The week ending 29th December 2024 saw significant legal and regulatory updates. A PIL was filed in the Supreme Court challenging the constitutionality of the TDS system, claiming it imposes undue burdens on taxpayers. In another case, the SC ruled in favor of the revenue, addressing share price manipulation for Long-Term Capital Gains exemption under section 10(38). On the GST front, various advisories were issued, including one for the entry of receipt numbers in the E-Way Bill System for leased wagons. The Delhi HC ruled against IGST on ocean freight, while upholding GST on mining royalties. Additionally, a new e-payment system for voluntary payments via ICEGATE was introduced. DGFT announced extensions in import periods for yellow peas and quantitative restrictions on low ash metallurgical coke. SEBI clarified rules regarding share transfers and control changes in investment intermediaries. RBI issued guidelines enhancing interoperability of Prepaid Payment Instruments (PPIs) with UPI and set up a committee for ethical AI use in financial services. In a significant SC ruling, maintenance claims by wives and children were given priority over financial creditors under the SARFAESI and IBC laws. The week also featured several rulings related to customs and foreign trade, impacting businesses and taxpayers.
Notifications & Circulars issued during week (23rd– 29th Dec 2024)
A. Income Tax
SC, PIL Challenges Constitutionality of TDS System Under Constitution: Case of Ashwini Kumar Upadhyay vs Union of India. A Public Interest Litigation (PIL) has been filed in Supreme Court under Article 32 of the constitution, to challenge the constitutionality of the Tax Deducted at Source (TDS) system. The petitioner argues that TDS imposes unreasonable administrative and financial burdens on deductors, who must navigate complex procedures without adequate compensation or training. This effectively shifts sovereign responsibilities onto private entities, violating Articles 14, 19, and 21 of the Constitution. Ill-equipped assessees face significant costs, penalties, and prosecution for unintentional errors, exacerbating inequality and causing undue hardship, especially for small taxpayers and economically weaker groups. The lack of compensation for performing these sovereign functions amounts to forced labor, contravening Article 23. There is disproportionate treatment between government officials and TDS assessees, noting that officials are not penalized for similar lapses. The petitioner emphasizes the need for a fairer system that adheres to constitutional principles and ensures equitable treatment for all stakeholders. (SC PIL filed Dated 26/12/2024)
SC, Revenue appeal allowed in claiming exemption u/s. 10(38) by manipulating share price of SRK Industries: Case of SN Sondhani HUF vs PCIT, SC Judgement Dated 9th December 2024. The appeal has been filed by the revenue, raising substantial question of law that whether ITAT erred in ignoring the direct and circumstantial evidence brought on record by AO in the form of modus operandi contrived by the accommodation entry providers who manipulated the share price of SRK Industries Ltd. and provided facility for round tripping of assessee’s unaccounted money to record fictitious Long Term Capital Gains, in favour of the instant assessee which is also claimed as exempted income tax u/s 10(38), giving rise thereby to the vice of perversity in the process of decision making. The apex court, by applying the case of Swati Bajaj, allowed the appeal of the revenue in manipulation of share price of SRK Industries recording fictitious Long Term Capital Gain and claiming exemption under section 10(38). (SC Judgement Dated 09/12/2024)
B. GST
Advisory for Entry of Receipt Numbers Pertaining to Leased Wagons in the E-Way Bill System: Advisories have already been issued regarding the correct format for entering Parcel Way Bill (PWB) numbers and Railway Receipt (RR) numbers for goods transported under the Parcel Management System (PMS) and the Freight Operations Information System (FOIS). Taxpayers transporting goods via Leased Wagons must prefix Receipt Numbers with the identifier “L” when entering them into the EWB system. Taxpayers transporting goods via PMS and FOIS have already been advised to enter PWB/RR numbers with Prefix P for PMS and F for FOIS systems. Taxpayers should select the transport mode as “Rail” in Part-B of the EWB using the “Multi-Transport Mode” option on the EWB portal. (GSTN Advisory Dated 23/12/2024)
HC, Upholds GST Levy on Mining Royalty: Case of Lakhwinder Singh Stone Crusher vs Union of India, HC HP Judgement Dated 4th November 2024. The petitioner challenged various notifications and notices that imposed GST on the royalty, arguing that such royalty was a tax and, therefore, should not be subject to GST. This argument was based on the Supreme Court’s 1990 decision in India Cement Ltd. v. State of Tamil Nadu, which declared royalty to be a form of tax. However, the court noted that the legal position had changed after the case of Mineral Area Development Authority v. Steel Authority of India 2024. In this case, the SC bench ruled that royalty is not a tax, thereby clearing the way for the levy of GST on the royalty paid by mineral concession holders. The High Court found the demand for GST to be legally valid and upheld the impugned notices and summons issued under the CGST Act. (HC HP Judgement Dated 04/11/2024)
HC, Levy of IGST on ocean freight unconstitutional: Case of Tavrur Oils and Fats Pvt Ltd vs Comm CGST, HC Delhi Judgement Dated 18th December 2024. Delhi High Court held that levy of Integrated Goods and Services Tax (IGST) on ocean freight is unconstitutional. Accordingly, directed department to refund service tax paid on ocean freight during April to June 2017. The petitioners contend that in international trade and where the subject matter be a Cost, Insurance and Freight contract, the overseas supplier would engage a vessel owner for transportation of goods to India. In such situations, the appointment of the vessel as well as payment of transportation charges are borne by the overseas supplier. These transportation charges incurred in transporting goods by a vessel or ship are commonly known as ocean freight. Supreme Court, Union of India and Anr. vs Mohit Minerals Pvt. Ltd. had held that the collection of IGST on ocean freight would violate the provisions of the CGST Act, 2017 and be unconstitutional. Since the amount of IGST collected by the Central Government is without authority of law, the Revenue is obliged to refund the amount erroneously collected. (HC Delhi Judgement Dated 18/12/2024)
HC, Input tax credit admissible on telecommunication towers under CGST Act: Case of Bharti Airtel Limited vs Commissioner, HC Delhi Judgement Dated 12th December 2024. The specific exclusion of telecommunication towers from the scope of the phrase “plant and machinery” would not lead one to conclude that the statute contemplates or envisages telecommunication towers to be immovable property. HC held that telecommunication towers would not fall within the ambit of Section 17(5)(d) of the CGST Act. Thus, denial of input tax credit unsustainable in law. (HC Delhi Judgement Dated 12/12/2024)
HC, GST order lacking proper reasons is liable to be quashed: Case of Chetak Logistics Limited vs Union of India, HC Delhi Judgement Dated 13th December 2024. The writ petition challenge the order by which the reply to the show-cause has been completely discarded by the proper officer without any reasons. High Court held that order lacking reasons and also lacking application of mind to the reply furnished by the petitioner is liable to be quashed. (HC Delhi Judgement Dated 13/12/2024)
HC, Supply of helicopters without transfer of right to use not exigible to tax under 2(g)(vi) of CST: Case of Pawan Hans Limited vs Comm of Trade and Taxes, HC Delhi Judgement Dated 19th December 2024. High Court held that supply of helicopters to Andaman and Nicobar Islands Administration without transfer of right to use not exigible to tax under section 2(g)(vi) of the Central Sales Tax Act. The flight as well as the equipment was to be exclusively managed and regulated by the appellant and the flights were to be operated by personnel who were in their employment. Additionally, the obligation to keep the equipment insured was also one which stood placed upon the appellant. There was also no transfer of permits and licenses which were necessarily required in order to undertake the operations contemplated under the agreement. (HC Delhi Judgement Dated 19/12/2024)
C. Central Excise
SC, Pure Coconut Oil Classified as ‘Edible Oil’ Unless marketed as ‘Hair Oil’: Case of Comm of CE vs Madhan Agro Industries Pvt Ltd, SC Judgement Dated 18th December 2024. The case involves whether pure coconut oil packaged in small quantities should be classified as “edible oil” (Heading 1513) or “hair oil” (Heading 3305) under the Central Excise Tariff Act. The apex court emphasized that packaging size without additional indicators of cosmetic use cannot reclassify coconut oil as hair oil. It outlined the key characteristics for classifying coconut oil as “edible”:
i. Food-grade packaging.
ii. Compliance with food safety regulations (Food Safety and Standards Act, 2006, and Edible Oils Packaging Order, 1998).
iii. Meeting edible oil quality standards (distinct from hair oil standards).
iv. Shorter shelf life (compared to hair oil).
v. Packaging in specified sizes (50 ml to 2 litres) as per weight and measures rules.
— The SC held that pure coconut oil is primarily classifiable as “edible oil” under Heading 1513. It establishes a clear presumption that can only be overcome by demonstrating that the product meets specific criteria for classification as “hair oil” under Heading 3305. (SC Judgement Dated 18/12/2024)
D. Custom Duty
Extension of Custom duty exemption on Import of Yellow Peas : The custom duty exemption has on import of Yellow Peas earlier in force till 31st December 2024 has been extended till 28th February 2025. (Custom Notification 49/2024 (T) Dated 26/12/2024)
Appointment of Customs Officers for Hyundai Case Adjudication: The officers have been appointed to adjudicate show cause notices issued to M/s HD Hyundai Construction Equipment India Private Ltd. The specific details of the show cause notices issued to the company, and also the relevant adjudicating authorities who are responsible for handling these cases, have been specified. (Custom Notification 87/2024 (NT) Dated 24/12/2024)
Anti-dumping Duty on Digital Offset Printing Plates originating in or exported from China, Japan, Korea, Vietnam and Taiwan: Anti-dumping Duty has been imposed on imports of Digital Offset Printing Plates originating in or exported from China, Japan, Korea, Vietnam and Taiwan, and imported into India. It shall be applicable for a period of 5 years. (Custom Notification 28/2024 (ADD) Dated 26/12/2024)
Enabling Voluntary Payment electronically on ICEGATE e-Payment Platform: CBDT has announced the introduction of an electronic Voluntary/Self-Initiated Payment (SIP) facility on the ICEGATE platform, aimed at digitizing and simplifying payment procedures. This system will replace the manual TR-6 payments currently used at Customs stations. The new system allows users to generate self-initiated challans for payments related to past imports and exports, with no further approval needed from Customs officers. Users must be registered on ICEGATE and can select from various payment categories, such as those related to audits, investigations, and penalties, from a pre-defined list. Payments can be made using multiple methods, including internet banking, NEFT/RTGS, and payment aggregator modes, with more banks to be added once testing is complete. The new payment system will be mandatory for payments from January 1, 2025, replacing manual payments unless specifically approved by senior Customs officers. A user manual has been uploaded to assist stakeholders in navigating the new system. (Custom Circular 27/2024 Dated 23/12/2024)
HC, Seizure of ornaments worn by foreign tourist not justifiable: Case of Farida Allyeva vs Comm of Customs, HC Delhi Judgement Dated 10th December 2024. High Court held the gold jewellery in the form of ornaments worn by the foreign tourist would not qualify for seizure under Rule 3 of the Baggage Rules, 2016. Thus, the detention receipt is accordingly quashed. (HC Delhi Judgement Dated 19/12/2024)
E. Directorate General of Foreign Trade (DGFT)
Extension in Import Period for Yellow Peas: DGFT has extended the import period for yellow peas from December 31, 2024, to February 28, 2025. The import policy for yellow peas remains “Free” without any Minimum Import Price (MIP) condition or port restrictions, subject to registration under online Import Monitoring System. (DGFT Notification 43/2024 Dated 24/12/2024)
Imposition of Quantitative Restriction on import of Low Ash Metallurgical Coke: The import of low ash metallurgical coke have been placed under “Restriction” as per the country-wise Quantitative Restrictions(QR) for a period of six months, effective from 01.01.2025 upto 30.06.2025. The restrictions apply to metallurgical coke with ash content below 18%, excluding coke fines and ultra-low phosphorus coke, intended for manufacturing. use in ferroalloy. Imports will be allowed only with an Import Authorization issued by DGFT for specified countries from 1st January 2025, to 39th June 2025. The total allowable import quantity for the period is 1,427,166 metric tons, divided into individual country quotas. (DGFT Notification 44/2024 Dated 26/12/2024)
Import of Menthol under Advance Authorisation/DFIA: Standard Input-Output Norms (SION) and Adhoc norms for importing Menthol, previously suspended by Public Notice 48/2023 dated 7th March 2024, have been re-instated with immediate effect. The updated norms now apply to menthol categorized under ITC(HS) codes 29061110 (Natural Menthol) and 29061190 (Other Menthol). (DGFT Public Notice 35/2024 Dated 24/12/2024)
Enlistment of Pre-Shipment Inspection Agencies (PSIAs) and Addition of area of operation of PSIAs: DGFT has included nine new PSIAs in Appendix 2G of the Foreign Trade Policy (FTP) 2023. The enlisted agencies are authorized to issue Pre-Shipment Inspection Certificates (PSIC) for designated regions, subject to compliance with outlined conditions such as valid calibration certificates, bank guarantees, and updated equipment mapping. Also, six existing PSIAs have been approved to expand their operational areas. This includes new operational regions like Puerto Rico, Algeria, and Madagascar. The approvals granted are valid for three years or until further notification. (DGFT Public Notice 36/2024 Dated 27/12/2024)
F. Securities and Exchange Board of India (SEBI)
SEBI Clarifies Rules on Share Transfer and Control Change: The circular clarify the conditions under which share transfer or transmission in investment intermediaries does not constitute a change in control. For unlisted body corporate intermediaries, share transfer among immediate relatives or through transmission will not be considered a control change. However, for proprietary firms, any transfer or transmission of business/capital to another person will require prior approval and fresh registration. In partnership firms, inter-partner transfers are not considered control changes unless a new partner is introduced, in which case prior approval and fresh registration are required. The circular also stipulates that incoming shareholders must meet SEBI’s fit and proper person criteria. (SEBI Circular Dated 27/12/2024)
SEBI Notifies Withdrawal of Recognition for Indian Commodity Exchange (ICEX): SEBI has notified the withdrawal of recognition granted to ICEX. Originally recognized as an ‘association’ under the Forward Contracts (Regulation) Act, ICEX became a deemed stock exchange following the merger of the Forward Market Commission with SEBI. In 2022, SEBI withdrew ICEX’s recognition, which was later challenged and set aside by the Securities Appellate Tribunal with certain conditions. Subsequently, ICEX requested regulatory relaxations and permission to voluntarily surrender its recognition. SEBI allowed ICEX to exit as a stock exchange, which will take effect from the date of notification. (SEBI Notification Dated 24/12/2024)
G. Ministry of Corporate Affairs (MCA)
NFRA Penalizes Haribhakti & Co. LLP, Auditors of DB Realty Ltd for Professional Misconduct: The key findings include failure to exercise due diligence, skepticism, and professional judgment in auditing guarantees worth ₹3,894.43 crore, loans and advances of ₹1,326.92 crore, and investments of ₹2,456 crore, many involving related parties with negative net worth. The auditors’ report misleadingly emphasized immaterial items while omitting crucial disclosures about prejudicial guarantees and lacked appropriate procedures and evidence collection. NFRA imposed monetary penalties of ₹5 lakh on CA Chetan Desai and ₹3 lakh on CA Rakesh Rathi, along with debarring them for five years and three years, respectively, from auditing any company or corporate body. (NFRA Order 28/2024 Dated 23/12/2024)
NFRA Penalizes Deloitte Haskins & Sells LLP and Partners, Auditors of Zee Entertainment Enterprises Limited (ZEEL) for Audit Misconduct: The findings include failure to identify and report unauthorized guarantees and premature fixed deposit closures used to settle promoter group companies’ loans, with the knowledge of ZEEL’s management. The auditors were found grossly negligent, lacking professional skepticism, and failing to evaluate suspected fraud as mandated under Section 143(12) of the Act. The penalties have been imposed of Rs 2 crore on Deloitte, Rs 10 lakh on CA Jani, who is also barred for five years, and Rs 5 lakh on CA Sharma, who is also barred for three years. (NFRA Order 27/2024 Dated 23/12/2024)
H. Insolvency and Bankruptcy Board of India (IBBI)
NCLAT, Relinquishment of security interest on non-payment of Liquidation Costs as per 21A(3) of Liquidation Regulations: Case of Suraksha Assets Reconstruction Ltd vs Varsha Bagri, NCLAT Delhi Judgement Dated 9th December 2024. Where secured creditor failed to pay the liquidation costs within 90 days after its intention to realize the security interest, the security interest should stand relinquished under Regulation 21A(3) of the Liquidation Regulations. (NCLAT Delhi Judgement dated 09/12/2024)
NCLAT, Amount lying in No Lien Account is asset of corporate debtor if one time settlement (OTS) not materialized: Case of Bank of India vs Naren Sheth, NCLAT Delhi Judgement Dated 13th December 2024. NCLAT held that once the CIRP was initiated, the amount lying in the “No Lien Account”, is an asset of the Corporate Debtor if OTS did not materialize. When the claim of the members has already been considered during the CIRP period by the COC, under such circumstances, the Bank of India cannot claim or detain this amount paid against the OTS by the Corporate Debtor. In that event, the Bank would be doubly benefited. The said amount of Rs. 1 Crore lying in “No Lien Account” with the Appellant bank is an asset of the Corporate Debtor. (NCLAT Delhi Judgement dated 13/12/2024)
NCLAT, Where RP performed his duties in accordance with CoC, no adverse remarks could be passed by Adjudicating Authority against RP: Case of Fintech Restructuring LLP vs Fairdeal Multifilament Pvt Ltd, NCLAT Delhi Judgement Dated 3rd December 2024. RP could not be blamed for having breached the IBC for the CoC to have approved the resolution plan, with requisite majority share which action was taken by the CoC in the exercise of its commercial wisdom. NCLAT directed to expunge the adverse remarks passed against the RP and partially modified the order. (NCLAT Delhi Judgement dated 03/12/2024)
NCLAT, Non-Fund based agreement to read in manner to make resolution plan workable: Case of State Bank of India vs Jyoti Structures Ltd, NCLAT Delhi Judgement Dated 9th December 2024. NCLAT held that post approval of resolution plan Non-Fund Based [NFB] agreement has to be read in a manner to give effect to the resolution plan and not to make any clause of resolution plan otiose and unworkable. The NFB Agreement entered between the parties was entered to give effect to the approved Resolution Plan between the parties and the NFB Agreement has to be read in a harmonious manner to give effect to the purpose and intent of the clauses of the approved Resolution Plan. (NCLAT Delhi Judgement dated 09/12/2024)
NCLT, Financial creditor cannot sale property of personal guarantors during moratorium under section 96 of IBC: Case of Raghavendra Joshi vs Indian Bank, NCLT Mumbai Judgement Dated 13th November 2024. NCLT held that sale of property of personal guarantors by financial creditor under SARFAESI Act during protection of moratorium under section 96 of the IBC is invalid sale as protection of moratorium under section 96 is far greater than of section 14 of IBC. (NCLT Mumbai Judgement dated 13/11/2024)
I. Reserve Bank of India (RBI)
Unified Payments Interface (UPI) access for Prepaid Payment Instruments (PPIs) through third-party applications: Currently, UPI payments from / to a bank account can be carried out using the UPI application of that bank or of any third-party application provider. However, UPI payments from / to a PPI can only be carried out using the mobile application provided by the PPI issuer. Now, RBI has announced new guidelines to enhance interoperability of full-KYC Prepaid Payment Instruments (PPIs) with Unified Payments Interface (UPI) through third-party applications. The provisions mandate that PPI issuers can link their full-KYC wallets to UPI handles on third-party apps, enabling broader usage while maintaining security protocols. Transactions will be authenticated using UPI credentials for third-party apps and existing wallet credentials for issuer apps. The guideline prohibit PPI issuers, acting as Payment Service Providers (PSPs), from onboarding customers of other banks or PPI issuers. (RBI Notification 97/2024 Dated 27/12/2024)
Reporting Platform for transactions undertaken to hedge price risk of gold: The guidelines mandate reporting of gold derivative transactions by Authorized Dealer Category-I Banks to the Clearing Corporation of India Ltd. (CCIL) trade repository. All over-the-counter (OTC) transactions in gold derivatives conducted by banks and their eligible customers in domestic markets, International Financial Services Centres (IFSC), or overseas must be reported to the trade repository. The banks are also required to retrospectively report all matured and outstanding transactions from April 15, 2024, to February 28, 2025, ensuring data completeness. (RBI Notification 98/2024 Dated 27/12/2024)
Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector: RBI has announced the setting up of a committee to develop FREE-AI in the Financial Sector. The committee will assess the current level of adoption of AI in financial services, globally and in India, review regulatory and supervisory approaches, identify potential risks and recommend a framework including governance aspects for responsible, ethical adoption of AI models / applications in the Indian financial sector. (RBI Press Release Dated 26/12/2024)
J. Miscellaneous
SC, Maintenance of wife & children overrides over statutory financial creditors of Husband within SARFAESI/IBC: Case of Apurva @ Apurvo Bhuvanbabu Mandal vs Dolly, SC Judgement Dated 10th December 2024. The apex court observed that the right to maintenance is equivalent to the right to livelihood, being a subset of the right to dignity and a dignified life, which in turn flows from Article 21 of the Constitution of India. Hence, right to maintenance being equivalent to a fundamental right will be superior to and have overriding effect than the statutory rights afforded to Financial Creditors, Secured Creditors, Operational Creditors or any other such claimants encompassed within the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI), the Insolvency and Bankruptcy Code (IBC), or similar such laws. (SC Judgement Dated 10/12/2024)
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