TaxTMI Updates e-Newsletter
Nov 22,2023

Construction and literal interpretation of commercial contract - liability of contractor to bear indirect taxes - effect of supersession of prior indirect taxes by the GST regime - supplier's statutory liability under the GST law - no retrospective imposition where statute post-dates contract

Liability of contractor to bear indirect taxes - construction and literal interpretation of commercial contract - The petitioner is liable under the contract to bear GST payable on the work contracts. - HELD THAT: - The taxation clause in the tender and contract unambiguously required the contractor/bidder to bear Income Tax, VAT, Sales Tax, Royalty, Construction Workers' Welfare Cess and "similar other statutory levy/Cess" and to quote rates after considering such charges. There is no wording restricting the liability to taxes "as on that date", and the plain meaning admits no external aid for reinterpretation. The GST Act subsumed existing indirect taxes (such as VAT and Sales Tax) rather than creating a separate additional charge; therefore the contractor's contractual obligation to bear indirect taxes extends to GST. The court declined to rewrite or delete the taxation clause and applied the literal rule of construction, holding that allowing the petitioner's interpretation would amount to excising the clause from the contract. [Paras 25, 26, 32, 33, 34]

Petitioner liable to pay GST under the terms of the contract.

Effect of supersession of prior indirect taxes by the GST regime - no retrospective imposition where statute post-dates contract - The introduction of the GST regime does not entitle the petitioner to refund of GST already paid in respect of the work orders. - HELD THAT: - The respondents did not seek retrospective operation of any law or circular; GST was insisted upon only from the date of its introduction. Since the contract required the contractor to bear indirect taxes generally, and GST subsumed prior indirect taxes, there is no basis to direct refund of GST amounts paid. The court rejected the petitioner's reliance on doctrines applicable to retrospective or oppressive circulars as inapplicable because no retrospective taxation was imposed by the respondents. [Paras 21, 25, 33, 45]

Writ petitions seeking refund of GST payments dismissed; no refund directed.

Construction and literal interpretation of commercial contract - supplier's statutory liability under the GST law - The change in the statutory taxation regime (replacement of VAT/Sales Tax etc. by GST) does not create a new contractual liability beyond what was contemplated by the parties, nor does it justify re-writing the contract or relieving the petitioner of tax obligations. - HELD THAT: - The court held that the contractual clause unambiguously embraced "similar other statutory levy/Cess", which necessarily included any indirect tax applicable to the supply chain; thus the replacement of enumerated taxes by GST did not impose a novel burden. Additionally, under the GST statute the petitioner qualifies as a supplier/taxable person liable for registration and payment; therefore the statutory obligation coincides with the contractual allocation of tax risk. The court refused to apply authorities concerning policy change altering contractual terms where no ambiguity or need for judicial correction of an unworkable clause existed. [Paras 35, 36, 37, 38, 43]

Introduction of GST does not constitute a new liability beyond the contract and does not permit re-writing the taxation clause; petitioner remains liable.

Final Conclusion: The writ petitions are dismissed on contest: the taxation clause, construed literally, obliges the contractor to bear indirect taxes now subsumed by GST; no refund of GST paid is directed and the contract is not to be rewritten to relieve the petitioner of that liability.

Maintainability of writ petition - challenge to contractual terms in writ jurisdiction - waiver by acquiescence to contractual term - tender condition as part of contract - classification of transaction as service and not sale for GST purposes

Maintainability of writ petition - challenge to contractual terms in writ jurisdiction - waiver by acquiescence to contractual term - tender condition as part of contract - Whether the petitioner can challenge, by way of a writ under Article 226, the requirement in the tender to pay GST @18% after having participated in and performed under the tender knowing the condition. - HELD THAT: - The Court found that the tender document (Annexure P1) expressly required payment of GST @18% and that the petitioner, fully aware of this condition, participated in the tender, quoted the bid, was declared successful and collected human hair from 01.08.2021 for more than eleven months without raising any objection. Having accepted and acted upon the finalized tender terms, the petitioner cannot belatedly challenge the GST condition in writ jurisdiction. The Court accepted the respondent-Department's contention that contractual disputes inter se, particularly where the petitioner had acquiesced to a clear contractual provision, are not amenable to being reopened by a writ petition; the petitioner's conduct amounted to waiver or estoppel against raising the objection at a belated stage. [Paras 7, 8, 9]

Writ petition is not maintainable to challenge the GST clause in the tender; the petitioner's belated objection is impermissible and the challenge fails.

Classification of transaction as service and not sale for GST purposes - tender condition as part of contract - Whether the human hair collection amounted to an outright sale (and thereby entitled to exemption relied upon by the petitioner) or was a right to collect/service as asserted by the Devasthanam. - HELD THAT: - The Devasthanam in its counter-claim expressly stated that there was no outright sale; what was offered and accepted was the right to collect human hair from temple premises, characterising the arrangement as provision of services. The Court noted this stance and observed that such a position by respondent No. 3 weakened the petitioner's case that the transaction fell within the exemption relied upon. In the factual matrix where the petitioner accepted the tender containing the GST clause and the Devasthanam disavowed any outright sale, the Court found no merit in the petitioner's contention of exemption under the cited notification. [Paras 10, 11]

The Court accepted the Devasthanam's characterization that the arrangement was not an outright sale but a right to collect (service), and on that basis the petitioner's claim of exemption was not sustained.

Final Conclusion: The writ petition is rejected: the petitioner, having knowingly accepted and performed under a tender condition requiring payment of GST @18%, cannot belatedly challenge that condition in writ jurisdiction; additionally, the Devasthanam's classification of the arrangement as a right to collect (service) undermined the petitioner's claim of exemption.

Prohibition on simultaneous exercise of jurisdiction by Central and State under the CGST/SGST framework - administrative assignment of taxpayers to a single authority pursuant to GST Council guidelines - challenge to concurrent show cause notices as violative of assigned jurisdiction - interim restraint on passing final orders during pendency of judicial challenge

Prohibition on simultaneous exercise of jurisdiction by Central and State under the CGST/SGST framework - administrative assignment of taxpayers to a single authority pursuant to GST Council guidelines - challenge to concurrent show cause notices as violative of assigned jurisdiction - interim restraint on passing final orders during pendency of judicial challenge - Whether the respondents may be restrained from passing final orders pursuant to the show cause notices dated 26.09.2023, 27.09.2023 and 06.10.2023 challenging simultaneous action by Central and State authorities. - HELD THAT: - The petitioner challenged multiple contemporaneous show cause notices issued by Central and State GST authorities on the ground that such simultaneous exercise of jurisdiction is contrary to the statutory scheme and the administrative assignment of taxpayers to a single authority under the GST Council guidelines. The High Court issued notice on the writ petition and on the interim stay application, directed service of the petition on respondents and permitted the respondents to file applications to vacate the interim order. In the meantime, the Court restrained the respondents from passing any final order in the proceedings initiated pursuant to the three specified show cause notices until the next date of hearing.

Notice issued; interim restraint granted preventing respondents from passing any final order pursuant to the show cause notices dated 26.09.2023, 27.09.2023 and 06.10.2023 until the next date; respondents permitted to apply for vacation of the interim order.

Final Conclusion: Writ petition entertained; interim protection granted restraining final adjudication under the three challenged show cause notices pending further hearing, with liberty to respondents to move for vacation of the interim order.

Transfer of Input Tax Credit - requirement to file Form GST ITC-02 on common portal - non-availability of portal functionality for filing statutory form - show-cause notice challenging availment/transfer of ITC - remand for fresh consideration in light of earlier High Court decision - opportunity of hearing and consideration of objections

Show-cause notice challenging availment/transfer of ITC - opportunity of hearing and consideration of objections - Petitioner's entitlement to have the show-cause notice considered after filing a response and to be afforded an opportunity of hearing. - HELD THAT: - The High Court directed the petitioner to file a response to the show-cause notice within two weeks and required the respondents to consider the petitioner's case in light of the submissions and the objections already raised. The Court noted that the petitioner's grievance concerning inability to use the prescribed online form had been placed before the authority and that the respondents must consider the petitioner's contentions and afford hearing before passing any final order. The direction compels fresh consideration rather than immediate adjudication on merits by the Court, ensuring procedural fairness by mandating the filing of a response and an opportunity of hearing prior to any decision. [Paras 6]

Petitioner directed to file response within two weeks and respondents directed to consider the matter and afford hearing before passing orders.

Requirement to file Form GST ITC-02 on common portal - non-availability of portal functionality for filing statutory form - remand for fresh consideration in light of earlier High Court decision - Validity of treating transfer as irregular where Form GST ITC-02 was not available on the GST portal and the consequence that the respondents must reconsider in light of the Allahabad High Court decision. - HELD THAT: - Relying on the Division Bench judgment of the Allahabad High Court, the Court observed that the non-availability of Form ITC-02 on the GST common portal during the relevant nascent period is a material fact which the authorities must take into account. The Allahabad High Court had set aside an order confirming a demand where the authority had not properly considered the petitioner's objections and had rejected the claim on technical grounds despite the portal functionality being unavailable. Accordingly, this Court directed the respondents to reconsider the show-cause notice and pass an appropriate order strictly in accordance with law, having regard to the finding as to non-availability of the prescribed online mechanism and after affording opportunity to the petitioner. [Paras 6, 7]

Respondents directed to reconsider the show-cause notice and pass a fresh order in accordance with law, taking into account the non-availability of Form ITC-02 and the Allahabad High Court's findings.

Final Conclusion: The petition is disposed of by directing the petitioner to file a response within two weeks and by remanding the matter to the respondents to reconsider and decide the show-cause notice afresh in accordance with law, having regard to the non-availability of Form ITC-02 on the GST portal and the Allahabad High Court's decision, with opportunity of hearing to the petitioner.

Refund of IGST paid on supplies to SEZ units - Zero-rated supply under Section 16(3)(b) of the IGST Act - Requirement of SEZ endorsement as proof of export - Rule 30(4) of SEZ Rules - 45 days endorsement and consequence - Limitation for refund claims under Section 54(1) of the CGST Act - Rule 90(2)/(3) of CGST Rules - scrutiny, acknowledgement and deficiency memo - Directory nature of limitation and duty to assist taxpayers (CBDT guidance)

Rule 30(4) of SEZ Rules - 45 days endorsement and consequence - Zero-rated supply under Section 16(3)(b) of the IGST Act - Requirement of SEZ endorsement as proof of export - Whether refund can be denied for delay or perceived inadequacy in SEZ endorsements when IGST was paid and endorsements were ultimately obtained. - HELD THAT: - The court held that where the supplier has paid IGST and the goods have entered the SEZ and an endorsement by the Authorized Officer (AO/SO) has been obtained and furnished for refund, the refund cannot be denied on account of delay in obtaining the endorsement, or on account of technical defects in the endorsement attributable to the AO. Rule 30(4) of the SEZ Rules serves to ensure goods reached the SEZ and to enable raising a demand where no endorsement is forthcoming within 45 days; it does not operate to defeat a bona fide refund claim where tax has been paid and endorsement is eventually produced. The Court noted that endorsements and their date primarily serve as proof of entry into the SEZ and that any delay caused by the AO or any non material irregularity in the form of endorsement are curable and should not prejudice the supplier's substantive right to refund under Section 16(3)(b). The amendment requiring endorsements to state use for authorized operations came into effect prospectively (w.e.f. 01.10.2023) and was not applicable to the supplies in issue. [Paras 14]

Findings denying refund on grounds of inordinate delay, inappropriate or incomplete endorsement are set aside and such defects are curable; refund entitlement stands where IGST was paid and endorsement was obtained.

Limitation for refund claims under Section 54(1) of the CGST Act - Rule 90(2)/(3) of CGST Rules - scrutiny, acknowledgement and deficiency memo - Directory nature of limitation and duty to assist taxpayers (CBDT guidance) - Whether refund claims were barred by limitation because supporting documents were submitted only at the time of reply/personal hearing. - HELD THAT: - The Court observed that Section 54(1) prescribes a two year period for filing refund applications but treated the time limit as directory in nature. Rule 90(2) obliges the proper officer to scrutinize applications within fifteen days and, where deficiencies exist, Rule 90(3) requires issuance of a deficiency memo to enable rectification. If the officer acknowledges the application as complete, it is incorrect subsequently to treat the claim as time barred on account of belated submission of supporting documents. The Court relied on the duty of administrative officers to assist taxpayers (as reflected in CBDT guidance) and noted that the respondent acted contrary to Rule 90(3) by not issuing deficiency memos. The Court also took note of the notification excluding 01.03.2020 to 28.02.2022 for computation of limitation. On these bases the Court held the respondents' limitation ground unsustainable and set aside the findings rejecting refunds on that ground. [Paras 15]

Findings that the refund claims were barred by limitation due to late submission of supporting documents are set aside; the belated production of documents at reply/personal hearing did not defeat claims filed within two years, and deficiency procedure under Rule 90(3) ought to have been followed.

Mismatches in Statement-4 and curable defects - Whether mismatch between endorsement dates in invoices and Statement 4 justified rejection where petitioner rectified the defect by filing revised Statement 4. - HELD THAT: - The Court recorded that the discrepancy in endorsement dates for the December 2019 claim was rectified by the petitioner by filing a revised Statement 4 on 28.01.2022 and that the respondent accepted the rectification. The learned Senior Standing Counsel for the Department conceded that the defect was procedural and curable. Accordingly, the mismatch could not sustain denial of refund. [Paras 16]

Findings rejecting the refund for mismatch of details are eschewed since the defect was corrected and accepted; refund cannot be denied on that ground.

Final Conclusion: Writ petitions allowed; impugned orders of the first and second respondents set aside. The second respondent is directed to process the petitioner's refund applications and issue the refund within 30 days from receipt of a copy of this order; no costs.

Non-speaking order - duty to consider reply/objections - speaking order - opportunity of personal hearing - principles of natural justice - remand for fresh consideration - assessment proceedings

Non-speaking order - duty to consider reply/objections - speaking order - Impugned assessment order is non-speaking because the Assessing Officer failed to deal with the reply/objections filed by the petitioner and therefore the proceedings are vitiated. - HELD THAT: - The court found that the petitioner was permitted to file a reply on 17.1.2022 and was afforded a personal hearing on 02.12.2022 during which the reply was recorded, but the impugned order dated 04.7.2023 did not address the stand taken in that reply. The Court emphasised that once objections/reply are filed pursuant to a show cause notice, the Assessing Officer is under a duty to conduct a full enquiry and pass a speaking order dealing with the points raised and stating reasons for any rejection. A cryptic or non-speaking order which does not touch upon the assessee's contentions vitiates the assessment proceedings and deprives the assessee of a considered opinion of the Assessing Officer. [Paras 6, 10, 12]

Impugned order set aside as non-speaking for failure to consider the reply/objections; assessment proceedings vitiated.

Remand for fresh consideration - opportunity of personal hearing - principles of natural justice - Matter remitted to the Assessing Officer for fresh consideration and passing of a detailed speaking order after taking into consideration the petitioner's reply dated 17.1.2022 and observing principles of natural justice. - HELD THAT: - Although an appeal remedy before the Appellate Authority exists, the Court observed that the assessee is entitled to two adjudicatory opportunities - first before the Assessing Officer and then before the Appellate Authority - and that the Appellate Authority's exercise of powers cannot substitute for a considered order by the Assessing Officer. Therefore, since the reply remained undecided, the appropriate course is to set aside the impugned order and remit the matter to the Assessing Officer to reconsider the show cause notice, afford necessary opportunities, deal with the reply/objections in detail and give reasons in a speaking order. [Paras 8, 13, 14]

Proceedings remitted to the Assessing Officer to pass a fresh, detailed speaking order after considering the reply dated 17.1.2022 and following principles of natural justice.

Final Conclusion: Writ petition allowed; impugned order dated 04.7.2023 set aside and matter remitted to the Assessing Officer for reconsideration and passing of a detailed speaking assessment order after considering the reply dated 17.1.2022 and observing principles of natural justice; no costs.

Quashing of administrative order - failure to consider reply and materials - right to be heard / audi alteram partem - withdrawal and setting aside of order on respondent's statement - fresh adjudication on merits after hearing

Failure to consider reply and materials - right to be heard / audi alteram partem - quashing of administrative order - Validity of the impugned refund rejection order dated 03 February, 2023 passed by the Assistant Commissioner. - HELD THAT: - The show cause notice was issued on 18 January, 2023 and the petitioner filed a reply on 02 February, 2023. The impugned order rejecting the refund application was passed on 03 February, 2023 without issuing a fresh notice for hearing and, on the material on record, did not address the contentions or documents placed before the authority. The respondents, through their counsel, conceded that the impugned order failed to consider the petitioner's reply and materials and offered to withdraw the order with liberty to issue a fresh show cause notice. In these circumstances the Court accepted the respondents' stand, held that further adjudication on the merits would be appropriate only after fresh proceedings compliant with the requirements of providing an opportunity of hearing, and directed withdrawal of the impugned order and fresh adjudication in accordance with law.

The impugned order dated 03 February, 2023 is withdrawn and set aside; respondents to issue a fresh show cause notice, consider the petitioner's reply, grant an opportunity of hearing, and pass a reasoned order within the timelines fixed by the Court.

Withdrawal and setting aside of order on respondent's statement - fresh adjudication on merits after hearing - Directions for further proceedings following withdrawal of the impugned order. - HELD THAT: - On the respondents' concession, the Court directed that a fresh show cause notice be issued within two weeks; the petitioner's reply to be placed on record within two weeks thereafter; a hearing date be communicated and the petitioner heard on all materials/documents; and a reasoned order be passed by the Designated Officer within two weeks from the date of hearing. All contentions of the parties were kept open for determination in the fresh proceedings. The Court declined to adjudicate the substantive issues in view of the respondents' offer to re-open the matter and conduct fresh proceedings.

Respondents directed to conduct fresh adjudication in accordance with the timetable and procedures specified, with no adjudication by this Court on merits and with all contentions reserved.

Final Conclusion: The petition is disposed of by withdrawing and setting aside the impugned refund rejection order; the respondents are directed to issue a fresh show cause notice and to adjudicate the refund claim afresh after considering the petitioner's reply and after granting an opportunity of hearing, in accordance with the timelines fixed by the Court; all contentions are kept open; no costs.

Direction to decide pending administrative application within a stipulated time - amendment of shipping bill - refund of IGST - interest on delayed refund - ex parte, ad interim relief

Amendment of shipping bill - direction to decide pending administrative application within a stipulated time - refund of IGST - Application for amendment of specified shipping bills placed before the Court was directed to be decided by the respondent authorities within six weeks - HELD THAT: - The petitioner filed an application for amendment of shipping bills on 30.01.2023, which was placed on record by an additional affidavit dated 07.02.2023. The Court did not adjudicate the merits of the claimed amendment, the entitlement to refund of IGST, or the claim for interest; instead, having noted the pending application and its recordal before the Court, the respondents were directed to deal with and decide that application within a period of six weeks from the date of the order. The order disposes of the petition by requiring the executive authority to take a fresh decision on the application; no substantive determination on merits, refund entitlement, or interest was made by the Court.

Respondents to decide the petitioner's application for amendment of the shipping bills within six weeks; petition disposed of and notice discharged.

Final Conclusion: The petition is disposed of by directing the respondent authorities to decide the application for amendment of the shipping bills (filed 30.01.2023) within six weeks; no adjudication was made on the merits of the claimed refund of IGST or interest, and the Court discharged notice and permitted direct service.

Summary order. Petitioners to appear before the respondent GST Authority at Surat on 16.09.2023 for return of goods as per Schedule I annexed to the affidavit; a panchanama shall be drawn for handing over goods as stated in Annexure I and placed on record; matter stood over to 20.09.2023; copy of order directed to be provided to the learned AGP for compliance.

Condonation of delay in statutory appeal - writ jurisdiction under Article 226 vis-a -vis statutory appeal - right of appeal is a creature of statute - imposition of conditions while condoning delay - remittance for admission and fresh disposal of appeal

Condonation of delay in statutory appeal - writ jurisdiction under Article 226 vis-a -vis statutory appeal - right of appeal is a creature of statute - Whether the High Court should interfere with the appellate authority's rejection of the appeal as barred by limitation and whether the delay may be condoned. - HELD THAT: - The adjudicating authority's order was dated 13.04.2022 and was served the same day; the statutory period for filing an appeal under Section 107(1) is three months, with one additional month condonable under Section 107(4). After accounting for the condonable month, the appeal filed on 01.11.2022 exhibited an unpaid delay of 81 days (112 days in total). The Court observed that the right of appeal is statutory and ordinarily the appellate authority has no power to admit an appeal beyond the condonable period unless sufficient cause is shown. The petitioner produced a medical certificate showing prolonged illness of the accountant who received service and which prevented timely filing; there was no contrary material. Reliance was placed on the settled principle that a writ under Article 226 cannot be routinely used to revive a statutory appeal filed beyond the condonable period unless the petitioner substantiates inability to file the appeal within the prescribed time. Applying these principles to the record, the Court was satisfied that the petitioner had demonstrated inability to file the appeal within time due to the documented illness of the authorised person and, on that basis, interference with the appellate authority's rejection was warranted. [Paras 8, 10, 11, 13]

The order rejecting the appeal on the ground of delay is set aside and the delay of 112 days is condoned.

Imposition of conditions while condoning delay - remittance for admission and fresh disposal of appeal - Whether the Court should impose conditions when condoning delay and the consequent direction to the appellate authority. - HELD THAT: - Having condoned the delay on the basis of inability proved by medical evidence, the Court exercised its equitable discretion to impose conditions to protect the public interest and ensure bona fide prosecution of the statutory appeal. The Court directed the petitioner to deposit 20% of the disputed tax (in addition to amounts already deposited, if any) and to pay costs to the High Court Legal Services Committee within six weeks of receipt of the order. Upon compliance, the appellate authority was directed to admit the appeal, afford hearing to both parties, and decide the appeal expeditiously in accordance with law and rules. The direction thus effects a remittance for fresh adjudication on merits subject to the stipulated conditions. [Paras 14]

Delay condoned subject to deposit of 20% of disputed tax and payment of specified costs within six weeks; on compliance, the appellate authority shall admit the appeal and decide it afresh after hearing the parties.

Final Conclusion: Writ petition allowed; order rejecting the appeal as barred by limitation is set aside, the delay of 112 days is condoned subject to the petitioner depositing 20% of the disputed tax and paying costs within six weeks, whereupon the appellate authority shall admit and dispose of the appeal afresh after hearing the parties.

Interim relief under Article 226 - Provisional release of seized goods and conveyance under Section 129 - Confiscation and fine in lieu of confiscation - Conditional release on deposit, bond and undertaking - Cooperation in adjudication proceedings

Provisional release of seized goods and conveyance under Section 129 - Conditional release on deposit, bond and undertaking - Confiscation and fine in lieu of confiscation - Cooperation in adjudication proceedings - Interim release of the petitioner's goods and vehicle was granted subject to specified conditions. - HELD THAT: - The High Court, after hearing counsel and noting earlier similar orders, issued rule and granted interim relief directing release of the seized goods and the vehicle bearing registration GJ-02-VV-7845. The release was made conditional on compliance with specified measures to protect the revenue and ensure participation in adjudication: deposit with the competent authority of the amount specified as penalty (the tax not having been assessed by the authorities); furnishing a bond towards the fine in lieu of confiscation of the goods; deposit towards fine in lieu of confiscation of the conveyance; filing an undertaking on oath disclosing the registered office address of the business; and undertaking to cooperate in the adjudication of proceedings. The court recorded that authorities had not assessed tax and hence no tax payment condition was imposed. The interim relief is liable to be vacated on non-compliance with any of the stated conditions. The rule was made returnable and the matter was directed to be listed with Special Civil Application No. 5900 of 2023. [Paras 5]

Goods and vehicle are released forthwith on compliance with the stated deposit, bond, undertaking and cooperation conditions; non-compliance will render the interim relief liable to be vacated and rule is returnable on 2nd August, 2023.

Final Conclusion: Rule issued; interim relief granted releasing the seized goods and conveyance subject to payment/deposit, bond, filing of an undertaking disclosing registered office and cooperation in the adjudication; non-compliance will result in vacatur of the interim relief.

Dismissal for non-filing of certified copy - online filing of appeal within statutory period - remand for consideration on merits - principles of natural justice - hyper-technical grounds for dismissal

Dismissal for non-filing of certified copy - online filing of appeal within statutory period - hyper-technical grounds for dismissal - remand for consideration on merits - principles of natural justice - Impugned order dismissing the appeal on the technical ground of non-filing of the certified copy despite on-line filing of the appeal within the statutory period and with a copy of the order. - HELD THAT: - The Court recorded that the appeal had been filed online within the statutory period and accompanied by a copy of the order. It held that where an appeal filed within time has merit, it ought not to be dismissed on a hyper-technical ground of non-filing of the certified copy within the statutory period. In the circumstances and in the interest of justice the impugned order dated 22nd March, 2023 was set aside and the matter remitted to the Appellate Authority for fresh consideration on merits. The Appellate Authority was directed to observe the principles of natural justice, permit fulfillment of any outstanding formalities, and dispose of the appeal in accordance with law within three months from communication of this order. [Paras 3, 4]

Impugned order set aside; appeal remanded to the Appellate Authority to be considered on merits after observing natural justice and completion of formalities, to be disposed of within three months.

Final Conclusion: Writ petition allowed to the extent that the impugned order dated 22nd March, 2023 is set aside and the appeal is remitted for fresh consideration on merits after compliance with formalities and observance of natural justice; disposal directed within three months.

Classification of goods - medicament versus cosmetic test - functional test for determining medicament - definition of biofertiliser under the Fertiliser (Control) Order, 1985 - interpretation of tariff schedule and application of residuary entry - advance ruling under Section 98(4)

Classification of goods - definition of biofertiliser under the Fertiliser (Control) Order, 1985 - interpretation of tariff schedule and application of residuary entry - medicament versus cosmetic test - functional test for determining medicament - Classification and applicable GST rate of the applicant's products Urban Roots, Bio Kavach and Immunity Booster (Avinja 7). - HELD THAT: - The Authority examined whether the bio-fertilizer products (Urban Roots and Bio Kavach) fall within HSN 31010092 as 'animal or vegetable fertilisers' or whether they are excluded and thus taxable under the residuary entry. Relying on the definitions in the Fertiliser (Control) Order, 1985, 'biofertiliser' is defined as carrier-based living microorganisms agriculturally useful for nutrient mobilisation and increasing soil productivity, whereas 'organic fertilizer' denotes unprocessed biological materials. Hence the applicant's bio-fertilizers qualify as biofertilisers and not as the animal/vegetable fertilizers covered by HSN 31010092. Because bio-fertilisers are not specified in Schedules I, II, IV, V or VI of Notification No. 01/2017, they fall under the residuary entry (Serial No. 453 of Schedule III) and attract the residuary rate. With respect to the Immunity Booster (Avinja 7), the Authority applied the settled tests for distinguishing medicaments under Chapter 30 from other products - including composition, product literature/label, intended purpose, presence of medicinal/curative ingredients, and whether the product is presented as a medicament (including drug licence). The applicant's description did not indicate curative/prophylactic use, nor was there evidence of a drug licence or decisive medicinal character; accordingly, the product could not be treated as a medicament under Chapter 30. As immunity boosters are not specified in the Schedules, they too fall under the residuary entry. Applying the explanatory rules for interpreting the Notification, the Authority therefore classed all three products under Serial No. 453 of Schedule III and imposed the residuary GST rate. [Paras 7, 8]

Urban Roots, Bio Kavach and Immunity Booster (Avinja 7) are classifiable under Serial No. 453 of Schedule III of Notification No. 1/2017 and attract the residuary rate of tax.

Final Conclusion: The Advance Ruling holds that the applicant's two bio-fertilizers and the herbal immunity booster are not covered by the fertilizer entries or by Chapter 30 medicaments and are therefore classifiable under the residuary entry (Serial No. 453, Schedule III of Notification No. 1/2017), attracting the residuary GST rate of 9% CGST and 9% SGST.

Deduction under Section 80P(2)(d) - Interest income from investment in a co-operative bank - Definition of "Co-operative society" under Section 2(19) - Distinction between Section 80P(2)(d) and Section 80P(2)(a)(i)

Deduction under Section 80P(2)(d) - Interest income from investment in a co-operative bank - Definition of "Co-operative society" under Section 2(19) - Co operative societies are entitled to deduction under Section 80P(2)(d) in respect of interest income derived from investments made with a co operative bank registered under the Co operative Societies Act. - HELD THAT: - Section 80P(2)(d) provides that income by way of interest derived by a co operative society from its investment with any other co operative society is deductible. The Income tax Act defines "co operative society" under Section 2(19) as a society registered under the Co operative Societies Act or any corresponding State law. A co operative bank registered under the Co operative Societies Act therefore falls within the statutory definition of a "co operative society" for the purposes of Section 80P(2)(d). The Supreme Court decision in Totagars Cooperative Sale Society related to the distinct head in Section 80P(2)(a)(i) and, accordingly, its ratio does not negate entitlement under Section 80P(2)(d) where interest is received from a co operative bank which is registered as a co operative society. A Division Bench of this Court has likewise treated analogous receipts as eligible under Section 80P(2)(d). The Assessing Officer's notices under Section 148A(b) were issued without considering these aspects and therefore were set aside. [Paras 9, 10, 11, 12, 13]

Notices under Section 148A(b) challenging entitlement to deduction under Section 80P(2)(d) were quashed and set aside; the co operative society is entitled to the deduction for interest received from a co operative bank registered under the Co operative Societies Act.

Final Conclusion: Writ petitions allowed; impugned notices issued under Section 148A(b) set aside for failure to consider that interest received by the petitioner co operative societies from a co operative bank registered under the Co operative Societies Act is eligible for deduction under Section 80P(2)(d).

Draft assessment order - final assessment order - opportunity to file objections before the Dispute Resolution Panel - excision of references to initiation of penalty proceedings from an assessment order - treatment of an assessment under Section 143(3) read with Sections 144C(1) and 144B of the Income Tax Act, 1961 - vacation of interim order

Draft assessment order - final assessment order - treatment of an assessment under Section 143(3) read with Sections 144C(1) and 144B of the Income Tax Act, 1961 - Impugned assessment order to be treated as a draft assessment order and not as a final assessment order. - HELD THAT: - Although the impugned order bore features that could be read as final, the Court accepted the revenue's concession that the order shall be treated as a draft assessment order. On this basis the order will no longer operate as a final order and will be treated as having been issued to enable the statutory objection process under the Act. The Court's treatment converts the order from its perceived final character to a draft for procedural purposes and restores the statutory avenue of objections before the Dispute Resolution Panel. [Paras 3, 5, 6, 7]

The impugned assessment order is to be treated as a draft assessment order.

Opportunity to file objections before the Dispute Resolution Panel - excision of references to initiation of penalty proceedings from an assessment order - References to initiation of penalty proceedings shall be excised and the assessee shall be permitted to file objections with the DRP within 30 days. - HELD THAT: - By re-characterising the order as a draft, the Court directed that parts of the order that attribute final-order consequences-specifically references to initiation of penalty proceedings-shall stand excised. The petitioner was accorded liberty to file objections within the statutory period of 30 days from receipt of the present order, thereby restoring the procedural right that would attend a draft assessment and enabling the DRP process to be followed. [Paras 7, 8]

References to initiation of penalty proceedings are excised and the petitioner may file objections with the DRP within 30 days.

Vacation of interim order - Earlier interim order dated 19.05.2021 (made absolute on 10.01.2023) is vacated. - HELD THAT: - Consequent to treating the assessment order as a draft and permitting the statutory objection process, the Court directed that the previously granted interim order shall stand vacated, enabling the parties to proceed in accordance with the digitally signed copy of the order and the directions given. [Paras 10, 11]

The interim order dated 19.05.2021 (made absolute on 10.01.2023) stands vacated.

Final Conclusion: Writ petition disposed by treating the assessment order dated 20.04.2021 as a draft order; references to initiation of penalty proceedings excised; petitioner granted 30 days to file objections with the Dispute Resolution Panel; earlier interim order vacated.

Time limit for notice under section 148 - Application of substituted section 149(1)(a) and 149(1)(b) - Escaped income threshold of fifty lakh rupees - Validity of reassessment notices issued between 01.04.2021 and 30.06.2021 - Effect of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 - Instruction of CBDT dated 11.05.2022 and 'travel back in time' theory - Availability of defences under amended regime

Time limit for notice under section 148 - Application of substituted section 149(1)(a) and 149(1)(b) - Escaped income threshold of fifty lakh rupees - Validity of reassessment notices issued between 01.04.2021 and 30.06.2021 - Impugned orders under Section 148A(d) and consequential notices under Section 148 for AYs 2016-17 and 2017-18 are time barred and cannot be sustained where alleged escaped income is below Rs. 50 lakhs. - HELD THAT: - The substituted Section 149(1) limits issuance of notices: ordinarily no notice if three years have elapsed from end of the relevant AY (Clause (a)), and permits extension up to ten years only where escaped income amounts to or is likely to amount to Rs. 50 lakhs or more (Clause (b)). For AYs 2016-17 and 2017-18 the three year limitation therefore applied, and where the alleged escaped income is below Rs. 50 lakhs the extended ten year period is unavailable. Notifications under TOLA and the various extensions cannot be read as displacing the substituted Section 149(1); TOLA did not empower the Executive to amend or postpone operation of the Finance Act, 2021 substitutions. The third and fourth provisos to Section 149 only exclude the period between issuance of a Section 148A(b) show cause notice and the assessee's response and do not permit shifting the reference date beyond the date on which the (deemed) Section 148A(b) notice was issued. Having applied these principles to the facts of the writ petitions (AY 2016 17 and 2017 18) the Court held the reassessment orders and consequent notices unlawful and unsustainable. [Paras 26, 27, 28, 29, 54]

Orders under Section 148A(d) and consequential notices under Section 148 for AYs 2016 17 and 2017 18 set aside as barred by limitation under substituted Section 149(1)(a).

Instruction of CBDT dated 11.05.2022 and 'travel back in time' theory - Effect of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 - Ultra vires and vagueness of executive instructions - The CBDT Instruction dated 11.05.2022 insofar as it adopts the 'travel back in time' theory for extended reassessment notices is ultra vires and invalid. - HELD THAT: - Paragraphs of the Instruction that state extended reassessment notices may 'travel back in time' to their original dates and then be tested under the amended Section 149 lack statutory foundation. Neither the Supreme Court's decision in Ashish Agarwal nor TOLA authorises treating notices issued in May-June 2022 as if they were issued prior to 31.03.2021 so as to alter the limitation applicable under the substituted Section 149. The Instruction exceeds the powers of the CBDT under Section 119 and is vague in failing to identify the 'original date' and in effect seeks to displace the clear legislative scheme enacted by the Finance Act, 2021. Accordingly those portions of the Instruction are declared bad in law. [Paras 51, 52, 55]

Reference in paragraphs 6.1 and 6.2(ii) of the CBDT Instruction dated 11.05.2022, propounding the 'travel back in time' theory, declared invalid.

Final Conclusion: Writ petitions allowed: orders under Section 148A(d) and consequential notices under Section 148 for AYs 2016 17 and 2017 18 set aside as time barred under substituted Section 149(1)(a); CBDT Instruction (paras 6.1 and 6.2(ii)) to the extent it endorses a 'travel back in time' theory declared bad in law.

Right to cross-examination - violation of principles of natural justice - reliance on third-party statements as basis for additions - assessment based on information from law enforcement agencies - rejection of books of account under section 145(3) - monetary threshold for High Court leave under CBDT Circular No.17/2019

Right to cross-examination - violation of principles of natural justice - reliance on third-party statements as basis for additions - Tribunal correctly allowed appeals because Assessing Officer did not afford opportunity to cross-examine third-party witnesses whose statements formed the basis of additions, amounting to violation of principles of natural justice. - HELD THAT: - The Court accepted the Tribunal's finding that additions were founded on statements of third parties (dealers, ex-employee, and others) and that requests for cross-examination were refused. Relying on the reasoning in Andaman Timbers and subsequent authorities, the Court held that where an adverse order is based on such third party statements, denial of an opportunity to cross-examine those witnesses is a serious procedural defect which can vitiate the order. The Tribunal's assessment of contradictions in the third party material (including recovered invoices, retractions and inconsistencies in statements and documentary sequences) reinforced the conclusion that the Assessing Officer's reliance on those statements without permitting the assessee to test them was impermissible, justifying interference by the Tribunal.

Tribunal's allowance on ground of denial of cross-examination was upheld and the impugned additions could not stand.

Assessment based on information from law enforcement agencies - reliance on third-party statements as basis for additions - rejection of books of account under section 145(3) - Additions founded on information from DGGI and on third party statements/electronic records without independent inquiry or corroboration were not conclusive and could not be sustained. - HELD THAT: - The Court noted that many additions sprang from information received from a law enforcement agency (DGGI) and from documents and statements allegedly recovered from ex personnel. For several years the Tribunal recorded material contradictions (e.g., sequence of invoice numbers, e mail author denial, retractions) and that the Assessing Officer did not undertake independent verification or produce corroborative material. In that factual matrix the Tribunal correctly concluded that the third party material could not be treated as conclusive evidence to uphold the additions. The fact that books were said to have been rejected under section 145(3) was not sufficient to validate additions made solely on uncorroborated third party statements.

Tribunal's interference in quashing the additions was sustained for want of independent inquiry and corroboration.

Monetary threshold for High Court leave under CBDT Circular No.17/2019 - No substantial question of law was made out warranting interference by this Court; appeals were dismissed in view of factual findings and the admitted tax effect being below prescribed monetary limits. - HELD THAT: - The Court observed that the appeals principally raised questions of fact which the Tribunal had adjudicated after examining contradictions and procedural defects. It further noted the admitted tax effect for the assessment years fell below the monetary threshold indicated by the Revenue's Circular No.17/2019. In light of the Tribunal's factual conclusions and the below threshold tax effect, the High Court found no substantial question of law to entertain and declined to disturb the Tribunal's orders.

No substantial question of law established; appeals dismissed.

Final Conclusion: The Tribunal's orders allowing the appeals were upheld: the Assessing Officer's reliance on uncorroborated third party statements and electronic material without permitting cross examination and without independent verification vitiated the additions; no substantial question of law was shown and the appeals are dismissed.

Offence under Section 276CC of Income Tax Act - failure to file return within the due date - notice under Section 153A of the Income Tax Act - voluntary compliance by filing belated return under Section 139(4) - independence of adjudication and criminal prosecution - effect of acceptance/cancellation of penalty on criminal prosecution - presumption as to culpable mental state under Section 278E - limitation under Section 468 of the Code of Criminal Procedure

Offence under Section 276CC of Income Tax Act - failure to file return within the due date - notice under Section 153A of the Income Tax Act - Whether prosecution under Section 276CC for non-filing/concealment in relation to assessment year 2012-2013 is liable to be quashed - HELD THAT: - The Court found that a search revealed non disclosure of material transactions and that the petitioner failed to file the return within the statutory time and also omitted disclosure; a notice under Section 153A was issued and the belated return was filed only thereafter. Relying on authority that failure to file within the prescribed time attracts Section 276CC and that subsequent filing does not automatically preclude prosecution, the Court held that the complaint discloses ingredients of the offence and that the question of mens rea and rebuttal of statutory presumption are matters for trial. Given these findings, quashing was refused and factual and legal pleas must be agitated before the trial court. [Paras 6, 7, 11, 17]

Prosecution under Section 276CC relating to assessment year 2012-2013 is not quashed; petition dismissed.

Limitation under Section 468 of the Code of Criminal Procedure - Whether the complaint is barred by limitation under Section 468 Cr.P.C. - HELD THAT: - The petitioner contended that sanction and complaint were issued after three years from the date when the obligation to file expired. The Court noted that even if penalty proceedings were time barred before the Tribunal, that fact does not automatically preclude initiation of criminal prosecution under Section 276CC; the Tribunal's dropping of penalty on limitation does not negate the respondent's ability to prosecute where ingredients of the offence are made out. The limitation plea as a basis for quashing was therefore rejected and left open to be raised at trial if appropriate. [Paras 8]

Limitation objection under Section 468 Cr.P.C. did not warrant quashing of the prosecution.

Effect of acceptance/cancellation of penalty on criminal prosecution - independence of adjudication and criminal prosecution - Whether cancellation or dropping of penalty/acceptance of revised return requires automatic quashing of criminal prosecution - HELD THAT: - The Court distinguished cases where the appellate Tribunal's factual finding of no concealment rendered prosecution unsustainable. Here, although penalty proceedings were dropped by the Tribunal, the prosecution is founded on alleged non filing and concealment discovered on search and subsequent proceedings; adjudication and criminal prosecution are independent and cancellation of penalty on technical or limitation grounds does not necessarily extinguish a cognizable offence. Thus the petitioner cannot claim automatic quashing on account of the penalty having been dropped; applicability of precedents depends on the nature and basis of the Tribunal's order and the facts of the case. [Paras 8, 10, 11, 15]

Cancellation or dropping of penalty does not automatically quash the criminal prosecution in the facts of this case.

Presumption as to culpable mental state under Section 278E - voluntary compliance by filing belated return under Section 139(4) - Whether mens rea is established and who bears burden to rebut presumption of culpable mental state - HELD THAT: - The Court observed that, in prosecutions under the Act, a presumption as to culpable mental state may arise and it is for the accused to rebut that presumption beyond reasonable doubt at trial. The subsequent filing of a belated or revised return after detection was held not to amount to voluntary compliance that negates criminal liability as a matter of law; the question of intention and any rebuttal must be examined in the course of trial where evidence (including PW1 already examined) can be tested. [Paras 9, 13, 16]

Mens rea is a matter to be determined at trial; the accused bears the burden of rebutting the statutory presumption.

Final Conclusion: The petition to quash criminal proceedings in EOCC.No.574 of 2017 was dismissed; the court held that the allegations disclose offences under Section 276CC for assessment year 2012-2013, that limitation or prior dropping of penalty does not automatically preclude prosecution in the present facts, and that issues of mens rea and rebuttal of statutory presumptions are questions to be decided at trial.

Compounding of offences under Section 279(2) of the Income Tax Act, 1961 - fresh adjudication / de novo consideration - production of foreign bank statements - personal hearing - speaking order - rectification application

Compounding of offences under Section 279(2) of the Income Tax Act, 1961 - fresh adjudication / de novo consideration - production of foreign bank statements - personal hearing - speaking order - Impugned orders rejecting the petitioner's compounding application and the rectification application were set aside and the compounding application was directed to be decided afresh. - HELD THAT: - The court found that the rejection of the compounding application was premised on the officer's conclusion that complete bank statements from the petitioner's HSBC Geneva accounts were not furnished. The petitioner contended, and produced a covering letter and later the bank statements, that the required consent/waiver and statements had been submitted or are available. In view of the availability of the bank statements and the respondent's ability to obtain further information, the court exercised supervisory jurisdiction to set aside the orders dated 09.03.2018 and 30.05.2019 and directed the concerned authority to adjudicate the compounding application dated 22.02.2016 afresh. The authority is to address any further information requirements by written communication, afford the petitioner or his authorised representative a personal hearing, and thereafter pass a speaking order. The authority was directed to endeavour to dispose of the application within eight weeks of receipt of the order. The court expressly declined to express any opinion on the merits of the compounding application. [Paras 13, 14, 15, 16, 18]

Impugned orders set aside; compounding application to be reconsidered de novo with opportunity for written communication and personal hearing, followed by a speaking order to be passed preferably within eight weeks; interim order to continue for specified period.

Final Conclusion: Writ petition disposed of by setting aside the orders dated 09.03.2018 and 30.05.2019 and directing fresh adjudication of the compounding application dated 22.02.2016 (relating to AY 2006-07) with written communications as necessary, a personal hearing, and a speaking order to be issued within the stipulated timeframe; no opinion expressed on merits.

Explanation about the nature and source of deposits - onus of proof in respect of unexplained investments and cash credits - ownership of foreign bank account and evidentiary burden - verification by foreign revenue authority and effect on assessment

Explanation about the nature and source of deposits - ownership of foreign bank account and evidentiary burden - onus of proof in respect of unexplained investments and cash credits - verification by foreign revenue authority and effect on assessment - Whether the additions made by the Assessing Officer and confirmed by the Commissioner, treating deposits in a foreign bank account as unexplained income of the assessee, were liable to be deleted in view of the Tribunal's findings. - HELD THAT: - The Tribunal found that the account's beneficial ownership had been transferred away from the assessee before the relevant period and that there was no material to show the amounts were deposited by the assessee; the assessee explained that the nephew was the beneficiary and produced a certificate showing taxes were paid to U.K. authorities under a disclosure facility, which was further verified by HMRC. The Court observed that under the statutory scheme a sum may be charged as income only where the assessee offers no explanation about the nature and source of the credit or where the Assessing Officer finds the offered explanation unsatisfactory. On the facts the Tribunal accepted the explanation that the nephew was the true owner, relied on the bank profile showing the assessee's name removed prior to the relevant period, and noted the absence of material proving the deposits belonged to the assessee. The Court held that the Assessing Officer and the Commissioner had wrongly rejected the explanation and that the additions could not be sustained. [Paras 2, 9, 10, 11]

Additions deleted; Tribunal's conclusion that the deposits were not the assessee's income upheld and revenue appeals dismissed.

Final Conclusion: The appeals under Section 260A are dismissed; the Tribunal's deletion of the additions in respect of the foreign account for Assessment Years 2006-2007 and 2007-2008 is upheld.

Retrospective effect of the second proviso to Section 40(a)(ia) - first proviso to Section 201(1) - protection from being an assessee in default where the payee has filed return, included the sum in income, paid tax and furnished a certificate - curative and declaratory amendment principle - retrospective operation of remedial legislative amendments - disallowance under Section 40(a)(ia) as compensatory and not penal in character

Retrospective effect of the second proviso to Section 40(a)(ia) - first proviso to Section 201(1) - protection from being an assessee in default where the payee has filed return, included the sum in income, paid tax and furnished a certificate - disallowance under Section 40(a)(ia) as compensatory and not penal in character - curative and declaratory amendment principle - retrospective operation of remedial legislative amendments - Applicability and retrospective operation of the second proviso to Section 40(a)(ia) where the first proviso to Section 201(1) is satisfied and the consequent entitlement to deletion of disallowance under Section 40(a)(ia). - HELD THAT: - The Court accepted the reasoning in Commissioner of Income Tax v. Ansal Land Mark Township Pvt. Ltd. and the analysis of the Agra Bench of the ITAT that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and, therefore, merits retrospective effect. The statutory scheme shows that where the conditions of the first proviso to Section 201(1) are fulfilled - the payee has filed a return under Section 139, taken the sum into account in computing income, paid tax on that income and furnished the prescribed certificate - the payer is not to be treated as an assessee in default. The second proviso to Section 40(a)(ia) creates a legal fiction that, in such circumstances, it shall be deemed that tax has been deducted and paid on the date of furnishing of the payee's return; this operates to relax the rigour of Section 40(a)(ia) and avoids disallowance where there is no actual loss to the revenue. Applying this principle to the present facts, no adverse finding was recorded by the Assessing Officer as to satisfaction of the conditions in the first proviso to Section 201(1); the CIT(A) and the Tribunal deleted the addition under Section 40(a)(ia). The Court found no substantial question of law warranting interference, while noting that the final outcome may be influenced by the Supreme Court's decision in the assessee's appeal for AY 2007-08. [Paras 10, 15, 16, 18]

The second proviso to Section 40(a)(ia) is to be given retrospective, curative effect in the circumstances described; where the first proviso to Section 201(1) is satisfied and no adverse finding is recorded, the disallowance under Section 40(a)(ia) is not justified and the deletion by the lower authorities stands.

Final Conclusion: The appeal is closed as lacking any substantial question of law after endorsing that the second proviso to Section 40(a)(ia) operates curatively and retrospectively where the first proviso to Section 201(1) is satisfied; the ultimate outcome may, however, depend on the Supreme Court's decision in the related AY 2007-08 matter.

Interpretation of Section 170A in the context of amalgamation and filing of a modified return - Non-obstante clause overruling pre-merger return for successor entities - Exclusion of period during which assessment proceedings are stayed - First proviso to Explanation 1 of Section 153 - grant of sixty days for completion of assessment - Assessing officer to proceed on the basis of the modified return

Interpretation of Section 170A in the context of amalgamation and filing of a modified return - Assessing officer to proceed on the basis of the modified return - Exclusion of period during which assessment proceedings are stayed - First proviso to Explanation 1 of Section 153 - grant of sixty days for completion of assessment - Liberty of the assessing officer to carry out scrutiny assessment after the petitioner filed the modified return, with exclusion of the period of stay and availability of sixty days under the first proviso to Explanation 1 of Section 153 starting from receipt of the order. - HELD THAT: - The petitioner filed the original return for AY 2021-2022 prior to sanction of an amalgamation scheme and thereafter filed a modified return on 30.03.2023 pursuant to Section 170A and the CBDT timeline. The respondents/revenue accept that on filing of the modified return the assessing officer may proceed with scrutiny. The Court directed that the time during which assessment proceedings were stayed shall be excluded from the limitation computation. Further, in accordance with the first proviso to Explanation 1 of Section 153, the assessing officer is entitled to a further period of sixty days to complete the scrutiny assessment; that sixty-day period will commence from the date of receipt of the copy of the Court's order. The assessment proceedings are to be carried out having regard to the modified return filed by the petitioner. [Paras 5]

The assessing officer is permitted to carry out scrutiny assessment on the basis of the modified return; time of the stay is excluded; and sixty days are available for completion of assessment commencing from receipt of the order.

Final Conclusion: Writ petition disposed: assessing officer granted liberty to carry out scrutiny assessment based on the modified return; the period of the Court-ordered stay is excluded from limitation; and the sixty-day extension under the first proviso to Explanation 1 of Section 153 begins from receipt of the order.

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - twin conditions for exercise of revisionary power - allowability of provision for unascertained liability under accrual system - adequacy of inquiry by Assessing Officer

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - twin conditions for exercise of revisionary power - adequacy of inquiry by Assessing Officer - Whether the Principal Commissioner of Income Tax was justified in invoking section 263 to revise the assessment order by treating the AO's order as erroneous and prejudicial to the revenue - HELD THAT: - The Tribunal applied the settled twin-condition test for exercise of revisional jurisdiction, observing that a revisional order under section 263 is permissible only if the assessment order is both erroneous and prejudicial to the interests of revenue. Where the Assessing Officer adopts one of the courses permissible in law or where two views are possible, revision is not sustainable unless the view taken by the AO is unsustainable in law. The record showed that the AO issued notice under section 142(1), elicited the assessee's explanation, considered the submission and took a permissible view by allowing the provision. The Principal Commissioner did not demonstrate why further or different inquiries were necessary or identify any legal unsustainability in the AO's approach. A mere assertion of inadequate inquiry, without specification of what further inquiry was required or why the AO's conclusions were legally untenable, is insufficient to meet the twin conditions. Consequently the Tribunal correctly held that the AO's order was not erroneous or prejudicial to the revenue on the ground of alleged lack of inquiry, and quashed the revisional order. [Paras 2, 3, 4]

The ITAT rightly quashed the PCIT's order under section 263; the revisional jurisdiction was not attracted as the AO's order was neither erroneous nor prejudicial to revenue.

Allowability of provision for unascertained liability under accrual system - adequacy of inquiry by Assessing Officer - Whether the provision for construction expenditure of Rs. 45,22,435/- was allowable where claimed as a proportionate estimated expenditure under the accrual system and subsequently paid in the next financial year - HELD THAT: - The Tribunal examined the factual matrix and noted that the assessee had debited the provision in the profit and loss account, responded to the AO's notice explaining that the provision represented proportionate estimated construction expenditure attributable to units sold, and that the amount was actually paid in the subsequent financial year and reversed there. On these facts the Tribunal concluded that the provision was a real provision made on a reliable estimate in accordance with the accrual system and that the Assessing Officer had properly examined and accepted the claim during assessment proceedings. Given that the AO conducted inquiry and formed a permissible view, the allowance of the provision could not be characterized as erroneous. Accordingly the Tribunal upheld the assessment order on merits and allowed the claim. [Paras 2, 12]

The provision for construction expenditure was properly allowable under the accrual system and the AO's allowance of the claim was sustainable.

Final Conclusion: The appeal is dismissed. The Tribunal correctly quashed the PCIT's revision under section 263 because the Assessing Officer had made adequate inquiry and taken a permissible view; the provision for construction expenditure was properly allowable under the accrual system and the assessment order was not erroneous or prejudicial to revenue.

Violation of principles of natural justice - opportunity of hearing - revisionary power under section 263 of the Income-tax Act, 1961 - adequacy of inquiry by Assessing Officer - prejudice to the Revenue

Violation of principles of natural justice - opportunity of hearing - revisionary power under section 263 of the Income-tax Act, 1961 - Impugned order under section 263 was passed without affording a fair opportunity of hearing to the assessee. - HELD THAT: - The Tribunal found on the facts recorded in the revisional order that only two notices were issued by the Principal Commissioner during March 2021 when COVID 19 was at its peak, and the last notice fixed a hearing within three days, leaving virtually no opportunity for the assessee to respond. Reliance was placed on binding Supreme Court authority that revisional orders passed in breach of natural justice cannot be remanded but must be set aside. Section 263 also prescribes a temporal limitation for exercise of revisionary power, making compliance with natural justice a precondition for validity. The revisional order was therefore legally fragile and unsustainable for want of a fair hearing. [Paras 6, 7, 8]

Order under section 263 set aside as passed in violation of principles of natural justice.

Adequacy of inquiry by Assessing Officer - prejudice to the Revenue - revisionary power under section 263 of the Income-tax Act, 1961 - Whether the Assessing Officer's inquiry into newly added sundry creditors was so inadequate as to render the assessment order erroneous and prejudicial to the Revenue. - HELD THAT: - On merits the Tribunal held that the Principal Commissioner failed to demonstrate any material error in the assessment. The Assessing Officer had issued specific queries under section 142(1) and the assessee furnished names, addresses, PANs and transaction details of the sundry creditors and explained inability to provide creditors' bank statements. The revisional order rested on a mere assertion of inadequacy because bank statements were not produced, without any financial analysis, comparison of turnover or purchases, or other basis to discredit the creditors' existence or the quantum claimed. Authorities were cited to the effect that an inadequate inquiry by itself does not warrant exercise of section 263 unless it results in an error causing prejudice to the Revenue; no such error was established here. Consequently the exercise of revisionary power was unjustified on merits. [Paras 11, 13, 15]

Revision under section 263 unsustainable on merits; no error shown in the assessment order regarding sundry creditors.

Final Conclusion: The revisional order passed under section 263 is quashed: it is set aside as invalid for breach of natural justice and, on merits, the Principal Commissioner has not shown any error in the assessment to justify revision.

Company in which public are substantially interested - deemed public company under proviso to s.2(71) of the Companies Act, 2013 - subsidiary company as per s.2(87) of the Companies Act, 2013 - deeming fiction - section 56(2)(viib) of the Income Tax Act, 1961 - valuation under Rule 11UA

Company in which public are substantially interested - deemed public company under proviso to s.2(71) of the Companies Act, 2013 - subsidiary company as per s.2(87) of the Companies Act, 2013 - section 56(2)(viib) of the Income Tax Act, 1961 - Whether Comptech Solutions Pvt. Ltd. is a company in which the public are substantially interested and hence outside the scope of section 56(2)(viib) of the Income Tax Act, 1961 for AY 2016-17. - HELD THAT: - The Tribunal agreed with the CIT(A)'s conclusion that Comptech, though a private company in form, is a subsidiary of Contech which itself is a wholly owned subsidiary of Allcargo Logistics Ltd., a widely held listed company. Applying the proviso to section 2(71) of the Companies Act, 2013, a company which is a subsidiary of a company that is not a private company is deemed to be a public company for purposes of the Companies Act. Section 2(87) (definition of subsidiary) and its Explanation permit treating a sub-subsidiary as subsidiary where control exists through an intervening subsidiary. The Tribunal held that the statutory fiction in these provisions must be given full effect and carried to its logical conclusion; consequently Comptech qualifies as a deemed public company. On this factual and legal foundation the Tribunal held that Comptech does not fall within the definition of a "company in which public are substantially interested" under section 2(18) of the Income-tax Act for purposes of applying section 56(2)(viib). The Tribunal also noted precedents cited by the CIT(A) supporting that a second-tier subsidiary can be regarded as a subsidiary for like purposes. The Revenue's contention that the proviso to section 2(71) cannot be stretched to subsume a subsidiary-of-a-subsidiary was rejected as unsustainable in law. The question of valuation under Rule 11UA was considered ancillary to this determinative finding; because Comptech was held to be a deemed public company, section 56(2)(viib) did not apply and the addition based on alleged excess share consideration was not sustainable. [Paras 11, 12, 13]

Comptech Solutions Pvt. Ltd. is a deemed public company and therefore section 56(2)(viib) of the Income-tax Act, 1961 is not attracted; the addition made by the AO is deleted.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s order holding the assessee to be a deemed public company and deleting the addition under section 56(2)(viib) for AY 2016-17 is affirmed.

Revisionary power under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of Revenue - scope and limitation of revisional jurisdiction - quasi-judicial conclusion of the Assessing Officer - disallowance of expenses after due application of mind

Revisionary power under section 263 of the Income Tax Act - disallowance of expenses after due application of mind - quasi-judicial conclusion of the Assessing Officer - Validity of PCIT's exercise of revisionary powers to enhance assessment by disallowing entire claimed general expenses - HELD THAT: - The Tribunal found that the assessment was completed after full scrutiny, issuance of statutory notices and consideration of the assessee's submissions, and that the Assessing Officer applied his mind and disallowed 20% of the claimed general expenses. The Principal CIT sought to disallow the entire claim on the ground that supporting evidence was not furnished, but the Tribunal held that substituting the PCIT's view for the AO's quasi-judicial conclusion is impermissible where the AO has applied his mind. An order of the AO reached after due application of mind cannot be characterised as 'erroneous' merely because the PCIT disagrees with the conclusion. Consequently the PCIT's enhancement of assessment by disallowing the remaining expenses was held unsustainable and was vacated. [Paras 9]

PCIT's order enhancing the assessment by disallowing the full amount of general expenses is vacated; the AO's 20% disallowance stands.

Erroneous and prejudicial to the interest of Revenue - scope and limitation of revisional jurisdiction - Legal test for invoking revision under section 263 - requirement of both error and prejudice to Revenue - HELD THAT: - The Tribunal reiterated that both elements - that the assessment order is erroneous and that it is prejudicial to the interest of the Revenue - must co-exist for exercise of power under section 263. 'Erroneous' does not mean an order with which the PCIT happens to disagree; it denotes an order vitiated by jurisdictional error or wrong application of law/facts resulting in prejudice to revenue. The revisional power is quasi-judicial and constrained by these twin conditions; in the present case those conditions were not satisfied because the AO had reached a reasoned conclusion after enquiry. [Paras 9]

Revision under section 263 cannot be invoked where the AO has applied his mind and reached a conclusion unless that order is shown to be erroneous and prejudicial to revenue; both conditions were not proved here.

Final Conclusion: Appeal allowed; order of the Pr. CIT under section 263 vacated and assessment order as framed by the Assessing Officer upheld.

Percentage of completion method - Accounting Standard 7 (AS-7) - fixed price contract-revenue recognized over life of contract - estimates in Section 197 application not determinative of turnover for assessment - notional addition and protection against double taxation - Addition based on projected contract revenue unsustainable

Percentage of completion method - Accounting Standard 7 (AS-7) - estimates in Section 197 application not determinative of turnover for assessment - fixed price contract-revenue recognized over life of contract - Addition based on projected contract revenue unsustainable - notional addition and protection against double taxation - Whether the addition made by treating the assessee's projected contract receipts (submitted in Section 197 proceedings) as the assessee's turnover for AY 2018-19 is sustainable where the assessee follows AS-7 percentage of completion method for a fixed price contract and recognizes revenue on certification of work over the life of the contract. - HELD THAT: - The Tribunal found that the assessee executed a fixed price subcontract and consistently applied the percentage of completion method in its financial statements. Under para 25 of AS-7, contract revenue and costs are to be recognized in the periods in which work is performed, and any expected excess of total contract costs over contract revenue must be recognized immediately. The projections made in an earlier Section 197 application were estimates of total contract revenue for obtaining lower withholding certificates and were not conclusive proof of turnover for assessment purposes. The assessee's recognized revenue was based on actual work certified by the contractor and the accounting treatment (including recognition of contract losses) conformed to AS-7. The project duration was extended beyond original estimates, explaining the variance between earlier projections and actual certified work. Aggregate contract revenue was offered to tax over the life of the contract as evidenced by invoices, and treating the Section 197 projections as turnover for AY 2018-19 would result in taxing amounts in excess of the fixed contract value and cause double taxation. In view of these factors, the impugned addition based on projected receipts was held to be unsustainable. [Paras 5, 6, 7, 8]

Impugned addition treating projected contract receipts as turnover is unsustainable; corresponding grounds of the assessee are allowed.

Final Conclusion: The appeal is partly allowed: the addition based on projected contract revenue (from the Section 197 application) is set aside as unsustainable, while the stay application is dismissed as infructuous.

Benchmarking of inter-unit transactions for arm's length pricing - application of profit split method in transfer pricing - effect of transfer pricing adjustment under section 92CA(3) on profits and carried forward losses for claim of deduction under section 80IC - treatment of transfer pricing adjustment as an addition to returned income

Effect of transfer pricing adjustment under section 92CA(3) on profits and carried forward losses for claim of deduction under section 80IC - treatment of transfer pricing adjustment as an addition to returned income - Whether the transfer pricing adjustment made for Unit V could be added to the returned income of the assessee when no deduction under section 80IC was claimed in the return. - HELD THAT: - The Tribunal found that the TPO had made an adjustment under section 92CA(3) because Unit V was eligible for deduction under section 80IC and downward adjustment would reduce current year profit and increase carried forward losses. The effect of the adjustment is to reduce Unit V's current year profit and correspondingly increase its carried forward losses; given existing accumulated losses, no distributable profit would be available to give rise to a claim under section 80IC either before or after the adjustment. Therefore the adjustment operates to increase carry forward losses rather than to enhance the assessee's taxable income. On this basis the assessing officer's addition of the adjustment amount to the returned income was held to be incorrect and was deleted. [Paras 6]

The addition made by the assessing officer on account of the transfer pricing adjustment is deleted.

Benchmarking of inter-unit transactions for arm's length pricing - application of profit split method in transfer pricing - Validity and correctness of the benchmarking exercise (and the TPO/DRP's application of the profit split method) in respect of Unit V's inter unit transactions were not adjudicated and left open as academic. - HELD THAT: - Although the TPO applied the profit split method and the DRP upheld that benchmarking, the Tribunal observed that once the consequential addition was deleted the challenge to the benchmarking and the appropriateness of the profit split method no longer had practical consequence. Consequently those contentions were not decided on merits and were left open for the parties; no adjudication on the correctness of the benchmarking or the method applied was undertaken by the Tribunal. [Paras 7]

The challenge to the benchmarking analysis and the transfer pricing adjustment is left open and not adjudicated upon.

Procedural consequence of non-pressing of grounds at hearing - Ground not pressed by the assessee during hearing was dismissed as not pressed. - HELD THAT: - Ground No. 3 (challenge to deeming under section 115BBE) was not pressed by the assessee's authorised representative at the hearing; accordingly the Tribunal treated that ground as not pressed and dismissed it without adjudication. [Paras 3]

Ground No. 3 dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: the assessing officer's addition arising from the transfer pricing adjustment is deleted; challenges to the benchmarking and the method applied are left open and not decided; one ground not pressed is dismissed.

Assessment - determination of dutiability and amount of duty, tax, cess or any other sum payable - assessment under Section 28 of the Customs Act - claim of exemption from IGST under notification - power to assess taxes, duties and cesses on imported goods

Assessment - assessment under Section 28 of the Customs Act - claim of exemption from IGST under notification - Validity of the impugned assessment order issued under Section 28 of the Customs Act in respect of alleged short levy of IGST on imported dates - HELD THAT: - The Court examined the definition of assessment in sub section (2) of Section 2 of the Customs Act which encompasses determination of the dutiability of goods and the amount of duty, tax, cess or any other sum payable under this Act, the Customs Tariff Act or any other law, including exemption or concession consequent upon notifications. Although duty is defined in sub section (15) of Section 2 as customs duty, Section 28 empowers the assessing authority to assess and recover duties not levied or short levied. Read together, the statutory scheme authorises the assessing authority to determine and recover not only customs duty but also taxes or cesses payable on imported goods where such liabilities arise from tariff classification, valuation or claimed exemptions under notifications. The petitioner had claimed exemption from IGST under the relevant notification; therefore the assessing authority was competent under Section 28 (in light of the broader statutory definition of assessment) to examine and determine the correctness of that claim and to confirm demand for short levied IGST and interest where applicable. [Paras 7, 8, 9, 10]

The assessment order under Section 28 confirming demand of IGST and interest is not without jurisdiction and the writ petition is dismissed; petitioner retains remedy by way of appeal and time spent in the writ petition will be considered for condonation of delay in filing the appeal.

Final Conclusion: Writ petition dismissed: the Customs assessing authority was competent to determine and recover the alleged short levy of IGST arising from a claimed exemption under the notification; the petitioner may prefer an appeal and the period spent in the writ petition will be taken into account for condonation of delay.

Bail - custodial detention duration as factor in bail - deposit of penalty as ground for bail - non-contact condition as bail term - offences under the Customs Act, 1962 read with criminal conspiracy

Bail - custodial detention duration as factor in bail - deposit of penalty as ground for bail - non-contact condition as bail term - Grant of bail to the petitioner accused of offences under the Customs Act, 1962 read with criminal conspiracy - HELD THAT: - The petitioner, accused under the Customs Act and conspiracy provisions, had been in custody for over fifteen months and had deposited the penalty required by the adjudicating authority. Having regard to these circumstances, the Court held that the petitioner deserved enlargement on bail. The Court directed that bail be granted subject to such terms and conditions as the Trial Court may impose, expressly including a condition that the petitioner shall not contact the other accused. No further grounds were recorded for denying bail and the limited facts of prolonged custody and compliance with penalty obligations formed the basis for granting bail.

Petitioner enlarged on bail subject to terms to be imposed by the Trial Court, including a prohibition on contacting the other accused.

Final Conclusion: The petition for bail is allowed; the petitioner is directed to be released on bail subject to such conditions as the Trial Court may impose, including that he shall not contact the other accused. All pending applications are disposed of.

Limitation under Section 28(9) of the Customs Act, 1962 - extension of time for adjudication by officer senior in rank - requirement of intimation / personal hearing before extension - adjournments sought by assessee and attribution of delay - exercise of writ jurisdiction in tax matters where alternate remedy exists

Limitation under Section 28(9) of the Customs Act, 1962 - Adjudication of the show cause notices dated 28.01.2022 was not barred by limitation under Section 28(9) of the Customs Act, 1962. - HELD THAT: - The Court found that the show cause notices issued on 28.01.2022 could validly be adjudicated because an extension of time for adjudication had been granted by the Chief Commissioner. The petitioner had delayed filing its reply and sought multiple adjournments for personal hearings, thereby contributing to the pendency. The record includes an extension letter dated 15.12.2022 and other correspondence showing the matter was placed in call-book category and later taken out, and that statutory counting and retrospective amendments were relied upon by the respondent. On these facts the petitioner's plea that adjudication was time-barred was rejected. [Paras 14, 16, 18, 19, 20]

The writ petition challenging limitation was dismissed and adjudication was held not to be time-barred.

Extension of time for adjudication by officer senior in rank - requirement of intimation / personal hearing before extension - The extension of time for passing the adjudicating order by the competent authority (Chief Commissioner) was valid and the petitioner had been made aware of the extension during proceedings. - HELD THAT: - The Court observed that the Chief Commissioner granted extension under Section 28(9) and the petitioner was informed about the extension during the hearing held on 01.02.2023. The petitioner had sought adjournments and filed submissions after the extension was granted; therefore the extension could not be faulted on the ground of lack of intimation. The factual matrix showed that extension was applied for and recorded, and that the petitioner did not promptly prosecute its defence within the statutory period. [Paras 14, 16, 18, 19]

Extension granted by the Chief Commissioner was upheld and absence of prior intimation did not invalidate the extension on the facts of the case.

Adjournments sought by assessee and attribution of delay - exercise of writ jurisdiction in tax matters where alternate remedy exists - Petitioner's conduct in seeking repeated adjournments and filing replies belatedly disentitled it from claiming termination of proceedings by operation of the limitation provision; High Court declined to invoke extraordinary writ jurisdiction. - HELD THAT: - The Court recorded that the petitioner did not cooperate by filing a reply within the 30-day period and repeatedly sought adjournments for personal hearings, thereby causing delay. Given these facts and the availability of statutory remedies, the High Court held that extraordinary relief under Article 226 was not warranted. The petition was dismissed on the ground that the delay was attributable to the petitioner and the departmental action in granting extension was justified. [Paras 7, 13, 19, 20]

Petition dismissed; delay attributed to petitioner and extraordinary writ relief refused.

Final Conclusion: Writ petition dismissed; the Court upheld the extension for adjudication and refused to restrain the respondent from proceeding with adjudication of the show cause notices, the delay being attributable to the petitioner and statutory/administrative steps having been taken.

Territorial jurisdiction under Article 226(2) - cause of action - integral part of the cause of action - nexus with the lis - bundle of facts - determination on pleadings alone

Territorial jurisdiction under Article 226(2) - cause of action - integral part of the cause of action - nexus with the lis - determination on pleadings alone - Whether this High Court has territorial jurisdiction to entertain the writ petition challenging notifications dated 25.08.2023. - HELD THAT: - The Court examined the averments in the writ petition as true for the limited purpose of deciding territorial jurisdiction. The settled test is whether the facts pleaded constitute that bundle of material facts which the petitioner must prove, if traversed, to obtain the relief sought, and whether at least a part of that cause of action arose within the territorial area of the High Court. The petition pleads that the petitioner has its registered office at Jaipur, received payments at Jaipur by Foreign Inward Remittance and that goods were gated-in at the port prior to publication of the impugned notifications. However, there is no specific pleading that clearance was withheld solely because payment was by cash/advance remittance rather than by irrevocable letters of credit. Facts which are not germane to the lis or which lack the requisite nexus do not constitute an integral part of the cause of action for conferring jurisdiction. Applying the principles in the cited precedents, the Court found that the operative facts necessary to claim the relief - in particular, the dispute as to clearance and exemption under the notifications - arose outside this Court's territorial jurisdiction and that the pleaded facts about business location and payment receipt at Jaipur do not, on the face of the petition, form an integral part of the cause of action conferring jurisdiction here. [Paras 5, 11, 12, 18, 19]

Objection to maintainability on territorial jurisdiction sustained; this Court lacks territorial jurisdiction to adjudicate the writ petition.

Final Conclusion: The writ petition challenging notifications dated 25.08.2023 is dismissed for want of territorial jurisdiction; the petitioner is left to seek appropriate remedy before the competent forum.

Show cause notice under Section 124 of the Customs Act, 1962 - extension of time to file reply - preliminary jurisdiction of adjudicating authority - reasoned and speaking order - stay of further proceedings pending decision on jurisdiction - opportunity of hearing - provisional release of goods

Extension of time to file reply - preliminary jurisdiction of adjudicating authority - reasoned and speaking order - opportunity of hearing - Petitioner shall be granted time to file reply to the show cause notice and the adjudicating authority shall decide the question of its preliminary jurisdiction by a reasoned and speaking order after hearing. - HELD THAT: - The High Court declined to quash the show cause notice at this stage and held that the petitioner ought to have replied to the notice and placed his case before the adjudicating authority. The Court extended the period to file a reply for two weeks and directed the adjudicating authority to consider the reply and decide the issue of its jurisdiction, having regard to the notification relied upon by the petitioner, by passing a reasoned and speaking order after giving an opportunity of hearing. The direction requires the authority to adjudicate the preliminary jurisdictional objection on merits and to record reasons for its conclusion. [Paras 3]

Time to file reply extended for two weeks; adjudicating authority directed to decide preliminary jurisdiction by a reasoned and speaking order after hearing within four weeks of receipt of the reply.

Stay of further proceedings pending decision on jurisdiction - Further proceedings in the impugned show cause notice are to be kept in abeyance until the adjudicating authority passes its final order on the preliminary jurisdictional objection. - HELD THAT: - The Court ordered that until the adjudicating authority issues its final order on the preliminary jurisdictional question raised in the reply, there shall be no further steps in the impugned proceedings. Any subsequent proceedings will depend upon the final order on the jurisdictional point. This direction operates as an interim bar on further action in the pending adjudication until the jurisdictional issue is resolved. [Paras 3]

No further proceedings shall be taken in the impugned matter until the adjudicating authority disposes of the reply on its preliminary jurisdiction.

Provisional release of goods - If an application for provisional release of the goods is filed in accordance with law, the adjudicating authority shall consider it on merits notwithstanding the pendency of the show cause proceedings. - HELD THAT: - The Court observed that, while maintaining the stay on further proceedings, any application by the petitioner for provisional release of the goods must be considered by the adjudicating authority in accordance with law. This obligation to consider a provisional release application is independent of the final disposal of the show cause notice; however, the respondent placed on record a contention that the goods might be prohibited and not liable for release, which the authority may take into account in deciding any such application. [Paras 4]

Adjudicating authority to consider any lawful application for provisional release of goods on its merits despite pendency of the show cause proceedings.

Opportunity of hearing - Petitioner is entitled to raise all points in response to the show cause notice when filing the reply. - HELD THAT: - The Court specifically recorded that at the time of hearing before the adjudicating authority the petitioner may raise all contentions relevant to the impugned show cause notice. This affirms the petitioner's right to ventilate substantive and jurisdictional defenses before the authority while the authority considers the reply and decides the jurisdictional question. [Paras 4]

Petitioner may raise all points in his reply and be heard by the adjudicating authority.

Final Conclusion: Writ petition disposed by extending the time to file reply for two weeks and directing the adjudicating authority to decide the preliminary jurisdictional objection by a reasoned and speaking order after hearing within four weeks; further proceedings stayed until that order, and any lawful application for provisional release of the goods to be considered on merits.

Approval of Resolution Plan - entitlement of operational creditor under Section 30(2)(e) of the IBC - waterfall mechanism under Section 53 of the IBC - priority of tax claims vis-a -vis insolvency resolution - first charge under Section 37 of the MVAT Act subject to Central Act - distinguishing Rainbow Paper Limited

Entitlement of operational creditor under Section 30(2)(e) of the IBC - waterfall mechanism under Section 53 of the IBC - priority of tax claims vis-a -vis insolvency resolution - distinguishing Rainbow Paper Limited - Whether the Adjudicating Authority erred in approving a Resolution Plan that allocates to the Department of State Tax (an admitted operational creditor) an amount substantially less than its claim, contrary to the entitlement under Section 30(2)(e) read with the liquidation waterfall. - HELD THAT: - The Tribunal held that the claim of the Appellant was admitted as that of an operational creditor and there was no material to show entitlement to any greater share than that provided in the approved Resolution Plan. The court applied the principle that Section 30(2)(e) entitles an operational creditor to the amount which it could have received in liquidation under the statutory waterfall, and therefore the allocation in the Resolution Plan must be tested against the distribution envisaged by Section 53. The Tribunal further distinguished the Supreme Court decision in Rainbow Paper Limited on the basis that the Maharashtra MVAT provision (Section 37) expressly provides that the first charge is "subject to any provision regarding creation of first charge in any Central Act", thereby recognising that the IBC waterfall (a central enactment) governs distribution in insolvency. Following the earlier decision in Company Appeal (AT) (Ins.) No.246 of 2022, the challenge based on Rainbow Paper was repelled and the allocation to the State Tax in the Plan was held not to violate Section 30(2)(e). [Paras 5, 9, 10]

The approval of the Resolution Plan was not shown to be contrary to the entitlements of the operational creditor under Section 30(2)(e) read with the liquidation waterfall, and the challenge was rejected.

Final Conclusion: Following the Tribunal's prior reasoning distinguishing Rainbow Paper and applying the IBC waterfall principle, no interference with the Adjudicating Authority's order approving the Resolution Plan was warranted; the appeal is dismissed.

Twin conditions for bail under Section 45 of the PMLA, 2002 - Non-bailable nature of offences under the PMLA - Prima facie involvement in money laundering as a ground to deny bail - Investigation for scheduled offences distinct from investigation for predicate offences - Right to speedy trial and its interplay with bail under economic offences - Burden of proof under Section 24 of the PMLA

Twin conditions for bail under Section 45 of the PMLA, 2002 - Prima facie involvement in money laundering as a ground to deny bail - Burden of proof under Section 24 of the PMLA - Whether the applicant is entitled to regular bail under Section 45 of the PMLA, 2002 - HELD THAT: - The Court applied the rigour of Section 45 of the PMLA and held that the applicant must prima facie establish non involvement in money laundering and that he is not likely to commit an offence while on bail. On the material on record the applicant's statements under Section 50 of the PMLA and other investigative material disclose prima facie cash deposits of Rs. 61.02 lacs proximate to registration of land and production of invoices which another witness described as bogus. These facts, taken together with the prosecution case linking the cash to the cartel's illegal levy and the applicant's admitted explanations, lead the Court to conclude that the twin conditions mandated by Section 45 are not satisfied. The Court considered authorities concerning the special rigour of Section 45, the distinction between investigation of predicate and scheduled offences, and the right to speedy trial, but found that prolonged incarceration alone did not outweigh the prima facie material against the applicant. Having regard to the prima facie findings, the burden and legal framework under Sections 24 and 45 of the PMLA, and the evidence adduced at the bail stage, the application for bail could not be allowed. [Paras 16, 17, 18, 19, 20]

Bail application under Section 439 Cr.P.C. is rejected; applicant not able to satisfy the twin conditions under Section 45 of the PMLA, 2002.

Final Conclusion: Bail refused: on the prima facie material (statements under Section 50 and bank transaction evidence indicating unexplained cash deposits and allegedly bogus invoices) the Court finds the twin conditions of Section 45 PMLA unsatisfied; the trial court will proceed on merits and the observations herein are limited to the bail application.

Applicability of the twin conditions in Section 45 of the PMLA to applications for anticipatory bail - power to arrest under the PMLA and its bearing on entitlement to anticipatory bail - economic offences as a class apart and the court's caution in granting bail - risk of tampering with witnesses and hampering investigation as a ground to deny anticipatory bail

Power to arrest under the PMLA and its bearing on entitlement to anticipatory bail - applicability of investigative discretion to arrest and its future exercise - Non-arrest during investigation does not by itself entitle the applicant to anticipatory bail. - HELD THAT: - The Court examined Section 19 of the PMLA and held that the investigating authority's decision not to arrest during a stage of investigation does not extinguish its statutory power to arrest later when reasons for arrest are available. Reliance on authorities including the Supreme Court's recent observations underscores that non-arrest coupled with voluntary participation in investigation cannot be converted into a substantive right to anticipatory bail. The Court therefore rejected the submission that mere absence of prior arrest or the applicant's cooperation automatically entitles him to protection under Section 438 CrPC. [Paras 12, 14, 15]

Answered against the applicant; non-arrest during investigation does not justify grant of anticipatory bail.

Applicability of the twin conditions in Section 45 of the PMLA to applications for anticipatory bail - economic offences as a class apart and the court's caution in granting bail - risk of tampering with witnesses and hampering investigation as a ground to deny anticipatory bail - The twin conditions under Section 45 of the PMLA apply to anticipatory bail applications and, on the material before the Court, are not satisfied by the applicant. - HELD THAT: - The Court applied Section 45 of the PMLA and relevant Supreme Court precedents emphasising that economic offences require cautious exercise of bail jurisdiction. Having considered the ECIR and material collected by the Enforcement Directorate, the Court found prima facie evidence of the applicant's involvement - including handwritten diary entries and his role in receipt, storage and dispatch of extorted cash - and noted his close association with the principal accused. Given the gravity of the offences, the stage of investigation, and the reasonable apprehension that grant of anticipatory bail could impede investigation or facilitate tampering with witnesses, the Court concluded that the applicant failed to satisfy the statutory twin conditions necessary for release. The Court therefore declined to grant anticipatory bail. [Paras 17, 19, 20, 21, 22]

Answered against the applicant; anticipatory bail refused as the Section 45 conditions are not met on the material before the Court.

Final Conclusion: The application for anticipatory bail under Section 438 CrPC is rejected; observations are limited to this bail application and shall not influence the trial court on merits.

Summons under Section 50 of PMLA - Power to summon any person for investigation under PMLA - Article 20(3) protection not attracted at summons stage - Quashing of ECIR - No-coercive-steps / anticipatory relief - Attendance at zonal office (Kolkata) on notice - Applicability of Section 160 Cr.P.C. to Section 50 PMLA (pending adjudication)

Summons under Section 50 of PMLA - Power to summon any person for investigation under PMLA - Validity of summons issued under Section 50 PMLA and prayer to quash them - HELD THAT: - The Court analysed Section 50 PMLA and authoritative pronouncements including Vijay Madanlal Choudhary, observing that authorised PMLA officials have wide power to summon any person for attendance, examination and production of records for purposes of investigation or proceedings under the Act. A summons under Section 50 is for collection of information or evidence and does not ipso facto make the noticee an accused; protections under Article 20(3) apply only if the person is an accused at the relevant time. Precedents disfavor interference at the stage of issuance of summons except in exceptional cases. On the facts, the petitioner had been summoned for recording statement and production of documents, had appeared once, and there were no demonstrable grounds of mala fides or prejudice warranting quashing of the impugned summons. [Paras 21, 25, 26]

Summons under Section 50 PMLA are not quashed; no ground made out to interfere with issuance of summons.

Quashing of ECIR - Prayerto quash the ECIR registered by the Enforcement Directorate - HELD THAT: - The Court noted that the petitioner had not placed a copy of the ECIR on record and, as per the respondent, the petitioner is not presently named as an accused in the ECIR. Reliance was placed on authority that a person not named as accused lacks locus to seek quashing of an ECIR and on the settled position that the ED is not obliged to furnish a copy of ECIR to the noticee at the investigation stage. Given these circumstances the petition for quashing was held to be premature. [Paras 30, 31]

Prayer to quash the ECIR is dismissed as premature and without merit.

Article 20(3) protection not attracted at summons stage - Claim for protection under Article 20(3) against being compelled to be a witness against oneself when summoned under Section 50 - HELD THAT: - The Court reiterated that protection under Article 20(3) is available only to a person who is an accused of an offence. Since the petitioner was not an accused as per the respondent's material, mere issuance of summons for collection of information would not engage Article 20(3). The Court relied on Vijay Madanlal Choudhary and related jurisprudence to hold that the contention that summons under Section 50 coerces self-incrimination is not sustainable at this stage. [Paras 32, 33]

Claim of entitlement to Article 20(3) protection at summons stage is rejected.

No-coercive-steps / anticipatory relief - Application for interim relief restraining the Enforcement Directorate from taking any coercive steps during investigation - HELD THAT: - The Court declined to grant a blanket direction of 'no coercive steps', noting jurisdictional and precedent-based cautions (Neeharika Infrastructure and allied decisions) that High Courts should not pass such orders which effectively amount to anticipatory bail without satisfying statutory tests. The Court observed that petitioner had been repeatedly summoned without arrest and that alternate remedies such as anticipatory bail under Section 438 Cr.P.C. remain available if apprehension of arrest arises. On the facts, no case was made out for prohibiting coercive steps. [Paras 37]

Prayer for a direction of no coercive steps is refused.

Attendance at zonal office (Kolkata) on notice - Direction as to place and manner of attendance for recording statement - HELD THAT: - While refusing to quash summons or ECIR, the Court recorded earlier orders of the Predecessor Bench and, having regard to the petitioner's age, health and status as a public functionary, directed that the Enforcement Directorate may require the petitioner's attendance at its Kolkata office by giving at least 24 hours' notice. The Court also directed issuance of simultaneous notices to the Commissioner of Police, Kolkata and the Chief Secretary, West Bengal to ensure adequate police protection and facilitation of the examination. [Paras 41]

ED permitted to summon the petitioner at its Kolkata office on at least 24 hours' notice; police protection to be provided.

Applicability of Section 160 Cr.P.C. to Section 50 PMLA (pending adjudication) - Whether Section 160 Cr.P.C. applies to summons under Section 50 PMLA - HELD THAT: - The Court expressly refrained from deciding the legal question whether Section 160 Cr.P.C. applies to Section 50 PMLA, observing that the controversy is pending before the Hon'ble Supreme Court in Nalini Chidambaram and related matters, and that the Coordinate Bench judgment in Abhishek Banerjee has been stayed by the Apex Court. Consequently the issue remains pending authoritative adjudication. [Paras 40]

Question left undecided and noted as pending before the Supreme Court.

Final Conclusion: The petition is dismissed. The impugned summons under Section 50 PMLA are not quashed and the prayer to quash the ECIR is held premature; no direction of 'no coercive steps' is granted. As a limited and case-specific accommodation, the Enforcement Directorate may summon the petitioner to its Kolkata office by giving at least 24 hours' notice, with simultaneous notice to local authorities to provide police protection. The question of applicability of Section 160 Cr.P.C. to Section 50 PMLA is left open pending adjudication before the Supreme Court.

Definition of - Cenvat credit entitlement for services used by a provider of taxable service - Cenvat credit entitlement for services used by a manufacturer in or in relation to manufacture and clearance of final products up to the place of removal - expansive interpretation of input service - place of removal for export determined as port where shipping bill is filed / goods handed over to shipping line

Definition of - Cenvat credit entitlement for services used by a provider of taxable service - Cenvat credit entitlement for services used by a manufacturer in or in relation to manufacture and clearance of final products up to the place of removal - expansive interpretation of input service - place of removal for export determined as port where shipping bill is filed / goods handed over to shipping line - Entitlement to Cenvat credit in respect of specified services received by the assessee (training and coaching, IT/software, CHA and cargo handling for export, warehouse and storage, land survey/real estate consultant, hotel services, manpower supply services and services at ports) for the period July, 2006 to 2010-11 (including credit taken in 2008-09). - HELD THAT: - The Court upheld the Tribunal's and Commissioner's findings largely allowing Cenvat credit in respect of the services challenged. Applying a wide and expansive construction of the definition of , the Court treated (a) services used by the assessee as a provider of taxable output service, and (b) services used by a manufacturer directly or indirectly in or in relation to manufacture and clearance of final products up to the place of removal, as admissible input services. The Court relied upon co ordinate decisions which divided the definition into the 'means' part and the 'includes' part and held that services connected to manufacture, sale promotion, storage, place of removal (ports), recruitment, quality control, after sales service and dealer network support fall within Rule 2(l). The Court accepted the administrative clarification that, for exports, transfer of property (place of removal) can be said to occur at the port/ICD/CFS where the shipping bill is filed and goods are handed over to the shipping line, and eligibility for Cenvat credit must be determined accordingly. On the specific factual findings recorded below - including that goods remained under the assessee's ownership until export and services were integrally connected to business/manufacturing operations - the Court found no error in allowing credit and in dismissing Revenue's appeal; only services held to be personal/staff welfare in nature (as found by the Commissioner) were excluded by the authorities below and the Court did not disturb the Tribunal's broad acceptance of entitlement.

Tribunal's order allowing the assessee's appeals and dismissing the revenue's appeals insofar as it granted Cenvat credit on the specified services was upheld; the revenue's challenge was dismissed.

Final Conclusion: The High Court found no substantial question of law requiring interference with the Tribunal's common order; the Tribunal's grant of Cenvat credit on the specified services (subject to the factual exclusions already made below) is upheld and the appeal by the Revenue is dismissed.

Goods Transport Agency (GTA) service - Supply of tangible goods for use / Declared service by hiring without transfer of right to use - Issuance of consignment note as decisive criterion for GTA - Liability of vehicle owner as 'any person' under GTA definition - Prohibition of double taxation and Article 265

Goods Transport Agency (GTA) service - Issuance of consignment note as decisive criterion for GTA - Supply of tangible goods for use / Declared service by hiring without transfer of right to use - Nature of transaction: whether services rendered by the appellant fall under GTA or under supply of tangible goods for use / declared service - HELD THAT: - The Tribunal examined the terms of the agreements and the documentary record, including that the appellant issued consignment notes covering transportation. The adjudicating authority's analysis of the contract clauses (use of fleet for transporting products, appellant's obligations for maintenance, crew, permits, insurance, registration in appellant's name, billing in prescribed format and liability for delivery) led to the conclusion that possession and effective control of the lorry chassis remained with the appellant. The CBEC clarification and statutory definitions were applied to hold that where consignment notes are issued and the contractual matrix shows transportation activity with appellant retaining possession and control, the activity constitutes GTA service rather than supply of tangible goods for use (or the declared service post-01.07.2012). Co-ordinate Tribunal decisions and reasoning on the mandatory requirement of consignment notes were accepted as determinative. As the appellant's transactions satisfied the conditions for GTA, the demand characterising them as supply of tangible goods for use was not sustainable. [Paras 34, 35, 36, 38, 39]

Transactions between the appellant and INOX constitute GTA services and not supply of tangible goods for use / declared service.

Liability of vehicle owner as 'any person' under GTA definition - Whether individual/owner of vehicles can be liable as a GTA - HELD THAT: - The Tribunal observed that the statutory definition of GTA uses the phrase 'any person' (post amendment) and is not confined to an 'agency'. Earlier decisions pre-dating the amendment were distinguished. The issuance of consignment notes by the appellant and legal language in the Finance Act were held to permit coverage of individual vehicle owners or operators within GTA, provided the statutory and documentary conditions (such as consignment note issuance) are met. [Paras 29, 30, 31, 33]

An individual owner/operator can be covered under the GTA definition where the statutory conditions (including issuance of consignment notes) are satisfied.

Issuance of consignment note as decisive criterion for GTA - Evidentiary role of consignment notes in determining GTA liability - HELD THAT: - The Tribunal placed decisive weight on the fact that consignment notes were issued by the appellant and observed that issuance of consignment notes is a mandatory and determinative condition for classifying a service as GTA under the statutory scheme and Rule 4B. Co-ordinate Bench decisions were relied upon to hold that absence of consignment notes would preclude GTA classification, whereas their presence supports it. [Paras 29, 34]

Issuance of consignment notes by the transporter is a conclusive indicium supporting classification as GTA service.

Prohibition of double taxation and Article 265 - Sustainability of a demand for service tax on the service-provider where service tax has already been discharged by the recipient under reverse charge - HELD THAT: - The Tribunal found on the facts that service tax in respect of the same transactions had been discharged by the service recipient (INOX) under the reverse charge mechanism. Proceeding to tax the same transaction again at the hands of the service provider under a different head would amount to double taxation. The Tribunal held that such a result would be contrary to Article 265 of the Constitution and therefore the demand could not be sustained. Consequentially, since the demand on merits was unsustainable, issues relating to extended period, interest and penalties were not decided as they became irrelevant. [Paras 4]

Demand set aside as the tax on the same transaction had already been paid by the service recipient; double taxation is not permissible and renders the demand untenable.

Final Conclusion: Appeal allowed: the transactions were correctly classified as GTA services, the service tax liability had been discharged by the recipient under reverse charge, and the demand, interest and penalties in the adjudication were set aside; consequential relief directed as per law.

Construction of complex service - works contract service - composite works contract - service simpliciter - self service doctrine

Construction of complex service - works contract service - composite works contract - service simpliciter - self service doctrine - Whether the appellant was required to discharge service tax under the category of construction of complex service during January, 2006 to September, 2010. - HELD THAT: - The Tribunal applied the Supreme Court decision in Larsen & Toubro and its own earlier exposition in Pragati Edifice together with Board circulars to determine the taxability of developers' activities. It held that where construction activity constitutes a composite works contract, service tax is not leviable as construction of complex service prior to 1-6-2007 in view of Larsen & Toubro. For the period after 1-6-2007 and up to 30-6-2010, the correct characterisation controls: a composite contract is chargeable as works contract service while a service simpliciter is chargeable as construction of complex service; further, services rendered prior to issue of completion certificate and transfer to the customer fall within the self service doctrine and are not taxable. Applying these principles to the undisputed facts - that the appellant acted as developer, entered into a development agreement, sold flats by individual agreements, engaged subcontractors who discharged tax, and itself paid service tax under works contract for the period after 1-6-2007 - the Tribunal concluded that no liability for construction of complex service arose prior to 1-6-2007 and that for the period 1-6-2007 to September 2010 the appellant had discharged tax as works contract service.

Service tax is not leviable as construction of complex service prior to 01-06-2007; for 01-06-2007 to September 2010 the appellant has discharged tax under works contract service, and the demand is therefore untenable.

Final Conclusion: The impugned order confirming demand for construction of complex service is set aside; the appeal is allowed with consequential reliefs as per law.

Excise duty payable on manufacture and clearance - Undisclosed income before Income Tax authorities not sufficient to levy excise duty - Burden of proof on Revenue to establish clandestine production and removal - Requirement of independent corroborative evidence for clandestine removal - Penalty cannot be sustained where demand of duty is not established

Excise duty payable on manufacture and clearance - Undisclosed income before Income Tax authorities not sufficient to levy excise duty - Burden of proof on Revenue to establish clandestine production and removal - Requirement of independent corroborative evidence for clandestine removal - Whether excise duty can be demanded solely on the basis of income surrendered before Income Tax authorities without independent evidence of manufacture and clearance - HELD THAT: - The Tribunal held that duty is exigible only on manufacture and clearance of excisable goods and that the Department bears the onus of proving excess production and clandestine removal. The impugned demand rested on the detection of unexplained income of Rs.1.00 crore surrendered before income tax authorities, but the Revenue did not produce independent evidence of purchase of raw materials, manufacture, dispatch or sale of finished goods, power consumption or other corroborative material establishing clandestine removals. Reliance was placed upon earlier decisions of the Tribunal and High Court which require tangible evidence beyond mere admissions or surrendered income to sustain a duty demand. In absence of such positive evidence and where the order is founded on assumptions and presumptions, the demand could not be sustained. [Paras 6, 7, 8, 9]

Demand of excise duty based solely on surrendered income was set aside for want of independent corroborative evidence establishing manufacture and clandestine removal.

Penalty cannot be sustained where demand of duty is not established - Whether penalty and other consequential impositions can survive where the demand of duty is set aside - HELD THAT: - The Tribunal applied the principle that imposition of penalty is contingent upon a sustainable demand. Since the duty demand was found unsustainable for lack of evidence proving clandestine removals, the question of levy of penalty did not survive. The Tribunal followed precedents holding that where demand cannot be upheld on merits, consequential penalties also fall away. [Paras 8, 11]

Penalties and consequential reliefs were set aside as the substantive demand for duty was not sustained.

Final Conclusion: The appeals were allowed; the order confirming the duty demand and imposing penalties was set aside for lack of independent evidence proving manufacture and clandestine removal, with consequential reliefs granted.

Cenvat Credit on embedded capital goods - components, spares and accessories as capital goods - Cenvat Credit on inputs and consumables used in manufacture of capital goods - transfer of Cenvat credit on change of ownership / transfer of factory - transfer of assets and liabilities of a going concern - invocation of extended period for demand and time bar - suppression versus bona fide interpretation

Cenvat Credit on embedded capital goods - components, spares and accessories as capital goods - Cenvat credit allowed on steel items and similar goods used as parts, components or structural supports of capital goods even though embedded in plant - HELD THAT: - The Tribunal held that items such as angles, channels, beams, plates, HR coil, joists, rebar coils and similar MS articles which were used as parts, components or structural supports of capital equipment (furnace, crane operating system, cooling bed, conveyor, mill accessories etc.) are covered by the definition of "capital goods" and are eligible for Cenvat credit. The Chartered Engineer's certificate documenting physical verification and item-wise usage within the factory was accepted, and earlier Tribunal and Court decisions applying a liberal interpretation of capital goods and their components were followed. The adjudicating authority's reliance on the Larger Bench decision in Vandana Global without proper verification of factual material was disapproved and the confirmed demand was set aside on merits. [Paras 3, 15, 17]

Allow Cenvat credit on the steel items and other MS components used in the manufacture or support of capital goods; impugned demand on this count set aside.

Cenvat Credit on inputs and consumables used in manufacture of capital goods - Cenvat credit allowed on inputs and consumables (including refractory material) used in maintenance or manufacture of furnaces, boilers and other capital equipment essential for production - HELD THAT: - The Tribunal accepted that refractory items were necessary for maintenance and functioning of boilers and furnaces without which the finished goods could not be manufactured; accordingly such inputs are eligible for credit. The factual finding that these materials were used within the factory in relation to essential capital equipment and the authorities cited supporting this proposition were relied upon to allow the credit. [Paras 8, 15]

Cenvat credit on refractory materials and similar consumables used in furnaces/boilers allowed; related demand set aside.

Transfer of Cenvat credit on change of ownership / transfer of factory - transfer of assets and liabilities of a going concern - Incoming owner entitled to avail Cenvat credit on inputs and capital goods transferred with the factory where assets and liabilities of the earlier unit were taken over and requisite undertaking/registration amendment produced - HELD THAT: - The Tribunal found that the appellant had applied for amendment of the Central Excise registration and furnished an undertaking accepting liabilities of the earlier company, and that the physical assets and inputs stood transferred with the factory. Reliance was placed on precedents holding that where stock of inputs/capital goods is transferred with the factory or where a going concern is transferred, the incoming entity may be permitted to transfer or avail the credit. The adjudicating authority's denial without proper satisfaction of transfer of assets was disapproved. [Paras 16, 17]

Appellant entitled to the Cenvat credit transferred with the factory on takeover; confirmed demand on this ground set aside.

Invocation of extended period for demand and time bar - suppression and bona fide interpretation - Demand for extended period set aside as barred by limitation and because suppression was not established where the matter involved contested interpretation - HELD THAT: - The Tribunal noted that the appellant had declared the credits in monthly returns and maintained books of account, and that no evidence of deliberate suppression was produced by the Revenue. Given that the controversy predominantly concerned interpretation of the Cenvat rules and earlier inconsistent decisions, the Tribunal held that the coverage of the suppression clause could not be invoked; consequently the extended period for demand could not be sustained. The demand was therefore set aside on limitation grounds as well as on merits. [Paras 12, 18, 19]

Extended period demand held time barred and set aside; no suppression established.

Final Conclusion: The appeal is allowed both on merits and on limitation: Cenvat credit claimed on steel items, inputs, consumables and refractory materials used as parts, components or supports of capital goods (including those transferred with the factory on change of ownership) is admissible; the adjudicated demand and invocation of the extended period are set aside and the appellant is entitled to consequential relief as per law.

Input service - Input Service Distributor - Cenvat credit - Manner of distribution by input service distributor - Recovery of wrongly taken or utilised CENVAT credit under Rule 14 - Burden of proof on manufacturer/provider under Rule 9(6) - Nexus test for input services - Credit in relation to trading / exempted services

Input Service Distributor - Recovery of wrongly taken or utilised CENVAT credit under Rule 14 - Cenvat credit - Jurisdiction - Whether the adjudicating formation at the recipient manufacturing unit (Puducherry) had jurisdiction to issue show cause notices and recover credit distributed by the ISD (Bengaluru). - HELD THAT: - The Tribunal examined Rule 7 (manner of distribution), the definition of 'input service distributor' and Rule 14 (recovery of wrongly taken or utilised credit). It noted that an ISD is an office of the manufacturer which avails credit and distributes it to manufacturing or output service units; however credit is ultimately availed and utilised by the manufacturing unit which can use it for payment of duty. Recovery under Rule 14 is directed at the manufacturer/provider who has taken and/or utilised the credit. Practical operation of the scheme means the manufacturing unit that utilised the distributed credit is amenable to proceedings; hence the formation at the recipient unit can initiate recovery proceedings. The Tribunal relied on the reasoning in Clariant Chemicals to hold that the cause of action lies where the availment/utilisation occurs and that ISD and manufacturing units form a single legal entity for enforcement of recovery. [Paras 15]

Jurisdiction to issue show cause notices and recover the credit at the recipient manufacturing unit (Puducherry) is sustained; this limb of the revenue's action is upheld.

Input service - Nexus test for input services - Cenvat credit - Credit in relation to trading / exempted services - Burden of proof on manufacturer/provider under Rule 9(6) - Whether the Cenvat credit distributed by the ISD and availed by the appellant manufacturing unit was ineligible for want of nexus to manufacture or because it related to trading (exempted) activity, and whether denial/demand on merits could be sustained. - HELD THAT: - The Tribunal considered the definition of 'input service' as it stood before and after 01.04.2011 and the application of the nexus test. For periods prior to 01.04.2011 the definition was wide (included 'activities in relation to business'), and such services fell within the ambit of input services. For periods after 01.04.2011 the Tribunal examined each category of disputed services and noted that, except for housekeeping and AMC/warranty which were specifically examined, the Department itself had allowed a majority of the services in subsequent period orders. The appellant explained documentary and accounting allocations showing that credits attributable to trading were not distributed to the manufacturing unit and that substantial undistributed/unavailed credit remained at the ISD. The Department failed to rebut the appellant's calculations or demonstrate that the distributed credit pertained to trading. The Tribunal also noted that where invoices did not separately identify warranty/AMC tax components the existence of taxable service was not in dispute and that warranty/AMC provided by common ASPs are common input services distributable under Rule 7. Applying these considerations, and having regard to the allocation mechanism and authorities discussed, the Tribunal found that the denial of Cenvat credit and consequent demands could not be sustained on the merits. [Paras 16, 17, 18]

Denial of Cenvat credit on the disputed input services is not sustained; on the merits the issue is answered in favour of the assessee and against the Revenue, and the demands are set aside.

Final Conclusion: Impugned orders denying Cenvat credit and confirming demands are set aside. The Tribunal upholds the jurisdiction of the recipient manufacturing unit to face recovery proceedings but, on merits, allows the appeals and quashes the demands; the appeals are allowed with consequential reliefs.

CENVAT credit - input service - includes clause - services used in relation to modernization, renovation or repairs of factory - exclusion clause - construction/works contract services - harmonious construction of inclusion and exclusion in definition of input service

Input service - includes clause - services used in relation to modernization, renovation or repairs of factory - exclusion clause - construction/works contract services - CENVAT credit - harmonious construction of inclusion and exclusion in definition of input service - Whether services used for renovation, modernization or repairs of factory premises are admissible as CENVAT credit despite insertion of an exclusion for construction/works contract services w.e.f. 01.04.2011 - HELD THAT: - The Tribunal examined the definition of 'input service' as it stood before and after amendments and held that the inclusive limb expressly covering services used in relation to modernization, renovation or repairs of a factory continues to admit credit. The exclusion introduced w.e.f. 01.04.2011 for construction/works contract services applies to services used for construction or initial setting up of a building or civil structure, and does not negate the separate inclusion for renovation/repair. The Commissioner (Appeals) erred in treating the exclusion as operating to deny credit for renovation/repair works which fall squarely within the inclusive part of the definition. Reliance on earlier Tribunal decisions and the Board Circular confirming admissibility of credit for services used in repair/renovation reinforced that the exclusion is to be read in a manner harmonious with the inclusion and is directed at initial construction/setting up rather than subsequent renovation/repair. Consequently the adjudicating authority's allowance of credit for a substantial number of invoices was sustained and the Commissioner (Appeals) order denying credit solely on the ground of the exclusion was set aside. [Paras 16, 20, 21, 22, 23]

Services used for renovation, modernization or repairs of the factory premises are eligible for CENVAT credit and the Commissioner (Appeals) was not justified in denying credit by invoking the exclusion for construction/works contract services.

Final Conclusion: The order of the Commissioner (Appeals) dated 26.08.2020 is set aside; the appellant is entitled to CENVAT credit in respect of services used for renovation/modernization/repairs of the factory as held by the adjudicating authority, and the appeal is allowed.

Classification of goods - Chapter heading 30.02 - antisera and other blood fractions - Chapter heading 38.22 - diagnostic or laboratory reagents - HSN explanatory notes - Diagnostic Kits - Issue no longer res-integra / consistency from appellant's own earlier orders

Classification of goods - Chapter heading 30.02 - antisera and other blood fractions - Chapter heading 38.22 - diagnostic or laboratory reagents - HSN explanatory notes - Diagnostic Kits - Product 'Salmonella Antigens' is classifiable under Chapter heading 30.02 (goods of heading 3002) and not under heading 38.22 (goods of heading 3822). - HELD THAT: - The Tribunal applied its earlier decisions in the appellant's own cases, including this Bench's orders dated 03.10.2011 and Final Order No. A/11371/2013 dated 17.10.2013, and the ratio in the Apex Court's consideration in the Span Diagnostics line of authority. The HSN explanatory notes classify diagnostic kits under Chapter 30 where the essential character of the kit is given by a component of that heading; antisera and other blood fractions fall under Chapter 30.02 and, once covered by that heading, are excluded from Chapter 38.22. The factual matrix-that the product functions by agglutination, is in substance antisera/antisera-derived material, and that the bulk supplier's classification under Chapter 30.02 was not disputed-supports classification under 30.02. On this basis the impugned classification under 38.22 was found incorrect and set aside. [Paras 5, 6]

Impugned order set aside; appeals allowed and the product classified under Chapter heading 30.02 (3002).

Final Conclusion: The Tribunal allowed the appeals, holding that 'Salmonella Antigens' are classifiable under Chapter heading 30.02 (3002) rather than under Chapter heading 38.22 (3822), relying on earlier orders in the appellant's own case and authoritative interpretation of the HSN notes.

Pre-deposit requirement for first appeal - inherent powers under Article 226 of the Constitution of India - financial hardship as ground for modification of pre-deposit - entertainment of appeal on merits despite statutory pre-deposit condition

Pre-deposit requirement for first appeal - financial hardship as ground for modification of pre-deposit - inherent powers under Article 226 of the Constitution of India - entertainment of appeal on merits despite statutory pre-deposit condition - Modification of the statutory pre-deposit condition imposed under Section 62(5) of the PVAT Act for filing first appeal and direction to entertain and decide the appeal on merits upon acceptance of a reduced pre-deposit. - HELD THAT: - The Court accepted the petitioner's unchallenged material showing heavy indebtedness and ongoing loan instalment obligations, and noted that forcing payment of the full 25% pre-deposit would impede the petitioner's ability to continue business and could lead to cancellation of GST registration. While the Supreme Court in Tecnimont Pvt. Ltd. upheld the mandatory nature of Section 62(5) and held that the appellate authority does not have implied power to dispense with the pre-deposit, the present High Court exercised its constitutional jurisdiction under Article 226 to afford relief on grounds of genuine financial hardship. The High Court found that, on the facts before it, modification of the pre-deposit to 10% would suitably balance the statutory requirement and the petitioner's hardship, and directed the respondent authorities to accept 10% as pre-deposit and to entertain and decide the appeal on merits in accordance with law. [Paras 13, 14]

Petition allowed by exercise of Article 226 powers; petitioner permitted to file appeal which respondent-authorities shall entertain and decide on merits upon acceptance of 10% pre-deposit of the total demand instead of 25%.

Final Conclusion: Writ petition allowed: the petitioner is directed to file the appeal and respondents shall accept a pre-deposit of 10% of the total demand and decide the appeal on merits in accordance with law.

Dishonour of cheque under Section 138 NI Act - Limitation requirement for notice under Section 138 - Validity of consolidated legal notice - Service of notice and summons as statutory notice - Vicarious liability of partners/partnership for acts of partner - Quashing jurisdiction under Section 482 CrPC

Validity of consolidated legal notice - Limitation requirement for notice under Section 138 - Inclusion of a cheque barred by limitation in a consolidated legal notice does not invalidate the notice insofar as it relates to other cheques for which the notice is within time. - HELD THAT: - The court held that the notice dated 17.04.2017 specifies separately the dates and amounts of all four cheques and must be read as a whole. Although the first cheque (15.12.2016) was time barred, the three subsequent cheques dishonoured on 24.03.2017 were within the statutory period and the common notice qua those cheques was timely. Reliance on precedents reiterating that a notice must make specific demand for the cheque amount and that consolidated notices containing separable claims are not necessarily vitiated was applied to uphold maintainability of the complaint in respect of the three timely cheques. [Paras 15, 16, 17, 18, 19]

The consolidated legal notice is valid in respect of the three cheques that were within limitation and does not become invalid by inclusion of one time barred cheque.

Service of notice and summons as statutory notice - Dishonour of cheque under Section 138 NI Act - Where the complainant's legal notice was not received, the summons issued by the Magistrate under the complaint proceedings operate as the statutory notice for the purposes of Section 138 NI Act. - HELD THAT: - Applying settled law, the court observed that in absence of receipt of the legal notice, the summons issued by the learned Magistrate must be treated as the statutory notice. The summons and the pre summoning evidence before the Magistrate relate only to the three cheques dishonoured on 24.03.2017, and therefore there is no misrepresentation as to liability or notice in respect of those three cheques. [Paras 21, 22]

The summons issued by the Magistrate are to be considered as statutory notice where the legal notice was not received; no fault is found with the summons insofar as they relate to the three subsequent cheques.

Vicarious liability of partners/partnership for acts of partner - Whether the partnership firm and a non signatory partner were wrongly impleaded is a matter for trial and not for quashing under Section 482 CrPC. - HELD THAT: - The court declined to adjudicate the contention that the partnership (petitioner no.1) and petitioner no.3 were wrongly impleaded or cannot be held vicariously liable for acts of petitioner no.2. It noted that such contentions are triable issues to be raised before the Magistrate at trial; the petitioners had not denied the partnership status or liability in respect of the three cheques for which pre summoning evidence was led, and therefore the challenge to impleadment cannot be sustained in these quashing proceedings. [Paras 23]

The question of wrongful impleadment and vicarious liability is to be agitated at trial and is not a ground for quashing the complaint.

Quashing jurisdiction under Section 482 CrPC - The petition under Section 482 CrPC seeking quashing of the complaint is not maintainable on the grounds advanced and is dismissed. - HELD THAT: - The court observed the petitioners delayed raising the defects they now rely upon, withdrew an earlier application before the Magistrate, and did not challenge summons previously issued. The court also noted that approaching the High Court under Section 482 instead of the revisional remedy under Section 397 CrPC indicated forum shopping. Given the factual matrix, settled legal principles on notice and summons, and that pre summoning evidence relates only to the three timely cheques, the court found no merit in the quashing petition. [Paras 24, 26]

The petition for quashing is dismissed and the proceedings before the Magistrate shall continue.

Final Conclusion: The petition under Section 482 CrPC seeking quashing of the complaint under Section 138 read with Section 141 of the Negotiable Instruments Act is dismissed; the complaint is maintainable insofar as it relates to the three cheques dishonoured on 24.03.2017, the questions of impleadment and vicarious liability are left for trial, and the petitioners are directed to pay token costs to the complainant.

Prospective operation of statutory amendment - Interim compensation under Section 143-A of the Negotiable Instruments (Amendment) Act, 2018 - Application of amendment to complaints filed before commencement - Quashing of interim deposit order

Prospective operation of statutory amendment - Interim compensation under Section 143-A of the Negotiable Instruments (Amendment) Act, 2018 - Whether Section 143-A of the Negotiable Instruments (Amendment) Act, 2018 could be invoked to direct interim compensation in a complaint instituted before the amendment came into force. - HELD THAT: - The High Court accepted the contention that the Amendment Act came into force on 01.09.2018 while the complaint in the present case was filed on 25.08.2018. Relying on the ratio in G.J. Raja v. Tejraj Surana, the court concluded that Section 143-A operates prospectively and cannot be applied to offences or complaints that arose prior to the commencement of the Amendment. As the trial Court directed the accused to deposit interim compensation under Section 143-A in respect of a complaint filed before the amendment's commencement, that direction was held to be legally impermissible. The court therefore found the trial Court to have committed an error of law in allowing the application for deposit of interim compensation. [Paras 6, 7]

Order directing deposit of interim compensation under Section 143-A quashed; petition allowed.

Final Conclusion: The order dated 24.12.2018 directing payment of interim compensation under Section 143-A was quashed on the ground that Section 143-A is prospective and could not be invoked in respect of a complaint filed before the amendment came into force; petition allowed.

Maintainability of consolidated complaint for multiple cheques - Section 138 Negotiable Instruments Act - Section 219 Cr.P.C. - Single transaction doctrine - Power of High Court under Section 482 Cr.P.C. and abuse of process - Cognizance and summoning in cheque dishonour cases

Maintainability of consolidated complaint for multiple cheques - Section 138 Negotiable Instruments Act - Section 219 Cr.P.C. - Single transaction doctrine - Whether the question of clubbing seven cheques in a single complaint under Section 138 NI Act and the applicability of Section 219 Cr.P.C. can be adjudicated in the present petition - HELD THAT: - The Court held that whether the seven cheques form part of a single transaction or distinct transactions is a matter of trial and cannot be finally determined in a petition under Section 482 Cr.P.C. The averments in the complaint that cheques were issued in pursuance of transactions and that a single notice was issued do not permit this Court to decide at the interlocutory stage whether the complaints may be clubbed; that determination requires adjudication on evidence and at the trial. Consequently the applicability of Section 219 Cr.P.C. insofar as it might bar consolidation of more than three offences is not finally resolved in this petition and must be examined during trial. [Paras 13]

Remanded for trial: the question of clubbing the cheques and applicability of Section 219 Cr.P.C. is to be determined at trial and cannot be decided in the present petition

Cognizance and summoning in cheque dishonour cases - Maintainability of consolidated complaint for multiple cheques - Whether the revisional court erred in holding that the facts disclosed in the complaint constitute one offence and that Section 219 Cr.P.C. has no application - HELD THAT: - The High Court found that the revisional court prematurely concluded that the complaint disclosed a single offence and that Section 219 Cr.P.C. was inapplicable. That conclusion was held to be erroneous because the issue of whether the cheques are interlinked to constitute a single transaction is a matter for trial; the revisional court should not have foreclosed that enquiry at the revision stage. [Paras 13, 16]

Revisional court's finding is set aside to the extent that it foreclosed trial; the petitioner remains free to raise the defence at trial

Power of High Court under Section 482 Cr.P.C. and abuse of process - Whether this Court should exercise its inherent jurisdiction under Section 482 Cr.P.C. to quash the proceedings in the absence of exceptional circumstances - HELD THAT: - The Court reiterated the narrow scope for interference under Section 482 Cr.P.C., observing that relief will be granted only in exceptional cases where continuation of proceedings would amount to an abuse of process. The Court will not determine disputed questions of fact in exercise of these powers and therefore will not quash the proceedings merely because contested questions of fact exist relating to clubbing of offences. [Paras 14, 15]

Petition under Section 482 Cr.P.C. is not entertainable in the absence of exceptional circumstances or demonstrable abuse of process

Final Conclusion: Petition dismissed; the trial court's cognizance and summoning stand and the revisional court's conclusion that Section 219 Cr.P.C. had no application is set aside to the extent it foreclosed trial. The accused may urge all available defences, including that a single complaint for seven cheques is not maintainable, during the course of trial; no quashing under Section 482 Cr.P.C. is warranted absent exceptional circumstances.

Compounding of offences under the Negotiable Instruments Act, 1881 (Section 147) - Effect of non obstante clause in Section 147 overriding Section 320(9) CrPC - Compounding at any stage of proceedings, including appellate stage - Acquittal consequent to compounding of offence under Section 138 NI Act

Compounding of offences under the Negotiable Instruments Act, 1881 (Section 147) - Effect of non obstante clause in Section 147 overriding Section 320(9) CrPC - Compounding at any stage of proceedings, including appellate stage - Offence under Section 138 of the Negotiable Instruments Act can be compounded at any stage and Section 147 overrides the bar in Section 320(9) CrPC. - HELD THAT: - The Court applied the ratio in Damodar S. Prabhu v. Sayed Babalal H. and related authorities to hold that Section 147 is an enabling provision permitting compounding of offences under the NI Act and, by virtue of its non obstante clause and character as an amendment to a special statute, overrides the restriction in Section 320(9) CrPC. The Court noted that compounding may be permitted even at later stages of litigation, including appellate proceedings, and accepted the parties' compromise as voluntary and without duress. On that basis the Court allowed the compounding application and set aside the conviction under Section 138, resulting in acquittal of the petitioners. [Paras 6]

Compounding allowed; conviction under Section 138 set aside and petitioners acquitted.

Consequences of compounding - withdrawal of court-ordered deposit - Disposal of amounts deposited pursuant to interim orders after compromise - Petitioners permitted to withdraw the amount deposited pursuant to the interim order of this Court. - HELD THAT: - The Court recorded that an interim deposit of the specified sum had been made in compliance with its earlier order. In view of the parties' compromise and the Court's acceptance of the compounding application, the Court allowed the petitioners to withdraw the deposited amount and disposed of the related applications accordingly. [Paras 7, 8]

Withdrawal of deposited amount permitted; related interlocutory applications disposed of.

Final Conclusion: The parties' compromise under Section 147 NI Act is accepted; compounding is permitted, the convictions under Section 138 are set aside and the petitioners are acquitted; the interim deposit may be withdrawn and the connected applications are disposed of.

Presumption under Section 139 of the Negotiable Instruments Act - presumption of consideration under Section 118 of the Negotiable Instruments Act - reverse onus - rebuttable presumption - preponderance of probabilities - legally enforceable debt or liability - conviction under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - reverse onus - rebuttable presumption - preponderance of probabilities - legally enforceable debt or liability - conviction under Section 138 of the Negotiable Instruments Act - Validity of the conviction under Section 138 of the Negotiable Instruments Act in view of the statutory presumption and the accused's defence that the cheque was stolen and not issued towards a legally enforceable debt. - HELD THAT: - The Court applied the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, and the doctrine of reverse onus, whereby once the signature on the cheque is established the obligation shifts to the accused to rebut the presumption that the cheque was issued for discharge of a legally enforceable debt. The settled standard for discharging that burden is the preponderance of probabilities. The accused raised a defence that signed blank cheques were given to his brother for business and that one such cheque was stolen and later used by the complainant. The courts below found this defence improbable, particularly in view of the accused's position as a police officer and his failure to initiate criminal proceedings if the cheque was indeed stolen; instead, a lawyer's notice was issued by his brother. On reappraisal, the High Court found no error in the concurrent findings that the accused failed to raise a probable defence sufficient to rebut the presumption of a legally enforceable debt, and therefore the conviction under Section 138 stood justified. The High Court confirmed the conviction and sentence imposed by the courts below. [Paras 16, 17, 18, 19, 20]

Conviction under Section 138 of the Negotiable Instruments Act is confirmed as the accused failed to rebut the statutory presumption of a legally enforceable debt on the preponderance of probabilities.

Final Conclusion: The revision petition is dismissed; concurrent convictions and sentences for the offence under Section 138 of the Negotiable Instruments Act are confirmed, and directions are given for the accused to undergo sentence and pay the fine, with specified timelines and consequential directions for payment as compensation under Section 357(1)(b) of the Code.