TaxTMI Updates e-Newsletter
Dec 12,2024

Exhaustion of alternate statutory remedies - relegation to appellate remedy - violation of principles of natural justice - consideration of limitation in appellate proceedings - rectification application as a remedial step

Exhaustion of alternate statutory remedies - relegation to appellate remedy - violation of principles of natural justice - Petition challenging assessment orders not entertained on ground that alternate statutory remedy by way of appeal was available and must be exhausted - HELD THAT: - The Court found no prima facie substantial ground to depart from the established practice of requiring exhaustion of alternate remedies. Mere allegations of breach of natural justice or non-consideration of precedents are insufficient to bypass the appellate forum; such contentions must be substantiated rather than asserted to litigate merits in writ proceedings. Allegations that tax was demanded on items already paid would raise factual issues better examined by the Appellate Authority. The absence of an application for rectification within the prescribed period further militated against entertaining the writ. Following the Court's prior survey of the principle, the petition was declined and the petitioner relegated to the statutory appeal route. [Paras 3, 7, 8, 9, 12]

Petition declined for want of exhaustion of alternate remedy; petitioner relegated to file statutory appeals.

Consideration of limitation in appellate proceedings - relegation to appellate remedy - rectification application as a remedial step - Liberty granted to institute appeals within a limited time and direction that appeals be considered on merits without addressing limitation if filed within the granted period; rectification application not precluded if maintainable - HELD THAT: - The Court exercised discretionary relief by permitting the petitioner to institute appeals within four weeks and directed that such appeals, if filed within that period, be considered and disposed of on merits without advertence to limitation, because the writ itself was filed within the appeal limitation and the petitioner had bona fide pursued the petition. The order clarified that failure to have earlier filed a rectification application does not preclude the petitioner from filing one now if maintainable and reasonable grounds exist. [Paras 10, 11, 12]

Liberty granted to file appeals within four weeks to be decided on merits without raising limitation; petitioner may still file rectification if maintainable.

Final Conclusion: Writ petition dismissed for failure to exhaust alternate statutory remedy; petitioner granted four weeks' liberty to prefer appeals which shall be heard on merits without being barred by limitation if filed within that period; parties' contentions left open and no order as to costs.

Entitlement to differential GST rate - payment of tax due - writ petition for payment

Entitlement to differential GST rate - payment of tax due - Petition seeking direction for payment of GST at the higher rate and recovery of the differential amount was disposed on the basis that the difference had been paid. - HELD THAT: - The petitioner contended that owing to a change in the GST rate he was entitled to payment at 18% instead of 12% and that only the lower amount had been paid. The Court granted time to the respondents to obtain instructions and directed attendance when necessary. The respondents produced instructions stating that the differential amount of GST had been paid to the petitioner. The petitioner's counsel did not dispute this submission. In view of the respondents' unchallenged statement that the amount due had been paid, there was no further relief to be granted and the petition was disposed. [Paras 5, 6, 7]

The petition is disposed as the respondents have paid the differential GST amount to the petitioner.

Final Conclusion: Writ petition disposed on the respondents' unchallenged assurance that the differential GST amount has been paid to the petitioner.

Quashing of impugned order - jurisdiction under Section 6(2)(b) of the CGST Act, 2017 - prior initiation of proceedings by Central Goods and Services Tax authorities - withdrawal or setting aside of State GST notice - continuation of CGST proceedings in accordance with law

Quashing of impugned order - jurisdiction under Section 6(2)(b) of the CGST Act, 2017 - prior initiation of proceedings by Central Goods and Services Tax authorities - withdrawal or setting aside of State GST notice - continuation of CGST proceedings in accordance with law - Impugned State GST order dated 25.08.2024 (and summary in Form DRC-07) prejudicial to the petitioner quashed and set aside. - HELD THAT: - The petitioner had raised an objection as to jurisdiction under the scheme of Section 6(2)(b) of the CGST Act, 2017 on account of prior proceedings initiated by the CGST authorities (show cause notice dated 02.06.2022). The State GST notice impugned was issued subsequent to the CGST proceedings and the State respondents, on instructions, indicated readiness to withdraw or have the notice set aside. Having regard to the admitted factual and legal position that parallel proceedings before the CGST authorities existed and that the jurisdictional objection was not taken into account when the impugned order was passed, the Court allowed the writ petition and quashed and set aside the impugned order. The Court left the CGST authorities free to continue the proceedings in accordance with law.

Writ petition allowed; impugned order dated 25.08.2024 quashed and set aside; CGST proceedings permitted to continue in accordance with law.

Final Conclusion: The petition was allowed: the State GST order dated 25.08.2024 (and related summary in Form DRC-07) was quashed and set aside on account of prior CGST proceedings and the unaddressed jurisdictional objection; CGST authorities may proceed in accordance with law.

Pre-deposit from Electronic Credit Ledger - conditional suspension of coercive recovery measures - statutory pre-deposit under Section 112 - CBIC Circular dated 11.07.2024 permitting utilisation of ECL for pre-deposit - no adjudication on merits

Pre-deposit from Electronic Credit Ledger - CBIC Circular dated 11.07.2024 permitting utilisation of ECL for pre-deposit - statutory pre-deposit under Section 112 - Permission to unblock Electronic Credit Ledger to enable deposit of statutory pre-deposit from available credit in ECL in accordance with CBIC Circular dated 11.07.2024. - HELD THAT: - The Court directed that the petitioner's Electronic Credit Ledger be unblocked to enable the petitioner to make the statutory pre-deposit required for filing an appeal by utilising the credit balance in the Electronic Credit Ledger, in terms of the CBIC Circular dated 11.07.2024. The Court recorded that the tax demand for the period 01.04.2018 to 31.03.2019 gave rise to a pre-deposit obligation equivalent to 20% of the tax amount, and noted that the ledger balance as on 25.09.2024 exceeded that 20% pre-deposit requirement. The petitioner was directed to make the pre-deposit from the Electronic Credit Ledger and to comply with other requirements of the Circular, including filing the requisite undertaking before the jurisdictional proper officer. [Paras 9, 10, 11]

Electronic Credit Ledger shall be unblocked to permit the petitioner to make the pre-deposit from ECL and comply with the CBIC Circular; operation of the ECL and lifting of bank hold are conditional upon such pre-deposit.

Conditional suspension of coercive recovery measures - no adjudication on merits - Conditional quashing of coercive actions (blocking of ECL and hold on bank account) consequent to petitioner making the pre-deposit and complying with the Circular; clarification that the Court did not decide merits. - HELD THAT: - The Court ordered that on the petitioner making the pre-deposit from the Electronic Credit Ledger and complying with the Circular dated 11.07.2024, no further coercive action shall be taken pursuant to the impugned order dated 25.01.2024 for the tax period 01.04.2018 to 31.03.2019, and existing coercive measures taken in relation to that assessment (blocking of ECL and bank account hold) shall be deemed quashed. The Court expressly clarified that it has not considered or commented on the merits of the assessment proceedings and that, if the petitioner fails to comply with the Circular and does not avail of the remedy of filing an appeal when the appellate tribunal functions, the revenue authorities remain free to proceed in accordance with law. [Paras 10, 11, 12, 13]

Coercive measures are quashed and further coercive action restrained, but only conditionally upon compliance with the pre-deposit and Circular; merits remain undetermined and non-compliance permits revenue to proceed.

Final Conclusion: The petition is disposed by directing unblocking of the Electronic Credit Ledger to permit the petitioner to make the statutory pre-deposit from ECL in terms of CBIC Circular dated 11.07.2024; on such pre-deposit and compliance with the Circular, coercive measures in respect of the assessment for 01.04.2018 to 31.03.2019 are quashed and no further coercive action shall be taken, subject to the Court's clarification that merits were not adjudicated and non-compliance will allow the authorities to act in accordance with law.

Failure to provide opportunity of hearing before demand - Service of notice via GST portal insufficient where registration cancelled - Section 73 of U.K. GST Act, 2017 - issuance of notice for tax demand - Quashing of demand order for non-service

Failure to provide opportunity of hearing before demand - Service of notice via GST portal insufficient where registration cancelled - Petitioner was not served with a notice or given an opportunity of hearing before a demand was raised. - HELD THAT: - The petitioner's GST registration having been cancelled on 26.11.2022, the Court accepted the petitioner's submission that he was not obliged to monitor the Department's online portal and that publication on the official GST portal did not constitute effective service in the circumstances. The State was afforded time to place instructions on service but none were produced. In consequence, the Court was constrained to treat that no notice had been served and that no opportunity of hearing had been afforded prior to issuance of the demand. [Paras 4, 5, 6, 7, 8]

Findings recorded that the petitioner was not served with notice and was not given an opportunity of hearing before the demand was raised; the impugned order cannot stand for want of service.

Section 73 of U.K. GST Act, 2017 - issuance of notice for tax demand - Quashing of demand order for non-service - Impugned demand order quashed with liberty to the Department to proceed afresh under Section 73 after serving notice and hearing the petitioner or his authorised agent. - HELD THAT: - In view of the absence of effective service and hearing, the Court quashed the demand order dated 28.11.2023. The Court granted the Department liberty to issue/serve a notice under Section 73 of the U.K. GST Act, 2017 and to pass an appropriate order thereafter, in accordance with law, after affording the petitioner an opportunity of hearing. This preserves the Department's right to adjudicate the claim subject to compliance with procedural fairness. [Paras 8, 9]

Impugned order quashed; Department permitted to serve notice under Section 73 and pass a fresh order after giving the petitioner a hearing.

Final Conclusion: Writ petition allowed in part: the demand order dated 28.11.2023 is quashed for non-service and lack of hearing; the Department is entitled to serve a notice under Section 73 of the U.K. GST Act, 2017 and decide the matter afresh after affording the petitioner a hearing.

Opportunity of hearing - principles of natural justice - Section 75(4) of the GST Act - demand under Section 74 of the GST Act - quashing of administrative order for non-compliance of audi alteram partem - remand for fresh adjudication after hearing

Opportunity of hearing - Section 75(4) of the GST Act - principles of natural justice - Original adjudicatory order was passed without granting the petitioner an opportunity of personal hearing as mandated by Section 75(4) and contrary to principles of natural justice. - HELD THAT: - The show-cause notice and reminder recorded 'NA' against the columns for date, time and venue of personal hearing and no personal hearing was in fact granted. Section 75(4) mandates the grant of an opportunity of hearing where an adverse decision is contemplated; this Court has held compliance with Section 75(4) to be mandatory. The impugned original order was therefore contrary to the legislative mandate and violative of audi alteram partem, warranting quashing of that order. [Paras 6, 8, 9]

Original order dated 01.02.2022 quashed for non-compliance with Section 75(4) and principles of natural justice.

Quashing of administrative order for non-compliance of audi alteram partem - remand for fresh adjudication after hearing - demand under Section 74 of the GST Act - Consequential appellate order was quashed and the matter remanded for fresh adjudication after permitting the petitioner to file reply and after granting a hearing. - HELD THAT: - Because the original order confirming demand under Section 74 was quashed for lack of hearing, the appellate order dependent on that original order could not stand and was accordingly quashed. The matter is remitted to the adjudicating authority to pass fresh orders in respect of the demand after permitting the petitioner to file a reply to the show-cause notice and after affording a personal hearing, in accordance with law. [Paras 10, 11]

Order dated 24.04.2024 quashed; matter remanded to respondent no.3 for fresh decision after permitting reply and granting an opportunity of hearing.

Final Conclusion: Writ petition allowed: impugned original order under Section 74 (F.Y. 2017-2018) and the consequent appellate order quashed; matter remitted for fresh adjudication after affording the petitioner an opportunity to file reply and a personal hearing in accordance with Section 75(4) and principles of natural justice.

Condonation of delay - power to entertain delayed appeal - exercise of jurisdiction under Article 226 of the Constitution of India - pre-deposit for hearing of appeal - right to effective hearing against cancellation of registration

Condonation of delay - exercise of jurisdiction under Article 226 of the Constitution of India - pre-deposit for hearing of appeal - Writ petition allowed and 21 days' delay in filing the appeal condoned; Appellate Authority directed to rehear and decide the appeal on merits. - HELD THAT: - Relying on the Court's earlier reasoning in the linked batch of cases, the Court observed that where a petitioner has complied with the requirement of pre-deposit and the controversy is of a legal nature, delay in filing an appeal may be condoned to ensure effective relief. Exercising jurisdiction under Article 226, the Court found it appropriate to condone the delay of 21 days and to direct the Appellate Authority to rehear the appeal on merits so that the petitioner is not deprived of an efficacious remedy. The Court recorded that no further reply from the respondents was necessary in view of the purely legal issue and the compliance by the petitioner with the pre-deposit condition. [Paras 4, 5, 6]

Delay of 21 days condoned; Appellate Authority directed to rehear and decide the appeal on merits; writ petition allowed.

Power to entertain delayed appeal - right to effective hearing against cancellation of registration - The Court affirmed the principle that the power to hear appeals under the relevant Act is not rendered ineffective by delay and that a writ petition can be entertained for condonation of delay to preserve the right of appeal against cancellation of registration. - HELD THAT: - The Court reiterated the legal proposition, as articulated in its earlier judgment, that the statutory scheme aims to provide relief where demands or cancellations may have been made wrongfully, and that delays arising from business affairs should not leave a person remediless. Accordingly, the jurisdiction to hear an appeal under the applicable provisions is not strictly defeated by delay; the writ jurisdiction under Article 226 can be invoked to condone delay and secure an efficacious remedy, particularly where cancellation of registration has wider cascading consequences. This legal principle informed the Court's decision to condone the delay and to direct rehearing. [Paras 4, 5]

Power to hear the appeal is not ousted by delay; writ remedy may be availed to seek condonation so as to secure an effective hearing against cancellation of registration.

Final Conclusion: The writ petition was allowed: 21 days' delay in filing the appeal was condoned under Article 226, and the Appellate Authority was directed to rehear and decide the appeal on merits; all pending applications were disposed of accordingly.

Deemed owner - Ownership of goods - Penalty under Section 129(1)(a) of the Uttar Pradesh Goods and Service Tax Act, 2017 - Penalty under Section 129(1)(b) of the Uttar Pradesh Goods and Service Tax Act, 2017 - CBIC Clarification dated 31.12.2018 - GST registration/GSTIN records as evidence of proprietorship

Deemed owner - Ownership of goods - GST registration/GSTIN records as evidence of proprietorship - Authority erred in rejecting the petitioner's claim of ownership of the detained goods despite official GST records showing proprietorship - HELD THAT: - The authority recorded that only the name appearing on invoice and e-way bill could be treated as owner and rejected the petitioner's claim for want of Aadhar/PAN in his individual name. That finding is inconsistent with material on the department's records where the GSTIN/registration certificate identifies the legal name as the petitioner, the trade name as the firm, and the constitution as proprietorship, and further shows Aadhar authentication. The court held that ignoring these official records and refusing to recognise the petitioner as the deemed owner of the consignee's goods was unsustainable. [Paras 6, 7]

Finding that the petitioner was not the owner despite GST registration/records was set aside.

Penalty under Section 129(1)(a) of the Uttar Pradesh Goods and Service Tax Act, 2017 - Penalty under Section 129(1)(b) of the Uttar Pradesh Goods and Service Tax Act, 2017 - CBIC Clarification dated 31.12.2018 - Impugned imposition of penalty under Section 129(1)(b) instead of applying Section 129(1)(a) in light of the CBIC clarification and the petitioner's status was erroneous and required fresh consideration - HELD THAT: - Counsel for the respondents conceded that the CBIC Clarification and earlier decisions support application of Section 129(1)(a) where the consignee is the owner as established. Because the authority's adverse finding on ownership was unsustainable in view of departmental records, the consequence of that finding-levy of penalty under Section 129(1)(b)-cannot be sustained. The court therefore set aside the impugned orders and remanded the matter for a fresh order applying Section 129(1)(a) and the observations made by the court. [Paras 2, 6, 8]

Impugned orders dated 05.11.2024 set aside; matter remanded for fresh decision under Section 129(1)(a) in accordance with the court's observations.

Final Conclusion: Writ petitions allowed; penalty orders dated 05.11.2024 set aside and matter remanded to the competent authority to pass a fresh order applying Section 129(1)(a) of the Act and the court's observations within two weeks.

Grant of bail in economic offences involving alleged GST fraud - confessional statement under Section 70 of the CGST Act - ineligible input tax credit (ITC) - seizure of incriminating digital records - parity with co-accused released on bail by coordinate Bench - absence of previous criminal history - conditional bail and supervisory conditions - trial court not to be influenced by observations in bail order

Grant of bail in economic offences involving alleged GST fraud - confessional statement under Section 70 of the CGST Act - ineligible input tax credit (ITC) - seizure of incriminating digital records - parity with co-accused released on bail by coordinate Bench - absence of previous criminal history - Applicant entitled to bail subject to conditions - HELD THAT: - The Court considered the nature of the alleged offence involving creation of fake firms and availing/passing of ineligible ITC, the seizure of incriminating digital devices and records, and the statement recorded by the applicant under Section 70 of the CGST Act. Countervailing factors weighed in applicant's favour were absence of any criminal history, lack of recovery from his personal possession, the fact that tax liability and penalties have not yet been ascertained, and that a co-accused with a more serious role had been granted bail by a coordinate Bench. Bearing in mind the material on record and without expressing any opinion on merits, the Court concluded that the applicant had made out a case for bail. The Court granted bail while recording that the possibility of tampering with evidence and risk of repetition of similar offences were considerations to be guarded against by imposing conditions. [Paras 8]

Bail allowed.

Conditional bail and supervisory conditions - surrender of passport and prohibition on leaving the country - non-tampering and non-contact conditions - bail cancellation on breach of conditions - trial court not to be influenced by observations in bail order - Terms and supervisory conditions of bail and consequence of breach - HELD THAT: - The Court directed release on furnishing a personal bond and two heavy sureties subject to enumerated conditions: prohibition on tampering with evidence, intimidation of prosecution witnesses, requirement to attend trial, prohibition on committing similar offences or inducing witnesses, restriction on criminal or antisocial activity, and surrender of passport with bar on leaving the country without prior permission. The order records that in case of breach the prosecution is at liberty to seek cancellation of bail before the Court. The Court clarified that observations in the bail order are confined to the bail application and shall not influence the trial court in final adjudication. [Paras 9, 10, 11]

Bail granted subject to specified conditions; prosecution may move for cancellation on breach; trial court to decide merits unimpaired by this order.

Final Conclusion: Bail application allowed; applicant released on furnishing bond and two sureties subject to enumerated conditions (non tampering, non intimidation, attendance, prohibition on similar offences, surrender of passport, and related restraints); prosecution may move for cancellation on breach; trial court to decide the case on merits unaffected by this order.

Mandatory statutory obligation to grant an opportunity of personal hearing where an adverse decision is contemplated - opportunity of hearing as a condition precedent to valid adjudication - quashing of orders passed without statutory hearing and remand for fresh adjudication - statutory protection under Section 75(4) of the WBGST/CGST Act, 2017

Opportunity of hearing as a condition precedent to valid adjudication - mandatory statutory obligation to grant an opportunity of personal hearing where an adverse decision is contemplated - quashing of orders passed without statutory hearing and remand for fresh adjudication - Whether the adjudication order passed for Financial Year 2017-2018 without affording any opportunity of personal hearing is sustainable. - HELD THAT: - The Court held that under Section 75(4) of the WBGST/CGST Act, 2017 the proper officer is obligated to afford an opportunity of hearing either when a written request for hearing is received or when an adverse decision is contemplated against the person. Reliance was placed on the Division Bench authority cited in the petition to the effect that where an adverse decision is in contemplation, the authority must communicate date, time and venue of hearing and cannot proceed to pass an adjudication order without affording such opportunity. Applying this principle to the present facts, the Court found that the show cause notice carried a note of "N.A." in the personal hearing column and no personal hearing was granted before the adjudication order dated 29th December, 2023 was passed. The failure to afford the statutorily mandated opportunity rendered the adjudication invalid. Consequently, the impugned order could not be sustained and the matter was remitted to the adjudicating authority for fresh decision after affording a reasonable opportunity of hearing to the petitioner.

Impugned adjudication for Financial Year 2017-2018 quashed and matter remitted for fresh adjudication after affording reasonable opportunity of personal hearing.

Final Conclusion: Writ petition disposed; impugned adjudication order set aside and matter remanded to the competent authority to decide afresh in accordance with law after granting the petitioner a reasonable opportunity of personal hearing; no order as to costs.

Refund of IGST on goods exported out of India - Rule 96 of the CGST Rules - processing of refund by system designated by Customs or Proper Officer of Customs - Proper officer of Customs - Cause of action - Territorial jurisdiction under Article 226 of the Constitution - Withholding of refund

Refund of IGST on goods exported out of India - Rule 96 of the CGST Rules - processing of refund by system designated by Customs or Proper Officer of Customs - Proper officer of Customs - Cause of action - Territorial jurisdiction under Article 226 of the Constitution - Writ petition challenging non-grant of IGST refund dismissed for want of territorial jurisdiction of the Rajasthan High Court. - HELD THAT: - The Court examined Rule 96 and concluded that shipping bills are deemed applications for refund but the refund claim is to be processed by the system designated by Customs or the Proper Officer of Customs at the port of export upon receipt of requisite information from the common portal. The petitioner's pleadings only established that it is registered and carries on business in Rajasthan and that exports had taken place through ports outside Rajasthan (Mundra, Tuticorin, Kattupalli, Nhava Sheva). No material facts were pleaded to show that a part of the cause of action for non-grant of refund arose within the territorial jurisdiction of Rajasthan. Reliance on a GST circular and on an order granting refund at Mundra did not displace the statutory scheme under Rule 96 which assigns processing to the Customs system/Proper Officer at the port of export. Applying the settled tests for territorial jurisdiction under Article 226, the Court held that mere registration or business presence in Rajasthan, without pleaded nexus between the pleaded facts and the lis, does not create a cause of action within Rajasthan. Consequently the petition is not maintainable in the Rajasthan High Court and must be dismissed without adjudicating the merits of whether refund should be granted despite an inadvertent higher duty-drawback claim. [Paras 18, 20, 21, 22, 23]

The writ petition is dismissed for want of territorial jurisdiction; the Court declines to decide the substantive entitlement to the IGST refund.

Final Conclusion: Petition dismissed for lack of territorial jurisdiction as the refund claim is to be processed by Customs at the port of export and the petitioner has not pleaded any part of the cause of action arising within Rajasthan; merits of the IGST refund claim left undecided.

Exhaustion of alternate remedies - statutory pre-deposit requirement for appellate remedy - writ jurisdiction vis-a-vis statutory appeal mechanism - challenge to jurisdiction insufficient to bypass alternate remedy - appellate authority to decide merits without raising limitation where appeal filed within prescribed period

Exhaustion of alternate remedies - writ jurisdiction vis-a-vis statutory appeal mechanism - challenge to jurisdiction insufficient to bypass alternate remedy - Writ petition seeking to quash demand was not entertained because alternate statutory appellate remedy had not been exhausted. - HELD THAT: - The Court held that mere characterization of the impugned order as being without jurisdiction or perverse is insufficient to bypass the statutory appellate forum; the contention that binding CBIC circulars were ignored can be agitated before the appellate authority. On the pleadings and submissions before the Court there were no circumstances warranting departure from the settled practice of requiring exhaustion of alternate remedies, and the petition therefore could not be entertained in exercise of writ jurisdiction. [Paras 8, 9, 13]

Petition declined; petitioner relegated to avail the statutory appeal remedy.

Statutory pre-deposit requirement for appellate remedy - writ jurisdiction vis-a-vis statutory appeal mechanism - The High Court refused to waive the statutory pre-deposit required for instituting the appeal. - HELD THAT: - The Court observed that the requirement of pre-deposit is statutory and cannot be lightly dispensed with in exercise of writ jurisdiction. Reliance was placed on the principle that where a statute prescribes a minimum pre-deposit, the High Court should not reduce or waive that statutory minimum; the petition contained only bald assertions of hardship without particulars to justify departure from the statutory requirement. [Paras 11, 13]

No waiver of the pre-deposit; petitioner must comply with statutory pre-deposit conditions to pursue the appeal.

Appellate authority to decide merits without raising limitation where appeal filed within prescribed period - If the petitioner institutes the statutory appeal within 30 days, the appellate authority should consider the appeal on merits without raising the question of limitation. - HELD THAT: - The Court recorded the petitioner's undertaking to file the appeal within 30 days and noted that this petition had been instituted within the limitation period prescribed for filing an appeal. In view of that chronology the Court directed that the appellate authority ought to adjudicate the appeal on merits and not take a preliminary view on limitation. [Paras 14, 15]

If appeal is filed within 30 days, appellate authority should consider it on merits and not refer to limitation.

Final Conclusion: Writ petition dismissed; petitioner relegated to statutory appeal after complying with pre-deposit requirement, with liberty that an appeal filed within 30 days will be considered on merits without objection on limitation; merits left open for the appellate authority.

Power of appellate authority to condone delay in appeals under Section 107 of the GST Act - interference by High Court under Article 226 to remedy absence of statutory power - fundamental right under Article 19(1)(g) to carry on business - reconsideration of cancellation of GST registration on merits despite procedural delay

Power of appellate authority to condone delay in appeals under Section 107 of the GST Act - interference by High Court under Article 226 to remedy absence of statutory power - Appellate authority's jurisdiction to condone delay in filing an appeal under Section 107 and the High Court's power to intervene where no such statutory power exists. - HELD THAT: - The Court found that the appellate authority (respondent no. 3) has no power to condone delay beyond the period stipulated for appeals under Section 107 of the GST Act. Noting the petitioner's explanation for delay (death of the chairman and belated knowledge), the Court observed that genuine causes of delay cannot be remedied by the appellate authority in view of the statutory bar. In such a situation, the High Court is entitled to exercise its writ jurisdiction under Article 226 to prevent the deprivation of rights caused by a statutory lacuna, particularly where cancellation of registration affects the ability to carry on business and may also prejudice revenue. Relying on precedents where division benches addressed similar lacunae, the Court held that intervention by the High Court to remit the matter for fresh adjudication is appropriate when the absence of condonation power would otherwise extinguish an aggrieved party's remedy. [Paras 9, 10]

Appellate authority lacks power to condone the delay; High Court may intervene under Article 226 and remit the matter for fresh consideration in such circumstances.

Reconsideration of cancellation of GST registration on merits despite procedural delay - fundamental right under Article 19(1)(g) to carry on business - Validity of the cancellation of registration for non-furnishing of bank details was not decided on merits and was remitted for fresh consideration. - HELD THAT: - Although the impugned cancellation was founded on the petitioner's failure to furnish bank details as required by the rules, the Court did not adjudicate the merits of whether cancellation was justified. Observing that the appellate authority could not entertain the delayed appeal, the Court quashed the cancellation order and disposed of the pending appeal by directing the petitioner to appear before the registering authority, to reply to the show cause notice and to furnish the bank details. The registering authority was directed to take a fresh decision in accordance with law. The Court expressly refrained from expressing any opinion on the merits of the cancellation. [Paras 8, 11, 12, 13]

Impugned cancellation quashed and set aside; matter remitted to the registering authority for fresh decision after the petitioner replies and furnishes bank details; no expression on merits.

Final Conclusion: Writ petition allowed; impugned cancellation order quashed and set aside, the appeal disposed of, and matter remitted for fresh consideration by the registering authority after the petitioner is given opportunity to reply and furnish bank details; High Court did not decide merits.

Rectification of returns - refund of excess payment - reverse charge mechanism - electronic cash ledger versus electronic credit ledger - Circular No. 26/2017-GST interpretation - writ remedy under Articles 226 and 227 of the Constitution - alternative remedy of appeal under section 107 of the GST Act

Rectification of returns - refund of excess payment - reverse charge mechanism - electronic cash ledger versus electronic credit ledger - Circular No. 26/2017-GST interpretation - Entitlement to refund of excess tax paid in March 2023 arising from earlier omission in the January 2023 GSTR-3B and consequent payment through electronic cash ledger - HELD THAT: - The petitioner mistakenly omitted inward supplies liable to reverse charge in the January 2023 GSTR-3B and discharged tax through the electronic cash ledger as output tax. The error was realised and, in the March 2023 return, the petitioner paid the reverse charge liability by making an additional cash payment. On examination of the filed returns and the undertaking, the Court found that the inward supplies liable to reverse charge for January and March 2023 aggregated to the amounts shown in the returns and that the petitioner paid tax through the electronic cash ledger in March 2023 to rectify the January omission. The excess cash payment thereby made in March 2023 over the correct output tax liability was identified from the returns and supporting undertaking. Applying the principle embodied in Circular No. 26/2017-GST that where adjustment is not feasible in Form GSTR-3B a refund may be claimed, and having regard to the factual matrix showing an excess cash payment, the Court held that the petitioner is entitled to refund of the excess payment. The Court treated the issue as fit for final adjudication on the record rather than remand, since the excess payment was apparent from the returns and documents submitted. [Paras 8, 9, 10]

Petitioner entitled to refund of the excess payment made in March 2023 in relation to the omission in January 2023; refund to be processed.

Writ remedy under Articles 226 and 227 of the Constitution - alternative remedy of appeal under section 107 of the GST Act - Maintainability of the writ petition despite availability of an alternative remedy of appeal under section 107 - HELD THAT: - Respondents contended that the petitioner had an efficacious alternative remedy by way of appeal under section 107 of the GST Act. The Court, however, noted that the respondent-authority had rejected the refund claim without giving reasons and that the facts on record made remand to the authority futile. Given the lack of reasoned adjudication by the respondent and the clear entitlement to refund on the material before the Court, the petition was entertained under Articles 226 and 227 rather than being relegated to the appellate remedy. [Paras 11, 12]

Writ petition entertained and allowed notwithstanding the existence of an alternative appellate remedy.

Final Conclusion: Writ petition allowed; respondent No. 3 directed to process the petitioner's refund claim for the excess tax paid in relation to January and March 2023 within twelve weeks from receipt of the order.

Demand and recovery proceedings under the Central Goods and Services Tax Act, 2017 - Jurisdictional challenge to a show-cause notice - Prematurity of writ petition where statutory response remains to be adjudicated - Direction to adjudicating authority to decide show-cause notice within statutory period

Prematurity of writ petition where statutory response remains to be adjudicated - Judicial restraint in granting prerogative writs before administrative decision - Maintainability of the writ petition filed prior to adjudication of the response to the show-cause notice - HELD THAT: - The Court declined to entertain the writ petition as premature because the petitioner had filed a response to the impugned show-cause notice which was yet to be considered by the authorities. Applying the principle of judicial restraint, the Court held that it would not intervene by way of certiorari or prohibition while the statutory process of adjudication of the show-cause notice remained pending. Accordingly, the writ petition was not entertained on merits and was disposed of without deciding the underlying demand and recovery controversy. [Paras 5]

Writ petition not entertained as premature; disposed of without adjudication of the show-cause notice.

Jurisdictional challenge to a show-cause notice - Direction to adjudicating authority to decide show-cause notice within statutory period - Requirement that the adjudicating authority consider the jurisdictional objection and the response before passing final order on the show-cause notice - HELD THAT: - Although the writ petition was not entertained, the Court directed the respondents to consider and decide the show-cause notice afresh, expressly including the jurisdictional point raised by the petitioner in the writ petition alongside the submissions made in the response. The Court mandated that the respondents, upon receipt of a copy of the writ petition, first address the jurisdictional issue and thereafter decide the matter in accordance with law within the statutory period, thereby remitting the controversy for administrative determination rather than adjudicating it judicially. [Paras 5, 7]

Respondents directed to consider the jurisdictional point and the petitioner's response and to pass final order on the show-cause notice within the statutory period.

Final Conclusion: The writ petition was disposed of as premature; the Court declined to grant certiorari or prohibition at this stage and directed the adjudicating authority to first decide the jurisdictional objection and then the show-cause notice within the statutory period.

Speculative transaction - Trading in derivatives on recognised stock exchange not speculative - Loss from speculation business under Section 73 - Set-off of business loss under Section 72 - Applicability of Rule 8D

Trading in derivatives on recognised stock exchange not speculative - Speculative transaction - Loss from speculation business under Section 73 - Set-off of business loss under Section 72 - Whether the carried forward loss arising from trading in derivatives ought to be treated as speculative loss and barred from set-off under Section 73, or regarded as business loss admissible for set-off under Section 72. - HELD THAT: - The Court held that after the amendment to Section 43(5) (Finance Act, 2005) trading in derivatives on a recognised stock exchange is not a speculative transaction and is to be treated as a business transaction. Consequentially, loss in the derivative business is a business loss and is not governed by Section 73 which deals exclusively with losses from speculation business. The Court relied on the reasoning in Snowtex Investment Ltd. (as reproduced) that the amendment excluded derivatives traded on recognised exchanges from the ambit of speculative transactions with applicability from AY 2006-07. Applying that principle to the facts, the Assessing Officer's treatment of the carried forward derivative loss as speculative and refusal to allow set-off was held to be illegal. The Tribunal's conclusion that the derivative loss was not speculative and its order remitting the matter for bifurcation were affirmed. [Paras 10, 11]

Derivative losses arising from trading in derivatives on a recognised stock exchange are not speculative; the Assessing Officer's disallowance was illegal and the Tribunal's order is upheld.

Applicability of Rule 8D - Whether Rule 8D of the Income-tax Rules (and the resultant disallowance under Section 14A as computed by Rule 8D) could be applied in assessment year 2007-08. - HELD THAT: - The Revenue did not press this question before the Court. The Court noted that Rule 8D was inserted into the Income-tax Rules with effect from 24.03.2008 and that its application to prior assessment years is not permissible. Although the Tribunal, recognising expenditure in relation to exempt income, directed a 2% disallowance, the Court answered the question against the Revenue and in favour of the assessee on the applicability of Rule 8D for AY 2007-08. [Paras 6, 11]

Rule 8D (and the consequent disallowance under Section 14A computed by it) is not applicable to AY 2007-08; question answered in favour of the assessee.

Final Conclusion: The appeal is dismissed. The Tribunal's conclusion that the derivative loss is not speculative and may be treated as business loss for set-off is upheld; the challenge to the Tribunal's directive on disallowance under Rule 8D is not sustained for AY 2007-08.

Penalty under Section 271(1)(c) of the Income-tax Act - opportunity of hearing / audi alteram partem - quashing of administrative order for denial of hearing - remand for fresh hearing and de novo consideration - effect of appellate interference on consequential penalty proceedings

Penalty under Section 271(1)(c) of the Income-tax Act - opportunity of hearing / audi alteram partem - quashing of administrative order for denial of hearing - Impugned penalty order dated 30.03.2022 was passed without affording any opportunity of hearing to the petitioner and is liable to be quashed. - HELD THAT: - The court found that multiple show-cause notices had been issued while the petitioner repeatedly requested that penalty proceedings be kept in abeyance during the pendency of appeals before appellate authorities. Despite such requests and the petitioner's explicit entreaties to be given an opportunity to make submissions, the respondent proceeded to pass the penalty order without hearing the petitioner. In these circumstances, the impugned order suffers from denial of the principle of audi alteram partem. The High Court exercised its supervisory jurisdiction to quash the order as it was rendered without providing the petitioner an opportunity to be heard, which was a determinative vice in the administrative action. [Paras 11, 13, 16, 17]

Impugned order dated 30.03.2022 quashed and set aside for having been passed without affording an opportunity of hearing.

Remand for fresh hearing and de novo consideration - effect of appellate interference on consequential penalty proceedings - Matter remitted to respondent to pass a fresh penalty order, if any, after considering the Tribunal's decision and after affording an opportunity of hearing to the petitioner. - HELD THAT: - Since the Tribunal has subsequently decided the appeals on merits and granted substantial relief to the petitioner, the court directed that the respondent must take that appellate outcome into account before proceeding on penalty, and must afford the petitioner one opportunity of hearing. The High Court did not decide the merits of any penalty claim on the files; instead it required fresh, de novo consideration by the authority in accordance with law and after hearing the petitioner, thereby preserving the administrative authority's power to impose penalty but ensuring procedural fairness and consideration of appellate outcomes. [Paras 14, 16, 17, 18]

Matter remanded to respondent to pass a fresh de novo penalty order, if any, after giving the petitioner an opportunity of hearing and after considering the Tribunal's order.

Final Conclusion: Writ petition allowed in part: the penalty order dated 30.03.2022 is quashed and the matter is remitted for fresh consideration; respondents to pass a fresh penalty order, if any, after affording the petitioner an opportunity of hearing and taking into account the appellate decision.

Reopening of assessment - jurisdiction to reopen assessment under Section 148 read with Section 147 of the Income Tax Act - change of opinion - reason to believe - genuineness and creditworthiness of loans and treatment under section 68 - scope of scrutiny in original assessment proceedings

Reopening of assessment - change of opinion - scope of scrutiny in original assessment proceedings - jurisdiction to reopen assessment under Section 148 read with Section 147 of the Income Tax Act - Validity of notice issued under Section 148 for reassessment where the same issue (unsecured loan from Phulchand Exports Pvt. Ltd.) was examined during original assessment and return was accepted under Section 143(3). - HELD THAT: - The Court found on the material that the unsecured loan from Phulchand Exports Pvt. Ltd. was called for and scrutinized during the original assessment proceedings and that the petitioner had furnished confirmation, ITR and bank statements which satisfied the Assessing Officer leading to acceptance of the return. Reopening was based on the Assessing Officer's subsequent doubt about the lender's creditworthiness because the lender showed a loss in its ITR. Applying settled law, including the principle that reopening cannot be founded merely on a later change of opinion, the Court held that where the issue has been considered in the original assessment and the Assessing Officer took a view, a subsequent re-opening on the same factual basis (absent new material that was not available or not considered) amounts to a mere change of opinion and is not a valid exercise of jurisdiction under Section 148/147. Although the Assessing Officer need only have a "reason to believe" at the initiation stage, that jurisdiction cannot be used to reopen an assessment where the matter was already addressed on the record and no fresh tangible material justifying reopening was shown. The Court applied the dictum in Kelvinator to conclude that the impugned notice was issued without jurisdiction as it amounted to reopening on the basis of a change of opinion rather than discovery of new material warranting reassessment. [Paras 8, 9, 11]

Impugned notice dated 27.03.2021 under Section 148 for AY 2016-17 and the order dated 23.03.2024 disposing of objections are quashed and set aside as issued without jurisdiction; petition allowed.

Final Conclusion: The High Court allowed the petition, holding that the reopening of assessment was a mere change of opinion since the unsecured loan had been examined in the original assessment and the Assessing Officer's subsequent doubts did not constitute fresh material to justify reassessment; the reassessment notice and the order disposing objections were quashed.

Condonation of delay - service of appellate order - limitation for filing appeal before Tribunal - perversity of factual finding - remand for decision on merits

Service of appellate order - condonation of delay - limitation for filing appeal before Tribunal - Whether the Tribunal erred in holding that there was delay in filing the appeal and in refusing to condone the delay on the ground that the appellate order had been served on the assessee - HELD THAT: - The High Court found from the record, including the RTI reply and the returned Speed Post cover, that the order of the CIT(Appeals) was not effectively served on the address relied upon by the Revenue and that the appellant received the order only on 12.05.2023. The appeal was filed on 24.05.2023, within the prescribed period counted from actual receipt of the CIT(Appeals) order. The Tribunal's contrary factual finding that the order was delivered on the address mentioned in Form No.35 and that the assessee was therefore at fault, was held to be contrary to the material on record and thus perverse. The court emphasised that in these circumstances there was no unexplained delay from the date of actual receipt and that the Tribunal ought to have condoned the delay and proceeded to decide the appeal on merits. [Paras 24, 25]

Tribunal's finding that the order had been served and refusal to condone delay set aside; delay of 2208 days condoned and appeal admitted as timely from date of actual receipt.

Remand for decision on merits - Whether the matter should be remitted to the Tribunal for adjudication on merits after condoning the delay - HELD THAT: - Having quashed the Tribunal's order dismissing the appeal on limitation grounds, the High Court directed that the delay be condoned and remanded the matter to the Tribunal for fresh adjudication on merits. The Court made clear that it has not expressed any opinion on the merits and that the Tribunal is to decide the appeal after giving the appellant an opportunity of hearing in accordance with law. [Paras 25]

Matter remanded to the Tribunal for decision on merits after condoning the delay; Tribunal to hear the appellant afresh in accordance with law.

Final Conclusion: The Tribunal's order dismissing the appeal as time-barred is quashed and set aside; the delay in filing the appeal is condoned and the matter is remitted to the Tribunal to be decided on merits after affording the appellant an opportunity of hearing.

Deduction under Section 80P(2)(a)(i) for co-operative societies engaged in providing credit facilities - deduction under Section 80P(2)(d) for interest from investments with other co-operative societies - distinction between operational income (profits and gains of business) and income from surplus investments - binding effect of Supreme Court precedent in Totgar's and its application in State Bank of India decision - concurrent findings of fact and absence of substantial question of law

Deduction under Section 80P(2)(a)(i) for co-operative societies engaged in providing credit facilities - distinction between operational income (profits and gains of business) and income from surplus investments - binding effect of Supreme Court precedent in Totgar's and its application in State Bank of India decision - Whether interest income earned by the co-operative credit society from fixed deposits with a nationalized bank is allowable as a deduction under Section 80P(2)(a)(i). - HELD THAT: - The Court applied the settled principle that Section 80P(2)(a)(i) permits deduction only for the "profits and gains of business" attributable to activities of carrying on banking or providing credit facilities to members. Reliance was placed on the Supreme Court's decision in Totgar's Co-operative Sale Society, as interpreted and applied by this Court in State Bank of India, which distinguishes income derived from funds utilised in the ordinary course of the society's credit business from interest earned on funds not immediately required for business (surplus investments). Interest arising from investments of surplus or retained funds in banks does not constitute operational business income and therefore does not fall within the ambit of Section 80P(2)(a)(i). The CIT(A) and the Tribunal correctly followed those precedents in disallowing the deduction qua interest on fixed deposits with the nationalized bank while allowing deduction under Section 80P(2)(d) for interest from investments with a co-operative bank. The concurrent factual findings of the revenue authorities and the Tribunal were not shown to raise any substantial question of law warranting interference. [Paras 9, 10]

Interest income from fixed deposits with the nationalized bank is not deductible under Section 80P(2)(a)(i); the concurrent orders of the CIT(A) and Tribunal are upheld.

Final Conclusion: The appeal is dismissed. The High Court upheld the concurrent findings that interest on investments placed with a nationalized bank by the co-operative credit society does not qualify for deduction under Section 80P(2)(a)(i), while interest from investments with a co-operative bank may be deductible under Section 80P(2)(d), and found no substantial question of law arising from the impugned orders.

Operation of registered document under Section 47 of the Registration Act - Retrospective effect of transfer from date of execution - Taxability of capital gains in the year of transaction and not year of registration - Validity of reassessment proceedings under Section 147/148 when no fresh cause of action exists

Operation of registered document under Section 47 of the Registration Act - Retrospective effect of transfer from date of execution - Taxability of capital gains in the year of transaction and not year of registration - Sale transaction operates from date of execution and the capital gains were assessable in AY 2005-06 despite subsequent registration. - HELD THAT: - The Court applied Section 47 of the Registration Act to hold that a registered document operates from the time it would have commenced to operate if no registration had been required or made. The undisputed facts show execution of the sale agreement, receipt of consideration and delivery of possession in AY 2005-06 and disclosure of the transaction in returns for AY 2005-06. Reliance on the Supreme Court decision in Ittianam and the Division Bench decision in Maharani Yogeshwari Kumari supports the legal proposition that title and taxable incidence follow the date of execution and not the date of later registration. Consequently the transaction related to AY 2005-06 for income-tax purposes and not to the later date of registration. [Paras 6, 7, 8, 9, 10]

Capital gains arising from the sale were taxable in AY 2005-06; subsequent registration in 2008 does not shift the year of taxability.

Validity of reassessment proceedings under Section 147/148 when no fresh cause of action exists - Reassessment notice for AY 2006-07 under Sections 147/148 was not sustainable because no sale or registration occurred in that year to give rise to fresh cause of action. - HELD THAT: - Having concluded that the sale transaction related to AY 2005-06, the Court found that in AY 2006-07 neither sale of immovable property nor registration giving rise to assessable income had occurred. Therefore there was no occasion for the income-tax authorities to initiate reassessment proceedings for AY 2006-07. The recorded reasons for reopening did not create a valid basis to treat the transaction as constituting income of AY 2006-07. [Paras 11, 12]

The notice and the order rejecting objections are quashed as the reassessment for AY 2006-07 lacked occasion.

Final Conclusion: Writ petition allowed; the reassessment notice dated 22.03.2013 and the order dated 19.09.2013 are quashed because the sale was taxable in AY 2005-06 and there was no occasion to reopen AY 2006-07.

Penalty under Section 271AAB(1) - undisclosed income - search and seizure under Section 132 - statement under Section 132(4) - classification under clauses (a),(b),(c) of Section 271AAB(1) - quantification of penalty

Penalty under Section 271AAB(1) - undisclosed income - search and seizure under Section 132 - statement under Section 132(4) - Validity of imposing penalty under Section 271AAB(1) in respect of amounts admitted as undisclosed income during search - HELD THAT: - The Tribunal found that incriminating documents recovered in the search showed unsupportable entries of material purchases and unidentifiable sundry creditors; the assessee admitted nonexistence of certain liabilities in the statement recorded under Section 132(4) and offered the amount for taxation in the return. Such admitted and detected entries meet the definition of 'undisclosed income' under Section 271AAB. The provision applies to undisclosed income of the specified previous year detected in the course of search and is attracted on the facts. The assessee's plea that there was no allegation of undisclosed income or that penalty under Section 271AAB was inapplicable was held to be without merit, and the main challenge to the legality of imposing penalty under Section 271AAB was rejected. [Paras 16]

Assessee's challenge to the applicability of Section 271AAB(1) is dismissed and penalty can be imposed under Section 271AAB(1) on the facts.

Penalty under Section 271AAB(1) - Requirement to specify the particular limb of subsection (1) of Section 271AAB in the show cause notice - HELD THAT: - The Tribunal observed that the three limbs of Section 271AAB(1) prescribe different penalty rates depending on factual compliance by the assessee (admission, manner and substantiation, or neither). However, for invoking Section 271AAB there is no statutory requirement akin to formation of 'satisfaction' under Section 271(1)(c), and it is often difficult to preconceive the exact quantification at the show cause stage. The statute mandates that the assessee be given a reasonable opportunity, which was provided and availed. Consequently, failure of the show cause notice to specify the particular limb at the initiation stage does not vitiate the proceedings. [Paras 16]

No obligation to specify in the initial show cause notice which specific limb of Section 271AAB(1) is attracted; the additional ground on this point is dismissed.

Classification under clauses (a),(b),(c) of Section 271AAB(1) - quantification of penalty - Correct limb of Section 271AAB(1) to be applied and appropriate rate of penalty where the assessee admitted undisclosed income but failed to substantiate manner of derivation - HELD THAT: - Clause (a) prescribes a concessional rate where the assessee admits undisclosed income, specifies the manner of derivation and substantiates it; clause (b) applies where there is no admission but the income is later declared and taxed; clause (c) catches situations not covered by (a) or (b) and prescribes the highest rate. The CIT(A)'s reduction of penalty to the 10% rate under clause (a) was based on a brief conclusion that a list of creditors was furnished; the Tribunal found this reasoning cryptic and lacking necessary factual appreciation. Mere production of a bare list without substantiation (invoices, PAN, addresses, bank payments) does not fulfill the twin requirements of 'manner' and its 'substantiation' under clause (a). Given the assessee's inability to substantiate the manner of deriving the admitted sum, the AO's invocation of clause (c) and the higher rate is justified and requires restoration. [Paras 18, 19, 20]

CIT(A)'s application of clause (a) and reduction of penalty to 10% is set aside; revenue's appeal is allowed and AO's application of clause (c) and corresponding quantification is restored.

Final Conclusion: The assessee's appeal and crossobjection are dismissed; the revenue's appeal is allowed - Section 271AAB(1) applies on the facts, no requirement to specify the precise limb in the initial show cause notice, and the Tribunal restores the AO's application of clause (c) (higher rate) in place of the CIT(A)'s concession under clause (a) for A.Y. 201617.

Disallowance of business loss arising from stock option transactions - burden of proof in assessment proceedings - reassessment under Section 147 of the Income-tax Act - faceless assessment and appellate proceedings - conjecture versus corroborative evidence in making additions

Disallowance of business loss arising from stock option transactions - burden of proof in assessment proceedings - conjecture versus corroborative evidence in making additions - Validity of the addition disallowing the loss claimed by the assessee on stock option transactions - HELD THAT: - The Tribunal found that the assessee had produced contract notes evidencing transactions on the recognised exchange, broker ledger entries and sauda registers, and thereby discharged the onus of proof in respect of the genuineness of the transactions. The Assessing Officer's conclusion rested on an opinion that options were sold at unreasonably low prices and were part of nongenuine reversal trades, but no comparative transactions or other corroborative material were brought on record to substantiate that view. The AO did not challenge the authenticity of the documents produced nor conduct an independent verification prior to making the addition. Having discharged the initial burden, the onus shifted to the revenue to produce evidence rebutting the assessee's materials; in absence of such corroboration and in presence of only conjecture and surmise by the AO, the addition could not be sustained. On these determinative facts and legal application of the burden of proof, the Tribunal held the addition unsustainable and deleted it. [Paras 7, 8, 9]

The addition disallowing the loss of the assessee arising from stock option transactions is deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal on merits by setting aside the addition made by the Assessing Officer in respect of stock option losses for AY 2015-16, deleted the impugned addition and thereby rendered the contested legal grounds academic.

Time-barred dismissal - e-filing extension under Board Circular No. 20/2016 - requirement of show cause before dismissal - opportunity of hearing - principle of natural justice - remand for fresh adjudication

Time-barred dismissal - e-filing extension under Board Circular No. 20/2016 - requirement of show cause before dismissal - opportunity of hearing - Whether the appellate order of NFAC dismissing the appeal as time-barred was sustainable in view of the assessee's physical filing, subsequent e-filing within the extended period and the requirements of natural justice - HELD THAT: - The Tribunal found that the appeal was instituted by the assessee on 14-06-2016 after migration to NFAC and that the Commissioner of Income Tax (Appeals) did not take note of this or of the Tribunal's earlier order setting aside the first ex parte order. The CIT(A) recorded a delay of 100 days based on e-filing date but failed to consider that e-appeals filed by 15-06-2016 were to be treated as filed in time under Board Circular No. 20/2016 and did not address the assessee's earlier physical filing dated 08-03-2016. The CIT(A) also did not issue any show cause notice or afford a hearing specifically on the question of delay before dismissing the appeal. In these circumstances the NFAC's dismissal without applying the Board's circular or providing an opportunity of hearing was held to be procedurally improper and contrary to the requirements of natural justice. [Paras 5]

Impugned order set aside; matter remitted to CIT(A), NFAC to decide the appeal on merits after giving proper opportunity of hearing within three months

Principle of natural justice - remand for fresh adjudication - Whether any further administrative direction should be given in consequence of the procedural lapse - HELD THAT: - The Tribunal, noting the repeated procedural lapses by the Revenue and the absence of merit adjudication despite detailed submissions and paper books filed by the assessee, exercised its supervisory authority to direct that the file be returned for fresh decision on merits within a fixed time and recommended that a copy of the order be marked to the Chairman, Central Board of Direct Taxes for guidance to NFAC in handling appeals. The Tribunal also recorded the appeal as allowed for statistical purposes. [Paras 5, 6, 7]

Direction issued to decide the appeal on merits within three months and copy of order to be marked to the Chairman, CBDT; appeal allowed for statistical purposes

Final Conclusion: The Tribunal set aside the NFAC appellate order dismissing the appeal as time-barred for Assessment Year 2013-14, remitted the matter to the CIT(A), NFAC for fresh adjudication on merits after affording opportunity of hearing within three months, directed that a copy be marked to the Chairman, CBDT for guidance, and allowed the appeal for statistical purposes.

Foreign Tax Credit - Directory requirement vs mandatory requirement - Double Taxation Avoidance Agreement overrides domestic law - Filing of Form No. 67 under Rule 128(9) of the Income-tax Rules

Foreign Tax Credit - Filing of Form No. 67 under Rule 128(9) of the Income-tax Rules - Directory requirement vs mandatory requirement - Double Taxation Avoidance Agreement overrides domestic law - Claim for foreign tax credit despite delayed filing of Form No.67 - HELD THAT: - The Tribunal examined the assessee's claim for credit of foreign tax paid in Netherlands and the fact that Form No.67 was filed after the due date. Having considered coordinate-bench precedents and relevant authorities, the Tribunal held that Rule 128(9) requiring filing of Form No.67 by the due date is a procedural/directory requirement and does not extinguish the substantive right to relief under the DTAA and Section 90. The Tribunal relied on consistent decisions of coordinate Benches and the Madras High Court to the effect that neither the Act nor the Rules provide for automatic disallowance of foreign tax credit for delay in filing Form No.67, and that DTAA provisions override contrary provisions of the Act or Rules. Applying these principles to the facts, the Tribunal set aside the orders of the AO and the CIT(A) which had denied the credit solely on the ground of delayed filing, and directed that the assessee be given the benefit of the foreign tax credit in accordance with law and the applicable DTAA. [Paras 8, 10, 17]

Assessee entitled to foreign tax credit claimed; disallowance for delayed filing of Form No.67 set aside and AO directed to give credit in accordance with law and DTAA.

Foreign Tax Credit - Interest under sections 234A, 234B and 234C - Directory requirement vs mandatory requirement - Levy of interest consequent to disallowance of foreign tax credit - HELD THAT: - The Tribunal found that since the disallowance of the foreign tax credit was set aside and the assessee is entitled to the credit, the consequential levy of additional interest under the provisions cited could not stand. In view of allowing the FTC claim, the Tribunal set aside the imposition of additional interest and directed appropriate adjustment consistent with the allowance of the credit. [Paras 10, 17]

Levy of additional interest set aside in consequence of allowing the foreign tax credit.

Final Conclusion: Appeal allowed: disallowance of foreign tax credit for delayed filing of Form No.67 set aside; assessee entitled to foreign tax credit for AY 2020-21 and consequential interest levied is also set aside; AO directed to give effect to the credit in accordance with law and the DTAA.

Interest under section 234C - advance tax liability on capital gains arising in the fourth quarter - second proviso to section 234C - relief for unforeseen capital gains/windfall gains where tax paid by 31st March - book profit under section 115JB

Interest under section 234C - advance tax liability on capital gains arising in the fourth quarter - second proviso to section 234C - relief for unforeseen capital gains/windfall gains where tax paid by 31st March - Whether interest under section 234C is chargeable where capital gains (forming part of book profit) arose on 28.03.2019 and the assessee paid the tax thereon on 31.03.2019. - HELD THAT: - The Tribunal held that the liability to pay advance tax in respect of a transaction resulting in capital gains arises only after the event giving rise to the gain has occurred. The second proviso to section 234C exempts shortfalls in advance tax where such shortfall is on account of the amount of capital gains, provided the assessee pays the whole of the tax payable in respect of the total income (including the capital gains) as part of the remaining instalments of advance tax which are due after the accrual of such gain or, where no instalments remain, by 31st March of the financial year. The assessee incurred the capital gain on 28.03.2019 and paid the advance tax for that gain on 31.03.2019. The Department did not dispute that the assessee paid the entire tax in respect of its total income (including the capital gain) by the relevant date. Relying on precedents dealing with unforeseen/windfall gains and the second proviso to section 234C, the Tribunal found the circular and cases relied on by the Revenue distinguishable, deleted the enhanced interest imposed by CPC, and allowed the appeal to the extent of deleting interest charged under section 234C. [Paras 8]

Enhanced interest under section 234C of Rs. 1,18,52,988/- deleted and appeal allowed on this ground.

Interest under section 234B - consequential adjudication - Whether interest under section 234B requires independent adjudication in view of deletion of interest under section 234C. - HELD THAT: - The Tribunal treated the challenge to interest under section 234B as consequential to the decision on section 234C and observed that it did not require separate adjudication. No independent determination on the merits of section 234B was made; the ground was dismissed as consequential. [Paras 9]

Ground relating to interest under section 234B dismissed as consequential and not adjudicated.

Final Conclusion: The appeal is partly allowed: the enhanced interest charged under section 234C was deleted as the capital gain arose in the fourth quarter and the tax thereon was paid by 31st March, while the challenge to interest under section 234B was dismissed as consequential and not independently adjudicated.

Summary order. The appeal is dismissed as withdrawn because the assessee has filed Form 1 opting for the Direct Tax Vivad Se Vishwas Scheme, 2024; liberty granted to reinstate the appeal if the assessee's application under the Scheme is not accepted.

Cost of acquisition of ancestral agricultural land - reference to District Valuation Officer (DVO) for valuation - deduction under Section 54F - purchase of residential house - date of investment for Section 54F - agreement/banakhat date vis-a -vis registration date - treatment of cash deposits during demonetisation as explained from agricultural income - addition as unexplained cash under the unexplained income provisions

Cost of acquisition of ancestral agricultural land - reference to District Valuation Officer (DVO) for valuation - Whether the value of the ancestral agricultural land as on 01.04.1981 adopted by the AO at Rs.6.20 per sq.mtr. could be sustained or required fresh valuation by DVO. - HELD THAT: - The Tribunal found that the assessee filed an approved valuer's report which itself showed wide variation across four methods, rendering that report unreliable. The AO, not being an expert, was not competent to substitute his own market value determination. In the interest of justice and because the approved valuer's report was inconclusive, the matter was set aside to the file of the jurisdictional AO with a direction to refer the correct market value as on 01.04.1981 to the DVO. The DVO's report must be confronted to the assessee and objections, if any, considered before finalizing the value. [Paras 7]

Remanded to the AO to refer valuation to the DVO for determination of correct market value as on 01.04.1981; ground allowed for statistical purposes.

Deduction under Section 54F - purchase of residential house - Whether the purchase of the subject property entitled the assessee to deduction under Section 54F. - HELD THAT: - The Tribunal examined the sale deed and annexure and found that the subject matter was primarily a plot of land of 840.70 sq.mtr. with only an approximate 27 sq.mtr. of open/overhead roof construction. The sale deed did not describe any enclosed residential house; the small open construction could not be treated as a residential house usable for habitation and, in any event, the 27 sq.mtr. construction was jointly owned prior to transfer. Reliance on precedent distinguishing cases with substantial built-up houses was held misplaced. As the assessee failed to establish acquisition of a residential house as required for Section 54F, the AO's disallowance was upheld (noting AO had been generous in allowing proportionate deduction already). [Paras 11, 12, 13]

Deduction under Section 54F denied; ground rejected.

Date of investment for Section 54F - agreement/banakhat date vis-a -vis registration date - Whether the date of investment in the new property for Section 54F purposes is the agreement/banakhat date (26.07.2017) or the sale deed registration date (09.05.2018). - HELD THAT: - The Tribunal accepted that the agreement (banakhat) dated 26.07.2017 was executed and full payment was made on that date. The delay in registration was attributable to reasons beyond the assessee's control. Accordingly, the Tribunal treated the date of investment as the date of agreement/banakhat and allowed the ground. [Paras 14]

Date of investment for Section 54F to be taken as 26.07.2017; ground allowed.

Treatment of cash deposits during demonetisation as explained from agricultural income - addition as unexplained cash under the unexplained income provisions - Whether cash deposits made during the demonetisation period totaling Rs.24,48,000/- were explained as agricultural income or rightly added as unexplained income. - HELD THAT: - The Tribunal noted that the assessee consistently derived agricultural income and had disclosed net agricultural income for the year comparable to prior years. The AO erred in treating the entire deposits as unexplained. Considering the opening cash balance and the net agricultural income for the year, the Tribunal held it reasonable to treat deposits up to Rs.15.48 lakhs as explained. However, no satisfactory explanation was offered for the remaining deposits; hence the AO's addition in respect of unexplained cash to the extent of Rs.9,00,000/- was confirmed. The ground was therefore allowed in part. [Paras 15, 16, 17, 18]

Cash deposits of Rs.15.48 lakhs treated as explained; balance addition of Rs.9.00 lakhs upheld.

Allegation of denial of opportunity to be heard through videoconferencing. - HELD THAT: - The assessee did not press this ground before the Tribunal. [Paras 19]

Ground not pressed and dismissed.

Final Conclusion: Appeal partly allowed: valuation issue remanded to AO with direction to obtain DVO report; deduction under Section 54F denied; investment date for Section 54F accepted as 26.07.2017; cash deposits partly explained (Rs.15.48 lakhs) and balance addition of Rs.9.00 lakhs confirmed; other ground not pressed.

Violation of principles of natural justice - opportunity to be heard - remand for fresh consideration after taking on record uploaded evidence - directions to make full compliance - dismissal as withdrawn - deemed allowed for statistical purposes

Dismissal as withdrawn - Two appeals originally numbered ITA Nos.138/Alld/2024 and 139/Alld/2024 were permitted to be withdrawn and dismissed as withdrawn. - HELD THAT: - The assessee explained that ITA Nos.138 & 139/Alld/2024 had been originally filed before ITAT Delhi and were transferred to ITAT Allahabad, after which duplicate appeals were filed. The assessee sought leave to withdraw the earlier-filed appeals before this Bench. The Department raised no objection to withdrawal. The Tribunal accordingly dismissed those two appeals as withdrawn. [Paras 2, 6]

ITA Nos.138/Alld/2024 and 139/Alld/2024 dismissed as withdrawn.

Violation of principles of natural justice - opportunity to be heard - remand for fresh consideration after taking on record uploaded evidence - directions to make full compliance - deemed allowed for statistical purposes - Appeals in ITA Nos.147/Alld/2024 and 148/Alld/2024 were remanded to the file of the ld. CIT(A), NFAC for fresh decision after considering the evidences already submitted and any further evidence furnished by the assessee. - HELD THAT: - The Tribunal found that the assessee had uploaded evidences (including affidavit, title deed, passport copy and bank statements) to the ld. CIT(A) on 15.06.2024, but the ld. CIT(A) did not consider those materials before deciding the appeals. This failure to consider material evidence amounted to a breach of natural justice and deprived the assessee of a fair hearing on determinative questions such as residential status and the source/ownership of investments and bank credits. In view of this procedural infirmity, the Tribunal remanded both appeals for fresh adjudication, directed that the assessee be given an opportunity to file any further evidence and to make full compliance before the ld. CIT(A), and recorded the appeals as allowed for statistical purposes. [Paras 5, 6]

Appeals in ITA Nos.147/Alld/2024 and 148/Alld/2024 are remanded to the ld. CIT(A), NFAC for fresh decision after considering the evidences; appeals deemed allowed for statistical purposes.

Final Conclusion: Two appeals (ITA Nos.138 & 139/Alld/2024) dismissed as withdrawn; the remaining appeals (ITA Nos.147 & 148/Alld/2024) remanded to the ld. CIT(A), NFAC for fresh decision after taking on record and considering the evidences already uploaded by the assessee and any further material, with directions for full compliance; those appeals are recorded as allowed for statistical purposes.

Validity of approval under section 153D - Jurisdiction in assessments initiated under section 153C r.w.s. 143(3) - Application of mind by the approving authority - Compliance with CBDT guidelines in search and seizure assessments

Validity of approval under section 153D - Application of mind by the approving authority - Compliance with CBDT guidelines in search and seizure assessments - Approval granted under section 153D was valid and not a mechanical exercise; therefore assessment made under section 153C was not invalid for want of approval. - HELD THAT: - The Tribunal examined the finding of the CIT(A) that the approving authority had applied its mind before granting approval under section 153D. The record showed that the draft questionnaire and appraisal material were routed through the Range Head/Additional Commissioner, that questionnaires were vetted and approved, and that the departmental practice and CBDT guidelines envisage consultation between the AO and the Range Head/Addl. CIT during preparation of show cause and draft assessment. In absence of any material or submission from the assessee to rebut these facts, the Tribunal found no infirmity in the CIT(A)'s conclusion that approval under section 153D was accorded after due application of mind and not mechanically. The Tribunal therefore upheld the jurisdictional validity of the assessment founded on that approval. [Paras 8, 9]

The objection that approval under section 153D was mechanical and invalid is rejected; approval is held to be valid and the related jurisdictional challenge fails.

Jurisdiction in assessments initiated under section 153C r.w.s. 143(3) - Appeals for AY 2012-13, 2015-16 and 2016-17 are dismissed; findings in AY 2012-13 are applied mutatis mutandis to AYs 2015-16 and 2016-17. - HELD THAT: - Having upheld the CIT(A)'s conclusion on the approving authority's exercise of jurisdiction under section 153D, and noting that the facts and record in the other assessment years are identical, the Tribunal applied the same reasoning to AYs 2015-16 and 2016-17. The assessee did not appear before the Tribunal or place any material to challenge the jurisdictional finding or to seek adjudication on the merits. Consequently, there was no basis to interfere with the CIT(A)'s order and the appeals were dismissed. [Paras 10, 11]

All three appeals are dismissed; the decision in AY 2012-13 is applied mutatis mutandis to AYs 2015-16 and 2016-17.

Final Conclusion: In absence of any material from the assessee to controvert the record, the Tribunal upheld the CIT(A)'s finding that approval under section 153D was given after application of mind in accordance with departmental practice and CBDT guidance, and dismissed the appeals for AYs 2012-13, 2015-16 and 2016-17.

Tariff Rate Quota (TRQ) allocation review - Opportunity of hearing / natural justice - Reasonableness and arbitrariness in administrative decision-making - Public notice and notice-based criteria for allocation - Maintenance of status quo / interim preservation of allocations - Remand for fresh consideration

Tariff Rate Quota (TRQ) allocation review - Opportunity of hearing / natural justice - Reasonableness and arbitrariness in administrative decision-making - Public notice and notice-based criteria for allocation - Validity of the mid-year revision of bullion TRQ allocations by DGFT via Minutes of Meeting dated 8th November, 2024 - HELD THAT: - The Court found substantial merit in petitioners' challenge to the mid-year review because the April 15, 2024 Minutes only indicated a review would occur but did not specify the criteria for re-allocation, making that review effectively 'blind'. The public notice relied upon by respondents addressed review consequences for utilization 25% but related to FY 2023-24 and did not provide comprehensive criteria for FY 2024-25. In these circumstances the Court held that the impugned decision, having been taken without affording affected license-holders an opportunity to be heard and without clear criteria communicated, could not be permitted to stand without further consideration. Rather than deciding the substantive merits, the Court directed DGFT to re-examine all issues raised by the petitioners and to take a fresh decision after considering the petitioners' contentions and applicable criteria. The Court observed that respondents' objective to ensure fulfilment of CEPA TRQ imports is legitimate, but the review process must comply with principles of reasonableness and give affected parties a hearing. [Paras 6, 7, 9]

DGFT directed to re-examine the allocations and to take a fresh decision after affording the petitioners an opportunity to be heard; the matter remanded for fresh consideration.

Maintenance of status quo / interim preservation of allocations - Remand for fresh consideration - Interim relief as to operation of the revised allocations pending fresh decision - HELD THAT: - The Court noted that no re-allocations pursuant to the impugned Minutes had been given effect in the present proceedings. Taking a precautionary approach, the Court ordered that current allocations be maintained until DGFT issues its fresh decision following the review. The Court prescribed a time-bound direction that the review and fresh decision be completed within three weeks. The Court also clarified that its observations were prima facie and that DGFT, while taking those into account, must examine each case on merits and may, if accepting petitioners' requests, impose additional conditions to secure compliance with TRQ obligations. [Paras 8, 9, 10]

Current TRQ allocations to be maintained and no re-allocations to be given effect until DGFT completes fresh decision within three weeks; DGFT may impose additional compliance conditions if reallocating.

Final Conclusion: Writ petitions disposed directing DGFT to re-examine and decide afresh the mid-year TRQ revisions after affording petitioners an opportunity of hearing; existing allocations to remain in force until such decision, to be taken within three weeks.

Jurisdiction of Directorate of Revenue Intelligence officers to issue show cause notices under Section 28 - proper officer for purposes of Section 28 - restoration of show cause notices for adjudication - limited scope of review excluding findings on limitation - retrospective validation by the Finance Act, 2022

Jurisdiction of Directorate of Revenue Intelligence officers to issue show cause notices under Section 28 - proper officer for purposes of Section 28 - Validity of show cause notices issued by officers of the Directorate of Revenue Intelligence (DRI) for want of jurisdiction - HELD THAT: - The Court applied the ratio of the Hon'ble Supreme Court in the review of Canon India, holding that DRI officers are officers of customs by virtue of executive notifications and administrative circulars and are empowered to issue show cause notices under Section 28. The Supreme Court reviewed Canon India only on the question of jurisdiction, observing that earlier decisions had not taken into account Circular No.4/99-Cus and Notification No.44/2011 and misconstrued the statutory scheme. The Supreme Court confined its review to jurisdictional infirmity and expressly did not disturb earlier findings on limitation; accordingly, challenges to maintainability based solely on want of jurisdiction must be dealt with in the light of that ruling. [Paras 168]

The Court accepts the Supreme Court's conclusion that DRI and similarly situated officers are proper officers competent to issue show cause notices under Section 28 and that challenges based on want of jurisdiction are to be determined in accordance with that ruling.

Restoration of show cause notices for adjudication - Relief to be granted in writ challenging the show cause notices issued by DRI - HELD THAT: - Pursuant to the Supreme Court's directions (para 168(vi)(a)), the High Court restored the show cause notices to the adjudicating authority for adjudication by a proper officer under Section 28. The High Court discharged the rule in the writ petition and disposed of the petition by directing restoration of the notices for fresh adjudication by the proper officer, thereby following the supervisory directions issued by the Supreme Court for cases where jurisdiction was questioned before High Courts. [Paras 5]

The petition is disposed of by restoring the impugned show cause notices to the adjudicating authority for adjudication by a proper officer under Section 28; rule discharged.

Final Conclusion: The High Court, following the Supreme Court's review of Canon India, held that DRI officers are proper officers competent to issue show cause notices under Section 28; the writ petition was disposed of by restoring the notices to the adjudicating authority for adjudication by a proper officer, with no order as to costs.

Customs valuation - inclusion of transportation cost in assessable value - Fifth proviso to Rule 10(2) of the Customs Valuation (Determination of value of Imported goods) Rules, 2007 - limitation of air freight to 20% of FOB - Transaction value and INCOTERMS (CPT/CFR) - treatment of CPT price and segregability of freight element

Fifth proviso to Rule 10(2) of the Valuation Rules - limitation of air freight to 20% of FOB - Transaction value - ascertainability of FOB where invoice shows CPT/CFR - Whether the additional amount shown as 'Add. Recov. Freight' in the invoices is to be treated as air freight and, if so, whether only an amount equal to 20% of the FOB value can be included in the assessable value under the fifth proviso to Rule 10(2). - HELD THAT: - The Tribunal accepted that Rule 10 requires inclusion of transport cost in assessable value subject to the proviso limiting air transport cost to 20% of FOB value where the cost is ascertainable. After examining the invoices, price lists and related documents, the Tribunal was satisfied that the amount described as 'Add. Recov. Freight' represents additional air freight actually incurred due to change of transport mode during the COVID period. The Tribunal rejected the Revenue's contention that the freight element was not ascertainable or that the CPT price necessarily absorbed all freight, observing that the distribution agreement permitted prices 'as agreed' and that the price lists and invoices supported the appellant's case that the published CPT/CFR prices were for sea carriage and that air freight was an additional recovery. Having held that the amount represented air freight, the Tribunal applied the statutory proviso and held that only an amount equal to 20% of the FOB value is permissible for inclusion in the assessable value; any excess cannot be included for duty calculation. [Paras 11, 24, 25, 29, 30]

The additional amount shown as 'Add. Recov. Freight' is air freight and, under the fifth proviso to Rule 10(2), only an amount equal to 20% of the FOB value can be included in the assessable value.

Remand for redetermination of assessable value and duty - Ascertainment of FOB value where invoices are on CPT basis - Whether the matter should be remitted to the original authority for re-determination of duty after applying the limitation under the proviso and for determination of the FOB value to the extent necessary. - HELD THAT: - The Tribunal held that, having found the 'Add. Recov. Freight' to be air freight and that only 20% of FOB is includable, the precise re-computation of assessable value and duty requires determination of the FOB value or appropriate deduction/adjustment from the CPT/CFR invoice values. The Tribunal therefore directed a remand to the original assessing authority to re-determine the duty payable on each of the 70 Bills of Entry in accordance with the finding that only 20% of FOB is to be included in respect of air freight and on the basis of the documents in the record. [Paras 30, 31]

All appeals are allowed and the matters are remanded to the original authority for re-determination of duty on the Bills of Entry limited to inclusion of air freight only to the extent of 20% of FOB, with FOB to be determined as indicated by the Tribunal.

Final Conclusion: The Tribunal allowed the appeals, holding that the additional recovery shown in the invoices is air freight and that, under the fifth proviso to Rule 10(2) of the Valuation Rules, only 20% of the FOB value may be included in the assessable value; the matters are remanded to the original authority to re-determine assessable value and duty on the 70 Bills of Entry accordingly.

Obligations of Customs Broker - Due diligence - KYC verification - Unauthorized use of broker's dongle / subletting of licence - Suspension and revocation of Customs Broker licence - Reasonable period for completion of inquiry - Liability of Customs Broker for acts of importer

Obligations of Customs Broker - Liability of Customs Broker for acts of importer - Due diligence - Whether the appellants breached Regulation 10(d) of CBLR, 2018 by failing to advise the importer and reporting noncompliance arising from misdeclaration of goods - HELD THAT: - The Tribunal found that the bills of entry were filed on the basis of documents furnished by the importer through their logistics intermediary and that the appellants had no knowledge of the actual contents of the container until physical examination disclosed the misdeclaration. Applying the principle that a broker processes declarations based on documents provided by the client and noting authority that a broker is not an inspector expected to detect concealed misdeclarations, the Tribunal concluded there was no evidence that the appellants failed to advise the importer or had prior knowledge of the misdeclaration. The adjudicating authority's conclusion of violation of Regulation 10(d) was therefore unsupported by the record.

Impugned finding of violation of Regulation 10(d) set aside; no liability on appellants under Regulation 10(d).

Due diligence - Unauthorized use of broker's dongle / subletting of licence - Obligations of Customs Broker - Whether the appellants contravened Regulation 10(e) of CBLR, 2018 by failing to exercise due diligence in ascertaining correctness of information and by permitting unauthorized persons to file declarations using the broker's access - HELD THAT: - While the Tribunal held that the appellants legitimately dealt with a logistics agent who had official capacity to handle the importer's cargo and that there was no proof of concealment or prior knowledge of misdeclaration by the broker, it found on the limited factual aspect that the broker's dongle/access was given to unauthorized persons for filing bills of entry. That specific practice constituted a breach of the regulatory obligations to exercise due diligence in handling documents and access. Balancing absence of evidence on broader duediligence failures with the admitted unauthorized use of access credentials, the Tribunal imposed a proportionate penalty rather than upholding broader revocation or forfeiture.

Finding of general breach of Regulation 10(e) not sustained, but penalty imposed for unauthorized use of dongle; appellants liable under Regulation 10(e) to the limited extent identified and fined.

KYC verification - Obligations of Customs Broker - Liability of Customs Broker for acts of importer - Whether the appellants breached Regulation 10(n), Regulation 1(4) and Regulation 13(12) of CBLR, 2018 in relation to KYC verification, sale/transfer of licence and supervision of employees - HELD THAT: - The Tribunal examined the documentary record and applicable CBIC guidance on KYC which permits verification by obtaining any two specified documents. It found that the appellants obtained requisite documents through the logistics intermediary and thereby fulfilled the verification required by Regulation 10(n). There was no evidence that the licence was sold or transferred or that the appellants failed in supervisory responsibilities to the extent alleged. Authorities cited supported the position that a customs broker is not expected to verify the genuineness of transactions beyond documentary KYC. Consequently, the findings of contravention of Regulations 10(n), 1(4) and 13(12) were not supported by facts or law.

Impugned findings of violations of Regulations 10(n), 1(4) and 13(12) set aside.

Suspension and revocation of Customs Broker licence - Reasonable period for completion of inquiry - Whether the disciplinary process culminating in revocation and forfeiture was vitiated by inordinate delay and noncompliance with prescribed timelines under the Regulations - HELD THAT: - Applying the principles that time limits in the licensing regulations are directory but must be complied with unless reasonable cause is recorded, the Tribunal observed substantial delay from receipt of the offence report to final order (about two years and three months). The inquiry process showed multiple opportunities to complete steps earlier and the explanations offered did not adequately attribute delays to factors beyond Revenue's control. The Tribunal relied on established guidance that deviations from timelines must be recorded with reasons and tested for reasonableness; absent adequate justification the prolonged suspension and delayed conclusion undermined the regulatory scheme's purpose and inflicted disproportionate harm on the broker.

Revocation of licence and forfeiture of security deposit set aside on account of inordinate and unexplained delay; disciplinary outcome moderated in view of procedural unfairness.

Final Conclusion: Appeal partly allowed: findings of breaches of Regulations 10(d), 10(n), 1(4) and 13(12) set aside and revocation and forfeiture quashed for inordinate delay; limited breach for unauthorized use of broker's access upheld and a monetary penalty imposed in lieu of heavier sanctions.

Recovery of drawback for non-receipt of export proceeds - deeming non-receipt under the second proviso to section 75 - recovery of duty foregone under section 28AAA requiring collusion, willful misstatement or suppression of facts - assessment and re-determination of value under section 17 and section 14 - confiscation of exported goods and imposition of penalties under section 113 and section 114

Recovery of drawback for non-receipt of export proceeds - deeming non-receipt under the second proviso to section 75 - Validity of recovery of drawback based solely on cancellation of certain Bank Realisation Certificates (BRCs) and whether such cancellations render remittances deemed as not received. - HELD THAT: - The Tribunal held that remittances received cannot be treated as erased except under authority of law and by availability of a machinery for regularisation; a bank circular cannot be construed as an absolute embargo on thirdparty payments. The adjudicating authority wrongly relied solely on cancellation of 1650 BRCs (some of which were quashed by a civil court order) to treat remittances as never received and to recover drawback. In absence of lawful proceedings that erase receipt in hands of the recipient, customs could not presume nonreceipt merely because of regulatory clarifications or investigatory action. Consequently the consignments sustained on that sole ground lack factual support and the recovery based thereon is unsustainable. [Paras 17, 18, 19, 23]

Recovery of drawback based solely on cancellation of the 1650 BRCs is not sustainable; the demands founded on that ground are set aside.

Recovery of duty foregone under section 28AAA requiring collusion, willful misstatement or suppression of facts - Whether section 28AAA can be invoked to recover duty foregone in absence of findings that collusion, willful misstatement or suppression existed at the time of issuance of the instrument. - HELD THAT: - Section 28AAA operates on the specific factual ingredients of collusion, wilful misstatement or suppression of facts at the relevant stage; it cannot be invoked on a general narrative of fraud built from postevent investigation or speculative inferences. The provision also contemplates the licencing authority's capacity to determine that the instrument was inappropriately obtained; recovery under section 28AAA without such prerequisite ascertainment and without identification/recourse to the actual importer lacks legal foundation. Thus the attempt to recover duty foregone on the basis of a broad fraud narrative without satisfying the statutory ingredients is impermissible. [Paras 20]

Section 28AAA cannot be resorted to for recovery absent specific findings of collusion, willful misstatement or suppression of facts; the recovery of duty foregone on that basis fails.

Assessment and re-determination of value under section 17 and section 14 - confiscation of exported goods and imposition of penalties under section 113 and section 114 - Whether confiscation of exported goods and penalties can be sustained on alleged overvaluation without redetermination of value by reference to section 14 and without assessment proceedings under section 17. - HELD THAT: - Customs may alter or substitute declared value only by following statutory valuation procedures; allegation of misdeclaration or overvaluation does not permit confiscation under section 113 or imposition of penalties under section 114 absent a proper redetermination of value in accordance with section 14 and without using the assessment machinery under section 17. Reliance on overseas declarations, statements or investigatory reports without invoking the statutory valuation process is legally unsound. Consequently, confiscation and penalties predicated on alleged overvaluation without compliance with valuation and assessment provisions cannot stand. [Paras 21, 22]

Confiscation under section 113 and penalties under section 114 are not sustainable where value has not been redetermined in accordance with section 14 and no proper assessment under section 17 has been carried out.

Recovery of drawback for non-receipt of export proceeds - recovery of duty foregone under section 28AAA requiring collusion, willful misstatement or suppression of facts - confiscation of exported goods and imposition of penalties under section 113 and section 114 - Validity of the adjudicating authority's selective approach that sustained recovery/detriments for certain consignments while dropping proposals for many others. - HELD THAT: - The adjudicating authority limited its finding to a narrow set of consignments based on cancellation of particular BRCs while treating the rest as presumed regular; Revenue's appeal to restore dropped demands failed because the adjudicating authority's sole distinguishing rationale (cancellation of BRCs) was flawed-some cancellations were quashed and no lawful mechanism was shown to erase receipt. The Tribunal observed that Revenue's review lacked specificity in seeking restoration and that a general narrative of fraud cannot substitute statutory requirements for recovery, valuation or confiscation. As a result, consignments sustained only on the cancelled BRCs revert to the larger group and the determinations lack merit. [Paras 8, 16, 23]

Revenue's appeals to restore the dropped demands are dismissed; the adjudicating authority's limited sustainment based on cancelled BRCs is set aside.

Confiscation of exported goods and imposition of penalties under section 113 and section 114 - Sustainability of penalties imposed on individual appellants in view of the invalidation of recoveries and confiscation findings. - HELD THAT: - Penalties on individuals were imposed consequential to findings of recoveries and confiscation. Having held that recovery of drawback, recovery of duty foregone and confiscation are not sustainable for want of statutory foundation and proper valuation/assessment, the penal consequences lack the necessary basis. Additionally, where penalties were imposed without notice and opportunity (as in the case of a named individual), basic procedural fairness independently warranted setting aside those penalties. [Paras 24]

Penalties imposed on individual appellants are vacated.

Final Conclusion: The Tribunal dismissed Revenue's appeals and allowed the appeals of the exporters and individual appellants: recoveries of drawback and duty foregone, confiscation of goods and consequential penalties based primarily on the cancellation of certain BRCs, on generalized fraud narratives without statutory findings of valuation or the ingredients in section 28AAA, and without proper assessment under section 17/valuation under section 14, are unsustainable and have been set aside.

Maintainability of application for release of amounts deposited in a disposed company petition - priority of creditors in winding up - pari passu treatment of similarly placed creditors - right to recover amounts deposited during earlier company petition after commencement of winding up - buy-back clause entitlement - appointment of Official Liquidator as Provisional Liquidator - admission of claim by the Official Liquidator - disbursement in winding up in accordance with Sections 529, 529A & 530 of the Act - effect of pending objections (FEMA/service tax) on court-deposited funds

Maintainability of application for release of amounts deposited in a disposed company petition - withdrawal/infructuousness of earlier company petition after winding up order - Application for withdrawal/release of amounts deposited in Court in a petition that has been rendered disposed by subsequent winding up is not maintainable. - HELD THAT: - The appellants' original company petition, in which the respondent had deposited the disputed amount with the Court, was effectively overtaken by the admission of a later winding up petition and appointment of a Provisional Liquidator. Once the Company Court proceeded with winding up under the later petition, earlier petitions became infructuous for purposes of obtaining disbursal orders, and a disposed company petition cannot serve as a basis for a separate application to withdraw amounts deposited in Court. The Court therefore held that the present application for release of the deposited sum in the disposed petition was not maintainable and could not give the appellants any superior right to the company's assets than other creditors. [Paras 11, 14, 15]

Application seeking release of funds deposited in a disposed company petition is not maintainable.

Priority of creditors in winding up - pari passu treatment of similarly placed creditors - right to recover amounts deposited during earlier company petition after commencement of winding up - Appellants are not entitled to preferential recovery of the deposited amount by virtue of having filed an earlier petition; they must stand with other similarly placed creditors in the winding up process. - HELD THAT: - Although the appellants had an admitted contractual entitlement under the buy-back clause and the Company had deposited the sum during the pendency of their petition, the initiation and admission of the subsequent winding up petition resulted in the appellants being placed in the same class as other creditors. The Court rejected the contention that temporal priority of the appellants' petition conferred a superior claim to the deposited funds, observing that once winding up proceedings are initiated and a liquidator appointed, creditors recover in accordance with the statutory scheme and priority, not by virtue of earlier petitions that have become infructuous. [Paras 12, 13, 15]

Appellants must rank with other similarly placed creditors and have no preferential right to the deposited amount.

Admission of claim by the Official Liquidator - disbursement in winding up in accordance with Sections 529, 529A & 530 of the Act - Official Liquidator directed to admit the appellants' claim and disburse any payment, if due, in accordance with the statutory provisions governing distribution in winding up. - HELD THAT: - The Court noted that the Company's records admitted the debt payable to the appellants and directed the Official Liquidator to admit their claim. The Court clarified that any disbursement in respect of the admitted claim shall be made strictly in accordance with the statutory provisions governing distribution in winding up (as identified in the order), and observed that the Official Liquidator was already processing a large number of claims. This direction was procedural and prompted admission and statutory distribution, not a substantive grant of priority. [Paras 17, 18, 19]

Official Liquidator to admit the appellants' claim; disbursement, if any, to be made in accordance with the Act.

Final Conclusion: Appeal dismissed with directions: the application for withdrawal of court-deposited funds in a disposed company petition is not maintainable; appellants must stand with other creditors and file/ pursue their claim before the Official Liquidator, whose admission of the claim and any disbursement shall be governed by the statutory scheme applicable to winding up.

Jurisdictional restraint on writ relief against show-cause notices - doctrine of laches in administrative adjudication - res judicata and double jeopardy in regulatory proceedings - judicial review limited to absence of application of mind - duty to disclose material relied upon and material favourable to the defence

Jurisdictional restraint on writ relief against show-cause notices - Whether the High Court should entertain a writ petition to quash a show-cause notice issued by SEBI and bypass alternate statutory remedies - HELD THAT: - The Court applied established principles restricting exercise of extraordinary writ jurisdiction where efficacious statutory remedies exist and where interference would short circuit statutory procedures. The Court relied on the settled practice that show cause notices are ordinarily not quashed at the threshold unless exceptional circumstances (such as violation of natural justice, lack of jurisdiction, or challenge to the vires of a statute) are made out. On the facts and material before it, no such extraordinary circumstance was shown to justify quashing the impugned show cause notice at this stage, and the petition therefore should not be entertained to forestall the statutory adjudicatory process. [Paras 32, 35, 36, 38]

The writ petition is not entertained to quash the show cause notice; statutory adjudicatory remedy must be permitted to run.

Doctrine of laches in administrative adjudication - Whether delay or laches in issuance of the show-cause notice warrants quashing the notice - HELD THAT: - The Court held that laches is not mere passage of time but requires demonstration of prejudice or creation of parallel rights such that it would be inequitable to permit the challenge. Determination of laches would involve factual inquiry into prejudice and the circumstances of delay; as such, the plea of laches is not a ground for summary quashing of the show cause notice. The petitioners remain free to raise delay/laches as a defence in the adjudication where it can be examined on evidence. [Paras 39, 40, 41]

Delay/laches does not justify quashing the show cause notice at the threshold; the defence can be raised and considered in adjudication.

Res judicata and double jeopardy in regulatory proceedings - Whether SEBI is precluded from issuing the impugned show-cause notice by reason of earlier complaint handling, review, or principles of res judicata/double jeopardy - HELD THAT: - The Court observed that pleas of res judicata or double jeopardy require detailed comparison of pleadings and issues and involve factual inquiry; they cannot ordinarily be decided summarily at the writ stage. Further, the impugned notice was issued after an investigation by an Investigating Authority on a 2022 complaint and was not based solely on the earlier 2014 complaint. On the material before the Court, it could not be concluded that SEBI impermissibly reviewed or revisited a finally closed matter. The petitioners may raise these defences during adjudication where they will be considered on the basis of evidence and pleadings. [Paras 42, 43, 44]

No interference on grounds of res judicata or double jeopardy; such defences to be raised and decided in the adjudicatory process.

Judicial review limited to absence of application of mind - Whether the show-cause notice is vitiated by non-application of mind or issuance without material - HELD THAT: - The Court emphasised the limited scope of judicial review of a show cause notice and noted that SEBI caused an investigation and formed a prima facie opinion based on the Investigating Authority's report and other material, copies of which were furnished to the petitioners. On the material before the Court, it could not be said that the notice was issued without any application of mind or ignoring relevant material. Accordingly, there was no basis to quash the notice on this ground at the threshold. [Paras 45, 46]

Allegation of non application of mind is rejected; no ground for summary quashing.

Duty to disclose material relied upon and material favourable to the defence - Whether SEBI's alleged non furnishing of documents/information vitiates the show cause notice and whether disclosure should be ordered - HELD THAT: - The Court applied the principle that quasi judicial authorities must disclose material relied upon and, where relevant, material that would assist the defence. The petition, however, did not clearly challenge the denial at the time of inspection and lacked particularity. The Court found that material relied upon had been furnished and, on an undertaking by SEBI, directed SEBI to furnish the documents referenced in paragraph 4(i) of the inspection proceedings of 4 October 2024 within two weeks of upload of the order. The Court refused to accede to a broader fishing expedition for documents covered by paragraph 4(ii), while leaving open the petitioners' right to raise any actual prejudice in due course. [Paras 51, 52, 53, 54, 55]

SEBI to furnish the documents referred to in paragraph 4(i) of the 4 October 2024 inspection within two weeks; petitioners granted four weeks thereafter to file their response; broader disclosure requests refused without prejudice to later contentions of prejudice.

Final Conclusion: The writ petition is dismissed and the impugned show cause notice is not quashed; SEBI is directed to furnish the specified inspection material (paragraph 4(i) of the 4 October 2024 proceedings) within two weeks and, on receipt, the petitioners shall file their response within four weeks; other contentions are left open to be raised and adjudicated in the statutory proceedings.

Relinquishment of security interest - realisation of security interest - presumption of security interest under Regulation 21A - payment of liquidation/CIRP costs as condition for realisation - subsume security interest into liquidation estate - effect of stakeholders' agreement for joint sale on secured creditor's rights - harmonious construction of regulation with Section 52 of the Code

Presumption of security interest under Regulation 21A - relinquishment of security interest - realisation of security interest - payment of liquidation/CIRP costs as condition for realisation - Validity of liquidator's communication dated 29.05.2023 declaring the Appellant's security interest to have been subsumed into the liquidation estate under Regulation 21A(2) and (3) for non-payment of liquidation/CIRP costs. - HELD THAT: - The Tribunal found that the Appellant had, after liquidation commencement, informed the liquidator of its decision to realise its security interest and had taken steps to realise it. Regulation 21A(2) requires a secured creditor who proceeds to realise its security interest to pay its share towards amounts payable under Section 53(1) and related items to the liquidator within ninety days from the liquidation commencement date, and Regulation 21A(3) provides that failure to comply results in the asset becoming part of the liquidation estate. The record discloses repeated demands by the liquidator for payment (including emails dated 16.02.2023 and earlier communications) and no payment having been made by the Appellant. The Appellant's contention of being willing to pay, or of not having received a formal invoice, did not negate the statutory requirement under Regulation 21A(2) once it chose to realise its security. The Adjudicating Authority's reliance on Regulation 21A(2) and (3) was therefore upheld and the communication of deemed relinquishment was held to be lawful. [Paras 11, 16]

Liquidator's declaration that the Appellant's security interest stood subsumed into the liquidation estate for non-payment of liquidation/CIRP costs under Regulation 21A(2) & (3) was valid; relief sought by the Appellant was refused.

Presumption of security interest under Regulation 21A - harmonious construction of regulation with Section 52 of the Code - Whether Regulation 21A(1) (presumption where secured creditor does not intimate decision within thirty days) applied in the facts of the case. - HELD THAT: - The Tribunal accepted that the Appellant submitted Form D and communicated its intention to realise its security interest on 10.01.2020, i.e., within the timeframe contemplated by Regulation 21A(1). Consequently, the presumption in sub regulation (1) did not apply. The dispute therefore turned on the applicability of sub regulations (2) and (3) (conditions and consequences when a secured creditor proceeds to realise its security), not on the initial presumption of inclusion in the liquidation estate under sub regulation (1). [Paras 12]

Regulation 21A(1) was not applicable as the Appellant had timely intimated its decision to realise its security interest.

Effect of stakeholders' agreement for joint sale on secured creditor's rights - subsume security interest into liquidation estate - Relevance of the Appellant's participation in Joint Lenders' Meetings and its recorded agreement to joint sale to the determination of the dispute. - HELD THAT: - Minutes of Joint Lenders' Meetings (including meetings of 22.03.2024 and 12.04.2024) recorded attendance of Appellant's representatives and their agreement that, given intermingling of assets and absence of physical demarcation, a joint sale by the two liquidators was appropriate. The Tribunal treated these consensual positions of stakeholders as material and noted that having agreed to joint sale modalities, the Appellant could not thereafter assert an exclusive right to realise its security in a manner inconsistent with those agreements. This factor, coupled with non payment of liquidation costs, reinforced the conclusion that the liquidator's action was justified. [Paras 13, 14, 16]

Minutes of Joint Lenders' Meetings evidencing the Appellant's agreement for joint sale were relevant and supported the view that the Appellant could not assert unilateral realisation inconsistent with stakeholders' consensus.

Final Conclusion: The Adjudicating Authority did not err in refusing relief and in holding that the liquidator's email of 29.05.2023 lawfully declared the Appellant's security interest to have been subsumed into the liquidation estate under Regulation 21A(2) & (3) for non payment of liquidation/CIRP costs; the appeal is dismissed.

Approval of resolution plan under Section 30(2) - eligibility of resolution applicant under Section 29A - entertainment of third party intervention challenging admission under Section 65(3) - judicial review of satisfaction of regulatory requirements and IBBI regulations 37, 38, 38(1A) and 39(4) - approval subject to non waiver of statutory liabilities and continuation of avoidance actions

Approval of resolution plan under Section 30(2) - eligibility of resolution applicant under Section 29A - entertainment of third party intervention challenging admission under Section 65(3) - Whether the Adjudicating Authority erred in approving the Resolution Plan in IA No.7/2024 in CP(IB) No.97/7/HDB/2022 despite an unnumbered intervention application alleging malice and fraud, and whether the Resolution Applicant was eligible under the Code - HELD THAT: - The Tribunal found that the Adjudicating Authority considered the appellant's unnumbered application and related contentions in detail before rejecting it for lack of material supporting allegations of malice or fraud and in view of the pendency of CIRP and the Resolution Plan being placed for approval. The Adjudicating Authority tested the Resolution Plan against the requirements of Section 30(2) read with Section 30(6) and relevant IBBI Regulations (37, 38, 38(1A) and 39(4)), and recorded satisfaction that the plan met those statutory and regulatory tests. It also recorded that the Resolution Applicant was eligible under Section 29A. The approval was made subject to the limited qualification that it would not operate as a waiver of any statutory obligations or liabilities and that pending avoidance actions would continue to be dealt with as provided in the plan. The Tribunal noted earlier proceedings in which the appellant had participated (including submission of claim in Form C) and prior dismissal of related challenges, and held that no defect was shown in the approval that could be agitated by the appellant. Given these findings, the Tribunal concluded the appeal lacked merit. [Paras 2, 4, 6]

Appeal rejected; approval of the Resolution Plan upheld as satisfying the statutory and regulatory tests and the Resolution Applicant held eligible, with approval subject to preservation of statutory liabilities and continuation of avoidance actions.

Final Conclusion: The appeal is devoid of merit and is dismissed; the Impugned Order dated 28.05.2024 approving the Resolution Plan is upheld having satisfied Section 30(2) read with Section 30(6) and applicable IBBI Regulations, and the Resolution Applicant is held eligible under Section 29A, subject to preservation of statutory liabilities and continuation of avoidance proceedings as provided in the plan.

Penalty under FEMA for contravention of foreign exchange regulations - deeming fiction in Section 10(6) of FEMA for non-utilisation/surrender of foreign exchange - proof of import as defence to alleged contravention of foreign exchange remittance - benefit of doubt in quasi criminal penalty proceedings where historical records are unavailable - lapse or failure of authorised dealer/successor bank as affecting proof of compliance - delay in initiation of proceedings and its effect on adjudication

Proof of import as defence to alleged contravention of foreign exchange remittance - lapse or failure of authorised dealer/successor bank as affecting proof of compliance - benefit of doubt in quasi criminal penalty proceedings where historical records are unavailable - Validity of imposition of penalty for five remittances effected through the erstwhile ANZ Grindlays Bank where the appellant produced import documents for three remittances but could not trace documents for two remittances owing to the passage of time and non availability of records with the successor bank. - HELD THAT: - The Tribunal accepted that the appellant successfully traced and produced import documents during investigation for thirty remittances and, in the appellate proceedings, produced invoices, packing lists and airway bills in respect of three of the five remittances attributed to the erstwhile ANZ Grindlays Bank. Those documents indicated that the consignee and notifier included the bank, suggesting the bank had been intimated of the imports. The Tribunal held that the appellant cannot be penalised for the failure of the erstwhile bank (or the Reserve Bank of India records) to retain or transmit historical records, particularly where the successor bank (Standard Chartered) does not possess complete predecessor records and the transactions concerned are 13-14 years old. In such circumstances, and having regard to the quasi criminal nature of penalty proceedings, the appellant was entitled to the benefit of doubt as to the two remaining remittances for which documentary proof could not be retrieved. The Tribunal therefore set aside the penalty levied in respect of those remittances while recognising that import proof had been established for the three other remittances. [Paras 5, 6]

Penalty in respect of the five remittances through the erstwhile ANZ Grindlays Bank set aside; benefit of doubt granted for the two remittances for which import documents could not be produced.

Delay in initiation of proceedings and its effect on adjudication - benefit of doubt in quasi criminal penalty proceedings where historical records are unavailable - Whether undue delay in initiation of proceedings or service of antecedent communications vitiated the adjudication and required setting aside of the penalty. - HELD THAT: - The Tribunal considered submissions regarding alleged delay and non service of a 2006 communication relied upon by the Enforcement Directorate. While noting the appellant's contention about disputed receipt of the communication and the passage of time, the Tribunal did not set aside the proceedings merely on the ground of delay. Instead, the Tribunal assessed prejudice and the availability of proof; it emphasised that delay alone is not necessarily a ground for overturning a valid order but observed that where historical records are not available and the appellant has otherwise demonstrated compliance for the bulk of transactions, the absence of documents for a small number of old transactions militates in favour of granting the appellant the benefit of doubt. The Tribunal therefore decided the appeal on the merits taking into account the age of transactions and the failure of the predecessor bank to furnish records. [Paras 3, 5, 6]

Delay in initiation of proceedings did not by itself vitiate adjudication; however, given the age of transactions and non availability of predecessor bank records, the appellant was accorded benefit of doubt on two remittances.

Final Conclusion: The appeal is allowed. The penalty imposed by the Adjudicating Authority for the five remittances effected through the erstwhile ANZ Grindlays Bank is set aside: import established for three remittances and benefit of doubt granted for two remittances due to non availability of historical records and lapse attributable to the bank/successor bank.

Writ jurisdiction under Articles 226 and 227 - Disputed question of fact - Non-entertainment of writ in presence of disputed facts - Right to personal hearing / audi alteram partem - Leave to pursue statutory appeal - Condonation of delay - bona fide consideration of time spent in earlier proceedings

Writ jurisdiction under Articles 226 and 227 - Disputed question of fact - Non-entertainment of writ in presence of disputed facts - Petition under Articles 226 and 227 seeking to quash Order-in-Original was not maintainable before the High Court because the challenge raised disputed questions of fact. - HELD THAT: - The petition challenged the Order-in-Original which recorded conflicting factual positions regarding whether opportunities of personal hearing were granted and attended. The petitioner asserted that no hearing opportunity was communicated, whereas the adjudicating authority's order records multiple hearing dates and opportunities. Where the controversy turns on such disputed facts, the High Court declined to exercise writ jurisdiction to adjudicate those factual disputes in the writ petition and refused to proceed with merits. The court treated the matter as unsuitable for relief by certiorari in view of the factual conflict and the availability of statutory appellate remedy. [Paras 5, 6]

Writ petition dismissed for want of maintainability on ground of disputed question of fact; petitioner directed to pursue statutory appeal.

Right to personal hearing / audi alteram partem - Condonation of delay - bona fide consideration of time spent in earlier proceedings - Leave to pursue statutory appeal - Court granted liberty to the petitioner to approach the Appellate Authority and directed that time spent before the High Court be treated as bona fide for any delay in filing the appeal. - HELD THAT: - Although the High Court declined to decide the factual dispute, it permitted the petitioner to challenge the Order-in-Original before the appropriate appellate forum in accordance with law. The court expressly directed that the period during which the petitioner was engaged in proceedings before the High Court shall be treated as bona fide by the Appellate Authority when considering any application for condonation of delay, thereby safeguarding the petitioner's right to approach the appellate remedy despite dismissal of the writ. [Paras 6]

Petitioner granted liberty to prefer appeal; time spent before the High Court to be considered bona fide by the Appellate Authority for purposes of delay.

Final Conclusion: Writ petition dismissed as raising disputed questions of fact unsuitable for adjudication under Articles 226/227; petitioner permitted to pursue statutory appeal and the time spent before this Court to be treated as bona fide for any delay.

Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) - extension of period of limitation due to COVID-19 - acceptance of payment under SVLDRS despite delayed payment - direction to issue Form SVLDRS-4 (discharge certificate) - directory versus mandatory nature of scheme timelines

Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) - acceptance of payment under SVLDRS despite delayed payment - direction to issue Form SVLDRS-4 (discharge certificate) - extension of period of limitation due to COVID-19 - Impugned endorsement rejecting payment made on 30.09.2020 and denying SVLDRS benefit was invalid and is quashed; respondents to accept the payment and issue Form SVLDRS-4. - HELD THAT: - The petitioner had filed Form SVLDRS-1 and was issued Form SVLDRS-3 quantifying the amount payable. The respondents rejected the payment made on 30.09.2020 solely on the ground that payment was beyond the deadline of 30.06.2020 under the Departmental notification. The Court applied the Supreme Court's suo motu orders extending the period of limitation in view of the COVID-19 pandemic (extension up to 28.02.2022) and considered the decisions of coordinate benches of other High Courts which, in similar circumstances, held that payments made after 30.06.2020 ought to be accepted for SVLDRS purposes (subject to interest where directed). The judgments relied upon by the respondents were held distinguishable because they did not take into account the effect of the Supreme Court's extension orders. On that basis, the impugned endorsement was held to be unsustainable and the respondents were directed to accept the payment made on 30.09.2020 and to proceed to issue the discharge certificate in Form SVLDRS-4 within the prescribed timeframe. [Paras 11, 12, 13]

Impugned Endorsement dated 13.01.2022 quashed; respondent to accept payment made on 30.09.2020 and issue Form SVLDRS-4 within four weeks.

Final Conclusion: Petition allowed: endorsement rejecting the petitioner's SVLDRS payment quashed and respondents directed to accept the payment and issue the discharge certificate in Form SVLDRS-4 within four weeks, having regard to the Supreme Court's COVID-19 limitation extensions and relevant High Court precedents.

Grants-in-aid not consideration for taxable service - reimbursement of expenses as pure agent not includable in assessable value - Rule 5 of Service Tax (Determination and Valuation) Rules, 2006 held ultra vires Section 67 - absence of service-provider-service-recipient relationship

Reimbursement of expenses as pure agent not includable in assessable value - Rule 5 of Service Tax (Determination and Valuation) Rules, 2006 held ultra vires Section 67 - inclusion of reimbursable expenses in valuation not permitted - Whether amounts reimbursed to the appellant for hotel accommodation, dinner, local transport, programme folders, stationery etc. are includable in the assessable value of taxable service - HELD THAT: - The Tribunal accepted the appellant's contention that the impugned receipts in respect of hotel accommodation, dinner charges, local transportation, programme folders and stationery were reimbursements made in the capacity of a pure agent and therefore not includable in the assessable value. Reliance was placed on the principle, as affirmed by the Hon'ble Supreme Court in Intercontinental Consultant Technocrats Pvt. Ltd., that inclusion of reimbursable expenses in the valuation of service is not permissible under Section 67 and that Rule 5(1) to the extent it mandates inclusion is ultra vires. The facts showed these amounts were paid by the Government for specific outlays incurred for providing training and not as consideration for any additional service by the appellant; consequently the reimbursed expenses were excluded from taxable value and the demand premised on Rule 5 was set aside. [Paras 4, 5]

Reimbursed expenses were not includable in the assessable value; impugned demand based on inclusion under Rule 5 is set aside.

Grants-in-aid not consideration for taxable service - absence of service-provider-service-recipient relationship - Whether grants-in-aid received by the appellant from Government for conducting training constitute consideration for taxable services - HELD THAT: - The Tribunal followed earlier decisions and Board circulars which hold that grants-in-aid released by Government under centrally sponsored schemes or for welfare/training projects are not prima facie consideration for a taxable service where no quid-pro-quo or link between the amount and a specific trainee or service recipient is established. The appellants were implementing government-sponsored training and received grants and reimbursements which were wholly utilised for that purpose; there was no over-and-above consideration paid to the appellant and no service-provider-client relationship. On that basis the Tribunal held that the grants-in-aid do not attract service tax and set aside the impugned demand. [Paras 4]

Grants-in-aid received from Government are not consideration for taxable service; related demands are set aside.

Final Conclusion: Appeals allowed; impugned demands set aside on the grounds that (a) the reimbursed expenses paid by Government are pure reimbursements not includable in assessable value and (b) grants-in-aid received for providing training do not constitute consideration for taxable services, having regard to the absence of a service-provider-service-recipient nexus and the principle that Rule 5 cannot be used to include such reimbursements in valuation.

Supply of tangible goods - deemed sale within the meaning of Article 366 (29A) of the Constitution - definition of "service" excluding deemed sale - effective control and right to possession - renting of tangible goods - VAT payment as indicia of deemed sale

Supply of tangible goods - deemed sale within the meaning of Article 366 (29A) of the Constitution - definition of "service" excluding deemed sale - effective control and right to possession - VAT payment as indicia of deemed sale - Whether the transaction of giving a Gas Engine on rent to Gujarat Insecticides Ltd amounted to a service liable to service tax or was a deemed sale excluded from the definition of service. - HELD THAT: - The Tribunal found on the undisputed facts that the appellant transferred effective control and the right to possession of the Gas Engine to M/s. Gujarat Insecticides Ltd under the MOU and had discharged VAT on the rental transaction. The definition of "service" (Section 65B(44) of the Finance Act, 1994, effective from 01.07.2012) excludes transfers or supplies of goods which are deemed to be sale within the meaning of Article 366(29A) of the Constitution from the scope of service. Applying that exclusion, the renting arrangement-on which VAT was paid and which amounted to a deemed sale-fell outside the levy of service tax. The Tribunal therefore held that the transaction was not exigible to service tax and that the impugned demand was not sustainable. [Paras 4, 5]

Impugned order set aside; appeal allowed and no service tax payable on the transaction held to be a deemed sale.

Final Conclusion: The Tribunal allowed the appeal, holding that the grant of the Gas Engine to Gujarat Insecticides Ltd amounted to a deemed sale (Article 366(29A)) on which VAT was paid and therefore fell outside the definition of "service" for the period April, 2016 to June, 2017; the impugned service-tax demand was set aside.

Conditional exemption for transport of goods in a vessel under Notification No. 26/2012ST (Sl. No. 10) - entitlement to refund of service tax voluntarily paid on ocean freight - legal effect of Board Circular No. 206/4/2017 visavis statutory notification - impact of Notification Nos. 15/2017S.T. and 16/2017S.T. on exemption under Notification No. 26/2012ST - applicability of judicial precedents (SRF Ltd. and Mohit Minerals) to service tax claims

Conditional exemption for transport of goods in a vessel under Notification No. 26/2012ST (Sl. No. 10) - entitlement to refund of service tax voluntarily paid on ocean freight - Refund claim for service tax paid on ocean freight for May, 2017 and June 2017 under Sl. No. 10 of Notification No. 26/2012ST was allowable. - HELD THAT: - The respondent had paid service tax on full value of transportation services without availing the conditional exemption under Sl. No. 10 of Notification No. 26/2012ST and filed a refund claim for the differential amount. The Tribunal examined the notification which exempts service tax in excess of a specified percentage subject to the condition that CENVAT credit on inputs, capital goods and input services used for the taxable service has not been taken. The Commissioner (Appeals) had set aside the adjudicating authority and allowed the refund. The Tribunal found no reason to interfere: Notification No. 26/2012ST remained on the statute book and continued to provide the conditional exemption, and the appellant had paid service tax without availing that exemption. Consequently the respondent was entitled to the refund of the service tax paid in excess. [Paras 4]

Refund claim allowed and lower adjudication set aside.

Legal effect of Board Circular No. 206/4/2017 visavis statutory notification - impact of Notification Nos. 15/2017S.T. and 16/2017S.T. on exemption under Notification No. 26/2012ST - CBEC Circular No. 206/4/2017 and Notifications 15/2017S.T. and 16/2017S.T. do not negate the exemption under Notification No. 26/2012ST where that notification has not been amended or withdrawn. - HELD THAT: - Revenue relied on the Board Circular and the 2017 Notifications to contend that foreign shipping lines do not fulfil the condition for the conditional exemption and that service tax is payable on full CIF value. The Tribunal noted that although Notifications 15/2017 and 16/2017 changed reversecharge liability and prescribed a mechanism for valuation, Notification No. 26/2012ST was neither withdrawn nor amended so as to remove the exemption. The Circular's clarification that foreign shipping lines do not fulfil the condition could not, in itself, override the statutory notification. On that basis the Commissioner (Appeals) was right to give effect to the conditional exemption in Notification No. 26/2012ST. [Paras 4]

Circular and Notifications do not extinguish the exemption under Notification No. 26/2012ST in the absence of amendment or withdrawal; no interference with Commissioner (Appeals).

Applicability of judicial precedents (SRF Ltd. and Mohit Minerals) to service tax claims - entitlement to refund where charging provision or impugned notification is struck down - Judicial pronouncements (including SRF and the Gujarat High Court in Mohit Minerals) that impugn the legal basis for notifications altering liability or levying tax are relevant and support refund where tax was not leviable; the ratio in GST/High Court decisions is applicable to service tax disputes of like nature. - HELD THAT: - The respondent relied on SRF (Supreme Court) and allied decisions; the Tribunal observed that the Circular conflicted with SRF and that High Court decisions (Mohit Minerals) striking down Notifications as ultra vires the GST regime supported the view that notifications cannot impose a tax where the underlying charging provision does not permit it. The Tribunal accepted that the ratio of GST proceedings (Mohit Minerals) is applicable to analogous service tax issues and reinforced the conclusion that amounts collected or paid pursuant to invalid measures are refundable. [Paras 4]

Precedents undermining the legal basis for levy support the refund claim; Tribunal upheld Commissioner (Appeals) reliance on such authorities.

Final Conclusion: Revenue's appeal is dismissed; the Commissioner (Appeals) order allowing refund of service tax paid on ocean freight for May, 2017 and June 2017 is upheld.

Reversal of proportionate Cenvat credit under Rule 6(3) read with Rule 6(3A) - Objective of Rule 6 to prevent availing Cenvat credit for inputs/input services used for exempted services - Procedural lapse of failure to intimate option for reversal - Penalty for non-disclosure and non-compliance with procedural requirements under Rule 15(3)

Reversal of proportionate Cenvat credit under Rule 6(3) read with Rule 6(3A) - Objective of Rule 6 to prevent availing Cenvat credit for inputs/input services used for exempted services - Whether payment of the credit wrongly availed along with interest and reversal as per the option under Rule 6(3)(ii) satisfies the conditions of Rule 6 and precludes demand for fixed percentage payment in respect of supplies related to exempted services. - HELD THAT: - The Tribunal examined the factual position that the respondent repaid the wrongly availed credit and paid interest pursuant to a spot memo and that the Commissioner accepted reversal under the option available in Rule 6(3)(ii) read with Rule 6(3A). Relying on precedents it held that the primary purpose of Rule 6 is to ensure that credit relating to exempted services is not retained; once the proportionate credit attributable to exempted services is reversed and interest paid, the substantive object of Rule 6 is achieved and the assessee cannot be compelled to pay a higher imputed percentage. The Tribunal further noted authority holding that the retrospective/alternative option of proportionate reversal is available even where separate accounts were not maintained and that mere procedural lapses do not defeat the substantive right to avail proportionate reversal. Applying these principles to the record, the Tribunal found no reason to sustain a demand when reversal and interest had been paid and affirmed the order of the lower authority which had dropped the demand. [Paras 11, 12, 13, 14, 15]

Payment of the reversed credit along with interest in exercise of option under Rule 6(3)(ii) read with Rule 6(3A) satisfied the conditions of Rule 6 and precluded recovery on the basis of imputed percentage; accordingly the appeal by the Revenue is dismissed.

Procedural lapse of failure to intimate option for reversal - Penalty for non-disclosure and non-compliance with procedural requirements under Rule 15(3) - Whether failure to disclose, maintain separate accounts or to intimate the department about choice of option justifies imposition of penalty and denial of benefit of proportionate reversal. - HELD THAT: - The Tribunal considered authorities where failure to intimate the option or to maintain separate records was treated as a procedural lapse. It held that such procedural non-compliance, in circumstances where the assessee has repaid the proportionate credit and interest, does not justify denying the substantive benefit of proportionate reversal under Rule 6(3)(ii). The Tribunal observed that revenue did not dispute the figures and that the imposition of penalty or treating the lapse as forfeiting the option would be inconsistent with the object of Rule 6. Consequently, the Commissioner's decision not to sustain demand or impose penalty in view of the reversal and interest was upheld. [Paras 5, 8, 11, 12, 15]

Failure to maintain separate accounts or to intimate the option was treated as procedural lapse; in view of reversal with interest the substantive benefit of proportionate reversal could not be denied and penalty/demand were not sustainable.

Final Conclusion: The appeal filed by the Revenue is dismissed and the order of the adjudicating authority (which had accepted reversal of proportionate Cenvat credit and dropped the demand) is upheld; cross objections are disposed of accordingly.

Exempted service - trading as exempted service - extended period of limitation - CENVAT Credit reversal - bona fide interpretation - common input services - Rule 6 compliance

Extended period of limitation - bona fide interpretation - exempted service - Invocability of the extended period of limitation for confirmation of CENVAT-related demands where trading was treated as an exempted service only by an explanation effective 01.04.2011 and there is no evidence of suppression, fraud, collusion or wilful mis-statement. - HELD THAT: - The Tribunal held that where the appellant maintained adequate records and the contention that trading falls within the definition of exempted service involved a bona fide and debatable interpretation (the explanation making trading an exempted service was inserted w.e.f. 01.04.2011), allegations of suppression, fraud or wilful mis-statement could not be sustained. In such circumstances the proviso permitting invocation of the extended period of limitation under Section 11A could not be invoked. The Tribunal relied upon coordinate and High Court decisions which treated the explanation as clarificatory and recognised that, in view of divergent views earlier, demands arising from such interpretative controversy are to be confined to the normal period of limitation; penalty for such matters is not exigible where the mistake was bona fide. The Delhi High Court decision relied upon by Revenue was distinguished on facts because there the assessee had not maintained records to demonstrate credits attributable to trading.

Extended period of limitation cannot be invoked; demands (and penalty) relating to the disputed claim are to be restricted to the normal period where no suppression, fraud, collusion or wilful mis-statement is shown and the issue involved a bona fide interpretation of law.

Trading as exempted service - CENVAT Credit reversal - common input services - Rule 6 compliance - Whether CENVAT Credit on inputs and input services used for trading (including common input services) was eligible and whether reversal was required after the explanation deeming trading as an exempted service. - HELD THAT: - The Tribunal noted that the explanation to Rule 2(e) (adding that trading is included within exempted service) was effective from 01.04.2011, and that where common input services are availed for both dutiable manufacture and trading, the scheme requires reversal of credit attributable to the trading activity if separate accounts are not maintained. The appellants had, on being pointed out by audit, suo motu reversed the credit for 2011-12 and that amount was appropriated by the adjudicating authority. The Tribunal accepted the established position that credit is available only to the extent attributable to taxable output and that reversal is required for credits attributable to trading activities; however, given the interpretative controversy, such reversal or demand is confined to the normal period.

Credit attributable to trading (including on common input services) is not eligible and must be reversed; the appellants' suo motu reversal for 2011-12 was noted, but any demand flowing from the issue is confined to the normal period of limitation.

Final Conclusion: The impugned order is set aside insofar as it confirmed adjudged demands by invoking the extended period of limitation; demands (and penalty) arising from the disputed treatment of trading as an exempted service are restricted to the normal period, while reversal of credit attributable to trading is required in accordance with law.

Place of removal - CENVAT credit on input services used in or in relation to clearance up to the place of removal - assessable value to include depot/direct shop expenses

Place of removal - Direct shop at Kolkata is the place of removal for the goods manufactured by the appellant - HELD THAT: - The Tribunal examined the facts and the decision of the Allahabad Regional Bench in an identical appeal by the same assessee, which held that where goods are sold from premises other than the factory gate, the value for duty is to be determined at the place of removal (depot/direct shop) and that the direct shop in Kolkata constituted the place of removal. Noting that the factual position in the present appeal is identical to that considered by the Allahabad Bench, the Tribunal found no reason to depart from that view and held that the direct shop at Kolkata is the place of removal of the goods manufactured by the appellant. [Paras 11]

The direct shop at Kolkata is the place of removal.

CENVAT credit on input services used in or in relation to clearance up to the place of removal - assessable value to include depot/direct shop expenses - Denial of CENVAT credit for input services (rent, repair and maintenance) attributable to the direct shop at Kolkata is not justified and is set aside - HELD THAT: - Having held that the direct shop at Kolkata is the place of removal, the Tribunal applied the legal principle that services used in or in relation to manufacture and clearance up to the place of removal are eligible for CENVAT credit. Reliance was placed on the Allahabad Bench's reasoning that expenses on rent, repair and maintenance of the direct shop cannot be excluded from the assessable value for excise duty and that service tax paid in respect of such services at the depot cannot be denied as CENVAT credit. In view of identical facts and the Allahabad Bench's decision, the Tribunal concluded that the denial of credit in the impugned order was without merit and set aside the demand including interest and penalty. [Paras 12]

The order denying CENVAT credit for the input services used up to the place of removal is set aside and the related demand, interest and penalty are quashed.

Final Conclusion: The impugned order dated 31.10.2016 is set aside; the Tribunal holds that the direct shop at Kolkata is the place of removal for the appellant and that CENVAT credit in respect of the input services relating to that place is allowable, accordingly allowing the appeal.

Summary order. Delay condoned. Civil Appeals dismissed. Pending applications, if any, disposed of.

Valuation of goods cleared partly for captive consumption and partly to a related/sister unit - revenue neutrality as a defence to valuation adjustments - application of Rule 8 vis-a -vis Rule 11 of the Valuation Rules where part captive consumption and part related party sale coexist - entitlement to Cenvat credit on the basis of endorsed invoices / endorsed Bills of Entry / Xerox copies where receipt and use are established - allowance of transit/evaporation loss for volatile inputs transported/stored by pipeline - admissibility of Cenvat credit for inputs used in research & development/testing integral to manufacture - requirement of reliable, corroborative stock taking (weighment/panchnama) to sustain allegations of clandestine removal - limitation - invocation of extended period under proviso to section 11A(1) requires willful suppression

Valuation of goods cleared partly for captive consumption and partly to a related/sister unit - application of Rule 8 vis-a -vis Rule 11 of the Valuation Rules where part captive consumption and part related party sale coexist - revenue neutrality as a defence to valuation adjustments - Whether the impugned valuation and demand under Rule 8 of the Valuation Rules for goods partly stock transferred to own unit and partly sold to sister concern was sustainable - HELD THAT: - The Tribunal held that where goods are partly consumed captively and partly cleared to a sister unit the situation is not covered exclusively by Rule 8 (CAS 4) and Rule 9, and Rule 11 (best judgement) may appropriately be applied. Reliance on the Tribunal's decision in Indian Oil Corporation Ltd. established that in such mixed situations Rule 11 can be the appropriate method and that even if CAS 4 valuation were applied revenue neutrality would obtain because duty paid would be available as credit to the recipient unit. Applying these principles to the facts, the Tribunal found the departmental valuation unreasonable, accepted the costing certified by the appellant's CA, and concluded there was no loss to revenue; accordingly the demands relating to stock transfers and sales to sister concern were not sustainable. [Paras 8, 9, 10]

Demand of Rs.1,94,02,717/- (stock transfers) and Rs.52,28,055/- (sales to sister unit) on valuation grounds set aside

Entitlement to Cenvat credit on the basis of endorsed invoices / endorsed Bills of Entry / Xerox copies where receipt and use are established - admissibility of credit where supplier/importer endorsed documents in favour of recipient - Whether Cenvat credit could be denied to the appellant where input invoices/Bills of Entry were endorsed by the importer/supplier in favour of the appellant (including cases based on Xerox copies) - HELD THAT: - The Tribunal examined precedents and the appellant's own earlier decisions and held that where the endorsed Bills of Entry / endorsed invoices (or certified copies) establish payment of duty and the goods were received and used in manufacture there is no legal bar to taking Cenvat credit. The Revenue did not dispute receipt and use or diversion; accordingly the credits disallowed of Rs.14,86,640/- and Rs.34,88,013/- were held to be admissible and the corresponding demands unsustainable. [Paras 13]

Cenvat credit of Rs.14,86,640/- and Rs.34,88,013/- allowed; related demands set aside

Allowance of transit/evaporation loss for volatile inputs transported/stored by pipeline - Whether Cenvat credit could be denied for short receipt of methanol on the ground that invoiced quantity was not received - HELD THAT: - On the facts that methanol is volatile and transported/stored in a manner prone to evaporation/handling loss, and having regard to Tribunal precedents allowing transit losses in similar situations, the shortfall (of small percentage) was attributable to evaporation/handling and did not justify denial of credit. The Tribunal therefore set aside the demand of Rs.1,15,616/- confirmed on this ground. [Paras 11]

Demand of Rs.1,15,616/- on short receipt of methanol set aside

Admissibility of Cenvat credit for inputs used in research & development/testing integral to manufacture - inputs for R&D/testing are inputs 'in or in relation to manufacture' where testing is integral to production - Whether Cenvat credit could be denied for inputs (Xtrazyme Hatchery and Enzyme Extra Clean Pond) used in research and development/testing - HELD THAT: - The Tribunal accepted that the materials were used in the appellant's factory for testing and R&D that formed an integral part of the manufacturing process. Relying on earlier Tribunal authorities recognising testing/R&D inputs as inputs in relation to manufacture, the Tribunal held the disallowance of credit of Rs.2,50,647/- to be untenable and set aside that portion of the demand. [Paras 12]

Cenvat credit of Rs.2,50,647/- allowed; related demand set aside

Requirement of reliable, corroborative stock taking (weighment/panchnama) to sustain allegations of clandestine removal - burden on Revenue to prove clandestine removal by cogent evidence - Whether the demand confirmed on account of shortages of finished goods found during stock verification was sustainable - HELD THAT: - The Tribunal found that stock verification was conducted by estimation/dip method without adequate corroborative documentation (panchnama, weighment slips), books were not updated and quantities issued for captive consumption and seized stocks at the sister unit explained large part of the discrepancy. Given the absence of reliable contemporaneous weighment records and corroborative evidence of clandestine removal, the Tribunal held the confirmed demand of Rs.14,04,491/- unsustainable and set it aside. [Paras 14]

Demand of Rs.14,04,491/- on alleged shortages of finished goods set aside

Limitation - invocation of extended period under proviso to section 11A(1) requires willful suppression - Whether invocation of extended limitation period (proviso to section 11A(1)) was justified on the facts - HELD THAT: - The Tribunal noted the settled law that extended limitation under the proviso requires a finding of willful suppression with intent to evade duty. On the material, no such suppression or intent was established; coupled with the findings of no loss to revenue and admissibility of credits, the extended period could not sustain the demands. (Findings on related demands reflected in the substantive issues above.)

Invocation of the extended limitation was not sustained on the facts; demands otherwise unsustainable

Penalty and interest consequences where principal duty demand is held unsustainable - Whether penalties and other personal penalties could be sustained once the principal demands were set aside - HELD THAT: - Having set aside the principal demands (except the conceded amount), the Tribunal held that no penalty was imposable on the appellants; imposition of personal penalty on the director/employee was also disallowed where the underlying demand did not survive and where imposition went beyond the scope of the show cause notice. Only the demand conceded by the appellant was confirmed with interest as ordered. [Paras 15, 16]

All penalties set aside; only the conceded demand of Rs.89,855/- confirmed and payable with interest

Final Conclusion: The Tribunal allowed the appeals in part: the conceded demand of Rs.89,855/- was confirmed and is payable with interest; all other demands confirmed by the impugned order (valuation under Rule 8/related party adjustments, denial of Cenvat on endorsed documents, short receipt of methanol, R&D input credit, and shortages of finished goods) were held unsustainable and set aside, and no penalties were imposed on the appellants.

Cash discount - transaction value - price actually paid or payable for the goods when sold - deductibility of discounts at the time of clearance - binding effect of Supreme Court precedent

Cash discount - transaction value - price actually paid or payable for the goods when sold - deductibility of discounts at the time of clearance - binding effect of Supreme Court precedent - Whether duty is exigible on the amount of cash discount declared in the invoice but not availed by the buyer. - HELD THAT: - The Tribunal held that the question is no longer res integra and is governed by the decision of the Hon'ble Supreme Court in Purolator India Ltd. The Court adopted the principle that transaction value for excise purposes is the price actually paid or payable for the goods at the time/place of clearance, and that a cash discount which is not operative at or prior to clearance (being conditional on subsequent payment timing) must be deducted to arrive at the value of excisable goods at that time. Applying that precedent and following the appellant's earlier Tribunal order (Final order No. A/11542/2019 dated 14.08.2019) which applied Purolator, the demand for duty on cash discounts not availed by buyers was held unsustainable. The impugned order confirming duty was therefore set aside. [Paras 4, 5]

Impugned order set aside; appeal allowed and demand for duty on the unavailed cash discount held not sustainable.

Final Conclusion: Following the binding Supreme Court precedent in Purolator India Ltd and the Tribunal's earlier order in the appellant's own case, the demand for excise duty on cash discounts not availed by buyers is set aside and the appeal is allowed.

Extended period of limitation - suppression with intent to evade duty - proviso to Section 11A(4) - Cenvat credit reversal and non-utilisation - penalty under Section 11AC - personal penalty under Rule 26 of Central Excise Rules, 2002

Extended period of limitation - suppression with intent to evade duty - proviso to Section 11A(4) - Whether the extended period of limitation could be invoked on the ground of suppression of facts with intent to evade payment of central excise duty. - HELD THAT: - The Tribunal found that the show cause notice covered the period December 2010 to June 2015 but the material on record did not establish suppression, fraud or wilful misstatement with the requisite intent to evade duty. Appellants maintained books of account, issued invoices showing VAT payment, filed GVAT and income-tax returns which were audited, and recorded manufacture and clearances in their accounts. There was no allegation or evidence of clandestine clearances or withholding of invoices; purchases and inputs were supported by proper documents. Reliance on advice of a Chartered Accountant, and the absence of any deliberate concealment in books or invoices, negated the finding of conscious suppression. In these circumstances the facts did not satisfy the threshold for invoking the proviso to Section 11A(4), which requires suppression or wilful misstatement with intent to evade duty; mere failure to pay duty or negligence was held insufficient to attract the extended period. [Paras 4]

Extended period of limitation cannot be invoked; demand for the extended period is set aside as barred by limitation, while demand for the normal period is maintainable.

Cenvat credit reversal and non-utilisation - Whether the cenvat credit demand and interest are sustainable where the credit was taken and reversed in the same month and was not utilized. - HELD THAT: - The Tribunal noted that the cenvat credit was availed in September 2015 and was reversed in the same month as reflected in ER-1 return; the credit was not utilized. In these circumstances the demand for cenvat and interest was not sustainable. The Tribunal relied on the principle that reversal of credit before utilisation is equivalent to not taking the credit and therefore interest would not be payable where there is no utilisation. [Paras 4]

Cenvat demand and interest are set aside.

Penalty under Section 11AC - personal penalty under Rule 26 of Central Excise Rules, 2002 - Whether penalty under Section 11AC and personal penalty under Rule 26 are exigible where there was no malafide intention to evade duty. - HELD THAT: - In view of the Tribunal's conclusion that there was no deliberate intention to evade duty and that the extended period could not be invoked, imposition of penalty under Section 11AC was not justified. The appellant's non-payment was found to be bona fide and based on professional advice rather than a willful act to evade duty. Consequently, personal penalty on the partner under Rule 26 was also held unsustainable; additionally, precedent in the jurisdiction indicated that personal penalty against a partner of a firm is not justified where malafide is not established. [Paras 4]

Penalty under Section 11AC and personal penalty under Rule 26 are set aside.

Final Conclusion: The appeal was allowed in part: the central excise demand is sustained for the normal period (with interest), the demand for the extended period is quashed as time-barred, the cenvat demand and interest are set aside, and both the statutory and personal penalties are rescinded; consequential relief was granted to the appellant.

Limitation on adjournments under Section 35C(1A) of the Central Excise Act - dismissal for default/non-prosecution under Rule 20 of CESTAT Procedure Rules, 1982 - abuse of adjournment and dilatory tactics - duty of advocate to prosecute proceedings and not seek routine adjournments

Limitation on adjournments under Section 35C(1A) of the Central Excise Act - abuse of adjournment and dilatory tactics - Whether the appellant was entitled to further adjournment after having been granted adjournments on more than three occasions - HELD THAT: - Section 35C(1A) permits adjournments during the hearing only if sufficient cause is shown and contains a proviso that no such adjournment shall be granted more than three times to a party. The appeal had been listed on multiple earlier dates and the appellant's counsel repeatedly sought adjournments; earlier order sheets recorded that more than three adjournments had already been granted and warned that no further adjournment would be entertained. The Tribunal, adopting the jurisprudential condemnation of routine and mechanical adjournments and dilatory tactics, concluded that no justification existed to extend hearing beyond the statutory maximum and refused the request for further adjournment. [Paras 4]

Request for further adjournment denied as beyond the statutory maximum of three adjournments.

Dismissal for default/non-prosecution under Rule 20 of CESTAT Procedure Rules, 1982 - duty of advocate to prosecute proceedings and not seek routine adjournments - Whether the appeal should be dismissed for non-prosecution in view of repeated adjournments and non-appearance/prosecution by the appellant - HELD THAT: - Rule 20 authorises the Tribunal to dismiss an appeal for default where the appellant does not appear or to hear and decide on merits; it also permits restoration where sufficient cause is shown. Given the appellant's pattern of seeking only adjournments on successive listings and the statutory limit on adjournments, the Tribunal found that the matter amounted to non-prosecution. The Tribunal applied the provision in Rule 20, considered the appellate practice condemned by higher courts against routine adjournments, and determined that dismissal for non-prosecution was warranted. [Paras 5]

Appeal dismissed for non-prosecution under Rule 20 of the CESTAT Procedure Rules, 1982.

Final Conclusion: The Tribunal refused further adjournment as exceeding the statutory limit under Section 35C(1A) and, having treated the appellant's conduct as non-prosecution, dismissed the appeal under Rule 20 of the CESTAT Procedure Rules, 1982.

Mandatory pre-deposit as condition precedent to entertain appeal - no power in appellate authority to waive or reduce statutory pre-deposit post-amendment - maintainability of appeal on account of non-compliance with pre-deposit requirement - application of section 35F of the Central Excise Act to service tax appeals by virtue of section 83 of the Finance Act

Mandatory pre-deposit as condition precedent to entertain appeal - no power in appellate authority to waive or reduce statutory pre-deposit post-amendment - maintainability of appeal on account of non-compliance with pre-deposit requirement - Appeal is not maintainable for non-compliance with the statutory pre-deposit requirement and must be dismissed where the pre-deposit under section 35F has not been made and no power exists to waive it after the 06.08.2014 amendment. - HELD THAT: - The Tribunal recorded that the appellant had not complied with the requirement of pre-deposit under section 35F of the Central Excise Act as applied to service tax by section 83 of the Finance Act (paras 5, 6). The amended provision, post 06.08.2014, removed the appellate authority's discretion to waive or wholly dispense with the pre-deposit; the language is peremptory and creates a condition precedent to maintainability (para 7). The judgment applies the established principle that where a statute grants a right of appeal subject to a condition precedent, the appellate forum cannot entertain the appeal without fulfillment of that condition; reliance is placed on the reasoning in Narayan Chandra Ghosh and subsequent Supreme Court and High Court decisions summarised in the record which uphold that pre-deposit requirements enacted by the Legislature cannot be circumvented by the Tribunal or courts (paras 8-14). In the present case the appellant neither made the mandated pre-deposit nor removed defects despite service of notices and several adjournments; consequently the appeal could not be entertained and dismissal followed (paras 2-4, 15). [Paras 6, 7, 8, 15, 16]

Appeal dismissed for non-compliance with the mandatory pre-deposit requirement; no waiver or reduction of the statutory pre-deposit could be granted.

Final Conclusion: The appeal is dismissed because the appellant failed to make the mandatory pre-deposit prescribed by section 35F (as applicable to service tax) and the Tribunal has no power to waive or dispense with that statutory pre-condition after the amendment of 06.08.2014.

Compounding of offences under Section 138 of the Negotiable Instruments Act - graded scheme for imposition of costs for delayed composition - payment to State Legal Services Authority as condition for compounding - acquittal on compromise subject to compliance with conditions - release from jail upon compliance with compromise - use of powers under Article 142 to frame guidelines in legislative vacuum

Compounding of offences under Section 138 of the Negotiable Instruments Act - payment to State Legal Services Authority as condition for compounding - graded scheme for imposition of costs for delayed composition - Acceptance of the parties' compromise and the conditions on which the petitioner is to be acquitted and released - HELD THAT: - The Court applied the principles and guidelines laid down in Damodar S. Prabhu v. Sayed Babalal H. regarding encouragement of early compounding and imposition of graded costs for delayed composition. Finding that the parties entered into a voluntary compromise verified by the Principal Registrar, the Court exercised its authority to permit compounding on specified terms. The petitioner was directed to deposit 3% of the cheque amount with the State Legal Services Authority, Indore, within ten days; upon such payment the petitioner would be released from jail and acquitted of the offence under Section 138 of the Negotiable Instruments Act on the basis of compromise. The Court recorded that the graded-costs principle permits the competent court to fix a cost amount in the interest of discouraging undue delay, and applied that principle by fixing 3% in the present case in view of the settlement before the High Court. [Paras 6, 7, 8]

Subject to deposit of 3% of the cheque amount with the State Legal Services Authority within ten days, the petitioner is to be released from jail and acquitted on the basis of compromise; failure to deposit will result in the petitioner undergoing the original sentence and compensation as awarded by the trial court.

Final Conclusion: Revision petition disposed of by accepting the parties' compromise; acquittal and release granted on payment of 3% of the cheque amount to the State Legal Services Authority within ten days, failing which the original sentence and compensation shall be carried out.

Compounding of offence under Section 147 of the Negotiable Instruments Act - Non-obstante clause in Section 147 and its effect vis-a-vis Section 320 CrPC - Compromise after conviction and revival of conviction on failure to comply - Deposit of entire compensation as full and final settlement - Power to quash conviction and set aside sentence on compounding - Complainant's no-objection to compounding

Compounding of offence under Section 147 of the Negotiable Instruments Act - Deposit of entire compensation as full and final settlement - Complainant's no-objection to compounding - Compounding of the offence under Section 138 of the Negotiable Instruments Act was permissible after conviction where the accused deposited the entire compensation in Court and the complainant had no objection. - HELD THAT: - The Court examined the fact that the petitioner had deposited the full amount of compensation in the Registry of the Court as full and final settlement and that the complainant recorded no objection to compounding. Relying on the statutory scheme embodied in Section 147 of the Negotiable Instruments Act and the guidance of the Hon'ble Apex Court in Damodar S. Prabhu and K. Subramanian, the Court noted that Section 147, being an enabling provision with a non-obstante clause, permits compounding of offences under the Act even after conviction and even where the scheme of Section 320 CrPC does not strictly apply. In the circumstances, with full payment made and the complainant consenting, the prerequisites for exercising the power to compound the offence were satisfied and the application for compounding was allowable. [Paras 10, 12, 13]

Application for compounding the offence allowed and the matter ordered to be compounded.

Power to quash conviction and set aside sentence on compounding - Compromise after conviction and revival of conviction on failure to comply - Release of deposited compensation to complainant - Consequential relief of quashing the conviction and setting aside the sentence, acquitting the accused, and releasing the deposited amount to the complainant was granted upon compounding. - HELD THAT: - Having accepted compounding under Section 147, the Court exercised its power to quash the judgment of conviction and order of sentence dated 16.01.2024 and the appellate affirmation dated 10.07.2024, and to acquit the petitioner of the offence under Section 138 of the Act. The Court further directed discharge of bail bonds, observed payment of the compounding fee to the District Legal Services Authority, and ordered the Registry to release the amount deposited by the petitioner to the complainant after due verification. These orders followed from the acceptance of the compromise and compliance with procedural formalities recorded before the Court. [Paras 14, 15]

Impugned conviction and sentence quashed and set aside, petitioner acquitted, bail bonds discharged, and deposited compensation to be released to the complainant after verification.

Final Conclusion: The petition is allowed: the offence under Section 138 is compounded under Section 147 of the Negotiable Instruments Act on the petitioner depositing the full compensation and the complainant expressing no objection; the conviction and sentence are quashed and set aside, the petitioner is acquitted, bail bonds discharged, and the deposited amount is to be released to the complainant after verification.

Compounding of offences under Section 147 of the Negotiable Instruments Act - acceptance of compromise after recording of conviction - non-obstante clause in Section 147 overriding Section 320 of the Code of Criminal Procedure - graded compounding fee guided by K. Subramanian - quashing of conviction and discharge/release on compounding

Compounding of offences under Section 147 of the Negotiable Instruments Act - acceptance of compromise after recording of conviction - Compounding of the offence under Section 138 of the Negotiable Instruments Act was permissible after conviction and appeal, upon compromise between the parties. - HELD THAT: - The Court applied Section 147 of the Negotiable Instruments Act, noting its non-obstante character vis-a-vis Section 320 Cr.P.C., and followed the precedent that a compromise can be accepted even after recording of the judgment of conviction. Having recorded the complainant's statement that the compromise deed dated 13.08.2024 has been executed and the compensation received, the Court held there was no impediment to permitting compounding under Section 147 and relevant Apex Court guidance. The application for compounding was therefore allowed and the matter ordered to be compounded. [Paras 10, 11, 12, 13, 14]

Matter compounded; impugned conviction and sentence quashed and set aside; accused acquitted of the offence under Section 138.

Graded compounding fee guided by K. Subramanian - judicial discretion to reduce compounding fee in view of financial condition - Appropriate compounding fee to be imposed in the circumstances, with discretion to reduce the prescribed scale. - HELD THAT: - Relying on the guidelines in K. Subramanian, which prescribe a graded scheme of costs to encourage early compounding (10% at Magistrate stage, 15% at Sessions/High Court, 20% at Supreme Court), the Court noted that the competent court may reduce the costs for specific facts while recording reasons. Considering the petitioner's financial condition, the Court exercised its discretion to reduce the compounding fee and directed deposit of a token amount with the State Legal Services Authority within a stipulated period. [Paras 16, 17]

Petitioner directed to deposit token compounding fee of Rs. 2,500/- with the H.P. State Legal Services Authority within four weeks.

Quashing of conviction and discharge/release on compounding - Legal consequence of quashing conviction upon compounding: discharge of bail bonds and release from custody if not required in other cases. - HELD THAT: - Having quashed and set aside the conviction and sentence pursuant to compounding, the Court directed that bail bonds, if any, stand discharged. The Superintendent of the jail was directed to release the petitioner forthwith if he was not required in any other case, reflecting the ordinary release consequences once conviction and sentence are set aside. [Paras 14, 18]

Bail bonds discharged; petitioner to be released forthwith if not required in any other case.

Final Conclusion: The petition for compounding is allowed; the conviction and sentence dated 08.07.2016 (affirmed on 06.03.2019) are quashed and set aside, the accused is acquitted of the offence under Section 138, directed to deposit token compounding fee of Rs.2,500/- with the H.P. State Legal Services Authority within four weeks, bail bonds stand discharged and the accused is to be released if not required in any other case.