TaxTMI Updates e-Newsletter
Oct 30,2024

Value of supply between related persons - open market value - second proviso to Rule 28 - import of services under reverse charge - CBIC Circular 210/4/2024-GST

CBIC Circular 210/4/2024-GST - second proviso to Rule 28 - open market value - value of supply between related persons - Whether, for supplies of services by foreign affiliates in the form of seconded employees where no invoice is raised by the related domestic entity, the value of such services must be treated as Nil for the purposes of the Second Proviso to Rule 28 and whether that precludes tax liability under the Act. - HELD THAT: - The Court proceeded on the basis of Paragraph 3.7 of CBIC Circular No. 210/4/2024-GST which clarifies that where a foreign affiliate provides services to a related domestic entity and full input tax credit is available to the recipient, the value declared in the invoice by the related domestic entity may be deemed as the open market value under the second proviso to Rule 28; further, where no invoice is issued by the related domestic entity, the value of such services may be deemed to be declared as Nil and treated as the open market value. In the present matters it is conceded that no invoices were generated by the writ petitioners in respect of the services provided by their related foreign affiliates. The Court therefore accepted the CBIC clarification as binding on the respondents and held that the value of the service rendered must be treated as Nil. On that basis, the Court concluded that no plausible tax liability could arise under the Act in respect of the impugned notices, rendering the show cause proceedings futile. [Paras 11, 12, 13, 14]

The show cause notices insofar as they seek to impose tax on the secondment services (where no invoice was raised) are quashed because, in light of the CBIC Circular, the value of those services is to be treated as Nil under the second proviso to Rule 28, precluding the asserted tax liability.

Penalty and interest - quashing of consequential orders - value of supply between related persons - Whether orders imposing interest and penalty (and consequential Orders in Original) survive once the CBIC clarification is applied to the secondment transactions. - HELD THAT: - The Court observed that where the CBIC clarification governs assessees pan India and indicates that no tax liability arises in the factual scenario of no invoice for services from the foreign affiliate, continuation of penalty or interest proceedings would not be tenable. The Court noted that one writ petitioner (Sony India) had already discharged tax and taken credit; nevertheless, in view of the CBIC position, the imposition or continuation of penalty and interest could not be sustained. Consequently, the Court quashed the consequential Orders in Original and the proceedings for interest and penalty to the extent they relate to the secondment issue. [Paras 15, 16, 17, 18]

Consequential orders imposing interest and penalty arising from the same secondment related tax liability are quashed; Orders in Original impugned in the writ petitions are set aside to the extent indicated.

Final Conclusion: Writ petitions allowed: show cause notices dated 29.09.2023, 28.09.2023, 27.09.2023, 28.09.2023 and 31.05.2024 are quashed insofar as they relate to tax on seconded employees (value treated as Nil under CBIC Circular and second proviso to Rule 28); consequential Orders in Original imposing interest/penalty are also quashed to that extent; other issues in the impugned SCNs remain open for adjudication by the respondents.

Double Jeopardy - Bail jurisprudence in economic offences - Prima facie satisfaction and gravity of offence - Presumption of innocence and principle that bail is the rule, jail is the exception - Investigation-based circumstantial evidence and money trail

Double Jeopardy - Distinctness of offences under GST law and IPC - Whether the applicant's prior release on bail in proceedings under the CGST Act bars prosecution under IPC by operation of double jeopardy - HELD THAT: - The Court analysed the scope of double jeopardy as protecting against a second prosecution or punishment for the same offence after a final conviction or acquittal. It held that mere grant of bail in proceedings under the CGST Act does not amount to an acquittal or conviction that attracts double jeopardy protection. Further, the present prosecution is framed under IPC offences which, on the court's view, are legally and conceptually distinct from the proceedings under the CGST/CGST Act; therefore the double jeopardy principle does not operate to bar the present criminal prosecution. Consequently, enlargement on bail in GST proceedings does not preclude separate criminal proceedings under IPC based on the same investigative material. [Paras 22, 24, 25, 26]

Double jeopardy objection rejected; prior bail under CGST Act does not bar IPC prosecution and bail is not equivalent to acquittal.

Bail jurisprudence in economic offences - Prima facie satisfaction and gravity of offence - Investigation-based circumstantial evidence and money trail - Whether the applicant is entitled to bail in the criminal cases under Sections 420, 467, 468, 471, 120B IPC - HELD THAT: - Applying settled principles, the Court observed that although bail is the rule, exceptions exist for grave economic offences where factors such as nature and gravity of accusation, prima facie evidence, risk of tampering with witnesses, flight, and public interest must be considered. On the material placed on record (investigation diary entries, recoveries, confessional statements of multiple co-accused, bank transaction tracing and nexus between fake GST firms and the applicant's company), the Court found a substantial money trail and circumstantial evidence linking the applicant to the alleged organized scheme of fake GST registrations and fraudulent ITC claims. The Court also noted prior orders refusing bail to co-accused and the investigative material indicating efforts to delay proceedings and absconding by some accused, which weigh against granting bail. Having regard to the gravity of the alleged economic offence and prima facie material, the Court concluded that the applicant is not entitled to bail. [Paras 36, 38, 39, 51, 52]

Bail refused; case not fit for enlargement on bail in view of gravity of offence and prima facie material against the applicant.

Final Conclusion: Bail applications of the applicant are rejected: double jeopardy objection is without merit and prior bail under CGST proceedings does not bar IPC prosecution; on merits, having regard to the gravity of the alleged organised economic offences and the prima facie investigative material, the court refused bail.

Bail is the rule, jail is the exception - economic offences - organized crime - forgery and misuse of PAN/Aadhaar for fake GST registration - input tax credit fraud - prima facie evidence - risk of tampering with evidence - gravity of offence - money trail/financial transactions as circumstantial evidence

Economic offences - organized crime - forgery and misuse of PAN/Aadhaar for fake GST registration - input tax credit fraud - money trail/financial transactions as circumstantial evidence - risk of tampering with evidence - prima facie evidence - Bail applications of the applicants (Tushar Gupta and Gurmeet Singh Batra alias Sahil) rejected - HELD THAT: - The Court found that the allegations disclose an organized scheme of registration of fake GST firms by misuse of PAN and Aadhaar to generate forged GST invoices and to wrongfully claim input tax credit, with extensive money flows and unexplained transactions forming the money trail. The applicants are chargesheeted and the investigation records, including bank transaction patterns and GST records, furnish circumstantial evidence pointing to a larger nexus rather than isolated acts. Given the gravity of the economic offence alleged, the public interest implicated by large-scale ITC fraud, and the risk of interference with the investigation and witnesses, the Court applied established bail principles - recognising that bail is the general rule but economic offences involving deep-rooted conspiracies and substantial public loss justify caution. Reliance was placed on the need for prima facie satisfaction of a genuine case against the accused and the triple considerations applicable to economic offences (gravity, impact if released, and national interest). In the circumstances and having regard to earlier orders refusing bail to co-accused and the material collected by the Investigating Officer, the Court concluded that the applicants are not entitled to bail.

Bail applications dismissed and rejected.

Final Conclusion: The High Court, after considering the nature and gravity of the allegations of organized GST-related fraud through misuse of PAN/Aadhaar, the money trail and investigation material, and relevant precedents on bail in economic offences, declined to grant bail to the applicants and dismissed their bail petitions.

Rejection of appeal for non-online filing - pre-deposit requirement for filing appeal - exercise of discretion in accepting appeals filed within limitation - opportunity to be heard - adjudication on merits - remand for fresh adjudication on merits

Rejection of appeal for non-online filing - pre-deposit requirement for filing appeal - exercise of discretion in accepting appeals filed within limitation - opportunity to be heard - Validity of the respondent's order rejecting the manually filed appeal dated 22.03.2024 on the ground that appeals must be filed only through the online portal. - HELD THAT: - The petitioner had paid the admitted tax on 04.03.2024 and made the pre-deposit for filing the appeal on 13.03.2024. The appeal was thereafter filed manually on 22.03.2024, within the period of limitation. The respondent rejected that appeal by order dated 26.07.2024 solely because the appeal was not filed through the online portal. When the petitioner subsequently attempted to file via the portal, the portal did not accept the appeal on the ground of limitation. The Court found that, having been presented with a manually filed appeal made within the limitation period and after the pre-deposit, justice required that the petitioner be given an opportunity to have the appeal adjudicated on its merits rather than be defeated by a technicality of portal filing. For these reasons the impugned order rejecting the manually filed appeal was set aside and the appellate authority was directed to take the manually filed appeal on record and proceed to hear and decide it after affording the petitioner a sufficient opportunity to be heard.

Impugned order dated 26.07.2024 set aside; respondent directed to take the manually filed appeal of 22.03.2024 on record and afford the petitioner an opportunity before adjudicating.

Remand for fresh adjudication on merits - direction to decide within fixed time - opportunity to be heard - Whether the matter should be remitted to the Appellate Authority for fresh consideration on merits and within what timeframe. - HELD THAT: - The Court directed that, in the interest of justice and because the appeal originally filed manually was within limitation and accompanied by the pre-deposit, the Appellate Authority must take the appeal on record and decide the matter on merits after providing a sufficient opportunity to the petitioner. The authority was required to complete adjudication and pass appropriate orders in accordance with law within six months from receipt of a copy of the Court's order. The direction constitutes a remand for fresh consideration on merits rather than a decision on the merits by this Court.

Appeal remitted to the Appellate Authority for fresh adjudication on merits after affording opportunity to the petitioner, to be decided within six months from receipt of the order.

Final Conclusion: The High Court set aside the order rejecting the manually filed appeal dated 22.03.2024 and directed the Appellate Authority to take the appeal on record and decide it on merits after affording the petitioner an opportunity, within six months from receipt of this order.

Validity and extension of E-way bill under Rule 138(10) of the RGST/CGST Rules - Consequences of transporting goods on an expired E-way bill and seizure - Excuse of vehicle breakdown for non-extension of E-way bill - Entitlement to refund where tax/penalty paid in respect of alleged E-way bill breach

Validity and extension of E-way bill under Rule 138(10) of the RGST/CGST Rules - Consequences of transporting goods on an expired E-way bill and seizure - Seizure and orders based on expiry of the E-way bills where the bills were not extended were valid. - HELD THAT: - The E-way bills were generated on 26.12.2022 and valid only up to 31.12.2022 11:59 pm for a distance of 978 kms. It is admitted that the E-way bills were not extended. Under Rule 138(10) the validity may be extended within eight hours from expiry, but no extension was obtained. The vehicle was seized at Beawar on 01.01.2023 at 5:45 pm after the E-way bills had lapsed. In these circumstances the orders premised on expiry of the E-way bills were upheld. [Paras 4]

Orders based on seizure for transportation on expired E-way bills were sustained.

Excuse of vehicle breakdown for non-extension of E-way bill - Burden to apply for extension upon delay - Breakdown of the vehicle and the repair bill did not excuse failure to extend the E-way bill and did not invalidate the seizure. - HELD THAT: - The petitioner claimed the vehicle broke down and produced a repair bill. However, the Court observed that the E-way bill required the goods to reach Noida on or before 31.12.2022. The petitioner's own case placed the vehicle at Rajasamand on 31.12.2022, which made it impossible for the vehicle to have reached the destination within the validity period. Consequently, the petitioner should have applied for extension of the E-way bill. The repair bill dated 31.12.2022 was not considered sufficient to justify non-extension or to rebut the basis for seizure. [Paras 5, 6]

The defence of vehicle breakdown, supported by the repair bill, was rejected; non-extension of the E-way bill remained the petitioner's responsibility.

Entitlement to refund where tax/penalty paid in respect of alleged E-way bill breach - Petitioner's claim for refund with interest was not allowed. - HELD THAT: - The petition sought refund of the amount paid on account of the orders. Having rejected the defence that the E-way bill expiry was excused by vehicle breakdown and finding that the E-way bills were not extended as required, the Court was not persuaded to direct a refund. The Court also recorded dissatisfaction with the repair bill dated on the date of expiry, further undermining the petitioner's claim for restitution. [Paras 6]

Prayer for refund with interest was dismissed along with the writ petition.

Final Conclusion: Writ petition dismissed; orders predicated on expiry of unextended E-way bills sustained and claim for refund with interest refused.

Show cause notice under Section 74(1) of the Jharkhand Goods and Services Tax Act, 2017 - jurisdiction to issue show cause notice - taxability of sale of securities (stocks) under GST - quashing of adjudicatory proceedings - disposal in terms of earlier order

Show cause notice under Section 74(1) of the Jharkhand Goods and Services Tax Act, 2017 - jurisdiction to issue show cause notice - taxability of sale of securities (stocks) under GST - Writ petition challenging issuance of a show cause notice (Form GST DRC-01 dated 01.02.2024) under Section 74(1) of the JGST Act, 2017, in respect of alleged taxable sale of securities was disposed of by reference to an earlier order. - HELD THAT: - The Court noted that the controversy raised in the present petition is similar to that examined in the order dated 8th July 2024 in W.P(C) No.3679 of 2024 in M/s Padam Kumar Jain v. State of Jharkhand and Ors. Rather than re-adjudicating the issue on its merits, the Court disposed of the present petition by directing disposal in terms of the detailed reasons and directions recorded in the earlier order. The disposal therefore adopts the determinative legal conclusions and reasoning set out in the 8th July 2024 order regarding the jurisdictional objection to the show cause notice and the taxability issue concerning sale of securities, without independently recounting those findings in this order.

Writ petition disposed of in terms of the order dated 8th July 2024 in W.P(C) No.3679 of 2024.

Final Conclusion: The writ petition challenging the show cause notice dated 01.02.2024 stands disposed of in terms of the Court's earlier order dated 8th July 2024 in W.P(C) No.3679 of 2024; the present order adopts the reasoning and directions contained in that earlier order.

Breach of principles of natural justice - right to personal hearing - quashing of order subject to conditions - remand for fresh consideration - opportunity to reply to show cause notice

Breach of principles of natural justice - right to personal hearing - Impugned order dated 09.09.2023 was passed without affording the petitioner a reasonable opportunity of hearing and therefore breached principles of natural justice. - HELD THAT: - The Court found on the record that the petitioner was not heard before the impugned order was passed. Although the respondent contends that an intimation and a show cause notice were issued and a personal hearing was offered on 25.08.2023, the material on file indicates that the petitioner did not receive a fair opportunity to contest the demand before the order was issued. In these circumstances, the Court concluded that the failure to afford a hearing amounted to a breach of principles of natural justice, warranting interference with the order. [Paras 5, 6]

Impugned order quashed on account of breach of principles of natural justice.

Quashing of order subject to conditions - remand for fresh consideration - opportunity to reply to show cause notice - Relief to be granted by quashing the order subject to conditions and directing fresh consideration after procedural compliance by the petitioner. - HELD THAT: - The Court exercised its remedial discretion to set aside the impugned order but imposed conditions to balance interests. The petitioner agreed to remit 10% of the disputed tax demand as a condition for remand. The Court allowed the petitioner a limited time to submit a reply to the show cause notice and directed the respondent, upon verification of the remittance, to afford a reasonable opportunity including a personal hearing and thereafter pass a fresh order within a stipulated timeframe. The directions are procedural and aimed at curing the defect of non-hearing while preserving the respondent's power to adjudicate the demand on merits. [Paras 4, 6]

Order quashed on condition that petitioner remits 10% of disputed tax demand within two weeks, may submit a reply within that period, and respondent shall, after satisfaction of the remittance, provide a personal hearing and pass a fresh order within two months of receipt of the reply.

Final Conclusion: The writ petition is allowed by quashing the impugned order dated 09.09.2023 for breach of natural justice, subject to the petitioner remitting 10% of the disputed tax demand within two weeks and submitting a reply; respondent to provide a personal hearing and pass a fresh order within two months thereafter.

Limitation for filing appeal - condonation of delay - pre-deposit requirement for statutory appeal - judicial interference with appellate limitation orders

Limitation for filing appeal - condonation of delay - pre-deposit requirement for statutory appeal - Appellate authority directed to receive and decide on merits an appeal filed after the limitation period, subject to satisfaction regarding the prescribed pre-deposit. - HELD THAT: - The Court examined the timeline: the assessment order dated 09.09.2023, expiry of the limitation period in early December 2023, expiry of the 30 day period for condonation in early January 2024, and the filing of the online appeal with the requisite 10% pre deposit on 31.01.2024. Having regard to these facts and the proximate filing shortly after the condonation window, the Court found it appropriate to set aside the appellate order rejecting the appeal on limitation grounds and to direct the appellate authority to receive and decide the appeal on its merits. The direction to receive and adjudicate the appeal was made subject to the appellate authority being satisfied that the stipulated 10% pre deposit had been received. [Paras 5, 6]

Impugned appellate order set aside; appellate authority directed to receive and dispose of the appeal on merits, subject to satisfaction that the 10% pre deposit was received.

Final Conclusion: Writ petition allowed to the extent that the appellate order rejecting the appeal on limitation grounds is set aside and the appeal is directed to be received and decided on merits upon verification of the prescribed pre deposit; no costs.

Principles of natural justice - imposition of GST on trade payables - imposition of GST on employee benefit expenses - reliance on balance sheet and profit and loss account as basis for turnover - remand for fresh consideration with opportunity of personal hearing

Principles of natural justice - personal hearing - show cause notice - Failure to afford a personal hearing and non-receipt of the show cause notice rendered the impugned order unsustainable - HELD THAT: - The Court noted that the petitioner contended it did not receive the show cause notice dated 30.09.2023 relied upon in the impugned order and that Reminder 3 dated 21.12.2023 records "not applicable" for the date of personal hearing. The respondents did not dispute that no personal hearing had been afforded. In the absence of a recorded opportunity for personal hearing and with the show cause notice not demonstrated to have been received, the impugned order suffered from breach of the principles of natural justice. For these reasons the order could not be sustained on the present record.

Impugned order quashed insofar as it was passed without affording a personal hearing and despite the petitioner not receiving the show cause notice; matter remitted for reconsideration.

Imposition of GST on trade payables - imposition of GST on employee benefit expenses - reliance on balance sheet and profit and loss account as basis for turnover - Validity of imposing GST by treating items from the balance sheet and profit and loss account as turnover without stated legal basis - HELD THAT: - The impugned order imposed GST on total trade payables by apparently taking the amount from the balance sheet as on 31.03.2018 and imposed GST on employee benefit expenses by taking amounts from the profit and loss account for the year 2017-18. The order does not explain the legal or factual basis by which such entries were treated as taxable turnover or liable to GST. Because the rationale for treating balance sheet and profit and loss entries as the basis for tax liability is unclear on the face of the order, the Court held that the order could not be sustained and requires fresh consideration after affording the assessee an opportunity to place relevant records on file.

Findings imposing GST on trade payables and on employee benefit expenses on the basis of balance sheet and P&L entries set aside and remanded for fresh adjudication.

Remand for fresh consideration with opportunity of personal hearing - Procedure and timetable for reconsideration on remand - HELD THAT: - The Court directed that the impugned order be quashed and the matter remanded. The petitioner was permitted to submit a reply to the show cause notice within three weeks from receipt of the Court's order. Upon receipt of the reply, the second respondent must provide a reasonable opportunity including a personal hearing and thereafter pass a fresh order. The fresh adjudication must be completed within two months from the date of receipt of the petitioner's reply. The Court thus confined the remand to reconsideration of the issues on the record after affording statutory opportunity of hearing.

Matter remanded; petitioner to file reply within three weeks and to be afforded personal hearing; fresh order to be passed within two months of receipt of the reply.

Final Conclusion: The impugned order dated 29.12.2023 is quashed insofar as it imposed GST on trade payables and employee benefit expenses without disclosing a legal basis and was passed without affording a personal hearing; the matter is remanded for fresh consideration after the petitioner files a reply within three weeks and is given a personal hearing, and a fresh order shall be passed within two months; no order as to costs.

Mandatory personal hearing under Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - denial of personal hearing vitiates assessment order - reliance on written reply and annexures does not dispense with personal hearing when statute mandates one - quashing and remand for fresh consideration with direction to afford opportunity of hearing

Mandatory personal hearing under Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - denial of personal hearing vitiates assessment order - reliance on written reply and annexures does not dispense with personal hearing when statute mandates one - Whether the assessment order dated 19.12.2023 is vitiated for failure to provide a personal hearing despite statutory mandate and despite the petitioner having filed a written reply with annexures - HELD THAT: - The Court found that sub-section (4) of Section 75 mandates a personal hearing either when so requested or when an adverse order is proposed. Although the petitioner had filed a detailed reply on 27.10.2023 and enclosed annexures, the statutory prescription for a personal hearing was not complied with. The respondent's reliance on the petitioner's written reply does not cure the denial of the mandatory personal hearing. For these reasons the assessment order cannot be sustained and requires reconsideration after affording the statutory opportunity of personal hearing. [Paras 5, 6]

Impugned order quashed and matter remanded for reconsideration; respondent directed to grant a reasonable opportunity including a personal hearing and to pass a fresh order within two months

Final Conclusion: The assessment order dated 19.12.2023 is quashed for failure to afford the mandatory personal hearing; the matter is remanded with a direction to provide a reasonable opportunity including personal hearing and to pass a fresh order within two months.

Maintainability of writ petition in presence of alternative statutory remedy - availability of alternative statutory remedy - statutory appeal under Section 107 of the CGST/SGST Act, 2017 - power of appellate authority to correct errors and call for documents

Maintainability of writ petition in presence of alternative statutory remedy - statutory appeal under Section 107 of the CGST/SGST Act, 2017 - power of appellate authority to correct errors and call for documents - Writ petition seeking to challenge confirmation of input tax credit and imposition of interest and penalty is not maintainable insofar as an efficacious statutory appeal under Section 107 of the CGST/SGST Act, 2017 is available. - HELD THAT: - The Court found that the petitioner has an equally efficacious remedy by way of statutory appeal under Section 107 of the CGST/SGST Act, 2017 against the impugned order. The appellate forum under Section 107 is vested with ample powers to correct mistakes of fact or law committed by the original authority and to call for such further pleadings or documents as it deems necessary for decision of the appeal. Given the availability of that statutory remedy, the Court declined to entertain the writ petition and disposed of it by granting liberty to the petitioner to prefer the statutory appeal. The petition was not decided on merits; the Court noted that the tax had already been deposited during the original proceedings but confined its order to procedural relief of permitting appeal. [Paras 2, 3]

Writ petition dismissed for want of maintainability; petitioner granted liberty to file appeal under Section 107 of the CGST/SGST Act, 2017.

Final Conclusion: The writ petition challenging confirmation of input tax credit and the levy of interest and penalty is dismissed for want of maintainability in view of the available statutory appeal under Section 107 of the CGST/SGST Act, 2017; petitioner permitted to pursue that remedy.

Assessment order denying TRAN-1 credit - failure to consider reply and documents not a jurisdictional error - appellate authority exercising original jurisdiction under Section 107(11) of the CGST/SGST Act - remedy by statutory appeal - limited scope of writ jurisdiction under Article 226/227 for non-jurisdictional errors

Failure to consider reply and documents not a jurisdictional error - limited scope of writ jurisdiction under Article 226/227 for non-jurisdictional errors - Omission by the assessing authority to consider the petitioner's reply and documents does not constitute a jurisdictional error warranting writ relief. - HELD THAT: - The High Court held that the assessing authority's alleged non-consideration of the petitioner's reply and supporting documents is an omission which, being non-jurisdictional and not an error of law, does not attract exercise of extraordinary writ jurisdiction under Article 226/227. Such factual or procedural omissions are amenable to correction by the statutory appellate process rather than by writ relief. The Court emphasised that mere failure to consider submissions by the assessing authority does not by itself convert the order into one susceptible to quashing by writ petition where no jurisdictional defect is shown. [Paras 2]

The contention that omission to consider replies/documents is a jurisdictional error was rejected and writ relief declined on that ground.

Appellate authority exercising original jurisdiction under Section 107(11) of the CGST/SGST Act - remedy by statutory appeal - Availability and adequacy of remedy by appeal under the CGST/SGST Act to correct omissions in the assessment order. - HELD THAT: - The Court observed that under the appellate power vested in the authority by Sub section (11) of Section 107, the Appellate Authority may exercise near-original jurisdiction, call for reports, make enquiries and consider arguments and documents afresh. Given the ample remedial powers of the Appellate Authority to rectify mistakes of the assessing officer, the High Court found no justification to entertain the writ petition and instead left the petitioner free to pursue the appellate remedy. [Paras 4]

Petitioner was directed to seek redress by way of statutory appeal before the Appellate Authority; writ petition dismissed.

Final Conclusion: Writ petition dismissed: the Court declined to interfere with the assessment order on the ground of non-consideration of replies/documents as that omission is non-jurisdictional and remediable by statutory appeal under Section 107(11) of the CGST/SGST Act; petitioner left free to prefer an appeal.

Right to be heard - notice uploaded on GST portal - garnishee proceedings - quashing and remand - remand subject to compliance - condition precedent for fresh adjudication - opportunity of personal hearing - lifting of bank attachment as corollary

Right to be heard - notice uploaded on GST portal - garnishee proceedings - Validity of the assessment order where the petitioner was not heard and notices/orders were communicated only by uploading on the GST portal. - HELD THAT: - The Court found from the impugned order that the tax demand arose from a mismatch between GSTR-3B returns and auto-populated GSTR-2A returns and that the petitioner was not heard before the assessment order was passed. Although the petitioner, as a registered person, was negligent in not monitoring the GST portal, the absence of a prior hearing rendered the assessment order susceptible to interference. The Court therefore concluded that the order could not stand without providing the petitioner a reasonable opportunity to contest the demand, particularly where garnishee proceedings had already commenced. [Paras 5]

Impugned assessment order quashed for non-provision of a hearing.

Quashing and remand - remand subject to compliance - condition precedent for fresh adjudication - opportunity of personal hearing - lifting of bank attachment as corollary - Remand of the matter for fresh consideration and the conditions and directions incident to such remand. - HELD THAT: - The Court remanded the matter to the respondent for reconsideration on terms. The petitioner was required to remit 10% of the disputed tax demand within two weeks from receipt of the order and was permitted to file a reply to the show cause notice within that period. Upon receipt of the petitioner's reply and satisfaction that the 10% has been paid, the respondent must provide a reasonable opportunity, including a personal hearing, and pass a fresh order within two months from receipt of the reply. As a consequence of quashing the assessment order, any bank attachment made in execution of the impugned order was directed to be raised. [Paras 6]

Matter remanded for fresh adjudication on the stated conditions; bank attachment to be lifted.

Final Conclusion: The assessment order dated 11.10.2023 is quashed for want of hearing and the matter is remanded for fresh consideration subject to the petitioner remitting 10% of the disputed demand and filing a reply; on compliance the respondent must provide a personal hearing and pass a fresh order within two months, and the bank attachment is to be lifted.

Principles of natural justice - comparison of returns for assessment - remand for fresh adjudication - conditional quashing of assessment - lifting of bank attachment as corollary

Principles of natural justice - comparison of returns for assessment - conditional quashing of assessment - remand for fresh adjudication - Validity of the assessment order dated 07.09.2023 and entitlement to fresh adjudication - HELD THAT: - The Court found that the adjudicating authority compared the turnover reflected in a single month's GSTR-3B return with the counter-party's GSTR-7 annual return, a comparison the Court described as unsustainable. Although the record shows that multiple opportunities for personal hearing were offered, the petitioner asserted non-hearing; having regard to the flawed comparison and the need to afford a proper opportunity of hearing, the impugned assessment order was quashed. The Court conditioned the quash on the petitioner remitting 10% of the disputed tax demand within three weeks and permitted the petitioner to file a reply to the show cause notice within that period. Upon receipt of the petitioner's reply and verification of the deposit, the first respondent was directed to provide a reasonable opportunity including a personal hearing and to pass a fresh order within two months thereafter. The order thus both set aside the earlier assessment for reconsideration on merits and specified the procedural steps and timeline for the remand disposal. [Paras 3, 5, 7]

Impugned assessment order quashed and remitted for fresh adjudication on condition that the petitioner deposits 10% of the disputed demand and files a reply within three weeks; fresh order to be passed after hearing within two months.

Lifting of bank attachment as corollary - Status of the bank attachment issued after the assessment order - HELD THAT: - As a direct consequence of quashing the assessment order, the Court directed that the bank attachment effected by the respondents stands raised. This relief was granted immediately and as corollary to the setting aside of the impugned assessment. [Paras 8]

Bank attachment is lifted.

Final Conclusion: The assessment order dated 07.09.2023 is quashed and remitted for fresh consideration because the comparison relied upon by the authority was unsustainable and the petitioner must be afforded a hearing; quash is conditional on payment of 10% of the disputed demand and filing a reply within three weeks, and the bank attachment is lifted.

Adequacy of particulars in show cause notice - Validity of assessment founded on a vague show cause notice - Right to personal hearing and opportunity to be heard - Quashing and remand for fresh adjudication

Adequacy of particulars in show cause notice - Validity of assessment founded on a vague show cause notice - The show cause notice lacked sufficient particulars to enable the petitioner to effectively respond, rendering the subsequent assessment unsustainable. - HELD THAT: - The court examined the show cause notice and its summary and found them to be vague, not specifying the nature of the alleged mismatch between GSTR-3B and GSTR-2A with adequate particulars. Where a taxpayer is not furnished with sufficient details of the alleged discrepancy, the taxpayer is deprived of a fair opportunity to meet the case against it. The existence of an earlier notice in Form GST ASMT-10 was noted, but the impugned show cause itself must contain adequate particulars to sustain an assessment; the Court found the impugned notice deficient in this respect and concluded the assessment founded on it could not stand. [Paras 4, 5]

The show cause notice is vitiated by vagueness and the assessment based thereon is quashed; matter remanded for reconsideration with liberty to issue a fresh show cause containing sufficient particulars.

Right to personal hearing and opportunity to be heard - Quashing and remand for fresh adjudication - No personal hearing was afforded under the show cause notice, which contributed to procedural infirmity requiring quashment and remand. - HELD THAT: - The Court observed that the show cause notice did not offer a personal hearing-the relevant entry being recorded as 'not applicable'. The absence of an opportunity for personal hearing, coupled with the vagueness of the notice, meant that the statutory right to be heard was not respected. In these circumstances, the appropriate remedy is to set aside the impugned order and permit the authority to commence fresh proceedings by issuing a fresh, particularised show cause and thereafter conducting proceedings in accordance with law, including offering an opportunity of hearing. [Paras 4, 5]

Proceedings quashed for procedural deficiency; respondent permitted to issue fresh, particularised show cause and to proceed thereafter in accordance with law, ensuring opportunity for hearing.

Final Conclusion: The impugned assessment order dated 19.10.2023 is quashed on grounds of a vague show cause notice and denial of personal hearing; the matter is remanded for reconsideration and the respondent may issue a fresh show cause with sufficient particulars and proceed in accordance with law.

Mistake apparent on the face of the record - rectification under section 154 - penalty under Section 270A - immunity under Section 270AA - merger of assessment into rectification order - credit of tax deducted at source

Penalty under Section 270A - mistake apparent on the face of the record - credit of tax deducted at source - Validity of the penalty order dated 27 September 2022 passed under Section 270A when rectification under Section 154 was pending and TDS credit was subsequently granted - HELD THAT: - The Court found that the Assessing Officer, while completing the assessment dated 30 March 2022, failed to give credit for TDS shown in Form 16 and Form 26AS. A rectification application under Section 154 was filed and, following this Court's interim directions, the rectification order dated 3 January 2023 allowed the TDS credit and reduced the tax demand to a nominal amount which was paid. Given that the assessment order's core infirmity (non-grant of TDS) was corrected by the rectification order, the foundation for initiating and completing penalty proceedings under Section 270A no longer survived. The Court held that penalty proceedings which were founded on the earlier assessment order were rendered inconsequential once the rectification order extinguished the erroneous demand and accounted for the TDS credit. [Paras 11, 16]

The penalty order dated 27 September 2022 is quashed and set aside.

Rectification under section 154 - merger of assessment into rectification order - Effect of the rectification order dated 3 January 2023 on the assessment order dated 30 March 2022 and consequential proceedings - HELD THAT: - The Court observed that the rectification order corrected the material mistake in the assessment by granting the TDS credit and thereby produced a fresh demand which the petitioner complied with. In consequence, the assessment order of 30 March 2022 lost its operative character and 'merged' into the rectification order; proceedings that depended on the original assessment cannot continue to prejudice the petitioner. The Court therefore held that no further proceedings under the original assessment order ought to be continued. [Paras 11, 16]

The assessment order dated 30 March 2022 stands extinguished and no proceedings under that order shall be taken against the petitioner.

Immunity under Section 270AA - rectification under section 154 - Whether the petitioner's application for immunity under Section 270AA filed after the rectification order should be proceeded with - HELD THAT: - The Court noted that the petitioner filed an application under Section 270AA after the rectification order was passed and the corrected, nominal demand was discharged. Given that the rectification order removed the basis of the assessment and the penalty proceedings, the Court considered that there was no need to proceed further with the application under Section 270AA. The decision to decline further consideration of the immunity application flows from the rectification having rendered the underlying assessment and penalty proceedings inconsequential. [Paras 12, 17]

The petitioner's application under Section 270AA need not be taken forward.

Final Conclusion: The petition is allowed: the penalty order dated 27 September 2022 is quashed; the assessment order dated 30 March 2022 is rendered extinguished by the rectification order dated 3 January 2023 and no proceedings under it shall be continued; and the petitioner's Section 270AA application need not be proceeded with. No costs.

Immunity from penalty under Section 270AA - under-reporting due to mis-reporting - opportunity of hearing - setting aside administrative order for failure to consider contentions - remand for fresh consideration

Setting aside administrative order for failure to consider contentions - opportunity of hearing - Impugned order passed under Section 270AA set aside on account of failure to consider the petitioner's contentions and absence of opportunity of hearing. - HELD THAT: - The impugned order rejecting the petitioner's application for immunity under Section 270AA was passed without considering the petitioner's contentions, the petitioner having sought an adjournment but being unable to do so due to technical difficulties. The Court recorded that the impugned order was passed without considering the petitioner's contentions and, in view of the Revenue's concession, set aside the order and directed that the matter be reconsidered afresh after affording the petitioner an opportunity of being heard in accordance with law. [Paras 7, 9]

Impugned order set aside and remitted for fresh decision after affording opportunity of hearing to the petitioner.

Immunity from penalty under Section 270AA - under-reporting due to mis-reporting - remand for fresh consideration - Application for immunity from imposition of penalty under Section 270AA to be considered afresh by the Assessing Officer. - HELD THAT: - Although the Assessing Officer recorded that the case involved under-reporting consequent to mis-reporting (and the AO had made an addition on account of negative interest spread), the Court did not adjudicate the merits of whether the case constituted mis-reporting. Instead, the Court remanded the question of grant or refusal of immunity under Section 270AA to the AO for fresh consideration, directing the AO to pass a fresh order after affording the petitioner an opportunity of being heard. [Paras 3, 4, 8, 9]

Matter remanded to the Assessing Officer to consider the petitioner's claim for immunity under Section 270AA afresh and to pass a fresh order after hearing the petitioner.

Final Conclusion: Impugned order dated 23.09.2024 under Section 270AA is set aside; matter remitted to the Assessing Officer to decide the petitioner's application for immunity afresh after providing an opportunity of hearing; petition disposed of accordingly.

Jurisdiction to initiate penalty proceedings under Section 271(1)(c) for concealment or furnishing inaccurate particulars - effect of filing modified return under sub section (3) of Section 92CD in consequence of an Advance Pricing Agreement - operation of a Unilateral Advance Pricing Agreement (APA) on assessment, modified return and penalty proceedings

Jurisdiction to initiate penalty proceedings under Section 271(1)(c) for concealment or furnishing inaccurate particulars - effect of filing modified return under sub section (3) of Section 92CD in consequence of an Advance Pricing Agreement - Respondents prima facie lacked jurisdiction to initiate the impugned penalty proceedings under Section 271(1)(c) in view of the APA and the modified return filed within the prescribed period. - HELD THAT: - The petitioner entered into a Unilateral APA on 7 May 2018, and filed a modified return on 31 August 2018 under the statutory provision enabling modification consequent to an APA. The modified return, filed within the period permitted by law consequent to the APA, incorporated the transfer pricing adjustment reflected in the APA. On these facts the Court found prima facie that there could not have been an event of concealment of income by the petitioner and therefore concluded that the initiation of penalty proceedings under Section 271(1)(c) was not maintainable without further examination. In view of this prima facie conclusion the Court considered it appropriate to stay the impugned penalty order until respondents file their response and the matter is further considered.

Impugned order under Section 271(1)(c) stayed until further orders; respondents directed to file a reply.

Operation of a Unilateral Advance Pricing Agreement (APA) on assessment, modified return and penalty proceedings - need for fresh adjudication in light of compliance report, modified return and APA - The matter was remitted for fresh consideration by the respondents of the question whether penalty proceedings are maintainable in light of the APA and the modified return. - HELD THAT: - The Income Tax Appellate Tribunal had earlier directed adjudication afresh on the payment claimed as management fees in light of the compliance report, the modified return and the APA. The High Court recorded that those facts and the filing of the modified return called for fresh consideration by the assessing authority/penalty authority before any final determination on concealment and penalty. Accordingly the Court ordered that respondents file a reply affidavit addressing these contentions and proceed to adjudicate the issue afresh in the light of the APA and the modified return.

Respondents to file a reply affidavit and re-examine and adjudicate the maintainability of the penalty afresh in light of the APA and the modified return.

Final Conclusion: On prima facie consideration the High Court stayed the impugned penalty order dated 25 September 2024 and directed respondents to file a reply and re-adjudicate the question of maintainability of penalty in the light of the APA and the modified return; matter posted to 26 November 2024.

Notice under Section 143(2) of the Income tax Act - prescribed income tax authority - authorization under Rule 12E of the Income tax Rules - service versus issuance of notice - validity of notices under Section 142(1) where antecedent 143(2) notice is challenged - centralised/NaFAC assessment and Section 144B

Notice under Section 143(2) of the Income tax Act - prescribed income tax authority - authorization under Rule 12E of the Income tax Rules - Validity of the notice dated 23.06.2024 issued under Section 143(2) by the Assistant Commissioner authorised by CBDT - HELD THAT: - Section 143(2) empowers either the Assessing Officer or the prescribed income tax authority to serve a notice. Rule 12E enables the CBDT to authorise an income tax officer of not less than the rank of Income tax Officer to act as the prescribed authority for purposes of Section 143(2). The CBDT notifications dated 12.05.2022 and 28.05.2022 authorised the Assistant Commissioner/Deputy Commissioner (International Taxation), Circle 1(1)(1), Delhi as the prescribed income tax authority. The impugned notice dated 23.06.2024 was issued by that authorised Assistant Commissioner; accordingly, the officer had jurisdiction to issue the notice under Section 143(2). [Paras 5, 8, 9, 10]

The notice dated 23.06.2024 under Section 143(2) issued by the authorised Assistant Commissioner is valid.

Service versus issuance of notice - notice under Section 143(2) of the Income tax Act - Whether a prescribed income tax authority can only 'serve' but not 'issue' a notice under Section 143(2) - HELD THAT: - The petitioner contended that even if an officer is a prescribed income tax authority, that officer can merely 'serve' a notice and not 'issue' it. A plain reading of Section 143(2) does not support this distinction; the provision contemplates that either the Assessing Officer or the prescribed income tax authority may issue a notice. The court rejected the artificial separation between 'serve' and 'issue' in this context. [Paras 6, 7, 12]

The contention that a prescribed income tax authority can only serve and not issue a notice under Section 143(2) is rejected.

NaFAC and centralised assessment under Section 144B - authorization under Rule 12E of the Income tax Rules - Whether only authorised officers of the National Faceless Assessment Centre (NaFAC) can be prescribed authorities under Rule 12E - HELD THAT: - The petitioner argued that only NaFAC officers could be authorised as prescribed authorities to issue notices under Section 143(2) in furtherance of automation. The statutory language of Section 143(2) and Rule 12E does not confine the CBDT's power to authorise only NaFAC officers; Rule 12E contemplates authorisation of an income tax authority not below the rank of Income tax Officer. The court found no basis for restricting the CBDT's authorisation to NaFAC officers alone and rejected the proposition. [Paras 11]

The contention that only NaFAC officers can be authorised as prescribed income tax authorities under Rule 12E is rejected.

Validity of notices under Section 142(1) where antecedent 143(2) notice is challenged - Whether notices dated 10.07.2024 and 06.09.2024 under Section 142(1) are time barred or invalid because the antecedent 143(2) notice was issued without jurisdiction - HELD THAT: - The petitioner contended that the Section 142(1) notices issued by the Assessing Officer, Central Circle 20, Delhi, were beyond limitation since the antecedent Section 143(2) notice was invalid. Having held that the Section 143(2) notice was validly issued by the authorised Assistant Commissioner, the premise for attacking the Section 142(1) notices on limitation grounds fails. Consequently, the Assessing Officer's issuance of the Section 142(1) notices and proceeding to complete assessment cannot be faulted on the ground asserted. [Paras 3, 13, 14]

The Section 142(1) notices dated 10.07.2024 and 06.09.2024 are not rendered invalid or time barred by the challenge to the Section 143(2) notice.

Final Conclusion: All challenges to the impugned notices were rejected: the Section 143(2) notice dated 23.06.2024 was validly issued by the CBDT authorised Assistant Commissioner; the prescribed authority may issue (not merely serve) such a notice; there is no statutory limitation to confine authorisation to NaFAC officers; and consequential attacks on the Section 142(1) notices fail. The petition is dismissed.

Violation of principles of natural justice - personal hearing - service of notice and acknowledgment - statutory appeal and limitation - entertainment of belated appeal without reference to limitation subject to statutory conditions - pre-deposit condition

Personal hearing - service of notice and acknowledgment - violation of principles of natural justice - Writ petition could not be maintained on the ground of denial of personal hearing because notice of personal hearing was served and acknowledged and a manuscript reply was filed. - HELD THAT: - The Court examined the original file produced by the Revenue and found that a notice of personal hearing dated 11.02.2019 had been issued and was received by the appellant on 13.02.2019 with the appellant's seal and signature. The record also demonstrated that the appellant sent a manuscript reply on 19.02.2019. In view of these facts, the contention that no opportunity of personal hearing was afforded was rejected and the writ petition could not be sustained on the ground of breach of natural justice. [Paras 6, 7, 8]

Found that personal hearing was afforded; writ petition unsustainable on natural justice ground.

Statutory appeal and limitation - entertainment of belated appeal without reference to limitation subject to statutory conditions - pre-deposit condition - Impugned order of the writ Court permitting the filing of a statutory appeal within a limited period and directing the Appellate Authority to entertain such appeal without reference to limitation but subject to compliance with statutory conditions (including pre-deposit) was sustained; intra Court appeal dismissed. - HELD THAT: - The writ Court had permitted the writ petitioner to file the statutory appeal within four weeks and directed that the First Appellate Authority entertain the appeal without reference to limitation while ensuring compliance with all other statutory conditions, including pre-deposit. The High Court declined to entertain merits purportedly raised before it at this stage, noting that the proper remedy was the statutory appeal. The High Court observed delay in prosecuting the current intra Court appeal and therefore was not inclined to interfere with the writ Court's direction. Consequently the High Court sustained the impugned order while granting two weeks' time to the appellant to file the statutory appeal before the appellate forum and dismissed the intra Court appeal. [Paras 3, 9, 10, 11]

Sustained the writ Court's direction to permit filing of statutory appeal without reference to limitation subject to statutory conditions; dismissed the intra Court appeal and granted two weeks to file the appeal.

Final Conclusion: The High Court found that no denial of personal hearing occurred, sustained the writ Court's direction allowing a statutory appeal to be filed within a limited period without regard to limitation subject to compliance with statutory conditions including pre-deposit, dismissed the intra Court appeal, and granted the appellant two weeks to file the statutory appeal; if no appeal is filed, the Revenue may proceed in accordance with law.

Foreign Tax Credit - Form 67 - Directory versus mandatory nature of procedural rules - Reassessment limited to consideration of foreign tax credit - Double taxation avoidance under India-UK tax treaty

Form 67 - Directory versus mandatory nature of procedural rules - Foreign Tax Credit - Filing of Form 67 is not a mandatory pre-condition to claim Foreign Tax Credit and delay in filing may be condoned where reasonable cause exists. - HELD THAT: - The Court held that Rule 128/Form 67 is directory and not mandatory for the purpose of claiming Foreign Tax Credit, following the reasoning in a similar High Court decision (Duraiswamy Kumaraswamy ) and the principle in the Supreme Court decision referred to in the judgment (CIT v. G.M.Knitting Industries ). The petitioner filed the return of income for assessment year 2020-21 declaring foreign income and claiming FTC, but could not upload Form 67 contemporaneously due to inability to obtain documents abroad during the COVID outbreak; Form 67 was uploaded later. The circumstances were found reasonable and genuine, and in light of the settled principle that procedural requirements for filing supporting forms are directory where the claim is made before completion of assessment, the delay in filing Form 67 was condoned and the petitioner's entitlement to FTC was sustained. [Paras 5, 6, 7]

Delay in filing Form 67 was condoned and Form 67 held to be directory in nature for claiming Foreign Tax Credit.

Reassessment limited to consideration of foreign tax credit - Foreign Tax Credit - The order rejecting the claim of Foreign Tax Credit is set aside and the matter is remitted to the assessing authority to reassess only on the aspect of the rejected FTC claim. - HELD THAT: - Having accepted that the filing of Form 67 was delayed for genuine reasons and is directory in nature, the Court set aside the impugned order insofar as it disallowed the FTC. The matter is remitted to the respondent to make reassessment and to give due credit for the United Kingdom tax paid, limited to reconsideration of the FTC claim. The Court directed that the respondent consider only the aspect of rejection of the foreign tax credit within eight weeks of receipt of the order, subject to the petitioner complying with the conditional payment ordered by the Court. [Paras 8]

Impugned order dated 07.03.2024 set aside insofar as it disallowed the FTC and matter remitted for reassessment limited to the FTC claim.

Final Conclusion: Writ petition allowed: the impugned order rejecting the Foreign Tax Credit is set aside and the matter remitted to the assessing authority to reassess and grant FTC after due consideration; relief is subject to the petitioner making the directed conditional payment within the time prescribed.

Reopening of assessment - change of opinion - failure to disclose material/tangible material - limitation for reopening after four years

Reopening of assessment - change of opinion - limitation for reopening after four years - Validity of the notice issued to reopen the assessment and the order overruling the objection to reopening. - HELD THAT: - The Court found that the assessment under Section 143(3) had been completed after the assessee furnished all required documents including the sale agreement and the ancillary non compete/non solicitation agreement. The return disclosed the consideration received but was treated as capital gains in the original assessment. In these circumstances the reopening notice issued after the four year normal period is consonant with a change of opinion rather than discovery of tangible material. Because no fresh tangible material or failure to disclose was shown to justify invoking the extended period, the reopening notice and the order overruling the objection are vitiated by being inspired by change of opinion and by being issued beyond the four year limitation without requisite tangible material. [Paras 10, 11]

The notice of reopening and the consequential order overruling the objection are quashed.

Reopening of assessment - prematurity of writ petition - Whether the Writ Petition was premature for challenging the reopening notice. - HELD THAT: - Respondents contended the petition was premature because the reopening only initiated assessment proceedings and any adverse order could be challenged before appellate authorities. The Court, however, proceeded to consider the merits and found the reopening to be without jurisdictional justification. Having adjudicated the validity of the notice and quashed it, the contention of prematurity did not preclude relief in the present petition. [Paras 6, 8, 12]

The plea of prematurity is not sustained; the petition is allowed on merits.

Final Conclusion: The Writ Petition is allowed; the impugned notice of reopening and the order overruling the objection are quashed. No costs.

Transfer of cases under Section 127 - centralisation for coordinated investigation - search and seizure under Section 132 - opportunity to file objections and principles of natural justice - place of seizure as relevant for jurisdictional transfer - public interest and administrative discretion in transfers

Transfer of cases under Section 127 - centralisation for coordinated investigation - place of seizure as relevant for jurisdictional transfer - public interest and administrative discretion in transfers - Sufficiency of material to transfer the petitioner's case from Chennai to Central Circle, Kolkata - HELD THAT: - The Court accepted the respondents' factual position that incriminating documents, seized pursuant to a search under Section 132, were inter-connected and located in the Kolkata Central Circle such that coordinated consideration of those materials was necessary. Given that multiple related cases and documents were gathered in Kolkata, the transfer was held to serve the purpose of harmonious and co ordinated investigation and to be within the administrative discretion entrusted by Section 127. The Court observed that transfer to the circle where material evidence was collected is appropriate even though the assessee's registered office is in Chennai, and that transfers for effective investigation and in public interest are permissible and not impermissible merely because they cause inconvenience to the assessee. The Court found no irregularity or infirmity in the issuance of the impugned notification ordering centralisation of the petitioner's case in Kolkata. [Paras 11, 15, 17, 19]

The respondents possessed sufficient material and justification to transfer the petitioner's case to DCIT, Central Circle, Kolkata for coordinated investigation.

Opportunity to file objections and principles of natural justice - transfer of cases under Section 127 - Whether the petitioner was afforded opportunity to file objections and a personal hearing before the impugned notification was issued - HELD THAT: - The show cause notice dated 27.12.2023 expressly set out the reasons for proposed centralisation and granted the petitioner five days to file objections in writing. The petitioner filed a written reply on the same date raising objections including inconvenience and locality concerns. The Court found that the 1st respondent considered the petitioner's written reply before issuing the notification on 15.05.2024. On these facts the Court concluded that adequate opportunity to file objections was provided and that consideration of the written reply cured the contention of breach of natural justice; the absence of a separate personal hearing did not render the notification invalid in the circumstances. [Paras 11, 12, 16]

The petitioner was given an opportunity to file objections which were considered; no infirmity on grounds of denial of natural justice is made out.

Final Conclusion: Writ petition dismissed: the impugned notification transferring the petitioner's income tax file to DCIT, Central Circle, Kolkata for centralised/co ordinated investigation is upheld and the challenge is rejected; no costs ordered.

Interplay between Section 234E and Section 200A - Late fee for delayed furnishing of TDS/TCS statements - Computation of fee at the time of processing TDS statements - Retrospective application of statutory amendment - Power to impose or waive late fee while processing under Section 200A

Interplay between Section 234E and Section 200A - Computation of fee at the time of processing TDS statements - Validity of imposing late fee under Section 234E while processing TDS statements under Section 200A for periods prior to insertion of Section 200A(1)(c) - HELD THAT: - The Court followed the reasoning in M/s. True Blue Voice India Private Ltd. that although Section 234E (levy of fee for late furnishing of TDS/TCS statements) came into force from 01.07.2012, there was no mechanism in Section 200A to compute and impose that fee at the time of processing TDS statements until Section 200A(1)(c) was inserted with effect from 01.06.2015. The objects and reasons for the amendment show it was intended to enable computation of the fee during processing because the original Section 200A did not provide for such determination. Consequently, where returns were processed under Section 200A before the insertion of clause (c), authorities lacked power to impose the Section 234E late fee in the processing exercise.

Imposition of late fee under Section 234E while processing TDS statements under Section 200A prior to insertion of Section 200A(1)(c) is not permissible.

Late fee for delayed furnishing of TDS/TCS statements - Power to impose or waive late fee while processing under Section 200A - Validity of the impugned Demand Intimation Letters dated 03.10.2016 which imposed late fee under Section 234E while processing TDS statements - HELD THAT: - Applying the principle that Section 200A did not permit computation or imposition of the Section 234E fee until 01.06.2015, the Court held that the respondents ought not to have imposed the late fee when processing the petitioner's TDS statements. The Court accepted the parties' reliance on the cited precedent and found no basis for retrospective application of the amendment to validate imposition of the fee for the earlier processing. No remand or further factual enquiry was required in this petition.

The Demand Intimation Letters dated 03.10.2016 imposing the Section 234E late fee are set aside.

Final Conclusion: The writ petition is allowed; the impugned demand intimations dated 03.10.2016 are set aside on the ground that Section 234E could not be applied while processing TDS statements under Section 200A prior to insertion of Section 200A(1)(c), and the petition is disposed of with no costs.

Violation of principles of natural justice in penalty proceedings - Penalty under Section 271(1)(c) - procedure and limitation for initiation and disposal - Remand for fresh consideration with opportunity of personal hearing

Violation of principles of natural justice in penalty proceedings - Penalty under Section 271(1)(c) - procedure and limitation for initiation and disposal - Impugned penalty orders dated 31.07.2024 were set aside on the ground that the petitioner was not afforded adequate opportunity of hearing. - HELD THAT: - The Court found that ITAT had passed orders on 09.01.2024 and 10.01.2024 but the Revenue remained inactive for nearly five months and issued a show-cause notice only on 19.07.2024, at the fag end of the six-month period for passing penalty orders. The petitioner sought adjournment and additional time to file documents, but the respondent granted only a short period and thereafter rejected the petitioner's submissions and passed the penalty orders on 30.07.2024 and 31.07.2024. The Court recorded that such conduct, giving the petitioner an abrupt notice and declining reasonable time for filing material, violated the principles of natural justice and precluded fair opportunity to be heard before imposition of penalty under Section 271(1)(c). On that basis the Court was inclined to and did set aside the impugned orders. [Paras 7]

Impugned orders dated 31.07.2024 imposing penalty under Section 271(1)(c) are set aside for violation of natural justice.

Remand for fresh consideration with opportunity of personal hearing - Matters remanded to the respondent for fresh consideration with directions to permit filing of documents and to grant personal hearing before passing final penalty orders. - HELD THAT: - Having set aside the impugned orders for denial of adequate opportunity, the Court directed that the petitioner shall file all available documents and any additional reply within the period specified from receipt of certified copy of the order. The respondent was directed to issue a fresh notice granting 21 days for personal hearing, on which the petitioner must appear and produce documents; thereafter the respondent must consider the material and pass final orders in accordance with law and in terms of the ITAT orders dated 09.01.2024 and 10.01.2024. The remand was for fresh consideration permitting compliance with principles of natural justice and does not constitute final adjudication on the merits of penalty liability. [Paras 8]

Matters remanded for fresh consideration; petitioner to file documents within two (3) weeks and respondent to grant 21 days' personal hearing and pass final orders in accordance with law.

Final Conclusion: Writ Petitions allowed: penalty orders dated 31.07.2024 set aside for breach of natural justice and remitted to the respondent for fresh consideration after the petitioner is permitted to place documents and is afforded a personal hearing in accordance with the directions of the Court.

Condonation of delay in filing income-tax returns - Quashing of administrative order rejecting condonation application - Non-willful delay due to unforeseen circumstances - Direction to permit filing upon compliance

Condonation of delay in filing income-tax returns - Non-willful delay due to unforeseen circumstances - Quashing of administrative order rejecting condonation application - Direction to permit filing upon compliance - Whether the delay in filing the Income Tax Return for Assessment Year 2021-22 should be condoned and the order rejecting the condonation application set aside - HELD THAT: - The Court found that the petitioner's delay in filing the return for AY 2021-22 arose from unforeseen circumstances - suspension of company operations due to the COVID-19 lockdown, resultant financial distress including disconnection of power, and corruption/loss of the computer server backups which prevented timely reconstruction of accounts. The petitioner reconstructed records and filed the return but the IT portal refused acceptance and the respondent rejected the condonation application without adequately considering these aspects. The Court observed that the delay was neither willful nor wanton and noted the petitioner's promptness in filing returns in other assessment years, indicating the petitioner was not a habitual defaulter. For these reasons the Court held that the respondent ought to have considered the stated circumstances before rejecting the application and was satisfied that the reasons for delay were genuine and reasonable. The Court exercised its discretion to condone the delay, while imposing a compliance condition to secure equitable relief and to mark the exceptional nature of the indulgence. As per the order, upon proof of compliance with the condition, the respondent is to proceed to pass assessment orders in accordance with law. [Paras 6, 7]

Delay in filing the return for AY 2021-22 is condoned; the impugned order dated 03.02.2023 is set aside; the petitioner shall obtain the benefit of this order only upon compliance with the Court's payment condition and upon production of proof to the respondent, who shall thereafter pass assessment orders in accordance with law.

Final Conclusion: Writ Petition allowed: condonation granted and impugned rejection set aside, subject to the petitioner's compliance with the Court's specified condition and production of proof, following which the respondent shall proceed with assessment in accordance with law.

Reopening of assessment and formation of belief on tangible material - Burden to substantiate purchases and contemporaneous quantitative records in construction contracts - Deletion of addition where supporting documents are furnished and not controverted - Prohibition against double taxation by taxing same liability in two assessment years

Burden to substantiate purchases and contemporaneous quantitative records in construction contracts - Deletion of addition where supporting documents are furnished and not controverted - Prohibition against double taxation by taxing same liability in two assessment years - Deletion of addition of Rs.4,68,796 on account of alleged bogus purchases in assessment year 2011-12 was justified and upheld. - HELD THAT: - The Tribunal examined the second-round proceedings conducted pursuant to restoration by a coordinate bench which had held that reopening was valid but granted the assessee opportunity to furnish quantitative details. The assessee uploaded audited accounts, purchase ledgers, bank statements, work orders and sale statements to substantiate purchases and consumption in construction activity. The AO rejected the material on the ground that the assessee did not provide date-wise month-to-month quantity reconciliation in the format prescribed by the AO. The Tribunal agreed with the CIT(A) that the AO's format was designed for traders with opening and closing stocks and was not suitable for a construction contractor, and that failure to furnish information in the AO's prescribed format alone cannot be the sole basis to treat purchases as bogus. The documents produced were neither controverted by the AO nor shown to be false. While the Tribunal accepted that an amount corresponding to sundry creditors was disallowed in the subsequent year and could not be taxed twice, the deletion of the remaining balance (Rs.4,68,796) was sustained on the basis that the assessee had furnished credible supporting material and the AO had not demonstrated that those documents were false or insufficient to establish genuineness. [Paras 6, 8, 9]

Impugned deletion of the addition of Rs.4,68,796 is sustained and the Revenue's ground is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the remaining addition of Rs.4,68,796 for AY 2011-12, on the basis that the assessee furnished supporting documents which were not controverted and the AO's prescribed format deficiency could not alone render the purchases bogus; additionally, double taxation was avoided with respect to amounts disallowed in AY 2012-13.

Addition on account of alleged bogus purchases - estimation of unexplained profit - evidential value of bills, bank payments and supplier confirmation - acceptance of recorded sales as corroboration - precedent supporting deletion where purchases are supported and no evidence of recoupment

Addition on account of alleged bogus purchases - estimation of unexplained profit - evidential value of bills, bank payments and supplier confirmation - acceptance of recorded sales as corroboration - Whether the addition of gross profit estimated on alleged bogus purchases should be sustained - HELD THAT: - The assessing officer estimated gross profit at 12.50% on purchases from a supplier alleged to have issued accommodation/ bogus sales bills, following a High Court decision applied by the AO. The AO, however, did not disbelieve receipt and sale of materials and accepted the sales recorded by the assessee. The assessee produced purchase details, stock register for the relevant Aluminium section, payment evidence and supplier confirmation; there was no evidence that payments were routed back to the assessee. Applying the Supreme Court's reasoning in PCIT v. Tejua Rohitkumar Kapadia (noting that where purchases are supported by bills, payments by account-payee cheque, supplier confirmation and absence of evidence of recycling, and sales shown from such purchases are accepted, addition cannot be sustained), the Tribunal held that the facts here are identical and the estimated addition cannot be maintained. The Tribunal also observed that the limited absence of stock-register entries for other product sections did not vitiate the sufficiency of the stock details furnished for the impugned Aluminium purchases.

The addition of gross profit made by the AO and confirmed by the CIT(A) on account of alleged bogus purchases is deleted and the appeal is allowed.

Final Conclusion: The Tribunal set aside the impugned addition relating to alleged bogus purchases for AY 2012-13, deleted the estimated gross profit, and allowed the assessee's appeal.

Taxability of software updates and support services - Fee for Technical Services (FTS) - Fee for Included Services (FIS) - Article 12(4)(b) of India - USA DTAA - Article 12(4)(a) of India - USA DTAA - royalty under Article 12(3) - "make available" condition - computation of interest under section 244A

Fee for Included Services (FIS) - Article 12(4)(b) of India - USA DTAA - "make available" condition - taxability of software updates and support services - Receipts from supply of software updates and patches and on-call support services are not taxable as FIS under Article 12(4)(b) of the India-USA DTAA. - HELD THAT: - The Tribunal found that the assessee had separately invoiced software updates and on-call support services, so the Assessing Officer's factual premise of an undifferentiated aggregate receipt was incorrect (paras 9). Earlier proceedings established that the receipts could not be treated as royalty under Article 12(3) in light of the Tribunal's reliance on the Supreme Court ratio in Engineering Analysis Centre of Excellence Pvt. Ltd., and there was no change in the distribution agreement or facts (paras 11-12). Article 12(4)(b) can be invoked only if the service provider "makes available" technical knowledge, know how, skill or experience such that the service recipient can independently perform the services in future. The Revenue produced no cogent material to demonstrate satisfaction of the make available condition; general observations in the assessment orders and DRP direction were insufficient (paras 12-13). The continuing provision of on call support year after year indicates that technical knowledge or skill was not transferred to enable independent performance by the recipient (para 14). On these findings the Tribunal concluded that the receipts do not satisfy the make available requirement and therefore are not taxable as FIS under Article 12(4)(b) (para 15). [Paras 11, 12, 13, 14, 15]

The receipts are not taxable as FIS under Article 12(4)(b) of the India-USA DTAA.

Computation of interest under section 244A - Interest on refund claimed by the assessee under section 244A is to be verified and computed by the Assessing Officer in accordance with law. - HELD THAT: - The assessee contended that interest under section 244A should be computed up to the date of issuance of the refund voucher (para 17). Having considered rival submissions, the Tribunal directed the Assessing Officer to verify the assessee's claim and compute interest in accordance with law, thereby remitting the quantification/verification to the Assessing Officer (paras 17-18). [Paras 16, 17, 18]

Assessing Officer to verify the claim and compute interest under section 244A in accordance with law.

Final Conclusion: The appeals are partly allowed: the Tribunal holds that the receipts are not taxable as FIS under Article 12(4)(b) of the India-USA DTAA and directs the Assessing Officer to verify and compute interest under section 244A in accordance with law.

Revision under section 263 - erroneous and prejudicial to the interest of the revenue - deeming provisions under section 69A and special rate under section 115BBE - characterisation of surrendered/unaccounted receipts as business income versus deemed income - prior approval under section 153D and its effect on revisional jurisdiction - Explanation 2 to section 263 - requirement of verification/inquiry - change of opinion doctrine

Revision under section 263 - erroneous and prejudicial to the interest of the revenue - Explanation 2 to section 263 - requirement of verification/inquiry - Validity of the Principal Commissioner's initiation of proceedings under section 263 to reclassify the addition made by the Assessing Officer. - HELD THAT: - The Tribunal found that the Assessing Officer had conducted enquiries, relied upon seized material, and consciously treated the extrapolated cash receipts as business income after giving opportunities to the assessee; the addition was contested and pending in appeal. The PCIT's action amounted to substituting her view on tax characterisation (only to impose a different rate) without demonstrating that the AO's order was legally erroneous and prejudicial to revenue. Explanation 2 to section 263 requires that failure of inquiry by the AO be shown before revisional power is exercised; that showing was absent. Where a plausible view taken by the AO is debatable and the matter is under dispute, exercise of revisional jurisdiction is impermissible as mere difference of opinion does not make the order erroneous and prejudicial. [Paras 21, 22]

PCIT's exercise of jurisdiction under section 263 in respect of the assessment orders for AY 2018-19 and AY 2019-20 was erroneous and is quashed.

Deeming provisions under section 69A and special rate under section 115BBE - characterisation of surrendered/unaccounted receipts as business income versus deemed income - Whether the addition should have been taxed as unexplained money under section 69A read with section 115BBE, instead of as business income at normal rates. - HELD THAT: - The Tribunal observed that the facts did not show the assessee to be owner of undisclosed money, bullion or valuables in the sense required by section 69A; the AO had accepted and treated the seized material as indicating unrecorded business sales and assessed the amount as business income after enquiry. The PCIT did not demonstrate that the AO failed to examine the requisite nexus or that the foundational conditions for invoking the deeming provisions existed. Given that reasonable contrary views were available and the matter was disputed, recharacterisation to invoke section 69A/115BBE could not be sustained under section 263. [Paras 21, 22]

PCIT's direction to tax the added amount under section 69A/115BBE was held to be unsustainable and is quashed.

Prior approval under section 153D and its effect on revisional jurisdiction - Effect of prior approval under section 153D on the validity of revisional proceedings under section 263. - HELD THAT: - The Tribunal considered authorities and the parties' contentions on whether an assessment passed with prior approval under section 153D can be revised under section 263 without first revising the approval. Although the PCIT did not impugn the 153D approval, the Tribunal treated the broader consistency and the existence of plausible conclusions taken by the AO (post-approval) as circumstance militating against exercise of section 263 in the instant facts. The PCIT's selective invocation of revision for some years while similar additions in other years were left untouched further underlined absence of a demonstrably erroneous order calling for revision. [Paras 21, 22]

PCIT's invocation of section 263 without addressing the effect of prior approval under section 153D and without showing a clear error in the assessment order was held not tenable; the revisional order is quashed on this ground as well.

Condonation of delay - Whether the assessee's delay in filing the appeals should be condoned. - HELD THAT: - The Tribunal accepted the assessee's explanation of merged emails/technical oversight and affidavit evidence showing sufficient cause for the delay. The Revenue did not oppose condonation. Applying established principles, the Tribunal held the delay to be excusable. [Paras 7]

Delay of 41 days in filing the appeals is condoned.

Final Conclusion: The ITAT allowed the appeals: the PCIT's orders dated 22.03.2024 for AY 2018-19 and AY 2019-20 under section 263 were quashed (revisional action held unsustainable on the grounds stated) and the delay in filing the appeals was condoned.

Fraudulent transfer to defeat recovery - extraordinary jurisdiction under Article 226 - attachment under the Customs (Attachment of Property of Defaulter for Recovery of Government Dues) Rules, 1995 - equitable discretion and petitioner's conduct - remedy before the Civil Court - suppression of material fact

Fraudulent transfer to defeat recovery - attachment under the Customs (Attachment of Property of Defaulter for Recovery of Government Dues) Rules, 1995 - extraordinary jurisdiction under Article 226 - Writ remedy under Article 226 is not appropriate where there is a prima facie fraudulent transfer by a defaulter to obstruct recovery of government dues. - HELD THAT: - The Court found that the facts disclose a strong prima facie case of a gift executed soon after the defaulter was declared liable for customs dues, amounting to an apparent attempt to obstruct recovery. Reliance on prior decisions cited by the petitioner was rejected because those cases did not involve a similar prima facie fraud. Having regard to the Coordinate Bench decision in Chhaya Atul Pandya, disputes of this character-where the transfer is challenged as being made to defeat legitimate dues-are not ordinarily to be resolved by exercise of extraordinary writ jurisdiction; the petitioner's remedy, at the highest, lies before the Civil Court. Consequently, the Court refused to entertain the petition seeking relief against attachment in these circumstances. [Paras 5, 7, 8, 11, 14]

Petition dismissed insofar as it seeks writ relief to set aside or impugn the consequences of the impugned transfer executed to defeat recovery.

Equitable discretion and petitioner's conduct - suppression of material fact - remedy before the Civil Court - Petitioner's conduct-including suppression of the original order and obstructive behaviour at valuation-disentitles him to equitable relief from the Writ Court. - HELD THAT: - The Court recorded that the petitioner omitted to annex the vital order declaring his brother a defaulter, a fact which was material to testing the petitioner's case and was thus suppressed. The affidavit of the Deputy Commissioner describes removal of attachment notices and obstructive conduct at the departmental valuation visit, supporting a finding of conduct aimed at impeding recovery. Given that the Court's equitable and extraordinary jurisdiction is discretionary, such conduct is a valid ground for refusal of relief. The Court therefore declined to exercise its discretion in favour of the petitioner. [Paras 12, 13, 15, 16, 17]

Petitioner denied equitable relief by reason of his conduct and suppression of material facts.

Final Conclusion: Writ petition dismissed; petitioner refused relief under Article 226 because the transfer constituted a prima facie fraudulent attempt to defeat recovery and the petitioner's conduct (including suppression of the order and obstructive acts at valuation) disentitled him to equitable relief. Costs awarded to the Maharashtra State Legal Services Authority.

Principles of natural justice - failure to place evidence before the adjudicatory Bench - rectification of mistake / review where documents were not filed at original hearing - duty and accountability of departmental representatives - provisional release of goods - disciplinary enquiry into departmental conduct

Failure to place evidence before the adjudicatory Bench - rectification of mistake / review where documents were not filed at original hearing - principles of natural justice - Whether the Tribunal erred in granting provisional release by ignoring IRMRA test reports and thereby violating principles of natural justice. - HELD THAT: - The Court recorded the Tribunal's finding that at the original hearing the Revenue's authorised representative specifically replied that no IRMRA test reports were available, and only during the subsequent rectification proceedings the same representative conceded that such reports existed but had not been filed or placed before the Bench. The Tribunal held that omission by the Revenue to produce documents at the original hearing could not be treated as a mistake apparent on record and therefore refused rectification. The High Court examined and accepted that factual position: the Tribunal was denied the opportunity to consider the reports because they were not before it during the main hearing, and the Revenue cannot seek rectification on the ground of its own omission. The Court treated the contention of non-consideration in that factual context rather than as an isolated breach of natural justice. [Paras 5, 6, 7]

The Tribunal did not commit an error in law in declining rectification on the ground that the IRMRA reports were not placed before it at the original hearing; the Revenue's challenge on that score is rejected.

Duty and accountability of departmental representatives - disciplinary enquiry into departmental conduct - Disposition of the matter in view of the admitted failure by the Revenue's representative to place relevant reports before the Tribunal and the appropriate institutional response. - HELD THAT: - The Court regarded the admitted lapse by the same departmental representative at the original hearing and the subsequent admission during rectification proceedings as a serious matter warranting investigation. Given the multiplicity of appellants and significant stakes, the Court considered it necessary that the departmental hierarchy ascertain how the lapse occurred, identify those responsible, and specify any disciplinary or other action proposed against departmental officials or private persons involved. The Court therefore directed an institutional enquiry by the Joint Chief Department Representative, Mumbai Bench CESTAT, with a personal attendance requirement and reporting to the Court and relevant departmental authorities. [Paras 8, 9, 10, 11]

A detailed enquiry is directed to be conducted by the Joint Chief Department Representative, Mumbai CESTAT, with a compliance report to be filed and the officer personally present on the next listing; registry to mark a copy to the Finance Secretary, Chief Commissioner of Customs and CBIC.

Final Conclusion: The petition rejects the Revenue's contention that the Tribunal erred by not considering IRMRA reports (the reports were not before the Bench at the original hearing); however, because the Revenue's authorised representative subsequently admitted the reports existed and were not filed, the Court has directed a departmental enquiry into the lapse and ordered compliance and reporting by the Joint Chief Department Representative, Mumbai CESTAT.

Principles of natural justice - opportunity to cross-examine - exhaustion of alternate remedies - pre-deposit requirement for statutory appeal - jurisdiction to entertain writ when alternate remedy exists

Exhaustion of alternate remedies - jurisdiction to entertain writ when alternate remedy exists - Writ not maintainable where an efficacious statutory appeal has been filed and alternate remedy has not been exhausted. - HELD THAT: - The Court held that the petitioner has an alternative statutory remedy before the Commissioner of Customs (Appeals) and had already instituted that appeal. In the absence of extraordinary circumstances justifying departure from the rule of exhaustion of alternate remedies, the High Court will not entertain the writ. Reliance was placed on coordinate authority where similar relief was declined and on the principle that a petitioner cannot bypass the statutory appellate forum to seek merits determination in writ proceedings. The Court therefore declined to exercise writ jurisdiction in the present case and left the petitioner to pursue the appellate remedy. [Paras 8, 9, 14]

Writ petition dismissed for non-exhaustion of the statutory appeal remedy; petitioner directed to pursue the appeal.

Principles of natural justice - opportunity to cross-examine - Alleged denial of opportunity to cross-examine does not justify bypassing the appellate remedy; such complaints are to be examined by the appellate authority. - HELD THAT: - The Court examined the contention that the petitioner was denied cross-examination of certain witnesses and noted that the adjudicating authority recorded reasons on this aspect in the impugned order. The Court observed that this case does not present a situation of no notice or complete denial of opportunity but, at best, a claim of insufficient opportunity requiring prima facie proof of prejudice. Those factual and evaluative matters can be tested and decided in the statutory appeal already instituted by the petitioner. [Paras 5, 6, 13]

Complaint about denial of cross-examination left open to be raised and examined in the appeal; not a ground to maintain the writ.

Pre-deposit requirement for statutory appeal - High Court will not waive the statutory pre-deposit requirement; the petitioner must comply with mandatory conditions for filing the appeal. - HELD THAT: - The Court noted the petitioner's plea that he cannot make the pre-deposit but found no material in the petition to justify waiving the statutory pre-deposit. The Court referred to higher authority which limits the power to waive or reduce mandatory pre-deposit requirements and held that the High Court cannot override the statutory scheme. Consequently, the petitioner must comply with the mandatory pre-deposit conditions while pursuing the appellate remedy. [Paras 11, 12, 14]

Petitioner required to comply with the mandatory pre-deposit conditions applicable to the statutory appeal; High Court refused to waive the pre-deposit.

Final Conclusion: Writ petition dismissed; petitioner may pursue the statutory appeal before the Commissioner of Customs (Appeals) by complying with the mandatory pre-deposit and other conditions; the High Court's order does not express any view on the merits and all contentions remain open for adjudication in the appellate proceedings.

Principles of natural justice / audi alteram partem - classification of account as 'fraud' under the Master Directions on Frauds (RBI) - debarment / blacklisting and denial of access to institutional finance - requirement of notice, supply of forensic report and opportunity of hearing before classifying an account as fraud - quashing of banking action for failure to accord procedural fairness

Requirement of notice, supply of forensic report and opportunity of hearing before classifying an account as fraud - principles of natural justice / audi alteram partem - Validity of the respondentbank's impugned intimation dated 20.06.2019 classifying the petitioner as 'fraud' in light of compliance with principles of natural justice. - HELD THAT: - The counteraffidavit does not show that any showcause notice proposing classification as 'fraud' was served on the petitioner, nor that the petitioner was informed of uploading of his name in the Central Fraud Registry, supplied with the forensic audit report, or afforded a hearing. The Supreme Court's exposition in Rajesh Aggarwal (as discussed) establishes that classification as 'fraud' carries grave civil consequences akin to blacklisting and therefore audi alteram partem must be read into the Master Directions on Frauds; the borrower must be served notice, allowed to explain conclusions of forensic audit, and the decision must be reasoned. Applying those principles, absence of notice, nonprovision of material and lack of opportunity to be heard render the impugned action arbitrary and unsustainable. [Paras 12, 13, 14, 15, 16]

Impugned intimation dated 20.06.2019 classifying the petitioner as 'fraud' is set aside for failure to comply with principles of natural justice.

Quashing of banking action for failure to accord procedural fairness - debarment / blacklisting and denial of access to institutional finance - Consequential reliefs and final factual/administrative finding as to existence of grounds for declaring the petitioner 'fraud' on account of nonpayment by MBSL. - HELD THAT: - The Court, having found procedural infirmity in the classification, also noted the decision of the Coordinate Bench in two related writ petitions and recorded that no grounds ever existed for declaring the petitioner as 'fraud' on account of nonpayment of institutional loans by MBSL. In consequence, the respondentbank is directed to take steps to remove the petitioner's name from the Central Fraud Registry within the time specified by the Court. [Paras 17, 18]

Declared that no grounds existed for classifying the petitioner as 'fraud' on account of nonpayment by MBSL; directed respondentbank to remove petitioner's name from the Central Fraud Registry within 15 days.

Final Conclusion: Writ petition allowed; the Bank of Baroda's order dated 20.06.2019 classifying the petitioner as 'fraud' is quashed for want of notice, nonsupply of material and denial of hearing; the petitioner is held not to have been properly liable to such classification and the respondentbank is directed to remove his name from the Central Fraud Registry within 15 days.

Supervisory jurisdiction of the Reserve Bank over NBFCs under Chapter III B - overriding effect of Chapter III B (Section 45 Q) - writ of mandamus to compel exercise of statutory duty by a public authority - power to appoint administrators/directors and to direct statutory audits under Chapter III B - failure or delay in exercise of supervisory powers as ground for judicial directions

Supervisory jurisdiction of the Reserve Bank over NBFCs under Chapter III B - writ of mandamus to compel exercise of statutory duty by a public authority - overriding effect of Chapter III B (Section 45 Q) - Maintainability of writ petition under Article 226 seeking directions to RBI to initiate action under Chapter III B of the RBI Act - HELD THAT: - The Court held that Chapter III B constitutes a complete code governing RBI's supervisory role over NBFCs from registration until winding up, and that Section 45 Q confers an overriding effect on Chapter III B vis a vis other laws. Where a public authority has a power coupled with a duty and fails or delays in its exercise, the High Court may, in an appropriate case, issue directions under Article 226 including mandamus in the nature of mandamus. Applying these principles to the material on record, including the RBI status report and documented supervisory concerns (leverage ratio breach, acceptance/conversion of OCDs/CCPS without prior RBI permission, non submission of essential returns and alleged diversion of funds), the Court found no legally sustainable objection to maintainability and that the writ petition is maintainable against the RBI to seek exercise of its statutory supervisory powers. [Paras 16, 18, 19, 24, 34]

Writ petition is maintainable and the Court may issue directions to the RBI to exercise its supervisory powers under Chapter III B.

Power to appoint administrators/directors and to direct statutory audits under Chapter III B - failure or delay in exercise of supervisory powers as ground for judicial directions - Whether interim judicial directions were warranted to protect the NBFC's funds and stakeholders and, if so, the nature of such directions - HELD THAT: - Having found cogent material on record indicating serious supervisory concerns (including alleged siphoning of funds, breach of leverage ratio, conversion of instruments without prior RBI approval, non submission of statutory records and auditors' certificates, and obstruction to inspection), the Court concluded that further delay in authoritative intervention might cause irreparable injury to stakeholders. Exercising jurisdiction under Article 226, the Court issued interim directions to protect the NBFC's assets and ensure proper inquiry: suspension of the existing Board; appointment of an Interim Committee of Administrators to perform board functions until RBI acts under Section 45ID; immediate handing over of records and properties to the Committee; appointment of a specified firm to conduct a special/statutory audit under Section 45MA and Companies Act for FY 2022 23 and 2023 24 within four weeks; liberty to RBI to nominate a member to the interim committee; requirement to file a detailed report of action within five weeks; and provision for payment of fees/honoraria to the administrators and auditors. The directions were framed without prejudice to RBI's statutory powers to initiate further action if criminality or other violations are found. [Paras 26, 27, 31, 34, 35]

Interim directions issued as stated (suspension of Board, appointment of Interim Committee of Administrators, handover of records, special/statutory audit for specified years, RBI's liberty to appoint its nominee, timeframe for reporting, and fees), without prejudice to RBI's statutory powers.

Final Conclusion: The High Court held the writ petition maintainable and, on the materials demonstrating supervisory lapses and risk of misappropriation, directed interim protective measures (suspension of the Board; appointment of an Interim Committee of Administrators with specified members; immediate surrender of records and assets to the Committee; a special/statutory audit for FY 2022 23 and 2023 24 to be completed within four weeks; RBI's liberty to nominate a member to the Committee; a compliance report within five weeks; and payment of specified remuneration), while leaving open RBI's statutory powers to take further action in accordance with law.

Enterprise - agreement - appreciable adverse effect on competition - refusal to deal - closure under Section 26(2) - res judicata - abuse of process - costs

Enterprise - economic activity - Whether the Department of Expenditure (DOE) is an "enterprise" within the meaning of Section 2(h) of the Competition Act, 2002 in relation to the impugned Office Memoranda. - HELD THAT: - The Tribunal accepted the Commission's assessment that DOE's functions, as reflected on the Ministry of Finance website and in the impugned circulars, are predominantly policy-making and administrative rather than commercial. The Commission had observed that the circulars represent government policy manifested as internal administrative directions concerning the government's choice as a consumer and are not economic activities of the kind contemplated by Section 2(h). The Tribunal noted that the Supreme Court has held similarly in earlier authority, and endorsed the conclusion that DOE cannot be regarded as an enterprise for the purposes of the impugned memoranda. [Paras 27, 29]

DOE is not an "enterprise" within the meaning of Section 2(h) of the Act in relation to the impugned Office Memoranda.

Agreement - Section 3(1) - Section 3(4) - appreciable adverse effect on competition - refusal to deal - Whether the Office Memoranda constitute an "agreement" and/or cause an appreciable adverse effect on competition under Sections 3(1) and 3(4) of the Act. - HELD THAT: - The Tribunal recorded the Commission's finding that the impugned Office Memoranda and subsequent circulars are internal administrative decisions and government policy directed to the government's procurement choices, not agreements entered into in the context of an economic activity. The Commission found no vertical relationship placing DOE at a level of the production chain with Balmer Lawrie and Ashok Travels; accordingly, no case under Section 3(4) (including refusal to deal) was made out. Having concluded that the memoranda are not agreements contemplated by Section 3(1), the Commission found no prima facie case to refer the matter for investigation and lawfully closed the information under Section 26(2). The Tribunal endorsed these conclusions. [Paras 28, 29, 30]

The impugned Office Memoranda are not "agreements" within the meaning of the Act and do not prima facie establish contravention of Sections 3(1) or 3(4); the Commission rightly closed the information under Section 26(2).

Res judicata - abuse of process - closure under Section 26(2) - Whether the second information (Case No. 4 of 2020) filed by the appellant is maintainable or is barred by the principle of res judicata / amounts to abuse of process because the same issues were earlier decided. - HELD THAT: - The Tribunal noted the prior adjudication: CCI's closure of the first information (Case No. 39 of 2010) on 15.09.2010 and the dismissal of the appellant's appeal by the erstwhile COMPAT on 26.09.2012, neither of which was further challenged. The Tribunal held that the present challenge repeats the same facts, same parties and same legal questions already finally decided, invoking the salutary maxim nemo debet lis vexari pro una et eadem causa. Although markets may be dynamic, the Tribunal observed that the core legal questions-whether DOE is an enterprise and whether the OM is an agreement-had been finally determined, and therefore the second information could not be re-agitated and was rightly closed. The Tribunal treated the filing as an abuse of process. [Paras 17, 32, 33]

The second information is barred by res judicata and constitutes an abuse of process; the Commission's closure was justified.

Costs - Whether costs should be imposed on the appellant for pursuing the second information and appeal. - HELD THAT: - Having found the appeal without merit because it re-litigated issues already finally decided, the Tribunal exercised its discretion to impose costs. It directed the appellant to deposit the amount ordered in the Prime Minister's Relief Fund within the specified period. [Paras 33]

Costs of Rs. 5 lakhs imposed on the appellant to be deposited in the Prime Minister's Relief Fund within 15 days.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Commission's closure of the information under Section 26(2) on the grounds that DOE is not an enterprise in relation to the impugned memoranda, the memoranda are not agreements attracting Sections 3(1)/3(4), and the second information is barred by res judicata as an abuse of process; costs were imposed on the appellant.

Liquidation value of dissenting financial creditor - commercial wisdom of the Committee of Creditors - entitlement under Section 30(2)(b) vis-a -vis Section 53(1) - valuation by registered valuer - judicial review of commercial and valuation aspects

Liquidation value of dissenting financial creditor - entitlement under Section 30(2)(b) vis-a -vis Section 53(1) - commercial wisdom of the Committee of Creditors - Whether a dissenting secured financial creditor is entitled to be paid the full value of its security interest rather than the minimum amount prescribed by Section 30(2)(b) read with Section 53(1) as applied by the Committee of Creditors in the resolution plan. - HELD THAT: - The Tribunal considered the competing interpretations of Section 30(2)(b) and Section 53(1) and relied on the decision in India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd. which holds that the limitation on the amount receivable by a dissenting financial creditor is inherent in Section 30(2)(b) and that a secured creditor cannot demand payment over and above the distribution determined by the CoC with reference to admitted claims and vote share. The Tribunal observed that the CoC's commercial wisdom in deciding distribution and feasibility of a resolution plan is paramount and not ordinarily subject to judicial substitution, unless similarly situated creditors are denied fair and equitable treatment. Although the Supreme Court has referred certain aspects for consideration by a larger bench in a subsequent decision, the Amit Metaliks ratio remains subsisting for present purposes. Applying these principles, the Tribunal held that the appellant was not entitled to insist on payment equal to the full asserted security value and that the payment proposed by the plan satisfied the minimums required by Section 30(2)(b). [Paras 16, 19]

The appellant is not entitled to demand payment of the full value of its security interest; the distribution fixed by the CoC under the resolution plan meets the minimum required by Section 30(2)(b) and the appeal is dismissed on this ground.

Valuation by registered valuer - judicial review of commercial and valuation aspects - commercial wisdom of the Committee of Creditors - Whether the Adjudicating Authority was in error in approving the resolution plan notwithstanding the appellant's challenge to the post-hoc revision of liquidation value by the registered valuers at the instance of the Resolution Professional. - HELD THAT: - The Tribunal noted that valuation of assets was carried out by IBBI-registered valuers and that the Adjudicating Authority had recorded that valuers' reports and addenda were provided in compliance with the Code and CIRP Regulations. Relying on authority that the commercial and valuation aspects underlying approval of a resolution plan fall within the CoC's domain, and that the Adjudicating Authority is not to substitute its commercial judgment, the Tribunal found no jurisdictional infirmity in the Adjudicating Authority's approach to the valuation issue. The Tribunal further observed that precedent confines judicial interference where the CoC has exercised its commercial wisdom and where the dissenting creditor is being paid at least the statutory minimum under Section 30(2)(b). [Paras 7, 15]

The Adjudicating Authority did not err in rejecting the appellant's objection to the valuation revision; the challenge to valuation and related commercial decisions does not warrant setting aside the approved resolution plan.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the approval of the resolution plan, ruling that the dissenting secured creditor was not entitled to demand payment equal to the full asserted security value and that challenges to valuation and other commercial aspects of the plan did not justify interference with the CoC's decision; no costs.

Extended period of limitation under the proviso to Section 73(1) - requirement of fraud, collusion or wilful suppression of facts - penalty under Section 78 - simultaneous imposition and applicability - penalties under Sections 76 and 77 - imposition for non-payment versus wilful suppression - bona fide belief as defence to invocation of extended limitation and penalties - requirement of a positive deliberate act to constitute 'suppression of facts' - payment within thirty days under sub section (1A) to Section 73 - consequence of non compliance - interest under Section 75 on belated payment of service tax

Extended period of limitation under the proviso to Section 73(1) - requirement of fraud, collusion or wilful suppression of facts - requirement of a positive deliberate act to constitute 'suppression of facts' - bona fide belief as defence to invocation of extended limitation and penalties - Invocation of the proviso to Section 73(1) for the extended period was not justified in the absence of wilful suppression, fraud or collusion. - HELD THAT: - The Court applied settled precedents that the proviso to the extended limitation can be invoked only where there is fraud, collusion or wilful misstatement or suppression of facts with intent to evade payment of tax, and that mere non declaration or non payment does not suffice. A deliberate and positive act amounting to withholding of correct information is required to constitute suppression. The appellant had a bonafide belief, sought clarification from the department and there is no record of deliberate concealment or wilful intent to evade; consequently the ingredients for invoking the proviso are not satisfied. [Paras 33, 34, 35]

The extended period under the proviso to Section 73(1) could not be invoked against the appellant.

Penalty under Section 78 - simultaneous imposition and applicability - penalties under Sections 76 and 77 - imposition for non-payment versus wilful suppression - bona fide belief as defence to invocation of extended limitation and penalties - Penalties under the relevant provisions (Sections 76, 77 and 78) are not imposable where there is no finding of wilful suppression or deliberate intent to evade tax. - HELD THAT: - Relying on the principle that mere failure to declare or omission does not amount to the mala fide conduct contemplated by the proviso, the Court held that absent a positive finding of deliberate suppression or intent to evade, penalty provisions cannot be applied. The appellant entertained a bona fide view, sought clarification from the department and there is no material showing wilful or deliberate non disclosure; accordingly imposition of penalties was set aside. [Paras 35, 36, 37]

No penalty is imposable on the appellant under the challenged provisions.

Interest under Section 75 on belated payment of service tax - payment within thirty days under sub section (1A) to Section 73 - consequence of non compliance - The appellant must pay interest under Section 75 on the belated payment of service tax; benefit of the 30 day payment option under sub section (1A) could not be extended where not availed within the prescribed period. - HELD THAT: - The Court observed that although the appellant paid the principal service tax (accepting liability), it did not demonstrate payment within the statutory 30 day window required to avail the limited settlement under sub section (1A). The statutory time limit for that option could not be relaxed. Consequently the appellant remains liable to pay interest for delayed payment under Section 75, to be paid within thirty days of the order if not already discharged. [Paras 27, 28, 30, 36, 37]

Appellant to pay interest under Section 75 on the belated payment of service tax; the 30 day concession under sub section (1A) was not available.

Final Conclusion: The appeal is partly allowed: the invocation of the proviso to Section 73(1) for the extended period was held to be unjustified and all penalties set aside; the appellant remains liable to pay interest under Section 75 on the belatedly paid service tax for the period in dispute, to be paid within thirty days if not already paid.

Reimbursement of expenses not subject to service tax - demand based on obsolete service category (BSS) unsustainable - reliance on findings of adjudicating authority for factual conclusion - multi-modal transport operator reimbursement treatment

Reimbursement of expenses not subject to service tax - multi-modal transport operator reimbursement treatment - reliance on findings of adjudicating authority for factual conclusion - Validity of CESTAT's decision to drop the service tax demand on amounts shown as non-taxable in FDSS as reimbursements - HELD THAT: - The Court accepted the Tribunal's finding that the amounts in question (customs duty, BAF & CAF, ocean freight and air freight) were paid by the respondent on behalf of clients and subsequently reimbursed, and therefore were in the nature of reimbursements and not taxable. The Tribunal's conclusion relied on material gathered during enquiry and verification which showed absence of any markup or taxable element in the reimbursements. The Tribunal also noted that the demand as framed proceeded under the erstwhile BSS category which was not in existence for the period in dispute; a demand founded on such an obsolete category could not be sustained. The High Court found no substantial question of law arising from these findings and upheld the Tribunal's approach of relying on the adjudicating authority's factual findings and the nature of the payments as reimbursements. [Paras 6, 7]

CESTAT's dropping of the service tax demand on the amounts treated as reimbursements is sustained; no substantial question of law is made out.

Reliance on findings of adjudicating authority for factual conclusion - demand based on obsolete service category (BSS) unsustainable - Liability to pay service tax on difference in 'Income' between Form ST-3 and Form 26AS - HELD THAT: - The challenge to liability based on discrepancies between Form ST-3 and Form 26AS was considered in the context of the Tribunal's overall conclusion that the contested amounts represented reimbursements and that the demand had been framed under an obsolete BSS category. Given the Tribunal's factual finding (supported by enquiry and verification) that reimbursements did not attract service tax and that no markup was evidenced, the Court found no substantial legal question in the contention regarding differences in reported income forms. The High Court therefore declined to entertain the stand that such differences gave rise to a service tax liability in the face of the factual finding that the amounts were reimbursements. [Paras 5, 7]

No service tax liability arises from the asserted difference between Form ST-3 and Form 26AS in respect of the amounts treated as reimbursements; the contention does not raise a substantial question of law.

Final Conclusion: Delay in filing and refiling of the appeal is condoned; the appeal is dismissed as the CESTAT's conclusion that the impugned amounts were reimbursements (and thus not taxable) and that the demand was framed under an obsolete BSS categorisation discloses no substantial question of law.

Reversal of CENVAT credit - interpretation of Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004 - common input services - total CENVAT credit taken - clarificatory amendment and retrospective effect of Notification No.13/2016-CE (NT) dated 01.03.2016 - exempted service (trading activity) - ineligible common credit

Interpretation of Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004 - common input services - total CENVAT credit taken - reversal of CENVAT credit - Whether 'P' in the formula M/N x P in Rule 6(3A)(c)(iii) denotes total CENVAT credit taken on input services during the financial year or only the CENVAT credit on common input services. - HELD THAT: - The Court examined the text and scheme of Rule 6(3A) and the purpose of attributing credit towards exempted goods and services. The determinative construction adopted is that 'P' denotes the CENVAT credit taken on common input services (i.e., the credit remaining for attribution after separating ineligible and eligible exclusive credits) and not the gross total CENVAT credit taken by the assessee. This construction avoids the distortion where reversal could exceed the credit attributable to common use and ensures proportional attribution consistent with the rule's objective to deny only that part of credit attributable to exempted use. The Court relied on the mechanism of attribution set out in Rule 6(3A) (exclusive ineligible/eligible credit, identification of common credit and its proportionate allocation) to support this interpretation and concluded that the formula must be read to apply to common input services credit. [Paras 33, 38]

P denotes CENVAT credit on common input services and not the total CENVAT credit taken.

Clarificatory amendment and retrospective effect of Notification No.13/2016-CE (NT) dated 01.03.2016 - reversal of CENVAT credit - Whether the amendment to Rule 6 by Notification No.13/2016 is clarificatory in nature and cures the distortion in the earlier provision, with retrospective operation. - HELD THAT: - The Court observed the history of the long-standing controversy, the issuance of clarificatory circulars, and the precise textual changes effected by Notification No.13/2016. The substitution corrected the earlier formulation by expressly prescribing the sequential attribution (ineligible exclusive credit, eligible exclusive credit, common credit and its proportionate allocation) and the concept of 'ineligible common credit'. The Court held that the correction was clarificatory, intended to remove the distortion arising from a strict reading of the pre-2016 provision, and therefore the amendment must be treated as clarificatory and given retrospective effect to resolve disputes arising in the period in question. [Paras 34, 35, 36]

The 2016 substitution is clarificatory and cures the distortion; it is to be given retrospective effect for the period in dispute.

Exempted service (trading activity) - reversal of CENVAT credit - Whether the appellant's trading of 'generated parts' constituted an 'exempted service' (or activity included within the definition of exempted services) for the purpose of Rule 6. - HELD THAT: - The Court noted that trading of 'generated parts' fell within activities on which no service tax was leviable under the relevant provisions and was therefore within the concept of 'exempted service' under Rule 2(e) (including activities not taxable under Section 65B(44) where inputs or input services were used). The Court observed that this characterization applied both before and after the 2016 amendment. Consequently, the trading activity qualified as exempted service/goods for attribution under Rule 6 and the formula for reversal accordingly applied to the common credit attributable to such exempted activity. [Paras 8, 40, 46]

The trading of 'generated parts' by the appellant is an 'exempted service' (activity included within 'exempted service') for the purposes of Rule 6.

Final Conclusion: The Tribunal's order is set aside. The Court held that for the periods April 2013 to March 2014 and April 2014 to March 2015 'P' in the Rule 6(3A)(c)(iii) formula refers to CENVAT credit on common input services, the 2016 amendment is clarificatory and retrospective, and the appellant's trading activity is an exempted service; the appellant is entitled to consequential relief. The Civil Miscellaneous Appeal is allowed.

Invocation of proviso to extended period of limitation for suppression of facts - liability for short payment/retention of collected service tax - deductibility of amount collected as service tax from gross value - penalty under Section 77 for breach of statutory obligations - penalty under Section 78 for deliberate suppression and retention of tax - remand for re-quantification of tax demand

Invocation of proviso to extended period of limitation for suppression of facts - liability for short payment/retention of collected service tax - Validity of demand and invocation of extended period of limitation for short payment/retention of service tax - HELD THAT: - Both the adjudicating authority and the First Appellate Authority found that the appellant provided taxable services, received consideration, issued invoices showing service tax and, in some instances, collected service tax from the recipient but did not deposit the full amount to the exchequer. The authorities concluded that the appellant had not disclosed the gross value of taxable services and had thereby suppressed facts with intent to evade tax. On these findings the proviso to the extended period was held to be invokable and the demand was held not to be time-barred. The Tribunal found no merit in appellant's attempt to raise new contentions for the first time on appeal and upheld the concurrent findings on limitation and on the existence of short payment/retention of collected service tax. Reliance was placed on precedents holding that interest is payable once tax is found unpaid by the due date and that pleas not raised earlier cannot be entertained at appellate stage.

Demand for service tax and interest sustained and invocation of extended period upheld

Deductibility of amount collected as service tax from gross value - remand for re-quantification of tax demand - Whether the amount claimed by the appellant as service tax collected from the recipient could be deducted from gross turnover for computing tax liability - HELD THAT: - The lower authorities recorded that the appellant admitted receipt of a substantial amount purportedly as service tax from the service recipient but deposited only part of it to the Government. While the adjudicating and appellate authorities disallowed the deduction because no documentary evidence (such as invoices showing that the gross amount was inclusive of service tax) was produced to establish that the gross receipts included the service tax component, the Tribunal observed an apparent conflict in the orders regarding whether that amount formed part of the gross turnover. The Tribunal held that the quantum of short payment must be re-determined after allowing the deduction claimed by the appellant for the amount stated to have been received as service tax from the recipient, and therefore remanded the matter to the original authority for limited re-computation permitting consideration of that deduction on verification.

Matter remanded to the original authority for re-quantification of demand after verification and, if proved, allowance of the claimed deduction for the amount received as service tax

Penalty under Section 77 for breach of statutory obligations - penalty under Section 78 for deliberate suppression and retention of tax - Sustainability of penalties imposed under Section 77 and Section 78 and treatment of Section 78 quantum - HELD THAT: - The Tribunal upheld imposition of penalty under Section 77 for failure to comply with statutory obligations, and under Section 78 on the finding of conscious and deliberate suppression and retention of collected service tax. However, because the quantum of the tax demand may change upon re-computation after the remand (specifically if the deduction claimed for the amount received as service tax is allowed), the Tribunal directed that the quantum of penalty under Section 78 be determined after the original authority completes the recomputation. The Tribunal did not interfere with penalties under Sections 70 and 77 but directed reassessment of the Section 78 penalty in accordance with the recomputed demand.

Penalties under Sections 77 and 78 upheld; quantum of Section 78 to be determined after remand recomputation

Final Conclusion: Appeal partly allowed: concurrent findings on liability, interest and invocation of extended period sustained; penalties under Sections 77 and 78 upheld; matter remanded to the original authority for limited re-quantification of demand to examine and, if established, allow deduction of the amount claimed to be service tax collected from the recipient and thereafter to determine the final quantum of penalty under Section 78; original authority to decide within three months.

Abatement under Notification No. 01/2006 ST (67% abatement) - erection, commissioning or installation service - supply of materials by the commissioning/installation agency - works contract service (including thermal insulation) - precedential effect of Tribunal's earlier decision

Abatement under Notification No. 01/2006 ST (67% abatement) - erection, commissioning or installation service - supply of materials by the commissioning/installation agency - Entitlement to the 67% abatement under Notification No. 01/2006 ST for thermal insulation services where the service provider supplies and applies insulating materials but does not supply plant, machinery or equipment. - HELD THAT: - The Tribunal held that the abatement entry applies not only where the contractor supplies plant, machinery or equipment but also where the commissioning/installation agency supplies "any other material sold by the commissioning and installation agency during the course of providing erection, commissioning or installation service." On the facts there was no dispute that the appellant acted as the commissioning/installation agency and supplied various thermal insulating materials and paid sales tax/VAT on those goods. Applying the Tribunal's earlier reasoning in M/s Rudra Engineering (Final Order No. 10427-20149/2024 dated 19.02.2024), the appellant is eligible for the benefit of Notification No. 01/2006 ST and the demand based on denial of abatement is without merit. [Paras 5, 6]

Benefit of the 67% abatement under Notification No. 01/2006 ST is available to the appellant for the stated period.

Works contract service (including thermal insulation) - classification of service - Classification of the activity of providing and applying thermal insulation as a works contract service thereby attracting the legal framework relied upon in the abatement entry. - HELD THAT: - Relying on the Tribunal's earlier decision reproduced from M/s Rudra Engineering, the Tribunal observed that the statutory definition of "works contract service" (as introduced and specified) expressly includes thermal insulation within clause (a). The earlier order also recorded that where goods used in installation attract sales tax/VAT, the activity falls within works contract service. On identical facts the Tribunal concluded that the impugned activity was "works contract service," and therefore the classification challenge raised by the revenue does not sustain the denial of the notification benefit. [Paras 5]

The appellant's activity of providing thermal insulation is to be treated as works contract service for the purposes of the notification and classification challenge fails.

Final Conclusion: The Tribunal, following its earlier decision in M/s Rudra Engineering, allowed the appeal, set aside the Commissioner (Appeals) order and held that the appellant is entitled to the 67% abatement under Notification No. 01/2006 ST for the period November 2007 to September 2010; the activity is also classifiable as works contract service.

Penalty equal to duty and its reduction to 25% on payment within 30 days - entitlement to reduced penalty despite omission in appellate order - refund consequent to payment and reduced penalty

Penalty equal to duty and its reduction to 25% on payment within 30 days - entitlement to reduced penalty despite omission in appellate order - Appellant entitled to reduction of penalty to 25% upon fulfilling conditions of payment within thirty days despite the Tribunal's order not expressly recording the reduction. - HELD THAT: - Section 11AC prescribes a penalty ordinarily equal to the duty and separately provides that where duty and interest are paid within thirty days of communication of the order of the officer who determined such duty, the penalty shall be reduced to twenty-five per cent., subject to payment within the specified period. Both the imposition of the full penalty and the statutory entitlement to its reduction on fulfilment of the condition are mandatory. Consequently, omission by the Tribunal to mention the reduction does not operate to deny the assessee the statutory reduction where the assessee has satisfied the condition of payment within thirty days. The Tribunal's silence cannot be read as an enhancement of penalty where the statutory condition for reduction was met by the appellant. [Paras 7]

Reduction of penalty to 25% applies because appellant satisfied the statutory condition of payment within thirty days, notwithstanding the Tribunal's omission to record that reduction.

Refund consequent to payment and reduced penalty - entitlement to reduced penalty despite omission in appellate order - Commissioner (Appeals) erred in setting aside the refund sanctioned by the Assistant Commissioner on the ground that the Tribunal had confirmed penalty at 100%. - HELD THAT: - The Assistant Commissioner sanctioned refund after accounting for the confirmed demand and the reduced penalty claimed by the appellant on the basis of payment within thirty days. The Commissioner (Appeals) reversed that sanction by misconstruing the Tribunal's order as confirming the full penalty without reduction. As the Tribunal's omission did not negate the appellant's statutory entitlement to reduction (having paid within thirty days), the Commissioner (Appeals) misread the Tribunal's order and therefore the refund sanctioned by the Assistant Commissioner was correctly granted and ought to be restored. [Paras 8]

Impugned order setting aside the refund was incorrect; the refund sanctioned by the Assistant Commissioner stands restored.

Final Conclusion: Appeal allowed; impugned order of the Commissioner (Appeals) set aside and the Assistant Commissioner's order sanctioning the refund restored.

Redetermination of MRP/RSP - Confiscation for incorrect declared MRP - Fine in lieu of confiscation - Penalty under Rule 25 of Central Excise Rules, 2002 - Penalty under Rule 26 of Central Excise Rules, 2002 - Prospective operation of statutory rules w.e.f. 01/03/2008 - Binding effect of coordinate Bench decisions until stayed by higher forum

Redetermination of MRP/RSP - Prospective operation of statutory rules w.e.f. 01/03/2008 - Confiscation for incorrect declared MRP - Redetermination of MRP/RSP and consequent confiscation is not permissible for goods manufactured and cleared prior to 01/03/2008. - HELD THAT: - The Tribunal examined whether MRP/RSP could be redetermined for ceramic tiles manufactured and cleared prior to 01/03/2008 and whether confiscation based on such redetermination was sustainable. It noted that the statutory mechanism for re-determination was introduced by rules made applicable w.e.f. 01/03/2008, and prior thereto no procedure existed to re-determine declared MRP/RSP. Reliance was placed on consistent decisions of coordinate Benches (including Acme Ceramics and subsequent Ahmedabad Bench authorities) holding that in absence of rules or a prescribed method prior to 01/03/2008, Revenue could not re-determine RSP/MRP and thereby impose duty or confiscate goods. Applying that principle to the facts-that the relevant clearances occurred before 01/03/2008 and seizures took place on 11/02/2008-the Tribunal held that the lack of statutory provision at the relevant time was fatal to Revenue's case and precluded confirmation of confiscation. [Paras 4]

Confiscation upheld by lower authorities quashed insofar as it pertains to goods cleared prior to 01/03/2008; redetermination of MRP/RSP for that period is not permissible.

Fine in lieu of confiscation - Penalty under Rule 25 of Central Excise Rules, 2002 - Penalty under Rule 26 of Central Excise Rules, 2002 - Fines and penalties predicated on a demand for duty arising from redetermination of MRP/RSP for the pre-01/03/2008 period are not sustainable. - HELD THAT: - The Tribunal held that where the foundational demand for duty based on re-determined MRP/RSP cannot be sustained for the period prior to 01/03/2008, consequential measures-namely confiscation fines in lieu and penalties under Rule 25 and Rule 26-also cannot be imposed. The bench observed established authorities that where no duty demand survives, imposition of penalty or fine cannot stand. Applying that legal principle to the present appeals, the Tribunal found no basis to uphold the fines or penalties levied on the manufacturer and the dealer/partner for the period in dispute. [Paras 4]

Fine in lieu of confiscation and penalties imposed under Rule 25 and Rule 26 are set aside as they rest on an unsustainable duty demand for the pre-01/03/2008 period.

Final Conclusion: Appeals allowed: in view of the absence of statutory mechanism to re-determine MRP/RSP prior to 01/03/2008 and consistent coordinate-Bench precedents not stayed by the Supreme Court, confiscation, fine in lieu thereof and penalties imposed for that period are quashed with consequential relief.

Exclusion of amounts collected under statutory obligation from taxable turnover - inclusion of service tax in sale price - taxable turnover and turnover of sales - composition tax under Section 14D - interpretation of inclusive term 'includes' in statutory definition - mirror image principle between taxable turnover of purchases and taxable turnover of sales

Inclusion of service tax in sale price - taxable turnover and turnover of sales - exclusion of amounts collected under statutory obligation from taxable turnover - composition tax under Section 14D - interpretation of inclusive term 'includes' in statutory definition - mirror image principle between taxable turnover of purchases and taxable turnover of sales - Whether the service tax component collected by the dealers is includible in 'sale price' and hence liable to VAT when computing taxable turnover for the purpose of composition under Section 14D. - HELD THAT: - The Court held that amounts collected by a dealer under a statutory obligation are ordinarily not part of the dealer's taxable turnover. The statutory definition of "sale price" uses the word "includes", making the definition enumerative and not exhaustive; the specific inclusion of duties under the Central Excise Tariff Act and the Customs Act indicates legislative intent to restrict the enumerated inclusions to those categories. Applying the ratio adopted in the Court's earlier decision concerning the exclusion of VAT from purchase price (and by mirror image reasoning to taxable turnover of sales), the service tax component collected by the petitioners does not fall within the "sale price" for the purpose of the GVAT Act. Consequently, the respondent authority was not justified in cancelling the permission to pay composition tax under Section 14D solely on the ground that the petitioners had not paid VAT on the service tax component charged to customers. The Court therefore quashed the show cause notices and impugned orders which had set aside the permission on that ground. [Paras 10, 11, 12]

Service tax collected from customers is not includible in the "sale price" for computing taxable turnover and VAT; impugned show cause notices and orders cancelling permission under Section 14D are quashed.

Final Conclusion: Petitions allowed. Show cause notice dated 14.10.2019 and orders dated 11.11.2020 and the similar orders in the listed matters are quashed and set aside; rule made absolute to that extent.

Auction purchaser's remedy where attachment is lifted - contract to the contrary under section 55 of the Transfer of Property Act - as is where is and buyer's duty of due diligence / caveat emptor - distinction between MPID Act sales and SARFAESI / debt recovery laws - availability of alternate statutory remedy and finality of designated court order

Availability of alternate statutory remedy and finality of designated court order - Maintainability of writ petition in view of statutory remedy under the MPID Act and finality of the designated Court's order - HELD THAT: - The Court held that the petitioner had an efficacious statutory remedy under section 11 of the MPID Act and had invoked the designated MPID Court by Misc. Application No. 1079 of 2019. The designated Court granted only limited relief (lifting the ED attachment) and rejected other reliefs sought by the petitioner, including compensation/interest claims. That order attained finality and, in these circumstances, invocation of extraordinary writ jurisdiction under Article 226 to seek reliefs of similar nature was inappropriate. The petition therefore lacked maintainability as a substitute for the statutory appeal/remedy which the petitioner did not pursue. [Paras 9, 31, 49]

Writ petition is not maintainable as a substitute for the statutory remedy; the designated Court's order having attained finality precludes relief under Article 226 in these facts.

Contract to the contrary under section 55 of the Transfer of Property Act - as is where is and buyer's duty of due diligence / caveat emptor - Effect of section 55(1) of the Transfer of Property Act in presence of express auction terms (clauses 2.2 and 2.3) - HELD THAT: - The Court analysed section 55 and noted that the seller's duty to disclose material defects is subject to any 'contract to the contrary'. The tender/auction terms (clauses 2.2 and 2.3) constituted a contract to the contrary by specifically cautioning bidders, requiring independent enquiries, permitting inspection and providing that properties were sold with all claims and encumbrances on an 'as is where is' basis, and entitling successful bidder only to the rights of the incumbent holder. In light of those contractual terms and absence of evidence of the petitioner's independent due diligence, the protections under section 55 did not assist the petitioner. [Paras 41, 44, 45, 46, 47]

Section 55(1) does not avail the petitioner because the auction terms formed a contract to the contrary obliging the bidder to make independent enquiries; petitioner is not entitled to relief on that ground.

Distinction between MPID Act sales and SARFAESI / debt recovery laws - auction purchaser's remedy where attachment is lifted - Whether sales under the MPID Act are to be treated like sales under SARFAESI/other debt recovery laws and whether decisions in those regimes are applicable - HELD THAT: - The Court distinguished the MPID Act scheme from SARFAESI and other debt recovery statutes. Under SARFAESI the sale enforces a secured creditor's contractual security interest; MPID operates by statutory attachment and vesting in a Competent Authority to protect depositors, without creation of a security interest in favour of a secured creditor. Given the different statutory architecture and the explicit caution/inspection clauses in the MPID auction, precedents from SARFAESI/DRT contexts were held not to be directly comparable or controlling. [Paras 36, 37, 38, 39, 40]

Sales under the MPID Act are legally distinct from SARFAESI/DRT sales; precedents from debt recovery laws are not directly applicable to MPID auctions.

Auction purchaser's remedy where attachment is lifted - Entitlement to refund of purchase price, interest and damages where sale certificate and possession have been delivered and attachment subsequently lifted - HELD THAT: - The Court noted that the subject property vested in the Competent Authority by operation of law, was sold following due process, sale certificate was issued in favour of the petitioner and physical possession was delivered on record. The designated Court subsequently lifted the ED attachment. Given vesting, sale formalities and the contractual caution, the petitioner cannot claim that it is unable to enjoy the property or demand refund, interest or damages. The petitioner's similar claims had been rejected by the designated Court and were not reopened by this writ jurisdiction. [Paras 31, 32, 48, 50, 52]

Petitioner is not entitled to refund of purchase price, interest or damages; sale certificate and possession, together with lifting of attachment, preclude such relief.

Final Conclusion: The petition is dismissed: the MPID statutory scheme and the auction terms (clauses 2.2 and 2.3) foreclose the petitioner's claims under section 55; the designated Court's order attained finality and statutory remedy was available; accordingly the petitioner is not entitled to refund, interest or damages and the writ petition is rejected.

True market value - Court-monitored auction - Stamp duty adjudication - Registering/Stamping Authority's power to reassess value - Bombay (Maharashtra) Stamp (Determination of True Market Value of the Property) Rules, 1995

True market value - Court-monitored auction - Registering/Stamping Authority's power to reassess value - Stamp duty adjudication - Whether the Stamp Authorities are entitled to determine a value different from the auction sale price where the sale was conducted under the aegis of the Court (Sale-cum-Monitoring Committee) and levy stamp duty on that purportedly higher "true market value". - HELD THAT: - The Court held that where an immovable property is sold by a court monitored process (here, a sale under the aegis of the Sale cum Monitoring Committee constituted pursuant to Supreme Court orders) and the sale price is the product of an open, transparent auction process accepted and confirmed by the court/monitoring committee, the registering/stamping authorities do not have a valid basis to reassess and substitute a notional or higher market value. The decision is founded on the reasoning of the Division Bench in Spectrum Constructions and Developers LLP and the three Judge Bench of the Supreme Court in ASL Vyapar Pvt Ltd, which recognise that a court auction is one of the most transparent means of arriving at the market price and that permitting the Stamp/ Registering Authority to re determine value in such cases would amount to sitting in appeal over the court's determination. The Court observed that the Stamp Authority's power to determine the "true market value" arises only when there is reason to believe the instrument understates the value, but in a court monitored sale that prerequisite is absent since the court/committee applies its mind to valuation, reserve price and confirmation of bids. Applying these principles to the present facts, where the petitioner's bid was accepted in the court monitored auction and the Sale Certificate issued and registered, the impugned demand notice seeking stamp duty on a higher valuation could not be sustained. [Paras 11, 12, 13, 14]

The demand notice dated 7th February 2024 insofar as it seeks stamp duty and penalty by treating a higher notional valuation as the "true market value" is quashed and set aside.

Final Conclusion: Writ petition allowed; impugned demand notice dated 7th February 2024 quashed in respect of the Stamp Authorities' attempt to reassess value of a property sold in a court monitored auction; no order as to costs.

Quashing power under Section 482 of the Code of Criminal Procedure - Summons/notice under Section 138 of the Negotiable Instruments Act - Prima facie satisfaction for issuance of process in NI Act complaints - Power of attorney: competence to file complaint and to depose - Personal knowledge requirement of an authorised representative in Section 138 prosecutions - Pre-trial quashing standard - unimpeachable factual defence - Challenge to compromise deed and forum for its adjudication

Pre-trial quashing standard - unimpeachable factual defence - Quashing power under Section 482 of the Code of Criminal Procedure - Whether the impugned summons/notice and complaints under Section 138 of the NI Act should be quashed at the pre-trial stage under Section 482 CrPC. - HELD THAT: - The Court applied the settled principle that quashing at the pre-trial stage is permissible only if the accused produces unimpeachable material disproving the complaint; factual controversies ordinarily require trial. Relying on the ratio in Rathish Babu Unnikrishnan, the Court held that scuttling the criminal process at a nascent stage is not justified where a prima facie case exists and the accused's factual defence is not of such impeachable quality as to negate the allegations outright. The petitioner's contentions - that the authorised representative lacked personal knowledge, that the compromise deed was fabricated, and that prior proceedings had been quashed - were factual or mixed questions appropriately left for trial and did not satisfy the high threshold for quashing under Section 482. [Paras 16, 17, 31, 32, 33]

Petitions under Section 482 seeking quashing of the complaints and summons were dismissed; the complaints were not quashed at the pre-trial stage.

Power of attorney: competence to file complaint and to depose - Personal knowledge requirement of an authorised representative in Section 138 prosecutions - Prima facie satisfaction for issuance of process in NI Act complaints - Whether an authorised representative's mere averment of personal knowledge in the complaint/pre-summoning affidavit is insufficient to support issuance of process and therefore vitiates the summons. - HELD THAT: - The Court examined A.C. Narayanan and TRL Krosaki, noting that a power-of-attorney holder can file and verify a complaint and may depose if he witnessed the transaction or possesses due knowledge, and that the complaint should aver such knowledge. However, there is no prescribed form or detailed mode in which the averment must be made; an averment that the authorised representative possesses personal knowledge, together with prima facie material, suffices for the Magistrate to take cognisance. The extent or veracity of the representative's knowledge is properly tested at trial; thus the mere absence of detailed description of how knowledge was acquired does not warrant quashing the summons. [Paras 20, 21, 25, 26, 28]

The summons based on the authorised representative's affidavit averring personal knowledge was not invalid; the sufficiency and extent of that knowledge are matters for trial.

Challenge to compromise deed and forum for its adjudication - Whether the Court should adjudicate, at the pre-trial stage, the petitioner's challenge to the validity of the compromise deed invoked by the complainant. - HELD THAT: - The Court observed that challenge to the legality or genuineness of a compromise placed before a complaint court ordinarily lies to the same court which accepted the compromise and should be decided after evidence is led. The petitioner's challenge to the compromise deed had earlier been rejected in part, and in any event the validity of the compromise and attendant factual disputes cannot be conclusively determined at the pre-trial stage without trial. Accordingly, the contention that the compromise deed vitiates the present complaints was not a ground for quashing at this stage. [Paras 29, 30]

The challenge to the compromise deed was held to be a matter for trial or the competent forum and did not justify pre-trial quashing.

Power of attorney: competence to file complaint and to depose - Whether prior quashing of proceedings in respect of the first cheque precludes continuation of complaints in respect of subsequent cheques. - HELD THAT: - The Court distinguished the earlier quashment of proceedings relating to the first cheque (which turned on absence of authentication of a Special Power of Attorney) from the present complaints. The Magistrate found on the record that the general power of attorney relied upon in respect of the second and third cheques was duly executed and attested by the Indian Embassy; hence the prior quashment did not automatically render the subsequent complaints non-maintainable. Questions regarding the authenticity or timing of the GPA are to be examined at trial. [Paras 30]

The prior quashment of the first complaint did not mandate quashing of the present complaints; maintainability of the subsequent complaints remained for trial.

Final Conclusion: The High Court declined to quash the complaints or the summons/notice under Section 138 NI Act at the pre-trial stage: the petitioner's factual and mixed-contentions were not of an unimpeachable character to justify interference under Section 482 CrPC and are left to be adjudicated by the trial court; the petitions are dismissed.