TaxTMI Updates e-Newsletter
Dec 28,2023

Principles of natural justice - right to inspection and supply of documents relied upon in adjudication - right to cross-examination of witnesses relied upon - adjournment and personal hearing in adjudicatory proceedings - administrative directions for expeditious adjudication

Principles of natural justice - right to inspection and supply of documents relied upon in adjudication - right to cross-examination of witnesses relied upon - Whether the petitioner is entitled to be furnished with the statement of the transporter and related documents referred to in the show cause notice so as to enable effective exercise of defence rights under principles of natural justice. - HELD THAT: - The Court found that certain materials relied upon by the Designated Officer - specifically the statement of one of the transporters recorded during enquiry and related summons/responses - are material to the petitioner's defence and that supplying those records is consonant with principles of natural justice. The petitioner's request for such documents, made by letter dated 17 November 2023, was a legitimate request to enable preparation of reply and to exercise the right to cross-examine relevant witnesses. In view of this, the adjudication can proceed only after the Adjudicating Officer furnishes the requested statement so that the petitioner may frame and urge appropriate pleas in response to the case made by the department. [Paras 5, 6]

The Adjudicating Officer shall supply the statement of the transporter (and the documents specifically requested) to the petitioner within two weeks.

Adjournment and personal hearing in adjudicatory proceedings - administrative directions for expeditious adjudication - What procedural directions should govern the further adjudication of the show cause notice once the requested documents are furnished? - HELD THAT: - The Court directed that after furnishing the documents, the Adjudicating Officer shall fix a convenient date for personal hearing and permit the petitioner to be heard on the show cause notice. The Court accepted the petitioner's representation that a single director will appear and cooperate in the proceedings. The adjudicating officer was directed to decide the show cause notice within eight weeks from the date of the order. The petitioner must comply with any other requirements the Adjudicating Officer may direct and shall appear on a date intimated at least 72 hours prior to the hearing. All substantive contentions of the parties remain expressly open for consideration by the Adjudicating Officer. [Paras 7, 8, 9, 10]

After supplying the documents, the Adjudicating Officer shall fix a hearing, permit the petitioner to be heard, and decide the show cause notice within eight weeks; the petitioner shall appear as directed and comply with requirements of the Adjudicating Officer.

Final Conclusion: The petition is disposed of by directing that the transporter's statement and related documents requested by the petitioner be furnished within two weeks; thereafter the Adjudicating Officer shall fix a hearing, hear the petitioner and decide the show cause notice within eight weeks, with all contentions remaining open.

Cancellation of GST registration - Contravention requiring a prior determination by a competent authority - Pre-mature initiation of cancellation proceedings - Restoration of registration pending final adjudication - Proportionality and protection of livelihood in exercising cancellation power

Contravention requiring a prior determination by a competent authority - Pre-mature initiation of cancellation proceedings - Whether cancellation of registration under Section 29(2)(a) of the A.P.G.S.T. Act can be invoked before a competent Tribunal or Court has rendered a finding of contravention. - HELD THAT: - The Court held that the phrase "has contravened" in Section 29(2)(a) is expressed in the past tense and contemplates a prior finding that the registered person has contravened the statute. Invocation of the cancellation power before such a determination amounts to a pre-mature exercise of the power. Although the petitioner's Managing Director had recorded a statement under Section 70 of the CGST Act and investigations by the D.G.G.I. were pending, no adjudicatory finding of contravention had been rendered by a competent Tribunal or Court. In that factual matrix, cancellation under Section 29(2)(a) could not be validly exercised, and the impugned cancellation demonstrated non-application of mind and erroneous appreciation of law. [Paras 6, 7, 9]

Cancellation under Section 29(2)(a) was held to be pre-mature in the absence of a prior adjudicatory finding of contravention.

Restoration of registration pending final adjudication - Proportionality and protection of livelihood in exercising cancellation power - Whether the petitioner's registration should be restored and whether cancellation is a resort to be used only where fraud and intention to cause loss to the State are established. - HELD THAT: - The Court observed that cancellation is a harsh measure with severe consequences for the business and livelihoods dependent on it, and therefore should be a last resort reserved for cases where material demonstrates that fraud was practiced with intent to cause loss to the State. Given the absence of a final finding against the petitioner and the admitted status of the petitioner as a going concern, the Court found it appropriate to set aside the impugned cancellation and direct restoration of registration. The Court preserved the respondents' right to recommence cancellation proceedings after a competent Tribunal or Court pronounces a finding of contravention. [Paras 10, 11, 12]

Impugned cancellation set aside; registration restored with liberty to respondents to restart the process after a competent Tribunal or Court holds the petitioner guilty of contravention.

Final Conclusion: Writ petition allowed in part: the cancellation order is set aside and the petitioner's registration is restored; respondents are at liberty to recommence cancellation proceedings only after a competent Tribunal or Court has given a finding of contravention; no order as to costs.

Right to statutory notice of not less than fifteen working days prior to conduct of audit - Obligation to consider the registered person's reply before finalising audit findings - Principles of natural justice in tax audit proceedings - Invalidity of show cause notice founded on an audit report prepared in breach of statutory notice requirements - Permissibility of issuing a show cause notice under assessment provisions independent of audit, subject to due notice

Right to statutory notice of not less than fifteen working days prior to conduct of audit - Obligation to consider the registered person's reply before finalising audit findings - Principles of natural justice in tax audit proceedings - Rule 101(4) requirement to finalise audit findings after due consideration of reply - Whether the audit notice and subsequent conduct of audit complied with Section 65(3) and Rule 101(4) of the Andhra Pradesh GST enactments and whether the registered person's reply was required to be considered before finalisation of the audit report. - HELD THAT: - The Court held that Section 65(3) mandates informing the registered person by notice not less than fifteen working days prior to conduct of audit, and Rule 101(4) requires that the proper officer finalise audit findings only after due consideration of any reply. Those provisions embody the principles of natural justice in audit proceedings. In the present case the revised notice was uploaded on 14.09.2023 and the audit report was finalised on 29.09.2023, such that there were not clearly fifteen working days available; the audit findings were finalised without waiting for completion of the statutory notice period and without due consideration of the reply which was sent on 28.09.2023 (and received on 03.10.2023). For these reasons the audit report was held to be inconsistent with the statutory scheme and the requirements of natural justice, and could not stand. [Paras 13, 14, 15, 16, 17]

Audit report dated 29.09.2023 and the process of finalising the audit were set aside for failure to comply with Section 65(3) and Rule 101(4) and for breach of principles of natural justice; the registered person's reply must be taken into account before finalisation.

Invalidity of show cause notice founded on an audit report prepared in breach of statutory notice requirements - Permissibility of issuing a show cause notice under assessment provisions independent of audit, subject to due notice - Whether the show cause notice issued under Section 73 could be sustained where it expressly relied upon the audit report which had been set aside for statutory infirmity. - HELD THAT: - Although the revenue may, in general, issue a show cause notice under Section 73 independent of an audit, the Court examined the impugned notice and found it referenced the audit report dated 29.09.2023. Because that audit report was held invalid for non-compliance with statutory notice requirements and natural justice, the show cause notice founded on it could not be sustained. The Court nevertheless clarified that the authorities remain free to proceed under Section 73 independent of any audit, provided they do so in accordance with law and give due notice to the petitioner. [Paras 16, 18]

Impugned show cause notice under Section 73 (which was based on the invalid audit report) was set aside; authorities may still proceed under Section 73 independently but only in accordance with law and after giving due notice.

Remand for fresh consideration after taking into account the reply - Direction to pass fresh audit order/report in accordance with law - Whether the matter should be remitted to the authorities for fresh action and what directions should be given for further proceedings. - HELD THAT: - In view of the invalidation of the audit report and the show cause notice that relied upon it, the Court directed the respondent authorities to pass a fresh audit order/report after taking into consideration the petitioner's reply dated 28.09.2023 (received 03.10.2023) and thereafter to proceed further in accordance with law. The Court explicitly permitted the authorities, if they wish to proceed under Section 73 independent of any audit, to do so but only after providing due notice to the petitioner. [Paras 17]

The matter was remitted to the respondent authorities to pass a fresh audit order/report after considering the petitioner's reply and to proceed thereafter in accordance with law; liberty granted to proceed under Section 73 independently only with due notice.

Final Conclusion: Writ petition allowed in part: the audit report dated 29.09.2023 and the consequential show cause notice under Section 73 (to the extent it was founded on that audit report) are set aside; authorities directed to reconsider the audit after taking the petitioner's reply into account and to proceed thereafter in accordance with law, subject to the requirement of due notice if proceeding under Section 73 independently.

Interest on refunds under section 244A of the Income tax Act - Condonation of delay under section 119(2)(b) - Liability of deductor and non applicability of section 194LA to agricultural land - Instruction/Circular: CBDT Instruction No.7/2013 - interest where assessee not at fault - CBDT Circular No.9/2015 - denial of interest on belated/supplementary refund claims - Obligation to refund with interest where revenue has retained money without right (ratio in Tata Chemicals)

Interest on refunds under section 244A of the Income tax Act - Condonation of delay under section 119(2)(b) - Instruction No.7/2013 - interest where assessee not at fault - Obligation to refund with interest where revenue retained money without right - Entitlement to interest on refund where return/claim was filed belatedly but delay was condoned under section 119(2)(b) and delay was not attributable to the assessee. - HELD THAT: - The court held that where a refund arises from tax incorrectly deducted and deposited (here, TDS on interest under section 28 of the Land Acquisition Act) and the delay in filing the return to claim refund was not attributable to the assessee, interest under section 244A is payable. Instruction No.7/2013 (following the Delhi High Court) requires that interest should not be denied where the assessee is not at fault. The Apex Court's reasoning in Tata Chemicals - that money received and retained without right carries with it an obligation to refund with interest - applies because the TDS was not leviable under section 194LA for agricultural land. The respondent had condoned the delay and allowed the refund; having received and retained the tax without right, the petitioners are entitled to interest from the date of deposit of TDS until the date of refund as per section 244A. The court therefore directed the respondent to grant interest accordingly and complete the exercise within a stipulated period. [Paras 11, 13, 14, 16, 17]

Petitions allowed; respondent directed to grant interest on the refund from date of deposit of TDS till date of refund in accordance with section 244A and to complete the exercise within 12 weeks.

CBDT Circular No.9/2015 - denial of interest on belated/supplementary refund claims - Scope of para 6(ii) of Circular No.9/2015 - Whether Circular No.9/2015 (para 6(ii)) validates denial of interest on the petitioners' belated refund claim. - HELD THAT: - The court found reliance on Circular No.9/2015 misplaced. Paragraph 6(ii) of that Circular pertains to belated claims of refund in the nature of supplementary claims after completion of assessment and states that no interest will be admissible on such belated claims. The petitioners' case involved a refund claimed for AY 2013-2014 arising from tax wrongly deducted on interest and a condonation of delay under section 119(2)(b); it was not a supplementary claim of refund after assessment in the sense contemplated by para 6(ii). Accordingly Circular No.9/2015 could not be invoked to deny interest where the delay was not attributable to the assessee. [Paras 14]

Circular No.9/2015 (para 6(ii)) does not bar payment of interest in the petitioners' circumstances; the respondent's reliance on that paragraph to deny interest was misplaced.

Section 244A(2) - exclusion of period attributable to assessee (and amendment inserting "or the deductor") - Temporal application of statutory amendment - Whether the amendment to subsection (2) of section 244A (inserting 'or the deductor') with effect from 01.04.2017 applies to the refund for Assessment Year 2013 2014 and can be used to exclude period attributable to the deductor. - HELD THAT: - The court held that the words 'or the deductor, as the case may be' were inserted w.e.f. 01.04.2017 and are not applicable to the facts of AY 2013 2014. For the relevant period, the provision operated only to exclude delay attributable to the assessee; since the petitioners were not at fault (the deductor failed to issue Form 16A and did not inform them of the deduction), the amendment has no retrospective effect to defeat their claim to interest. Therefore the period of delay cannot be excluded on the basis of deductor attributable delay for AY 2013 2014. [Paras 16]

The amendment to section 244A(2) is not applicable to AY 2013 2014 and does not justify denial of interest to the petitioners.

Final Conclusion: The writ petitions are allowed. The respondent is directed to grant interest on the refund from the date of deposit of the TDS till the date of refund in accordance with section 244A of the Income tax Act; the exercise shall be completed within 12 weeks from receipt of a copy of this order.

Reason to believe - reassessment under Section 147 - notice under Section 148 - satisfaction/approval under Section 151 - tangible material / live link - change of opinion - non-communication of reasons / furnishing of reasons - limited scope of judicial review of reasons

Reason to believe - tangible material / live link - change of opinion - reassessment under Section 147 - notice under Section 148 - limited scope of judicial review of reasons - Whether Assessing Officers had authority to initiate reassessment proceedings by forming 'reason to believe' that income had escaped assessment and the extent to which High Court can interfere under Article 226 - HELD THAT: - Applying Supreme Court precedents (including S. Narayanappa, Rajesh Jhaveri, Kelvinator, Phool Chand Bajrang Lal, Techspan India and M.R. Shah Logistics), the Court held that jurisdiction to reopen under Section 147 exists only if the Assessing Officer had reasons to believe, based on specific, reliable and relevant information, supported by tangible material having a live link with escapement of income. Sufficiency of those reasons is ordinarily non-justiciable; however the existence or bona fides of the belief may be challenged and the Court may examine whether the material had a rational connection to formation of the belief and was not mere change of opinion. Applying these principles to the facts, the Court found that the recorded reasons and available computations furnished a live link and tangible material to form belief in each writ petition: the reassessments for AY 2011-12 and AY 2013-14 could not be quashed on the ground that no reason to believe existed. [Paras 67, 68, 69, 71, 72]

Reassessment proceedings under Section 147/148 were not interfered with; Assessing Officers had reasons to believe on tangible materials that income had escaped assessment.

Satisfaction/approval under Section 151 - notice under Section 148 - jurisdictional requirement - Whether non-compliance with the approval mandate in Section 151 vitiates reassessment proceedings - HELD THAT: - Section 151 prescribes the authority whose satisfaction is required before issuing notices under Section 148 (Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner where more than four years have elapsed; Joint Commissioner otherwise). The Court observed that this prior approval is an important safeguard and must be the satisfaction of the statutorily specified authority. However, the plea of non-compliance touching the jurisdictional exercise must be pleaded and relied upon; it cannot be first raised by oral submissions. On the record produced, approvals for the three sets of petitions were shown to have been obtained from the Joint Commissioner (or through the online approval mechanism) and thus non-compliance did not arise for those matters. The missing physical file for one petitioner (WP(C) No. 5437/2016) was noted with criticism of departmental record-keeping but did not lead to quashing given certified reasons on record and absence of pleaded challenge. [Paras 58, 73, 74, 75, 76]

Section 151 compliance is mandatory in form and substance but the defect must be pleaded; on the record approval from Joint Commissioner was shown for the relevant matters and no interference was ordered.

Non-communication of reasons / furnishing of reasons - GKN Driveshafts principle - limited scope of judicial review of reasons - Whether non-furnishing of the entire satisfaction note/reasons to the assessee invalidates reassessment proceedings and what relief is available - HELD THAT: - The Court explained that the Act does not mandate furnishing of the assessing officer's recorded reasons prior to issuance of notice; earlier authorities acknowledge the administrative character of recording reasons. GKN Driveshafts requires that where reasons are requested the Assessing Officer should furnish them within reasonable time and the assessee may then file objections which the Assessing Officer should decide by a speaking order. The present court held that non-furnishing of the entire satisfaction note does not itself nullify reassessment; however the petitioners have the statutory and judicially-recognized right to file objections to the sufficiency of the reasons. The Court accordingly granted the petitioners liberty to submit objections within 30 days and directed the Assessing Officer to dispose of those objections by passing a speaking order, after which reassessment may proceed and any challenge to the speaking order/assessment can be prosecuted in appeal. [Paras 65, 66, 77, 78, 79]

Non-furnishing of the full satisfaction note does not invalidate reassessment; petitioners granted liberty to file objections to the reasons and Assessing Officer directed to pass a speaking order thereon.

Final Conclusion: Writ petitions dismissed insofar as they sought quashing of the reassessment notices: the Court found existence of 'reasons to believe' supported by tangible material for reopening for AY 2011-12 and 2013-14, held that Section 151 approval is mandatory but the alleged non-compliance could not be raised for the first time orally and, where approvals were shown on record, no interference was warranted. The petitioners are granted 30 days to file objections to the reasons; the Assessing Officer must decide those objections by a speaking order, after which reassessment proceedings may continue and any challenge can be pursued in appeal. The Department is directed to inquire into loss of records in WP(C) No. 5437/2016.

Interpretation of exemption clauses - Strict construction of taxing and exemption provisions - Scope of the expression "assessee" for claiming exemption - Application of Section 54B - reinvestment in spouse's name - Pari materia interpretation of Sections 54, 54B and 54F - Doctrine favouring taxpayer only where statutory ambiguity exists

Application of Section 54B - reinvestment in spouse's name - Scope of the expression "assessee" for claiming exemption - Strict construction of taxing and exemption provisions - Deduction under Section 54B cannot be allowed where the replacement agricultural land was purchased in the name of the assessee's wife and not in the assessee's own name. - HELD THAT: - The Court held that Section 54B uses the term 'assessee' and the defined meaning in Section 2(7) cannot be enlarged to include the wife so as to grant the exemption. Authorities on statutory construction require resort to liberal or taxpayer favouring interpretations only where language is ambiguous; where the statutory language is plain, exemption provisions are to be construed strictly. The Court applied the principles laid down in Mangalore Chemicals and related decisions and followed the Supreme Court's exposition in Dilip Kumar and Company that exemption clauses must satisfy mandatory conditions and cannot be extended by implication. Though earlier decisions permit giving the benefit to a taxpayer when two reasonable constructions exist, the Court found no such ambiguity in Section 54B on the facts of the case. Consequently, the ITAT was correct in disallowing the deduction claimed for properties purchased in the wife's name. [Paras 15, 16, 17, 18, 19]

The ITAT was justified in holding that exemption under Section 54B is not allowable because the new agricultural land was not purchased in the assessee's own name.

Final Conclusion: The appeal is dismissed; the order of the ITAT upholding disallowance of deduction under Section 54B because the replacement land was purchased in the name of the assessee's wife is sustained; no order as to costs.

Arm's Length Price - CUP method - Selection of comparables - Unsecured versus secured debt - risk-based interest differential - Determination of ALP under section 92C - Associated enterprises

Arm's Length Price - CUP method - Selection of comparables - Unsecured versus secured debt - risk-based interest differential - Associated enterprises - Determination of ALP under section 92C - Whether the interest rate of 13% paid on NCDs issued to associated enterprises was at arm's length - HELD THAT: - The Tribunal accepted that the CUP method is the appropriate transfer pricing method but held that selection of comparables must account for the risk differential between secured and unsecured instruments. The Tribunal noted that the assessee's NCDs were unsecured and that unsecured debt carries higher risk and therefore a higher market interest rate. It rejected the Revenue's contention that the holding/subsidiary relationship renders secured/unsecured distinction irrelevant. The Tribunal observed that when appropriate filters (excluding secured/guaranteed instruments and non solar sectors) are applied the percentile benchmarks moved above the assessee's rate and, on the assessee's benchmarking, the relevant percentile exceeded 13%. The Tribunal relied on coordinate bench decisions which recognized that unsecured debentures merit higher interest rates and found that the Revenue produced no contrary material. On this basis the Tribunal concluded that the rate of interest charged by the assessee was at arm's length and allowed the objections to the TPO/DRP adjustments (grounds 1 and 2). The remaining grounds were treated as consequential and not separately adjudicated. [Paras 4, 5]

Rate of interest of 13% on the unsecured NCDs is at arm's length; grounds 1 and 2 allowed.

Final Conclusion: Appeal allowed; the Tribunal held the interest charged on the assessee's unsecured NCDs to be at arm's length and sustained the assessee's benchmarking, with other grounds being consequential.

Revisionary jurisdiction under section 263 - weighted deduction under section 35(1)(ii) - patently ineligible claim v. plausible view - CBDT advisory regarding forged certificates and non existence of approval

Revisionary jurisdiction under section 263 - weighted deduction under section 35(1)(ii) - patently ineligible claim v. plausible view - CBDT advisory regarding forged certificates and non existence of approval - Validity of exercise of revisionary powers under section 263 in setting aside assessment for allowing weighted deduction under section 35(1)(ii) in respect of donation made to an institute whose approval for receiving such donations was not subsisting in the relevant year. - HELD THAT: - The Assessing Officer allowed weighted deduction under section 35(1)(ii) on a donation made in Financial Year 2014-15 (relevant to AY 2015-16) to M/s Shri Arvindo Institute of Applied Scientific Research Trust after having examined documents produced by the assessee. Subsequent records available to the Commissioner and brought to field officers by a CBDT advisory dated 14/12/2018 established that the Institute's approval for purposes of section 35(1)(ii) had expired on 31/03/2006 and that donations were being raised thereafter on forged certificates. Where an allowance in an assessment order is based on a claim that is in law impermissible because the donee lacked the requisite approval, the assessment order is erroneous and prejudicial to the interests of revenue. The fact that the assessee and the AO may have acted bonafidely and relied on documents provided by the donee does not cure the legal defect; a bonafide but ineligible claim cannot be sustained. Consequently, the AO could not be said to have taken a defensible or plausible view when the claim was patently ineligible as a matter of law once the non existence of approval is established. The CBDT advisory confirming expiry of approval and use of forged certificates reinforced that the deduction was not allowable, justifying exercise of revisionary jurisdiction to set aside the assessment for fresh adjudication on the issue. [Paras 14, 15, 16]

Order under section 263 setting aside the assessment for incorrect allowance of weighted deduction under section 35(1)(ii) is upheld; the assessment order was erroneous and prejudicial to the revenue.

Final Conclusion: The appeal is dismissed; the Commissioner's revision under section 263 is sustained and the matter is remitted for fresh assessment on the issue of weighted deduction in accordance with law.

Validity of adjustment made in intimation under section 143(1) - Requirement of prior intimation for adjustments under section 143(1)(a) - Exemption of dividend income from mutual funds under section 10(35) - Exemption of interest on tax-free bonds under section 10(15) - Exemption of long-term capital gains on mutual fund consolidation under section 10(38)

Validity of adjustment made in intimation under section 143(1) - Requirement of prior intimation for adjustments under section 143(1)(a) - Whether the adjustment made by CPC in the intimation under section 143(1) denying exemptions claimed in the return was sustainable in absence of proper prior intimation to the assessee. - HELD THAT: - The Tribunal found that the return disclosed exempt income and that a communication dated 9 January 2020 about a proposed adjustment was limited and did not correspond to the substantial variation effected in the intimation dated 11/05/2020. Section 143(1)(a) permits prescribed adjustments only after giving intimation to the assessee in writing or electronically. The CPC's computation treating the exempt amounts as business income resulting in a variation of the total asserted exempt income was made without giving the assessee the required intimation that the claimed exemptions would be disallowed. Consequently the adjustment was made in contravention of the procedure under section 143(1) and is unsustainable. [Paras 10, 12]

Intimation passed under section 143(1) is not sustainable as the adjustment was made without the statutorily required intimation; Ground No.1 is allowed.

Exemption of dividend income from mutual funds under section 10(35) - Exemption of interest on tax-free bonds under section 10(15) - Exemption of long-term capital gains on mutual fund consolidation under section 10(38) - Whether the amounts claimed as exempt (dividend from mutual funds, interest on tax-free bonds, and long-term capital gains on mutual fund consolidation) were correctly characterized as exempt. - HELD THAT: - On the merits the Tribunal noted that the exemptions claimed were supported by law and were also affirmed by the CIT(A): dividend from mutual funds was excludable under section 10(35) for income received during the relevant period, interest on tax-free bonds fell within section 10(15), and the long-term capital gain arising on consolidation/merger of mutual funds was within section 10(38) subject to timing conditions. The Tribunal observed that, having allowed Ground No.1, these grounds became academic for disposal but recorded that the exemptions were properly claimed and examined by the CIT(A) and are supported by the statutory provisions. [Paras 11, 13]

Exemptions claimed by the assessee are supported by law and were confirmed by the CIT(A); grounds 2-4 are academic in view of the decision on Ground No.1.

Final Conclusion: The appeal is allowed: the intimation under section 143(1) is set aside because the CPC's adjustment was made without the requisite intimation, and the claimed exemptions for dividend, tax-free bond interest and specified long-term capital gains are supported by law (as affirmed by the CIT(A)), rendering the other grounds academic.

Summary order. Civil Appeal dismissed on account of gross delay of 444 days in filing; reason for delay not satisfactorily explained. Delay in refiling condoned. Questions of law, if any, left open to be urged in another appropriate case. Pending applications disposed of.

Prospective operation of delegated legislation - Retrospective application of administrative amendment - Limits of procedure-making power of Director General of Foreign Trade (DGFT) - Exclusive power of Central Government to amend Foreign Trade Policy - Change to meaning and computation of export obligation requires amendment of FTP - Legitimate expectation and vested rights

Change to meaning and computation of export obligation requires amendment of FTP - Limits of procedure-making power of Director General of Foreign Trade (DGFT) - Prospective operation of delegated legislation - Retrospective application of administrative amendment - Exclusive power of Central Government to amend Foreign Trade Policy - Legitimate expectation and vested rights - Validity of Policy Circular No. 22/2015-20 dated 29.03.2019 and applicability of amended Paragraph 5.10(c) of the revised Handbook of Procedures (HBP) 2015-20 to EPCG authorisations issued prior to 05.12.2017. - HELD THAT: - The Court analysed the scope of powers exercisable under the FTDR Act and the FTP, observing that DGFT's competence under paragraph 1.03/2.4 is to prescribe procedure and cannot be used to amend substantive policy or confer or take away substantive rights conferred by the FTP. The revision of Paragraph 5.10(c) of the HBP on 05.12.2017 introduced a substantive change in how third-party exports are to be reckoned for fulfilment of EPCG export obligation (counting only proceeds actually realised through normal banking channel instead of the full realised value of the shipping bill). The Court held that such a change affects the meaning and computation of export obligation and thus cannot be effected by HBP or a policy circular so as to alter the rights under authorisations issued earlier. Applying the settled principle that delegated or subordinate legislation is prospective unless a statute expressly permits retrospective operation, the Court held that the amendment commencing 05.12.2017 could be applied to EPCG authorisations issued on or after that date only. The Policy Circular dated 29.03.2019, which made the amended procedure applicable to shipments after 05.12.2017 without recognising the date of issuance of the EPCG authorisation, was therefore beyond DGFT's jurisdiction insofar as it affected authorisations issued prior to 05.12.2017. The Court further noted that beneficiaries who relied on the FTP and HBP in force at the time of authorisation have protection against retrospective curtailment of benefits, and that promissory estoppel/legitimate expectation and vested-right considerations support protection from retrospective withdrawal of accrued rights unless validly amended by the competent authority. [Paras 16, 17, 18]

Policy Circular No. 22/2015-20 dated 29.03.2019 and application of amended Paragraph 5.10(c) of the revised HBP 2015-20 are invalid insofar as they are applied to EPCG authorisations issued prior to 05.12.2017; the amendment is prospective and applies only to authorisations issued on or after 05.12.2017.

Final Conclusion: Writ petition allowed in part: the DGFT's clarification and the amended Paragraph 5.10(c) of the revised HBP (as read with Policy Circular dated 29.03.2019) cannot be applied to EPCG authorisations issued before 05.12.2017; the amendment operates prospectively only.

Jurisdiction of adjudicating officer to issue show cause notice - challenge to issuance of show cause notice in light of Canon India Pvt. Ltd. v. Commissioner of Customs - validation of retrospective action under Section 97 of the Finance Act, 2022 - challenge to validity of notifications empowering issuance of show cause notice - right to agitate legal defences before the adjudicating authority - direction for expeditious adjudication within a fixed time-frame

Direction for expeditious adjudication within a fixed time-frame - right to agitate legal defences before the adjudicating authority - Writ petition disposed directing adjudication of the impugned show cause notice by the adjudicating officer within six months and permitting all contentions to be urged before that officer. - HELD THAT: - The High Court declined to quash the show cause notice at this stage and instead directed that the adjudicating officer shall adjudicate the show cause notice. The Court recorded that the adjudicating officer is to take into consideration all legal contentions raised by the petitioner and pass appropriate orders. Given the age of the show cause notice, the Court mandated completion of the adjudication within six months from the date of the order to avoid further delay. [Paras 7, 9]

Petition disposed with direction to adjudicate the show cause notice within six months; all contentions may be urged before the adjudicating officer.

Challenge to issuance of show cause notice in light of Canon India Pvt. Ltd. v. Commissioner of Customs - jurisdiction of adjudicating officer to issue show cause notice - validation of retrospective action under Section 97 of the Finance Act, 2022 - challenge to validity of notifications empowering issuance of show cause notice - Legal challenges as to the legality and jurisdictional competence in issuing the show cause notice (including reliance on Canon India), and submissions on the retrospective operation of Section 97 and validity of relevant notifications, are not adjudicated by the Court but left open for determination by the adjudicating officer. - HELD THAT: - The Court observed the petitioner's contention that the designated officer lacked jurisdiction in view of the Supreme Court's decision in Canon India and the challenge to retrospective validation under Section 97. Rather than finally deciding those contentions, the Court held that such legal positions should be canvassed before and considered by the adjudicating officer during the adjudication of the show cause notice. The Court expressly kept open all contentions, including submissions on interest in light of Cosmo Films Limited, to be agitated and determined in the adjudication process. [Paras 3, 5, 7, 8]

All legal and jurisdictional contentions (including those based on Canon India, Section 97 and the notifications) are remitted to the adjudicating officer for determination; the Court did not adjudicate them on merits.

Final Conclusion: The writ petition is disposed of; the High Court declined to quash the show cause notice and directed the adjudicating officer to decide the notice expeditiously within six months, leaving all legal contentions open for adjudication by that officer; no order as to costs.

Prohibited goods - dutiable goods - smuggling - confiscation under Section 111(d) - onus of proof under Section 123 - discretion under Section 125 and provisional release under Section 110A - penalty under Section 112(b) - admissibility of statement recorded under Section 108 - relevance of expert opinion on purity

Prohibited goods - dutiable goods - Foreign marked gold recovered without documentary proof falls within the definition of 'prohibited goods' and is a 'dutiable good'. - HELD THAT: - The Tribunal, applying precedent and a conjoint reading of Section 2(33) and Section 11, held that goods imported in violation of prescribed conditions or regulatory notifications (including DGFT/RBI prescriptions relating to gold) fall within the ambit of 'prohibited goods'. Gold is also a 'dutiable good' and, in the absence of documents showing lawful import and payment of duty, the foreign marked gold in the appellant's possession could not be treated as lawfully imported. The appellant admitted absence of bills and the alleged supplier denied sale; on these materials the Tribunal accepted that the statutory conditions for lawful import were not satisfied and classified the seized items accordingly. (para 14, para 15, para 22(a)-(b)) [Paras 14, 15, 22]

The seized foreign origin gold is 'prohibited goods' and also 'dutiable goods'.

Smuggling - onus of proof under Section 123 - confiscation under Section 111(d) - Seized foreign marked gold, not supported by lawful import documents and fitting the statutory definitions, amounts to smuggled goods and is liable to confiscation under Section 111(d). - HELD THAT: - Having found the goods to be prohibited/dutiable and noting the appellant's failure to produce supporting import documentation (and admissions in his Section 108 statement), the Tribunal concluded that the transaction amounted to smuggling as defined in Section 2(39). Relying on statutory definitions and judicial precedents, the Tribunal held that goods imported contrary to prohibitions or conditions are liable for confiscation under Section 111(d). The appellant's inconsistent explanations and the denial by the alleged supplier reinforced the finding that the goods were not lawfully procured. (paras 15, 17, 22(c)-(d)) [Paras 15, 17, 22]

The seized gold amounts to smuggled goods and is liable to confiscation under Section 111(d).

Discretion under Section 125 and provisional release under Section 110A - Adjudicating authority properly exercised discretion to refuse provisional release and to order absolute confiscation in the facts of the case. - HELD THAT: - The Tribunal reviewed authorities establishing that release/redemption of prohibited goods is discretionary and not automatic. Considering the appellant's failure to discharge the statutory onus, the prima facie case of smuggling, inconsistent statements, non cooperation in investigation and absence of documents, the Tribunal held that denial of provisional release under Section 110A and imposition of absolute confiscation under Section 125 was a lawful exercise of discretion. Distinguishing cases where import documents were produced, the Tribunal found those authorities inapplicable. (paras 16-18, 22(e)) [Paras 16, 17, 18, 22]

Refusal of provisional release and order of absolute confiscation was justified and within the adjudicating authority's discretion.

Admissibility of statement recorded under Section 108 - The appellant's statement recorded under Section 108 is admissible and, in the absence of any request for cross examination during his lifetime, his later complaint about denial of opportunity is unsustainable. - HELD THAT: - The Tribunal noted that the appellant repeatedly failed to appear before the investigating agency, had not sought cross examination when alive, and never retracted his Section 108 statement. Relying on settled law that admissions need not be proved and are admissible, the Tribunal rejected the contention that denial of cross examination vitiated the adjudication. The appellant's non cooperation weighed against him. (para 19, para 22(f)) [Paras 19, 22]

The Section 108 statement is admissible; the plea of denial of opportunity/cross examination is rejected.

Relevance of expert opinion on purity - On spot testing by a certified jewellery appraiser using the touchstone method was acceptable; the request for retesting by melting purity was not a tenable ground to stall proceedings. - HELD THAT: - The Tribunal recorded that a certified jewellery appraiser tested the recovered gold on the spot by touchstone method in the presence of independent witnesses and issued a certificate. Noting that no definite tests are prescribed by law and that expert opinion is relevant under evidence law, the Tribunal treated the retest request as an attempt to delay adjudication and declined it. (para 20) [Paras 20]

The touchstone test report was acceptable; the request for retesting was refused.

Penalty under Section 112(b) - The appellant is liable to penalty under Section 112(b) for his acts of omission and commission in relation to the smuggled gold. - HELD THAT: - Having upheld that the seized gold constituted smuggled/prohibited and dutiable goods and having considered the appellant's conduct, admissions and failure to produce lawful import documents, the Tribunal concluded that penal consequences under Section 112(b) follow. The finding on confiscation and the appellant's role were the basis for imposing penalty. (para 21, para 22(f)) [Paras 21, 22]

The appellant is liable to penalty under Section 112(b).

Final Conclusion: The Tribunal affirmed the orders below: the foreign marked gold recovered without lawful import documentation was held to be prohibited and dutiable, smuggled and liable to confiscation under Section 111(d); provisional release was rightly refused and absolute confiscation upheld; the appellant's Section 108 admissions and the touchstone expert test were accepted; and penalty under Section 112(b) was sustained. The appeal is dismissed.

Classification under the Customs Tariff - self-assessment and re-assessment - power to recover duty under Section 28 - effect of exemption notifications under Section 25 - policy pronouncements of Ministries and classification - confiscation under Section 111(m) - penalty under Section 112(a)(ii) - Rules of Interpretation (Customs Tariff)

Classification under the Customs Tariff - Rules of Interpretation (Customs Tariff) - specific entry versus general entry - Classification of front cover, middle cover and back cover of mobile phones under CTH 85177090 or CTH 39209999 - HELD THAT: - Applying the tariff headings, chapter and section notes and the Rules of Interpretation, the Tribunal examined the manufacturing processes (extrusion, printing, physical vapour deposition/lamination, hard coating, thermoforming and CNC milling) which were not disputed. Chapter Note 10 to Chapter 39 and Note 2(s) were read together. The Tribunal held that vapour deposition (lamination) and subsequent thermoforming and CNC milling constitute more than mere cutting or surface-work and therefore take the articles out of the ambit of heading 3920. Once Rule 1 of interpretation excludes classification under 3920, the parts classification under Chapter 85 follows; a specific entry for parts of mobile phones prevails over the general entry for articles of plastic. Consequently, the coverings are classifiable under CTH 85177090 and not under CTH 39209999. [Paras 39, 41, 42, 43, 50]

Classification set aside; goods held classifiable under CTH 85177090 in favour of the appellant

Policy pronouncements of Ministries and classification - self-assessment and re-assessment - Whether an executive policy (MeITY HSN coding) can determine classification under the Customs Tariff - HELD THAT: - The Tribunal held that classification is part of assessment under Section 17 and can be decided only by the importer (self-assessment), the proper officer (re-assessment) and appellate authorities. A Ministry's policy or HSN indication is an executive, non-quasi-judicial action and does not have the power to determine tariff classification. Such policy cannot substitute for assessment or an appealable classification decision. [Paras 21, 22, 23]

MeITY policy cannot determine classification and cannot sustain re-classification

Effect of exemption notifications under Section 25 - classification under the Customs Tariff - Whether an exemption notification under Section 25 can determine classification of goods - HELD THAT: - Section 25 empowers the Government to grant exemption from duty by notification; such notifications are quasi-legislative and operate to exempt goods that both match the description and fall under the specified tariff heading. The Tribunal held classification must precede application of a notification; an exemption notification does not itself determine the tariff classification of goods. Relying on a notification as the basis to re-classify goods is impermissible. [Paras 24, 25, 26, 27]

Exemption notification cannot determine classification; it applies only after proper classification

Power to recover duty under Section 28 - self-assessment and re-assessment - Whether differential duty and interest confirmed in the impugned order are recoverable given the classification outcome - HELD THAT: - The Tribunal explained the distinction between assessment/appeal remedies and the Section 28 route for recovery. While the Revenue may issue a show cause notice under Section 28 to recover duties not levied or short paid, the substantive question of classification must be determined under the tariff and appellate process. Since the Tribunal set aside the re-classification and held the goods classifiable under Chapter 85, the demand of differential duty as confirmed in the impugned order could not stand. Interest being consequent on the confirmed demand likewise could not be sustained. [Paras 21, 22, 31, 51]

Differential duty and interest confirmed in the impugned order set aside consequent to holding on classification

Confiscation under Section 111(m) - penalty under Section 112(a)(ii) - self-assessment and re-assessment - Whether goods were liable to confiscation under Section 111(m) and whether penalty under Section 112 could be imposed for alleged wrong classification - HELD THAT: - The Tribunal held that classification, valuation and claims of exemption are elements of assessment and may reflect opinions. An importer performing self-assessment cannot be required to anticipate the officer's later view; divergence between an importer's self-assessment and a later re-assessment does not render goods liable to confiscation under Section 111(m). Consequently, a penalty under Section 112 consequential to confiscation cannot be imposed merely because the importer's classification is later found incorrect. The law does not compel impossible anticipations by the importer; penal consequences are not attracted by a bona fide differing classification. [Paras 31, 32, 33, 34, 35]

No confiscation under Section 111(m) and no penalty under Section 112 imposed on appellant

Final Conclusion: The appeal is allowed. The re-classification of the front, middle and back covers under CTH 39209999 is set aside; the goods are classifiable under CTH 85177090. The Department's reliance on MeITY policy and the exemption notification to determine classification is rejected. Consequential demand of differential duty, interest, confiscation and penalty affirmed in the impugned order are set aside and the impugned order is quashed with consequential benefit to the appellant.

Obligations of Customs Broker under Regulation 10(d) - obligations of Customs Broker under Regulation 10(n) (KYC verification) - Know Your Customer (KYC) verification by Customs Broker - suspension and revocation of Customs Broker licence - liability for post-clearance diversion of goods - reasonableness of delay in CBLR timelines (directory vs mandatory) - principles of natural justice - opportunity to be heard - proportionality of penalty and mitigation

Obligations of Customs Broker under Regulation 10(d) - liability for post-clearance diversion of goods - Whether the appellants contravened Regulation 10(d) of CBLR, 2018 by failing to advise or bring to notice non-compliance where diversion of imported goods occurred - HELD THAT: - The Tribunal examined the factual matrix and found that the ex-bond bills of entry were filed in accordance with documents furnished by the importers and that no mis-declaration or discrepancy was apparent at the time of customs clearance. The diversion of goods occurred after customs control and was established only on the basis of an offence report by DRI KZU received later. There is no evidence that the appellants planned or executed the diversion or that they had knowledge of such diversion at the time of clearance. Accordingly, the finding of contravention of Regulation 10(d) in the impugned order was held to be unsustainable. [Paras 6, 7]

Finding of violation of Regulation 10(d) is set aside; revocation and forfeiture cannot be sustained on this ground.

Obligations of Customs Broker under Regulation 10(n) (KYC verification) - Know Your Customer (KYC) verification by Customs Broker - proportionality of penalty and mitigation - Whether the appellants failed to comply with Regulation 10(n) of CBLR, 2018 by not undertaking adequate KYC and verification of importer antecedents and documents - HELD THAT: - The Tribunal noted that while the appellants had obtained KYC documents and authorisation and produced certain documents (IEC certificate, PAN, GST certificate), the documents were procured through an intermediary and originals were not retained. The adjudicating authority relied on statements and other material to conclude that the appellants did not make serious efforts to verify antecedents and identity. The Tribunal balanced precedents recognising that a CHA/CB is not expected to be an investigator with the duty of due diligence expected of a broker. Applying authorities and the Supreme Court's emphasis on the CHA's important role, the Tribunal held that the appellants were not sufficiently proactive in verifying documents received through an intermediary and therefore breached Regulation 10(n). However, revocation was disproportionate; a reduced monetary penalty was appropriate to reflect the breach and its gravity. [Paras 8, 9, 14, 15]

Violation of Regulation 10(n) is sustained in part; revocation is not warranted solely on this ground and a reduced penalty is imposed.

Suspension and revocation of Customs Broker licence - reasonableness of delay in CBLR timelines (directory vs mandatory) - principles of natural justice - opportunity to be heard - Whether the suspension, inquiry and final adjudication suffered from a breach of natural justice or inordinate delay rendering the action invalid - HELD THAT: - The Tribunal found that the licensing authority afforded written and oral opportunities to the appellants and there was no breach of principles of natural justice. On timelines, the Tribunal applied the High Court of Bombay's guidance that prescribed timelines in CBLR are directory and must be judged by reasonableness; the record showed inquiry initiation, submission of inquiry report and adjudication within a reasonable period given administrative exigencies. The delay was not inordinate and was justified on the facts. [Paras 6, 13]

No breach of natural justice; no inordinate delay vitiating the proceedings; timelines were directory and complied with reasonably.

Final Conclusion: Appeal allowed in part: the finding of violation of Regulation 10(d) is set aside and the revocation and forfeiture cannot be sustained on that ground; the finding of breach of Regulation 10(n) is maintained but revocation is moderated and a reduced penalty of Rs.10,000 is imposed; inquiry and suspension proceedings were not vitiated by denial of natural justice or by inordinate delay.

Corporate Insolvency Resolution Process moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - effect of initiation of CIRP on pending company law proceedings - exclusive control of interim resolution professional over management during CIRP - maintainability of petitions alleging mismanagement and fraud after commencement of CIRP

Effect of initiation of CIRP on pending company law proceedings - Corporate Insolvency Resolution Process moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - exclusive control of interim resolution professional over management during CIRP - Whether an application under the Companies Act, 1956 seeking reliefs for alleged mismanagement and fraud can be proceeded with after admission of an insolvency petition and commencement of CIRP against the company. - HELD THAT: - The application filed by the appellant under the Companies Act, 1956 sought reliefs against the company and its directors for alleged fraud and mismanagement. While that application was pending, a Section 7 insolvency petition filed by a financial creditor against the same company was admitted and CIRP was commenced. Upon admission, the moratorium under Section 14 and the vesting of management control in the interim resolution professional operate to displace the power of other fora to grant the reliefs sought in the pending company-law application. Because the CIRP had been initiated and had progressed to consideration of the resolution plan, the pending application could not survive in a manner that would permit the grant of the reliefs sought. The Tribunal therefore did not err in dismissing the application on that ground.

The dismissal of the application by the Tribunal was upheld as the pending company-law remedies could not be permitted to proceed after commencement of CIRP and imposition of the moratorium; the appeal is without merit and is dismissed.

Final Conclusion: The appeal is dismissed as devoid of merit; the Tribunal's order dismissing the company-law application in view of the admitted CIRP and the moratorium is upheld. No costs.

Restoration of name of a struck-off company - carrying on business / operations - just and equitable restoration - striking off for failure to file financial statements and annual returns - discretion of the Tribunal to restore where company has assets and liabilities

Carrying on business / operations - striking off for failure to file financial statements and annual returns - Whether the Company was carrying on business or in operation at the time its name was struck off and whether striking off was justified. - HELD THAT: - The Tribunal examined the material placed on record, including provisional/audited financial statements for the years ending 31.03.2015 to 31.03.2020 and evidence of leasehold property and liabilities. It rejected the NCLT's reliance on absence of revenue in the immediate preceding two financial years as conclusively establishing non-operation where the company possesses substantial assets and liabilities. The Tribunal followed precedents holding that existence of movable and immovable assets, ongoing obligations and the capacity to generate revenue can warrant restoration under the expression "or otherwise" and that a struck-off company need not be a trading entity with positive turnover to be considered in operation for restoration purposes. [Paras 10, 15, 18]

The Company cannot be said to have ceased operation merely because revenue from operations was nil in the cited years; the presence of assets and liabilities supports restoration.

Restoration of name of a struck-off company - just and equitable restoration - discretion of the Tribunal to restore where company has assets and liabilities - Whether the NCLT's order dismissing restoration was sustainable in law and whether the Tribunal should restore the company's name. - HELD THAT: - Having applied the legal tests and considered authorities where restoration was granted on the basis of assets and ongoing liabilities, the Tribunal concluded that the NCLT's order was not sustainable. It held that, in the facts of this case, restoration would be just and equitable because the company holds leasehold property and recorded assets/liabilities, and the appellants' explanation about non-compliance was credible as a consequence of succession and lack of professional support. The Tribunal distinguished cases concerning shell companies or unlawful transactions and relied on coordinate Bench decisions that permit restoration where substantive assets and operations, even if limited, exist. [Paras 15, 19, 20]

NCLT's order set aside and the name of the Company restored to the Register of Companies.

Restoration of name of a struck-off company - striking off for failure to file financial statements and annual returns - Conditions and consequential directions upon restoring the company's name. - HELD THAT: - The Tribunal restored the company's name subject to specified compliances: payment of costs to the RoC and filing of all outstanding annual returns and balance sheets with applicable fees and late fees. The order also expressly preserved the RoC's right to initiate any other punitive or corrective proceedings under the Act for past non-filing or late filing of statutory returns/documents. [Paras 20, 21]

Restoration subject to payment of costs and compliance with statutory filing and fees; RoC permitted to take further action as permissible under the Act.

Final Conclusion: The Tribunal set aside the NCLT order and directed restoration of M/s Agerson Telecommunications Pvt. Ltd. to the Register of Companies on the grounds that the company has substantive assets and liabilities making restoration just and equitable; restoration is subject to payment of costs and filing of outstanding statutory returns and does not preclude the RoC from pursuing further action under the Act.

Person aggrieved - locus to file appeal - principles of natural justice - effectiveness of share transfer subject to condition precedent - transfer on trust until conditions satisfied - implementation of approved resolution plan - directions to liquidator to assist transfer of securities - actions during pendency of appeal rendered otiose

Person aggrieved - locus to file appeal - principles of natural justice - Whether the appellants (Lanco Infratech Ltd. and KRS Erectors Pvt. Ltd.) are 'persons aggrieved' and have locus to maintain the appeal and be heard before directions were issued. - HELD THAT: - The Tribunal examined the meaning of 'person aggrieved' and applied established principles to the facts: the subject 42,00,00,000 CCPS remained recorded in the name of LITL and the second tranche of consideration under the SPA remained unpaid. Those circumstances constituted a legal grievance and an invasion of legal/pecuniary rights of LITL and of KRS Erectors (which purchased LITL as a going concern on an as is basis). The record also showed that the Monitoring Committee had dealt with the matter and that notice of the reconstitution meeting was received by IDBI; IDBI did not object until after the appeal was filed. In view of these findings, non hearing of the appellants before issuing the impugned directions would have violated principles of natural justice. The Tribunal therefore held that the appellants were aggrieved parties and had locus to file and prosecute the appeal. [Paras 27, 28]

Appellants are persons aggrieved and have locus to maintain the appeal; they should have been heard.

Effectiveness of share transfer subject to condition precedent - transfer on trust until conditions satisfied - Whether the 42,00,00,000 CCPS were effectively transferred to the purchaser in 2012 or remained subject to the conditions in the SPA, thus affecting validity of the impugned directions. - HELD THAT: - The Tribunal analysed Clause 3.2(ii)(c) of the SPA and the subsequent amendment: the SPA envisaged transfer only upon satisfaction of specified conditions (approvals from lenders, VIPL/REPL acceding to financing terms, dematerialisation). Until such conditions were fulfilled the shares were to be held in trust by LITL and the name of LITL would remain on the company books. The conditions were not complied with and the balance consideration was not paid; consequently the shares could not be treated as having been effectively transferred with effect from 30.03.2012. The Tribunal rejected the respondents' contention that title had already passed, holding that actual transfer required completion by share certificates and registration/demat as stipulated. [Paras 35, 36]

Transfer was conditional and the stipulated conditions were not satisfied; the CCPS did not stand effectively transferred as claimed.

Implementation of approved resolution plan - directions to liquidator to assist transfer of securities - Whether the Adjudicating Authority was justified in directing the liquidator (and others) to assist/cooperate in dematerialisation and transfer of the CCPS by its order dated 13.09.2023. - HELD THAT: - IA 816/2023 was filed in the CIRP of REPL; the impugned order directed the liquidator of LITL to assist in dematerialisation and transfer of shares to facilitate implementation of REPL's resolution plan. The Tribunal found this unjustified because (i) title to the CCPS remained with LITL pending satisfaction of SPA conditions and (ii) the appellants, being aggrieved parties, were not afforded a hearing before such directions were issued. The Acquisition Plan and Process Document provisions (including sharing of unearned receivables) and the Monitoring Committee's pending consideration (including resolution to seek legal opinion) were relevant and not superseded by the impugned directions. Having regard to these factors and to the unsettled factual and legal issues, the Tribunal set aside the Adjudicating Authority's directions. [Paras 35, 37, 39]

Impugned directions to the liquidator (and related directions) were unjustified and are set aside.

Actions during pendency of appeal rendered otiose - Whether actions taken by respondents during the pendency of the appeal (transfer of shares) stand and/or should be sustained. - HELD THAT: - The Tribunal noted that the respondents completed transfer/demat of the subject CCPS during the pendency of this appeal and while the Tribunal was seized of the matter. Given the finding that the CCPS were not effectively transferred under the SPA and that the Adjudicating Authority's directions were set aside for lack of justification and failure to hear appellants, the Tribunal held that actions taken during the pendency of the appeal cannot be permitted to subsist. Consequently, such actions were rendered otiose. [Paras 39]

Actions taken by respondents during pendency of the appeal (including transfer) are rendered otiose.

Final Conclusion: The appeal is allowed. The appellants are aggrieved persons with locus to prosecute the appeal; the Adjudicating Authority's impugned order of 13.09.2023 directing assistance in dematerialisation and transfer of the CCPS is set aside; actions taken by respondents during the pendency of the appeal are rendered otiose and all pending IAs are closed.

Principles of Natural Justice - Duty to hand over custody and control of corporate debtor records on change of liquidator - Non-cooperation of outgoing liquidator - Power to appoint an Advocate Commissioner to verify and effect handover - Authority to forward compliance affidavits and commissioner's report to IBBI and Insolvency Professional Agency - Judicial scrutiny of conduct of insolvency professionals

Principles of Natural Justice - Duty to hand over custody and control of corporate debtor records on change of liquidator - Non-cooperation of outgoing liquidator - Power to appoint an Advocate Commissioner to verify and effect handover - Authority to forward compliance affidavits and commissioner's report to IBBI and Insolvency Professional Agency - Validity of observations against the erstwhile liquidator and the direction to forward the compliance affidavit and Advocate Commissioner's report to IBBI and Insolvency Professional Agency. - HELD THAT: - The Tribunal examined the chronology of hearing dates, prior orders directing handover, the appellant's applications and appearances, the appointment of an Advocate Commissioner to inventory and effect transfer of records, and the Advocate Commissioner's interim and final reports. The record shows repeated opportunities for the appellant to comply, an order dated 01.07.2022 requiring handover within seven days, the appellant's request for extension which was refused, and subsequent hearings culminating in the Advocate Commissioner's report listing 377 items and documenting the handover process. Given the prolonged delay (about 81/2 months from appointment of the new liquidator) and the stalemate necessitating the Commissioner's appointment, the Tribunal found no breach of Principles of Natural Justice in passing the impugned observations in the appellant's absence. The appointment of the Advocate Commissioner to verify and supervise the transition was within the Adjudicating Authority's powers and the contents of the compliance affidavit and commissioner's report justified forwarding them to IBBI and the Insolvency Professional Agency for any further action. Contentions concerning the Advocate Commissioner's working hours and fee quantum were held to be peripheral to the determinative question of whether the observations and directions were justified, and thus not a ground to invalidate the order. [Paras 7, 8, 9, 10, 11]

Observations against the erstwhile liquidator and the direction to forward the compliance affidavit and Advocate Commissioner's report to IBBI are justified; the appellant's plea of denial of natural justice is untenable.

Final Conclusion: Appeal dismissed; impugned order upheld as not suffering from illegality or breach of natural justice; appellant permitted to pursue any grievances before IBBI.

Binding effect of a CoC approved resolution plan inter se - breach of addendum and Letter of Intent as ground for revocation of plan - forfeiture of performance security under RFRP and Regulation 36B(4A) - power to withdraw plan approval application and invite fresh RFRP/Form G - exclusion of time for CIRP where process is re commenced

Binding effect of a CoC approved resolution plan inter se - breach of addendum and Letter of Intent as ground for revocation of plan - The Successful Resolution Applicant committed breach of the addendum dated 18.06.2021 and the conditions of the Letter of Intent by effecting change in shareholding/directorship without requisite consent. - HELD THAT: - The Tribunal found on the record that the Resolution Plan and addendum and the LoI expressly contemplated continued association of the Shoora group and an undertaking not to dilute investment or change the constitutional pattern for five years without consent of the top two financial creditors. Emails from Shoora Capital/SRA and subsequent non disclosure showed that the ultimate holding (Shoora Capital) had transferred 100% shareholding, thereby altering the very substratum on which CoC approval had been granted. The Adjudicating Authority's factual finding that these acts contravened material provisions of the Resolution Plan, addendum and LoI was affirmed. [Paras 32]

Breach of the addendum and LoI by the Successful Resolution Applicant was established and the Adjudicating Authority's finding to that effect is upheld.

Power to withdraw plan approval application and invite fresh RFRP/Form G - binding effect of a CoC approved resolution plan inter se - The CoC was not precluded from withdrawing the plan approval application where the Successful Resolution Applicant had materially altered its constitution in breach of the plan; consequently CoC/RP could seek to invite fresh Resolution Plans. - HELD THAT: - While a CoC approved resolution plan is generally binding inter se the CoC and the Successful Resolution Applicant, that binding effect does not bar the CoC from revoking or seeking withdrawal of the approval where the basis of approval (the credentials, net worth and undertakings of the SRA) has been vitiated by the SRA's own conduct. The Tribunal agreed with the Adjudicating Authority that the SRA's transfer of 100% shareholding and exit of the promoter amounted to effectively selling the plan to a third party, justifying the CoC's decision to withdraw the plan approval application and restart the process. [Paras 29]

CoC was entitled to seek withdrawal of the plan approval application and to invite fresh Form G in the circumstances of material breach by the Successful Resolution Applicant.

Forfeiture of performance security under RFRP and Regulation 36B(4A) - Forfeiture/invocation of the performance bank guarantee by the CoC was permissible under the RFRP clauses relied upon; invocation was not confined only to post AA approval contingencies under Regulation 36B(4A). - HELD THAT: - The RFRP expressly empowered the designated lender/CoC to invoke the performance bank guarantee upon breach of conditions under the LoI or Resolution Plan (clause 13.2) and set out non compliance remedies (clause 24). Regulation 36B(4A) contemplates forfeiture post approval, but does not exclude forfeiture under broader RFRP stipulations that may arise prior to AA approval. As the CoC action invoked clause 13.2 in light of the SRA's breach, the Tribunal held the forfeiture decision to be in accordance with the RFRP. [Paras 35]

The CoC's decision to forfeit the performance security under the RFRP was lawful and is upheld.

Exclusion of time for CIRP where process is re commenced - power to withdraw plan approval application and invite fresh RFRP/Form G - Exclusion of time in the CIRP (from 05.02.2021 until the order) and direction to issue fresh Form G were consequential and permissible where the Adjudicating Authority allowed withdrawal of the plan approval application and permitted restart of the resolution process. - HELD THAT: - The Adjudicating Authority recorded that the Corporate Debtor remained a going concern with commercial prospects, and, having permitted withdrawal of the plan approval application and directed an expedited fresh invitation, it was entitled to grant exclusion of the period spent in the unsuccessful plan process. The Tribunal found no error in treating exclusion as consequential to permitting the RP/CoC to restart the CIRP and to issue fresh Form G. [Paras 38]

Exclusion of time and direction to issue fresh Form G were rightly granted and are sustained.

Final Conclusion: All appeals are dismissed; the Adjudicating Authority's order permitting withdrawal of the plan approval application, directing fresh invitation of resolution plans (fresh Form G), allowing exclusion of time, and upholding forfeiture of the performance security is affirmed.

Approval of resolution plan - committee of creditors' approval by 100% vote - effect of Supreme Court restraint order on CIRP - clarification from the Hon'ble Supreme Court - liberty to file clarification/modification

Approval of resolution plan - effect of Supreme Court restraint order on CIRP - clarification from the Hon'ble Supreme Court - Whether the Adjudicating Authority could direct the Resolution Professional and the Committee of Creditors to seek clarification from the Hon'ble Supreme Court regarding its order dated 21.11.2013 as a condition before implementing an approved resolution plan. - HELD THAT: - The Tribunal examined the scope and purpose of the Supreme Court order dated 21.11.2013, which restrained the Sahara Group from parting with movable and immovable properties, and concluded that the direction was intended to protect assets and did not operate as a fetter upon independent insolvency resolution proceedings. The Tribunal noted subsequent clarifications by the Supreme Court (order dated 27.04.2016) releasing the restraint so far as proceedings before other fora (e.g., NCDRC) were concerned, indicating that the 21.11.2013 order was not intended to prevent adjudicative processes from proceeding. The Tribunal also considered the Adjudicating Authority's earlier order dated 27.08.2021 which merely granted liberty to the suspended management to seek modification/clarification and recorded that the CoC/RP may seek clarification if so advised; that provision did not translate into an obligation on the CoC/RP to seek such clarification. Having regard to these conclusions and the fact that the resolution plan had been approved by 100% of the CoC and sanctioned by the Adjudicating Authority, the Tribunal held that imposing a condition requiring the RP/CoC to obtain clarification from the Supreme Court before implementing the plan was unnecessary and constituted an error of direction. The Tribunal therefore deleted the directions in the impugned order that required the RP/CoC to move the Supreme Court for clarification, while affirming the remainder of the Adjudicating Authority's order approving the plan. [Paras 16, 23, 24, 25]

Direction in the Adjudicating Authority's order requiring the Resolution Professional and the Committee of Creditors to seek clarification from the Hon'ble Supreme Court in relation to the order dated 21.11.2013 is erroneous and is deleted; the approval of the resolution plan otherwise stands affirmed.

Final Conclusion: The appeals are allowed in part by deleting the directions that required the RP/CoC to seek clarification from the Supreme Court regarding its order dated 21.11.2013; the Adjudicating Authority's approval of the resolution plan (otherwise) is affirmed and the dismissal of I.A. No. 434 of 2023 is maintained.

Validity of termination of development agreement for breach - lawfulness of assignment/arrangement transferring development rights without consent - scope and applicability of moratorium under Section 14(1)(d) of the IBC to assets not owned by the corporate debtor - power of Adjudicating Authority to direct possession to Resolution Professional where corporate debtor has no proprietary right - prohibition on parting with contractual rights without prior written consent

Validity of termination of development agreement for breach - The termination order dated 17.01.2022 issued by Kolkata Municipal Corporation cancelling the Development Agreement and Supplemental Agreement was lawful and the Adjudicating Authority erred in setting it aside. - HELD THAT: - The Development Agreement granted development rights to Respondent No.1 subject to express obligations and remediation procedure under clause 9(g). Appellant issued show-cause notice and, on unsatisfactory reply, lawfully terminated the Agreement. No challenge to the termination was made by Respondent No.1 before any competent forum. The Adjudicating Authority should not have adjudicated the validity of that termination in the CIRP of the Corporate Debtor or set aside KMC's termination order; the termination fell outside the insolvency proceeding and was a matter between KMC and Respondent No.1. The court concluded that KMC had jurisdiction to cancel the agreement on the proved breaches and that the Adjudicating Authority's interference was erroneous. [Paras 16, 17, 23, 24]

Termination dated 17.01.2022 was lawful and the Adjudicating Authority erred in setting it aside.

Lawfulness of assignment/arrangement transferring development rights without consent - prohibition on parting with contractual rights without prior written consent - The Assignment/Arrangement dated 06.03.2008 in favour of the Corporate Debtor conferred no lawful right on the Corporate Debtor because it contravened the contractual prohibition against transferring rights without KMC's prior written consent. - HELD THAT: - Clause 13(b) of the Development Agreement prohibited either party from parting with rights or obligations under the Agreement to any third party without prior written approval. The alleged assignment of development rights by Respondent No.1 to Respondent No.2 in 2008 was made without KMC's consent and without communication to KMC; therefore no valid proprietary or developmental right flowed to Respondent No.2. Possession taken by Respondent No.2 was held to be unlawful and could not form the basis of rights in the CIRP. [Paras 12, 16, 21, 22]

The 06.03.2008 Arrangement/Assignment did not create any lawful rights in favour of the Corporate Debtor.

Scope and applicability of moratorium under Section 14(1)(d) of the IBC to assets not owned by the corporate debtor - power of Adjudicating Authority to direct possession to Resolution Professional where corporate debtor has no proprietary right - Moratorium under Section 14(1)(d) and corresponding duties of the IRP under Section 18 do not protect or bring into the CIRP assets over which the corporate debtor has no ownership or proprietary right; therefore the Adjudicating Authority erred in directing KMC to hand over possession to the Resolution Professional. - HELD THAT: - Section 14(1)(d) prohibits recovery of property by an owner where occupied by the corporate debtor, but it applies only to property that is an asset of the corporate debtor. Section 18 empowers the IRP to take control of assets over which the corporate debtor has ownership rights as recorded. Here, the premises remained the property/asset of KMC and development rights were given to Respondent No.1, not the Corporate Debtor. As the Corporate Debtor had no legitimate proprietary interest, the moratorium and IRP duties did not operate to require KMC to hand over possession; consequently the Adjudicating Authority should not have directed transfer of possession to the RP. [Paras 17, 18, 20, 21, 25]

Moratorium and IRP powers did not justify directing KMC to hand over possession; the Adjudicating Authority erred in doing so.

Final Conclusion: Appeal allowed. The order dated 17.11.2022 of the Adjudicating Authority setting aside KMC's termination order is set aside; IA filed by Respondent No.3 is rejected. Parties to bear their own costs.

Electricity charges accrued prior to liquidation commencement date stand permanently extinguished - security deposit to continue in the name of the Corporate Debtor - restoration of electricity supply to enable the Corporate Debtor to be run as a going concern - no financial charges for grant of fresh electricity connection - interest on security deposit governed by applicable regulations - tribunal will not adjudicate fresh regulatory entitlement and remand to Adjudicating Authority

Restoration of electricity supply to enable the Corporate Debtor to be run as a going concern - no financial charges for grant of fresh electricity connection - security deposit to continue in the name of the Corporate Debtor - Appeal disposed with directions regarding restoration of electricity supply, continuance of security deposit in name of Corporate Debtor and absence of financial charges for fresh connection. - HELD THAT: - The Tribunal recorded the appellant's statement that dues had been recovered, the connection had been permanently disconnected in 2017 and that a fresh connection would be made available to the successful bidder upon submission of required application/form within the stipulated timeline. The Tribunal made it clear that no financial charges would be demanded from the Corporate Debtor for providing a fresh connection and accepted that the security deposit already held would continue in the name of the Corporate Debtor. On this basis the appeal was disposed of. [Paras 4]

Appeal disposed; electricity to be restored on compliance with application/form; no financial charges to be imposed; security deposit to remain in name of Corporate Debtor.

Interest on security deposit governed by applicable regulations - tribunal will not adjudicate fresh regulatory entitlement and remand to Adjudicating Authority - Application seeking payment of interest on security deposit cannot be entertained by this Tribunal in the present appeal and is to be considered by the Adjudicating Authority in accordance with law. - HELD THAT: - The Tribunal observed that the question of entitlement to interest on the security deposit was not before the Adjudicating Authority in the earlier proceedings before this Tribunal. Although the appellant was asked to 'consider in accordance with applicable rules and regulations', the Tribunal declined to adjudicate the entitlement to interest in the appeal. The Tribunal expressly refrained from expressing any opinion on the merits of the claim and indicated that if the appellant's consideration is not favourable the applicant is free to pursue appropriate proceedings before the Adjudicating Authority for decision in accordance with law. [Paras 6, 7]

Claim for interest on the security deposit is not adjudicated by this Tribunal and is left to the Adjudicating Authority to consider and decide in accordance with law; the application is disposed with that observation.

Final Conclusion: The appeal was disposed: directions issued for restoration of electricity and retention of security deposit in the name of the Corporate Debtor with no financial charges for fresh connection; the question of entitlement to interest on the security deposit was not decided and is to be considered and decided by the Adjudicating Authority in accordance with law.

Appealability of refund order under Section 142 of the CGST Act - disposal of refund claims in accordance with the existing law - continuation of appellate proceedings under repealed/amended enactments by virtue of repeal and saving - non availability of appeal to the GST Appellate Tribunal against orders not passed under sections 107 or 108

Appealability of refund order under Section 142 of the CGST Act - disposal of refund claims in accordance with the existing law - continuation of appellate proceedings under repealed/amended enactments by virtue of repeal and saving - Whether an appeal lies to the Customs, Excise & Service Tax Appellate Tribunal against an order passed under section 142 of the Central Goods and Services Tax Act, 2017. - HELD THAT: - Section 142(3) provides that claims for refund of any amount of CENVAT credit paid under the existing law shall be disposed of in accordance with the provisions of the existing law and any amount eventually accruing shall be paid in cash. 'Existing law' refers to laws in force prior to commencement of the CGST Act (Chapter V of the Finance Act and the Central Excise Act). Section 142(6)(b) preserves disposal of proceedings of appeal, review or reference relating to recovery of CENVAT credit in accordance with the existing law. Further, section 174(2)(f) preserves proceedings, including appeals, instituted before, on or after the appointed day and requires that such proceedings be continued as if the CGST Act had not come into force. By contrast, section 112 of the CGST Act permits appeals to the GST Appellate Tribunal only against orders under sections 107 or 108 of the CGST Act; it does not provide for appeals against orders under section 142. Taken together, these provisions indicate that where a refund claim under section 142(3) must be disposed of according to the existing law, the appellate route provided by the existing law (i.e., appeal to the Tribunal) continues to be available. The legislative scheme thus does not intend to leave either the assessee or the Revenue without a remedy by way of appeal in respect of orders under section 142, and an appeal against such an order lies to the CESTAT. [Paras 44, 45, 46, 50]

An appeal lies to the Customs, Excise & Service Tax Appellate Tribunal against an order passed under section 142 of the CGST Act, 2017.

Final Conclusion: The Larger Bench answered the reference by holding that appeals against orders passed under section 142 of the CGST Act, 2017 lie to the Customs, Excise & Service Tax Appellate Tribunal, since such refund claims are to be disposed of in accordance with the existing law and proceedings (including appeals) under the existing law are saved by the repeal and saving provisions.

Classification of site formation and earth moving activities vis a vis mining services - composite mining contract cannot be vivisected for levy of service tax - site formation services not taxable prior to 1 6 2007 - Board's Circular dated 27.5.07 - reliance on precedents including Daelim line of decisions - penalty under Section 78 - application of Section 73(3) read with Board's Circular for conclusion of proceedings

Classification of site formation and earth moving activities vis a vis mining services - composite mining contract cannot be vivisected for levy of service tax - Board's Circular dated 27.5.07 - site formation services not taxable prior to 1 6 2007 - Demand raised as Site Formation & Clearance, Excavation & Earth Moving & Demolition Services for the period 16.06.2005 to 31.05.2007 was not sustainable and was correctly dropped. - HELD THAT: - The Adjudicating Authority examined the Board's Circular dated 27.5.2007 and held that the Circular treats site formation services as inclusive but does not convert activities integral to mining into a separate taxable category prior to 1 6 2007. Applying settled precedents (including the Daelim line), the authority concluded that where the contract/agreement is for mining, the services forming part of that comprehensive mining contract cannot be vivisected to treat site formation or overburden removal as separately taxable prior to 31.5.2007. The agreements before the authority were executed for mining and contained no separate consideration for overburden removal or site formation; payments were tied to removal of coal, and valuation of a part of the service did not alter the character of the overarching service contract. On these grounds the demand was rightly dropped. [Paras 14]

Demand of Rs.11,64,74,435/ treated as Site Formation etc. for 16.06.2005 to 31.05.2007 was correctly dropped.

Classification of income under mercantile system and reconciliation with billing - reliance on statutory auditor's certificate for reconciliation of balance sheet figure - Demand based on difference between balance sheet figures and billed amounts for 2008 09 was unsustainable and was correctly dropped. - HELD THAT: - The Adjudicating Authority accepted the statutory auditor's certificate which reconciled the excess in the balance sheet figure over billed mining clients. The auditor certified that, under the mercantile system, expenditures and provisions for coal stock at mine site (not invoiceable to joint venture companies) are required to be reflected in the Profit & Loss Account as income from mining services, thereby explaining the discrepancy relied upon in the show cause notice. Having given cognizance to this reconciliation, the authority found no basis for the proposed demand under the SCN for 2008 09. [Paras 18]

Demand of Rs.2,09,43,980/ for 2008 09 (difference between Balance Sheet & Service Tax Return figures) was correctly dropped.

Penalty under Section 78 - application of Section 73(3) read with Board's Circular for conclusion of proceedings - Proposed penalty under Section 78 in respect of the amount paid with interest before issuance of the show cause notice was not justified and was correctly dropped. - HELD THAT: - Following the ratio of prior Tribunal and Court decisions and Board's Circular No.137/167/2006/CX 4 dated 03/10/2007, and applying Section 73(3) of the Act, the Adjudicating Authority concluded that the demand in question had been covered by those provisions and clarifications. In consequence, and in view of the fact that the amount was paid with interest before issuance of the show cause notice, the authority found no justification to impose penalties under Section 78 and ordered closure of proceedings in respect of that amount. [Paras 17]

Penalty under Section 78 in respect of the amount paid with interest was correctly dropped and proceedings concluded under Section 73(3) read with the Board's Circular.

Final Conclusion: The Tribunal found no error in the Adjudicating Authority's detailed findings and dismissed the Revenue's appeal, upholding the dropping of the demands and the proposed penalty for the periods and amounts determined by the authority.

Procedure for sampling under Excise Manual rule 776 - notice under section 74-A(1) of the Excise Act - principles of natural justice - consequences of procedural non-compliance - interim preservation of disputed funds pending judicial review

Procedure for sampling under Excise Manual rule 776 - principles of natural justice - Whether samples were drawn in compliance with rule 776 of the U.P. Excise Manual and whether the penalty order complied with principles of natural justice - HELD THAT: - The Court records that while samples were drawn from the CL-2/wholesale supplier, the mandatory requirement under rule 776 that a person of the distillery be present was not complied with. The Court further records that no notice under section 74-A(1) was issued prior to passing the penalty order and that the order was passed without giving the petitioner an opportunity to be heard. Because the initiating steps themselves were procedurally defective, the consequential penalty proceedings stand vitiated in law and cannot be sustained without fresh compliance with the prescribed procedure and observance of natural justice.

Finding of procedural non-compliance with rule 776 and violation of principles of natural justice; initiation and consequential proceedings held vitiated and liable to be re-considered.

Notice under section 74-A(1) of the Excise Act - consequences of procedural non-compliance - Whether a notice under section 74-A(1) was served before passing the order and the legal effect of its non-issuance - HELD THAT: - On enquiry, the State conceded that no notice under section 74-A(1) was issued. The Court treats the absence of statutorily required notice as a material irregularity. The legal effect of such omission is that the impugned order cannot stand and requires reconsideration after adherence to the statutory mandate for issuing notice and affording opportunity to the petitioner.

Non-issuance of the required notice held to be a material flaw rendering the order unsustainable and necessitating fresh consideration.

Interim preservation of disputed funds pending judicial review - Interim treatment of the amount recovered from the petitioner pending disposal of the writ petition - HELD THAT: - The Court directed that after deducting 25% of the amount realised (sum asserted to be the deposit required for filing revision), the remaining amount shall be placed in a fixed term interest bearing account in a nationalised bank for an initial period of two years, renewable, and kept subject to the final outcome of the writ petition. The Court also required the Commissioner of Excise Tax, U.P. to file a personal affidavit about compliance. These interlocutory directions preserve the subject-matter funds while permitting adjudicatory process to proceed.

Directed deduction of 25% for revision requirement and placement of the balance in a fixed term interest-bearing account pending final adjudication; compliance affidavit to be filed.

Consequences of procedural non-compliance - Procedural posture for further proceedings and evidence filing after finding of initial infirmity - HELD THAT: - Because the initiation of proceedings is found to be defective, the matter requires consideration on merits only after the State files its counter-affidavit and the petitioner may file rejoinder. The Court has therefore given a timetable for filing affidavits to enable fresh adjudication on the merits consistent with statutory procedure and principles of natural justice.

Directed State to file counter-affidavit within four weeks and allowed rejoinder within one week; remanded matter for fresh consideration in light of procedural infirmities.

Final Conclusion: The Court found material procedural lapses-non-compliance with rule 776 and non-issuance of notice under section 74-A(1)-which vitiate the initiation and consequential penalty proceedings; it ordered interim preservation of the disputed funds (after deducting 25% for revision) in a fixed deposit, directed filing of affidavits by the State and the Commissioner, and remanded the matter for fresh consideration consistent with statutory procedure and principles of natural justice.

Mandatory penalty under section 11AC - extended period of limitation - CENVAT credit adjustment for computation of duty - rectification of mistake - incorrect invocation of statutory provision does not vitiate order

Mandatory penalty under section 11AC - extended period of limitation - rectification of mistake - Whether omission of a separate finding on imposition of 100% penalty under section 11AC in the miscellaneous order dated 30.9.2022 was a mistake apparent on the record. - HELD THAT: - The Tribunal held that section 11AC prescribes a mandatory penalty where the elements (fraud, collusion, willful statement or suppression of facts or contravention with intent to evade duty) which also justify invocation of the extended period of limitation are found. The Tribunal had already upheld the demand invoking the extended period of limitation in the final order; accordingly, the imposition of penalty under section 11AC necessarily follows and there is no discretion to reach a different conclusion. Consequently, there was no omission or mistake in not recording a separate finding on penalty in the miscellaneous order. [Paras 5]

No mistake apparent; penalty under section 11AC correctly held to follow from findings warranting extended period of limitation.

CENVAT credit adjustment for computation of duty - rectification of mistake - Whether the miscellaneous order dated 30.9.2022 erred in not computing duty after deducting claimed CENVAT credit on inputs. - HELD THAT: - The Tribunal found no provision in the statute or rules permitting determination of duty after deducting available CENVAT credit. It explained that while the assessee may be entitled to CENVAT credit under the Cenvat Credit Rules and may be permitted to use such credit to discharge duty (subject to verification of entitlement), duty computation itself is not to be carried out by netting off CENVAT credit in the manner suggested by the appellant. Therefore, omission to compute duty after adjusting claimed CENVAT credit did not constitute a mistake. [Paras 6]

No mistake apparent; duty cannot be computed by deducting CENVAT credit though credit, if available, may be used to discharge duty subject to verification.

Rectification of mistake - extended period of limitation - incorrect invocation of statutory provision does not vitiate order - Whether the appellant could, by a second rectification application, raise a new contention that the confirmed demands pertained only to the normal period of limitation and therefore penalty under section 11AC could not be invoked, and whether citing section 11A(1) by the Commissioner vitiates the order. - HELD THAT: - The Tribunal observed that the contention now sought to be raised was not part of the grounds of appeal and cannot be introduced for the first time in an application for rectification of mistake. A rectification application cannot be used to raise new grounds which were not the subject matter of the appeal. Further, the Tribunal noted that confirmation of demands for a shorter / normal period does not preclude findings of fraud, suppression or willful misstatement; shorter periods may be confirmed even when those elements are established. Finally, the Tribunal applied the settled principle that mere citation of an incorrect statutory provision by the adjudicating authority does not invalidate the order if the power exercised is available under the correct provision. [Paras 8, 9, 10]

Application to raise the new limitation/penalty contention in rectification is impermissible; incorrect reference to section does not vitiate the confirmed demands.

Final Conclusion: The application for rectification of alleged mistakes in the miscellaneous order dated 30.9.2022 is rejected: (i) no omission in respect of penalty under section 11AC where findings justifying extended period were upheld; (ii) no error in declining to compute duty after deducting CENVAT credit though credit, if established, may be used to pay duty; and (iii) a rectification application cannot be used to raise new grounds not part of the appeal, and an incorrect statutory citation by the authority does not vitiate the order.

Dismissal for default / non-prosecution - adjournment limits under Section 35C(1A) of the Central Excise Act, 1944 - discretion under Rule 20 of CESTAT Procedure Rules, 1982 - abuse of adjournment practice and delay in justice delivery - restoration proviso where sufficient cause is shown

Dismissal for default / non-prosecution - discretion under Rule 20 of CESTAT Procedure Rules, 1982 - abuse of adjournment practice and delay in justice delivery - Whether the appeals should be dismissed for non-prosecution because the appellants repeatedly failed to appear despite multiple listings and had no justification for further adjournment. - HELD THAT: - The Tribunal recorded that the appellants did not appear when the matters were called and had repeatedly abstained from attending hearings on multiple earlier dates. The Tribunal considered Rule 20 of the CESTAT Procedure Rules, 1982, which permits dismissal for default or hearing on merits where an appellant fails to appear, and noted the proviso allowing restoration if sufficient cause is shown. The Tribunal also applied the principle, drawn from Supreme Court authorities condemning routine and mechanical adjournments as an abuse that delays justice, to conclude there was no justification to grant further adjournment. In view of the repeated adjournments already granted and the absence of any request for adjournment on the date fixed (including an e hearing listing), the Tribunal exercised its discretion under Rule 20 to dismiss the appeals for non prosecution. [Paras 1, 3, 5, 6]

Appeals dismissed for non-prosecution in terms of Rule 20 of the CESTAT Procedure Rules, 1982.

Final Conclusion: The Tribunal, applying Section 35C(1A) and Rule 20 and relying on Supreme Court pronouncements condemning repeated adjournments, dismissed the appeals for non prosecution as there was no sufficient cause to grant further adjournment.

Maintainability of appeal - goods imported as baggage - jurisdiction of the Appellate Tribunal under Section 129A(1) of the Customs Act, 1962 - exclusion of appeals in respect of baggage imports - appeals concerning payment of drawback

Maintainability of appeal - goods imported as baggage - jurisdiction of the Appellate Tribunal under Section 129A(1) of the Customs Act, 1962 - Appeal against the Commissioner (Appeals) in respect of goods imported as baggage is not maintainable before the Appellate Tribunal (CESTAT). - HELD THAT: - The appeal arises from an order concerning goods imported as baggage and the sanction/recovery of duty drawback. Section 129A(1) of the Customs Act, 1962 enumerates the orders appealable to the Appellate Tribunal but expressly excludes from the Tribunal's jurisdiction appeals where the order relates to any goods imported as baggage and also excludes certain matters relating to payment of drawback. The Tribunal found the present dispute falls squarely within the exclusion for baggage imports and therefore the statutory bar on entertaining such appeals applies. Consequentially, the appeal cannot be maintained before this Tribunal and must be pursued by the appellant through the appellate remedy provided by law. [Paras 4, 5]

Appeal dismissed as not maintainable before the Appellate Tribunal; appellant may pursue the appellate remedy available in law.

Final Conclusion: The Tribunal held that appeals arising from orders relating to goods imported as baggage are excluded from its jurisdiction under Section 129A(1) of the Customs Act, 1962; the present appeal was dismissed as not maintainable and the appellant was directed to pursue the statutory remedy elsewhere.

Definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 - nexus of input services with manufacture or activities relating to business - Cenvat credit admissibility for services used in manufacturing plant (housekeeping, catering, interior decoration, garden maintenance, manpower) - Cenvat credit admissibility for services used in guest house and employee township within factory premises (construction, consultancy, repairs, interior works, maintenance) - invocation of extended period of limitation for recovery of Cenvat credit - consequence of unsustainable demand on interest and penalty

Definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 - nexus of input services with manufacture or activities relating to business - Cenvat credit admissibility for services used in manufacturing plant (housekeeping, catering, interior decoration, garden maintenance, manpower) - Cenvat credit availed on specified input services used in the manufacturing plant is admissible. - HELD THAT: - The Court construed the definition of "input service" in Rule 2(l) as having wide ambit: covering services used directly or indirectly in or in relation to manufacture and those integrally connected with activities relating to business. Housekeeping, catering, interior decoration and garden maintenance in the plant were held to have a sufficient nexus with manufacturing-housekeeping and garden maintenance being essential for upkeep and statutory compliance, catering being necessary for workers (especially in remote location), interior works facilitating day-to-day business, and manpower services supporting canteen, dispensary and related factory functions. Reliance on earlier tribunal and High Court decisions demonstrating that such services qualify as input services was applied to the facts, and the denial of credit for these plant-used services was set aside. [Paras 8, 9, 10, 11]

Credit availed on the specified services used in the manufacturing plant is allowable and the denial is not sustainable.

Nexus of input services with manufacture or activities relating to business - Cenvat credit admissibility for services used in guest house and employee township within factory premises (construction, consultancy, repairs, interior works, maintenance) - Cenvat credit availed on input services relating to guest house and employee township situated within factory premises is admissible. - HELD THAT: - The Court found that the staff colony and guest house located within the plant were indispensable for continuity of manufacturing at the remote location and for accommodating business visitors; services for construction, consultancy, repair and maintenance, interior decoration and upkeep of these facilities were thus directly and intrinsically linked to the manufacturing activity. The tribunal followed precedents holding that services necessary for staff colonies and on-site guest houses constitute input services under Rule 2(l). Applying those authorities, the impugned denial of credit for services used in the guest house and township was held unsustainable. [Paras 12, 13]

Credit availed on services for the guest house and employee township within factory premises is allowable and the denial is not sustainable.

Invocation of extended period of limitation for recovery of Cenvat credit - consequence of unsustainable demand on interest and penalty - The demand confirmed by invoking the extended period of limitation is not sustainable and, consequently, interest and penalty do not arise. - HELD THAT: - The Appellant established that returns (ER-1) were regularly filed and there was no evidence of suppression with intent to evade duty. The Department did not produce materials to justify invocation of the extended limitation period. On these findings the tribunal concluded that the demand raised by the adjudicating authority was time-barred; since the demand itself was set aside on limitation and merits, charging of interest and imposition of penalty could not be sustained. [Paras 14, 15]

Demands confirmed under the extended period of limitation are set aside; interest and penalty cannot be imposed.

Final Conclusion: The impugned order is set aside: Cenvat credit availed for the challenged input services used in the manufacturing plant, and for services relating to the guest house and employee township within factory premises for the period May 2008 to March 2011, is held admissible; the departmental demand invoking the extended period is barred by limitation and, consequently, interest and penalty are not sustainable.