TaxTMI Updates e-Newsletter
Dec 13,2023

Release of goods under Section 129(1)(a) of the CGST Act - release of goods under Section 129(1)(b) of the CGST Act - owner of the goods deemed where tax invoice and E-way bill accompany consignment - applicability of Circular No.76/50/2018-GST dated 31st December 2018

Owner of the goods deemed where tax invoice and E-way bill accompany consignment - release of goods under Section 129(1)(a) of the CGST Act - applicability of Circular No.76/50/2018-GST dated 31st December 2018 - Whether goods seized in transit were liable to be released under Section 129(1)(a) of the CGST Act where the petitioner produced the tax invoice and E-way bill and claimed to be the owner. - HELD THAT: - The Court applied the clarification in Circular No.76/50/2018-GST dated 31st December 2018 and the consistent Division Bench precedents of this Court which hold that where a tax invoice and E-way bill accompany a consignment, the consignor or consignee who produces those documents before the authorities is to be treated as the owner of the goods for the purposes of Section 129(1). In the present case the petitioner produced the tax invoice and E-way bill and goods were found to be as per those documents. On that basis the petitioner is to be deemed the owner and the statutory scheme requires release in terms of Section 129(1)(a) (payment of applicable tax and penalty as specified therein) rather than under Section 129(1)(b). The order passed by the authorities determining penalty under Section 129(1)(b) was therefore inconsistent with the statutory provision as interpreted in light of the Circular and binding Division Bench decisions, and is liable to be quashed and set aside. The Court directed the authorities to carry out the exercise under Section 129(1)(a) within three weeks. [Paras 11, 12]

Order dated October 19, 2023 is quashed and set aside; authorities directed to release the goods in accordance with Section 129(1)(a) of the CGST Act within three weeks.

Final Conclusion: Writ petition allowed insofar as the challenge to the order under Section 129; goods to be released in terms of Section 129(1)(a) on the petitioner producing the tax invoice and E-way bill, and the impugned order is quashed.

Rectification of assessment - treatment of representation as rectification application - GSTR-3B return correction - opportunity of hearing - writ of mandamus under Article 226

Rectification of assessment - treatment of representation as rectification application - GSTR-3B return correction - opportunity of hearing - Whether the representation filed by the petitioner (Exts.P4 and P5) should be treated as a rectification application and decided by the 3rd respondent after affording opportunity of hearing. - HELD THAT: - The petitioner admitted errors in the GSTR-3B returns which, according to counsel, resulted in the impugned assessment order (Ext.P3). The petitioner submitted Ext.P4 (and Ext.P5) seeking correction/rectification of those mistakes. The learned Government Pleader raised no substantial objection to treating the representation as a rectification application. On these facts the High Court directed that the 3rd respondent shall consider Exts.P4 and P5 as a rectification application filed by the assessee and decide the same in accordance with law after affording the petitioner an opportunity of hearing. The Court specified an expeditious timeline for disposal, indicating the order should be passed preferably within two months. [Paras 5]

Exts.P4 and P5 shall be treated as a rectification application and the 3rd respondent is directed to decide them in accordance with law after giving the petitioner an opportunity of hearing, preferably within two months.

Final Conclusion: Writ petition disposed by directing the 3rd respondent to treat Exts.P4 and P5 as a rectification application, hear the petitioner and pass appropriate orders expeditiously (preferably within two months).

Principles of natural justice - opportunity of personal hearing - Section 75(4) of the CGST Act - quashing of ex parte order - exercise of writ jurisdiction despite alternate remedy

Principles of natural justice - Section 75(4) of the CGST Act - opportunity of personal hearing - Impugned ex parte order passed without granting the petitioner an opportunity of personal hearing was contrary to the principles of natural justice and Section 75(4) of the CGST Act. - HELD THAT: - The Court found that the petitioner, though inadvertently ticked the box 'No', had in the same reply expressly requested a personal hearing; a holistic reading of the reply showed no intention to waive the right. Section 75(4) mandates that an opportunity of hearing be granted where a written request for hearing is received or an adverse decision is contemplated. The adjudicating officer mechanically relied on the inadvertent tick mark and did not consider the specific request in the reply, thereby failing to comply with the statutory obligation and breaching principles of natural justice. Consequently, the impugned ex parte decision cannot stand. [Paras 7, 9, 11]

Impugned order held to be in breach of natural justice and contrary to Section 75(4) of the CGST Act.

Quashing of ex parte order - Whether the impugned ex parte order should be quashed. - HELD THAT: - In view of the failure to grant the statutorily mandated opportunity of personal hearing, the Court exercised its discretionary writ jurisdiction to quash the impugned order. The Court set aside the order dated 18 August 2023 and directed further proceedings in accordance with law. [Paras 12]

Impugned order dated 18 August 2023 is quashed and set aside.

Exercise of writ jurisdiction despite alternate remedy - Whether the writ petition was maintainable despite availability of an alternate remedy of appeal. - HELD THAT: - The Court held that the petition could be entertained notwithstanding the existence of an appeal because the impugned order suffered from a fundamental breach of natural justice-namely, denial of the statutorily required hearing-which is a factor justifying invocation of writ jurisdiction instead of relegation to the appellate remedy. [Paras 7]

Writ jurisdiction exercised; petition entertained despite alternate remedy of appeal.

Opportunity of personal hearing - Direction on further course of action after quashing the order. - HELD THAT: - The Court directed respondent no. 3 to grant a personal hearing to the petitioner, consider all contentions afresh and pass an appropriate order in accordance with law. The exercise was to be completed within four weeks from the date of hearing, thereby remitting the matter for fresh adjudication constrained by the obligation to afford the hearing. [Paras 12]

Matter remitted for fresh consideration after granting personal hearing; adjudicating officer to pass fresh order within four weeks.

Final Conclusion: Writ petition allowed: the ex parte order dated 18 August 2023 is quashed for breach of natural justice and Section 75(4) of the CGST Act; respondent no. 3 to grant personal hearing and decide the matter afresh within four weeks.

Rectification of GSTR-1 - inadvertent human error - input tax credit entitlement - rectification under Section 37(3) provisos - absence of notified Forms GSTR-2/GSTR-1A as disabling mechanism - judicial discretion to permit corrective uploading

Rectification of GSTR-1 - inadvertent human error - input tax credit entitlement - absence of notified Forms GSTR-2/GSTR-1A as disabling mechanism - Petitioner permitted to upload rectified GSTR-1 statements for specified periods and to claim corresponding input tax credit - HELD THAT: - The Court found that the petitioner had committed inadvertent errors in filing GSTR-1 for August 2017, November 2017, December 2017 and January 2018 and had missed the statutory window for rectification because it was unaware of the notification extending time. Having regard to the absence, at the relevant time, of notified enabling forms (GSTR-2/GSTR-1A) which would have facilitated detection and correction of mismatches, and to the line of decisions permitting rectification where no mala fides are alleged, the Court exercised its supervisory jurisdiction to permit corrective uploading. The Court relied on the principle that bonafide human errors should not deprive a party of legitimate input tax credit where the statutory mechanism for seamless correction was not effectively available, and directed a time-bound procedure for the petitioner to upload rectified GSTR-1 and for the respondents to process and enable the auto-population and grant of the claimed input tax credit. [Paras 7, 9]

Writ petition allowed; petitioner permitted to upload rectified GSTR-1 within four weeks and respondent directed to process and enable the claimed input tax credit within the prescribed short time-frames.

Final Conclusion: The writ petition is allowed: the petitioner is authorised to upload rectified GSTR-1 for the periods August 2017, November 2017, December 2017 and January 2018 within four weeks; the respondent is directed to upload and process the rectified statements and enable the petitioner to avail the claimed input tax credit within the time periods ordered.

Renting of residential dwelling for use as residence - residential dwelling (scope and characteristics) - unit of accommodation / paid guest / hostel style units - exemption under Notification No. 12/2017 (renting of residential dwelling) - classification under SAC 9963 / SAC 996311 (accommodation services) - taxability under Notification No. 11/2017 entry 7(i) at 12% - availment of input tax credit subject to Sections 16 & 17

Renting of residential dwelling for use as residence - residential dwelling (scope and characteristics) - unit of accommodation / paid guest / hostel style units - exemption under Notification No. 12/2017 (renting of residential dwelling) - Whether the accommodation provided by the applicant qualifies as 'renting of residential dwelling for use as residence' and is exempt under entry 12 of Notification No. 12/2017 CTR. - HELD THAT: - The Authority held that the term 'residential dwelling' is not defined in GST but, as guided by erstwhile CBIC education material and common parlance, denotes residential accommodation meant for permanent or long term stay and ordinarily includes features such as exclusive use of a room, kitchen/cooking facility and metered utilities. The applicant offered single/double/triple occupancy units where rent is charged per bed/unit, inhabitants are unrelated and share rooms, cooking by inhabitants is prohibited and meals and other services are mandatorily provided as part of the monthly charge. The Residential Service Agreement and mode of charging (per bed, fixed utility/maintenance charges, minimum term, shared common facilities and restrictions on cooking) demonstrate that the supply is unit accommodation akin to paid guest/hostel services and not renting of an entire residential dwelling for use as a residence. Consequently the services do not satisfy the essential characteristics required for exemption under entry 12 of Notification No. 12/2017 CTR and are not covered by that exemption. [Paras 16, 17, 18, 19, 21]

The services provided by the applicant do not qualify as 'renting of residential dwelling for use as residence' and are not exempt under entry 12 of Notification No. 12/2017 CTR.

Classification under SAC 9963 / SAC 996311 (accommodation services) - taxability under Notification No. 11/2017 entry 7(i) at 12% - unit of accommodation / room or unit accommodation services - If not exempt, how the impugned services are to be classified and the applicable rate of GST. - HELD THAT: - The Authority classified the impugned supply as accommodation services falling under SAC 9963, specifically room or unit accommodation services under SAC 996311, since the applicant provides rooms/units without individual kitchens and with daily housekeeping/ancillary services on a single or multi occupancy basis. Applying the rate schedule, such services fall under entry 7(i) of Notification No. 11/2017 CTR and, given the charge per unit per person is below the specified threshold, attract GST at the rate provided by that entry. The Authority accordingly applied the applicable rate to the classified service. [Paras 22, 24]

The impugned services are classifiable under SAC 9963 (SAC 996311) and attract GST at 12% under entry 7(i) of Notification No. 11/2017 CTR.

Availment of input tax credit subject to Sections 16 & 17 - input tax credit on inputs used for providing taxable accommodation services - Whether the applicant can claim input tax credit on inputs used for providing the taxable services. - HELD THAT: - The Authority noted that entry 7(i) of Notification No. 11/2017 CTR does not prohibit availment of input tax credit. Therefore, entitlement to ITC depends on satisfaction of the general statutory conditions for credit under Sections 16 and 17 of the CGST Act and the corresponding rules. No specific restriction was found in the rate notification that would deny ITC for the applicant's supplies; claimability is subject to the ordinary legal requirements for ITC. [Paras 23, 24]

The applicant may claim input tax credit on inputs used in providing the taxable services subject to fulfilment of the conditions under Sections 16 & 17 of the CGST Act, 2017 and related rules.

Final Conclusion: The Authority ruled that the applicant's shared unit accommodation with mandatory services does not qualify as 'renting of residential dwelling for use as residence' and is not exempt under Notification No. 12/2017 CTR; the services are classifiable under SAC 9963 (SAC 996311) and attract GST at 12% under Notification No. 11/2017 CTR entry 7(i); and the applicant may avail ITC subject to conditions in Sections 16 and 17 of the CGST Act, 2017.

Scope of supply under GST - deemed supply as per Schedule II clause 5(e) - consideration for supply - liquidated damages vs. consideration - principal supply and ancillary supply - classification as Real Estate Services (Heading 9972)

Scope of supply under GST - deemed supply as per Schedule II clause 5(e) - consideration for supply - liquidated damages vs. consideration - Damages received for early termination of sub-lease before the lock-in period amount to a supply and constitute consideration for that supply. - HELD THAT: - The advance ruling authority examined the sub-lease agreements and noted the contractual clause making the lessee liable to pay rental for the remainder of the lock-in period on early termination (contractual forfeiture/settlement). The payment was part of the agreed commercial terms and was receivable in the event of breach; consequently the applicant received money for non-fulfilment of contractual conditions. Applying Section 7 and Schedule II clause 5(e), the Authority held that accepting payment in return for refraining from exercising a right or tolerating an act falls within the activities treated as supply. The Authority considered the CBIC circular on liquidated damages but followed the circular's own clarification that where a payment is a consideration for tolerating or facilitating early termination (i.e., forms part of the commercial terms as a facility to effect early exit), it constitutes consideration for a supply. On these findings the payments received by the applicant were held to be consideration for a supply of service. [Paras 11, 12, 13, 15]

Payments received as damages for early termination of the sub-lease are a taxable supply and amount to consideration for that supply.

Principal supply and ancillary supply - classification as Real Estate Services (Heading 9972) - rate of tax on real estate services - The services represented by the damages are classifiable under Heading 9972 (Real Estate Services) and are taxable at 18% (9% CGST and 9% SGST). - HELD THAT: - Having held that the amount received is consideration for a supply, the Authority treated the payment as ancillary to the principal supply of sub-letting commercial property. The principal supply-sub-letting of immovable property-falls within real estate services. The Authority applied the relevant tariff entry for real estate services under Heading 9972 and concluded that the applicable GST rate on such real estate services (other than specified exemptions) is 9% CGST and 9% SGST, resulting in a combined rate of 18%. [Paras 14, 15]

The received amount is classifiable as Real Estate Services under Heading 9972 and is liable to GST at 18% (9% CGST and 9% SGST).

Final Conclusion: The Authority ruled that the amounts received by the applicant for early termination of the sub-lease constitute consideration for a supply under Section 7 and Schedule II(5)(e) and are taxable; such services are classifiable under Heading 9972 (Real Estate Services) and chargeable to GST at 18% (9% CGST and 9% SGST).

Classification of goods as parts and accessories of motorcycles - classification under Customs Tariff Heading 8714 (87149990) - distinction between seats and seat covers for classification purposes - applicable GST rate on parts and accessories of vehicles of heading 8711 - binding nature of an advance ruling

Classification of goods as parts and accessories of motorcycles - distinction between seats and seat covers for classification purposes - classification under Customs Tariff Heading 8714 (87149990) - Classification of two wheeler seat covers manufactured by the applicant. - HELD THAT: - The Authority examined the nature and use of the product and the relevant HSN headings. Heading 8708 (parts and accessories of motor vehicles of headings 8701-8705) was held inapplicable because those headings cover larger motor vehicles and not two wheelers (finding that CTH 8708 is not applicable). Heading 9401 (seats for motor vehicles) was excluded because the applicant manufactures seat covers fitted over existing factory-fitted seats and not the seats themselves. The Authority analysed chapter 87, which covers motorcycles under heading 8711 and parts and accessories under heading 8714, and concluded that seat covers designed to fit motorcycle seats are accessories to motorcycles. On the facts, including sample photographs and invoices showing covers made to fit specific motorcycle models, the Authority found that the products fall within CTH 8714 and more specifically 87149990. [Paras 6, 7]

Two wheeler seat covers manufactured by the applicant are classifiable as parts and accessories of motorcycles under CTH 87149990.

Applicable GST rate on parts and accessories of vehicles of heading 8711 - classification under Customs Tariff Heading 8714 (87149990) - Applicable GST rate on two wheeler seat covers once classified under CTH 87149990. - HELD THAT: - Having classified the goods under CTH 87149990, the Authority referred to the relevant entries in Notification No. 1/2017-CT(Rate) as amended (including Notification No. 24/2018), which attach the tax rate to parts and accessories of vehicles of heading 8711. The Authority found that parts and accessories of vehicles of heading 8711 are taxable at the rate specified in Schedule IV (entry for 8714), and applying that entry, the seat covers attract the stated rate under the Notification. The Authority noted past inconsistent filings by the applicant and other taxpayers but applied the tariff and notification entries to determine the correct rate. [Paras 6, 7]

Seat covers classifiable under CTH 87149990 are taxable at the rate applicable to parts and accessories of heading 8711 as per the cited notification.

Final Conclusion: The Authority ruled that two wheeler seat covers made to fit motorcycle seats are classifiable under CTH 87149990 as parts and accessories of motorcycles and are taxable at the rate applicable to parts and accessories of heading 8711 as set out in the relevant notification; the advance ruling is binding as provided by law.

Supply in the course or furtherance of business - Consideration for supply - Composite supply of food treated as supply of service under Schedule II - Perquisites under employment agreement - exclusion from levy where provided free as part of contract - Binding effect of advance ruling

Supply in the course or furtherance of business - Composite supply of food treated as supply of service under Schedule II - Consideration for supply - Perquisites under employment agreement - exclusion from levy where provided free as part of contract - Whether recovery of subsidised value from employees for providing canteen facility amounts to 'supply' under the CGST Act and whether such recovery attracts GST. - HELD THAT: - The Authority found that establishment and operation of a canteen mandated by the Factories Act, where the number of workers ordinarily employed exceeds the statutory threshold, is an activity incident to and in furtherance of the applicant's business. Consequently, provision of meals at concessional rates in the employer's canteen constitutes an outward supply by a taxable person. Clause 6 of Schedule II treats supply of food for cash or other valuable consideration as a supply of service; therefore the subsidised meals supplied by the applicant fall within that description. The amount collected from employees is 'consideration' as defined in the Act and is chargeable to GST. The Board's circular exempting perquisites given in terms of employment contracts applies to benefits provided free of cost as part of the employment arrangement; where there is a recovery from employees, even at subsidised rates, that portion collected is a consideration for supply and is taxable. Applying these principles to the facts and to the contractual clauses in the appointment orders and memorandum of settlement, the Authority held that the collected amount is taxable. [Paras 7]

Recovery of subsidised value from employees for providing canteen facility amounts to a supply under the CGST Act and GST is leviable on the amount recovered by the applicant.

Final Conclusion: The Authority ruled that the subsidised charges recovered from employees for canteen meals constitute consideration for a supply (a composite supply of food treated as a service) in the course or furtherance of business, and GST is payable on the amounts collected.

Refund - adjustment of refund against demand - interest on delayed refund - statutory remedy - authority to decide interest and balance in accordance with law

Refund - adjustment of refund against demand - Payment of the crystallized refund amount to the petitioner/assessee - HELD THAT: - The Court recorded that the respondents/revenue had computed the refundable amount and directed that the amount already crystallized (noted in the record as Rs.44.60 lakhs) shall be remitted to the petitioner/assessee within two weeks. This direction resolves the immediate claim for payment of the computed refund which had earlier been adjusted against the demand for AY 2015-16. [Paras 8, 13]

Respondents directed to remit the computed crystallized refund to the petitioner within two weeks.

Interest on delayed refund - statutory remedy - authority to decide interest and balance in accordance with law - Claim for interest and the balance of the refund held in abeyance and left to statutory remedy and decision by the concerned authority - HELD THAT: - The Court declined to adjudicate the contested claim for interest and the claimed balance of the refund in the writ petition, noting contestation on facts and amount and that interest claimed in the application exceeded the statutory rate. Instead, the petitioner was afforded liberty to pursue available statutory remedies for payment of interest and the balance principal amount; the concerned authority is directed to decide such claims in accordance with law. The earlier orders will not impede the petitioner from invoking statutory remedies. [Paras 11, 12, 13]

Petitioner permitted to pursue statutory remedies for interest and the balance refund; the concerned authority to decide those claims in accordance with law.

Final Conclusion: The writ petition is disposed by directing immediate remittance of the computed refund to the petitioner and by leaving the claims for interest and any balance refund to be pursued through statutory remedies, to be decided by the concerned authority in accordance with law; pending applications are closed.

Carry forward and set off of losses - change in shareholding affecting carry forward of losses (Section 79) - power of assessing officer who computes loss versus assessing officer of subsequent year - unabsorbed depreciation and capital losses not within Section 79

Carry forward and set off of losses - change in shareholding affecting carry forward of losses (Section 79) - power of assessing officer who computes loss versus assessing officer of subsequent year - Legality of the observation in the assessment order that "brought forward loss is not allowed to be carry forward as per para 3, 4 and 5". - HELD THAT: - The Tribunal correctly directed expunction of the remark because an AO who computes and notifies the amount of loss for a particular assessment year is not empowered to finally determine whether that loss may be carried forward and set off in a subsequent year. A textual reading of Section 79 shows it prescribes conditions under which carry forward and set off is prohibited when there has been a change in shareholding, but it does not empower the AO for a given year to pre-empt the adjudicatory powers of the AO who will deal with the subsequent year. The Supreme Court's decision in Manmohan Das, interpreting a pari materia provision, establishes that the question whether a loss may be carried forward and set off has to be determined by the Income-Tax Officer dealing with the subsequent year's assessment and that a declaration by the officer computing the loss that it cannot be set off in the next year is not binding. Applying these principles, the impugned observation in the assessment order was excessive and properly expunged by the Tribunal; the issue of eligibility for carry forward and set off, including any effect of change in shareholding under Section 79, is to be adjudicated in the assessment(s) for the year(s) in which set off is claimed. [Paras 13, 15, 16, 17, 20]

The Tribunal's direction to expunge the observation was upheld; the AO for AY 2014-15 should not have recorded a conclusive finding on carry forward and set off which is to be determined by the AO of the subsequent year.

Unabsorbed depreciation and capital losses not within Section 79 - practical efficacy of carrying forward losses and deductions - Whether unabsorbed depreciation and capital losses fall within the scope of Section 79 and whether expunging the observation affects the revenue's stand. - HELD THAT: - Section 79, by its terms, governs carry forward and set off of losses in relation to change in shareholding; it does not extend to unabsorbed depreciation or capital losses. The court observed that unabsorbed depreciation and capital losses are distinct and outside the ambit of Section 79, and that the practical utility of carrying forward any of these items depends on their later applicability and adjudication in the relevant subsequent assessment years. Consequently, expunction of the impugned remark in the assessment order does not prejudice the revenue's ability to challenge carry forward or set off in the appropriate proceedings. [Paras 18, 19, 20]

Unabsorbed depreciation and capital losses are not governed by Section 79; expunging the remark does not affect the revenue's substantive position on future claims for set off.

Final Conclusion: The appeal is dismissed; delay in filing is condoned and no substantial question of law arises. The Tribunal was right to expunge the assessment officer's conclusive remark regarding carry forward of brought forward losses, and matters of carry forward and set off (including any consequences of change in shareholding under Section 79) and claims for unabsorbed depreciation or capital losses are to be determined in the assessments for the relevant subsequent years.

Settlement under Direct Tax Vivaad Se Vishwas Act, 2020 - statutory conditions for maintainability of declaration - no inherent or fundamental right to statutory settlement - condonation of delay and maintainability of appellate proceedings - objects and reasons cannot override clear statutory provisions

Settlement under Direct Tax Vivaad Se Vishwas Act, 2020 - statutory conditions for maintainability of declaration - no inherent or fundamental right to statutory settlement - Maintainability of the petitioner's application/ declaration under the Act where no appeal/ litigation was pending before the cut off date. - HELD THAT: - The Court held that the right to seek settlement under the Act is purely statutory and available only if the conditions prescribed by the statute are satisfied. The designated authority correctly rejected the application because the petitioner failed to have a litigation pending before the cut off period and also did not seek condonation of delay in filing the second appeal within the cut off window. Settlement outside the judicial process is not a fundamental right; therefore, inability to meet the statutory precondition precluded maintainability of the declaration. The Court further observed that policy preferences for settlement cannot override express statutory stipulations, and accordingly found no error in the designated authority refusing to entertain the declaration on the ground that the appeal was not pending within the specified cut off period. [Paras 5, 7]

The petitioner's declaration under the Act was not maintainable because the statutory condition of having litigation pending before the cut off date was not satisfied; no interference with the designated authority's rejection.

Condonation of delay and maintainability - objects and reasons cannot override clear statutory provisions - Effect of subsequent condonation of delay in filing the second appeal on the petitioner's entitlement to settlement. - HELD THAT: - The Court noted that even though the petitioner's second appeal was later granted condonation of delay (thereby preserving the right of appeal before the Tribunal), that preservation post dates the statutory cut off relevant to maintainability of a declaration under the Act and does not cure the petitioner's earlier failure to satisfy the Act's condition. The Court reiterated that objects and reasons of the Act cannot be used to defeat explicit statutory conditions and therefore declined to extend relief on that basis. [Paras 8]

Subsequent condonation of delay did not confer any retrospective right to seek settlement under the Act where the statutory precondition was not met within the cut off period.

Final Conclusion: Writ petition dismissed; no interference with the designated authority's order rejecting the declaration under the Act for failure to satisfy statutory conditions, while the petitioner's right of appeal before the Tribunal remains preserved by subsequent condonation.

Faceless Assessment Scheme - principles of natural justice - service of draft assessment order and notice - notice under Section 148 - availability of alternative statutory remedy of appeal

Service of draft assessment order and notice - Faceless Assessment Scheme - principles of natural justice - Draft assessment order dated 24.9.2021 and notice dated 23.9.2021 were served and absence of response did not amount to violation of principles of natural justice - HELD THAT: - The Court found that all other notices issued during the faceless assessment proceedings were received by the petitioner and replies were filed, making it improbable that the draft assessment order and the notice were not served. Reliance on a prior media report of portal glitches did not establish continuing technical failure at the relevant time, as the draft order was dated a month after that report. The Court held that failure to file a response to a draft assessment order or to seek additional time, when no request for extension was made or denied, does not constitute denial of the opportunity of hearing. On these facts the alleged non-service or procedural lapse did not amount to a breach of natural justice warranting interference with the assessment order. [Paras 9, 11, 12]

Petition dismissed insofar as it challenged non-service and asserted breach of natural justice.

Principles of natural justice - Whether the short time given (three days) to file objections to the draft assessment order amounted to denial of natural justice - HELD THAT: - The Court held that short notice would only offend principles of natural justice if the assessee sought additional time and the authority refused it. In the present case the petitioner neither filed objections nor requested an extension; consequently there was no adjudicated denial of opportunity that could be set aside. The reasoning distinguishes cases remanded for lack of opportunity where an express finding of denial had been recorded. [Paras 10, 11]

No violation of natural justice on account of the three-day period for filing objections where no request for extension was made.

Availability of alternative statutory remedy of appeal - Exercise of writ jurisdiction in presence of an efficacious alternative remedy under the statute - HELD THAT: - The Court observed that an appeal under the statute (Section 246A) is available against the assessment order and noted the availability of that remedy. While dismissing the writ petition on merits, the Court permitted the petitioner to file the statutory appeal within three weeks and directed that it be entertained and decided on merits without going into limitation. This reflects the Court's approach of leaving the statutory appellate remedy open and curial intervention limited to the present writ challenge. [Paras 8, 14]

Writ petition dismissed; petitioner permitted to file appeal within three weeks which shall be decided on merits without raising limitation.

Final Conclusion: Writ petition challenging the faceless assessment order and consequent penalty for assessment year 2013-14 dismissed: the court found no proven non-service or denial of opportunity under the Faceless Assessment Scheme and allowed the petitioner to pursue the statutory appeal within three weeks to be decided on merits without reference to limitation.

Sham transaction / bogus transaction - pre-arranged transaction / accommodation entry - surrounding circumstantial evidence - onus on assessee to prove genuineness of transaction - assessment based on trade and financial analysis of scrip - onus under Section 68 - set-off of short term capital loss against long term capital gain

Sham transaction / bogus transaction - pre-arranged transaction / accommodation entry - surrounding circumstantial evidence - assessment based on trade and financial analysis of scrip - onus on assessee to prove genuineness of transaction - set-off of short term capital loss against long term capital gain - Validity of disallowance of claimed short-term capital loss on sale of shares of M/s Looks Health Services Ltd as a bogus/sham transaction - HELD THAT: - The AO and the CIT(A) concluded that the assessee's short-term capital loss was a product of a pre-arranged accommodation entry and therefore bogus, relying on trade data, price movements of the scrip, concentration of bulk deals, the use of a broker pool account and payments from the assessee's father's account. The Tribunal examined whether these circumstantial observations were supported by corroborative material or enquiries directed to other participants or brokers. It found that the transactions were executed on the BSE platform where counter-parties are anonymous, and there was no independent or corroborative evidence on record showing collusion, rigging by the assessee or his broker, or any material establishing that money was converted through accommodation entries. The Tribunal held that the principle of surrounding circumstantial evidence, applied without further corroboration, was insufficient to sustain a finding of sham transactions in the facts of this case. The Tribunal noted that the assessee had made payments routed through banking channels, had dematerialised shares and that the claimed loss did not equal the entire long-term gain (which, the Tribunal observed, would have been expected if a wholly pre-arranged set-off had been contrived). Relying on the reasoning in PCIT v. Krishna Devi, the Tribunal concluded that absent cogent corroborative material or further inquiry, the lower authorities' conclusion was conjectural. On that basis the Tribunal set aside the disallowance and directed deletion of the addition.

Disallowance of the short-term capital loss held unsupported by corroborative material and set aside; the addition deleted and the assessee's ground of appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the findings of the AO and CIT(A) that the short-term capital loss on sale of Looks Health Services Ltd shares was bogus, and directed deletion of the addition for Assessment Year 2014-15.

Revisionary jurisdiction under section 263 - entitlement to exemption under section 54(1) - capital gains account scheme deposit requirement - errorous and prejudicial to the interest of Revenue test - scope of departmental inquiry in assessment proceedings - hyper-technical approach in exercise of revisionary power

Revisionary jurisdiction under section 263 - errorous and prejudicial to the interest of Revenue test - scope of departmental inquiry in assessment proceedings - Validity of exercise of power under section 263 to set aside the assessment on ground that the Assessing Officer did not consider deposit of capital gain in capital gains account scheme - HELD THAT: - The Tribunal examined the assessment record and order-sheet entries which demonstrate that the Assessing Officer had thoroughly considered the sale transaction, computed the capital gain and called for evidence supporting the claim of exemption under section 54. The revisionary authority did not question the quantum of capital gain or that the investment in a new residential property was made within the time prescribed by section 54(1); its objection rested solely on the fact that the capital gain was not deposited in the capital gains account scheme during the interim period. The Tribunal held that such narrow focus amounted to a hyper-technical application of the revisionary power. Since the conditions material to allowance of deduction under section 54(1) had been satisfied and no prejudice to Revenue was shown in respect of the assessment itself, the exercise of power under section 263 was unjustified and therefore invalid. [Paras 5, 6]

Revision under section 263 quashed and the assessment order restored.

Entitlement to exemption under section 54(1) - capital gains account scheme deposit requirement - Whether assessee was entitled to claim deduction under section 54 despite not depositing the capital gain in the capital gains account scheme - HELD THAT: - The Tribunal found that the Assessing Officer had accepted the computation of long-term capital gain and the assessee had invested the capital gain amount in purchase of a new residential property within the time limits prescribed by section 54(1). The revisionary authority did not dispute these facts. The Tribunal concluded that when the basic statutory conditions of section 54(1) are fulfilled, the assessee is entitled to the deduction, and absence of deposit in the capital gains account scheme during an interim period did not negate that entitlement in the facts of this case. [Paras 5]

Deduction under section 54(1) upheld; assessee entitled to claim the exemption.

Final Conclusion: The section 263 revision was invalidly exercised; the order under section 263 is quashed and the original assessment for AY 2012-13, sustaining the claim of exemption under section 54(1), is restored; appeal allowed.

Power to reopen assessment under section 147 of the Income Tax Act - reason to believe - finality of assessment - change of opinion - tangible material - abatement and scrutiny under section 153A - addition under section 68 - revisional power under section 263 of the Income Tax Act - taxability of share premium w.e.f. 01.04.2013

Power to reopen assessment under section 147 of the Income Tax Act - reason to believe - change of opinion - tangible material - abatement and scrutiny under section 153A - addition under section 68 - taxability of share premium w.e.f. 01.04.2013 - Validity of the action of the assessing officer in reopening the completed assessment for AY 2009-10 by issuance of notice under section 148/147. - HELD THAT: - The Tribunal examined the reasons recorded by the AO and the course of the original assessment framed under section 153A/143(3). The AO's reasons relied on entries in the assessee's balance-sheet and the fact of allotment of shares at high premium; there was no reference to any new external tangible information not previously available to the AO. During the original (abated) scrutiny assessment the AO had specifically called for and received details of share allotment, including the identity of the subscriber and the premium, and yet made no adverse finding in the assessment order - an omission which the Tribunal treated as implied acceptance of the assessee's explanation. Reopening on the same facts in order to reach a different conclusion amounted to a prohibited review or a mere change of opinion, which cannot furnish the requisite "reason to believe" under section 147. The Tribunal emphasised that reopening must be founded on tangible material or information showing escapement of income; vague, remote or internally available material is insufficient. The Tribunal further noted that even on merits share premium could not be brought to tax for the year in question as the law (per Bombay High Court) made share premium taxable only with effect from 01.04.2013. In that factual and legal backdrop, the reassessment was unsustainable. [Paras 10, 11, 12, 13, 14]

The reopening of assessment by issuance of notice dated 29.03.2014 (under section 148/147) is invalid; the assessee succeeds on the jurisdictional/legal challenge and the reassessment is set aside.

Final Conclusion: The Tribunal allowed the appeal: the AO's reopening of the completed assessment for AY 2009-10 was unsustainable (being based on matters already considered in abated scrutiny proceedings and amounting to change of opinion, and in any event share premium was not taxable for that year), and the reassessment/addition was quashed.

Condonation of delay under section 253 - omission of clause (i) of section 92BA - effect of repeal/omission on pending proceedings - Specified Domestic Transactions - determination of Arm's Length Price for domestic transactions - reference to Transfer Pricing Officer under section 92CA

Condonation of delay under section 253 - Whether the delay in filing the appeal by the revenue and the delay in filing the cross-objection by the assessee should be condoned. - HELD THAT: - The Tribunal applied the established liberal construction of "sufficient cause" and the principles laid down by higher courts that condonation should advance substantial justice unless delay is shown to be deliberate or mala fide. The revenue explained the 85 day delay as arising from procedural approvals; the assessee explained the 110 day delay by reference to later awareness of the correct legal position and the pure question of law raised. Finding the explanations satisfactory and noting that the cross objection raised a pure question of law that did not require further fact investigation and affected tax liability, the Tribunal exercised its power under the relevant provision to admit both filings and proceeded to decide the matters on merits. [Paras 2]

Delay in filing the appeal and the cross objection is condoned and both are admitted for adjudication.

Omission of clause (i) of section 92BA - effect of repeal/omission on pending proceedings - Specified Domestic Transactions - determination of Arm's Length Price for domestic transactions - reference to Transfer Pricing Officer under section 92CA - Whether omission of clause (i) of section 92BA rendered reference to the TPO and the consequent adjustments to Specified Domestic Transactions invalid, thus requiring deletion of those adjustments. - HELD THAT: - The Tribunal accepted the assessee's contention that clause (i) of section 92BA was omitted by the Finance Act, 2017 and, absent a saving clause, the omission must be construed as if the provision had never existed; consequently, the statutory basis for determining Arm's Length Price in respect of transactions falling under section 40A(2)(b) ceased to exist. Relying on coordinate decisions and the reasoning reproduced from the Karnataka High Court, the Tribunal held that where the legislative omission removes the provision unconditionally, actions predicated on that provision do not survive and orders of the TPO and consequent adjustments based on that now omitted provision are invalid. Applying that principle to the present assessment for AY 2014 15, the Tribunal found the adjustments to the SDTs unsustainable and deleted them. [Paras 3, 5, 9]

Cross objection allowed; adjustments made to SDTs (and corresponding TPO reference/action) are deleted as invalid in view of the omission of clause (i) of section 92BA.

Final Conclusion: The Tribunal condoned the delays and, on the merits, allowed the assessee's cross objection holding that omission of clause (i) of section 92BA removed the statutory foundation for the SDT/ALP adjustments; accordingly the revenue's appeal is dismissed and the adjustments are deleted for AY 2014 15.

Disallowance under clause (i) of Section 40(a) for non-deduction of tax - restriction of disallowance to the chargeable sum - retrospective effect of curative and declaratory provisos preventing disallowance where the payee has declared the relevant income and paid tax - no TDS liability where the chargeable sum is a loss - bank guarantee commission not subject to withholding under section 194H

Disallowance under clause (i) of Section 40(a) for non-deduction of tax - retrospective effect of curative and declaratory provisos preventing disallowance where the payee has declared the relevant income and paid tax - Disallowance of fees paid to Formula One World Championship Ltd. (FOWC) for non-deduction of tax - HELD THAT: - The Tribunal in the assessee's earlier appeals held that no part of the RPC fee paid to FOWC was liable to be disallowed under clause (i) of Section 40(a) because the second proviso to clause (i) (and analogous proviso to clause (ia)) are curative and declaratory and therefore retrospective; where the relevant income has been declared by the payee and tax paid by the payee, no disallowance can be made in the hands of the payer. The AT Delhi bench respectfully followed that decision and, on that basis, rejected Revenue's challenge to the CIT(A)'s restriction/deletion of the disallowance in respect of FOWC. [Paras 6, 7]

Grounds of Revenue in respect of fees paid to FOWC rejected; no disallowance under clause (i) of Section 40(a).

Restriction of disallowance to the chargeable sum - no TDS liability where the chargeable sum is a loss - Disallowance of fees paid to Formula One Management Ltd. (FOM) for non-deduction of tax - HELD THAT: - The CIT(A) examined the assessment of FOM and noted that the chargeable sum attributable to the PE in India resulted in a loss; consequently there was no income chargeable to tax in FOM's assessment and no withholding obligation arose for the payer. The Tribunal followed the CIT(A)'s conclusion that because the chargeable sum was negative, the AO's disallowance could not be sustained and was correctly deleted. [Paras 8, 9]

Grounds of Revenue in respect of fees paid to FOM rejected; disallowance deleted because chargeable sum resulted in loss and no withholding was required.

Bank guarantee commission not subject to withholding under section 194H - Disallowance of bank guarantee commission for non-deduction of tax under section 194H - HELD THAT: - The Tribunal in the assessee's earlier appeal accepted the view that bank guarantee commission does not fall within the Explanation to section 194H and is not subject to withholding; the CIT(A) had followed the decision of the Delhi High Court in CIT v. Living Media India Ltd. The AT Delhi bench respectfully followed that precedent and the Tribunal's earlier order, holding the AO's disallowance unsustainable. [Paras 10, 11]

Grounds of Revenue in respect of bank guarantee commission rejected; no withholding required under section 194H and disallowance deleted.

Final Conclusion: Following earlier Tribunal decisions on the issues, the Appellate Tribunal dismisses the Revenue's appeals and upholds the deletion/restriction of disallowances in respect of fees paid to FOWC and FOM and bank guarantee commission for the assessment years 2012-13, 2013-14 and 2014-15.

Reopening of assessment under section 147/148 based on search and seized statement - violation of principles of natural justice for non-supply of seized statement - addition as unexplained expenditure under section 69/69A - imputing liability to a transferee not privy to earlier sale agreement

Reopening of assessment under section 147/148 based on search and seized statement - violation of principles of natural justice for non-supply of seized statement - Reopening of assessment for A.Y. 2011-12 whether sustainable when based on statement recorded during search and where copy of that statement was not supplied to the assessee - HELD THAT: - The Tribunal found as an undisputed fact that the figure of alleged on-money originated from the statement of Shri N.K. Vora recorded under section 132(4) during search at Sunshine group, and that the assessee had no nexus with the sale agreement dated 23.03.2010 relied upon by the AO. The assessee had specifically requested supply of the statement of Shri N.K. Vora, which the AO did not furnish and had indicated would be provided "after giving proper opportunity of being heard". In this factual matrix the Tribunal held that reopening of assessment for A.Y. 2011-12, initiated on the basis of the seized statement and the search, was not sustainable. The absence of supply of the said statement and the fact that the assessee had not entered into the 2010 agreement meant that the reassessment was founded on incorrect facts and was invalid; consequently the reopening was held void and unsupportable on merits. [Paras 5, 9, 10, 15]

Reopening of assessment for A.Y. 2011-12 quashed as invalid and unsustainable.

Addition as unexplained expenditure under section 69/69A - imputing liability to a transferee not privy to earlier sale agreement - Sustainability of addition of Rs. 1,25,39,000/- as unexplained cash payment (on money) in the hands of the assessee for A.Y. 2011-12 when the assessee purchased the property only in 2012-13 from an intervening transferor - HELD THAT: - The Tribunal recorded that the assessee purchased the office premises by a sale agreement dated 13.08.2012 with M/s. Trincas Agencies & Commerce Pvt. Ltd., and had no transaction or agreement with M/s. Sunshine Housing & Infrastructure Pvt. Ltd. in A.Y. 2011-12. Documentary records-ledger of M/s. Trincas and the assessee's bank statements-showed payment of the consideration through banking channels and that the assessee's purchase consideration exceeded the fair market value. The addition made by invoking unexplained expenditure (the alleged difference between the 23.03.2010 agreement value and market value) was founded on the 2010 agreement between Sunshine and Trincas, to which the assessee was not a party; if any liability arose from that earlier sale it could only be in the name of M/s. Trincas. In view of these facts and the lack of connection between the assessee and the 2010 transaction, the Tribunal held that the addition in the hands of the assessee for A.Y. 2011-12 was unsustainable and deserved deletion. [Paras 11, 12, 13, 14, 15]

Addition of Rs. 1,25,39,000/- as unexplained expenditure in A.Y. 2011-12 deleted; the addition could not be sustained against the assessee.

Final Conclusion: The appeal is allowed: the reopening of assessment for A.Y. 2011-12 is quashed as invalid and the addition of Rs. 1,25,39,000/- as unexplained expenditure in the hands of the assessee is deleted.

Weighted deduction under section 35(2AB) - recognition by Department of Scientific and Industrial Research (DSIR) - eligibility of expenditure incurred prior to date of DSIR approval - reassessment under section 147

Weighted deduction under section 35(2AB) - recognition by Department of Scientific and Industrial Research (DSIR) - eligibility of expenditure incurred prior to date of DSIR approval - Entitlement to weighted deduction under section 35(2AB) for R&D expenditure incurred in the period 1.4.2012 to 31.3.2013 despite DSIR approval being effective from 20.11.2012 - HELD THAT: - The Tribunal examined whether the assessee could claim weighted deduction under section 35(2AB) for the entire expenditure incurred during 1.4.2012 to 31.3.2013 notwithstanding that the DSIR certificate recorded the approval period from 20.11.2012. Relying on the reasoning of the Hon'ble Jurisdictional High Court in CIT v. Sandan Vikas (India) Ltd (335 ITR 117 (Del)) and the approach of the Gujarat High Court, the Tribunal accepted that once the in house R&D facility is approved by DSIR, the statutory scheme contemplates allowance of weighted deduction on expenditure actually incurred for development of the facility and that the cut off date in the DSIR certificate does not restrict the eligibility to expenditure incurred prior to that date. The Tribunal observed that the AO in original assessment had allowed the claim on this basis and that subsequent reassessment restriction by the AO (upholding only expenditure from the DSIR certificate cut off) was not sustainable in view of the cited precedents. Applying these authorities and the facts (existence of DSIR approval and auditor's certification of expenditure), the Tribunal held that the assessee is entitled to claim weighted deduction for the entire expenditure incurred during 1.4.2012 to 31.3.2013. [Paras 9]

Allowed the assessee's claim for deduction under section 35(2AB) for expenditure incurred from 1.4.2012 to 31.3.2013.

Reassessment under section 147 - Admissibility of an additional ground filed by the assessee and its non pressing at hearing - HELD THAT: - An additional ground was filed by the assessee by letter dated 21.9.2022 but, on hearing, the assessee's counsel stated that it was not being pressed. The Tribunal treated that statement as made from the Bar and recorded that no arguments were advanced for admission of the additional ground. Consequently the additional ground was dismissed as not admitted. [Paras 2]

The additional ground was dismissed as not admitted.

Final Conclusion: Following the jurisprudence of the Hon'ble High Courts relied upon, the Tribunal allowed the assessee's claim for weighted deduction under section 35(2AB) for expenditure incurred during 1.4.2012 to 31.3.2013 and set aside the disallowance confirmed in reassessment; the unpressed additional ground was dismissed as not admitted.

Value of statement on oath as evidence - retraction of statement - weight of contemporaneous incriminating material found during survey - treatment of income offered during survey - prohibition on double taxation / duplication of addition

Value of statement on oath as evidence - retraction of statement - weight of contemporaneous incriminating material found during survey - Evidentiary value of the assessee's sworn statement admitting receipt of on-money and the efficacy of his subsequent retraction made after seven months. - HELD THAT: - The Tribunal accepted the finding that the assessee had given a sworn statement during the survey admitting receipt of on-money and had offered an amount for taxation. The subsequent retraction made seven months later was held to be of no value, the court observing that a statement on oath is an important and weighty piece of evidence and that a retraction, to be effective, must be made at the earliest; no supporting material was furnished by the assessee to rebut the original statement. The presence of similar incriminating material and statements from other searched premises was noted as corroborative. On these facts the retraction was rejected. [Paras 9]

Retraction after seven months rejected; the sworn statement and contemporaneous incriminating material retained evidentiary weight.

Treatment of income offered during survey - prohibition on double taxation / duplication of addition - Whether an addition made by the Assessing Officer in respect of the same amount already offered and taxed during the survey could be sustained. - HELD THAT: - The Tribunal found on the assessee's financial statements and affidavit that the amount of Rs. 1,00,00,000/- had been offered as additional income during the survey, credited in the profit and loss account and taxed. The AO's separate addition of the same amount would result in duplication of the same income being taxed twice, which is impermissible. The Tribunal held that the AO erred in making a fresh addition of the identical amount and directed deletion of that addition. [Paras 10]

Addition of the amount already offered and taxed set aside; Assessing Officer directed to delete the duplicate addition.

Final Conclusion: The assessee's appeal is allowed: the retraction of the sworn statement was rejected as belated, but the addition of Rs. 1,00,00,000/- made by the AO was set aside because the same amount had already been offered and taxed during the survey, and the AO was directed to delete that addition.

Addition based solely on Form 26AS entries - Mechanical processing by CPC and allowability of deductions - Requirement of verification before making income enhancement

Addition based solely on Form 26AS entries - Mechanical processing by CPC and allowability of deductions - Requirement of verification before making income enhancement - Deletion of addition/adjustment of Rs. 4,12,540/- made by CPC by comparing Form 26AS entries with return without allowing corresponding expenditure. - HELD THAT: - The Tribunal examined the computation of income and the material on record and found that the CPC's enhancement arose from a mismatch between interest shown in Form No. 26AS and the amounts in the assessee's return. The assessee had disclosed gross interest receipts and claim of net interest (interest paid exceeding interest received) by setting off the difference against business income; bank interest was shown separately under other sources. The Tribunal held that the CPC, being an automated processing system, could not, by mechanical comparison of Form 26AS entries, take into account the allowability of corresponding deductions. The Tribunal further observed that confirmation of the addition by the CIT(A) proceeded on different conjectures rather than examining the factual material and the computation submitted by the assessee. In view of settled practice that an addition cannot be sustained solely on the basis of Form 26AS without verification of facts and allowability of expenditure, the Tribunal allowed the appeal and deleted the addition. [Paras 7, 8]

The addition/adjustment of Rs. 4,12,540/- made by CPC and confirmed by the CIT(A) is deleted and the grounds of appeal are allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2017-18, holding that an enhancement of income based solely on Form 26AS mismatch by automated CPC processing-without verification of the allowability of corresponding deductions-cannot be sustained, and accordingly deleted the addition.

Third party exports under EPCG scheme - condonation of procedural lapse - relaxation of procedural conditions - endorsing EPCG licence details on shipping bills - verification of exports by DGFT - export obligation fulfillment requirements

Relaxation of procedural conditions - third party exports under EPCG scheme - condonation of procedural lapse - Whether benefit of Circular No.7/2002 relaxing procedural lapses could be extended despite non-compliance with condition (v) requiring shipping bills to contain both the names of the third party and the licence holder. - HELD THAT: - The Court examined Circular No.7/2002, which permitted condonation of procedural lapses subject to specified documentary safeguards for third party exports, including condition (v) that the relevant shipping bills contain both the names of the third party(s) and the licence holder. The appellant conceded that the shipping bills did not bear those names and also failed to place the shipping bills on record. The Court held that where the prescribed condition aimed at enabling verification of the exports is not complied with, the regulatory authority did not err in refusing relaxation. The determinative reasoning is that the conditional relaxation in the policy is contingent upon fulfilment of all prescribed safeguards; non-compliance with the shipping-bill endorsement requirement frustrates verification and is fatal to claiming the benefit of the circular. [Paras 11, 12, 14]

Claim for relaxation under Circular No.7/2002 was rightly rejected because condition (v) was not complied with and the shipping bills were not produced to enable verification.

Endorsing EPCG licence details on shipping bills - verification of exports by DGFT - export obligation fulfillment requirements - Whether failure to place shipping bills and to endorse EPCG licence number, date and names on the shipping bills justifies denial of the condonation/relaxation claim. - HELD THAT: - The Court noted that paragraph 5.7.1 of the Handbook of Procedures requires endorsement of EPCG licence number and date on shipping bills presented to discharge export obligation. The appellant admitted non-endorsement and also did not produce shipping bills before the authority. Given that the endorsement and production of shipping bills are integral to the respondents' ability to verify the genuineness of the exports and the linkage to the EPCG licence, the Court found no error in the authority's decision to deny the benefit. The Court explicitly refrained from adjudicating the separate question of timely fulfilment of export obligation since that was not the basis for denial in the impugned order. [Paras 13, 14]

Denial of benefit was justified because required endorsement on, and production of, shipping bills was absent, preventing verification and warranting refusal of relaxation.

Final Conclusion: Writ appeal dismissed; the authority did not err in refusing relaxation under Circular No.7/2002 where the shipping bills did not bear the names and EPCG licence endorsements required by the circular and the shipping bills were not placed for verification.

Power to summon under Section 108 of the Customs Act - Statements recorded under Section 108 as material evidence - Inquiry under Section 108 deemed a judicial proceeding within meaning of sections 193 and 228 IPC - Prima facie satisfaction and investigatory discretion of customs authorities - Seizure of goods pending investigation - Requirement to produce transport documents/invoices under GST law during movement of goods - Delay in asserting rights and its bearing on credibility

Power to summon under Section 108 of the Customs Act - Statements recorded under Section 108 as material evidence - Inquiry under Section 108 deemed a judicial proceeding within meaning of sections 193 and 228 IPC - Validity and legal character of statements recorded by customs under Section 108 and allegation of coercion in obtaining signatures. - HELD THAT: - The Court examined the legal nature of statements recorded under Section 108 and noted that a gazetted customs officer has power to summon persons to give evidence or produce documents and that such inquiry is deemed a judicial proceeding under Sections 193 and 228 IPC. The Court observed that statements recorded under Section 108 are material evidence (citing Naresh J. Sukhawani). On the factual matrix, the petitioners alleged coercion and non-disclosure of contents before obtaining signatures. The Court found no cogent material to accept the coercion allegation; the petitioners delayed raising the objection (statements dated 20.03.2023 but letters only on 07-08.04.2023), and their conduct, together with other suspicious circumstances, did not support a finding of involuntary statements. Consequently, there was no demonstration of breach of the procedure under Section 108 sufficient to invalidate the recorded statements at this stage. [Paras 7, 8]

The Court upheld the legal character of statements recorded under Section 108 and declined to find, on the record before it, that those statements were obtained by coercion.

Seizure of goods pending investigation - Prima facie satisfaction and investigatory discretion of customs authorities - Requirement to produce transport documents/invoices under GST law during movement of goods - Delay in asserting rights and its bearing on credibility - Whether the seized gold should be released to petitioners pendente lite in view of claimed invoices and ownership. - HELD THAT: - The Court considered the totality of circumstances: (i) absence of supporting transport documents or copies of invoices with the persons intercepted; (ii) the proprietor of the seller-dealer stating he sold twenty 100 g bars whereas the seized pieces were of different shapes and weights; (iii) the unusual claim of a new trader supplying large quantity on credit without corroborative ledger/credit documents; and (iv) delay by the 1st petitioner in producing invoices or seeking release (silence for about two weeks, contrary to expectation given the high value). These factors, together with the ongoing nascent investigation, produced prima facie doubt regarding the petitioners' version. Given the investigatory discretion of customs and the unresolved factual disputes, the Court declined to order release of the seized gold and held that the truthfulness of the competing versions is to be determined after completion of investigation and in appropriate proceedings. [Paras 7, 8]

The Court refused to direct release of the seized gold pending completion of investigation and found no merit to grant the writ for release.

Final Conclusion: Writ petition dismissed. The court found no present basis to hold the statements recorded under Section 108 to be coerced or to order release of the seized gold; respondent authorities are directed to proceed with and complete the investigation uninfluenced by the observations in this order. No costs.

Previous sanction for prosecution under the Customs Act - authority to accord sanction under Section 137 of the Customs Act, 1962 - validity of executive notification appointing officers as Commissioner of Customs - power of the Central Government to appoint Customs officers prior to amendment of Section 4(1)

Previous sanction for prosecution under the Customs Act - authority to accord sanction under Section 137 of the Customs Act, 1962 - Legality of the sanction granted for prosecution by the officer holding charge as Commissioner (Central Excise, Customs and Service Tax), Thiruvananthapuram. - HELD THAT: - The petitioners contended that sanction as contemplated by Section 137 can be granted only by the Principal Commissioner of Customs or Commissioner of Customs and that the officer who accorded sanction in this case lacked statutory power. The Court examined the notification dated 07.03.2002 and the statutory scheme governing appointment and authorisation of officers. It held that the notification appointing the Commissioner of Central Excise to be the Commissioner of Customs within specified jurisdiction was valid, and that the officer officiating as Commissioner of Customs could validly discharge the functions under Section 137. The contention that only the Central Board of Indirect Taxes and Customs could authorise such appointments was rejected on the basis that prior to the amendment of Section 4(1) on 11.05.2002 the Central Government had the authority to appoint officers of Customs. On that basis the Court declined to prima facie accept the challenge to the validity of the sanction, noting that the petitioners remain entitled to raise the issue as a defence at trial. [Paras 4, 5, 6, 7, 8]

The sanction accorded by the officer officiating as Commissioner of Customs is not prima facie illegal and the challenge to it is rejected.

Validity of executive notification appointing officers as Commissioner of Customs - power of the Central Government to appoint Customs officers prior to amendment of Section 4(1) - Validity of the Central Government notification dated 07.03.2002 appointing the Commissioner of Central Excise to be Commissioner of Customs and its effect on competence to grant sanction. - HELD THAT: - The Court considered the scope of Section 4(2) and the temporal legislative scheme. It observed that Section 4(2) relates to authorisation by the Board for appointments below certain ranks, whereas the 07.03.2002 notification classified officers and appointed Commissioner of Central Excise to perform duties as Commissioner of Customs within specified jurisdiction. Since, before the amendment of Section 4(1) on 11.05.2002, the Central Government had authority to appoint Customs officers, the notification is valid and confers the necessary authority on the officiating Commissioner to accord sanction under Section 137. [Paras 6, 7]

The notification dated 07.03.2002 is valid and authorises the Commissioner of Central Excise (officiating as Commissioner of Customs) to grant sanction under Section 137.

Final Conclusion: The revision petition is dismissed; the impugned order refusing to set aside the sanction stands, subject to the petitioners' liberty to raise their objections to the validity of the sanction as a defence during trial.

Use of DEPB scrips for payment of Clean Energy Cess - Inapplicability of CENVAT Credit Rules to restrict DEPB utilisation - Refund of Clean Energy Cess paid in cash where DEPB was also debited - Power of Commissioner (Appeals) to remand for fresh consideration

Use of DEPB scrips for payment of Clean Energy Cess - Inapplicability of CENVAT Credit Rules to restrict DEPB utilisation - Validity of utilising DEPB scrips to discharge the Clean Energy Cess component of duty - HELD THAT: - The Tribunal held that Clean Energy Cess, when levied as additional duty of customs under section 3(1) of the Customs Tariff Act, could be discharged by debit to DEPB scrips and that restrictions in the CENVAT Credit Rules and the TRU instruction disallowing use of CENVAT credit for Clean Energy Cess do not operate to prohibit utilisation of DEPB scrips. The reasoning was that the governmental restriction addressed CENVAT credit (applicable to excise/CENVAT regime) and did not extend to payment through DEPB under the Customs scheme; had the intention been to prohibit DEPB utilisation, such restriction would have been incorporated in the DEPB notification governing the scheme. On this basis the Tribunal found no merit in Revenue's challenge and dismissed the appeals filed by Revenue on this point (appeals at Sl. Nos. 1 and 5). [Paras 2]

Appeals by Revenue challenging utilisation of DEPB scrips for payment of Clean Energy Cess dismissed; DEPB utilisation held permissible and CENVAT Credit Rules do not prohibit DEPB payment.

Refund of Clean Energy Cess paid in cash where DEPB was also debited - Entitlement to refund of cash paid where Clean Energy Cess was also debited against DEPB and verification required - HELD THAT: - Welspun Steel Ltd claimed refund of the Clean Energy Cess paid in cash in addition to amounts debited through DEPB scrips, asserting that utilisation by DEPB had been resisted by Revenue. The Commissioner (Appeals) had remanded the matter to the adjudicating authority for verification of facts rather than deciding on merits. The Tribunal observed that the Commissioner (Appeals) had not considered the refund claim on merits and therefore set aside the remand insofar as it was not a decision on merits, and remitted the matter to the Commissioner (Appeals) to decide the refund claim on merits after proper verification. The Tribunal directed expedition in view of the age of the matter. [Paras 2, 3, 5]

Welspun's appeal allowed to the extent that the matter is remitted to the Commissioner (Appeals) to decide the refund claim on merits within three months.

Power of Commissioner (Appeals) to remand for fresh consideration - Competence of Commissioner (Appeals) to remand matters to the original authority - HELD THAT: - Revenue contested the Commissioner (Appeals)'s power to remand. The Tribunal reviewed precedent and acknowledged jurisprudence recognising that the Commissioner (Appeals) retains power to remit matters for fresh consideration. Notwithstanding that recognition, the Tribunal found the particular remand in this case improper because the Commissioner (Appeals) had not decided the matter on merits and had remitted without appropriate determination; accordingly the Tribunal set aside the order to the extent it failed to decide on merits and directed remittal for adjudication on merits. [Paras 3]

While the appellate authority has power to remand, the Commissioner (Appeals)'s remand in this case was set aside as the issue required adjudication on merits and is remitted for fresh decision.

Final Conclusion: Revenue appeals challenging the use of DEPB scrips for payment of Clean Energy Cess are dismissed; Welspun's claim for refund of cash paid (in addition to DEPB debits) is remitted to the Commissioner (Appeals) for decision on merits; cross objections disposed of and Commissioner (Appeals) directed to decide the refund within three months.

Natural justice - power of Commissioner (Appeals) under Section 128A(3) - remand for fresh adjudication - classification of imported goods under tariff headings

Natural justice - power of Commissioner (Appeals) under Section 128A(3) - Change of tariff classification by the Commissioner (Appeals) without affording the appellant an opportunity and without conducting further inquiry was improper. - HELD THAT: - The Commissioner (Appeals) may, under Section 128A(3), after making such further inquiry as may be necessary, confirm, modify or annul the decision or order appealed against or, in specified cases, refer the matter back for fresh adjudication. The statutory mandate requires a just and proper order founded on further inquiry and, where proposed action adversely affects the appellant (including enhancement or reassessment), a reasonable opportunity to show cause. In the present case the Commissioner (Appeals) changed the classification to a different tariff heading without affording the appellants an opportunity or conducting the requisite inquiry, thereby breaching the requirements of natural justice and the procedural safeguard embedded in Section 128A(3). [Paras 3, 4]

The change of heading by the Commissioner (Appeals) without affording opportunity and making further inquiry was held improper.

Remand for fresh adjudication - classification of imported goods under tariff headings - Whether the matter should be remanded for fresh consideration of the correct classification with opportunity to the appellants. - HELD THAT: - Given the procedural deficiency in the appellate order, and the appellants' acceptance of remand subject to being given opportunity to address the correct classification (including the third heading adopted by the Commissioner (Appeals)), the Tribunal exercised the remedial power to remit the matter for fresh adjudication. The remand is directed to enable a proper inquiry and to afford the appellants a fair opportunity to be heard so that classification is settled on merits in accordance with law. [Paras 5, 7]

Matter remanded for fresh adjudication to determine the correct tariff classification after conducting proper inquiry and affording the appellant opportunity.

Final Conclusion: Appeal allowed by way of remand: the appellate order altering tariff classification without affording opportunity was set aside and the matter remitted for fresh adjudication to determine correct classification after conducting necessary inquiry and observing principles of natural justice.

Classification of imported goods as High Speed Diesel versus mixed hydrocarbon oil - admissibility and sufficiency of partial laboratory test reports - application of IS 1460 specifications in classification - standard of proof in departmental/quasi criminal revenue inquiries (not required to be mathematical or beyond reasonable doubt)

Classification of imported goods as High Speed Diesel versus mixed hydrocarbon oil - application of IS 1460 specifications in classification - Imported goods were correctly held to be High Speed Diesel and not mixed hydrocarbon oil. - HELD THAT: - The Tribunal considered the chemical examiner's report describing the sample as a mineral hydrocarbon liquid with specified density and distillation range and noted that the Department treated the goods as High Speed Diesel (HSD) while the appellant claimed classification under mixed hydrocarbon oil. Applying the reasoning in the Gujarat High Court decision reproduced in the paper book, the Bench accepted that the analyst's findings, not seriously challenged by any contrary report from the appellant, support classification as HSD. The Court rejected the appellant's contention and upheld the Department's conclusion on classification. [Paras 2, 4]

Appeal dismissed insofar as classification of the imported goods; the goods are held to be High Speed Diesel.

Admissibility and sufficiency of partial laboratory test reports - standard of proof in departmental/quasi criminal revenue inquiries (not required to be mathematical or beyond reasonable doubt) - A laboratory report testing a subset of prescribed parameters (10 out of 21) may be sufficient to support the Department's conclusion that the sample is High Speed Diesel; the Department is not required to establish its case with mathematical accuracy or beyond reasonable doubt. - HELD THAT: - Relying on the Gujarat High Court's observations (paras reproduced at length), the Bench held that if the tested parameters indicate the sample to be HSD, the report cannot be discarded merely because certain other tests were not undertaken. The Tribunal observed that the CRCL's report included calculation of derived parameters (such as Cetane Index) from tested data, and in the absence of any reliable contrary report by the appellant, the partial testing sufficed to support the Department's finding. The Court therefore accepted the analyst's report as adequate proof for the purpose of classification. [Paras 3]

Partial laboratory test report (10/21 parameters with calculated derived parameters) held admissible and sufficient to sustain the Department's finding.

Final Conclusion: The Tribunal, adopting the High Court's approach that the Department need not prove its case with mathematical exactitude, accepts the chemical examiner's report and dismisses the appellant's appeal.

Professional misconduct - jurisdiction of the National Financial Reporting Authority (retrospective jurisdiction) - failure to comply with Standards on Auditing (including SA 315, SA 230, SA 240, SA 500, SA 550, SA 570) - invalid/void ab initio audit opinion due to incomplete branch audits - non-consolidation in violation of Accounting Standard (AS) 21 - insufficient audit evidence and baseless opinion on Internal Financial Controls over Financial Reporting - failure to consider non-compliance with laws and regulations (NHB directions) in audit - inadequate assessment of Risk of Material Misstatement (RoMM) - sanctions under Section 132(4) of the Companies Act, 2013 (monetary penalty and debarment)

Jurisdiction of the National Financial Reporting Authority (retrospective jurisdiction) - NFRA has jurisdiction to investigate and decide matters of professional or other misconduct, including misconduct committed prior to its commencement. - HELD THAT: - After examining statutory provisions and authorities, NFRA held that Section 132(4) confers power to investigate 'matters of professional or other misconduct' committed by members/firm of chartered accountants and that the proviso bars other institutes from proceeding where NFRA has initiated investigation. The Authority concluded that these words include misconduct committed before NFRA's commencement and that such jurisdiction does not create a new offence but designates the forum for adjudication; retrospective application is justified by necessary implication and does not impair any vested right because no right to commit misconduct exists. Accordingly NFRA's exclusive jurisdiction over the present matters was upheld. [Paras 28, 29, 30, 31, 32]

NFRA has the requisite and exclusive jurisdiction to investigate and decide the present allegations of professional misconduct, including conduct predating NFRA's formation.

Invalid/void ab initio audit opinion due to incomplete branch audits - failure to comply with Standards on Auditing - The Engagement Partner relied on reports of illegally appointed branch auditors and failed to conduct or document branch audits as required, rendering the auditor's reports on the standalone and consolidated financial statements void ab initio. - HELD THAT: - The Audit File and audit reports show explicit references to branch auditors and reliance on their reports despite there being no legally appointed branch auditors under section 143(8) and section 139; C&S was the sole statutory auditor. The EP documented appointment letters, branch auditor reports and confirmations addressed to C&S and recorded reliance in audit planning and Audit Committee presentations. There is no evidence that C&S itself audited branches or tested branch controls; sampling and branch procedures were inadequately documented and in many instances absent. NFRA examined branch-auditor work and found non-compliance with SAS. Given the absence of required branch audits and reliance on illegally appointed auditors, the Independent Auditor's opinions are unsupported and void ab initio. [Paras 40, 41, 42, 43, 44]

The EP's reports that referred to and relied upon branch auditor reports were false and invalid; in the absence of proper branch audits the audit opinions for FY 2017-18 are void ab initio.

Non-consolidation in violation of Accounting Standard (AS) 21 - Exclusion of DHFL Investments Limited (DIL), a wholly owned subsidiary, from consolidation was not justified under AS 21 and resulted in material misstatement of the consolidated financial statements. - HELD THAT: - Facts show DHFL held 100% of DIL's equity and therefore control as defined in AS 21. The exception for temporary control pending disposal in the 'near future' (Paragraph 11) was not supported: the conversion of CCDs was after 100 months (well beyond the ordinarily accepted near-future period of 12 months) and there was no contemporaneous evidence of intention at acquisition to dispose in the near future. The tripartite arrangements and pledging of CCDs to raise external borrowings meant the substance produced increased liabilities for DHFL. The expert opinion relied on by management/EP was inadequately supported and not treated per SA 500. NFRA found the CFS materially misstated and the EP failed to exercise professional skepticism and obtain sufficient appropriate evidence. [Paras 45, 46, 47, 48, 49]

The exclusion of DIL from consolidation contravened AS 21; the consolidated financial statements for FY 2017-18 are materially misstated and the EP failed to report the misstatement.

Failure to consider non-compliance with laws and regulations (NHB directions) - failure to comply with SA 250 - The EP failed to obtain and document sufficient appropriate audit evidence regarding suspected non-compliance with NHB directions and did not perform the procedures required by SA 250 to evaluate material impact on the financial statements. - HELD THAT: - NHB inspection reports documented suspected violations (e.g., misclassification/restructuring of loans, short provisioning) that could materially affect Net Owned Funds and disclosures. SA 250 requires the auditor to identify laws/regulations with a direct effect, perform specified procedures, and respond to suspected non-compliance. The Audit File lacked evidence of such procedures, the EP accepted management explanations without challenge, and did not assess materiality or perform follow-up procedures. Consequently, shortcomings (including incorrect asset classification and potential short provisioning) were not addressed and the auditor's report is unreliable in this respect. [Paras 50, 51, 52, 53]

Charges that the EP failed to consider and respond to suspected non-compliance with NHB directions and thereby violated SA 250 are proved.

Failure to obtain sufficient evidence on going concern (SA 570) - going concern assessment - The EP did not obtain sufficient appropriate audit evidence or perform required procedures under SA 570 and related standards; the going concern assessment was inadequately supported. - HELD THAT: - Audit working papers and replies lacked documentation of discussions with management, analysis of forecasts, evaluation of liquidity mismatches and regulatory breaches (including significant ALM gaps and cumulative liquidity gap far exceeding prudential limits), and consideration of indicators that could cast significant doubt. SA 570 mandates inquiry, evaluation of management's assessment, and documentation; these steps were either absent or perfunctory. The EP's conclusion that the going concern basis was appropriate was unsupported by evidence and did not satisfy the standard's requirements. [Paras 54, 55, 56, 57, 58]

The EP failed to comply with SA 570; the going concern evaluation was inadequate and charges in this respect are proved.

Inadequate assessment of Risk of Material Misstatement (RoMM) under SA 315 and SA 230 - insufficient audit documentation - The EP failed to identify, assess, classify and document the RoMM at financial statement and assertion levels as required by SA 315 and SA 230, and consequently failed to design appropriate responses. - HELD THAT: - Mandatory risk assessment procedures, mapping of risks to account balances/assertions, documentation of significant matters and professional judgments, and evidence of inquiries and analytical procedures were missing or cryptic. Workpapers contained templates and 'examples' rather than entity-specific risk assessments; there was no adequate mapping of significant risks to assertions, no rebuttal or assessment of fraud presumptions under SA 240, and limited or no evidence of continuous reassessment. As a result, further audit procedures were not appropriately designed or performed and the audit failed to reduce RoMM to an acceptably low level. [Paras 63, 64, 65, 66, 67]

The EP's risk assessment and documentation failed to meet SA 315/SA 230 requirements and the related charges are established.

Insufficient audit evidence and baseless opinion on Internal Financial Controls over Financial Reporting - report under Section 143(3)(i) of the Act - The EP did not obtain sufficient appropriate evidence to express an opinion on ICFR; the ICFR opinion issued under Section 143(3)(i) is baseless. - HELD THAT: - Guidance Note and relevant SAs require understanding entity-level and significant controls, transaction flows, walkthroughs and tests of design and operating effectiveness; the Audit File largely reproduced management RCMs without independent testing, lacked evidence of effective walkthroughs, did not test operating effectiveness for many controls, and failed to consider management override and IT controls adequately. The EP's control testing was superficial, frequently pending, and relied on management documentation, rendering the ICFR opinion unsupported. [Paras 80, 81, 82, 83]

The EP failed to perform necessary procedures for ICFR audit; the opinion under Section 143(3)(i) is unsupported and the charge stands proved.

Failure to verify Related Party Transactions (SA 550) and improper CARO reporting - The EP failed to obtain sufficient appropriate audit evidence regarding related party relationships and transactions, did not ensure completeness or arm's-length testing, and issued unsupported reporting under CARO 2016. - HELD THAT: - While the EP relied on director declarations (Form MBP-1), audit committee minutes and certain ledger extracts, the Audit File lacked contemporaneous declarations for FY 2017-18, had dated or inapplicable declarations, and did not document procedures required by SA 550 (identification, completeness testing, understanding controls, substantive validation of purposes and arm's-length nature). Approval evidence was partial and inconsistent with transaction amounts disclosed. There was inadequate evaluation of valuation/expert evidence and absence of required corroborative procedures, making the CARO and audit conclusions on RPTs unreliable. [Paras 84, 85, 86]

The EP's procedures on related party transactions were insufficient and the related charges are proved.

Professional misconduct - sanctions under Section 132(4) of the Companies Act, 2013 - On the proven departures from standards and law, the EP committed professional misconduct and NFRA imposed penalties: monetary penalty and debarment. - HELD THAT: - NFRA found multiple proved instances of professional misconduct as defined under Section 132(4) read with relevant provisions of the Chartered Accountants Act and Second Schedule clauses (failure to disclose material facts, failure to report material misstatements, gross negligence, failure to obtain sufficient information, failure to draw attention to departures from accepted audit procedures). Considering proportionality, precedent and the NCLAT guidance limiting retrospective penalty quantum, NFRA imposed a monetary penalty and a period of debarment to serve deterrence and protect public interest. [Paras 95, 96, 97, 98, 99]

The charges of professional misconduct are proved; NFRA imposed a monetary penalty of Rs. Five Lakh and debarred the EP from appointment as auditor/internal auditor or undertaking any audit for ten years, effective after 30 days from issuance of the order.

Final Conclusion: NFRA, having upheld its jurisdiction, found that CA Jignesh Mehta materially breached multiple mandatory Standards on Auditing and accounting requirements in the statutory audit of DHFL for FY 2017-18 (including failures in branch audits, consolidation under AS 21, consideration of NHB directions, going concern assessment, RoMM and ICFR), concluded that professional misconduct was proved, and ordered a monetary penalty of Rs. Five Lakh and debarment for ten years, the order to take effect 30 days after issuance.

Operational debt - operational creditor - barter agreement - payment means money - locus to appeal under Section 61 of the Code - moratorium under the I&B Code - non-maintainability of Section 9 application

Locus to appeal under Section 61 of the Code - moratorium under the I&B Code - Real Estate Regulatory Authority has locus to file an appeal under Section 61 of the I&B Code against admission of a Section 9 application. - HELD THAT: - RERA is a statutory authority constituted to protect the interests of allottees and had taken multiple regulatory actions and orders against the Corporate Debtor prior to the Section 9 petition. The consequence of admission and the attendant moratorium would halt RERA's enforcement proceedings under the RERA Act; this direct effect establishes RERA as an aggrieved person within the meaning of Section 61. The Tribunal distinguished precedents where other statutory bodies or regulators had no direct enforcement interest against the corporate debtor, noting that locus is a question distinct from the merits of the appeal. [Paras 12, 18, 25]

RERA held to have locus to file Company Appeal (AT) (Ins.) No. 1172-1173 of 2022.

Locus to appeal under Section 61 of the Code - Aquacity Consumer and Societies Welfare Society (association of homebuyers) has locus to file an appeal under Section 61 of the I&B Code. - HELD THAT: - The association represents homebuyers who obtained a favourable consumer adjudication and whose ability to secure refunds or enforcement would be directly affected by initiation of CIRP and the moratorium. The Tribunal recorded that the association had active proceedings (including a Supreme Court order altering the interest direction) and that it was not contended by respondents that the association lacked locus. [Paras 27, 28]

Aquacity Consumer and Societies Welfare Society held to have locus to file Company Appeal (AT) (Ins.) No. 1321 of 2022.

Operational debt - operational creditor - barter agreement - payment means money - non-maintainability of Section 9 application - The transactions under the Barter Agreements did not give rise to an operational debt payable in money such as would permit initiation of a Section 9 application by the Operational Creditor. - HELD THAT: - The I&B Code defines an operational debt as a 'claim' entailing a right to payment. The Barter Agreements provided for consideration partly in cash and partly by transfer/allotment of units (barter component). The Tribunal applied the principle that 'payment' in the Code denotes monetary payment (as explained by the Supreme Court), and held that non-delivery of units under the barter component cannot be converted into a claim for payment of money under Section 8/9. Consequently, there was no unpaid operational debt in money due to the Operational Creditor that would justify a demand notice and initiation of CIRP under Section 9. [Paras 41, 42, 49]

No operational debt in money was owed to the Operational Creditor on the basis of the Barter Agreements; the Section 9 application was non maintainable.

Final Conclusion: Both appeals allowed. The admission order dated 05.08.2022 under Section 9 is set aside on the ground that no operational debt in money arose from the Barter Agreements; consequential IAs disposed of and parties to bear their own costs.

Limitation for filing appeal - condonation of delay - merger of orders - effect of subsequent clarification on limitation - review/rectification and its effect on limitation

Limitation for filing appeal - condonation of delay - Whether the application for condonation of delay in filing the appeal against the order dated 2nd May, 2023 should be allowed. - HELD THAT: - The Tribunal found that the limitation for filing an appeal against the order dated 2nd May, 2023 commences from the date of passing of that order, as the appellant was present and heard on 2nd May, 2023 and the order was then pronounced. Time spent pursuing a subsequent application does not automatically suspend the running of limitation unless the subsequent order itself vacates or modifies the earlier order in a manner that renders the subsequent order the operative order for appeal. The appellant's contention that the period during which I.A. No. 2679 of 2023 was pending should be excluded and limitation counted from the date of the subsequent order was rejected. The Tribunal held that it had jurisdiction to condone only a limited period (fifteen days) and, on the facts, the appeal was filed beyond the permissible condonation period. (See paragraphs 7 and 12.) [Paras 7, 12]

Delay condonation application dismissed and memo of appeal rejected.

Merger of orders - effect of subsequent clarification on limitation - review/rectification and its effect on limitation - Whether the subsequent order dated 17th August, 2023 operates to merge, vacate or modify the earlier order dated 2nd May, 2023 for purposes of limitation. - HELD THAT: - The Tribunal examined the subsequent order dated 17th August, 2023 and held that it merely clarified that Respondent No. 6 had filed a reply earlier and that this clarification would form part of the May 2, 2023 order. The later order did not vacate, reverse or modify the operative effect of the earlier order so as to render the subsequent order the effective order for appeal. The Tribunal distinguished the present facts from cases (and paragraphs of DSR Steel) where a review/rectification results in vacation and re pronouncement or modification of the earlier order; paragraph 25.3 of DSR Steel was held applicable, confirming that dismissal or mere clarification of a subsequent application does not merge the original order for limitation purposes. Consequently, there was no merger and the original order remained appealable from its date. (See paragraphs 8, 9, 10 and 11.) [Paras 8, 9, 10, 11]

The subsequent order dated 17th August, 2023 did not merge with or revive the May 2, 2023 order for limitation; the original order's limitation period governs.

Final Conclusion: The appeal against the order dated 2nd May, 2023 was filed out of time; the subsequent clarification dated 17th August, 2023 did not merge with or modify the earlier order for limitation purposes, the application for condonation of delay is dismissed and the memo of appeal is rejected.

Interest on refund - refund under Section 11B of the Central Excise Act - statutory rate of interest - tribunal's power constrained by statute - entitlement to refund governed by statute

Interest on refund - statutory rate of interest - refund under Section 11B of the Central Excise Act - Whether interest beyond the rate and date prescribed by statutory provisions can be granted on refund of amounts deposited during investigation. - HELD THAT: - The Tribunal held that entitlement to refund and the incidence and rate of interest thereon are governed by the statutory scheme. Reliance placed by the appellants on earlier Tribunal orders allowing interest beyond statutory provision was held not to be tenable in view of recent decisions of the Apex Court emphasizing that where a statute prescribes a rate or date for interest, Courts and Tribunals cannot award interest beyond those statutory provisions. The decision referred to the Apex Court's reasoning in Cosmo Films Limited and related authorities to conclude that the tribunal cannot traverse beyond the statutory provisions regarding interest for refunds under the Central Excise Act.

Appeal rejected to the extent of claim for interest beyond the statutory provisions; interest must follow the Central Excise Act/notification.

Tribunal's power constrained by statute - entitlement to refund governed by statute - Whether the Tribunal can alter the date from which interest on refund is payable or the rate at which interest is to be computed. - HELD THAT: - The Tribunal found that it cannot intervene to change the date of commencement or the rate of interest applicable to refunds under the Central Excise Act, 1944. The reasoning emphasises that a claim to refund is statutory and not a constitutional entitlement; consequently, judicial or quasi-judicial bodies must apply the statutory scheme and cannot substitute their own rates or commencement dates. The Bench distinguished earlier authority relied upon by the appellants (Sandvik Asia Ltd. ) on its facts and relied on the Apex Court's exposition in Cosmo Films Limited and related decisions to uphold the impugned order refusing interest beyond statutory prescription.

Tribunal will not direct a different date or a higher rate for payment of interest; impugned order refusing such relief is upheld.

Final Conclusion: The appeal is dismissed; interest on the refund deposited during investigation must be governed and limited by the statutory provisions under the Central Excise Act and the applicable notification, and the Tribunal cannot award interest beyond or substitute a different date/rate than that prescribed by law.

Import of service - reverse charge mechanism - place of provision rules - exemption under Notification No.25/2012-ST (Health Care Services) - pure agent - service provider versus service recipient - extended period of limitation

Import of service - reverse charge mechanism - service provider versus service recipient - pure agent - exemption under Notification No.25/2012-ST (Health Care Services) - Whether the fees collected by the appellant (inclusive of US$30 remitted to Bestinet) for biometric registration constituted import of service liable to Service Tax on reverse charge basis. - HELD THAT: - The Tribunal examined the agreement and the invoicing practice and found that Bestinet was the developer and owner of the FWCMS and that the appellant acted as Bestinet's collaborating Medical Centre using the remote system provided by Bestinet. The appellant performed registration on behalf of Bestinet and collected the US$30 fee which was paid to Bestinet; there was no separate consideration retained by the appellant for biometric registration and the invoices did not show any amount over and above the US$30 for that service. The appellant therefore acted as an agent/pure agent in collecting the biometric registration fee on behalf of Bestinet and the ultimate service recipients were the prospective foreign workers. The medical/diagnostic services charged separately were held to be exempt under Notification No.25/2012-ST and were not part of the taxable import-of-service claim. In view of these findings, the demand of Service Tax computed on the US$30 collections under reverse charge could not be sustained and the impugned demand was set aside. [Paras 12, 14]

The appellant acted as agent/pure agent for Bestinet and the demand of Service Tax under reverse charge on the biometric registration fee is unsustainable; the impugned demand is set aside and the appeal is allowed on merits.

Extended period of limitation - Whether invocation of the extended period under Section 73(1) was maintainable in the facts of the case. - HELD THAT: - The Tribunal observed that since the appeal succeeds on merits and the substantive demand has been set aside, there was no need to examine or decide the question of invoking the extended period of limitation. The question of extended period was therefore not adjudicated upon. [Paras 14]

Not adjudicated as the appeal succeeds on merits; the Tribunal did not decide the maintainability of invocation of extended period.

Final Conclusion: The appeal is allowed on merits; the impugned order is set aside and the demand of Service Tax in respect of the biometric registration fees collected as agent for the foreign service provider cannot be sustained.

Cenvat credit on inputs/capital goods used in construction of immovable capital assets - eligibility of inputs such as steel and cement as inputs for taxable services - chargeability of interest under Rule 14 of CCR in respect of credit taken and later reversed prior to amendment - setting aside of penalties in exercise of adjudicatory discretion

Cenvat credit on inputs/capital goods used in construction of immovable capital assets - eligibility of inputs such as steel and cement as inputs for taxable services - Cenvat credit claimed on MS items (angles, channels, beams etc.) used in port construction was allowable. - HELD THAT: - The Tribunal held that the question was no longer res integra and followed High Court authorities which accepted that inputs like cement and steel used in construction for ports or for warehouses providing taxable services are eligible for Cenvat credit. The Bench referred to the decisions cited and noted that earlier contrary pronouncements by a Larger Bench were subsequently reversed by a High Court, leading to the conclusion that credit on such inputs/capital goods is admissible under the facts presented. [Paras 4, 5]

Credit of Rs.77,21,700 taken on MS items is allowed in favour of the appellant.

Chargeability of interest under Rule 14 of CCR in respect of credit taken and later reversed prior to amendment - retrospectivity of amendments to Rule 14 - Interest under Rule 14 of CCR was rightly charged on the Cenvat credit taken and reversed prior to the 2012 amendment. - HELD THAT: - The Tribunal examined competing authorities, including the Apex Court's decision in Ind swift Laboratories, and observed that the period in question predates the 17.03.2012 amendment to Rule 14 which made interest chargeable only on credit taken and utilized. As there was no indication that the amendment was to operate retrospectively, the Tribunal upheld the levy of interest for the period prior to amendment. [Paras 6, 7]

Charging of interest of Rs.6,59,207 (in respect of the reversed credit) is sustained.

Setting aside of penalties in exercise of adjudicatory discretion - Penalties imposed were set aside. - HELD THAT: - Having allowed the claim of Cenvat credit on the principal issue and having upheld interest only, the Tribunal, in the facts and circumstances of the case, found it appropriate to relieve the appellant of the penalties that had been imposed. [Paras 8]

All penalties imposed are set aside.

Final Conclusion: Appeal allowed in part: credit on MS items used in construction upheld; interest charged for the pre amendment period sustained; penalties set aside.

Taxability of educational services as Commercial Training and Coaching Centre services - negative list exclusion for education leading to qualification recognized by law - recognition of degree conferred by a university constituted by State Act as "recognized by law" - classification of arrangements with learning centres as franchise services - extended period of limitation for suppression and penalty under Section 78 for wilful suppression

Taxability of educational services as Commercial Training and Coaching Centre services - recognition of degree conferred by a university constituted by State Act as "recognized by law" - Services provided by the appellant in conducting distance education programmes of PTU are not taxable as Commercial Training and Coaching Centre services for the period 01.10.2011 to 31.03.2015. - HELD THAT: - The Tribunal examined the scheme of the Distance Education Programme operated by PTU and the legal position that degrees conferred by a university established under a State Act are qualifications "recognized by law." On the material (including the MOU and PTU's authorisations) the courses conducted at the appellant's centre led to the award of degrees/diplomas by PTU. Consequently, such educational activity falls outside the definition of commercial training/coaching as it results in a qualification recognized by law and thus is not taxable under the category of Commercial Training and Coaching Centre Services for the relevant period. The Tribunal further held that the impugned conclusion to the contrary was inconsistent with this legal position and with prior tribunal decisions considering similar PTU arrangements.

Demand insofar as it treats the appellant's activity as taxable Commercial Training and Coaching Centre services is set aside.

Negative list exclusion for education leading to qualification recognized by law - After introduction of the negative list (post 01.07.2012), the appellant's services are excluded from taxation as education that is part of a curriculum leading to a qualification recognized by law. - HELD THAT: - The Tribunal applied the negative-list concept and the Education Guide explaining that educational services which are delivered as part of a curriculum leading to a qualification recognized by law are in the negative list and hence not taxable. Since the PTU-awarded degrees are recognized by law, the services provided by the appellant in conducting PTU distance education courses fall within this negative-list exclusion and cannot be subjected to service tax after the amendment introducing the negative list.

Post-01.07.2012 levy cannot be sustained; the impugned tax demand on this basis is set aside.

Classification of arrangements with learning centres as franchise services - The characterisation of the arrangement between PTU, regional centres and learning centres may satisfy the ingredients of a franchise under the Finance Act, and prior decisions treating similar arrangements as franchise services preclude treating the same receipts as taxable again under the coaching service head. - HELD THAT: - The Tribunal noted earlier decisions-examining the same or similar MOU-that found the learning centres acted with representational rights of the university and that the relationship possessed the elements of a franchise as defined in the statute. Allowing classification as coaching services in the present facts would amount to double taxation where earlier findings held the arrangement taxable (if at all) under the franchise rubric. The Tribunal observed that the impugned order's attempt to classify the activity as commercial coaching was thus contrary to such reasoning and authorities.

Classification of the activity as coaching service is not sustainable in view of the contractual structure and prior decisions; the impugned classification is set aside.

Extended period of limitation for suppression and penalty under Section 78 for wilful suppression - Extended period of limitation and penalty under Section 78 for wilful suppression are not invocable against the appellant. - HELD THAT: - The Tribunal found no material evidence of a positive act of wilful suppression or deliberate withholding of information by the appellant. The appellant had widespread accreditation and publicly advertised its distance education programme and had entered into numerous MOUs; mere non-registration or non-filing of returns, or the bald allegations in the show cause notice, do not establish the requisite wilful suppression. Reliance was placed on Supreme Court precedents requiring a positive act for invoking extended limitation and the imposition of penalties for wilful suppression. On that basis, the Tribunal rejected the invocation of the extended period and held that penalty under Section 78 was not imposable.

Extended period and Section 78 penalty cannot be sustained and are set aside.

Penalties under Sections 77(1) and 77(2) - Penalties imposed under Sections 77(1) and 77(2) are not sustainable in view of the Tribunal's acceptance that the activity is not taxable under the coaching service head and absence of wilful suppression. - HELD THAT: - Given the Tribunal's conclusions that the activity was not taxable as commercial coaching (and was excluded under the negative list) and that there was no wilful suppression warranting extended limitation or punitive treatment, the basis for sustaining penalties under Sections 77(1) and 77(2) fails. The impugned imposition of such penalties followed from the liability and suppression findings which have been negatived.

Penalties under Sections 77(1) and 77(2) as confirmed in the impugned orders are set aside.

Final Conclusion: The appeal is allowed. The demand and penalties confirmed by the authorities - treating the appellant's conduct in running PTU distance education programmes as taxable Commercial Training and Coaching Centre services for 01.10.2011 to 31.03.2015, and imposing extended-period liability and penalties - are set aside, with consequential relief to the appellant.

Cum-duty price - clandestine removals - recomputation of duty excluding duty element - precedential consistency between Maruti Udyog, Amrit Agro and Dugar Tetenal - remand for recomputation of duty, interest and penalty

Cum-duty price - clandestine removals - recomputation of duty excluding duty element - Whether the appellant was entitled to benefit of cum-duty price given that services were rendered without registration or filing of returns (clandestine removals) and whether the Commissioner (Appeals) erred in denying that benefit. - HELD THAT: - The Tribunal examined the competing precedents and factual matrix and concluded that where goods or services are clandestinely removed or supplied without registration or invoicing, and the seller has not separately charged or intended to charge duty, the sale/consideration is to be treated as inclusive of duty (cum-duty price) and the duty element must be excluded when recomputing assessable value. The Court distinguished the factual domain of Amrit Agro (a classification change where a previously available exemption produced effectively a 'nil' duty and the question whether that 'nil' rate should be treated as duty in recomputation) from the present facts of clandestine supplies; it found no conflict between Maruti Udyog, Amrit Agro and Dugar Tetenal and held that the Commissioner (Appeals) wrongly applied Amrit Agro to deny cum-duty benefit in the instant circumstances. Accordingly, the matter requires recomputation of duty allowing cum-duty benefit, with consequential reworking of interest and penalty. [Paras 4, 5]

Commissioner (Appeals) was directed to rework the duty by allowing cum-duty benefit to the assessee; interest and penalty, if any, are to be reworked accordingly.

Final Conclusion: Appeal allowed by way of remand: the matter is remitted to the Commissioner (Appeals) for recomputation of duty for 2010-11 allowing cum-duty benefit in view of clandestine supplies, with consequential recalculation of interest and penalty.

Remand for fresh adjudication - principles of natural justice - service under the Finance Act, 1994 - reverse charge mechanism - Negative List entry and definition of "Government" under Section 65B(37)

Remand for fresh adjudication - service under the Finance Act, 1994 - Negative List entry and definition of "Government" under Section 65B(37) - Validity of the Commissioner (Appeals)'s remand to the Adjudicating Authority to examine on merits whether fees paid to USFDA constitute a taxable service - HELD THAT: - The sole question decided is whether the remand by the Commissioner (Appeals) was correct. The Tribunal held that the determinative question - whether the fees paid to the overseas USFDA constitute a service - hinges on whether the USFDA qualifies as "Government" for the purposes of the Negative List under Section 65B(37). Because that characterization (whether the service-provider is the Government or otherwise) is central to taxability, the Adjudicating Authority's earlier conclusion that no service was involved did not attain finality as against the department. The department's appeal therefore legitimately raised a contest on the core legal classification, and the Commissioner (Appeals) was justified in remanding the matter for fresh consideration on merits, observing principles of natural justice. The remand was not shown to be prejudicial to the appellant; the appellant remains free to raise all available defenses before the Adjudicating Authority. [Paras 4, 5]

Remand ordered by the Commissioner (Appeals) is sustainable; matter remitted to the Adjudicating Authority for fresh adjudication on whether the USFDA fees constitute a taxable service.

Final Conclusion: Impugned order upholding remand is affirmed and the appeal is dismissed.

Maintainability of penalty appeals where demand has been set aside - penalty under Rule 15(3) of the Cenvat Credit Rules, 2004 - requirement of fraud, collusion, wilful mis-statement or suppression of facts for imposition of penalty - effect of departmental knowledge and issuance of show cause notices within limitation on penal liability

Maintainability of penalty appeals where demand has been set aside - Maintainability of Revenue's appeals against proposal for penalty consequential to confirmation of Cenvat credit demand which has been set aside by Tribunal. - HELD THAT: - The Tribunal held that the proposal for imposition of penalty under Rule 15(3) is consequential upon the confirmation of the Cenvat credit demand. As the assessee's appeals against the same impugned orders were allowed by setting aside the demand of Cenvat credit, the confirmed demand no longer exists. There being no subsisting demand, the appeals seeking imposition of penalty as consequential thereto are not maintainable and therefore liable to be dismissed on that ground. [Paras 4]

Revenue's appeals are not maintainable because the demand on which the penalty was predicated has been set aside.

Penalty under Rule 15(3) of the Cenvat Credit Rules, 2004 - requirement of fraud, collusion, wilful mis-statement or suppression of facts for imposition of penalty - effect of departmental knowledge and issuance of show cause notices within limitation on penal liability - Whether penalty under Rule 15(3) CCR, 2004 could be imposed on merits in the facts of the case. - HELD THAT: - Rule 15(3) permits penalty only where Cenvat credit has been taken or utilised wrongly by reason of fraud, collusion, wilful mis-statement or suppression of facts, or contravention of provisions with intent to evade payment of service tax. The Tribunal found that all show cause notices were issued within the normal period and were subsequent to an earlier show cause notice in the appellant's own related case; hence the Department was aware of the availment of the credits. The Adjudicating Authority had earlier declined to impose penalty, having held there was no suppression of facts. Applying these facts to the statutory test, the Tribunal agreed that the ingredients of fraud, collusion, wilful mis-statement or suppression with intent to evade were not established. The Tribunal relied on the reasoning consistent with precedent cited (Nizam Sugars Factory) and concluded that on merits penalty under Rule 15(3) was not invokable. [Paras 4, 5]

Independently on merits, penalty under Rule 15(3) CCR, 2004 is not imposable as the requisite culpable mens rea and suppression of facts were not established and show cause notices were issued with departmental knowledge within limitation.

Final Conclusion: The Revenue's appeals are dismissed: they are not maintainable because the underlying demand for Cenvat credit has been set aside, and, without prejudice, the imposition of penalty under Rule 15(3) CCR, 2004 is unsustainable on the facts and merits.

Job work - manpower supply service - service tax applicability - supply of tangible goods for use - Board Circular No. 190/2015 - ST - negative list

Job work - manpower supply service - Board Circular No. 190/2015 - ST - service tax applicability - Whether the appellant's textile processing activities performed under contract are liable to service tax as manpower supply service or constitute job work not attracting service tax. - HELD THAT: - The Tribunal examined the contract terms and the nature of services performed for Valson Industries and found the engagement to be a job-work contract covering specified textile processes with payment on a per-piece/metre basis. The contract allowed the contractor to decide manpower deployment, fixed payment by quantum of work (piece/metre basis), and made the contractor accountable for the job-characteristics identified in Board Circular No. 190/2015 - ST as distinguishing job work from manpower supply service. Applying the criteria in the Circular, the Tribunal concluded that the service recipient was concerned with the job outcome and not the control or deployment of personnel, and that the value of service correlated to quantum of job work rather than manpower deployed. On these determinative facts the activity does not fall within manpower supply service and thus the demand of service tax on this count is unsustainable. [Paras 4]

Demand of service tax held not sustainable as the textile processing activities are job work and not manpower supply service.

Supply of tangible goods for use - service tax applicability - Whether the appellant's carriage of goods for others (issuing consignment notes/LR) constitutes supply of tangible goods for use attracting service tax, or is a transport service not liable under that head. - HELD THAT: - The Tribunal considered the nature of the activity and the documentary evidence (consignment notes/LR) and found that the appellant acted as a transporter issuing consignment notes for carriage of goods. The activity was the provision of transport service of goods, not the rental or supply of trucks as tangible goods for use to the recipient. On the facts and documents, the essential character is transportation, and therefore classification as supply of tangible goods for use was incorrect. Consequently, the demand on this count could not be sustained. [Paras 4]

Demand of service tax held not sustainable as the activity is carriage/transport service and not supply of tangible goods for use.

Final Conclusion: Both demands of service tax-on the textile processing activities (treated as job work rather than manpower supply service) and on the transportation activity (treated as transport service rather than supply of tangible goods for use)-were set aside; the appeal is allowed with consequential relief in accordance with law.

Transaction value - additional consideration - inclusion of subsidy in assessable value - exclusion of sales tax from transaction value - industrial promotion subsidy adjustable against subsequent years' tax liability - Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000

Transaction value - additional consideration - inclusion of subsidy in assessable value - exclusion of sales tax from transaction value - Whether the industrial subsidy (75% of VAT/CST) remitted by the State Government and adjustable against subsequent years' tax liability is includable in the transaction value under section 4 of the Central Excise Act as additional consideration flowing directly or indirectly from the buyers to the assessee. - HELD THAT: - The Tribunal examined the scheme under the State's Industrial Promotion Policy and found that the assessee paid the entire VAT/CST collected from customers to the State and that the State subsequently sanctioned an amount equivalent to 75% of the tax paid as a subsidy, issued by way of cheque in favour of the Commercial Tax Department and adjustable against future tax liabilities. The Tribunal relied on its prior interim decision in M/s. Harit Polytech Pvt. Ltd. which distinguished cases where a portion of tax collected is retained by the seller from the present scheme. The Tribunal reasoned that merely because the subsidy is computed with reference to the tax paid does not render it directly or indirectly related to the sale such that it becomes part of the transaction value. The subsidy does not reduce the sales tax payable by the assessee; the selling price received from customers remains unchanged and the entire tax collected is remitted. Consequently, the subsidy, being an amount disbursed by the State for promotion and adjustable against future liabilities, cannot be treated as additional consideration for the sale of goods for the purpose of section 4 read with the Valuation Rules.

The industrial subsidy equal to 75% of VAT/CST, adjustable against subsequent years' tax liability, is not includable in the transaction value as additional consideration; the demand confirmed by the Principal Commissioner is set aside.

Final Conclusion: The appeal is allowed; the order dated 31.12.2018 confirming central excise duty, interest and penalty on account of treating the State industrial subsidy (75% of VAT/CST) as part of transaction value is set aside, holding that the subsidy is not additional consideration for the purposes of section 4.

Classification of special purpose armoured vehicles under CETH 8705 9000 - Special purpose vehicle certification by VRDE - HSN Explanatory Notes - fittings enabling firing from within vehicle - Rule 3(a) of the General Rules for Interpretation of the First Schedule - most specific description prevails - Principle of Ejusdem Generis in tariff classification - Valuation Rules - Rule 10A and job work versus independent manufacture - Imposition of penalty where duty is not demandable

Classification of special purpose armoured vehicles under CETH 8705 9000 - Special purpose vehicle certification by VRDE - HSN Explanatory Notes - fittings enabling firing from within vehicle - Rule 3(a) of the General Rules for Interpretation of the First Schedule - most specific description prevails - Principle of Ejusdem Generis in tariff classification - Impugned vehicles are classifiable under CETH 8705 9000 as special purpose armoured vehicles and eligible for exemption. - HELD THAT: - The Tribunal found the classification question no longer res integra, having regard to earlier decisions of the same Bench and CESTAT precedents where the special purpose nature of similar vehicles and VRDE certification were determinative. The vehicles incorporate specific fittings (holes for firing and a roof opening for machine guns) and are certified by VRDE as special purpose bullet proof vehicles; in light of the HSN Explanatory Notes to heading 8705 and the rule that the most specific description shall be preferred under Rule 3(a), the special purpose description fits heading 8705 rather than the more general heading 8710. The expression "other armoured fighting vehicle" appears alongside specific terms such as "tanks," and applying the principle of ejusdem generis narrows the scope of the general words to vehicles of the same kind as the specific examples, supporting classification under 8705. The Tribunal therefore upheld the classification in favour of the appellants and annulled the contrary conclusion of the adjudicating authority. [Paras 6]

Classification held under CETH 8705 9000; impugned vehicles eligible for exemption.

Valuation Rules - Rule 10A and job work versus independent manufacture - Imposition of penalty where duty is not demandable - Discussion on valuation under Rule 10A and imposition of penalty were rendered unnecessary; penalty could not be imposed since duty was not demandable. - HELD THAT: - The Tribunal recorded that once the goods are held not dutiable by virtue of their correct classification under heading 8705, questions of valuation (including the applicability of Rule 10A premised on a job work relationship) fall away and need not be adjudicated further. Consequentially, where no duty is payable, imposition of penalty lacks foundation. The Tribunal set aside the penalty imposed on both the fabricator and the chassis supplier in view of the finding that duty was not exigible on the impugned goods. [Paras 6]

Valuation issue and Rule 10A not considered as duty held not payable; penalty set aside.

Final Conclusion: Impugned adjudication set aside; both appeals allowed. The vehicles are held to be classifiable under CETH 8705 9000 as special purpose armoured vehicles (VRDE certified) and exempt from duty, rendering valuation under Rule 10A and the penalties untenable.

Confiscation and penalty under Rule 25 - Penalty under Rule 26(1) - Section 11AC conditionality for invocation of Rule 25 - Requirement of intention/culpable mental state to evade duty - Reliance on statutory records and Rule 10 maintenance - Insufficiency of eye-estimation and lack of corroborative evidence

Confiscation and penalty under Rule 25 - Requirement of intention/culpable mental state to evade duty - Insufficiency of eye-estimation and lack of corroborative evidence - Whether confiscation of unaccounted MS ingots and MS angles could be sustained. - HELD THAT: - The Tribunal found that although excess MS ingots and angles were discovered without entries in statutory books, confiscation under Rule 25 (on the premise of clandestine removal) requires cogent evidence of a deliberate intention to remove goods without payment of duty. The Department bore the burden to prove such intention and did not produce corroborative evidence. The stock estimation was done by eye estimation and the Panchnama and Panchas did not establish a reliable physical verification method. Citing precedents, the Tribunal observed that mere improper accounting or absence of entries does not ipso facto establish intent to evade payment of duty. In these circumstances confiscation was unsustainable and the redemption fine set aside. [Paras 8]

Confiscation/redemption fine on the seized goods set aside for lack of cogent evidence of intent to evade and unreliable stock verification.

Section 11AC conditionality for invocation of Rule 25 - Confiscation and penalty under Rule 25 - Requirement of intention/culpable mental state to evade duty - Whether penalty under Rule 25(1) on the assessee (appellant No.1) could be upheld. - HELD THAT: - The Tribunal held that Rule 25(1) is expressly "subject to the provisions of Section 11AC" and therefore the ingredients of Section 11AC (fraud, collusion, wilful mis-statement or suppression of facts with intent to evade duty) must be satisfied before imposing penalty under Rule 25. In the present case, other than statements, no corroborative material established intent to evade, nor was there evidence of prior similar conduct. Reliance on mere non-entry in records or on eye-estimation was insufficient. In view of settled authorities, penalty under Rule 25(1) could not be sustained. [Paras 9, 10, 11]

Penalty imposed on appellant No.1 under Rule 25(1) set aside for failure to establish the Section 11AC ingredients and requisite intent to evade duty.

Penalty under Rule 26(1) - Requirement of intention/culpable mental state to evade duty - Insufficiency of eye-estimation and lack of corroborative evidence - Whether personal penalty under Rule 26(1) could be sustained against the authorised signatory (appellant No.2). - HELD THAT: - The Tribunal noted that Rule 26(1) requires that the person be shown to have acquired possession of or be concerned in dealing with excisable goods which he knows or has reason to believe are liable to confiscation. There was no evidence that the authorised signatory personally benefited, directed, or abetted any clandestine activity; the statements relied upon were later retracted and no corroboration was produced. Prior Tribunal precedents indicate personal penalty on an employee or signatory should not ordinarily be imposed where the record does not establish personal involvement or benefit. Accordingly, the penalty on appellant No.2 was not sustainable. [Paras 12]

Penalty on the authorised signatory under Rule 26(1) set aside for absence of evidence of personal involvement, knowledge or benefit.

Final Conclusion: The impugned order confirming confiscation and imposing penalties is set aside: confiscation/redemption fine quashed for lack of evidence of intent to evade and unreliable stock verification; penalty on the assessee under Rule 25(1) quashed for failure to satisfy Section 11AC ingredients; personal penalty under Rule 26(1) on the authorised signatory quashed for lack of evidence of personal involvement or benefit. Appeals allowed.

Valuation of DTA clearances by 100% EOU under the proviso to Section 3(1) of the Central Excise Act - application of Section 14 of the Customs Act and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - transaction value and Rule 3 of the Customs Valuation Rules - transaction value of identical goods and Rule 4 - lowest such value to be used - computed value under Rule 8 - profit and general expenses of same class or kind exported to India - scope of Rule 8 where goods are manufactured in India - exemption of DTA clearances against Advance Release Order under Notification No. 23/2003-CE (Sr. No. 22) - invocation of extended period of limitation and requirement of mala fide/suppression

Valuation of DTA clearances by 100% EOU under the proviso to Section 3(1) of the Central Excise Act - application of Section 14 of the Customs Act and Customs Valuation Rules - transaction value and Rule 3 of the Customs Valuation Rules - Correct legal method for determining assessable value of goods manufactured by a 100% EOU and cleared to related DTA parties - HELD THAT: - The proviso to Section 3(1) mandates that the value of goods manufactured by a 100% EOU and brought into DTA shall be determined in accordance with the Customs Act and Customs Tariff Act; accordingly Section 14 and the Customs Valuation Rules, 2007 govern valuation. Where buyer and seller are related, Rule 3 and the sequential methods of Rules 4-9 must be applied. The Tribunal held that the Revenue erred in rejecting the EOU's declared value without applying Rule 4 by reference to transaction value of identical imports into India; instead Revenue directly adopted alternative methods. The Tribunal applied precedent holding that DTA transaction value may be accepted if it conforms with Rule 3(1) and stressed that the valuation sequence under the Customs Valuation Rules is mandatory. [Paras 4]

Valuation must follow Section 14 and the sequential application of the Customs Valuation Rules; the Revenue's departure from that sequence renders its valuation unsustainable.

Transaction value of identical goods and Rule 4 - lowest such value to be used - Whether Revenue correctly applied Rule 4 by using the highest observed domestic sale price of identical goods - HELD THAT: - Rule 4(1)-(3) requires that where more than one transaction value of identical goods is found, the lowest such value shall be used. In the present case the Revenue selected the highest observed sale price (a stray sale for R&D) to unrelated parties and applied it across clearances; the Tribunal found this approach contrary to the unambiguous statutory provision. Further, Rule 4 requires reference to transaction values of identical goods sold for export to India (i.e., contemporaneous imports), not simply domestic sales, and Revenue did not produce imported-into-India values. As the appellants' DTA clearances to related parties were at prices lower than the highest value taken by Revenue and lower than other unrelated-sales, there was no justification to disturb the declared value. [Paras 4]

Revenue's adoption of the highest domestic sale price was contrary to Rule 4; the declared value cannot be disturbed on that basis.

Computed value under Rule 8 - profit and general expenses of same class or kind exported to India - scope of Rule 8 where goods are manufactured in India - Permissibility of adopting computed value under Rule 8 by applying profit margins derived from domestic production/cost audit reports - HELD THAT: - Rule 8 contemplates computed value consisting of cost plus a profit and general expenses 'equal to that usually reflected in sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to India.' The Tribunal held that where goods are manufactured in India, profit parameters of goods 'produced in the country of exportation' cannot be sensibly derived from domestic production; hence Rule 8's profit benchmark pertains to producers in the country of exportation. Revenue also skipped the mandated sequential enquiry under Rules 4-7 before resorting to Rule 8. The Cost Auditor's widely varying margins (40%-80%) produced contradictory results and cannot supplant the statutory method. The Tribunal observed that the notional 10% profit in Rule 8 of the Central Excise Valuation Rules, 2000 (as an analogous yardstick) supports adopting 10% where a computed margin is to be applied; consequently the appellant's 110% of cost was held reasonable. [Paras 4]

Revenue's computed-value approach was legally unsound; application of divergent domestic profit margins was unacceptable and the appellant's valuation (110% of cost) was sustained as reasonable.

Exemption of DTA clearances against Advance Release Order under Notification No. 23/2003-CE (Sr. No. 22) - Whether clearances made against Advance Release Orders (ARO) are liable to differential duty - HELD THAT: - Notification No. 23/2003-CE (Sr. No.22) exempts specified DTA clearances of goods produced in EOU when cleared to a person holding an ARO subject to procedural conditions. The Tribunal found that supplies made against AROs fall within the exemption and, in any event, even if duty were payable by the EOU the related person was entitled to refund of terminal excise duty under the FTP; accordingly differential-duty demands relating to ARO supplies cannot be sustained. [Paras 4]

Differential-duty demands in respect of supplies against ARO are unsustainable and are to be set aside.

Invocation of extended period of limitation and requirement of mala fide/suppression - Whether the Revenue could invoke the extended period of limitation for the duty demands - HELD THAT: - The Tribunal reviewed the facts: the appellant was a 100% EOU subject to regular departmental vigilance, filed ER-2 returns, used a bona fide valuation method (CAS-4 and precedent including Incowax), and there was no established suppression or mala fide intent to evade duty. The Tribunal applied precedent (including Reliance and other Tribunal decisions) recognizing that where a bona fide view was taken and disclosures made, extended period cannot be invoked. Consequently demands falling outside the statutory normal period were time-barred for the specified appeals. [Paras 4]

Extended period of limitation is not invocable; the differential-duty demands for the extended periods are time-barred.

Final Conclusion: The appeals are allowed. The Tribunal set aside the impugned orders: (a) Revenue's valuation by reference to the highest domestic sale or by applying arbitrary computed margins was contrary to the Customs Valuation Rules and unsustainable; (b) supplies against Advance Release Orders are exempt under Notification No. 23/2003-CE (Sr. No.22); and (c) demands for the extended period are time-barred given the absence of suppression or mala fide; consequential relief to follow in accordance with law.

Exemption available to 100% EOU where goods are manufactured wholly from indigenous raw materials - treatment of cotton waste as a separate indigenous raw material - distinction between imported raw cotton and cotton waste used as raw material - excisable goods under Section 2(d) and levy under Section 3 of the Central Excise Act - exemption under Notification No. 8/97-C.E. and Notification No. 23/2003-C.E. subject to manufacture wholly from Indian raw materials - extended period of limitation - invocation only on suppression, fraud or wilful mis-statement (Section 11A principles) - bona fide belief / absence of suppression disentitles revenue from invoking extended period

Exemption available to 100% EOU where goods are manufactured wholly from indigenous raw materials - treatment of cotton waste as a separate indigenous raw material - distinction between imported raw cotton and cotton waste used as raw material - exemption under Notification No. 8/97-C.E. and Notification No. 23/2003-C.E. subject to manufacture wholly from Indian raw materials - excisable goods under Section 2(d) and levy under Section 3 of the Central Excise Act - Whether open end yarn cleared to DTA by the appellant qualifies for concessional excise treatment under Notification No. 8/97-C.E. and Notification No. 23/2003-C.E. when manufactured from cotton waste arising in the appellant's EOU - HELD THAT: - The Tribunal found on the material on record that the appellant manufactured ring spun yarn (from imported and domestic raw cotton) and separately manufactured open end yarn from cotton waste generated on the factory premises. The Notifications require that the finished goods be produced wholly from raw materials produced or manufactured in India. The Tribunal held that cotton waste generated in the appellant's manufacturing process is a distinct, commercially identifiable product (covered under CETA heading 5202) and therefore qualifies as an indigenous raw material when used to make open end yarn. Applying Section 2(d) and Section 3 of the Central Excise Act, the Tribunal concluded that goods manufactured in an EOU (including waste produced there) are excisable and can be regarded as produced in India for the purpose of the Notifications. The imported raw cotton used for ring spun yarn could not be equated with the cotton waste which, having arisen domestically, is the raw material for open end yarn; accordingly the condition of manufacture wholly from indigenous raw material was satisfied and the exemption at the concessional rate was allowable. [Paras 4]

Benefit of Notification No. 8/97-C.E. / Notification No. 23/2003-C.E. applies to the appellant's open end yarn manufactured from cotton waste generated in India; revenue's demand unsustainable on merits.

Extended period of limitation - invocation only on suppression, fraud or wilful mis-statement (Section 11A principles) - bona fide belief / absence of suppression disentitles revenue from invoking extended period - disclosure in ER-2 returns and departmental knowledge preclude invocation of extended limitation - Whether the revenue could invoke the extended period of limitation to recover duty for the disputed clearances - HELD THAT: - The Tribunal examined the documentary record, including ER-2 returns, DTA sale permission and excise invoices, and found that the department was aware of the appellant's DTA clearances and the nature of raw material/production. The appellant had declared DTA sales and the Notifications availed in returns; there was no finding of suppression, fraud, collusion or wilful mis-statement. Applying settled principles that extended limitation is available only where requisite ingredients (suppression, fraud etc.) are established, and having regard to case law and the factual matrix that information was available to the department, the Tribunal held that the extended period could not be invoked and the demand was time barred to that extent. [Paras 4]

Extended period of limitation not invokable; demand for extended period unsustainable.

Final Conclusion: The Tribunal set aside the impugned adjudication, holding that open end yarn manufactured from cotton waste generated in the appellant's premises qualifies for concessional treatment under the cited Notifications and that the revenue cannot invoke the extended period of limitation; the appeal is allowed with consequential relief as per law.

Refund of duty paid on manufactured goods - refund under area based exemption Notification No. 39/2001-CE dated 31.07.2001 - clearance of inputs "as such" and payment of duty under Rule 3(5) of the Cenvat Credit Rules, 2004 - erroneous refund recoverable - extended period of limitation invoked for suppression of facts

Refund of duty paid on manufactured goods - clearance of inputs "as such" and payment of duty under Rule 3(5) of the Cenvat Credit Rules, 2004 - refund under area based exemption Notification No. 39/2001-CE dated 31.07.2001 - erroneous refund recoverable - Claim for refund under Notification No.39/2001-CE in respect of valves cleared 'as such' was not allowable and the refund granted was recoverable. - HELD THAT: - The Tribunal held that Notification No.39/2001-CE is applicable only to duty paid on manufactured goods. The admitted facts show the valves did not undergo any manufacturing process and were cleared 'as such' with duty paid under Rule 3(5) of the Cenvat Credit Rules, 2004. Since the notification does not provide for refund on removal of inputs cleared as such, the refund earlier granted in respect of the valves was not permissible and was correctly held recoverable by the authorities. The conclusion rests on the distinction between duty on finished/manufactured goods and duty paid on inputs cleared as such, and the appellant's admission that the valves were not manufactured by them. [Paras 4]

Refund on the valve cleared 'as such' was not allowable under the Notification and the recovery of the erroneous refund was justified.

Extended period of limitation invoked for suppression of facts - disclosure in ER-1 returns and sufficiency for invoking extended period - Invocation of the extended period for issuing the show cause notice was valid because there was suppression of material facts regarding non-manufacture of the valves. - HELD THAT: - The Tribunal concurred with the Commissioner (Appeals) that mere filing of ER-1 returns showing duty and credit figures did not disclose that the appellant procured parts from outside and cleared them 'as such' without manufacturing. The non-disclosure of the fact that the valves were not manufactured by the appellant amounted to suppression, thereby justifying invocation of the extended period. Reliance was placed on the reasoning of the lower authority that statutory records like ER-1 would not reveal that the parts were procured and cleared as such, and therefore extended limitation was correctly invoked. [Paras 4]

Extended period was rightly invoked as there was suppression of facts, and the show cause notice was not time-barred.

Final Conclusion: The impugned order upholding recovery of the refund and the invocation of the extended period is affirmed; the appeal is dismissed.

Order XXII Rule 9 C.P.C. - setting aside abatement or dismissal by legal representative - legal representative (Section 2(11) C.P.C.) - right to step into shoes of deceased plaintiff - survival of cause of action - effect of death of plaintiff on continuance of suit - Order XXII Rule 5 C.P.C. - determination of question as to legal representative - maintenance of application to implead subsequent beneficiaries under alleged Will

Order XXII Rule 9 C.P.C. - setting aside abatement or dismissal by legal representative - legal representative (Section 2(11) C.P.C.) - right to step into shoes of deceased plaintiff - Respondents 1 and 2 (daughters) entitled to apply under Order XXII Rule 9 C.P.C. as persons claiming to be legal representatives of the deceased plaintiff and to be impleaded in his place. - HELD THAT: - The Court examined the distinction between 'legal heirs' and 'legal representative' and held that Order XXII deals with legal representatives as defined in Section 2(11) C.P.C. A person claiming to be a legal representative may apply under Order XXII Rule 9(2) to set aside abatement or dismissal by showing sufficient cause for being prevented from continuing the suit. The daughters, admittedly the children of the deceased plaintiff, claimed to be legal representatives entitled to the estate and sought substitution to prosecute the suit. The Court held that the procedure does not require prior proof of the Will at the stage of the application; correctness or genuineness of the Will can be contested and determined in trial, and Order XXII Rule 5 provides a mechanism to determine whether a person is a legal representative. The Court further observed that Order XXII Rule 9(1) bars fresh suit on the same cause of action, favouring substitution to avoid multiplicity of litigation, and that the defendants' technical objections would not defeat substantive justice. [Paras 16, 17, 18, 19]

Applications by the daughters under Order XXII Rule 9 C.P.C. were maintainable and they could be impleaded as plaintiffs in place of the deceased.

Survival of cause of action - effect of death of plaintiff on continuance of suit - maintenance of application to implead subsequent beneficiaries under alleged Will - Death of the original plaintiff did not extinguish the cause of action so as to bar the daughters from stepping into his shoes and prosecuting the suit challenging the settlement deed. - HELD THAT: - The Court considered authorities and the factual matrix: the suit challenged a settlement deed said to have been effected by fraud based on a Will that had not taken effect during the plaintiff's lifetime. The daughters sought substitution after the plaintiff executed a subsequent Will in their favour and after his death. The Court distinguished cases where the right sued upon is strictly personal to the deceased and does not survive; here the suit seeks to challenge the settlement deed affecting the property, and the daughters, as claimed legal representatives, seek to continue the same cause of action. The Court found that allowing substitution would avoid multiplicity of proceedings and that objections to the genuineness of the Will or to the entitlement can be raised and adjudicated in trial; therefore the cause of action survives for the purpose of continuation by legal representatives. [Paras 15, 18, 19, 20, 21]

The cause of action survives such that the daughters could be substituted and continue the suit; the trial Court did not err in allowing the applications.

Final Conclusion: The trial Court's order allowing I.A.Nos.894 and 895 of 2015 to implead the daughters as plaintiffs was upheld; both civil revision petitions are dismissed. The trial Court is directed to dispose of the suit expeditiously, by 30.04.2024; no order as to costs.