TaxTMI Updates e-Newsletter
Dec 04,2024

Interpretation of Rule 86A of GST Rules, 2017 - negative blocking of electronic credit ledger - electronic credit ledger - disallow debit of electronic credit ledger for discharge of liabilities - reasons to be recorded in writing - concurrent jurisdiction / cross-empowerment

Concurrent jurisdiction / cross-empowerment - Form GST ASMT-10 - State Authorities were empowered to issue Form GST ASMT-10 dated 26.09.2024 despite earlier search by Central Authorities on 13.03.2024 - HELD THAT: - The Court observed that although the Central Authorities conducted search relating to wrongful availment up to 31.03.2024, the State Authorities issued ASMT-10 for wrongful availment up to the month of September, 2024, and the quantum and period alleged by the two Authorities were different. Where the period and quantum under investigation differ, cross-empowerment does not automatically bar the State from initiating proceedings for the period/amount remaining within its claim. At the time of the State's ASMT-10 (26.09.2024) no Central notice for the larger quantum had been issued; subsequent issuance of DRC-01A by the Central Authorities (08.10.2024) may affect further proceedings, but it was premature at the time of challenge to conclude that cross-empowerment barred the State. The Court therefore held that the State acted within its jurisdiction while leaving open the consequences of later overlapping action by the Central Authorities. [Paras 6]

State Authorities were within their power to issue ASMT-10 and it was premature to hold them barred by cross-empowerment at the time of issuance.

Interpretation of Rule 86A of GST Rules, 2017 - negative blocking of electronic credit ledger - electronic credit ledger - disallow debit of electronic credit ledger for discharge of liabilities - reasons to be recorded in writing - Blocking of ITC under Rule 86A is permissible even if the ECL shows zero balance at the moment of blocking (negative blocking) provided the credit was fraudulently availed and had been available in the ECL at any point prior to utilisation - HELD THAT: - The Court analysed Rule 86A in its entirety, noting the first part requires reasons to believe that input tax credit available in the ECL has been fraudulently availed or is ineligible, and the second part empowers the authority to not allow debit of an amount equivalent to such credit for discharge of liabilities. Reading both parts together, the Court held that 'available in the ECL' refers to credit which, after fraudulent availment, was made available in the ECL at any point of time for debiting, even if it has subsequently been utilised. The scheme permits authorities to block (including by creating a negative balance) an amount equivalent to fraudulently availed credit so as to prevent future debits up to the blocked amount. The Court rejected the literalist view that blocking is impermissible when the ledger balance is zero, and concluded that nothing in Rule 86A expressly prohibits negative blocking; to interpret otherwise would frustrate the Rule's object to protect revenue where fraudulent credit has been availed and may already have been utilised. [Paras 7]

Rule 86A authorises blocking of ITC to the extent of fraudulently availed credit whether or not the ECL shows a positive balance at the time of blocking; negative blocking is permissible where reasons are recorded.

Form GST DRC-01A - effect of payment and remittance on parallel proceedings - Issuance of DRC-01A for a limited amount and remittance in respect thereof does not operate as determination of the entire ASMT-10 demand - HELD THAT: - The Court noted that the DRC-01A issued related to a specific smaller amount (pertaining to the blocking dated 24.06.2024) and the State's ASMT-10 covered a much larger demand. Payment/remittance of that smaller amount and dropping of proceedings in respect of it did not determine or exhaust the State Authority's power to prosecute remaining allegations under ASMT-10. The Court observed that, following subsequent developments (including the Central Authorities' DRC-01A of 08.10.2024), it is for the State Authorities to consider the petitioner's reply and decide whether the Central action covers the matters in the State's ASMT-10; that process of consideration remains open and must be undertaken by the State. [Paras 8]

Payment in respect of a limited DRC-01A does not conclude the broader ASMT-10 demand; the State must consider the petitioner's reply and determine whether to continue proceedings.

Final Conclusion: The writ petition was dismissed. The Court held that the State acted within jurisdiction in issuing ASMT-10, that Rule 86A permits blocking (including negative blocking) to the extent of fraudulently availed credit even if the ECL had been drawn down, and that payment/remittance against a limited DRC-01A does not decide the larger ASMT-10 demand; the State Authorities remain to consider the petitioner's reply and take a decision in accordance with law.

Reconciliation of Input Tax Credit - lack of opportunity of hearing - treatment of assessment order as show cause notice - remand for fresh consideration - deposit as condition for remand - reasonable opportunity of hearing

Reconciliation of Input Tax Credit - lack of opportunity of hearing - reasonable opportunity of hearing - Whether the impugned assessment order dated 09.08.2024 should be set aside for lack of adequate opportunity to explain alleged discrepancies in ITC reconciliation - HELD THAT: - The court found that the assessment order confirming proposed discrepancies in Input Tax Credit arose after examination of return-related records and notices, but the petitioner had sought an opportunity to explain those discrepancies and had filed a reply. The learned Additional Government Pleader did not press a serious objection to affording a further opportunity. In these circumstances the court set aside the impugned order and directed that the order be treated as a show cause notice, thereby ensuring the petitioner is afforded a reasonable opportunity of hearing to explain reconciliation issues and produce supporting material before a fresh adjudication is undertaken. [Paras 5]

Impugned order set aside and treated as show cause notice; petitioner to be given opportunity to file objections with supporting documents and be heard afresh.

Remand for fresh consideration - deposit as condition for remand - Whether the matter should be remanded to the adjudicating authority and on what terms - HELD THAT: - Relying on the principle applied in a comparable decision of this Court, the petitioner's offer to pay 10% of the disputed tax was accepted as a condition for remand. The court ordered deposit of 10% of the disputed tax within four weeks; on payment, the impugned assessment order shall be treated as a show cause notice and the adjudicating authority shall consider objections filed within four weeks and pass orders in accordance with law after affording a hearing. Failure to deposit or to file objections within the stipulated time will result in restoration of the impugned order. [Paras 5]

Matter remanded on condition that petitioner deposits 10% of disputed tax within four weeks; on such deposit the assessment order is treated as show cause notice and fresh adjudication shall follow after hearing; failure to comply restores the impugned order.

Final Conclusion: Writ petition disposed by setting aside the impugned assessment order for assessment year 2019-20; remand directed on condition of deposit of 10% of the disputed tax and grant of opportunity to file objections and be heard, failing which the original order will be restored.

Notice under Section 65(3) for audit - Requirement of prior notice for audit - Validity of notice in Form DRC-01 issued with reference to Rule 100(2) and Rule 142(1)(a) - Distinction between assessment and audit for initiation of proceedings - Stay of further proceedings

Notice under Section 65(3) for audit - Requirement of prior notice for audit - Validity of the notice issued to the petitioner as compliance with the requirement of prior notice for audit under Section 65(3). - HELD THAT: - The Court examined the notice produced by the State and observed that no notice issued under the specific mandate of Section 65(3) or any corresponding rule for audit had been pointed out by the State. The notice relied upon by the State was in Form GST-DRC-01 (Annexure P-1) but was issued with reference to Rule 100(2) and Rule 142(1)(a), which pertain to assessment-related proceedings rather than the statutory pre-audit notice contemplated by Section 65(3). In the absence of any demonstrable compliance with the requirement of informing the registered person not less than fifteen working days prior to the conduct of audit in the prescribed manner, the Court concluded that, prima facie, the statutory prerequisite for initiating an audit had not been satisfied. [Paras 8, 9, 10]

Prima facie the notice does not satisfy the requirement of Section 65(3) for conducting an audit; compliance with the prior-notice requirement was not shown.

Distinction between assessment and audit for initiation of proceedings - Validity of notice in Form DRC-01 issued with reference to Rule 100(2) and Rule 142(1)(a) - Stay of further proceedings - Whether the petitioner's case is comparable to CWP No. 1793 of 2024 and whether further proceedings should be stayed pending satisfaction of the statutory notice requirement. - HELD THAT: - The petitioner contended similarity with CWP No. 1793 of 2024 where proceedings were stayed for failure to issue the requisite pre-assessment notice before issuing a show cause notice. The State argued that the earlier matter related to assessment while the present matter relates to audit under Section 65. The Court, however, found that the notice relied upon in the present case was framed by reference to assessment provisions and that no proper audit notice under Section 65(3) was produced. Given this prima facie defect and the factual parity with the earlier stay granted in CWP No. 1793 of 2024, the Court considered it appropriate to protect the petitioner from further proceedings until the statutory notice requirement is addressed. [Paras 6, 7, 9, 10, 11]

Further proceedings pursuant to Annexure P-1 dated 24.5.2024 and the impugned order dated 12.9.2024 for financial year 2019-20 are stayed.

Final Conclusion: The Court found a prima facie lack of compliance with the statutory prior-notice requirement for audit under Section 65(3) and, on that basis and having regard to the parity with the earlier order in CWP No. 1793 of 2024, stayed further proceedings in respect of the notices/orders challenged for financial year 2019-20.

Vague show cause notice - rectification of assessment under Section 161 of the GST Act - computation of limitation period for appeal from date of rectification order - remedy before appropriate statutory authority (appeal/rectification)

Vague show cause notice - remedy before appropriate statutory authority (appeal/rectification) - Challenge to the assessment on the ground that the show cause notice was vague and whether the Writ Petition was maintainable on merits of assessment. - HELD THAT: - The Court noted that the decision in MD Electric Co (reported) concerned a show cause notice held to be vague. In the present matter the petitioner had filed a detailed reply to the show cause notice and the assessment order was passed after considering that reply. The rectification application was dismissed on the ground that its contents amounted to a challenge to the assessment order. The Court therefore held that, except for any vagueness in the show cause notice already acted upon by the petitioner, the remaining contentions relate to the merits of assessment and are not suitable for disposal by writ. The petitioner was directed to pursue remedies before the appropriate statutory authority rather than seek relief by writ. [Paras 4]

Writ not maintainable to ventilate merits of assessment; petitioner to approach the appropriate statutory authority; vagueness point already acted upon and cannot sustain the writ.

Rectification of assessment under Section 161 of the GST Act - computation of limitation period for appeal from date of rectification order - Date from which the period of limitation for filing an appeal against the original assessment order is to be computed where a rectification application has been filed and rejected. - HELD THAT: - The Court examined the effect of a rectification application under Section 161 being disposed of after an original assessment. It reasoned that a rectification, if allowed, merges into the original order; therefore rejection of the rectification does not permit the limitation for appeal to be treated as running from the date of the original assessment. The Court held that the period of limitation for instituting an appeal against the assessment commences from the date on which the rectification application is disposed of (rejected or otherwise), and not from the date of the original assessment order. Applying this principle to the facts, the Court recorded that the assessment order was dated 07.08.2024 and the rectification order was dated 12.11.2024, and directed that the limitation period shall be calculated from 12.11.2024. [Paras 5, 6]

Limitation for appeal against the assessment runs from the date of dismissal of the rectification application; in the present case from 12.11.2024.

Final Conclusion: Writ petitions disposed with liberty to the petitioner to pursue statutory remedies; limitation for appeal against the assessment shall be computed from the date of dismissal of the rectification application (12.11.2024 in this case).

Restoration of Input Tax Credit - reversal of ITC under compulsion - double debit in the Electronic Credit Ledger - refund of accumulated input tax credit on account of exports - eligibility for refund under Section 54(3) of the CGST Act read with Section 16(3)(a) of the IGST Act - adjudication under the provisions of Section 73 or Section 74 of the CGST Act

Reversal of ITC under compulsion - double debit in the Electronic Credit Ledger - restoration of Input Tax Credit - ITC reversed by the petitioner during summons proceedings without adjudication must be restored where that same ITC has been subsequently debited again on account of a refund application so that the same credit is not debited twice. - HELD THAT: - The Court found on the material that the petitioner availed ITC in July, 2021 and, during summons proceedings on 12-13.01.2023, reversed that ITC from the premises of DGGI. When the petitioner later filed a refund application, Rule 89 caused the Electronic Credit Ledger to be debited again for the same ITC. The Court held that the same ITC cannot be debited twice in the Electronic Credit Ledger - once by the compelled reversal and again by the operation of the refund filing rules - and therefore the ITC reversed on 13.01.2023 in the course of summons proceedings (without any adjudication) is required to be restored. The Court expressly did not decide the substantive question whether the petitioner was entitled to the refund or eligible to claim the ITC on the transfer of leasehold rights, leaving adjudication of those merits to the appropriate forum. [Paras 10, 11, 12]

Respondents directed to restore the ITC of Rs. 9,83,53,032/- in the petitioner's Electronic Credit Ledger within four weeks.

Eligibility for refund under Section 54(3) of the CGST Act read with Section 16(3)(a) of the IGST Act - adjudication under the provisions of Section 73 or Section 74 of the CGST Act - The Court did not adjudicate the substantive entitlement to the refund or the legality of claiming ITC on transfer of leasehold rights and left those questions to the pending appeal and adjudicatory process. - HELD THAT: - The Court declined to examine the merits of whether the petitioner was entitled to refund under Section 54(3) of the CGST Act read with Section 16(3)(a) of the IGST Act or whether the ITC on transfer of leasehold rights was allowable; those matters remain sub judice before the Appellate Authority and any adjudication under Sections 73/74 of the CGST Act was not undertaken by this court. The limited relief granted-restoration of the compelled reversal-was without prejudice to the outcome of the pending appeal and any consequent adjudication in accordance with law. [Paras 11]

Merits of refund claim and eligibility to claim ITC left open for adjudication before the Appellate Authority; this Court did not decide those questions.

Final Conclusion: The petition succeeds in part: the Court directs restoration of the ITC reversed under compulsion on 13.01.2023 in the petitioner's Electronic Credit Ledger within four weeks, while leaving the substantive entitlement to refund and the question of eligibility to claim ITC on the transfer of leasehold rights to the pending appellate and adjudicatory proceedings.

Requirement to record reasons in adjudicatory orders - Unreasoned order - Quashing of order for failure to consider reply - Re-adjudication on merits - Section 73 CGST Act

Requirement to record reasons in adjudicatory orders - Unreasoned order - Quashing of order for failure to consider reply - Section 73 CGST Act - Re-adjudication on merits - Impugned adjudication order dated 30 December 2023 under Section 73 of the CGST Act is unsustainable for being wholly unreasoned and for failing to engage with the reply filed by the petitioner. - HELD THAT: - The Goods & Services Tax officer finalized the Section 73 proceedings by recording only that the taxpayer's reply was 'not acceptable as incomplete, not duly supported by adequate documents' without any engagement with the detailed reply placed on record. The impugned order contains no independent reasons or assessment of the submissions made by the petitioner. An adjudicatory order that fails to assign reasons and does not consider the response filed by the assessee is legally infirm and cannot be sustained. In view of this absence of reasoned decision-making, the appropriate remedial course is to quash the impugned order and remit the matter to the proper officer for fresh adjudication, with directions to take into account and deal with the replies already submitted by the petitioner. All substantive rights and contentions on the merits are left open for determination afresh by the proper officer.

Impugned order dated 30 December 2023 quashed; matter remitted to the proper officer for re-adjudication, taking into account the petitioner's replies; rights on merits kept open.

Final Conclusion: Writ petition allowed; order dated 30 December 2023 quashed and proceedings under Section 73 remitted for fresh adjudication by the proper officer with directions to consider the petitioner's replies. Challenge to Notification No.9/2023-Central Tax dated 31 March 2023 left open for appropriate proceedings.

Extension of limitation by writ jurisdiction - extraordinary circumstances for condoning delay - maintainability of appeal under Section 107 of the CGST/SGST Acts - limited applicability of the Limitation Act - Section 14 - inordinate delay and laches in filing writ petitions

Extension of limitation by writ jurisdiction - maintainability of appeal under Section 107 of the CGST/SGST Acts - Whether the High Court can, in exercise of writ jurisdiction under Article 226, extend the statutory time-limit for filing an appeal under Section 107 of the CGST/SGST Acts and permit belated appeals to be entertained. - HELD THAT: - The Court held that ordinarily it cannot extend the time-limit for filing an appeal under Section 107 of the CGST/SGST Acts by exercising writ jurisdiction. The judgment relies on earlier precedents, including Singh Enterprises v. CCE and Ors and the line of decisions considered in Ketan V. Parekh, to the effect that the High Court should not ordinarily entertain appeals beyond the statutory period and that Section 5 of the Limitation Act may not apply to such statutory appeals. The Court reiterated that only in rare and extraordinary cases, where exceptional circumstances are demonstrated, can the court exercise its jurisdiction to allow a belated appeal to be considered on merits. Applying that principle, the Court found no justification to extend time in the present proceedings and declined to permit the belated appeal. [Paras 3]

Ordinary extension of the statutory period for filing an appeal under Section 107 cannot be granted by writ jurisdiction; no such extension is warranted here.

Extraordinary circumstances for condoning delay - limited applicability of the Limitation Act - Section 14 - Whether the petitioner established extraordinary or special circumstances (such as inability to download appeal from the portal or help-desk failures) sufficient to justify restoration/condonation of the belated appeal. - HELD THAT: - The Court acknowledged that, under exceptional situations, relief may be moulded and appeals beyond time can be entertained where extraordinary circumstances are shown, drawing upon reasoning in Ketan V. Parekh and B.C. Chaturvedi. However, after examining the petitioner's claim of portal malfunction and help-desk failure and the asserted illness, the Court found that no extraordinary circumstances were demonstrated in this case. The Court observed that the petitioner attempted to file only in December 2023 against orders dated February 2020 and that the asserted grounds did not satisfy the threshold for invoking the limited equitable relief under Section 14 of the Limitation Act or for exercising extraordinary writ powers to restore the appeal. [Paras 3, 5, 6]

No extraordinary or special circumstances were shown; therefore the belated appeal cannot be condoned or restored.

Inordinate delay and laches in filing writ petitions - Whether the writ petition itself should be dismissed for inordinate delay in approaching the High Court. - HELD THAT: - The Court applied settled law that, although Article 226 does not prescribe a limitation period, writ petitions may be dismissed for inordinate delay or laches. The adjudicating authority's orders were dated February 2020, and the writ petition was filed in 2024. The Court found that the petitioner failed to approach the Court within a reasonable time. The petitioner's claim of serious illness was treated with scepticism and did not suffice to excuse the four-year delay in seeking relief. [Paras 4, 6]

The writ petition is barred by inordinate delay and is dismissed on that ground as well.

Final Conclusion: Writ petition dismissed. The High Court declined to extend the statutory time for filing an appeal under Section 107 CGST/SGST in the absence of extraordinary circumstances and also dismissed the petition for inordinate delay in approaching the Court.

Service of notice - opportunity of hearing - treatment of assessment order as show cause notice - conditional remand on deposit of a percentage of disputed tax - lifting of attachment upon compliance

Service of notice - opportunity of hearing - Validity of the impugned assessment order where notices and order were not tendered or dispatched but uploaded on the common portal, and the petitioner did not participate in adjudication. - HELD THAT: - The Court found that the petitioner had neither been served the show cause notices nor the impugned order by tender or registered post, but that the material was uploaded only to the common portal under "Additional Notices and Orders", and therefore the petitioner was unaware of the proceedings and did not participate. In these circumstances the Court set aside the impugned order and directed that, upon compliance with the conditions imposed (deposit and filing of objections), the impugned order shall be treated as a show cause notice and the petitioner afforded an opportunity to submit objections and be heard. The Court relied on the petitioner's stated readiness to explain the alleged defects if given an opportunity and on the respondent's lack of serious objection to granting a final chance. [Paras 5, 8]

Impugned order set aside; to be treated as show cause notice upon compliance and objections to be considered after affording reasonable hearing.

Conditional remand on deposit of a percentage of disputed tax - treatment of assessment order as show cause notice - lifting of attachment upon compliance - Whether the matter should be remanded for fresh adjudication subject to condition of deposit and whether interim attachment should be lifted on compliance. - HELD THAT: - The Court directed that the petitioner shall deposit 10% of the disputed tax within four weeks from receipt of the order and, on such deposit, the impugned assessment order shall be treated as a show cause notice; the petitioner must file objections with supporting material within four weeks of receipt. The respondent is required to consider any objections and pass orders in accordance with law after affording a reasonable opportunity of hearing. The Court further ordered that, upon compliance with the deposit condition, the bank attachment placed in consequence of the impugned assessment shall be lifted forthwith. The Court provided that failure to pay the deposit or to file objections within the stipulated periods would result in restoration of the impugned assessment order. [Paras 6, 8]

Matter remanded for fresh consideration on condition of deposit of 10% and filing of objections within specified time; bank attachment to be lifted on compliance; failure to comply restores the assessment order.

Final Conclusion: Writ petition allowed by setting aside the impugned assessment order for assessment year 2019-2020; matter remanded for fresh adjudication on the terms that the petitioner deposits 10% of the disputed tax and files objections within prescribed periods, and the bank attachment shall be lifted upon such compliance, failing which the impugned order shall be restored.

Constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act - functional test for determining whether immovable property is a "plant" under Section 17(5)(d) - remand for factual adjudication on whether construction of immovable property amounts to a plant - liberty to raise relevant factual issues in appropriate proceedings

Constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act - Clauses (c) and (d) of Section 17(5) of the CGST Act are constitutionally valid. - HELD THAT: - The High Court accepted and followed the Supreme Court's decision in Chief Commissioner of Central Goods and Service Tax v. M/s Safari Retreats Private Ltd., wherein the Supreme Court held that the challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) (and Section 16(4)) was not established. The court recorded the Supreme Court's conclusions that the impugned provisions are intra vires and that the expression "plant or machinery" in Section 17(5)(d) cannot be equated with the separate definition of "plant and machinery"; these conclusions dispose of the constitutional challenge. Accordingly, the writ petition insofar as it sought to impugn the constitutional validity of those clauses was dismissed. [Paras 6, 8]

Writ petition dismissed insofar as it challenges the constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act.

Functional test for determining whether immovable property is a "plant" under Section 17(5)(d) - remand for factual adjudication on whether construction of immovable property amounts to a plant - liberty to raise relevant factual issues in appropriate proceedings - Question whether the petitioner's construction of immovable property amounts to a "plant" under Section 17(5)(d) is not finally adjudicated and requires factual determination. - HELD THAT: - The Court followed the Supreme Court's directive that whether a building (such as a mall, warehouse or other immovable property) qualifies as a "plant" under Section 17(5)(d) is a question of fact to be decided by applying the functionality test in the context of the registered person's business and the role the building plays. The High Court declined to make a final factual adjudication in writ proceedings and reserved liberty for the petitioner to raise and prosecute the question in appropriate proceedings where evidence and factual determination can be undertaken. The petition is therefore dismissed on constitutional grounds but the factual issue is left open for appropriate adjudication. [Paras 7, 8]

Issue remitted for factual determination; petitioner granted liberty to raise the question in appropriate proceedings applying the functionality test.

Final Conclusion: The writ petition is dismissed insofar as it challenges the constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act, following the Supreme Court's decision; however, whether the petitioner's construction of immovable property amounts to a "plant" under Section 17(5)(d) is left open for factual adjudication and the petitioner is granted liberty to raise that issue in appropriate proceedings.

Regular bail under Bharatiya Nagarik Suraksha Sanhita, 2023 - offences relating to fraudulent availment and passing of input tax credit - sanction for prosecution by competent authority - absence of incriminating recovery at accused's instance - concurrent prosecution of another person affecting culpability - custodial period and likely delay in trial as a ground for bail - consideration of transgender status in bail adjudication

Regular bail under Bharatiya Nagarik Suraksha Sanhita, 2023 - offences relating to fraudulent availment and passing of input tax credit - absence of incriminating recovery at accused's instance - concurrent prosecution of another person affecting culpability - custodial period and likely delay in trial as a ground for bail - consideration of transgender status in bail adjudication - Grant of regular bail to the applicant arrested for alleged fraudulent availment and passing of input tax credit - HELD THAT: - The Court considered the nature of the allegations and the materials on record including the fact that significant aspects of the evidence were procured in proceedings against another person (Ishan Gupta), that no incriminating recovery was effected at the instance of the present applicant, and that the complaint/charge-sheet has been filed. The Court recorded that there is no material demonstrating active or conscious participation by the applicant in the alleged offences and noted the applicant's prolonged custody since 06.08.2024 and the likelihood that trial will take time. The applicant's transgender status was also taken into account. Balancing these factors and without expressing any opinion on merits, the Court exercised its discretionary power under the criminal bail jurisdiction to allow regular bail on furnishing the stated bond and surety. [Paras 6, 7]

Bail allowed; applicant to be released on furnishing a personal bond of Rs.1,00,000 with one solvent surety, order to remain in force till disposal of the case.

Final Conclusion: The First Bail Application is allowed and the applicant is directed to be released on bail on furnishing the specified bond and surety; the order is without prejudice to the trial and merits of the case.

Violation of principles of natural justice - service by uploading on common portal vs. personal/registered service - opportunity of hearing before assessment - treatment of assessment order as show cause notice - remand for fresh adjudication on deposit condition - conditional restoration of order

Violation of principles of natural justice - service by uploading on common portal vs. personal/registered service - opportunity of hearing before assessment - Impugned assessment order set aside on grounds of denial of opportunity to participate in adjudication due to service only by upload on common portal and inability of petitioner to access the portal. - HELD THAT: - The Court found that the petitioner did not receive the show cause notices or assessment order by tender or registered post but only by uploading on the common portal, and the petitioner asserted inability to access the portal and so could not participate in the proceedings. In these circumstances, the adjudicatory process suffered from a breach of principles of natural justice, warranting interference. The petitioner represented readiness to explain the alleged discrepancies and to participate if given an opportunity. The Court relied on this factual position to set aside the impugned order and to direct a fresh opportunity to be afforded to the petitioner. [Paras 3, 4]

Impugned order of assessment set aside for non-compliance with principles of natural justice and lack of effective service.

Treatment of assessment order as show cause notice - remand for fresh adjudication on deposit condition - conditional restoration of order - Assessment proceedings remanded for fresh consideration subject to deposit of 10% of disputed tax and specified timelines for filing objections, failing which the impugned order shall be restored. - HELD THAT: - The Court directed that upon deposit of 10% of the disputed tax within four weeks, the impugned order shall be treated as a show cause notice and the petitioner given four weeks from receipt of the order to file objections with supporting material. The respondent is directed to consider any objections filed and pass orders in accordance with law after affording a reasonable opportunity of hearing. The Court expressly provided that if the deposit is not made or objections are not filed within the stipulated periods, the impugned assessment order shall stand restored. This remand confines the rehearing to adjudication on merits after compliance with the conditional deposit and procedural timelines ordered by the Court. [Paras 6]

Matter remitted to the adjudicating authority for fresh consideration on payment of 10% of disputed tax and compliance with the Court's directions; failure to comply results in restoration of the impugned order.

Final Conclusion: Writ petition disposed by setting aside the impugned assessment order for breach of natural justice; assessment remanded for fresh adjudication on the conditions and timelines directed by the Court (deposit of 10% of disputed tax; filing of objections; hearing), with restoration of the original order if conditions are not complied with.

Condonation of delay - Limitation for filing appeal - Principles of natural justice - Non-formation of Appellate Tribunal - Section 107 - appeal timeline and discretion - Applicability of Section 5 of the Limitation Act, 1963

Condonation of delay - Limitation for filing appeal - Section 107 - appeal timeline and discretion - Whether the Appellate Authority was justified in rejecting the appeal as time-barred and in refusing condonation of delay - HELD THAT: - The High Court found that the Appellate Authority's rigid refusal to condone delay was legally unsound. Having examined the material and submissions, the Court accepted that the delay in filing the appeal arose from circumstances beyond the petitioner's control and that a mechanical application of the statutory timeline failed to account for genuine extenuating circumstances. The Court relied on reasoning that Section 107's time-limits cannot be interpreted so inflexibly as to preclude consideration of sufficient explanations for delay, noting precedent which permits application of Section 5 of the Limitation Act in appropriate cases and authority holding that an appellate authority may, in given facts and circumstances, extend time. On this basis the Court held the impugned order dismissing the appeal as barred by limitation to be unsustainable. [Paras 12, 13, 14]

Appellate Authority's refusal to condone delay set aside; order dismissing appeal as time-barred quashed.

Principles of natural justice - Whether the impugned order was vitiated by breach of principles of natural justice for nonprovision of personal hearing - HELD THAT: - The petitioner contended that the order dated February 27, 2024 was passed without affording personal hearing in breach of statutory mandate. The Court noted that no personal hearing had been given in violation of Section 75(4) (as invoked) and that such procedural lapse contributed to the conclusion that the authority's decision was arbitrary. The absence of adequate opportunity to be heard was a material flaw in the impugned exercise of authority. [Paras 5, 12]

Impugned order was procedurally defective for failure to afford personal hearing; this vitiated the decision.

Non-formation of Appellate Tribunal - Right to further appeal - Whether the petitioner's right to further appeal was effectively obstructed by nonformation of the GST Appellate Tribunal - HELD THAT: - The Court observed that the petitioner's statutory right to an appellate forum was frustrated by the nonformation of the Appellate Tribunal, which amounted to an effective obstruction of the right to further appeal. This consideration reinforced the view that the dismissal of the appeal on timing grounds without empathetic consideration of circumstances and procedural lapses produced substantial prejudice to the petitioner. [Paras 12]

The petitioner's right of further appeal had been effectively obstructed by non-formation of the Appellate Tribunal; this context weighed in favour of relief.

Condonation of delay - Applicability of Section 5 of the Limitation Act, 1963 - Remand for fresh consideration of the application for condonation of delay and direction to decide appeal on merits if delay is condoned - HELD THAT: - Having quashed the impugned order, the Court directed the Appellate Authority to consider the petitioner's application for condonation of delay on merits. The Court instructed that if the explanations for delay are found sufficient, the Authority may condone the delay and proceed to hear and dispose of the appeal on its merits. This constitutes a remand for fresh consideration limited to the condonation application and, if allowed, subsequent adjudication of the appeal. [Paras 14]

Application for condonation of delay remanded to Appellate Authority for fresh merits consideration; if condoned, appeal to be heard and decided on merits.

Final Conclusion: Writ petition allowed; impugned order dated February 27, 2024 quashed. Petitioner's rights under the WBGST Act, 2017 restored; Appellate Authority directed to consider condonation application on merits and, if accepted, to admit and decide the appeal on merit. No order as to costs.

Unreasoned order - quashing and remand for fresh adjudication - requirement of a reasoned and speaking order - right to be heard / personal hearing - rejection of a taxpayer's reply for being not perspicuous without reasons

Unreasoned order - requirement of a reasoned and speaking order - right to be heard / personal hearing - Validity of the Assistant Commissioner's order dated 16.08.2024 which confirmed demand after rejecting the taxpayer's reply as "not comprehensible" without assigning reasons. - HELD THAT: - The Court noted that upon issuance of the Show Cause Notice dated 29.05.2024 the petitioner filed a detailed reply on 29.06.2024 but the impugned order perfunctorily rejected that reply by stating it was "not comprehensible, conceivable, not perspicuous and is ambiguous" without assigning any further reasons. The Court observed that such formulaic language appeared to be used as a template and that the impugned order was therefore wholly unreasoned. In view of the absence of determinative reasoning and having regard to the principles of natural justice and the requirement that adjudicating authorities record reasons when rejecting replies and confirming demands, the Court was unable to sustain the order. The Court quashed the impugned order and remitted the matter to the Assistant Commissioner to initiate proceedings afresh in terms of the earlier SCN, directing that a fresh reasoned and speaking order be passed after taking into account the reply already submitted; all substantive rights and contentions remain open for adjudication on merits. [Paras 2, 3, 4, 5, 6]

Impugned order dated 16.08.2024 quashed; matter remitted for fresh adjudication and a fresh reasoned and speaking order to be passed after considering the taxpayer's reply; rights on merits kept open.

Final Conclusion: Writ petition allowed; impugned order of 16.08.2024 set aside and matter remitted to the Assistant Commissioner for fresh proceedings in terms of the SCN with a direction to pass a reasoned and speaking order after considering the reply already filed; liberty reserved to challenge the Notifications in appropriate proceedings.

Retrospective cancellation of GST registration - Requirement of reasoned show cause notice and reasoned order for retrospective cancellation - Exercise of power under Section 29(2) must be based on objective satisfaction and not mechanical - Effect of retrospective cancellation on input tax credit

Retrospective cancellation of GST registration - Requirement of reasoned show cause notice and reasoned order for retrospective cancellation - Validity of cancellation of the petitioner's GST registration with retrospective effect to 02/07/2017 where the show cause notice and final order did not set out reasons for retrospective effect - HELD THAT: - The Court examined whether the power to cancel registration with retrospective effect under Section 29(2) can be exercised mechanically where the show cause notice and the cancellation order do not articulate reasons that justify retrospective operation. Relying on earlier decisions outlined in the order, the Court held that clauses in Section 29(2) are independent limbs permitting retrospective cancellation only when the proper officer records objective satisfaction and reasons demonstrating due application of mind. Given the deleterious consequences of retroactive cancellation (including consequences to third-party input tax credit), the authority must state cogent reasons in the show cause notice and in the order for choosing a retrospective effective date. In the present case the SCN and the impugned order did not indicate the reasons which weighed upon the respondents to cancel registration from 02/07/2017; instead the order merely recorded lack of response and other observations without explaining why retrospective cancellation was warranted. For these reasons the Court found the retrospective cancellation unsustainable and quashed that aspect of the order. [Paras 8, 9, 10]

Impugned order to the extent it purported to cancel registration effective from 02/07/2017 is quashed; cancellation shall take effect from the date of issuance of the SCN, namely 15/01/2023.

Final Conclusion: Writ petition allowed; retrospective cancellation back to 02/07/2017 set aside and cancellation treated as effective from 15/01/2023 because the show cause notice and order failed to record reasons justifying retrospective operation.

Wrongly availed input tax credit - reversal of ITC in GSTR-3B - treatment as payment under Section 73 of the CGST Act, 2017 - DRC-07 demand notice - availability of departmental amnesty - maintainability of writ petition against tax demand

Wrongly availed input tax credit - reversal of ITC in GSTR-3B - treatment as payment under Section 73 of the CGST Act, 2017 - DRC-07 demand notice - Validity of the demand included as item No.3 in the DRC-07 notice which sought recovery of ITC that the petitioner had already reversed in its GSTR-3B and which the adjudicating officer had directed to be treated as payment under Section 73 of the CGST Act, 2017. - HELD THAT: - The first respondent issued a show cause notice, heard the petitioner and recorded a factual finding that the petitioner had reversed the wrongly availed ITC in its GSTR-3B for the month of February, 2020 on 28.02.2021, and ordered that the reversed amount be treated as payment under Section 73 of the CGST Act, 2017. Notwithstanding that order, the second respondent included the same amount in the DRC-07 demand notice as a recoverable amount. The counter affidavit admitted reversal by the petitioner but relied on an inability of the portal to reflect adjustment; that explanation was held to be unacceptable. Given the adjudicating officer's finding and order treating the reversal as payment under Section 73, inclusion of the same amount again in the DRC-07 demand was erroneous. The court therefore set aside the demand in respect of item No.3 of the impugned DRC-07 notice, while leaving the petitioner free to pursue available remedies in respect of other items and to seek amnesty where appropriate. [Paras 7, 8, 9, 10]

Demand in respect of item No.3 of the DRC-07 notice is set aside.

Final Conclusion: Writ petition partly allowed; the demand under item No.3 of the DRC-07 notice dated 15.05.2024 is quashed, and the petitioner is at liberty to pursue remedies for other items and seek departmental amnesty; no order as to costs.

Revisionary jurisdiction u/s 263 - treatment of development fees as revenue or corpus - application of income for capital expenditure by educational trusts - requirement of enquiry before invoking revisionary power - Delay filling SLP

As decided by HC [2023 (3) TMI 1554 - ORISSA HIGH COURT] Tribunal's order quashing the CIT(E)'s revisionary order for AY 2017-18 is maintained and no substantial question of law arises.

HELD THAT:- We find that there is absolutely no explanation for a long delay of 504 days in preferring the Special Leave Petition. Hence, the Application seeking condonation of delay in preferring the Special Leave Petition is rejected. Consequently, the Special Leave Petition stands dismissed on the ground of delay.

Unexplained cash credits under Section 69A - effect of breach of contractual arrangement on taxability of deposits - treatment of cash deposits where funds ultimately reach principal - treatment of deposits in Specified Bank Notes during demonetisation

Unexplained cash credits under Section 69A - treatment of cash deposits where funds ultimately reach principal - Whether cash deposits in the assessee's bank accounts could be treated as unexplained cash credits under Section 69A when the cash was collected from micro borrowers on behalf of the bank and ultimately deposited into the bank's account. - HELD THAT: - Both the Commissioner (Appeals) and the Tribunal found as a concurrent fact that the assessee collected instalments from micro borrowers of the bank and, after depositing them in his bank accounts, transferred the amounts to the account of the bank so that there was no dispute as to the amount collected or its remittance to the bank. The authorities held that mere non compliance with the contractual mode of immediate deposit in the bank's account did not convert those receipts into unexplained cash credits. Absent any dispute that the amounts collected belonged to the bank and were ultimately deposited with it, the deposits in the assessee's account could not be treated as unexplained income under Section 69A. The factual findings that the amounts were collected from the bank's customers and remitted to the bank were upheld and do not raise a substantial question of law. [Paras 5, 8]

Additions under Section 69A on account of the cash deposits were not justified; the deposits were not unexplained as the amounts were collected on behalf of and ultimately deposited with the bank.

Treatment of deposits in Specified Bank Notes during demonetisation - effect of breach of contractual arrangement on taxability of deposits - Whether cash deposits in Specified Bank Notes during the demonetisation period could be treated as tainted and hence as unexplained deposits attracting Section 69A. - HELD THAT: - The Commissioner (Appeals) had declined to delete additions for the demonetisation period on an assumption that the assessee was not authorised to receive Specified Bank Notes under the agreement. The Tribunal, however, found that there was no pleading or material by the revenue to show that the assessee was not in receipt of Specified Bank Notes from the bank's customers during 09.11.2016 to 30.12.2016, and noted that similar transactions had been accepted for earlier periods. On these facts the Tribunal concluded that deposits during the demonetisation period were not tainted merely because they comprised Specified Bank Notes and therefore could not be treated as unexplained deposits. The Tribunal's findings on this factual matrix do not give rise to a substantial question of law. [Paras 5, 9]

Additions for deposits in Specified Bank Notes during the demonetisation period cannot be sustained as unexplained deposits in absence of any material showing the assessee did not receive such notes from the bank's customers.

Final Conclusion: The concurrent factual findings that the assessee collected instalments on behalf of the bank and remitted them to the bank, including during the demonetisation period, negate the classification of those deposits as unexplained cash credits under Section 69A; the appeal is dismissed.

Condonation of delay - unexplained cash deposits - addition under section 69A - presumptive taxation - application of section 44AD - best judgment assessment and non-compliance with notices - ownership of bank account transactions and onus of attribution - requirement to proceed against actual owner and available procedures (summons under section 131, inquiries under section 133(6), assessment under section 143(2) / re-opening under section 148) - co-terminus powers of Appellate Commissioner with Assessing Officer

Condonation of delay - Condonation of delay in filing appeal before the Tribunal - HELD THAT: - The assessee filed the appeal 174 days beyond the period prescribed under the Act and sought condonation, explaining non-communication of the CIT(A) order due to counsel's staff e-mail registration and receipt of a demand notice which alerted the assessee. The Tribunal, after hearing parties and noting the transitional difficulties in electronic communication and absence of mala fide, held that substantial justice warranted condonation of delay. Reliance was placed on the principle that courts lean towards advancement of substantial justice where technical lapses exist and there is no mala fide. The delay in filing the appeal was therefore condoned and the appeal admitted for adjudication on merits. [Paras 3]

Delay in filing the appeal condoned; appeal admitted for hearing on merits.

Ownership of bank account transactions and onus of attribution - unexplained cash deposits - addition under section 69A - requirement to proceed against actual owner and available procedures (summons under section 131, inquiries under section 133(6), assessment under section 143(2) / re-opening under section 148) - Deletion of additions under section 69A in respect of demonetisation-period deposits in account held in the name of M/s Anurag Kumar Neeraj Kumar - HELD THAT: - The AO attributed large demonetisation-period cash deposits in current account No. 384601010011133 to the assessee because pay-in slips bore the assessee's PAN and signature and made additions under section 69A. On appeal and before the Tribunal, the assessee produced a bank certificate and other material showing the account belongs to M/s Anurag Kumar Neeraj Kumar and is operated by its proprietor Mr. Neeraj Kumar, who filed his own return declaring turnover and availing presumptive taxation. The Tribunal found the assessee's explanation satisfactory that the deposits belonged to the brother's proprietary business and that inadvertent use of the assessee's PAN on pay-in-slips did not convert ownership of funds to the assessee. The Tribunal also observed that Revenue had not initiated proceedings against Mr. Neeraj Kumar nor issued summons or inquiries to him and, therefore, should have proceeded against the actual owner if required. In these circumstances the additions made in the hands of the assessee under section 69A were unsustainable and ordered deleted. [Paras 7]

Additions under section 69A in respect of deposits in account No. 384601010011133 deleted.

Unexplained cash deposits - SOP threshold and declared deposits - best judgment assessment and non-compliance with notices - Deletion of addition relating to cash deposits in the assessee's own bank accounts which were declared in the return - HELD THAT: - The assessee's saving bank account No. 384602010945067 and an SBI account contained aggregate demonetisation-period cash deposits of Rs. 84,000 and Rs. 49,000 respectively, which the assessee had declared in its income-tax return showing income of Rs. 2,84,600. The Tribunal examined the bank statements and the return, noted there was no adverse finding that these deposits were unaccounted for, and observed that, as per the CBDT SOP, small deposits below specified limits during the demonetisation period merit no addition where accounted for. Given the assessee had owned and disclosed these deposits in the ITR and had participated in appellate proceedings, the Tribunal found no justification for sustaining the addition and ordered deletion. [Paras 7]

Additions in respect of the assessee's declared cash deposits (aggregate Rs. 84,000 and related deposits) deleted.

Presumptive taxation - application of section 44AD - ownership of bank account transactions and onus of attribution - requirement to proceed against actual owner and available procedures (summons under section 131, inquiries under section 133(6), assessment under section 143(2) / re-opening under section 148) - Deletion of income computed on presumptive basis under section 44AD by treating deposits as turnover of the assessee - HELD THAT: - The AO applied an 8% profit rate on alleged turnover (deposits) to compute income under section 44AD and added the resultant amount in the assessee's hands. The Tribunal accepted the assessee's evidence that the bulk of the deposits were in the current account of Mr. Neeraj Kumar's proprietary concern and that Neeraj had declared turnover and opted for presumptive taxation. The Tribunal emphasised that Revenue had not proceeded against Neeraj Kumar nor shown that he disowned the transactions; it could have invoked assessment or re-opening provisions or issued summons to him. Given the attribution to the proprietor and absence of any contrary finding by Revenue, the Tribunal held that computing presumptive income in the assessee's hands was not sustainable and directed deletion of the addition. [Paras 7]

Addition made by applying presumptive taxation under section 44AD in the assessee's hands deleted.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and on merits allowed the appeal: deletions were ordered of the additions made under the demonetisation-related unexplained deposit head and of income computed presumptively, and declared deposits in the assessee's own accounts were deleted; the appeal is allowed.

Prospective application of departmental circular - binding nature of CBDT circulars on the Revenue - scope and exhaustiveness of exceptions in administrative circulars - recall of Tribunal order for hearing on merits in view of changed administrative instructions

Prospective application of departmental circular - binding nature of CBDT circulars on the Revenue - Applicability of CBDT Circular No.5/2024 dated 15.03.2024 to appeals/SLPs decided earlier and to the assessee's AY 2017-18 proceedings - HELD THAT: - The Tribunal examined para 10 of Circular No.5/2024 which expressly states that the circular "shall come into effect from the date of issue" and "will apply to SLPs/appeals to be filed henceforth before the SC/HCs/Tribunals." On that textual basis the Bench held the circular to be prospective and not retrospective. The Tribunal further noted the settled principle that circulars issued by the CBDT, while in operation, are binding on the Revenue. Consequently Circular No.5/2024 cannot be applied retrospectively to recall or reopen orders in the assessee's case for AY 2017-18. [Paras 7]

Circular No.5/2024 is prospective and does not apply to the assessee's AY 2017-18 appeals; it cannot be invoked to recall the Tribunal's order.

Scope and exhaustiveness of exceptions in administrative circulars - recall of Tribunal order for hearing on merits in view of changed administrative instructions - Whether the modified para 10 of CBDT Circular No.3/2018 (as amended on 20.08.2018) brings information from state police within the enumerated external agencies so as to require hearing on merits despite low tax effect - HELD THAT: - The Tribunal reproduced the amended para 10 of Circular No.3/2018 which lists specific categories of cases to be heard on merits notwithstanding low tax effect and includes information from specified enforcement agencies (CBI/ED/DRI/SFIO/DGGI). The Bench held that the list of agencies in the circular is exhaustive and does not include state police. On that basis the Tribunal rejected the Revenue's contention that the addition based on information from the state police fell within the exception; it emphasized that an act lawful when done cannot be rendered unlawful by subsequent administrative change and therefore the modified circular did not apply to the assessee's case. [Paras 8]

Modified Circular No.3/2018 does not cover information from the state police; the exception is not attracted and the Revenue's plea to recall and hear on merits fails.

Final Conclusion: Both miscellaneous applications filed by the Revenue seeking recall of the Tribunal's order for AY 2017-18 were dismissed: Circular No.5/2024 was held prospective and inapplicable, and the amended exceptions in Circular No.3/2018 were held not to extend to information from the state police, so there was no ground to reopen the matter.

Refusal by the High Court to entertain a writ petition under Article 226 of the Constitution of India - relegation to statutory remedy under the Income Tax Act - application of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] precedent - consideration of delay in issuance of notices under amended Section 148-A(b)

Relegation to statutory remedy under the Income Tax Act - application of Rajeev Bansal precedent - Validity of the High Court's refusal to entertain writ and relegation of the assessee to statutory remedies under the Income Tax Act - HELD THAT: - The Division Bench of the Bombay High Court declined to entertain the writ petition and directed the appellant to avail statutory remedies under the I.T. Act. Having regard to this Court's decision in Rajeev Bansal and connected matters, the Supreme Court concluded that the High Court's order should be set aside so as to permit consideration of the substantive objections before the Assessing Officer. The appellants were granted an opportunity to appear before the Assessing Officer and press all contentions and objections available to them, consistent with the law as laid down in Rajeev Bansal. The Court therefore did not uphold a blanket refusal to entertain judicial review where merits require adjudication by the Assessing Officer in accordance with that precedent.

The impugned High Court order refusing the writ petition is set aside and the appeal is allowed to the extent of permitting fresh consideration before the Assessing Officer.

Quash of assessment order - remand to Assessing Officer for fresh consideration of objections - consideration of delay in issuance of notices under amended Section 148-A(b) - Whether the final Assessment Order dated 22.05.2023 and the impugned notices should be quashed or remitted for fresh consideration - HELD THAT: - Applying the dictum in Rajeev Bansal, the Court found it just and proper to quash the final Assessment Order dated 22.05.2023 for the limited purpose of enabling the appellant to raise objections to the notices dated 30.06.2021 and 28.07.2022 before the Assessing Officer. The Assessing Officer is directed to consider the objections and contentions of the appellant in accordance with law (including issues relating to delay in issuance of notices deemed issued under amended Section 148-A(b) as elucidated by the three-Judge Bench), and thereafter pass a fresh order. The Court made clear that the appellant remains free to pursue all remedies in law against the fresh assessment order, save as to issues concluded by the earlier precedent.

The final Assessment Order dated 22.05.2023 is quashed for the limited purpose of remitting the matter to the Assessing Officer to consider objections and pass a fresh order in accordance with law.

Final Conclusion: The impugned High Court order is set aside; the final Assessment Order dated 22.05.2023 is quashed only to enable the appellant to press objections before the Assessing Officer who shall decide afresh in accordance with law and the Rajeev Bansal judgment; the appellant is at liberty to pursue remedies against the fresh order.

Interest on securities - accrual basis v. due basis - Accrual of interest - Mercantile system of accounting - delay of 220 days in filing the special leave petition - HC [2023 (1) TMI 725 - TELANGANA HIGH COURT] allowed assessee appeal as interest on securities for AY 1994-95 is to be taxed on due basis where the security stipulates payment on a specified date

HELD THAT:- We find that the reasons assigned for seeking condonation of delay are neither satisfactory nor sufficient in law to be condoned. Hence, the application seeking condonation of delay is dismissed. Consequently, the special leave petition is dismissed on the ground of delay.

However, the question of law, if any, which arises in this matter is left open to be agitated in any other appropriate case.

Reopening of assessment - notice under Section 148 of the Income tax Act, 1961 - notice under Section 148A(b) and order under Section 148A(d) - premature writ intervention - statutory remedy under the Income tax Act - jurisdictional error versus error within jurisdiction - Application of precedent -

HELD THAT: - The issue involved in this Special Leave Petition is squarely covered by the Judgment of “Union of India & Ors. vs. Rajeev Bansal” [2024 (10) TMI 264 - SUPREME COURT (LB)]

In view of the above, the petition filed by the assessee is disposed of. The assessee will be governed by reasons discussed in the said Judgment.

The assessing officers will dispose of the objections in terms of the law laid down by this Court. Thereafter, the assessee who is aggrieved will be at liberty to pursue all the rights and remedies in accordance with law, save and except for the issues which have been concluded in the Judgment.

Final Conclusion: The Special Leave Petition is disposed of as governed by the Court's earlier judgment in Union of India & Ors. vs. Rajeev Bansal (2024 (10) TMI 264 - SUPREME COURT (LB) - the exemption application is allowed; assessing officers are directed to decide objections in accordance with that law and the assessee may pursue further remedies except on issues conclusively determined by the cited judgment.

Refund - power of Assessing Officer to order refund - obligation of Central Board of Direct Taxes to effect refund - modification of interlocutory order - directions to revenue authorities

HELD THAT:- Additional Solicitor General appearing for the Revenue makes a statement that the directions issued by the High Court [2022 (9) TMI 1642 - ORISSA HIGH COURT] in the impugned order have been duly complied with. He informs that an amount of Rs.16,90,510/- has been refunded after adjusting the self-assessed liability of Rs.58,09,487/-.

Nothing further is required to be adjudicated now. If the assessees have any grievance or any further difficulty, we leave it open for them to take appropriate recourse available to them in law.

Special Leave Petition is, accordingly, disposed of

Deduction under Section 80P(2)(d) - Mandatory procedure under Section 144B - Reassessment proceedings under Section 148 - Quashing and remand for de novo assessment - Obligation to participate in assessment proceedings

Deduction under Section 80P(2)(d) - Final determination of entitlement to deduction under Section 80P(2)(d) cannot be adjudicated in writ proceedings under Article 226. - HELD THAT: - The Court declined to finally decide the claim of exemption under Section 80P(2)(d) in proceedings under Article 226, observing that the substantive question of entitlement to the deduction must be considered and decided in the statutory reassessment process. The petitioner's contentions on merit therefore were not adjudicated on merits in the writ; instead the matter is remitted for fresh consideration in the assessment proceedings so that the claim may be examined by the assessing authority in accordance with law. [Paras 13, 14]

Claim under Section 80P(2)(d) not decided; matter remitted for fresh adjudication in reassessment proceedings.

Mandatory procedure under Section 144B - Quashing and remand for de novo assessment - Impugned assessment order set aside for failure to proceed with final adjudication in reassessment and matter remitted to respondent to pass fresh order from the stage of show cause notice. - HELD THAT: - Relying on the Court's reasoning in the cited precedent, the Court found that procedural safeguards and the statutory process must be followed in reassessment. Consequently the impugned order is quashed and the case is remitted to the respondent to pass fresh orders on merits and in accordance with law from the stage of the show cause notice issued pursuant to Section 148, enabling the petitioner to be heard afresh. The petitioner is directed to file a consolidated reply within 30 days and to participate in the de novo proceedings; the impugned order will operate as an addendum to the show cause notice. [Paras 14, 17]

Impugned order quashed; matter remitted for fresh proceedings from show cause stage with directions to enable filing of reply and participation.

Obligation to participate in assessment proceedings - Petitioner must participate in reassessment and cooperate; failure to do so permits the respondent to proceed on available material. - HELD THAT: - The Court recorded that the petitioner had neglected statutory obligations by failing to file returns under Section 139(4) and by not participating in proceedings after service of notices. The Court granted one more opportunity but made clear that the petitioner must engage in the de novo proceedings and cooperate with the assessing authority; failure to participate will entitle the respondent to proceed in accordance with law on the material on record. [Paras 4, 5, 16]

Petitioner directed to participate and cooperate in reassessment; respondent may proceed if petitioner fails to do so.

Quashing and remand for de novo assessment - Administrative direction to pay to Court fund as consequence of petitioner's neglect. - HELD THAT: - Considering the petitioner's neglect in complying with statutory requirements and non-participation, the Court imposed a direction that the petitioner pay a specified sum to the Chief Justice's Relief Fund as a condition of granting the relief of remand and another opportunity to be heard. This direction is ancillary to the relief of remand and aimed at reflecting the petitioner's failure to prosecute the statutory process earlier. [Paras 15]

Petitioner directed to make the specified payment to the Chief Justice Relief Fund before the stipulated date.

Final Conclusion: The writ petition is disposed of by quashing the impugned order and remitting the matter to the assessing authority for de novo consideration from the stage of the show cause notice issued under Section 148; the petitioner must file a consolidated reply within 30 days, participate and cooperate in the reassessment, and comply with the Court's direction to make the specified payment to the Chief Justice Relief Fund.

Alternative statutory remedy - writ jurisdiction under Article 226 - efficacious alternative remedy rule - self-imposed restraint in exercise of writ jurisdiction - exemption from statutory deposit under the proviso to Section 249(4)

Alternative statutory remedy - writ jurisdiction under Article 226 - efficacious alternative remedy rule - self-imposed restraint in exercise of writ jurisdiction - Maintainability of the writ petition challenging the reassessment order while an appeal before the Commissioner (Appeals) is pending - HELD THAT: - The Court held that the Income Tax Act provides a complete code of remedies against assessment/re-assessment and that the petitioner had already availed the statutory remedy by preferring an appeal to the Commissioner (Appeals) which remained pending. Applying the established principle that the High Court will ordinarily refrain from exercising its writ jurisdiction under Article 226 when an adequate and efficacious alternative statutory remedy exists, the Court declined to entertain the writ petition. The Court noted that no exceptional circumstances were shown to render the statutory appeal ineffective or illusory, and that the petitioner had not contended before the Court that the alternative remedy was ineffectual. The petition therefore could not supplant the appellate mechanism provided by the statute. [Paras 8, 9, 10]

Writ petition not maintainable and cannot be entertained while the statutory appeal is pending; petitioner must pursue the appeal before the Commissioner (Appeals).

Exemption from statutory deposit under the proviso to Section 249(4) - alternative statutory remedy - Direction to the Commissioner (Appeals) to consider the petitioner's application for exemption from the statutory deposit and to proceed to hear and decide the pending appeal - HELD THAT: - The Court observed that the statute itself contemplates an application to the Appellate Authority for exemption from the requirement of payment of tax or deposit as a precondition for entertaining an appeal, in terms of the proviso to Section 249(4). Rather than entertain the writ, the Court granted the petitioner liberty to file all necessary applications and papers before the Commissioner (Appeals) within two weeks and directed the Commissioner (Appeals) to consider any application for exemption from the deposit and to hear and dispose of the pending appeal in accordance with law. The Court continued the interim order for a limited period to enable compliance. [Paras 10, 11, 12]

Petitioner granted liberty to seek exemption from the statutory deposit before the Commissioner (Appeals); Commissioner (Appeals) directed to consider the application and decide the pending appeal; writ petition disposed accordingly.

Final Conclusion: Writ petition challenging the Assessment Order dated 31.03.2022 for Assessment Year 2017 is disposed of as not maintainable in view of the pending statutory appeal; petitioner permitted to file applications before the Commissioner (Appeals) (including for exemption from the deposit under the proviso to Section 249(4)), and the Commissioner (Appeals) directed to consider and decide the appeal in accordance with law; interim protection extended for a short limited period.

Exemption under Section 54F - investment in a residential house - appreciation of evidence - perverse finding - description in revenue records as agricultural land - joint ownership and allocation of share

Exemption under Section 54F - investment in a residential house - appreciation of evidence - joint ownership and allocation of share - description in revenue records as agricultural land - Whether the Assessee is entitled to exemption under Section 54F by treating his investment in the jointly purchased property as investment in a residential house - HELD THAT: - The question was treated as one of fact: whether the new property upon which the Assessee claims a part share contained a residential house within the Assessee's share so as to attract the exemption under Section 54F. The registered sale deed described only a 'makaan' and did not expressly refer to a 'residential house' (rihayasi makaan). On inspection and on the material before the authorities, brick-kiln structures and sheds were found to exist on the property; the revenue records described the land as agricultural land and registration fees were paid on that basis. Although the sale deed conveyed the property jointly to co-owners, the contention that the brick-kiln and built-up structures fall exclusively within the shares of other co-owners was not accepted by the authorities. The ITAT examined the evidence and concluded that the investment was not in a residential house; the High Court found no perversity in that concurrent factual appreciation and declined to interfere. [Paras 6, 7, 8, 10, 11]

The ITAT's factual finding that the Assessee's investment was not in a residential house and therefore the exemption under Section 54F was not available is upheld; the appeal is dismissed.

Final Conclusion: The High Court upheld the factual conclusion of the authorities that the jointly purchased property did not constitute investment in a residential house for the Assessee's share and dismissed the appeal for lack of any substantial question of law.

Foundational fact for criminal liability - Abetment under Section 278 of the Income Tax Act - Presumption of culpable mental state under Section 278E of the Income Tax Act - Credibility of an untested show cause reply - Obligation of the prosecution to prove case beyond reasonable doubt - Effect of non-examination of a witness on prosecution case

Foundational fact for criminal liability - Effect of non-examination of a witness on prosecution case - Credibility of an untested show cause reply - Foundational facts necessary to convict the petitioner for abetment were not proved by the prosecution. - HELD THAT: - The court found that the prosecution's case depended primarily on the show cause reply (Exhibit-6) of the assessee Munilal Devi, who attributed the fabrication and management of her return to the petitioner. Munilal Devi was not examined as a witness, which precluded testing the credibility of her show cause reply by way of oral evidence and cross-examination. It was the prosecution's duty to establish the foundational facts upon which the charge of abetment was based; the learned trial court's conclusion that non-examination did not affect credibility, and that the petitioner should have secured her examination, was held to be perverse. In these circumstances the Court concluded that the foundational facts required to prove abetment were not established beyond reasonable doubt. [Paras 19, 21]

Foundational facts for abetment were not proved by the prosecution; the trial court's treatment of non-examination as immaterial was perverse.

Presumption of culpable mental state under Section 278E of the Income Tax Act - Obligation of the prosecution to prove case beyond reasonable doubt - The statutory presumption under Section 278E cannot be invoked unless the prosecution first proves the foundational facts beyond reasonable doubt. - HELD THAT: - The court held that the presumption of 'mens rea' under Section 278E is a substantive evidential presumption which operates only after the foundational facts are proved by the prosecution. Reliance on Section 278E was inappropriate in the present case because the foundational facts establishing the petitioner's role in abetment were not proved beyond reasonable doubt. The court distinguished the cited Supreme Court authority on the basis that, in that case, foundational facts (including admissions and conduct) were satisfactorily proved; by contrast, here the prosecution's reliance on an untested show cause reply could not sustain the presumption. [Paras 20, 22, 24]

Presumption under Section 278E did not arise because foundational facts were not proved; therefore the presumption of culpable mental state was inapplicable.

Abetment under Section 278 of the Income Tax Act - Obligation of the prosecution to prove case beyond reasonable doubt - Whether the conviction and sentence of the petitioner under Section 278 of the Income Tax Act could be sustained. - HELD THAT: - Having concluded that the prosecution failed to prove the foundational facts necessary to establish the petitioner's abetment, and that the statutory presumption of mens rea could not be invoked, the court held that the conviction and sentence recorded by the trial court and affirmed on appeal could not stand. The court noted that the same show cause reply had not been accepted to convict the maker in another proceeding, underscoring the insufficiency of the material relied upon against the petitioner. In view of these conclusions, maintaining the conviction would not be sustainable in law. [Paras 25, 26]

Conviction and sentence under Section 278 were set aside; the petitioner was acquitted and discharged from bail bonds.

Final Conclusion: The High Court allowed the criminal revision: the prosecution failed to prove the foundational facts of abetment for AY 2003-04, the presumption under Section 278E was inapplicable, the conviction and sentence under Section 278 were set aside, the petitioner was acquitted and discharged, and the trial court records were remitted.

Furnishing false particulars in verification of income-tax return - conviction under Section 277 of the Income Tax Act - presumption as to culpable mental state under Section 278E of the Income Tax Act - burden to rebut statutory presumption beyond reasonable doubt - reliance on documentary and oral evidence to prove forgery and false claim

Furnishing false particulars in verification of income-tax return - conviction under Section 277 of the Income Tax Act - reliance on documentary and oral evidence to prove forgery and false claim - Trial and appellate courts' concurrent findings that the petitioner filed an income-tax return for AY 2003-04 supported by forged TDS certificate and false housing-loan documents and that the prosecution proved the offence under Section 277 beyond reasonable doubt. - HELD THAT: - The trial court examined oral testimony and a series of documentary exhibits and found that the return (Exhibit 13) and attached documents including Form 16 (Exhibit 13/2) were forged or contained false facts; verification bore the petitioner's signature and his explanation that an office assistant had affixed or misused signatures was not supported by cogent evidence. The appellate court independently reviewed the documentary and oral evidence (including the petitioner's reply Exhibit 15/1) and sustained the finding that the refund claim was based on fabricated papers and that the petitioner had verified the return. Both courts concluded that prosecution established the essential facts required for conviction under Section 277 by cogent, credible and consistent evidence, and the High Court found no perversity or material irregularity in those concurrent findings and declined revisional interference. [Paras 12, 19, 21, 23, 24]

Conviction under Section 277 of the Income Tax Act for AY 2003-04 (FY 2002-03) upheld; concurrent findings of the trial and appellate courts sustained.

Presumption as to culpable mental state under Section 278E of the Income Tax Act - burden to rebut statutory presumption beyond reasonable doubt - Applicability of the statutory presumption under Section 278E and the consequent burden on the accused to disprove culpable mental state beyond reasonable doubt. - HELD THAT: - Section 278E mandates that in prosecutions requiring a culpable mental state a court shall presume existence of such state, while permitting the accused to adduce evidence to prove absence of that state. The High Court explained that the accused must rebut the presumption by proving the requisite fact to the court's satisfaction beyond reasonable doubt (and not by mere preponderance of probability). Applying this principle, the courts found that the petitioner failed to discharge the heavy evidentiary burden to rebut the presumption of culpable mental state arising from the false verification and supporting forged documents. [Paras 21, 22, 23]

Presumption under Section 278E applied; petitioner failed to rebut the presumption beyond reasonable doubt and therefore culpable mental state was established for conviction.

Compoundable nature of the offence - Whether the question of compounding the offence was adjudicated by the Court. - HELD THAT: - The matter of compounding was raised in the revision petition, but the Income Tax Department's counsel had no instruction on compounding and the petitioner was absent from court; consequently the Court did not adjudicate the compounding question on merits. The record only notes lack of instruction and non pursuit by the petitioner. No substantive determination was recorded on whether the offence could or should be compounded. [Paras 25]

Not decided by the Court for want of instructions and petitioner's absence; compounding was not adjudicated.

Final Conclusion: The High Court dismissed the criminal revision petition, upheld the concurrent convictions and sentence for the offence under Section 277 of the Income Tax Act for Assessment Year 2003-04 (Financial Year 2002-03), applied Section 278E to hold that the petitioner failed to rebut the presumption of culpable mental state beyond reasonable doubt, and did not adjudicate the question of compounding due to lack of instruction and the petitioner's non presence.

Revision jurisdiction under section 263 of the Income tax Act - order erroneous in so far as prejudicial to the interests of revenue (Explanation 2) - requirement of inquiries or verification which should have been made - distinction between lack of inquiry and mere change of opinion - reopening of assessment and consequential assessment under section 147 - remand for fresh examination of cash deposits, bank credits, demat/commodity transactions and reconciliation with Form 26AS

Requirement of inquiries or verification which should have been made - distinction between lack of inquiry and mere change of opinion - Whether the Principal Commissioner was justified in invoking section 263 to set aside the AO's reopened assessment on the ground that the AO failed to make inquiries which should have been made (demat transactions, bank credits and reconciliation with Form 26AS) rather than merely expressing a change of opinion. - HELD THAT: - The Tribunal accepted the PCIT's finding that, after reopening under section 147, the assessment order dated 18.12.2018 contained no record showing that the AO had examined or verified specific matters later flagged by the PCIT - namely, transactions in two demat accounts, unexplained credit entries in the assessee's bank accounts, and mismatch between receipts reflected in Form 26AS and income declared in the ITR. The PCIT relied on Explanation 2 to section 263, which identifies as erroneous an order passed without making inquiries or verification which should have been made. The Tribunal held that the phrase 'which should have been done' imports an objective test of necessity of enquiry for correct assessment and that the impugned order demonstrated absence of such necessary enquiries. The assessee failed to place on record any statutory notice, order sheet entry or other material to show that the AO had in fact made the requisite inquiries during the reopened assessment; therefore the case was not one of mere change of opinion but of lack of inquiry and non application of mind by the AO. Given these findings, the PCIT was entitled to annul the assessment and remit the matter to the AO for fresh examination of the specified issues. [Paras 7, 8, 10, 11]

PCIT rightly exercised jurisdiction under section 263; the assessment was set aside as erroneous in so far as prejudicial to revenue and the matter remanded for fresh inquiry into bank credits, demat/commodity transactions and reconciliation with Form 26AS.

Final Conclusion: The Tribunal upheld the PCIT's order under section 263, dismissed the assessee's appeal and directed remand to the AO for fresh examination of cash deposits/credit receipts, commodity/demat transactions and receipts as per Form 26AS in accordance with the impugned order.

Disallowance of expenditure paid to an unapproved fund - treatment of amounts shown as bonus and gratuity payable in the balance sheet - taxation on accrual (mercantile) basis - reconciliation of receipts with Form 26AS and verification by assessing officer - remand for verification and fresh decision by assessing officer - application of precedent in Checkmate Services Pvt. Ltd.

Disallowance of expenditure paid to an unapproved fund - taxation on accrual (mercantile) basis - Disallowance of gratuity of Rs. 71,375/- debited to Profit & Loss account on the ground that it was deposited in an unapproved gratuity fund - HELD THAT: - The Tribunal upheld the findings of the lower authorities that the gratuity amount debited to the Profit & Loss account had been deposited in an unapproved gratuity account and therefore could not be allowed as a deduction. The Tribunal found merit in the reasoning recorded by the assessing officer and the Commissioner (Appeals) and sustained the disallowance accordingly. [Paras 6]

Disallowance upheld; addition sustained

Treatment of amounts shown as bonus and gratuity payable in the balance sheet - application of precedent in Checkmate Services Pvt. Ltd. - Disallowance of bonus and gratuity aggregating to Rs. 13,49,827/- shown as payable in the balance sheet - HELD THAT: - The Tribunal noted that the issue requires fresh consideration in the light of the Supreme Court decision in Checkmate Services Pvt. Ltd. Rather than adjudicating the correctness of the disallowance on the existing record, the Tribunal set aside the matter and remitted it to the assessing officer for fresh decision keeping in view the Supreme Court's guidance. The remand contemplates reconsideration of whether the liability shown as payable should be disallowed when assessed against the legal principles laid down in the cited precedent. [Paras 7]

Issue remitted to the assessing officer for fresh decision in accordance with Checkmate Services Pvt. Ltd.

Reconciliation of receipts with Form 26AS and verification by assessing officer - remand for verification and fresh decision by assessing officer - Addition of Rs. 68,03,907/- made on account of discrepancy between receipts shown in Form 26AS and receipts recorded in the assessee's Profit & Loss account - HELD THAT: - The Tribunal concluded that the addition could not be sustained without proper verification and reconciliation of the records. It accepted the Revenue's submission that reconciliation between the assessee's books and Form 26AS was necessary and therefore set aside the addition and remitted the matter to the assessing officer for verification, reconciliation and fresh adjudication, directing that reasonable opportunity be afforded to the assessee during the set-aside proceedings. [Paras 8]

Issue remitted to the assessing officer for verification, reconciliation and fresh decision

Final Conclusion: The Tribunal upheld the disallowance relating to gratuity deposited in an unapproved fund, remitted the disputes concerning bonus/gratuity payable and the Form 26AS-books discrepancy to the assessing officer for fresh adjudication (with directions to afford the assessee reasonable opportunity), and allowed the appeal for statistical purposes.

Condonation of delay under Section 28KA of the Customs Act, 1962 - timebar for appeals against advance rulings (sixty days with a thirtyday proviso) - special statute as a complete code excluding extension beyond proviso - inordinate delay versus short delay; doctrine of prejudice

Condonation of delay under Section 28KA of the Customs Act, 1962 - timebar for appeals against advance rulings (sixty days with a thirtyday proviso) - special statute as a complete code excluding extension beyond proviso - Whether the High Court can condone a delay of 856 days in filing an appeal against an Advance Ruling under Section 28KA. - HELD THAT: - Section 28KA permits filing an appeal to the High Court within sixty days from communication of the ruling and, by proviso, empowers the High Court to allow a further period of thirty days where satisfied that the appellant was prevented by sufficient cause. The court held that this scheme limits the power to extend time to the additional thirty days prescribed by the proviso and that the special code excludes condonation beyond that period. Reliance was placed on the reasoning in Commissioner of Customs (Import) Air Cargo Complex, New Delhi (Delhi High Court) which interpreted Section 28KA to preclude condonation of any delay beyond ninety days from communication of the order; this approach was applied to the present facts. Given the delay of 856 days, the Court concluded it had no power to condone such delay under Section 28KA. [Paras 5, 6, 9, 10, 11]

Delay of 856 days cannot be condoned; appeal filed beyond the 60+30 day period is timebarred.

Inordinate delay versus short delay; doctrine of prejudice - Whether the explanation for the delay constituted sufficient cause to merit condonation within the proviso period. - HELD THAT: - The applicant's stated reasons - complexity of classification, revenue implications, analysis of precedents and a general assertion of unavoidable circumstances - were examined. The Court observed that in cases of inordinate delay a more persuasive and specific explanation is required and that the doctrine of prejudice distinguishes inordinate delays from short delays. On the material before it, the Court found the reasons insufficient to justify condonation even assuming competence to extend time. [Paras 12, 13]

The reasons tendered do not constitute sufficient cause to justify extension of time.

Condonation of delay under Section 28KA of the Customs Act, 1962 - Consequences of refusal to condone the delay for the interlocutory application and the accompanying appeal. - HELD THAT: - As the interim application for condonation was dismissed for want of power to extend time beyond the statutory proviso and for insufficiency of cause, the accompanying appeal could not be admitted. The Court accordingly dismissed the interim application and directed that the appeal be dismissed for nonadmission; no costs were directed. [Paras 14, 15, 16]

Interim application dismissed; accompanying appeal not admitted and dismissed; no orders as to costs.

Final Conclusion: The application for condonation of delay is dismissed; the appeal against the Advance Ruling is timebarred and not admitted (dismissed); no orders as to costs.

Substantial question of law - Findings of fact and appellate interference - Jurisdictional High Court precedent binding on tribunal - Residual penal provision under Section 117 not to be invoked as a fallback - Admissibility of factual contentions on customs area and assessable value where not raised below

Substantial question of law - Findings of fact and appellate interference - The appeals do not raise any substantial question of law and attack pure findings of fact which do not warrant admission under Section 130 of the Customs Act, 1962. - HELD THAT: - The court held that appeals under Section 130 are entertainable only if they involve substantial questions of law. The tribunal considered the factual matrix at length (see the impugned order paragraphs 7 to 14) and reached factual findings about storage within the gated complex, permissions obtained, and marginal excesses. Those findings are not shown to be perverse and therefore do not constitute substantial questions of law permitting admission of the appeals. Similar factual aspects had been considered in Ganesh Benzoplast Limited and in BISCO Limited, which the court found dispositive for the present matters. [Paras 11, 12, 13, 16]

Appeals dismissed for lack of any substantial question of law; factual findings of the tribunal will not be interfered with.

Jurisdictional High Court precedent binding on tribunal - Reliance on coordinate High Court decisions - The tribunal was justified in relying upon the Division Bench decision of the Bombay High Court in Finesse Creation Inc. rather than the decisions of the Gujarat and Madras High Courts. - HELD THAT: - The court observed that where the Bombay High Court is the jurisdictional High Court for the matters before the tribunal, the tribunal was correct to follow the Bombay precedent. The Supreme Court had rejected the SLP against the Bombay decision, and the contrary views from other High Courts had earlier been considered and rejected in Ganesh Benzoplast Limited. Accordingly, the tribunal's reliance on the Bombay Division Bench decision was appropriate. [Paras 14]

Tribunal's reliance on the Bombay High Court decision was proper and not amenable to challenge on that ground.

Residual penal provision under Section 117 not to be invoked as a fallback - Invoking the residual penal provision of Section 117 of the Customs Act as a fallback where no fines or penalties could be imposed under Sections 111 and 112 is impermissible. - HELD THAT: - The court disapproved the approach of invoking Section 117 residually after concluding that penalties could not be sustained under Sections 111 and 112. This position had been adopted in Ganesh Benzoplast Limited and is applied to the present appeals, rejecting the Commissioner's use of the residual penal provision as a basis for imposing penalties. [Paras 15]

Use of Section 117 as a residual basis for penalty in these circumstances is disapproved.

Admissibility of factual contentions on customs area and assessable value where not raised below - Findings of fact and appellate interference - Contentions regarding whether tanks were within customs area, estimation of assessable value under Section 2(41), and Regulation 12 (Custody and Handling of Goods) do not constitute substantial questions of law for admission where they were not agitated below or are essentially factual. - HELD THAT: - The court noted that issues about customs area, estimation of assessable value, and the scope of Regulation 12 were either not raised before lower fora or resolved as factual matters by the tribunal. Given that these are factual or unargued contentions, they do not give rise to substantial questions of law warranting appellate interference. The tribunal's consideration of excess storage, permissions obtained, and the limited nature of transshipment/storage was upheld as not perverse. [Paras 11, 12, 16]

Those contentions do not amount to substantial questions of law and do not justify admission of the appeals.

Final Conclusion: The appeals are dismissed for want of any substantial question of law; the tribunal's factual findings and reliance on the Bombay High Court precedent were upheld, the residual use of Section 117 for penalties was disapproved, and interim applications are dismissed.

Jurisdiction of proper officer to issue show cause notices under Section 28 - validation of show cause notices by retrospective enactment - directions for restoration/remand of show cause notices and appeals to CESTAT - challenge to Note 3 of Notification No.125/2010/Cus

Jurisdiction of proper officer to issue show cause notices under Section 28 - validation of show cause notices by retrospective enactment - directions for restoration/remand of show cause notices and appeals to CESTAT - Maintainability of show cause notice issued by officers of the Directorate of Revenue Intelligence (DRI) on the ground that they were not 'proper officers' and the consequential treatment of pending proceedings/appeals. - HELD THAT: - The High Court considered the effect of the Hon'ble Supreme Court's order dated 7 November 2024 in Review Petition No. 400 of 2021 which reviewed and qualified its earlier decision in Canon India (supra). The Supreme Court concluded that officers of DRI and similarly situated officers are proper officers for the purposes of Section 28 and upheld the legislative and administrative measures validating the competence of such officers to issue show cause notices, while clarifying that its review did not disturb prior observations on limitation. The Supreme Court also prescribed a remedial regime (paragraph 168(vi)) for disposal of pending writs, appeals and proceedings, including restoration of notices for adjudication and granting time to assessees to prefer appellate remedies before the CESTAT. Applying paragraph 168(vi)(c) and related directions, the High Court disposed of the petition by directing that the appellate process proceed in accordance with law and the Supreme Court's observations, and that the appeal already filed against the Order-in-Original dated 5 October 2017 be decided by the Appellate Authority following the applicable law and the Supreme Court's directions. [Paras 6, 7, 8, 9, 11]

Petition disposed by directing the Appellate Authority to decide the appeal following law and the Supreme Court's observations; the proceedings are to be dealt with in accordance with paragraph 168(vi) of the Supreme Court order.

Challenge to Note 3 of Notification No.125/2010/Cus - Validity of the petitioner's challenge to Note 3 of Notification No.125/2010/Cus. - HELD THAT: - The Court recorded that the petitioner had earlier raised the challenge to Note 3 in Writ Petition No.3079 of 2014 and that this Court had previously declined to interfere with the show cause notice while granting liberty to challenge Note 3 in appropriate proceedings. The High Court reiterated and granted the petitioner liberty to raise the alleged invalidity of Note 3 in appropriate proceedings, including before this Court if the petitioner does not succeed before the authorities under the Act. Accordingly, the challenge to Note 3 is not finally adjudicated but is expressly kept open for future proceedings. [Paras 10]

Liberty granted to the petitioner to challenge the validity of Note 3 in appropriate proceedings; the point is kept open.

Interim orders and costs - Incidental procedural reliefs including interim orders and costs. - HELD THAT: - The Court recorded that interim orders, if any, stand vacated, interim applications will not survive and the petition is disposed of without any order for costs. [Paras 12, 13]

Interim order, if any, vacated; interim applications disposed of; no order as to costs.

Final Conclusion: The petition is disposed of in terms of the Supreme Court's review order dated 7 November 2024: DRI officers are recognised as proper officers for issuing show cause notices under Section 28, the appellate authority is directed to decide the appeal in accordance with law and the Supreme Court's observations, the challenge to Note 3 of the Notification is left open with liberty to the petitioner, interim relief stands vacated and no costs are awarded.

Compliance with Section 102 of the Customs Act (procedure for search and seizure) - requirement of production before a Gazetted Officer of Customs or Magistrate - attendance of independent witnesses and panchnama formalities for seizure - effect of non-compliance with statutory search procedure on prosecution's case - identification and production of seized property as proof beyond reasonable doubt - reliance on statement under Section 108 of the Customs Act and its evidentiary value

Compliance with Section 102 of the Customs Act (procedure for search and seizure) - requirement of production before a Gazetted Officer of Customs or Magistrate - attendance of independent witnesses and panchnama formalities for seizure - effect of non-compliance with statutory search procedure on prosecution's case - Whether the prosecution complied with the mandatory procedure for search and seizure under Section 102 of the Customs Act and whether failure to comply vitiates the conviction. - HELD THAT: - The Court found that the prescribed procedure under Section 102 was not followed: the Applicant was not produced before the nearest Gazetted Officer of Customs or Magistrate but was taken to the Customs Office where the search was conducted; independent panch witnesses to the statutory search procedure were not properly engaged; and the statutory formalities required to authenticate seizure were not observed. The trial and appellate courts nevertheless accepted the prosecution case despite these omissions. The High Court held that statutory compliance is a condition precedent for lawful search and seizure in the circumstances of this case and that failure to follow the statutory procedure fatally undermines the prosecution's case and vitiates any conviction founded on such defective proceedings. [Paras 9, 10, 11, 13, 14]

Convictions and sentences quashed because the statutory search and seizure procedure under Section 102 was not complied with and that non-compliance vitiated the prosecution case.

Identification and production of seized property as proof beyond reasonable doubt - reliance on statement under Section 108 of the Customs Act and its evidentiary value - proof beyond reasonable doubt - Whether the prosecution proved identification and production of the seized gold bar and established guilt beyond reasonable doubt. - HELD THAT: - The Court noted that the actual gold bars seized at the time of apprehension were not produced in trial; prosecution relied on a 'paper label' and a different gold bar (marked Exhibit-P4) which lacked the panchas' endorsements and identifiable marks. The confessional statement recorded under Section 108 was retracted, increasing the prosecution's evidentiary burden. Given the absence of the seized items and failure to examine or prove the panchnama and panch witnesses, the prosecution did not discharge the burden of proving the case beyond reasonable doubt. The trial and appellate courts' acceptance of the identification was held to be erroneous and perverse in the facts of this case. [Paras 9, 10, 11, 13, 14]

Prosecution failed to prove identification and production of the seized gold bar and therefore failed to establish guilt beyond reasonable doubt; conviction cannot stand.

Final Conclusion: The Criminal Revision is allowed: both the trial and appellate convictions and sentences under the Customs Act and the Gold (Control) Act are quashed and set aside because statutory search-and-seizure procedure and proof of identification of the seized property were not complied with, and the prosecution failed to prove guilt beyond reasonable doubt.

Violation of principles of natural justice (non-supply of material documents) - Admissibility of statements under Section 138B and requirement of examination in chief, cross examination - Reliance on statements recorded under Section 108 - Applicability of minimum import price condition to SEZ imports - Remand for de novo adjudication with supply of documents and opportunity for personal hearing

Violation of principles of natural justice (non-supply of material documents) - Adjudication order set aside for failure to supply to the appellants documents pertaining to verification of Country of Origin conducted by the FTA Cell/MEA and for denying effective opportunity to defend. - HELD THAT: - The Tribunal found that the adjudicating authority passed the order without supplying vital documents relating to verification of the Country of Origin certificates carried out by the FTA Cell and the Ministry of External Affairs, and thus denied the appellants an effective opportunity to meet the case against them. The non supply of those verification records, which were directly material to the core contention as to origin and entitlement to SAFTA benefits, amounted to a breach of principles of natural justice by a quasi judicial authority. The Tribunal noted that the appellating firms had specifically requested such documents and relied upon the FTA/MEA verification in their defence, but the adjudicating authority nevertheless proceeded to disbelieve or disregard that verification without securing or disclosing further responses or material to the appellants for rebuttal. For these reasons the impugned order could not be sustained and required reconsideration. [Paras 4]

Impugned order set aside and matter remanded for reconsideration after supplying the verification documents and affording an opportunity to file defence and personal hearing.

Admissibility of statements under Section 138B and requirement of examination in chief, cross examination - Reliance on statements recorded under Section 108 - The adjudicating authority's straight reliance on statements recorded under Section 108 without compliance with the procedural requirements of Section 138B rendered the impugned order unsustainable. - HELD THAT: - The Tribunal observed that statements recorded under Section 108 were relied upon by the adjudicating authority, yet the mandatory safeguards in Section 138B - namely examination in chief followed by cross examination and re examination where required for admissibility - had not been complied with. The Tribunal reproduced the statutory scheme in Section 138B and held that in proceedings other than a court, those procedural requirements apply so far as may be, and non compliance with them undermines the evidentiary basis of the adjudication. Consequently, reliance on such statements without conducting the prescribed procedures made the adjudication vulnerable and warranted fresh consideration. [Paras 2, 4]

Findings based on the impugned reliance on Section 108 statements are set aside for non compliance with Section 138B and the matter is remitted for fresh consideration with proper evidentiary procedure.

Applicability of minimum import price condition to SEZ imports - Question of applicability of the minimum import price condition to imports destined for SEZ warehousing was not examined by the adjudicating authority and requires fresh adjudication. - HELD THAT: - The Tribunal noted that the charge of breach of minimum import price (MIP) is closely linked to the determinative issue of Country of Origin. The adjudicating authority did not examine whether the MIP condition applied to the goods trans shipped and warehoused in an SEZ. The Tribunal observed that Notification No. 21/2015 20 dated 25.07.2018 prima facie suggests that the MIP condition may not apply to imports by units in SEZ, and therefore that aspect was material and ought to have been considered before recording a finding on MIP. Because this was not addressed, the Tribunal required the issue to be reconsidered in the course of the de novo adjudication. [Paras 1, 4]

Matter remitted for re examination of the applicability of the minimum import price condition to the SEZ bound consignments as part of the de novo adjudication.

Remand for de novo adjudication with supply of documents and opportunity for personal hearing - The appeals are allowed by setting aside the impugned order and remanding the entire matter to the adjudicating authority to pass a reasoned, speaking de novo order after supplying documents and granting personal hearing. - HELD THAT: - Having found multiple procedural infirmities and material omissions - non supply of FTA/MEA verification documents, non compliance with evidentiary procedure under Section 138B, and failure to consider the SEZ/MIP issue - the Tribunal held that the proper course was to set aside the impugned order and remit the matter. The appellants must be supplied all required documents, given adequate time and opportunity to file replies and appear for personal hearing, and thereafter the adjudicating authority must pass a reasoned, speaking order de novo. The Tribunal also observed that the appeal of the warehouse owner was connected to the main issues and therefore likewise requires reconsideration. [Paras 4, 5]

Impugned order set aside; appeals allowed by remanding the matter for de novo adjudication with disclosure of documents and opportunity for hearing.

Final Conclusion: The Tribunal set aside the adjudication order dated 08.11.2024 and allowed the appeals by remanding the matters to the adjudicating authority for de novo consideration: the appellants are to be supplied the verification documents, afforded adequate opportunity to file replies and personal hearing, and the adjudicating authority is to observe the evidentiary requirements for statements and consider the applicability of minimum import price to SEZ imports before passing a reasoned order.

Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - Misuse of Entry Pass/Identity Card facilitating smuggling - Abetment of smuggling - Mitigation of penalty based on role, antecedents and lack of benefit

Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - Misuse of Entry Pass/Identity Card facilitating smuggling - Abetment of smuggling - Both appellants were held liable for penalty under Section 112(a) and 112(b) of the Customs Act, 1962 for their roles in smuggling the impugned gold. - HELD THAT: - The Tribunal found on the material on record and the statements recorded that the appellant Shri Ayan Das received a cut piece of gold from an incoming passenger inside the International Arrival Immigration Area, concealed it in his shoe and attempted to take it outside the airport. Shri Syed Ghazanfar Raza Hussain, as the Assistant Stores Manager and superior, instructed Shri Ayan Das to conceal and smuggle the gold, thereby acting as an abettor. The appellants misused the Entry Pass/Identity Card issued to them to facilitate the smuggling. On these findings the Tribunal held that their roles in the smuggling activity are established and they are therefore liable to penalty under the said provisions. [Paras 7]

Appellants held liable for penalty under Section 112(a) and 112(b) of the Customs Act, 1962.

Mitigation of penalty based on role, antecedents and lack of benefit - Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - The quantum of penalty imposed on each appellant was reduced in view of their limited role, absence of antecedents and non-beneficiary status. - HELD THAT: - Although liability was established, the Tribunal observed that both appellants had no prior record of smuggling, were neither owners nor beneficiaries of the impugned gold, and were low-level carriers working for small benefits. The Tribunal noted that no investigation had been carried out into the actual beneficiary and that the appellants had suffered loss of employment and mental trauma. Considering these mitigating circumstances and that the penalty originally imposed was not commensurate with their roles, the Tribunal exercised its discretion to reduce the penalty. [Paras 7, 8]

Penalty on each appellant reduced to Rs. 1,00,000/- under Section 112(a) and 112(b) of the Customs Act, 1962.

Final Conclusion: The appeals were allowed in part: liability for penalty under Section 112(a) and 112(b) was affirmed against both appellants for their roles in smuggling facilitated by misuse of entry passes, but the penalty on each was reduced to Rs. 1,00,000/- in view of mitigating circumstances; appeals disposed accordingly.

Conversion of Shipping Bills from Advance Authorisation Scheme to Duty Drawback Scheme - Circular No.36/2010 - three months limitation held ultra vires - conversion permissible on basis of documentary evidence available at time of export - remand for fresh consideration on merits irrespective of Circular

Circular No.36/2010 - three months limitation held ultra vires - conversion of Shipping Bills from Advance Authorisation Scheme to Duty Drawback Scheme - Sustainability of rejection of conversion requests made beyond three months from Let Export Order relying on Board's Circular No.36/2010. - HELD THAT: - The Tribunal treated the question as no longer res integra in view of the Division Bench decision of the Gujarat High Court (as cited) which declared the impugned circular insofar as it imposed the three months limitation to be ultravires of Articles 14 and 19(1)(g) and Section 149 of the Customs Act, and noted that the special petition against that decision was dismissed by the Apex Court. Reliance was also placed on the Tribunal's earlier final order in the appellant's own case. Applying that jurisprudence, the rejection of conversion requests merely because they were filed beyond three months from the Let Export Order cannot be sustained. The Commissioner's order dated 19.12.2013 rejecting conversion of certain shipping bills on the ground of delay under the Circular is therefore unsustainable.

The order rejecting conversion insofar as it relied on Circular No.36/2010 is set aside.

Conversion permissible on basis of documentary evidence available at time of export - remand for fresh consideration on merits irrespective of Circular - Disposition of the 104 shipping bills which were rejected for conversion. - HELD THAT: - The Tribunal directed that the question of conversion of the remaining 104 shipping bills be reconsidered on merits without regard to the three months restriction in the Circular. The correct approach is to determine eligibility for conversion (and entitlement to drawback at applicable All Industry Rate) on the basis of documentary evidence that existed at the time of export. Consequently, the matter is remitted to the original authority for fresh adjudication in accordance with law and the cited precedents.

The matter relating to the 104 shipping bills is remanded to the Original Authority for fresh decision on merits.

Final Conclusion: The impugned order of the Commissioner rejecting conversion of certain shipping bills under Circular No.36/2010 is set aside; the appeal is allowed by way of remand and the Original Authority is directed to reconsider the conversion requests for the 104 shipping bills on merits and in accordance with law, having regard to documentary evidence available at the time of export.

Liability of intermediary/middleman for export of restricted goods - penalty under the Customs Act for facilitating export of prohibited/restricted goods - absolute confiscation of restricted goods - corroboration of third party statements as evidentiary basis for imposing penalty

Liability of intermediary/middleman for export of restricted goods - corroboration of third party statements as evidentiary basis for imposing penalty - penalty under the Customs Act for facilitating export of prohibited/restricted goods - Penalty imposed on the appellant under Section 114(i) of the Customs Act was sustained but reduced. - HELD THAT: - The Tribunal accepted the Commissioner's finding that the exported consignment was Muriate of Potash, a restricted item requiring licence, and had been absolutely confiscated. The appellant's plea that he merely introduced parties and had no nexus or mens rea was considered against his own statement and corroborative statements of third parties. The Commissioner recorded that the appellant admitted introducing a supplier, supplied vehicle numbers for lorries arriving at ICD, and that statements of the exporter's representative and an assistant manager corroborated that the appellant supplied consignments for export. On this basis the appellant was held liable as an intermediary for facilitating the export of restricted goods. In view of the factual findings and the abatement of the appeal insofar as the main exporter, the Tribunal exercised its discretion to reduce the penalty imposed on the appellant to a lesser amount while upholding his liability for the offence. [Paras 6, 7]

Liability of the appellant as a middleman is sustained; penalty under Section 114(i) reduced to Rs.1,00,000/ .

Final Conclusion: The appeal is disposed of by reducing the penalty imposed on the appellant to Rs.1,00,000/ while upholding his liability for facilitating the export of restricted goods; the confiscation of the goods as recorded by the Commissioner stands.

Procedure for revocation or imposition of penalty under Regulation 17 of the Customs Broker License Regulations, 2018 - Requirement to state grounds in a show cause notice and consequent entitlement to a written statement of defence - Right to production of documents relied upon and fair opportunity to contest under principles of natural justice - Inquiry officer's duty to conduct inquiry and furnish inquiry report under Regulations 17(2)-(6) - Prohibition on adjudicatory authorities or appellate tribunals substituting for failed departmental inquiry

Procedure for revocation or imposition of penalty under Regulation 17 of the Customs Broker License Regulations, 2018 - Requirement to state grounds in a show cause notice and consequent entitlement to a written statement of defence - Validity of the show cause notice vis-a -vis the procedure prescribed by Regulation 17 of CBLR 2018 - HELD THAT: - The show cause notice proceeded on a pre-emptive finding that the customs broker had been found to be contravening the 2018 Regulations and called for a reply to an Inquiry Report before any inquiry under Regulation 17(2)-(5) could be conducted. Regulation 17(1) requires that the notice state the grounds on which revocation or penalty is proposed and call for a written statement of defence within thirty days; only where charges are not admitted does the Commissioner direct an inquiry under Regulation 17(2). The impugned notice conflated the function and timing of notices under Regulation 17(1) with the post-inquiry step under Regulation 17(6) by asking the broker to reply to an Inquiry Report that could arise only after an inquiry. A notice under Regulation 17(1) cannot lawfully require submission of a response to an Inquiry Report which, by the regulation's scheme, is a subsequent document. [Paras 7, 8, 25]

The show cause notice was procedurally invalid for failing to follow the sequence and requirements of Regulation 17 and for not stating the requisite grounds in the manner mandated by Regulation 17(1).

Right to production of documents relied upon and fair opportunity to contest under principles of natural justice - Inquiry officer's duty to conduct inquiry and furnish inquiry report under Regulations 17(2)-(6) - Whether principles of natural justice were complied with by supplying documents and allowing effective defence and cross-examination - HELD THAT: - The appellant repeatedly sought production of documents and statements expressly referred to in the show cause notice but these were not furnished by the Inquiry Officer; instead the broker was directed to approach other sections. The Regulations contemplate that the inquiry authority will consider documentary and oral evidence and enable cross-examination. Directing the broker to obtain documents from other departmental sections and failing to supply them to enable a proper response and cross-examination amounted to denial of a fair opportunity. The Inquiry Officer's conduct in not producing the relied-upon material demonstrated a failure to discharge the duties entrusted by the 2018 Regulations and resulted in violation of natural justice. [Paras 9, 11, 13, 16, 26]

The inquiry proceedings violated principles of natural justice by failing to supply material documents and thereby denying the broker an effective opportunity to defend and to cross-examine, rendering the consequent inquiry and orders unsustainable.

Prohibition on adjudicatory authorities or appellate tribunals substituting for failed departmental inquiry - Whether the Tribunal should itself examine the documents now produced and decide the matter - HELD THAT: - The Department suggested that since documents/statements have now been supplied, the Tribunal could examine them and pass appropriate orders. The Tribunal held that it is not the function of the Tribunal to perform the inquiry exercise which the Inquiry Officer and the Commissioner were required to undertake; the failure to conduct a fair inquiry cannot be cured by the Tribunal conducting the departmental fact-finding in their stead. [Paras 22, 27, 28]

The Tribunal will not substitute its fact-finding for the inquiry that the departmental authorities were required to conduct; it declined to examine the documents in lieu of the failed inquiry.

Final Conclusion: For the procedural infirmities and breach of natural justice found in the show cause and inquiry process, the order dated 08.11.2021 revoking the customs broker's licence, forfeiting the security and imposing penalty was set aside and the appeal was allowed.

Condonation of delay in refiling - due diligence in curing registry defects - time bound regime of the Insolvency and Bankruptcy Code - strategic or opportunistic delay vitiating condonation - judicial scrutiny of reasons for delay despite limited role of respondents

Condonation of delay in refiling - due diligence in curing registry defects - strategic or opportunistic delay vitiating condonation - Application for condonation of 104 days' delay in refiling the Company Appeal was rejected. - HELD THAT: - The Tribunal held that condonation of refiling delay requires satisfaction that the delay was unavoidable and that the applicant acted with due diligence in curing defects. Although a more liberal approach is normally adopted for refiling delays, the Court must nonetheless scrutinise explanations in light of the time bound object of the insolvency regime. The Registry defects in the present case were largely minor and readily curable; they did not justify a 104 day lapse. The appellant's explanations - that instructions from a Germany based client were delayed and that it was awaiting developments in Committee of Creditors' proceedings - indicated opportunistic delay and an election to defer curing defects rather than unavoidable inability to do so. Participation of the appellant in CoC meetings undermined the claim of inability to provide timely instructions. On these findings the appellant failed to demonstrate cogent grounds beyond its control warranting condonation. [Paras 12, 13, 14, 15]

Application for condonation of the 104 day refiling delay is dismissed and the memo of appeal is rejected.

Final Conclusion: The Tribunal refused to condone the 104 day delay in refiling, finding the defects curable, the delay deliberate or strategic, and the appellant insufficiently diligent; the condonation application was dismissed and the appeal rejected.

Moratorium under Section 14 of the IBC - Prohibition on enforcement of security interest during CIRP - Assets deposited by the corporate debtor remain property of the corporate debtor during CIRP - Operational creditor to file claim and follow claims procedure under the IBC - Section 238 IBC overrides inconsistent provisions of other laws

Moratorium under Section 14 of the IBC - Prohibition on enforcement of security interest during CIRP - Operational creditor to file claim and follow claims procedure under the IBC - Assets deposited by the corporate debtor remain property of the corporate debtor during CIRP - Adjustment by CTUIL of a payment security deposit towards preCIRP dues during the moratorium triggered by initiation of CIRP against the corporate debtor. - HELD THAT: - The Tribunal held that on commencement of CIRP the moratorium under Section 14 of the IBC comes into effect from the insolvency commencement date and bars, inter alia, actions to foreclose, recover or enforce any security interest created by the corporate debtor. Money or assets deposited by the corporate debtor as payment security remain its assets until properly appropriated in accordance with law, and recovery or enforcement steps in respect of past dues are restrained during the CIRP. The proper course for a creditor claiming preCIRP dues is to submit its claim before the Interim/Resolution Professional in the prescribed form and time under the Code; unilateral appropriation/encashment by the operational creditor during moratorium is impermissible. Section 238 gives the IBC overriding effect over inconsistent provisions of other statutes and regulatory regimes; accordingly, regulatory procedures (including FIFO or CERC sharing rules) cannot be invoked to justify enforcement that contravenes the moratorium. The Tribunal applied Supreme Court and NCLAT precedents (including ABG Shipyard and cases holding that authorities have limited powers during moratorium) to conclude that CTUIL's encashment and appropriation of the security deposit towards preCIRP dues violated the moratorium and that the NCLT was correct in directing adjustment of the appropriated payment security only towards postCIRP dues. [Paras 14, 15, 17, 26]

The appropriation/encashment of the security deposit by CTUIL towards preCIRP dues during the moratorium was impermissible; the NCLT order directing that the payment security be adjusted only against postCIRP dues is upheld.

Final Conclusion: Appeal dismissed; the NCLT's order preventing adjustment of the encashed payment security towards preCIRP dues and directing adjustment only against postCIRP dues is affirmed, and connected interim applications stand closed.

Operational debt - admission of debt - pre-existing dispute - Section 9 application under IBC - Mobilox test - Corporate Insolvency Resolution Process

Operational debt - admission of debt - Section 9 application under IBC - Mobilox test - Whether the Operational Creditor proved an operational debt that was due and payable and exceeded the statutory threshold such as to justify admission of the Section 9 application. - HELD THAT: - The Tribunal applied the three-part test from Mobilox to the documents on record. The Adjudicating Authority relied upon contemporaneous correspondence - notably the letter dated 22.04.2015 and email of 07.03.2016 - together with payments made in January and April 2015, to conclude that the Corporate Debtor had acknowledged the debt and that the amount claimed exceeded the threshold. The appellate court found no error in relying on those admissions and the payment records to hold that an operational debt had arisen, was due and payable and met the threshold requirement, and that the Adjudicating Authority was justified in admitting the Section 9 application. [Paras 13, 14, 15]

Operational debt was proved to be due and payable and above the threshold; admission under Section 9 was justified on this ground.

Pre-existing dispute - admission of debt - Section 9 application under IBC - Whether a genuine pre-existing dispute existed between the parties such that the Section 9 application ought to have been rejected. - HELD THAT: - The Corporate Debtor pleaded misappropriation of stock and produced ledger entries and a statutory auditor's certificate to demonstrate a dispute. The Adjudicating Authority examined the ledgers, observed discrepancies between an initial one-page screenshot and a subsequently produced detailed ledger, noted inconsistent dates and altered amounts, and directed clarifications. The Tribunal agreed that the ledger anomalies and belated adjustments cast doubt on the veracity of the claimed misappropriation and concluded that the purported dispute was not supported by credible contemporaneous evidence. Applying Mobilox, the court held that where the debt has been admitted and invoices were not specifically disputed prior to the demand notice, and where the purported dispute lacks plausible documentary support, the Section 9 admission is not vitiated. The Tribunal thus found the pre-existing dispute to be a contrived defence. [Paras 20, 21, 22]

The alleged pre-existing dispute was not genuine or supported by credible evidence; it did not preclude admission under Section 9.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in admitting the Section 9 petition: the Corporate Debtor had admitted the operational debt which was due and payable and above the threshold, and the pleaded pre-existing dispute was found to be unsubstantiated, permitting continuation of CIRP in accordance with law.

Presumption under section 24 of the PMLA - Foundational facts for moneylaundering - Onus to rebut - Evidentiary value of statement under section 50 of the PMLA - Protection under section 25 of the Indian Evidence Act - Bail and Article 21 - right to speedy trial - Broad probabilities test at bail stage - Bail is rule and jail is exception

Presumption under section 24 of the PMLA - Foundational facts for moneylaundering - Onus to rebut - Whether the prosecution established the foundational facts under section 24 of the PMLA so as to shift the onus on the accused - HELD THAT: - The Court applied the principle that prosecution must prima facie establish three foundational facts - commission of a scheduled offence, that the property was derived from such criminal activity, and that the person was involved in processes connected with the proceeds - before the legal presumption under section 24 shifts to the accused. Noting the authorities relied upon, the Court found that link and involvement required to attract the presumption were not satisfactorily established at the bail stage and that the petitioner must be afforded an opportunity before the trial Court to rebut the presumption by adducing evidence within his personal knowledge. The determination was made on broad probabilities appropriate to a bail application, not by weighing complete evidence for trial. [Paras 18, 19, 20, 21]

Prosecution has not, at the bail stage, established the foundational facts to shift the onus under section 24; petitioner to be given opportunity in trial Court to rebut the presumption.

Evidentiary value of statement under section 50 of the PMLA - Protection under section 25 of the Indian Evidence Act - Appropriate treatment at bail stage of statements recorded under section 50 of the PMLA and confessional statements - HELD THAT: - The Court reiterated the settled view that statements of coaccused recorded under section 50 are not substantive evidence against other accused and their evidentiary value must be tested at trial; such statements cannot be treated as gospel truth when considering bail and only broad probabilities are to be examined. The Court also noted that whether protection under section 25 of the Evidence Act is available to an accused in a moneylaundering prosecution is a question to be considered case by case at trial, and that a judge may examine whether the remaining evidence, excluding any confession, is sufficient to sustain conviction before relying on any confession. [Paras 23, 24]

Statements under section 50 of the PMLA are not substantive proof for denying bail; admissibility and weight of confessional statements are to be tested at trial.

Bail and Article 21 - right to speedy trial - Broad probabilities test at bail stage - Bail is rule and jail is exception - Whether petitioner ought to be released on bail given prolonged pretrial incarceration, volume of prosecution material, and absence of imminent trial - HELD THAT: - Relying on the principle that the right to speedy trial under Article 21 applies irrespective of the gravity of the offence and that bail is ordinarily the rule while custody the exception, the Court observed that the petitioner had been incarcerated for over twenty months with no immediate prospect of trial commencement despite voluminous prosecution material being in custody of the prosecution. The Court noted that coaccused in similar circumstances were granted bail, that documentary evidence was largely with the prosecution reducing tampering risk, and that appropriate stringent conditions could address apprehensions about interference with witnesses or evidence. Applying the broad probabilities test at the bail stage, the Court concluded that continued pretrial detention would unduly infringe the petitioner's Article 21 rights. [Paras 30, 31, 32, 33, 34]

Petitioner entitled to bail; release ordered subject to stringent conditions.

Final Conclusion: Bail granted to the petitioner in C.R.M. (S.B) 17 of 2024 upon furnishing bond with sureties and on specified conditions; observations confined to the bail determination and petitioner to be permitted to rebut the statutory presumption and have all evidentiary issues adjudicated at trial.

Determination of tax dues under Sabka Vishwas (Legacy Dispute Resolution) Scheme - treatment of availed but not utilised CENVAT credit for computing tax dues - pre-deposit requirement for availing amnesty under the Scheme - scope of court's interference with Designated Committee's determinations - direction to consider representations for grant of relief under the Scheme

Determination of tax dues under Sabka Vishwas (Legacy Dispute Resolution) Scheme - treatment of availed but not utilised CENVAT credit for computing tax dues - scope of court's interference with Designated Committee's determinations - Designated Committee correctly determined the tax dues for the purposes of the SVLDR Scheme by referring to the total amount of duty disputed in the pending appeal, including the CENVAT credit as held in the Order in Original. - HELD THAT: - Clause 123 and clause 124 of the Scheme require that where a single appeal is pending as of 30 June 2019, the total amount of duty disputed in that appeal is the tax dues for computing relief under the Scheme. Clause 2(d) defines the amount of duty to include Central Excise Duty, Service Tax and Cess. The O I O of 4 February 2019 recorded a finding that the CENVAT credit of Rs. 1,03,16,150/- was availed and utilised (see the adjudicating officer's reasoning reproduced in paragraph 26 of that order). For the limited purpose of the Scheme, the Designated Committee was therefore entitled to proceed on the basis of the total duty disputed in the appeal (Rs. 4,80,00,050/-) and determine the amount payable under the Scheme; the Court will not, in the writ petition under Article 226, re adjudicate the merits of the O I O or recompute disputed duty which is the subject matter of the appeal before CESTAT. The Designated Committee's calculations, having applied the Scheme's statutory criteria, cannot be set aside on the present record where the mandatory deposit called for under the Scheme was not made by the petitioners. [Paras 16, 20, 21, 22, 23]

Challenge to the Designated Committee's determination for the purposes of the Scheme is rejected and the petition is dismissed insofar as it seeks quashing of Form SVLDRS 3 on the ground of excluding the CENVAT credit.

Pre-deposit requirement for availing amnesty under the Scheme - scope of court's interference with Designated Committee's determinations - Failure to deposit the amount determined by the Designated Committee within the prescribed (and extended) period disentitles the petitioners to relief under the Scheme and the Court will not extend or override the deposit requirement. - HELD THAT: - The Scheme prescribes the time bound mechanism for availing relief, including deposit within the period specified in Form SVLDRS 3. The petitioners admittedly did not deposit the amount called for even after accounting for extensions granted on account of the COVID 19 pandemic. Reliance is placed on the Supreme Court decision in M/s. Yashi Constructions which precludes extension of the deposit period by the Court. Given non compliance with the mandatory deposit requirement, interference with the Designated Committee's decision is not warranted in exercise of writ jurisdiction. [Paras 14, 22, 26]

No relief can be granted to the petitioners for non deposit; the Court will not extend or relax the mandatory deposit requirement under the Scheme.

Direction to consider representations for grant of relief under the Scheme - determination of tax dues under Sabka Vishwas (Legacy Dispute Resolution) Scheme - If petitioners make a fresh representation accompanied by the deposit offered by them, the Respondents must consider that representation expeditiously and in accordance with law and the objectives of the Scheme. - HELD THAT: - The petitioners offered to deposit the amount determined by the Designated Committee (with interest) and to make a representation seeking grant of Amnesty, citing a bona fide dispute on quantification. The Court declined to grant relief in the writ but directed that, upon receipt of such a representation, the Respondents should dispose of it expeditiously and on merits having regard to the Scheme's object and the peculiarities of the petitioners' case. This amounts to a limited remand for fresh consideration of the representation and any accompanying deposit, not a re adjudication of the O I O on merits by this Court. [Paras 24, 25, 27]

Respondents directed to consider and dispose of any representation made by the petitioners (with the offered deposit) expeditiously and in accordance with law; the petition is otherwise dismissed.

Final Conclusion: The writ petition is dismissed; however, if the petitioners make a representation accompanied by the deposit/offering indicated, the Respondents are directed to consider and dispose of that representation expeditiously and in accordance with law and the object of the SVLDR Scheme.

Business auxiliary service - service tax on sale/promotion of lottery tickets - definition of goods as excluding actionable claims - actionable claim - Explanation to clause (ii) of clause 19 of Section 65 of the Finance Act, 1994 cannot override main provision - entitlement to consequential reliefs including refund under Article 265

Service tax on sale/promotion of lottery tickets - business auxiliary service - definition of goods as excluding actionable claims - Levy of service tax on promotion, marketing or sale of lottery tickets during the period when the Explanation was in force - HELD THAT: - The Court adopted the reasoning in K. Arumugam (supra) that clause (19) which taxes a business auxiliary service relates to services concerning promotion or marketing of goods or services of the client. Clause (50) of Section 65 incorporates the Sale of Goods Act definition of 'goods', which excludes actionable claims. Lottery tickets are actionable claims and therefore do not fall within 'goods' for clause (19)(i). The outright purchase and sale of lottery tickets by the State is a revenue-generating privileged activity and not a service rendered by the State; hence the activity of selling lottery tickets is not a business auxiliary service taxable under clause (19). Accordingly service tax could not be levied on promotion, marketing or sale of lottery tickets in the period covered by the Explanation insofar as it purported to bring such activity within business auxiliary service. [Paras 4, 5]

Service tax was not leviable on promotion, marketing or sale of lottery tickets for the period covered by the Explanation.

Explanation to clause (ii) of clause 19 of Section 65 of the Finance Act, 1994 cannot override main provision - actionable claim - Validity and effect of the Explanation introduced w.e.f. 16.05.2008 seeking to include lottery within clause 19(ii) - HELD THAT: - The Court followed the Supreme Court's conclusion that the Explanation, although framed as one to remove doubt, sought to include lottery (an actionable claim) within clause 19(ii) as a service in relation to promotion or marketing by the client. That attempt was contrary to the main provision and to the definitional scheme which excludes actionable claims from 'goods'. An Explanation cannot alter the scope of the main provision to make an activity a taxable service where the main text and incorporated definitions do not cover it. Therefore the Explanation could not validly bring the sale/promotion of lottery tickets within clause 19(ii) for the period it was in force. [Paras 4, 5]

The Explanation introduced w.e.f. 16.05.2008 could not override the main provision and therefore could not render the sale/promotion of lottery tickets taxable as a business auxiliary service.

Entitlement to consequential reliefs including refund under Article 265 - Relief available to the petitioner in view of the Supreme Court judgment - HELD THAT: - Having accepted that K. Arumugam (supra) squarely covers the present controversy, the High Court disposed of the writ petition in terms of that judgment. The Supreme Court allowed appeals, set aside the High Courts' judgments, and directed that consequential reliefs in respect of amounts paid be granted, noting Article 265. The High Court accordingly held that the petitioner is entitled to relief to the extent permissible under the Supreme Court decision and disposed of the petition accordingly. [Paras 1, 5]

Writ petition disposed of in terms of the Supreme Court judgment and petitioner entitled to reliefs consequential to that decision.

Final Conclusion: The High Court disposed of the writ petition in terms of K. Arumugam (supra), holding that lottery tickets are actionable claims outside the definition of 'goods', that the Explanation introduced w.e.f. 16.05.2008 could not render sale/promotion of lottery tickets taxable as a business auxiliary service, and that the petitioner is entitled to consequential reliefs as permissible under the Supreme Court's judgment.

Condonation of delay - restoration of appeal - dismissal as withdrawn - maintainability of appeal - refund of tax wrongly paid - rectification of tribunal orders

Condonation of delay - 525-day delay in instituting the appeal was condoned. - HELD THAT: - The Court examined the Interim Application and the explanation for delay. It found that the applicant had pursued alternative remedies before the tribunal and the revisionary authority on legal advice, explained the delay at each stage, and that there was no mala fides or undue benefit gained by the applicant. On cumulative consideration of these circumstances the delay was held to be satisfactorily explained and condoned. [Paras 2, 3, 4]

Delay of 525 days in instituting the appeal is condoned.

Dismissal as withdrawn - maintainability of appeal - refund of tax wrongly paid - rectification of tribunal orders - Tribunal erred in dismissing the appeal as withdrawn and ought to have restored the appeal because the matter concerned refund of tax wrongly paid and was therefore maintainable. - HELD THAT: - The Court analysed the factual and procedural record including the tribunal's orders which recorded withdrawal purportedly prompted by the tribunal's inclination to treat the dispute as relating to rebate of tax. The High Court accepted the appellant's contention that the dispute concerned a refund of tax wrongly paid and not a tax rebate; the withdrawal recorded before the tribunal was attributable to a communication gap and a mistaken premise about maintainability. Given that the appeal was in fact maintainable on the true character of the grievance, the tribunal's dismissal as withdrawn was held to be erroneous. The Court observed that ordinarily superior courts do not correct recording errors, but the peculiar facts (including the tribunal's own observations that withdrawal was prompted by its inclination on maintainability and its direction to seek rectification) made it appropriate to set aside the tribunal's orders rather than require the appellant to pursue further futile steps. [Paras 17, 18, 19, 20, 21]

Tribunal's orders dismissing the appeal as withdrawn are set aside and the appeal is restored to the tribunal's file.

Restoration of appeal - The restored appeal is remitted to the tribunal for fresh adjudication on merits after giving parties full opportunity. - HELD THAT: - After setting aside the tribunal's orders and restoring the appeal, the Court directed that the tribunal, upon giving all parties full opportunity, must decide the appeal on merits in accordance with law. The High Court expressly declined to examine the merits itself and left all contentions open to be decided by the tribunal in the first instance, while requesting expedition given the peculiar facts. [Paras 22, 23]

Appeal restored and remitted to the tribunal for adjudication on merits; merits left open to be decided by the tribunal.

Final Conclusion: The High Court condoned the 525-day delay, set aside the tribunal's orders dismissing the appeal as withdrawn, restored the appeal to the tribunal's file and remitted it for fresh and expeditious adjudication on merits, leaving all substantive contentions open.

Service tax - technical testing and analysis service - statutory duty of sovereign/public authority - testing fee as statutory levy under Arms Rules, 1962 - exclusion of applicability of Finance Act, 1994 to State of Jammu & Kashmir - place of provision of services

Service tax - technical testing and analysis service - testing fee as statutory levy under Arms Rules, 1962 - statutory duty of sovereign/public authority - Liability of petitioners to pay service tax on proof-testing/quality-assurance charges collected by respondent for testing of shot guns - HELD THAT: - The Court held that the charges collected by the authorised testing authority for proof-testing of firearms constitute a statutory testing fee levied under Rule 22 of the Arms Rules, 1962 and are part of a mandatory statutory scheme undertaken in public interest by a sovereign/public authority. Reliance was placed on the earlier coordinate-bench judgment of this Court (decided 22.11.2016) and on administrative clarifications and appellate precedent indicating that activities mandated by statute for public safety (such as proof-testing of firearms, testing of gas cylinders, boilers, and certificates issued by statutory inspectors) are statutory duties and the fees collected therefor are compulsory levies deposited into Government account rather than consideration for taxable services. Applying that ratio, the Court found that the fee for proof-testing does not constitute a taxable technical testing and analysis service and therefore service tax cannot be levied on the petitioners; accordingly, no interest on such tax is payable. [Paras 11, 12]

No service tax is payable by the petitioners on the testing fees charged by the authorised testing agency; impugned communications demanding/charging service tax are quashed and respondents are directed not to levy or recover service tax or interest thereon from the petitioners.

Final Conclusion: The writ petitions are allowed: communications directing levy/collection of service tax on proof-testing charges for shot guns are quashed and respondents are directed not to levy or recover service tax (or interest) from the petitioners in respect of the statutory testing fee.

Taxability of liquidated damages/penalty/forfeiture under declared service - scope of declared service: agreeing to the obligation to refrain from an act or to tolerate an act or a situation - concept of consideration and nexus between amount charged and taxable service - valuation under Section 67: amount must be consideration for the service provided - exclusion of penalties/compensation as consideration for service - non-applicability of declared service to notice-pay received from employees

Taxability of liquidated damages/penalty/forfeiture under declared service - scope of declared service: agreeing to the obligation to refrain from an act or to tolerate an act or a situation - concept of consideration and nexus between amount charged and taxable service - valuation under Section 67: amount must be consideration for the service provided - Penalty/compensation/forfeiture recovered from contractors/suppliers for breach or delay in performance is not taxable as a declared service under Section 66E(e). - HELD THAT: - The Tribunal's precedent establishes that a declared service under Section 66E(e) requires an agreement that one party, for consideration, assumes an obligation to refrain from an act, tolerate an act or situation, or to do an act, such that consideration flows to the obligor in respect of that specific activity. Section 67 requires value to be the consideration for the service provided; there must be a nexus between the amount charged and the taxable service. Penalty, liquidated damages or forfeiture recoveries are contractual safeguards triggered by breach and do not represent consideration for any service performed or agreed to be performed; they are designed to compensate for non performance and protect commercial interests. Absent an agreement which specifically contemplates toleration or forbearance as a serviced activity with consideration, such recoveries do not form part of the taxable value under Section 67 and cannot be taxed under Section 66E(e). The Tribunal's reasoning in Gujarat State Electricity Corporation Limited (Final Order No. 12608/2024 dated 06.11.2024) and supporting precedents were followed to set aside the demand.

Demand of service tax on penalty/compensation/forfeiture recovered from contractors/suppliers is set aside.

Non-applicability of declared service to notice-pay received from employees - provision of service by an employee to the employer excluded - concept of consideration and nexus between amount charged and taxable service - Amounts recovered as notice pay from employees (payment in lieu of serving notice) are not taxable as a declared service under Section 66E(e). - HELD THAT: - Following the decision of the Madras High Court in GE T & D India Limited, the employer's receipt of notice pay is not a rendition of a declared service under Section 66E(e). The arrangement is a contractual mechanism to permit immediate exit upon compensation and does not amount to the employer 'tolerating' an act in the sense contemplated by Section 66E(e) where an agreement to forbear or tolerate an act is separately contracted for and supported by consideration flowing for that forbearance. Moreover, provision of service by an employee to the employer is excluded from the definition of 'service', and the notice-pay mechanism does not give rise to an independent taxable service by the employer. Consequently the impugned tax demand on such receipts is unsustainable.

Service tax demand on amounts recovered as notice pay from employees is set aside.

Final Conclusion: Following this Tribunal's precedent and the cited High Court decision, the impugned demand for service tax on (i) penalties/liquidated damages/forfeitures recovered from contractors/suppliers and (ii) notice pay recovered from employees is unsustainable; the impugned order is set aside and the appeal is allowed.

Royalty as consideration for grant of mining rights - Service - Reverse charge mechanism - District Mineral Foundation and National Mineral Exploration Trust as governmental authorities - Consideration for rehabilitation services (Polluter Pays principle)

Royalty as consideration for grant of mining rights - Service - Reverse charge mechanism - Amounts paid by the assessee to DMF and NMET, calculated as percentages of royalty, are consideration for services and taxable under service tax leviable on royalty, payable under reverse charge mechanism. - HELD THAT: - The Tribunal observed that royalty is the consideration paid to the government/mine-owner for assignment of rights to extract natural resources and that such assignment constitutes an activity falling within the definition of "service" under section 65B(44) of the Finance Act, 1994. The appellants have been paying service tax on royalty under reverse charge in terms of Notification No.30/2012. The sums paid to DMF and NMET are mandated by sections 9B and 9C of the Mines Act as payments by the lease-holder for rehabilitation and related activities arising from mining. Those activities qualify as services received by the lease-holder and the payments therefore constitute consideration for taxable services. Consequently the amounts paid to DMF and NMET are subject to service tax under the reverse charge mechanism as applied to royalty-related payments. [Paras 8, 11, 13, 19]

Demand of service tax in respect of amounts paid to DMF and NMET confirmed as payable under reverse charge; appeal dismissed on this ground.

District Mineral Foundation and National Mineral Exploration Trust as governmental authorities - Consideration for rehabilitation services (Polluter Pays principle) - DMF and NMET, being trusts constituted by State governments under sections 9B and 9C of the Mines Act, are governmental authorities for purposes of Notification No.25/2012 and Notification No.30/2012, and the payments to them are chargeable to service tax. - HELD THAT: - The Tribunal noted that DMF and NMET are statutory trusts established by state governments, with objects and composition prescribed by the Mines Act. The payments made to these trusts are for activities of rehabilitation and benefit of persons/areas affected by mining - activities which fall within the concept that the polluter should pay for environmental rehabilitation. Because these trusts are creations of the State, they qualify as governmental authorities under the relevant notification, and amounts paid to them are therefore caught by the reverse charge notification which makes the lease-holder liable to discharge service tax on such consideration. [Paras 15, 16, 19]

DMF and NMET held to be governmental authorities and payments to them held taxable under the reverse charge notification; appeal dismissed on this ground.

Final Conclusion: The Tribunal rejected the appellant's challenge and upheld the original order confirming service tax, interest and penalty in respect of amounts paid to District Mineral Foundation and National Mineral Exploration Trust (for the period 01.04.2016 to 30.06.2017), holding those payments to be consideration for services rendered and taxable under the reverse charge mechanism; the appeal is dismissed.

Time barred appeal - service by registered acknowledgement (stamped A.D.) - compliance of Section 37(C) of the Central Excise Act, 1944 - effect of High Court order on limitation - pre deposit as indicium of knowledge of adjudication

Time barred appeal - effect of High Court order on limitation - pre deposit as indicium of knowledge of adjudication - Whether the appeal before the Commissioner (Appeals) was barred by limitation and whether the High Court order operated to save the appeal from limitation - HELD THAT: - The Tribunal found, on the admitted chronology, that the appellant made the pre deposit for filing the appeal on 04.05.2017 and therefore had knowledge of the Order in Original well before receipt of the certified copy on 20.06.2017. Under the appeal provisions, the statutory period runs from receipt/knowledge of the order; the deposit on 04.05.2017 is indicative of knowledge and the appeal filed on 25.07.2017 was consequently beyond the two month period prescribed. The writ petition before the High Court (order dated 01.06.2017) was examined: the High Court directed re service of the order and expressly refrained from expressing any opinion on merits, leaving the prayer challenging limitation (clause B) open for adjudication by the Appellate Authority. The Tribunal held that the High Court direction did not retrospectively alter the date of knowledge such as to validate the delayed appeal, because the appellant had already obtained knowledge earlier (as shown by the pre deposit) and the High Court had not decided the limitation point in the appellant's favour but left it for fresh consideration.

Appeal was filed beyond the period of limitation and the rejection of the appeal on limitation grounds was upheld.

Service by registered acknowledgement (stamped A.D.) - compliance of Section 37(C) of the Central Excise Act, 1944 - Whether dispatch and acknowledgment by registered A.D. constituted valid service of the O I O for the purpose of initiating limitation - HELD THAT: - The Commissioner (Appeals) relied upon the departmental record (revised AD registered part) showing that the O I O was dispatched by registered A.D. and that an acknowledgement stamped by the appellant was received. The Tribunal held that receipt of a stamped A.D. is sufficient compliance with the statutory requirement for service under the relevant provision and that such service establishes the date from which limitation runs. The appellant's contention that service was ineffective or that the High Court order altered the date of service was not accepted in the absence of documentary proof to rebut the departmental record.

Receipt of stamped registered A.D. was held to be valid service and sufficient to commence the limitation period; the Commissioner (Appeals) did not err in so holding.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals)' order rejecting the appeal as barred by limitation and held that dispatch/receipt by stamped registered A.D. constituted valid service; the High Court order did not save the belated appeal, and the appeal is dismissed.

Cenvat credit reversal under Rule 3(5A) of Cenvat Credit Rules, 2004 - Net-off method of Cenvat adjustment - Interest on delayed or erroneous availing of Cenvat credit - Penalty under Section 77(2) of the Finance Act, 1994

Cenvat credit reversal under Rule 3(5A) of Cenvat Credit Rules, 2004 - Net-off method of Cenvat adjustment - Interest on delayed or erroneous availing of Cenvat credit - Whether the appellant is liable to pay interest on alleged non-reversal of Cenvat credit under Rule 3(5A) for the impugned period - HELD THAT: - The Tribunal found that the appellant followed a consistent net-off method whereby the amount of Cenvat credit available in a month was adjusted by the credit attributable to reversal under Rule 3(5A) and shown in ST-3 returns, and that subsequently the appellant rectified the returns where required. No other discrepancy was found in the records. Because the appellant had not availed excess Cenvat credit by virtue of this method and the reversal was effectively reflected (including through revised returns), the appellant cannot be said to have failed to reverse credit under Rule 3(5A) so as to attract interest. The determinative reasoning is that absence of excess availment of credit and the manner of adjustment precludes a charge of interest for the impugned period. [Paras 8]

No interest is payable by the appellant.

Penalty under Section 77(2) of the Finance Act, 1994 - Whether penalty under Section 77(2) of the Finance Act, 1994 is imposable for not filing correct details in ST-3 returns - HELD THAT: - The Tribunal noted that the method adopted by the appellant for availment and adjustment of Cenvat credit was known to the department and there was no material to demonstrate deliberate concealment or an intention to evade duty by the appellant. In these circumstances, imposition of penalty under Section 77(2) was not warranted. The Tribunal thus set aside the penalty, finding that the facts did not establish the culpable omission or willful misstatement necessary to sustain the penalty. [Paras 9]

Penalty under Section 77(2) of the Finance Act, 1994 is not imposable.

Final Conclusion: The impugned order is set aside; the appellant's appeal is allowed insofar as the demand of interest and the penalty are concerned, with consequential relief as applicable.

Service tax on collection of statutory levies - Business Auxiliary Service - commission agent - cum-tax benefit - exemption under Notification No. 33/2012-ST - penalty not imposable

Service tax on collection of statutory levies - Business Auxiliary Service - commission agent - Liability to service tax on the excess of royalty collected over and above the bid amount for the period April 2009 to March 2012 - HELD THAT: - The Tribunal applied its earlier decision in Mateshwari Indrani Contractors Pvt. Ltd. which held that amounts retained by a successful bidder for collection of statutory levies (royalty/toll) do not attract service tax as Business Auxiliary Service where the recipient (government/statutory authority) is not engaged in business. The appellant acted as contractor to collect statutory levies for the Mines & Geology Department and any profit/loss arising from collections was to the appellant's account. Since the service, if any, was not rendered in relation to the business of the government department, the activity does not fall within the taxable category of Business Auxiliary Service or as services of a commission agent for the purpose of service tax. Following that precedent, the demand for service tax on the excess royalty was held unsustainable and dropped. [Paras 10]

Demand of Rs.21,87,591/- for non-payment of service tax on excess royalty for April 2009 to March 2012 is dropped.

Cum-tax benefit - exemption under Notification No. 33/2012-ST - penalty not imposable - Liability to service tax on rent received for leasing hotel premises (used solely for running a hotel) for the period July 2012 to March 2014 and imposition of penalty - HELD THAT: - The Tribunal examined the claim for cum-tax benefit and reliance on the exemption regime (Notification No. 6/2005-ST as superseded by Notification No. 33/2012-ST). Applying those benefits and after appropriation of service tax and interest already paid by the appellant prior to issuance of the show cause notice, only a residual tax demand remained. The learned counsel conceded the reduced demand after computation. The Tribunal therefore confirmed the limited outstanding demand and observed that, on the facts and in view of payments made and concessions, imposition of penalty was not warranted. [Paras 11, 12]

Demand of Rs.98,933/- for July 2012 to March 2014 is confirmed (amounts already paid to be appropriated); no penalty is imposed.

Final Conclusion: Appeal disposed: demand for service tax on excess royalty for April 2009 to March 2012 set aside; a residual demand of Rs.98,933/- for July 2012 to March 2014 confirmed with prior payments appropriated; no penalty imposed.

Export of service - intermediary services - place of provision of services - Rule 6A - Export of Services - destination based consumption tax - convertible foreign exchange - exemption for services to educational institutions

Export of service - Rule 6A - Export of Services - convertible foreign exchange - place of provision of services - Commission received from foreign universities for referral/recruitment services is export of service and not liable to service tax - HELD THAT: - The Tribunal found that the appellant provided services to foreign universities which were located outside India, received consideration in convertible foreign exchange, and the benefit of the services accrued to recipients abroad. Applying the criteria in Rule 6A and related placeofprovision rules, the appellant satisfied the conditions for export of service. The decision treated the recipient as the foreign university (per the contract) and held the place of provision/consumption to be outside India; consequently the services were not amenable to service tax as they were export of services within the statutory scheme and consistent authorities cited.

Service tax demand set aside as the commission services qualify as export of service and are not taxable.

Intermediary services - place of provision of services - Services are not intermediary services for the purpose of taxation - HELD THAT: - The Tribunal rejected the Revenue's contention that the appellant acted as an intermediary. On the facts and contract terms the appellant provided services on its own account to the foreign universities (principaltoprincipal relationship) and did not merely arrange or facilitate a main service by a third party. As intermediary services are treated differently under the placeofprovision rules, the finding that the appellant was not an intermediary supported the export classification and nontaxability.

Appellant not liable to be treated as intermediary; intermediary classification rejected.

Exemption for services to educational institutions - Exemption notification in favour of educational services noted but not required for main decision - HELD THAT: - The Tribunal recorded that services to or by educational institutions in respect of education are covered by the exemption notification and observed that this additional ground further supports nontaxability. However, the Tribunal did not base its primary conclusion on the exemption and decided the appeal on the exportofservice analysis.

Notification-based exemption noted as reinforcing nontaxability but not relied upon as the primary ground.

Final Conclusion: The appeal is allowed: the demand confirmed by the lower authority is set aside because the commission for referral/recruitment services rendered to foreign universities (period after 01.07.2012 to 31.12.2015) qualifies as export of service and is not liable to service tax; the services are not intermediary services, and the exemption for educational services was noted as additional support.

Works contract - valuation for service tax - inclusion of goods supplied free of cost in taxable value - remand for limited determination of value - interest liability on admission of tax - penalty liability under statutory provisions

Remand for limited determination of value - valuation for service tax - Whether the appeal remained infructuous following adjudication on remand and whether the appellant could withdraw the main prayer in the appeal memo. - HELD THAT: - The Tribunal noted that subsequent proceedings on remand resulted in a de novo adjudication which adjusted the service tax demand and that, in view of those subsequent developments, the appellant sought deletion of the principal prayer seeking setting aside of the Commissioner (Appeals) order. The Tribunal observed that the appellant's request to delete that prayer effectively amounted to abandonment of the present appeal as rendered infructuous by the later adjudication on remand. Consequently, the Tribunal allowed the procedural modification implied by deletion of the contested prayer and treated the appeal as not being pursued further to the extent indicated by the appellant.

Prayer in the appeal seeking to set aside the impugned Order-in-Appeal was treated as withdrawn and the appeal, to that extent, rendered infructuous.

Inclusion of goods supplied free of cost in taxable value - valuation for service tax - Whether the appellant could add a new prayer seeking 'benefit' of the later Order in Original dated 19.03.2021 by amendment to the appeal memo before the Tribunal. - HELD THAT: - The Tribunal considered the appellant's application to amend the relief sought so as to claim the benefit of the subsequent Order in Original. The Tribunal found that the proposed additional prayer was not maintainable before the Tribunal in the present appeal. The Tribunal observed that any benefit accruing from the later adjudication is enforceable by the appellant through appropriate implementation proceedings and does not permit adding the suggested prayer in the pending appeal for the purpose of obtaining retrospective advantage.

Application to add a prayer to seek benefit of the later Order in Original dated 19.03.2021 was refused as not maintainable; appellant free to seek implementation of that order separately.

Interest liability on admission of tax - penalty liability under statutory provisions - Whether interest and penalties imposed in the adjudication are sustainable given the appellant's admission of service tax liability during remand proceedings. - HELD THAT: - The Tribunal recorded that the appellant admitted liability during remand proceedings, which, under the statutory framework, attracts interest under the relevant provision for interest on service tax. The Tribunal found no infirmity in the adjudicating authority's imposition of interest and in the confirmation of penalties under the statutory provisions applied; accordingly, those parts of the adjudication required no interference. The Tribunal also noted the adjustment/appropriation of amounts already deposited towards the adjudicated liability as made by the adjudicating authority.

Interest payable by the appellant confirmed in view of admitted liability; penalties imposed under the statutory provisions upheld.

Final Conclusion: The appeal is disposed of: the principal prayer to set aside the Commissioner (Appeals) order was treated as withdrawn as infructuous in view of subsequent remand adjudication; the application to add a prayer seeking benefit of the later Order in Original was refused as not maintainable; interest and penalties as imposed by the adjudicating authority are sustained.

Monetary limit for preferring appeal to the Supreme Court - enhancement of pecuniary jurisdiction - disposal of appeal where appellant does not press

Monetary limit for preferring appeal to the Supreme Court - disposal of appeal where appellant does not press - Effect of the Ministry of Finance circular raising the monetary limit to Rs.5 crores on the maintainability/pressing of the present appeals and consequent disposition - HELD THAT: - The Court recorded placement on record of a circular dated 06.08.2024 by the Ministry of Finance increasing the monetary limit for preferring appeals to this Court to Rs.5 crores. The amount under consideration in these appeals is Rs. 3,30,81,801, which is below the enhanced pecuniary threshold. Having regard to the increased monetary limit and the amount involved, the appellant informed the Court that it did not wish to press the appeals. In consequence, the Court disposed of the appeals. [Paras 1, 2, 3, 4]

Appeals disposed of as not pressed in view of the enhanced monetary limit and the amount involved being below Rs.5 crores.

Final Conclusion: The appeals were disposed of on the appellant's statement that they would not be pressed after a Ministry of Finance circular (06.08.2024) raised the pecuniary limit for preferring appeals to Rs.5 crores, the amount in dispute being below that threshold.

Cenvat credit recovery - inadmissibility of statements not subjected to cross-examination - requirement of corroborative evidence for clandestine removal or diversion - insufficiency of presumptions and assumptions as basis for demand - improper accounting does not constitute incorrect taking of credit under Rule 14 - probative value of SAP adjustment entries

Cenvat credit recovery - requirement of corroborative evidence for clandestine removal or diversion - insufficiency of presumptions and assumptions as basis for demand - improper accounting does not constitute incorrect taking of credit under Rule 14 - probative value of SAP adjustment entries - Sustainability of demand of Cenvat credit on account of physical shortage of inputs and SAP accounting entries. - HELD THAT: - The Tribunal held that the departmental case rested on the premise that shortages in physical stocks proved clandestine removal or diversion of inputs and therefore recovery of Cenvat credit was warranted. The adjudication was found to be based on assumptions, there being no positive or corroborative evidence to show actual diversion, clandestine clearance or disposal of the inputs outside manufacture. The adjustments made in the SAP ERP system were explained as accounting reconciliations implemented to accommodate earlier mis recordings and to reconcile consumption when the ERP was brought into use, and cannot, by themselves, be treated as proof of non utilisation in manufacture. In the absence of any finding that credit was originally taken incorrectly or improperly, mere shortages or improper accounting do not attract recovery under Rule 14. Applying these principles, the Tribunal concluded the demand was unsustainable and set aside the impugned order.

Demand of Cenvat credit based on stock shortages and SAP entries is not sustainable and is set aside.

Inadmissibility of statements not subjected to cross-examination - Admissibility and probative value of statements recorded during investigation which were not subject to cross examination before the adjudicating authority. - HELD THAT: - The Tribunal held that statements recorded during investigation, relied upon by the department but whose makers were not produced for examination in chief and not made available for cross examination at adjudication, could not be treated as admissible evidence. The appellant's request for cross examination of such witnesses was rejected below; the Tribunal found that reliance on those untested statements was impermissible and contrary to principles of natural justice and settled authority. Consequently, those statements could not sustain the confirmation of demand or penalties.

Oral statements not subjected to cross examination are inadmissible as evidence and cannot support the impugned order.

Final Conclusion: The impugned order confirming recovery of Cenvat credit and imposing penalties was set aside; the appeals are allowed following the Tribunal's reasoning that the departmental case lacked corroborative evidence of diversion/theft and impermissibly relied upon untested statements and accounting assumptions.

Recovery under Section 11D - Payment under Rule 6(3) of the Cenvat Credit Rules, 2004 - CBEC Circular No. 870/08/2008-CX - Cenvat credit on rent-a-cab services as input service - Place of removal and includibility of freight in assessable value - Penalty consequent upon unsustainable demands

Recovery under Section 11D - Payment under Rule 6(3) of the Cenvat Credit Rules, 2004 - CBEC Circular No. 870/08/2008-CX - Amount reversed and paid under Rule 6(3) of the Cenvat Credit Rules and subsequently recovered from buyers is not exigible to deposit under Section 11D. - HELD THAT: - The Tribunal held that Section 11D applies only where an assessee collects amounts as representing excise duty and retains them without depositing to the Government. Where an amount equal to 8%/10% has been paid to the Government in terms of erstwhile Rule 57CC or Rule 6(3) of the Cenvat Credit Rules, such payments are not to be treated as amounts to be deposited under Section 11D even if recovered from buyers. The Board's clarification in CBEC Circular No.870/08/2008-CX recording acceptance of the Larger Bench decision in Unison Metals supports this position and clarifies that the buyer cannot take Cenvat credit for such payments but the supplier is not liable to remit them under Section 11D. Applying these principles to the facts where the appellant had reversed the 10.3% amount under Rule 6(3) and then recovered it from the customer, Section 11D could not be invoked against the appellant. [Paras 4]

Demand under Section 11D in respect of the amount reversed under Rule 6(3) and recovered from customers is not sustainable and is set aside.

Cenvat credit on rent-a-cab services as input service - Cenvat credit is admissible on rent-a-cab services used for business travel of employees. - HELD THAT: - Relying on the decision of the High Court of Gujarat in Transpek Industry Ltd. and SR Oil Ltd., the Tribunal found that rent-a-cab services availed for business travel of employees qualify as an input service under the Cenvat Credit Rules and the appellant is entitled to claim Cenvat credit for service tax paid on such rent-a-cab services. The Tribunal, after considering submissions for both sides, respectfully followed the High Court's precedent and allowed the credit claimed. [Paras 19]

Cenvat credit on rent-a-cab services is allowable to the appellant.

Place of removal and includibility of freight in assessable value - Freight from the seller's premises to the buyer's premises in FOR contracts is not includible in assessable value where the place of removal is the seller's premises. - HELD THAT: - The Tribunal applied the Supreme Court's reasoning in Ispat Industries and related decisions, holding that the statutory concept of 'place of removal' must be referable to the seller's premises (factory, depot or other premises relatable to the manufacturer). Consequently, freight incurred from the place of removal to the buyer's premises cannot be included in the assessable value for central excise. The Tribunal noted the Circular issued by the Board (Circular No.1065/4/2018-CX) summarising these authorities and the exceptions limited to the special factual scenarios considered by the Apex Court. On the facts, the sale though on FOR basis did not render the buyer's premises as place of removal and therefore freight was not exigible to central excise. [Paras 23]

Demand of central excise on freight charges for FOR sales is not sustainable and is set aside.

Penalty consequent upon unsustainable demands - Penalty imposed in relation to the three demands is liable to be set aside as the demands themselves are unsustainable on merits. - HELD THAT: - Having found that the demands under Section 11D, the disallowance relating to freight and the denial of credit were not sustainable, the Tribunal concluded that the penalty based on those demands also cannot survive. The penalty was therefore set aside as consequential relief. [Paras 24]

Penalty is set aside consequent to the setting aside of the substantive demands.

Final Conclusion: The impugned order is set aside; the appeal is allowed and consequential relief, if any, is granted to the appellant.

Clandestine removal based on stock shortages - reliability of third party statements in adjudication where cross examination is not permitted - retraction of statement and its evidentiary value - entitlement to Cenvat credit where receipt of inputs is recorded and outputs accepted for duty - requirement of proper stock verification and consideration of contemporaneous evidence (including CCTV)

Clandestine removal based on stock shortages - requirement of proper stock verification and consideration of contemporaneous evidence (including CCTV) - Sustainability of demand confirmed on account of alleged clandestine removals and shortages of finished goods. - HELD THAT: - The Tribunal found that the department's case on clandestine removals rested virtually entirely on shortages observed at the time of the visit. In the absence of any other corroborative evidence of clandestine activity, and having regard to the settled judicial view that shortages alone, especially if stock verification is not conducted properly and all factory stock (including various sections/sheds and available CCTV footage) is not considered, cannot establish clandestine removal, the demand based on such shortages is unsustainable. The Tribunal noted that statements retracted by the partner and failure to consider CCTV footage and proper stock taking further undermine the reliance on the detected shortages. Consequently, the demand relating to shortage of finished goods was set aside. [Paras 4]

Demand on account of alleged clandestine removals/shortages of finished goods set aside.

Reliability of third party statements in adjudication where cross examination is not permitted - retraction of statement and its evidentiary value - entitlement to Cenvat credit where receipt of inputs is recorded and outputs accepted for duty - Validity of denial of Cenvat credit where denial is founded on third party statements not subjected to cross examination and on retracted admissions. - HELD THAT: - The Tribunal held that the Revenue relied on statements of transporters and dealers to allege non receipt of inputs, but the assessee's request for cross examination of those witnesses was either denied or the witnesses failed to appear. The adjudicating authority's refusal to afford effective opportunity for cross examination rendered those statements inadmissible for sustaining demand; adverse inference cannot be drawn against the assessee without proper cross examination of relied upon witnesses. Further, the partner's statements recorded during investigation were subsequently retracted by affidavit and thus lacked evidentiary value. The assessee had contemporaneous documentary records showing receipt of goods in raw material accounts, booking of purchase transactions, use of inputs in manufacture and payment of transportation; Revenue produced no evidence of diversion or of any buyer of alleged diverted inputs. The Tribunal applied the principle that once outputs are accepted for duty, credit on inputs cannot be denied absent substantial evidence to the contrary, and concluded that the Cenvat credit taken complied with the statutory scheme. [Paras 4]

Denial of Cenvat credit set aside; Cenvat credit allowed as compliant with scheme and unsupported by reliable adverse evidence.

Final Conclusion: The impugned order of the Commissioner (Appeals) is set aside: demands confirmed on account of alleged clandestine removals/shortages are quashed, and the denial of Cenvat credit is reversed; appeal allowed with consequential relief.

Refund under Section 142(3) of the CGST Act, 2017 - CENVAT credit of countervailing duty and special additional duty (CVD & SAD) - cash refund in lieu of transitional CENVAT credit - transition of CENVAT credit under Section 140(1) of the CGST Act, 2017 - refund mechanism under Section 11B of the Central Excise Act, 1944 - export obligation shortfall under Advance Authorization (AA) / EPCG

Refund under Section 142(3) of the CGST Act, 2017 - CENVAT credit of countervailing duty and special additional duty (CVD & SAD) - cash refund in lieu of transitional CENVAT credit - refund mechanism under Section 11B of the Central Excise Act, 1944 - export obligation shortfall under Advance Authorization (AA) / EPCG - Appellants are entitled to cash refund under Section 142(3) of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944, of CVD & SAD paid after 01.07.2017 in respect of imports made prior to 01.07.2017 where export obligations under AA/EPCG were not fulfilled. - HELD THAT: - The Tribunal found that the duties (CVD & SAD) pertained to goods imported prior to 01.07.2017 and, prima facie, were eligible as CENVAT credit under the erstwhile regime. Because the payments of CVD & SAD were made after introduction of GST, the appellants could not utilize such amounts as CENVAT credit under the pre GST returns nor could they be carried into the electronic credit ledger, creating a transitional gap. The legislature has provided for refund of such amounts by virtue of Section 142(3) of the CGST Act read with Section 11B of the Central Excise Act. The Tribunal, after noting consistent decisions of coordinate benches and the High Court in the appellant's case, held that the issue is no longer res integra and that a cash refund is payable where transitional CENVAT credit cannot be carried forward or utilised post GST. On that basis the Tribunal set aside the orders rejecting the refund claim and granted consequential relief.

Impugned order rejecting the refund set aside; appeal allowed and appellants entitled to consequential cash refund relief.

Final Conclusion: The Tribunal allowed the appeal, holding that refund under Section 142(3) CGST Act, 2017 read with Section 11B CE Act, 1944 is available for CVD & SAD paid after 01.07.2017 in respect of imports made prior to 01.07.2017 on account of non fulfilment of AA/EPCG export obligations, and set aside the orders rejecting the refund.

Cross-examination of material witnesses - Section 9D of the Central Excise Act - admissibility of statements recorded during investigation - principles of natural justice - remand for fresh adjudication

Cross-examination of material witnesses - Section 9D of the Central Excise Act - admissibility of statements recorded during investigation - principles of natural justice - Impugned orders which relied on statements recorded during investigation without allowing cross-examination of the material witnesses were set aside and the matters were remanded for fresh adjudication after affording opportunity of cross-examination in accordance with Section 9D. - HELD THAT: - The Tribunal found that the adjudicating authorities had relied on statements recorded during investigation to make demands/penalties against the appellants but had not permitted cross-examination of the witnesses whose statements formed the basis of the orders. Relying on the ratio of the Punjab & Haryana High Court (Jindal Drugs) and Supreme Court authority (Andaman Timber Industries) as applied in earlier Tribunal precedents, the Tribunal emphasised that Section 9D prescribes mandatory procedures for admitting statements recorded before a gazetted Central Excise Officer and that clause (b) requires that the person who made the statement be examined as a witness before the adjudicating authority and that the authority record reasons for admitting the statement in the interests of justice. The Tribunal held that denial of the opportunity to cross-examine key witnesses where their statements are relied upon vitiates quasi-judicial proceedings and amounts to breach of principles of natural justice. In view of these legal principles and consistent earlier orders of this Tribunal in cases arising from the same investigation, the impugned orders were not sustainable and the proper remedy is to remit the matters to the adjudicating authority to decide afresh after following the procedure under Section 9D and allowing cross-examination.

Impugned orders set aside; appeals allowed by remand to the adjudicating authority for fresh decision after affording opportunity for cross-examination and following Section 9D.

Remand for fresh adjudication - The appeals were disposed of by remanding the matters to the adjudicating authority for fresh adjudication and directed cooperation by appellants. - HELD THAT: - Given the failure to afford cross-examination and the necessity to comply with the statutory procedure under Section 9D, the Tribunal directed remand for fresh adjudication. The Tribunal relied on its own recent orders in matters arising from the same investigation and on binding judicial pronouncements to justify remand rather than deciding the merits at appellate stage. The appellants were directed to cooperate for speedy disposal.

All appeals allowed by way of remand; appellants to cooperate with the adjudicating authority for expeditious disposal.

Final Conclusion: The Tribunal set aside the impugned orders and remitted the matters to the adjudicating authority for fresh adjudication after permitting cross-examination of the material witnesses and following the procedure under Section 9D; the appellants were directed to cooperate for speedy disposal.