TaxTMI Updates e-Newsletter
Nov 20,2023

Validity of administrative circulars issued without statutory authorisation - Power of the Central Board to issue instructions under Section 168 of the CGST Act - Jurisdiction of the Tax Research Unit to issue classification directives - Classification of goods under the Harmonized System of Nomenclature (HSN) - Distinction between plastics (Chapter 39) and textiles/Section XI (Chapters 56 and 63) in tariff classification - Advance ruling mechanism as the prescribed route for classification disputes

Power of the Central Board to issue instructions under Section 168 of the CGST Act - Jurisdiction of the Tax Research Unit to issue classification directives - Whether the Tax Research Unit was empowered to issue the impugned circular purporting to clarify classification of polypropylene woven and non-woven bags. - HELD THAT: - The Court examined Section 168 of the CGST Act and observed that the statutory power to issue orders, instructions or directions to central tax officers for uniformity in implementation is vested in the Central Board of Indirect Taxes and Customs. No provision in the CGST Act was identified which confers equivalent authority on the Tax Research Unit to issue binding clarifications on classification. Respondents were unable to point to any statutory provision empowering the TRU to issue the impugned directive. On this statutory construction, the impugned circular was held to have been issued by a body lacking the requisite authority. [Paras 7, 23]

The circular is ultra vires insofar as it purports to be a statutorily authorised clarification by the TRU and is liable to be quashed on this ground.

Distinction between plastics (Chapter 39) and textiles/Section XI (Chapters 56 and 63) in tariff classification - Validity of administrative circulars issued without statutory authorisation - Classification of goods under the Harmonized System of Nomenclature (HSN) - Whether the impugned circular's substantive conclusion (that polypropylene woven and non-woven bags fall under Chapter 39/Tariff Heading 3923) was supportable on the materials and statutory scheme. - HELD THAT: - The Court noted that the impugned circular rested solely on Chapter 39 and did not advert to Section XI of the First Schedule or to Chapters 56 and 63 which deal with textiles and textile articles. The Notes to Chapter 39-specifically the exclusion of materials regarded as textile materials of Section XI-were not considered in the circular. Given that the petitioners' contention that non-woven polypropylene may fall under Heading 5603 was neither addressed nor contested below, and that the circular failed to examine the statutory distinction between plastics and textile materials, the Court found the circular unsustainable on these additional substantive grounds. [Paras 26]

For the additional reason that the circular failed to consider the statutory distinction between Chapter 39 and Section XI (including Chapters 56 and 63), the impugned circular could not be upheld.

Classification of goods under the Harmonized System of Nomenclature (HSN) - Advance ruling mechanism as the prescribed route for classification disputes - Disposition of the substantive classification dispute concerning polypropylene woven and non-woven bags. - HELD THAT: - Although invited to decide the classification issue, the Court declined to render a final determination because the parties had not placed adequate and cogent material before it and because the writ petition was confined to the validity of the circular. The Court observed that divergent views by AARs/AAARs exist and that such conflicts are to be resolved by the statutory mechanisms (advance rulings and related proceedings) rather than by a non statutory circular. Given the industry wide implications and the lack of comprehensive material, the Court left the question of classification open for decision by the competent authority in appropriate proceedings. [Paras 27, 28, 29]

The issue of classification is left open and not finally decided by this Court; parties remain free to pursue the matter through appropriate statutory channels.

Final Conclusion: Writ petition allowed; the impugned Tax Research Unit circular dated 31 December 2018 is quashed as issued without statutory authority and, additionally, for failing to confront the statutory distinction between Chapter 39 and Section XI (Chapters 56/63). The substantive classification of polypropylene woven/non woven bags is left open for determination by the competent authority through appropriate proceedings.

Refund of tax paid under pre-GST regime pursuant to Section 142 of the CGST Act - payment of interest on delayed refund - opportunity of being heard and requirement of a speaking order on rejection - treatment of returns of goods sold prior to GST rollout

Refund of tax paid under pre-GST regime pursuant to Section 142 of the CGST Act - payment of interest on delayed refund - Respondent directed to consider and process the petitioner's Section 142 application for refund of tax paid under the pre-GST regime and to pay applicable interest if refund is due. - HELD THAT: - The petitioner filed an application dated 28.06.2018 under Section 142 of the CGST Act seeking refund in respect of tax paid under the Central Sales Tax Act, 1956 for goods sold before the roll-out of GST and returned within six months from the appointed date; the application was acknowledged on 02.07.2018. The Court recorded the respondent's undertaking to consider the application and to process the refund in accordance with law, including payment of applicable interest where due. The direction requires the respondent to take steps to adjudicate the pending application on merits and to conclude the refund process without undue delay.

Petitioner's application to be considered and refund, if payable, to be processed with applicable interest.

Opportunity of being heard and requirement of a speaking order on rejection - If the Section 142 refund application is rejected, the respondent must pass a speaking order after affording the petitioner an opportunity of being heard. - HELD THAT: - The Court required that in the event the respondent decides to reject the petitioner's claim, the concerned officer shall record reasons in a speaking order and afford the petitioner an opportunity to be heard before passing such order. This obligation was accepted by the respondent's counsel and the Court bound the respondent to that undertaking, ensuring procedural fairness in the adjudication of the refund claim.

Any rejection must be preceded by opportunity to be heard and must be communicated by a speaking order stating reasons.

Final Conclusion: Writ petition disposed directing the respondent to consider and decide the petitioner's Section 142 refund application (acknowledged 02.07.2018), process any refund found payable with applicable interest, and, if rejecting the claim, pass a reasoned speaking order after affording the petitioner an opportunity of hearing; all rights and contentions reserved.

Input tax credit - disallowance of ITC for bogus invoices / circular trading - eligibility for input tax credit under Section 16(2)(d) - constructive possession / constructive receipt - penalty and interest under Section 74 - efficacious alternative remedy by way of appeal - natural justice

Input tax credit - disallowance of ITC for bogus invoices / circular trading - penalty and interest under Section 74 - Validity of impugned orders disallowing input tax credit and imposing penalty and interest on the petitioners based on findings of bogus invoices and absence of business activity. - HELD THAT: - The Court upheld the factual conclusion reached by the respondents that search and seized documents showed the petitioners had indulged in creation of bogus invoices and had not conducted business activity at the registered premises, and that the cotton yarn alleged to be purchased and sold was not received at the petitioners' premises. The Court noted that only ITC was availed by the beneficiary (SKMPL) and that penalty and interest were fastened on the petitioners based on the departmental adjudication. The Court found no violation of principles of natural justice in the adjudication and recorded that opportunity had been afforded to the petitioners. On these factual and procedural bases the Court was not inclined to interfere with the impugned orders. [Paras 8]

Writ petitions dismissed insofar as challenge to disallowance of ITC and imposition of penalty and interest; no interference with impugned orders.

Eligibility for input tax credit under Section 16(2)(d) - constructive possession / constructive receipt - Whether absence of physical receipt at the petitioners' premises and lack of transport documents precluded entitlement to ITC under the doctrine of constructive receipt/possession. - HELD THAT: - Petitioners argued that constructive receipt/possession and transfer of title at supplier's premises would suffice for claiming ITC under Section 16(2)(d). The Court, however, proceeded on the basis of the departmental factual findings that goods were not received and that invoices were bogus; having accepted those findings and having found no breach of natural justice, the Court did not accede to the petitioners' contention and did not set aside the impugned orders on that ground. [Paras 8]

Petitioners' contention based on constructive receipt and Section 16(2)(d) not accepted; challenge rejected on the facts.

Efficacious alternative remedy by way of appeal - leave to appeal without insisting upon limitation - pre-deposit discretion of appellate authority - Whether writ jurisdiction should be exercised in presence of an efficacious statutory appeal and what relief to grant. - HELD THAT: - The Court observed that an efficacious remedy by way of appeal is available against the impugned orders. Accordingly, rather than granting substantive relief, the Court declined to entertain the writ petitions and granted liberty to the petitioners to prefer appeals within 30 days from receipt of the order without insisting on limitation. The Court declined to give any positive direction regarding pre-deposit, leaving the matter to the appellate authority to decide in accordance with law after affording opportunity to the petitioners. [Paras 9]

Writ petitions dismissed with liberty to prefer appeals within 30 days without insisting on limitation; appellate authority to deal with pre-deposit as per law.

Final Conclusion: The writ petitions challenging the disallowance of input tax credit and imposition of penalty and interest were dismissed for want of merit and in view of available statutory remedy; petitioners granted liberty to prefer appeals within 30 days without insistence on limitation, with pre-deposit to be considered by the appellate authority in accordance with law.

Limitation period for refund claims - interpretation of the 'relevant date' under Section 54(1) of the GST Act - prospective operation of statutory amendment - manual filing and processing of refund under Rule 97-A / Section 97-A - exclusion of period for limitation by Supreme Court order

Limitation period for refund claims - interpretation of the 'relevant date' under Section 54(1) of the GST Act - prospective operation of statutory amendment - exclusion of period for limitation by Supreme Court order - The application for refund in respect of December, 2017 was within time and ought to have been entertained. - HELD THAT: - The court accepted that the period excluded by the Supreme Court (between 15/03/2020 and 28/02/2022) renders the application filed on 13/05/2020 for December, 2017 within the two-year limitation. The court further held that the 2019 amendment to the definition of 'relevant date' in Section 54(1) is prospective unless expressly stated otherwise; hence the earlier definition (where the relevant date was the end of the financial year) governs refund claims arising from returns filed prior to 01/02/2019. Applying these principles, the petitioner's refund claim for December, 2017 falls under the pre-amendment regime and was therefore not properly rejected on grounds of limitation. [Paras 5, 6, 7]

The refund application for December, 2017 is timely and respondents were obliged to entertain it.

Manual filing and processing of refund under Rule 97-A / Section 97-A - procedural acceptance of refund applications - The petitioner is entitled to file refund applications manually under Rule 97-A for January to March, 2018 where portal filing was not accepted. - HELD THAT: - Having regard to the language of Rule 97-A of the GST Rules and the evidence that portal applications for the relevant months were not accepted, the court held that the petitioner could pursue manual filing and processing of refund applications. The court directed that the respondents accept and process the applications in accordance with applicable rules. [Paras 8, 9]

The petitioner may file and have the refund applications for January to March, 2018 accepted and processed manually under Rule 97-A.

Final Conclusion: The petition is allowed: respondents are directed to accept and entertain the petitioner's refund applications for December, 2017 to March, 2018 and to process them according to the applicable rules; no costs.

Interception of goods in transit - exercise of powers under Section 129 of the Central Goods and Services Tax Act, 2017 - confiscation under Section 130 of the Central Goods and Services Tax Act, 2017 - non obstante clause in Section 129 - interim release on compliance of conditions - bond and deposit as condition for release

Interception of goods in transit - exercise of powers under Section 129 of the Central Goods and Services Tax Act, 2017 - confiscation under Section 130 of the Central Goods and Services Tax Act, 2017 - interim release on compliance of conditions - bond and deposit as condition for release - Interim release of the petitioner's goods and vehicle subject to specified deposits, penalty, bond and compliance conditions. - HELD THAT: - The court noted that the goods in transit were intercepted under powers exercisable when goods are in transit and that authorities also invoked the provision for confiscation. Without adjudicating the ultimate question on the propriety of switching from the transit provision to the confiscation provision, the High Court in the exercise of its discretionary jurisdiction granted interim relief. Having considered the facts and prior similar matters, the court ordered release of the goods and vehicle on strict compliance with conditions: deposit of tax, deposit of penalty, furnishing of a bond towards fine in lieu of confiscation of goods, and deposit towards fine in lieu of confiscation of the conveyance. The order is interlocutory and directed compliance before the authorities release the goods and vehicle; the petition is to be listed with the similar Special Civil Application for further hearing. [Paras 6, 7]

Goods and vehicle released on petitioner's compliance with the specified deposits, penalty and bond; petition to be listed with Special Civil Application No.8353 of 2022.

Final Conclusion: Interim order granting release of the intercepted goods and vehicle upon the petitioner depositing tax and penalty amounts and furnishing a bond as directed; the order is interlocutory and the petition will proceed for further hearing.

Principles of natural justice - service of notice - opportunity of being heard - quashing and remand for fresh consideration - adjournment and issuance of further notice

Principles of natural justice - service of notice - opportunity of being heard - Whether the impugned appellate order was passed in violation of the principles of natural justice due to non-service of further notice and absence of a proper opportunity of hearing to the petitioner. - HELD THAT: - The High Court examined the averments recorded in paragraphs 19 and 20 of the impugned order which indicate that the appellant and the authorized representative had appeared and sought an adjournment, no next date of hearing was recorded by the appellate authority, and a further notice was issued to the appellant and his representative. The petitioner contended that the further notices were not served upon them and therefore no proper opportunity of hearing was afforded. Having regard to these facts, the Court concluded that the appellate order was passed in breach of the procedural right to be heard, an essential facet of the principles of natural justice, warranting interference. [Paras 6, 7]

Impugned order quashed and the appeal remitted to the appellate authority for fresh consideration after giving the petitioner an opportunity of being heard.

Quashing and remand for fresh consideration - opportunity of being heard - The relief to be granted consequential to the finding of violation of natural justice. - HELD THAT: - The Court directed that the impugned order dated 18.05.2023 be quashed and the matter remitted to the appellate authority to consider the appeal afresh in accordance with law. As the petitioner was represented before the High Court without awaiting further notice, the Court specified that the petitioner or his authorized representative shall appear before the appellate authority on the fixed date and the authority shall thereafter afford an opportunity of hearing and dispose of the appeal expeditiously. [Paras 7]

Order quashed; matter remitted to the appellate authority with directions to hear the petitioner afresh (appearance directed on 02.08.2023) and decide the appeal in accordance with law as expeditiously as possible.

Final Conclusion: The appellate order dated 18.05.2023 was quashed for violation of natural justice arising from non-service of further notice and denial of a proper hearing; the appeal is remitted for fresh consideration with directions to afford the petitioner an opportunity of being heard and to decide the appeal expeditiously.

Duty of the Appellate Authority to decide appeals on merits - obligation to consider grounds raised in the memorandum of appeal even in ex parte proceedings - impropriety of dismissal for non-prosecution where statutory duty to inquire exists - power to conduct further enquiry to decide the appeal - requirement of a speaking order - restoration of appeal for fresh adjudication

Duty of the Appellate Authority to decide appeals on merits - obligation to consider grounds raised in the memorandum of appeal even in ex parte proceedings - impropriety of dismissal for non-prosecution where statutory duty to inquire exists - power to conduct further enquiry to decide the appeal - requirement of a speaking order - restoration of appeal for fresh adjudication - Whether the appellate authority was justified in dismissing the appellant's appeal for non-prosecution without deciding the grounds on merits and without issuing proper notice, and what relief follows. - HELD THAT: - The High Court held that under the statutory scheme applicable to appeals the Appellate Authority is obliged to examine the grounds raised in the memorandum of appeal and decide the appeal on its merits. Even where an appeal is proceeded with ex parte, the Appellate Authority must consider the appellant's pleaded grounds and may conduct such further enquiry as the statute empowers it to undertake; failure to do so amounts to abdication of statutory power. The appellate order under challenge was set aside because it dismissed the appeal for non-prosecution despite findings that the supplier had not been issued notice and without adjudication on the merits. The matter was restored to the Appellate Authority for fresh hearing; directions were given for fixation of hearing, cooperation by the appellant, consideration of the appeal on merits even in the absence of the appellant or his representative, and for a speaking order to be passed within a specified timeframe. [Paras 2, 3, 4, 5]

Order dismissing appeal for non-prosecution set aside; appeal restored for fresh hearing and disposal on merits with directions to conduct necessary enquiry and pass a speaking order.

Final Conclusion: Writ petition allowed; impugned ex parte dismissal for non-prosecution set aside and appeal restored to the Appellate Authority for fresh hearing and merits adjudication with directions to consider the grounds, conduct further enquiry if necessary, ensure a hearing is fixed and acknowledged, and pass a speaking order within three months of the last hearing.

Vires of Sub-Rule (10) of Rule 96 of the Central Goods and Service Tax Rules, 2017 - interim injunction against coercive recovery - refund of integrated tax

Vires of Sub-Rule (10) of Rule 96 of the Central Goods and Service Tax Rules, 2017 - interim injunction against coercive recovery - refund of integrated tax - Challenge to the vires of Sub-Rule (10) of Rule 96 of the Central Goods and Service Tax Rules, 2017 and interim relief against coercive recovery in respect of integrated tax paid pursuant to claimed refund. - HELD THAT: - The petitioner sought adjudication on the constitutional vires of Sub-Rule (10) of Rule 96, Central Goods and Service Tax Rules, 2017. Having placed on record orders in similar matters and upon hearing preliminary submissions, the Court issued notice and granted ad-interim relief. Pending final disposal of the petition, the respondent authorities were restrained from making any coercive recovery from the petitioner in respect of the refund of integrated tax already paid. The order is interlocutory and does not decide the merits of the vires challenge, but preserves the petitioner's position by preventing enforcement measures until further orders. [Paras 2]

Notice issued returnable on 27th July, 2023; ad-interim relief granted restraining coercive recovery in respect of the refund of integrated tax already paid until further orders.

Final Conclusion: The petition challenges the vires of Sub-Rule (10) of Rule 96, CGST Rules, 2017; the High Court issued notice and granted interim protection restraining coercive recovery of the integrated tax claimed as refund until further orders.

Perquisites provided by employer to employee - supply under section 7 of the CGST Act - input tax credit proviso to section 17(5)(b) - obligation under Factories Act, 1948 - services for personal consumption - definition of input service - input tax credit exclusion under section 17(5)(g) - exemption for transport of passengers by non AC contract carriage

Perquisites provided by employer to employee - supply under section 7 of the CGST Act - Whether GST is leviable on recoveries made from employees for canteen services provided by the applicant - HELD THAT: - The Authority found that canteen facilities in the present case are provided as perquisites under the employment contract and arise from the statutory regime under Section 46 of the Factories Act, 1948 which mandates provision of canteens in specified factories. CBIC Circular No.172/04/2022 (06.07.2022) was applied to hold that perquisites provided by an employer to employees in terms of contractual obligation are not subject to GST. The members concluded that where the canteen is provided as a contractual/statutory perquisite and not as a commercial supply, GST is not leviable on such recoveries from employees. The Authority added that if the employer instead makes a taxable supply of canteen services for business consideration (i.e., not as a perquisite), GST would be payable at applicable rates. [Paras 7, 9, 10]

Recoveries from employees for canteen services provided as a contractual/statutory perquisite are not subject to GST; taxable treatment would apply only if the employer supplies canteen services as a business consideration.

Input tax credit proviso to section 17(5)(b) - obligation under Factories Act, 1948 - Whether input tax credit is available on GST paid for inward supplies used to provide canteen facilities - HELD THAT: - The Authority examined Section 17(5)(b) and the proviso which, as clarified by CBIC Circular No.172/04/2022, applies to the whole of clause (b). The proviso makes input tax credit available where the supply is obligatory for an employer to provide to employees under any law. Since the applicant is a registered unit under the Factories Act and canteen provision is obligatory under Section 46 and applicable factory rules, the Authority held that input tax credit on inward supplies for canteen services is available subject to the accounting treatment: if the employer passes on full costs to employees (so that cost is not borne by the employer in its books) then it would not be an input; conversely, if the employer bears the cost (or recovers only nominal amounts) and records the expenditure, ITC is claimable under the proviso to Section 17(5)(b). [Paras 7, 9, 10]

ITC on inward supplies for canteen services is available under the proviso to Section 17(5)(b) where provision of canteen is obligatory under the Factories Act and the cost is borne by the employer (not fully passed on to employees).

Perquisites provided by employer to employee - exemption for transport of passengers by non AC contract carriage - Whether GST is leviable on recoveries made from employees for transportation facilities provided by the applicant - HELD THAT: - The Authority noted that transport of passengers by non air conditioned contract carriage is exempt under Notification No.12/2017 (28.06.2017), and observed that if transportation is provided as a perquisite under a contractual arrangement it would not be subject to GST as a supply. Both members recorded that where an employer provides transportation as a perquisite in terms of the employment contract it is not a taxable supply; however, if transportation is provided as a commercial taxable supply (i.e., not as a perquisite) GST would be attracted at prescribed rates. [Paras 7, 9, 10]

Recoveries for transportation provided as a contractual perquisite are not subject to GST; if provided as a business consideration, GST would be payable, noting the relevant exemption for non AC contract carriage where applicable.

Definition of input service - input tax credit exclusion under section 17(5)(g) - Whether input tax credit is available on GST paid for inward supplies used to provide transportation facilities to employees - HELD THAT: - The Authority analysed Sections 2(60) (definition of 'input service') and 17(5)(g) which denies ITC for goods or services used for personal consumption. Relying on judicial precedent and the nature of the activity, the Authority held that transportation of employees from residence to workplace is for personal convenience and not an input used in the course or furtherance of the applicant's business of manufacturing and supplying pre engineered buildings. The applicant is not statutorily obligated to provide employee transport; accordingly the proviso to Section 17(5)(b) does not apply and ITC is not available. The Central Member emphasised that such transport is not an 'input service' and falls within the exclusion in Section 17(5)(g). [Paras 9, 10]

ITC is not available on GST paid for transportation services provided to employees because such services are for personal consumption, not an 'input service', and the applicant is not under statutory obligation to provide them.

Final Conclusion: The Authority ruled that canteen services provided as statutory/contractual perquisites are not subject to GST and ITC on inputs for such canteens is available under the proviso to Section 17(5)(b) where the employer is obliged under the Factories Act and bears the cost; transportation provided as a contractual perquisite is not taxable when so provided, but ITC on transportation services is not available because employee transport is for personal consumption and the applicant is not statutorily obliged to provide it.

Stay of impugned demand order - Service tax on royalty - Interim relief pending disposal of lead writ - Filing of counter-affidavit and rejoinder

Stay of impugned demand order - Service tax on royalty - Interim relief pending disposal of lead writ - The operation of the impugned order dated 25.02.2023 demanding service tax on royalty was stayed until further orders. - HELD THAT: - The Court, referring to reasons recorded in the lead order dated 22.03.2022 in Writ (Tax) No. 343 of 2022, granted interim relief by staying the impugned demand order dated 25.02.2023. The stay is interlocutory and expressly extended until further orders, thereby preserving the position of the petitioner while the connected lead matter is adjudicated. [Paras 6]

Impugned order dated 25.02.2023 demanding service tax on royalty shall remain stayed until further orders.

Filing of counter-affidavit and rejoinder - Procedure for interim hearing - Directions for expeditious filing of pleadings and listing for hearing were issued. - HELD THAT: - The Court directed all respondents to file a counter-affidavit within four weeks and allowed the petitioner two weeks thereafter to file a rejoinder affidavit. The matter is to be listed for hearing immediately after completion of this exchange of affidavits, thereby directing a timetable for further proceedings in the petition connected with the lead writ. [Paras 4, 5]

Respondents shall file counter-affidavit within four weeks; petitioner to file rejoinder within two weeks thereafter; matter to be listed for hearing immediately thereafter.

Final Conclusion: Connected to the lead Writ (Tax) No. 343 of 2022, the Court granted an interim stay on the demand for service tax on royalty contained in the order dated 25.02.2023 and directed exchange of affidavits on an expedited timetable, with the matter to be listed for hearing thereafter.

Addition under Section 69 of the Income Tax Act, 1961 - addition made on protective basis - substantive addition dropped on merits - reliance on Kabul Chawla and its affirmation in Abhisar Buildwell - no substantial question of law

Addition under Section 69 of the Income Tax Act, 1961 - addition made on protective basis - substantive addition dropped on merits - no substantial question of law - Validity of the Tribunal's dismissal of the revenue's appeal against deletion of the protective addition in the hands of the assessee for AY 2010-11 - HELD THAT: - The Tribunal dismissed the revenue's appeal after noting that the substantive addition had been dropped on merits in respect of the JP Minda Group by a coordinate bench. The addition in the hands of the respondent/assessee had been made only on a protective basis. The coordinate bench's decision to drop the substantive addition rested on the authority of Commissioner of Income Tax v. Kabul Chawla, which has been affirmed by the Supreme Court in Principal Commissioner of Income Tax v. Abhisar Buildwell. Given that the substantive addition was abandoned on merits, the Tribunal correctly declined to sustain the protective addition against the assessee. In these circumstances the High Court found that no substantial question of law arose for its consideration. [Paras 7, 8]

The appeal is closed; no substantial question of law arises and the Tribunal's dismissal of the revenue's appeal is sustained.

Final Conclusion: The High Court declined to entertain the appeal for AY 2010-11, holding that because the substantive addition in respect of the JP Minda Group was dropped on merits (relying on Kabul Chawla as affirmed in Abhisar Buildwell) and the addition against the assessee was only protective, no substantial question of law arises; the appeal is closed.

Refund of tax and interest on delayed refund - mandamus/direction for payment of undisputed refund - centralised processing centre (CPC) technical delay not excusing non-payment - public money and interest liability of the revenue

Refund of tax and interest on delayed refund - mandamus/direction for payment of undisputed refund - centralised processing centre (CPC) technical delay not excusing non-payment - Direction to respondents to credit the undisputed refund to the petitioner with interest by a specified date. - HELD THAT: - The Court recorded that the petitioner seeks refund for Assessment Year 2020-21 and that the respondents do not dispute the amount payable. The respondents attributed non-payment to a technical issue at the Centralised Processing Centre, Bangalore; the Court observed that such systemic excuses are recurrent and that interest is payable in law until the date of refund, emphasising that delay causes needless burden on the public exchequer. Concluding that the technical difficulty did not negate the petitioner's right to the undisputed refund, the Court directed respondents, either directly or through CPC, to ensure credit of the refund amount to the petitioner's account on or before 4th November 2023 together with interest up to the date of payment in accordance with law. The Court also recorded its administrative concern and directed that copies of the order be sent to central authorities for information and necessary action. [Paras 1, 2, 3]

Respondents to credit the undisputed refund for Assessment Year 2020-21 to the petitioner by 4th November 2023 with interest up to the date of payment; petition disposed.

Final Conclusion: The petition for refund in respect of Assessment Year 2020-21 is allowed to the extent directed: the respondents shall ensure payment of the undisputed refund with interest by the specified date; petition disposed with liberty to apply.

Natural justice - notice under Section 148 of the Income Tax Act - service of notice by post and e portal uploads - waiver of right to personal hearing - opportunity of appeal before appellate authority - assessment under Section 144 read with Section 147

Natural justice - service of notice by post and e portal uploads - e filing/e portal access - Validity of the assessment order impugned as being passed in violation of the principles of natural justice - HELD THAT: - The Court found on the record that the notice under Section 148 was issued on 31.03.2021 and received by the petitioner on 03.04.2021, notices were uploaded on the e portal and the petitioner had accessed the e portal to file return and audit report for the relevant year. In those circumstances the respondent had taken steps to communicate the proceedings both physically and electronically. The Court concluded that the assessment order was a consequence of the petitioner's failure to file a reply or seek personal hearing and therefore there was no breach of the principles of natural justice. [Paras 6, 7, 8, 9]

The challenge to the assessment on the ground of violation of natural justice is rejected and the impugned order is held valid.

Waiver of right to personal hearing - opportunity of appeal before appellate authority - Relief to be afforded to the petitioner despite dismissal of the writ - HELD THAT: - Although the petitioner had voluntarily failed to avail the opportunity for filing reply and personal hearing before the Assessing Officer and thus had forfeited that remedy, the Court recognised the statutory scheme which affords a second opportunity before the appellate authority. Exercising its discretionary supervisory jurisdiction, the Court declined to entertain the writ but granted the petitioner a limited procedural relief: a period of 30 days to file an appeal, directing the appellate authority to consider the appeal on its merits and to provide the petitioner an opportunity without insisting on limitation. [Paras 10]

Petitioner granted 30 days to file appeal; appellate authority directed to hear on merits and not to press limitation.

Final Conclusion: Writ petition dismissed; petitioner permitted 30 days to file appeal and the appellate authority directed to consider the appeal on merits, affording opportunity to the petitioner and not to press limitation.

Search and seizure powers under Section 132(1) of the Income-tax Act - prohibitory/restraint order under Section 132(3) of the Income-tax Act - meaning and scope of "valuable article"/"thing" in Section 132 - distinction between second proviso to Section 132(1) and Section 132(3) - colourable exercise of statutory power

Meaning and scope of "valuable article"/"thing" in Section 132 - Whether liquor falls within the expression "valuable article"/"thing" under Section 132 of the Income-tax Act - HELD THAT: - The Court held that the expression "valuable article"/"thing" in Section 132 is wide and to be understood in common parlance as covering inanimate objects having market value. Dictionary meanings of "valuable", "article" and "thing" were applied to show that items which are marketable and possess value are includible. Liquor, being a marketable commodity with monetary value, falls within the expression "valuable article"/"thing" and therefore is within the scope of the assets contemplated by Section 132.

Liquor is a "valuable article"/"thing" and is includible within the ambit of Section 132.

Search and seizure powers under Section 132(1) of the Income-tax Act - prohibitory/restraint order under Section 132(3) of the Income-tax Act - distinction between second proviso to Section 132(1) and Section 132(3) - colourable exercise of statutory power - Validity of invoking Section 132(3) (prohibitory order) instead of exercising seizure powers under Section 132(1) in respect of liquor found during search - HELD THAT: - The Court analysed Section 132 as an integrated code governing search and seizure. Section 132(1) confers wide powers to enter, search and seize books, documents, money, bullion, jewellery and other valuable articles. Section 132(3) is available only where it is not practicable to seize such items for reasons other than those specified in the second proviso to Section 132(1). The second proviso itself applies where physical seizure is impracticable due to volume, weight, other physical characteristics or dangerous nature, in which case a restraint order is deemed seizure. The Court emphasised that Section 132(3) cannot be used so as to circumvent the duty to seize where seizure is practicable. Revenue failed to demonstrate any practicable impossibility to seize the liquor; reliance on Excise Authorities' jurisdiction or on the CBDT circular did not justify treating liquor as beyond the scope of seizure by income-tax authorities. Invoking Section 132(3) in the facts was therefore a colourable exercise of power.

Invocation of Section 132(3) was invalid in the circumstances; the prohibitory order is set aside and Revenue may, if so advised, invoke the appropriate provisions in accordance with law.

Final Conclusion: The Court held that liquor is a "valuable article" under Section 132 and that the impugned order under Section 132(3) was a colourable exercise of power when seizure under Section 132(1) was practicable; the restraint order dated 29.09.2023 is set aside and Revenue is at liberty to proceed lawfully, with costs awarded to the petitioners and the State Legal Services Authority as directed.

Mandamus - de-sealing of property - possession during liquidation - verification of title - custody of documents by Income Tax authorities - vacate and hand over vacant possession

De-sealing of property - possession during liquidation - verification of title - vacate and hand over vacant possession - First respondent to consider the petitioner's representation and de-seal and vacate the property belonging to the petitioner. - HELD THAT: - The Court recorded that the Official Liquidator locked and sealed the premises in liquidation proceedings under the impression that the property belonged to the company, but upon verification it was found to belong to the petitioner. The Deputy Official Liquidator admitted the position and assured that the Official Liquidator would vacate the premises, subject to sufficient time being granted. In view of these findings, the Court directed the first respondent to consider the petitioner's representation dated 04.01.2022, pass orders for de-sealing, take back books of accounts and equipment, and vacate and hand over the premises within 30 days from receipt of the order. [Paras 4, 7]

Writ petition disposed directing the first respondent to consider the representation and de-seal, take back items, and hand over vacant possession within 30 days.

Custody of documents by Income Tax authorities - mandamus - Second respondent (Assistant Commissioner of Income Tax) has no role in the petitioner's prayer for de-sealing; direction against the Income Tax authority is unnecessary. - HELD THAT: - The Court noted that Income Tax officials had seized certain books and records from the company's premises and that the Official Liquidator had issued a notice for provision of those documents. However, having impleaded the Income Tax authority, the Court found it sufficient to direct the Official Liquidator to vacate the property because the Income Tax officer had no direct role in the prayer for de-sealing the petitioner's property. Consequently no separate direction was issued against the second respondent. [Paras 6, 7]

No direction required against the second respondent; relief confined to the first respondent.

Final Conclusion: The writ petition is disposed by directing the Official Liquidator to consider the petitioner's representation dated 04.01.2022, de-seal the property, take back any books or equipment, and vacate and hand over vacant possession within 30 days; no relief is directed against the Income Tax authority.

Substantial question of law - non-admission under Section 260A - cross-objection - academic and infructuous cross-objection - application mutatis mutandis of findings across assessment years

Cross-objection - academic and infructuous cross-objection - Whether the ITAT erred in not adjudicating the assessee's cross-objection (including ground no. 3) in respect of Assessment Year 2012-13 - HELD THAT: - The High Court reviewed the Tribunal's reasoning and factual matrix and observed that the grounds of the assessee for A.Y. 2012-13 were identical to those for A.Ys. 2011-12 and 2013-14. The Court accepted the Tribunal's conclusion that the Revenue's appeals for A.Y. 2011-12 were dismissed and, in view of identical facts, those conclusions applied mutatis mutandis to A.Ys. 2012-13 and 2013-14. The Court noted that the assessee filed cross-objections merely to support the first appellate order and that no substantial arguments in support of the cross-objections were advanced before the Tribunal. Because the appeals were dismissed, the cross-objections became academic and infructuous and were therefore not adjudicated on merits by the ITAT. [Paras 4]

Cross-objection (including ground no. 3) was not adjudicated by the ITAT because it had become academic/infructuous; the cross-objections were dismissed.

Substantial question of law - non-admission under Section 260A - application mutatis mutandis of findings across assessment years - Whether any substantial question of law arises which warrants admission of the appeal under Section 260A - HELD THAT: - Applying the test in Santosh Hazari v. Purushottam Tiwari regarding what constitutes a 'substantial question of law', the Court examined the proposed substantial questions and the Tribunal's findings. It held that the questions advanced were not debatable or determinative of rights of the parties in a manner that would merit admission: the factual matrix was identical across assessment years and the Tribunal's reasoning applying earlier conclusions mutatis mutandis left no substantial point of law open for consideration by the High Court. Consequently, none of the proposed substantial questions (1) to (3), nor any other substantial question of law, arose for admission. [Paras 5, 6, 7]

No substantial question of law is made out; the appeal does not deserve admission under Section 260A.

Final Conclusion: The petition is dismissed: the Court found no substantial question of law for admission under Section 260A and upheld the Tribunal's treatment of the cross-objections as academic, resulting in dismissal of the appeal.

Faceless assessment procedure under Section 144B - Reopening of assessment under Section 147 - Supply of reasons for reopening - Draft assessment order requirement - Principles of natural justice (opportunity to be heard)

Supply of reasons for reopening - Principles of natural justice (opportunity to be heard) - Reopening of assessment under Section 147 - Whether the assessment framed without supplying the reasons for reopening violated principles of natural justice and warranted quashing. - HELD THAT: - The Court examined the faceless assessment procedure and observed that once a case is reopened under the provisions invoked, reasons recorded for reopening must be supplied so as to put the assessee on notice and enable objections. Section 144B prescribes the faceless procedure, including the requirement for draft assessment orders and for providing notices where variation prejudicial to the assessee is proposed. The impugned assessment was finalised without supplying the reasons for reopening and without following the procedure under Section 144B which, in effect, denied the assessee the opportunity of being heard. For these reasons the assessment was held to be in violation of the principles of natural justice and unsustainable. [Paras 9, 10, 11]

Assessment passed without supplying reasons for reopening and without following the faceless-procedure requirements violated natural justice and was quashed.

Draft assessment order requirement - Faceless assessment procedure under Section 144B - Whether the Revenue could be permitted to redo the assessment and, if so, on what terms. - HELD THAT: - Having quashed the impugned order for procedural infirmity, the Court did not examine the merits of the additions. The Revenue was granted liberty to proceed afresh in accordance with the statutory faceless-procedure, including supplying the reasons for reopening and issuing the draft assessment order or show-cause notice as mandated, and to afford the assessee the opportunity of being heard. The Court directed completion of such exercise within a specified timeframe. [Paras 12]

Quash set aside; Revenue permitted to proceed afresh under Section 144B complying with procedural requirements and to complete reassessment within 12 weeks.

Final Conclusion: The assessment order dated 29.03.2022 and demand notice for AY 2013-14 are quashed for failure to supply reasons for reopening and failure to follow the faceless-assessment procedure; the Revenue is permitted to redo the assessment in accordance with Section 144B, providing reasons, draft assessment order and opportunity of hearing, to be completed within 12 weeks; the merits were not examined.

Principles of natural justice - faceless assessment procedure under section 144B - show cause notice-cum-draft assessment order - opportunity of personal hearing through video conferencing - reassessment under section 147 in faceless assessment

Principles of natural justice - show cause notice-cum-draft assessment order - faceless assessment procedure under section 144B - Impugned assessment order was passed without following the procedure under section 144B and in violation of principles of natural justice by not issuing the prescribed show-cause notice-cum-draft assessment order and by not affording the opportunity of personal hearing. - HELD THAT: - The Court examined the procedure prescribed by section 144B for faceless assessments, which contemplates that where a variation prejudicial to the assessee is proposed the National Faceless Assessment Centre must serve a show-cause notice calling upon the assessee to show cause against the proposed variation and, if requested and permissible, provide personal hearing through video conferencing. In the present case no draft assessment along with the statutorily mandated show-cause notice as contemplated by section 144B(1) and 144B(7) was given to the petitioner to enable explanation before completion of assessment. The absence of the prescribed notice and opportunity of hearing amounted to non-compliance with the faceless assessment procedure and thereby violated the principles of natural justice. The Court therefore held that the assessment framed without following the statutory procedure was vitiated. [Paras 9]

Impugned assessment order quashed for failure to issue show-cause-cum-draft assessment order and for denial of the opportunity of personal hearing as mandated under section 144B.

Faceless assessment procedure under section 144B - opportunity of personal hearing through video conferencing - reassessment under section 147 in faceless assessment - Remedial course permissible to the Revenue following quashing: authority may proceed afresh by issuing show-cause-cum-draft assessment order and affording hearing as per section 144B. - HELD THAT: - Having quashed the impugned order for procedural illegality, the Court did not adjudicate the merits of the additions. The Revenue was placed at liberty to proceed under the faceless assessment scheme in accordance with law by issuing the show-cause-cum-draft assessment order, providing the petitioner the opportunity of hearing (including personal hearing by video conferencing if applicable), and completing the exercise within the timeframe directed by the Court. The Court expressly confined its order to procedural compliance and preservation of the right to a fresh adjudication under the statutory faceless procedure. [Paras 10]

Assessment and demand notice quashed; Revenue permitted to proceed afresh under section 144B after issuance of show-cause-cum-draft order and affording hearing, to be completed within 12 weeks of receipt of this order.

Final Conclusion: Writ petition allowed; the assessment order and demand notice for AY 2018-19 are quashed for non-compliance with the faceless assessment procedure and principles of natural justice. Revenue may reinitiate assessment in accordance with section 144B, affording the statutory opportunity of show-cause and hearing, to be completed within twelve weeks.

Exemption of income arising from NRE accounts under section 10(4) of the Income Tax Act, 1961 - power to initiate reassessment proceedings under section 148A(d) and issue notice under section 148 of the Income Tax Act, 1961 - residential status determination under section 6 of the Income Tax Act, 1961

Exemption of income arising from NRE accounts under section 10(4) of the Income Tax Act, 1961 - power to initiate reassessment proceedings under section 148A(d) and issue notice under section 148 of the Income Tax Act, 1961 - residential status determination under section 6 of the Income Tax Act, 1961 - Validity of the order dated 29.03.2022 under section 148A(d) and consequential notice dated 30.03.2022 under section 148 where investments were made from NRE accounts by a person resident and citizen of Uganda for Assessment Year 2018-19. - HELD THAT: - The Court examined the petitioner's response to the notice which showed that all challenged investments in time deposits and mutual funds were funded from the petitioner's NRE bank accounts. Those factual disclosures were not controverted. Income arising from funds in NRE accounts falls outside the taxable total income by reason of the statutory exemption contained in section 10(4), and the source of the funds was therefore beyond the reach of the revenue for the year under consideration. Although the assessing officer noted that the petitioner had not submitted a passport copy and observed that residential status under section 6 could not be ascertained without it, the material before the officer established that the funds were from NRE accounts and the claim of exemption under section 10(4) was determinative. In those circumstances, issuance of the impugned order and notice under section 148A(d)/148 was without jurisdiction.

Impugned order dated 29.03.2022 under section 148A(d) and consequential notice dated 30.03.2022 under section 148 quashed and set aside for Assessment Year 2018-19.

Final Conclusion: Petitions allowed; orders dated 29.03.2022 (and consequential notice) set aside as the investments were shown to have been made from NRE accounts and thus exempt under section 10(4), rendering the reassessment steps without jurisdiction; no order as to costs.

Cessation or remission of liability under Section 41(1) of the Income tax Act - requirement of writing off liability in books for invocation of Section 41(1) - genuineness of transactions - concurrent findings of fact - preceding assessment year's findings precluding fresh adverse conclusion

Cessation or remission of liability under Section 41(1) of the Income tax Act - requirement of writing off liability in books for invocation of Section 41(1) - genuineness of transactions - preceding assessment year's findings precluding fresh adverse conclusion - Deletion of addition under Section 41(1) of the Act in respect of sundry creditor balance of M/s. Paper Star Marketing for AY 2013-14 was sustainable. - HELD THAT: - The Tribunal and the CIT(A) concurrently found that the transactions with M/s. Paper Star Marketing were examined and held to be genuine by the Assessing Officer in the preceding assessment year (AY 2012-13). Section 41(1) applies only where an allowance/deduction was made earlier and subsequently the liability has ceased or been remitted (including by being written off in the books). The Assessing Officer in the impugned year relied on adverse material (denial by the creditor and absence of corresponding bank entries) which had already been considered and found not to vitiate the genuineness of the transactions in AY 2012-13. Moreover, the assessee made payment in the next year (AY 2014-15) and had not written off the liability in the year under consideration; therefore the statutory condition for invoking Section 41(1) - cessation/remission or write off of the liability in the relevant previous year - was not satisfied. For these reasons the Tribunal rightly deleted the addition made under Section 41(1). [Paras 5, 6]

The Tribunal correctly affirmed deletion of the addition under Section 41(1); the Revenue's challenge is dismissed.

Final Conclusion: The Tax Appeal is dismissed; no substantial question of law arises as the Tribunal correctly applied Section 41(1) in light of the preceding year's finding of genuineness and absence of cessation or write off of liability in the year under consideration.

Disallowance of business loss as bogus or sham transaction - onus of proof on assessing officer to establish sham or pre arranged trades - relevance of contract notes, investor reports and broker client-wise sauda summary to prove genuineness of trades - pre-arranged trades/entry provider modus operandi not sufficient without specific linkage to the assessee

Disallowance of business loss as bogus or sham transaction - onus of proof on assessing officer to establish sham or pre arranged trades - relevance of contract notes, investor reports and broker client-wise sauda summary to prove genuineness of trades - Claimed business loss of Rs. 1,53,890/- arising from share trades held to be genuine and disallowance by AO (confirmed by CIT(A)) set aside. - HELD THAT: - The Assessing Officer treated the losses as bogus relying on general observations, price/volume charts and statements attributed to entry providers, but failed to demonstrate specific linkage between those statements and the assessee's transactions. Material documents evidencing trading on recognised exchanges - contract notes, investor's report and client-wise sauda summary - were on record and were not given due cognisance by the AO. Mere charted market fluctuations and generalized statements about entry providers did not suffice to rebut the assessee's evidence of genuine trades executed through a registered broker. For these reasons the Tribunal found that the AO did not discharge the burden of establishing that the assessee's losses were sham transactions and therefore allowed the appeal. [Paras 8, 9]

The disallowance of business loss of Rs. 1,53,890/- was set aside and the assessee's appeal allowed.

Final Conclusion: Appeal allowed: the Tribunal held that the Assessing Officer failed to establish that the share transactions were sham and erred in disregarding the assessee's documentary evidence, and therefore restored the claimed business loss for Assessment Year 2014-15.

Exemption under section 54F - proviso to section 54F - date of transfer - ownership on the specified date - gift deed and change of ownership - colourable device

Exemption under section 54F - date of transfer - ownership on the specified date - proviso to section 54F - gift deed and change of ownership - Whether the assessee, as on 27.12.2014 (date of transfer), owned more than one residential house so as to disqualify him from claiming exemption under section 54F. - HELD THAT: - The Tribunal examined the meaning of "on the date of transfer" in the proviso to section 54F and concluded that the date of transfer covers the entire day from 00:00 to 23:59 hours. It was an admitted fact that at the beginning of 27.12.2014 the assessee held two residential properties (a self-occupied flat and another house subsequently gifted during the same date). Because the assessee owned more than one residential house at any time on the specified date of transfer, the proviso to section 54F operated to deny the exemption. The Tribunal rejected the assessee's contention that ownership should be reckoned at the end of the day, distinguishing earlier decisions relied upon by the assessee on their differing facts (where transfer had been effected prior to the relevant date). The Tribunal also noted that the Hyderabad decision cited by the Revenue involved treatment of the gift as a colourable device, which was not a finding in the present case. The interpretative conclusion that "on the date of transfer" includes ownership at the start of the day was determinative of the claim for exemption.

Claim of exemption under section 54F denied as the assessee owned more than one residential house on the date of transfer (27.12.2014).

Final Conclusion: Appeal dismissed; exemption under section 54F refused because the assessee owned more than one residential house on the date of transfer (27.12.2014), and precedents relied upon were distinguished on facts.

Requirement of quoting computer-generated Document Identification Number (DIN) in communications - Invalidity of communications not conforming to CBDT Circular No. 19/2019 - Subsequent generation of DIN not curative - Admissibility of additional ground based on question of law - Tribunal's discretion to allow new grounds where foundational facts are on record

Admissibility of additional ground based on question of law - Tribunal's discretion to allow new grounds where foundational facts are on record - Introduction of an additional ground of appeal based on CBDT Circular No. 19/2019 was permitted. - HELD THAT: - The Tribunal exercised its discretion to permit the additional ground as it raises a pure question of law founded on material already on record. The Tribunal applied the principle in NTPC v. CIT that it may allow new grounds where the issue is purely legal and the foundational facts are available in the assessment proceedings. Given that the contention regarding compliance with the CBDT Circular depends on documents and orders already on record, the additional ground was allowed. [Paras 7]

Additional ground based on CBDT Circular No. 19/2019 allowed.

Requirement of quoting computer-generated Document Identification Number (DIN) in communications - Invalidity of communications not conforming to CBDT Circular No. 19/2019 - Subsequent generation of DIN not curative - Assessment orders issued without quoting the DIN as mandated by CBDT Circular No. 19/2019 are invalid and liable to be set aside. - HELD THAT: - The CBDT Circular mandates generation/allotment and quoting of a computer-generated DIN in the body of all communications and provides limited exceptions where manual issuance is permitted only after recording reasons and obtaining prior written approval of the Chief Commissioner/Director; communications not conforming are to be treated as invalid. The orders under challenge did not bear any DIN and no exceptional reasons or prior approvals as envisaged by the Circular were recorded. Reliance on the administrative communication about provision of facility for uploading manually issued documents does not cure the absence of DIN where the Circular's exceptions are not shown to have been invoked. The Tribunal followed coordinate decisions, including Brandix, and high court precedents holding that subsequent generation or upload of DIN does not validate an originally non-conforming communication. Consequently, the assessments made pursuant to such communications cannot be sustained. [Paras 11, 12, 15, 16, 17]

Assessments under section 153C r.w.s. 143(3) set aside for non-compliance with the CBDT Circular; impugned orders held invalid.

Final Conclusion: The appeals are allowed; the assessment orders for AY 2015-16 are set aside for non-compliance with CBDT Circular No. 19/2019 (absence of DIN), and the additional ground based on the Circular was permitted.

Fixed place permanent establishment - Application of Article 5(1) of the India-Germany DTAA - Attribution of business profits to a permanent establishment - Tax treatment of interest on external commercial borrowing - business profits versus interest - Rectification under Section 154 of the Income-tax Act

Fixed place permanent establishment - Application of Article 5(1) of the India-Germany DTAA - Attribution of business profits to a permanent establishment - Project Office at Vadodara and Bombardier Transportation India Limited (BTIL) do not constitute a fixed place permanent establishment of the assessee for AY 2011-12. - HELD THAT: - The tribunal examined the facts for AY 2011-12 and found them to be similar to those in AY 2010-11, where the tribunal had held that none of the conditions for a fixed place PE under Article 5(1) of the India-Germany DTAA were satisfied so as to treat BTIL as the assessee's PE. The DRP and AO had relied on the similarity of facts to treat both the Project Office and BTIL as fixed base PEs and to attribute offshore receipts to such PE. Respectfully following the ITAT decision in the assessee's own case for AY 2010-11, the tribunal held that BTIL cannot be construed as the assessee's PE in India and that the Project Office at Vadodara likewise does not constitute a fixed place PE; consequently, the attribution of profits to such alleged PEs is unsustainable. Other grounds flowing from the PE determination were treated as academic or consequential and were not adjudicated separately. [Paras 9, 10, 11]

Assessee's grounds that the Project Office and BTIL are not fixed place PEs are allowed; issue decided in favour of the assessee.

Tax treatment of interest on external commercial borrowing - business profits versus interest - Rectification under Section 154 of the Income-tax Act - Attribution of business profits to a permanent establishment - Rectification under Section 154 to tax interest received on ECB at the higher rate as business profits is unsustainable because it was consequential on the PE finding; interest income should be taxed as returned. - HELD THAT: - The AO, relying on his conclusion that the assessee had a PE in India, invoked rectification under Section 154 to recast the tax treatment of interest on external commercial borrowing from Bombardier Transportation India Ltd., treating it as business profits taxable at a higher rate. The tribunal, having held that the assessee has no PE in India for AY 2011-12, treated the AO's rectification as consequential to the erroneous PE determination. Given the absence of a PE, the interest income was not effectively connected with activities of a PE and therefore should not have been recharacterised and taxed as business profits; the interest remains taxable as declared by the assessee. The tribunal allowed the assessee's ground and set aside the rectification to the extent it sought higher taxation of the interest income. [Paras 15, 16, 18, 20]

Assessee's appeal against the rectification is allowed; interest on ECB is not to be taxed as business profits attributable to a PE and is restored to the return treatment.

Final Conclusion: Both appeals by the assessee for AY 2011-12 are allowed: the Project Office at Vadodara and BTIL are not fixed place permanent establishments of the assessee, and the rectification treating interest on ECB as business profits attributable to a PE is set aside; consequential grounds need no adjudication.

Revision of return - belated return - validity of revised return prior to substitution of section 139(5) - jurisdiction under section 143(2) - selection under Computer Aided Scrutiny Selection (CASS) - assessment framed on an invalid return is illegal

Revision of return - belated return - validity of revised return prior to substitution of section 139(5) - selection under Computer Aided Scrutiny Selection (CASS) - jurisdiction under section 143(2) - assessment framed on an invalid return is illegal - Whether the revised return filed on 11-02-2016 (revising a belated return filed u/s 139(4)) was valid for the purposes of selection under CASS, issuance of notice u/s 143(2) and framing of assessment for AY 2015-16, and whether the assessment based thereon was maintainable. - HELD THAT: - Prior to substitution of section 139(5) (w.e.f. A.Y. 2017-18) a return could be revised only if the original return had been furnished under section 139(1) or in pursuance of a notice under section 142(1). The assessee's original return for AY 2015-16 was a belated return filed on 11-09-2015 under section 139(4). Consequently the revised return filed on 11-02-2016, purporting to revise the belated return, did not conform to the pre-amendment statutory prescription and was therefore invalid. The Assessing Officer's own note recorded awareness that the revised return was invalid. Selection under CASS and the notice issued under section 143(2) expressly referred to the acknowledgement number and date of the revised return (11-02-2016) and the ground of "Deduction claimed under the head Capital Gains", a claim made only in the revised return. Because jurisdiction to frame assessment under section 143(2) must relate to a valid return, selection and issuance of notice with reference to the invalid revised return could not confer jurisdiction to assess on that basis. An assessment framed by acting upon the invalid revised return is therefore illegal. For these reasons the assessment and consequential proceedings were vacated. [Paras 7, 8, 9, 10, 11]

The revised return filed on 11-02-2016 was invalid; selection under CASS and the notice u/s 143(2) based on that invalid return did not confer jurisdiction to frame assessment; the assessment framed thereon is vacated.

Final Conclusion: The Tribunal allowed the appeal, vacated the assessment and consequential proceedings because the revised return (which formed the basis of selection and notice) was invalid for AY 2015-16; only the original belated return filed u/s 139(4) remained operative.

Summary order. Appeals disposed of by directing the parties to abide by the Minutes of the Meeting dated 3rd June, 2021 of the Committee constituted by this Court pursuant to the order dated 15th October, 2020; delay condoned.

Waterfall mechanism - priority of dues to Central Board of Indirect Taxes & Customs - Section 53 of the Insolvency and Bankruptcy Code, 2016

Section 53 of the Insolvency and Bankruptcy Code, 2016 - waterfall mechanism - priority of dues to Central Board of Indirect Taxes & Customs - Dues of the Central Board of Indirect Taxes & Customs shall be paid in accordance with the waterfall under Section 53 of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Court, while noting that the question of limitation required consideration, declined to remit the matter for fresh adjudication on merits. Instead, the appeal was disposed by a clarificatory direction that the dues of the Central Board of Indirect Taxes & Customs, Department of Revenue, will be paid as per the statutory priority regime prescribed by Section 53 of the Insolvency and Bankruptcy Code, 2016. No detailed determination on limitation or other merits was undertaken; the operative clarification confines the treatment of the Board's dues to the IBC waterfall mechanism.

Appeal disposed with the clarification that the CBIC's dues are to be paid according to the Section 53 waterfall under the Insolvency and Bankruptcy Code, 2016.

Final Conclusion: The appeals are disposed of by directing that dues of the Central Board of Indirect Taxes & Customs will be paid in accordance with the waterfall under Section 53 of the Insolvency and Bankruptcy Code, 2016; no remand on merits was ordered and questions such as limitation were not finally determined.

Delegation to a regulatory authority for fresh consideration - power of the Commission for Air Quality Management to pass interim directions - holistic allocation and distribution of polluting fuel resources - referral of specific interlocutory applications to the expert regulatory authority - dismissal of obsolete or academic applications - urgent administrative reporting on crop burning and air pollution control

Delegation to a regulatory authority for fresh consideration - holistic allocation and distribution of polluting fuel resources - All issues concerning availability, import requirement, distribution and inter industry allocation of Pet Coke are delegated to the Commission for Air Quality Management for fresh consideration. - HELD THAT: - The Court accepted the Amicus suggestion that changing ground realities and industry requirements necessitate a fresh, holistic assessment by the Commission for Air Quality Management (CAQM) of domestic availability of Pet Coke, the need for imports, and equitable distribution among industries (including the aluminium industry). Given practical difficulties in Court supervision and evolving facts since Report No.91 and earlier orders, the CAQM is directed to examine these matters afresh and determine appropriate allocations and import requirements.

CAQM shall reconsider and decide afresh on availability, import needs and distribution of Pet Coke among industries.

Power of the Commission for Air Quality Management to pass interim directions - CAQM is authorised to pass interim directions, after hearing concerned parties, pending its final consideration. - HELD THAT: - Recognising the need for prompt action where industries are affected, the Court empowered the CAQM to pass interim directions within a short timeframe (with interim action anticipated within 4-6 weeks), and to conduct hearings of all concerned parties in the course of its exercise. The Court emphasised that such interim directions by the Commission should be uninfluenced by orders of other courts and should address exigencies arising during the Commission's reconsideration.

CAQM may issue interim directions after hearing parties, in the course of its fresh exercise.

Referral of specific interlocutory applications to the expert regulatory authority - Pending applications seeking import/enhancement of import quota and related impleadment/intervention applications are disposed of by referring their substantive reliefs to CAQM. - HELD THAT: - The Court disposed of multiple listed applications concerning import quotas, enhancement and impleadments by delegating their substantive consideration to the CAQM, which is better placed to evaluate technical and factual aspects such as supply, demand and distribution priorities. The applications for impleadment and intervention were similarly disposed of in terms of this delegation.

Those applications stand disposed by referral of their substantive reliefs to the CAQM for consideration.

Referral of specific interlocutory applications to the expert regulatory authority - IA No.115613/2021 (clarification sought by Rain CII Carbon (Vizag) Ltd.) is referred to the CAQM for examination. - HELD THAT: - Counsel for the applicant requested that the facts of IA No.115613/2021 be examined by the CAQM in light of the broader delegation. The Court accepted this request and delegated the reliefs sought in that application to the Commission for consideration as part of its overall reassessment.

Reliefs in IA No.115613/2021 are to be considered by the CAQM; the application is disposed accordingly.

Dismissal of obsolete or academic applications - IA No.31988/2018 (directions on behalf of Paper Manufacturing Association) is dismissed. - HELD THAT: - The application sought permission to use Pet Coke as fuel despite a notification banning such use. The Amicus opposed the application and no counsel appeared for the applicant, leading the Court to conclude that with the passage of time the application has likely become academic or has worked itself out. Consequently, the application was dismissed.

IA No.31988/2018 is dismissed.

Urgent administrative reporting on crop burning and air pollution control - The CAQM is directed to urgently submit a report on steps being taken to control air pollution caused by crop burning in and around the Capital; list for limited purpose on 31.10.2023. - HELD THAT: - The Amicus drew attention to the seasonal aggravation of air pollution due to crop burning. The Court called upon the Commission for Air Quality Management to submit an urgent report detailing measures undertaken to control air pollution in and around the Capital, and listed Writ Petition (Civil) No.13029/1985 for this limited purpose on the specified date.

CAQM to submit an urgent report on crop burning control measures; matter listed for limited purpose on 31.10.2023.

Final Conclusion: The Court delegated all substantive adjudication of availability, import requirement, allocation and interim distribution of Pet Coke to the Commission for Air Quality Management, authorised the Commission to pass interim directions after hearing parties, referred specified interlocutory applications (including IA No.115613/2021) to the Commission, dismissed IA No.31988/2018 as worked out, and directed an urgent CAQM report on crop burning with the writ listed for a limited purpose on 31.10.2023.

Validity of amendment to lapsed anti-dumping notification - Binding effect of Supreme Court precedent - Doctrine of unjust enrichment in respect of refund of anti-dumping duty - Remand to appellate tribunal for adjudication of legality of notifications and refund claims

Validity of amendment to lapsed anti-dumping notification - Binding effect of Supreme Court precedent - Applicability of the legal principle that an amending notification issued after expiry of the primary anti-dumping notification is without authority and therefore vulnerable, and whether that principle is binding on the High Court and Tribunal. - HELD THAT: - The Court stated that the Supreme Court's decision in Union of India v. M/s. Kumho Petrochemicals establishes that a notification imposing anti-dumping duty is temporary and cannot be amended after its five-year life has expired; an amendment issued after expiry amounts to attempting to amend a non-existent notification and is without legal authority. The High Court observed that this principle, declared by the Supreme Court under Article 141, is binding on all courts and tribunals, including this Court and the CESTAT. While the petitioner sought striking down of the notifications before this Court, the Court noted that the CESTAT is already seized of the departmental order and that the petitioner is not precluded from urging all grounds (including reliance on the Supreme Court principle) before the Tribunal for adjudication on facts and law. [Paras 6, 7]

The Supreme Court's principle that an amending notification issued after the original notification has lapsed is without legal authority is binding; the petitioner may press this contention before the CESTAT which will consider it on merits.

Doctrine of unjust enrichment in respect of refund of anti-dumping duty - Remand to appellate tribunal for adjudication of legality of notifications and refund claims - Whether, if notifications are set aside, refund of anti-dumping duty payable to the petitioner should be directed and the role of the doctrine of unjust enrichment in such refund claims. - HELD THAT: - The Court noted earlier authorities and the coordinate-bench decision in Kanakia Constructions which require examination of unjust enrichment before directing refunds of anti-dumping duty. Although earlier courts (including the Delhi High Court) had indicated entitlement to refund when an amending notification was set aside, this Court observed that entitlement to refund remains subject to applicable law, including consideration of unjust enrichment. Rather than decide entitlement to refund itself, the Court held that the Tribunal, which is seized of the appeal, should examine refund claims and the applicability of the doctrine of unjust enrichment in the facts of the case and pass appropriate orders. [Paras 5, 8, 9]

Refund claims arising from any quashing of notifications are to be considered and decided by the Tribunal in accordance with law and after addressing unjust enrichment; the High Court declined to direct refunds itself.

Final Conclusion: The petition is disposed of with liberty to the petitioner to raise all contentions before the CESTAT (including reliance on the Supreme Court principle regarding amendments to lapsed anti-dumping notifications) and to seek refund if entitled in accordance with law; no costs and liberty to seek early disposal before the Tribunal.

Principles of natural justice - right to be heard - valuation enhancement based on NIDB data - consideration of contractual evidence in customs valuation - remand for fresh adjudication with opportunity of hearing

Principles of natural justice - valuation enhancement based on NIDB data - consideration of contractual evidence in customs valuation - right to be heard - remand for fresh adjudication with opportunity of hearing - Whether enhancement of declared import value based solely on NIDB data without furnishing that data to the importer and without considering the import contract violated principles of natural justice and required fresh adjudication. - HELD THAT: - The Tribunal found that the Adjudicating Authority enhanced the declared value of the imported goods solely on the basis of NIDB data which had been enclosed as an annexure to the order-in-original but was not furnished to the appellant during the adjudication process. The appellant therefore did not have an opportunity to meet or rebut the NIDB data. In addition, the appellant had placed a contract on record and argued that the imports were under that contract, yet the adjudicating authority did not take the contract into account when enhancing value. The combination of failure to provide the NIDB data prior to adjudication and non-consideration of the contract amounted to a grave violation of the principles of natural justice and the appellant's right to be heard. For these reasons the Tribunal concluded that the impugned adjudication (and the appellate confirmation thereof) could not stand and that the matter ought to be returned to the Adjudicating Authority for fresh consideration after affording the appellant a full opportunity to make submissions and to inspect and rebut the NIDB data. [Paras 4]

Impugned order set aside and matter remitted to the Adjudicating Authority for fresh adjudication after furnishing the NIDB data and affording the appellant an opportunity of hearing and consideration of the contract.

Final Conclusion: Appeals allowed; the impugned order-in-appeal set aside and the matter remitted to the Adjudicating Authority for fresh adjudication after supplying the NIDB data to the appellant and affording a full opportunity to be heard, including consideration of the contract relied upon by the appellant.

Mis-declaration of export goods and liability for attempted smuggling - Admissibility and relevance of statements recorded under Section 108 and examination under Section 138B - Substitution of cargo en route and tampering of container seals - Reliance on documentary verification over retracted oral statements - Penalty under Section 114(i) of the Customs Act, 1962

Mis-declaration of export goods and liability for attempted smuggling - Penalty under Section 114(i) of the Customs Act, 1962 - Reliance on documentary verification over retracted oral statements - Whether the appellant was liable for mis-declaration of exported goods and sustainment of penalty under Section 114(i). - HELD THAT: - The Tribunal examined whether the facts established that the appellant mis-declared food items as exported goods while the container in fact carried red sanders logs and whether that established culpability attracting penalty under Section 114(i). The record showed that the container was stuffed at the appellant's premises and one-time bottle seals and central excise seal were affixed; those seals were later found intact when the container was opened and red sanders were recovered. However, the Tribunal found that documentary evidence of stuffing and verification signed by the central excise officers and the customs officer (Annexure/examination report and shipping bill verification) prevailed over the oral statements which were retracted and not corroborated. In absence of cogent evidence identifying the person who substituted or placed the red sanders in the container, and in view of the possibility of substitution en route, the appellant's active role in the illegal export was not established. Applying these findings, the Tribunal held that the penalty imposed on the appellant under Section 114(i) could not be sustained and set it aside. [Paras 8]

Penalty imposed on the appellant under Section 114(i) was set aside because mis-declaration and the appellant's role in attempted export of red sanders were not established by cogent evidence.

Admissibility and relevance of statements recorded under Section 108 and examination under Section 138B - Reliance on documentary verification over retracted oral statements - Whether statements of the appellant and other witnesses could be relied upon as evidence to implicate the appellant. - HELD THAT: - The Tribunal noted that the appellant's statements recorded were retracted and that the appellant was not examined under Section 138B of the Act; on that basis the statements were held not to be voluntary or reliably admissible. Similarly, several oral statements of third parties (including the forwarder and CHA personnel) were not put to the appellant under Section 138B and therefore were of limited evidentiary value. The Tribunal relied on precedents holding that retracted statements and statements not tested under Section 138B cannot be given weight against the accused. Consequently, the adjudicatory reliance on these oral statements to draw adverse inferences against the appellant was rejected. [Paras 8]

Retracted statements and untested oral statements were not admissible/reliable to implicate the appellant and could not support imposition of penalty.

Substitution of cargo en route and tampering of container seals - Reliance on documentary verification over retracted oral statements - Whether the possibility of substitution of cargo en route or tampering warranted setting aside the penalty and whether the investigating authority investigated that possibility and examined responsible officers. - HELD THAT: - The Tribunal observed that the adjudicating authority did not investigate the possibility of substitution of cargo en route or the use of double/tampered bottle seals despite judicial precedents highlighting such modus operandi. It was also noted that the central excise officers and the customs officer who verified and signed the stuffing and shipping bill were not made parties to the show cause notice and were not examined under relevant provisions, leaving the authenticity of those verifications insufficiently challenged. Given documentary verifications in favour of the declared cargo and the absence of an inquiry into substitution en route, the Tribunal held that the adjudication failed to exclude substitution or identify the perpetrator, thereby undermining the basis for penalising the appellant. [Paras 8]

Because substitution en route was neither investigated nor excluded and verifying officers were not examined, the penalty could not stand.

Final Conclusion: The appeal was allowed; the penalty imposed upon the appellant under Section 114(i) of the Customs Act, 1962 was set aside because the Department failed to establish the appellant's culpable role in the attempted export of red sanders by cogent and admissible evidence, and the possibility of substitution en route was not satisfactorily investigated.

Obligations of Customs Broker under Regulation 11 of CBLR, 2013 - duty to obtain authorisation from importer under Regulation 11(a) - due diligence in verification and KYC under Regulation 11(n) - obligation to advise client and report non-compliance under Regulation 11(d) - duty to exercise due diligence in information imparted under Regulation 11(e) - requirement of prompt and efficient discharge of duties under Regulation 11(m) - directory versus mandatory nature of timelines in Regulation 20 of CBLR - forfeiture of security deposit as proportionate punishment for regulatory breach

Obligation to advise client and report non-compliance under Regulation 11(d) - duty to exercise due diligence in information imparted under Regulation 11(e) - requirement of prompt and efficient discharge of duties under Regulation 11(m) - due diligence in verification and KYC under Regulation 11(n) - Whether the appellants violated Regulations 11(d), 11(e), 11(m) and 11(n) of CBLR, 2013. - HELD THAT: - The Tribunal examined the record and DRI investigation and found that the appellants filed Bills of Entry declaring description and values as per commercial invoices supplied by importers and that incriminating parallel invoices and remittance documents were recovered from the premises of third parties (S/Shri Purav Mehta and Pratik Mehta). There was no evidence that the appellants were aware of undervaluation or that declarations in the Bills of Entry differed from the commercial invoices. Rule 11/Customs valuation rules place primary responsibility for GATT valuation declarations on the importer/agent, and re-determination of value requires a stepwise process under the valuation rules, which was not shown. The appellants produced KYC documents meeting the CBIC circular requirement that any two prescribed documents suffice; therefore the finding of breach of Regulation 11(n) was factually incorrect. No record established inefficiency or undue delay in clearance to sustain Regulation 11(m) breach. Consequently the impugned findings that the appellants breached Regulations 11(d), 11(e), 11(m) and 11(n) were set aside as unsustainable on the facts and law. [Paras 7, 8, 9, 10, 11]

Findings of violation of Regulations 11(d), 11(e), 11(m) and 11(n) are not sustainable and are set aside.

Duty to obtain authorisation from importer under Regulation 11(a) - forfeiture of security deposit as proportionate punishment for regulatory breach - Obligations of Customs Broker under Regulation 11 of CBLR, 2013 - Whether the appellants breached Regulation 11(a) of CBLR, 2013 and the appropriate consequence of any such breach. - HELD THAT: - The Tribunal accepted that the appellants had obtained authorisation letters and KYC documents but also relied on the director's statement that import documents were received through intermediaries and that the director knew the behind-the-scenes operators were the real importers using rented IECs. Citing precedent and the importance of a CHA's proactive role, the Tribunal held that where documents are obtained through intermediaries the broker must exercise greater diligence to ensure genuineness of the importer and authenticity of IEC usage. On the facts the appellants failed to be sufficiently proactive in discharging the specific obligation under Regulation 11(a) when business was procured through intermediaries, and that breach justified a proportionate regulatory consequence. Having found other alleged breaches unsustainable, the Tribunal concluded that forfeiture of the entire security deposit (rather than revocation of licence) was an appropriate and justifiable sanction for the established deficiency under Regulation 11(a). [Paras 14, 15]

A breach of Regulation 11(a) was made out on the facts; revocation of licence is not sustained, but forfeiture of the entire security deposit is justified and ordered.

Directory versus mandatory nature of timelines in Regulation 20 of CBLR - Obligations of Customs Broker under Regulation 11 of CBLR, 2013 - Whether non-adherence to prescribed timelines in CBLR vitiates the inquiry and conclusions reached against the appellants. - HELD THAT: - The Tribunal recognised the legal position that timelines in Regulation 20 are directory rather than absolute, adopting the test in Unison Clearing P. Ltd.: deviations must be explained and justified by the Revenue, with accountability for stages of delay. In this case the Tribunal found inordinate and unexplained delay in the inquiry and passing of the impugned order; the reasons recorded by the licensing authority were inadequate. The Tribunal observed the appellants had suffered prolonged deprivation of business and livelihood. While the directory nature of timelines does not automatically invalidate proceedings, unexplained and unreasonable delay must be weighed; here the delay militated against sustaining the more severe penalty of licence revocation. [Paras 12, 13]

Timelines under CBLR are directory; inordinate and inadequately explained delay in this case weighed against upholding revocation, supporting mitigation of the sanction.

Final Conclusion: The appeal is allowed in part: the revocation of the appellants' Customs Broker licence is set aside, findings of breach under Regulations 11(d), 11(e), 11(m) and 11(n) are quashed, but on the proved failure to act proactively under Regulation 11(a) the entire security deposit is forfeited as a proportionate sanction.

Recovery of duty from surety - liability of director for company obligations where bond executed as surety - penalty under section 117 of the Customs Act - contravention of bond conditions by failure to renew bank guarantee

Recovery of duty from surety - liability of director for company obligations where bond executed as surety - Whether duty payable by the company could be recovered from the appellant who had signed the bond as surety and whether the Commissioner's direction to recover dues from the appellant to the extent they could not be realised from the company was correct. - HELD THAT: - It was undisputed that the importer (the company) availed exemption subject to conditions and failed to meet the Net Foreign Exchange requirement, thereby rendering duties payable. At the time of import the exemption was granted upon execution of bonds on which the appellant signed as surety. The Tribunal held that where a surety has bound itself to pay duties in case the primary obligor fails, recovery from the surety is legally permissible. The impugned order confirmed demands only against the importer and provided for recovery from the appellant only to the extent the dues could not be realised from the company. That arrangement was found legally correct, fair and not liable to interference. [Paras 6, 7, 8]

Recovery of duties from the appellant, who executed the bond as surety, to the extent recoverable from the company is legally valid and the impugned direction for such recovery is upheld.

Penalty under section 117 of the Customs Act - contravention of bond conditions by failure to renew bank guarantee - Whether imposition of penalty of Rs. 1,00,000 on the appellant under section 117 of the Customs Act was justified. - HELD THAT: - The impugned order recorded that the company violated bond conditions by failing to renew the bank guarantee, deeming the goods removed without payment of duty, and that the appellant, as whole-time director, was responsible for day-to-day affairs, had executed the bond and had misled the department about making the unit functional. Section 117 is a residuary penal provision applicable where no specific penalty is provided. Given the undisputed findings in the order regarding the appellant's role, his execution of the bond and the recorded misleading conduct, the Tribunal found no reason to interfere with the penalty imposed under section 117. [Paras 9, 10, 11, 12]

Penalty imposed on the appellant under section 117 is affirmed.

Final Conclusion: The appeal is dismissed; the impugned order is upheld insofar as (a) recovery of duties from the appellant as surety to the extent recoverable from the company is sustained, and (b) the penalty under section 117 imposed on the appellant is affirmed.

Interlocutory order versus final order for purposes of revision - jurisdictional challenge to Special Court under the PMLA - application of Section 8(8) PMLA and the definition of "claimant" under the PMLA Rules, 2016 - manner of restoration envisaged by Rules 3 and 3A of the PMLA (Restoration of Property) Rules, 2016 - doctrine that orders adjudicating custody/possession of property may be final between parties

Interlocutory order versus final order for purposes of revision - jurisdictional challenge to Special Court under the PMLA - Whether the revision petition is barred as being against an interlocutory order or is maintainable because the impugned order finally decides rights and involves jurisdictional error. - HELD THAT: - The Court examined authority on when an order passed during interlocutory stages is nonetheless final for the purposes of revision. Applying decisions which hold that an order which finally adjudicates possession or custody of property is final between the parties, and that a jurisdictional challenge converts the order into a final decision for the revisional forum, the Court found that the respondents' objection to maintainability under Section 397(2) Cr.P.C. must be rejected. Because the petitioner challenges the Special Court's order on the ground that it was passed without jurisdiction and in contravention of the PMLA scheme, the revision is competent and not barred as interlocutory. The Court therefore dismissed the plea of non-maintainability and proceeded to examine the merits. [Paras 20]

Revision is maintainable; the objection of non-maintainability is rejected and the petition proceeded to merits.

Application of Section 8(8) PMLA and the definition of "claimant" under the PMLA Rules, 2016 - manner of restoration envisaged by Rules 3 and 3A of the PMLA (Restoration of Property) Rules, 2016 - Whether the Special Court rightly ordered release of attached properties in lieu of fixed deposit in the absence of compliance with the statutory tests and procedures under PMLA, 2002 and the PMLA Rules, 2016. - HELD THAT: - The Court scrutinised the Special Court's reliance on the second proviso to Section 8(8) PMLA permitting consideration of a claimant's restoration during trial. The Court observed that the PMLA Rules, 2016 define a "claimant" as one who has acted in good faith, suffered a quantifiable loss despite reasonable precautions and is not involved in money laundering. The applicants in the present case include the accused and relatives; the Special Court made no finding or enquiry to establish that they fall within the statutory definition. Further, Rules 3 and 3A prescribe the manner for restoration (publication of notices, time-limits, opportunity to claimants, prorata distribution, conditions for custody and bond, and requirement to hear owners), none of which the Special Court addressed or complied with in its order. For these reasons the impugned order was held to be in gross violation of the statutory scheme and the prescribed manner of restoration under the Rules. [Paras 25, 26, 27, 28, 29]

Impugned order is illegal for failure to apply the statutory tests and prescribed manner; the Special Court's order releasing property in lieu of fixed deposit is set aside.

Final Conclusion: The High Court held the revision maintainable and, on merits, found the Special Court's order unlawful for ignoring the statutory definition of "claimant" and the procedural requirements of Rules 3 and 3A of the PMLA Rules, 2016; the impugned order releasing attached properties in lieu of fixed deposit was set aside.

Offence of money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002 - proceeds of crime - predicate offence - scope and interpretation of Section 3 of the 2002 Act - quashing of criminal proceedings under inherent jurisdiction of the High Court (Section 482 Cr.P.C.) - statement under Section 50(2) and (3) of the 2002 Act

Offence of money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002 - scope and interpretation of Section 3 of the 2002 Act - predicate offence - proceeds of crime - Whether prosecution under Section 3 of the 2002 Act is impermissibly premature in the absence of trial/conviction in the predicate scheduled offence and whether the petitioner's connection with proceeds of crime is negatived so as to warrant quashing. - HELD THAT: - The Court applied the authoritative exposition of Section 3 in Vijay Madanlal Choudary and others v. Union of India, observing that Section 3 is wide and captures every process or activity, direct or indirect, connected with proceeds of crime, and is not confined to the final act of integration into the formal economy. While the authorities cannot proceed on a mere notional assumption that a scheduled offence has been committed unless it is registered with the jurisdictional police or is the subject of pending enquiry/trial, the Court found on the materials and admissions that the petitioner had an acquaintance with the principal accused and that substantial sums allegedly mobilised in the predicate offence were transferred to the petitioner's accounts. The petitioner's purchases of property with cash and the absence of satisfactory explanation for the receipts were noted. The Court held that, on prima facie consideration, the petitioner's involvement is not negated and the prosecution under Section 3 is not premature in the facts of this case; therefore quashing is not warranted on that ground. [Paras 12, 13, 14, 17, 18]

Prosecution under Section 3 of the 2002 Act is not prematurely instituted in the present case and the petition for quashing on that ground is dismissed.

Statement under Section 50(2) and (3) of the 2002 Act - admissibility and voluntariness of statements - Admissibility of the petitioner's statement under Section 50(2) and (3) alleged to be given under coercion and whether that issue can be adjudicated in the quash petition. - HELD THAT: - The Court recorded the petitioner's contention that his statement under Section 50(2) and (3) was obtained under coercion and therefore cannot be the basis for prosecution. The High Court refrained from adjudicating the voluntariness or admissibility of that statement in a petition under Section 482 Cr.P.C., holding that such contentions concerning evidentiary admissibility and coercion are matters for the trial Court to examine and decide in the course of trial. [Paras 15]

The question of voluntariness and admissibility of the statement under Section 50(2) and (3) is left to be decided by the trial Court; it is not determined in this quash petition.

Quashing of criminal proceedings under inherent jurisdiction of the High Court (Section 482 Cr.P.C.) - Whether the facts and materials fall within the recognised categories for exercise of power to quash under the principles laid down in State of Haryana v. Bhajan Lal. - HELD THAT: - Applying the illustrative categories from Bhajan Lal, the Court examined whether allegations, accompanying materials, or circumstances rendered the prosecution non-maintainable, absurd, or otherwise barred. The Court found no ground - such as absence of prima facie offence, legal bar to initiation, or malicious/ mala fide institution - that would justify exercise of inherent jurisdiction to quash the complaint as against the petitioner. Consequently, the petition did not satisfy any of the Bhajan Lal categories warranting quashment. [Paras 19, 20]

No ground is made out to exercise inherent jurisdiction under Section 482 Cr.P.C.; the petition to quash is dismissed.

Final Conclusion: The Criminal Original Petition to quash proceedings in CC No.1 of 2017 is dismissed; the High Court finds on prima facie consideration that the petitioner's alleged involvement with proceeds of crime is not negated and leaves disputed evidentiary issues to the trial Court to decide uninfluenced by this order.

Money-laundering - proceeds of crime - Section 45 bail test - enquiry under Section 50 of the PMLA - presumption under Section 23 of the PMLA - reverse burden under Section 24 of the PMLA - application of Vijay Madanlal Choudhary principle

Section 45 bail test - money-laundering - proceeds of crime - Whether the applicants are entitled to bail under Section 45 of the PMLA. - HELD THAT: - The Court applied the statutory bail test in Section 45 of the PMLA and examined the materials on record including statements recorded under Section 50 and other witness statements which disclose the alleged modus operandi and role of the accused in the syndicate. Given the materials, the Court held that the first limb of Section 45 - satisfaction that there are reasonable grounds for believing the applicant is not guilty of the offence - cannot be presumed in favour of the applicants at this stage. The prosecution materials prima facie inculpate the applicants with involvement in the alleged scheme to collect illegal commissions and possession of proceeds of crime. Applying these conclusions, the Court found that the applicants are not entitled to bail. [Paras 16, 23, 24, 25]

Bail applications rejected and interim orders discharged.

Application of Vijay Madanlal Choudhary principle - enquiry under Section 50 of the PMLA - presumption under Section 23 of the PMLA - reverse burden under Section 24 of the PMLA - Whether action under the PMLA in this matter is impermissible because a scheduled offence has not been registered or cognizance taken by a criminal court as contemplated in Vijay Madanlal Choudhary. - HELD THAT: - The Court considered the Supreme Court's exposition in Vijay Madanlal Choudhary that PMLA action cannot proceed on mere assumption that property is proceeds of crime unless a scheduled offence is registered with the jurisdictional police or is pending inquiry/trial before a competent forum. Here, the Court found that a scheduled offence has been registered, proceeds of crime have been recovered, and a complaint has been filed and is pending before the competent Court. Consequently, the factual prerequisites identified in Vijay Madanlal Choudhary for restraining PMLA action are not satisfied in the present case. The Court further noted the statutory presumptions available under Sections 23 and 24 of the PMLA and that statements recorded under Section 50 constitute enquiry-material that may be relied upon at the bail stage to draw prima facie inferences. [Paras 19, 20, 21, 22, 23]

Vijay Madanlal Choudhary does not bar PMLA action here; enquiry and complaint are in place and statutory presumptions apply.

Final Conclusion: On the material placed before the Court - including statements under Section 50, witness statements and the fact of registration of scheduled offences and recovery of proceeds - the High Court concluded that prima facie satisfaction required under Section 45 of the PMLA is not made out and that the constraints identified in Vijay Madanlal Choudhary are inapplicable; accordingly all bail applications were rejected and interim orders discharged.

Refund of tax paid erroneously - time bar under Section 11B - exemption for transportation of foodstuff under Notification No.25/2012 ST - classification of biscuits as foodstuff - unjust enrichment

Refund of tax paid erroneously - time bar under Section 11B - Whether the refund claim is barred by limitation under Section 11B when service tax was paid though exemption applied and the tax was not payable in law - HELD THAT: - The Tribunal found that the Show Cause Notice and the orders below rejected the refund solely on the ground of time bar under Section 11B. Applying precedent, including the decision in KVR Construction as affirmed by the Supreme Court and subsequent coordinate Bench and Third Member/Final Orders of the CESTAT, the Tribunal held that where tax or service tax has been paid under a mistaken belief or was not payable in law (including where exemption applied), such payment is not a duty or tax payable in law and therefore falls outside the scope of Section 11B. The Tribunal treated the cited Third Member/Final Order as a binding bench decision and held that the limitation under Section 11B would not apply to refund claims of amounts paid erroneously though eligible to exemption. On that basis the Tribunal concluded that the time bar objection could not be sustained and allowed the appeal with consequential relief as per law. [Paras 9, 11, 12, 14]

Section 11B limitation does not apply to refund of service tax paid erroneously or not payable in law; the refund claim succeeds on this ground.

Unjust enrichment - Whether the objection of unjust enrichment can be sustained against the refund claim - HELD THAT: - The Tribunal observed that the Adjudicating Authority did not address unjust enrichment in its order and the Department did not pursue the point before the Commissioner (Appeals) or by way of an appeal to the Tribunal. Since the revenue neither raised nor agitated the unjust enrichment objection in the lower stages or by proper appeal, the Tribunal declined to entertain that submission at the hearing. The Tribunal further noted that, insofar as Section 11B is held inapplicable to refunds of amounts paid erroneously, the unjust enrichment provision under Section 11B would likewise not operate in such cases. [Paras 15]

Objection of unjust enrichment is not sustained as it was not raised/agitated in the lower fora; in any event unjust enrichment under Section 11B does not apply where Section 11B itself is inapplicable.

Final Conclusion: The appeal is allowed: the refund claim for the period July 2013 to March 2014 succeeds because the payment was not payable in law and therefore not subject to the time bar under Section 11B; the revenue's unjust enrichment objection is rejected for the reasons stated.

Technical Inspection and Certification Agency Service - reverse charge mechanism - fees charged by a statutory/public authority not constituting taxable service - CBEC Circular on applicability of service tax to fees collected by public authorities - exigibility of service tax on fees paid to foreign statutory authorities - extended period of limitation in tax demands - penalty for failure to pay service tax

Technical Inspection and Certification Agency Service - reverse charge mechanism - fees charged by a statutory/public authority not constituting taxable service - CBEC Circular on applicability of service tax to fees collected by public authorities - exigibility of service tax on fees paid to foreign statutory authorities - Payments made to US Food & Drug Administration (USFDA) as fees for obtaining approval to export pharmaceuticals are not exigible to service tax under reverse charge. - HELD THAT: - The Tribunal considered its earlier decisions and the Board's Circular which holds that fees collected by sovereign/public authorities for statutory functions are compulsory statutory levies and do not constitute provision of taxable service; only activities not in the nature of statutory obligations would be exigible to service tax. The USFDA was treated as a statutory authority performing a statutory regulatory function analogous to the Indian Drugs Controller; its certification for import/marketing is a statutory requirement. The distinction drawn by lower authorities between Indian statutory authorities and foreign statutory authorities was rejected as having no legal basis. Relying on precedent (Vidhi Dyestuff Mfg. Ltd. and related decisions) and the CBEC Circular, the Tribunal held that fees paid to USFDA for approval fall outside taxable service and therefore no service tax was payable. Having decided the taxability on merits in favour of the appellant, the Tribunal did not examine the contentions on invocation of extended limitation or imposition of penalty. [Paras 8, 9, 10, 11, 12]

No service tax is leviable on the fees paid to USFDA for approval; the demand is unsustainable and set aside.

Final Conclusion: Appeal allowed; the impugned order upholding demand is set aside and consequential relief granted to the appellant.

Classification of service as Clearing and Forwarding Agent - classification of service as Business Auxiliary Service - binding effect of Board circulars in service classification - conjunctive construction of 'clearing and forwarding' - limits on adjudicator traveling beyond show cause notice

Classification of service as Clearing and Forwarding Agent - binding effect of Board circulars in service classification - conjunctive construction of 'clearing and forwarding' - Activity undertaken by the appellant is not classifiable as Clearing and Forwarding Agent service - HELD THAT: - The Tribunal examined the factual matrix and earlier decision of this Tribunal in the appellant's own case dated 15.12.2011, and applied Board circulars (F. No. B.43/7/97-TRU and the 2002 clarification) which describe essential characteristics of C&F services, including receipt/warehousing/dispatch of goods and an agency relationship between principal and agent. The Tribunal held that the appellant did not perform the clearing and forwarding functions described in the circulars nor maintain the principal-agent relationship required; reliance upon judicial authorities construing the conjunctive 'and' in 'clearing and forwarding' supported the conclusion that both activities must be connected and simultaneously performed to attract the C&F classification. The adjudicating authority's interpretation was therefore incorrect and the impugned orders holding the appellant to be a C&F agent were set aside on the merits. [Paras 4]

The appellant's activity does not fall under Clearing and Forwarding Agent service and the finding to the contrary is set aside.

Limits on adjudicator traveling beyond show cause notice - Commissioner (Appeals) travelled beyond the scope of the show cause notice by reclassifying the service and that order is vitiated - HELD THAT: - The Tribunal found that the Commissioner (Appeals) went beyond the charges set out in the show cause notice and the Order in Original by independently classifying the appellant's activity under Business Auxiliary Service. Applying the principle laid down by the Hon'ble Supreme Court in Caprihans India Ltd., an adjudicator cannot decide a case beyond the scope of the show cause notice. For this reason the Commissioner (Appeals)'s order was set aside. [Paras 4]

The Commissioner (Appeals)'s order is set aside for travelling beyond the scope of the show cause notice.

Final Conclusion: Impugned orders in the appeals are set aside; the appeals are allowed.

Classification of handling charges under business auxiliary services - exclusion of value of goods from gross taxable value of a taxable service - benefit of Notification No. 12/2003 where goods are invoiced and taxed - management, maintenance and repair services and incidental supply of materials - reverse charge liability for consulting engineering services received from abroad - taxable event under amended service tax law w.e.f. 18.04.2006

Classification of handling charges under business auxiliary services - benefit of Notification No. 12/2003 where goods are invoiced and taxed - Service tax demand on handling charges collected by the appellant and recovered as part of sale of paints cannot be sustained as business auxiliary services. - HELD THAT: - The Tribunal held that where the appellant raised an invoice and VAT was paid inclusive of the handling charges, the appellant was entitled to the benefit of Notification No. 12/2003. The mere contractual labelling of procurement as being done on behalf of the customer and charging a handling percentage does not convert the handling charge into a distinct BAS when the procurement is inextricably linked to the main activity of maintenance and repair. The court therefore rejected the Revenue's characterisation of the 13% handling element as a procurement service attracting BAS, noting that the actual intent and the commercial substance of the transaction must be considered and that procurement for the purpose of providing MMRS may not be separately taxable as BAS. [Paras 5]

Demand on handling charges under BAS set aside; benefit of Notification No. 12/2003 available.

Management, maintenance and repair services and incidental supply of materials - exclusion of value of goods from gross taxable value of a taxable service - Service tax demand on the value of paints (materials) procured and used in repair activities is not exigible as part of the taxable value of MMRS. - HELD THAT: - Relying on earlier Tribunal decisions, the Bench observed that supplies of materials incorporated or replaced in repair/maintenance work, which have already suffered sales tax or excise duty, are not to be included in the gross taxable value of the service. The appellant had proved entitlement to exclude the cost of materials and to the benefit of Notification No.12/2003; consequently, the material component (paints) was excluded from the taxable service value and the demand was held to be covered in favour of the appellant. [Paras 6, 7]

Demand on value of paints under MMRS deleted.

Reverse charge liability for consulting engineering services received from abroad - taxable event under amended service tax law w.e.f. 18.04.2006 - Service tax demand under reverse charge for consulting engineering services received from abroad deleted where services were received prior to the statutory amendment effective 18.04.2006. - HELD THAT: - The Tribunal noted that section bringing the reverse charge provision into force operated w.e.f. 18.04.2006. The Commissioner recorded only the payment date (2006-07) but did not find that the services were received after 18.04.2006. On the appellant's uncontradicted contention that the services were received before 18.04.2006, the taxable event did not arise under the amended law and the demand could not be sustained. [Paras 8]

Reverse charge demand on consulting engineering services deleted.

Final Conclusion: Both appeals allowed; impugned orders set aside and the demands in respect of handling charges, value of paints, and reverse charge for consulting engineering services deleted, with consequential benefits to the appellant in accordance with law.

Export of service in a joint venture - privity of contract not determinative of service recipient - services provided from India and delivered outside India - receipt of payment in convertible foreign exchange - extended period of limitation - disclosure in statutory returns and absence of fraud, suppression or misdeclaration - revenue neutrality as a defence to extended limitation

Export of service in a joint venture - privity of contract not determinative of service recipient - services provided from India and delivered outside India - receipt of payment in convertible foreign exchange - Whether the service rendered by the appellant, in joint venture with a domestic partner, qualified as export of service and was received by the foreign principal despite absence of direct privity of contract - HELD THAT: - The Tribunal found on the material before it and the MoU between the appellant and the domestic partner that the appellant and the partner had entered into a joint venture/partnership to provide business auxiliary services of marketing to the foreign manufacturer. The service related to marketing of goods manufactured by the foreign principal and was therefore delivered outside India and used in the principal's business abroad. The fact that payment was routed first to the domestic partner and thereafter shared with the appellant did not alter the identity of the ultimate service recipient. The element of partnership and the agreed sharing of commission established that the services were provided jointly to the foreign principal and that remuneration was received in convertible foreign exchange. Applying these findings, the Tribunal held that the services qualified as export of service under the facts of the case. [Paras 8]

Services rendered by the appellant in joint venture qualify as export of service and were received by the foreign principal despite lack of direct contractual privity

Extended period of limitation - disclosure in statutory returns and absence of fraud, suppression or misdeclaration - revenue neutrality as a defence to extended limitation - Whether the revenue could invoke the extended period of limitation for recovery where the appellant had disclosed the turnover in returns and there was no fraud, suppression or misdeclaration - HELD THAT: - The Tribunal recorded that the appellant was registered, had regularly filed returns and had disclosed the commission/turnover in question, claiming it as exempt export of service. There was no finding of fraud, suppression or misdeclaration. Given these facts, the Tribunal held that the extended period of limitation was not invokable. The Tribunal also noted the practical aspect that the tax charged could be neutralised in the hands of the domestic partner by availment of Cenvat credit and refund in respect of export, reinforcing that extended limitation could not be invoked in the circumstances presented. [Paras 9]

Extended period of limitation not available to revenue where turnover was disclosed in returns and there was no fraud, suppression or misdeclaration; appeal allowed with consequential benefits

Final Conclusion: The appeal is allowed: the Tribunal held that the services provided by the appellant in joint venture qualified as export of service to the foreign principal and, because the turnover was disclosed and there was no fraud or suppression, the extended period of limitation could not be invoked; the impugned order is set aside and consequential reliefs follow in accordance with law.

Writ of Mandamus - Rectification application - Consideration in accordance with law - Section 74 of Finance Act 1994 - Judicial direction for disposal of representation

Rectification application - Consideration in accordance with law - Writ of Mandamus - Section 74 of Finance Act 1994 - Respondents directed to consider the petitioner's Rectification Application dated 24.06.2023 and pass appropriate orders in accordance with law within a specified time. - HELD THAT: - The High Court declined to examine the merits of the underlying dispute or the correctness of order No.MAD-ST-ASC-160/2022 dated 11.11.2022. Instead, the Court exercised its supervisory jurisdiction to mandate that the respondents entertain and decide the petitioner's Rectification Application dated 24.06.2023. The Court required the respondents to consider the representation by applying the law (including submissions invoking Section 74 of Finance Act 1994, as relied upon by the petitioner) and to pass an appropriate order. The direction is procedural and limited to fresh consideration, not an adjudication on substance. [Paras 4, 5]

Writ petition allowed; respondents directed to consider and decide the Rectification Application dated 24.06.2023 in accordance with law within six weeks; no costs.

Final Conclusion: The writ petition is allowed by directing the respondents to consider and decide the petitioner's Rectification Application dated 24.06.2023 in accordance with law within six weeks; the Court did not decide the merits of the underlying order and made no order as to costs.

Cenvat credit - reversal of Cenvat credit - clerical error in endorsement behind Bills of Entry - verification by jurisdictional authority / Range Superintendent certificate - suppression with intent to evade - limitation under proviso to Section 11A - consequential relief

Cenvat credit - clerical error in endorsement behind Bills of Entry - verification by jurisdictional authority / Range Superintendent certificate - reversal of Cenvat credit - Whether Cenvat credit taken by the B. T. Road unit was rightly allowed despite endorsements on Bills of Entry indicating clearance to the Pansukra unit - HELD THAT: - The Tribunal accepted the factual evidence that the imported consignments were received and used at the B. T. Road unit, were accounted for in the RG 23 A Part I and Part II records and reflected in ER-1 returns, and that the Range Superintendent of Haldia-II Division certified on two occasions that no input materials were received and no Cenvat credit was taken at the Pansukra unit. The endorsements on the Bills of Entry were treated as unintended clerical errors which did not negate the documentary and verification evidence showing receipt and utilization at the B. T. Road unit. The Adjudicating Authority's failure to give reasons for disregarding the Range Superintendent's certificates and the RG 23 A records was noted; had those materials been properly considered the dispute would have been resolved earlier. On this basis the Tribunal allowed the appeal on merits and set aside the demand for reversal of credit. [Paras 6]

Demand for reversal of Cenvat credit was quashed on merits as the endorsements were clerical errors and the credit was validly taken by the B. T. Road unit supported by records and verification.

Limitation under proviso to Section 11A - suppression with intent to evade - verification by jurisdictional authority / Range Superintendent certificate - Whether the demand was sustainable as within time having regard to alleged suppression or was barred by limitation - HELD THAT: - The Tribunal observed that the Show Cause Notice was issued more than three years after the Cenvat credit was taken. Given that the Cenvat entries were reflected in ER-1 returns, the RG 23 A records were maintained, and the Range Superintendent had certified that no credit was taken at the Pansukra unit, the Department could not reasonably allege suppression with intent to evade. In the absence of such suppression and in view of the statutory proviso relied upon by the Department, the Tribunal held the impugned order unsustainable on limitation grounds and allowed the appeal on that basis as well. [Paras 7]

The demand was also set aside as barred by limitation in the absence of suppression with intent to evade.

Final Conclusion: The appeal was allowed both on merits and on limitation grounds; the confirmed demand, interest and penalty were set aside and the appellant is entitled to consequential relief as per law.

Provisional assessment and finalization of assessment - limitation for issuance of show cause notice under Section 11A - equal application of limitation to the Revenue and the assessee (Mafatlal principle) - premature issuance of show cause notice - inclusion of JPC Cess in assessable value - imposition of interest beyond the scope of the show cause notice

Provisional assessment and finalization of assessment - limitation for issuance of show cause notice under Section 11A - equal application of limitation to the Revenue and the assessee (Mafatlal principle) - premature issuance of show cause notice - Whether the Show Cause Notice dated 22/02/1996 was time-barred in respect of clearances effected during March 1992 to May 1993 - HELD THAT: - The Tribunal found that the price list was provisionally assessed on 10/03/1992 and finally approved by the Assistant Commissioner on 11/12/1992, and that the assessee followed that finalized price list for clearances between March 1992 and May 1993. The Commissioner (Appeals) set aside the Assistant Commissioner's order on 19/04/1994 directing inclusion of JPC Cess, but the Department did not produce evidence of any subsequent order giving effect to that direction until the finalization of RT-12 on 31/10/1996. The Show Cause Notice was issued on 22/02/1996 without invoking extended limitation provisions and while RT-12 returns had not yet been finalized. Applying the principle in Mafatlal that limitation rules applicable to the assessee apply equally to the Revenue, the Tribunal held that the Department was bound by the limitation under Section 11A and that the SCN was either belated (if 11/12/1992 is treated as the date of final assessment) or premature (if 31/10/1996 is treated as the date of finalization of RT-12). On these facts the issuance of the SCN was legally infirm and the consequential demand could not be sustained. [Paras 13, 14, 15, 16, 17]

The Show Cause Notice dated 22/02/1996 and the demand confirmed thereunder are time-barred or premature; the confirmed demand is unsustainable.

Imposition of interest beyond the scope of the show cause notice - provisional assessment and finalization of assessment - Whether interest under Rule 7 of the Central Excise Rules, 2002 could be upheld where the Show Cause Notice did not propose interest - HELD THAT: - The appellant contended that the SCN did not propose levy of interest and that the Commissioner (Appeals) travelled beyond the scope of the SCN by directing interest under Rule 7. The Tribunal recorded this contention and, having found the impugned adjudication unsustainable on limitation grounds, set aside the impugned order in its entirety. Consequently the demand for interest forming part of the impugned order cannot be sustained. [Paras 7, 17]

The demand of interest under Rule 7, being part of the impugned and set-aside order, is not sustained.

Final Conclusion: The appeal is allowed; the impugned Commissioner (Appeals) order confirming the differential duty and interest is set aside as legally unsustainable on limitation and related grounds, and the appellant is entitled to consequential relief as per law.

Related person - inter-connected undertakings - mutuality of interest - transaction value - Rule 8 of the Central Excise Valuation Rules - Rule 9 of the Central Excise Valuation Rules - Rule 10 of the Central Excise Valuation Rules - scope of show cause notice - limitation / extended period of limitation - revenue neutrality - EOU clearances and Customs jurisdiction

Related person - inter-connected undertakings - mutuality of interest - Whether the seller and the four buyers are related persons under sub clauses (ii), (iii) or (iv) of Section 4(3)(b) of the Central Excise Act, 1944 or only inter connected undertakings under sub clause (i). - HELD THAT: - The Tribunal examined the statutory definition of "related" in Section 4(3)(b) and the CBDT/CBEC clarification on the meaning of "inter connected undertakings". The show cause notice alleged relationship under sub clauses (i) and (iv) only; Revenue's attempt to invoke (ii) and (iii) was beyond the SCN and impermissible. Even on merits, clause (ii) (relatives) cannot apply to corporate bodies. Clause (iii) (buyer being a relative and distributor) is inapplicable as its first condition requires natural persons and there is no holding/subsidiary relationship. As to clause (iv) (so associated that they have interest directly or indirectly in each other's business), the record did not establish any interest in each other's business beyond ordinary seller buyer transactions; there was no two way mutuality of interest. Precedents including Atic Industries / Hind Lamps and Goodyear were applied to hold that mere inter connection or common shareholding does not by itself create the kind of reciprocal interest contemplated by clause (iv). [Paras 4]

The parties are inter connected undertakings under sub clause (i) but are not "related persons" under sub clauses (ii), (iii) or (iv) of Section 4(3)(b); clause (iv) is not attracted on the facts.

Rule 8 of the Central Excise Valuation Rules - Rule 9 of the Central Excise Valuation Rules - Rule 10 of the Central Excise Valuation Rules - transaction value - Whether valuation of goods cleared to the four buyers should be determined under Rules 9 and 10 (by reference to resale by related persons) or whether transaction value/Rule 8 applies. - HELD THAT: - Rules 9 and 10 apply only where the goods are sold to/through persons who are related in the sense of sub clauses (ii), (iii) or (iv) of Section 4(3)(b) or where the buyer is holding/subsidiary company; mere inter connectedness under clause (i) is insufficient. Where the related person does not resell but uses the goods in manufacture, Rule 8 applies. On the facts, the Tribunal found no material to establish the specific relationships required by Rules 9/10; further, in respect of buyers who consume the goods in works contracts there was no onward sale price available for computation under Rules 9/10. The adjudicating authority's finding that transaction value between the respondent and the inter connected buyers was maintainable therefore stands. The Tribunal also noted that certain alternative grounds relied upon by the adjudicating authority (limitation, revenue neutrality, and Customs/EOU jurisdiction) were not challenged by Revenue and have attained finality. [Paras 4]

Rules 9 and 10 cannot be invoked for determining value on the present facts; transaction value is correct and the valuation under Rules 9/10 is not attracted.

Scope of show cause notice - Whether Revenue could raise new grounds in appeal (invoking sub clauses (ii) and (iii) of Section 4(3)(b)) which were not alleged in the show cause notice. - HELD THAT: - The Tribunal applied settled law that the department cannot travel beyond the scope of the show cause notice; grounds not pleaded in the SCN cannot be made the basis of appeal. Consequently, Revenue's contention invoking sub clauses (ii) and (iii) in appeal was impermissible and could not be sustained. [Paras 4]

Revenue cannot rely on sub clauses (ii) and (iii) in appeal when those clauses were not invoked in the show cause notice.

Limitation / extended period of limitation - revenue neutrality - EOU clearances and Customs jurisdiction - Validity of the adjudicating authority's alternative findings on limitation, revenue neutrality, and the need to raise demands for EOU clearances under Customs law. - HELD THAT: - The Tribunal recorded that the adjudicating authority had set aside portions of the demand on multiple independent grounds: (i) extended period of limitation was not invokable due to prior audit/inquiry; (ii) the transactions were revenue neutral for certain buyers who could avail credit; (iii) demands against EOU clearances ought to be under Customs law and were void under Central Excise; and (iv) demands for periods prior to 01.12.2013 were not sustainable as Rules 9/10 could not be applied to part sales to unrelated buyers. Revenue did not challenge these findings in appeal; unchallenged findings attained finality. [Paras 4]

The alternative findings of the adjudicating authority on limitation, revenue neutrality, EOU/Customs jurisdiction and applicability prior to 01.12.2013 stand accepted and have attained finality.

Final Conclusion: The impugned order of the Commissioner, which held that the respondent and the buyers were only inter connected undertakings and not "related persons" under Section 4(3)(b)(ii) (iv), that Rules 9/10 of the Valuation Rules are not attracted, and which also set aside demands on independent grounds (limitation, revenue neutrality, and EOU/Customs jurisdiction), is upheld; Revenue's appeal is dismissed.

Denial of CENVAT credit on account of non-receipt of inputs - Paper transactions / bogus invoicing - Preponderance of probability test - Failure to maintain records under Rule 10 of the Central Excise Rules, 1944 - Use of chartered engineer's report as corroborative evidence - Assessment of physical capacity (electricity/fuel/plant) to establish manufacturing

Denial of CENVAT credit on account of non-receipt of inputs - Paper transactions / bogus invoicing - Preponderance of probability test - Failure to maintain records under Rule 10 of the Central Excise Rules, 1944 - Use of chartered engineer's report as corroborative evidence - Assessment of physical capacity (electricity/fuel/plant) to establish manufacturing - Whether cenvat credit availed by the appellant for the period July, 2007 to January, 2008 could be denied on the basis that the transactions were paper transactions and inputs were not actually received or manufactured at the registered premises. - HELD THAT: - The Tribunal found on the record that the 300 sq. ft. premises were rented out and from May 2007 were used exclusively by M/s BDS Control Systems; on the date of visit no employees, raw materials, finished goods or machinery of the appellant were found and the statements of BDS personnel supported exclusive use by BDS. Discrepancies between declared electricity/fuel/plant expenditures and official electricity records, absence of plant and machinery on site, conflicting turnover figures for sale of scrap, and non-existent/false transporter details further undermined the appellant's case. The Chartered Engineer's report described the site as a mini-repairing workshop, corroborating the Revenue's case. Applying the preponderance of probability standard (Collector v. D. Bhoormull), and noting failure to maintain statutory records under Rule 10, the Tribunal concluded the appellant engaged in paper transactions-taking invoices without receipt of inputs-and enabled improper cenvat credit claims. The Tribunal rejected the appellant's contentions regarding simultaneous manufacture, sufficiency of electricity consumption, reliance on audited figures, alleged double demand, and the probative value of the Chartered Engineer's report, and held the Revenue made out a case to deny the credit. [Paras 6]

CENVAT credit claimed for July, 2007 to January, 2008 was denied as the transactions were held to be paper transactions involving non-receipt of inputs; the appeal of the assessee is dismissed and Revenue's appeals are allowed.

Final Conclusion: On the evidence and applying the preponderance of probability standard, the Tribunal upheld denial of cenvat credit for July, 2007 to January, 2008 on the ground of paper transactions and non-receipt of inputs; the assessee's appeal is dismissed and the Revenue's appeals are allowed.

Revisional power of the Commissioner under Section 49(3) - finality of an order passed by the Appellate Deputy Commissioner - officers appointed under Section 3 to assist the Commissioner - distinction between appeal and revision - limitation on suo motu revisional jurisdiction where appellate remedy exists

Revisional power of the Commissioner under Section 49(3) - officers appointed under Section 3 to assist the Commissioner - finality of an order passed by the Appellate Deputy Commissioner - distinction between appeal and revision - Whether the Commissioner could exercise suo motu revisional jurisdiction under Section 49(3) to reopen orders passed by the Appellate Deputy Commissioner appointed under Section 3 - HELD THAT: - The Court examined the text and scheme of Sections 3, 48 and 49(3) of the CGVAT Act, 2005 and distinguished appellate and revisional functions: an appellate authority may re-evaluate evidence and merits, whereas revisional jurisdiction is confined to legality and prejudice to revenue. Section 49(3) empowers the Commissioner to call for records of proceedings conducted by persons appointed under Section 3 if an order is found erroneous and prejudicial to revenue, but the power is circumscribed by provisos. The Court noted that the appellate orders in the present case were passed by the Appellate Deputy Commissioner and were not challenged by the Revenue before the Tribunal under Section 48(2). Having regard to the statutory scheme and precedents relied upon, and the fact that the Revenue did not avail of the appellate remedy for a considerable period, the Court held that the Commissioner's issuance of notices under Section 49(3) to revisit the appellate orders in these circumstances was legally unsustainable. [Paras 14, 15, 18, 19]

Commissioner's exercise of revisional jurisdiction to reopen the Appellate Deputy Commissioner's orders in the facts of this case is not sustainable.

Limitation on suo motu revisional jurisdiction where appellate remedy exists - distinction between appeal and revision - Validity of the notices dated 05.11.2018 and 29.01.2019 issued under Section 49(3) of the Act - HELD THAT: - The Court observed that the assessment orders were appealed to and allowed by the Appellate Deputy Commissioner by orders dated 03.08.2017, 08.08.2017 and 09.08.2017, and that the Revenue did not prefer further appeal to the Tribunal within the statutory scheme nor offered any explanation for inaction. In these circumstances the Commissioner's subsequent issuance of show-cause notices under Section 49(3), after a lapse of time and without the Revenue having invoked the prescribed appellate remedy, was held to be impermissible. The Court therefore found the impugned notices to be legally unsustainable and liable to be set aside. [Paras 13, 19, 20]

Notices dated 05.11.2018 and 29.01.2019 issued under Section 49(3) are quashed.

Final Conclusion: The writ petitions are allowed; the Commissioner's notices issued under Section 49(3) impugning orders of the Appellate Deputy Commissioner are quashed as legally unsustainable in the circumstances, and the appellate orders remain undisturbed.

Propriety of writ jurisdiction vis-a -vis available statutory remedy - Article 226 and supervisory jurisdiction - Appointment of Court Receiver - Effect of prior statutory possession under the SARFAESI Act - Duty to implead mortgagee and disclosure of material facts - Maintainability and territorial jurisdiction of civil suits

Propriety of writ jurisdiction vis-a -vis available statutory remedy - Article 226 and supervisory jurisdiction - Horizontal comity and judicial discipline in entertaining inter-state writs - Whether the Bombay High Court ought to have entertained a petition under Article 226 challenging an order of a Civil Court in another State when a statutory remedy by way of appeal was available to the bank. - HELD THAT: - The Court held that the first respondent had a statutory remedy available against the Civil Court's order under Order XLIII CPC and therefore the Bombay High Court should not have entertained the writ petition under Article 226. While the High Court's jurisdiction under Article 226 is wide, judicial discipline and principles of comity required relegation to the statutory remedy, subject to any limited protective relief the High Court might consider appropriate. Entertaining inter-state writs of this nature would invite chaotic interference with proceedings in other States. Accordingly, the impugned High Court order was set aside and the writ petition dismissed on that ground. [Paras 9, 14]

The impugned order of the Bombay High Court dated 27th September 2023 is set aside and the writ petition dismissed because a statutory remedy was available to the first respondent and the High Court should not have entertained the petition under Article 226.

Appointment of Court Receiver - Effect of prior statutory possession under the SARFAESI Act - Duty to implead mortgagee and disclosure of material facts - Maintainability and territorial jurisdiction of civil suits - Whether the Trial Court's order appointing a Court Receiver on 24th January 2023 should be permitted to operate, having regard to prior orders and possession taken under the SARFAESI Act and to alleged suppression/non-disclosure by the appellant. - HELD THAT: - The Court found that the Trial Court had passed a drastic order appointing a Receiver without adequately attending to the fact that the properties were subject to prior proceedings and orders under Section 14 of the SARFAESI Act, and without impleading the mortgagee (the bank) as a party. The appellant had pressed for the Receiver despite knowledge (or constructive knowledge) of the bank's proceedings, and the Trial Court failed to consider maintainability and territorial jurisdiction. In view of these substantial defects and the existence of prior possession/orders under SARFAESI, the Supreme Court directed that the Trial Court's order of 24th January 2023 shall not be acted upon for the time being, that the status quo as obtaining immediately before that order shall be maintained, and that the matter be placed before the Trial Court for fresh consideration after impleading the bank and hearing it on all contentions including maintainability and jurisdiction. The Trial Court is to pass a fresh order on the Receiver application; any order adverse to the bank shall not be acted upon for one month to enable appropriate remedies. [Paras 6, 8, 10, 14]

The order appointing a Court Receiver is to be kept in abeyance; status quo as existing immediately before 24th January 2023 shall continue; the appellant must implead the bank and the Trial Court shall hear the bank and pass a fresh order on the Receiver application, with protective timelines as directed.

Final Conclusion: The appeal is partly allowed: the Bombay High Court's order is set aside and its writ petition dismissed for lack of propriety in invoking Article 226 when a statutory remedy existed; the Trial Court's receiver order of 24th January 2023 is held in abeyance with status quo restored, the bank is to be impleaded and heard, and the Trial Court is directed to pass a fresh order on the appointment of a Receiver, subject to the protective measures ordered by this Court.

Presumption under Sections 118 and 139 of Negotiable Instruments Act - burden of proof after rebuttal - rebuttal of presumption by preponderance of probabilities - proof of financial capacity of the complainant - effect of failure to reply to legal notice - service of legal notice - presumption under Section 27 of the General Clauses Act - credibility and bonafides of the complainant - multiple presentations of cheque

Presumption under Sections 118 and 139 of Negotiable Instruments Act - burden of proof after rebuttal - rebuttal of presumption by preponderance of probabilities - Whether the statutory presumption in favour of the complainant arose and whether the accused successfully rebutted that presumption shifting the burden back on the complainant. - HELD THAT: - The Court held that, because the accused admitted that the cheque was drawn on his account and bore his signature, the statutory presumption under Sections 118 and 139 of the N.I. Act initially arose. However, once the accused raised a specific defence - that the cheque and promissory note were connected to the complainant's son's chit fund transactions and not a legally recoverable debt to the complainant - he was entitled to rebut the presumption. Rebuttal need only be by preponderance of probabilities. The Court found that the accused's evidence and surrounding circumstances were sufficient to rebut the presumption, thereby shifting the legal burden back on the complainant to prove the existence of a legally enforceable debt and the circumstances in which the cheque reached the complainant. [Paras 15, 26]

Presumption under Sections 118 and 139 did arise but was rebutted by the accused; burden shifted to the complainant.

Proof of financial capacity of the complainant - credibility and bonafides of the complainant - multiple presentations of cheque - Whether the complainant discharged the burden to prove passing of consideration and his financial capacity to have advanced the alleged loan. - HELD THAT: - The Court examined the complainant's oral testimony and account entries relied upon to show receipt of funds prior to the alleged loan. The complainant's explanation (sale of coconut/vegetables and cash at home) was unsupported by corroborative documents such as RTC or other proof. Material inconsistencies were noted, including improvement in testimony about timing of funds and unexplained multiple presentations of the cheque (three instances in the bank record while the complainant asserted presentation only once). The trial and Sessions Courts erred in convicting solely on the basis of the statutory presumption without adequately testing these contradictions and the complainant's ability to establish that he had the financial capacity to lend the sum on the pleaded date. [Paras 20, 21, 22, 23, 27]

Complainant failed to prove passing of consideration and his financial capacity; his credibility was doubtful.

Effect of failure to reply to legal notice - service of legal notice - presumption under Section 27 of the General Clauses Act - Legal consequence of the accused's failure to reply to the statutory notice and the effect of service of the notice on the accused. - HELD THAT: - The Court noted that the legal notice was sent and, on the accused's admission as to address, deemed served under Section 27 of the General Clauses Act; the signature on the acknowledgement prima facie matched the accused. As per established precedent, non reply to the notice ordinarily means the complainant need not initially prove financial capacity. However, when the accused specifically raises the defence challenging the complainant's financial capacity during trial, the complainant must then prove capacity. Here, despite lack of reply, the accused raised such a defence and the complainant was required to adduce acceptable and reliable evidence of capacity, which he failed to do. [Paras 16, 17, 18, 21]

Notice was deemed served; absence of reply did not obviate the complainant's obligation to prove financial capacity once the accused challenged it.

Credibility and bonafides of the complainant - multiple presentations of cheque - burden of proof after rebuttal - Whether the concurrent convictions were sustainable in view of the evidence and findings on credibility, and whether interference was warranted. - HELD THAT: - The Court found that both the trial Court and the Sessions Court failed to properly appreciate inconsistencies and attempts by the complainant to 'create evidence' to establish financial capacity. The courts relied unduly on the statutory presumption without scrutinising the weakened evidentiary foundation after the accused rebutted the presumption. Given the totality of evidence - inconsistent account entries, lack of corroboration for the complainant's asserted sources of funds, unexplained multiple presentations of the cheque, and the accused's plausible explanation about chit fund connections - the appellate courts' conclusions were held to be perverse. [Paras 24, 26, 27]

Concurrent convictions were perverse and liable to be set aside; interference was justified.

Final Conclusion: Criminal revision allowed; impugned judgments of trial and Sessions Courts set aside; accused acquitted of the offence under Section 138 of the Negotiable Instruments Act and his bail bond discharged; trial records to be returned to the trial Court with a copy of this order.