of prototype vehicles abroad is an integral part of the manufacturing process and does not disentitle the manufacturer from claiming CENVAT credit on inputs used for manufacture. - HELD THAT: - The Tribunal applied established principles that manufacture is complete only when a product is rendered marketable and that physical presence of an input in the final product is not a pre-requisite for claiming credit. Citing Supreme Court and Tribunal authorities (including Flex Engineering Ltd., Eastend Paper Industries, Dharampal Satyapal and earlier Tribunal decisions), the Bench held that mandatory testing required to ensure marketability forms part of manufacture; therefore inputs consumed in relation to such testing remain inputs for the manufacture of final products and credit cannot be denied merely because the samples/prototypes are destroyed in testing. Even if prototypes were characterised as not being final products, the definitions of 'input' and 'final products' in the Rules mean that the nature of inputs does not change and credit remains claimable so long as the appellant is a manufacturer of final products. [Paras 12, 13, 14, 15, 16]

Testing of prototypes is integral to manufacture; inputs used for such testing qualify for CENVAT credit.

Invocation of extended period - suppression and bona fide doubt on law - Extended period of limitation cannot be invoked as there was no suppression with intent to evade duty and there existed bona fide doubt on the legal position. - HELD THAT: - The Tribunal observed that the issue involved interpretation of statutory provisions and that the Department itself had taken inconsistent views, including an earlier Tribunal order in favour of the appellants for 2014-15. Given the existence of bona fide doubt and absence of any positive act of suppression on the part of the assessee, the conditions for invoking extended period, which require culpable suppression or evasion, are not satisfied. Accordingly, the extended period was held inapplicable. [Paras 17]

Extended period of limitation not invocable; assessment must be within normal period.

Final Conclusion: Both appeals allowed: CENVAT credit on inputs and input services used in manufacture of prototypes exported under bond for testing is admissible; testing/prototype use forms part of the manufacturing process and does not defeat credit, and extended period of limitation is not invocable in the facts of the case.

Definition of input service - eligibility of CENVAT credit for outward transportation from the place of removal - amendment substituting 'from the place of removal' with 'upto the place of removal' w.e.f. 1-4-2008 - finality of judicial pronouncement upholding entitlement (Vasavadatta Cements Ltd approving ABB Ltd)

Eligibility of CENVAT credit for outward transportation from the place of removal - definition of input service - finality of judicial pronouncement upholding entitlement (Vasavadatta Cements Ltd approving ABB Ltd) - Entitlement to CENVAT credit of tax paid on goods transport agency services for outward transportation of finished products from the place of removal for the period before the amendment effective 1-4-2008 - HELD THAT: - The Tribunal held that the question is no longer res integra and that the entitlement to CENVAT credit for services used in clearance of final products 'from the place of removal' for the period prior to the amendment has been finally settled by the Supreme Court in Vasavadatta Cements Ltd which affirmed the Full Bench decision in ABB Ltd and the Karnataka High Court. The reasoning reproduced from the authoritative decisions explains that the exhaustive portion of the definition of 'input service' must be construed restrictively but includes services used in or in relation to clearance of final products from the place of removal; such clearance encompasses transportation and related services from the place of removal up to the first point (depot or customer). The Tribunal noted that the rule-making amendment substituting 'from' with 'upto' with effect from 1-4-2008 curtailed the availability of credit prospectively, but did not affect entitlement for the earlier period. Since the adjudicating authority did not follow the binding judicial pronouncements, the demand could not be sustained for the period before the amendment. [Paras 5, 6, 7, 8]

The impugned demand, recovery and penalty for the disputed period are unsustainable and the appeal is allowed.

Final Conclusion: The appellate order sets aside the impugned demand and penalty and allows the appeal, holding that CENVAT credit for outward transportation from the place of removal is admissible for the period 1st January 2005 to 31st March 2008 in view of the binding judicial decisions, while noting that the 1-4-2008 amendment narrows entitlement prospectively.

Classification of petroleum oils: distinction between crude and other petroleum oils - HSN explanatory notes - processes preserving essential character (decantation, dehydration/distillation, blending) - evidentiary value of chemical examiner's opinion versus laboratory test reports and cross-examination - classification under Chapter 27.09 versus Chapter 27.10 of the Central Excise Tariff

Classification of petroleum oils: distinction between crude and other petroleum oils - HSN explanatory notes - processes preserving essential character (decantation, dehydration/distillation, blending) - classification under Chapter 27.09 versus Chapter 27.10 of the Central Excise Tariff - Whether ARH C Oil (residue/bottom oil obtained from processing of comingled/condensate crude oil) is classifiable under CETH 27090000 (crude petroleum oils) or under CETH 27101990 (other petroleum oils). - HELD THAT: - The Tribunal analysed the appellant's process (decantation of incoming commingled/condensate crude oil, removal of bottom residue of 2-5% which is heated to remove water, collection of distilled fractions and remixture/blending back into the crude) and compared it with the HSN explanatory notes to Chapter 27.09 and 27.10. The explanatory notes to Heading 27.09 expressly list decantation, dehydration (distillation as dehydration), elimination of very light fractions and any other minor process that does not change the essential character of the product as processes which leave a product within Heading 27.09. Chapter 27.10 covers only products subjected to processes other than those specified in Heading 27.09 and, by its Note C/Part II(b), generally concerns products containing 70% or more by weight of petroleum oils or oils obtained from bituminous minerals. The Tribunal found that the appellant's operations remove water and impurities from a very small residue and then remix the residue with the principal crude material, so no new product emerges and the essential character of crude oil remains. Reliance on precedents dealing with similar residue/topped crude issues supported that dehydration/distillation for removal of water or light fractions does not alter classification as crude. On this basis the disputed ARH C Oil was held to remain classifiable under Chapter 27.09 and not Chapter 27.10 (the Revenue's classification). [Paras 26, 27, 28, 31, 37]

ARH C Oil is classifiable under CETH 27090000 as petroleum crude oil; the reclassification to CETH 27101990 is set aside.

Evidentiary value of chemical examiner's opinion versus laboratory test reports and cross-examination - testing reports and admissibility - role and limits of chemical examiner's opinion - Whether the Department could rely solely on the Chemical Examiner's later opinion to reclassify the product notwithstanding earlier laboratory test reports and the result of cross examination. - HELD THAT: - The Tribunal examined the sequence of test reports: the Regional Laboratory (Vadodara) initial test report (3 10 2006) and a later senior examiner's test report (28 9 2007) both described the sample as crude mineral hydrocarbon oil; an accredited private laboratory (Caleb Brett) also reported the sample as falling in the category of crude oil. The Department, however, issued notices relying on a subsequent clarificatory opinion by the Chemical Examiner (Mr. G.P. Sharma) who characterised the product as a derivative of crude. On remand the examiner was cross examined; his answers conceded that no fresh tests were conducted for the clarificatory opinion, that the dehydration/distillation of the small residue would not change the basic characteristics of crude, and he could not contradict the senior examiner's report. The Tribunal reiterated established propositions that the chemical examiner may give opinion on chemical nature but not determinatively classify goods, and that an adjudicating authority cannot ignore laboratory test reports and cross examination results in favour of the assessee and base reclassification solely on an unsupported opinion. Given the two laboratory reports and accredited laboratory opinion supporting classification as crude, and the contradictions exposed in cross examination, the Tribunal held the Department's reliance on the later opinion insufficient. [Paras 20, 21, 23, 24, 25]

The Department could not rely solely on the Chemical Examiner's clarificatory opinion to override multiple test reports and the cross examination record; the opinion did not justify reclassification.

Final Conclusion: The Tribunal allowed the appeal, held that ARH C Oil is crude petroleum oil classifiable under CETH 27090000, found that the Department's reclassification under CETH 27101990 based on a lone clarificatory opinion was unsustainable in view of the laboratory reports and cross examination, set aside the impugned order and allowed consequential relief.

Advertisement tax - advertisement - name board / signboard - commercial purpose / soliciting customers - municipal power to levy tax on advertisements - territorial jurisdiction for municipal tax - fundamental rights under Article 19(1)(a) and 19(1)(g) - Article 265 (taxes not to be imposed except by authority of law)

Precedential applicability - advertisement tax - Whether the High Court correctly relied on Bharti Airtel to dispose of the writ petitions. - HELD THAT: - The Court examined the scope of the coordinate-bench decision in Bharti Airtel and found that the lis in that case concerned whether a municipal corporation could appoint/empower an agent or contractor to collect advertisement tax. That issue is distinct from the question whether display of a trader's trade name or products on its own premises amounts to an "advertisement." Consequently, the principles in Bharti Airtel are inapplicable to the facts of these appeals and the impugned High Court orders cannot be sustained solely on that ground. [Paras 10]

Bharti Airtel was inapplicable and the High Court's reliance on it is not a sustainable basis for dismissing the petitions.

Advertisement - name board / signboard - commercial purpose / soliciting customers - municipal power to levy tax on advertisements - Article 19(1)(a) and 19(1)(g) - Article 265 (taxes not to be imposed except by authority of law) - Whether display of trade name and description of products on signboards at a business premises necessarily constitutes an "advertisement" liable to advertisement tax. - HELD THAT: - Applying authoritative dictionary meanings and this Court's precedents, an "advertisement" ordinarily denotes a public notice designed to draw attention with a commercial purpose or to solicit customers. A mere display of a trader's name and the goods or services available at the premises, serving primarily to identify the place of business, does not automatically partake the character of an advertisement unless it solicits or promotes the product or service with the object of attracting customers. The Municipal Corporation's power under the Act permits imposition of a tax on advertisements (other than those in newspapers), but legislative intent does not extend that power to every identification nameboard. If a display in substance solicits customers or promotes a product, it may be an advertisement; otherwise it is informational. Further, if such levy were to be held to extend beyond that meaning it could impinge Article 19(1)(a) and 19(1)(g) and Article 265. [Paras 15, 16, 17, 18]

Mere name/sign boards on a business premises generally convey information and do not, without more, amount to an "advertisement"; only displays that solicit or promote products/services fall within the taxable ambit.

Procedure for adjudication of tax demand - territorial jurisdiction for municipal tax - What remedial course should be followed in respect of the disputed advertisement-tax demands and the contention that some premises lay outside municipal limits? - HELD THAT: - The Court noted that appellants had filed objections to the demand notices but, rather than permitting the municipal authority to adjudicate those objections, approached the High Court prematurely. Given the unresolved factual and legal questions (including territorial jurisdiction of the Municipal Corporation for specified premises), the appropriate course is to require the Corporation to consider the objections afresh. The Court directed the Commissioner to examine the objections expeditiously within an outer limit and restrained enforcement of any adverse determination for a further period, preserving the appellants' rights to challenge any adverse order in accordance with law. [Paras 19]

The matters are remitted to the Municipal Corporation for fresh consideration of the appellants' objections within eight weeks; enforcement of any adverse determination stayed for a further eight weeks.

Final Conclusion: Bharti Airtel did not decide the central question here and was inapplicable; the Court held that a mere name or identification signboard on a business premises does not, without soliciting customers or promoting goods/services, amount to an "advertisement" liable to advertisement tax, but remitted the disputed demands (including the territorial-jurisdiction contention) to the Municipal Corporation for fresh, expeditious adjudication with limited interim protection to the appellants.

Offences under Section 138/141 of the Negotiable Instruments Act - vicarious liability of persons in charge of a company - requirement of specific averment regarding the role and responsibility - onus on complainant to plead responsibility of accused under Section 141(1) - due diligence defence and burden of proof on accused under the proviso to Section 141(1)

Offences under Section 138/141 of the Negotiable Instruments Act - requirement of specific averment regarding the role and responsibility - vicarious liability of persons in charge of a company - onus on complainant to plead responsibility of accused under Section 141(1) - Whether the written complaints in the two prosecution files sufficiently averred the petitioner's role and responsibility in the company so as to attract liability under Section 141(1) of the Negotiable Instruments Act. - HELD THAT: - The Court reviewed settled law that a complaint invoking liability under Section 141 must specifically aver how the accused was in charge of, and responsible for, the conduct of the company's business and the part played by the accused in the transaction. The statutory scheme places an initial pleading burden on the complainant to make specific allegations linking the person to the company's conduct; the proviso to Section 141(1) then casts on the accused the evidentiary burden to prove absence of knowledge or exercise of due diligence. The impugned complaints contained averments that the petitioner and others 'are working for gain' and 'are responsible for day to day affairs' of the company and alleged issuance and delivery of the cheques. The Court held that such averments are adequate at the threshold to disclose the petitioner's role for purposes of proceeding under Sections 138/141, having regard to the fact that detailed proof of the accused's precise role lies within the accused's special knowledge. [Paras 7, 9, 12, 13, 14]

The complaints contained sufficient specific averments to proceed against the petitioner under Section 141(1); the pleading burden on the complainant was satisfied.

Due diligence defence and burden of proof on accused under the proviso to Section 141(1) - vicarious liability of persons in charge of a company - Whether the petitioner discharged the evidentiary burden under the proviso to Section 141(1) by producing material to show the offence was committed without his knowledge or that he had exercised all due diligence. - HELD THAT: - The Court observed that while the proviso permits an accused to avoid liability by proving lack of knowledge or exercise of due diligence, the relevant facts are generally within the special knowledge of the accused and must be supported by 'sterling' or incontrovertible material. On the record, the petitioner failed to produce any such material or acceptable circumstances to rebut the presumption of liability. In absence of evidence satisfying the proviso, the petitioner's challenge to the complaints could not succeed. [Paras 15, 16, 17]

The petitioner did not meet the evidentiary burden under the proviso to Section 141(1); the revision petitions are dismissed.

Final Conclusion: The High Court held that the complaints adequately pleaded the petitioner's responsibility under Section 141(1) and that the petitioner failed to produce evidence to avail the proviso; both revision applications were dismissed and the criminal proceedings under Sections 138/141 were permitted to continue.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Vicarious liability under Section 141 of the Negotiable Instruments Act - Moratorium under Section 14 of the Insolvency and Bankruptcy Code and its non-application to natural persons - Stay of complaint proceedings under Section 210 of the Code of Criminal Procedure - Power to quash proceedings under Section 482 Cr.P.C.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Vicarious liability under Section 141 of the Negotiable Instruments Act - The complaint under Sections 138/141 NI Act against the directors could not be quashed as the complaint contains specific averments making the petitioners liable and the signatory director's liability is of higher stature. - HELD THAT: - The Court held that the complaint contains specific averments that the petitioners were in charge of and responsible for the day-to-day affairs of the accused company and that petitioner Ramji Sharma signed the cheque which was later dishonoured. Reliance was placed on settled principles that a complaint must be read as a whole and that vicarious liability under Section 141 may be fastened where the factual substratum is pleaded; further, where a director is the signatory to the cheque, liability under Section 141(2) is attracted even without separate averment of being in-charge. The petitioners have not denied issuance of the cheque or the signatures and have not placed incontrovertible material to show that proceeding would be an abuse of process. Applying these principles, the Court found that the ingredients as pleaded are sufficient to let the complaint proceed and thus quashing under Section 482 Cr.P.C. was not justified. [Paras 8, 18]

Proceedings under Sections 138/141 NI Act against the petitioners shall continue; the complaint is not liable to be quashed on the pleadings before the Court.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code and its non-application to natural persons - Vicarious liability under Section 141 of the Negotiable Instruments Act - Commencement of CIRP and moratorium under Section 14 IBC does not bar continuation of Section 138/141 proceedings against natural persons such as directors; moratorium applies to the corporate debtor. - HELD THAT: - Following the three-Judge bench rulings in P. Mohanraj and subsequent Supreme Court decisions, the Court reiterated that the moratorium under Section 14 IBC operates only in respect of the corporate debtor and interdicted continuation or initiation of proceedings against the corporate debtor during CIRP. However, the statutory scheme leaves natural persons mentioned in Section 141 liable to proceedings; accordingly, proceedings under Section 138/141 can be continued against directors/persons in-charge notwithstanding moratorium. In the present case the cheque was dishonoured before the NCLT order admitting CIRP, and in any event the moratorium does not shield the petitioners. [Paras 9, 12, 13]

Moratorium under Section 14 IBC does not entitle the petitioners (natural persons/directors) to quash or stay the Section 138/141 proceedings.

Stay of complaint proceedings under Section 210 of the Code of Criminal Procedure - Procedure when police investigation and complaint relate to the same offence - Section 210 Cr.P.C. does not require stay of the complaint proceedings in this case because the police FIR relied upon concerns different offences and is registered outside the territorial jurisdiction of the Trial Court; the essential requirement of 'same offence' and practicable joint trial/report under Section 173 is absent. - HELD THAT: - Section 210 mandates stay of complaint proceedings only where a police investigation is in progress in relation to the same offence; the Magistrate must call for the police report and, if a Section 173 report results in cognizance against any person accused in the complaint, try the matters together. The Trial Court's order (recorded in the impugned order) noted that the FIR lodged in Noida pertains to separate offences of cheating/forgery and does not mention the cheque in question, and that the FIR lies outside its territorial jurisdiction; hence the conditions for stay under Section 210 were not satisfied. The High Court agreed that the application under Section 210 had been rightly dismissed and that there was no merit in seeking stay on that ground. The Court left open the petitioners' right to place any material emerging from the FIR/investigation before the Trial Court during trial for consideration. [Paras 15, 16, 17]

The application for stay under Section 210 Cr.P.C. was correctly dismissed; no stay is warranted on the basis of the FIR relied upon by the petitioners.

Final Conclusion: The petitions under Section 482 Cr.P.C. seeking quashing of Complaint No. 4350/2018 (Sections 138/141 NI Act) are dismissed; the complaint shall proceed against the petitioners, and nothing in this order expresses any opinion on the merits of the case.