TaxTMI Updates e-Newsletter
Dec 14,2023

Inspection under Section 67(1) of the CGST Act - Validity of authorization in FORM GST INS-01 - Direction by a criminal court to revenue authorities to investigate source of funds - Limits of roving and fishing inquiries - Return of documents/photocopies collected during inspection - Summons under Section 70 of the CGST Act

Inspection under Section 67(1) of the CGST Act - Validity of authorization in FORM GST INS-01 - Limits of roving and fishing inquiries - Authorization for inspection under Section 67(1) was not supported by material on record and was patently erroneous. - HELD THAT: - The court examined the original file and found that the inspection of the petitioners' premises was undertaken pursuant to the Special Judge's order dated 05.04.2023 directing revenue agencies to check the source of Rs.50,00,000/-. The authorization in FORM GST INS-01 recorded standard grounds in Clause 'A' (suppressed transactions, excess ITC/refund, evasion etc.), but there was no material on the GST authority's record to substantiate those grounds independently of the Special Judge's directions. The record did not disclose any further inquiry or supporting information by the respondent before issuing the inspection authorization. For these reasons the authorization was held to be defective, and the court observed serious reservations as to the propriety of a criminal court directing revenue authorities to carry out a roving and fishing inquiry without regard to the statutory limits and powers under the CGST Act. [Paras 3, 6, 7, 8, 9]

Authorization was patently erroneous and the conditions for inspection under Section 67(1) were not satisfied; the inspection was conducted pursuant to the Special Judge's order rather than on independent grounds.

Return of documents/photocopies collected during inspection - Photocopies/documents collected during the inspection are to be returned to the petitioners. - HELD THAT: - The respondent stated that no documents were formally seized but that photocopies of documents were collected. Given the court's finding that the conditions for conducting the inspection under Section 67(1) were not satisfied and that the authorization was defective, the collected documents/photocopies must be returned to the petitioners. [Paras 11]

Collected photocopies/documents to be returned to the petitioners.

Summons under Section 70 of the CGST Act - Direction by a criminal court to revenue authorities to investigate source of funds - No directions issued by this Court regarding summons; GST authorities are not precluded from proceeding but are not required to act to comply with the Special Judge's order. - HELD THAT: - The court declined to quash or stay the summons issued under Section 70, and did not judicially restrain the GST authorities from initiating or continuing proceedings under the CGST Act. However, the court clarified that the GST authorities are not obliged to take any further inquiries or actions specifically to comply with the Special Judge's order dated 05.04.2023. Thus, while departmental proceedings in accordance with the CGST Act remain permissible, they cannot be proximately driven by the Special Judge's direction to conduct a roving inquiry. [Paras 12]

No direction on summons; GST authorities may proceed under the CGST Act but need not and should not undertake inquiries merely to comply with the Special Judge's order.

Final Conclusion: The petition is disposed of: the inspection authorization under Section 67(1) was found defective and documents/photocopies collected must be returned; no further direction is issued regarding the summons, and GST authorities remain free to proceed under the CGST Act but are not required to act to implement the Special Judge's order dated 05.04.2023.

Requirement to serve summary electronically in FORM GST DRC-01 and FORM GST DRC-02 - notice and order for demand of amounts payable under the Act - service of show cause notice under Section 74(1) of the Central Goods and Services Tax Act - substantial compliance with procedural mandate

Requirement to serve summary electronically in FORM GST DRC-01 and FORM GST DRC-02 - service of show cause notice under Section 74(1) of the Central Goods and Services Tax Act - substantial compliance with procedural mandate - Whether a show cause notice issued under Section 74(1) of the CGST Act that was not accompanied by the electronic summaries in FORM GST DRC-01 and FORM GST DRC-02 requires issuance of those summaries and whether furnishing them at a later stage constitutes compliance. - HELD THAT: - The Court noted that Rule 142(1) of the CGST Rules requires the proper officer to serve, along with a notice issued under the specified sections (including Section 74), a summary electronically in FORM GST DRC-01 and, where applicable, FORM GST DRC-02 specifying details of the amount payable. The absence of the electronic summary alongside the show cause notice dated 02.08.2023 was identified. The respondents accepted that the requisite summary had not been issued in the prescribed electronic form. The Court held that while the summary is required to be furnished along with the show cause notice, issuance of the summary at the stage of adjudication proceedings would amount to substantial compliance with the statutory/formal requirement. In consequence, the Court directed the proper officer to issue the electronic summaries in FORM GST DRC-01 and FORM GST DRC-02 expeditiously, preferably within one week, thereby remedying the procedural deficiency without quashing the notice itself. [Paras 6, 8, 9]

The proper officer is directed to issue electronically the summary of the notice and demands in FORM GST DRC-01 and FORM GST DRC-02 forthwith (preferably within one week), and the petition is disposed of on that basis.

Final Conclusion: The petition is disposed of by directing issuance of the electronic summaries in FORM GST DRC-01 and FORM GST DRC-02 as expeditiously as possible; all pending applications are disposed of.

Pre-deposit for appeals - statutory right to second appeal - failure to constitute the Appellate Tribunal cannot deny statutory remedy - consistency in interim orders - balance of equities in granting interim relief - executive inactivity cannot defeat statutory rights - writ jurisdiction under Article 226

Pre-deposit for appeals - consistency in interim orders - balance of equities in granting interim relief - Extent of pre-deposit required for grant of interim stay where the Appellate Tribunal under Section 112 has not been constituted - HELD THAT: - The Court examined inconsistent interim orders directing deposits of 30% (with adjustment of earlier 10%) and orders directing 50% of the disputed tax. Having considered the statutory scheme which contemplates payment of the amount deposited under Section 107(6) before the first appellate authority and payment of 20% of the remaining disputed tax under Section 112(8), the Court preferred the line of earlier Single Judge orders permitting deposit of 20% of the remaining disputed tax in addition to the earlier deposit (10) rather than imposing a 50% deposit. The Court emphasised the need for consistency and uniformity in interlocutory orders in congruent cases, and that interim relief should balance revenue interest with the assessee's rights; it also noted that higher deposits penalise assessees for the State's failure to constitute the Tribunal. The Court retained the power to order different deposits in peculiar facts of a case.

Petitioner directed to deposit 20% of the disputed tax in addition to the earlier 10% deposit; on such deposit recovery of the balance shall remain stayed till final disposal of the writ petition.

Failure to constitute the Appellate Tribunal cannot deny statutory remedy - statutory right to second appeal - executive inactivity cannot defeat statutory rights - Whether non-constitution or non-functionality of the Appellate Tribunal can be a ground to deny the statutory right of second appeal - HELD THAT: - The Court held that the statutory right of second appeal vested in the petitioner cannot be defeated by executive inertia in constituting the Tribunal. Relying on the principle that inactivity of the State does not amount to impossibility, the Court observed that where the Tribunal is not constituted the petitioner cannot be deprived of statutory relief; therefore interim protection may be granted subject to statutory pre-deposit requirements so as to preserve the parties' rights until the Tribunal becomes functional.

Court granted interim protection (stay of recovery) subject to deposit as directed, recognising that non-constitution of the Tribunal cannot operate to deny the right of appeal.

Final Conclusion: The interim application is disposed of by directing deposit of 20% of the disputed tax in addition to the prior 10% deposit, on which the recovery of the balance shall remain stayed until the writ petition is decided; the Court preferred a consistent approach adopted in earlier orders while leaving room for different directions in exceptional facts.

Exemption for services relating to sanitation and solid waste management - works contract - requirement of transfer of property in goods for GST exigibility - non-exigibility of GST on services entrusted to a municipality under Article 243W

Exemption for services relating to sanitation and solid waste management - Whether the consideration received by the petitioner for solid waste management and sanitation services is exempt from levy under the BGST Act - HELD THAT: - The Court considered the exemption notifications and the Circular of the Central Board in relation to services provided to a local authority by way of sanitation, conservancy and solid waste management. The work order shows the petitioner performed collection, disposal and sanitation services in specified municipal wards. Having regard to the CBIC circular excerpts and the nature of services rendered, the Court concluded that such activity falls within the exemption head for services ordinarily entrusted to a municipality and is therefore not taxable under the BGST Act in the period under consideration. [Paras 6, 8]

The activities of the petitioner in solid waste management and sanitation are exempt from BGST; the assessment and demand confirmed in the impugned orders are set aside on this ground.

Works contract - requirement of transfer of property in goods for GST exigibility - Whether the contract awarded to the petitioner is a 'works contract' taxable under the BGST Act - HELD THAT: - The Court examined the statutory definition of 'works contract' under the BGST Act which requires transfer of property in goods as part of execution of the contract. The work awarded - collection and disposal of solid waste and sanitation - did not involve transfer of property in goods in the execution of the contract. On that basis the activity did not satisfy the definition of a works contract and therefore could not be subjected to tax as such under the BGST Act. [Paras 7, 8]

The activity does not constitute a 'works contract' within the BGST Act and is not taxable on that basis.

Non-exigibility of GST on services entrusted to a municipality under Article 243W - Whether further factual verifications are required and what directions should follow after concluding non-exigibility of tax - HELD THAT: - Although the Court concluded non-exigibility of tax on the solid waste management and sanitation services rendered at the instance of the local authority, it directed factual verification of tax deducted at source. The petitioner was directed to produce details and evidence regarding the tax deduction and consideration received; the Assessing Officer was directed to consider the materials and pass orders in accordance with law, taking note of the Court's declaration regarding non-exigibility. [Paras 9]

Assessment orders and demands set aside; matter remitted to Assessing Officer for consideration of produced materials and issuance of fresh orders in accordance with law after verification.

Final Conclusion: Writ petition allowed; impugned assessment and appellate orders set aside on the ground that the petitioner's solid waste management and sanitation services rendered to the local authority are not exigible to BGST (not being a 'works contract' and falling within the exemption); petitioner to produce TDS and consideration details and Assessing Officer to decide afresh in accordance with law.

Validity of penalty under the GST regime for failure to furnish returns - Show cause notice offering conditional withdrawal upon compliance - Compliance with notice by tendering returns within prescribed time - Non application of mind in adjudicatory orders

Validity of penalty under the GST regime for failure to furnish returns - Show cause notice offering conditional withdrawal upon compliance - Compliance with notice by tendering returns within prescribed time - Non application of mind in adjudicatory orders - Whether imposition of penalty was permissible after the petitioner complied with the show cause notice by furnishing returns within the period stated therein, and whether the assessing authority's contrary finding was vitiated by non application of mind. - HELD THAT: - The show cause notice dated 28.01.2023 expressly stipulated that if the returns were tendered within the time stated, the proceedings would be withdrawn. The petitioner furnished the returns on 07.02.2023, within the period specified. Notwithstanding this compliance, the assessing authority imposed a penalty by the order dated 10.02.2023 and simultaneously recorded a finding that no reply had been tendered. The Court found that the assessing authority failed to apply its mind to the material on record which established compliance with the terms of the notice. Given that the petitioner had complied with the condition that would have led to withdrawal of proceedings, there was no lawful justification for imposing the penalty. The impugned orders were therefore contrary to law and passed without proper application of mind.

Impugned orders dated 10.02.2023 and 14.03.2023 are set aside; writ petition allowed.

Final Conclusion: The petition succeeds: because the petitioner tendered the returns within the period stipulated in the show cause notice and the assessing authority acted without applying its mind, the orders imposing penalty and the subsequent order are set aside.

Input Tax Credit - retrospective cancellation of registration - requirement of departmental evidence for denial of Input Tax Credit - show cause notice - obligation to furnish details under CGST Rules 99, 100 and 142

Input Tax Credit - retrospective cancellation of registration - requirement of departmental evidence for denial of Input Tax Credit - Impugned show cause notice alleging that Input Tax Credit was availed on the basis of invoices issued by suppliers whose registrations were cancelled retrospectively is not sustainable in absence of any departmental evidence of such cancellations for the relevant assessment year. - HELD THAT: - The Court examined the show cause notice and the petitioner's reply and noted that there is no express or physical communication on record from the respondents demonstrating that the registration of any of the suppliers had been cancelled retrospectively for the assessment year 2018-19. In the absence of such material particulars or documentary evidence establishing cancellation of registration in the relevant period, the allegation in the notice that ITC was availed from retrospectively cancelled dealers lacks foundation. Consequently, there is nothing on which the department can adjudicate on merits with respect to that specific discrepancy in the notice. [Paras 11]

The impugned notices are quashed to the extent they allege that ITC was availed on the basis of invoices from suppliers whose registrations were cancelled retrospectively for the assessment year 01.04.2018 to 31.03.2019.

Show cause notice - obligation to furnish details under CGST Rules 99, 100 and 142 - Respondents are permitted to issue a fresh notice if they possess specific evidence of cancellation of supplier registrations and after furnishing requisite details to the petitioner. - HELD THAT: - The Court recognised the departmental power to question ITC where valid grounds and supporting evidence exist, but emphasised the procedural requirement that the department must place specific details and evidence before the assesseee. Relying on the petitioner's request for particulars and the cited CGST Rules concerning supply of details, the Court held that the department may re-examine the matter and serve a fresh notice, provided it attaches specific documentary evidence of retrospective cancellation and the particulars necessary for the assessee to meet the allegation. [Paras 11]

Respondents are free to serve a fresh notice containing specific details and evidence of cancellation of registrations for the relevant period.

Final Conclusion: Writ petition disposed; show cause notices quashed insofar as they allege ITC was availed from suppliers whose registrations were retrospectively cancelled for 01.04.2018 to 31.03.2019, with liberty to the department to issue a fresh notice supported by specific evidence and particulars.

Confiscation under Section 130 of the Karnataka Goods and Services Tax Act, 2017 - penalty and fine consequent to confiscation - substantive remedy under Section 107 of the Karnataka Goods and Services Tax Act, 2017 - exclusion of time during pendency for computation of limitation

Confiscation under Section 130 of the Karnataka Goods and Services Tax Act, 2017 - substantive remedy under Section 107 of the Karnataka Goods and Services Tax Act, 2017 - exclusion of time during pendency for computation of limitation - Petition for quashing the order of confiscation was not adjudicated on merits; petitioner granted liberty to challenge the impugned order by availing the remedy under Section 107 and to seek exclusion of time spent in these proceedings for calculating limitation. - HELD THAT: - The High Court noted that a previous writ concerning the same petitioner for different periods had been disposed of with liberty to pursue the substantive remedy under Section 107. Following that approach, the Court declined to decide the merits of the present challenge to the order of confiscation passed under Section 130 and instead disposed of the petition by expressly reserving liberty to the petitioner to invoke Section 107. The Court further observed that the period during which the present writ was pending can be sought to be excluded when calculating limitation for any proceedings under the statutory remedy. All substantive contentions were left open for determination before the competent forum upon initiation of the prescribed remedy.

Petition disposed of by granting liberty to challenge the confiscation order under Section 107; time spent in these proceedings may be excluded for limitation purposes; all other contentions kept open.

Final Conclusion: Writ petition dismissed without adjudication on merits; petitioner permitted to pursue the statutory remedy under Section 107 of the Karnataka GST Act, 2017, with liberty to claim exclusion of the time spent in these proceedings for limitation calculations.

Composite supply - principal supply - classification under CTH 8802 - valuation including free issue materials (FIM) - time of supply of goods - transaction value - Section 8 of the CGST Act - Section 12 of the CGST Act - Section 15 of the CGST Act

Composite supply - principal supply - Section 2(30) of the CGST Act - Section 8 of the CGST Act - Whether the contract between the applicant and Airbus is a supply of goods or a composite/mixed supply and, if composite, which is the principal supply. - HELD THAT: - A conjoint reading of the contract and scope of work shows the applicant's main obligation is to manufacture and deliver 40 airworthy C-295 aircrafts, while support and after-sales activities are ancillary. The contract bundles manufacture, assembly, testing and post-delivery support into a single contract price and the service elements cannot be performed independently to discharge the contractual obligation. Applying the tests for 'naturally bundled' supplies and the definition of 'principal supply', the Authority finds the transaction is a composite supply in which the supply of aircraft (goods) is the predominant element and the ancillary services are incidental to that principal supply. The Authority therefore treats the transaction as a supply of the principal supply under Section 8(a). [Paras 33, 34, 35, 36]

The contract is a composite supply and the principal supply is the supply of aircraft (i.e., supply of goods).

Classification under CTH 8802 - rate of tax - notification No. 1/2017-IT (Rate) - The tariff classification and applicable GST rate for the principal supply. - HELD THAT: - Having held that the principal supply is the supply of aircrafts, the Authority applies the tariff and entry in the notifications. Aircrafts fall under Chapter/Heading 8802 and notification entries specify a 5% rate for goods under that heading. Reliance on statutory scheme and relevant judicial exposition of composite supply treatment supports taxing the bundle as the principal supply (goods) and applying the corresponding rate. [Paras 39, 40]

The aircraft are classifiable under CTH 8802 and will attract GST at 5% in terms of the relevant notification.

Valuation including free issue materials (FIM) - transaction value - Section 15(2)(b) of the CGST Act - Whether the value for GST purposes must include the value of free issue materials (FIM) supplied by Airbus. - HELD THAT: - Section 15 prescribes transaction value as the primary basis, and Section 15(2)(b) requires inclusion of amounts the supplier is liable to pay but which have been incurred by the recipient. The Authority follows reasoning in the cited High Court decision which held that where goods supplied free by the recipient are integral/essential to the supplier's performance (i.e., are crucial components), their value cannot be ignored and must be included in the value of supply. Given that FIM comprise critical aircraft components and are essential to manufacture and delivery of airworthy aircraft, the Authority holds their value must be included in the transaction value for GST. [Paras 42, 43, 44, 45]

The value for GST will include the value of FIMs supplied free of cost by Airbus.

Time of supply of goods - Section 12 of the CGST Act - Notification No. 66/2017-Central Tax - The time of supply for payment of GST and whether GST is payable on receipt of advances for supply of goods under the contract. - HELD THAT: - Section 12 provides that time of supply of goods is the earlier of invoice issuance (or last date to issue) and receipt of payment. Notification No. 66/2017-Central Tax notifies registered persons to pay central tax on outward supply of goods at the time of supply as specified in clause (a) of sub-section (2) of Section 12, effectively aligning liability to invoice issuance for such registered persons. Reading Section 12 with Notification No. 66/2017, the Authority concludes that advances received for supply of goods do not attract immediate GST liability under the circumstances described and that time of supply will be determined under Section 12 (i.e., by invoice/last date to issue invoice or receipt of payment as applicable). [Paras 46, 47]

Time of supply will be determined in accordance with Section 12 of the CGST Act; GST is not required to be paid on receipt of advances for supply of goods in view of Notification No. 66/2017-Central Tax as explained.

Final Conclusion: The Authority ruled that the applicant's contract with Airbus is a composite supply with the supply of aircraft as the principal supply; the aircraft are classifiable under CTH 8802 and attract GST at 5%; the transaction value for GST purposes will include the value of free issue materials supplied by Airbus; and the time of supply shall be determined under Section 12 of the CGST Act (with advances treated in light of Notification No. 66/2017-Central Tax).

Summary order. Delay condoned; leave granted; matter listed on 24.01.2024.

Late fee under Section 234E - failure to deliver statement under Section 200(3) - retrospective effect of statutory amendment - laches and inordinate delay in writ petitions

Laches and inordinate delay in writ petitions - Writ petition dismissed for inordinate delay and laches in challenging intimations issued in 2013 and 2016. - HELD THAT: - The Court found that the petitioner approached the High Court more than ten years after the intimations in Exhibits P-1 to P-5 were issued (in 2013 and 2016). The delay and laches in bringing the challenge were held to be a sufficient ground for dismissal. The Court treated the prolonged unexplained delay as fatal to the petition's maintainability and concluded that the writ petition was liable to be dismissed on this ground. [Paras 1, 4]

The writ petition is dismissed on the ground of gross delay and laches.

Late fee under Section 234E - failure to deliver statement under Section 200(3) - retrospective effect of statutory amendment - Validity of intimations for late fee under Section 234E and rejection of the petitioner's contention based on a subsequent amendment to Section 200A. - HELD THAT: - The Court examined the legal position prevailing on the dates when the intimations were issued and held that Section 234E, inserted by the Finance Act, 2012 with effect from 01.07.2012, governed levy of late fee for failure to deliver the statement within the time prescribed by Section 200(3). The petitioner's submission that an amendment to Section 200A effective from 01.06.2015 rendered the intimations incorrect was rejected because subsequent amendments without retrospective effect cannot be applied to notices issued earlier. The determinative legal standard was the law existing on the date of issuance of the intimations, namely Section 234E. [Paras 2, 3, 4]

The intimations charging late fee under Section 234E were valid as per the law in force when issued; the contention based on the later amendment to Section 200A is rejected.

Final Conclusion: The writ petition challenging intimations for late fee relating to Assessment Year 2012-13 is dismissed both for inordinate delay and on merits: the late fee under Section 234E was leviable as per the law in force when the notices were issued, and a subsequent non retrospective amendment does not affect those intimations.

Stay of demand - adjustment of refunds against demand - deposit percentage for grant of stay (20%) - Office Memorandum on stay guidelines - appeal before CIT(A) as ground for stay - right to refund of excess amount

Office Memorandum on stay guidelines - appeal before CIT(A) as ground for stay - deposit percentage for grant of stay (20%) - Whether the Assessing Officer was obliged to grant stay of the demand in view of the CBDT OMs when the demand was disputed before the CIT(A). - HELD THAT: - The Court examined the CBDT Office Memoranda dated 29.02.2016 and 31.07.2017 which prescribe that where an outstanding demand is disputed before the CIT(A), the Assessing Officer shall grant stay of the demand on payment/deposit of a specified percentage of the disputed demand. The OM of 29.02.2016 fixed a standard rate at 15% subject to exceptions and supervisory review; the OM of 31.07.2017 revised that standard rate to 20%. The assessment order dated 30.12.2019 created a disputed demand which was contested before the CIT(A) by an appeal filed on 27.01.2020. Applying the said OMs, the AO was required to grant a stay of recovery pending disposal of the first appeal on the modified standard terms prescribed by the Board. [Paras 8, 9, 10]

The AO was obliged to grant stay of the disputed demand pending disposal of the first appeal in accordance with the CBDT OMs, with the standard deposit fixed at 20% of the disputed demand.

Adjustment of refunds against demand - right to refund of excess amount - stay of demand - Whether the petitioner was entitled to release of refunds in excess of the amount to be retained for granting stay. - HELD THAT: - Facts recorded show that the revenue had already adjusted the demand against the petitioner's pre-paid taxes and subsequently remitted an amount to the petitioner in March 2020. The outstanding demand as per the assessment order was quantified; the respondents held refunds exceeding 20% of that disputed demand. Instructed by the Board's guideline permitting adjustment of refunds to the extent required for granting stay, the Court directed that the AO stay the demand while retaining 20% of the disputed demand and release the balance amount held as refund to the petitioner, thereby giving effect to the entitlement to the excess refund once the prescribed retention for stay is satisfied. [Paras 10, 11]

The AO shall retain 20% of the disputed demand and release to the petitioner the refunds in excess of that retained amount.

Final Conclusion: Writ petition disposed directing the Assessing Officer to stay the demand created by the assessment order dated 30.12.2019 by retaining 20% of the disputed demand and to release the remaining refunds to the petitioner for AY 2017-18.

Section 54EE capital gains exemption by investment in notified long-term specified fund - promissory estoppel - legitimate expectation - judicial review of executive discretion - mandamus cannot be issued to direct executive to make policy or exercise delegated legislative power - arbitrariness under Article 14 in exercise of delegated legislative power - distinction between subordinate legislation and administrative action

Section 54EE capital gains exemption by investment in notified long-term specified fund - arbitrariness under Article 14 in exercise of delegated legislative power - mandamus cannot be issued to direct executive to make policy or exercise delegated legislative power - Validity of non-issuance of notification under Explanation 2(b) to Section 54EE and whether such non-issuance is arbitrary in violation of Article 14. - HELD THAT: - Section 54EE grants exemption only upon investment in units of funds to be notified by the Central Government and requires units to be issued before 1 April 2019. The decision whether to notify such a fund lies within the executive's domain of fiscal policy and amounts to exercise of delegated legislative power (subordinate legislation). Judicial interference by issuing mandamus to compel notification would amount to directing the executive to adopt a particular policy, which courts must avoid. Absent evidence that the executive acted with mala fide, extraneous considerations, or without applying relevant mind, mere non-issuance of the notification cannot be characterised as arbitrary so as to invoke Article 14. Reliance on Mangalam Organics and related precedents establishes that courts will not direct the exercise of such discretionary subordinate-legislative power except in exceptional circumstances of mala fides or abuse. [Paras 12, 13, 14, 15]

Non-issuance of the notification under Section 54EE is not shown to be arbitrary and does not warrant issuance of mandamus directing the Central Government to notify the long-term specified asset/fund.

Promissory estoppel - judicial review of executive discretion - distinction between governmental/sovereign functions and situations where estoppel may apply - Whether the Central Government is estopped from not issuing the notification by virtue of public statements, memorandum and press releases and whether promissory estoppel can be invoked to compel notification. - HELD THAT: - The doctrine of promissory estoppel is an equitable remedy requiring a valid promise and detrimental change of position; it is not generally applied against the State in its governmental, public or legislative functions except to prevent fraud or manifest injustice. The material placed by the petitioner (memorandum, press release, parliamentary answer) does not demonstrate the type of irrevocable promise or reliance leading to fraud or manifest injustice analogous to cases where estoppel has been imposed. Authorities establish that in tax and fiscal matters the Revenue and Government may change positions and that promissory estoppel will not ordinarily be used to amend or override statutory provisions or eligibility conditions. Accordingly, the Court cannot hold the Central Government bound by promissory estoppel to issue the notification. [Paras 20, 21, 22, 23, 24]

Doctrine of promissory estoppel does not apply to compel the Central Government to notify long-term specified assets under Section 54EE in the facts of this case; the contention is rejected.

Legitimate expectation - judicial review of executive discretion - mandamus cannot be issued to direct executive to make policy or exercise delegated legislative power - Whether the petitioner possessed a legitimate expectation that the notification would be issued before 1 April 2019 and what relief, if any, follows from such expectation. - HELD THAT: - Legitimate expectation concerns fairness, reasonableness and non-arbitrariness, but it cannot be used to compel the executive to perform a legislative or policy function. The petitioner was aware that the statutory benefit under Section 54EE required a notification and that without such notification investment in a notified fund could not be made. The executive's choice not to notify falls within policy domain and does not constitute unfairness or arbitrariness in the sense required to sustain relief. There is no foundation for recognising a enforceable legitimate expectation that would oblige the Government to issue the notification in the manner sought. The petitioner therefore has no entitlement to the Section 54EE exemption in absence of a notification. [Paras 25, 26, 27, 28]

No enforceable legitimate expectation is made out; petitioner is not entitled to relief compelling notification and the writ petition is rejected, subject to petitioner being permitted to make a representation to the Central Government.

Final Conclusion: Writ petition dismissed. The Court holds that non-issuance of the notification under Explanation 2(b) to Section 54EE is not arbitrary, promissory estoppel does not oblige the Government to notify the fund, and no legitimate expectation entitles the petitioner to the statutory exemption; petitioner may, however, make a representation to the Central Government which shall be considered expeditiously.

Unexplained cash credit - non-compliance with summons under section 131 not a ground per se for addition - identity and creditworthiness of investors - duty of assessing authority to verify and investigate material/evidence filed - disallowance under section 14A read with Rule 8D - prospective operation of explanatory amendment to section 14A (Finance Act, 2022)

Unexplained cash credit - non-compliance with summons under section 131 not a ground per se for addition - identity and creditworthiness of investors - duty of assessing authority to verify and investigate material/evidence filed - Addition of share application money of Rs. 2,70,50,000/- treated as unexplained cash credit by the AO and confirmed by the Ld. CIT(A). - HELD THAT: - The Tribunal held that where the assessee produced documents establishing the receipt of share application money and material bearing on the identity and creditworthiness of the investors, the AO and the first appellate authority could not summarily treat the receipts as unexplained cash credit merely because directors or investors did not personally comply with summons under section 131. The authorities were under a duty to examine, investigate and comment upon the documents placed on record and to make further enquiries where necessary; absent such inquiry the conclusion of unexplained cash credit is unsustainable. The Tribunal applied the ratio of precedents holding that non-production in response to summons is of little significance when documentary evidence proving identity and creditworthiness is on record and when no further pursuit was made by the revenue to test those documents. On this basis the Tribunal set aside the orders of the authorities and allowed the ground. [Paras 8, 9]

Addition treated as unexplained cash credit set aside; appeal allowed on this ground and addition deleted.

Disallowance under section 14A read with Rule 8D - prospective operation of explanatory amendment to section 14A (Finance Act, 2022) - Confirmation of disallowance under section 14A read with Rule 8D amounting to Rs. 1,26,958/- when no exempt income was earned during the year. - HELD THAT: - The Tribunal noted it was undisputed that no exempt income arose in the relevant year. Following settled law, the Tribunal held that no disallowance under section 14A read with Rule 8D is called for where there is no exempt income. The Tribunal further rejected the revenue's contention that the explanatory insertion by Finance Act, 2022 operates retrospectively, treating that amendment as prospective and therefore inapplicable to the assessment year under consideration. Applying the decisions relied upon by the assessee, the Tribunal set aside the disallowance and directed deletion. [Paras 10, 13, 14]

Disallowance under section 14A read with Rule 8D deleted; appeal allowed on this ground.

Final Conclusion: The appeal is allowed in entirety: the addition treating share application money as unexplained cash credit is set aside and the disallowance under section 14A read with Rule 8D is deleted; the AO is directed to give effect to this order.

Fees for Technical Services - make available - Article 12(4)(b) of India-Singapore DTAA - taxability of management support services - credit for tax deducted at source - interest under section 234B - penalty under section 271(1)(c)

Fees for Technical Services - make available - Article 12(4)(b) of India-Singapore DTAA - taxability of management support services - Receipts from management support services provided to Cameron Manufacturing (India) Pvt. Ltd. are not in the nature of Fees for Technical Services (FTS). - HELD THAT: - The Tribunal examined the nature of services (international purchasing, marketing and sales support, accounting and finance support, tax and legal support, IT support and HR support) and found them to be broadly managerial and, to some extent, consultancy. Article 12(4)(b) treats managerial, technical or consultancy services as FTS only where the provider "makes available" technical knowledge, experience, skill, know how or process enabling the recipient to apply the technology independently. The departmental authorities failed to produce cogent material to show that the assessee made available such technical knowledge or skill that would enable the recipient to apply it independently. The facts for the assessment year 2016 17 are identical to those in the Tribunal's earlier decisions for assessment years 2013 14 to 2015 16, where the Tribunal held the receipts were not FTS. In view of the absence of evidence satisfying the "make available" condition, the receipts are not taxable as FTS and the assessee's grounds on this point are allowed. [Paras 5, 6]

Management support fees from Cameron Manufacturing (India) Pvt. Ltd. are not FTS; grounds 2 and 3 allowed.

Credit for tax deducted at source - Direction to the Assessing Officer to consider the assessee's claim for credit of TDS. - HELD THAT: - The assessee claimed credit for tax deducted at source which the Assessing Officer had not granted. The Department had no objection to consideration of the claim. The Tribunal directed the Assessing Officer to examine and grant TDS credit in accordance with law. The relief is allowed for statistical purposes and remitted to the Assessing Officer for adjudication consistent with legal provisions. [Paras 9]

Assessing Officer directed to consider the plea for granting credit for TDS in accordance with law; ground allowed for statistical purpose.

Interest under section 234B - penalty under section 271(1)(c) - Charge of interest under section 234B and initiation of penalty under section 271(1)(c) not adjudicated as they are consequential and premature at this stage. - HELD THAT: - The Tribunal observed that the contention on interest and penalty arises as consequential matters flowing from the assessment and are premature to adjudicate at present. No substantive decision was rendered on the merits of charging interest or imposing penalty; the matters were left open for adjudication at the appropriate stage. [Paras 10]

Interest and penalty issues are consequential and premature; no adjudication at this stage.

Final Conclusion: The appeal is partly allowed: the management support fees are not taxable as Fees for Technical Services for AY 2016 17; the Assessing Officer is directed to consider the claim for TDS credit in accordance with law; issues as to interest under section 234B and penalty under section 271(1)(c) are consequential and premature and are not adjudicated.

Additions made dehors incriminating material found during search - deletion of additions in absence of incriminating material (PCIT vs Abhisar Buildwell) - section 2(22)(e) deemed dividend limited to shareholder and inapplicable where advance is a trade advance - addition under section 68 for unsecured loan not sustainable without seized material - disallowance under section 40(a)(ia)/TDS cannot be mechanical and requires application of mind - Rule 27 ITAT petition challenging post-search additions on ground of finality

Additions made dehors incriminating material found during search - deletion of additions in absence of incriminating material (PCIT vs Abhisar Buildwell) - Rule 27 ITAT petition challenging post-search additions on ground of finality - Deletion of additions made without reliance on seized/incriminating material as per Hon'ble Supreme Court authority - HELD THAT: - The Tribunal found that multiple additions in the assessments under challenge were not founded on any incriminating or seized material recovered during the search and were made dehors such material. The Revenue's concession on this factual position was recorded. Applying the principle in PCIT vs Abhisar Buildwell Pvt. Ltd. (2023) SCC Online SC 481, additions which are not supported by incriminating material seized in the search cannot be sustained. On this basis the Tribunal held that the additions so made were liable to be deleted and allowed the assessee's petitions filed under Rule 27 of the ITAT Rules asserting finality of assessment in absence of incriminating material. [Paras 7, 13, 23]

Additions made dehors seized/incriminating material deleted; assessee's Rule 27 grounds allowed and revenue grounds dismissed.

Section 2(22)(e) deemed dividend limited to shareholder and inapplicable where advance is a trade advance - addition under section 68 for unsecured loan not sustainable without seized material - Deletion of addition as deemed dividend under section 2(22)(e) where recipient was not a registered shareholder and advance was found to be a trade advance - HELD THAT: - The Assessing Officer treated a loan/advance from another company as deemed dividend under section 2(22)(e) on account of common director/shareholding. The Appellate Authority found the nature of the advance to be a trade advance and recorded that the assessee was not a registered shareholder of the lender-company. Reliance was placed on precedents holding that the scope of section 2(22)(e) is confined to shareholders and that trade advances do not attract deemed dividend treatment. On these findings the Tribunal upheld the deletion of the addition treated as deemed dividend. [Paras 14, 15, 17]

Addition as deemed dividend deleted; revenue appeal dismissed on this issue.

Disallowance under section 40(a)(ia)/TDS cannot be mechanical and requires application of mind - Deletion of addition for alleged failure to deduct TDS where the Assessing Officer acted mechanically and Appellate Authority's factual findings on nature of payments and compliance were upheld - HELD THAT: - The Appellate Authority remanded and then examined the nature of payments alleged to be made without deduction of tax. It found that certain transactions were not made, that only a small portion attracted TDS and had been complied with, and that remaining payments either did not attract TDS or were below threshold. The Tribunal agreed that the Assessing Officer had made the disallowance mechanically without applying his mind and that the Appellate Authority's reasoning was cogent. Accordingly, the deletion of the addition under section 40(a)(ia) was affirmed. [Paras 24, 26]

Addition for alleged non-deduction of TDS deleted; Appellate Authority's order affirmed.

Final Conclusion: All three appeals filed by the Revenue are dismissed: additions made without reliance on incriminating/seized material are deleted under the principle in PCIT vs Abhisar Buildwell; the deemed dividend addition is deleted as section 2(22)(e) was inapplicable; and the TDS-related disallowance was deleted for being mechanical and lacking application of mind.

Revisionary jurisdiction under Section 263 of the Income-tax Act - Requirement of twin conditions for invoking Section 263 - Scope of interference where Assessing Officer has conducted independent enquiry and taken a plausible view - Maintainability of a second revision on the same issue - Duty of the revisional authority to make independent enquiry before invoking revisionary power

Scope of interference where Assessing Officer has conducted independent enquiry and taken a plausible view - Requirement of twin conditions for invoking Section 263 - Validity of exercise of revisionary jurisdiction to set aside an assessment where the Assessing Officer had made enquiries, called for details from shareholders and taken a plausible view deleting additions. - HELD THAT: - The Tribunal found that in the set-aside assessment proceedings the Assessing Officer had called for and considered details from the assessee and subscribers (including notices under section 133(6)), carried out examination and enquiry and recorded reasons for deleting the addition made earlier under section 68. The revisional power under Section 263 can be exercised only when the twin conditions envisaged therein are satisfied; if those conditions are not met the jurisdiction is not available. Where the Assessing Officer has conducted an enquiry and taken a plausible view based on material on record, the Principal Commissioner cannot exercise revisionary jurisdiction merely because he would have taken a different view. Further, if the revisional authority believes there was inadequate enquiry, it is incumbent on him to make or cause an independent enquiry to reach a conclusion that the order is erroneous and prejudicial to revenue before invoking Section 263. Applying these principles to the facts, the Tribunal held that the twin conditions were not satisfied and the second revisionary order was therefore invalid. [Paras 9, 10, 11, 12]

Revision under Section 263 quashed as the Assessing Officer had conducted inquiry and taken a plausible view; the twin conditions for invoking Section 263 were not satisfied.

Maintainability of a second revision on the same issue - Revisionary jurisdiction under Section 263 of the Income-tax Act - Whether a second invocation of revisionary jurisdiction under Section 263 on the same issue, after an earlier revision and fresh assessment, is maintainable. - HELD THAT: - The Tribunal noted precedents of the Calcutta High Court holding that a second round of revision under Section 263 on the same issue, following an earlier exercise of revision, is invalid. Respecting that ratio and applying it to the facts - where the matter had already been subjected to revision and the Assessing Officer had adjudicated the set-aside assessment - the Tribunal held that a subsequent revision in respect of the same issue was not maintainable. Consequently the second revisional order was held to be invalid. [Paras 13, 14]

Second revision on the same issue held invalid and not maintainable; the revisional order quashed.

Final Conclusion: The second revisional order passed under Section 263 was quashed: the Assessing Officer had conducted inquiries and taken a plausible view, the twin conditions for invoking Section 263 were not satisfied, and a second revision on the same issue is not maintainable; appeal allowed.

Assessment against a dissolved company is a nullity - company struck off under Section 560(5) of the Companies Act ceases to exist - restoration and continuance of juridical personality under Section 560(6)-(7) - liability and recovery from directors or third parties under Section 179 and Section 226(3) of the Income tax Act - competence to prosecute appeals: dissolved company versus directors

Company struck off under Section 560(5) of the Companies Act ceases to exist - assessment against a dissolved company is a nullity - competence to prosecute appeals: dissolved company versus directors - liability and recovery from directors or third parties under Section 179 and Section 226(3) of the Income tax Act - Validity of assessment orders passed in the name of a company that had been struck off and dissolved under Section 560(5) of the Companies Act - HELD THAT: - The Tribunal found on facts that the assessee company had been struck off and dissolved w.e.f. the date notified by the Registrar of Companies and therefore had ceased to exist on the dates when the impugned assessment orders were passed. Relying on the statutory scheme in Section 560(5)-(7) (which permits restoration in limited circumstances) and on authoritative precedents, the Tribunal held that a company dissolved under Section 560(5) has no juridical existence and an assessment made against a non existent entity is a nullity. The Tribunal noted that Sections 226(3) and 179 of the Income tax Act preserve remedies to recover tax from persons who hold money for the dissolved company or from directors where recovery from the company is not possible; such persons retain locus to challenge assessments. The Tribunal distinguished decisions concerning conversion of a company into another form (such as conversion to an LLP) where dissolution was not involved. In the circumstances, and following coordinate bench decisions and the J&K & Ladakh High Court authority, the Tribunal upheld the Commissioner (Appeals) in quashing the assessments which were made in the name of the non existing company and dismissed the Revenue appeals. [Paras 4, 6]

Both assessment orders passed in the name of the struck off and dissolved company are not sustainable and are quashed; Revenue appeals dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s orders quashing the assessments for A.Y. 2008 09 and A.Y. 2009 10 because the company had been struck off and dissolved under Section 560(5) of the Companies Act, and an assessment against a non existent company is a nullity; appeals by the Assessing Officer are dismissed.

Unexplained cash credit under Section 68 - taxation under Section 115BBE - retrospective application of amended Section 115BBE - benefit of doubt in absence of evidence of application of funds - test of human probabilities

Unexplained cash credit under Section 68 - benefit of doubt in absence of evidence of application of funds - test of human probabilities - Addition of Rs. 15,35,000 on account of alleged unexplained cash deposits treated as unexplained cash credit under Section 68 - HELD THAT: - The Tribunal examined the Assessing Officer's finding that cash withdrawals made in October 2012 were subsequently deposited during demonetisation in 2016 but that the assessee failed to prove continuing availability of those cash amounts. The Assessing Officer did not produce material showing that the withdrawn cash had been applied or spent; his conclusion rested on the time gap and on applying the test of human probabilities to doubt the assessee's explanation that cash was kept in a safe for emergencies. The Tribunal noted the assessee's regular income declarations in preceding years and that cash withdrawals in October 2012 were recorded in the cash book produced by the assessee. In the absence of any evidence from the revenue demonstrating application or diversion of the withdrawn cash, the Tribunal gave the assessee the benefit of doubt to the extent of 50% of the cash deposits, deleting that portion of the addition, while confirming the remaining 50% as unexplained cash credit. [Paras 8, 9]

Addition partly deleted to the extent of 50% of the cash deposit; remaining 50% confirmed as unexplained cash credit.

Taxation under Section 115BBE - retrospective application of amended Section 115BBE - Whether the addition confirmed as unexplained cash credit is to be taxed under the amended (substituted) provisions of Section 115BBE retrospectively - HELD THAT: - The Tribunal considered earlier Bench and other decisions holding that the substituted/amended provisions of Section 115BBE are not retrospective. Applying that view, the Tribunal held that the amended Section 115BBE could not be applied to the cash deposits in issue and directed that the confirmed portion of the addition be taxed under the pre-amendment treatment at the applicable rate (directed as 30% plus applicable surcharges). [Paras 10]

Amended Section 115BBE held not retrospective; confirmed addition to be taxed at pre-amendment rate (directed at 30% plus surcharges).

Final Conclusion: The appeal is partly allowed: 50% of the addition of Rs.15,35,000 is deleted for lack of evidence of application of funds, the balance addition is confirmed and shall be taxed under the pre-amendment provisions of Section 115BBE (at the directed rate of 30% and applicable surcharges).

Penalty under section 271D - Contravention of provisions of section 269SS - Provisions of section 271D and 271E are pari materia - Requirement of recorded satisfaction in the assessment order for initiation of penalty proceedings

Penalty under section 271D - Requirement of recorded satisfaction in the assessment order for initiation of penalty proceedings - Provisions of section 271D and 271E are pari materia - Whether penalty under section 271D can be levied without satisfaction being recorded in the assessment order. - HELD THAT: - The Tribunal applied the binding precedent of the jurisdictional High Court which, relying on the Supreme Court decision in Jai Laxmi Rice Mills, held that Sections 271D and 271E are in pari materia and that initiation of penalty proceedings under those provisions requires satisfaction recorded in the original assessment order. The revenue's contention that penalty under section 271D is automatic and may be imposed independently of the assessment order was rejected. The Tribunal observed that when the Supreme Court has laid down that recorded satisfaction must exist in the assessment order for initiating penalty proceedings under Section 271E, the same principle applies equally to Section 271D because the two provisions are pari materia; therefore, penalty under Section 271D cannot be sustained in absence of recorded satisfaction in the assessment order. Applying that legal principle to the facts, the Tribunal found the impugned orders sustaining the penalty to be contrary to law and liable to be quashed. [Paras 6, 7]

Penalty under section 271D cannot be levied without recorded satisfaction in the assessment order; impugned orders confirming the penalty are quashed and the assessee's appeal is allowed.

Final Conclusion: Following the binding precedent that Sections 271D and 271E are pari materia and require recorded satisfaction in the assessment order for initiation of penalty proceedings, the Tribunal set aside the orders confirming penalty and allowed the assessee's appeal for AY 2017-18.

Disallowance under section 14A of the Income-tax Act - computation under Rule 8D - average investment limited to investments yielding exempt income - prospective application of Finance Act, 2022 explanation to section 14A - treatment of ESOP expenses as revenue deduction under section 37(1)

Disallowance under section 14A of the Income-tax Act - computation under Rule 8D - average investment limited to investments yielding exempt income - prospective application of Finance Act, 2022 explanation to section 14A - Whether the disallowance under section 14A should be computed by considering only those investments which yielded exempt income during the year and whether the amendment/explanation inserted by Finance Act, 2022 justifies the AO's broader computation. - HELD THAT: - The Tribunal upheld the view in Vireet Investment (Special Bench) and the Delhi High Court in ACB India Ltd. that for computing average investment under Rule 8D(2)(iii) only investments that yielded exempt income during the year are to be taken into account. The assessee had furnished a breakup of exempt income (dividend from mutual funds, interest from PTCs and bonds) and a computation of suo-moto disallowance; however, the AO included investments capable of yielding exempt income but which did not actually yield such income. The Tribunal directed the assessee to furnish a bifurcation of investments that earned exempt income and those that did not, and directed the AO to re-compute disallowance under section 14A taking the average of investments that yielded exempt income; if the assessee's suo-moto disallowance conforms to that computation, no further disallowance would be required. The Tribunal also rejected the Revenue's reliance on the Explanation inserted by Finance Act, 2022, holding (following the Delhi High Court in Era Infrastructure) that the Explanation is prospective with effect from 01.04.2022 (applicable from AY 2022-23) and is not applicable to the assessment year under appeal. [Paras 8]

Direction that Rule 8D computation shall consider only investments that yielded exempt income; assessee to furnish bifurcation and AO to re-compute disallowance accordingly; contention based on Finance Act, 2022 Explanation rejected as not applicable to AY. 2020-21.

Treatment of ESOP expenses as revenue deduction under section 37(1) - Whether ESOP expenses claimed by the assessee are to be disallowed as capital in nature or allowable as revenue expenditure. - HELD THAT: - The Tribunal recorded that the First Appellate Authority and earlier Tribunal decisions in the assessee's own case and in the group applied the principle that ESOP discount/expenses are allowable as revenue deduction (section 37(1)) where facts remain unchanged. Revenue did not demonstrate any change in facts or law warranting interference. In view of consistent earlier departmental and judicial decisions (including Tribunal orders in the assessee's own case), the learned CIT(A)'s deletion of the addition was upheld. [Paras 11]

Addition disallowing ESOP expenses deleted; allowance of ESOP expenses upheld.

Final Conclusion: Revenue's appeal dismissed. AO directed to re-compute disallowance under section 14A/Rule 8D after the assessee furnishes bifurcation of investments that yielded exempt income; ESOP expenses allowed as revenue deduction and the related addition deleted.

Taxability of offshore sale where title passes outside India - Separate offshore and onshore contracts versus composite/turnkey contract - Dependent agent permanent establishment and attribution of profits - Characterisation of receipts as fees for technical services (FTS) vis-a -vis business income from sale of goods - Allocation of receipts between service element and sale element without contractual basis

Taxability of offshore sale where title passes outside India - Receipts from offshore CIF supplies where title and risk pass outside India are not taxable in India. - HELD THAT: - The Tribunal examined the offshore contracts and noted the contracts provide for design, manufacture, testing and CIF supply with title passing on loading at the port of origin and payment in foreign exchange. The contract terms, documents to be submitted on shipment and bid-data that expressly records that income-tax is not payable if title passes outside India, demonstrate that the transfer of ownership and associated risks and liabilities took place outside India. Reliance was placed on precedents holding that where sale is completed overseas and property passes outside India, taxable event does not arise in India. The Tribunal found the Revenue's contrary conclusion to be without rational basis and unsupported by evidence, and directed deletion of additions relating to offshore supplies. [Paras 11, 12, 13, 18, 20]

Receipts from the offshore supply of goods and equipment are not chargeable to tax in India and the additions are to be deleted.

Separate offshore and onshore contracts versus composite/turnkey contract - Dependent agent permanent establishment and attribution of profits - Distinct offshore and onshore contracts cannot be treated as composite merely because of cross-fall breach clauses or because an Indian group entity performed onshore activities; no attribution of offshore supply receipts to a PE on that basis. - HELD THAT: - The Tribunal held that the mere existence of cross-fall breach clauses or that related Indian entity performed onshore tasks does not convert separate contracts into a composite contract. There is no material showing ZTT India Private Limited was involved in design, manufacture, testing or the CIF supply from China. Reimbursement of local expenses and a small commission paid to the Indian group entity did not establish a dependent-agent relationship that would create a PE for the offshore supply. Authorities cited support the proposition that offshore supply remains taxable outside India when property passes abroad despite turnkey or linked arrangements. Consequently, even if a PE existed, there was no basis to attribute incomes from the offshore supply to it. [Paras 13, 19, 20]

Offshore receipts cannot be attributed to an alleged PE in India; the finding of a PE basis for taxing the offshore supplies is unsustainable.

Characterisation of receipts as fees for technical services (FTS) vis-a -vis business income from sale of goods - Allocation of receipts between service element and sale element without contractual basis - The Assessing Officer's arbitrary bifurcation of offshore receipts into FTS and sale proceeds (60%/40%) is irrational, unsupported by contract or evidence, and unacceptable. - HELD THAT: - The Tribunal noted the Assessing Officer apportioned 60% of offshore receipts to FTS and 40% to sale without any basis in the contract documents or rationale in the assessment order. The activities such as design, manufacture, testing were integral to the manufacturing and supply and could not be carved out as separate FTS absent contractual allocation. Precedents and the contractual scheme do not justify artificial segregation of the consolidated price; the AO failed to demonstrate any link between the alleged PE and the offshore supply that would justify attribution. Therefore the bifurcation and resultant additions were held to be without basis. [Paras 5, 19]

The AO's allocation of receipts between FTS and supply is deleted as arbitrary and without contractual or evidentiary foundation.

Final Conclusion: Appeals allowed: the Tribunal held that the offshore CIF supplies where title passed outside India are not taxable in India; the characterisation and artificial bifurcation of receipts by the Assessing Officer and the attribution to an alleged PE were unsustainable, and the additions were deleted.

Condonation of delay - limitation for filing appeal - ex-parte assessment under section 144 read with section 147 - remand for fresh adjudication on merits - deposit as condition for grant of relief - exclusion of limitation period during Covid-19

Condonation of delay - limitation for filing appeal - ex-parte assessment under section 144 read with section 147 - exclusion of limitation period during Covid-19 - Whether the appeal dismissed in limine by the Commissioner for want of prosecution/limitation should be restored for adjudication on merit. - HELD THAT: - The Tribunal examined the Commissioner's in limine dismissal of the appeal for delay and the documentary material filed to explain the delay, including an affidavit by the assessee's erstwhile director claiming detention abroad from March 2018 to October 2021 and technical difficulties in filing the appeal. The Tribunal found that the assessee failed to satisfactorily substantiate the delay before the Commissioner, but, on a holistic view, noted mitigating circumstances: the assessment was ex parte, the director's asserted detention and subsequent need to take stock of proceedings, and the judicial exclusion of the Covid 19 period while computing limitation. Although a gap of about one year after return to India was not fully explained, the Tribunal held that no prejudice would be caused to the Revenue and substantial justice requires adjudication on merits. Accordingly, the Tribunal set aside the Commissioner's in limine dismissal and remanded the quantum appeal for fresh decision on merits, subject to a condition of deposit to secure the Revenue's interest. The Commissioner is to afford reasonable opportunity to the assessee, and further default will disentitle the assessee to leniency. [Paras 4, 6]

Set aside the Commissioner's in limine dismissal of the appeal and remand the quantum appeal for fresh adjudication on merits, conditional upon deposit of Rs. 51,000 in the Prime Minister's National Relief Fund within 30 days; grant of opportunity to the assessee and warning that further default bars leniency.

Remand for fresh adjudication on merits - penalty imposed under section 271(1)(c) - deposit as condition for grant of relief - Whether the penalty order affirmed by the Commissioner should be restored to the Commissioner for fresh decision after remand of the assessment order. - HELD THAT: - The Tribunal observed that the penalty appeal was predicated on the assessment order which had been dismissed in limine by the Commissioner. Having set aside and remanded the quantum assessment for fresh adjudication, the Tribunal found it necessary to remit the penalty proceedings as well to enable coordinated determination on merits. The remand of the penalty appeal is made on the same terms as the quantum remand, including the deposit condition to protect the Revenue's interest, and with directions to afford the assessee reasonable opportunity; continued non compliance will forfeit any entitlement to leniency. [Paras 5, 6]

Set aside the Commissioner's order on penalty and remand the penalty proceedings for fresh decision on merits on the same terms as the quantum remand, subject to deposit of Rs. 51,000 in the Prime Minister's National Relief Fund within 30 days and with reasonable opportunity to the assessee.

Final Conclusion: Both appeals are allowed to the extent that the in limine dismissal of the quantum appeal and the consequential penalty order are set aside and remitted to the Commissioner for fresh adjudication on merits; relief is made subject to the deposit of Rs. 51,000 in the Prime Minister's National Relief Fund within 30 days and with directions to afford reasonable opportunity to the assessee, failure of which will forfeit leniency.

Notice under section 148/149 of the Income tax Act - time bar/limitation for reopening assessment - issuance of notice - dispatch/delivery versus mere signing - doctrine of substantial compliance - reassessment under section 147 read with section 144

Notice under section 148/149 of the Income tax Act - time bar/limitation for reopening assessment - issuance of notice - dispatch/delivery versus mere signing - doctrine of substantial compliance - Validity of the notice dated 31.03.2016 issued under section 148 for reopening assessment of A.Y. 2009-10 and the consequent reassessment framed under section 147/144. - HELD THAT: - The Tribunal examined whether the notice dated 31.03.2016 was issued within the statutory six year period for reopening the assessment for A.Y. 2009 10. Relying on the principle that 'issuance' of a notice under section 149 must be understood in the context of actual dispatch/delivery and not merely the date of signing, the Tribunal applied the reasoning in Smt. Parveen Amin Bhathara and allied precedents which hold that issuance is complete when the notice is put in the hands of the proper officer for service (or otherwise dispatched in the prescribed mode), and that mere signing does not satisfy the statutory requirement. The doctrine of substantial compliance was considered but, on the facts, the impugned notice was handed over to the postal authority only after the expiry of the six year period and was received by the assessee beyond that period. Consequently, the notice was held to be beyond the permissible time limit prescribed by law, rendering the reassessment proceedings initiated thereon vitiated for want of jurisdiction. As the jurisdictional defect was dispositive, the Tribunal quashed the notice and all consequential proceedings; the remaining substantive grounds were treated as academic and were not adjudicated. [Paras 8]

Notice under section 148 dated 31.03.2016 was beyond the statutory limitation and therefore void; reassessment framed under section 147/144 and all consequential actions are quashed and set aside.

Final Conclusion: Appeal allowed: reassessment proceedings and the assessment order framed pursuant to the time barred notice are quashed; consequential additions and proceedings set aside.

Reliance on third party proceedings - seized documents as primary evidence - need for independent enquiry and corroboration - use of statements recorded under section 132(4) - veracity of entries in loose papers recovered from third parties

Reliance on third party proceedings - seized documents as primary evidence - need for independent enquiry and corroboration - Whether additions of interest income in the hands of the assessees could be sustained by the AO/CIT(A) by relying on seized loose papers recovered from a third party and on findings/orders in proceedings before the Income Tax Settlement Commission in respect of unrelated third parties - HELD THAT: - The Tribunal found that the AO made additions by treating alleged payments of interest as cash income based primarily on (a) seized loose papers recovered from third parties and (b) a breakup of cash expenditure prepared in proceedings before the Income Tax Settlement Commission (ITSC) in respect of members of the Damale/Wellbuild group. Examination of the seized entries showed absence of any stated nature or purpose of transactions and no direct nexus with the assessees; many relied documents were third party material or post search records prepared during ITSC proceedings. The Tribunal noted contradictions in statements of Shri Yuvraj Dhamale recorded under section 132(4) and that the ITSC itself found the statements unclear and ordered joint verification; the breakup of cash expenditure relied upon by the AO was not part of the seized material and was prepared in third party proceedings. The Tribunal held that mere entries in loose papers recovered from a third party, without corroborative inquiry or evidence linking those entries to the assessees, do not constitute conclusive proof to fasten liability. The AO did not undertake independent verification or afford opportunity for cross examination on the seized entries; reliance on ITSC proceedings in which the assessees had no participation and on unseized, post search documents was therefore not a legitimate basis to levy additions. Applying these principles to the facts, the Tribunal concluded that the additions confirmed by the CIT(A) were unjustified and set them aside. [Paras 6, 7, 14, 15, 16]

Additions made by the AO and confirmed by the CIT(A), based on seized loose papers from a third party and on proceedings before the Income Tax Settlement Commission pertaining to third parties, are not sustainable for want of independent enquiry and corroborative evidence; the appeals are allowed and the additions are set aside.

Final Conclusion: The Tribunal allowed the appeals, holding that additions of interest in the assessees' hands based on entries in loose papers seized from third parties and on ITSC proceedings in respect of unrelated parties were not justified in the absence of independent verification or corroborative evidence; the orders of the AO and CIT(A) confirming such additions were set aside.

Interest on delayed refunds - Liability to pay interest from expiry of three months from date of receipt of refund application - Application date versus date of compliance with departmental queries - Interpretation and application of Section 11BB of the Central Excise Act - Precedent establishing liability to pay interest (Apex Court precedents)

Interest on delayed refunds - Liability to pay interest from expiry of three months from date of receipt of refund application - Application date versus date of compliance with departmental queries - Interpretation and application of Section 11BB of the Central Excise Act - Appellants are entitled to interest on the sanctioned refunds computed from the date immediately after expiry of three months from the date of receipt of their refund applications, and not from the date of compliance with departmental queries. - HELD THAT: - The Tribunal held that Section 11BB mandates payment of interest where a refund is not made within three months from the date of receipt of the refund application, and that interest runs from the day after the expiry of that three month period until the date of refund. The lower appellate authority erred in computing the three month period from the date of compliance with departmental queries; the correct reference date is the date of receipt of the original application. The Tribunal relied on the statutory language of Section 11BB and consistent precedents of the Apex Court confirming the Revenue's liability to pay interest on delayed refunds. Applying these principles to the facts, the refunds sanctioned on 01.04.2013 were beyond three months from the dates of the respective applications (01.10.2012 and 06.11.2012), and therefore interest is payable. [Paras 12, 13]

Impugned appellate orders denying interest are set aside; appellants are entitled to interest on the refunds from the date immediately after expiry of three months from the dates of their refund applications until the date of payment.

Final Conclusion: The appeals are allowed; the orders of the first appellate authority rejecting interest are set aside and the appellants shall receive interest on the sanctioned refunds in accordance with Section 11BB, with consequential benefits as per law.

Penalty for attempt to export goods improperly - Penalty for use of false and incorrect material - Liability of partner for consent, connivance or negligence - Abetment and intentional aid as basis for penal liability - Confiscation rendering goods liable to penalty - Show cause notice not vitiated by non-mention of specific provision - Delay in adjudication and reasonableness of time

Penalty for attempt to export goods improperly - Penalty for use of false and incorrect material - Abetment and intentional aid as basis for penal liability - Liability of partner for consent, connivance or negligence - Validity of imposition of penalties under Section 114 and Section 114AA of the Customs Act, 1962 on the appellant - HELD THAT: - The Tribunal concluded that the penalties were rightly imposed. The appellant was a 49% partner in the Dubai firm Aan Impex, visited Dubai regularly, admitted receipt of substantial share of profits and admitting awareness of the modus operandi of over-invoicing in his recorded statement. The appellant also admitted introducing the alleged mastermind to his partner and signing documents related to formation of the firm. The adjudicating authority's findings that the appellant had knowledge of and participated in arrangements resulting in overvaluation of exports satisfy the elements of abetment/connivance and use of false/incorrect material. Reliance on precedents establishing that partners can be proceeded against for contraventions committed with their consent/connivance and on decisions upholding penalties for over-valuation of exports supports the imposition. Consequently, the Tribunal was not persuaded to equate the appellant's role with that of a mere employee or to fault the penalty imposition. [Paras 7, 8]

Penalties under Section 114 and Section 114AA were validly imposed on the appellant and are upheld.

Liability of partner for consent, connivance or negligence - Distinction between employee act and partner participation - Whether the Tribunal's earlier decision in respect of a co-noticee (employee) compelled deletion or reduction of penalty in the appellant's case - HELD THAT: - The Tribunal distinguished the co-noticee's case where the co-noticee was an employee carrying out directions and not a beneficiary. In contrast, the appellant was a partner in the overseas firm, admitted taking 25-30% of profits, visiting Dubai periodically, introducing the alleged mastermind to his partner and admitting knowledge of the overvaluation scheme. The factual distinction - partner and profit recipient versus salaried employee with no benefit - meant the co-noticee's favourable finding was not applicable to the appellant. [Paras 3, 7]

The co-noticee's favourable outcome does not alter the validity of penalties against the appellant; the distinction in roles justifies a different outcome.

Delay in adjudication and reasonableness of time - Whether delay of adjudication vitiated the penalty order - HELD THAT: - The Tribunal noted submissions on unreasonable delay but observed that multiple noticees in the show cause proceedin s contributed to the elapsed time. The Tribunal declined to set aside the order on this ground, finding no illegality in the period taken for adjudication given the circumstances. [Paras 3, 8]

Delay in adjudication did not vitiate the impugned order; the contention was rejected.

Show cause notice not vitiated by non-mention of specific provision - Whether omission or wrong mention of a rule/section in the show cause notice vitiated the proceedings - HELD THAT: - Relying on settled precedent, the Tribunal held that non-mention of a particular section does not invalidate proceedings where the allegations and charges are clearly set out in the notice. The appellant's role was specifically described in the notice and the Tribunal found no procedural infirmity in this regard. [Paras 8]

The show cause notice was not vitiated by the omission; the contention was rejected.

Final Conclusion: The appeal is dismissed; the penalties imposed by the adjudicating authority under the Customs Act, 1962 are upheld.

Doctrine of merger - maintainability of appeal - seizure and confiscation - redemption fine - de novo adjudication

Doctrine of merger - maintainability of appeal - de novo adjudication - Whether the appeal filed by the Revenue against the original order dated 26.08.2013 is maintainable in view of subsequent proceedings and orders. - HELD THAT: - The Tribunal's order dated 01.04.2014, which remanded the matter for determination of quantum at debonding, and the subsequent dismissal of the Revenue's challenge to that remand by the High Court, resulted in the original order dated 26.08.2013 being merged into the Tribunal's order. As the original order no longer subsists independently, the departmental appeal against that original order cannot be sustained. The Tribunal applied the doctrine of merger to conclude that there is no live original order available for judicial scrutiny and that the appeal against it is therefore not maintainable. [Paras 4, 5]

Appeal against the original order dated 26.08.2013 is not maintainable and cannot be sustained.

Seizure and confiscation - redemption fine - Whether the Tribunal should order seizure and confiscation of the capital goods and impose redemption fine in the present appeal. - HELD THAT: - The prayer by the Revenue for seizure and confiscation of the capital goods and for imposition of a redemption fine was considered in the context that the original order under challenge has merged into later orders and that the subsequent Tribunal order remanded the matter on a different subject-matter (quantum at debonding) without any adjudication on confiscation or redemption fine. Given that the impugned original order no longer survives and the remand/appeal history did not address confiscation or redemption fine, the Tribunal found that the Revenue's prayer for seizure/confiscation and redemption fine could not be sustained in the present appeal. [Paras 5, 6]

Prayer for seizure and confiscation of capital goods and for imposition of redemption fine is not sustainable and is rejected.

Final Conclusion: The appeal filed by the Revenue is dismissed; the departmental challenge to the original order dated 26.08.2013 is held not maintainable in view of merger with subsequent proceedings, and the prayer for seizure/confiscation and redemption fine is refused.

Duty exemption under notification No.84/1997-Customs - Essentiality Certificate as condition precedent - Amendment of bill of entry under Section 149 - proviso - Principles of construing exemption notifications (strict eligibility, liberal construction of exemption) - Remand for verification of documentary entitlement

Duty exemption under notification No.84/1997-Customs - Essentiality Certificate as condition precedent - Principles of construing exemption notifications (strict eligibility, liberal construction of exemption) - Remand for verification of documentary entitlement - Entitlement to duty exemption where Essentiality Certificate was issued after clearance of goods and application for certificate was made prior to filing of Bills of Entry; scope of remand for verification and grant of exemption. - HELD THAT: - The Tribunal found that the appellants had applied for the Duty Exemption Certificate (DEC) on 10.10.2019, prior to filing the Bills of Entry, and that the department was aware of the claimed entitlement. Relying on the principles in Tullow India Operations Ltd., the Court held that while eligibility clauses must be strictly construed, the exemption itself may be given a liberal construction once eligibility is established. The proviso to section 149 permitting amendment only on the basis of documentary evidence in existence at the time of clearance does not operate to deny relief where the application for the certificate pre-dated the Bills of Entry and the competent authority subsequently issued the Essentiality Certificate covering the imported goods. In the facts of these appeals the Tribunal concluded that denial of the exemption would defeat the legislative intent and public interest purpose of the notification. For these reasons the matters were remitted to the original authority for limited verification of the Essentiality Certificate dated 08.05.2020 and, thereafter, for consideration of grant of the duty exemption, with an opportunity of personal hearing to the appellants. [Paras 6, 7, 9]

Impugned orders set aside; appeals allowed by way of remand to verify the Essentiality Certificate dated 08.05.2020 and thereafter to consider and grant the duty exemption under Notification No.84/1997-Customs, with personal hearing.

Amendment of bill of entry under Section 149 - proviso - Essentiality Certificate as condition precedent - Applicability of proviso to section 149 of the Customs Act to deny amendment or relief where Essentiality Certificate was not in existence at the time of clearance. - HELD THAT: - The Tribunal examined the proviso to section 149 and observed that amendment of documents is permissible but the proviso conditions are framed to prevent post-clearance amendments except on the basis of documentary evidence in existence at clearance. On the facts, however, the appellants had sought the DEC prior to filing the Bills of Entry and the department had knowledge of the claimed exemption; thereafter the competent authority issued the Essentiality Certificate. The Tribunal held that reliance on section 149 to deny the exemption was misplaced in these facts, and that the departmental delay in issuing the certificate could not be visited upon the appellants to defeat the statutory exemption purpose. [Paras 6, 7]

Proviso to section 149 not applied to deny relief in the present facts; reliance upon it by the Commissioner (Appeals) was unsustainable.

Final Conclusion: The appeals are allowed by setting aside the impugned orders and remitting the matters to the original authority for limited verification of the Essentiality Certificate dated 08.05.2020 and, thereafter, for consideration and grant of the duty exemption under Notification No.84/1997-Customs; a personal hearing shall be afforded to the appellants.

Remission of customs duty under Section 23 of the Customs Act - Applicability of Customs Act provisions to units located in a Special Economic Zone (SEZ) - Negligence and duty to take precautions for loss of imported goods - Effect of insurance covering invoice/principal value (excluding duty) on claim for remission

Remission of customs duty under Section 23 of the Customs Act - Applicability of Customs Act provisions to units located in a Special Economic Zone (SEZ) - Section 23 of the Customs Act is applicable for remission of customs duty in respect of imported goods destroyed in a SEZ unit. - HELD THAT: - The Tribunal found that assessment and levy of customs duty are governed by the Customs Act and that the SEZ Act does not automatically oust all other enactments; it only overrides provisions of other Acts which are inconsistent with it. Grant of remission under Section 23 does not conflict with any provision of the SEZ Act; accordingly Section 23 applies to the claim for remission of customs duty on imported goods destroyed in the appellant's SEZ unit. The Tribunal accepted the appellant's submission that the remission provision is not inconsistent with the SEZ regime and thus the Adjudicating Authority's objection to applicability was not sustainable. [Paras 4]

Section 23 applies and the Adjudicating Authority's rejection on the ground of non-applicability of Section 23 is set aside.

Negligence and duty to take precautions for loss of imported goods - The finding that the appellant failed to take proper precautions and was negligent in respect of the fire incident was rejected. - HELD THAT: - The Tribunal reviewed the survey report and material on record and concluded the fire broke out suddenly and was beyond the control of the appellant. The insurance survey and grant of the insurance claim were treated as evidence that the incident was accidental and not due to carelessness or negligence by the appellant. The Tribunal noted absence of any inspection or analysis by the Customs authority to support the allegation of negligence, and held the Adjudicating Authority's conclusion on lack of precautions to be baseless. [Paras 4]

The allegation of negligence is rejected and cannot justify denial of remission.

Effect of insurance covering invoice/principal value (excluding duty) on claim for remission - Non-inclusion of customs duty in the insurance cover does not preclude remission of customs duty under Section 23 in respect of imported goods destroyed in SEZ. - HELD THAT: - The Tribunal observed that in SEZ imports enter free of duty and invoice/principal value is the element ordinarily insured; insurance companies typically insure the invoice value and not an element (duty) which was not part of the goods' value at the time of entry into SEZ. The absence of customs duty in the insurance cover therefore cannot be a ground to deny statutory remission under Section 23. The Tribunal also relied on precedents cited by the appellant as supporting the principle that remission may be allowed in SEZ circumstances despite insurance covering only invoice value. [Paras 4]

Failure to insure customs duty does not bar remission; the remission claim cannot be denied on that basis.

Final Conclusion: The impugned order rejecting remission is set aside; the appeal is allowed and remission of customs duty in respect of the goods destroyed by fire in the SEZ unit is granted with consequential relief.

Classification as ores versus processed products - processes not normal to the metallurgical industry - Chemical examination report as evidence for classification - change in classification by operation of processing - remand for fresh consideration of processes and classification

Classification as ores versus processed products - processes not normal to the metallurgical industry - Chemical examination report as evidence for classification - Whether the exported "Iron Oxide Powder" remained an ore under Chapter 26 or, having been subjected to processes not normal to the metallurgical industry, ceased to be an ore and required classification under Chapter 28 - and whether the adjudicating authorities had examined the processes and their outcome. - HELD THAT: - The Section Note to Chapter 26 defines "ores" for headings 2601-2617 and excludes minerals that have been subjected to processes not normal to the metallurgical industry. The Chemical Examiner's report recorded high iron content and siliceous matter, supporting a view that the material carried characteristics of iron ore. The appellant placed a flow chart on record asserting that the raw ore was subjected to processes which rendered it unfit for metallurgical use and suitable for oilfield chemicals. The Commissioner (Appeals) treated the matter by reference to "manufacturing processes" and relied on the chemical report, but did not examine on record whether the specific processes undertaken were those which the Section Note contemplates as removing the mineral from Chapter 26. Because the determinative statutory test is whether the minerals were subjected to processes not normal to the metallurgical industry, and the lower authorities did not consider the processes recorded by the appellant or their outcome in that statutory light, the Tribunal found that the matter requires fresh consideration on that point.

Matter remanded to the Commissioner (Appeals) to examine the processes shown on record, determine whether they are processes not normal to the metallurgical industry, and decide classification accordingly.

Final Conclusion: Appeal allowed to the extent of remanding the classification issue to the Commissioner (Appeals) for fresh consideration of the processes undertaken and their effect on whether the exported product remains an ore under Chapter 26 or is classifiable under Chapter 28.

Offence of money-laundering as independent offence - Proceeds of crime - Continuing offence - Double jeopardy not attracted between PC Act and PMLA offences - Special Court may take cognizance without committal - Section 44 PMLA overrides CrPC cognizance/committal procedure - Section 202(2) Cr.P.C. inapplicable to PMLA complaints

Offence of money-laundering as independent offence - Proceeds of crime - Continuing offence - Petitioner liable to be prosecuted under Section 3 of PMLA notwithstanding that the predicate offence was committed earlier, subject to factual determination whether he dealt with proceeds of crime after notification as a scheduled offence. - HELD THAT: - The Court applied the principle that the offence under Section 3 of the PMLA is an independent offence concerned with processes or activities connected with the proceeds of crime (concealment, possession, acquisition, use, or projecting as untainted property). The relevant date is when the respondent indulges in the process or activity connected with proceeds of crime; consequently even if the predicate criminal activity occurred earlier, continuing possession or dealing with proceeds after the relevant notification may attract PMLA liability. Whether the petitioner in the present facts has indulged in such dealing is a question of fact for trial. [Paras 8]

PMLA prosecution under Section 3 is not barred merely because the predicate offence pre-dates its scheduling; factual inquiry at trial is required to determine dealing with proceeds.

Double jeopardy not attracted between PC Act and PMLA offences - Prosecution under Section 3 of PMLA in addition to prosecution under Section 13(1)(e) of the PC Act does not amount to double jeopardy. - HELD THAT: - The Court held that the ingredients of the offence under Section 13(1)(e) of the PC Act (possession of disproportionate assets and inability to account) are different from the ingredients of Section 3 of the PMLA (process or activity connected with proceeds of crime). A public servant may be guilty under the PC Act even if illegally spent money is exhausted, whereas PMLA targets dealing with proceeds of crime and continuing possession or concealment. Given the distinct statutory elements, prosecuting under both statutes is not prohibited as double jeopardy. [Paras 9]

The plea of double jeopardy is untenable; the two offences are distinct and separate.

Certificate for appeal under Article 134A refused - Request for a certificate to appeal to the Supreme Court under Article 134A(b) was refused. - HELD THAT: - The Court refused to grant a certificate for appeal because the legal question relied upon by the petitioner is already covered by the Supreme Court's decision in Vijay Madan Lal Choudhary and a pending review petition does not justify issuance of a certificate. The purported conflict with the decision in Ganpati Dealcom was held not to be a comparable or conflicting precedent in the facts of this case. [Paras 10]

No certificate for appeal under Article 134A(b) issued; petition does not raise an unanswered substantial question of law.

Special Court may take cognizance without committal - Section 44 PMLA overrides CrPC cognizance/committal procedure - Section 202(2) Cr.P.C. inapplicable to PMLA complaints - Summons and proceedings by the Special Court under PMLA do not require a prior inquiry under Section 202(2) Cr.P.C.; Section 44 of PMLA permits Special Courts to take cognizance without committal. - HELD THAT: - The Court examined Section 44 of the PMLA and concluded it is an exception to the general cognizance/committal scheme under the Cr.P.C. A Special Court constituted under the PMLA may take cognizance of an offence under Section 3 on complaint by an authorized authority without committal, and shall try offences in accordance with Cr.P.C. as applied to a Sessions Court. Therefore the proviso to Section 202(2) Cr.P.C., which contemplates Magistrate-stage inquiry and production/examination of witnesses when cognizance is by a Magistrate for a Sessions-triable offence, has no application where the Special Court itself takes cognizance under the PMLA scheme. [Paras 13, 14, 18]

No obligation to conduct a Section 202(2) Cr.P.C. inquiry before issuing summons in a complaint taken cognizance of by a PMLA Special Court; the Criminal Original Petition challenging summons is dismissed.

Final Conclusion: Both the Criminal Revision Case and Criminal Original Petition are dismissed: (i) prosecution under Section 3 PMLA is maintainable subject to trial-level factual determination of dealing with proceeds; (ii) double jeopardy does not bar concurrent proceedings under the PC Act and PMLA; (iii) no certificate for appeal to the Supreme Court is granted; and (iv) Section 202(2) Cr.P.C. inquiry is inapplicable to complaints cognizable by a PMLA Special Court under Section 44, hence summons are sustained.

Trading of cargo space - service taxability of international freight - negative list exemption for transportation of goods by an aircraft or vessel from a place outside India up to the customs station of clearance in India - place of provision of services - destination principle for transportation of goods - consideration must be for a rendered service - mark-up not taxable as consideration for service where activity is trading

Trading of cargo space - service taxability of international freight - mark-up not taxable as consideration for service - place of provision of services - destination principle for transportation of goods - Whether ocean freight, air freight and the mark-up received by the appellants are liable to service tax for the period April 2015 to March 2017 - HELD THAT: - The Tribunal found that the appellants purchased cargo space from shipping/air lines (master bookings) and resold that space to their customers (house bookings), thereby undertaking trading in cargo space on their own account rather than rendering a distinct taxable service to the shippers. Applying the legal tests for service taxability - existence of a rendered service, its falling within taxable service definitions, and receipt of consideration for that service - the Tribunal held that where no service is rendered the receipts cannot be taxed as service. The mark-up represented profit from trading (difference between price paid to carriers and price charged to customers) and not consideration for a service. The decision noted the destination principle under the Place of Provision of Services Rules and the negative-list exemption (prior to 01.06.2016) for international transportation to the customs station of clearance, reinforcing that international freight for the disputed period was not within the service tax net. The Tribunal followed and relied on earlier decisions holding identical transactions to be trading of cargo space and not taxable services, and accordingly concluded that neither the freight nor the mark-up attracted service tax for the period in question. [Paras 6, 7, 8]

Demand of service tax on ocean freight, air freight and the mark-up received by the appellants for April 2015 to March 2017 is not sustainable; impugned orders set aside and appeals allowed.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeals, holding that the ocean/air freight and the differential/mark-up received by the appellants for April 2015 to March 2017 represent trading in cargo space and are not liable to service tax; consequential relief to follow as per law.

Payment of service tax by book adjustment - Reconciliation and verification of tax paid by book adjustment - Acceptance of book-adjusted payments in adjudication - Requirement of supporting evidence from Controller General of Accounts - Prohibition of double recovery where payment by book adjustment is established

Payment of service tax by book adjustment - Acceptance of book-adjusted payments in adjudication - Whether service tax liability could be discharged by book adjustment and whether such mode of payment is acceptable in adjudication. - HELD THAT: - The Tribunal examined the Board's Instructions dated 21.03.2023 which recognise that, although there was no change in the legal position as to method of duty payment, demands solely on account of non-adherence to prescribed mode where payment was in fact made by book adjustment should be addressed by reconciliation and verification rather than automatic confirmation of demand. The Instructions direct adjudicating authorities to focus on reconciliation of duty/tax paid by book adjustment and permit submission of reconciliation statements and a certificate from the office of the Controller General of Accounts. Applying these Instructions, the Tribunal held that payment by book adjustment is an accepted mode for the legacy cases in which demands were raised only for non-observance of the procedural mode of payment, subject to satisfactory reconciliation and proof. [Paras 5, 6, 10, 11]

Payment of service tax by book adjustment is acceptable for the legacy period when reconciled and verified as directed by the Board; the Tribunal accepted book-adjusted payment as a valid mode for the present adjudication.

Reconciliation and verification of tax paid by book adjustment - Requirement of supporting evidence from Controller General of Accounts - Prohibition of double recovery where payment by book adjustment is established - Whether the appellant furnished the required reconciliation and supporting evidence to show that service tax had been paid by book adjustment. - HELD THAT: - The Tribunal considered the submissions and documentary material placed by the appellant, including the Railway Board communication dated 13.10.2022 and data taken from the Controller General of Accounts' website showing credits under the relevant head. The adjudicating authority had relied on the absence of 'Final Accounts audited by C&AG', a misreading identified by the Tribunal as a confusion between 'Comptroller and Auditor General' and 'Controller General of Accounts'. Given that the reconciliation data were derived from the Controller General of Accounts and corroborated by Railway Board's communication, the Tribunal found that the Board's directions for reconciliation were fulfilled and that there was no justification for confirming the demand or effecting double recovery. [Paras 6, 8, 9, 10, 11]

The appellant satisfied the requirement of reconciliation and supporting proof from the Controller General of Accounts; therefore the demand could not be sustained.

Final Conclusion: The impugned order confirming service tax demands was set aside and the appeal allowed: the Tribunal accepted payment of service tax by book adjustment for the legacy period after finding that the appellant had furnished reconciliation and supporting evidence from the Controller General of Accounts as directed by the Board.

Doctrine of mutuality - club or association service (sub-clause (zzze) of clause (105) of Section 65) - definition of service under Section 65B(44) - show cause notice as foundation of demand - taxability of incorporated members' clubs - refundable deposit not consideration for service

Show cause notice as foundation of demand - Adjudication travelled beyond the scope of the show cause notice and such adjudication is unsustainable. - HELD THAT: - The Tribunal noted that the show cause notice grounded the demand on the definition of "club or association service" under sub-clause (zzze) of clause (105) of Section 65, whereas the adjudication order confirmed the demand on a different statutory basis (post-1.7.2012 scheme). Following settled precedent of the Apex Court and the Gujarat High Court, the adjudicatory order cannot travel beyond the allegations and grounds stated in the show cause notice. Consequently, the demand confirmed on grounds not pleaded in the show cause notice was held to be vitiated and liable to be set aside. [Paras 4]

Demand set aside insofar as adjudication travelled beyond the show cause notice.

Doctrine of mutuality - club or association service (sub-clause (zzze) of clause (105) of Section 65) - definition of service under Section 65B(44) - taxability of incorporated members' clubs - Services between an incorporated cooperative society and its members do not constitute taxable 'service' under the pre and post 1.7.2012 scheme due to the doctrine of mutuality; incorporated members' clubs are not taxable. - HELD THAT: - The Tribunal held that the appellant is an incorporated cooperative society under the Gujarat Cooperative Societies Act, 1961 and therefore falls within the exclusion in the definition of "club or association". Applying the doctrine of mutuality, the Tribunal concluded there is no provision of service by one person to another between the society and its members; hence the activity does not meet the requirement of an activity carried out by a person for another for consideration under Section 65B(44). The Tribunal relied on the Larger Bench decision of the Supreme Court in State of West Bengal v. Calcutta Club Ltd. which, inter alia, held that incorporated members' clubs are not taxable even after introduction of the negative list regime post-1.7.2012. Following that precedent, the service tax demand was held not sustainable. [Paras 4]

Service tax demand unsustainable as the doctrine of mutuality and the authorities on incorporated members' clubs exclude taxability.

Refundable deposit not consideration for service - Maintenance deposits shown as refundable are not consideration for service and are not taxable. - HELD THAT: - The Tribunal accepted the appellant's ledger evidence that maintenance deposits were received as refundable and accounted for as such. On that basis, and following earlier decisions holding refundable deposits not to constitute consideration for a service, the Tribunal held that such maintenance deposits cannot be treated as consideration liable to service tax. [Paras 4]

Refundable maintenance deposits are not taxable as consideration for service.

Taxability of incorporated members' clubs - Extended period of limitation is not invocable against the appellant. - HELD THAT: - Given the existence of bona fide legal controversy from the outset over taxability of members' societies and the subsequent pronouncements of Tribunals, High Courts and the Supreme Court favouring non taxability on the basis of mutuality and incorporation, the Tribunal found no suppression, mis declaration or mala fide on the part of the appellant. In that factual and legal matrix, the extended period for assessment was held not invocable. [Paras 4]

Demand for extended period is not sustainable.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the Service Tax demand is held unsustainable on multiple grounds (adjudication beyond the show cause notice, non taxability of services involving an incorporated cooperative members' society under the doctrine of mutuality, refundable maintenance deposits not being consideration, and limitation), with consequential relief to the appellant.

Denial of CENVAT credit on input services - Invocation of extended period of limitation - Suppression to evade payment of duty - Audit report as sole basis for invoking extended period

Denial of CENVAT credit on input services - Audit report as sole basis for invoking extended period - Validity of denial of CENVAT credit in respect of earth excavation and land development work, erection of street light poles and manpower supply for the period under appeal - HELD THAT: - The Tribunal examined whether the Commissioner was justified in denying CENVAT credit for the specified input services and in invoking the extended period for issuance of the show cause notice. The Bench declined to adjudicate disputed classifications (such as the contention that certain works constituted "plant and machinery"), but focused on whether suppression with intent to evade duty had been established so as to warrant extended limitation. Relying on the consistent view of this Tribunal that an audit report alone cannot form the sole foundation for invoking extended period, and by reference to the described purpose and participative nature of audit (as explained in the cited Thyssenkrupp decision), the Tribunal held that the Commissioner's reliance on the audit report to infer suppression was not convincing. In consequence, the denial of credit founded on that premise was unsustainable. The determinative reasoning is that absence of proof of suppression meant that the extended period could not be validly invoked and, therefore, the impugned denial of credit could not be sustained. [Paras 5, 6, 7]

Order denying CENVAT credit is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed; the Commissioner's order denying CENVAT credit for the period September, 2014 to June, 2017 is set aside on the ground that the extended period was not validly invoked and the audit report alone did not establish suppression to evade duty.

Liability of job worker when principal fails to furnish undertaking under exemption notification - applicability of Rule 10A and Rule 8 for valuation of goods manufactured by a job-worker - transfer of excise liability by exemption notification subject to substantive condition of undertaking - penalty and interest for deliberate suppression of facts and invocation of extended period of limitation

Liability of job worker when principal fails to furnish undertaking under exemption notification - transfer of excise liability by exemption notification subject to substantive condition of undertaking - Whether the demand of central excise duty on goods manufactured by the appellant on job-work basis is justified where the principal manufacturer did not furnish the undertaking required by notification no. 83/94. - HELD THAT: - The Court accepted that excise duty is leviable on manufacture and the appellant, having carried out the manufacturing activity, is prima facie liable. The exemption under notification no. 83/94 operates to shift liability to the principal manufacturer only upon compliance with the substantive condition of furnishing the prescribed undertaking to the proper officer. As M/s Aditya did not furnish the undertaking required by the notification, the condition precedent for shifting liability was not satisfied. The authorities below therefore correctly held that the exemption could not be invoked and the duty liability remained on the job worker. The Tribunal relied on consistent precedent holding that the undertaking is substantive and mandatory and that non-compliance results in duty falling on the job-worker. [Paras 5, 6]

Demand of central excise duty on the appellant (job worker) is justified because the principal did not furnish the undertaking required by notification no. 83/94, so the exemption could not be invoked.

Applicability of Rule 10A and Rule 8 for valuation of goods manufactured by a job-worker - Whether valuation of goods manufactured by the job-worker is to be determined under Rule 10A read with Rule 8 of the Central Excise Valuation Rules, 2000. - HELD THAT: - The Tribunal applied Rule 10A which governs valuation where excisable goods are produced by a job-worker on behalf of a principal manufacturer. Finding that the present case was not covered by clauses (i) or (ii) of Rule 10A, the Tribunal proceeded under Rule 10A(iii) which makes the other valuation provisions applicable mutatis mutandis. Consequently Rule 8, which fixes value at 110% of cost of production where goods are not sold by the assessee, was held applicable. The authorities below therefore correctly applied Rule 10A(iii) read with Rule 8 to determine the value of excisable goods manufactured by the job-worker. [Paras 7]

Valuation of the goods manufactured by the job-worker is to be determined under Rule 10A(iii) and Rule 8 of the Central Excise Valuation Rules, 2000.

Penalty and interest for deliberate suppression of facts and invocation of extended period of limitation - Whether imposition of interest and penalty on the appellant is justified for deliberate evasion and suppression, and whether extended period of limitation is invokable. - HELD THAT: - The Tribunal found that the appellant manufactured and cleared identical goods on its own account (paying duty) while deliberately avoiding duty on job-work clearances, knowing that the principal had not complied with the notification conditions. This conduct amounted to suppression with intent to evade duty, discovered on audit, justifying invocation of the extended period of limitation. On the facts the authorities were held justified in imposing interest and penalty; the Tribunal endorsed prior reasoning that mens rea is not an essential element for imposition of penalty where statutory ingredients are attracted and that discretion to quantify penalty ends once the statutory criteria are met. The adjudicating authority's choice to impose penalty equal to the duty and interest was sustained. [Paras 8, 9]

Interest and penalty are maintainable; extended limitation applies and penalty and interest as determined by the authorities are leviable on the appellant.

Final Conclusion: The Tribunal affirmed the demand of central excise duty, interest and penalty against the appellant: the exemption under notification no. 83/94 could not be invoked because the principal did not furnish the required undertaking; valuation is to be determined under Rule 10A read with Rule 8; and the imposition of interest and penalty (with extended limitation) was upheld. The appeal is dismissed.

CENVAT credit reversal under rule 6(3)(b) of the CENVAT Credit Rules, 2004 - treatment of waste/refuse/by-product arising during mining - scope of manufacturing when exempted material arises incidentally in extraction of dutiable product - liability to pay amount under rule 6 where input service is used for mining of final dutiable product

CENVAT credit reversal under rule 6(3)(b) of the CENVAT Credit Rules, 2004 - treatment of waste/refuse/by-product arising during mining - Whether the appellant was liable to pay an amount under rule 6(3)(b) of the CENVAT Credit Rules in respect of clay (an exempted product) arising incidentally during excavation of lignite - HELD THAT: - The Tribunal found that the appellant was authorised to excavate lignite for captive consumption and engaged a contractor whose payment was based on quantity of lignite delivered. Removal of overburden, including clay, was an unavoidable technical necessity in the extraction of the dutiable final product. The clay thereby arising was not manufactured as a final product by the appellant but was a by-product/waste/refuse for which the appellant had no ownership or intention to produce or sell. Relying on the precedent of the Tribunal in Gujarat Mineral Development Corporation, which held that where an exempted material is unavoidably generated as a by-product in mining of the main product, demand under Rule 6 is not sustainable, the Tribunal applied the same reasoning. Consequently, the facts showed no separate manufacture of clay requiring maintenance of separate accounts or reversal of CENVAT credit under rule 6(3)(b); the input service credit attributable to mining could not be disallowed on that basis.

The Commissioner's demand under rule 6(3)(b) read with rule 14 for reversal/recovery on account of clay is unsustainable and the impugned order is set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that clay arising incidentally during excavation of lignite is a by-product/waste and not a separately manufactured exempted product; therefore, no amount under rule 6(3)(b) was exigible and the demand confirmed by the Commissioner was set aside.

Automobile Cess - payment of cess at import / preclusion of double levy - CKD imports - manufacture under section 2(f) of the Central Excise Act - classification parity between import and clearance - ER-1 returns - extended period of limitation - limitation-barred demand

Automobile Cess - payment of cess at import / preclusion of double levy - classification parity between import and clearance - ER-1 returns - Appellant not liable to pay automobile cess again on E bikes assembled from CKD imports where automobile cess was paid at import and classification at import and clearance remained the same. - HELD THAT: - Tribunal found that the appellant imported E bikes in CKD condition, assembled them and cleared them without payment of central excise duty because E bikes were exempt. The record contained a bill of entry (Bill of entry 531 dated 11.07.2008) showing payment of automobile cess at the time of customs clearance. The classification at import and at home consumption clearance was the same and ER 1 returns reflected the clearances periodically without departmental objection. On these facts the Tribunal held that the automobile cess had already been discharged at import and there was no requirement to levy cess again on clearance. [Paras 7]

Demand for automobile cess set aside insofar as it sought to tax the same goods again where cess had been paid at import.

CKD imports - manufacture under section 2(f) of the Central Excise Act - Assembling E bikes imported in CKD condition did not amount to 'manufacture' under section 2(f) because no new or distinct product came into existence. - HELD THAT: - On the material, the processes undertaken on CKD consignments did not result in a new or distinct product; the goods remained within the same sub heading post assembly. The Tribunal accepted that the activities were assembly of imported goods and not manufacture attracting central excise, and therefore clearances without payment of excise duty were appropriate. [Paras 7]

Assembly of CKD E bikes was not manufacture for the purpose of central excise.

Extended period of limitation - limitation-barred demand - Demand confirmed by the department is barred by limitation because the extended period was invoked without establishing requisite ingredients. - HELD THAT: - For the period September, 2006 to September, 2008 the show cause notice was issued on 19.11.2010, beyond the normal period of limitation. The department invoked the extended period of limitation but did not demonstrate the presence of facts or concealment necessary to justify extended limitation. The Tribunal therefore concluded that the proceedings and demand were time barred. [Paras 8, 9]

Demand set aside as barred by limitation for the specified period.

Final Conclusion: Appeal allowed: impugned order set aside on merits and on limitation; appellant relieved of the automobile cess demand (and related consequences) for the period in question.

Transfer of Cenvat credit on closure of factory - Scope of Rule 10 of Cenvat Credit Rules, 2004 - Requirement of transfer of inputs or capital goods for credit transfer - Precedential effect of High Court decision affirmed by Supreme Court

Transfer of Cenvat credit on closure of factory - Scope of Rule 10 of Cenvat Credit Rules, 2004 - Requirement of transfer of inputs or capital goods for credit transfer - Precedential effect of High Court decision affirmed by Supreme Court - Legality of rejecting the appellant's request to transfer unutilized Cenvat credit to another unit on account of closure of the factory. - HELD THAT: - The appellant notified the department of closure of its Puducherry unit and sought transfer of unutilized Cenvat credit to its Sriperumbudur unit. Rule 10 of the Cenvat Credit Rules, 2004 permits transfer of Cenvat credit when a manufacturer shifts his factory to another site or when factory is transferred on account of change in ownership, sale, merger, amalgamation, lease or transfer to a joint venture, subject to accounting of inputs or capital goods to the satisfaction of the proper officer. The Tribunal followed the reasoning in the Madras High Court decision in CCE Chennai v. Featherlite Products Pvt. Ltd., which held that Rule 10's purpose-enabling use of unutilised Cenvat credit-permits transfer in situati ons of factory closure/shift, and that the question of transfer of stocks or capital goods depends on factual accounting and was addressed in the record before the authority. That decision was affirmed by the Supreme Court, so the High Court ratio is binding. Applying that precedent to the facts, the Tribunal held that rejection of the transfer request solely on the ground that Rule 10 does not cover closure/shifting is unsustainable, and directed allowance of the transfer with consequential relief.

The impugned order rejecting transfer of unutilized Cenvat credit on account of closure of the factory is set aside; the appeal is allowed with consequential relief.

Final Conclusion: Following the binding precedent of the Madras High Court affirmed by the Supreme Court, the Tribunal allowed the transfer of unutilized Cenvat credit on closure/shift of the factory and set aside the rejection, granting consequential relief.

Substantial expansion - installed capacity - exemption under Notification No. 33/99 dated 08/07/1999 - pre-increase and post-increase capacity - Chartered Engineer's certificate - acceptance and verification of factual findings - self-contradiction and concealment of material information

Substantial expansion - installed capacity - exemption under Notification No. 33/99 dated 08/07/1999 - Chartered Engineer's certificate - pre-increase and post-increase capacity - self-contradiction and concealment of material information - Whether the appellant effected an increase in installed capacity of not less than twenty five percent so as to be eligible for exemption under the notification. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s factual findings that the ECP Dryer (capacity 140 kg/hr) was installed during the pre-increase stage and therefore ought to have been included in assessing the pre-increase installed capacity. The Commissioner (Appeals) rightly scrutinised the Chartered Engineer's report, noting the appellant's own acceptance of the corrected installation date and the qualification in the engineer's methodology. The appellant's inconsistent representations in two separate claims - first showing the ECP Dryer used for manufacturing and later for 'gapping' without justification - amounted to self-contradiction and supported the conclusion that the capacity had been improperly excluded from the pre-increase calculation. In consequence, the actual increase after expansion was found to be only about four percent, not meeting the prescribed twenty five percent threshold. The Tribunal found no reason to interfere with the Commissioner (Appeals)'s detailed evaluation of evidence and the engineer's certificate and therefore upheld the conclusion that the appellant was not entitled to the exemption. [Paras 9, 10, 11, 12, 13]

The appeal is dismissed; the increase in installed capacity is found to be insufficient (approximately four percent) and the appellant is not eligible for the exemption under the notification.

Final Conclusion: The Tribunal, after reviewing the impugned order and the factual materials including the Chartered Engineer's report, upheld the Commissioner (Appeals)'s finding that the claimed increase in installed capacity did not meet the twenty five percent threshold and dismissed the appeal.

Summary order. Special Leave Petitions dismissed; delay condoned; no interference under Article 136 of the Constitution of India. Pending applications, if any, disposed of.

Liability under Section 138 of the Negotiable Instruments Act - Drawer of cheque - Vicarious liability - Strict construction of penal provisions - Person defined under Section 7

Liability under Section 138 of the Negotiable Instruments Act - Drawer of cheque - Person defined under Section 7 - Vicarious liability - Strict construction of penal provisions - Whether the petitioner can be prosecuted under Section 138 of the Negotiable Instruments Act when she did not draw the cheque, is not a signatory, and is not an account-holder in respect of the cheque in question. - HELD THAT: - The Court found that Section 138 criminalises the conduct of the person who has drawn the cheque on an account maintained by him; the statutory phrase 'such person' in Section 138 refers to the drawer of the cheque as defined under Section 7. The impugned cheque was issued by the petitioner's brother from his bank account; the petitioner was not a drawer, not a signatory, and not an account-holder of that account. The respondent had not prosecuted the corporate entity alleged to be associated with the transaction. Given the scheme of Section 138 and the requirement to construe penal provisions strictly, no vicarious criminal liability can be fastened upon a person who is not the drawer or who has not maintained the account from which the cheque was drawn. Reliance was placed on precedents applying these principles to similar facts, leading to the conclusion that proceedings under Section 138 cannot be continued against the petitioner. [Paras 10, 11, 12, 13]

Proceedings under Section 138 of the Negotiable Instruments Act are quashed qua the petitioner, who is not the drawer, signatory, or account-holder in respect of the impugned cheque.

Final Conclusion: Petition allowed; Complaint Case No.4061/2020 filed under Section 138 of the Negotiable Instruments Act is quashed insofar as it relates to the petitioner (accused no.2).