TaxTMI Updates e-Newsletter
Nov 21,2024

Applicability of audit to a person registered for the audit period despite subsequent cancellation of registration - construction of the expression "registered person" in context of Section 65 - effect of cancellation of registration on liability and obligations under Section 29(3) - audit under Section 65 as a post-facto verification in aid of initiation of proceedings under Sections 73 and 74 - interpretation of Rule 101 read with Section 65 regarding audit period - obligation to furnish records and cooperation under Section 65(5)

Construction of the expression "registered person" in context of Section 65 - interpretation of Rule 101 read with Section 65 regarding audit period - effect of cancellation of registration on liability and obligations under Section 29(3) - Whether audit under Section 65 could be directed for the financial year 2020-21 when the petitioner was registered for that period though registration was cancelled on the date the audit was ordered - HELD THAT: - The Court held that the phrase "registered person" in Section 65 must be read contextually and in conjunction with Rule 101(1), so that a person who was registered for the financial year/period subjected to audit falls within the scope of Section 65 even if registration has been cancelled by the date of ordering the audit. The definition of "audit" and its use of past tense indicate that audit is chiefly concerned with examination of records and returns relating to past periods. Rule 101(1) fixes the audit period as a financial year or part thereof, and the qualifying phrase "for such period" requires that registration be examined for the period under audit; if the person was registered during that period, Section 65 applies. Section 29(3) confirms that cancellation does not affect liability to pay tax or other dues or the discharge of obligations for periods prior to cancellation, and hence also supports conduct of audit post-cancellation. To hold otherwise would render the statutory phrases redundant and frustrate the scheme where audit is in aid of Sections 73 and 74. The court therefore rejected the petitioner's contention and the view in the cited Madras decision to the extent it excluded post-cancellation audits without considering Section 29(3) and Rule 101. [Paras 17, 21, 23, 24, 29]

Section 65 applies to an audit of the financial year 2020-21 when the person was registered for that period, notwithstanding cancellation of registration on the date the audit was ordered.

Audit under Section 65 as a post-facto verification in aid of initiation of proceedings under Sections 73 and 74 - obligation to furnish records and cooperation under Section 65(5) - Whether cancellation of registration, and a prior order recording no tax payable, bars initiation or continuation of audit and related verification aimed at detecting tax not paid, short-paid, erroneously refunded or wrong input tax credit for the past period - HELD THAT: - The Court observed that Section 65 is intended to enable tax authorities to reach a prima facie conclusion about past defaults and is in aid of initiating proceedings under Sections 73 and 74. Section 29(3) expressly preserves liability and obligations for periods prior to cancellation whether or not dues are determined before or after cancellation; consequently, obligations under Section 65(5) to provide facilities, records and information remain enforceable post-cancellation. The recording of no tax payable at the time of de-registration does not immunise a person from later detection of tax dues by audit. The Court therefore held that authorities are entitled to conduct an audit and that the petitioner cannot avoid audit proceedings by relying on cancellation. [Paras 19, 20, 21, 22, 23]

Cancellation of registration and a prior record of no tax payable do not bar an audit under Section 65 for periods when the person was registered, and the obligations to cooperate under Section 65(5) survive cancellation by virtue of Section 29(3).

Final Conclusion: Writ petition challenging the notice dated 21 August 2024 for audit of financial year 2020-21 and the preliminary audit findings dated 11 October 2024 is dismissed; Section 65 read with Rule 101 and Section 29(3) permits audit of a period when the person was registered even if registration stood cancelled on the date of ordering the audit.

Limitation period for issuance of order under Section 73(9) read with Section 73(10) - due date for furnishing annual return under Section 44(1) - retrospective extension of limitation by notification and its temporal applicability - jurisdictional bar due to expiry of limitation period

Limitation period for issuance of order under Section 73(9) read with Section 73(10) - due date for furnishing annual return under Section 44(1) - retrospective extension of limitation by notification and its temporal applicability - jurisdictional bar due to expiry of limitation period - Validity of impugned orders dated 05.10.2024 and 02.12.2023 for financial year 2017-18 insofar as they were issued after the three-year period prescribed by Section 73(10) as calculated from the extended due date for filing the annual return under Section 44(1). - HELD THAT: - The court examined the temporal interplay between the due date for filing the annual return under Section 44(1) and the three-year limitation in Section 73(10) for issuing an order under Section 73(9). The due date for filing the annual return for 2017-18 had been extended to 05.02.2020 by a central notification which the State adopted, and hence the three-year period under Section 73(10) expired on 05.02.2023. Reliance placed by the opposite parties on the notification dated 24.04.2023 was considered: that notification extended the three-year period up to 31.12.2023 but expressly provided retrospective operation only from 31.03.2023. Where the three-year limitation had already expired prior to 31.03.2023 (here on 05.02.2023), the retrospective effect from 31.03.2023 could not operate to revive or validate actions taken after the expiry. Consequently, orders issued after 05.02.2023 were held to be beyond the statutory time and therefore without jurisdiction. [Paras 5, 7, 8, 9]

Impugned orders dated 05.10.2024 and 02.12.2023 are time barred under Section 73(10) read with Section 44(1) for FY 2017 18 and are quashed; consequential directions follow including de freezing of the petitioner's bank accounts.

Final Conclusion: Writ petition allowed; impugned orders quashed as time barred and the petitioner's frozen bank accounts shall be defrozen with consequential relief.

Quashing of order for non-appearance - non-prosecution due to medical incapacity - restoration of appeal - opportunity of personal hearing - conditional restoration of impugned order - fresh adjudication on merits after hearing

Quashing of order for non-appearance - non-prosecution due to medical incapacity - Impugned first appellate order disposing of the appeal for non-appearance was set aside on grounds that the petitioner was medically incapacitated and thus prevented from prosecuting the appeal. - HELD THAT: - The Court considered the petitioner's affidavit and accompanying medical documents establishing that he was under treatment when the notices for personal hearing were served and that he, being handicapped, was prevented from appearing. The impugned order records successive notices and non-appearance but does not deal with the petitioner's incapacity. In these circumstances the Court interfered with and quashed the order of the first appellate authority solely on the ground of prevention from prosecuting the appeal due to illness, thereby recognising that non-prosecution attributable to medical incapacity justified setting aside the order disposing the appeal without hearing the petitioner.

Impugned order quashed and set aside on the ground of the petitioner's medical incapacity preventing prosecution of the appeal.

Restoration of appeal - opportunity of personal hearing - fresh adjudication on merits after hearing - conditional restoration of impugned order - The appeal was restored and the matter was remitted for fresh hearing with directions to the appellate authority to fix a date for personal hearing and, after hearing, to pass a fresh order; failure by the petitioner to prosecute on the fixed date would result in automatic restoration of the impugned order. - HELD THAT: - The Court directed that the petitioner communicate the order to the appellate office and, upon receipt, the appellate authority (opposite party no.2) shall fix a date for personal hearing. The Court made clear that if the petitioner either himself or through an authorised representative does not prosecute the appeal on the date so fixed, the earlier impugned order will stand automatically restored; otherwise the appellate authority is to hear the petitioner and pass a fresh order. This constitutes a remit for fresh consideration limited to affording the petitioner an opportunity of personal hearing and adjudicating afresh on merits thereafter.

Appeal restored and remitted for fresh hearing; appellate authority to fix hearing and pass a fresh order, with automatic restoration of the impugned order if the petitioner fails to prosecute on the fixed date.

Final Conclusion: Writ petition disposed of by quashing the first appellate order on the ground of petitioner's medical incapacity; appeal restored and remitted for a fresh personal hearing and fresh adjudication, subject to automatic restoration of the impugned order if the petitioner fails to prosecute on the hearing date.

Statutory time-limit for audit completion under Section 65(4) of the GST Act - audit proceedings under Section 65(1) read with Rule 101 of the Central Goods and Services Tax Rules, 2017 - jurisdictional vires of show-cause notices issued pursuant to audit report - interim restraint on passing final orders during pendency of challenge - permissibility of direct service by email

Interim restraint on passing final orders during pendency of challenge - jurisdictional vires of show-cause notices issued pursuant to audit report - Grant of interim relief restraining final adjudication under the impugned show-cause notices pending disposal of the petition - HELD THAT: - The High Court issued notice and directed that, while proceedings pursuant to the impugned show-cause notices may continue, no final order shall be passed without the permission of the Court during the pendency of the petition. The petitioner challenged the validity of the show-cause notices inter alia on the ground that the audit was concluded beyond the time-limits in the statutory provision governing audit completion. The Court has not finally adjudicated the merits of that challenge; it has afforded interim protection by restraining the authorities from passing any final order until the petition is disposed of, and fixed a returnable date for further consideration. [Paras 3]

Notice issued returnable on 4th December, 2024; proceedings under the impugned show-cause notices may continue but no final order shall be passed without permission of the Court during pendency of the petition.

Permissibility of direct service by email - Permission for service of process by email - HELD THAT: - The Court expressly permitted direct service through email for service of the petition and related notices, thereby authorising an alternative mode of service for the respondents pending further orders.

Direct service through email is permitted.

Final Conclusion: The Court issued notice, granted interim protection by restraining the passing of any final order pursuant to the impugned show-cause notices without its permission pending adjudication, fixed a returnable date, and permitted service by email.

Cancellation or Suspension of Registration under Section 29 of the CGST Act - Requirement of reasoned order / non-speaking order - Due application of mind - Power to cancel for non-filing of returns - Opportunity of being heard - Remand for fresh consideration - Right to carry on trade or business affected by cancellation

Requirement of reasoned order / non-speaking order - Due application of mind - Right to carry on trade or business affected by cancellation - Impugned cancellation order is non-speaking for failure to record reasons and therefore legally unsustainable - HELD THAT: - The Court held that the power to cancel registration under Section 29 requires a due application of mind by the proper officer which must be reflected in the statutory order of cancellation. The impugned order dated 30.12.2022 was examined and found to be completely non-speaking, lacking any recorded reasons why the authority considered cancellation appropriate. The Court rejected the contention that the cancellation order can be read together with the show cause notice to cure this defect, observing that cancellation affects the registered person's right to carry on trade or business and therefore the statutory order itself must state the rationale for cancellation. Since the basis for initiating action (non-filing of returns) engages Section 29(2), the authority must record satisfaction that the conditions of that subsection are attracted before cancelling registration. [Paras 3, 4, 5]

Impugned cancellation order set aside for being non-speaking; no decision on merits was recorded.

Power to cancel for non-filing of returns - Remand for fresh consideration - Opportunity of being heard - Matter remanded to authority for fresh consideration without adjudicating merits - HELD THAT: - The Court remanded the case to the concerned authority to consider the matter afresh and pass appropriate orders in accordance with law, making clear that it did not decide the merits of the cancellation. The remand was ordered because the original order failed to record reasons and, accordingly, the authority must re-examine the position under the appropriate clause of Section 29 (including Section 29(2)(b) where non-filing of returns is alleged), provide an opportunity of being heard if required, and record its reasons. The petitioner was permitted to submit a reply within one month from the date of the order. [Paras 6]

Case remanded for fresh consideration; petitioner permitted to submit reply within one month; petition disposed.

Final Conclusion: The impugned order of cancellation dated 30.12.2022 is set aside as non-speaking and the matter is remanded to the concerned authority for fresh consideration and passing of reasoned orders in accordance with law; the petitioner may submit a reply within one month and the petition is disposed.

Jurisdictional issue - show cause notice - treatment of supplies between persons treated as distinct as supply without consideration - Input Service Distributor - ISD mechanism - deemed/ open market value under second proviso to rule 28 - limited interim protection - extension of time to reply - opportunity of hearing

Jurisdictional issue - show cause notice - treatment of supplies between persons treated as distinct as supply without consideration - Input Service Distributor - ISD mechanism - Writ petition raises a jurisdictional issue requiring adjudication and is directed to be heard on merits. - HELD THAT: - The Court noted that the show cause notice challenges the respondents' assertion that supplies between the head office and branch offices (where the head office acts as an Input Service Distributor) constitute supplies without consideration under the statutory scheme. Having considered the parties' submissions and the clarification of the Board dated 17th July, 2023, the Court held that the challenge gives rise to a jurisdictional question which cannot be disposed of at the threshold. Consequently the writ petition must be heard and the respondents directed to file an affidavit-in-opposition and the petitioners permitted to file a reply, so that the matters raised in the notice and the applicability of ISD principles and the Board's clarification are adjudicated on merits. [Paras 6, 7]

Writ petition is to be heard; affidavit-in-opposition to be filed within six weeks after annual vacation and reply within four weeks thereafter.

Limited interim protection - extension of time to reply - opportunity of hearing - show cause notice - Interim relief granted: time to reply extended and respondents restrained from giving effect to any order without leave of the Court pending adjudication. - HELD THAT: - The Court found that a prima facie case was made out in favour of the petitioners, having regard to the Board's clarification and the facts on record, and granted limited protection. The petitioners were permitted to file a response to the show cause notice within three weeks from the date of the order (the time for response having expired during pendency). The respondents were directed to decide the show cause notice after affording an opportunity of hearing and considering any response, but any order passed shall not be given effect to without prior leave of the Court. The Court also granted liberty to mention for inclusion in the list after exchange of affidavits and liberty to the respondents to apply. [Paras 8, 9, 10, 11]

Extension of three weeks granted to the petitioners to respond; respondents may decide after hearing but any order shall not be given effect to without leave of the Court; liberty to mention and to apply reserved.

Final Conclusion: The Court treated the challenge to the show cause notice as raising a jurisdictional question and directed full adjudication by permitting pleadings; in the meantime limited interim protection was granted by extending time to reply and restraining the respondents from giving effect to any consequential order without the leave of this Court.

Prospective operation of notification - invalid retrospective amendment - quashing of show cause notice issued under Section 74 of the GST Acts - refund of IGST on export of goods - application of Rule 96(10) of the CGST Rules - rectification of earlier judgment

Application of Rule 96(10) of the CGST Rules - prospective operation of notification - invalid retrospective amendment - quashing of show cause notice issued under Section 74 of the GST Acts - refund of IGST on export of goods - rectification of earlier judgment - Notification No.54/2018-Central Tax is to be given prospective effect from 09.10.2018 and a show cause notice issued on the basis of retrospective operation is without jurisdiction and liable to be quashed. - HELD THAT: - The Court accepted the rectification of the earlier CAV judgment in Cosmo Films Ltd., holding that Notification No.54/2018 came into effect on 9th October, 2018 and not with retrospective effect from the inception of Rule 96(10). In view of that rectification, the retrospective substitution introduced earlier by Notification No.39/2018 was withdrawn and Notifications No.53/2018 and No.54/2018 operate so as to make the amended sub-rule effective prospectively w.e.f. 09.10.2018. Consequently, any attempt by authorities to recover amounts on the basis that Notification No.54/2018 applies retrospectively to periods prior to 09.10.2018 is without jurisdiction. The impugned show cause notice dated 31.03.2023, which seeks recovery for periods before 09.10.2018 by applying Notification No.54/2018 retrospectively, cannot be sustained. [Paras 35, 36]

Impugned show cause notice dated 31.03.2023 quashed and set aside; Notification No.54/2018 held applicable prospectively from 09.10.2018 and amounts alleged for periods prior to that date do not survive.

Final Conclusion: Petition allowed to the extent indicated: the retrospective application of Notification No.54/2018 is rejected, the impugned notice is quashed, and Notification No.54/2018 applies prospectively from 09.10.2018.

Writ jurisdiction - Non-functioning appellate tribunal - Interim deposit with liberty to avail alternative remedy - Precedent binding on similar writ petitions

Writ jurisdiction - Non-functioning appellate tribunal - Precedent binding on similar writ petitions - Whether the High Court should entertain the petition challenging the appellate order in view of an earlier Division Bench order in M/s. Maa Tarini Traders where the Tribunal was non-functional - HELD THAT: - The petitioner sought adjudication of grievances against an appellate order where no Tribunal was functioning. The petitioner's case was held to be covered by the Division Bench order dated 16th February, 2024 in M/s. Maa Tarini Traders. The department did not dispute that coverage. In consequence, the High Court disposed of the writ petition on the basis of the earlier decision rather than independently adjudicating the appellate order, applying the precedent to the facts before it.

Writ petition disposed as covered by the earlier Division Bench order in M/s. Maa Tarini Traders.

Interim deposit with liberty to avail alternative remedy - Non-functioning appellate tribunal - Directions regarding interim deposit and liberty to pursue remedy upon reconstitution of the Tribunal - HELD THAT: - The prior Division Bench order directed a quantum of deposit and granted liberty to parties to pursue their remedy once the Tribunal is reconstituted, with a stipulation that failure to do so within the time provided would permit the department to proceed. The present petition was disposed in accordance with that scheme, thereby applying the interim deposit requirement and preserving the petitioner's right to approach the Tribunal upon reconstitution as per the terms of the precedent.

The petition is disposed subject to the deposit and liberty regime directed in the Division Bench order dated 16th February, 2024.

Final Conclusion: The High Court disposed of the writ petition as covered by the Division Bench order in M/s. Maa Tarini Traders (16th February, 2024), applying the deposit and liberty regime where the appellate Tribunal is not functioning; the petitioner may pursue the prescribed remedy upon reconstitution of the Tribunal.

Mismatch between GSTR-3B and GSTR-2A - Duplication of demand - Personal hearing / audi alteram partem - Setting aside of assessment order - Remand for fresh consideration

Mismatch between GSTR-3B and GSTR-2A - Duplication of demand - Personal hearing / audi alteram partem - Remand for fresh consideration - Validity of the impugned assessment order dated 30.12.2023 confirming demand on account of alleged mismatch between GSTR-3B and GSTR-2A for assessment year 2017-18 where an earlier assessment order on the same defect was set aside and remanded. - HELD THAT: - The Court found that the respondent confirmed the identical demand in the impugned order which had already been the subject matter of an earlier assessment order dated 19.12.2023 that this Court had set aside and remanded for fresh consideration. The respondent had earlier failed to afford personal hearing; the remand required reconsideration after granting personal hearing. The impugned order thus overlapped with the earlier set-aside order and perpetuated the same demand without adhering to the direction to afford an opportunity of personal hearing and to reconsider the matter afresh. In these circumstances the Court exercised its supervisory jurisdiction to set aside the impugned order and to remit the matter for fresh decision, directing the respondent to afford personal hearing and then pass orders afresh. [Paras 7, 8]

Impugned order dated 30.12.2023 set aside and matter remanded to the respondent to reconsider after affording personal hearing to the petitioner.

Final Conclusion: Writ petition disposed by setting aside the impugned assessment order dated 30.12.2023 and remanding the matter to the respondent for fresh consideration after granting personal hearing; no costs.

Anticipatory bail - quashing of FIR - remand to assessment authority - beneficiary of Input Tax Credit - conditions under Section 438(2) of the Code of Criminal Procedure

Anticipatory bail - quashing of FIR - remand to assessment authority - beneficiary of Input Tax Credit - Grant of anticipatory bail to the petitioner in connection with Telco P.S. Case No. 104/2018 (G.R. Case No. 2027/2018). - HELD THAT: - The Court, having regard to the fact that an FIR of similar nature at Bokaro Steel City had earlier been quashed and that the assessment order challenging the demand against the petitioner was quashed with a remand to the assessment authority, found sufficient ground to extend anticipatory bail. Although the State opposed bail and pointed to an alleged wrong account number given to GST officials, the Court accepted that the concurrent quashment and remand proceedings materially affected the backdrop of criminal prosecution. In view of these circumstances the Court directed the petitioner to surrender before the trial court within four weeks and ordered release on bail upon furnishing a bail bond and sureties, subject to the standard conditions prescribed by Section 438(2) CrPC.

Application allowed; petitioner to surrender within four weeks and on surrender to be released on bail on furnishing a bail bond of Rs. 10,000 with two sureties of like amount, subject to the conditions under Section 438(2) CrPC.

Final Conclusion: Anticipatory bail granted to the petitioner in Telco P.S. Case No. 104/2018 (G.R. Case No. 2027/2018); surrender and specified bail conditions directed, the order being grounded on prior quashment of a similar FIR and remand of the assessment proceedings.

Payment of pre-deposit for stay under Section 107 of the Goods and Services Tax Act - Electronic Credit Ledger versus Electronic Cash Ledger - maintainability of appeal upon payment from Electronic Credit Ledger - consideration of appeals pending decision of a superior court

Payment of pre-deposit for stay under Section 107 of the Goods and Services Tax Act - Electronic Credit Ledger versus Electronic Cash Ledger - maintainability of appeal upon payment from Electronic Credit Ledger - Whether the ten per cent pre-deposit required for instituting an appeal under Section 107 of the GST Act must be paid from the Electronic Cash Ledger or may be paid from the Electronic Credit Ledger and whether payment from the Electronic Credit Ledger renders the appeal maintainable. - HELD THAT: - The petitioner had paid the ten per cent from the Electronic Credit Ledger and the Appellate Authority rejected the appeal insisting on payment from the Electronic Cash Ledger. The Court noted a coordinate Division Bench decision holding otherwise, but observed that those portions have been stayed by the Hon'ble Supreme Court. The Court further took into account the Central Government Notification No. 53/2023 (recommending a higher pre-deposit for delayed appeals) which itself contemplated that a portion of the required payment may be discharged from the Electronic Credit Ledger, indicating that the statutory ten per cent can be enabled for payment through the Electronic Credit Ledger. In the circumstances, and having regard to the stay of the Division Bench ruling by the Supreme Court, the Court held that there shall be no insistence that the ten per cent pre-deposit be paid from the Electronic Cash Ledger and that payment from the Electronic Credit Ledger already made in the case renders the appeal maintainable. [Paras 2, 3, 4, 6]

Payment of the ten per cent pre-deposit under Section 107 from the Electronic Credit Ledger is sufficient for maintainability of the appeal and there shall be no insistence on payment from the Electronic Cash Ledger pending the decision of the Hon'ble Supreme Court.

Consideration of appeals pending decision of a superior court - Whether the appeal dismissed for non-payment from the Electronic Cash Ledger should be reopened and considered on merits. - HELD THAT: - Although bound by a coordinate Division Bench, the Court observed that the relevant Division Bench observations are stayed by the Supreme Court; consequently, the Court exercised its discretion to set aside the Appellate Authority's order and directed that the appeal be considered on merits. The Court also directed the Commissioner to issue necessary instructions for uniform treatment of appeals where the question is pending before the Supreme Court, thereby ensuring that appellate authorities do not insist on cash-ledger payment while higher court proceedings remain undecided. [Paras 4, 5]

The order in appeal dated 14.01.2023 is set aside and the Appellate Authority is directed to consider the appeal on merits; the Commissioner shall issue necessary directions to appellate authorities while the question is pending before the Supreme Court.

Final Conclusion: Writ petition allowed; appellate order set aside and appeal to be decided on merits-payment of the ten per cent pre-deposit from the Electronic Credit Ledger is held sufficient for maintainability and no insistence on payment from the Electronic Cash Ledger shall be made pending the Supreme Court's decision.

Limitation - deprivation of hearing - exclusion of time spent in judicial proceedings - statutory appeal - excess of jurisdiction

Limitation - exclusion of time spent in judicial proceedings - excess of jurisdiction - Whether the appellate authority erred in rejecting the appeal as barred by limitation without excluding the time consumed in prosecuting a writ petition. - HELD THAT: - The Court found that the petitioner had diligently pursued remedy before the writ Court and that the appeal was filed soon after the writ petition was disposed of. The appellate authority's rejection of the appeal as time barred resulted in depriving the petitioner of a hearing and constituted an exercise of jurisdiction in excess of its power. The High Court accepted the contention that time taken in prosecuting the writ petition ought to be taken into account for excluding delay when the remedy available to the petitioner lay in a statutory appeal, and therefore set aside the impugned order which denied the petitioner a hearing. [Paras 3]

Impugned order dated 24th April, 2024 set aside and appellate rejection on limitation grounds vacated; petitioner found to have been deprived of hearing.

Statutory appeal - deprivation of hearing - Direction as to the further course: Whether the appeal should be remanded for fresh consideration on merits. - HELD THAT: - Having set aside the order which deprived the petitioner of a hearing, the Court directed the first appellate authority to proceed to decide the appeal on merits. The appellate authority was requested to deal with the appeal expeditiously, thereby remanding the matter for fresh adjudication on merits without imposing the time bar that had earlier prevented a hearing. [Paras 3]

Appeal remitted to the first appellate authority for expeditious consideration on merits.

Final Conclusion: Impugned appellate order rejecting the appeal as time barred was set aside for depriving the petitioner of hearing; the matter is remitted to the first appellate authority to decide the appeal on merits expeditiously.

Electronic commerce operator - taxable supply and transaction value under Section 15(1) - health care services exemption - clinical establishment test - TCS under e commerce operator framework - meaning of insurance agent - SAC classification for diagnostic/healthcare services

Taxable supply and transaction value under Section 15(1) - health care services exemption - clinical establishment test - SAC classification for diagnostic/healthcare services - Whether GST is payable on diagnostic and lab services provided through third party labs, whether tax is on whole invoice or only on margin, the applicable rate and SAC. - HELD THAT: - The Authority found that the applicant operates a digital platform but does not function as an electronic commerce operator because the supply is made by the applicant on its own account: labs invoice the applicant and the applicant invoices its clients after adding a margin (para 12). The applicant therefore is not merely a facilitator and does not fall within the e commerce operator construct (para 12). As the applicant supplies services on its own account and invoices the clients for the marked up value, the transaction value for levy of GST is the whole invoice amount and not only the margin, in accordance with the principle of transaction value (para 13). The services supplied are held to be health care services (diagnostic services) and hence fall under the relevant SAC for healthcare (para 14). However, the exemption for healthcare services under Notification No.12/2017 applies only when the service provider qualifies as a clinical establishment; the applicant, being an aggregator procuring services from diagnostic labs, does not qualify as a clinical establishment and therefore cannot claim the exemption (para 15). On these bases the Authority held that GST is payable on the entire invoice value, the SAC is the healthcare SAC specified (9993), and the applicable rate is 18% (paras 13-15). [Paras 12, 13, 14, 15]

GST is payable by the applicant on the whole invoice amount for diagnostic and lab services procured from third party labs; SAC is the healthcare SAC and the applicable rate is 18%.

TCS under e commerce operator framework - electronic commerce operator - Whether the applicant is required to collect TCS. - HELD THAT: - Collection of TCS under the statutory scheme arises in the context of supplies made through an electronic commerce operator. Having held that the applicant does not qualify as an e commerce operator because it supplies services on its own account (para 12), the question of TCS collection becomes redundant and need not be applied (para 16). [Paras 16]

Question of TCS collection is redundant because the applicant is not an e commerce operator.

Meaning of insurance agent - Whether the applicant falls within the meaning of an insurance agent when invoicing an insurance company. - HELD THAT: - The Authority noted that the statutory term 'insurance agent' (as explained by reference to the Insurance Act) refers to a representative who sells insurance policies on behalf of an insurer (para 17). The services rendered by the applicant are not connected with sale or negotiation of insurance policies and therefore do not fall within the concept of an insurance agent. Consequently, supplies to an insurance company are to be invoiced on the same basis as to other corporate clients (para 17). [Paras 17]

The applicant is not an insurance agent and must raise invoice to an insurance company on the same terms as to other companies.

Final Conclusion: The Authority ruled that the applicant must discharge GST on the entire invoice value of diagnostic and lab services (SAC: healthcare classification; rate: 18%), the question of TCS is redundant since the applicant is not an e commerce operator, and the applicant does not qualify as an insurance agent and must invoice insurance companies on the same basis as other clients.

Classification of rental income between income from business and profession and income from house property - predominant-object test for characterisation of receipts - finality of factual findings by the Income Tax Appellate Tribunal

HELD THAT:- Having heard the learned Additional Solicitor General appearing for the petitioner and having gone through the materials on record, we see no reason to interfere with the impugned order passed by the High Court of Madhya Pradesh at Indore.[2024 (4) TMI 753 - MADHYA PRADESH HIGH COURT]

The Special Leave Petition is, accordingly, dismissed.

Foreign Tax Credit - Double Taxation Avoidance Agreement - Section 90 of the Income-tax Act - Form No. 67 as a procedural/directory requirement - Rule 128(9) of the Income-tax Rules - Elimination of double taxation

Foreign Tax Credit - Form No. 67 as a procedural/directory requirement - Rule 128(9) of the Income-tax Rules - Double Taxation Avoidance Agreement - Section 90 of the Income-tax Act - Whether the assessee is entitled to foreign tax credit for tax paid in Sri Lanka despite non-filing of Form No. 67 with the original return within the time prescribed by rule 128(9). - HELD THAT: - The Tribunal held that Article 24 of the India-Sri Lanka DTAA (elimination of double taxation) and section 90 of the Act afford the assessee a substantive right to claim foreign tax credit and that such substantive right cannot be defeated by a procedural lapse. Rule 128(9) prescribes filing of Form No. 67 before the due date of filing the return, but neither the rule nor the Act provides that failure to file Form No. 67 within that timeframe extinguishes the right to credit. The Tribunal followed coordinate Bench and High Court precedents which treat filing of Form No. 67 as directory rather than mandatory, and applied the principle that DTAA provisions override contrary provisions of the Act where they are more beneficial to the assessee. Having found that the assessee paid tax in Sri Lanka, filed Form No. 67 during rectification proceedings, and otherwise satisfied substantive requirements for claiming credit, the Tribunal directed the Assessing Officer to allow the foreign tax credit in accordance with the DTAA and section 90, and to rectify the demand raised by denial of the credit. [Paras 7, 8]

The assessee's claim for foreign tax credit is allowed; the Assessing Officer is directed to grant FTC in accordance with the DTAA and section 90 and to rectify the demand arising from its earlier denial.

Final Conclusion: The appeal is allowed: foreign tax credit in respect of tax paid in Sri Lanka is to be granted despite initial non-filing of Form No. 67 with the original return, the procedural requirement being directory and not extinguishing the substantive right under the DTAA and section 90; the demand arising from disallowance is to be rectified.

Treatment of seized cash as unexplained income under section 69A read with section 115BBE - revisional power under section 263 in respect of orders erroneous and prejudicial to revenue

Treatment of seized cash as unexplained income under section 69A read with section 115BBE - claim supported by contemporaneous demonstrable evidence - Seized cash declared by the assessee under 'income from other sources' is liable to be treated as unexplained income under section 69A read with section 115BBE. - HELD THAT: - Although the assessee declared the seized cash in the return and described it as receipts for services rendered to friends and relatives, he failed to produce any contemporaneous demonstrable evidence or a list of persons from whom the amounts were received or to whom services were rendered. The Assessing Officer did not verify these claims. In the absence of such evidence the initial onus under section 69A was not discharged and the claim could not be accepted as explained income. The Principal Commissioner therefore correctly directed that the amount be assessed as unexplained cash under section 69A read with section 115BBE. [Paras 6]

Order of Principal Commissioner treating the seized cash as unexplained income under section 69A r.w.s. 115BBE is upheld.

Revisional power under section 263 in respect of orders erroneous and prejudicial to revenue - failure to make enquiries or verifications - Invocation of section 263 by the Principal Commissioner was valid since the Assessing Officer's order was erroneous and prejudicial to the revenue for want of necessary enquiries/verification. - HELD THAT: - Section 263 permits revision where an assessing officer's order is erroneous in so far as it is prejudicial to the interests of the revenue, including where the order is passed without making enquiries or verification which should have been made. Here, the Assessing Officer accepted the assessee's explanation without verifying contemporaneous evidence or obtaining a list of parties involved; that failure amounted to lack of necessary verification. Consequently, the Principal Commissioner was justified in invoking section 263 and directing reassessment for the limited purpose of treating the seized amount as unexplained and invoking penal provisions as appropriate.

Invocation of section 263 is held to be in accordance with law and the revision order is sustained.

Final Conclusion: Appeal dismissed; the order of the Principal Commissioner setting aside the assessment for limited reassessment of the seized cash as unexplained income under section 69A r.w.s. 115BBE and invoking section 263 is upheld.

Exemption under section 54F of the Income-tax Act - estimation of income from unexplained bank credits - reassessment under section 147 of the Income-tax Act - penalty for concealment under section 271(1)(c) of the Income-tax Act

Exemption under section 54F of the Income-tax Act - Whether deduction under section 54F could be allowed in respect of two floors of the same residential building purchased from the same seller. - HELD THAT: - On the admitted facts the assessee purchased two floors of the same building which were used for residence and were acquired from the same seller. The Tribunal accepted the assessee's contention and cited authority for the proposition that the expression "a residential house" in section 54F must be understood as indicating the residential nature of the building and not mandating a strict singular numerical limitation; consequently acquisition of two residential units (floors) in the same building attracts the exemption. The Tribunal therefore allowed the ground impugning the disallowance and sustained exemption in favour of the assessee. [Paras 3]

Deduction under section 54F allowed in respect of the two floors of the same residential building.

Estimation of income from unexplained bank credits - reassessment under section 147 of the Income-tax Act - penalty for concealment under section 271(1)(c) of the Income-tax Act - Whether the Assessing Officer was justified in treating bank credits as business receipts and estimating income at 12% without adequate inquiry or confronting the assessee with the inference of business activity. - HELD THAT: - The assessee filed an affidavit denying any business activity and produced explanations and documents showing the character of various bank credits (including sale proceeds of property, share of compensation from brother, amounts received from government on land acquisition, and repayments of loans). The Tribunal found that the AO relied on bank credits to infer business receipts without making effective enquiries or giving the assessee notice of that adverse inference during proceedings; the AO also included transactions (such as dishonoured cheques, loan repayments and sale proceeds) as business receipts. Given the absence of contrary evidence and lack of confrontation on the inference, the Tribunal held that extending the reassessment to treat the credits as business turnover and applying a 12% presumptive profit rate was not justified and therefore the additions based on that estimation could not be sustained. [Paras 4, 5, 6]

Addition made by treating bank credits as business receipts and estimating income at 12% set aside; grounds allowing deletion of the addition sustained.

Final Conclusion: The appeal is allowed: the disallowance of exemption under section 54F is reversed in respect of the two floors of the same residential building, and the additions made by estimating business income from bank credits are deleted for lack of adequate enquiry and confrontation by the Assessing Officer.

Bogus purchases - addition of profit element embedded in purchases - acceptance of related sales precludes addition of entire purchase amount - estimation of profit margin as method of assessment - verificatory notices to suppliers for purchase validation - condonation of delay

Bogus purchases - acceptance of related sales precludes addition of entire purchase amount - estimation of profit margin as method of assessment - Validity of the assessing officer's disallowance of purchases as bogus and measure of addition to be made - HELD THAT: - Assessing Officer made disallowance of purchases aggregating Rs. 8,21,27,860 on the ground that purchases from two suppliers were bogus. On appeal the CIT(A) reduced the disallowance by estimating a profit element at 15% and deleted the balance. The Tribunal examined the material on record and found that the assessee had produced stock details, purchase invoices, E-waybills, computerized weigh-bridge receipts and payments through banking channels, and that the related sales were not doubted by the AO. The Tribunal also followed the coordinate-bench decision in Sangam Wires (identical facts) and decisions holding that where related sales are accepted, the entire purchase amount need not be added; only the profit element embedded in such tainted purchases may be brought to tax. Applying these principles and exercising appellate discretion, the Tribunal considered the rival contentions on an appropriate benchmark for profit estimation and, while upholding the approach of estimating profit rather than adding full purchases, adjusted the rate to 10% of the disputed purchases as a reasonable estimate of the embedded profit to be taxed. [Paras 10, 11, 12]

Addition sustained only to the extent of 10% of the disputed purchases (Rs. 82,12,786) and the balance of the disallowance is deleted; Revenue's appeal dismissed on this issue.

Verificatory notices to suppliers for purchase validation - Whether the Assessing Officer's issuance of notices to suppliers and findings of discrepancies justified treating purchases as bogus - HELD THAT: - The record shows that notices under authoritatively directed verification procedures were issued to suppliers and discrepancies were noted by the AO. However, the Tribunal found that despite those steps the assessee had produced supporting commercial documentation (invoices, E-waybills, weigh-bridge receipts) and effected payments through banking channels, and that sales were not disputed. In view of these facts and the ratio of coordinate-bench and other authorities, the Tribunal concluded that the AO's conclusion to add the entire purchase amount could not be sustained and that a profit-element estimation was the appropriate remedial measure. [Paras 10, 11]

AO's factual steps noted but did not justify addition of whole purchase amount; only profit element to be taxed.

Condonation of delay - Admissibility of the assessee's cross-objection barred by limitation and the Tribunal's decision on condonation - HELD THAT: - The cross-objection was filed 16 days beyond the limitation period. The assessee moved a condonation petition setting out reasons for delay. The Tribunal heard both parties on this preliminary point and, having regard to the explanation furnished, exercised its discretion to condone the delay and admitted the cross-objection for hearing. [Paras 2]

Delay in filing cross-objection condoned and the cross-objection admitted for hearing.

Acceptance of related sales precludes addition of entire purchase amount - Disposition of the assessee's appeal and cross-objection after appellate adjustments - HELD THAT: - Following the adjustment of the addition to 10% of the disputed purchases and having allowed part relief to the assessee, the Tribunal disposed both appeals accordingly. The assessee's appeal was partly allowed in consequence of the reduction in addition; the Revenue's appeal was dismissed. The cross-objection filed by the assessee, admitted earlier by condonation, was rendered infructuous by the Tribunal's overall findings and dismissed. [Paras 12, 13, 15, 16]

Assessee's appeal partly allowed; Revenue's appeal dismissed; cross-objection dismissed as infructuous.

Final Conclusion: On A.Y. 2021-22 the Tribunal upheld the appellate approach of taxing only an estimated profit element embedded in disputed purchases where related sales were accepted, confirmed an addition equal to 10% of the disputed purchases and deleted the balance, dismissed the Revenue's appeal, partly allowed the assessee's appeal, condoned delay in admitting the cross-objection but dismissed it as infructuous.

Stay of further recovery of outstanding demand pending appeal - Compliance with superior court order - Condonation of delay - Direction to bank to implement judicial order - Stay on debit of bank accounts pursuant to tax department communication - Restoration of normal banking operations

Compliance with superior court order - Direction to bank to implement judicial order - ICICI Bank was directed to comply forthwith with this Court's order dated 09.08.2024. - HELD THAT: - The Court noted that ICICI Bank had failed to comply with the Court's earlier order dated 09.08.2024 and was instead relying on a communication dated 15.12.2023 from the Office of the Deputy Commissioner of Income Tax, Central Circle 1, Delhi. Observing that the Court's order is subsequent to that communication, the Court issued a direct mandate to the Branch Manager, ICICI Bank, E-30, Saket, New Delhi to comply with the Court's order dated 09.08.2024 both in letter and spirit forthwith. The Court recorded the attendance of learned counsel for ICICI Bank and his undertaking to ensure compliance with both the earlier order and the directions in the present order.

ICICI Bank directed to comply immediately with this Court's order dated 09.08.2024.

Stay on debit of bank accounts pursuant to tax department communication - Restoration of normal banking operations - Prayers seeking that amounts credited to the petitioner's bank accounts shall not be debited pursuant to the tax department's communication and that normal banking operations be resumed were allowed. - HELD THAT: - The miscellaneous application sought, inter alia, (ii) a direction that amounts credited to the petitioner's accounts with the ICICI Bank, Saket Branch shall not be debited to the Income Tax Department pursuant to its communication dated 15.12.2023, and (iii) a direction that normal banking operations in those accounts be resumed. Having found the bank in default of complying with the Court's earlier order and observing the primacy of the subsequent judicial direction, the Court granted the reliefs sought at (ii) and (iii). Consequently the miscellaneous application was disposed of and appropriate orders/directions were allowed to that extent.

Reliefs (ii) and (iii) in the miscellaneous application granted: amounts shall not be debited pursuant to the tax office communication and normal banking operations in the petitioner's accounts shall resume.

Final Conclusion: Delay condoned; ICICI Bank ordered to comply forthwith with this Court's order dated 09.08.2024; the petitioner's prayers that amounts shall not be debited pursuant to the tax office communication and that normal banking operations be restored were allowed and the miscellaneous application disposed of accordingly.

Validity of notice under Section 148 of the Income-tax Act, 1961 - Quashing of reassessment notice - Related-party/family transaction between mother and son

Validity of notice under Section 148 of the Income-tax Act, 1961 - Quashing of reassessment notice - Related-party/family transaction between mother and son - Notices dated 28.04.2023 issued under Section 148 were quashed on the basis that the transaction in question was between a mother and son and respondents raised no objection to quashing. - HELD THAT: - Leave was granted and, on instructions, learned counsel for the respondents stated they had no objection to the notices dated 28.04.2023 under Section 148 being quashed because the impugned transaction concerned a mother and son. In view of that position the Court set aside the impugned judgment/order and quashed the said notices. The appeal was allowed and the writ petition was treated as allowed. No additional reasoning or factual findings were recorded by the Court beyond the respondents' concession and the familial character of the transaction.

The notices dated 28.04.2023 issued under Section 148 are quashed; the impugned judgment/order is set aside; the appeal is allowed and the writ petition treated as allowed.

Final Conclusion: The Supreme Court allowed the appeal and quashed the reassessment notices dated 28.04.2023 under Section 148 in light of the respondents' concession and the transaction being between a mother and son; the impugned order was set aside and the writ petition treated as allowed.

Premature redemption and lock-in under Section 54EC - Long-term specified assets and five-year lock-in - Statutory intent of Section 54EC preventing judicially ordered premature redemption - Contractual terms governing bond allotment - Writ jurisdiction under Article 226 and contractual disputes - Mistake of fact as ground for contractual relief

Premature redemption and lock-in under Section 54EC - Long-term specified assets and five-year lock-in - Contractual terms governing bond allotment - Petitioner's claim for cancellation or premature redemption of PFC 54EC bonds and refund of invested amount - HELD THAT: - The bonds issued to the petitioner are statutory long-term specified assets falling within the scheme of Section 54EC and the relevant notification, carrying an express five-year lock-in. The information memorandum and bond terms expressly prohibited transfer or premature redemption during the five-year period and the funds raised are intended as long-term borrowings to meet the stated object of the issue. Permitting premature redemption would undermine the statutory and contractual lock-in and the object of Section 54EC. For these reasons, the court held that the petitioner's request for cancellation or early redemption cannot be acceded to and that the court may not rewrite or modify the contractual conditions of the bond issued under the statutory scheme. [Paras 14]

Request for cancellation or premature redemption of the bonds refused; petition for refund of invested amount dismissed on merits.

Writ jurisdiction under Article 226 and contractual disputes - Mistake of fact as ground for contractual relief - Whether the relief sought could be granted in writ jurisdiction under Article 226 despite contractual terms and alleged mistake of fact - HELD THAT: - The court observed that the dispute is essentially contractual - the rights and obligations arose upon issuance of the bonds governed by their terms. The petitioner did not allege the contract to be void or voidable; rather, reliance on alleged mistake of fact or misguided financial advice does not create an enforceable right in writ jurisdiction. While Article 226 permits moulding of reliefs in appropriate cases, that power does not extend to altering clear statutory and contractual obligations implicit in the bond scheme. Consequently, the petition lies beyond the scope of reliefs properly grantable under Article 226 in these circumstances. [Paras 14, 16]

Writ jurisdiction cannot be invoked to compel premature redemption or to provide contractual relief based on alleged mistake of fact; such relief is beyond the court's competence under Article 226.

Final Conclusion: The writ petition seeking cancellation/redemption of the PFC 54EC bonds and refund of the invested amount is dismissed; all other contentions left open.

Revisionary jurisdiction under section 263 of the Income tax Act - requirement of assessment order being erroneous and prejudicial to revenue - scope of Explanation 3 to section 147 of the Income tax Act - reopening of assessment and notice under section 148 - assessment framed under section 147 read with section 144

Revisionary jurisdiction under section 263 of the Income tax Act - scope of Explanation 3 to section 147 of the Income tax Act - requirement of assessment order being erroneous and prejudicial to revenue - Validity of the Principal Commissioner of Income tax's exercise of jurisdiction under section 263 to quash and direct fresh assessment where the Assessing Officer had reopened assessment under section 147/148 for specific transactions but had not added other transactions which were not found during reassessment proceedings - HELD THAT: - The Tribunal found that the Assessing Officer had formed belief and recorded reasons under section 147 only in respect of receipts from three specified parties aggregating to the amount mentioned in the reasons, had obtained prior approval under section 151, had issued notices under section 148 and conducted inquiries (including issuing notices under section 133(6)), and ultimately framed assessment under section 147 read with section 144 making additions in respect of items that came to his notice during the assessment proceedings. The Principal Commissioner invoked section 263 on the basis that additional transactions (allegedly aggregating to a larger sum) forwarded by the investigation wing were not included in the reasons and not added in assessment. The Tribunal held that Explanation 3 to section 147 permits the Assessing Officer to deal with fresh issues that arise in the course of re assessment proceedings, but does not permit the Principal Commissioner to treat as erroneous the assessment merely because the Assessing Officer did not add items which did not come to his notice during those proceedings. Since the alleged additional transactions did not come to the AO's notice in the reassessment and were not part of the reasons recorded forming the basis for reopening, the assessment could not be characterised as erroneous and prejudicial to the revenue for purposes of invoking section 263. Relying on the principle that both conditions (erroneous and prejudicial) must be satisfied to exercise revisionary jurisdiction, the Tribunal concluded that the PCIT exceeded jurisdiction in setting aside the assessment. [Paras 5, 6, 7, 10, 11]

Exercise of revisionary jurisdiction under section 263 was invalid and the order passed by the PCIT quashing the assessment was quashed.

Final Conclusion: The ITAT allowed the appeal, quashed the PCIT's order under section 263, and held that the Assessing Officer's reassessment under section 147/144 could not be set aside on the ground that transactions not noticed during reassessment were omitted; the PCIT's exercise of jurisdiction was held to be bad in law.

Unexplained cash credit - onus under section 68 of the Income Tax Act - identity, genuineness and creditworthiness of shareholders - AO's duty to conduct independent inquiry - adverse inference from non-appearance to summons - share premium as matter of business prerogative - non-speaking order - appellate powers of the CIT(A)

Unexplained cash credit - onus under section 68 of the Income Tax Act - identity, genuineness and creditworthiness of shareholders - AO's duty to conduct independent inquiry - share premium as matter of business prerogative - Whether the addition of Rs. 2,62,00,000 treated as unexplained cash credit under section 68 is sustainable. - HELD THAT: - The Tribunal found that the assessee had produced detailed documentary evidence - including bank statements, ITR acknowledgements, share application forms, reconciliation and accounts - establishing the existence, identity and financial capacity of the subscriber companies and evidencing receipt of the funds. Once the assessee discharged the primary onus by producing such material, the burden shifted to the Assessing Officer to make independent enquiries and to point out specific discrepancies requiring further investigation. The AO had not identified any defect in the documents nor recorded what further enquiries were necessary, and did not conduct independent verification before making the addition. The Tribunal also noted that the quantum of share premium is a commercial/business prerogative which cannot be attacked merely for being large in the absence of evidence of collusion or mala fide intent. Applying these principles, the addition under section 68 was held unsustainable and was directed to be deleted. [Paras 6, 7, 8]

The addition of Rs. 2,62,00,000 treated as unexplained cash credit under section 68 is deleted as the assessee discharged its onus and the AO failed to make required independent inquiries.

Adverse inference from non-appearance to summons - AO's duty to conduct independent inquiry - non-speaking order - appellate powers of the CIT(A) - Whether non-appearance of directors in response to summons justifies drawing an adverse inference and whether the CIT(A)'s confirmation of the AO's addition without reasons is sustainable. - HELD THAT: - The Tribunal held that mere non-appearance of directors of subscriber companies cannot, by itself, justify treating share capital as unexplained when the assessee has produced documentary evidence proving identity and creditworthiness. It is not within the assessee's control to compel personal attendance of third-party directors; the AO must point out specific deficiencies and seek further verification if needed. Further, the CIT(A), having co-terminus powers, failed to examine the material facts or identify any defect in the evidence and simply upheld the AO's order. Such a nonspeaking appellate order is unsustainable. Accordingly, the Tribunal found the reliance on non-appearance insufficient and held the CIT(A)'s mechanical confirmation of the addition to be untenable. [Paras 6, 8]

No adverse inference could be drawn solely from non-appearance; the CIT(A)'s non-speaking confirmation of the addition is not sustainable.

Final Conclusion: The appeal is allowed; the addition made as unexplained cash credit under section 68 is deleted for AY 2012-13 because the assessee established identity, genuineness and creditworthiness of the subscriber companies and the revenue failed to carry out requisite independent inquiries, and the CIT(A)'s nonspeaking confirmation of the addition is unsustainable.

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealing particulars of income - Defective or ambiguous penalty notice - Preprinted omnibus notice and failure to strike out irrelevant clauses - Requirement to specify the limb of section 271(1)(c) in the penalty notice - Vitiation of penalty proceedings arising from ambiguous notice

Defective or ambiguous penalty notice - Preprinted omnibus notice and failure to strike out irrelevant clauses - Requirement to specify the limb of section 271(1)(c) in the penalty notice - Vitiation of penalty proceedings arising from ambiguous notice - Validity of penalty proceedings under section 271(1)(c) where the penalty notice was in a preprinted form that either did not strike out irrelevant clauses or did not specify the limb of section 271(1)(c) on which penalty was sought to be levied. - HELD THAT: - The Tribunal examined the penalty notice dated 31.12.2009 and the subsequent notice dated 07.06.2019 and found both defective. The first notice used a preprinted proforma in which both limbs of section 271(1)(c) were printed and the Assessing Officer did not strike out the irrelevant limb, rendering the notice omnibus and vague. The subsequent notice failed to mention any limb of section 271(1)(c) for which penalty was to be levied, likewise making it ambiguous. The Tribunal held that non-striking of irrelevant clauses in an omnibus notice and non-mentioning of the specific charge are defects that vitiate the penalty proceedings. In support, the Tribunal relied on the view of the Jurisdictional High Court in PCIT vs. Sahara India Life Insurance Company Ltd. which followed CIT vs. Manjunatha Cotton & Ginning Factory in deleting penalty where the AO failed to clearly specify the limb of section 271(1)(c) in the notice. The Tribunal also noted the Full Bench decision of the Bombay High Court in Mohd. Farhan A Shaikh vs. DCIT that an omnibus notice suffers from vagueness and that a defect in not striking off irrelevant matter would vitiate penalty proceedings where the assessment order records satisfaction on one or other or both grounds under section 271(1)(c). Applying these principles, the Tribunal concluded that the proceedings arising from the defective notices were vitiated and could not sustain the penalty. [Paras 5, 6, 7, 8]

Penalty proceedings under section 271(1)(c) quashed as the notices were defective and vitiated for being omnibus/ambiguous for failure to specify the limb or strike out irrelevant clauses.

Final Conclusion: The impugned order confirming penalty under section 271(1)(c) is set aside and the appeal of the assessee is allowed on the ground that the penalty notices were defective and vitiated.

Liability to deduct tax at source under Section 194A - broker / intermediary not being a person responsible for payment - primary responsibility of the exchange (NSEL) for paired contracts - characterisation of paired contracts as financing transactions

Liability to deduct tax at source under Section 194A - broker / intermediary not being a person responsible for payment - primary responsibility of the exchange (NSEL) for paired contracts - Assessee not liable to deduct TDS under Section 194A in respect of profits earned by its clients from paired contracts on NSEL - HELD THAT: - The Tribunal upheld the conclusion reached by the CIT(A) that although the paired contracts have been characterised by other authorities and courts as financing transactions, the assessee functioned solely as a broker/ intermediary executing trades on behalf of its clients and earning brokerage income. The decision rests on the exchange bye-laws showing that members entered trades as agents for clients, contract notes were issued in prescribed format, the clearing and settlement provisions placed financial liability on NSEL and the exchange was substituted as counter-party for net financial obligations. The Tribunal noted SEBI observations and Supreme Court findings that primarily laid responsibility on NSEL for offering and advertising the paired contracts and for ensuring collateral; those materials, however, also corroborate that the assessee was not the counter-party. Applying the statutory test for Section 194A (which attracts where a person is responsible for paying interest), the Tribunal found the assessee could not be treated as the person responsible for payment of interest to clients and therefore Section 194A could not be invoked against the assessee. Reliance placed on analogous authorities holding intermediaries not liable to deduct TDS reinforced this conclusion. Consequently the grounds raised by the Revenue were dismissed and the cross objections treated as infructuous insofar as they challenged the characterization of NSEL's transactions. [Paras 21, 22, 23, 24, 25]

Assessee was not required to deduct TDS under Section 194A for A.Y.2013-14 and A.Y.2014-15; Revenue's appeals and assessee's cross objections dismissed.

Condonation of delay in filing appeal - Delay of 22 days in filing Revenue's appeals condoned - HELD THAT: - The Tribunal considered the submissions on delay and found reasonable grounds for the belated filing. Given the short period of delay (22 days) the Tribunal exercised its discretion to condone the delay and admit the appeals for hearing. [Paras 2]

Delay of 22 days in filing the appeals by Revenue condoned.

Final Conclusion: The appeals filed by the Revenue and the cross objections of the assessee are dismissed: delay in filing the appeals was condoned, and on merits the assessee, being a broker/intermediary and not the person responsible for payment, was not liable to deduct TDS under Section 194A for A.Y.2013-14 and A.Y.2014-15.

Condonation of delay - cash deposits in Specified Bank Notes during demonetisation - addition as unexplained cash credit under section 68 - taxation under section 115BBE - verification of source by matching VAT returns and debtor confirmations - application of preponderance of probability - mere violation of RBI/GOI notifications not automatically attracting provisions for unexplained money - precedent on SBN deposits where source is explained

Condonation of delay - Admission of Revenue's appeal despite 28 days' delay. - HELD THAT: - The Tribunal noted that the appeal was filed 28 days beyond the due date and that the assessee did not object. The AO filed an affidavit explaining the delay. In view of the explanation and absence of objection by the assessee, the Tribunal exercised its discretion to condone the delay and admit the appeal. [Paras 2]

Delay of 28 days condoned and appeal admitted.

Cash deposits in Specified Bank Notes during demonetisation - addition as unexplained cash credit under section 68 - taxation under section 115BBE - verification of source by matching VAT returns and debtor confirmations - mere violation of RBI/GOI notifications not automatically attracting provisions for unexplained money - application of preponderance of probability - precedent on SBN deposits where source is explained - Whether the AO was justified in treating demonetisation-period deposits of Specified Bank Notes as unexplained cash credit and taxing them under section 115BBE when the assessee produced books, VAT returns and debtor confirmations. - HELD THAT: - The Tribunal examined the material placed before the CIT(A) and found that the assessee's books recorded substantial sales which tallied with VAT returns. The assessee produced ledger copies and confirmation letters from debtors showing receipt of amounts both by cash and bank transfer. The AO had not rejected the books of account or pointed to tangible evidence that the deposits were unaccounted money; instead he relied on perceived anomalies in cash patterns. The Tribunal applied the principle that where the source of deposits is satisfactorily explained and corroborated by books and returns, mere contravention of RBI/GOI notifications governing Specified Bank Notes does not, by itself, justify invoking provisions for unexplained money. The Tribunal also relied on relevant guidance that AO must analyse the business model, bank accounts, cash receipts and stocks before making additions. In the facts of the case the cash generation for the period up to 08.11.2016 was found to be explained in the books and by corroborative documents, and therefore the addition under section 68 and taxation under section 115BBE was not sustainable. [Paras 6]

Order of CIT(A) deleting the addition is confirmed; addition under section 68 and tax under section 115BBE set aside.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the merits, dismissed the Revenue's appeal by upholding the CIT(A)'s deletion of the addition made to the assessee's income in respect of demonetisation-period deposits of Specified Bank Notes for Assessment Year 2017-18.

Disallowance under section 36(1)(iii) of the Income Tax Act - Sufficient own / interest-free funds test for treating advances as out of business funds - Temporal nexus between extension of interest-free advances and year of assessment - Relevance of year on year reduction in outstanding advances in rebutting disallowance - Judicial precedent on nexus between interest free funds and inter corporate advances

Disallowance under section 36(1)(iii) of the Income Tax Act - Sufficient own / interest-free funds test for treating advances as out of business funds - Temporal nexus between extension of interest-free advances and year of assessment - Relevance of year on year reduction in outstanding advances in rebutting disallowance - Judicial precedent on nexus between interest free funds and inter corporate advances - Validity of disallowance under section 36(1)(iii) in AY 2018-19 on account of interest free advances to a related concern - HELD THAT: - The Tribunal found that the impugned advances reflected in the balance sheet for the year under consideration were carried forward from earlier years and no new advances were made in the year relevant to AY 2018-19. The assessee produced financial statements showing that the advances had been given in the financial year relevant to AY 2012-13 out of substantial interest free own funds available at that time and that the outstanding balance had been decreasing year on year thereafter. The Revenue did not place material on record to controvert these facts. The Tribunal applied the legal principle that where advances were made in earlier years out of established own or interest free funds and the outstanding has been reducing, disallowance under section 36(1)(iii) for a later year is not warranted absent contrary proof. The Tribunal also relied on precedents addressing the required nexus between interest free funds and non interest advances to related parties, holding those authorities to be applicable on facts. On this basis the AO's disallowance was held unsustainable. [Paras 4, 5, 7]

Delete the disallowance made under section 36(1)(iii); allow the appeal.

Final Conclusion: Appeal allowed; the disallowance under section 36(1)(iii) for AY 2018-19 is deleted by the Tribunal on the ground that the advances were made in an earlier year out of sufficient own/interest free funds and the Revenue failed to rebut the assessee's claim; AO directed to give effect accordingly.

Condonation of delay - Admission of additional legal ground - Reopening of assessment - Validity of reassessment under Section 147/148 vis-a -vis Section 153C - Quashing of reassessment as void-ab-initio

Condonation of delay - Delay in filing the appeal was condoned and the appeal admitted. - HELD THAT: - The assessee filed the appeal 192 days beyond the prescribed period and applied for condonation of delay, explaining non-service of the order due to dissolution and subsequent revival of the company in ROC records, landlord-director disputes at rented premises, and ongoing NCLT proceedings which impeded obtaining the certified copy. The Tribunal found no deliberate or intentional laches, accepted the supporting documents (including the NCLT order) as genuine, and held the cause for delay to be reasonable. Accordingly, the delay was condoned and the appeal admitted for adjudication on merits. [Paras 3, 4]

Delay condoned and appeal admitted.

Admission of additional legal ground - Reopening of assessment - Validity of reassessment under Section 147/148 vis-a -vis Section 153C - Quashing of reassessment as void-ab-initio - Reopening of assessment under Section 147/148 on the basis of documents seized from search of a third party was unsustainable and the reassessment was quashed as void-ab-initio; the proceedings should have been initiated under Section 153C. - HELD THAT: - The assessee raised, and the Tribunal admitted, a pure legal ground challenging the initiation and completion of reassessment under Section 147/148 where the reason to believe was founded on documents and incriminating material seized during a search on third parties (the Surendra Kumar Jain group). The Tribunal analysed Section 153C, noting its mandate that where seized material during a search of one person pertains to another, the proper procedure is to hand over such material to the Assessing Officer of the other person and proceed under Section 153C; Section 153C applies notwithstanding Sections 139, 147, 148, 151 and 153. Having regard to the seized documents originating from the third party search and relying on precedents cited by the assessee, the Tribunal concluded that the Assessing Officer lacked jurisdiction to reopen the assessee's assessment under Section 148 on that basis. The reassessment completed under Section 143(3) r.w.s. 147/148 was therefore held to be void-ab-initio and quashed. [Paras 5, 9, 10, 11, 12]

Reopening under Section 148/147 set aside; assessment quashed as void-ab-initio for non-application of Section 153C.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, after admitting a legal ground challenging reopening, held that reassessment initiated under Section 148/147 on the basis of documents seized from a third party was not maintainable under law; the assessment was quashed as void-ab-initio.

Classification of petroleum products as Low Aromatic White Spirit versus Kerosene - Adequacy of laboratory test report for classification under IS 1459:2018 - Import restriction for Kerosene limited to State Trading Enterprises or agencies approved by DGFT - Confiscation for mis-declaration under the Customs Act - Penalty under Section 112(a)(i) of the Customs Act, 1962

Classification of petroleum products as Low Aromatic White Spirit versus Kerosene - The imported goods are Low Aromatic White Spirit (LAWS) and are classifiable under CTH 2710 1990, not as Kerosene under CTH 2710 1910. - HELD THAT: - The Tribunal examined the CRCL test report and technical literature on LAWS and international nomenclature. Although the CRCL report recorded several parameters, the Tribunal found that some critical parameters required by IS 1459:2018 and relevant distillation criteria were either not tested or showed variation; notwithstanding that, the appellant produced industry and technical material explaining LAWS characteristics, and the product matched the characteristics of LAWS as used in industry practice. The Tribunal also noted a prior Tribunal decision in which similar goods were held classifiable under 2710 1990 and observed that the consignment before it was substantively similar. On the combined technical literature, industry practice and comparison with the prior decision, the Tribunal held that the imported material is Low Aromatic White Spirit and properly classifiable under CTH 2710 1990. [Paras 12, 13, 14]

Goods held to be Low Aromatic White Spirit and classifiable under CTH 2710 1990.

Adequacy of laboratory test report for classification under IS 1459:2018 - The CRCL test report was not adequate by itself to conclusively classify the sample as Kerosene under IS 1459:2018. - HELD THAT: - The Tribunal analysed the CRCL report against the parameters prescribed by IS 1459:2018 and found several required tests either not performed or showing divergence from standard limits (notably colour, copper strip corrosion and certain distillation metrics). The Tribunal concluded that the CRCL results were insufficient to sustain a finding that the material was Kerosene as per IS 1459:2018 and that absence of tests for LAWS-specific criteria meant the appellant's claim could not be rejected without appropriate testing. [Paras 8, 10]

CRCL report is inadequate to establish that the sample is Kerosene under IS 1459:2018; testing for LAWS characteristics was required.

Import restriction for Kerosene limited to State Trading Enterprises or agencies approved by DGFT - Confiscation for mis-declaration under the Customs Act - Penalty under Section 112(a)(i) of the Customs Act, 1962 - Confiscation and penalty imposed for mis-declaration and violation of import policy are not sustainable because the goods are LAWS classifiable under CTH 2710 1990 and thus not subject to kerosene import restrictions. - HELD THAT: - The adjudicating authority reclassified the goods as Kerosene and imposed confiscation under provisions relating to mis-declaration and violations of import policy, together with a penalty. Having held that the goods are LAWS under CTH 2710 1990, the Tribunal found no breach of the import restrictions applicable to kerosene (limited to STEs or DGFT-approved agencies). Consequently, confiscation under the Customs Act and the related penalty could not be sustained. The Tribunal therefore set aside the adjudicating order insofar as it imposed confiscation, remission conditions, and the penalty. [Paras 15, 16]

Confiscation and penalty set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding the imported material to be Low Aromatic White Spirit classifiable under CTH 2710 1990; the CRCL report was inadequate to sustain a finding of Kerosene under IS 1459:2018; therefore confiscation and the penalty imposed were set aside.

Relevancy of statements recorded under Section 108 and admissibility under Section 138B - Mandatory application of procedural safeguards under Section 138B(1) to departmental adjudication under Section 138B(2) - Inadmissibility of departmental investigation statements when statutory procedure for admission is not followed - Proof requirement for export transactions alleged to be supported by pre-signed veterinary certificates

Relevancy of statements recorded under Section 108 and admissibility under Section 138B - Mandatory application of procedural safeguards under Section 138B(1) to departmental adjudication under Section 138B(2) - Inadmissibility of departmental investigation statements when statutory procedure for admission is not followed - The statements recorded by Customs officers during investigation could not be admitted as evidence in the adjudication because the mandatory procedure under Section 138B was not followed. - HELD THAT: - The Court examined the statutory scheme and concluded that statements recorded under Section 108 can be relevant to prove the facts they contain only within the limits set out in Section 138B. Section 138B(1) prescribes two specific situations in which such statements are relevant in prosecution and, by virtue of Section 138B(2), those provisions apply to departmental proceedings "so far as may be". The expression does not confer a permissive discretion to ignore the procedural safeguards; rather it requires adaptation of terminology (for example, substituting "adjudicating authority" for "Court") while preserving the mandatory procedural conditions for admission. Because the adjudicating authority neither showed that any condition in Section 138B(1)(a) obtained nor complied with the procedure under Section 138B(1)(b) (examining the maker as a witness or admitting the statement in the interests of justice), the relied-upon investigation statements could not be treated as relevant evidence. The Court held that the mandatory nature of Section 138B means that failure to follow its procedure renders such statements inadmissible in departmental adjudication. [Paras 19, 20, 21, 22, 23]

The 14 statements relied upon in the SCN were inadmissible because the mandatory procedure under Section 138B was not complied with.

Proof requirement for export transactions alleged to be supported by pre-signed veterinary certificates - Inadmissibility of departmental investigation statements when statutory procedure for admission is not followed - In the absence of admissible evidence linking the recovered pre-signed veterinary certificates to past export consignments, the demand for duty recovery under the legal undertaking and the penalties imposed could not be sustained. - HELD THAT: - The undisputed recovery of blank but signed and stamped veterinary certificates establishes the potential for misuse but does not, by itself, prove that earlier consignments were exported under pre-signed certificates. The department built the causal link primarily on the investigation statements, which the Court found inadmissible for want of compliance with Section 138B. With those statements excluded, the remaining relied-upon documents were insufficient to establish that the appellant exported meat using pre-signed veterinary certificates. As the primary allegation underlying the demand for recovery of duty foregone under the scrips and the imposition of penalties was not proved by admissible evidence, the adjudicating authority's conclusions could not stand. [Paras 23, 24]

The demand for duty recovery and the penalties imposed were set aside for want of admissible evidence establishing the alleged exports under pre-signed veterinary certificates.

Final Conclusion: The impugned order upholding the original adjudication is set aside; because the mandatory procedure under Section 138B was not followed, the investigation statements relied upon were inadmissible, the departmental case collapsed, and the demand for duty recovery and penalties are quashed with consequential relief to the appellants.

Transaction value - customs valuation - additions for freight and insurance - onus of proof in valuation - evidentiary value of statements under section 108 and certified electronic records under section 138C - reliance on statistical/export declarations for valuation - rule 10 and rule 3(1) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rule 12 - alternative methods of valuation - fraud as ingredient for invoking extended jurisdiction and penalties under section 28 and section 114A - confiscation and penalties under section 111 and section 112

Transaction value - customs valuation - additions for freight and insurance - rule 10 and rule 3(1) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rule 12 - alternative methods of valuation - onus of proof in valuation - Validity of enhancing declared invoice value by additions for freight and insurance to arrive at transaction value and assessable value. - HELD THAT: - The Tribunal held that the declared invoice price at import, made on CIP/DAP contractual terms, is prima facie the transaction value and that the adjudicating authority, having alleged exclusion of freight and insurance, bore the onus to establish that these elements were excluded and unascertainable before invoking rule 10(2) or the additions envisaged by rule 3(1). The contract placed risk and delivery liability on the seller (CIP/DAP) and contained no provision for post-contractual price revision or supplementary invoices; absent evidence that contractual terms changed or that the buyer engaged transport/insurance, mere statistical/export declarations or untested supplementary invoices could not justify treating the declared price as FOB and loading it by 21.125%. Recourse to alternative methods under rule 12 was not made out. Consequently the adjudicating authority failed to discharge the onus required under the valuation code and the enhancement of declared value for recovery of differential duty was without basis in law. [Paras 11, 12, 27, 28, 30]

Enhancement of declared value by additions for freight and insurance and re-determination of transaction value was unwarranted; declared price stands unimpeached and differential duty recovery fails.

Evidentiary value of statements under section 108 and certified electronic records under section 138C - reliance on statistical/export declarations for valuation - Admissibility and probative value of statements obtained from overseas freight forwarders (and responses from Indian affiliates) and of certified documents/statistical declarations relied upon by the adjudicating authority. - HELD THAT: - The Tribunal found that statements communicated by overseas persons via email and confirmations from employees of Indian affiliates, not recorded under section 108 through personal appearance or demonstrating authority to speak for the overseas entities, lacked the legal rigour required. Certification under section 138C may establish source but does not vouchsafe truth of contents; the so-called supplementary invoices and HMRC/statistical declarations are documents of doubtful provenance and limited probative force for altering valuation. Statistical returns to HMRC are for data collection and do not carry the force of export declarations having fiscal consequences. Given absence of authenticated admissions, payments, bank remittances or corroborative ledger/account evidence, the documents and statements relied upon did not suffice to overturn the declared transaction value. [Paras 22, 23, 24, 25, 26]

Statements and certified/statistical documents relied upon are not legally sufficient or credible to displace the declared value; they cannot support the impugned additions.

Fraud as ingredient for invoking extended jurisdiction and penalties under section 28 and section 114A - confiscation and penalties under section 111 and section 112 - onus of proof in valuation - Whether findings of fraud were made out so as to justify invocation of extended jurisdiction, confiscation and imposition of penalties under relevant Customs provisions. - HELD THAT: - The Tribunal cautioned against facile invocation of 'fraud' to neutralize evidentiary deficiencies and emphasized that fraud as a statutory ingredient must be established on reliable evidence. The adjudicating authority relied on the same contested documents and statements to allege deliberate suppression and fraud; but those materials lacked provenance, corroboration or proof of payments. In absence of proved misdeclaration of value and without having discharged the onus to show alteration of contract terms or unascertainability of freight/insurance, ingredients for invoking section 28 or section 114A were not established. Consequently, confiscation under section 111 and penalties under section 112 and section 114A could not be sustained on the available record. [Paras 21, 27, 28, 29, 30]

Fraud and related statutory ingredients were not proved; extended jurisdiction, confiscation and penalties founded on fraud/misdeclaration do not survive.

Final Conclusion: On the evidence and law, the adjudicating authority failed to discharge the onus to displace the declared transaction value or to prove fraud; the additions to value, differential duty, confiscation and penalties are unsustainable and the impugned order is set aside, allowing the appeals.

Failure to mention Director Identification Number (DIN) - adjudication of penalties under section 172 of the Companies Act, 2013 - Companies (Adjudication of Penalties) Rules, 2014 - beneficial construction of amendment to procedural scheme - dropping adjudication against deceased director

Failure to mention Director Identification Number (DIN) - Existence of contravention of Section 158 of the Companies Act, 2013 for the financial year ended 2014-15. - HELD THAT: - The Inquiry Officer observed that the Directors' Identification Numbers were not mentioned in the financial statements and Directors' Report for the financial year 2014-15. No relevant explanation or reply was furnished by the company or its directors to rebut that finding. On that basis the adjudicating authority concluded that the company and the directors were in default of the obligation to mention DIN as required by Section 158 of the Companies Act, 2013.

Contravention of Section 158 established for the financial year ended 2014-15.

Adjudication of penalties under section 172 of the Companies Act, 2013 - Companies (Adjudication of Penalties) Rules, 2014 - beneficial construction of amendment to procedural scheme - Imposition of penalty under Section 172 on the company and a director for the Section 158 contravention and entitlement to adjudicate penalties under the amended scheme. - HELD THAT: - The adjudicating authority considered the statutory scheme enabling adjudication of penalties, including the effect of amendments and supporting judicial treatment referenced in the Madras Court decision. Taking into account that adjudication under the Companies (Adjudication of Penalties) Rules is the prescribed in house remedy and having found default under Section 158, the authority exercised power to impose penalties under Section 172. The authority also noted the absence of a substantive reply and applied the amended adjudicatory framework to the facts before it in determining sanction and quantum.

Penalty of Rs.50,000 imposed on the company and Rs.50,000 imposed on the director in default Mr. Ishan Agarwal for the contravention in respect of the financial year ended 2014-15; total penalty ordered Rs.1,00,000.

Dropping adjudication against deceased director - Disposition of proceedings against a director who died during the interregnum. - HELD THAT: - The record contained information that one director in default, Mr. Vishwanath Agarwal, had died on 22-10-2020. On that factual basis the adjudicating authority treated the proceedings against the deceased director as not maintainable and accordingly dropped adjudication against him pursuant to the relevant rule permitting such disposition in respect of a deceased person.

Adjudication proceedings dropped as to the deceased director; no penalty imposed on him.

Final Conclusion: The adjudicating authority found failure to mention DIN in records for the financial year 2014-15, imposed penalties under Section 172 amounting to Rs.50,000 on the company and Rs.50,000 on the living director in default, and dropped proceedings as to the director who had died.

Violation of Rule 14(6) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 - Private placement - return of allotment in Form PAS-3 with complete list of allottees - Penalty under Section 450 of the Companies Act, 2013 - Adjudication under Section 454(1) of the Companies Act, 2013 - Ex-parte adjudication under the Companies (Adjudication of Penalties) Rules, 2014

Violation of Rule 14(6) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 - Private placement - return of allotment in Form PAS-3 with complete list of allottees - Whether the company and its officer were in contravention of Rule 14(6) for failing to furnish complete details of allottees in the return of allotment - HELD THAT: - The record established that the company did not provide complete particulars required by Rule 14(6), specifically omission of Permanent Account Number and E-mail ID of security holders and omission of particulars such as class of security and date/number of securities, thereby breaching the requirement to file a return of allotment in Form PAS-3 with a complete list of allottees within the prescribed period. The adjudicating authority noted no reply from the company or its officers and proceeded ex parte under the Companies (Adjudication of Penalties) Rules, 2014. The authority further observed that the company is not a "small company" for the purpose of section 2(85) and therefore any lesser penalty under section 446(b) was not applicable. On these findings the authority concluded that the company and the officer in default committed contravention of Rule 14(6). [Paras 8, 9]

Contravention of Rule 14(6) is established against the company and the officer in default; penalty under Section 450 of the Companies Act, 2013 is imposed accordingly.

Penalty under Section 450 of the Companies Act, 2013 - Payment and consequences of non-compliance of adjudication order - Quantum of penalty to be imposed and procedural directions for payment and appeal - HELD THAT: - Applying Section 450 as the penal provision where no specific penalty is provided, the adjudicating authority imposed the minimum one time penalty on both the company and the officer in default. The order requires payment online within ninety days and records the right of appeal to the Regional Director (SR) within sixty days. The authority also recorded statutory consequences for non-compliance, including increased fines and potential imprisonment for officers in default as set out in section 454(8). [Paras 9, 10, 11, 12, 13]

A penalty under Section 450 is imposed on the company and the officer in default; payment is to be made online within ninety days and appeal lies to the Regional Director (SR) within sixty days; statutory sanctions for non-compliance are drawn to attention.

Final Conclusion: The adjudicating authority found that M/s Soundarambigai Benefit Fund Nidhi Limited and the officer in default violated Rule 14(6) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 for incomplete particulars in the return of allotment, imposed penalties under Section 450 of the Companies Act, 2013, directed payment within ninety days, and recorded the right of appeal and consequences of non-compliance.

Monies deposited in court as security - ownership versus possession of assets - moratorium under Section 14 of the IBC - security interest - claim and decree-holder as creditor under the IBC - duties of the Resolution Professional under Section 18 of the IBC - IBC's overriding scheme over pre IBC common law precedents

Monies deposited in court as security - ownership versus possession of assets - security interest - Monies or other assets deposited in court by a corporate debtor prior to commencement of CIRP as security do not cease to be assets of the corporate debtor. - HELD THAT: - The Court held that loss of possession by deposit in court does not extinguish title: a deposit placed as security for stay of execution remains the property of the depositor subject to the outcome of the appeal. Such deposited sums constitute a security interest securing the decree-holder's claim but remain assets of the corporate debtor and therefore fall within the scope of assets to be identified, secured and conserved under the IBC. The Court rejected the submission that deposit in court ipso facto transfers ownership to the decree-holder, observing that ownership and possession are distinct and that the deposited asset must be treated as part of the corporate debtor's estate for purposes of CIRP or liquidation. [Paras 13, 14, 24, 28, 54]

Deposited monies are assets of the corporate debtor and do not cease to be so by reason of deposit in court.

Moratorium under Section 14 of the IBC - claim and decree-holder as creditor under the IBC - IBC's overriding scheme over pre IBC common law precedents - The moratorium under Section 14 applies to execution or enforcement against assets deposited as security and the rights of a decree-holder are subject to the IBC regime. - HELD THAT: - The Court explained that Section 14(1)(a) prohibits continuation of proceedings and execution of judgments against a corporate debtor once CIRP commences, and Section 14(1)(c) bars enforcement of security interests created by the corporate debtor. A decree-holder is a creditor with a 'claim' under the IBC; therefore enforcement against assets provided as security would vitiate the collective distribution scheme and is restrained by the IBC. Consequently, decisions predating or external to the IBC that treat deposited funds as not belonging to the debtor cannot override the IBC's object and code; the Court analysed Chowthmull, Nahar HDIL and Rajendra Bansal and concluded that the IBC's scheme governs the treatment of such deposits. [Paras 19, 21, 30, 36, 38]

Section 14 moratorium applies to monies deposited as security; decree-holder's rights are subject to the IBC regime and cannot bypass CIRP mechanisms.

Duties of the Resolution Professional under Section 18 of the IBC - claim and decree-holder as creditor under the IBC - Monies deposited in court by the corporate debtor must be identified, secured and conserved by the Resolution Professional and will form part of the estate to be dealt with under the IBC process, including resolution plans or liquidation distribution. - HELD THAT: - Relying on Section 18, the Court held the Resolution Professional is required to take control and custody of assets over which the corporate debtor has ownership rights, including assets not in the possession of the corporate debtor. The deposited cash, being an asset recorded in the corporate debtor's accounts and constituting a security interest, falls within this duty and accordingly will be administered under the CIRP and, if required, the liquidation waterfall under the IBC. [Paras 13, 18, 27, 28, 54]

The Resolution Professional must identify, secure and conserve the deposited monies as assets of the corporate debtor for CIRP or liquidation outcomes.

IBC's overriding scheme over pre IBC common law precedents - Authorities such as Chowthmull and the coordinate-bench reading in Rajendra Bansal do not supplant the IBC's code; the IBC alters the legal landscape and governs the treatment of deposits made by corporate debtors. - HELD THAT: - The Court analysed Chowthmull (1924) and later decisions relied upon in Rajendra Bansal and Nahar HDIL, distinguishing them on facts and legal context and holding that the IBC's comprehensive insolvency code, its objectives and statutory provisions (including collective distribution and moratorium) have displaced earlier common-law conclusions insofar as corporate debtors undergoing CIRP are concerned. The Court noted that where earlier orders had released security, such releases remain subject to the eventual outcome of IBC proceedings. [Paras 34, 35, 36, 39, 53]

Pre-IBC precedents do not override the IBC; the Code governs treatment of deposited assets for corporate debtors undergoing CIRP.

Monies deposited in court as security - moratorium under Section 14 of the IBC - Withdrawal of the appeal and release of the deposited amounts (with earnings) to the Applicant Appellant is permitted, subject to procedural compliance, and the judgement creditor's substantive rights remain governed by the IBC. - HELD THAT: - Having found that the deposited monies are assets of the corporate debtor and in view of the Supreme Court's order revoking the ICICI bank guarantee on identical pleadings, the Court accepted the Applicant's request to withdraw Appeal No. 597 of 2016 and allowed refund of the cash deposit with accrued earnings. The release is to be effected within two weeks subject to registry procedures. The Court clarified that the Respondent's substantive rights under the impugned judgment will be regulated by the IBC (resolution plan or liquidation waterfall) and that no other facet of the dispute was decided. [Paras 11, 53, 54, 55, 57]

Appeal withdrawn and the deposited amounts (with earnings) to be released to the Applicant Appellant; Respondent's rights remain subject to the IBC.

Final Conclusion: The Court held that monies deposited in court by a corporate debtor as security prior to commencement of CIRP remain assets of the corporate debtor, are subject to the moratorium under Section 14 and to administration by the Resolution Professional under the IBC, and accordingly allowed withdrawal of the appeal and release of the deposited amounts (with earnings) to the Applicant Appellant while stating that the judgement creditor's substantive rights will be governed by the IBC's resolution or liquidation processes.

Inordinate and unexplained delay - Violation of principles of natural justice - Quashing of show-cause notice - Restraint on further adjudication - Frequent change of adjudicating officer as explanation for delay - Prejudice caused by delayed adjudication

Inordinate and unexplained delay - Violation of principles of natural justice - Quashing of show-cause notice - Restraint on further adjudication - Whether the show-cause notice dated 28 March 2013 and further adjudication should be quashed and restrained on account of inordinate unexplained delay causing prejudice and violating principles of natural justice. - HELD THAT: - The petitioner received a show-cause notice dated 28 March 2013 and sought copies of illegible documents before filing an interim reply on 6 September 2013. The respondents' affidavit and records disclose multiple personal hearing dates spanning several years, and the respondents admitted that the petitioner was not responsible for the delayed adjudication, attributing the delay to frequent changes in the officer adjudicating the case and repeated reassignments. Although the respondents urged that such reasons and occasional adjournments for co-noticees constituted sufficient cause, the Court concluded that the cumulative delay was inordinate, unexplained and had caused serious prejudice to the petitioner. Relying on and adopting its earlier decisions in like circumstances, the Court held that continuation of proceedings would perpetuate the violation of principles of natural justice and therefore interference was warranted. [Paras 5, 6, 8, 9, 10]

The show-cause notice dated 28 March 2013 is quashed and set aside and the respondents are restrained from taking any further steps or proceedings in furtherance of it; the rule is made absolute without any order as to costs.

Final Conclusion: The writ petition succeeds: the impugned show-cause notice dated 28 March 2013 is quashed and the respondents are restrained from proceeding further in respect of that notice; rule absolute, no costs.

Summary order. Appeal dismissed and delay condoned.

Place of removal - FOR destination sale - input service - CENVAT credit - goods transport agency services - place of removal shifts to buyer's premises in FOR destination sales

Place of removal - FOR destination sale - place of removal shifts to buyer's premises in FOR destination sales - Place of removal for excisable goods sold on FOR destination basis shifts to the buyer's premises where ownership transfers. - HELD THAT: - The appellant sold cement on FOR destination basis where delivery and transfer of ownership occur at the buyer's premises. There were competing views whether place of removal remains the seller's factory or shifts to the customer's premises. The Tribunal followed the Larger Bench decision in Ramco Cement which held that when goods are sold on FOR destination basis and ownership transfers at the buyer's premises, the place of removal shifts to the buyer's premises. Applying that precedent, the Tribunal held that the place of removal shifts to the buyer's premises in the present case. [Paras 7, 8]

Place of removal shifted to the buyer's premises.

CENVAT credit - input service - goods transport agency services - Entitlement to CENVAT credit of service tax paid on GTA services for transportation of goods up to the buyer's premises where place of removal shifts. - HELD THAT: - Under the CENVAT Credit Rules, input service includes services used by a manufacturer in relation to manufacture and clearance of final products up to the place of removal. Since the Tribunal held that the place of removal in FOR destination sales shifts to the buyer's premises, the services of the GTA used to transport goods up to that place fall within the definition of input service. Consequently, the appellant is entitled to CENVAT credit of the service tax paid on the GTA services deployed to transport goods to the buyer's premises. [Paras 8, 9]

Appellant entitled to CENVAT credit of service tax paid on GTA services for transport up to buyer's premises; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that for FOR destination sales the place of removal shifts to the buyer's premises and thus the appellant is entitled to CENVAT credit of service tax paid on GTA services for transporting goods to the buyer's premises; the impugned order was set aside.

Dismissal for default - adjournment limitation under Section 35C of the Central Excise Act, 1944 - Rule 20 of CESTAT (Procedure) Rules, 1982 - Order XLI Rule 17 CPC - Explanation - natural justice - exemption under Notification No. 4/2006-CE for inputs used in manufacture of fertilizers

Dismissal for default - Rule 20 of CESTAT (Procedure) Rules, 1982 - adjournment limitation under Section 35C of the Central Excise Act, 1944 - natural justice - Whether the appeal should be dismissed for default for non-appearance of the appellant after multiple notices and adjournment requests. - HELD THAT: - The Tribunal found that the appellant failed to appear either in person or by authorised representative on seven occasions despite notice and that only limited adjournments were sought on specific dates with no substantiation for repeated non-appearance. Rule 20 of the CESTAT (Procedure) Rules, 1982 confers discretion on the Tribunal to dismiss an appeal for default or hear it on merits, and Section 35C restricts the number of adjournments. The Tribunal considered relevant judicial authorities concerning abuse of adjournments and the Explanation to Order XLI Rule 17 CPC, but exercised its statutory discretion under Rule 20 after noting lack of due diligence by the appellant and that adjournments cannot be granted as a matter of course without cogent proof. The Tribunal observed that the matter involved a claimed exemption but procedural diligence was required to pursue the appeal; having regard to the repeated non-appearance and the statutory framework, the Tribunal concluded that continuing the appeal would serve no purpose and rejected the appeal for default. [Paras 3, 5, 6, 9, 10]

Appeal rejected and disposed of for default.

Final Conclusion: The Tribunal, exercising its discretion under Rule 20 of the CESTAT (Procedure) Rules, 1982 and having regard to limits on adjournments and repeated non-appearance, dismissed the appeal for default.

Cenvat credit on input services distributed by an Input Service Distributor - Availment of Cenvat credit for advertising, marketing and sales promotion services forming part of assessable value - Proportionate reversal of Cenvat credit for inputs used for exempted products - Invoice formalities and entitlement to Cenvat credit - Penalty for erroneous availment of Cenvat credit

Cenvat credit on input services distributed by an Input Service Distributor - Availment of Cenvat credit for advertising, marketing and sales promotion services forming part of assessable value - Entitlement to Cenvat credit of Rs.10,03,635/- where credit was distributed by the Head Office/ISD for marketing and promotional expenses. - HELD THAT: - The Tribunal accepted the appellant's contention that the ISD distributed credits for marketing and promotional services on the basis of the appellant's turnover and that such services form part of the assessable value of the final goods. Relying on the Larger Bench decision in M/s. Krishna Food Products and authorities recognising that advertising, market research and sales promotion services which enter into the cost/assessable value of the goods are eligible for Cenvat credit, the Tribunal held that denial of credit on the ground that the Head Office did not segregate services by particular products would frustrate the Cenvat scheme's purpose to avoid cascading. Accordingly the distributed credit for promotional and marketing expenses was allowed. [Paras 7, 8]

Cenvat credit of Rs.10,03,635/- allowed.

Invoice formalities and entitlement to Cenvat credit - Entitlement to Cenvat credit of Rs.32,149/- where denial was based on alleged absence of invoice number. - HELD THAT: - The appellant produced the invoice showing the invoice number and the Authorized Representative did not dispute that the invoice bore the number. The Tribunal accepted the produced invoice as satisfying the formal requirement and held that the credit taken against that invoice was correctly availed. [Paras 3, 9]

Cenvat credit of Rs.32,149/- allowed.

Proportionate reversal of Cenvat credit for inputs used for exempted products - Entitlement to Cenvat credit on packing material of Rs.39,159/- subject to proportionate reversal for exempted final products. - HELD THAT: - The appellant produced a challan and a calculation sheet showing reversal of proportionate credit attributable to exempted final products. The Tribunal held that such reversal is sufficient to permit availment of the remaining Cenvat credit, while directing the adjudicating authority to verify the records and computations and to require further reversal if any calculation error is found. [Paras 3, 10]

Cenvat credit of Rs.39,159/- allowed subject to verification of calculations by the adjudicating authority.

Penalty for erroneous availment of Cenvat credit - Whether penalty is imposable on the appellant for the Cenvat credit issues examined. - HELD THAT: - Having allowed the substantive credits (subject to verification of packing-material calculations) and found that certain credits were admitted and reversed by the appellant, the Tribunal concluded that, in the facts and circumstances of the case, imposition of penalty was not justified. [Paras 11]

No penalty is imposable on the appellant.

Final Conclusion: The appeal is allowed in part: Cenvat credits of Rs.10,03,635/- and Rs.32,149/- are allowed; Cenvat credit of Rs.39,159/- on packing material is allowed subject to verification of the appellant's proportionate reversal calculations; and no penalty is imposable. The adjudicating authority is directed to verify computation records and require any additional reversal if calculation errors are found.

Rehabilitation appointment for land-loser's family member - proof of marriage as entitlement to employment - misrepresentation/fraud vitiating appointment - scope of judicial interference with findings of fact by Labour Court - reinstatement without back wages

Proof of marriage as entitlement to employment - rehabilitation appointment for land-loser's family member - misrepresentation/fraud vitiating appointment - Whether the appellant, as son-in-law of the land-loser, had legally secured the job under the rehabilitation scheme and whether the Single Judge was justified in setting aside the Labour Court's Award holding the appointment obtained by fraud. - HELD THAT: - The Labour Court found on evidence that the appellant had married the land-loser's daughter and that the appointment was given at the instance of the land-loser under the relevant rehabilitation scheme; on that basis the Reference was answered in favour of the appellant. The Single Judge set aside the Award, concluding that the appellant had misrepresented his marital status and secured the job by fraud. This Court observed that the Writ Court failed to consider material records (including the employer's family details and the ration card) and overlooked the divorce proceedings and earlier admissions that supported the finding of marriage. Absent compelling reasons, a Writ Court should not disturb concurrent or subordinate fact-findings recorded by a Labour Court after evaluation of evidence. The Single Judge's conclusion amounted to an inappropriate interference with the Labour Court's factual finding. [Paras 9, 11, 12]

The Award of the Labour Court in favour of the appellant is restored and the Single Judge's setting aside of that Award is unsustainable; the appellant is entitled to reinstatement in service.

Reinstatement without back wages - scope of judicial interference with findings of fact by Labour Court - Extent of relief on reinstatement-whether back wages should be awarded for the entire period of termination including after the Single Judge's order. - HELD THAT: - While restoring the Labour Court's Award and directing reinstatement, the Court exercised discretion in relation to monetary relief. The Court held that back wages should not be awarded for the period from 16.12.2020 (date when the Single Judge set aside the Award) until actual reinstatement, but directed that the interregnum be counted for continuity and other service benefits. The order balances the reinstatement remedy with the fact that a writ court had set aside the Award on 16.12.2020 and that the employee had not been in service thereafter. [Paras 13]

The appellant shall be reinstated within four weeks and shall not be entitled to back wages from 16.12.2020 until reinstatement, but the period from 16.12.2020 until reinstatement shall be reckoned for all other service benefits.

Final Conclusion: The appeals are allowed: the Labour Court's Award dated 09.08.2012 is restored, the Single Judge's judgment setting it aside is vacated, the appellant is to be reinstated within four weeks with continuity and consequential service benefits (excluding back wages from 16.12.2020 until reinstatement); parties to bear their own costs.