TMI Tax Updates e-Newsletter
Oct 28,2024

Cancellation of registration of petitioner - petitioner, on account of illness of his daughter, was unable to file the requisite returns - no opportunity of hearing was provided to the petitioner - violation of principles of natural justice - HELD THAT:- A look at the provisions of Section 30 of GST Act, 2017 reveals that proviso to sub-section (2) provides that the application for revocation of cancellation of registration shall not be rejected unless the applicant has been given an opportunity of being heard.

In the present case, no order has been passed by the respondents on the application seeking the revocation and in those circumstances, it would be required of the respondents to give an opportunity of hearing to the petitioner and pass an order on the pending application of the petitioner.

Petitioner would be free to file a fresh, detailed application if so advised. The requisite order would be passed within a period of three weeks from the date a copy of this order is placed by petitioner with the competent authority/a representation is filed by the petitioner, whichever is earlier - Petition disposed off.

Rejection of refund claim - lack of opportunity for a personal hearing as required by Rule 92(3) of the CGST Rules, 2017 - violation of principles of natural justice - HELD THAT:- The show causes issued to the Petitioner gave the Petitioner 15 days to respond. Accordingly, they did respond by 17 April 2024. Therefore, it is rather incomprehensible how a hearing was allegedly given on 8 April 2024. The Petitioner has denied that any hearing was ever given. The show cause notice had also stated that the date and time of the hearing would be intimated to the Petitioner. There is no clear evidence of such intimation. In any event, proviso to Rule 92 (3) of the CGST Rules, 2017, contemplates reasonable opportunity to be heard, implying that such hearing should be after the Petitioner files the reply within the time prescribed in the show cause notice.

The impugned refund rejection orders are in breach of the requirements of Rule 92 (3) of the CGST Rules, 2017 and the principles of natural justice and fair play.

The refund rejection orders dated 25 April 2024 are quashed and set aside - matter remanded to Respondent No.3 for fresh consideration of the Petitioner’s refund application dated 28 February 2024 - petition allowed by way of remand.

Dismissal of appeal preferred by the petitioner as being beyond limitation - no date of hearing was fixed nor any hearing granted to the petitioner prior to passing of an order under Section 73 of the State Goods & Service Tax Act - violation of principles of natural justice - HELD THAT:- Prima facie, from the said communication as well as the from the impugned order, it is evident that no hearing was accorded to the petitioner prior to passing of an order under Section 73 of the State Goods & Service Tax Act, which is a clear violation of Section 75(4) of the GST Act and also in violation of the principle of nature justice. Thus on the said limited ground, both the impugned orders are quashed and the matter is remanded to the Assessing Authority to pass a fresh order after giving opportunity of hearing to the petitioner in accordance with law.

Petition disposed off by way of remand.

Maintainability of petition - availability of alternative remedy - Suspension of GST registration of the petitioner - consent letter/NOC from the land owner had not been produced - It is the submission of the petitioner that the provisions governing the GST registration, nowhere requires for providing NOC more than once before the authorities.

Maintainability of petition - availability of alternative remedy - HELD THAT:- The respondent has issued a show cause notice and at the same time suspended the GST registration which results immediately stopping the business of the petitioner - The Three Judges Bench of the Supreme Court in the case of PHR INVENT EDUCATIONAL SOCIETY VERSUS UCO BANK AND OTHERS [2024 (4) TMI 466 - SUPREME COURT (LB)], while considering the maintainability of the writ petition on the basis of there being statutory alternate remedy has held that the writ petition is maintainable.

Suspension of registration - HELD THAT:- The petitioner was granted GST registration on 11.07.2017 and amended registration order was also passed on 10.02.2019. Thus, from 2019 onwards the petitioner has been operating his business from the principal place of business as well as from additional place of business. It is now only when some dispute has arisen between the landlord and the petitioner in December 2023 after about 4 years, the respondent has now issued the impugned letter on 20.05.2024 seeking initiation of cancellation proceedings and order has been passed on 10.07.2024 whereby the suspension of GST registration has been issued on the ground mentioning others - at the stage of amending the registration, certificate of registration and for incorporating additional place of business, no proof or consent letter or NOC from the property owner is required to be produced.

It is only for the purpose of issuing the registration certificate for the principal place of business that the NOC or consent letter from the property owner along with proof of address is required to be produced. Once the same has been done and the registration certificate has been issued, merely for adding another place of business there is no requirement under Rule 19 of the GST Rules. Rule 8 of the GST Rules cannot be read contrary to Rule 19 of the GST Rules - the petitioner is not said to have violated the GST provisions and is duly depositing his taxes. The grounds for cancellation cannot be added into the provisions of Section 29 (2) of the GST Act as there is no inclusive clause to Section 29 (2) of the GST Act.

There has been a complete non-application of mind while issuing order-cum-show cause notice dated 10.07.2024. The suspension of GST registration has been done for the entire places of business while the NOC demanded was only with respect to the additional place of business. As it is held that even for additional place of business NOC could not have been asked for by the respondents and the same cannot be a ground for suspension/ cancellation of GST registration, therefore, the order dated 10.07.2024 cannot be allowed to be sustained.

The order-cum-show cause notice dated 10.07.2024 passed by the respondents is quashed and set aside. The GST registration is restored. The petitioner shall be allowed to continue operate his business - petition allowed.

Service of SCN - SCN issued u/s 73 of GST Act were uploaded on 'Additional Notices and Orders' Tab of the G.S.T. Portal - Principles of natural justice - HELD THAT:- In the case of OLA FLEET TECHNOLOGIES PRIVATE LIMITED VERSUS STATE OF UP AND 2 OTHERS [2024 (7) TMI 1543 - ALLAHABAD HIGH COURT] a co-oridiante Bench of this Court inter alia observed and held that 'No material exist to reject the contention being advanced that the impugned order was not reflecting under the tab "view notices and orders". On merits, as noted in the earlier orders an other dispute exists whether all replies and annexures to the replies as filed by the assessee were displayed to the assessing officer and whether those have been considered. We find, no useful purpose may be served for keeping this petition pending or calling for a counter affidavit or even relegating the petitioner to the available statutory remedy.'

In view of the submissions made and the judgement in the case of Ola Fleet Technologies Pvt. Ltd the writ petition filed by the petitioner is allowed. The orders impugned dated 27.4.2024 and 30.4.2024 passed by the Deputy Commissioner, State Tax, Kanpur (annexure 1 and 2 to the writ petition) are quashed and set aside - petition allowed.

Cancellation of GST Registration of the petitioner - non filing of returns and non payment of taxes - HELD THAT:- In view of the fact that the petitioner company had to undergo the CIRP process under the Insolvency and Penalty Code, certain leeway would have to be granted to the petitioner to bring its business back on the rails.

The petitioner shall file an application for revocation of the cancellation of the registration of the petitioner on or before 05.11.2024 - This application for revocation shall be accompanied by the draft returns which the petitioner proposes to file in the event of the registration of the petitioner being restored - In view of the fact that the petitioner company had to undergo the CIRP process under the Insolvency and Penalty Code, certain leeway would have to be granted to the petitioner to bring its business back on the rails. In view of the special circumstances, this Writ Petition is disposed of subject to fulfilment of conditions imposed.

Cancellation of registration of the petitioner - non filing of the GST return for a continuous period of six months - HELD THAT:- The matter is covered by the order passed in KIRAN ENTERPRISES GSTIN VERSUS COMMISSIONER, STATE GOODS & ANOTHER [2024 (10) TMI 1306 - UTTARAKHAND HIGH COURT], the present writ petition is also decided in terms of the said order. The petitioner shall be at liberty to move an application for revocation or cancellation of the order under Section 30(2) of the CGST Act, 2017, within two weeks.

With this application, the petitioner shall also furnish all the GST returns, which he fails to submit and he will also deposit the outstanding dues of tax, interest and penalty of the goods and service tax with his application. If he makes such an application within stipulated period, the Competent Authority shall consider petitioner’s application and pass appropriate order as per law, within four weeks thereafter.

Petition disposed off.

Availment of Input Tax Credit (ITC) in respect of the IGST paid on manpower supply services received by the Petitioner - IGST on the External Commercial Borrowings (ECB) received from VTAL - exemption provided under of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 - HELD THAT:- The issue regarding admissibility of input tax credit by invoking Section 16(4) is covered by the Judgment of this Hon’ble Court in the cases of Bosch [2024 (9) TMI 496 - KARNATAKA HIGH COURT] and M/S. MUSASHI AUTO PARTS INDIA PVT. LTD. VERSUS STATE OF KARNATAKA BENGALURU, DEPUTY COMMISSIONER OF COMMERCIAL TAXES, BENGALURU [2024 (7) TMI 1545 - KARNATAKA HIGH COURT] read with Circular No. 211/5/2024-GST dated 26/6/2024.

In regard to the second demand Circular No. 218/5/2024- GST dated 26/6/2024 and the decision of this Hon’ble Court in the case of AO Smith India Water Products Pvt. Ltd, [2024 (8) TMI 1453 - KARNATAKA HIGH COURT] are applicable. The authorities are directed to consider the same including the applicability of Section 128A & Section 13(3)(c) as regards demand of interest on the aforesaid amounts.

It is deemed just and appropriate to dispose of this petition by issuing certain directions - Petition is hereby disposed of.

Challenge to SCN demanding input tax credit availed by the Petitioner - IGST paid on manpower supply services received by the petitioner - erroneous invocation of Section 74 of the CGST Act, 2017 / KGST Act, 2017 - HELD THAT:- A perusal of the material on record and the submissions made by both sides will clearly indicate that prior to issuance of the impugned Show Cause Notice dated 28.09.2023 at Annexure — A, the State GST Authorities had already initiated proceedings as against the petitioner proposing to demand IGST and consequently, in light of Section 6(2)(b) of the CGST Act, 2017, which contemplates a complete bar / embargo on the Central GST Authorities to initiate proceedings in a situation where the State GST Authorities had already initiate proceedings as against the petitioner on the same subject matter, the impugned Show Cause Notice at Annexure — A to extent of demand of IGST of Rs.1,68,04,057/- along with interest in the light of Section 6(2)(b) of the CGST Act, 2017 deserves to be quashed.

Denial of input tax credit on the alleged violation of Section 16(4) of the CGST Act, 2017 - HELD THAT:- The issue is covered by the judgment of this Court in the case of Bosch Limited Vs. State of Karnataka and others [2024 (9) TMI 496 - KARNATAKA HIGH COURT] and M/S. MUSASHI AUTO PARTS INDIA PVT. LTD. VERSUS STATE OF KARNATAKA BENGALURU, DEPUTY COMMISSIONER OF COMMERCIAL TAXES, BENGALURU [2024 (7) TMI 1545 - KARNATAKA HIGH COURT] and the Circular No. 211/5/2024-GST dated 26.06.2024 issued by the Central Board of Indirect Taxes and Customs, New Delhi. The input tax credit has been validly availed.

It is deemed just and appropriate to dispose of this petition by issuing certain directions - the impugned Show Cause Notice at Annexure — A dated 28.09.2023 issued by the Respondent No. 3 to the extent of demand of IGST of Rs.1,68,04,057/- along with interest in terms of Section 6(2)(b) of the CGST Act, 2017 is hereby quashed - petition disposed off.

Initiation of two parallel proceedings in respect of the same assessment period - mismatch between the petitioner's GSTR 3B returns and the auto-populated GSTR 2A - HELD THAT:- On perusal of the impugned order, it is evident that the tax proposal relating to a mismatch between the petitioner's GSTR 3B returns and the auto-populated GSTR 2A was confirmed solely on the ground that the tax payer did not reply to the show cause notice. The admitted position is that a sum of Rs. 3,17,300/- was appropriated from the petitioner's bank account. This amount represents more than 10% of the disputed tax demand in respect of assessments forming the subject of this writ petition and W.P.No.18424 of 2024. In these circumstances, reconsideration is necessary.

The impugned order dated 26.12.2023 is set aside and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice within 15 days from the date of receipt of a copy of this order by raising all contentions - Petition disposed off by way of remand.

Excess refund - petitioner asserts that he was unaware of proceedings culminating in the impugned order - violation pf principles of natural justice - HELD THAT:- On perusal of orders impugned herein, it is clear that the petitioner did not participate in proceedings. Such non participation was a consequence of not monitoring the GST portal and responding to notices. In these circumstances, it is just and appropriate to provide an opportunity to the petitioner, albeit by putting the petitioner on terms.

Therefore, solely with a view to provide an opportunity to the petitioner, the orders impugned herein are set aside and these matters are remanded for reconsideration subject to the condition that the petitioner remits 10% of the disputed tax demand in respect of each relevant month with in two weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit a reply to the respective show cause notice with in the aforesaid period.

Petition disposed off.

Cancellation of GST registration of petitioner - petitioner had not filed GST monthly returns for a continuous period of six months - HELD THAT:- The reason set out in the order of cancellation is non filing of returns for a continuous period of six months. In Suguna Cutpiece, this Court directed restoration of GST registration subject to several terms and conditions. The said judgment was followed thereafter in many cases. In order to maintain consistency, the said judgment is followed.

The petitioner is directed to file her returns for the period prior to the cancellation of registration, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of forty five (45) days from the date of receipt of a copy of this order - petition disposed off.

Rectification of mistake - error apparent on the face of assessment order - HELD THAT:- This writ petition stands disposed of directing opposite party no.3 to take a decision on the application dated 23.01.2024 under Annexure-2 and make necessary correction in the order dated 28.12.2023, which is apparent on the face of the assessment order.

Seeking grant of anticipatory bail - availing fraudulent Input Tax Credit and passing of Input Tax Credit without actual supply of goods - HELD THAT:- On a perusal of the judgment of the Delhi High Court in Tarun Jain v. Directorate General of GST Intelligence DGGI [2021 (12) TMI 135 - DELHI HIGH COURT], it considered the provisions of the CST Act, the powers of inspection, seizure and arrest prescribed under Chapter XIV of the Act, the provisions under Section 69 and 132 of the CGST Act and the judgment in P.V. Ramana Reddy vs. Union of India [2019 (4) TMI 1320 - TELANGANA AND ANDHRA PRADESH HIGH COURT] of this Court and the judgments in SHRAVAN A. MEHRA AND ORS. VERSUS SUPERINTENDENT OF CENTRAL TAX, ANTI-EVASION, GST COMMISSIONERATE [2019 (2) TMI 2114 - KARNATAKA HIGH COURT] and of the Delhi High Court itself in Raghav Agrawal v. Commissioner of Central Tax and GST Delhi North [2020 (12) TMI 940 - DELHI HIGH COURT] and of the Bombay High Court in Sapna Jain vs. Union of India [2019 (5) TMI 1610 - BOMBAY HIGH COURT], which was challenged before the Hon'ble Apex Court and the Hon'ble Apex Court without interfering into the order tagged it to be listed before the 3-Judge Bench in the case of Union of India v. Sapna Jain [2019 (6) TMI 58 - SC ORDER] and the said matter was pending till date, it observed that the question regarding anticipatory bail while dealing with offences under CGST was yet unsettled and as such decided the matter by exercising its own discretion.

As the facts of this case are also similar to the facts of the above case, which were pertaining to fraudulently availing input tax credit, extending to more than Rupees Five Hundred Lakhs under Section 132 of the TGST Act, 2017 and the petitioners are also apprehending their arrest, it is considered fit to grant anticipatory bail to the petitioners on the fulfilment of terms and conditions imposed - bail application allowed.

Maintainability of appeal - Time limit for passing order u/s 101 of CGST Act, 2017 - appeal barred by limitation or not - failure to follow due procedure - Appellant No. 1 is Proper Authority to file an appeal - Appellant No. 2 is revisiting the stand already taken - Valuation of GTA service - inclusion of value of diesel provided by the customer (service recipient) to the trucks in the freight charged by the Applicant -

Whether time limit for passing order u/s 101 of CGST Act, 2017 stands expired? - HELD THAT:- In the instant case, the intention of the law according to the subsection 2 of the Section 101 of the CGST Act 2017 is to accord a right to the appellant to be heard and to obtain a ruling in respect of the appeal filed within a set time frame. If, the meaning of ‘shall’ is to be taken in a binding or restrictive manner then upon expiry of 90 days, the order cannot be passed by the Appellate Authority, depriving the appellant of the right of getting the order issued in their appeal - the word ‘shall’ in Section 101 of the CGST Act has to be interpreted in an advisory way. Any other interpretation shall have the effect of denying the right of appeal to taxpayers & stake holders which is not the scheme/intention of law. It will be interpreted to convey that the AAAR shall endeavour to pass the order in 90 days. Therefore, the argument of expiry of time limit for passing an order is hereby rejected as a preliminary objection as well as an objection to the grounds of appeal.

Whether the appeal is barred by limitation? - HELD THAT:- The impugned Order was communicated on 15.09.2022 to the Appellant No. 2 and an appeal was filed by them on 14.10.2022 that was within statutory period of 30 days, accordingly, the appeal was filed within time prescribed, hence not time barred - the appeals filed by the Appellants are well within the period of limitation are not barred by it as provided under proviso to Section 100 (2) or Section 100 (2) of the CGST Act, 2017 - the preliminary objection to this effect raised by the Respondent is liable for rejection and is hereby rejected.

Whether due procedure not followed? - HELD THAT:- In view of the express provisions of Rule 107A of the CGST Rules, 2017 manual filing of appeals by the Appellants is in consonance with the legal provisions and, therefore, the preliminary objection raised by the Respondent on this count is liable to be rejected and the same is hereby rejected.

Whether Appellant No. 1 is Proper Authority to file an appeal or not? - HELD THAT:- The term ‘concerned officer’ and ‘jurisdictional officer’ are two different officers distinct from each other. Further, since there are only two officers, one from the Central GST and the other from the State GST, exercising territorial jurisdiction over a taxable person it logically follows that both are entitled to file an appeal against the Advance Ruling pronounced in respect of that taxable person. Thus, the appeal filed by the Central GST authority is well within the scope of Section 100 (1) of the CGST Act, 2017.

Whether Appellant No. 2 is revisiting the stand already taken? - HELD THAT:- The Appellant has revisited the stand taken before the AAR, we note that the Joint Commissioner, State Tax, Suratgarh vide letter dated 08.05.2024 furnished additional submissions in continuation of those made during the Personal Hearing held on 07.05.2024. It is noted that during the course of hearing, representative of the respondent has raised a contention that the appellant (Deputy Commissioner, SGST, Circle Suratgarh) cannot revisit the stand taken before the AAR to the effect that GST is not leviable on free of cost (FOC) materials supplied by service recipient to applicant when such goods are in the scope of service recipient as per contractual terms.

In the instant case, it is observed that Appellant No. 2 filed the appeal proceedings after consideration of the matter by higher authority in the State Tax department, whereas their initial stance was at their own accord sans proper approval from the higher authority. Consequently, we find that an appeal cannot be deemed non-maintainable merely because it contradicts the earlier stance taken by the appellant, under mistaken belief about the jurisdiction and authority. Thus, Appellant No. 2 has rightfully filed the appeal, rendering the issue of revisiting the previously taken stand as incorrect & improper.

The principle of estoppel cannot be made applicable in the instant case. The preliminary objection on this count is, therefore, liable to be rejected and the same is hereby rejected.

The preliminary objections raised by the Respondent against the appeals filed by the department against the Advance Ruling dated 16.06.2022 are not sustainable and the appeals are maintainable and deserve to be decided on merits.

Maintainability of advance ruling application - Admissibility of input tax credit - tax paid or deemed to have been paid on construction materials used in the construction of Marriage & Convention hall - tax paid on inward supplies of D.G. Sets, Air Conditioners, Furnitures, Chairs etc., used in the course of business of letting out of Marriage / Convention halls - HELD THAT:- The first proviso to Section 98(2) stipulates that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the CGST Act 2017. In the instant case the questions, on which the applicant seeks advance ruling, are already pending in the proceedings of show cause notice under the provisions of the CGST / KGST Act 2017. Thus the instant application is liable for rejection in terms of first proviso to Section 98(2) of the CGST/KGST Act 2017.

The application filed by the Applicant for advance ruling is rejected, in terms of first proviso of section 98(2) of the CGST Act 2017.

Classification of supply - GST Rate - supply of affordable and non-affordable apartments under REP - Supply of Affordable residential apartments and residential apartments under REP conjointly - supply of Construction of a complex, building, civil structure or a part thereof, including, commercial apartments (shops, offices, godowns etc.) by a promoter in a RFP other than RREP - Eligibility of Input Tax Credit which will be used in the course of business or for furtherance of business for Construction of Commercial apartments in a Real Estate Project (REP).

GST Rate on supply of affordable and non-affordable apartments under REP - HELD THAT:- The services of construction of affordable and other than affordable apartments under REP provided by the applicant fall within the description of services specified in serial no. (ic), (id) and (if) of Notification No. 3/2019-Central Tax (Rate), dated 293-2019 and accordingly the tax rates as prescribed in the said entries shall be applicable to the said services supplied by the applicant. Accordingly, the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments as per entry at item No. (ic), at the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at item No. (id) and at the rate Of 18% in respect of the services of construction of complex, building, civil structure or a part including commercial apartments (shops, offices, godowns etc,) as per entry at item No. (if) of Notification No. 3/2019-CentraI Tax (Rate), dated 29-3-2019 subject to the conditions prescribed under the respective entries.

Whether taxpayer can supply of Affordable residential apartments and residential apartments under REP conjointly? - HELD THAT:- The services provided by taxpayer is clearly fall under notification No. 03/2019-CT (rate) dated 29th March, 2019 - the notification bifurcates affordable and non-affordable apartments by area and gross amount charge for the apartment. There appears no bar for a promoter to supply affordable residential apartments and residential apartments conjointly. The only thing is that the taxpayer has to pay the tax according to the size and gross amount charge for the apartment subject to the condition mentioned in the Notification No. 03/2019-CT(Rate) dated 29th March 2019.

GST Rate on supply of Construction of a complex, building civil structure or a part thereof, including, commercial apartments (shops, offices, godowns etc.) by a promoter in a REP other than RREP - HELD THAT:- The applicant is liable to pay GST at the rate of 18% in respect of the services of construction of complex, building, civil structure or a part including commercial apartments (shops, offices, godowns etc.) as per entry at Item No. (if) of Notification No. 3/2019-CentraI Tax (Rate), dated 29-3-2019 subject to the conditions prescribed under the said entry.

Eligibility of input tax credit which will be used in the course of business or for furtherance of business for Construction of Commercial apartments in a Real Estate Project (REP) - HELD THAT:- ITC is restricted in case of construction undertaken on his own account. Clause (d) restricts input tax credit of goods and services used by a person for construction of immovable property (except plant and machinery) on his own account. Thus, if a person purchases construction material and engages a labour contractor to provide the construction services using the purchased material, ITC shall not be available of both the goods purchase and the services of the labour contractor procured - Section 16 of CGST Act, 2017 defines the eligibility and conditions for taking input tax credit wherein section 17 of CGST Act,2017 deals in apportionment of credit and blocked credits hence these sections must be treated simultaneously. Thus, input tax credit is not available for construction of immovable property on its own account even if inputs and input services are used in course or furtherance of business.

Validity of assessment order passed u/s 143(3) r.w.s. 144B - disallowance u/s 40(a)(ia) - no notice of an intent of the AO to reject the books of account and to make additions referable to section 40(a)(ia) - As decided by HC [2024 (5) TMI 1480 - DELHI HIGH COURT] from show-cause notice, AO had in clear and unequivocal terms placed the petitioner- assessee on notice with respect to the doubts harboured by it relating to the correctness and completeness of the accounts of the assessee.

AO had further observed that since the expenditure claimed is not verifiable, income was proposed to be assessed at 12 per cent. of the total disclosed revenue after rejecting the books of account. And no specific disallowance u/s 40(a)(ia) has been made nor have any additions consequentially factored in.

HELD THAT:- We are not inclined to interfere with the impugned judgment and, hence, the special leave petition is dismissed.

We clarify that in the event the petitioner files a statutory appeal, the appellate forum, that is, the Commissioner of Income Tax (Appeals), shall examine all issue and contentions on merits without being influenced by any of the observations made by the High Court.

Revision u/s 263 - TDS u/s 195 - disallowance of expenditure u/s 40(a)(ia) - HC [2022 (11) TMI 1526 - ORISSA HIGH COURT] held that conclusion reached by the ITAT that the CIT could not have unilaterally directed the AO to add back the aforementioned sum by holding that it was disallowable as expenditure could not have been issued u/s 263 of the Act without the AO again examining the issue. To that extent, the said direction was indeed beyond the jurisdiction of the CIT u/s 263 - HELD THAT:- We have heard learned senior counsel for the petitioner and for the respondent/Assessee. We are not inclined to interfere in the matter.

Special Leave Petition is hence dismissed. Pending application(s) shall stand disposed of.

Assessment u/s 153A - incriminating material" found in search or not? - addition made as entire payment through paper/ shell companies for purchase of land measuring 430 acres at Manger, Gurugram and it was assessee who is the ultimate beneficiary of such transactions - as per ITAT additions could not have been made in the hands of the assessee, as such additions had already been made in the hands of bogus entry provider [M/s Peakwood Reality Private Limited] -

Whether warrants of authorization issued u/s 132? - HELD THAT:- The original file containing satisfaction note for issue of consequential warrant of authorization and the satisfaction note prepared after search was also perused. It is noticed that there were two warrants of authorization issued u/s 132 by the Principal Director of Income Tax (Inv.), Chandigarh. The name of the firm assessee is mentioned in the warrants at (Global 3rd Floor) 106-A, Tower-1, DLF Aralias, DLF Golflinks, Gurugram, which is not the registered office of the assessee.

The other warrant which does not contain name of the assessee but contains name of M/s M3M India Holdings Private Limited and registered office of the assessee i.e. C-13, Sushant Lok, Phase-1, Gurgaon. However, the name of the partners of the firm are mentioned. We find ourselves in agreement with learned counsel for the Revenue that mentioning M/s M3M India Holdings Private Limited for the addressee C13, Sushant Lok, Phase-1, Gurgaon would not be a reason to hold that no search operation was conducted at the premises of the assessee because even if the name of other private limited company is mentioned in the warrant, the fact remains that the registered address of the respondent firm was searched and the names of their partners were mentioned. The findings of the ITAT that there was no search conducted at the premises of the respondent-firm is, therefore, found to be erroneous and perverse.

Further contention of the appellant with regard to assertion of incriminating material being found in the premises of the respondent, however, is without any basis. We have carefully gone through the Satisfaction Report and found that only incriminating material which has been made the basis for initiating proceedings u/s 153-A of the Act is the so called laptop of one Bina Shah recovered from Mumbai. We also noticed that recovery of the said Laptop is not from the office belonging to the assessee.

The search operation in which the laptop was recovered was of different firm and it was not during the course of search operation conducted against the respondent-firm or its partners that incriminating material was recovered. If there was any indication of violation of provisions of the Act or suppression of income or any other incriminating material, which may have been recovered from the premises, the proceedings u/s 153-A of the Act can be said to be justified and legal. However, since no such material was collected or found from the premises of the respondent-assessee, we are unable to sustain the proceedings initiated u/s 153-A of the Act.

Substantial question of law to be examined by this Court. All the pleas raised are purely factual.

Faceless assessment of income escaping assessment - assessment order was made u/s 143 (3) r.w.s. 260 - as argued assessment order made manually under provisions in section 143 (3) though the assessment was to be done in a faceless manner as per scheme notified on 29th March, 2022 - HELD THAT:- Petitioner seeks interference on strength of notification dated 29th March, 2022. The notification says, it was made in exercise of powers conferred by sub-sections (1) and (2) of section 151-A. The section provides for faceless assessment of income escaping assessment. Accordingly, scope of the scheme, under section 3 thereof is, inter alia, assessment, reassessment or re-computation under section 147. We find from assessment order dated 31st July, 2024, it was made under section 143 (3) read with section 260, pertaining to assessment year, 2021-22. The scheme has no application to the assessment.

Violation of principles of natural justice - Section 144-B appears to be a complete code providing for faceless assessment. We have already noted before that impugned assessment order was made under section 143 (3) read with section 260. Sub-section (1) in section 144-B (1), without the clauses thereunder.

It is clear that the Assessing Officer (AO) found purchases made from suppliers were doubtful. Questions of fact will arise in event petitioner’s contentions are to be gone into. As such, even otherwise we are not inclined to interfere.

Writ petition is dismissed.

Seeking release of cash seized illegally - scope of second proviso to Section 132B - amount was seized by the respondent from the bank locker belonging to the petitioners - mandate to return the assets to the assessee - HELD THAT:- Once AO has arrived at a satisfaction with regard to the existing liability and with regard to the return of the assets, then the second proviso would apply and the assets or part of the assets as the case may be shall be released within a period of 120 days. Thus, the second proviso is mandatory and the same would come into play only after the satisfaction of the AO and the determination by him and after approval of the appropriate authorities.

In the present case in hand, the application was filed within thirty days before the AO, but the AO has not passed any order with regard to the liability or with regard to the return of the assets. Thus, the second proviso would not come into play. The first proviso does not give any time line and the second proviso is applicable only when there is an assessment by the AO.

As far as factual aspects of the case are concerned, it is not disputed that the seizure was made on 21.09.2023 and an application for release of the cash seized from the lockers of the petitioners was made on 09.10.2023 and 06.11.2023, which have not been decided by the respondent. Thereafter, prior to the seizure by the respondent, the petitioners vide letters dated 17.01.2023 & 23.08.2023 had disclosed that their bank lockers were having cash to the tune of around Rs. 37 lac.

We are of the considered view that second proviso to Section 132B would apply only after the AOhas determined the liability and has come to the conclusion that the nature and source of acquisiton has been explained by the person concerned. In the present case, since the AO has not decided the application, the second proviso to Section 132B would not come into play.The second proviso is mandatory, however, this will come into play only when the AO has determined the liability. The purpose behind the proviso was that after determination of the liability, the assets and goods should not be retained by the department.

We are of the considered view that the judgment of the Allahabad High Court in Dipak Kumar Agarwal [2024 (3) TMI 1081 - ALLAHABAD HIGH COURT] has dealt with Section 132B(4)(a) & (b) of the Act and has rightly come to the conclusion that the second proviso to Section 132B of the Act does not contemplate automatic release on expiry of 120 days.

The prayer of the petitioners for refund of the amount cannot be granted. However, since cash has been recovered from Bank locker and even prior to recovery, petitioners have informed the income tax authorities about cash lying in locker, we deem it proper to direct the authorities to decide the application of the petitioners within four weeks from the date of receipt of this order by a reasoned and speaking order after hearing the petitioners. It goes without saying that if the petitioners are able to satisfy their source, the amount has to be refunded with interest as provided under Section 132B(4)(a)& (b) of the Act.

Reopening of assessment u/s 147 - notice was not received by the petitioner and the petitioner was not provided sufficient and reasonable opportunity to submit his response/reply along with the documents to the aforesaid notice u/s 148A(b) - HELD THAT:- A perusal of the impugned order indicates that except stating that the notice u/s 148A(b) had been issued, the respondents has neither stated nor given the details/particulars regarding service of notice upon the petitioner nor any opportunity has been provided to the petitioner to submit his response/reply to the said notice.

Under these circumstances coupled with the specific assertion on the part of the petitioner that his inability and omission to submit his reply to the notice under Section 148A(b) was due to bona fide reasons, unavoidable circumstances and sufficient cause, adopting a justice oriented approach, we deem it just and appropriate to set aside the impugned order and remit the matter back to the respondents for reconsideration afresh in accordance with law from the stage of notice u/s 142A(b) of the IT Act.

The matter is remitted back to the respondents for reconsideration afresh in accordance with law from the stage of issuance of notice u/s 148 A(b).

Penalty u/s 271AAC(1) - no notice u/s 142[1] issued - HELD THAT:- Notice u/s 142[1] of the Act was issued to the petitioner, the first respondent has not stated as to when the said notice was delivered/served upon the petitioner.

The impugned notice, proceedings culminating in the impugned order cannot be said to have been done after providing sufficient and reasonable opportunity to the petitioner thereby violating principles of natural justice and consequently the impugned order deserves to be set aside by adopting justice oriented approach and to provide one more opportunity to the petitioner to submit his reply to the said notice u/s 142 of the Act and with the direction to the respondents to proceed further in accordance with law.

It is to be stated that since indulgence is being shown in favour of the petitioner after a lapse of almost four years from the date of the impugned order, in the event, the first respondent passes an order against the petitioner after remand by virtue of this order, the first respondent would be entitled to claim interest on the amount in terms of the Notice of Demand.

Imposition of penalty on the Appellant under Section 112 (a) of the Customs Act, 1962 - cryptic and non-speaking order - Non-consideration of any of the submissions of the Appellant - violation of principles of natural justice - it was held by High Court that 'The finding arrived at by the Commissioner as well as the Tribunal was on facts that appellant had abetted evasion of duty' - HELD THAT:- It is not required to interfere with the impugned order passed by the High Court.

Accordingly, the Special Leave Petitions are dismissed.

Restoration of import policy of newsprint - it is submitted that if the earlier policy is to prevail, they may not have any objection for the disposal of the Special Leave Petition - HELD THAT:- The Special Leave Petition stands disposed of, as the petitioner has now decided to discontinue the Notification No. 9 dated 03.06.2016 which, in any case, has also been quashed by the High Court and to restore the import policy of newsprint which prevailed prior to 03.06.2016. In other words, the petitioners are not pressing this Special Leave Petition.

SLP disposed off.

Obscene art materials - prohinition on import and confiscation of seven drawings by world-renowned artists, Mr. F N Souza and Mr. Akbar Padamsee - entire case is based on N/N. 1/1964-Customs dated 18 January 1964, issued under Section 11 of the Customs Act, 1962, and it is contended that since such artworks constitute obscene drawings, paintings or representations, importing such artworks is prohibited - HELD THAT:- The views of the writer of a play, the metre of a poet or the sketches of a cartoonist may not be palatable to those who are criticised. Those who disagree have a simple expedient of not watching a film, not turning the pages of the book, or not hearing what is not music to their ears. The Constitution does not permit those in authority who disagree to crush the freedom of others to believe, think and express. The ability to communicate “ideas” is a legitimate area of human endeavour and is not controlled by the acceptability of the views to those to whom they are addressed. When the ability to portray art in any form is subject to extra-constitutional authority, there is a grave danger that a cloud of opacity and arbitrary State behaviour will imperil fundamental human freedoms.

The danger of vesting Customs authorities to decide on obscenity issues was evident about two years ago when the Customs Authorities confiscated and ordered the destruction of Wave Body Massagers by invoking the same Notification No. 1/1964-Customs dated 18 January 1964. The concerned Commissioner reasoned that this Wave Body Massager was “an obscene object because it had the potential to be used as an adult sex toy”. The CESTAT, by its detailed judgment and order dated 11 May 2023 penned by C J Mathew, roundly criticised the Customs Authorities for such a perverse approach. This decision discusses admirably the legal position about obscenity and the power of the Customs Commissioners to determine the same.

The impugned order in the present case ignores most relevant considerations like expert opinions, appeals from experts, artistic value, contemporary community standards, and several legal precedents on the subject. The impugned order is based mainly on irrelevant considerations like the ACC’s individualised standards of morality and decency, his personal opinions and prejudices on the topic of obscenity, the fact that the Petitioner had declared that the goods were “nude paintings”, and some of the artworks depicted sexual intercourse poses. The ACC has brushed aside several legal precedents by trying to distinguish them on frivolous or even jejune grounds. The circumstance that similar artworks are available in the domestic market or displayed in prestigious art galleries nationally and internationally was entirely ignored. The reasoning in the impugned order is quite perverse.

The alternate remedy in the facts of this gross case would not amount to an efficacious remedy for yet another reason. The SCN issued by the ACC, in this case, had required the Petitioner to show cause as to why the works of art by Akbar Padamsee and F N Souza should not be destroyed upon confiscation. Although, the impugned order is unclear on the destruction of these works of art. Still, considering the severe observations made by the ACC, we are not sure whether the ACC might destroy these works of art if the Petitioner were to be relegated to resort to the alternate remedy of departmental appeals, etc. In such circumstances, requiring the petitioner to go through the regular channels of appeals and second appeals is not quite appealing.

Equally unappealing is the argument that the Petitioner applied for re-export when confronted with a customs official who treated not just to confiscate but to destroy the artworks of the world-renowned artists. Discretion was perhaps thought the better part of valour by way of an offer to at least allow re-export. To deny the petitioner relief on such grounds would be a travesty of justice.

The impugned order is set aside - petition allowed.

Challenge to holding/impounding/detaining of the rubber process oil stated to have been imported by the petitioner - seeking direction to the respondents to release the said goods and also to pay the compensation - Hazardous Waste or not - HELD THAT:- The record produced by Mr. Vaibhav Sharma, Appraiser, ICT Import, Customs Department, who brought the relevant record reflects that the sample was only tested by Mr. Arun Kumar Maurya, Chemical Examiner GR-2, from the office of the Regional Revenues Control Laboratory, New Delhi-110012, controlled by the Department of Revenue, Ministry of Finance, Government of India but it does not reflect that the said Chemical Examiner GR-2 was recognised in terms of Circular dated 23.02.2009. It is also not reflecting that the test report dated 31.12.2014 was ever supplied to the petitioner. Although, Mr. Harpreet Singh argued whether the information was given to the CHA of the petitioner, who intends to inform about the test report to the petitioner.

It is appearing from the averments made in the petition that the CHA was informed about the test report but it is not reflecting that the test report dated 31.12.2014 was actually supplied to the petitioner to oppose the detention /unclearing of goods i.e. rubber process oil which was not done in accordance with the rules and regulations.

Petition allowed.

Provisional attachment of bank accounts of the Petitioners - Section 110 (5) of the Customs Act, 1962 - HELD THAT:- In similar circumstances, this Hon'ble Court in Bharat F. Parmar, Karta of M/s. Kaka Gold vs. Union of India and Ors.[2023 (11) TMI 271 - BOMBAY HIGH COURT], where the value of the alleged purchases were Rs.22 crore. Considering the duty at the rate of 10%, the duty was roughly estimated at Rs.2 crores in paragraph 8. Subsequently, the Hon'ble Court gave directions on page 5, below paragraph 9. The party therein was, inter alia, asked to keep a sum of Rs. 1.5 crores in fixed deposit and mark a lien in favour of the Revenue. The parties have pleaded that similar conditions may be imposed in the facts of the present case.

The Petitioners would execute a bond to protect the revenue from liability arising out of any O-I-O to be passed, subject to its rights to contest the order in accordance with law - On the Petitioners securing the Revenue with the bond and the fixed deposit as stated above, the Respondents would defreeze all the accounts mentioned in the letter dated 11 January 2024 and 11 July 2024.

Petition disposed off.

Legality and Jurisdiction of seizure of the gold dust - violation of fundamental rights of the Petitioner - jurisdiction to accost and apprehend Transit passengers, and their detention - misdeclaration - HELD THAT:- Since, in this matter, gold dust is seized from the petitioner. The interest of justice would be met if the direction for not disposing of seized items until adjudication proceedings are concluded must operate.

Petition disposed off.

Dismissal of bail application - seizure of commercial quantity of contraband - cognizance of offences allegedly committed by applicant under Sections 8/21/23/28 of the NDPS Act - Improper Sampling Procedure - Delay in filing Section 52A Application NDPS Act - Proforma Notice under Section 50 of NDPS Act - Defective Notice under Section 102, of Customs Act - Delay in Trial.

Improper sampling procedure - HELD THAT:- In the facts of this case, the seizure was made at the airport in a supervised environment where capsules were found to be containing heroin. As noted, there is no prohibition at least pre-December 2022 [when the notification issued by the Ministry of Finance, Government of India came into effect] in drawing the samples at the stage of seizure. Considering that the seized capsules would not comply with the definition of either “package/container”, it would have to be seen whether the process adopted to cut open all 107 capsules and mixing them together in a homogenous mixture would cause any prejudice to the accused - it is mandated that the drugs should be well-mixed to make them homogenous before drawing a sample. Guidelines in terms of multiple packages/containers require an option of bunching them in lots. The phrase used in clause 2.5 of SO 1/89 is “may be carefully bunched in lots”. This is in contrast to the other clauses which use the words “must” and “should” or “shall”. The option of drawing in lots must be provided in order to accommodate for various situations which may arise on the spot - The Court, therefore, does not find any fault, at least prima facie, in the procedure adopted by the Customs.

Delay in Filing Section 52A Application - HELD THAT:- As regards the delay in moving application under Section 52A, NDPS Act, there is nothing in the SO 1/89 which prescribes specific time- period. SO 1/88 requires samples to be dispatched to the FSL not later than 72 hours. In this case the delay claimed in filing the application under Section 52A, NDPS Act, as contended by counsel for the petitioner is 17 days.

In the present case, the application under Section 52A, NDPS Act was preferred 17 days after the seizure of the contraband from the applicant. The applicant may, in accordance with applicable law, could potentially contend prejudice caused on account of this delay, during trial which would be addressed basis evidence led - Although in SOVRAJ VERSUS STATE GOVT. OF NCT OF DELHI [2024 (7) TMI 1538 - DELHI HIGH COURT], this Court had enlarged the accused on bail, same was done inter alia on the issue of absence of independent witnesses and lack of photography or videography of the recovery. Same do not form basis of applicant’s contentions herein and thus, application of law in this case will have to be done in the facts and circumstances of this case. In the present matter, at this stage, this Court is of the opinion that the applicant has failed to overcome the threshold as prescribed by Section 37 of the NDPS Act.

Defective notice - HELD THAT:- Though the signatures of the accused are there of having “received” the notice, with the signatures of the witnesses as well, there is a pre-typed no objection for search to be conducted by a lady customs officer under which the sign is procured of the accused. This practice may not be totally correct considering that Section 50 requires options to be given to the person being searched; in fact an affirmative option is to be exercised for the search being conducted before the nearest Gazetted Officer/Magistrate - A proforma typed notice may ideally have both the options i.e. first that the person requires the personal search to be done before a Gazetted Officer/Magistrate; and second that the person to be searched has no objection to being searched by an officer present (lady officer in case the person to be searched is female).

Delay in Trial/Prolonged Incarceration - HELD THAT:- Assessment of these decisions of the Supreme Court cited above shows that bail has been granted in cases having differing facts, some with incarceration of more than 3 years, and some in cases of seizure of ganja. The assessment, therefore, on prolonged custody and delay in trial will depend of facts and circumstances of the case. Whether 2 or 3 years or more, or any other time period is “prolonged”, is clearly left to the assessment of the Court - In this case, the petitioner has undergone 2.5 years of custody and the trial is progressing. An attempt may be made by the Trial Court to expedite the trial. In the event, that the trial does not proceed ahead expeditiously, needless to state that the applicant will have the right to approach the Court at a subsequent stage.

Taking into consideration four times the commercial quantity of contraband seized from the instance of the applicant, there being no prejudicial infirmity in the process adopted by the respondent, rigours of Section 37, NDPS Act, and progressing trial, this Court is unable to reach a prima facie conclusion that applicant is not guilty of the offences and is unlikely to commit the same if enlarged on bail. The threshold of Section 37, NDPS Act not having been crossed, the application for bail cannot be granted.

Bail application stands dismissed.

Benefit of N/N. 52/2003-Cus. dated 31.03.2003 on goods re-imported after one year - re-import of 6000 kg. ‘Coarse Ground Chilli’ which was originally exported - Department was of the view that since said part consignment had been rejected which accordingly would fall under Sr. No.15 of Annexure-I of Notification No. 52/2003-Cus. dated 31.03.2003 and re-import was made after one year of the initial export, hence, the benefit of the said Notification not admissible - HELD THAT:- The difference between the entry at Sr. No.14 and 15 of the notification is that in the former case, the goods could be re-imported for repair or reconditioning, irrespective of whether the overseas buyer rejects or fail to take delivery; the re-import could be within three years or seven years as the case may from the date of import, and also time limit is prescribed for re-export after the process of repair or reconditioning; whereas, under Sr. No.15, the goods could be re-imported if the same is rejected or not accepted by the buyer; within a period of one year from the date of export. It could be cleared to Domestic Tariff Are (DTA), if permissible under law but there is condition for re-export of the same.

Thus, Sr. No.14 and 15 can be applied to the re-imported goods depending on the purpose and circumstances for which different time period prescribed under each of the said entry. Further, it is significant to note that there are two classes of goods prescribed under Sr. No. 14 ; (i) goods that are mentioned under Annexure-VII and (ii) goods falling outside the scope of Annexure-VII, for the purpose of applying the period of limitation to re-imported goods. In these circumstances, there are no merit in the impugned order of the authorities below observing that the goods rejected by the foreign buyer would invariably fall under Sr. No.15 of Annexure-I even though the appellant specifically advanced a request for repair or reconditioning for the purpose of re-export, as permitted to the type of goods (other than goods specified in Annexure VII) under Sr. No.14. Thus the benefit of Notification 52/2003 Cus. dated 31.03.2003 (Sr. No.14(i) of Annexure-I) is admissible on the re-imported goods.

The impugned order is set aside and the appeal is allowed.

Levy of penalties u/s 114(i) and/or 114(AA) of the Customs Act, 1962 - appellant was involved in abating the smuggling of red sanders - bona fide belief.

Penalty u/s 114(i) of CA - HELD THAT:- The penalty was imposed on the appellant only for the charge of negligence. In this case, since, the appellant was not aware about the concealment of “red sander” in the container with “feldspar powder”, It cannot be said that the appellant was involved with mala fide intention to abet the smuggling of ‘red sander’. It is found that involvement in abetting the smuggling of ‘red sander’ was not established against the appellant. The case was detected only on the intelligence received by the DRI. In such case in absence of any intelligence, the appellant was not aware about the concealment of red sander under the bags of feldspar powder. It is also found that when Shri Sandeep, Inspector Customs examined the containers after opening it at that time only feldspar powder was found. Therefore, he was of bona fide belief that the goods stuffed in the containers is feldspar powder. In the normal course it cannot be expected by any one that behind the feldspar powder bags some other goods are concealed. Therefore, there are no involvement of the appellant in the abetment in smuggling of Red Sander. Accordingly, the penalty under Section 114(i) of Customs Act, 1962 was wrongly imposed on the appellant - It is also observed that it is not coming out from record that the appellant was aware of the stuffing of red sander in the container. Therefore, even if some negligence has occurred on his part which is not established, the appellant cannot be charged for aiding or abetting the smuggling of ‘red sander’.

Penalty u/s 114(AA) of CA - HELD THAT:- It is found that the appellant had not signed or submitted any document before customs with a prior knowledge about alleged mis-declaration, neither any show cause nor impugned order pointed out any specific documents were made or signed before the customs. Therefore, the appellant is not liable to penalty under the provision of Section 114(AA) also.

The penalties are set aside - appeal allowed.

Valuation of imported goods - rejection of declared value - enhancement of value - goods were supplied by the foreign company to the related Indian company at a much lesser price when compared with those supplied to an unrelated buyer in India or not - HELD THAT:- When the imported goods were running into more than 100 items, a reference was made only to 22 items. Whatever the inputs information submitted by the Respondent whether was considered or not is not clear from the orders passed. Further, it is not disputed that the grounds on the basis of which values were enhanced were not intimated to the Respondent-importer. The volumes of imports by the Respondent are far higher when compared to the quantities imported by M/s. Vestas. The provisions of Rule 3(b) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 are very clear as to arriving at the transaction value in respect of imports by the related persons. Both the foreign supplier and the importer-respondent must be having published pricelists for sale of various components being manufactured by them, which were not examined at all.

Thus, it is not disputed that the Original Authority has clearly violated the principles of natural justice by not intimating the grounds on the basis of which enhancement of the values of the imported products was resorted too. As the issue of arriving at appropriate values in terms of CVR, 2007, requires further detailed examination clearly the Original Authority should have examined the values of all the items under import with those values of identical or similar items imported by the independent buyers from the same supplier or other identical or similar contemporaneous imports. The Lower Appellate Authority has also without examining the issue in detail has simply ordered to set aside the order of the Original Authority leaving a vacuum as to the values to be adopted for the imported goods by the related importer-respondent.

The case is to be remanded to the Lower Original Authority for considering the issue afresh in strict observance of the principles of the natural justice. As considerable time has already elapsed, such an order may be passed within three months from the communication of this order.

The appeal filed by the Department is allowed by way of remand to the Original Adjudicating Authority.

Refund of SAD paid by them at the time of the import in terms of the Notification No. 102/2007-Cus. dated 17.09.2007 - Time Limitation - rejection of claim of the appellant only on this ground that the period of one year from the date of the payment of the SAD have not been followed by the appellant - HELD THAT:- The matter is no longer resintegra, as the Larger Bench of this Tribunal in case of M/S. AMBEY SALES VERSUS COMMISSIONER OF CUSTOMS, GRFL, SAHNEWAL, LUDHIANA [2024 (6) TMI 257 - CESTAT CHANDIGARH-LB] has decided the issue and it was held that 'The limitation of one year for filing a claim for refund of additional duty of customs paid on import of goods from the date of payment of additional duty would, therefore, not be applicable.'

The impugned Orders-In- Appeals are legally not sustainable and are set aside - appeal allowed.

Import of goods at concessional rate of duty - Process amounting to manufacture - assembly from the semi -knockdown condition to full TV - argument of the revenue is that the goods imported by the appellants are in semiknockdown condition - HELD THAT:- It is seen that what is being imported are not goods in semi -knockdown condition. All the goods imported are individual items separately classifiable under different headings. Learned counsel pointed out that they are buying many products from local market. However, even if that is not the case, assembly of Television from individual components to a full T.V is a process of manufacture. In fact, there are no evidence whatsoever of any imports under semi-knockdown condition as can be seen from the list declared by the respondents in their applicable.

There are no merit in the appeal filed by the revenue, and the same is dismissed.

Levy of penalty u/s 112(b)(ii) of the Customs Act, 1962 - Primary Gold of foreign origin from a secret cabinet - admissibility of the statement recorded under Section 107 of the Customs Act, 1962 - HELD THAT:- In this case, the statement of Shri Suman Chandra Paul, one of the Appellants, has been heavily relied upon by the ld. adjudicating authority in the impugned order to impose penalty on both the Appellants. Admittedly, the statement of Shri Suman Chandra Paul was recorded under Section 107 of the Customs Act, 1962 which is not an admissible piece of evidence as held by the Tribunal in the case of COMMISSIONER OF CUSTOMS (PREV.), LUCKNOW VERSUS SHEO SHANKER JAISWAL [2010 (2) TMI 1018 - CESTAT NEW DELHI] wherein it was observed 'The presence of injuries found on the driver during his medical examination on 9-6-07 also indicates that the statement of the driver had been recorded under duress. Moreover other than the statement of the driver, there is no corroborative evidence indicating that the sugar loaded in the truck was going to the smuggled into Nepal.'

Admittedly, in this case, the statement of Shri Suman Chandra Paul is not recorded on the authorization given by any officer of Customs in this behalf, by General or Special Order from the Principal Commissioner of Customs or Commissioner of Customs, to examine any person during the course of enquiry in connection with the smuggling of any goods. Therefore, the statement recorded from Shri Suman Chandra Paul is not an admissible evidence to implicate the Appellants in this case - the penalties imposed on both the Appellants are set aside.

Appeal allowed.

Classification of imported goods- Pran Lassi Drink (Yoghurt Flavoured) - to be classified under the CTH 22029030 or under CTH 04039090? - HELD THAT:- From the letter issued by the supplier, it is evident that the said goods imported by the appellant is internationally classified under the H.S. Code 0403.9090. It is observed that there is no finding in the impugned order against this submission made by the appellant. Accordingly, there are no reason to disagree with the classification adopted internationally for the said goods.

The classification of the said goods is no more res integra as the Hon'ble Madras High Court has examined the issue in the case of M/S. PARLE AGRO PVT. LTD., REPRESENTED BY ITS MANAGER, G. MADHAVAN VERSUS UNION OF INDIA, COMMISSIONER OF COMMERCIAL TAXES, GST COUNCIL [2023 (11) TMI 601 - MADRAS HIGH COURT] wherein it has been held that the appropriate classification of the goods would be under the Chapter Heading 04 and not under the Chapter Heading 22.

The Hon’ble Madras High Court has held that the goods, namely, “Flavoured Milk” do not fall under Chapter Heading 22 of the Customs Tariff Act, 1975 but would fall under the Chapter Heading 04. Therefore, relying on the decision of the Hon'ble Madras High Court, it is held that the appropriate classification of the goods namely, ‘Pran Lassi Drink’ imported by the appellant is under the Chapter Heading 04 and not under Chapter Heading 22. Thus, the demand of customs duty along with interest and penalty confirmed in the impugned order, by classifying the said goods under the Chapter Heading 22 is not sustainable and accordingly, the same is set aside.

The impugned order is set aside - appeal allowed.

Levy of composite penalty under Section 112(a) and 112 (b) and Section 114 AA of the Customs Act, 1962 - importation of old and used car by mis declaring the same as new car and it is a case of under valuation also - HELD THAT:- Admittedly in this case, it is a case of importation and penalty under Section 114 AA of the Customs Act can be imposed on account of fraudulent exports of the goods. In that circumstances, we hold that penalty under Section 114AA of the Customs Act cannot be imposed but in the impugned order penalty under Section 114 AA of the Act as proposed in the Show Cause Notice was also imposed but quantum penalty is not known.

As the quantum of penalty imposed on under Section 112(a) and 112(b) are not known and penalty under Section 114AA is not imposable on the appellant therefore, it is held that composite penalties imposed on the appellant are not sustainable. Accordingly, penalties imposed in both the cases are set aside.

The impugned orders qua imposing penalties under various provisions of the Customs Act, 1962 are set aside - Appeal allowed.

Maintainability of section 7 application - initiation of CIRP - existence of ‘debt’ and ‘default’ on the part of the Corporate Debtor - HELD THAT:- There is a disbursement against the consideration for time value of money and there is a clause for payment of interest. Further, the documents furnished show that it is receivables discounting with recourse basis. Thus, receivables sold under recourse basis will constitute a financial debt as per Section 5 (8)(e) of IBC Act.

It has been held by the Hon’ble Supreme Court in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT] as well as in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT] after going through the Scheme of IBC, 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor as compared to the one filed under Section 9 by an Operational Creditor, that in relation to a Section 7 Application where there is an existence of a ‘financial debt’ and the default in excess of Rs. 1,00,00,000/-, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence of set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute in relation to the Financial debt and default in relation to it. In the present case, it is clear that there is a default on the part of the Corporate Debtor for a sum exceeding Rs. 1 Crore.

The Applicant / Financial Creditor has proved that there is a ‘debt’ and ‘default’ on the part of the Corporate Debtor and hence in term of Section 7(5) of IBC, 2016, the present application is required to be admitted and Corporate Insolvency Resolution Process as against the Corporate Debtor is required to be initiated.

Application admitted - moratorium declared.

Grant of regular bail - Money Laundering - proceeds of crime - scheduled offence - offence of cheating and criminal conspiracy - It was held by High Court that 'It is an organized crime having various facets of its complexion, therefore, further considering the provisions of Section 45 of the PMLA, 2002 this Court is satisfied that there are reasonable grounds for believing that the applicant is involved in the offence and he is likely to commit any other offence while on bail, it is not required to grant bail to the applicant.' - HELD THAT:- Applications for exemption from filing c/c of the impugned judgment, official translation and permission to file additional documents/facts/annexures are allowed.

Issue notice returnable on 29th November, 2024.

Seeking grant of Regular bail - creating fraudulent documents for availing LC facility from the banks - manipulating accounts to inflate stock-in-transit and create bogus debtors - Section 447 of Companies Act, 2013 and Sections 409, 467, 468, 471, 120B IPC - HELD THAT:- It is noted that the investigation was initiated in the year 2019 and the prosecution has named 156 accused persons and cited 82 witnesses. There are 2.5 lac pages of documents which need to be analysed. Learned Special Judge took cognizance of the supplementary chargesheet vide order dated 26.07.2024. It is also observed that in the supplementary complaint dated 08.03.2024, permission was taken by the ED under Section 173 (8) Cr.P.C. for further investigation into the matter. As such, the Trial is yet to commence.

When there are multiple accused persons, lacs of pages of evidence to assess, scores of witnesses to be examined, the trial is not expected to end anytime in the near future. Importantly, the delay being not attributable to accused, keeping the accused in custody by using Section 45 PMLA as a tool for incarceration is not permissible. Flow of liberty cannot be dammed by Section 45 without taking all other germane considerations into account. It is the duty of Constitutional Courts to champion the constitutional cause of Liberty and uphold the majesty of Article 21.

Moreover, as repeatedly held, Constitutional Courts can always exercise their powers to grant bail on the grounds of violation of Part III of the Constitution of India and stringent provisions for the grant of bail such as those provided in Section 45 of the PMLA do not take away the power of Constitutional Courts to do so. The right of liberty and speedy trial guaranteed under Article 21 is a sacrosanct right which needs to be protected and duly enforced even in cases where stringent provisions have been made applicable by way of special legislation. The stringent provisions would have to be interpreted with due regard to Article 21 and in case of a conflict, the stringent provisions, such as section 45 of the PMLA in the instant case, would have to give way.

In the present cases, both the applicants were arrested on 11.01.2024. They have been in custody since more than 9 months. Moreover, the trial in the predicate as well as the present complaint is yet to commence and would take some time to conclude. It is also pertinent to note that the main accused and other similarly placed co-accused persons have been enlarged on bail - No evidence has been led to show that the present applicants are a flight risk. In fact, records would show that both the applicants have joined investigation on multiple occasions. There is no incident alleged by the respondent wherein the applicants have tried to tamper with evidence or influence witnesses.

Considering the totality of the facts and circumstances, the fact that the main accused are out on bail, the period of custody undergone and that the trial is yet to commence, it is directed that both the applicants be released on regular bail subject to them furnishing a personal bond in the sum of Rs. 1,00,000/- with one surety of the like amount each to the satisfaction of the concerned Jail Superintendent/concerned Court/Duty J.M. and subject to fulfilment of conditions imposed - bail application allowed.

Challenge to Notification Nos. 14/2017-ST, 15/2017-ST and 16/2017-ST all dated 13 April 2017 issued by respondent no. 1 and Circular No. 206/4/2017-ST dated 13 April 2017 issued respondent no. 2 - liability to pay Service-tax under the Reverse Charge Mechanism on Ocean Freight paid by the petitioner on import of the goods - HELD THAT:- The challenge to these very notifications and circular had come up for consideration before the Gujarat High Court in case of MESSRS SAL STEEL LTD. & 1 OTHER (S) VERSUS UNION OF INDIA [2019 (9) TMI 1315 - GUJARAT HIGH COURT], and by a detailed judgment, in paragraph 58, the said notifications and the circular were quashed.

In view of thereof, the impugned Notification Nos. 14/2017-ST, 15/2017-ST and 16/2017-ST all dated 13 April 2017 issued by respondent no. 1 and Circular No. 206/4/2017-ST dated 13 April 2017 issued respondent no. 2 are hereby quashed and set aside.

Petition disposed off.

Liability of appellant to discharge the service tax under reverse charge mechanism - transportation of imported goods by a vessel (Ocean Freight) from the place outside India to custom station in India - HELD THAT:- This issue is no longer res-integra as the same is settled by the Hon’ble Gujarat High court in the case of MESSRS SAL STEEL LTD. & 1 OTHER (S) VERSUS UNION OF INDIA [2019 (9) TMI 1315 - GUJARAT HIGH COURT] wherein the Hon’ble high court has held that 'The Notification Nos. 15/2017- ST and 16/2017-ST making Rule 2(1)(d) (EEC) and Rule 6(7CA) of the Service Tax Rules and inserting Explanation-V to reverse charge Notification No.30/2012-ST is struck down as ultra vires Sections 64, 66B, 67 and 94 of the Finance Act, 1994; and consequently the proceedings initiated against the writ applicants by way of show cause notice and enquiries for collecting service tax from them as importers on sea transportation service in CIF contracts are hereby quashed and set aside.'

Following the above judgment, in another case of COMMISSIONER OF SERVICE TAX, AHMEDABAD VERSUS KIRI DYES AND CHEMICAL LIMITED [2023 (3) TMI 1400 - CESTAT AHMEDABAD], this Tribunal held that ocean freight is not taxable.

In the present case the demand on ocean freight is not sustainable. Hence, the impugned order is set aside - Appeal allowed.

Short payment of service tax - interest for the delayed payment of service tax - Penalty - Maintenance & Repair Service - Man Power Recruitment & Supply Agency Service - extended period of limitation - non-application of mind - violation of principles of natural justice - HELD THAT:- The Original Authority has determined the tax due from the appellant to be less than the amount claimed to be payable by the appellant as per the calculation chart submitted by the appellant, and paid by them. Having noted so he went on to invoke the extended period of limitation, demanded interest and also imposed penalties under Section 77 and 78 of the Act. The order in original only shows non application of the mind by the adjudicating authority. It seems that adjudicating authority has recorded all the finding in the matter just to justify imposition of penalty.

Both the authorities below have misdirected themselves as there was no contest by the appellant to the invocation of the extended period or the demand of service tax. Appellant has suo motto computed the service tax due and has paid the said amount. He made the submission to this effect before the original authority and also before the appellate authority. He also deposited the interest due as has been noted by the First Appellate authority. He also pleaded his lack of knowledge and status as petty contractor not having means to understand the complexity of taxation of services. Both the authority agreed to these submissions and have still gone on to impose heavy penalties under Section 77 and 78 of the Finance Act, 1994.

Taking note of undisputed findings with regards to status of appellant and his compliance even before the adjudication/ appellate proceeding has been concluded there are no justification for not having considered extending the benefit of Section 80 of the Finance Act, 1994 and waiving of all the penalties imposable on the appellant.

There are no merits in the impugned order to the extent it is in relation to the penalties imposed on the appellant. This is a fit case where penalties imposable under Section 77 and 78 should have been waived in terms of provisions of Section 80 of the Finance Act, 1994 - appeal allowed in part.

Recovery of service tax with interest and penalty - quantification of service tax liability and deductions claimed by the appellant - suppression of taxable value - HELD THAT:- Interestingly, appellant in the present case even before the Original Authority also did not contested anything in the show cause notice except for certain computations.

The appellant do not dispute the liability to pay the service tax and has in fact admitted the liability to pay the service tax. In view of the admission of liability to pay the service tax as per show cause notice, we are left with only one issue. Appellant has before the original authority submitted a calculation chart computing the tax liability. However no supporting document were produced before the adjudicating authority. When the said chart was sent for verification to the range office, appellant had failed to produce any of the supporting documents and the said chart could not be verified for its correctness.

As appellant has not produced any document to establish their claim for further deduction of Rs 40,896.45/- paid a service tax by Hindalco, the said deduction has not be allowed by the authorities below. No such document evidencing payment of this amount as service tax by Hindalco to appellant has been produced before us, hence we do not find any merits in this claim also. In view of the specific admissions made by the appellant, there are no infirmities in the impugned order.

There are no merits in this appeal - appeal dismissed.

Levy of service tax on Business Support Service - Denial of CENVAT Credit on club membership renewal fees in terms of Rule 2(l) of the CENVAT Credit Rules, 2004 - Suo-Moto recredit to the CENVAT account taken on account of service tax paid twice or in excess of the service tax liability done without documentary evidence as prescribed under Rule 9 of the CENVAT Credit Rules, 2004 - Imposition of penalty for non-payment of Service Tax under the category of “Intellectual Propery Service other than copyright” - time limitation.

Levy of service tax on Business Support Service - HELD THAT:- The appellant and EPML were operating in two completely different products and were catering to two completely different sets of customers. As such, EPML could not have outsourced the activities of evaluation of prospective customers, processing of purchase orders and fulfilment of services to the Appellant, as alleged in the impugned Show Cause Notice. Moreover, the exports were not being made by the appellant to its own goods and accounting of the same was made in the books of the appellant only. It is an admitted position in the impugned order that none of the parties were undertaking the export of goods manufactured by the other. Therefore, by exporting its own goods, the appellant has not provided any kind of support service to EPML, but the same is to themselves only.

The appellant was not undertaking the activity of evaluation of prospective customers, processing of purchase orders or fulfilment of service as the Appellant and EPML were dealing in varied products and were catering to varied customers - the activity of export of goods by the appellant through their group company viz. EPML cannot be termed as “business support service”. Therefore, on merit, the appellant is not liable to pay Service Tax under the said category. Accordingly, the demand of Rs.1,54,77,549/- under the category of ‘Business Support Service’, is dropped.

Denial of CENVAT Credit on club membership renewal fees in terms of Rule 2(l) of the CENVAT Credit Rules, 2004 - HELD THAT:- In this case, the charges paid by the Appellant were towards corporate club membership which were used for organising meeting with various stakeholders viz., promoters, distributors and vendors in order to carry out sales promotion activities - the appellant is entitled to avail CENVAT Credit on club membership renewal fees. Hence, the CENVAT Credit of Rs.82,400/- cannot be denied to the appellant.

Suo-moto recredit to the CENVAT account without documentary evidence - HELD THAT:- The the appellant is entitled to avail CENVAT Credit on club membership renewal fees. Hence, the CENVAT Credit of Rs.82,400/- cannot be denied to the appellant.

Imposition of penalty for non-payment of Service Tax - HELD THAT:- The appellant has paid the entire amount of tax along with interest before issuance of the Show Cause Notice upon being pointed out by the audit. In these circumstances, no penalty is imposable on the appellant. Accordingly, the penalty of Rs.1,49,822/- imposed against the appellant is dropped.

Time limitation - HELD THAT:- The fact is noted that periodical audits took place from time to time, at the premises of the appellant. Therefore, the Show Cause Notice issued on 15.12.2016 for the period 2011-12 is barred by limitation. Hence, the appellant also succeeds on the ground of limitation.

The impugned order is set aside - appeal allowed.

Extended period of limitation - suppression of facts or not - liability of sub-contractor - to pay Service Tax on supply of labour services - manpower recruitment or supply agency service - revenue neutarlity - HELD THAT:- The Circular No.96/7/2007-S.T. dated 23.08.2007 has been issued clarifying that sub-contractors are required to pay Service Tax even when the main contractor has paid Service Tax on the entire amount, since the sub-contractor will be eligible to take CENVAT Credit thereon. Accordingly, it is observed that after 23.08.2007, sub-contractors are liable to pay Service Tax even if the main contractor pays the Service Tax on the entire amount.

There was confusion prevalent on this issue. The Board had also issued a clarification dated 14.09.1997 wherein it had been clarified that sub-contractors were not liable to pay Service Tax when the main-contractor had paid Service Tax on the entire amount as the issue involved is revenue neutral. Only after issue of the Circular dated 23.08.2007 by the Board, the doubt about the liability to Service Tax of the sub-contractor has been clarified. However, may service providers continue to adopt the old practice of non-payment of service tax treating the issue as revenue neutral.

In the present case, it is observed that the Appellant had entered into the agreement in the year 2004 and the main contractor had been paying Service Tax. The Appellant has not paid service tax on the amount received by them as a sub-contractor and no objection was raised at any point of time - the suppression of facts with intention to evade the tax has not been established in this case. For the same reason, the penalty under Section 78 of the Finance Act, 1994 is not imposable on the Appellant.

The demand of Service Tax by invoking the extended period of limitation is not sustainable. Accordingly, the impugned order is set aside and the matter remanded back to the adjudicating authority for the purpose of calculating the Service Tax liability for the normal period of limitation, if any. The Appellant is liable to pay service tax along with interest for the normal period of limitation.

The demand raised by invoking the extended period of limitation is not sustainable. The demand of service tax, if any, along with interest is upheld for the normal period of limitation - matter is remanded back to the adjudicating authority for calculating the Service Tax liability for the normal period of limitation, if any - appeal allowed by way of remand.

Payment of differential service tax - Cleaning Services - allegation in the SCN and the impugned order is general in nature and there is no specific allegation which warrants levy of Service Tax - HELD THAT:- The case at hand shows that the SCN was issued on assumptions and presumptions and hence cannot be sustained. A similar matter was examined by a Division Bench of this Tribunal, in Balaji Insulations India Pvt. Ltd. [2024 (6) TMI 771 - CESTAT MUMBAI] which covers the legal issues involved in this case, where it was held that 'while determining value of taxable service under Section 67 ibid, such aspect as to the activities which are covered by negative list and activities which are mentioned in the definition of service as those which are not covered by such definition becomes important'.

It is a well-accepted norm of judicial discipline that a Bench of lesser quorum / strength should follow the view taken by Bench of larger quorum / strength, in a case whose ratio covers the legal issue involved in the impugned lis, more so when it is based on the precedence of earlier judgments on the matter. Having found the impugned order to be based on assumptions and presumptions without examining the books of accounts etc. and is liable to be set aside, the question of extended period, penalty etc. does not arise.

The impugned order is set aside - appeal allowed.

Non-payment of differential tax - short reporting of taxable services - whether in the facts of the case, the credit claimed to have been adjusted against the service tax liability by the appellant can be allowed or otherwise? - HELD THAT:- In the facts of the case, it is obvious that they are not disputing the liability as such and infact they have paid certain amount through challan way back in 2016 itself i.e. much before the detection of non-payment by the Audit Team. Therefore, there was no intention as such not to pay the service tax liability on the said unreflected amount of provision of services. Apparently, they were under the impression that the Cenvat Credit accrued to them would automatically get adjusted against the total liability and they have to discharge only on the net liability by way of challan payments. Admittedly, they made such adjustment during relevant period without reflecting all these transactions in the ST-3.

Since, the factual matrix is not very clear and the appellant will be required to demonstrate the actual availability of credit and its adjustment in their books of accounts, this requires to be remanded back to the Original Jurisdictional Authority, who shall go through the books of accounts, IT Returns and any other relevant documents which the appellants may like to produce in support of their legitimate Cenvat Credit and its adjustment. However, it is made clear that non-mentioning of the said credit in the ST-3 would not debar them from off setting or adjusting the said credit towards total liability - Adjudicating Authority should also see whether this credit has been otherwise not been used in discharge of liability for any other services during the relevant period or got transited to GST Regime with effect from approved date. Subject to such verification available credit would be admissible for adjustment towards outstanding liability.

The order of the Commissioner (Appeals) is set aside and the matter is remanded back to the Original Jurisdictional Authority for fresh adjudication - Appeal allowed by way of remand.

Levy of service tax - Director’s remuneration in the form of commission as per percentage of total profit of the company - reverse charge mechanism - HELD THAT:- There is no dispute that director was paid the commission amount as a part of director’s remuneration and the amounts paid as salary and on such amount the TDS was also deducted under the salary head. Therefore, any amount paid to the director in the form of director’s remuneration which is commission of company’s profit, the same is not chargeable to service tax under reverse charge basis as held in the case of ALCHEMIE ORGANICS VERSUS C.C.E & S.T. -VALSAD [2024 (6) TMI 1413 - CESTAT AHMEDABAD] where it was held that 'it is clarified that remunerations paid to Managing Directors/Directors of companies whether whole-time or independent when being compensated for their performance as Managing Directors/Directors would not be liable to service tax.'

Thus, it is settled law that any commission from the profit of the company paid to the director as director remuneration is not liable to the service tax under reverse charge basis.

The impugned order is not sustainable, hence, the same is set aside, appeals are allowed.

Appropriate interest for the delay of rebate to the petitioner - Section 11BB of the Central Excise Act, 1944 - HELD THAT:- In the light of the undisputed fact that the respondent did not grant refund in favour of the petitioner within the maximum prescribed period of three months from the date of the petitioner submitting the refund claim in relation to the amount rejected in the first instance by the respondent which was allowed/granted in favour of the petitioner - the respondent would be liable to pay interest on the refund allowed vide order dated 06.02.2023 in revision order No.46/2023 – CX.

The respondent is directed to grant interest in terms of Section 11BB of the Central Excise Act, 1944 in favour of the petitioner on the amount of refund as directed in revision order No.46/2023 – CX dated 06.02.2023 from 09.02.2017 till the date of payment within a period of eight weeks from the date of receipt of a copy of this order - Petition allowed.

CENVAT credit of the duty paid on the materials and capital goods used for fabrication, erection and commissioning of both the paint shops on turn key basis - immovable property embedded to earth and ceiling are not excisable goods - scooter and motorcycle plants was wrongly taken and irregularly utilized by them - interest at the appropriate rate leviable on the amount availed wrongly and utilized irregularly - penal action for the act of omission and commission under the provision of the Central Excise Act, 1944.

HELD THAT:- The proposed questions of law, however, stand finally adjudicated and decided in favour of the assessee by this Court vide judgment dated 12.01.2024, in COMMISSIONER, CENTRAL EXCISE COMMISSIONERATE, SONEPAT (DELHI-III) VERSUS M/S. ULTRATECH CEMENT LTD. [2024 (1) TMI 959 - PUNJAB AND HARYANA HIGH COURT] wherein, this Court has held 'The view taken as such was that the amendment could only operate prospectively which was made in the Cenvat Credit Rules, 2004 which came into force from 07.07.2009 and in such circumstances the benefit had been granted regarding the issue of the structures which are embedded to the earth and whether the structures were to be treated as inputs used in final products as input for capital goods.'

This Court has rejected the appeal on limitation. However, since the delay is condoned, the appeal on limitation is not dismissed. As no substantial question of law worth examining left in the present appeal, the same is accordingly dismissed.

Appeal dismissed.

CENVAT Credit - construction, consultancy, repair, and maintenance services - nexus with manufacturing activity - for what purpose and in connection with which plant/factory, the Appellant had availed those credits? - HELD THAT:- There is no denial of the fact that Appellant had replied back to the show-cause notice almost after a year on dated 10.09.2015 when physical hearing was last scheduled to 22.09.2015. On going through the reply to the show-cause notice but no reference is made in the said reply that the new plant is located away from the present factory of the Appellant, though a distinction between ‘plant’ and ‘factory’ was attempted therein. It is apparently for this reason that learned Commissioner, after conclusion of physical hearing had issued a letter to the Appellant on dated 09.10.2015 seeking its response on the location where services were provided and the place where setting of new plant was progressing and the activities to be undertaken in the same plant. The reply though receipt after passing of the order by the Commissioner, going by its content as available in page 25 to 28 of the appeal memo, it can be considered as a cryptic reply for the reason that para 2.3 of its reply letter reveals that the plant was still in proposal stage which can be considered as forward integration.

Further, it is also noticed that Appellant has indicated that they were in the process of expanding their existing sponge iron plant capacities in village Salav but there is nothing mentioned about proposed plants in other two villages namely Nidhi and Mithekhar Village. This being fact on record and when annexure 8 i.e. copy of the letter received from the Ministry of Environment & Forest issued on dated 27.01.2011 speaks about conditionalities for setting of the plant and the reply letter in response to Commissioner’s query issued in November, 2015 indicates that new proposed plant was not completed by that time, which could be treated as forward integration of their existing plant, availment of credits on those inputs by the end of 2012 claimed to have been used in the proposed plant and not in a functional plant without proof of forward integration of the existing plant covering three villages is irregular and not in conformity to the CENVAT Credit Rules, 2004.

The order passed by the Principal Commissioner of Central Excise, Customs & Service Tax, Raigad is hereby confirmed - Appeal dismissed.

Abatement of appeal under Rule 22 of CESTAT (Procedure) Rules, 1982 - Liquidation proceedings - recovery of irregular CENVAT credit availed, with interest and penalty - HELD THAT:- As the Department has already registered its claim with the Liquidator, no further proceedings can survive in this appeal.

As the NCLT, Chennai has ordered for Liquidation of the appellant vide its order dated 19.03.2018 and as the Liquidator has confirmed the receipt of claim from the Deputy Commissioner of GST and Central Excise, Trichy and also as no application as per Rule 22 has been made by the Official Liquidator appointed by the NCLT for continuance of the appeal, the appeal should abate in terms of the above referred Rule.

As such the appeal gets abated in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982 and also gets dismissed being infructuous.

Classification of goods - soya nuts and wheat puffs - goods cleared below the threshold limit prescribed - benefit of SSI exemption under Notifications 175/86-CE dated 01.03.1986 and 01/93-CE dated 28.02.1993 - HELD THAT:- It is undisputed that the appellant was clearing goods most of which were supplied to ICDS which were exempted anyway regardless of the SSI exemption. These have to be excluded from the aggregate value of clearances under the notification in view of the Explanation II. Once the value of these clearances is deducted from the total turnover of the appellant, what remains is the value of dutiable goods during different years which are recorded in the impugned order by the Commissioner. During the entire period the value of such clearances had not exceeded Rs. 7.5 lakhs in any financial year even as per the impugned order.

Condition No. 4 stipulates that the assessee must have been registered with the Director of Industries but the proviso therein clarifies that if the value of clearances during the preceding financial year or the current financial year did not exceed and was not likely to exceed Rs.7.5 lakhs, this condition shall not apply. Explanation II clarifies that the value of clearances does not include such clearances whether the goods are exempted by any other notification or are chargeable to nil rate of duty. A perusal of the impugned order says that the year wise values of goods cleared did not exceed Rs.7.5 lakhs in any year.

The appellant was entitled to SSI exemption and, therefore, the duty demanded in the impugned order and the consequential penalties cannot be sustained and need to be set aside - the impugned order is set aside - Appeal allowed.

Reversal of CENVAT Credit with interest and penalty - non-moving/ obsolete /surplus inventories - inputs written off in their books of account in accordance of rule 3 (5B) of CCR - Invocation of extended period of limitation - HELD THAT:- On a plain reading of the said Rule it is clear that in the event the value of any input or capital goods before being put to use on which Cenvat credit has been availed are written off fully or partially or any provision has been made to write off those fully or partially than the manufacturer or service provider are required to reverse/pay Cenvat credit availed on such inputs or capital goods. Thus it is clear that provisions of rule 3 (5B) CCR are applicable only when the value of asset and or inventory is written off fully or partially, or wherein any specific provision to write-off fully or partially has been made in the books of accounts.

In the present case from the very beginning the appellant have submitted that they have only written down the value of the raw materials in their books of account and has not written off the value fully or partially. Also, the claim of the appellant are that all these raw materials are still available in their factory and are in usable conditions; the value is written down as per the accounting principle and since the credit availed is on inputs, therefore, under the CCR, 2004, there is no bar in taking depreciation benefit' under Income-tax Act, 1961 - there is no evidence to the effect that the inputs whose value had been written down had been removed from the factory, thus, reducing the value of the raw materials. Keeping in view the accounting principles and Income-tax benefit, if any, it cannot be construed that the value of the inputs are written off from the books of account and are not usable resulting into invoking of Rule 3(5B) of Cenvat Credit Rules, 2004.

There is no denial by the Department about appellant to have kept the inventory in their accounts at full value and upon consumption in regular course of business, the cost of inventory is booked at full value itself. There is also no denial to the fact that the non/slow moving inventory has at certain stage being used by the appellant in its manufacturing process. Hence the inventory which had not become obsolete cannot be called as the entry written off. As already observed above Rule 3(5B) CCR is invokable vis-à-vis written off entry only. The said rule has wrongly been invoked by the Department.

This Tribunal also in the case of M/S. HINDUSTAN ZINC LTD. VERSUS COMMISSIONER OF CENTRAL GOODS & SERVICE TAX COMMISSIONERATE, UDAIPUR (RAJASTHAN). [2021 (8) TMI 935 - CESTAT NEW DELHI] and in another case titled as M/S TAKATA INDIA PVT. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, ALWAR, RAJASTHAN [2022 (4) TMI 1359 - CESTAT NEW DELHI] has been held that since the assessee has made only a general provision and the department has not been able to identify the details of inventory or assets for which the provision has been made as to whether those inventories have become obsolete, the demand confirmed invoking Rule 3(5B) in the circumstances is not sustainable. There is also no denial to the fact that in case where such non/slow moving inventory had become obsolete the appellant had already reversed the credit.

Invocation of extended period of limitation - HELD THAT:- It is observed that the provision in the records of the appellant (balance-sheet/ P & L accounts) was the activity in accordance of normal accounting practice. Appellant is found to have committed nothing which may amount to evasion of tax. His defence since the stage of replying to the show cause notice has been apparently clearer about non-invokability of rule 3 (5B) of CCR, but the same has not been considered by the authority below - there is no evidence for the invocation of extended period. Show Cause Notice (SCN) therefore is held to be barred by the period of limitation.

The impugned order is set aside - appeal allowed.

Levy of penalty under Rules 15 (1) of the Cenvat Credit Rules, 2004 on an employee who did not avail or utilize Cenvat Credit - HELD THAT:- The penal provision provided under Rules, 15 of the Cenvat Credit Rules, 2004 clearly mentioned that penalty imposable of the person who takes of utilises Cenvat Credit in respect of input or capital goods or input service. It is found that the appellant has been working only as a employee of the main noticees, he has neither taken Cenvat Credit himself or utilize the same for its own purposes for payment of the duty and therefore, the penal provisions has provided under Rules, 15(1) of the Cenvat Credit Rules, 2004 are not invokable in this case.

Reliance placed upon this Tribunal decision in case of SHRI PRANATHARTHIHARAN SRIDHARAN VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, VADODARA-I [2023 (3) TMI 1123 - CESTAT AHMEDABAD] where it was held that 'penalty under Rule 15(1) on the present appellant, who is merely an employee of the Company, is not sustainable.'

The impugned order in Original is without any merit so far as imposition of penalty on the appellant is concerned - appeal allowed.

Denial of Cenvat Credit distributed during April to June 2012 by the Appellant’s Head Office (Input Service Distributor) at Kolkata to the Appellant unit at Palej (Bharuch) - denial on the ground that the ISD did not distribute the Credit amongst all units proportionate to the respective turnovers of the units, resulting in distribution of excess Credit to the Palej unit - revenue neutrality - intent to evade or not - extended period of limitation - HELD THAT:- It is found that as regard distribution of credit in respect of common input service , the provisions is made under Rule 7 of Cenvat Credit Rules, 2004 which has undergone the change with effect from 01.04.2016.

It is found that the proportionate distribution of the input service credit was made mandatory by amendment with effect from 01.04.2016. However, prior to the said amendment there was no compulsion on the assessee to distribute the credit either to one unit or proportionately to different units. Therefore, even if the entire credit is distributed to the appellant instead of distribution proportionately to all the units, credit to the appellant unit cannot be denied.

It is also found that the other units to whom the proportionate credit should have been distributed have paid much more duty from PLA /cashthan the said attributed credit therefore, this being clearly a revenue neutral situation, the demand is not tenable.

In the case of Unifrax India Ltd v CCE [2023 (10) TMI 955 - CESTAT AHMEDABAD], the CESTAT Ahmedabad has held that 'in view of existing provisions of CENVAT Credit Rules, 2004 during relevant period, the 100% credit availed by the appellant is in order in terms of Rule 2007, existing at the relevant time.'.

In view of the judgments on the point of distribution of input service credit as well as on revenue neutrality it is settled that even if the cenvat credit is distributed to one unit only during the relevant period, the credit cannot be denied.

The impugned order is set aside - Appeal is allowed.

CENVAT Credit - capital goods - inward transport - reverse charge mechanism - scope of SCN - penalty - HELD THAT:- The Adjudicating Authority has clearly traversed beyond the charges levelled in the show cause notice and confirmed the demand on the grounds which were not indicated in the show cause notice. Therefore, on this ground itself, the demand is not sustainable, even though he has rightly held the said goods as input or consumable and therefore allowed the taking of the credit of the same by the appellant which had initially taken the credit on the same as capital good. Therefore, taking of credit has not been found to be wrong by the Adjudicating Authority as such.

CENVAT credit on Araldite - HELD THAT:- It is found that because of their mechanical properties and resistance to chemical and suitability for prevention of formation of rust, levelling etc., they are used in fermentation tanks on the interior and exterior surfaces providing a barrier against corrosive substances. Therefore, once the Adjudicating Authority has held Epoxide Resin as capital goods, by the same logic even Araldite would also be considered as capital goods. Therefore, in view of the facts of the case and its use in the factory, Commissioner was not correct in holding that it was in the nature of inputs or consumables. On this count itself demand is not sustainable.

It is further noted that Commissioner after holding it as inputs or consumables had further gone to confirm the demand on the grounds that the same has been used in the manufacture of both dutiable and exempted goods and therefore the demand has been confirmed, which has been included in the total amount of Rs. 1,33,312/- - this demand for reversal or payment of duty under Rule 6(3A) of CCR 2004 is not sustainable.

Penalty - HELD THAT:- It is noticed that a composite penalty has been imposed covering both the issues. However, as the demand is not sustainable on the amount of Rs. 1,33,312/- and only demand which is sustainable on account of their non-contest is Rs. 1,25,329/-. Therefore, the penalty also needs to be appropriately re-determined. In the light of the discussion, I consider an amount of Rs. 20,000/- as penalty would be adequate and therefore the order for penalty is modified to that extent.

The demand of Rs. 1,33,312/- is not sustainable and set aside. The demand of Rs. 1,25,239/- is upheld - Appeal allowed in part.

Inclusion of amount retained by the appellant under the Package Scheme of Incentive 1993 - difference between the amount collected and the ‘net present value (NAV)’, computed with the date of schedule payments as benchmark - HELD THAT:- The issue stood covered by the decision of the Tribunal in COMMISSIONER OF CENTRAL EXCISE, RAIGAD, BALKRISHNA INDUSTRIES LTD., ESSEL PROPACK LTD. VERSUS UTTAM GALVA STEELS LTD., BHUSHAN STEEL LTD., JSW ISPAT STEEL LTD., COMMISSIONER OF CENTRAL EXCISE, AURANGABAD [2015 (10) TMI 1727 - CESTAT MUMBAI] which, in identical circumstances of dispute of another similarly situated automotive parts manufacturer, RATIONAL ENGINEERS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE – I [2023 (11) TMI 363 - CESTAT MUMBAI] where it was held that 'In view of the decisions of the Tribunal, relating to the peculiarity of the scheme which was prevailed insofar as the impugned order is concerned, the demand is set aside'.

In view of the decisions of the Tribunal, deciding on the dispute arising from the peculiar features of the said scheme of the Government of Maharashtra, the impugned order is set aside - appeal allowed.

Quashing of disciplinary proceedings midway, i.e., at the stage when the enquiry had been completed - jurisdiction of the disciplinary authority - HELD THAT:- There was no adversarial order, resulting in no cause of action to canvass or maintain the Writ Petition. The mere pendency of the inquiry or the Writ Petitioner’s apprehension of any adverse orders cannot be a ground to maintain the Writ Petition. It is apparent that no rights of the Writ Petitioner have been abridged, nor has the inquiry resulted in altering the service conditions. In that context, the mere issuance of the show cause notice would not confer jurisdiction on this Court to entertain and appreciate the Writ Petition. In the absence of any right of the litigant being adversely affected, it is not seen how the learned Single Judge could have heard and ordered the Writ Petition.

Appreciation of the facts is the domain of the statutory authorities, specifically the disciplinary authority in this case - the Appellant/Department is directed to produce the records relating to the refund claim, which has been the contention between the Appellant/Department and the Employee.

The learned Single Judge has erred in taking up the role of the disciplinary authority and in attempting to substitute the opinion of the disciplinary authority with the opinion of this Court, which is impermissible. The learned Single Judge could not have usurped or pre-empted the statutorily empowered disciplinary authority from forming an opinion on imposing or not imposing any penalties. The authority to impose or not impose any penalty, as provided under the rules, is in the exclusive domain of the disciplinary authority, an action that has now been pre-empted by the impugned order. The Writ Petition itself was premature in the absence of any adverse impact on the rights or service conditions of the Writ Petitioner.

There are no hesitation in allowing the appeal. Accordingly, the appeal is allowed in part. The impugned order is set aside, and the matter is remitted back to the disciplinary/competent authority for consideration of the reply to be submitted by the Respondent/Writ Petitioner. Thereafter, the disciplinary/competent authority shall pass necessary orders within six (6) weeks from the date of receipt of the reply to the second show cause notice - appeal allowed by way of remand.

Conviction for the offences punishable under Section 120B read with Sections 420/419 of the Indian Penal Code (IPC) and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988 - substantive sentence of 7 years - embezzlement - HELD THAT:- The power of suspension of sentence under Section 389 of the CrPC (Corresponding to Section 430 of the Bharatiya Nagarik Suraksha Sanhita, 2023) is vested in the Appellate Court dealing with an appeal against the order of conviction. On a plain reading of subsection (1), the Appellate Court has the power to suspend the execution of a sentence or order appealed against. If the appellant/accused is in confinement, there is a power vesting in the Appellate Court to release him on bail pending the final disposal of the appeal. In case of offences covered by the first proviso to subsection (1) of Section 389, there is a mandate to give an opportunity to the Public Prosecutor to show cause in writing against such release before releasing a convicted person on bail. As stated earlier, the substantive sentence imposed on the respondent is rigorous imprisonment for seven years. In addition, there is a direction to pay a fine of Rs.95,00,000/-.

Perusal of the impugned order shows that the High Court was conscious of the fact that as the embezzlement alleged against the respondent and other accused persons was to the tune of Rs.46,00,000/, the Special Court had sentenced the respondent to pay a fine of Rs.95,00,000/. The order notes that the sentence imposed on the respondent was of both imprisonment and payment of fine. Therefore, on a plain reading of the impugned order, the argument of learned ASG that the sentence of the fine was not suspended cannot be accepted.

There is no reason to interfere with the impugned order, especially when the respondent has deposited a sum of Rs.15,00,000/in this Court. The deposit of Rs.15,00,000/shall be treated as a condition for suspending the sentence of fine. Accordingly, the appeal is disposed of with the above modification. The amount of Rs.15,00,000/deposited by the respondent has been invested by the Registry in fixed deposit. Immediately after maturity of the existing fixed deposit, the Registry shall transfer the amount of Rs.15,00,000/with interest accrued thereon to the Delhi High Court.

Appeal disposed off.

Suit for declaration of title over the suit property - recovery of possession - whether the registered gift deed dated 05.03.1983 was duly acted upon and accepted and is a valid document which continue to exist despite its revocation on 17.08.1987 as the donor had not reserved the right to revoke the same? - HELD THAT:- Admittedly, the present suit for declaration and recovery of possession of the suit property was filed by the plaintiffrespondent on 25.09.1991. The court of first instance held that as the same was not filed within three years from the date of revocation of the gift deed, i.e., 17.08.1987 (Exhibit B-2), the suit is barred by limitation - Once it is held that the gift deed was validly executed resulting in the absolute transfer of title in favour of the plaintiff-respondent, the same is not liable to be revoked, and as such the revocation deed is meaningless especially for the purposes of calculating the period of limitation for instituting the suit.

In the case at hand, the suit is not simply for the declaration of title rather it is for a further relief for recovery of possession. It is to be noted that when in a suit for declaration of title, a further relief is claimed in addition to mere declaration, the relief of declaration would only be an ancillary one and for the purposes of limitation, it would be governed by the relief that has been additionally claimed. The further relief claimed in the suit is for recovery of possession based upon title and as such its limitation would be 12 years in terms of Article 65 of the Schedule to the Limitation Act.

Though the limitation for filing a suit for declaration of title is three years as per Article 58 of the Schedule to the Limitation Act but for recovery of possession based upon title, the limitation is 12 years from the date the possession of the defendant becomes adverse in terms of Article 65 of the Schedule to the Limitation Act. Therefore, suit for the relief of possession was not actually barred and as such the court of first instance could not have dismissed the entire suit as barred by time.

There are no error or illegality on part of the first appellate court and the High Court in decreeing the suit of the plaintiff-respondent - appeal dismissed.

Maintainability of the appeals - right to contest an appeal against its order determining tariff for aeronautical services before TDSAT - Whether AERA has a right to contest an appeal against its order determining tariff for aeronautical services before TDSAT, and then consequently prefer an appeal against the order of TDSAT before this Court under Section 31 of the AERA Act? - Even if AERA does not have a right to contest an appeal against its order determining tariff for aeronautical services before TDSAT, does it have a right to prefer an appeal against the order of TDSAT before this Court in terms of Section 31 of the AERA Act?

HELD THAT:- The judicial principle that a judicial or quasi-judicial authority must not be impleaded as a party to an appeal against its order is premised on two reasons, both rooted in constitutional philosophy. The first reason is that with the impleadment of the judicial or quasi-judicial authorities as respondents, they will be required to justify their decision before the Appellate Court. This is contrary to the established principle that Judges only speak through their judgments. Any dilution of this principle would lead to a situation where every judicial authority would be called upon to justify their decisions in the Court of appeal. This would break down the entire edifice of the judicial system.

The exercise of power by Authorities and Tribunals was described as “quasi-judicial’ to ensure that the principles of natural justice were complied with. However, with the evolution of the doctrine of fariness and reasonableness, all administrative actions (even if there is nothing ‘judicial (or adjudicatory)’ about them) are required to comply with the principles of natural justice. The evolution of the fairness doctrine has transcended many boundaries. Thus, the reason for which the expression ‘quasi-judicial’ came into vogue is no longer relevant. Neither are the tests to identify them because the functions of an authority no more need to have any semblance to ‘judicial functions’ for it to act judicially (that is, comply with the principles of natural justice).

AERA has a statutory duty to regulate tariff upon a consideration of multiple factors to ensure that airports are run in an economically viable manner without compromising on the interests of the public. This statutory role is evident, inter alia, from the factors that AERA must consider while determining tariff and the power to amend tariff from time to time in public interest - It is interested not in a personal capacity. Its interest lies in ensuring that the concerns of public interest which animate the statute and the performance of its functions by AERA are duly preserved. Thus, AERA is a necessary party in the appeal against its tariff order before TDSAT and it must be impleaded as a respondent.

It does not confer that power to any party expressly. There are three ways in which provisions dealing with statutory appeal are drafted. First, the provision may not prescribe who can file an appeal such as Section 31 of the AERA Act. Second, the provision may provide that an appeal may be preferred by a ‘person aggrieved’ such as under the Electricity Act 96, the Major Port Authorities Act 2021, the Securities and Exchange Board of India Act 1992 and the Pension Fund Regulatory and Development Authority Act 2012. The third category is where the statute confers ‘any party’ with the right to file an appeal as under the Companies Act 2013.100 With respect to the first of the three categories, at a minimum the parties to the appeal before first appellate body (in this case TDSAT) will have a right to file an appeal before this Court. AERA can file an appeal under Section 31 in view of conclusion that it is a necessary party in the appeals against the tariff orders issued by it.

The appeals filed by AERA against orders of TDSAT under Section 31 of the AERA Act are maintainable. The Registry shall list the matters before the Regular Bench for adjudication of the appeals on merits.