TaxTMI Updates e-Newsletter
Dec 23,2024

Audi alteram partem - show cause notice as condition precedent to demand under Section 11A - interest on delayed payment of duty under Section 11AA - penalty for short-levy under Section 11AC - voluntary payment and exclusion under Section 11A(16) - power to conduct audit and requisition records under Sections 14/14A/14AA

Show cause notice as condition precedent to demand under Section 11A - audi alteram partem - Validity of demanding interest and penalty and freezing of bank account without issuing a prior show cause notice and giving an opportunity of hearing - HELD THAT: - The Court held that the statutory scheme embodied in Section 11A and related provisions requires that a person be afforded an opportunity to show cause before a demand for duty (and consequential penalty) is made. Principles of natural justice are inherent in the recovery regime; therefore, reliance solely on an audit report to demand interest and penalty and to take coercive steps (such as freezing bank accounts) without a prior show cause notice and an invitation to be heard vitiates the action. The Court observed that Sections 11AA and 11AC specify differing consequences depending on whether payment is voluntary or determined after adjudication, and that a speaking order following consideration of the assessee's representation is necessary so that appeal rights attach to a determinative order. [Paras 5, 6, 7, 8, 9]

Demand for interest and penalty and the order freezing the petitioner's account, issued without prior show cause notice and opportunity to be heard, are not sustainable and are quashed.

Interest on delayed payment of duty under Section 11AA - penalty for short-levy under Section 11AC - voluntary payment and exclusion under Section 11A(16) - power to conduct audit and requisition records under Sections 14/14A/14AA - Whether audit findings alone permit automatic imposition of interest and penalty without adjudication - HELD THAT: - The Court recognised that authorities may conduct audits and summon records under Sections 14/14A/14AA, and that Section 11AA makes interest payable for delayed payment while Section 11AC prescribes penalty regimes. However, the Court held that audit findings cannot be treated as an automatic ground for imposition of interest and penalty without following the statutory procedure. Where payment is said to be voluntary, Section 11A(16) and provisos in Section 11AC bear on entitlement to relief; consequently, assessment of whether payment was voluntary, delayed, or otherwise justified must follow an opportunity to be heard and a determinative order rather than summary recovery on the basis of audit alone. [Paras 4, 5, 6, 8]

Audit report findings do not entitle automatic recovery of interest and penalty; statutory procedure and opportunity to be heard must precede determinative action.

Final Conclusion: Writ petition allowed; the order dated 02.05.2024 directing freezing of accounts and the summons dated 17.09.2024 are quashed and set aside for failure to afford prior notice and hearing; no costs.

Mandatory pre-show-cause notice under Rule 142(1A) - interim stay on deposit conditions - entertainment of writ under Article 226 for lack of tribunal

Mandatory pre-show-cause notice under Rule 142(1A) - Stay of operation of the Assessing Authority's order dated 03.11.2020 and the Additional Commissioner (Appeal-III)'s order dated 05.09.2024 was granted subject to a further deposit by the petitioner. - HELD THAT: - The petitioner challenged the impugned tax liability on the ground that initiation of proceedings under Section 73 (as then applied) proceeded without issuance of the pre-show-cause communication required by the then-existing Rule 142(1A), rendering the proceedings vitiated. The Court noted the petitioner's reliance on the Division Bench decision in Skyline Automation Industries which set aside proceedings initiated without the Rule 142(1A) communication and observed that subsequent orders passed pursuant to defective initiation would also be vulnerable. While the matter was listed for further consideration and a counter-affidavit was directed, the Court in the interim granted protective relief by staying the operation of the impugned orders on condition that the petitioner deposit an additional 10% of the tax liability within three weeks, in addition to the 10% already deposited at the stage of first appeal. The interim stay was made conditional and temporal, with an express provision that failure to make the directed deposit would terminate the interim protection. [Paras 7, 8]

Interim stay granted on the two impugned orders until further orders, subject to deposit of a further 10% of the tax liability within three weeks; default will render the stay inoperative.

Entertainment of writ under Article 226 for lack of tribunal - The Court accepted the petitioner's contention that in the absence of a constituted appellate Tribunal under the Act the petitioner had no alternate remedy and therefore the writ petition could be entertained. - HELD THAT: - The petitioner submitted that no Tribunal had been constituted under the statute and consequently he was left without an efficacious alternative remedy, inviting exercise of the High Court's extraordinary jurisdiction under Article 226. The Court recorded this contention and proceeded to issue directions for further proceedings (including filing of counter-affidavit) and to pass interim protective orders while keeping the matter for hearing. This acceptance enabled continuation of adjudication of the writ petition in the High Court pending further consideration. [Paras 3, 4, 5]

Writ petition entertained by the High Court in view of the absence of a constituted Tribunal; matter listed for further proceedings with directions for filing affidavits.

Final Conclusion: Interim protective relief granted: the Assessing Authority's order dated 03.11.2020 and the Additional Commissioner (Appeal-III)'s order dated 05.09.2024 are stayed until further orders, subject to the petitioner depositing an additional 10% of the tax liability within three weeks (failure will terminate the stay); the High Court has admitted the writ petition for consideration in view of the non-constitution of the appellate Tribunal and directed filing of counter and rejoinder affidavits with the matter listed for hearing.

Violation of principles of natural justice - mandated notice period under Form GST MOV-07 - remand for fresh adjudication after opportunity of hearing - maintainability of writ against seizure/confiscation orders

Mandated notice period under Form GST MOV-07 - violation of principles of natural justice - Whether the confirmation of penalty was vitiated by passing the order within the seven-day period prescribed by Form GST MOV-07 and thereby violated principles of natural justice. - HELD THAT: - The Court found that the show cause notice dated 29.10.2024 invoked the seven-day response period stipulated in Form GST MOV-07 and that the penalty order dated 05.11.2024 was passed within that statutory period. The petitioner had contended that personal hearing notices were issued before the expiry of the seven-day period, thereby foreclosing the time statutorily available to respond. The Court held that the premature proceeding amounted to a clear procedural breach under the statute and, concomitantly, to a violation of principles of natural justice because the petitioner was not afforded adequate opportunity to make its case before confirmation of the penalty. The Court therefore treated the confirmation as vitiated by procedural unfairness and lack of requisite opportunity to the petitioner. [Paras 6, 7, 8]

Confirmation of the penalty was set aside as being vitiated by breach of the seven-day notice period under Form GST MOV-07 and by denial of adequate opportunity, contrary to principles of natural justice.

Remand for fresh adjudication after opportunity of hearing - Appropriate remedy to be granted after finding of procedural and natural justice violations. - HELD THAT: - Having found procedural infirmity and denial of fair opportunity, the Court refrained from adjudicating the merits of the seizure/confiscation or the quantum of penalty. Instead, the Court set aside the impugned order dated 05.11.2024 and remanded the matter to the 4th respondent for fresh consideration. The remand was directed to be in accordance with law, requiring that the petitioner be given due opportunity of hearing and an opportunity to make out its case before any fresh order is passed. The Court thereby preserved the respondent's statutory forum while ensuring compliance with procedural fairness. [Paras 9, 10]

Impugned order set aside and matter remanded to the 4th respondent for fresh adjudication after affording the petitioner due opportunity of hearing.

Final Conclusion: Writ petition allowed; penalty order dated 05.11.2024 set aside and matter remanded for fresh hearing in accordance with law; no order as to costs.

Lien on bank account - attachment and appropriation without compliance with principles of natural justice - pre-deposit as condition precedent to filing appeal - proportionate protection of revenue interest - equitable interim mechanism to enable statutory appeal - acceptance of physical filing where online filing is not possible

Attachment and appropriation without compliance with principles of natural justice - lien on bank account - Petitioner not permitted to deal with amounts in the Axis Bank account in view of the findings recorded in the Order-in-Original and earlier proceedings. - HELD THAT: - The Court recorded that respondents had attached and appropriated a specified sum from the petitioner's bank account without minimum compliance with principles of natural justice (paras 3 and 4). Having regard to the findings and allegations made in the Order-in-Original dated 25 May 2023, the Court was satisfied that the petitioner should not be allowed to deal with any of the amounts in the specified bank account. That restraint is imposed as an interim protective measure in the factual matrix presented and is not a final adjudication on the merits of the underlying demand. [Paras 3, 4, 8]

Petitioner restrained from dealing with amounts in the specified Axis Bank account.

Pre-deposit as condition precedent to filing appeal - equitable interim mechanism to enable statutory appeal - proportionate protection of revenue interest - Court directed an equitable procedure by which the bank shall transfer the account balance to the Court, the Registrar shall transfer the pre-deposit to the respondent, and the balance shall be invested, thereby enabling the petitioner to file the appeal by use of the transferred pre-deposit. - HELD THAT: - The Court balanced the competing interests of the revenue and the petitioner's right to appeal. Recognising that the petitioner could not arrange the requisite pre-deposit, and that the revenue's interest required protection, the Court ordered the bank to transfer the entire account balance to the Registrar. Thereafter the Registrar is to transfer the amount equivalent to the required pre-deposit to the respondent within two weeks of deposit; the remaining funds are to be placed in a fixed deposit. This mechanism was fashioned as a proportionate, interim, and equitable remedy to permit the petitioner to institute an appeal without prejudicing the revenue, and with the deposited funds remaining subject to the outcome of any appeal (paras 9-11). [Paras 9, 10, 11]

Bank to transfer account funds to Registrar; Registrar to transfer pre-deposit to respondent and invest the balance in a fixed deposit; deposited funds to remain subject to appellate orders.

Acceptance of physical filing where online filing is not possible - pre-deposit as condition precedent to filing appeal - Appellate authority must accept the appeal filed by the petitioner within the prescribed period using the transferred pre-deposit and, in the peculiar facts of the case, must accept physical filing if online filing is not possible; the appellate authority shall not take a preliminary point on limitation if the petition was instituted within the limitation period. - HELD THAT: - The Court directed that once the Registrar transfers the pre-deposit amount to the respondent, the petitioner shall file the appeal within four weeks of that transfer. In the peculiar facts of this case, if online filing is not feasible the appellate authority must accept a physical filing. Further, because the petition challenging the Order-in-Original was instituted within the limitation period for filing an appeal, the appellate authority was directed to dispose of the appeal on merits without advertence to the limitation issue (paras 10 and 12). The Court emphasised that its observations are prima facie and should not influence the appellate authority's decision on merits. [Paras 10, 12]

Appellate authority to accept the appeal using the transferred pre-deposit, permit physical filing if necessary, and not raise limitation as a bar to adjudication on merits.

Final Conclusion: The Court issued interim directions: the Axis Bank account balance is to be transferred to the Registrar, who will remit the stipulated pre-deposit to the respondent and invest the balance; the petitioner may file an appeal within the specified timeframe (physical filing permitted if online filing is not possible), and the appellate authority must consider the appeal on merits without taking a preliminary limitation objection; the restraint on dealing with the account remains in place pending appellate adjudication.

Opportunity of personal hearing under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 - requirement to pass a reasoned order after hearing - quash and set-aside of administrative order with remand for fresh hearing - precedent reliance on Mahaveer Trading Company vs. Deputy Commissioner State Tax

Opportunity of personal hearing under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 - requirement to pass a reasoned order after hearing - quash and set-aside of administrative order with remand for fresh hearing - Impugned ex-parte order passed without affording personal hearing was unsustainable and required quashing and remand for fresh opportunity to reply and hearing. - HELD THAT: - Relying on the ratio of the coordinate Bench in Mahaveer Trading Company v. Deputy Commissioner State Tax , the Court held that before passing any adverse order against the petitioner an opportunity of personal hearing ought to have been afforded under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017. The absence of such hearing rendered the impugned orders vitiated. The Court directed that the officer concerned must grant the petitioner an opportunity to file a fresh reply, fix a date for hearing and thereafter pass a reasoned order. The direction contemplates completion of the exercise within two months from the date of the order, thereby remitting the matter for fresh consideration while preserving the requirement of a reasoned decision after hearing. [Paras 3, 4]

Impugned orders dated 29.08.2024 quashed and set aside; matter remitted for fresh reply, hearing and reasoned order within two months.

Final Conclusion: Writ petition allowed; impugned exparte orders set aside and matter remitted for fresh reply, opportunity of personal hearing and passage of a reasoned order within two months.

Interpretation of Rule 86A of the Central Goods & Services Tax Rules, 2017 - Scope to block input tax credit whether actually available in electronic credit ledger or equivalent amount - Blocking of credit obtained from fake or non-existent suppliers - Requirement of reasons to be recorded in writing and principles of natural justice - Delegation/authorization by the Commissioner to an officer not below the rank of Assistant Commissioner - Extraordinary protective power for safeguarding revenue

Interpretation of Rule 86A of the Central Goods & Services Tax Rules, 2017 - Scope to block input tax credit whether actually available in electronic credit ledger or equivalent amount - Rule 86A permits disallowing debit of an amount equivalent to input tax credit wrongfully availed, regardless of whether that credit is actually available in the electronic credit ledger at the time of blocking. - HELD THAT: - The Court analysed the language of Rule 86A(1) which authorises the Commissioner or an authorised officer, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible, to not allow debit of an amount equivalent to such credit. The phrase "such credit" is read as referring to the credit created wrongfully by means set out in sub-clauses (a) to (d) and not limited to credit physically present in the ledger at the time of the order. Consequently, the scheme of the Rule is to set aside (put aside) that amount of input tax credit wrongfully utilized and await appropriate assessment and penalty proceedings, irrespective of whether the specific credit balance remains in the electronic ledger when blockage is ordered. The Court rejected the narrower construction that blockage is permissible only if the credit is actually available in the ledger at the time of blocking and aligned with the view taken by the High Courts of Allahabad and Calcutta. [Paras 16, 19, 21]

Rule 86A authorises blocking of an amount equivalent to wrongfully availed input tax credit even if that credit is not actually available in the electronic credit ledger at the time of blockage.

Blocking of credit obtained from fake or non-existent suppliers - Extraordinary protective power for safeguarding revenue - Blocking under Rule 86A may be exercised where input tax credit is alleged to have been availed from fake or non-existent suppliers; the power is protective of revenue and need not be negated by the fact that the assessee had previously paid taxes. - HELD THAT: - The Court observed that where the authority has reasons to believe that ITC was obtained from non-existent or fake suppliers or without receipt of goods/services, Rule 86A may be invoked to prevent misuse of such credit. The past conduct of the registered person, including prior payment of taxes, does not preclude the exercise of this extraordinary revenue-protective power when there are reasons to believe the credit was wrongly availed. The Court accepted the respondents' contention that allegations of ITC derived from fake entities can justify blocking under Rule 86A. [Paras 3, 13, 21]

Exercise of Rule 86A to block credit allegedly derived from fake/non-existent suppliers is permissible as a protective revenue measure and is not negated by prior tax payments by the registered person.

Delegation/authorization by the Commissioner to an officer not below the rank of Assistant Commissioner - The delegation of power to the Assistant Commissioner to exercise authority under Rule 86A was valid in the facts of this case. - HELD THAT: - The Court examined the delegation dated 18.05.2023 made in the context of a special All India Drive against fake registrations and found that the authority to exercise powers under Rule 86A had been validly delegated to the Assistant Commissioner for the relevant divisions. The petitioner's contention that there was no proper delegation or that the 2nd respondent acted only on the Commissioner's directions was rejected for want of supporting material; the record did not show any impermissible blanket direction to block credits without application of mind. [Paras 10, 11]

Delegation of authority to the Assistant Commissioner was valid and there was no material to sustain the contention that the 2nd respondent acted merely on an unduly directive instruction from the Commissioner.

Requirement of reasons to be recorded in writing and principles of natural justice - Reason sufficiency when initial portal communication is brief - The initial brief reason recorded in the GST portal, followed by subsequent detailed communications, met the requirement of reasons in writing and the principles of natural justice in the circumstances of this case. - HELD THAT: - The Court acknowledged that the first communication contained a cryptic description but noted that the substantive grounds for blockage (e.g., ITC from fake invoices and lack of receipt of goods) were discernible and were later elaborated in subsequent communications. While criticising the portal's space constraints for recording reasons, the Court held that an initial concise statement followed by fuller details satisfies the requirement that reasons be recorded and communicated, and that blocking the ledger is not tantamount to recovery but an administrative restraint pending assessment or penalty proceedings. [Paras 7, 12, 20]

The reasons initially recorded in the portal, supplemented by later elaboration, were sufficient to comply with the Rule's requirement of reasons in writing and the principles of natural justice.

Final Conclusion: The High Court dismissed the writ petition. It construed Rule 86A as permitting blockage of an amount equivalent to wrongfully availed input tax credit even if that credit is not physically available in the electronic credit ledger, upheld the validity of the delegation to the Assistant Commissioner, found the reasons (initial and subsequent) adequate for the purpose of the Rule, and therefore declined to interfere with the blocking order.

Refund of unutilized input tax credit - Section 54(3) of the CGST Act, 2017 - Availability of refund only in specified categories (zero-rated supplies; credit accumulated due to higher input tax rate) - Accumulated input tax credit versus duplicated payment - Electronic credit ledger and electronic cash ledger

Refund of unutilized input tax credit - Section 54(3) of the CGST Act, 2017 - Accumulated input tax credit versus duplicated payment - Whether the petitioner was entitled to refund of accumulated unutilized input tax credit for March, 2021 where the electronic credit ledger had been temporarily blocked and the petitioner discharged output tax liability through the electronic cash ledger. - HELD THAT: - The Court examined Section 54 read with sub-section (3) and (8) and applied the statutory embargo that refund of unutilized ITC is permissible only in the categories expressly provided (e.g., zero-rated supplies without payment of tax or where credit accumulation is on account of higher tax on inputs than outputs). The petitioner had not debited the same tax dues twice; there was no duplication of payment for the tax period March, 2021. The temporary blocking and subsequent unblocking of ITC by SGST authorities was not the subject of any adjudication establishing illegality; hence the accumulated ITC remained available for adjustment against future liabilities. As none of the statutory exceptions in Section 54(3) were satisfied, the claim for refund of the accumulated credit paid through electronic cash ledger could not be permitted. The Court therefore upheld the appellate authority's conclusion that the refund claim was not maintainable under the statutory scheme and that the petitioner must utilize the unutilized ITC for future tax liabilities. [Paras 6, 7]

The petition seeking refund of unutilized ITC for March, 2021 was dismissed as the claim did not fall within the categories allowable under Section 54(3) of the CGST Act, 2017 and there was no duplication of tax payment.

Final Conclusion: Writ petition dismissed; the appellate order rejecting the refund claim for unutilized ITC for March, 2021 is upheld as not contrary to Section 54(3) of the CGST Act, 2017, and the petitioner was directed to utilize the credit for future liabilities.

Denial of input tax credit due to supplier registration cancellation - failure to consider reply and absence of a reasoned and speaking order - reassessment proceedings under Section 73 of the CGST/SGST/IGST Act - quashing of order and remand for fresh decision

Denial of input tax credit due to supplier registration cancellation - failure to consider reply and absence of a reasoned and speaking order - Final order denying ITC and creating demand was quashed and the SCN proceedings were directed to be decided afresh. - HELD THAT: - The GST Officer concluded SCN proceedings without recording reasons for rejecting the assessee's reply and without affording a considered decision on the contention that subsequent cancellation of supplier registrations did not necessarily disentitle the assessee to ITC. The record shows a reply had been filed and particulars were placed before the officer, but the officer proceeded to create the demand after noting non-appearance at a hearing; no independent reasoning was articulated to repudiate the contentions raised on behalf of the petitioner. Given the absence of a reasoned and speaking order addressing the explanations and documents submitted by the petitioner, the impugned final order cannot be sustained. The matter is therefore reopened for fresh adjudication so that the GST Officer may consider the petitioner's reply, examine discrepancies between GSTR-1 and GSTR-3B as necessary, and pass a reasoned order on merits in the SCN proceedings.

Final order dated 27 August 2024 quashed; SCN proceedings to be decided afresh by the GST Officer after considering the petitioner's reply and by passing a reasoned and speaking order; all rights and contentions on merits kept open.

Challenge to notifications - Challenge to Notification No. 9/2023-Central Tax dated 31 March 2023 and Notification No. 56/2023-Central Tax dated 28 December 2023 was left open for determination in appropriate proceedings. - HELD THAT: - The Court did not adjudicate the validity or applicability of the cited notifications in the present petition. Those challenges were expressly reserved for consideration in appropriate proceedings, permitting the parties to raise them where relevant and before the proper forum. No substantive decision on the notifications was rendered in this order.

Challenge to the two notifications kept open to be addressed in appropriate proceedings if and when necessary.

Final Conclusion: The writ petition is allowed; the impugned final order dated 27 August 2024 is quashed and the GST Officer is directed to decide the SCN proceedings afresh after considering the petitioner's reply and by passing a reasoned and speaking order; challenges to the specified notifications are left open for appropriate proceedings.

Reverse charge mechanism - import of goods and levy of IGST - treatment of ocean freight under IGST - composite supply doctrine - binding precedent and remand for fresh consideration

Reverse charge mechanism - treatment of ocean freight under IGST - import of goods and levy of IGST - Impugned Order-in-Original No.01(R4)/2022 GST dated 23.02.2022 set aside and remitted for fresh adjudication. - HELD THAT: - The High Court found that the respondent confirmed a demand for IGST under reverse charge on ocean freight without having an occasion to consider the subsequent pronouncement of the Supreme Court in Union of India v. Mohit Minerals Private Limited (2022 SCC Online SC 657). The Court noted the Supreme Court's discussion on composite supply and the applicable scheme of the GST law (paras 176-181 of the Supreme Court judgment as reproduced in the impugned order) which addressed whether IGST can be levied on the service component when the transaction is a composite supply. Because the respondent did not consider that binding decision when passing the impugned order, the High Court concluded that the proper course was to set aside the impugned order and remit the matter to the respondent to decide afresh in light of the Supreme Court's ruling. The remand is for reconsideration on merits and not for mere mechanical compliance; the respondent is to pass a fresh order applying the law as laid down by the Supreme Court and addressing the points raised in the show cause notice. [Paras 4, 5]

Impugned order dated 23.02.2022 set aside; matter remitted to respondent to pass fresh order on merits in light of Union of India v. Mohit Minerals Private Limited within six weeks; no costs.

Final Conclusion: Writ petition allowed by way of remand: the impugned demand confirmed by the respondent is set aside and the matter is remitted for fresh decision in light of the Supreme Court's judgment; respondent directed to decide on merits within six weeks and no costs.

Effect of non-mention of DIN on validity of GST proceedings - Requirement of DIN under the GST regime - Setting aside assessment order for non-compliance with CBIC circular - Liberty to reassess with issuance of DIN and fresh notice

Effect of non-mention of DIN on validity of GST proceedings - Requirement of DIN under the GST regime - Setting aside assessment order for non-compliance with CBIC circular - Whether an assessment order under the GST Act uploaded without a DIN number is valid - HELD THAT: - The Court noted that the impugned assessment order in Form GST DRC-07 for the period 2019 to 2020 did not contain a DIN number and that the Government Pleader conceded this factual position. The Court relied upon the decision of the Hon'ble Supreme Court in Pradeep Goyal v. Union of India & Ors, and on the CBIC circular dated 23.12.2019, to conclude that an order uploaded without a DIN number is non-est and invalid. The Court also placed reliance on earlier Division Bench decisions of this Court which held that non-mention of a DIN militates against the validity of such proceedings. In view of these authorities and the circular, the absence of a DIN on the uploaded order required setting aside the impugned assessment order. The Court, however, permitted the assessing authority to conduct a fresh assessment after giving notice to the petitioner and assigning a DIN to the fresh proceedings. [Paras 3, 4, 5, 6, 7]

Impugned assessment order Ref. No.ZD370824029595Y dated 31-08-2024 set aside as invalid for lack of DIN; liberty granted to respondents to conduct fresh assessment after serving notice and assigning a DIN; no order as to costs.

Final Conclusion: Writ petition allowed; the assessment order of 31-08-2024 is set aside for non-mention of DIN, with liberty to the assessing authority to re-assess after issuing notice and assigning a DIN.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Overriding effect of approved resolution plan under Section 238 of the IBC - Validity of reassessment proceedings under Sections 148A and 148 of the Income Tax Act, 1961 - Extinguishment of pre approval claims by an approved resolution plan

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Overriding effect of approved resolution plan under Section 238 of the IBC - Validity of reassessment proceedings under Sections 148A and 148 of the Income Tax Act, 1961 - Extinguishment of pre approval claims by an approved resolution plan - Reassessment proceedings initiated under Sections 148A(b), 148A(d) and 148 of the Income Tax Act, 1961 against the petitioner for A.Y. 2016-17 were impermissible and without jurisdiction in view of the IBC moratorium and the approved resolution plan. - HELD THAT: - The Court held that Section 14 of the IBC imposes a moratorium prohibiting initiation or continuation of proceedings against a corporate debtor undergoing CIRP and that an approved resolution plan has overriding effect under Section 238 of the IBC. Reliance was placed on the principle that once a resolution plan is duly approved by the Adjudicating Authority, claims not part of the plan stand extinguished and proceedings in respect of such claims cannot be initiated or continued. Applying these principles to the facts before it, the Court found that the reassessment process initiated by respondent authorities contravened the statutory moratorium and the binding terms of the NCLT approved resolution plan which precluded reassessment for the period prior to the effective date. Consequently, the statutory preconditions for lawful reassessment under Sections 148A and 148 were not satisfied and the proceedings were held to be without jurisdiction and unsustainable in law. [Paras 22, 23, 24]

The reassessment notices and orders issued under Sections 148A(b), 148A(d) and 148 for A.Y. 2016-17, and all consequential proceedings, are quashed.

Final Conclusion: Writ petition allowed; impugned notices and orders under Sections 148A(b), 148A(d) and 148 of the Income Tax Act, 1961 for A.Y. 2016-17 quashed as being in violation of the IBC moratorium and the NCLT approved resolution plan; no order as to costs.

Extraordinary jurisdiction under Article 226 - exhaustion of statutory remedies - principles of natural justice - appeal before Commissioner of Income Tax (Appeals) - assessment order passed by competent assessing authority - limitation - exclusion of time spent in court

Extraordinary jurisdiction under Article 226 - exhaustion of statutory remedies - appeal before Commissioner of Income Tax (Appeals) - Maintainability of writ petition challenging the assessment order without exhausting statutory appellate remedy - HELD THAT: - The Court held that the impugned order of assessment is appealable before the Commissioner of Income Tax (Appeals) and that the Act of 1961 prescribes a hierarchy of adjudicatory authorities for redressal. While availability of an alternative remedy under Article 226 is not an absolute bar, the writ may be entertained only in limited circumstances such as jurisdictional incompetence, violation of principles of natural justice or challenge to vires of a statutory provision. On the materials, the petition did not fall within those exceptions and the assessing authority had jurisdiction. Consequently the petition was not entertained and the petitioner was relegated to prefer the statutory appeal. [Paras 1, 2, 4, 7, 8]

Writ petition dismissed as not maintainable; petitioner relegated to file statutory appeal before the appellate authority under the Act of 1961.

Principles of natural justice - opportunity of personal hearing - Allegation that the assessing authority ignored the reply to the show-cause notice and denied personal hearing - HELD THAT: - The Court examined the contention that the reply to the show-cause notice dated 16.09.2022 was not considered and that no personal hearing was afforded. On prima facie appraisal of the record the Court observed that the petitioner failed to submit the reply within the time granted and that the request for personal hearing was made after the time for submitting the reply and was therefore out of time. The Court found that this was not a clear case of violation of principles of natural justice, but left the matter to be examined and determined by the appellate authority if an appeal is preferred. [Paras 3, 5, 6]

Not a clear case of violation of natural justice; appellate authority permitted to examine the issue afresh if the petitioner files the statutory appeal.

Limitation - exclusion of time spent in court - Whether time spent by the petitioner in approaching this Court would be excluded from computation of limitation for filing the statutory appeal - HELD THAT: - The Court granted liberty to the petitioner to avail the statutory appellate remedy and provided that if the petitioner chooses to file the statutory appeal, the period spent by him in this Court shall be eschewed from the computation of limitation. This is a procedural direction to protect the petitioner's limitation period while relegating him to the appellate forum. [Paras 8]

Period spent in this Court to be excluded from computation of limitation for filing the statutory appeal.

Final Conclusion: The writ petition challenging the assessment order for Assessment Year 2020-21 is dismissed for failure to exhaust statutory remedies; the natural justice complaint was not found to be a clear violation and is left to the appellate authority for consideration if an appeal is filed; the petitioner is granted liberty to appeal and the time spent in this Court shall be excluded from limitation.

Substantial question of law - onus under Section 68 to establish identity, creditworthiness and genuineness and the source of source - scope of interference by High Court in appeals under Section 260A read with Section 100 CPC - concurrent findings of fact and perversity - conversion of loan into equity does not attract addition under Section 68 where no fresh credit was received

Substantial question of law - scope of interference by High Court in appeals under Section 260A read with Section 100 CPC - concurrent findings of fact and perversity - The questions formulated by the High Court did not involve any substantial question of law and were essentially questions of fact not permitting interference under Section 260A. - HELD THAT: - The Court examined the test for a "substantial question of law" and applied settled principles that a question is substantial if debatable, not finally settled and has material bearing on rights of parties. The Court held that the questions framed (including whether the Tribunal erred in holding that the assessee discharged its burden of substantiation) were essentially factual. As the Tribunal's conclusions were based on evidence and concurrent findings of fact, the High Court in its third appellate jurisdiction under Section 260A (with Section 100 CPC principles applicable) could not reappreciate the evidence or substitute its view unless the findings were perverse or based on no evidence. Applying these principles to the material on record, the Court concluded that no substantial question of law arose warranting interference. [Paras 9, 12, 27, 30]

No substantial question of law is involved; the High Court will not interfere with the Tribunal's factual findings under Section 260A.

Onus under Section 68 to establish identity, creditworthiness and genuineness and the source of source - conversion of loan into equity does not attract addition under Section 68 where no fresh credit was received - concurrent findings of fact and perversity - The Tribunal and the first appellate authority correctly found on evidence that the assessee and the shareholders discharged the onus under Section 68 and that the conversion of unsecured loan into equity did not give rise to a fresh credit chargeable under Section 68. - HELD THAT: - The Court reviewed the Tribunal's reasons showing documentary verification from shareholders, bank statements, board resolutions, loan cum share purchase agreement and enquiries under section 133(6). The Tribunal found no fresh credit received in the relevant year where an unsecured loan was converted into equity by journal entry, and accepted the explanations and source of source furnished by the shareholders for both Orchid Finlease Pvt. Ltd. and Shantidham Marketing Pvt. Ltd. The High Court emphasised that these findings are evidentiary and concurrent; in absence of perversity or absence of evidence the third appellate court must not reweigh or reappreciate such evidence. The Apex Court precedent relied upon by Revenue was held inapplicable on the facts because there the material showed absence of independent corroboration, which is not the situation here. [Paras 15, 16, 26, 28, 31]

The deletion of additions under Section 68 by the appellate authorities is sustained; the Tribunal's factual findings are not interfered with.

Final Conclusion: The departmental appeal fails. The Court finds no substantial question of law and declines to disturb the Tribunal's evidence based concurrent findings that the assessee and shareholders discharged the onus under Section 68; the appeal is dismissed.

Section 150 - notice under Section 148 - finding - direction - reopening of assessment - cumulative effect of statements - loose papers found during search

Section 150 - notice under Section 148 - finding - direction - reopening of assessment - Whether the conditions of Section 150 of the Act were satisfied so as to permit issuance of a notice under Section 148 to reassess the assessee for AY 2007-08 - HELD THAT: - The Court analysed the statutory scope of the terms 'finding' and 'direction' in Section 150(1) and reiterated that such findings or directions must be material, dispositive and directly necessary to give effect to an appellate or judicial order (drawing on established precedent). It examined the ITAT order dated 30.09.2014 and the Coordinate Bench order dated 29.07.2015 and noted that, while certain paragraphs observed that a letter was on the company letterhead and that the surrender language referred to the company/group, the same orders also recorded subsequent statements, contradictions and the need to consider statements cumulatively with seized material. The Court found that the ITAT and this Court did not render any conclusive finding or direction that the Rs. 7 crores necessarily belonged to Capital Power Systems Ltd. or that the Assessing Officer was to assess that amount in the assessee's hands. Instead, the authorities had accepted that the proper course was to determine undisclosed income on the basis of loose papers seized during the search, and had noted the lack of corroborative material and contradictions in the statements. The AO, by relying selectively on certain observations and treating them as a conclusive finding that Rs. 7 crores was the assessee's undisclosed income, erred in invoking Section 150 to issue a notice under Section 148. The non obstante clause in Section 150(1) applies only where there is a dispositive finding or direction warranting reassessment; incidental or collateral observations about disclosure on behalf of a group do not satisfy that test. Consequently, the conditions of Section 150 were not met and the reassessment could not be initiated on that basis. [Paras 40, 41, 42, 43, 44]

The conditions in Section 150 of the Act were not satisfied; the AO could not validly invoke Section 150/Section 148 to reopen assessment for AY 2007-08.

Final Conclusion: Appeal dismissed; the High Court affirmed that no finding or direction existed in the earlier orders requiring reassessment of the assessee for AY 2007-08 under Section 150, and accordingly the reassessment proceedings were invalidly initiated.

Reopening of assessment under Section 148 and procedure under Section 148A - investment in shares as a capital account transaction not giving rise to taxable income - escapement of income benchmark for invoking reassessment - assessment or notice framed in the name of a non-existent (dissolved/amalgamating) entity - effect of amalgamation on continuance and validity of assessment proceedings - doctrine of curable mistake under Section 292B vis-a-vis substantive illegality - succession to business and liability of successor under the scheme of amalgamation - relevance of CBDT Instruction accepting that investment in shares of Indian subsidiary is a capital transaction

Investment in shares as a capital account transaction not giving rise to taxable income - escapement of income benchmark for invoking reassessment - reopening of assessment under Section 148 and procedure under Section 148A - relevance of CBDT Instruction accepting that investment in shares of Indian subsidiary is a capital transaction - Validity of reassessment initiated by invoking Section 148/148A in respect of investment in shares of an Indian subsidiary - HELD THAT: - The Court held that the investment in equity shares of the Indian joint-venture (BEIPL) is a capital account transaction and does not constitute 'income' which could have escaped assessment. The decision relied upon and applied earlier precedents and the CBDT Instruction accepting that investment in shares of an Indian subsidiary is not taxable income, concluding that the foundational premise for reopening the assessment - that such investment gave rise to income escaping assessment - was flawed and lacking basis. Because the statutory threshold of escapement of income was not met, the reassessment action could not be sustained. [Paras 6]

Reassessment in respect of the share investment was invalid as the transaction was capital in nature and did not furnish a basis for reopening under Section 148/148A.

Assessment or notice framed in the name of a non-existent (dissolved/amalgamating) entity - effect of amalgamation on continuance and validity of assessment proceedings - doctrine of curable mistake under Section 292B vis-a-vis substantive illegality - succession to business and liability of successor under the scheme of amalgamation - Validity of proceedings and notices issued in the name of the amalgamating (now non-existent) entity after merger with the petitioner - HELD THAT: - The Court concluded that framing proceedings in the name of an entity that had ceased to exist pursuant to an amalgamation rendered the proceedings void. The judgment applied the established principle that an amalgamating company, after a sanctioned scheme, ceases to exist and notices/assessments in its name cannot sustain except in the limited factual circumstances where substantial material shows the Revenue always intended the successor to be the addressee (curable mistake under Section 292B). Here, the reopening was conducted in the name of the amalgamating entity despite being informed of the merger and, on the facts, did not fall within the narrow exception; accordingly the proceedings were invalid as being drawn against a non-existent entity. [Paras 7, 31, 32]

Proceedings and notice issued in the name of the dissolved/amalgamating entity are void; reassessment initiation quashed insofar as framed against a non-existent entity.

Final Conclusion: Writ petition allowed; the order under Section 148A(d) dated 30.08.2023 and the consequential notice under Section 148 dated 30.08.2023 are quashed and set aside because (i) the investment in shares was a capital account transaction not giving rise to taxable income and (ii) the proceedings were framed in the name of an entity that had ceased to exist following amalgamation; respondents remain free to initiate fresh proceedings if permissible in law.

Power of suo motu revision under section 263 - requires the assessment order to be both erroneous and prejudicial to the interests of the Revenue - Erroneous assessment - absence of any enquiry (lack of inquiry) distinct from merely inadequate inquiry - Substance over form / piercing the corporate veil as a judicial antiavoidance principle - Dividend Distribution Tax liability attaches to the company which declares/distributes the dividend, not the recipient

Power of suo motu revision under section 263 - requires the assessment order to be both erroneous and prejudicial to the interests of the Revenue - Erroneous assessment - absence of any enquiry (lack of inquiry) distinct from merely inadequate inquiry - Whether the Commissioner was justified in invoking revisional jurisdiction under section 263 to set aside the AO's order - HELD THAT: - The Tribunal's conclusion that the Commissioner had not established the twin conditions necessary for exercise of suo motu revision was affirmed. The court adopted the settled test that section 263 can be invoked only where the order is contrary to law and is prejudicial to revenue, and there must be material on record to prima facie show the absence of requisite enquiry (a true lack of inquiry) rather than merely an arguable or inadequate inquiry. Where the AO has examined the records, applied his mind and taken one of two possible views, the Commissioner cannot substitute his judgment merely because he would have preferred a different conclusion. On the facts, the Commissioner relied on conclusions about group motive and alleged sham transactions but failed to demonstrate that the AO's order was legally erroneous in a manner prejudicial to revenue; the revisional order was therefore unsustainable. [Paras 8, 11, 12]

The invocation of revisional power under section 263 was unjustified and the Tribunal correctly set aside the Commissioner's order.

Substance over form / piercing the corporate veil as a judicial antiavoidance principle - Dividend Distribution Tax liability attaches to the company which declares/distributes the dividend, not the recipient - Whether the Commissioner could treat an alleged motive to avoid Dividend Distribution Tax in Genpact India as rendering the assessment of the Singapore resident assessee erroneous and prejudicial to the Revenue - HELD THAT: - The court found a fundamental disconnect between the Commissioner's assertion that the share transfer was a sham to avoid DDT in the hands of Genpact India and the act of revising the assessment of the nonresident transferor. Even accepting the Commissioner's factual contentions, any liability for DDT arises on the company which declares or distributes the dividend. The complainant failed to show how an asserted DDT liability of Genpact India could translate into additional tax liability assessable against the transferor. Consequently, the alleged motive to avoid DDT did not furnish a legally cognisable basis to impugn the AO's order in the hands of the respondent. [Paras 9, 10, 11]

Perceived DDT consequences in the hands of Genpact India did not render the assessment of the Singapore resident assessee erroneous or prejudicial to the Revenue; the Commissioner's reliance on that ground was misplaced.

Final Conclusion: The appeal is dismissed. The Tribunal correctly held that the Commissioner had no jurisdiction under section 263 to revise the AO's order-the requisite legal conditions for suo motu revision were not satisfied and the alleged DDTavoidance in Genpact India could not be marshalled to render the transferor's assessment erroneous and prejudicial to revenue.

Sufficient cause - condonation of delay - power of the Appellate Tribunal to admit appeals after limitation under Section 253(5) of the Income Tax Act - liberal construction to advance substantial justice - remittal for fresh consideration on merits

Sufficient cause - condonation of delay - power of the Appellate Tribunal to admit appeals after limitation under Section 253(5) of the Income Tax Act - liberal construction to advance substantial justice - Whether the delay of 55 days in preferring the appeal to the ITAT should be condoned. - HELD THAT: - The Court held that the ITAT erred in rejecting the application for condonation of delay. The appellant filed an affidavit explaining that, on wrong advice of its counsel, it had re-applied for registration under Section 12A instead of instituting the statutory appeal, and thereafter, on realising the mistake, filed the appeal which was 55 days late. The Revenue did not file any counter-affidavit disputing the facts or the cause shown. Applying the well-established principle that the expression "sufficient cause" in the context of condonation must receive a liberal, justice-oriented construction, and having regard to precedents emphasising bona fides, absence of mala fides or deliberate inaction, and the need to decide matters on merits unless hopelessly devoid of merit, the uncontroverted affidavit constituted sufficient cause within the meaning of Section 253(5). The Court also noted the adverse civil consequences on the Society's ability to claim exemptions under Sections 11 and 12 if delay were not condoned, reinforcing the need to advance substantial justice. [Paras 7, 22, 23, 24]

Delay of 55 days in preferring the appeal is condoned; the ITAT's order refusing condonation is set aside.

Remittal for fresh consideration on merits - no expression on merits - Whether the appeal should be restored and remitted to the ITAT for decision on merits. - HELD THAT: - Having condoned the delay, the Court restored the appeal to its original number and remitted the matter to the ITAT to consider and decide the appeal afresh on merits. The High Court expressly refrained from expressing any opinion on the merits of the controversy and imposed a timeline for fresh adjudication. [Paras 24]

The appeal is restored to the ITAT and the matter is remitted for fresh consideration and decision on merits within three months.

Final Conclusion: The tax appeal is allowed: the delay of 55 days in preferring the appeal is condoned, the ITAT order refusing condonation is set aside, and the appeal is restored and remitted to the ITAT for fresh decision on merits within three months; no order as to costs.

Unexplained cash credit under section 68 - Specified Bank Notes deposited during demonetisation - books of account as evidence of source of cash deposits - application of deeming provision for unexplained income under section 115BBE - no addition where receipt is offered as income and remains undisputed

Unexplained cash credit under section 68 - Specified Bank Notes deposited during demonetisation - books of account as evidence of source of cash deposits - no addition where receipt is offered as income and remains undisputed - Addition of Rs. 12 lakhs as unexplained cash credit on account of SBNs deposited during demonetisation. - HELD THAT: - The Tribunal found that the assessee, engaged in sale of computer peripherals, produced cash book, sales register and ledger to the AO and had shown the cash deposits as sales in his books of account. Neither the AO nor the CIT(A) made any enquiry into the sales shown from which the cash allegedly originated. Although acceptance of SBNs post-demonetisation was not authorised, once the assessee had deposited the SBNs, shown the nexus between sales and deposits in his books and offered the amount as income, the authorities could not make a further addition. The Tribunal relied on the principle that undisputed sales reflected in books preclude treatment of the receipts as unexplained cash credit and accordingly held that the addition under section 68 (and consequential application of the deeming provision under section 115BBE) was not sustainable and must be deleted. [Paras 8]

Addition of Rs. 12 lakhs on account of SBNs deposited during demonetisation deleted; grounds 1 and 2 allowed.

Procedural non-advancement of unargued ground - Ground No. 3 of the appeal which was not argued before the Tribunal. - HELD THAT: - The Tribunal recorded that Ground No.3 was not pressed by the appellant before it and therefore declined to entertain or decide that ground on merits. [Paras 9]

Ground No.3 dismissed for non-argument.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 12 lakhs on account of SBNs deposited during demonetisation is deleted; one unargued ground is dismissed.

Capital gains computation and allocation among co-owners - explanation of credits under Section 68 - documentary proof for loans from relatives - admissibility of bank statements, remittance evidence and affidavits - treatment of transactions between relatives

Capital gains computation and allocation among co-owners - Addition of Rs. 1,88,429/- as suppressed capital gain was not pressed by the assessee. - HELD THAT: - The assessee abandoned contest on the addition made by the Assessing Officer regarding alleged suppression/under-valuation of capital gain arising from the proportionate share claimed in the purchase of land. The Tribunal records that the ground relating to this addition is not pressed and therefore no adjudication on the merits was required. [Paras 7]

Ground relating to capital gain addition not pressed and dismissed.

Explanation of credits under Section 68 - documentary proof for loans from relatives - admissibility of bank statements, remittance evidence and affidavits - treatment of transactions between relatives - Addition of Rs. 59,28,094/- as unexplained unsecured loans under Section 68 was unjustified and deleted. - HELD THAT: - The Assessing Officer and the CIT(A) made an addition treating amounts received from four persons (relatives of the assessee) as unexplained credits. On appeal, the assessee produced confirmations, account statements, statements showing remittances from abroad, affidavits, PAN and passport details which substantiate the source and genuineness of the loans. The Tribunal found that these documentary evidences were available on record but were not taken into account by the authorities. In consequence, the addition under Section 68 could not be sustained. [Paras 7]

Addition under Section 68 deleted and assessee's appeal allowed on this ground.

Final Conclusion: Appeal allowed in part: capital-gains ground not pressed and dismissed; addition treating loans from relatives as unexplained under Section 68 deleted in view of documentary evidence, and the appeal is allowed.

Approval under Section 153D - requirement of separate approval for each assessment year - application of independent mind by approving authority - mechanical approval vitiating assessments framed under Section 153A - quashing of assessment on account of non-application of mind

Approval under Section 153D - application of independent mind by approving authority - requirement of separate approval for each assessment year - mechanical approval vitiating assessments framed under Section 153A - Validity of the approval accorded by the Joint Commissioner under Section 153D and its effect on assessments framed under Section 153A for AY 2014-15 - HELD THAT: - The Tribunal found that the approving authority accorded approval in a mechanical manner without any separate application of mind to the draft assessment orders for each assessment year and each assessee. The bench noted that approvals for a large number of assessment orders (110 approvals in respect of 19 assessees) were placed before the JCIT on the same date and that a single approval was in some instances granted for multiple assessment years, contrary to the statutory scheme which contemplates approval for "each assessment year." The Tribunal relied on and followed the view expressed by the Delhi High Court in ShivKumar Nayyar and subsequent ITAT decisions which held that exercise of power under Section 153D cannot be a ritualistic or rubber-stamp approval and must reflect an appropriate application of mind by the approving authority. Applying that principle to the facts, the Tribunal concluded that the approval in the present case was purely mechanical and therefore vitiated the assessments framed under Section 153A. [Paras 5, 6, 7]

The approvals under Section 153D were held to be mechanical and lacking independent application of mind; assessments framed under Section 153A for the relevant matters are quashed.

Final Conclusion: Appeal allowed; assessment framed for Assessment Year 2014-15 quashed because the JCIT's approval under Section 153D was mechanical and did not involve independent application of mind.

Deduction of tax at source under section 194C - Liability of individual to deduct TDS - Application of section 194C(1)(k) w.e.f. 1-6-2007 - Sub-section 194C(2) - contractor-subcontractor liability - Disallowance under section 40(a)(ia) - Characterisation of payments as wages versus contractual payments

Application of section 194C(1)(k) w.e.f. 1-6-2007 - Liability of individual to deduct TDS - Applicability of the amendment inserting clause (k) in section 194C(1) to the assessee (an individual) for the assessment year in question - HELD THAT: - The Tribunal noted that sub-clause (k) of section 194C(1), which brought individuals/HUFs within the scope of clause (1), was introduced with effect from 1-6-2007. For A.Y.2006-07 that amendment had not come into force and therefore could not be invoked against the assessee. Consequently the contention that the assessee, an individual, was liable to deduct tax under section 194C(1)(k) for the year under consideration was rejected. [Paras 8]

The amendment in section 194C(1)(k) is not applicable to A.Y.2006-07; the assessee, an individual, was not liable to deduct TDS under that provision for the year in question.

Sub-section 194C(2) - contractor-subcontractor liability - Characterisation of payments as wages versus contractual payments - Disallowance under section 40(a)(ia) - Whether payments described as "crew wages" attracted deduction under section 194C(2) (i.e., payments by a contractor to a sub-contractor) and whether invocation of section 40(a)(ia) was justified - HELD THAT: - The Tribunal examined the statutory conditions of section 194C(2): existence of a contractor, a contract with a sub-contractor, performance of part of the contracted work by the sub-contractor and payment for such work. The factual matrix showed that the assessee was engaged by the principal to deploy and execute the work using his own manpower and that the assessee remained solely responsible for execution and liabilities; there was no material on record demonstrating that the crew members were engaged as sub-contractors or that contractual responsibility was passed to them. Given absence of evidence of any further sub contracting or transfer of contractual obligations to the crew, the payments could not be treated as payments to sub contractors attracting section 194C(2). Accordingly, invocation of section 40(a)(ia) for non deduction of TDS under section 194C was incorrect. [Paras 14]

Payments for crew wages did not fall within section 194C(2) as payments to sub contractors; disallowance under section 40(a)(ia) was wrongly invoked and is set aside.

Final Conclusion: The assessee's appeal is allowed: the amendment bringing individuals within section 194C(1)(k) is not applicable to A.Y.2006-07, and on the facts there was no sub contracting such as to attract section 194C(2); the disallowance under section 40(a)(ia) is reversed.

Cash deposits treated as unexplained income under section 68 - Acceptance of books of account and corroborative confirmations as proof of source - Trading stock nexus with sales - Double taxation/double assessment of the same receipt - Admission of additional evidence under Rule 46A - Natural justice and appellate power to call for evidence

Cash deposits treated as unexplained income under section 68 - Acceptance of books of account and corroborative confirmations as proof of source - Trading stock nexus with sales - Double taxation/double assessment of the same receipt - Deletion of addition of Rs. 1,46,84,779/- treated as unexplained cash deposits for AY 2021-22 - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in holding that the cash deposits represented sales proceeds recorded in the assessee's regular books and were not unexplained money chargeable under section 68. The AO had not rejected the books of account, nor had he pointed to any defect in purchases, opening or closing stock or trading results; confirmations from more than 40 debtors were furnished during appellate proceedings and not rebutted on merits by the AO. The cash receipts constituted less than 10% of turnover and the pattern of cash sales and deposits was consistent across preceding and succeeding years. Given that sales were admitted and accounted for, and stock movement supported the sales, treating the same receipts again as unexplained deposits resulted in double taxation and was unsustainable. The Tribunal also relied on consistent judicial precedents recognizing that where sales are recorded, stock and trading account support the outflow of stock, and books are not rejected, deposits representing those sales cannot be treated as undisclosed income. [Paras 12, 13, 14, 17, 18]

Addition of Rs. 1,46,84,779/- deleted and AO's invocation of section 68/section 115BBE set aside

Admission of additional evidence under Rule 46A - Natural justice and appellate power to call for evidence - Validity of admission by CIT(A) of confirmatory ledger accounts and correspondence under Rule 46A during appellate proceedings - HELD THAT: - The Tribunal held that the documents called for and furnished during the appellate proceedings were not inadmissible additional evidence but were produced in response to directions during appeal and were admitted in the interest of natural justice. The appellate authority has power to call for and admit evidence under section 250(4) and Rule 46A is founded on principles of natural justice; the AO's objection to admission without addressing the merits did not justify excluding those confirmations which materially supported the assessee's explanation of source of deposits. [Paras 15]

Admissibility of evidence under Rule 46A sustained and AO's objection rejected

Proof of delivery and creditworthiness irrelevant once sales accepted - Acceptance of books of account and corroborative confirmations as proof of source - Rejection of Revenue's ancillary objections regarding absence of delivery details, mode of payment particulars on invoices, and creditworthiness of debtors - HELD THAT: - The Tribunal agreed with the CIT(A) that once the AO accepted the books of account and sales were recorded and admitted as revenue receipts, absence of delivery particulars or detailed KYC on individual invoices and the issue of creditworthiness of debtors were not decisive to displace the assessee's explanation. The AO neither produced evidence disproving the sales nor rejected the books; therefore such formal deficiencies did not justify treating the deposits as unexplained money. [Paras 16]

Ancillary objections of Revenue on invoice details and debtors' creditworthiness rejected

Final Conclusion: The Tribunal dismissed the Revenue's appeal against the CIT(A)'s order for AY 2021-22, upholding deletion of the addition treating bank cash deposits as unexplained income, sustaining admission of appellate evidence under Rule 46A, and rejecting ancillary contentions regarding invoice formalities and debtors' creditworthiness.

Mode of computation of capital gains under section 48 - indexed cost of acquisition - Cost Inflation Index - application of indexation to foreign assets - first proviso to section 48 and its applicability to non-residents - interpretation of statutory language without recourse to external aids

Indexed cost of acquisition - Cost Inflation Index - application of indexation to foreign assets - mode of computation of capital gains under section 48 - first proviso to section 48 and its applicability to non-residents - interpretation of statutory language without recourse to external aids - Assessee entitled to deduct indexed cost of shares of a foreign company while computing long-term capital gain for AY 2016-17. - HELD THAT: - The Tribunal examined section 48 and its provisos and held that the first proviso, which prescribes conversion rules, applies only to non-residents and is therefore inapplicable to the resident assessee. The second proviso grants the benefit of indexation by substituting 'indexed cost of acquisition' and makes no distinction between assets held in India and assets held abroad. Because the statutory language of the second proviso is clear, there is no room to resort to internal or external aids or to read in limitations based on the situs of the asset. The Tribunal rejected the Revenue's reliance on a coordinate-bench decision in ICICI Bank Ltd. on the ground that factual findings in that decision (regarding currency of acquisition and receipt) differ from the present case, and thus that decision does not bind the outcome here. Applying these principles, the Tribunal concluded that the AO was not justified in denying indexation benefit in respect of the sale of shares of the foreign subsidiary and affirmed the CIT(A)'s allowance of indexation. [Paras 6]

Appeal of the Revenue dismissed; indexation benefit under the second proviso to section 48 upheld for the sale of shares of the foreign company.

Final Conclusion: The Tribunal dismisses the Revenue's appeal and affirms the CIT(A)'s order allowing deduction of indexed cost of acquisition (indexation) in computing long-term capital gain on sale of shares of the foreign subsidiary for Assessment Year 2016-17.

Release of perishable seized goods under Section 110(1-A) of the Customs Act, 1962 - jurisdiction of Adjudicating Officer (Additional Commissioner/Joint Commissioner) under Chapter XIV for goods liable for confiscation between Rs.10 lakhs and Rs.15 lakhs - requirement of a formal application in prescribed format for release - application of principles of natural justice in adjudication of release petition

Release of perishable seized goods under Section 110(1-A) of the Customs Act, 1962 - requirement of a formal application in prescribed format for release - jurisdiction of Adjudicating Officer (Additional Commissioner/Joint Commissioner) under Chapter XIV for goods liable for confiscation between Rs.10 lakhs and Rs.15 lakhs - principles of natural justice in adjudication of release petition - Procedure for seeking release of the seized consignment of perishable goods and the forum to decide the application. - HELD THAT: - The Court directed that the petitioner must file a formal application in the prescribed format before the Adjudicating Officer (Additional Commissioner/Joint Commissioner, Customs, Agartala) for release of the perishable goods under Section 110(1-A) of the Customs Act, 1962. The Court recorded that the Adjudicating Officer vested with powers under Chapter XIV (in respect of goods whose value is between the cited range) is the proper authority to entertain and decide the application. On receipt of the application, the Adjudicating Officer is to decide the same in accordance with law, complying with the principles of natural justice and preferably within ten days from receipt. The Court expressly refrained from expressing any view on the merits of the petitioner's claim and confined its order to directing the procedure and timeline for adjudication. [Paras 6, 7, 8]

Petitioner to file the prescribed application before the Additional Commissioner/Joint Commissioner, Customs, Agartala within four days; the Adjudicating Officer to decide the application in accordance with law and after observing principles of natural justice, preferably within ten days; no observation on merits.

Final Conclusion: Writ petition disposed of by directing the petitioner to make a formal application to the Adjudicating Officer for release of the seized perishable consignment and directing the Adjudicating Officer to decide the application in accordance with law and after observing principles of natural justice within the specified timeframe; no adjudication on merits by the Court.

Violation of the principles of natural justice - non-consideration of adjournment request - failure to communicate rejection of adjournment - quashing of impugned order and remand for fresh hearing - requirement of a reasoned and speaking order on reconsideration - proportionality of administrative action - imposition of costs as a condition for grant of relief

Violation of the principles of natural justice - non-consideration of adjournment request - failure to communicate rejection of adjournment - proportionality of administrative action - There was a breach of natural justice in passing the impugned order dated 4 November 2024 by not acceding to or communicating refusal of the adjournment requested by the petitioner's advocate. - HELD THAT: - The Court found that the advocate for the petitioner requested adjournment on 29 October 2024 on account of being out of town for Diwali vacation and asked that the matter be fixed after 11 November 2024. No justifiable reason was recorded by respondent No. 2 for not considering or acceding to that request, nor was the rejection communicated to the petitioner. The Court held that the resultant action was disproportionate and another opportunity ought to have been granted; accordingly, procedural fairness was violated and remediation was warranted. [Paras 8, 9]

Impugned order dated 4 November 2024 is quashed and set aside on grounds of breach of natural justice; the matter is remanded for fresh hearing.

Quashing of impugned order and remand for fresh hearing - requirement of a reasoned and speaking order on reconsideration - imposition of costs as a condition for grant of relief - Relief by way of quashing and remand is granted subject to conditions including payment of costs and timelines for completion of adjudication. - HELD THAT: - The Court ordered that on remand respondent No. 2 must give the petitioner an opportunity of hearing and thereafter pass a reasoned and speaking order. To meet the interests of justice, the Court imposed costs on the petitioner and made the remand conditional upon payment of those costs. The Court also directed respondent No. 2 to complete the adjudication proceedings by 31 March 2025 and required the petitioner to file proof of payment with the High Court Registry within the stipulated period. [Paras 9, 10]

Remand to respondent No. 2 for fresh hearing and reasoned order, subject to the petitioner paying the directed costs and compliance with the timeline for completion.

Final Conclusion: Rule made absolute; impugned order dated 4 November 2024 quashed and set aside for violation of natural justice, matter remanded to respondent No. 2 for fresh hearing and a reasoned order subject to payment of costs and completion of adjudication by 31 March 2025; petition disposed of.

Maintainability of writ petition despite alternative statutory remedy - availability and efficacy of statutory appeal under Section 129-A of the Customs Act, 1962 - violation of principles of natural justice - pre-deposit requirement as impediment to efficacious remedy - writ jurisdiction under Article 226 of the Constitution of India

Maintainability of writ petition despite alternative statutory remedy - availability and efficacy of statutory appeal under Section 129-A of the Customs Act, 1962 - violation of principles of natural justice - pre-deposit requirement as impediment to efficacious remedy - Whether the writ petition under Article 226 is maintainable in view of the availability of a statutory appeal before the appellate forum under the Customs Act, 1962 - HELD THAT: - The Court considered the petitioner's contention that the writ is maintainable notwithstanding the alternative statutory remedy because of alleged violation of the principles of natural justice and on account of the pre-deposit condition which allegedly renders the appellate remedy ineffectual. The Bench noted the principles laid down by the Apex Court recognising limited exceptions where a writ may be entertained despite an alternative remedy (including violation of natural justice), but contrasted those authorities with subsequent decisions emphasising that where a statutory appeal exists it ought normally to be availed. Applying the later precedents cited by the Court, the availability of an efficacious appeal remedy under Section 129-A was held to be decisive. The Court found that the existence of the statutory appellate route precluded interference by writ in the present proceedings and did not accept the submission that the pre-deposit requirement made the remedy ineffectual so as to bar reliance on the statutory appeal. The petitioner was therefore directed to pursue the statutory remedy in accordance with law. [Paras 7, 8]

Writ petition not entertained; petitioner granted liberty to avail the statutory appeal under Section 129-A of the Customs Act, 1962.

Final Conclusion: The petition is dismissed with liberty to the petitioner to pursue the statutory appellate remedy under Section 129-A of the Customs Act, 1962 in accordance with law.

Confiscation of goods as smuggled property - Burden of proof on the Department to establish smuggling - Goods not being notified goods under Section 123 of the Customs Act - Penalty under Section 112 of the Customs Act

Confiscation of goods as smuggled property - Burden of proof on the Department to establish smuggling - Goods not being notified goods under Section 123 of the Customs Act - The seized consignments of Rahar Dal and Urad were not liable to confiscation as smuggled goods. - HELD THAT: - The appellant produced cash receipts signed by local farmers and asserted purchase and intra-country transportation of the pulses; the Department produced no evidence to rebut these claims. The Tribunal found merit in the appellant's claim of Indian origin and noted the appellant's GST registration and business existence. Since the goods are not notified under Section 123, the onus lay on the Department to prove smuggling; the Department failed to discharge that burden. Applying these findings, the Tribunal held that the ingredients for confiscation under Sections 111(b) and 111(d) were not established. [Paras 7, 8]

Confiscation of the seized goods set aside and appeal allowed on this ground.

Penalty under Section 112 of the Customs Act - Consequential invalidity of penalty when confiscation is not sustainable - The penalty imposed on the appellant under Section 112 was not sustainable and was set aside. - HELD THAT: - The Tribunal concluded that because the goods were not liable to confiscation-the foundational finding for imposing the penalty-the penalty under Section 112 could not stand. Having quashed the confiscation for lack of proof of smuggling, the Tribunal found the penalty to be consequentially unsustainable and therefore set it aside. [Paras 7, 8]

Penalty under Section 112 set aside.

Final Conclusion: The Tribunal allowed the appeal, set aside the confiscation of the seized Rahar Dal and Urad and the penalty imposed on the appellant, concluding that the Department failed to prove the smuggled nature of the goods.

Restoration of appeal - Deemed service by uploading on official portal - Adjournment discretion under proviso to Section 129B(1A) - Power to pass final order for non-appearance under Rule 21 of CESTAT (Procedure) Rules, 1982 - Decision on merits notwithstanding non-appearance

Restoration of appeal - Application for restoration of appeals dismissed - HELD THAT: - Restoration of appeal is not a matter of right and will be permitted only in exceptional circumstances where valid reasons are shown for the failure to prosecute the appeal. The appellants failed to justify non-appearance despite multiple opportunities: the earlier counsel withdrew his Vakalatnama in July 2023 and the appellants waited about a year before appointing fresh counsel on 23.08.2024 solely to file the restoration applications. The Tribunal observed extreme tardiness and lack of interest by the appellants in pursuing the appeals, and no valid or justifiable reason was furnished for non-appearance across the seven hearings afforded by the Tribunal. In these circumstances, restoration was refused. [Paras 6, 7]

Restoration applications C/ROA/51943/2024 and C/ROA/51942/2024 dismissed

Deemed service by uploading on official portal - Submission that final hearing notice of 05.12.2023 was not served was rejected - HELD THAT: - The Tribunal held that orders and daily hearing sheets uploaded on the official CESTAT portal are deemed served in terms of Section 153(1)(ca) and subsection (2) of the Customs Act, 1962, which provides that every order shall be deemed to have been served on the date of upload. The Tribunal therefore could not accept the contention that the appellant was not served with the final hearing notice and held that the appellant was on notice of the proceedings. [Paras 8]

Submission of non-service of notice on 05.12.2023 rejected; upload on portal constituted service

Decision on merits notwithstanding non-appearance - Adjournment discretion under proviso to Section 129B(1A) - Power to pass final order for non-appearance under Rule 21 of CESTAT (Procedure) Rules, 1982 - Final order was passed on merits and Tribunal's exercise of powers regarding adjournments and final order upheld - HELD THAT: - The Tribunal recorded that the impugned Final Order No. 55357-55360/2024 dated 19-03-2024 was pronounced after considering the appeal memorandum and submissions, and therefore was a decision on merits rather than a merely procedural dismissal for non-prosecution. The Tribunal also noted that while the proviso to Section 129B(1A) limits adjournments, the CESTAT had already afforded seven opportunities (exceeding that proviso) and retains power under Rule 21 of its Procedure Rules to pass a final order where the appellant does not respond to repeated hearings. Having afforded multiple chances and received no satisfactory explanation, the Tribunal was justified in upholding the final order. [Paras 9]

Tribunal's final order treated as a merits decision and its exercise of discretion to proceed after repeated non-appearance sustained

Final Conclusion: The applications for restoration of the two appeals were dismissed; the Tribunal's finding that notices and orders uploaded on the CESTAT portal are deemed served was affirmed, and the Final Order dated 19-03-2024 was held to have been passed on merits after repeated opportunities to the appellants.

Summary order. Civil Appeals dismissed; the Supreme Court declined to interfere with the National Company Law Appellate Tribunal order dated 10.12.2021 in Company Appeal (AT) (Insolvency) No.385/2020.

Judicial interference - approval of resolution plan by the Committee of Creditors - use of fixed deposits to preserve corporate assets - primacy of the adjudicating authority for adjudication of issues under the Code - liberty to raise contentions before the adjudicating authority - refund and restoration of appropriated FD proceeds

Judicial interference - Whether the Court should interfere with the NCLAT judgment on the question/factum of default - HELD THAT: - On consideration of the material and submissions, the Court found no good ground to interfere with the impugned judgment of the NCLAT on the question of default. The appeal preferred by the suspended director of the corporate debtor is dismissed insofar as it challenges that factual/legal finding. [Paras 2, 20]

Appeal dismissed; no interference with the NCLAT's finding on default.

Use of fixed deposits to preserve corporate assets - approval of resolution plan by the Committee of Creditors - Permissibility of CoC meeting and payment from fixed deposits to meet contractual obligations (overlaying) and consequent disbursement to the contractor - HELD THAT: - The Court modified earlier interim orders to permit the CoC meeting to proceed and directed that if the CoC approved payment due to the contractor for overlaying, the approved amount would be paid from the fixed deposits held with the lead bank. Pursuant to that direction the CoC approved payment and Rs.31 crores has been disbursed to the contractor. The Court recorded that further payments may be required in future but did not examine the quantum at this stage. [Paras 7, 8, 11]

CoC permitted to approve payment for overlaying and the approved amount has been paid from the FDs; future payments noted but not adjudicated.

Primacy of the adjudicating authority for adjudication of issues under the Code - liberty to raise contentions before the adjudicating authority - Forum for adjudication of all issues, including the pending resolution plan and related pleas - HELD THAT: - The Court observed that all issues and relevant facts required to be adjudicated must be raised and decided before the adjudicating authority (NCLT). While noting intervening developments (CoC approval, bank guarantees, OTS proposals and payments), the Court declined to decide those matters on merits and granted liberty to the parties, including the prospective resolution applicants and the holding company, to raise all pleas and contentions before the NCLT for examination in accordance with law. The Court clarified its observations are not expressions on the merits. [Paras 14, 15, 16]

Matters remitted to the NCLT for adjudication; parties given liberty to raise all contentions before the adjudicating authority.

Refund and restoration of appropriated FD proceeds - Appropriation by the lead bank of FD proceeds distributed to CoC members and the remedial direction - HELD THAT: - Despite earlier orders that any resolution passed by the CoC (except the contractor payment) from the FDs would be subject to the Court's directions, the lead bank appropriated FD proceeds and distributed them to CoC members. The action was objected to by the Resolution Professional. The bank stated an undertaking had been given that members of the CoC would refund the amounts if necessary. The Court directed that the banks/financial institutions who are CoC members shall forthwith refund the monies received, which shall be converted into interest-bearing fixed deposits with auto-renewal clauses. [Paras 17, 18]

Banks/financial institutions who are CoC members to refund the appropriated amounts and such amounts to be converted into interest-bearing FDs with auto-renewal.

Final Conclusion: The appeal is dismissed; the Court permitted the CoC to approve and effect the contractor payment from fixed deposits (already disbursed), remitted all substantive contentions to the NCLT for adjudication with liberty to the parties to raise them, and directed refund and restoration of FD proceeds improperly appropriated by CoC members into interest-bearing FDs.

No Objection Certificate under Rule 10 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 - investigation under Section 37(1) of the Foreign Exchange Management Act, 1999 - nexus between an ongoing investigation and the proposed overseas investment - deemed approval on failure to furnish NOC within sixty days - requirement of reasoned decision and principles of natural justice in administrative refusals - duty of Authorised Dealer banks under FEMA and FEMA OI Directions - attachment under Section 37A and monetary penalties under Section 13 of FEMA, 1999

No Objection Certificate under Rule 10 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 - requirement of reasoned decision and principles of natural justice in administrative refusals - Validity of ED's rejection of applications for NOC which comprised identical, non-reasoned communications - HELD THAT: - The Court held that the impugned communications rejecting the NOCs contained no substantive reasons and therefore were arbitrary and liable to be set aside. A decision of the character of denial of an NOC under Rule 10 must be predicated on clear, cogent and rational reasons; summary rejection without disclosure of basis offends principles of natural justice. Consequently, a non-speaking rejection letter is unsustainable and is quashed. [Paras 23]

Impugned rejection letters quashed for want of reasons; summary denial set aside.

Investigation under Section 37(1) of the Foreign Exchange Management Act, 1999 - nexus between an ongoing investigation and the proposed overseas investment - No Objection Certificate under Rule 10 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 - Whether mere issuance of summons and an ongoing investigation without formal findings can justify denial of NOC for overseas investment - HELD THAT: - The Court found that issuance of summons under Section 37(1) followed by prolonged investigation without initiation of formal proceedings or any finding of contravention under Section 4 does not, by itself, justify refusal of an NOC. There must be a demonstrable nexus between the alleged contravention and the specific proposed investment; absent such nexus and definitive findings, perpetual inhibition of legitimate business activity is unreasonable. The Court emphasised that investigations lingering without progress cannot be used to indefinitely impede remittances. [Paras 25, 27, 29]

Mere pendency of investigation/summons is insufficient ground to deny NOC in the absence of established nexus or conclusive findings.

Valuation compliance under FEMA OI regime - probative value of valuer empanelled with SEBI - obligation on investigating agency to initiate proceedings to substantiate allegations - Whether allegations of overvaluation and diversion of foreign exchange justified denial of NOC without initiation of adjudicatory proceedings - HELD THAT: - The Court observed that allegations of overvaluation relied upon by ED remained, at present, unsupported by adjudicatory findings. The Petitioners had engaged a SEBI-registered merchant banker for valuation, which prima facie carries probative force. If ED possesses cogent material of overvaluation or misuse, it ought to initiate appropriate proceedings under FEMA rather than rest denial of NOC on suspicion alone. The Court declined to make conclusive factual findings on valuation, noting that doing so could prejudice the parties, but stressed that suspicion without adjudication cannot sustain denial. [Paras 26]

Allegations of overvaluation do not justify refusal of NOC absent initiation of proceedings or conclusive findings; valuation by SEBI-registered valuer has prima facie weight.

Duty of Authorised Dealer banks under FEMA and FEMA OI Directions - deemed approval on failure to furnish NOC within sixty days - attachment under Section 37A and monetary penalties under Section 13 of FEMA, 1999 - Scope of consequent directions and interplay between ED's investigatory powers and the Authorised Dealer's obligations once NOC is quashed - HELD THAT: - The Court noted that Authorised Dealers retain statutory obligations to ensure compliance with FEMA, Regulations and Directions and may be liable for facilitation of remittances without requisite documents. The Rules provide that if the concerned agency fails to furnish the NOC within sixty days, approval may be presumed. Having quashed the non-reasoned rejections, the Court directed that the Petitioners be permitted to approach Authorised Dealers for remittance, which shall be processed on merits in accordance with applicable rules; this preserves the ED's rights under Section 37A and the penal/attachment regime while restoring the Petitioners' right to seek remittance subject to lawful scrutiny by the AD and regulators. [Paras 28, 30]

Petitioners permitted to approach Authorised Dealers; remittances to be processed on merits with ADs and regulators applying statutory safeguards; ED's rights under FEMA preserved.

Final Conclusion: Writ petitions allowed: non-reasoned rejection letters of ED quashed; Petitioners may approach Authorised Dealers to process proposed remittances on merits under FEMA and related directions, subject to statutory safeguards and without prejudice to ED initiating or pursuing proceedings if supported by cogent material.

Quashing of show cause notices for undue delay in adjudication - failure to comply with Tribunal's remand directions - reconstruction of department as defence to inordinate delay - continuation of stale proceedings contrary to principles of expedition - precedential rejection of reconstruction excuse

Quashing of show cause notices for undue delay in adjudication - failure to comply with Tribunal's remand directions - reconstruction of department as defence to inordinate delay - Whether the show cause notices dated 9 May 2000 should be quashed on account of prolonged non-adjudication after the Tribunal's remand orders of 11 February 2003 and 11 April 2008 and whether departmental reconstruction justifies the delay. - HELD THAT: - The Tribunal had remanded the matters for de novo consideration by orders dated 11 February 2003 and 11 April 2008, but no further adjudication was carried out pursuant to those directions. The revenue's explanation that reconstruction of the department in 2014 impeded adjudication was general and failed to account for the long period between 2003/2008 and 2014, and likewise provided no justification for the post-2014 inaction up to the date of the present petitions. The Court relied on its earlier decisions rejecting reconstruction as a blanket excuse for prolonged non-adjudication and held that, in the absence of any satisfactory or specific explanation for non-compliance with the Tribunal's directions over the intervening years, continuation of the original show cause proceedings could not be permitted. Applying these principles, the impugned show cause notices issued on 9 May 2000 were held to be vitiated by the inordinate delay and consequently liable to be set aside. [Paras 9, 10, 11, 12]

The show cause notices dated 9 May 2000 are quashed and set aside for inordinate delay in adjudication and failure to implement the Tribunal's remand directions; departmental reconstruction does not justify the prolonged inaction.

Final Conclusion: The rule is made absolute; the impugned show cause notices dated 9 May 2000 are quashed and set aside for inordinate delay in carrying out the Tribunal's remand directions, no order as to costs, and pending interim applications are disposed of.

Quashing and remand for fresh adjudication - limitation and extended period for recovery under Section 73(1) including fraud or suppression exception - opportunity of hearing and production of records before adjudicating tax liability - exercise of writ jurisdiction despite availability of statutory appellate remedy in extraordinary circumstances

Quashing and remand for fresh adjudication - opportunity of hearing and production of records before adjudicating tax liability - Validity of the impugned adjudication order in light of centralized service tax registration, filed returns and the petitioner's opportunity to produce documents - HELD THAT: - The Court found that the impugned order proceeded to confirm the show cause notice without adequately considering the petitioner's claim of having surrendered branch-wise registrations, obtained a centralized registration and filed ST-3 return declaring the aggregate turnover which, according to the petitioner, included the branch turnover in dispute. Although the petitioner's reply to the show cause notice was belated, the impugned order did not meticulously examine the documentary material demonstrating consolidation of registrations and inclusion of the disputed turnover in the centralized return. In the circumstances, the High Court held that justice required granting the petitioner an opportunity to produce relevant records/accounts so that respondent no. 2 can re-examine the correctness of the demand on merits after hearing the petitioner. The Court therefore quashed the impugned order and directed respondent no. 2 to decide afresh after granting opportunity of hearing and permitting production of documents. [Paras 10, 11, 12, 14, 16]

Impugned order quashed and matter remitted to respondent no. 2 for fresh adjudication after affording the petitioner an opportunity to produce records and be heard.

Limitation and extended period for recovery under Section 73(1) including fraud or suppression exception - Whether the extended limitation period beyond 30 months could be validly invoked in the absence of explicit demonstration of fraud or suppression - HELD THAT: - The Court observed that the impugned order's reasoning (notably paragraph 23 therein) did not explicitly demonstrate how fraud or suppression of facts was established so as to justify invocation of the extended five-year period beyond the 30 months prescribed under Section 73(1). Given the factual matrix relating to centralized registration and returns, the Court considered it appropriate to remit the question to respondent no. 2 for fresh consideration so that the authority may specifically examine and demonstrate whether the conditions for extending the limitation period are met, having regard to any documents produced by the petitioner and after affording opportunity of hearing. [Paras 13, 14, 16]

Question of applicability of the extended limitation period was not decided on merits and is remitted to respondent no. 2 for fresh examination and determination after hearing the petitioner.

Final Conclusion: Writ petition allowed partly; the impugned order is quashed and the matter is remitted to respondent no. 2 to afford the petitioner an opportunity on 06.01.2025 to produce relevant records/accounts and thereafter pass a fresh order on merits; all issues are kept open.

Extended period of limitation - suppression of facts - interpretation of a notification - eligibility for exemption under Notification No. 8/2003-CE - exclusion of branded goods from turnover computation - strict construction of notification

Extended period of limitation - suppression of facts - Validity of issuance of a subsequent show cause notice invoking the extended period of limitation arising out of the same audit report - HELD THAT: - The Tribunal found that SCN-1 (dated 09.04.2009 for January 2008 to March 2008) and SCN-2 (dated 19.08.2009 for April 2007 to December 2007) arose out of the same audit report. Applying settled precedents, the Tribunal held that where a subsequent notice arises from the same audit report, the department cannot allege suppression and invoke the extended period of limitation. The earlier notice put the department on notice of the facts relied upon; therefore the later invocation of extended limitation on the same factual matrix was unsustainable. [Paras 6, 9]

The invocation of the extended period of limitation in SCN-2 was held invalid and the demand based thereon was not sustainable.

Suppression of facts - interpretation of a notification - Whether the department can treat the dispute as suppression of facts when the controversy is one of interpretation of a notification - HELD THAT: - The Tribunal observed that the dispute concerned interpretation of a condition of Notification No. 8/2003-CE. In such circumstances, it is not permissible to characterise the matter as suppression or deliberate concealment with intent to evade duty. Reliance on authorities recognising that mere omission or an interpretative controversy does not amount to suppression supported this conclusion. [Paras 7, 9]

The allegation of suppression could not be sustained where the issue was one of interpretation of the notification.

Eligibility for exemption under Notification No. 8/2003-CE - exclusion of branded goods from turnover computation - strict construction of notification - Whether clearances of branded medicaments (manufactured for others) must be included in computing turnover for claiming benefit under Notification No. 8/2003-CE - HELD THAT: - The Tribunal construed condition 3A(b) of Notification No. 8/2003-CE to exclude clearances of branded goods from the benefit; that branded medicaments specifically excluded by the notification cannot be brought within its scope merely because such goods may be eligible for some other exemption notification. Adopting the reasoning of the Principal Bench in M/s Wenger and Company (as not challenged), the Tribunal held that value for eligibility must exclude exempted or non-excisable goods as specified by the notification and that the Revenue's contrary view would introduce a new condition inconsistent with the unambiguous wording of the clause. [Paras 8, 9]

Branded medicaments excluded by the notification are not to be included in turnover computation for entitlement to Notification No. 8/2003-CE; the department's contrary view was rejected.

Penalty - demand unsustainable - Consequences for imposition of penalty where the demand is held unsustainable - HELD THAT: - The Tribunal noted that since the demands raised (including those based on the extended period) were not sustainable on limitation and on merits, the imposition of penalty could not stand as a corollary. The appeals were allowed with consequential relief as per law. [Paras 9]

Penalty confirmed by the lower authority cannot be sustained where the underlying demand is set aside; consequential relief granted.

Final Conclusion: Both appeals were allowed; the impugned order of the Commissioner (Appeals) was set aside as unsustainable on limitation and on merits, and consequential relief was directed as per law.

Finality of adjudication and preclusive effect of appellate order - Confirmation of demand on grounds not set out in the show cause notice - Demand on subsequent proceedings barred where identical earlier demand was dropped

Finality of adjudication and preclusive effect of appellate order - Demand on subsequent proceedings barred where identical earlier demand was dropped - Whether a subsequent demand could be sustained where an earlier show cause notice on the identical issue was adjudicated in favour of the assessee by the Commissioner (Appeals) and that order had attained finality. - HELD THAT: - The Tribunal noted that the first show cause notice dated 06.01.2012, involving a demand on the identical issue, was dropped by the Commissioner (Appeals) on 28.01.2014 and that the Department did not file an appeal against that order, rendering it final. Having attained finality, that adjudication operated to preclude confirmation of the subsequent demands raised in later show cause notices in respect of the same controversy. On this basis the Tribunal found that the subsequent demand could not be sustained and set aside the impugned order confirming duty and penalty. [Paras 6, 8]

The subsequent demand was unsustainable because the earlier identical demand was dropped by the Commissioner (Appeals) and had attained finality; the appeal is allowed and the impugned order is set aside.

Confirmation of demand on grounds not set out in the show cause notice - Whether confirmation of duty on a ground not pleaded in the show cause notice vitiates the order. - HELD THAT: - The Tribunal applied the settled principle that an order confirming demand cannot be founded on grounds which were not alleged in the show cause notice. On examination, the impugned order had travelled beyond the allegations in the show cause notice and confirmed demand on unalleged grounds. Relying on authoritative law to that effect, the Tribunal held that such adjudication was not sustainable and therefore set aside the confirmation of duty and penalty. [Paras 6, 7]

The impugned order is unsustainable because it confirmed demand on grounds not set up in the show cause notice; the order is set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming duty and imposing equal penalty is set aside because the earlier identical demand had been dropped by the Commissioner (Appeals) and had attained finality, and because the confirmation proceeded on grounds not alleged in the show cause notice.

Specific averment that person was in-charge of and responsible for the company - offence under Section 138 of the Negotiable Instruments Act - quashing of complaint for absence of mandatory averments - abuse of the process of the Court - exercise of inherent power under Section 482, Cr.P.C.

Specific averment that person was in-charge of and responsible for the company - offence under Section 138 of the Negotiable Instruments Act - quashing of complaint for absence of mandatory averments - Whether the complaints under Section 138, NI Act contained the mandatory averments that the appellant was in charge of and responsible for the company so as to sustain prosecution against him, and whether absence of such averments warranted quashment of the complaints and related proceedings. - HELD THAT: - The Court applied the principle in Ashok Shewakramani that to maintain a complaint and to frame a charge under Section 138 of the NI Act there must be a specific averment that the accused was in-charge of and responsible for the company in relation to the conduct of its business. On perusal of the complaints in the five matters, the Court found the statutorily required averments to be conspicuously absent. Proceeding to put the appellant on trial in those circumstances would amount to an abuse of the process of the Court. In view of the settled legal position and the factual deficiency in the complaints, the Court concluded that the complaints and all consequent proceedings could not be sustained and therefore had to be quashed. [Paras 6, 7, 8, 9]

The complaints and all further proceedings including the summoning orders in complaint Nos. 49307 of 2016, 49308 of 2016, 49309 of 2016, 49310 of 2016 and 48700 of 2016 stand quashed for failure to aver that the appellant was in-charge of and responsible for the company.

Exercise of inherent power under Section 482, Cr.P.C. - abuse of the process of the Court - quashing of High Court order - Whether the High Court's dismissal of the petitions under Section 482, Cr.P.C. should be set aside in light of the deficiency in the complaints. - HELD THAT: - The Court held that because the complaints lacked the mandatory averments required by the law laid down in Ashok Shewakramani, the High Court erred in declining to exercise its inherent jurisdiction to quash the proceedings. Given the substantive defect going to maintainability of prosecution, the exercise of power under Section 482 was warranted to prevent abuse of process and to put an end to vexatious criminal proceedings. [Paras 8, 9]

The common order of the High Court dated 21.08.2023 dismissing the Criminal Miscellaneous Cases is set aside and the appeals are allowed.

Final Conclusion: The appeals are allowed; the impugned common order of the High Court dated 21.08.2023 is set aside and the five complaint cases and all further proceedings and summoning orders against the appellant stand quashed.

Compounding of offence under Section 138 of the Negotiable Instruments Act - High Court revisional jurisdiction under Section 397 Cr.P.C. - High Court powers under Section 401 Cr.P.C. - Inherent powers of the High Court under Section 482 Cr.P.C. - Section 147 NI Act non obstante provision making NI offences compoundable - Application of Damodar S. Prabhu guidelines for costs on belated compounding - Acceptance of consent/settlement terms in revision proceedings - Role of Lok Adalat and Legal Services Authorities in recording compromises

Compounding of offence under Section 138 of the Negotiable Instruments Act - High Court revisional jurisdiction under Section 397 Cr.P.C. - High Court powers under Section 401 Cr.P.C. - Inherent powers of the High Court under Section 482 Cr.P.C. - Section 147 NI Act non obstante provision making NI offences compoundable - Whether a High Court sitting in revision under Section 397 Cr.P.C. can accept consent/settlement terms and permit compounding of offences under Section 138 NI Act and set aside conviction and sentence. - HELD THAT: - The Court held that a conjoint reading of Sections 397 and 401 Cr.P.C., the inherent power under Section 482 Cr.P.C. and the non obstante provision of Section 147 of the NI Act empowers the High Court in appropriate facts to take on record consent/settlement terms in revision proceedings and permit compounding of offences under Section 138. The revisional jurisdiction, coupled with Section 401(1) enabling exercise of appellate powers and the residual inherent jurisdiction under Section 482, permits the High Court to secure ends of justice where parties have legitimately compromised a compoundable offence. The Court emphasised that the statutory scheme and Supreme Court jurisprudence (including recognition of Section 147 as making NI offences compoundable) allow acceptance of compromise even after conviction, subject to judicial discretion exercised on case specific facts. [Paras 2, 23, 24, 35]

Affirmed that the High Court in revision can accept consent terms and allow compounding of Section 138 NI Act offences, quash convictions and set aside sentences in appropriate cases.

Application of Damodar S. Prabhu guidelines for costs on belated compounding - Acceptance of consent/settlement terms in revision proceedings - Whether courts should direct deposit of costs when accepting belated consent terms and the scope of judicial discretion to reduce such costs. - HELD THAT: - The Court applied and endorsed the graded cost guidelines suggested in Damodar S. Prabhu: no costs if compounding is sought at first or second hearing, 10% (Magistrate), 15% (Sessions/High Court in revision/appeal), and 20% (Supreme Court) of cheque amount as benchmark scales, while recognising that these are judicially suggested scales to curb delayed compromises. The Court held that costs may be directed when consent terms are tendered belatedly and that courts retain discretion to reduce or vary costs after recording reasons, having regard to the timeline, facts, quantum (where relevant), and to avoid defeating genuine compromises by imposing oppressive costs. The Court also observed that parties sometimes tender consent terms to circumvent costs, and that consideration of Legal Services/ Lok Adalat mechanisms is relevant. [Paras 25, 26, 27, 28, 30]

Directed that costs may be imposed in belated compromise cases in accordance with the Damodar S. Prabhu scheme as a guideline, but courts may reduce or vary costs on recorded reasons in individual cases.

Acceptance of consent/settlement terms in revision proceedings - Disposition, on the merits of the individual filings, of the listed revision/appellate matters in which consent/compromise terms were tendered. - HELD THAT: - Applying the legal principle that the High Court may accept consent terms in revision proceedings (subject to the exercise of discretion and consideration of costs), the Court took on record and accepted the consent/compromise terms filed in a number of matters, quashed the convictions and set aside sentences subject to deposit of token or specific costs as directed in each matter and ancillary directions for payment/withdrawal where funds were deposited in Court. The Court considered facts, stage of litigation and circumstances in each matter before fixing modest costs payable to the Maharashtra State Legal Services Authority and made directions for payment and for release of deposited amounts on production of a server copy of the judgment. [Paras 39, 41, 42, 43, 44]

Consent/compromise terms in the enumerated matters were taken on record; convictions and sentences quashed and set aside and compounding allowed, subject to the case specific costs and directions recorded by the Court.

Interim application for bringing legal heirs on record - Whether the delay in bringing legal heirs on record in CRA No. 152 of 2007 should be condoned and the legal heirs permitted to continue the revision. - HELD THAT: - The Court considered the interim application, allowed condonation of delay, set aside any abatement, permitted amendment to bring the legal heirs on record and dispensed with reverification. The Court took the affidavits of the legal heirs on record, noted that the deposited amounts had been received by them, and allowed compounding subject to nominal costs, applying the general principles governing compromise and the need to consider facts and timelines. [Paras 39]

Delay condoned, abatement set aside, legal heirs brought on record; CRA No. 152 of 2007 allowed on terms including deposit of modest costs.

Matters requiring separate hearing (remand for further consideration) - Identification of matters requiring separate further hearing and listing for fresh consideration by the Court. - HELD THAT: - The Court found that CRA No. 380 of 2002 and CRA No. 585 of 2002 raised distinct factual situations - including inability to trace the complainant in CRA No. 380 and absence of the complainant where substantial compensation had previously been directed in CRA No. 585 - which could not be disposed on the papers or by accepting consent in the complainant's absence. The Court therefore directed separate listings for further hearing so that appropriate steps (including appointment of legal aid counsel or hearing the APP) could be taken and the matters decided on their facts. [Paras 46, 48]

CRA No. 380 of 2002 and CRA No. 585 of 2002 listed separately for hearing on specified dates for fresh consideration; not disposed in the present order.

Final Conclusion: The High Court held that, in appropriate cases, it may accept consent/settlement terms in revision proceedings under Section 397 Cr.P.C. and permit compounding of offences under Section 138 NI Act (in view of Section 147 NI Act), quashing convictions and setting aside sentences; where compromises are tendered belatedly courts may direct deposit of costs following the Damodar S. Prabhu scheme as guidelines while retaining discretion to reduce such costs on recorded reasons; numerous identified revision and appeal matters were accordingly disposed in terms of the consent/compromise accepted, and two matters (CRA Nos. 380/2002 and 585/2002) were reserved for separate hearing and fresh consideration.