TaxTMI Updates e-Newsletter
Dec 20,2024

Interim relief - ex-parte interim orders - release of confiscated goods and vehicles - protection of revenue interest - security by bank guarantee as condition for release - personal surety bonds inadequate for safeguarding revenue - remand for fresh consideration - Rule 140 of the Central Goods and Services Tax Rules, 2017

Interim relief - ex-parte interim orders - release of confiscated goods and vehicles - protection of revenue interest - Impugned interim orders of the High Court releasing confiscated goods and vehicles without adequate participation of the State and effectively granting main relief were set aside. - HELD THAT: - The High Court granted interim reliefs which were, in substance, equivalent to granting one of the main reliefs sought by the respondents, without having the benefit of the State's stand. Those interim orders were rendered virtually ex-parte, and in the absence of proper security such as a bank guarantee, the release of confiscated goods and vehicles would imperil recovery and prejudice the revenue. For these reasons the Court found the impugned orders unsustainable and set them aside. [Paras 11, 12]

Impugned interim orders set aside as they were granted virtually ex-parte and jeopardised the revenue.

Remand for fresh consideration - security by bank guarantee as condition for release - Rule 140 of the Central Goods and Services Tax Rules, 2017 - personal surety bonds inadequate for safeguarding revenue - Matters remanded to the High Court for fresh consideration of interim/final reliefs, with liberty to pass appropriate directions in accordance with law regarding security for release. - HELD THAT: - The Court remanded the cases to the High Court to reconsider both interim and final reliefs sought by the respondents. The remand was ordered because the prior interim orders were issued without adequate consideration of the State's stance and without ensuring suitable security to protect revenue. The Supreme Court observed that, if interim reliefs are pressed on reconsideration, the High Court may pass appropriate directions in accordance with law, including insistence on bank guarantees rather than mere personal sureties, and otherwise ensure protection of the revenue. No observation was made on the merits of the substantive matters. [Paras 13]

Cases remanded to the High Court for fresh consideration of interim/final reliefs; appropriate directions may be issued to protect the revenue.

Final Conclusion: The impugned interim orders releasing confiscated goods and vehicles were set aside and the matters remanded to the High Court for fresh consideration of interim and final reliefs, with leave to the High Court to pass appropriate directions in accordance with law to safeguard the revenue; no decision was made on merits.

Detention and seizure under Section 129 - Validity of proceedings despite procedural irregularities - Discrepancy in declared description/quantity and market valuation as evidence of misrepresentation - Onus on taxpayer to prove compliance and valuation - Regulatory measures under GST vis-a -vis Article 19(1)(g)

Detention and seizure under Section 129 - Lawfulness of detention of the vehicle and goods under Section 129 of the WBGST Act. - HELD THAT: - The Court examined the material surrounding the interception, physical verification and subsequent detention and concluded that the detention and seizure were lawful. Although procedural irregularities in documentation were noted, the Court held that they did not vitiate the detention because the core factual findings - notably the mismatch between declared particulars and physical verification, and the resultant valuation gap - remained intact and justified action under the GST scheme. The Court therefore sustained the detention under Section 129 as a lawful exercise of statutory power. [Paras 22]

Detention and seizure under Section 129 upheld as lawful.

Validity of proceedings despite procedural irregularities - Whether procedural defects (e.g., unsigned MOV-01, non-supply of copies) rendered the detention and subsequent proceedings void. - HELD THAT: - The Court acknowledged procedural defects such as an unsigned MOV-01 and non-provision of copies but held that these irregularities did not negate the validity of the detention or subsequent adjudication. The determinative factual and evidentiary findings were unaffected by these formal defects; accordingly, the proceedings were not rendered invalid merely by those documented irregularities. [Paras 22]

Procedural irregularities did not invalidate the detention or proceedings.

Discrepancy in declared description/quantity and market valuation as evidence of misrepresentation - Onus on taxpayer to prove compliance and valuation - Whether the mismatches in goods' description/quantity and the gap between declared and market valuation justified the imposition of demand and penalty. - HELD THAT: - The Court found that the differences between the descriptions in invoices and the physical verification report, together with a substantial disparity between declared taxable value and market valuation adopted by authorities, supported an inference of deliberate misrepresentation. The Court emphasized that under the GST laws the burden lies on the taxpayer to prove compliance; the petitioner failed to demonstrate consistent inventory records or to rebut the valuation methodology relied upon by the authorities. On that basis the Court held the adjudicating and appellate authorities were justified in affirming the demand and penalties. [Paras 23, 24, 25]

Mismatch in description/valuation justified demand and penalty; taxpayer failed to discharge onus.

Regulatory measures under GST vis-a -vis Article 19(1)(g) - Whether the actions of the tax authorities infringed the petitioner's fundamental right under Article 19(1)(g). - HELD THAT: - The Court rejected the contention that detention, valuation exercise and consequential proceedings amounted to an infringement of Article 19(1)(g). It held that regulatory measures to ensure compliance with GST law and to prevent evasion are legitimate exercises of the State's regulatory power and do not constitute an infringement of the fundamental right to carry on trade and business. [Paras 26]

Article 19(1)(g) challenge dismissed; regulatory action under GST held valid.

Final Conclusion: Writ petition dismissed; adjudicating and appellate orders upholding detention, tax demand and penalties under the WBGST and CGST Acts are affirmed, and all ancillary reliefs are refused; no order as to costs.

Principles of natural justice - service of notice - proof of service - personal hearing - quashing and setting aside of order - remand for fresh adjudication

Principles of natural justice - service of notice - proof of service - personal hearing - The show cause notice and personal hearing notice were not validly served on the petitioner and such defective service vitiated the Order in Original. - HELD THAT: - The Court found that the Directorate recorded the petitioner's correct address as "A/3, Ahmedabad Street, Carnac Bunder, Mumbai - 400 009", which matches the petitioner's own correspondence. The personal hearing notice was addressed to a different location in Pydhonie with an incorrect pin code and different road/area particulars, and the O I O was sent to the Carnac Bunder address but with an incorrect pin code. The respondents did not produce any evidence that the Pydhonie address belonged to the petitioner or any proof of effective service at the petitioner's correct address. The mere fact that mail sent to the incorrect address was not returned does not establish valid service at the petitioner's true address. In these circumstances, the Court held that service was defective and that principles of natural justice were infringed. [Paras 7, 8, 9, 10, 11]

Defective service found; principles of natural justice breached and impugned O I O cannot stand.

Quashing and setting aside of order - remand for fresh adjudication - service of notice - Relief by quashing the impugned O I O and remanding the matter for fresh adjudication with directions on service. - HELD THAT: - In the interest of justice, and because the respondents failed to prove valid service at the petitioner's correct address, the Court quashed and set aside the O I O dated 27 February 2021 and remanded the show cause notice to respondent no. 4 for fresh adjudication. The Court directed that further notices and correspondence be served at the address recorded by the Directorate and confirmed by the petitioner (A/3, Ahmedabad Street, Carnac Bunder, Mumbai - 400 009) and also at the email address registered with the respondents. The order disposes the petition and leaves the respondents free to proceed after complying with these directions. [Paras 12]

O I O quashed and set aside; matter remanded for fresh adjudication and respondents directed to serve notices at the correct postal and registered email addresses.

Final Conclusion: The impugned Order in Original dated 27 February 2021 is quashed for defective service in breach of principles of natural justice; the matter is remanded to respondent no. 4 for fresh adjudication after service of notices at the petitioner's correct address and registered email; petition disposed of with no order as to costs.

Exhaustion of alternate remedies - relegation to statutory appellate remedy - challenge to administrative notifications - consideration of appeal on merits without reference to limitation

Exhaustion of alternate remedies - relegation to statutory appellate remedy - challenge to administrative notifications - Maintainability of the writ petition vis-a -vis availability of statutory appeal and entitlement to challenge the Notifications dated 28 December 2023 and 16 January 2024 - HELD THAT: - The High Court declined to entertain the writ petition and, adopting the reasoning in Oberoi Constructions Limited (and its own prior orders in Alkem Laboratories Ltd.), relegated the petitioner to the alternate statutory remedy of appeal. The court observed that while no appeal may lie against the impugned Notifications, the petitioner can raise all other grounds (including the contention regarding IGST liability) in the appeal against the Order-in-Original; if the Appellate Authority grants relief, there may be no occasion to challenge the Notifications. The court nonetheless granted liberty to the petitioner to challenge the Notifications in future if no relief is obtained under statutory remedies. The court further recorded that if the petitioner institutes an appeal within four weeks and completes legal formalities, the Appellate Authority must decide the appeal on merits without advertence to limitation, since the writ was filed within the limitation period and the petition was bona fide. All merits contentions were left open for consideration by the appellate forum. [Paras 4, 6, 7]

Writ petition declined; petitioner relegated to statutory appeal against the Order-in-Original with liberty to later challenge the Notifications if no relief is obtained; appellate authority to decide any timely-filed appeal on merits without raising limitation.

Final Conclusion: The petition is dismissed for non-entertainment on the ground of alternate statutory remedy; liberty granted to file an appeal against the Order-in-Original and to challenge the impugned Notifications if no relief is obtained; if an appeal is filed within four weeks after completing legal formalities, it must be considered on merits without reference to limitation.

Show cause notice - classification of service - prejudice by departmental adjudication despite existing appellate order - restraint on communication of final adjudication pending vacation of appellate order

Show cause notice - classification of service - prejudice by departmental adjudication despite existing appellate order - restraint on communication of final adjudication pending vacation of appellate order - Whether the respondents could make and communicate a final order on the impugned show cause notice dated 27 October 2023 when the Joint Commissioner (Appeals-II) had earlier upheld the petitioner's classification for the period August 2017 to May 2018 and that appellate order had not been challenged or set aside. - HELD THAT: - The court recorded that the Joint Commissioner (Appeals-II), by order dated 24 February 2021, had rejected classification under heading '9988' and upheld the petitioner's classification under heading '9973' for the period August 2017 to May 2018, and that the department had not challenged that appellate order. In those circumstances, permitting the department to conclude the impugned show cause notice by making and communicating a final order would prejudice the petitioner. While the respondents were not precluded from adjudicating or from instituting an appeal against the Joint Commissioner (Appeals) order in accordance with law, the court directed that no final order on the show cause notice be made or communicated until the Joint Commissioner (Appeals) order dated 24 February 2021 is set aside or stayed. The court therefore balanced the departmental right to adjudicate and to prefer an appeal with the need to protect the petitioner from being prejudiced by a final adjudication inconsistent with an unchallenged appellate order. [Paras 4, 6, 7, 9]

Respondents may adjudicate the impugned show cause notice but shall not make or communicate any final order thereon until the Joint Commissioner (Appeals) order dated 24 February 2021 is set aside or stayed; respondents remain free to challenge that appellate order in accordance with law.

Final Conclusion: Writ petition disposed by permitting adjudication of the show cause notice but restraining communication of any final order until the Joint Commissioner (Appeals) order dated 24 February 2021 is set aside or stayed; respondents free to challenge that appellate order in accordance with law.

Alternate remedy - abstention from judicial review - liberty to challenge administrative notification - consideration of appeal on merits without limitation - IGST liability on imports

Alternate remedy - abstention from judicial review - The writ petition is not entertained and the petitioner is relegated to the statutory remedy of appeal. - HELD THAT: - The Court, adopting the reasoning in Oberoi Constructions Limited (supra) and earlier orders in similar petitions, declined to entertain the petition and held that the petitioner must pursue the statutory appellate remedy. The Court relied on the doctrine of exhaustion of alternate remedies and prior identical orders refusing writ relief in comparable circumstances, thereby directing the petitioner to seek relief before the Appellate Authority instead of by way of writ. [Paras 4, 6]

Petition declined; petitioner relegated to file the statutory appeal against the Order-in-Original.

Liberty to challenge administrative notification - consideration of appeal on merits without limitation - IGST liability on imports - Liberty granted to challenge the impugned Notification dated 28 December 2023 if statutory remedies do not secure relief; appellate authority directed to decide any appeal instituted within four weeks on merits without advertence to limitation. - HELD THAT: - The Court observed that no appeal may lie against the Notification dated 28 December 2023 but afforded the petitioner liberty to challenge that Notification should no relief be obtained under statutory remedies. Further, the Court directed that if the petitioner institutes the appeal against the Order-in-Original within four weeks (after complying with legal formalities), the Appellate Authority must consider the appeal on merits and not raise the limitation issue, because the writ petition was instituted within limitation and bona fide pursued. All contentions on merits, including those relating to IGST liability on imports, were left open for adjudication by the Appellate Authority. [Paras 3, 6, 7]

Liberty to challenge the Notification preserved; appeal instituted within four weeks to be decided on merits without consideration of limitation; merits left open.

Final Conclusion: Writ petition declined and petitioner relegated to statutory appeal against the Order-in-Original; petitioner granted liberty to challenge the impugned Notification if no relief is obtained under statutory remedies; if the appeal is filed within four weeks and formalities complied with, the Appellate Authority shall decide the appeal on merits without raising limitation, and all merits contentions remain open.

Grounds of arrest in writing - Article 22(1) of the Constitution - Section 69(2) CGST Act - obligation to inform and produce within 24 hours - Document Identification Number (DIN) requirement under CBIC Circular - legality of arrest and remand - judicial review of arrest

Grounds of arrest in writing - Article 22(1) of the Constitution - Section 69(2) CGST Act - obligation to inform and produce within 24 hours - Whether the authorised officer furnished the written grounds of arrest to the petitioner and whether non-furnishing vitiates the arrest - HELD THAT: - The Court found that no written grounds of arrest were available in the case file either prior to or after the arrest and that the petitioner was not furnished with written grounds at the time of arrest. The respondent's contention that oral explanation, acknowledgement on the Arrest Memo, or supply of the remand application shortly before the remand hearing sufficed was rejected. Applying the Supreme Court precedents (including Pankaj Bansal, Prabir Purkayastha and Arvind Kejriwal), the Court held that the constitutional and statutory mandate to inform the arrested person of the grounds of arrest must be meaningful and in writing and a copy furnished to the arrestee at the earliest; mere oral communication or retrospective reliance on the remand application does not satisfy this requirement. Non-compliance with this requirement renders the arrest process legally infirm. [Paras 23, 25, 35]

No written grounds of arrest were furnished to the petitioner; non-furnishing of written grounds vitiates the arrest.

Document Identification Number (DIN) requirement under CBIC Circular - legality of arrest and remand - Whether the proceedings showed irregularity in summons/DIN generation and whether detention prior to formal arrest was lawful - HELD THAT: - The Court noted discrepancies in the summonses: DIN generation timestamps post-dated the times for which appearance was sought and signatures bore earlier dates, pointing to back-dating or after-the-fact generation. The respondent produced no record of subsequent regularisation under the CBIC circular's provisions. These irregularities created serious doubt about detention of the petitioner on 28th and 29th November 2024 and demonstrated a failure to punctiliously follow prescribed procedural safeguards. The Court held that such mismanagement contributes to invalidating the custody/attendant arrest process. [Paras 44, 45, 46, 47]

The summons/DIN discrepancies and lack of satisfactory explanation cast doubt on the lawfulness of detention preceding arrest and indicated procedural irregularity by the agency.

Legality of arrest and remand - judicial review of arrest - Relief to be granted consequent upon the illegality found in arrest and remand - HELD THAT: - Having concluded that written grounds were not furnished and noting procedural irregularities concerning detention and summons, the Court exercised judicial review limited to legality (not merits) of the arrest and remand. The Court held that the arrest and the remand order could not be sustained in view of the constitutional and statutory breaches identified. The Court emphasised that this exercise was confined to judicial review of procedural legality and did not express any view on the merits of the underlying investigation. [Paras 50, 51, 53]

Arrest on 30th November 2024 held illegal; remand order dated 30th November 2024 set aside; petitioner directed to be released from judicial custody forthwith if not required in any other matter.

Final Conclusion: The High Court, upon judicial review limited to procedural legality, held that the authorised officer failed to furnish written grounds of arrest and that material irregularities in summons/DIN and detention rendered the arrest and remand unlawful; the remand order was set aside and the petitioner ordered to be released from judicial custody, without expressing any view on the merits of the allegations.

Opportunity of personal hearing under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 - quashing of adjudication orders and remand for fresh consideration - right to file fresh reply and requirement of a reasoned order after hearing

Opportunity of personal hearing under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 - quashing of adjudication orders and remand for fresh consideration - Impugned orders passed without affording the petitioner personal hearing under Section 75(4) were liable to be quashed and remitted for fresh consideration after affording hearing. - HELD THAT: - The Court applied the ratio of the coordinate Bench in Mahaveer Trading Company vs. Deputy Commissioner State Tax [(Writ Tax No.303 of 2024), Neutral Citation No.-2024:AHC:38820- DB] and held that the petitioner ought to have been given an opportunity of personal hearing under Section 75(4) before any adverse order was passed. For that reason the orders impugned dated 29.12.2023 and 27.6.2024 were set aside. The matter is remanded to the officer concerned with directions to permit the petitioner to file a fresh reply, thereafter fix a date of personal hearing and pass a reasoned order. The Court prescribed a two-month timeline from the date of the order for completion of this exercise. [Paras 3, 4]

Impugned orders quashed and set aside; matter remitted for fresh reply, personal hearing and reasoned adjudication within two months.

Final Conclusion: Writ petition disposed of by quashing the impugned orders and directing fresh consideration after granting the petitioner an opportunity of personal hearing and filing a fresh reply, to be completed within two months.

Due communication of notices and orders via GST portal - service of notice under Section 73 of the Goods and Service Tax Act, 2017 impeded by portal upload to 'Additional Notices and Orders' tab - benefit of doubt where statutory notice does not appear under 'View Notices and Orders' tab - quashing of impugned orders for defective service and remand for fresh notice and proceedings

Due communication of notices and orders via GST portal - service of notice under Section 73 of the Goods and Service Tax Act, 2017 impeded by portal upload to 'Additional Notices and Orders' tab - benefit of doubt where statutory notice does not appear under 'View Notices and Orders' tab - Impugned demand orders passed under Section 73 were not validly communicated as notices/orders were uploaded on the 'Additional Notices and Orders' tab of the GST portal instead of the 'View Notices and Orders' tab, entitling the petitioner to relief. - HELD THAT: - The Court accepted the petitioner's contention that notices issued under Section 73 and the impugned orders were uploaded on the GST portal's 'Additional Notices and Orders' tab and therefore did not come to the petitioner's notice in the manner required for effective communication. The departmental representative did not dispute that the orders were uploaded under the other tab and acknowledged that the portal's design/maintenance by GSTN affects how orders are displayed. The Court followed the reasoning in Ola Fleet Technologies Pvt. Ltd., which held that where an order does not show up under the 'view notices and orders' tab but appears under 'additional notices and orders', the assessee is entitled to the benefit of doubt. Having regard to the absence of effective communication and the precedent, the Court found it appropriate to set aside the impugned orders and direct fresh compliance with the prescribed mode of service so that the petitioner may be afforded an opportunity to respond within a statutoryly sufficient period. [Paras 5, 6, 7]

Impugned orders dated 24.11.2023 and 30.09.2023 are quashed for defective communication; assessing officer directed to issue a fresh notice with at least fifteen days' clear notice and proceed in accordance with law.

Final Conclusion: Writ petition allowed; impugned orders quashed and set aside. Assessing Officer to issue a fresh notice in the prescribed manner with at least 15 days' clear notice and proceed thereafter in accordance with law.

Characterisation of telecommunication towers as immovable property - availability of input tax credit under Section 17(5)(d) of the CGST Act - interpretation of the Explanation excluding telecommunication towers from the expression "plant and machinery" - application of tests of permanency, functionality and marketability in determining movability - precedential effect of Bharti Airtel Ltd. on classification of telecom towers

Characterisation of telecommunication towers as immovable property - application of tests of permanency, functionality and marketability in determining movability - precedential effect of Bharti Airtel Ltd. on classification of telecom towers - Telecommunication towers are movable property and not immovable property for the purposes of Section 17(5) of the CGST Act. - HELD THAT: - The Court applied the settled tests adopted by the Supreme Court in Bharti Airtel and earlier authorities - nature of annexation, object of annexation, intendment of the parties, functionality, permanency and marketability - and concluded that telecommunication towers are fabricated, delivered in CKD/SKD form, assembled on site, can be dismantled and relocated without change of character, and can be resold. Placement on a concrete foundation is for stability and operational efficacy, not for permanent beneficial enjoyment of the land. The Explanation to Section 17 (defining "plant and machinery" and excluding telecom towers) does not imply that telecommunication towers are thereby rendered immovable; statutory exclusion from the definition of "plant and machinery" cannot be read to mean that the excluded item is ipso facto immovable. The Court therefore followed and gave effect to the ratio in Bharti Airtel (which endorses the Delhi High Court's reasoning in Vodafone) and held that telecom towers do not satisfy the characteristics of immovable property. [Paras 16, 18, 19]

Telecommunication towers are movable goods and not immovable property within the meaning of Section 17(5) of the CGST Act.

Availability of input tax credit under Section 17(5)(d) of the CGST Act - interpretation of the Explanation excluding telecommunication towers from the expression "plant and machinery" - Denial of input tax credit on account of treating telecommunication towers as construction of immovable property under Section 17(5)(d) is unsustainable; impugned order and show cause notices are quashed. - HELD THAT: - Because telecommunication towers are movable goods, they cannot be excluded from input tax credit on the ground that they were used for construction of immovable property under clause (d) of Section 17(5). The Court held that the specific exclusion of telecom towers from the statutory definition of "plant and machinery" does not convert them into immovable property for the purpose of denying credit. Consequently, the impugned Order in Original and the Show Cause Notices predicated on the premise that towers are immovable are founded on an untenable premise and cannot be sustained. The Court allowed the writ petitions and quashed the impugned orders and SCNs accordingly. [Paras 17, 20, 21, 22]

Denial of input tax credit founded on classification of towers as immovable property is quashed; the impugned order dated 24 March 2023 and its appellate affirmation, and the specified SCNs, are set aside.

Final Conclusion: The writ petitions are allowed: telecommunication towers are movable goods and not immovable property for the purposes of Section 17(5) CGST Act; consequently the impugned Order in Original dated 24 March 2023 and its appellate affirmation, and the challenged Show Cause Notices dated 25 July 2024, are quashed.

Service of show cause notice - opportunity of hearing - verification of payment of disputed tax - interim relief conditional on deposit - lifting of bank attachment - treatment of assessment order as show cause notice for fresh adjudication

Service of show cause notice - opportunity of hearing - Impugned order set aside because notices/orders were uploaded on the GST Portal and the petitioner was not afforded an effective opportunity to be heard; petitioner to be given fresh opportunity to file objections. - HELD THAT: - The Court observed that neither the show cause notices nor the impugned order were served on the petitioner by tender or RPAD and had been uploaded under the "Additional Notices and Orders" tab on the GST Portal. In light of the absence of effective service and the petitioner's assertion that it could explain the alleged discrepancies, the Court set aside the impugned order and directed that the assessment order be treated as a show cause notice, permitting the petitioner to submit objections within a stipulated period. The respondents were directed to consider any objections filed and to afford a reasonable opportunity of hearing before passing fresh orders. [Paras 7, 10]

Impugned order set aside; petitioner granted four weeks to file objections and respondents to re-adjudicate after hearing.

Verification of payment of disputed tax - interim relief conditional on deposit - lifting of bank attachment - Bank attachment ordered to be lifted subject to verification of payment of the mismatch liability or, if incorrect, deposit of 25% of disputed tax within two weeks; failure to comply will revive the impugned order. - HELD THAT: - The Court accepted the petitioner's counsel's statement that the mismatch liability had been paid and permitted the respondents to verify that statement. If verification showed the payment was not made, the respondents were to inform the petitioner and require deposit of 25% of the disputed tax within two weeks. Upon verification of payment or deposit of 25%, the bank attachment was to be lifted immediately. The Court further directed that non-compliance with the verification/deposit conditions or failure to file objections within the prescribed four-week period would result in revival of the impugned assessment order. [Paras 6, 10]

Bank attachment to be lifted upon verification of payment or on deposit of 25% of disputed tax; impugned order to revive if conditions not met.

Treatment of assessment order as show cause notice for fresh adjudication - opportunity of hearing - On compliance with verification or deposit conditions, the impugned order shall be treated as a show cause notice and the adjudicating authority shall consider petitioner's objections and pass appropriate orders in accordance with law. - HELD THAT: - The Court converted the impugned assessment order into a show cause notice for the limited purpose of fresh adjudication after compliance with the conditional interim relief. The petitioner was given four weeks from receipt of the order to submit objections with supporting material. The respondents were directed to consider those objections and to pass appropriate orders after affording a reasonable opportunity of hearing, thereby ensuring adjudication on merits after effective service and compliance with interim conditions. [Paras 10]

Impugned assessment order to be treated as show cause notice; respondents to reconsider objections and pass fresh orders after hearing.

Final Conclusion: Writ petition disposed by setting aside the impugned order; respondents to verify payment or obtain 25% deposit, lift the bank attachment on compliance, treat the assessment order as a show cause notice, permit filing of objections within four weeks, and decide afresh after hearing; failure to comply will revive the impugned order.

Violation of principles of natural justice - requirement to fix separate dates for filing reply and personal hearing - cancellation of registration - remand for fresh consideration after opportunity of hearing

Violation of principles of natural justice - requirement to fix separate dates for filing reply and personal hearing - cancellation of registration - Whether the cancellation orders suffered from procedural infirmity for failure to fix separate dates for filing a reply and for personal hearing, resulting in violation of principles of natural justice and warranting quashing of the orders. - HELD THAT: - The Court observed that the show cause notice did not specify two separate dates - one for filing the reply and another for personal hearing - contrary to the departmental circular and the practice applied in earlier authority. The petitioner's counsel asserted non-receipt of the notice and that the notice fixed only a single date, which precluded effective exercise of the right to be heard. The Court took prima facie guidance from the decision in Mahaveer Trading Company vs Deputy Commissioner State Tax and another, where absence of separate dates led to allowance of relief. Applying that reasoning, and noting that the record in this case similarly shows no distinct dates for reply and hearing, the Court concluded that the cancellation orders suffered from breach of natural justice. For these reasons the orders dated 10.05.2023 and 06.03.2024 were quashed. [Paras 6, 7]

Orders of cancellation and the appellate dismissal were quashed on account of procedural defect and violation of principles of natural justice.

Remand for fresh consideration after opportunity of hearing - consideration of returns filed, if any - Whether the matter should be remitted to the Assessing Authority for fresh adjudication after providing opportunity of hearing and considering any returns filed by the petitioner. - HELD THAT: - Having found the impugned orders vitiated by procedural infirmity, the Court did not decide the merits of the cancellation on substantive grounds. Instead the Court remitted the matter to the Assessing Authority with directions to pass fresh orders in accordance with law, giving the petitioner an opportunity of hearing and taking into account any returns, if filed. The remand is therefore for fresh consideration and adjudication consistent with principles of natural justice and applicable law. [Paras 8]

The matter is remanded to the Assessing Authority to pass fresh orders after giving an opportunity of hearing and considering the returns, if any.

Final Conclusion: The High Court quashed the cancellation order and the appellate dismissal for procedural breach of natural justice and remanded the matter to the Assessing Authority for fresh adjudication after affording opportunity of hearing and considering any returns filed.

Detention and seizure of goods in transit - penalty under Section 129 of the TNGST Act - finality of proceedings on payment under Section 129(5) - statutory appeal under Section 107 of the TNGST Act - e-way bill validity and transit compliance - mitigating circumstances in penalty assessment

Penalty under Section 129 of the TNGST Act - finality of proceedings on payment under Section 129(5) - Effect of payment of penalty under Section 129(1) read with Section 129(5) on maintainability of writ challenging seizure and penalty - HELD THAT: - The petitioner paid the amount under Clause (a) of Sub Section (1) of Section 129 after seizure. Section 129(5) provides that on payment of the amount referred to in Sub Section (1) all proceedings in respect of the notice specified in Sub Section (3) shall be deemed to be concluded. The Court therefore accepted that, as a legal consequence of the payment, the proceedings specified in Section 129(3) had attained finality and the petitioner could not ordinarily reopen those proceedings by way of writ. The factual background (importation through Chennai port and filing of Bill of Entry) and the chronology of payment were noted, but the Court recorded that the statutory effect of payment under Section 129(5) is to bring the specified proceedings to an end.

Payment under Section 129(1) resulting in operation of Section 129(5) produces finality of the notice proceedings; the challenge by writ is not ordinarily maintainable once payment has been made.

Statutory appeal under Section 107 of the TNGST Act - mitigating circumstances in penalty assessment - e-way bill validity and transit compliance - Relief to be afforded where payment has been made but mitigating circumstances exist and records are incomplete - HELD THAT: - Although the statutory scheme gives finality to proceedings on payment, the Court found mitigating circumstances in the present case: the consignment originated from import through Chennai, a Bill of Entry under Section 49 of the Customs Act was filed by the petitioner, and certain records (notably the driver's statement) were not available at the time of seizure. In order to balance the parties' interests and in view of these mitigating features, the High Court exercised its supervisory discretion to permit the petitioner to pursue the statutory remedy. The Court directed that the petitioner be permitted to file a statutory appeal under Section 107 within 30 days from receipt of the order and that the appeal shall be taken up and decided on merits without reference to limitation. The petitioner was also permitted to procure necessary departmental documents relating to the driver's statement for use in the appeal.

Petitioner permitted to file a statutory appeal under Section 107 within 30 days; the appeal to be adjudicated on merits and without reference to limitation, and the petitioner may obtain relevant departmental records.

Final Conclusion: Writ dismissed on the footing that payment under Section 129(5) effects finality of the notice proceedings; nevertheless, in view of mitigating circumstances and incomplete records the petitioner is permitted to file a statutory appeal under Section 107 within 30 days, which shall be heard on merits without regard to limitation, and the petitioner may obtain relevant documents from the Department.

Cancellation of GST registration - Natural justice - Maintainability of writ petition for lack of constituted appellate tribunal - Judicial review of administrative action - Bogus input tax credit

Maintainability of writ petition for lack of constituted appellate tribunal - Judicial review of administrative action - Whether the writ petition is maintainable in view of non-constitution of the GST Tribunal and absence of alternate remedy - HELD THAT: - The Court held that the petitioner was entitled to challenge the impugned order by writ since the statutory appellate forum under the TNGST Act (the GST Tribunal) had not been constituted and therefore no alternate remedy was available. On that basis the writ petition was entertained and taken up on merits. [Paras 5]

Writ petition is maintainable and was heard on merits.

Natural justice - Cancellation of GST registration - Whether the cancellation of the petitioner's GST registration was vitiated for want of hearing - HELD THAT: - The Court observed that the petitioner's registration was cancelled without an antecedent personal hearing, which gives rise to a concern under principles of natural justice. However, the Court found that the Enforcement Department had inspected the place of business and recorded material observations about limited premises and absence of business activity, and concluded that even if a personal hearing had been granted the consequence would have been the same. Thus the procedural lapse did not merit interference with the cancellation on the facts of the case. [Paras 6, 8]

Although a hearing was not afforded before cancellation, the writ court declined to set aside the cancellation on merits.

Bogus input tax credit - Cancellation of GST registration - Whether the appellate order sustaining cancellation rightly relied on returns and inspection findings indicating passage of bogus credit - HELD THAT: - The impugned appellate order noted the returns filed by the petitioner which suggested facilitation of bogus input tax credit to customers without actual supply. The High Court found no reason to interfere with the detailed appellate conclusion which was supported by inspection findings and return records. [Paras 7, 8]

The appellate order upholding cancellation on account of inspection findings and returns suggesting bogus credits was not disturbed.

Cancellation of GST registration - Right to apply for fresh registration - Whether the petitioner should be granted any relief or further direction after dismissal - HELD THAT: - The Court dismissed the writ petition but granted liberty to the petitioner to apply for fresh registration upon compliance with the provisions of the TNGST Act, leaving open the procedural route for re-application without disturbing the substantive cancellation. [Paras 9]

Writ petition dismissed; petitioner granted liberty to apply for fresh registration in accordance with law.

Final Conclusion: The writ petition was entertained because the GST Tribunal was not constituted, but on merits the High Court declined to interfere with the appellate order upholding cancellation of the petitioner's GST registration-noting inspection findings and return records suggesting bogus input tax credit-while permitting the petitioner to seek fresh registration in compliance with the TNGST Act.

Relevance of incriminating material under Section 153A of the Income Tax Act, 1961 - remand to the Income Tax Appellate Tribunal for fresh consideration - judicial non-interference with High Court remittal orders - preservation of parties' rights to canvass contentions before the Tribunal

Judicial non-interference with High Court remittal orders - Dismissal of Special Leave Petitions challenging the High Court's order remitting the matter to the Income Tax Appellate Tribunal. - HELD THAT: - The Supreme Court noted that the High Court had remitted the matter to the Income Tax Appellate Tribunal to consider the alleged incriminating materials which had been examined by the Assessing Officer and the Commissioner (Appeals) for the purpose of proceedings under Section 153A. The Court observed that the question as to the relevance and effect of those materials remains open and capable of being fully canvassed before the Tribunal by both parties. In light of this, the Court declined to interfere with the common impugned orders of the High Court and found no ground for granting the special leave sought by the petitioners. [Paras 2, 3, 4, 5]

Special Leave Petitions dismissed; Supreme Court declined to interfere with the High Court's remittal.

Relevance of incriminating material under Section 153A of the Income Tax Act, 1961 - remand to the Income Tax Appellate Tribunal for fresh consideration - preservation of parties' rights to canvass contentions before the Tribunal - Remand of the question of incriminating material to the Income Tax Appellate Tribunal for fresh consideration with parties' rights preserved. - HELD THAT: - The Court recorded that the High Court had directed the Income Tax Appellate Tribunal to examine the alleged incriminating material afresh in the context of proceedings under Section 153A. The Supreme Court left the issue open for both sides to present their cases before the Tribunal and expressly preserved all rights and contentions so that the matter can be adjudicated on merits by the Tribunal. Consequently, the factual and legal questions concerning the incriminating material were not finally decided by this Court but remitted for adjudication. [Paras 2, 3, 6]

Matter remitted to the Income Tax Appellate Tribunal for fresh consideration; all rights and contentions left open to be canvassed before the Tribunal.

Final Conclusion: The Special Leave Petitions are dismissed; the High Court's remittal of the matter to the Income Tax Appellate Tribunal to consider the alleged incriminating materials (in the context of Section 153A) is left undisturbed, with all rights and contentions preserved for adjudication before the Tribunal; pending applications stand disposed of.

Right to be heard - principles of natural justice - opportunity of hearing - due process - quashing of order for lack of fair hearing - penalty under Section 271(1)(c) of the Income Tax Act - demand notice under Section 156 of the Income Tax Act - remand for fresh hearing

Right to be heard - principles of natural justice - opportunity of hearing - quashing of order for lack of fair hearing - penalty under Section 271(1)(c) of the Income Tax Act - Whether the petitioner was denied a meaningful and reasonable opportunity of hearing such that the penalty order became unsustainable - HELD THAT: - The Court found that although a show cause notice provided a right to personal hearing, the statutory exercise was conducted within an unreasonably short timeframe. The show cause notice dated 27.03.2024 required production of documentary evidence by 28.03.2024 by 4:30 p.m. and fixed oral arguments for 29.03.2024, thereby compressing the opportunity to file documents and obtain personal hearing into roughly 48 hours and, in part, less than 24 hours. Applying the principles of natural justice and due process, the Court held that what constitutes a reasonable opportunity depends on circumstances, and in the facts of this case the petitioner was deprived of a fair hearing. Consequently the penalty order pronounced on 29.03.2024 could not be sustained for want of a meaningful opportunity to present the case. [Paras 2, 6, 10, 11]

Order dated 29.03.2024 imposing penalty under Section 271(1)(c) set aside as unsustainable for lack of fair hearing.

Remand for fresh hearing - demand notice under Section 156 of the Income Tax Act - due process - Whether the demand notice issued under Section 156 and the penalty matter should be remitted for fresh consideration with directions to afford meaningful opportunity - HELD THAT: - Having quashed the penalty order for violation of the right to a fair hearing, the Court also found the consequent demand notice issued under Section 156 to be unsustainable. The Court remitted the matter to the assessing authority with a clear direction to afford the petitioner a meaningful opportunity to file its response, produce documentary evidence and to grant personal hearing. The Court prescribed a timeline for completion of this exercise to ensure effective remedy and orderly re-adjudication. [Paras 12]

Demand notice under Section 156 quashed and matter remanded to the authority to afford a meaningful opportunity of filing evidence and personal hearing; exercise to be completed within two months.

Final Conclusion: The penalty order dated 29.03.2024 and the consequent demand notice under Section 156 were quashed for denial of a meaningful opportunity of hearing; the matter is remitted to the authority to afford the petitioner a fair opportunity to file evidence and be heard, to be completed within two months, and the petition is disposed of.

Genuineness of expenditure - disallowance under section 37 of the Income Tax Act - proof and identity of payees (PAN/Aadhaar/KYC) - bills in the name of lessor and rent agreement as corroboration - application of net profit rate for adjustment in absence of complete documentation

Genuineness of expenditure - disallowance under section 37 of the Income Tax Act - proof and identity of payees (PAN/Aadhaar/KYC) - Allowability of consultancy and legal fees of Rs. 23,08,963 disallowed by the AO and sustained by the CIT(A). - HELD THAT: - The Tribunal examined the documentary proof placed on record by the assessee in respect of the payments sought to be disallowed. The assessee furnished declarations, KYC, PAN and Aadhaar particulars of the individuals to whom consultancy payments were made. There was no contrary material on record and the assessee's business profile and declared business income were not disputed. The mere fact that the payees had not filed returns, allegedly on account of incomes being below taxable limit, did not justify sustaining the disallowance in the face of the identity and supporting documents produced by the assessee. Applying these conclusions, the Tribunal directed deletion of the addition of Rs. 23,08,963 made on account of consultancy and legal fees. [Paras 5]

Deletion of the addition of Rs. 23,08,963 on account of consultancy and legal fees; Ground No.2 allowed.

Disallowance under section 37 of the Income Tax Act - bills in the name of lessor and rent agreement as corroboration - application of net profit rate for adjustment in absence of complete documentation - Allowability of power and fuel expenses partly disallowed by the AO and sustained by the CIT(A), and treatment of the remaining undocumented expenditure. - HELD THAT: - The assessee explained that power and fuel bills were in the name of property owners because premises were rented and produced rent agreements to corroborate this position. On verification, the assessee could correlate documentation for a portion of the disallowed expenditure. The Tribunal accepted the explanation and directed deletion of the corroborated amount of power and fuel expenditure (Rs. 10,42,713). For the remaining undocumented expenditure (Rs. 31,05,327), the Tribunal found that the assessee could not procure necessary documentation and therefore directed the AO to recompute the addition by applying the assessee's net profit rate after verification of documentary evidence, rather than sustaining an ad hoc disallowance. [Paras 6, 7]

Deletion of Rs. 10,42,713 of power and fuel expenses; balance of Rs. 31,05,327 to be adjusted by the AO applying the assessee's net profit rate after verification.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 23,08,963 in respect of consultancy and legal fees is deleted; power and fuel expenses of Rs. 10,42,713 are deleted and the remaining disputed amount is to be recomputed by the AO applying the assessee's net profit rate after verification; appeal disposed of partly in favour of the assessee for statistical purposes.

TP Adjustment - MAM selection - RPM v/s TNMM - Tribunal rejecting the Transactional Net Margin Method (TNMM) as used by TPO in ascertaining ALP - Delay filling SLP - As decided by HC [2023 (11) TMI 289 - DELHI HIGH COURT] once the ITAT, on considering the relevant facts as well as the order of the TPO, had concluded that the business of the assessee was merely that of a pure trader, and there was no value addition made before re-selling the particular products (i.e. the SIM cards), its consequent finding that RPM is the Most Appropriate Method, is irreproachable.

HELD THAT:- There is a delay of 311 days in filing the Special Leave Petition which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same.

Special Leave Petition is, therefore, dismissed on the ground of delay as well as on merits.

Reopening of assessment u/s 147 - reason to believe - scope of Section 148A(b) and Section 148A(d) - diversion of the loan to sister concerns - petitioner impugned the exercise of the assessment which came to be continued post the rendering of the judgment in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] in terms of a Section 148A(b)

As decided by HC [2024 (7) TMI 1568 - DELHI HIGH COURT] AO was not disabled from examining the entire case, including allegations of loan diversion to sister concerns mentioned in the original reasons to believe. The court found the credible information forming the basis of the assessment opinion specifically addressed these transactions, making the challenge unsustainable.

HELD THAT:- Having heard the learned counsel appearing for the petitioner and having gone through the materials on record, we see no good reason to interfere with the impugned order passed by the High Court.

Special Leave Petition is, accordingly, dismissed.

Taxability of interest on government grants - interest on funds parked in fixed deposits - income from other sources - inextricable link to setting up of project (capital receipt) - distinction between interest on borrowed funds and interest on grants - state circular adjusting grants by interest earned

HC [2023 (9) TMI 1617 - PATNA HIGH COURT] upheld the assessment treating interest earned on government grant funds deposited in banks as taxable income from other sources for AY 2018-19, distinguished authorities on interest from borrowed funds, and held that the State's circular cannot alter taxability under the Income Tax Act.

HELD THAT:- There is a gross delay of 364 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner.

Special Leave Petition is, accordingly, dismissed on the ground of delay.

Obligation to deduct tax at source under Section 195 - Consequences under Section 40(a)(i) for non-deduction - Income deemed to accrue or arise in India under Section 9(1)(i) Explanation 1(a) - Re-assessment under Section 148 - change of opinion versus rectification of mistake - Maintainability of writ petition against a show-cause/notice

Obligation to deduct tax at source under Section 195 - Income deemed to accrue or arise in India under Section 9(1)(i) Explanation 1(a) - Re-assessment under Section 148 - change of opinion versus rectification of mistake - Validity of the notice issued under Section 148 for reassessment in respect of commission paid to non-resident for services rendered outside India - HELD THAT: - The court found that the original scrutiny assessment had examined and accepted the petitioner's claim that the commission payments were for services rendered outside India. Under Section 9(1)(i) Explanation 1(a), income is deemed to accrue in India only to the extent reasonably attributable to operations carried out in India; if the operations are wholly outside India, such income is not chargeable in India. Applying the principle in Toshoku Ltd., commission for services rendered outside India is not chargeable under the Act and therefore the obligation under Section 195 did not arise. The Department's contention that the reassessment was to rectify a mistake was rejected because the allowance in the original assessment resulted from adjudication and decision-making, not from a clerical or inadvertent error susceptible of rectification; reopening on the basis of a change of opinion is impermissible. Accordingly the Section 148 notice was held to be without jurisdiction. [Paras 17, 19, 20, 21]

Impugned notice dated 17.09.2013 under Section 148 and continuation of reassessment proceedings quashed for lack of jurisdiction.

Maintainability of writ petition against a show-cause/notice - Whether the writ petition challenging the show-cause/notice is maintainable - HELD THAT: - The court held there is no absolute prohibition on entertaining a writ against a show-cause notice; exceptions exist where relief is appropriate. The present petition fell within such an exception because the notice was found to be without jurisdiction on the merits. The departmental plea of non-maintainability was therefore rejected. [Paras 18]

Writ petition challenging the show-cause notice is maintainable and the objection to maintainability is dismissed.

Final Conclusion: Writ petition allowed; the show-cause notice dated 17.09.2013 and the order rejecting preliminary objections dated 21.11.2014 are quashed and the reassessment proceedings consequent thereto are set aside; no costs.

Extinguishment of claims on approval of resolution plan - Binding effect of an approved resolution plan on statutory authorities including tax authorities - Protection of successful resolution applicant from post approval liabilities - Obligation to submit claims to the resolution professional and freeze of claims - Moratorium under the Insolvency and Bankruptcy Code and its effect on subsequent claims

Extinguishment of claims on approval of resolution plan - Binding effect of an approved resolution plan on statutory authorities including tax authorities - Protection of successful resolution applicant from post approval liabilities - Whether an assessment order passed after approval of a resolution plan, in respect of claims not included in that plan, can fasten liability on the successful resolution applicant - HELD THAT: - The Court applied the principles in the decisions of the Supreme Court and subsequent High Courts to hold that once a resolution plan is approved by the adjudicating authority under Section 31 of the I&B Code, claims not provided for in the resolution plan stand frozen and extinguished and the resolution applicant cannot be saddled with unforeseen liabilities arising from such claims. The judgment reasons that the legislative scheme and the object of the Code are to enable the resolution applicant to take over the corporate debtor on a clean slate, and that permitting post approval adjudication of prior claims would defeat that object and undermine the moratorium and freeze intended by the Code. Reliance was placed on the ratio that all claims must be submitted to and decided by the resolution professional so that the successful resolution applicant knows what is payable; the Court rejected the departmental contention that pending or subsequently quantified assessments could legitimately be completed so as to impose fresh liabilities on the resolution applicant. The Court found that allowing assessment/re assessment to be kept pending and culminated after approval of the plan would be contrary to the fundamental principles of the moratorium and the Code. The reasoning draws upon and follows the views expressed in Committee of Creditors of Essar Steel and Ghanshyam Mishra and Sons (P.) Ltd. and subsequent High Court decisions applying those principles. [Paras 5, 6, 7, 13, 14]

An assessment order passed after approval of the resolution plan in respect of claims not included in the plan cannot fasten liability on the successful resolution applicant and is unlawful.

Obligation to submit claims to the resolution professional and freeze of claims - Moratorium under the Insolvency and Bankruptcy Code and its effect on subsequent claims - Whether the Income Tax Department had notice of the resolution plan and whether the respondents' contention that they were unaware of IBC proceedings was tenable - HELD THAT: - The Court examined the material facts and found on record that the petitioner had communicated approval of the resolution plan to the Income Tax Authorities by letter dated March 8, 2021 and that the Department itself had filed a claim before the Resolution Professional. On that factual foundation the Court held that the departmental plea of want of notice was without merit. The Court further held that even if notice had not been given, the legal position under the I&B Code (as interpreted by higher courts) precludes saddling the resolution applicant with new claims post approval. [Paras 12, 13]

The contention that the Department was unaware of the IBC proceedings is rejected; the department had notice and, in any event, could not pursue the assessment to fasten liability on the resolution applicant.

Protection of successful resolution applicant from post approval liabilities - Validity of the impugned assessment order dated April 28, 2021 - HELD THAT: - Applying the legal principles that approved resolution plans bind all stakeholders and that claims not part of the plan stand extinguished, and on the factual finding that the Department had notice and had filed a claim, the Court concluded that the impugned assessment order was in conflict with the Code's scheme and the settled jurisprudence forbidding the imposition of unforeseen liabilities on the resolution applicant after approval of the plan. [Paras 14, 15]

The impugned assessment order dated April 28, 2021 is quashed and set aside.

Final Conclusion: Writ petition allowed; the assessment order dated April 28, 2021 for assessment year 2018-19 is quashed and set aside, and the petitioner is at liberty to challenge any penalty proceedings in accordance with law.

Reopening of assessment - Reason to believe - Change of opinion - Live link between information and record - Roving and fishing inquiry

Reopening of assessment - Reason to believe - Live link between information and record - Roving and fishing inquiry - Change of opinion - Validity of the notice issued under section 148 read with section 147 to reopen assessment for A.Y. 2017-18 - HELD THAT: - The Court examined whether the Assessing Officer had formed a bona fide reason to believe, on the basis of material before him, that income chargeable to tax had escaped assessment such as to justify reopening beyond the original assessment. The petitioner had filed the return for A.Y.2017-18 and, in response to a summons under section 131(1), furnished details, bank statements, audited balance-sheet and a reconciliation explaining cash deposits during the demonetisation period (stating deposits of Rs.80,07,000/-). The reasons recorded for reopening relied on information from investigation portals alleging cash deposits of Rs.56,07,000/- and stated that the known source of those deposits was not conclusively proved. The Court found that the Assessing Officer, in disposing objections, ignored the documentary material filed by the assessee and rejected the explanation only by noting absence of corroborative evidence and failure to prove a direct nexus. The order disclosing objections thus contradicted the record: there was no independent application of mind establishing a live link between the information received and the material on record, and the AO did not demonstrate tangible material enabling a prima facie belief of escapement of income. The Court held that mere desire to verify veracity of cash deposits cannot justify reopening where the AO has not applied his mind and where the assessee has provided explanations and supporting records. Reliance on authorities upholding reopening on specific, reliable subsequent information was distinguished on facts because here the requisite nexus and independent satisfaction by the AO were absent. Accordingly the notice for reassessment was held to be vitiated as amounting to a roving and fishing inquiry. [Paras 10, 11, 12, 13, 14]

Impugned notice dated 30.03.2021 under section 148/147 for A.Y.2017-18 quashed and set aside for want of independent application of mind and absence of a live link between information received and material on record.

Final Conclusion: The petition succeeds; the reopening notice under section 148 read with section 147 for Assessment Year 2017-18 is quashed and set aside for lack of jurisdictional satisfaction and for being based on inadequate application of mind, thereby amounting to a prohibited roving and fishing inquiry.

Disallowance under section 40A(3) for cash payments in excess of Rs.20,000 to a person in a day - disallowance under section 40(a)(ia) for failure to deduct tax at source - reimbursement of expenses on cost-to-cost basis not attracting TDS - distinction between payment for sale/purchase of asset and payment for services attracting TDS - verification/remand for de novo adjudication where records not examined - proof of TDS by ledger and Form 16A leads to deletion of disallowance

Disallowance under section 40A(3) for cash payments in excess of Rs.20,000 to a person in a day - verification/remand for de novo adjudication where records not examined - Disallowance of cash payments aggregating Rs.32,28,387 under section 40A(3). - HELD THAT: - The assessee's business involves production activities at various locations requiring petty cash disbursements to employee-cashiers as advances for expenses (conveyance, tea, snacks, repairs, etc.). The assessee produced cashier ledger accounts and sample vouchers showing individual petty payments below the statutory cash limit, but the AO and CIT(A) recorded the disallowance without examining those records. The Tribunal found that the accounting treatment and supporting documents require examination and verification by the AO. Consequently the matter is restored to the file of the AO for de novo adjudication and verification of details and ledger entries; the AO must afford the assessee a reasonable opportunity of hearing and consider the evidence before making any order under section 40A(3). [Paras 6]

Issue remanded to the AO for fresh adjudication after verification of the cashier ledgers and supporting vouchers; ground no.1 allowed for statistical purposes.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - reimbursement of expenses on cost-to-cost basis not attracting TDS - verification/remand for de novo adjudication where records not examined - Disallowance of Rs.8,10,150 under section 40(a)(ia) in respect of payments to J.K. Films Power comprising generator hire, attendant charges and fuel/diesel charges. - HELD THAT: - On the material, the Tribunal accepted the assessee's submission and invoices showing that fuel/diesel amounts were separately invoiced as reimbursement of actual consumption on a cost-to-cost basis; such reimbursements do not fall within the scope of section 194C (work contract) and accordingly no TDS was exigible on fuel charges, warranting deletion of the disallowance insofar as fuel is concerned. As to generator hire and attendant charges, the assessee contended TDS was deducted (and produced ledger entries), but did not produce other corroborative documents such as Form 16A. The Tribunal therefore directed limited remand to the AO to verify whether TDS in respect of generator hire and attendant charges was in fact deducted and deposited; if verified, the AO is to delete the disallowance in respect of those charges. [Paras 11]

Disallowance deleted for fuel charges (no TDS liability); verification remanded to AO limited to proof of TDS deduction/deposit on generator hire and attendant charges; ground no.2 allowed for statistical purposes.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - proof of TDS by ledger and Form 16A leads to deletion of disallowance - Disallowance of Rs.97,250 under section 40(a)(ia) on payment of professional charges to Ms. Annu Pathak. - HELD THAT: - The assessee produced the party ledger showing TDS entries and Form 16A for the relevant periods evidencing deduction of TDS under section 194J on the professional fees payable to the production manager. The Revenue placed no material contradicting these documents. On this basis the Tribunal found no justification for disallowance under section 40(a)(ia) and deleted the addition made by the AO. [Paras 15]

Disallowance deleted as TDS was duly deducted and evidenced by Form 16A and ledger entries; ground no.3 allowed.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - distinction between payment for sale/purchase of asset and payment for services attracting TDS - Disallowance of Rs.5,84,000 under section 40(a)(ia) on payment to Kathasis Studio Pvt. Ltd. for a film set. - HELD THAT: - The assessee produced the ledger entry and an invoice indicating the transaction was for the purchase (sale) of a ready-made set, with ownership transferred to the assessee, rather than a hire or service contract. The AO's conclusion that the amount represented site rental was not supported by the ledger or invoice. As a sale of an asset, the payment did not attract TDS provisions applicable to fees for services, and therefore the disallowance under section 40(a)(ia) was unsustainable. [Paras 18]

Disallowance deleted on the ground that the payment was for purchase of the set (sale) and not for services; ground no.4 allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for statistical purposes: the cash-payment disallowance under section 40A(3) and certain TDS-related disallowances under section 40(a)(ia) were remanded to the AO for verification where records were not examined, while disallowances for fuel charges, the professional fees to Ms. Annu Pathak, and the purchase of the film set were deleted on the merits; directions were given for verification of TDS on generator/attendant charges where necessary.

Addition under Section 68 - unexplained cash credit - capital introduced - burden of proof for source of cash deposits - acceptance of source on production of land records and bills - ad-hoc disallowance of business expenses - 10% benchmark disallowance

Addition under Section 68 - unexplained cash credit - capital introduced - burden of proof for source of cash deposits - acceptance of source on production of land records and bills - Validity of addition of Rs. 25,26,619 as unexplained cash credit treated as capital introduced - HELD THAT: - The assessee produced details purporting to show the source of the capital introduction, including land records, crop details and sale bills for agricultural produce. The Tribunal found that these materials were placed before the Assessing Officer and the CIT(A) but were not given due cognisance. On the material produced, the Tribunal concluded that the assessee had furnished the requisite particulars to explain the source of the deposits and that the addition treating the amount as unexplained cash credit under Section 68 was not justified. The Assessing Officer's adverse conclusion, adopted by the CIT(A), was therefore set aside and the addition was deleted.

Addition of Rs. 25,26,619 as unexplained cash credit/capital introduced deleted.

Ad-hoc disallowance of business expenses - 10% benchmark disallowance - business expenses disallowance - Sustainability of adhoc disallowance of 10% of business expenses amounting to Rs. 37,856 - HELD THAT: - The Assessing Officer applied a notional 10% disallowance of total business expenses. The Tribunal examined the expense record and concluded that the expenses appeared justifiable and that the adhoc 10% cut was not sustainable. In the absence of specific justificatory reasons to uphold the ad-hoc reduction, the Tribunal deleted the disallowance.

Ad-hoc disallowance of Rs. 37,856 being 10% of expenses deleted.

Final Conclusion: Both grounds of appeal are allowed; the additions and adhoc disallowance made by the Assessing Officer and confirmed by the CIT(A) are set aside and the appeal is allowed.

Revision of return under section 139(5) - Belated return under section 153A - Rectification under section 154 - Deduction under section 54B

Revision of return under section 139(5) - Belated return under section 153A - Deduction under section 54B - Rectification under section 154 - Validity of the revised return dated 30.03.2014 (claiming deduction under section 54B) which sought to revise the belated return filed on 10.10.2013 in response to notice under section 153A, and consequence for the rectification order under section 154. - HELD THAT: - The Tribunal found as an admitted fact that the assessee filed a belated return in response to the notice under section 153A on 10.10.2013, which, in law, replaced the original return filed under section 139(1). The determinative question was not whether the belated return was a valid return for other purposes, but whether a belated return could be the subject of a revision under section 139(5). The law, as it stood at the relevant time, did not permit revision of a belated return filed after the time prescribed in the notice under section 153A. Consequently, the subsequent revised return dated 30.03.2014 purporting to revise the belated return could not be treated as a valid revised return under section 139(5), and any claim (including the deduction under section 54B) made for the first time in that revised return could not be allowed on the basis of that revision. In view of this statutory rule, the rectification order under section 154 that withdrew the benefit granted earlier (recognising that the revised return was not a valid revision of the belated return) was not erroneous. The Tribunal therefore found no infirmity in the CIT(A)'s conclusion upholding the AO's action and dismissing the assessee's appeal on this point (see paras. 8 and 10). [Paras 8, 10]

The revised return dated 30.03.2014 revising the belated return of 10.10.2013 is not a valid revision under section 139(5); the deduction claimed under section 54B in that revised return cannot be allowed, and the rectification under section 154 withdrawing that claim was correctly upheld.

Final Conclusion: The appeal is dismissed: the Tribunal upheld the CIT(A)'s finding that a belated return filed in response to a section 153A notice cannot be revised under section 139(5), rendering the subsequent revised return (and the deduction claimed therein under section 54B) invalid and justifying the rectification under section 154.

Addition under section 68 as unexplained cash deposits - business deduction for written off insurance claim previously offered to tax - estimated addition of sundry creditors in absence of confirmations - inadmissibility of additions founded on surmise, conjecture and lack of enquiry

Addition under section 68 as unexplained cash deposits - inadmissibility of additions founded on surmise, conjecture and lack of enquiry - Deletion of addition of Rs. 1,29,99,000 as unexplained cash deposits during demonetisation period. - HELD THAT: - The assessee, a partnership firm trading in timber, had deposited substantial cash during the year and maintained regular books showing realization from sundry debtors; the assessing officer accepted the source for part of the cash and accepted the quantum of sales. The cash deposits in issue were recorded in the cash book and supported by debtors' ledger extracts and were not shown to be non-genuine by any concrete material. The books were not rejected nor were defects pointed out. Taxing amounts already offered as sales would amount to double taxation. The addition rested on conjecture that non genuine sales were booked, without independent evidence or adequate inquiry, and therefore was unsustainable. [Paras 3]

Addition held to be unsustainable and deleted.

Business deduction for written off insurance claim previously offered to tax - inadmissibility of additions founded on surmise, conjecture and lack of enquiry - Deletion of addition relating to reversal/write off of insurance claim of Rs. 58,78,451. - HELD THAT: - The insurance claim had been credited to the Profit & Loss account and offered to tax in the earlier year. The claim was subsequently rejected by the insurer (rejection letter on record) and accordingly written off in the relevant year by debit to Profit & Loss. A claim arising out of trading stock that was previously offered to tax but not recovered subsequently is allowable as a business deduction. The assessing officer's view that the write off was an afterthought to reduce income was not supported in view of the earlier offer to tax and documentary evidence of rejection. [Paras 4]

Addition deleted and write off allowed as business deduction.

Estimated addition of sundry creditors in absence of confirmations - inadmissibility of additions founded on surmise, conjecture and lack of enquiry - Deletion of adhoc/estimated addition of Rs. 208.94 lakhs in respect of sundry creditors for non production of confirmations. - HELD THAT: - The sundry creditors were reflected in audited books and ledger extracts showing purchases and regular dealing; payments were made through banking channels. There was no invocation of any provision showing cessation or non genuineness of creditors, nor was any enquiry made by the assessing officer to establish non existence. An adhoc percentage addition based solely on non production of confirmations is arbitrary and founded on suspicion; where purchase transactions are accepted and books are not rejected, such estimated addition cannot be sustained. [Paras 5]

Estimated addition deleted.

Final Conclusion: The appeal is allowed: the additions in respect of unexplained cash deposits, the write off of the insurance claim and the estimated addition of sundry creditors are deleted in accordance with the Tribunal's findings.

Penal liability for concealment of particulars of income under section 271(1)(c) - Deemed concealment under Explanation 3 to section 271(1)(c) for failure to file return within the period specified in section 153(1) - Estimated assessment does not preclude imposition of penalty where return was not filed and AO is satisfied of taxable income - Assessee's statutory duty to file return is independent of auditor's failure to file tax audit report

Penal liability for concealment of particulars of income under section 271(1)(c) - Deemed concealment under Explanation 3 to section 271(1)(c) for failure to file return within the period specified in section 153(1) - Estimated assessment does not preclude imposition of penalty where return was not filed and AO is satisfied of taxable income - Assessee's statutory duty to file return is independent of auditor's failure to file tax audit report - Validity of penalty under section 271(1)(c) for concealment where assessee did not file return and income was determined on estimate basis - HELD THAT: - The Tribunal confirmed that Explanation 3 to section 271(1)(c) deems a person to have concealed particulars of income where the person fails, without reasonable cause, to furnish a return within the period specified in section 153(1) and until expiry of that period no notice under section 142(1) or 148 has been issued, and the AO is satisfied that the person has taxable income. In the present case the assessee neither filed return under section 139 nor in response to the section 148 notice within the prescribed period, notices were issued beyond the period specified in section 153(1), and the AO was satisfied on the basis of information from ITD systems and NMS portal that substantial receipts were received. Therefore the matter fell squarely within Explanation 3 and constituted deemed concealment. The Tribunal rejected the contention that penalty cannot be levied because the addition was made on an estimated basis, explaining that the principle relied upon by the assessee applies where an original return had been filed and minor defects led to estimation; it does not apply where the assessee wholly failed to file returns or substantiate claimed expenses. The plea that auditor's failure absolved the assessee was also rejected because the statutory obligation to file the return rests on the assessee and is distinct from the obligation to file an audit report under section 44AB. Applying these considerations, the Tribunal upheld the CIT(A)'s conclusion that penalty under section 271(1)(c) was rightly levied and sustained the AO's order. [Paras 11, 12, 14]

Penalty under section 271(1)(c) upheld as the case falls within Explanation 3 and the assessee's non-filing and failure to substantiate receipts justified imposition of penalty.

Final Conclusion: The appeal is dismissed; the penalty imposed under section 271(1)(c) is upheld.

Revision under section 263 - Order erroneous insofar as prejudicial to the interests of revenue - Assessment passed without making inquiries or verification which should have been made - Allowance of depreciation on goodwill - Examination of investment in intangible assets versus inquiry into claim of depreciation - De novo adjudication on a limited issue after remand

Revision under section 263 - Order erroneous insofar as prejudicial to the interests of revenue - Assessment passed without making inquiries or verification which should have been made - Invocation of revisionary jurisdiction under section 263 was justified - HELD THAT: - The Tribunal found that although the return was selected for complete scrutiny and the Assessing Officer had issued notices concerning investment in intangible assets, the AO did not make any inquiry or form an opinion specifically on the assessee's claim of depreciation on goodwill acquired on slump sale. The Court applied Explanation 2 to section 263(1), observing that an order passed without making inquiries or verification which should have been made, or allowing relief without inquiring into the claim, is to be regarded as erroneous and prejudicial to revenue. On the material on record the Tribunal concluded there was no examination of the depreciation claim and therefore the Principal Commissioner correctly invoked revisionary jurisdiction under section 263 to set aside the assessment for fresh consideration of that limited issue. [Paras 15, 16]

Invocation of section 263 was upheld and the grounds raised by the assessee on this point were dismissed.

Allowance of depreciation on goodwill - Examination of investment in intangible assets versus inquiry into claim of depreciation - De novo adjudication on a limited issue after remand - Whether the matter of depreciation on goodwill should be remanded for fresh adjudication and the scope of directions given by the Principal Commissioner - HELD THAT: - The Tribunal noted that the Principal Commissioner in the impugned order had both set aside the assessment for verification and also expressed views on the merits of the depreciation claim. The Tribunal held such merit observations by the Principal Commissioner to be irrelevant once the assessment is set aside for de novo adjudication on the limited issue. The proper course is that the Assessing Officer shall verify the factual aspects directed (including whether the transferor declared profits on the transfer and paid tax thereon) and decide the claim of depreciation on goodwill in accordance with law after giving the assessee an opportunity of being heard. [Paras 17]

Assessment order set aside for de novo adjudication on the limited issue; AO to verify facts and decide the depreciation claim as per law; merit observations in the revision order treated as irrelevant.

Final Conclusion: The invocation of revisionary proceedings under section 263 was upheld and the assessment order is set aside for de novo adjudication by the Assessing Officer limited to the question of allowance of depreciation on goodwill and related verifications; the appeal is dismissed.

Principles of natural justice - show cause notice - opportunity of hearing - penalty under Section 114AA of the Customs Act, 1962 - quash and set aside

Show cause notice - principles of natural justice - opportunity of hearing - quash and set aside - Impugned Order-In-Original dated 24 November 2023 imposing penalty collectively on the Petitioners was made without service of any show cause notice on them and in violation of principles of natural justice. - HELD THAT: - The record demonstrates that the show cause notice dated 08 June 2023 was addressed only to the Company and was not addressed, marked or served on the Petitioners, who are Directors. The Petitioners were not granted any opportunity to show cause or for a hearing before the order was passed which visits them with serious consequences. The Court, following its earlier decision in Devanshu Desai (order dated 03 December 2024 in Writ Petition No. 18 of 2023) where an order against an independent director was quashed for non-service of a show cause notice, held that the absence of notice and hearing amounted to a breach of the principles of natural justice and required the order to be set aside insofar as it affects the Petitioners. [Paras 4, 5, 6]

Impugned Order-In-Original dated 24 November 2023 quashed and set aside insofar as it concerns the Petitioners for breach of principles of natural justice.

Show cause notice - penalty under Section 114AA of the Customs Act, 1962 - Whether quashing the order precludes the Respondents from issuing a fresh show cause notice and proceeding afresh under law. - HELD THAT: - The Court clarified that quashing the impugned order on grounds of non-service and denial of opportunity does not bar the Respondents from issuing a show cause notice and following the statutory process afresh. The Court expressly left all parties' contentions on the merits open for determination in any subsequent proceedings. [Paras 7]

Quashing does not preclude Respondents from issuing a show cause notice and acting under law; all contentions reserved.

Final Conclusion: Writ petition allowed in part: the Order-In-Original dated 24 November 2023 is quashed and set aside insofar as it imposes penalty on the Petitioners for non-service of show cause notice and violation of principles of natural justice; respondents remain free to issue a show cause notice and proceed according to law; no costs.

Delay in adjudication of show cause notice - transfer of show cause notice to call book without intimation - restructuring of departmental office not a justification for inordinate delay - quashing of show cause notice on ground of unjustified delay - precedential weight of coordinate bench decisions

Delay in adjudication of show cause notice - transfer of show cause notice to call book without intimation - restructuring of departmental office not a justification for inordinate delay - quashing of show cause notice on ground of unjustified delay - Whether show cause notices delayed by periods ranging from nine to twenty years could be sustained where the respondents rely on transfer to call book without intimating the petitioners or on restructuring of the Commissionerate. - HELD THAT: - The Court found that the respondents produced no material to show that petitioners were informed of transfer of their show cause notices to the call book; it was incumbent on the respondents to intimate such transfer. The pleaded ground of departmental restructuring was held to be a generalised explanation which cannot justify delays of nine to twenty years. The Court noted and followed a series of coordinate-bench decisions rejecting identical contentions and quashing long-delayed notices where no justification for the delay was shown. Applying those precedents and the determinative reasoning that unexplained or unjustified inordinate delay vitiates adjudication, the Court concluded that the impugned notices and original order must be quashed for non-justification of delay. [Paras 3, 4]

Show cause notices and the order in original quashed and set aside on the ground of unjustified delay in adjudication.

Final Conclusion: The rule is made absolute and the impugned show cause notices are quashed for non-justification of prolonged delay; no order as to costs and pending interim applications disposed of.

Quashing of show cause notice for inordinate delay in adjudication - delay as ground for judicial review - following coordinate bench precedent - liberty to initiate separate proceedings for refund

Quashing of show cause notice for inordinate delay in adjudication - delay as ground for judicial review - following coordinate bench precedent - Impugned show cause notice dated 07.05.1997 quashed on account of inordinate delay in adjudication - HELD THAT: - The Court examined the lengthy delay between issuance of the show cause notice (07.05.1997) and adjudication and found the reasons offered by the respondents to explain the delay unacceptable. The Court adopted and applied the reasoning of the Coordinate Bench decision in Welspun India Limited (Writ Petition No. 1148 of 2023) which addressed the same contention of delayed adjudication, and, following that precedent, quashed and set aside the impugned show cause notice dated 07 May 1997. [Paras 4, 5, 6]

Impugned show cause notice dated 07 May 1997 quashed and set aside.

Liberty to initiate separate proceedings for refund - Petitioners granted liberty to pursue separate proceedings for recovery of amounts collected during investigation - HELD THAT: - The Court declined to adjudicate the claim for refund of the amount collected (prayer clause (b)) in these proceedings. At the request of the respondents, the Court granted the petitioners liberty to institute appropriate proceedings seeking return of the collected amount and interest. The Court left all contentions on that relief open and directed that, if such proceedings are instituted, they be disposed of by the respondents in accordance with law and expeditiously. [Paras 7, 8, 9]

Liberty granted to the petitioners to initiate appropriate proceedings regarding the refund; substantive claim left open.

Final Conclusion: The rule is disposed of: the show cause notice dated 07 May 1997 is quashed for inordinate delay; the petitioners are granted liberty to pursue separate proceedings for recovery of amounts collected, with those contentions left open and to be decided expeditiously in accordance with law.

Writ of mandamus - compliance with appellate tribunal order - provisional release under bond - stay pending appeal - validation of reclassification - re-determination of customs valuation - confiscation under section 111(d) and 111(m) of Customs Act, 1962

Compliance with appellate tribunal order - stay pending appeal - writ of mandamus - Whether the Respondents could refuse to release the seized consignment by relying on their intention to appeal the CESTAT order dated 01 July 2024. - HELD THAT: - The Tribunal allowed the appeal and set aside the orders of the lower authorities, holding that the goods were correctly declared and that re-determination of value and confiscation lacked legal basis (paras 13-15 of the CESTAT order). Once the CESTAT order was rendered, the Customs Authorities were dutybound to release the confiscated consignment unless they obtained interim relief from a higher forum. The mere pendency or proposed filing of an appeal does not entitle the Respondents to indefinitely defer compliance with the Tribunal's judgment; compliance must be stayed only if an appropriate stay is granted by a competent court. In the absence of such a stay, the Court directed release within a specified time frame. The determinative principle is that appellate remedy does not suspend the operative effect of a tribunal's order unless interim relief is secured. [Paras 10, 12, 13]

The Respondents cannot indefinitely avoid implementation of the CESTAT order dated 01 July 2024 by merely intending to appeal; they must release the goods unless they obtain a stay on implementation.

Provisional release under bond - validation of reclassification - re-determination of customs valuation - confiscation under section 111(d) and 111(m) of Customs Act, 1962 - Whether the conditions imposed by the Respondents in the letter dated 05 August 2024 - notably drawing a fresh sample before release and imposing bonds - were warranted. - HELD THAT: - The CESTAT had found that the goods were correctly declared in description and value and that confiscation and re-determination of value had no basis in law. Given those findings and the fact that samples had already been taken and analysed after seizure, the High Court concluded that insisting on drawing a fresh sample at this late stage was unwarranted and amounted to delaying compliance with the Tribunal's order. The Court treated the imposition of such conditions, including the requirement to draw another sample before provisional release, as unreasonable in the facts of the case and set aside the impugned letter directing those measures. The Court left open the limited possibility that, if the Respondents obtain a stay from a higher court, different steps may follow. [Paras 11, 12, 13]

The letter dated 05 August 2024 imposing conditions such as drawing a fresh sample before release is set aside as unwarranted; the Respondents are directed to release the seized goods unless a stay on the Tribunal's order is obtained.

Final Conclusion: The rule is made absolute: the impugned letter dated 05 August 2024 is set aside and the Respondents are directed to implement the CESTAT order dated 01 July 2024 and release the seized goods within two weeks of uploading of this order unless a stay of the Tribunal's order is obtained.

Classification of goods under Customs Tariff - Containers for transport or storage of compressed or liquefied gas - Appliances and apparatus used in medical, surgical, dental or veterinary sciences - Exclusion of cylinders fitted in special transport from Gas Cylinder Rules - Limitation for issuance of Show Cause Notice - Penalty for mis-declaration and confiscation

Classification of goods under Customs Tariff - Containers for transport or storage of compressed or liquefied gas - Appliances and apparatus used in medical, surgical, dental or veterinary sciences - Appropriate classification of the imported cylinders for the Bill of Entry No. 7836092 dated 15.12.2016 - HELD THAT: - The Tribunal examined whether the imported semi-welded steel and aluminium high-pressure cylinders (fitted with valves and accessories) are classifiable under CTH 73110030 as containers for transport or storage of compressed/liquefied gas or under CTH 90189099 as appliances/apparatus used in medical sciences. The Tribunal noted that the cylinders were imported to be fitted in 108/102 ambulances and, once filled, are used to store and supply medical oxygen for life-supporting purposes during patient transportation. It held that their use as integral life-support equipment in ambulances brings them within the ambit of Chapter Heading 9018 (medical appliances/apparatus), making CTH 90189099 the more appropriate classification. The Tribunal also relied on consistency with clearance of similar goods by the appellant at another port and set aside the re-classification and the differential duty confirmed below. [Paras 7, 8, 10]

The impugned goods are classifiable under CTH 90189099; the differential duty confirmed on re-classification is set aside.

Exclusion of cylinders fitted in special transport from Gas Cylinder Rules - Confiscation - Applicability of the Gas Cylinder Rules (GCR, 2004/GCR, 2016), Explosives Act jurisdiction and consequent confiscation - HELD THAT: - The Tribunal considered whether the imported cylinders fell within the regulatory ambit of the GCR, 2004/GCR, 2016 and the jurisdiction of the Explosives Act, thereby justifying confiscation for lack of licence/BIS certification. It observed that Section 2(xxi) of GCR, 2004 expressly excludes containers fitted to special transport such as ambulances. Given that the cylinders were to be fitted in ambulances, the Tribunal concluded that the GCR (and related licensing under the Explosives Act) did not apply. Consequently, confiscation on the ground of contravention of those Rules was unsustainable and was set aside. [Paras 11, 13]

GCR, 2004/GCR, 2016 and the jurisdiction of the Explosives Act do not apply to the impugned cylinders fitted in ambulances; confiscation is set aside.

Limitation for issuance of Show Cause Notice - Sustainability of the Show Cause Notice issued about four years after importation - HELD THAT: - The Tribunal addressed the challenge to the Show Cause Notice issued in 2021 in respect of goods imported in 2016. Noting that the appellant had not suppressed material information and relying on the principles reflected in the authorities cited by the appellant, the Tribunal found that issuing the notice beyond the normal period of limitation (after four years) was legally unsustainable. The demand confirmed on the basis of the extended period of limitation was therefore set aside. [Paras 12]

The Show Cause Notice issued after four years from import is unsustainable; the demand confirmed on limitation grounds is set aside.

Penalty for mis-declaration and confiscation - Imposability of penalty on the appellant for alleged mis-declaration or contravention - HELD THAT: - The Tribunal found no established mis-declaration or suppression with intent to evade duty on the part of the appellant. In the absence of requisite culpability, the Tribunal held that penalties imposed under the impugned orders could not be sustained and accordingly set them aside. [Paras 12, 13]

Penalties imposed on the appellant are set aside.

Final Conclusion: The appeal is allowed: the impugned goods are held classifiable under CTH 90189099; confiscation for breach of GCR/Explosives Act is set aside; the demand based on belated Show Cause Notice is quashed as barred by limitation; and penalties are overturned, with consequential relief as per law.

Export Promotion Capital Goods (EPCG) scheme - competence of Customs officer to modify or add conditions to DGFT authorisations - mis-declaration in Bill of Entry - liability to confiscation under section 111(m) of the Customs Act - liability to confiscation under section 111(o) of the Customs Act - penalty under section 114A of the Customs Act - scope of Customs action for alleged undue benefit under other Ministries' schemes (TUF)

Mis-declaration in Bill of Entry - Whether the appellant mis-declared the year of manufacture of the imported capital goods before Customs. - HELD THAT: - The Tribunal found that the Bill of Entry, which is the declaration made under the Customs Act, did not indicate any year of manufacture (para 15). The EPCG licence and the ANF-4 application similarly did not contain any declaration of year of manufacture by the appellant, although a proforma invoice furnished to DGFT showed year 2000 (para 17). Since no year of manufacture was declared to Customs, there was no mis-declaration in the Bill of Entry by the appellant. [Paras 15, 17]

No mis-declaration of year of manufacture in the Bill of Entry; allegation of mis-declaration is not sustained.

Export Promotion Capital Goods (EPCG) scheme - scope of Customs action for alleged undue benefit under other Ministries' schemes (TUF) - Whether import under EPCG was impermissible because of alleged attempt to avail benefits under the TUF scheme and whether such alleged attempt permits Customs to deny EPCG benefit. - HELD THAT: - The Tribunal noted that import of capital goods under EPCG is governed by the HBP and that paragraph 5.2 permits import of second hand capital goods without age restriction (para 20). The appellant had not applied under TUF (para 18), and the proforma invoice indicating year did not alter the character of the EPCG authorisation. Further, the Tribunal held there is no legal basis for Customs to demand duty, confiscate goods or impose penalties on the ground that undue benefits under some other Ministry's scheme (TUF) were claimed or attempted; such matters, if established, should be conveyed to the concerned ministry for action (paras 28-29). [Paras 18, 20, 28, 29]

Import under EPCG is not vitiated by alleged TUF benefits in this case; Customs cannot treat alleged undue claims under another ministry's scheme as ground to deny EPCG benefit or to demand duty.

Competence of Customs officer to modify or add conditions to DGFT authorisations - Whether the Commissioner of Customs had power to read into or modify the EPCG licence issued by DGFT by adding conditions such as restriction on year of manufacture. - HELD THAT: - The Tribunal observed that EPCG licences are issued under the FTDR Act and the Foreign Trade Policy and that paragraph 2.3 of the FTP makes DGFT's interpretation final and binding (para 26). The Customs Act does not confer on the Commissioner any power to modify DGFT licences or to add conditions to them; if evidence of fraud or mis-declaration emerges, Customs may forward such material to DGFT but cannot itself alter the licence (paras 26-27). [Paras 26, 27]

Commissioner of Customs had no power to modify the EPCG licence or read additional conditions into it; the impugned additions are unsustainable.

Liability to confiscation under section 111(m) of the Customs Act - liability to confiscation under section 111(o) of the Customs Act - Whether the imported capital goods were liable to confiscation under sections 111(m) or 111(o) of the Customs Act. - HELD THAT: - Section 111(m) applies where goods do not correspond with the entry made under the Act. The Tribunal found that the Bill of Entry contained no year of manufacture, so there was no mismatch to attract section 111(m) (para 32). Section 111(o) applies where exemption is subject to a condition that is not observed. The exemption under EPCG was conditional on fulfilment of export obligation, which in this case had been met and an EODC was issued by DGFT, so 111(o) could not be invoked (para 33). [Paras 32, 33]

Confiscation under sections 111(m) and 111(o) cannot be sustained in this case.

Penalty under section 114A of the Customs Act - Whether penalty under section 114A could be imposed on the appellant. - HELD THAT: - Section 114A penalises cases of short-levy or non-levy of duty by reason of collusion or wilful mis-statement or suppression of facts. The Tribunal concluded there was no short payment or demand of duty that could be sustained (paras 34-36). Because the foundational demand of duty was not maintainable, the consequent penalty under section 114A could not be imposed. [Paras 34, 36]

Penalty under section 114A is not sustainable as the duty demand itself fails.

Export Promotion Capital Goods (EPCG) scheme - interpretation of exemption notification for EPCG - Whether the exemption notification corresponding to EPCG imposed any restriction on year of manufacture of capital goods. - HELD THAT: - The Tribunal examined notification no. 103/2009-Cus issued under section 25(1) and found that it exempts goods imported under EPCG without placing any restriction on year of manufacture (para 23). Coupled with HBP paragraph 5.2 permitting second hand capital goods without age restriction (para 20), there was no legal basis to treat the goods as ineligible for exemption on account of age. [Paras 20, 23]

The exemption notification for EPCG does not restrict imports by year of manufacture; therefore the exemption applicability is not negated on that ground.

Final Conclusion: The impugned order is set aside insofar as it pertains to the appellant: there was no mis-declaration in the Bill of Entry, the EPCG authorisation and corresponding customs notification contain no restriction as to year of manufacture, the Commissioner had no power to add conditions to the DGFT licence or to treat alleged TUF claims as a basis for demanding duty, confiscation under sections 111(m) and 111(o) and penalty under section 114A are unsustainable, and the appeal is allowed with consequential relief.

Mandatory BIS certification for pneumatic tyres - Prohibited goods under Section 2(33) of the Customs Act - Confiscation under Section 111 for goods imported contrary to law - Mis-declaration of quantity, quality and valuation - Valuation by Chartered Engineer under Customs Valuation Rules (resort to Rule 9) - Penalty under Section 112(a)(i) and Section 114AA - Discretion under Section 125 regarding redemption of prohibited goods

Mandatory BIS certification for pneumatic tyres - Prohibited goods under Section 2(33) of the Customs Act - Confiscation under Section 111 for goods imported contrary to law - Imported tyres without BIS Standard Markings are prohibited goods and liable to absolute confiscation under Section 111. - HELD THAT: - The Tribunal held that the Pneumatic Tyres and Tubes of Automobiles (Quality Control) Order, 2009, read with Section 17 of the BIS Act, mandates affixation of the BIS Standard Mark on pneumatic tyres except in narrowly defined exceptions (OEM/export-oriented consignments), which do not apply to the appellant. Chapter 1(a) of the Customs Tariff Act subjects imports to domestic regulatory requirements. In view of the statutory scheme and Board/Ministry communications emphasizing verification of BIS markings, tyres imported without the mandatory BIS mark constitute import in violation of the statutory condition and thereby fall within the definition of "prohibited goods" under Section 2(33). Goods so imported are liable to confiscation under Section 111 and the authorities below were correct in treating the consignments as prohibited and ordering confiscation. [Paras 12, 13, 15, 21]

Confiscation affirmed: tyres lacking mandatory BIS markings are prohibited and liable to absolute confiscation under Section 111.

Mis-declaration of quantity, quality and valuation - Valuation by Chartered Engineer under Customs Valuation Rules (resort to Rule 9) - Mis-declaration of quantity and quality was established and the market valuation by the Chartered Engineer was upheld. - HELD THAT: - On examination the physical quantity and the nature of tyres differed from the Bills of Entry declarations (excess tyres recovered and tyres found to be Passenger Car Radial rather than "Off the Road Tyres"). The appellant's proffered explanation (an email alleging supplier's mistake) was rejected as implausible. Since valuation under Rules 4-8 could not be applied, the adjudicating authority legitimately resorted to Rule 9 and accepted the Chartered Engineer's market-value report; the appellant had in any event accepted the violations in his statement. Consequently, the Tribunal found no error in the valuation and the finding of mis-declaration. [Paras 2, 22, 23]

Findings of mis-declaration sustained and market valuation by the Chartered Engineer upheld.

Penalty under Section 112(a)(i) and Section 114AA - Penalties under Section 112(a)(i) and Section 114AA on the appellant were valid and rightly confirmed. - HELD THAT: - Having regard to the appellant's conduct-holding out the IEC and bank account while actual import operations were handled by another, filing false declarations, admitting awareness of mis-declaration, and attempting to rely on a forged email-the Tribunal applied the settled principle that mens rea is not requisite for confiscation or imposition of penalty in cases of mis-declaration. The authorities below properly imposed penalties under Section 112(a)(i) and Section 114AA; the Tribunal found no error in confirmation of those penalties and approved modulation principles cited by the authorities. [Paras 24]

Penalties under Section 112(a)(i) and Section 114AA affirmed.

Discretion under Section 125 regarding redemption of prohibited goods - Confiscation under Section 111 for goods imported contrary to law - Adjudicating authorities acted within discretion in refusing redemption and ordering absolute confiscation of the prohibited tyres; appeal against absolute confiscation dismissed. - HELD THAT: - The Tribunal reviewed the scope of Section 125 and relevant precedents, noting that while Section 125 affords the adjudicating authority discretion to allow redemption in respect of prohibited goods, that discretion may be declined where release would risk public safety or promote smuggling. Given the regulatory object of the BIS regime to protect public safety, the character of the goods, and the appellant's conduct as a trader (risk of diversion to unauthorized persons), the Commissioner (Appeals) rightly refused redemption as a matter of discretion. Earlier authorities and High Court observations (including Aban Exim and related jurisprudence) support the view that prohibited goods in breach of statutory conditions need not be redeemed as of right and may be absolutely confiscated; hence the Tribunal declined to interfere. [Paras 25, 26, 27]

Discretion to refuse redemption upheld and absolute confiscation confirmed; prayer for release on payment of redemption fine refused.

Final Conclusion: The appellate order confirming absolute confiscation of the imported tyres (for lack of mandatory BIS markings), the market valuation, and the penalties under Section 112(a)(i) and Section 114AA is affirmed; the appeal is dismissed.

Entitlement to refund of security deposit/Extra Duty Deposit on finalisation of provisional assessment - Automatic refund without requirement of a formal claim under Section 27 - Limitation under Section 27 in relation to provisional assessment - Provisional assessment adjustment and refund not governed by statutory refund provisions - Security deposit is not a tax and must be returned (Article 265 principle applied) - Effect of Special Valuation Branch report on finalisation of provisional assessments

Entitlement to refund of security deposit/Extra Duty Deposit on finalisation of provisional assessment - Automatic refund without requirement of a formal claim under Section 27 - Effect of Special Valuation Branch report on finalisation of provisional assessments - Whether the deposit collected as Extra Duty Deposit (EDD) at the time of provisional assessment must be returned to the importer upon finalisation of assessment without requiring an independent refund claim under Section 27. - HELD THAT: - The Tribunal held that where provisional assessments are finalised following receipt of the Special Valuation Branch report accepting declared value, the customs station must proceed to finalise the provisional assessments and the deposit collected as EDD, being a security and not a tax, is no longer required to be held by the department and must be returned to the depositor. Reliance was placed on the administrative instruction in CBEC Circular No. 5/2016-Customs that provisional assessments so finalised need not await a formal refund application, and on the ratio in Mafatlal Industries which distinguishes adjustment/refunds arising on provisional assessment from statutory refund provisions. The Madras High Court authority confirming that refund upon finalisation is due without insisting on a formal claim was also applied. The Tribunal therefore rejected the department's contention that an independent claim under Section 27 was a precondition for refund in these circumstances and set aside the impugned order denying refund on limitation grounds. [Paras 5, 6, 7, 8, 9]

Impugned order set aside; appellant entitled to return of EDD on finalisation of provisional assessments without requirement of a fresh claim under Section 27, with consequential relief.

Limitation under Section 27 in relation to provisional assessment - Provisional assessment adjustment and refund not governed by statutory refund provisions - Whether the refund claims in respect of the provisionally assessed Bills of Entry were barred by limitation under Section 27. - HELD THAT: - The Tribunal rejected the revenue's limitation argument for the provisionally assessed Bills of Entry on the basis that where provisional assessments are finalised (including after acceptance by the Special Valuation Branch), refunds of security deposits are not to be treated as statutory refund claims governed by Section 27's limitation in the same manner. The decision in Mafatlal was applied to show that adjustments and refunds consequent to finalisation of provisional assessment are conceptually distinct from independent refund provisions, and the Madras High Court ruling supporting automatic refund on finalisation was followed. Accordingly, the limitation bar under Section 27 could not sustain rejection of the refund in the facts of this case. [Paras 6, 7, 8, 9]

Limitation under Section 27 does not preclude return of the EDD in the circumstances of finalised provisional assessments; impugned rejection on limitation grounds set aside.

Entitlement to refund of security deposit/Extra Duty Deposit on finalisation of provisional assessment - Validity of rejection of refund for the single Bill of Entry where original TR-6 challan was not produced. - HELD THAT: - The Tribunal observed that in the peculiar facts of the case the non-production of the original TR-6 challan does not mandate outright rejection. The authority may accept production of the TR-6 or, if still unavailable, may permit the deposit to be returned on the importer executing an indemnity bond in accordance with departmental procedure. This direction preserves departmental safeguards while ensuring return of the security where formal proof is absent. [Paras 3, 8, 9]

For the lone Bill of Entry lacking the original TR-6, the department may accept an indemnity bond as per procedure and deal with the refund accordingly; the rejection on that ground is not sustained.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the Extra Duty Deposit collected on provisional assessments filed during 2016-2018 is to be returned to the appellant on finalisation of those assessments without requiring a separate claim under Section 27, and the single entry lacking the TR-6 may be processed on production or by accepting an indemnity bond as per departmental procedure.

Transshipment and ship stores exemption - transformation of imported goods into stores by delivery and placement on board - failure to file bill of transshipment as mere procedural/technical defect - levy under section 28 of Customs Act, 1962 and territorial nexus for assessment - confiscation and penal provisions without statutory empowerment - notice to importer/agent and identity of the person chargeable to duty

Transshipment and ship stores exemption - transformation of imported goods into stores by delivery and placement on board - Whether the consignments delivered under escort and placed for use in the salvage operation qualified as transshipped goods and as ship stores, attracting zero-rating and exclusion from duty liability. - HELD THAT: - The Tribunal found on the facts that the consignments arrived from abroad and were moved under customs permission under escort to the site of the grounded vessel and were received for placement on board the vessels engaged in salvage. Such movement amounted to transshipment and, in the circumstances of salvage, delivery and acceptance by the salvage master for placement on board effected the transformation of the goods into ship stores. Section 54(1) and the special provisions recognising stores (including the deeming in section 88) render the goods zero-rated and outside the levy jurisdiction applicable to clearance for home consumption. The factual absence of any evidence that the goods entered domestic consumption or remained within the territory defeated Revenue's case that duty liability crystallised. [Paras 13, 14, 15]

Consignments qualified as transshipped goods and as ship stores for the purposes of exclusion from duty; zero-rating under the transshipment/stores regime applies.

Failure to file bill of transshipment as mere procedural/technical defect - Whether non-filing of a bill of transshipment vitiated the transshipment and justified imposition of duties. - HELD THAT: - The Tribunal held that the goods were moved upon application and with permission of competent customs authorities and that non-filing of the bill of transshipment amounted to a technical lapse. In the absence of any evidence that the goods entered domestic consumption, the procedural omission did not negate the transshipment or justify invoking assessment and recovery under the domestic levy provisions. [Paras 13]

Failure to file the bill of transshipment was a technical/ procedural defect and did not nullify the transshipment or permit levy of duty.

Levy under section 28 of Customs Act, 1962 and territorial nexus for assessment - Whether duty could be recovered under section 28 where goods were not cleared for home consumption but were transshipped and placed on board for salvage. - HELD THAT: - The Tribunal observed that section 28 applies to duties on goods imported into India subject to the overall scheme which confines levy to goods cleared for home consumption or statutorily deemed to have been so cleared. Given the transshipment and treatment as stores (reinforced by section 88 and the absence of evidence of domestic use), there was no territorial nexus to sustain a demand under section 28. The adjudicating authorities' recourse to section 28 therefore lacked merit. [Paras 5, 13, 18]

Demand under section 28 could not be sustained in view of transshipment/stores treatment and absence of domestic clearance or use.

Confiscation and penal provisions without statutory empowerment - Whether confiscation of goods and imposition of penalties under sections invoked by the adjudicating authorities were sustainable. - HELD THAT: - Because the Tribunal concluded there was no valid imposition of duty (section 28) in respect of the consignments, the consequential measures of confiscation under the cited provisions and penalties (including under section 114A and section 114AA) were without lawful foundation. The Tribunal emphasised that penalties and confiscation cannot be sustained in the absence of lawful levy and that movements effected with customs approval did not justify the penal consequences imposed by the authorities. [Paras 18]

Confiscation and the penalties imposed stood without authority of law and were set aside.

Notice to importer/agent and identity of the person chargeable to duty - Whether issuance of recovery notice to M/s JM Baxi & Co. as the person chargeable to duty was valid. - HELD THAT: - The Tribunal found that the record did not establish that M/s JM Baxi & Co. were 'importer' or the person chargeable to duty within the statutory meaning during the period before clearance for home consumption. Section 148, dealing with liability of agents, does not enlarge the definition of the person chargeable to duty to render an agent liable in the absence of statutory fastening of obligations or fiscal consequences on the principal. Consequently, issuance of the recovery notice to M/s JM Baxi & Co. lacked justification. [Paras 17]

Notice to M/s JM Baxi & Co. as the person chargeable to duty was not legally sustainable.

Final Conclusion: The appeals were allowed: the consignments were held to be transshipped and to have attained the character of ship stores for salvage, non-filing of the bill of transshipment was a technical lapse, demands under section 28 and consequential confiscation and penalties were unsustainable, and the recovery notice to M/s JM Baxi & Co. was not justified; the impugned orders were set aside.

Determination of brand rate - limitation for filing application for drawback - deemed date of export upon conversion of shipping bill - conversion/amendment of shipping bill under section 149 of Customs Act, 1962 - condonation of delay under rule 7 of Customs, Central Excise Duties and Service Tax Drawback Rules, 2017

Limitation for filing application for drawback - determination of brand rate - Rejection of the appellant's application for fixation of brand rate solely on the ground of delay without reference to the appropriate relevant date - HELD THAT: - The Tribunal found that the jurisdictional Commissioner rejected the brandrate application by applying the limitation period against the original let export order (LEO) dates without considering the changed circumstances occasioned by the unit's exit from the EOU scheme and subsequent conversion of shipping bills. The Rules permit fixation of a separate rate on application within three months from the relevant date (subject to extension/condonation under rule 7). Where eligibility and the option for drawback or separate rate only crystallised after conversion of shipping bills, reliance on the original export date for limitation was inappropriate. For these reasons the Tribunal held that the rejection premised solely on lapse of time was unsustainable and set aside the impugned order so that the competent authority may determine the correct limitation period and consider condonation under rule 7. [Paras 6, 7, 8]

Impugned rejection set aside and the applications remitted to the competent authority for fresh determination of limitation and consideration of condonation under rule 7.

Deemed date of export upon conversion of shipping bill - conversion/amendment of shipping bill under section 149 of Customs Act, 1962 - condonation of delay under rule 7 of Customs, Central Excise Duties and Service Tax Drawback Rules, 2017 - Whether the date of conversion/amendment of shipping bills should be treated as the relevant/deemed date of export for computing limitation for making an application for brand rate - HELD THAT: - The Tribunal observed that where exports originally undertaken under the EOU regime are converted to drawback claims or alternative FTP schemes only after the unit is delicensed, the eligibility for filing drawback or brandrate applications arises upon such conversion. Absent recognition of the conversion date as the deemed export date, the procedural requirement to file for separate rate or drawback would be rendered futile. Consequently, the Tribunal directed that the competent authority should treat the conversion/amendment as altering the relevant date for the purpose of computing the limitation, and proceed to verify compliance with rule 7 including any prayer for condonation of delay. [Paras 7]

Conversion of shipping bills requires the competent authority to treat the conversion date as the relevant/deemed date of export for limitation; matter remanded for the authority to determine limitation and consider condonation under rule 7.

Final Conclusion: Appeal allowed by way of remand: the order rejecting the brandrate applications for being timebarred is set aside and the applications are directed to be reconsidered by the competent authority with reference to the appropriate deemed date of export (on conversion) and after assessing compliance with rule 7 including any condonation of delay.

Revocation of customs broker licence - forfeiture of security deposit - penalty under Customs Brokers Licensing Regulations, 2018 - scope of customs broker's obligations under section 146 of Customs Act, 1962 - due diligence of customs broker - KYC and verification of client under Regulation 10(n) - advising client to comply with statutory provisions under Regulation 10(d) - duty not to withhold information under Regulation 10(f) - onus of proof on licensing authority for establishing broker's breach

Advising client to comply with statutory provisions under Regulation 10(d) - scope of customs broker's obligations under section 146 of Customs Act, 1962 - Alleged breach of Regulation 10(d) by the customs broker was not established. - HELD THAT: - The Court held that the portion of transactions prior to entry of consignments for export and filing of the shipping bill falls outside the activities for which a customs broker's licence is issued under section 146 of the Customs Act, 1962. There was no allegation or evidence that any act undertaken by the appellant on behalf of the exporter constituted a breach of the Customs Act or any other law. Consequently, the requirement that a broker advise the client to comply with statutory provisions could not be invoked to sustain the disciplinary action against the appellant in the absence of any demonstrable statutory breach attributable to the broker. [Paras 5]

No breach of Regulation 10(d) was made out; allegation rejected.

Due diligence of customs broker - onus of proof on licensing authority for establishing broker's breach - Alleged breach of Regulation 10(e) for failing to exercise due diligence was not established. - HELD THAT: - The Tribunal found that the licensing authority erred in construing Regulation 10(e) as imposing on brokers the role of surrogate enforcers who must instruct exporters/importers on statutory contents. The licence certifies competence in clearance procedures, but invocation of Regulation 10(e) is appropriate only where a broker's incorrect information has been shown to have led an importer/exporter to innocently breach statutory compliance and the licensing authority is informed of such by the party affected. No allegation or evidence was produced that incorrect information was imparted by the appellant which caused non-compliance by the exporter; hence the provision was wrongly invoked. [Paras 6]

No breach of Regulation 10(e) was established; allegation rejected.

Duty not to withhold information under Regulation 10(f) - onus of proof on licensing authority for establishing broker's breach - Alleged breach of Regulation 10(f) for withholding information was not established. - HELD THAT: - The Tribunal observed that there was nothing on record to show the appellant had withheld any order, instruction, or public notice from its clients. The licensing authority premised this charge on the existence of an incorrect declaration, but under section 50 of the Customs Act the exporter bears responsibility for declarations. Only where evidence shows that incorrect declaration resulted from the broker's withholding of relevant material, and such evidence is adduced by the exporter in defence, can Regulation 10(f) be applied. No such evidence exists here. [Paras 7]

No breach of Regulation 10(f) was made out; allegation rejected.

KYC and verification of client under Regulation 10(n) - onus of proof on licensing authority for establishing broker's breach - Alleged contravention of Regulation 10(n) for deficient KYC/verification was not proved and the licensing authority impermissibly shifted the onus to the broker. - HELD THAT: - The Tribunal noted that the impugned order's conclusion that the broker had not been careful or diligent in KYC flowed from the licensing authority's placing the burden on the broker to demonstrate verification, rather than the authority proving lack of verification from the record. Absent allegations or evidence that IEC, GSTIN (where relevant), or address details were incorrect, or that the client was fictional or non-operational, the presumption that the broker failed to verify was inappropriate. The Tribunal held that the licensing authority must show from facts and circumstances that verification was not undertaken or that a clear inference of failure arises; such proof was absent here. [Paras 8]

No breach of Regulation 10(n) is established on the record; the onus was improperly shifted and the finding cannot be sustained.

Final Conclusion: The impugned order revoking the customs broker licence, forfeiting the security deposit and imposing penalty is set aside for want of proof that the appellant breached Regulations 10(d), 10(e), 10(f) or 10(n) of the Customs Brokers Licensing Regulations, 2018; the licensing authority impermissibly shifted the onus of proof to the broker.

Includability of royalty as part of transaction value under Customs Valuation rules - provisional assessment and finalization of provisional assessment - jurisdiction of appellate authority to entertain appeals prior to final determination - maintainability of appeals against non-finalized assessments

Jurisdiction of appellate authority to entertain appeals prior to final determination - provisional assessment and finalization of provisional assessment - maintainability of appeals against non-finalized assessments - The first appellate authority lacked jurisdiction to entertain and decide the appeal in respect of provisional assessments which had not been finally determined. - HELD THAT: - The Tribunal observed that provisional assessment directed under the statutory scheme requires final determination by the 'proper officer' before any grievance regarding differential duty crystallises into an appealable order. Finalization contemplated by the statutory scheme is integral to creating an appealable cause; an order that merely directs finalization without determining differential duties is not a final adjudication and does not give rise to a maintainable appeal. The first appellate authority entertained and decided the matter before such finalization, and in doing so acted beyond its jurisdiction. That want of jurisdiction infects the merits of the impugned order and requires its invalidation. The Court declined to adjudicate the substantive question of includability of 'royalty' on the merits in view of absence of particulars of the bills of entry and the jurisdictional defect in the appellate disposal.

Impugned order of the first appellate authority set aside for lack of jurisdiction; matter left without prejudice to remedies available after finalization of the provisional assessments.

Final Conclusion: The appellate order affirming addition was invalidated for want of jurisdiction because the assessments relied upon had not been finally determined; the set-aside is without prejudice to any remedy that may accrue following lawful finalization of the provisional assessments.

Classification of goods - burden of proof on Revenue in classification - self-assessment and re-assessment under section 17 of the Customs Act, 1962 - requirement of a speaking order under section 17(5) of the Customs Act, 1962 - remand for compliance with statutory procedure

Requirement of a speaking order under section 17(5) of the Customs Act, 1962 - self-assessment and re-assessment under section 17 of the Customs Act, 1962 - remand for compliance with statutory procedure - Validity of re-assessments and the duty to pass a speaking order where re-assessment overrules self-assessment - HELD THAT: - The Tribunal found that where an importer has effected self-assessment and a subsequent re-assessment is contrary to that self-assessment, the proper officer is statutorily obliged to pass a speaking order under section 17(5) unless the importer gives written acceptance. The first appellate authority affirmed altered classification without ensuring that the original authority had complied with the speaking-order requirement. Such failure to record reasons and follow the procedure prescribed by section 17(5) taints the legality of the re-assessment. Affirmation by the appellate authority in these circumstances would amount to participation in the statutory breach. The appropriate course is to set aside the impugned orders and restore the matters to the original authority for compliance with the statutory procedure and issuance of speaking orders where required. [Paras 6, 7, 8, 9]

Set aside the impugned orders and remand the bills of entry to the original authority for compliance with section 17, in particular section 17(5), including issuance of speaking orders where re-assessment overrules self-assessment.

Classification of goods - burden of proof on Revenue in classification - Whether the appellate authority could affirm a revised classification without material discharging the Revenue's burden of proof - HELD THAT: - The Tribunal observed that classification is a matter of chargeability and the burden of proof lies on the Revenue to establish entitlement to a different tariff heading. The first appellate authority affirmed classification alterations without there being material or findings by the original authority explaining the basis of the revision. The appellate authority thereby undertook an exercise without the wherewithal required by the Rules for Interpretation of the Import Tariff and the established principle that the Revenue must lead evidence to discharge its burden. Given the absence of requisite material and findings, the Tribunal held that the matter cannot be finally adjudicated by the appellate authority and requires fresh consideration by the original authority after compliance with statutory procedure. [Paras 1, 4, 5, 7, 8]

The affirmation of classification without material discharging the Revenue's burden is unsustainable; the matter is remanded to the original authority for fresh consideration consistent with the Rules for Interpretation and the Revenue's burden of proof.

Final Conclusion: Appeals allowed by way of remand: impugned orders set aside and the bills of entry restored to the original authority for compliance with section 17 of the Customs Act, 1962 (including section 17(5)) and for fresh consideration of classification with the Revenue bearing the burden of proof.

Admissibility of statements recorded under section 108 of the Customs Act, 1962 - reliance on oral statements in disciplinary proceedings under Customs Brokers Licensing Regulations, 2018 - obligations of customs broker under regulation 10 of the Customs Brokers Licensing Regulations, 2018 - supervisory duty of licence holder under regulation 13(2) of the Customs Brokers Licensing Regulations, 2018 - scope and limits of disciplinary action for alleged failure to advise or verify client compliance

Admissibility of statements recorded under section 108 of the Customs Act, 1962 - reliance on oral statements in disciplinary proceedings under Customs Brokers Licensing Regulations, 2018 - Findings in the disciplinary/enquiry proceedings based solely upon statements recorded under section 108 of the Customs Act, 1962 are legally infirm and cannot sustain adverse findings against the customs broker. - HELD THAT: - The Tribunal applied its earlier ruling in Thakkar Shipping Agency to conclude that the enquiry findings which rested entirely on statements (not supported by independent evidence) do not meet the legal standard required to uphold charges under the Customs Brokers Licensing Regulations, 2018. Where the licensing authority has placed decisive reliance on such statements without corroboration, those findings are incapable of sustaining the disciplinary consequences imposed on the licensee.

The enquiry findings that rest solely on statements under section 108 are invalidated.

Obligations of customs broker under regulation 10 - supervisory duty of licence holder under regulation 13(2) of the Customs Brokers Licensing Regulations, 2018 - Alleged breaches of regulation 10(b) and regulation 13(2) cannot be sustained where they are based principally on inadmissible statements and lack factual particularity. - HELD THAT: - The licensing authority found that the appellant breached regulation 10(b) (transaction of business personally or through an authorised employee) and regulation 13(2) (supervision over employees) relying on the statement of a third party. The Tribunal held that such reliance, in view of the infirmity identified in the enquiry material, does not survive legal scrutiny. The absence of adequate, independent evidence and of specific factual findings showing how the obligations were contravened is fatal to confirmation of those charges.

The findings of breach of regulation 10(b) and regulation 13(2) are set aside.

Scope and limits of disciplinary action for alleged failure to advise or verify client compliance - obligations of customs broker under regulation 10(d) of the Customs Brokers Licensing Regulations, 2018 - The charge under regulation 10(d) based on the same inadmissible statements is unsustainable and is invalidated. - HELD THAT: - Regulation 10(d) requires a broker to advise the client to comply with statutory provisions and to bring non compliance to the competent authority. The licensing authority's finding of breach was founded on a lone third party statement. Applying the principle against sole reliance on such statements, the Tribunal concluded there was no proper evidentiary basis to uphold the charge under regulation 10(d).

The finding of breach of regulation 10(d) is set aside.

Obligations of customs broker under regulation 10(m) of the Customs Brokers Licensing Regulations, 2018 - scope and limits of invoking disciplinary provisions without independent investigation - The charge under regulation 10(m) (duty to discharge duties with speed and without delay) was misconstrued by the licensing authority and, in the absence of complaint or investigative findings, has no factual or legal basis. - HELD THAT: - The Tribunal observed that regulation 10(m) cannot be interpreted so as to make the broker a surrogate for the licensing authority to educate or police the client in all respects. Invocation of the provision requires factual triggers such as complaints or investigative findings showing failure to act with due speed. No such material exists on record; consequently the licensing authority's inference is erroneous and unsustainable.

The charge under regulation 10(m) is held to be without basis and set aside.

Obligations of customs broker under regulation 10(n) of the Customs Brokers Licensing Regulations, 2018 - requirement of factual specificity to prove verification failures - The finding of breach of regulation 10(n) (verification of client particulars and address) fails for want of specific factual findings and cannot be sustained. - HELD THAT: - Although the licensing authority relied upon certain investigative assertions to hold that verification obligations under regulation 10(n) were breached, the Tribunal found those findings devoid of particulars linking the licence holder to the alleged lapse. The absence of concrete, specific evidence demonstrating how and when the statutory verification duties were neglected renders the charge untenable.

The finding of breach of regulation 10(n) is set aside for lack of factual specificity.

Final Conclusion: For the reasons recorded, the Tribunal set aside the impugned order revoking the customs broker licence, forfeiting the security deposit and imposing the penalty, and allowed the appeal.

Conditional guarantee - condition precedent - operative status of a guarantee - bar of jurisdiction under Section 18 of the RDB Act - rejection of plaint under Order VII Rule 11 CPC for being barred by law - distinction between void and voidable instruments for limitation - interim declaration without staying concurrent tribunal proceedings - balance of convenience and irreparable injury in granting interim relief

Conditional guarantee - condition precedent - operative status of a guarantee - The prima facie operability of the Deed of Guarantee dated 10 April 2014 - HELD THAT: - The Court examined the recitals (I, J, K, L) and Clauses 1 and 12 of the Deed of Guarantee and held that the instrument was a conditional guarantee which would become effective only if the CDR package sanctioned by the CDR EG was implemented in full and signed by all lenders. The CDR failure report dated 23 March 2016 and attendant events (resignation of the plaintiff, lenders walking out, liquidation proceedings) meant that the condition precedent for the guarantee to 'spring to life' was not fulfilled. On a prima facie reading of the deed and undisputed factual matrix, the guarantee did not come into force and, therefore, the jural relationship purportedly created by the deed was, at least prima facie, absent. The Court distinguished operability (formation of the jural relationship) from enforceability, finding that the contract, sans approval of CDR by CDR EG, did not become operative. [Paras 32, 34, 61, 62, 64]

On the prima facie record the Deed of Guarantee did not become operative because the condition precedent (sanction and implementation of the CDR package) was not fulfilled.

Bar of jurisdiction under Section 18 of the RDB Act - interplay of Section 17 and Section 19 of the RDB Act - Whether Section 18 of the RDB Act ousts the civil court's jurisdiction to entertain the plaintiff's suit challenging the effectiveness of the guarantee - HELD THAT: - Relying on the Supreme Court's decision in Bank of Rajasthan v. VCK Shares and Stock Broking Services Ltd., the Court held that Section 18 does not, prima facie, oust the civil court's jurisdiction to try an independent suit by a borrower challenging the validity or operability of a guarantee even where recovery proceedings by banks are pending before the DRT. The statutory scheme (Sections 17 and 19) confers summary remedy to banks and permits counterclaims or separate suits by defendants; however, such parallel civil suits do not entitle the defendant to stay or impede DRT proceedings. Applying that principle, the Court found that the bar under Section 18 was not prima facie attracted to preclude the plaintiff from seeking a declaration in the civil court as to non-operability of the guarantee. [Paras 36, 41, 43, 44, 45]

Section 18 of the RDB Act does not, on the prima facie material, preclude the plaintiff from seeking a declaration in the civil court that the Deed of Guarantee did not become effective.

Rejection of plaint under Order VII Rule 11 CPC for being barred by law - distinction between void and voidable instruments for limitation - Whether the plaint is ex facie barred by limitation and therefore liable to be rejected under Order VII Rule 11 CPC - HELD THAT: - The Court reviewed the plaintiffs' pleadings, the catalogue of DRT proceedings (Exhibit F) and the limitation provisions (Articles 58 and 59). While recognising that Order VII Rule 11 empowers the Court to reject a plaint if it appears to be barred by law, the Court held that where an instrument is prima facie inoperative (i.e., never came into existence because a condition precedent was not fulfilled), the conventional limitation rules applicable to suits for cancellation or declaration may not apply in the same manner. Relying on authorities distinguishing void and voidable instruments, the Court concluded that because the Deed of Guarantee, on its plain terms, was conditional and prima facie never became operative, the plea of limitation premised on enforcement steps from 2016 could not, at the interlocutory stage, warrant an ex facie rejection of the plaint under Order VII Rule 11. [Paras 54, 55, 58, 61, 68]

The plaint cannot be rejected at this stage under Order VII Rule 11 on the ground of limitation, because the Deed of Guarantee is prima facie an inoperative instrument and the limitation bar is not established ex facie.

Interim declaration without staying concurrent tribunal proceedings - balance of convenience and irreparable injury in granting interim relief - Whether interim relief in the form of a declaration that the Deed of Guarantee has not become operative should be granted and whether such relief would impede ongoing proceedings before the Tribunals - HELD THAT: - Balancing the competing considerations, the Court found that the plaintiff had made out a strong prima facie case on the non operability of the guarantee and that the balance of convenience and risk of irreparable injury favoured protection of the plaintiff's interests. At the same time, the Court adhered to the principle that civil courts should not stay or impede proceedings before the DRT or other tribunals under the RDB Act or IBC; those proceedings would continue. To accommodate both interests, the Court granted a limited interim declaration that the Deed of Guarantee dated 10 April 2014 has not become operative, expressly noting that this declaration should not stymie the statutory tribunal proceedings (which may nevertheless take the interim declaration into account while exercising their jurisdiction). [Paras 69, 70, 71, 72]

Interim relief granted by way of declaration that the Deed of Guarantee has not become operative; the declaration does not stay or impede ongoing tribunal proceedings.

Final Conclusion: The Court, on the prima facie record, held that the Deed of Guarantee dated 10 April 2014 was a conditional guarantee which did not become operative because the condition precedent (sanction and implementation of the CDR package) was not fulfilled; Section 18 of the RDB Act does not, prima facie, oust the civil court's jurisdiction to entertain the plaintiff's declaratory suit; the plaint was not rejected under Order VII Rule 11 CPC on limitation grounds at this interlocutory stage; and an interim declaration was granted that the Deed of Guarantee has not become operative while expressly permitting the parallel tribunal proceedings to continue.

Binding effect of approved resolution plan - extinguishment of claims of government and tax authorities upon approval of resolution plan - appealability of Section 31 order under Section 61 of the I&B Code - limitations period for appeals under Section 61 - inapplicability of Section 5 of the Limitation Act to time barred IBC appeals

Binding effect of approved resolution plan - extinguishment of claims of government and tax authorities upon approval of resolution plan - Whether the respondents/Commercial Tax Department could maintain or insist upon an encumbrance against properties taken over by the resolution applicant after approval of the resolution plan by the NCLT. - HELD THAT: - The Court recorded that the NCLT, Hyderabad approved the resolution plan on 08.04.2021 and that the Commercial Tax Department had filed and been admitted as a claimant before the Resolution Professional. The petitioner's request to remove the encumbrance was considered in the context of the binding nature of an approved resolution plan and the legislative purpose of the I&B Code to enable the resolution applicant to start on a clean slate. While the petitioner relied on the Supreme Court's exposition in Ghanashyam Mishra (noted in the judgment) regarding extinguishment and protection of successful resolution applicants, the High Court's operative conclusion rests on the absence of a valid and timely challenge to the NCLT order by the respondents. In consequence, the respondents cannot take a stand contrary to the NCLT approval at this belated stage and the relief sought by the petitioner to remove the encumbrance was granted. [Paras 9, 11]

The writ petition is allowed and, in view of the unassailable approval of the resolution plan, the respondents cannot maintain the encumbrance against the properties taken over by the petitioner.

Appealability of Section 31 order under Section 61 of the I&B Code - limitations period for appeals under Section 61 - inapplicability of Section 5 of the Limitation Act to time barred IBC appeals - Whether the Commercial Tax Department could challenge the NCLT order approving the resolution plan at this stage by bringing an appeal or invoking Section 5 of the Limitation Act. - HELD THAT: - The Court held that the NCLT order dated 08.04.2021 is an appealable order under Section 61 of the I&B Code and that the statutory time for filing such an appeal is 30 days plus 15 days. The High Court observed that where a specific limitation period is prescribed for an appeal under the I&B Code, Section 5 of the Limitation Act cannot be invoked to condone delay. Consequently, at this distant point of time the Commercial Tax Department cannot file an appeal against the NCLT order before the NCLAT, and any attempt to do so would be barred by limitation. [Paras 9]

The respondents cannot challenge the NCLT order approving the resolution plan because the appeal period under Section 61 has expired and Section 5 of the Limitation Act is not available to condone the delay.

Final Conclusion: Writ petition allowed; in view of the NCLT's approval of the resolution plan and the respondents' failure to prosecute a timely appeal under Section 61 of the I&B Code, the respondents cannot maintain an encumbrance contrary to the approved plan and the petitioner's representation for removal of the encumbrance succeeds.

Corporate Insolvency Resolution Process - scope of CIRP vis-a -vis multiple real estate projects - real-estate allottees as financial creditors - admission and verification of claims by the Interim/Resolution Professional - Committee of Creditors' prerogative to decide consolidation or project-wise resolution - relevance of Occupancy Certificate and Completion Certificate to possession and surviving claims

Corporate Insolvency Resolution Process - scope of CIRP vis-a -vis multiple real estate projects - Committee of Creditors' prerogative to decide consolidation or project-wise resolution - Whether the CIRP against the corporate debtor can be confined to the single project 'Spaze Arrow' as prayed by the Appellant. - HELD THAT: - The Tribunal examined the Appellant's contention that CIRP should be restricted to the project for which the Section 7 petition was filed. The record showed that on commencement of CIRP the IRP published and collated claims from allottees across multiple projects of the corporate debtor; claims from various projects, including Spaze Arrow and Corporate Park, have been filed and admitted or are under verification. The Tribunal noted prior CIRP proceedings in respect of Corporate Park and related facts indicating contested completion/possession despite OCC/CCs. The Tribunal held that excluding claims filed before the RP by confining CIRP to a single project would effectively deny rights of other financial creditors who have filed claims, and that it is for the CoC to decide whether resolution should be project-wise or across projects. Having considered the material, the Tribunal was not persuaded to limit the CIRP to Spaze Arrow and rejected the application to that effect. [Paras 14, 15, 16, 19, 20]

Application seeking confinement of CIRP to the single project 'Spaze Arrow' is rejected.

Real-estate allottees as financial creditors - admission and verification of claims by the Interim/Resolution Professional - relevance of Occupancy Certificate and Completion Certificate to possession and surviving claims - Extent of scrutiny and forum for challenges to claims filed by real-estate allottees and the legal consequence of possession/conveyance on surviving claims. - HELD THAT: - The Tribunal observed that real-estate allottees qualify as financial creditors and are entitled to file claims upon commencement of CIRP. Whether a particular claim is admissible is a matter for the IRP to collate and verify under the insolvency regulations; subsequent challenge to wrongful admission lies by remedy under Section 60(5). The Tribunal further recorded that if a unit holder has been handed possession and a conveyance deed executed, ordinarily no claim survives; however, factual disputes (including contention that despite OCC/CC project is incomplete) are to be examined during verification. Thus, the court placed emphasis on the statutory verification process and available remedies rather than pre-emptive exclusion of claims based on asserted completion status. [Paras 17, 18, 19]

Claims filed by real-estate allottees are to be collated and verified by the IRP; admissibility can be challenged before the adjudicating forum under the statutory remedy; possession/conveyance may extinguish claims but factual disputes on that score require verification.

Final Conclusion: The application to confine the CIRP to the single project 'Spaze Arrow' is rejected; claims filed by allottees across projects remain subject to collation and verification by the IRP and to the statutory remedies available for any wrongful admission, while the CoC retains the authority to determine the manner of resolution (project-wise or consolidated).

Decree-holder as Financial Creditor based on underlying financial debt - Initiation of CIRP under Section 7 of the IBC by a Financial Creditor - Limitation and extension by acknowledgement under Section 18 of the Limitation Act - Non-obstante effect of the IBC and supremacy of its insolvency regime

Decree-holder as Financial Creditor based on underlying financial debt - Initiation of CIRP under Section 7 of the IBC by a Financial Creditor - Appellant as Decree Holder qualifies as a Financial Creditor and may initiate CIRP under Section 7 of the IBC if the decree is based on a financial debt. - HELD THAT: - The Tribunal observed that a 'creditor' under the Code includes a decree-holder and that a decree-holder falls within the ambit of 'financial creditor' if the underlying decree is founded on a financial debt. Reliance was placed on the Supreme Court's decision in Dena Bank which holds that a decree based on a financial debt preserves the character of the underlying financial obligation. The Settlement Agreement recorded the Appellant's financial claim and the Delhi High Court decree formalised the Respondent's obligation to pay; the decree therefore did not convert or extinguish the character of the underlying financial debt. The Appellate Tribunal rejected contrary precedents to the extent inconsistent with Dena Bank and held that prosecution of execution proceedings before a civil court does not preclude initiation of CIRP because the IBC, by its non-obstante provision, governs insolvency resolution. On these bases the Adjudicating Authority erred in holding that a decree-holder could not be a financial creditor capable of invoking Section 7. [Paras 23, 24, 28, 29, 31]

Appellant qualifies as a Financial Creditor and is entitled to file an application under Section 7 of the IBC.

Limitation and extension by acknowledgement under Section 18 of the Limitation Act - Initiation of CIRP under Section 7 of the IBC - The Section 7 petition was within limitation because the Respondent's recorded acknowledgements extended the limitation period under Section 18 of the Limitation Act. - HELD THAT: - The Tribunal examined the date of default (dishonour of cheque on 07.04.2016) and the subsequent proceedings in the Delhi High Court. It applied the principle that acknowledgements in writing by the debtor attract Section 18 of the Limitation Act and thereby restart the limitation period for filing an IBC petition, as recognised by the Supreme Court in Dena Bank and Laxmi Pat Surana. The Tribunal noted specific orders of the Delhi High Court dated 23.08.2018, 04.09.2018 and 17.09.2018 in which the Respondent admitted liability and sought time to make payment; these admissions were treated as acknowledgements extending limitation. Counting from the last such acknowledgement (taking the requested six months into account), the Tribunal found the Section 7 petition filed in October 2019 to be within the extended three year period and therefore not time barred. [Paras 25, 26, 27, 31]

The petition under Section 7 was within limitation due to the Respondent's acknowledgements and the Adjudicating Authority erred in holding it time barred.

Final Conclusion: The NCLT order dated 24.04.2023 is set aside; the Section 7 petition is admitted, CIRP is initiated against the corporate debtor and the Adjudicating Authority is directed to proceed to admit the petition and appoint an IRP in accordance with the IBC.

Financial debt - operational debt - construction of receivables sold or discounted under Section 5(8)(e) vis-a -vis financial creditor under Section 5(20) and 21(5) - maintainability of application under Section 7 - relegation to remedy under Section 9

Financial debt - operational debt - construction of receivables sold or discounted under Section 5(8)(e) vis-a -vis financial creditor under Section 5(20) and 21(5) - maintainability of application under Section 7 - relegation to remedy under Section 9 - Whether the purchasers of invoices who financed payments on the platform could maintain an application under Section 7 or whether the claim constituted operational debt attracting remedy under Section 9 - HELD THAT: - The appellate Tribunal noted the undisputed factual matrix that the corporate debtor's invoices were discounted on a fintech platform and that financers had disbursed amounts against those invoices. Reliance was placed on this Court's earlier decision in Minions Ventures Pvt. Ltd., which addressed the identical controversy and held that such transactions are not to be treated as receivables within the scope of Section 5(8)(e) but fall within the ambit of the definitions contemplated by Section 5(20) and Section 21(5). Applying that precedent, the Tribunal concluded that the purchasers of the invoices do not qualify to maintain an insolvency petition under Section 7 as financial creditors. The Court therefore set aside the admission order of the Adjudicating Authority. However, recognising that the financers are not left without remedy, the Tribunal relegated them to pursue their rights, if so advised, under Section 9 in accordance with law.

The appeal is allowed; the admission under Section 7 is set aside and the alleged financers are relegated to seek remedy under Section 9.

Final Conclusion: The Tribunal allowed the appeal, held that the invoice purchasers do not qualify as financial creditors for the purpose of Section 7 in the facts of this case following Minions Ventures Pvt. Ltd., set aside the NCLT admission order and directed that the alleged financers may, if advised, seek relief under Section 9 of the Code.

Admission of claim after approval of resolution plan - IBC is a timebound process - public announcement constituting deemed knowledge (Section 15 / Regulation 6) - condonation of delay in filing claims in CIRP - effect of approval and implementation of resolution plan on pending claims - exclusion of limitation period by Supreme Court suo motu proceedings

Condonation of delay in filing claims in CIRP - exclusion of limitation period by Supreme Court suo motu proceedings - Whether the claim filed by the appellant on 19.03.2022 could be admitted as within time by virtue of the exclusion period announced by the Supreme Court and whether the RP erred in rejecting the claim as barred by delay. - HELD THAT: - The Tribunal and this Court examined the Appellant's contention that the period from 15.03.2020 to 28.02.2022 was excluded for limitation by the Supreme Court's suo motu order and that therefore the claim filed on 19.03.2022 was within time. The record shows the Appellant filed Form B on 19.03.2022, after the CoC had approved the resolution plan on 18.10.2021. The Supreme Court decisions relied upon by the Appellant (including GPR Power and the suo motu order) do not override the principle that the IBC process is timebound and that public announcement under Section 15 and Regulation 6 constitutes deemed knowledge for a commercial party. Applying these principles, the Court found no basis to fault the RP's rejection of the belated claim and agreed with the Tribunal's conclusion that the claim was rightly rejected on the ground of delay. [Paras 14, 15, 16]

The claim filed on 19.03.2022 was properly rejected as timebarred; the exclusion period argument did not justify admission of the belated claim.

Admission of claim after approval of resolution plan - effect of approval and implementation of resolution plan on pending claims - IBC is a timebound process - Whether a claim not admitted before the CoC's approval of the resolution plan can be entertained thereafter, and whether the Tribunal erred in upholding rejection of the claim after CoC approval. - HELD THAT: - The Court followed the Supreme Court's ruling in M/s RPS Infrastructure Ltd. that, once the CoC has approved a resolution plan, belated claims ought not to be entertained so as to prevent making CIRP an endless process and to protect the integrity of the resolution. The Appellant filed its claim months after the CoC approved the plan on 18.10.2021. In light of the timebound nature of the IBC and the principle that public announcement gives deemed knowledge to commercial parties, permitting admission of such belated claims would reopen the concluded resolution and prejudice the resolution applicants and implementation. The Court therefore found no error in the Tribunal's refusal to admit the claim postapproval. [Paras 4, 11, 15, 16]

A claim filed after approval of the resolution plan by the CoC cannot be admitted; the Tribunal rightly upheld rejection of the claim.

Effect of approval and implementation of resolution plan on pending claims - Whether the appeal against the Tribunal's order rejecting the claim and approving the resolution plan deserved admission on merits. - HELD THAT: - Having considered the factual record that the Appellant's claim was filed after the CoC's approval of the plan and the binding authority of the Supreme Court in RPS Infrastructure that the IBC process cannot be kept open by admitting belated claims, the Court concluded that the Tribunal committed no error. The Appellant's additional contentions - including reliance on earlier decisions and the contention that the RP must ensure compliance with Section 30(2) - did not alter the outcome where the CoC had already approved the plan and implementation had occurred. The appeal was therefore without merit. [Paras 16]

The appeal is dismissed for lack of merit; the Tribunal's rejection of the claim and approval/implementation of the resolution plan stand.

Final Conclusion: The Tribunal did not err in rejecting the appellant's belated claim filed after the CoC approved the resolution plan; following the Supreme Court's authority that the IBC is timebound and claims filed after CoC approval should not be entertained, the appeal is dismissed with no costs.

Freezing order under Section 17(1-A) of the PMLA - reason to believe - proceeds of crime - search and seizure under Section 17 - forwarding reasons to the Adjudicating Authority in a sealed envelope - sufficiency of 'for the purposes of investigation' as stated in freezing notice - authority of delegated officers (Assistant Director/Deputy Director) to issue freezing/search orders

Freezing order under Section 17(1-A) of the PMLA - sufficiency of 'for the purposes of investigation' as stated in freezing notice - proceeds of crime - reason to believe - Validity of the freezing orders impugned in relation to the petitioner company and whether the brief reasons in the freezing notice ('for the purposes of investigation') were sufficient - HELD THAT: - The Court found that the investigation material placed before it establishes a monetary trail linking the petitioner to Corporate Power Limited and related entities. Section 17(1-A) permits freezing where it is not possible to seize property; Section 17(2) requires the authorised officer to forward the reasons and material to the Adjudicating Authority in a sealed envelope. The judge held that the phrase 'for the purposes of investigation' in the Section 17(1-A) notice, coupled with the reference to the ECIR and the financial trail produced by the investigating agency, amounted to enough information at the investigation stage and did not warrant interference. The petitioner retains the opportunity to explain the receipts before the Adjudicating Authority and is not deprived of an effective remedy under the statute.

The freezing orders are not interfered with; the brief reasons in the Section 17(1-A) notice were held sufficient in the circumstances and the petition is dismissed on this ground.

Authority of delegated officers (Assistant Director/Deputy Director) to issue freezing/search orders - search and seizure under Section 17 - Whether the issuing authority (Assistant Director/authorised subordinate officers) lacked competence to pass the freezing orders - HELD THAT: - The Court observed that earlier coordinate decisions accept that the Director may delegate authority to an officer not below the rank of Deputy Director, and such delegated authority permits a subordinate (e.g., Assistant Director) to execute search, seizure and freezing if the chain of authorization is established. The factual record in this case did not show any challenge to the delegation that would invalidate the orders, and the Court treated the precedent upholding delegated authority as applicable.

No fault was found with the authority of the officers who issued the freezing orders; the challenge on delegation/competence did not succeed.

Search and seizure under Section 17 - forwarding reasons to the Adjudicating Authority in a sealed envelope - Applicability of precedents cited by the petitioner (including Reshmi Metaliks) to the facts of this case - HELD THAT: - The Court distinguished the Reshmi Metaliks decision on the ground that that case arose where the Supreme Court had stayed proceedings in respect of an affected party; in the present matter no such stay or similar judicial bar existed and the investigation was ongoing. The Court therefore declined to treat those precedents as mandating interference with the impugned freezing orders here.

Precedents relied upon by the petitioner were distinguished and did not warrant quashing of the freezing orders in the present facts.

Final Conclusion: Writ petition dismissed; freezing orders under Section 17/17(1-A) of the PMLA upheld on the material and reasons available at the investigation stage, with the petitioner remaining entitled to pursue explanation and remedies before the Adjudicating Authority.

Exemption of legal services by individual advocate and firm of advocates - acting without jurisdiction where orders contravene binding notifications - quashing of order-in-original and consequential communications as ultra vires

Exemption of legal services by individual advocate and firm of advocates - acting without jurisdiction where orders contravene binding notifications - Impugned OrderinOriginal dated 30 November 2022 and impugned letter dated 5 June 2024 were quashed for being passed contrary to notifications exempting legal services by advocates. - HELD THAT: - The Court followed the coordinate Bench decision in Adv. Pooja Patil which, after considering relevant notifications, held that services provided by an individual advocate and by a firm of advocates attract nil/exempt treatment; consequently the Designated Officer acted without jurisdiction in issuing and sustaining the impugned order. The Court observed that the notifications relied upon were clear and had not been considered in the earlier authority relied upon by the respondents; in the interest of justice no remand was required and the impugned orders were liable to be set aside as passed patently contrary to the binding notifications. [Paras 5]

Petition allowed; impugned order dated 30 November 2022 and impugned letter dated 5 June 2024 quashed and set aside.

Final Conclusion: The petition is allowed and the impugned order and letter are quashed as being contrary to the notifications exempting legal services by advocates; no costs.

Refund of Service Tax - imposition of Service Tax on training/educational institutes - passing on of tax to students - administrative consideration of representations in light of judicial precedent

Administrative consideration of representations in light of judicial precedent - refund of Service Tax - Liberty granted to petitioners to file fresh individual representations for refund and direction to the opposite party to consider and decide such representations expeditiously. - HELD THAT: - Petitioners were permitted to submit fresh individual applications/representations, physically or by e-mail, for refund of Service Tax along with a copy of the order. The Court directed the opposite party to consider and decide those representations expeditiously, preferably within two months from presentation, expressly taking into account whether the tax was realized from the petitioners as part of their fee and the relevant judgment of the Delhi High Court relied upon by petitioners. The direction is procedural and mandates administrative action rather than adjudication of the substantive entitlement by this Court. [Paras 10, 11]

Liberty to file representations granted and opposite party directed to decide them expeditiously, preferably within two months.

Passing on of tax to students - imposition of Service Tax on training/educational institutes - refund of Service Tax - Merits of entitlement to refund, including whether Service Tax was passed on to students and whether refund is payable in terms of the Delhi High Court judgment, left for fresh consideration by the opposite party. - HELD THAT: - Although the petitioners relied on earlier judicial decisions (Delhi High Court judgment and subsequent appellate orders) to assert that such institutes were not liable to Service Tax and therefore students are entitled to refund, this Court did not adjudicate the substantive claim. The opposite party's earlier application to the Assistant Commissioner claimed that the tax was paid by the institute without burden being passed on to students, while contemporaneous correspondence with some students indicated refunds had been deferred pending departmental receipt. The Court observed that separate Central Excise Appeals by the opposite party remain pending. Consequently, the factual and legal determination whether the tax was realized from petitioners and refund is due is remitted to the opposite party for decision on the representations, rather than being finally decided by this Court. [Paras 5, 6, 7, 8, 10]

Substantive entitlement to refund remitted to the opposite party for fresh consideration and decision on representations.

Final Conclusion: Petitions disposed of by granting petitioners liberty to file individual representations for refund of Service Tax and directing the opposite party to consider and decide those representations expeditiously (preferably within two months), while leaving the substantive question of entitlement and whether the tax was passed on to students for administrative determination by the opposite party.

Banking and Financial Services under reverse charge - Place of Provision of Services - services provided from outside India - Negative-list regime - transaction in money exclusion - Cash management and bill-discounting - characterisation of activity - Service provider-recipient relationship and contractual obligation - Extended period and penalties not leviable where primary demand unsustainable

Banking and Financial Services under reverse charge - Service provider-recipient relationship and contractual obligation - Place of Provision of Services - services provided from outside India - Liability to pay service tax on amounts retained/charged by M/s Amsco Finance Ltd. (AFL) for processing export realisation - HELD THAT: - The Tribunal held that the demands in respect of amounts retained by AFL for processing export proceeds do not sustain. Following decisions of the Chennai Bench (including AKR Textiles, Eastman Exports and Carona Knitwear), the Tribunal found that the contractual obligation to repatriate export proceeds rested with the overseas buyer and AFL acted as a delegate or intermediary appointed by the buyer. The essential elements of a service relationship vis-a -vis the appellant - knowledge of the service provider, agreement to receive and pay for the service and provision of the service 'for' the appellant in the taxable territory - were not established. Where an intermediary performs the activity outside India and the consideration flows pursuant to arrangements between the buyer and the overseas entity, the activity is not taxable as a service received by the exporter in India. The Tribunal also noted the distinction between mere transfer/remittance of money (excluded under the negative-list regime) and a comprehensive banking service, and on the facts the characterisation relied upon by the department failed.

Demand in respect of services allegedly received from AFL set aside; no service tax liability on reverse charge basis.

Banking and Financial Services under reverse charge - Negative-list regime - transaction in money exclusion - Service provider-recipient relationship and contractual obligation - Liability to pay service tax on collection/transfer charges deducted by foreign banks while remitting export proceeds - HELD THAT: - The Tribunal held that charges deducted by foreign banks in the course of remitting export proceeds are not taxable in the hands of the exporter. Applying earlier Tribunal precedents (including SKM Egg Products, Theme Exports and Dileep Industries), the Tribunal observed that the foreign bank provides services to the foreign bank or the Indian collecting bank, and the exporter does not have a direct service-provider/service-recipient relationship with the foreign bank. The exporter neither contracts with nor is aware of the identity or quantum of charges of the foreign bank; the foreign-bank deduction represents a bank-to-bank collection arrangement and the activity amounts to a transaction in money or a service rendered outside India, not attracting service tax liability of the exporter under reverse charge.

Demand in respect of charges deducted by foreign banks set aside; no service tax liability on reverse charge basis.

Extended period and penalties not leviable where primary demand unsustainable - Validity of invocation of extended period and imposition of penalties consequential to the demands - HELD THAT: - Having concluded that the primary demands for service tax in respect of AFL and foreign-bank charges do not sustain, the Tribunal held that the invocation of the extended period of limitation and the imposition of penalties under the Finance Act do not arise. The penalties and extended-period invocation were quashed as consequential to setting aside the substantive demand.

Extended-period invocation and penalties set aside as consequential to quashing of the substantive demands.

Final Conclusion: The impugned Order-in-Original confirming service-tax demands, extended-period invocation and penalties is set aside; appeal allowed and consequential relief granted as per law.

Cenvat credit of service tax on input services - distinction between credit on input services and credit on excluded inputs (diesel/electricity) - recovery of Cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004 - interest and penalty consequential to disallowance of Cenvat credit

Cenvat credit of service tax on input services - distinction between credit on input services and credit on excluded inputs (diesel/electricity) - interest and penalty consequential to disallowance of Cenvat credit - recovery of Cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004 - Whether Cenvat credit availed on invoices for reimbursement of diesel/electricity (treated as part of input services supplied by infra service providers) for April 2015 to March 2016 was admissible, and whether the demand, interest and penalty arising therefrom were sustainable. - HELD THAT: - The Tribunal found that the appellant had availed credit on invoices of service providers for services (for example AMC) which consumed diesel/electricity as inputs, and that the demand proceeded on an erroneous premise of denying credit as if the credit was being claimed on diesel/electricity themselves. Reliance was placed on earlier decisions of the Tribunal (including Idea Cellular Ltd. and the Tribunal's decisions in related matters) holding that while duty paid on diesel/electricity as inputs cannot be availed as Cenvat credit, there is no bar to availing Cenvat credit of service tax paid on services associated with delivery or use of such inputs where the taxable service rendered by the service provider is an input service. The adjudicating authority had not recorded any finding to negatethe claim that credit related to the input services rendered by the service provider; consequently the demand under Rule 14 was without merit. As the substantive demand was set aside, the consequential interest and penalty imposed in respect of that demand were also unsustainable and were set aside. [Paras 4, 5]

Demand of Cenvat credit, and consequential interest and penalty, set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that Cenvat credit of service tax paid on invoices of service providers (relating to diesel/electricity used by those providers) was admissible for April 2015 to March 2016 and accordingly set aside the demand, interest and penalty arising from the impugned adjudication.

Classification of services as Works Contract Service vis-a -vis Construction of Residential Complex Service - Leviability of service tax on construction activities prior to 01.07.2010 - Effect of wrong classification in show-cause notice on sustainment of demand - Application of CCCE v. Larsen & Toubro (L & T) on classification and temporal scope of Works Contract Service - CBEC Circular No. 151/2/2010-ST-no service tax leviable for period prior to 01.07.2010

Classification of services as Works Contract Service vis-a -vis Construction of Residential Complex Service - Application of CCCE v. Larsen & Toubro (L & T) - Whether the services provided by the appellant are CRCS or properly classifiable as WCS - HELD THAT: - The Tribunal found as an admitted factual position that the appellant undertook construction using its own materials and without engaging a subcontractor. Where both materials and services are involved, the activity is more appropriately classifiable as Works Contract Service rather than Construction of Residential Complex Service. The Tribunal applied the legal principle in CCCE v. Larsen & Toubro that WCS is the proper classification where materials form part of the consideration and observed that WCS in any event came into existence w.e.f. 01.07.2007. Accordingly, classification and confirmation of demand under the head of CRCS is incorrect on the facts of this case. [Paras 10, 12]

Services provided by the appellant are classifiable as Works Contract Service and not Construction of Residential Complex Service.

Leviability of service tax on construction activities prior to 01.07.2010 - CBEC Circular No. 151/2/2010-ST-no service tax leviable for period prior to 01.07.2010 - Whether service tax is leviable for the period prior to 01.07.2010 on the appellant's activities - HELD THAT: - The Tribunal noted that it is settled by precedents and CBEC clarification that no service tax is leviable for construction of flats/villas for the period prior to 01.07.2010, irrespective of classification as CRCS or WCS. The Tribunal referred to earlier decisions including Pragathi Edifice and Creative Engineering Constructions, and accepted that the CBEC Circular No.151/2/2010-ST precludes levy for periods before 01.07.2010. Therefore, demands for periods before 01.07.2010 cannot be sustained. [Paras 11]

No service tax is leviable on the appellant's construction activities for the period prior to 01.07.2010.

Effect of wrong classification in show-cause notice on sustainment of demand - Requirement that allegations in SCN correspond to the correct service classification - Whether the demand confirmed for the period post 01.07.2010 up to September 2010 is sustainable where the SCN alleges CRCS but facts show WCS - HELD THAT: - For the period after 01.07.2010, the Tribunal observed that although the activities are factually WCS, the SCN and confirmation proceeded on the basis of CRCS. The Tribunal held that a demand confirmed under an incorrect classification is not sustainable when the allegation does not correspond to the service in law or fact. Having regard to the L & T judgment and the mismatch between the SCN and the factual classification, the demand for the period beyond 01.07.2010 up to September 2010 was held unsustainable. The Tribunal also noted the appellant had already paid and not disputed an amount collected and appropriated by revenue. [Paras 12, 13]

Demand for the period post 01.07.2010 up to September 2010 is not sustainable because the SCN wrongly alleged CRCS while the services were in fact WCS.

Final Conclusion: The impugned Order is set aside except to the extent of the amount already paid and appropriated by the Revenue; the appeal is allowed partly, with demands confirmed under CRCS found unsustainable in view of correct classification as WCS and non-leviability for periods prior to 01.07.2010.

Leviability of Service Tax on construction services - Non-leviability prior to 01.07.2010 - Effect of advance receipt and issuance of completion/occupancy certificate on taxability - Composite/works contract transactions and exclusion from declared service categorisation - Remand for verification of advances, completion certificates and VAT/Sales Tax for recalculation - Demand cannot be confirmed under a category not specified in the SCN

Non-leviability prior to 01.07.2010 - Leviability of Service Tax on construction services - No Service Tax liability for the period before 01.07.2010 - HELD THAT: - The Tribunal observed that construction activity which was in the nature of composite/works contract could not be charged as a declared service for periods when the specific taxable category did not exist and, in any event, for the period prior to 01.07.2010 construction of residential flats or villas is not leviable to Service Tax. The Tribunal relied on settled precedent that composite contracts cannot be taxed as "Construction of Residential Complex Service" for periods before the relevant specific levy and that Board circulars and earlier decisions exclude taxability for the pre-01.07.2010 period. On these legal principles the Tribunal held there is no Service Tax liability for the period before 01.07.2010. [Paras 21, 25]

Demand for Service Tax for the period before 01.07.2010 is not sustainable

Effect of advance receipt and issuance of completion/occupancy certificate on taxability - Remand for verification of advances, completion certificates and VAT/Sales Tax for recalculation - Matters post 01.07.2010 and w.e.f. 01.04.2012 remanded for verification of advance receipts, validity/competence of issuing authority for completion/occupancy certificates and for recalculation of liability including adjustment of taxes already paid - HELD THAT: - For the period after 01.07.2010 (and with effect from 01.04.2012 as applicable), the Tribunal recorded that taxability depends on factual determinations: whether any advance or development rights were received prior to issuance of completion/occupancy certificates and whether VAT/Sales Tax applicable on materials/works was actually paid so as to allow abatement. The Tribunal found merit in the department's contentions about non-production of ledger evidence and about the authority issuing the OCs, and therefore remanded the matters to the Original Adjudicating Authority to examine ledger/receipt records, verify who was competent to issue the OCs for the projects and the practice followed, ascertain payment of VAT/Sales Tax on materials/works and then recalculate the Service Tax liability, adjusting amounts already paid or appropriated. [Paras 23, 24, 25]

Issues concerning advances, validity of OCs and VAT/Sales Tax payment are remanded for fresh verification and recalculation by the Original Adjudicating Authority

Demand cannot be confirmed under a category not specified in the SCN - Confirmation of demand under a service category different from that proposed in the SCN is unsustainable - HELD THAT: - The Tribunal noted that portions of the impugned order confirmed demands under categories which were not the subject of the SCNs. Citing the principle that a demand cannot be confirmed in a different category than that proposed in the show-cause notice, and having regard to the authorities cited, the Tribunal held that such confirmations are not sustainable and this ground supports remand to the Original Adjudicating Authority for reconsideration in light of the correct scope of the SCNs and the factual verifications directed. [Paras 6, 24]

Demands confirmed in categories beyond the scope of the SCNs are not sustainable and require reconsideration

Abatement/Composition scheme and entitlement on verification of VAT/Sales Tax payment - Entitlement to abatement/composition to be determined after verifying payment of VAT/Sales Tax and applicability of the scheme; remanded for recalculation - HELD THAT: - The Tribunal observed that extension of abatement or composition treatment cannot be granted suo motu and must be based on proof that VAT/Sales Tax on materials or value of property in goods has been paid as required by the rules. The Department's appeal on this aspect raised factual questions about non-payment of VAT and absence of supporting evidence. Consequently, the Tribunal directed remand so the Original Adjudicating Authority may examine records, proof of VAT/Sales Tax payment and then decide on entitlement to abatement and recompute the tax liability. [Paras 18, 24, 25]

Entitlement to abatement/composition is remanded for factual verification and recalculation

Final Conclusion: All three appeals are disposed of by remanding the matters to the Original Adjudicating Authority: there is no Service Tax liability for periods prior to 01.07.2010; for periods after 01.07.2010 and w.e.f. 01.04.2012 factual issues (receipt of advances, validity/competence of OCs, and payment of VAT/Sales Tax) must be verified and the Service Tax liability recalculated, adjusting amounts already paid; confirmations made in categories beyond the scope of the SCNs require reconsideration.

Definition of "governmental authority" for exemption - exemption under Notification No.25/2012-ST Serial No.12(a) for construction services - construction "meant predominantly for use other than for commerce, industry or any other business or profession" - commercial or industrial construction services versus works contract service - Article 243W / Twelfth Schedule functions and their relevance to governmental authority

Definition of "governmental authority" for exemption - exemption under Notification No.25/2012-ST Serial No.12(a) for construction services - Construction services provided to Indian Chartered Accountants Institute (ICAI) are covered by the exemption as services to a governmental authority. - HELD THAT: - The Tribunal accepted the adjudicating authority's finding that ICAI is established under the Chartered Accountants Act, 1949 enacted by Parliament and is under the control of the Ministry of Corporate Affairs. Applying the definition of "governmental authority" in the exemption framework, the Tribunal held that ICAI falls within that definition and, consequently, construction services provided to ICAI qualify for exemption under Serial No.12(a) of Notification No.25/2012-ST. The Tribunal relied on the reasoning adopted by the Commissioner and on the line of authorities considered in the adjudication to support this classification. [Paras 5]

The exemption granted to the respondent in respect of construction services to ICAI is upheld.

Exemption under Notification No.25/2012-ST Serial No.12(a) for construction services - construction "meant predominantly for use other than for commerce, industry or any other business or profession" - commercial or industrial construction services versus works contract service - Construction of a community hall and auditorium for Rajkot Municipal Corporation is exempt from service tax. - HELD THAT: - The Tribunal agreed with the adjudicating authority's finding that Rajkot Municipal Corporation is a local government body and that the community hall and auditorium were intended for non-commercial use. The record included a certificate from the Deputy Municipal Commissioner indicating the auditorium is operated on a non-profit basis for citizen welfare. Applying Serial No.12(a) of Notification No.25/2012-ST and the exclusions in the definitions of commercial/industrial construction and works contract services for non-commercial uses, the Tribunal held the construction is not taxable and affirmed the dropping of the demand. [Paras 6]

The exemption in respect of construction for Rajkot Municipal Corporation is affirmed.

Definition of "governmental authority" for exemption - exemption under Notification No.25/2012-ST Serial No.12(a) for construction services - Article 243W / Twelfth Schedule functions and their relevance to governmental authority - construction "meant predominantly for use other than for commerce, industry or any other business or profession" - Construction services provided to GIDC for an engineering college are exempt from service tax as services to a governmental authority and because the works are for education (non commercial) purposes. - HELD THAT: - The Tribunal accepted the adjudicating authority's conclusion that Gujarat Industrial Development Corporation (GIDC) is a department/agency of the State Government and thus qualifies as a governmental authority within the meaning of the exemption. Further, the Tribunal held that the nature of the construction - an engineering college - is educational and not commercial, bringing it within the exemption under Serial No.12(a) and excluding it from the ambit of commercial/industrial construction or taxable works contract services. The Tribunal also noted the consistent judicial treatment cited in the adjudication and relied upon by the respondent to support the non commercial character of educational constructions. [Paras 6, 7]

The exemption in respect of construction for GIDC for an engineering college is affirmed.

Final Conclusion: The Appellate Tribunal upheld the adjudicating authority's order dropping the service tax demands in respect of construction services provided to ICAI, Rajkot Municipal Corporation and GIDC (engineering college); the Revenue's appeal is dismissed.

Delay in adjudication - show cause notice - transfer to call book - duty to communicate transfer - quashing of proceedings for inordinate delay

Delay in adjudication - transfer to call book - duty to communicate transfer - quashing of proceedings for inordinate delay - Whether show cause notices pending for more than 18 years can be sustained where they were transferred to the call book without communicating such transfer to the petitioner. - HELD THAT: - The Court noted that the show cause notices issued on the dates stated remained undecided for over 18 years. The Revenue's explanation that the notices were transferred to the call book was found inadequate because the transfer had not been communicated to the petitioner. The Bench followed its earlier decisions establishing that where a show cause notice is transferred to the call book, the Revenue is under an obligation to inform the affected party; failure to do so disentitles the Revenue from justifying the prolonged non-adjudication. Having applied these precedents and the determinative principle that non-communication of transfer cannot excuse inordinate delay, the Court concluded that the continuation of the notices for the stated period was unjustified. [Paras 4, 5, 6]

Impugned show cause notices quashed and set aside on the ground of unjustified delay in adjudication; writ petition disposed of and rule made absolute.

Final Conclusion: The High Court allowed the petition, quashed the show cause notices issued between 2006 and 2009 on the ground of inordinate delay arising from non-communication of transfer to the call book, disposed of the writ petition and made the rule absolute, with no order as to costs.

Mandatory pre-deposit under Section 35F and writ jurisdiction under Article 226 - rare and deserving case exception to pre-deposit requirement - treatment of incentive/PLB as taxable commission versus nontaxable incentive - application of precedent Kafila Hospitality on CRS incentives

Application of precedent Kafila Hospitality on CRS incentives - treatment of incentive/PLB as taxable commission versus nontaxable incentive - Whether incentive/PLB/CRS payments received by the petitioner qualify as taxable commission or as nontaxable incentives in light of the CESTAT Larger Bench decision in Kafila Hospitality. - HELD THAT: - The Adjudicating Authority held the amounts recorded as PLB/Incentive to be commissions liable to service tax. The Court observed that the legal position regarding incentives earned by IATA members is authoritatively settled by the CESTAT Larger Bench in Kafila Hospitality, which concluded that CRS incentives paid to air travel agents are not leviable to service tax and are not promotional activities before passengers, and that such incentives are not BAS but fall under air travel agent services and, in any event, incentives for achieving targets are not taxable. Applying that precedent, the Court found the petitioner had a strong prima facie case on the question of taxability of incentive income and that the incentive component of the demand qualifies as the rare and exceptional category meriting relief from the predeposit requirement. [Paras 11, 12, 13, 16]

Prima facie the incentive/PLB receipts are not leviable to service tax in view of Kafila Hospitality and the petitioner has a strong case on this discrete issue.

Mandatory pre-deposit under Section 35F and writ jurisdiction under Article 226 - rare and deserving case exception to pre-deposit requirement - Whether the High Court should, in exercise of its writ jurisdiction under Article 226, waive or relax the statutory predeposit imposed by Section 35F in this case. - HELD THAT: - The Court surveyed the postamendment jurisprudence acknowledging that Section 35F mandates a predeposit and generally bars discretion in the appellate authorities, but that the High Court's writ jurisdiction under Article 226 survives and may be exercised in rare and deserving cases. Applying those principles to the present facts, and having regard to the authoritative CESTAT decision on CRS incentives and the petitioner's strong prima facie case on that discrete head, the Court concluded that the circumstances were sufficiently exceptional to justify partial relief. The Court therefore ordered that the portions of the demand attributable to incentive income (as specified) shall be excluded for the purpose of computing the predeposit. At the same time the petitioner must discharge its service tax liabilities quantified in the OrderinOriginal (as specified in paragraph 20 of that order); other rights and contentions on merits remain open. [Paras 13, 14, 15, 17, 18]

Court exercised Article 226 jurisdiction in this rare case to relax the predeposit requirement by excluding the incentive income component from the predeposit calculation, subject to the petitioner first discharging the other service tax liabilities quantified in the OrderinOriginal.

Final Conclusion: Writ petition allowed in part: petitioner granted relief from the statutory predeposit to the extent of liabilities arising from incentive/PLB/CRS income (on the basis of Kafila Hospitality and the Court's finding of a strong prima facie case), subject to the petitioner discharging the other service tax liabilities quantified in the OrderinOriginal; all other rights and contentions on merits are left open.

Rebate under Rule 6A of the Service Tax Rules, 1994 - refund under Rule 5 of the CENVAT Credit Rules, 2004 - Swachh Bharat Cess not includible in CENVAT credit - revision under Section 35EE of the Central Excise Act, 1944 - jurisdiction to entertain petition against order of revisionary authority

Rebate under Rule 6A of the Service Tax Rules, 1994 - refund under Rule 5 of the CENVAT Credit Rules, 2004 - Swachh Bharat Cess not includible in CENVAT credit - Validity of the revisionary authority's rejection of the revision application on the sole ground that simultaneous claims for rebate under Rule 6A and refund under Rule 5 for the same period are inadmissible - HELD THAT: - The Central Government proceeded on the erroneous premise that the appellate order had rejected the appeal because the petitioner had simultaneously filed for rebate under Rule 6A and refund under Rule 5. The High Court observed that the Swachh Bharat Cess is not included in CENVAT credit under the CENVAT Rules and that the order-in-original expressly recorded that no CENVAT credit was availed in respect of Swachh Bharat Cess. The revisionary authority's rejection of the revision application solely on the basis of alleged simultaneity of claims therefore lacked foundation. In consequence the impugned order was set aside and the petition restored to the revisionary authority for fresh consideration after affording the petitioner an opportunity of hearing. [Paras 7, 8, 11]

Impugned order set aside; revision petition restored for fresh consideration and hearing by the revisionary authority.

Jurisdiction to entertain petition against order of revisionary authority - Maintainability of the petition before this Court against an order passed by the revisionary authority located in Delhi - HELD THAT: - The Court rejected the preliminary objection that the petition was not maintainable because the order-in-original and order-in-appeal emanated from authorities in Bangalore. The impugned order under challenge had been passed by the revisionary authority located within the National Capital Territory of Delhi, and therefore the petition was held to be maintainable in this Court. [Paras 10]

Petition is maintainable before this Court.

Final Conclusion: The impugned order of the Central Government rejecting the revision under Section 35EE was set aside; the revision petition is restored for fresh consideration by the revisionary authority after affording the petitioner an opportunity of hearing. The writ petition is maintainable and is disposed accordingly.

Doctrine of unjust enrichment - refund of amounts deposited under protest during adjudication or investigation - deposit versus duty for the purposes of section 11B - evidentiary value of Chartered Accountant's certificate - accounting treatment in Profit & Loss Account does not by itself establish passing on of tax incidence - price fixed by statutory authority and effect on ability to pass on duty

Doctrine of unjust enrichment - refund of amounts deposited under protest during adjudication or investigation - deposit versus duty for the purposes of section 11B - Refund claim in respect of amounts deposited 'under protest' during the pendency of adjudication/investigation is not barred by the doctrine of unjust enrichment. - HELD THAT: - The Tribunal followed the Principal Bench decision in Chambal Fertilizers and other High Court precedents holding that sums deposited during the pendency of adjudication or investigation are deposits and not payments of duty. Such deposits do not acquire the character of duty under section 11B and therefore the bar of unjust enrichment is not attracted when refund is claimed after the adjudicatory proceedings are decided in favour of the depositor. The reasoning in Allied Photographic and other revenue decisions was examined and distinguished on facts; where deposits are made 'under protest' pending adjudication they do not confer a right on the department to retain funds absent proof of unjust enrichment. The Tribunal held that the Principal Bench decision is binding and dispositive on this question of law and fact. [Paras 11, 15]

The refund claim in respect of amounts deposited under protest during adjudication/investigation is allowable and not hit by unjust enrichment.

Accounting treatment in Profit & Loss Account does not by itself establish passing on of tax incidence - evidentiary value of Chartered Accountant's certificate - price fixed by statutory authority and effect on ability to pass on duty - Accounting entries showing the disputed duty as an expenditure do not by themselves establish that the incidence of duty was passed on to the buyer; a Chartered Accountant's certificate based on books of account is admissible evidence which shifts the burden to revenue to produce contrary evidence; where price is fixed by statutory authority the supplier cannot unilaterally pass on duty. - HELD THAT: - The Tribunal noted that mere booking of the duty as an expense in the Profit & Loss Account is not conclusive proof that the seller passed on the duty to its customers. Reliance was placed on earlier Tribunal decisions and the Principal Bench in Chambal Fertilizers which held that accounting method does not determine admissibility of refund. The Chartered Accountant's certificate, prepared after scrutiny of books, invoices and returns, is a credible piece of evidence; once produced it obliges the revenue to produce evidence to rebut it. Further, where the price of goods is fixed by a statutory authority (RERC in this case), the seller had no liberty to alter the price to include duty, and that factor militates against a finding of passing on. [Paras 12, 13]

The appellant's accounting treatment does not establish unjust enrichment; the Chartered Accountant's certificate is acceptable evidence in absence of contrary proof; price fixed by RERC supports the appellant's case.

Deposit versus duty for the purposes of section 11B - refund of amounts deposited under protest during adjudication or investigation - Amounts deposited 'under protest' in the absence of any show cause notice (period April 2016 to June 2017) are mere deposits and not duty, and therefore are refundable and not barred by unjust enrichment. - HELD THAT: - The Tribunal emphasised that deposits made without any show cause notice and merely as matter of abundant caution cannot be characterised as duty liable to attract the bar of unjust enrichment. The department initiates liability by issuing a show cause notice; where no such notice was issued for the period in question, payments made 'under protest' do not convert into duty under section 11B and are refundable upon final favourable adjudication. [Paras 14]

The deposits for April 2016 to June 2017 are refundable as they are mere deposits and not subject to unjust enrichment.

Final Conclusion: The impugned order of the Commissioner (Appeals) rejecting the refund on the ground of unjust enrichment is set aside; the adjudicating authority's order allowing refund is restored and the appeal is allowed with consequential relief.

Voidness of transfer under Section 281 of the Income-tax Act - first charge under Section 26B of the KGST Act - effect of attachment and auction under the Revenue Recovery Act and Rule 16(1) of the Second Schedule of the Income-tax Act - priority between statutory first charge and claims under the Income-tax Act

First charge under Section 26B of the KGST Act - priority between statutory first charge and claims under the Income-tax Act - Whether properties sold in public auction to realise KGST dues (and Cashew Workers Welfare Fund dues) for the period from 1995 onwards can be proceeded against by the Income Tax Department to realise income tax arrears of the original assessee for assessment year 1995 96 - HELD THAT: - The court held that Section 26B of the KGST Act, by virtue of its non obstante clause, creates a statutory first charge on the dealer's property for tax payable under that Act and therefore has priority over other claims not given statutory preference. The Income Tax Act does not create a corresponding statutory first charge; Section 281 renders certain post pendency transfers void but applies only where the assessee creates a charge or parts with possession during the pendency of proceedings under the Income tax Act or after service of notice under the Second Schedule. Here the properties were proceeded against and auctioned to realise KGST (and related) dues arising from 1995 onwards, and the charge in favour of the State under Section 26B operated to give priority over other claims. Applying the principle in Connectwell Industries and the Division Bench decision in South Indian Bank Ltd. v. State of Kerala, the court concluded that an earlier charge created under law to secure KGST dues (or a statutory first charge by operation of Section 26B) disentitles the Income Tax Department from proceeding against those properties to satisfy income tax arrears of the deceased for AY 1995 96. The civil judgment (Ext.P11) concerning a mortgage in favour of a financial corporation did not, in the circumstances of these petitions, entitle the Income Tax Department to disturb the petitioners' possession acquired through auction under the RR Act, and the Department cannot declare the ownership transfers void under Section 281 without instituting appropriate proceedings against those transferees. [Paras 13, 14, 15, 16, 17]

The Income Tax Department cannot proceed against the properties in the petitioners' possession to realise the deceased's income tax arrears for the period in question; the impugned notices/proceedings are set aside and the properties are declared not liable to be proceeded against for those income tax arrears.

Final Conclusion: Writ petitions allowed; impugned notices/proceedings set aside and petitioners' possession of the properties declared not liable to be proceeded against for realisation of the deceased assessee's income tax arrears arising for the periods specified.

Penalty for failure to use goods for specified purpose under Section 10(d) of the CST Act - Requirement of mens rea for imposition of penalty - Burden on revenue to prove absence of reasonable excuse - Entitlement to reduced rate on inter state sales under Section 8(1) read with Section 8(3)(b) of the CST Act - Imposition of penalty not automatic where reasonable excuse is shown

Penalty for failure to use goods for specified purpose under Section 10(d) of the CST Act - Burden on revenue to prove absence of reasonable excuse - Requirement of mens rea for imposition of penalty - Imposition of penalty not automatic where reasonable excuse is shown - Validity of the penalty imposed under Section 10(d) where the assessee produced an engineer's certificate of consumption and no mens rea was alleged or proved - HELD THAT: - The Court examined whether imposition of penalty under Section 10(d) is automatic upon default or requires the Department to establish the absence of a reasonable excuse and, where applicable, mens rea. Reliance was placed on authority holding that penalties of this character require proof of deliberate or dishonest conduct and that the burden to prove such circumstances rests on the revenue. On the plain language of Section 10(d) and the material on record, the revisionist produced an engineer's certificate demonstrating consumption of cement for foundation work, which constituted a reasonable excuse. The Department did not allege or establish the necessary ingredients for imposing the penalty, including any mens rea or disproving the certificate. Consequently, the conditions for levy of penalty under Section 10(d) were not satisfied and the penalty could not be sustained. [Paras 13]

The penalty imposed under Section 10(d) was quashed as the assessee had produced a reasonable excuse (engineer's certificate) and the Department failed to establish mens rea or otherwise discharge the burden necessary to sustain the penalty.

Final Conclusion: Revision allowed; penalty order set aside and questions answered in favour of the revisionist.

Second sale exemption - burden of proof under Section 10 of the TNGST Act - registration of dealer and effect of cancellation on exemption claim - movement of goods and checkpost seal as evidentiary requirement - fabricated or manipulated purchase bills as indicia of tax evasion

Second sale exemption - registration of dealer and effect of cancellation on exemption claim - fabricated or manipulated purchase bills as indicia of tax evasion - movement of goods and checkpost seal as evidentiary requirement - Claim for second sale exemption in respect of purchases from M/s. Sri Valli Traders was correctly disallowed. - HELD THAT: - The Tribunal and the lower authorities found on the material on record and inspection report of the Enforcement Wing that the registration of M/s. Sri Valli Traders stood cancelled with effect from 01.04.1990, that the premises inspection revealed that sale bills were issued without handling goods, and that bills bore no checkpost seals nor were copies received from any checkpost. On that factual basis the authorities concluded that there was no actual movement of goods from Madras to Tindivanam and that bills were obtained subsequently to cover purchases from unregistered dealers. Given these concurrent findings of fact, the assessing officer and first appellate authority rightly rejected the claim of exemption as based on non existent or fabricated bills and the Tribunal correctly confirmed those findings and the resulting addition to taxable turnover. [Paras 11, 12, 15, 16]

The claim of exemption on the disputed turnover in respect of purchases from M/s. Sri Valli Traders is rejected and the assessment sustained.

Burden of proof under Section 10 of the TNGST Act - Burden to prove that a transaction is not liable to tax lies on the dealer and was not discharged by the assessee. - HELD THAT: - Under Section 10 of the TNGST Act the dealer bears the burden of proving that a sale is not taxable (i.e., establishing the point of first sale and entitlement to second sale exemption). The Court noted that the assessee failed to discharge that burden: the registration status and authenticity of the vendor's bills and the movement of goods were not satisfactorily established. The concurrent factual findings by the authorities that the bills were manipulated and the vendor was not a registered dealer lead to the conclusion that the statutory burden remained unmet. [Paras 18, 19]

The dealer failed to discharge the burden under Section 10 and therefore the exemption claim cannot be allowed.

Final Conclusion: Concurrent findings of fact that the seller was effectively unregistered, that purchase bills were fabricated and that there was no actual movement of goods justified disallowance of the second sale exemption; the assessee also failed to discharge the statutory burden under Section 10 of the TNGST Act. The writ petition is dismissed.

Reversal of input tax credit - capital goods - processing - nexus between goods and production or processing - reasoned order requirement for denial of input tax credit

Reversal of input tax credit - reasoned order requirement for denial of input tax credit - Validity of the Tribunal's deletion of the assessing authority's reversal of input tax credit on capital goods - HELD THAT: - The Tribunal examined the assessing authority's order and the first appellate authority's findings and concluded that the assessing authority's reasons for denying input tax credit were bald, unsubstantiated and not supported by judicial authority. The Tribunal relied on precedents and the appellate findings to hold that there were no forceful or valid reasons to disallow the claim of input tax credit on capital goods. The High Court, on review, found no reason to interfere with the Tribunal's well-considered order and held that the reversal of input tax credit could not be sustained where the denial lacked cogent reasoning.

Tribunal's deletion of the reversal of input tax credit upheld; denial of ITC for lack of reasoned findings set aside in favour of the assessee.

Processing - capital goods - nexus between goods and production or processing - Whether the respondent's bleaching activity falls within the scope of processing so as to permit input tax credit on capital goods - HELD THAT: - The appellate authorities construed the definition of processing (and related definitions concerning capital goods) to include processes incidental or ancillary to producing the final product, emphasizing that use may be direct or indirect so long as a nexus exists between the goods used and the production or processing. The respondent's bleaching of fabric was accepted as a process attracting tax under the TNVAT Act but nonetheless within the ambit of processing such that capital goods used for that process qualify for input tax credit. The High Court endorsed the Tribunal's acceptance of the appellate reasoning and found no error in holding that input tax credit on capital goods used in bleaching could not be denied.

Bleaching activity held to be a processing activity permitting input tax credit on capital goods; finding affirmed in favour of the assessee.

Final Conclusion: The High Court dismissed the Tax Case Revision, upholding the Tribunal's deletion of the reversal of input tax credit on capital goods and affirming that the respondent's bleaching activity falls within processing, answering the substantial questions of law in favour of the assessee and against the Revenue.

Sanction for prosecution under Section 197 CrPC - acting or purporting to act in the discharge of official duty - reasonable connection between the act and official duty - protection under Section 197 CrPC - lodging a false FIR / fabricating a case as outside official duty - quashing of criminal proceedings - cognizance of charge-sheet - trial court to decide sanction at a suitable stage

Sanction for prosecution under Section 197 CrPC - acting or purporting to act in the discharge of official duty - quashing of criminal proceedings - cognizance of charge-sheet - Whether the Criminal Judge could take cognizance of the charge-sheets and the High Court rightly quashed the proceedings for want of sanction under Section 197 CrPC; and whether respondent no.1 was entitled to protection of sanction. - HELD THAT: - The Court examined the scope and tests for applicability of Section 197 CrPC, including the requirement that the alleged offence must have a reasonable or direct connection with the discharge of official duty or be an act that could reasonably be claimed to have been done by virtue of office. Applying those principles to the facts, the Court observed that the Trial Court had held that the Gwalior FIR was concocted and that several police officials were implicated, suspended and departmental inquiries initiated; but the material before this Court was limited. On the record before it, respondent no.1 was not posted at Murar Police Station when the alleged second FIR was registered and therefore any act attributable to him would be outside the scope of his official duty. The Court reiterated that statements under Section 161 CrPC are not substantive evidence and that independent witnesses relied on by prosecution were not tested at trial. Given the legitimate doubt whether sanction was required and the risk of prejudicing evidence by premature quashing, the High Court erred in quashing the proceedings at the preliminary stage. Accordingly cognizance by the CJM of the charge-sheets was held to be proper and the quashing was set aside insofar as it stopped the trial; the proceedings were ordered to continue. [Paras 83, 84, 86]

High Court's quashing of Case Nos. 67/2008 and 67A/2009 was set aside; cognizance taken by CJM was proper and trial shall proceed; no requirement of sanction qua respondent no.1 since he was not posted at Murar at the relevant time.

Protection under Section 197 CrPC - reasonable connection between the act and official duty - lodging a false FIR / fabricating a case as outside official duty - trial court to decide sanction at a suitable stage - Whether the question of sanction for prosecution qua respondent nos. 3, 4 and 5 should be finally decided at the preliminary stage or left to the Trial Court to determine in the course of trial. - HELD THAT: - The Court held that where there is legitimate doubt on the record about whether the acts of public servants were done in discharge of official duty, the question of necessity of prior sanction may be raised and examined at any stage and, in many cases, cannot be effectively decided without allowing the trial to proceed and evidence to be led. Given the evidentiary gaps and disputed factual matrix (including the untested Section 161 statements and absence of conclusive proof about the identity and arrest at Murar), the Court concluded that it would be inappropriate to foreclose the trial by quashing. Consequently the question of sanction qua respondent nos. 3, 4 and 5 was left open for the Trial Court to decide at a suitable stage; if evidence at trial shows the acts were done or purported to be done in discharge of official duty or that the FIR was not bogus, the Trial Court may stay the trial for want of sanction in accordance with law. [Paras 85]

Question of sanction qua respondent nos. 3, 4 and 5 left open for determination by the Trial Court at an appropriate stage; trial to proceed in the meantime.

Final Conclusion: Appeals allowed; impugned High Court order quashing the proceedings set aside; Case Nos. 67/2008 and 67A/2009 to proceed to trial; no sanction required for respondent no.1 on the record before this Court; question of sanction qua respondent nos. 3, 4 and 5 left open for the Trial Court to decide in accordance with law and on evidence, the trial to be concluded expeditiously preferably within one year.