TaxTMI Updates e-Newsletter
Jan 01,2024

Entitlement to refund under Section 54 of the CGST Act - appeal under Section 107 of the CGST Act - invocation of writ jurisdiction under Article 226 despite availability of alternative remedy - show cause notice and duty to respond - speaking order and adjudication on merits

Entitlement to refund under Section 54 of the CGST Act - speaking order and adjudication on merits - Validity of the demand for IGST and the authority's conclusion that the petitioner was not entitled to the refund claimed under Section 54 of the CGST Act. - HELD THAT: - The Court recorded that the authority issued a show cause notice and, after the petitioner failed to file any response even after pendency and subsequent rejection of an interlocutory petition, passed a detailed speaking order examining and negativing the petitioner's contention of entitlement under Section 54. The High Court found that the deficiency in the petitioner's claim was considered on merits by the adjudicating authority and that the authority has addressed the plea of entitlement under Section 54 in the impugned order. Consequently, the correctness of that adjudication is a matter to be contested in the appropriate appellate forum rather than by interlocutory writ relief. [Paras 6]

The authority's determination negating the petitioner's entitlement under Section 54 has been left intact for challenge by the petitioner through the statutory appellate remedy.

Invocation of writ jurisdiction under Article 226 despite availability of alternative remedy - appeal under Section 107 of the CGST Act - Whether the High Court should entertain the writ petition in exercise of Article 226 when an alternative statutory remedy by appeal under Section 107 is available. - HELD THAT: - Relying on settled principles, including the precedent relied upon by the parties, the Court held that exceptional jurisdiction under Article 226 ought not to be exercised where an efficacious alternative statutory remedy exists. The petitioner's failure to avail of the appeal mechanism under Section 107 and the existence of a detailed adjudicatory order disposing of the claim rendered exercise of extraordinary writ jurisdiction inappropriate. The Court therefore declined to bypass the appellate remedy and dismissed the writ petition on that ground. [Paras 7]

Writ jurisdiction under Article 226 is not to be invoked in the present facts; the petitioner must seek relief by filing the statutory appeal under Section 107.

Final Conclusion: Writ petition dismissed; petitioner is left free to challenge the impugned adjudicatory order by pursuing the remedy of appeal in accordance with law.

Violation of principles of natural justice - Service of statutory notice via GST portal versus entitlement to physical service - Cancellation of GST registration and its effect on service of notices - Remand for fresh assessment with opportunity to file reply - Prohibition on raising limitation defence on remand

Violation of principles of natural justice - Service of statutory notice via GST portal versus entitlement to physical service - Cancellation of GST registration and its effect on service of notices - Impugned assessment order set aside for breach of natural justice owing to lack of time to reply and absence of physical service when registration was cancelled prior to upload. - HELD THAT: - The Court found that the notice in GST ASMT-10 was uploaded on 29.9.2023 and a show cause notice under Section 73 was uploaded the next day, without affording the petitioner any time to file a reply. It was also recorded that the petitioner's GST registration had been cancelled before the notices were uploaded on the portal. In these circumstances the procedure adopted resulted in denial of an opportunity of hearing and thereby violated the principles of natural justice. Consequently the assessment order (Ext.P5) premised on that process is unsustainable and has been set aside. [Paras 3, 4]

Assessment order Ext.P5 is set aside for breach of natural justice.

Remand for fresh assessment with opportunity to file reply - Prohibition on raising limitation defence on remand - Matter remanded for fresh assessment with directions permitting the petitioner to file reply and be heard; petitioner barred from taking limitation as a ground in finalisation. - HELD THAT: - The Court remitted the matter to the assessing authority for fresh consideration and directed that the petitioner be allowed to file a reply to the show cause notice within three days from the date of the order. If a reply is filed, the petitioner must be afforded an opportunity of hearing before finalising the assessment. The Court also expressly recorded that the petitioner shall not take any ground regarding limitation in finalising the assessment for the assessment year 2017-18. [Paras 5]

Matter remanded for fresh assessment; petitioner permitted to file reply within three days and given opportunity of hearing; petitioner estopped from raising limitation defence in the final assessment.

Final Conclusion: The writ petition is allowed in part: the assessment order Ext.P5 is quashed for breach of natural justice and the matter is remanded to the assessing authority for fresh assessment after giving the petitioner the stated opportunity to reply and be heard; the petitioner is precluded from relying on limitation in the remade assessment. The petition stands finally disposed of.

Extension of time for issuance of show-cause notice under Section 168A - application of Section 168A of the Central Goods and Services Tax Act, 2017 - explanation to Section 168A - validity of Central Board of Indirect Taxes and Customs notification - interim restraint on passing final orders pursuant to show-cause notices

Interim restraint on passing final orders pursuant to show-cause notices - extension of time for issuance of show-cause notice under Section 168A - Grant of ad interim relief restraining respondent authority from passing final orders pursuant to show cause notices issued during the period extended by the impugned notification - HELD THAT: - The Court, after hearing the petitioner, recorded the contention that the impugned notification No. 9 of 2023 dated 31.03.2023, issued by the Central Board of Indirect Taxes and Customs under Section 168A of the Act, extended the period for issuance of show cause notices without reciting any ground and despite the absence of the eventualities specified in the explanation to Section 168A. Absent final adjudication on the validity of the notification, the Court found it appropriate to preserve the parties' positions and granted interim protection by restraining the respondent authority from passing any final order pursuant to show cause notices issued during the extended period without the Court's permission until the next date of hearing.

Ad interim relief granted: no final order shall be passed by the respondent authority pursuant to show cause notices issued during the period extended by the impugned notification without the permission of the Court until the next date of hearing.

Validity of Central Board of Indirect Taxes and Customs notification - application of Section 168A of the Central Goods and Services Tax Act, 2017 - explanation to Section 168A - Questioning the legal validity of notification No. 9 of 2023 for extending limitation under Section 168A - HELD THAT: - The Court has taken the challenge to the validity of the impugned notification on board and issued notice returnable on the next date; it did not adjudicate the merits of that challenge at this stage. The petitioner's primary contention - that none of the eventualities specified in the explanation to Section 168A existed when the notification was issued and therefore the extension was not sustainable in law - has been directed to be examined on the returnable date.

Notice issued and the validity of the impugned notification directed to be considered on the returnable date; merits not decided at present.

Final Conclusion: Notice issued on the challenge to notification No. 9 of 2023; ad interim protection granted restraining any final order pursuant to show cause notices issued during the extended period until the next date of hearing.

Pre-deposit of ten per cent of remaining amount of tax in dispute under Section 107(6)(b) of the CGST Act - pre-deposit of admitted amount including tax, interest, fine, fee and penalty under Section 107(6)(a) of the CGST Act - distinction between tax and consequential penalties, fees and interest for purposes of pre-deposit - literal interpretation of statutory language

Pre-deposit of ten per cent of remaining amount of tax in dispute under Section 107(6)(b) of the CGST Act - distinction between tax and consequential penalties, fees and interest for purposes of pre-deposit - literal interpretation of statutory language - Whether the 10% pre-deposit mandated by Section 107(6)(b) of the CGST Act applies to the whole composite demand (tax, interest, fine, fee and penalty) or only to the disputed tax amount when the appellant disputes the entire tax liability. - HELD THAT: - Section 107(6) requires payment in full of amounts admitted by the appellant (tax, interest, fine, fee and penalty) under clause (a) and separately mandates under clause (b) payment of a sum equal to ten per cent of the remaining amount of tax in dispute. The language of clause (b) expressly refers only to the "remaining amount of tax in dispute" and omits any reference to disputed interest, fine, fee or penalty. That omission reflects a legislative choice and must be given effect by literal construction; penalties, fees and interest are consequential upon determination of the tax liability and are therefore not included within the phrase "tax in dispute" used in clause (b). Construing clause (b) to include consequential elements would defeat the clear statutory scheme that distinguishes admitted amounts (clause (a)) from the limited 10% pre-deposit on disputed tax (clause (b)). Applying these principles, the appellate authority erred in computing the 10% pre-deposit on the entire composite demand instead of only on the disputed tax amount. The court relied on established rules of statutory interpretation that the legislature is presumed to have said what it meant and the court cannot supply omissions. [Paras 10, 11, 12, 13, 14]

The 10% pre-deposit under Section 107(6)(b) applies only to the disputed tax amount and does not extend to disputed interest, fine, fee or penalty; the impugned direction to pre-deposit 10% of the entire composite demand is set aside and the appellate authority is directed to admit the appeal as the petitioner has deposited 10% of the tax liability.

Final Conclusion: Writ petition allowed; impugned order directing pre-deposit of 10% of the entire demand set aside and appellate authority directed to admit the appeal, petitioner having deposited 10% of the tax liability.

Liberty to file appeal - entertain appeal without insisting on limitation - afford an opportunity of hearing before disposal - service of communications on contact details provided by the taxpayer - assessment proceedings initiated due to input mismatch between GSTR-3B and GSTR-2A

Liberty to file appeal - entertain appeal without insisting on limitation - afford an opportunity of hearing before disposal - service of communications on contact details provided by the taxpayer - Petitioner's challenge to the assessment orders was not quashed; instead the petitioner was granted liberty to file an appeal and the appellate authority was directed to entertain the appeal without insisting on limitation and to dispose it after affording an opportunity to the petitioner. - HELD THAT: - The petitioner alleged non-receipt of communications because the mobile number and email registered for notices related to the impugned proceedings belonged to employees/consultants who had since died, and thus the petitioner remained unaware of the initiation and consequential orders. The State submitted that communications were sent to the contact details provided by the petitioner and the petitioner should have engaged replacement personnel. The petitioner sought permission to agitate the matter before the Appellate Authority. The Court, after considering the submissions, did not quash the impugned assessment orders but exercised its supervisory power to grant relief by permitting the petitioner to prefer an appeal. The Court directed that the appeal be filed within thirty days from receipt of the order and that the authorities shall entertain the appeal without raising limitation as a bar, and shall decide the appeal in accordance with law after giving the petitioner an opportunity to be heard.

Liberty granted to the petitioner to file an appeal within thirty days from receipt of copy of this order; appellate authority to entertain the appeal without insisting on limitation and dispose it after affording an opportunity to the petitioner.

Final Conclusion: Writ petition disposed by granting the petitioner liberty to file an appeal against the assessment order for 2019-2020 within thirty days; the appellate authority to entertain the appeal notwithstanding limitation and to decide it after affording opportunity of hearing.

Discretion to cancel GST registration under Section 29(2) of the CGST Act - Retrospective cancellation of GST registration - Requirement of reasoned order for retrospective effect - Cancellation for failure to file returns - Cancellation to take effect from date of show cause notice - Opportunity to file pending returns before final effect

Retrospective cancellation of GST registration - Requirement of reasoned order for retrospective effect - Discretion to cancel GST registration under Section 29(2) of the CGST Act - Impugned retrospective cancellation of the petitioner's GST registration from 01.07.2017 is invalid for want of reasoned exercise of discretion. - HELD THAT: - The Court observed that while Section 29(2) of the CGST Act confers a discretion on the proper officer to cancel registration from such date as he considers fit, that discretion cannot be exercised arbitrarily or whimsically and must be informed by reasons. The impugned order merely records that no reply was received to the show cause notice and does not state any reason for cancelling registration, much less for doing so retrospectively. In the absence of any reasoned justification for retrospective cancellation, the order purporting to cancel registration from 01.07.2017 is liable to be set aside. [Paras 11, 13, 14]

Retrospective cancellation set aside for lack of reasons; cancellation from 01.07.2017 held invalid.

Cancellation for failure to file returns - Cancellation to take effect from date of show cause notice - Opportunity to file pending returns before final effect - Cancellation may operate prospectively from the date of the show cause notice and the petitioner is to be given an opportunity to file pending returns. - HELD THAT: - The Court noted that the cancellation was effected on the ground of failure to furnish returns for a continuous period of six months, whereas the petitioner had filed returns up to 31.03.2022. Cancellation for non-filing of returns does not justify nullifying the period during which returns were actually filed. The Court therefore directed that cancellation shall take effect from the date of the show cause notice, 15.01.2023, and granted the petitioner four weeks to comply by filing the outstanding returns up to that date. The Court also clarified that the concerned authority remains free to proceed if other violations or recoveries are found to be due. [Paras 9, 15, 16, 17, 18]

Cancellation to operate prospectively from 15.01.2023; petitioner granted four weeks to file pending returns; enforcement of other rights and recovery preserved.

Final Conclusion: The petition is allowed to the extent that the retrospective cancellation of GST registration from 01.07.2017 is quashed; the cancellation shall instead take effect from 15.01.2023, and the petitioner is granted four weeks to file the outstanding returns, without prejudice to the authority pursuing any other proceedings or recovery.

Processing of refund of input tax credit including cess - prohibition on successive re-adjudication and multiple show cause notices - requirement of a single show cause notice setting out all grounds and a final adjudicatory order - finality of proceedings and appellate power under Section 107(11) of the CGST Act - liberty to initiate separate proceedings for wrongful/refunded claims based on fabricated invoices

Prohibition on successive re-adjudication and multiple show cause notices - processing of refund of input tax credit including cess - Respondents were not permitted to re-open and re-adjudicate the petitioner's refund application by issuing a fresh show cause notice after this Court had directed processing of the refund. - HELD THAT: - The Court observed that once the petitioner's refund application had been examined, a show cause notice was issued, the petitioner replied and additional documents were furnished, and a final order rejecting the claim was passed and upheld on appeal. After this Court directed the respondents to process the refund, the respondents issued a further show cause notice and resumed scrutiny. The Court held that successive issuance of show cause notices and repeated re-adjudication of the same refund claim in that manner is impermissible. Having granted the petitioner relief, the respondents were required to pass the sanction order in accordance with law rather than re-adjudicate the application repeatedly. [Paras 3, 5, 6, 9]

Issuance of a subsequent show cause notice to re-adjudicate the refund claim after the Court's direction was impermissible; respondents must proceed to pass the appropriate order for sanctioning the refund in accordance with law.

Requirement of a single show cause notice setting out all grounds and a final adjudicatory order - The proper procedure for adjudication of a refund application is to issue a show cause notice specifying all grounds proposed for rejection, afford the taxpayer an opportunity to reply, and then pass a final order accepting or rejecting the claim with clear reasons. - HELD THAT: - The Court emphasised that an application for refund must be examined in its entirety. If further clarification or proof is needed, the officer should issue a show cause notice setting out all grounds so that the taxpayer may meet the allegations. After the taxpayer's response, the officer must pass a final order either allowing the refund or rejecting it with reasons. This ensures procedural fairness and finality in the adjudicatory process. [Paras 7]

Adjudication must follow the course of a single comprehensive show cause notice, opportunity to reply, and a final reasoned order.

Finality of proceedings and appellate power under Section 107(11) of the CGST Act - The Appellate Authority under the provisions reflected in Section 107(11) cannot remit the matter back to the adjudicating authority; it must pass such order as it deems just and proper, ensuring finality. - HELD THAT: - The Court noted that the Appellate Authority is empowered to confirm, modify or annul the order appealed against but is not permitted to refer the case back to the adjudicating authority for fresh consideration. This legislative scheme demonstrates an intent to secure finality in proceedings and prevents successive cycles of adjudication and remand that would prolong resolution. [Paras 8]

Appellate Authority does not have power to remand the matter to the adjudicating authority; it must decide the appeal finally as per its powers.

Liberty to initiate separate proceedings for wrongful/refunded claims based on fabricated invoices - The respondents retain the liberty to initiate appropriate proceedings (for example under provisions dealing with recovery or wrongful claims) if material establishes that the petitioner wrongfully claimed refund on the basis of fabricated invoices or non-supply. - HELD THAT: - While prohibiting successive re-adjudication of the same refund application, the Court made clear that its order did not preclude the respondents from initiating any action warranted by cogent material. If it is established that the petitioner claimed refund relying on fabricated invoices or that the supplier had not supplied goods, the respondents may initiate appropriate proceedings in accordance with law (including relevant provisions for recovery or assessment). [Paras 6, 10]

Respondents may initiate separate legal action if material is found to justify proceedings for wrongful refund claims, but cannot re-adjudicate the same refund application by iterative show cause notices.

Final Conclusion: The application for clarification is disposed of: respondents were directed to comply with the Court's earlier direction to process the petitioner's refund claim and not to re-adjudicate the application by issuing successive show cause notices; however, respondents remain free to initiate appropriate proceedings if cogent material discloses wrongful claim or fabricated invoices.

Writ against show-cause notice - prematurity of writ - jurisdictional challenge to notice and non est - failure to pass on benefit of tax reduction under Section 71 of the CGST Act, 2017 - obligation to reply to notice and produce documents - virtual hearings by the Competition Commission of India

Writ against show-cause notice - prematurity of writ - jurisdictional challenge to notice and non est - obligation to reply to notice and produce documents - Maintainability of writ petition challenging notice and summons issued under Rule 129 of the CGST Rules, 2017 and Section 71 allegations - HELD THAT: - The High Court applied settled precedents holding that ordinarily a writ petition challenging a show-cause notice or charge-sheet is premature and should not be entertained unless the notice is totally non est or issued without jurisdiction. A show-cause notice does not by itself give rise to a cause of action because no adverse order affecting rights has been passed; the recipient must ordinarily be directed to reply and pursue statutory remedy. The petitioner's factual and practical contentions (difficulty of passing on commensurate reduction for services, ticket price fixation by State, variation across categories, and payment of tax at reduced rate) are defences available to be raised before the authority and do not establish a jurisdictional defect. Consequently the petitioner was directed to appear, furnish a detailed reply and relevant documents; the authority is expected to consider the submissions and proceed in accordance with law, including dropping proceedings if warranted. [Paras 13, 14, 15]

Writ petition to quash the notice and summons is not entertained; petitioner to appear and file response and the authority to decide further in accordance with law.

Virtual hearings by the Competition Commission of India - Direction to the Competition Commission of India regarding manner of hearings - HELD THAT: - Noting practical hardship caused by requirement of physical appearance at the Commission in New Delhi, the Court directed the Competition Commission of India to take steps to permit interested parties to appear and contest their cases virtually. The direction recognises the move towards digital hearings and addresses economic and logistical difficulties of mandatory physical presence, while leaving the Commission to implement measures permitting virtual participation. [Paras 16]

Competition Commission of India to ensure interested persons may be permitted to appear and contest their cases virtually instead of insisting on physical presence.

Final Conclusion: Writ petitions dismissed with liberty to the petitioner to appear before the authorities, file detailed replies and documents; authorities to proceed in accordance with law. The Competition Commission of India is directed to facilitate virtual appearances for parties.

Interim protection from coercive action - show cause notices - entitlement to parity of interim relief - challenge to validity of Rule 31A of the CGST Rules, 2017 and Section 15(5) of the CGST Act, 2017 - continuance of adjudicatory proceedings subject to further orders

Interim protection from coercive action - entitlement to parity of interim relief - show cause notices - continuance of adjudicatory proceedings subject to further orders - Petitioner entitled to interim protection restraining respondents from taking coercive action pursuant to the show cause notices and proceedings to continue subject to further orders - HELD THAT: - The High Court observed that the core subject-matter of the petition - namely the contention that the petitioner's gaming platform amounts to betting and gambling and the attendant challenge to Rule 31A of the CGST Rules, 2017 and Section 15(5) of the CGST Act, 2017 - is identical to matters in which the High Court of Gujarat had granted interim relief. Applying parity, the Court granted interim protection to the petitioner and restrained the respondents from taking any coercive action pursuant to the show cause notices. The order is limited to restraint from coercive measures; the petitioner is, however, directed to file responses to the show cause notices and the adjudicatory proceedings are permitted to continue, remaining subject to further orders of this Court.

Respondents restrained from taking coercive action under the show cause notices; petitioner directed to respond and proceedings shall continue subject to further orders.

Final Conclusion: Interim relief granted: respondents are prohibited from taking coercive action pursuant to the show cause notices; the petitioner must respond to the notices and the adjudicatory proceedings may continue, with all actions subject to further orders of the Court.

Release of confiscated goods and conveyance on satisfaction of tax/penalty liability - refund of wrongly deposited tax/penalty - re-deposit by correct taxable person as condition for release - temporary GST registration and attribution of payment - remedy by online refund application on GST portal

Release of confiscated goods and conveyance on satisfaction of tax/penalty liability - re-deposit by correct taxable person as condition for release - temporary GST registration and attribution of payment - Whether the confiscated goods and the vehicle should be released upon correct attribution of the penalty and fine to the temporary GST registration created in the name of petitioner No. 2. - HELD THAT: - The Court noted that the vehicle was detained on account of alleged contravention of the Punjab GST Act, 2017 and that a temporary GST registration had been generated in the name of petitioner No. 2 after he came forward post-detention. The penalty and fine, however, were deposited into the GST account of petitioner No. 1. The State's affidavit explained that because the temporary registration stands in petitioner No. 2's name, the penalty and fine must be attributed to that registration before the conveyance can be released, and that the amount wrongly deposited by petitioner No. 1 can be utilized by her for future liabilities or reclaimed by filing an online refund application with the jurisdictional officer. Having regard to the admitted facts and the State's position, the Court directed a practical remedy: the jurisdictional officer was ordered to refund the wrongly deposited amount to petitioner No. 1 within a specified short period so that petitioner No. 2 may deposit the amount in the correct registration and thereby enable release of the goods and vehicle. The direction balances the requirement that the correct taxable person satisfy the liability for release with the petitioners' financial hardship by requiring a refund rather than double payment. [Paras 3, 4, 5]

Ordered refund of the amount wrongly deposited by petitioner No. 1 by the Superintendent, Muktsar Ward I, Central GST/Jurisdictional Officer within 10 days of receipt of certified copy of the order; upon deposit by petitioner No. 2 in the correct temporary registration, directed release of the goods and vehicle within one week.

Final Conclusion: Writ petition disposed by directing the jurisdictional officer to refund the penalty/fine wrongly deposited into petitioner No. 1's GST account within 10 days; upon correct deposit by petitioner No. 2 into the temporary registration, the confiscated goods and vehicle to be released within one week.

Validity of Rule 96(10)(b) of Central Goods and Service Tax Rules/State Goods and Service Tax Rules - Ultra vires challenge under Article 14 of the Constitution of India - Interim relief - prohibition on coercive recovery - Parity with similarly situated petitioners - Adjudication proceedings to continue subject to restraint on coercive measures

Validity of Rule 96(10)(b) of Central Goods and Service Tax Rules/State Goods and Service Tax Rules - Ultra vires challenge under Article 14 of the Constitution of India - Interim relief - prohibition on coercive recovery - Parity with similarly situated petitioners - Interim relief was granted by restraining coercive recovery and notice was issued in the challenge to the validity of Rule 96(10)(b). - HELD THAT: - The petition challenges the vires of Rule 96(10)(b) as being ultra vires Article 14. The Court noted that other petitions raising similar contentions have been admitted and interim relief granted. Applying parity with those similarly situated petitioners, the Court issued notice and directed that, while adjudication proceedings may continue, no coercive recovery shall be made against the petitioner pending disposal of the petition returnable on 21.06.2023. The order relied on the Coordinate Bench's order which observed that petitioners deserving parity should be entitled to ad-interim relief and recorded that adjudication may proceed subject to non-coercive restraint. [Paras 3]

Notice issued returnable on 21.06.2023; adjudication may continue but no coercive recovery shall be made against the petitioner in the meantime.

Final Conclusion: Notice on the petition challenging Rule 96(10)(b) issued returnable on 21.06.2023; interim relief granted restraining coercive recovery while adjudication proceedings may continue.

Change in rate of tax in respect of supply of goods or services (Section 14) - Time of supply - Works contract - Continuous supply of services - Applicability of notification - Advance ruling

Change in rate of tax in respect of supply of goods or services (Section 14) - Time of supply - Works contract - Continuous supply of services - Applicable GST rate for works contracts awarded before the notification No. 03/2022-Central Tax (Rate) dated 13.07.2022 (w.e.f. 18.07.2022). - HELD THAT: - The Authority applied the statutory rule contained in Section 14 of the CGST Act to determine the applicable rate where the rate of tax changes during the course of an ongoing supply of services. Works contracts are contractual supplies that qualify as continuous supply of services for the purpose of invoicing and time of supply. Under Section 14, where the supply has been made before the change in rate, the time of supply (and hence the rate applicable) is determined by the relative dates of issue of invoice and receipt of payment; similarly, supplies made after the change are governed by the dates of invoice and payment as specified in the provision. Applying these principles to the facts and invoices submitted by the applicant, the Authority held that transactions in respect of which advance was received or invoices were raised before 18.07.2022 attract GST at 12%, whereas transactions where advance is received or invoices are raised on or after 18.07.2022 attract GST at 18%, as illustrated by the table of invoices at paragraph 13.1. [Paras 13, 14]

Where advance is received or invoices are raised before 18.07.2022 the applicable GST rate is 12%; where advance is received or invoices are raised on or after 18.07.2022 the applicable GST rate is 18%.

Final Conclusion: The Authority ruled that the change in rate effected by Notification No. 03/2022 (w.e.f. 18.07.2022) must be applied in terms of Section 14: invoices or advances dated before 18.07.2022 attract 12% GST, and those dated on or after 18.07.2022 attract 18% GST; the table in paragraph 13.1 illustrates the application to the applicant's invoices.

Classification of goods - diagnostic reagents designed to be administered to the patient - radioactive isotopes and their compounds - General Rules for interpretation of the Harmonized System - Section VI Note 1(A) and Section Note 2

Classification of goods - diagnostic reagents designed to be administered to the patient - General Rules for interpretation of the Harmonized System - Whether the F 18 products are classifiable under HSN 30063000 (diagnostic reagents designed to be administered to the patient) attracting GST at 12% - HELD THAT: - The Authority examined the product description and the applicable tariff interpretation rules. While the applicant relied on the Chapter 30 Note 4(d) description of diagnostic reagents put up in measured doses for administration to the patient, classification must follow the General Rules for interpretation of the Harmonized System and relevant Section and Chapter Notes. Section VI Notes require that goods answering to a description in heading 28.44 (radioactive chemical elements and radioactive isotopes and their compounds) are to be classified in that heading and in no other heading of the Nomenclature. Although the F 18 products are used as diagnostic reagents in medical imaging, they are compounds of the radioisotope 18F and therefore fall squarely within heading 2844. The Section Notes thus prevail and preclude classification under chapter 30 despite the products meeting the descriptive terms of heading 3006. [Paras 15]

F 18 products are not classifiable under HSN 30063000; the answer to the question is negative.

Radioactive isotopes and their compounds - classification of goods - If not classifiable under HSN 30063000, what is the correct HSN classification and GST rate for the F 18 products - HELD THAT: - Applying the Section VI Note that mandates classification of radioactive elements, isotopes and their compounds in heading 2844, the Authority concluded that 18F compounds (including 18F FDG and related radiopharmaceuticals) are classifiable under heading 2844. Having determined the correct HSN heading, the applicable rate under the relevant GST notifications is the rate tied to heading 2844. [Paras 15, 16]

F 18 products are classifiable under heading 2844 and attract GST at 18% (9% CGST + 9% SGST).

Final Conclusion: The Advance Ruling holds that F 18 radiopharmaceutical compounds are not classifiable as diagnostic reagents under HSN 30063000 but as radioactive isotopes and their compounds under HSN 2844, and accordingly attract GST at 18% (9% CGST + 9% SGST).

Applicability of advance ruling to the supplier (and not a recipient) - Definition and scope of "supply" under GST - Binding effect of an advance ruling on the applicant

Applicability of advance ruling to the supplier (and not a recipient) - Definition and scope of "supply" under GST - Admissibility of the applicant's request for advance ruling where the applicant is a recipient of services and not the supplier - HELD THAT: - The Authority examined the statutory definition of "advance ruling" and the role of an "applicant" under section 95 read with section 97(2) and concluded that advance rulings are intended to decide matters "in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant". The term "supply" as set out in section 7 was considered to show that the scheme contemplates the applicant being a supplier (or a person proposing to make supplies), not merely a recipient. Since the applicant in the present matter seeks a determination while being the recipient of the services provided by MVVNL, the Authority held that the application does not fall within the category of persons entitled to seek an advance ruling. The Authority also noted that under section 103(1)(a) the advance ruling is binding only on the applicant, reinforcing that the statutory scheme confines the remedy to suppliers seeking clarity about supplies they make or propose to make. On these grounds the Authority declined to admit the application for consideration on merits and did not proceed to decide the substantive questions raised. [Paras 10, 11, 12, 13, 14]

Application for advance ruling is not admissible because the applicant is a recipient and not a supplier, and therefore no ruling on merits can be given.

Final Conclusion: The Authority declined to admit the application for advance ruling because the applicant is a recipient of the services and not the supplier; consequently no substantive ruling was given.

Classification of goods - HSN classification - composite supply - mixed supply - principal supply - treatment of mixed supply under Section 8(b) - tax rate on mixed supply - treatment of components as separate supplies - GST rate applicable to solar panels - GST rate applicable to motor controllers - GST rate applicable to power driven pumps

Classification of goods - GST rate applicable to solar panels - GST rate applicable to motor controllers - GST rate applicable to power driven pumps - treatment of components as separate supplies - Applicable GST rate and classification for the components of a solar driven submersible pump. - HELD THAT: - The Authority examined the constituent components submitted (solar panels, controller and submersible pump) and held that the components are distinct goods capable of independent use. Solar panels (photovoltaic modules) are classifiable under heading 8541 43 00 and attract GST at the rate prescribed for such photovoltaic cells/modules. Controllers, being electrical transformers/static converters/inductors, fall under Chapter Heading 8504 and attract the rate prescribed for that heading. Submersible pumps are classifiable under heading 8413 as power-driven pumps primarily designed for handling water and attract the rate prescribed for such pumps. In the absence of technical specifications to show that the entire assembly functions only as an inseparable solar device, each component must be classified according to its respective tariff heading and rate. Having identified the classification and applicable rates for the individual components, the Authority applied the mixed-supply rule (see issue on nature of supply) to determine the GST to be levied on the composite offering in the applicant's case. [Paras 11]

Solar panels are classifiable under heading 8541 43 00 and chargeable to GST at the rate applicable to that heading; controllers are classifiable under heading 8504 and chargeable at the rate applicable to that heading; submersible pumps are classifiable under heading 8413 and chargeable at the rate applicable to that heading.

Mixed supply - composite supply - principal supply - treatment of mixed supply under Section 8(b) - tax rate on mixed supply - HSN classification - Whether the supply of solar panel, controller and submersible pump taken together is a single/composite supply or a mixed supply and the GST treatment/HSN outcome for such supply. - HELD THAT: - Applying the statutory definitions of 'composite supply' and 'mixed supply', the Authority found that the three items are not naturally bundled in the ordinary course of business, no principal supply can be identified, and each item can be supplied separately. Therefore the aggregate offering proposed by the applicant does not constitute a composite supply but falls within the definition of a mixed supply. Under the rule for mixed supplies, the entire supply is to be treated as the supply attracting the highest rate of tax among the component supplies (as per Section 8(b) logic applied by the Authority). Consequently, for the applicant's proposed supply of the solar-driven submersible pump system (solar panel + controller + pump), the highest applicable GST rate among the component goods governs the tax liability. The Authority recorded that the HSN to be used will accordingly be determined by treating the supply as a mixed supply and applying the highest rate amongst the goods supplied. [Paras 12, 13, 14]

The combined supply of solar panel, controller and submersible pump is a mixed supply; the entire supply is taxable at the highest rate applicable to any of the component goods, and the HSN/treatment for invoicing shall follow that mixed-supply determination.

Final Conclusion: The Authority ruled that the constituents of the solar driven submersible pump are to be classified under their respective tariff headings (solar panels under photovoltaic modules; controllers under Chapter 8504; submersible pumps under heading 8413). The composite offering proposed by the applicant is a mixed supply, and GST is to be charged at the highest rate applicable to any of the component goods; accordingly the applicable tax rate on the applicant's supply is 18% (CGST 9% + SGST 9%) within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh.

Restriction on claiming deductions unless return furnished by due date (interpretation of Section 80AC vis-a -vis Section 139(1)) - Effect of revised return and returns under Section 139(4)/139(5) on entitlement to deductions - Bonafide delay due to delayed statutory audit as basis for permitting deduction where entitlement established on merits - Appellate authority's jurisdiction to entertain deduction claimed before it though not claimed in original return

Restriction on claiming deductions unless return furnished by due date (interpretation of Section 80AC vis-a -vis Section 139(1)) - Effect of revised return and returns under Section 139(4)/139(5) on entitlement to deductions - Bonafide delay due to delayed statutory audit as basis for permitting deduction where entitlement established on merits - Appellate authority's jurisdiction to entertain deduction claimed before it though not claimed in original return - Whether deduction under Section 80IB(10) could be allowed although the original return for AY 2006-2007 was filed after the due date prescribed under Section 139(1) - HELD THAT: - The Court acknowledged the statutory bar in Section 80AC which ordinarily precludes allowance of deductions under Chapter VI-A unless the return is furnished on or before the due date in Section 139(1). Earlier authorities show that a return filed under Section 139(4) does not meet the requirement of furnishing the return 'in due time' under Section 139(1) for purposes of statutory consequences. However, on the facts of this case the Commissioner(A) and the ITAT had concurrently examined the claim on merits and found that the assessee was entitled to particular deductions under Section 80IB(10), which they computed. The assessee's explanation for late filing - delay in statutory audit - was accepted on the material before the authorities and was not disputed by Revenue. Having regard to (a) the undisputed factual finding of entitlement on merits, (b) the acceptance on facts of a reasonable and bona fide cause for delay in filing, and (c) the appellate forum's duty to ensure that taxpayers are not saddled with tax to which they are not liable, the Court held that in these circumstances the assessee should not be denied the deductions otherwise admissible. The Court therefore affirmed the ITAT's approach of allowing the computed deductions despite the original return being time barred, distinguishing the general rule by applying it to the present accepted factual matrix. [Paras 4, 5]

Appeal dismissed; deductions under Section 80IB(10) allowed to the assessee for AY 2006-2007 on the concurrent factual findings and accepted bonafide cause for delayed filing.

Final Conclusion: Where the assessing and appellate authorities have concurrently found on the facts that an assessee is entitled to deductions under Section 80IB(10) and a bona fide, reasonable cause (delay in audit) for late filing of the original return has been accepted, the Court declined to deny the statutory deduction under Section 80IB(10) despite the general bar in Section 80AC, and dismissed the Revenue's appeal for AY 2006-2007.

Immunity from imposition of penalty under Section 270AA - Misreporting of income / misrepresentation or suppression of facts under Section 270A(9) - Maintainability of application under Section 270AA where assessment records misreporting under Section 270A(9) - Assessing officer not to re open or sit in appeal against own assessment while deciding application under Section 270AA - Initiation of penalty proceedings under Section 270A

Immunity from imposition of penalty under Section 270AA - Misreporting of income / misrepresentation or suppression of facts under Section 270A(9) - Maintainability of application under Section 270AA where assessment records misreporting under Section 270A(9) - Application under Section 270AA is not maintainable where the assessment order records misreporting or misrepresentation of facts falling under sub section (9) of Section 270A. - HELD THAT: - Section 270AA permits an assessee to seek immunity from penalty subject to prescribed conditions, but such immunity is barred where penalty proceedings are to be initiated under circumstances set out in sub section (9) of Section 270A. Sub section (9) enumerates misreporting incidents including misrepresentation or suppression of facts, failure to record investments or receipts, false entries, unsubstantiated claims of expenditure and non reporting of international or specified domestic transactions. The assessment order (paragraph 3.10 reproduced in the judgment) specifically records that the assessee not only under reported income but misrepresented facts by claiming deductions already self disallowed, and accordingly initiated penalty proceedings under Section 270A(9). Where the assessment order contains such a specific finding of misreporting/misrepresentation, the Assessing Officer, when processing an application under Section 270AA, is precluded from re examining or reversing that finding; the statutory scheme bars grant of immunity in such cases. The impugned order rejecting the Section 270AA application on that ground is lawful. [Paras 4, 6, 7, 8]

Application under Section 270AA was rightly rejected as not maintainable in view of the assessment finding of misreporting under Section 270A(9).

Assessing officer not to re open or sit in appeal against own assessment while deciding application under Section 270AA - Initiation of penalty proceedings under Section 270A - While deciding an application under Section 270AA the Assessing Officer cannot re open or sit in appeal against the assessment order by re assessing the correctness of findings already recorded in the assessment. - HELD THAT: - The court emphasised that the Assessing Officer, in considering an application for immunity under Section 270AA, must not reassess or re adjudicate matters already concluded in the assessment order. If the assessment contains a specific finding that the assessee misreported income or misrepresented facts, that finding precludes grant of immunity under Section 270AA and the AO must proceed accordingly rather than re examine the assessment on merits. The impugned rejection proceeded on the basis of the assessment finding and did not illegally re open the assessment; accordingly, no illegality was found in the AO's approach. [Paras 8]

Assessing Officer correctly refused to entertain the Section 270AA application by applying the assessment finding and did not err in declining to grant immunity.

Final Conclusion: Writ petition dismissed; the rejection of the petitioner's application for immunity under Section 270AA was upheld as the assessment recorded misreporting falling under Section 270A(9), rendering the application not maintainable.

Penalty under Section 271(1)(c) for concealment of income - Validity of revised return under Section 139(5) - Voluntary disclosure versus after thought disclosure - Relevance of survey operations/discovery to levy of penalty - Regularisation of revised return by notice under Section 148

Validity of revised return under Section 139(5) - Voluntary disclosure versus after thought disclosure - Whether the revised returns filed on 15.03.2006 amounted to voluntary disclosures which would preclude levy of penalty under Section 271(1)(c). - HELD THAT: - The Court accepted the factual finding that the Department's survey of Apollo Hospitals in February 2006 precipitated the disclosure and that the assessee filed revised returns after the survey and contemporaneous investigation. Applying authority that a disclosure made after the Revenue has discovered falsity in the original return (or after events disclosing concealed income) is an after thought, the Court agreed with the ITAT that such disclosures cannot be treated as voluntary for the purpose of avoiding penalty. The assessing officer had specific findings that the omissions were deliberate and that no satisfactory explanation was given for failure to disclose the full professional income in the original returns. The Court held that, on these facts, the revised returns were not voluntary disclosures capable of negativing liability under Explanation 1 to Section 271(1)(c). [Paras 13, 14]

Revised returns of 15.03.2006 were not voluntary disclosures and could not preclude imposition of penalty under Section 271(1)(c).

Penalty under Section 271(1)(c) for concealment of income - Relevance of survey operations/discovery to levy of penalty - Regularisation of revised return by notice under Section 148 - Whether the ITAT was right in sustaining the levy of penalty under Section 271(1)(c) having regard to the survey, the subsequent revised returns and the later issuance of notice under Section 148 to regularise those returns. - HELD THAT: - The Court examined the sequence of events and the legal principle that penalty proceedings may be sustained where the disclosure stems from a discovery by the Revenue and the assessee fails to give a satisfactory, bona fide explanation. The Court rejected the contention that regularisation of the revised return by issuance of a notice under Section 148 converts an after thought disclosure into a voluntary one for the purposes of negating penalty. Reliance by the CIT(A) on a decision favourable to the assessee was held to be factually distinguishable. The Court upheld the ITAT's application of precedents which support levy of penalty where concealment is deliberate and the revised return follows investigative disclosure. [Paras 13, 14]

ITAT correctly sustained penalty under Section 271(1)(c); regularisation under Section 148 did not preclude penalty where disclosure was an after thought following survey.

Final Conclusion: All three Tax Case Appeals are dismissed; the substantial questions of law are answered against the appellant and in favour of the Revenue.

Reopening of assessment - notice under Section 148 - limitation / barred by limitation - service, dispatch and date of issuance of notice - electronic service / e-mail and absence of digital signature - procedure under Section 148A (Finance Act, 2021) - deemed issuance under Section 148A - setting aside assessment for lack of authority

Notice under Section 148 - service, dispatch and date of issuance of notice - electronic service / e-mail and absence of digital signature - limitation / barred by limitation - setting aside assessment for lack of authority - Validity of the notice dated 31.03.2021 and lawfulness of the assessment order passed pursuant thereto - HELD THAT: - The Court examined the dates on which the notice was prepared, electronically sent and physically dispatched/served. Although the notice was prepared on 31.03.2021, the electronic copy was sent by e-mail and the physical dispatch occurred on 01.04.2021, and physical service to the petitioner was on 05.04.2021. The unsignatured digital copy sent by e-mail cannot be treated as having been validly issued on 31.03.2021. Consequently the assessment order passed on the basis of the notice purportedly issued on 31.03.2021 was held to be without authority and barred by limitation. The Court therefore set aside the impugned assessment order as it was founded on a notice not lawfully issued within time. [Paras 6, 7]

Impugned assessment order set aside as barred by limitation for being founded on a notice not lawfully issued.

Procedure under Section 148A (Finance Act, 2021) - reopening of assessment - deemed issuance under Section 148A - Whether reopening proceedings should be treated and proceeded with under the regime of Section 148A and directions for further action - HELD THAT: - Although the reopening action was initiated before 01.04.2021, the Court, having set aside the assessment, invoked the decision of the Supreme Court in Union of India v. Ashish Agarwal and directed that the impugned notice shall be deemed to have been issued under Section 148A as amended by the Finance Act, 2021. In the interest of revenue and fairness, the Court did not remand for blind reissue but directed procedural compliance: the Assessment Officer must furnish relevant documents to the petitioner on request within 30 days, allow two weeks for the petitioner to file a reply, afford an opportunity of personal hearing, and thereafter pass fresh assessment/reassessment in accordance with law. [Paras 7, 8]

Matter remitted for fresh consideration and assessment under the procedure of Section 148A, with specific directions for document production, reply period, hearing and fresh order.

Final Conclusion: Writ petition allowed: the assessment order for Assessment year 2015-2016 set aside as barred by limitation; the matter is remitted with directions treating the notice as deemed issued under Section 148A (Finance Act, 2021) and for the Assessing Officer to furnish documents, permit reply and personal hearing and to pass fresh assessment/reassessment in accordance with law.

Absence of jurisdiction under section 251 to dismiss appeal for non-prosecution - principles of natural justice - opportunity of being heard - remand for fresh adjudication and speaking order - transfer pricing adjustment and determination of arm's length price - comparability and functional comparability under Rule 10B(2)

Absence of jurisdiction under section 251 to dismiss appeal for non-prosecution - principles of natural justice - opportunity of being heard - Validity of ld. CIT(A)'s ex parte dismissal of the assessee's appeal for non prosecution - HELD THAT: - The Tribunal found that section 251 of the Income tax Act does not confer power upon the ld. CIT(A) to dismiss an appeal for non prosecution. Having noted the assessee's contention that an adjournment had been sought before the CIT(A), the Tribunal held that summary dismissal in such circumstances was not permissible under the statutory scheme and in the interests of natural justice. Consequently, the matter could not be left as an ex parte dismissal without adjudication on merits and without affording the assessee an adequate opportunity of being heard. [Paras 7]

Ld. CIT(A)'s ex parte dismissal for non prosecution set aside for being beyond the power conferred by section 251 and for breach of principles of natural justice.

Remand for fresh adjudication and speaking order - transfer pricing adjustment and determination of arm's length price - comparability and functional comparability under Rule 10B(2) - Disposition of the transfer pricing adjustments and related grounds of appeal (selection/rejection of comparables, CUP/cost to cost contention, working capital differences) - HELD THAT: - The Tribunal did not decide the transfer pricing contentions on merits. Instead, in light of the defect in the appellate procedure, the Tribunal remitted the entire issue to the file of the ld. CIT(A) with directions to adjudicate the contested transfer pricing adjustment and the grounds raised by the assessee (including comparability, applicability of CUP or cost to cost treatment, combined losses in the value chain, and working capital differences) by passing a speaking order after giving the assessee adequate opportunity of being heard. The remand requires fresh consideration of these matters by the CIT(A) rather than affirmation based on the prior ex parte approach. [Paras 7, 8]

Transfer pricing adjustment and related grounds remitted to ld. CIT(A) for fresh adjudication and a speaking order after affording the assessee an opportunity of being heard; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s ex parte dismissal as beyond the power under section 251 and contrary to natural justice, remitted the transfer pricing issues to the CIT(A) for fresh adjudication by a speaking order after hearing the assessee, and allowed the appeal for statistical purposes.

Revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - obligation to refer transfer pricing risk cases to the Transfer Pricing Officer under CBDT Instruction No.3/2016 - specified domestic transactions and transfer pricing risk parameters - erroneous and prejudicial to the interest of Revenue - duty of Assessing Officer to make enquiries and apply mind before accepting return

Obligation to refer transfer pricing risk cases to the Transfer Pricing Officer under CBDT Instruction No.3/2016 - specified domestic transactions and transfer pricing risk parameters - revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - erroneous and prejudicial to the interest of Revenue - Validity of Pr. CIT's exercise of jurisdiction under section 263 in setting aside the assessment for failure of the AO to refer the case to the TPO where the case was selected on TP risk parameters - HELD THAT: - The Tribunal found that Instruction No.3/2016 requires that where a case is selected for scrutiny on transfer pricing risk parameters in respect of International Transactions or Specified Domestic Transactions, the AO must refer the case to the TPO after obtaining approval of the jurisdictional PCIT/CIT. The AO did not comply with these directions for AY 2014-15 and did not record reasons for not referring the matter to the TPO. The Tribunal held that such failure to follow the CBDT instruction rendered the assessment order erroneous and prejudicial to the interest of the Revenue, and that this defect justified the Pr. CIT setting aside the assessment and directing reference to the TPO. The Tribunal emphasised that the absence of any justification that the AO applied the requisite procedure under the instruction meant the PCIT was entitled to intervene under the revisionary jurisdiction. (See paragraph 11.) [Paras 11]

Pr. CIT's setting aside of the assessment and direction to refer the matter to the TPO upheld insofar as it rests on the AO's failure to refer the case to the TPO under Instruction No.3/2016.

Duty of Assessing Officer to make enquiries and apply mind before accepting return - revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - erroneous and prejudicial to the interest of Revenue - Sustainability of Pr. CIT's directions under section 263 insofar as they question the assessment for lack of detailed enquiries into sales turnover, related-party payments, and other expenses - HELD THAT: - The Tribunal noted that the Pr. CIT took cognisance of the assessee's submissions on record but did not itself demonstrate by independent inquiry or reasoning how the AO's acceptance of those submissions was legally unsustainable. The order of the Pr. CIT does not indicate findings of his own showing the AO failed to follow the mandate of law in accepting the assessee's explanations; instead the Pr. CIT concluded the enquiries were not detailed without specifying why the AO's conclusions were erroneous. On this basis the Tribunal held that the Pr. CIT's exercise of revisionary jurisdiction was not sustainable in respect of those other grounds. The Tribunal therefore declined to interfere with the assessment only to the extent of the TPO referral, but set aside the Pr. CIT's directions on the remaining counts. (See paragraphs 12-14.) [Paras 13, 14]

Pr. CIT's directions are not sustained insofar as they rest on alleged failure of the AO to make detailed enquiries into sales turnover, payments to related parties, and other expenses; those grounds were set aside.

Final Conclusion: Appeal allowed in part: the Tribunal upholds the Pr. CIT's order under section 263 only to the extent that the AO failed to refer the case to the TPO as required by CBDT Instruction No.3/2016 for transfer pricing risk; the Pr. CIT's other grounds for setting aside the assessment are not sustained and are set aside.

Capital gains on transfer under section 2(47)(v) - joint development agreement and transfer of land - part performance and possession under section 53A of the Transfer of Property Act - distinction between permission to construct and transfer of ownership - taxation of development rights vis-a -vis post-completion regime under section 5A to section 45 (w.e.f. A.Y. 2018-19)

Capital gains on transfer under section 2(47)(v) - joint development agreement and transfer of land - distinction between permission to construct and transfer of ownership - Whether execution of the joint development agreement (JDA) by the assessee in respect of its land gave rise to a transfer chargeable to capital gains under section 2(47)(v). - HELD THAT: - The Tribunal found that the Assessing Officer treated the JDA as a transfer of land and computed short-term capital gain by adopting stamp valuation authority value as deemed sale consideration. On facts the assessee did not surrender possession to the developer in part performance; the arrangement amounted to permission to carry out construction with the allotment of constructed area to the assessee on completion, rather than an immediate transfer of ownership. The Tribunal applied the reasoning of the jurisdictional High Court in PCIT v. Emporis Properties Pvt. Ltd., which relied on the Supreme Court's decision in Balbir Singh Maini, noting that the owner continues to be the owner throughout such agreements and no rights akin to ownership are purportedly transferred to the developer. The Tribunal also noted that no construction had commenced due to legal hurdles. In view of these findings the invocation of section 2(47)(v) to tax capital gain at the stage of execution of the JDA was held to be incorrect. The Revenue's submission about the later statutory insertion (section 5A to section 45 w.e.f. A.Y. 2018-19) was noted as a subsequent legislative change and did not affect assessment for A.Y. 2015-16.

Addition of capital gain computed by treating the JDA as a transfer under section 2(47)(v) is deleted and the appeal is allowed.

Final Conclusion: For A.Y. 2015-16 the Tribunal set aside the addition of capital gain made on the basis of the joint development agreement, holding that mere execution of the JDA without transfer of possession or rights akin to ownership does not constitute a transfer under section 2(47)(v), and directed deletion of the addition.

Reopening of assessment under section 147 - Reasons recorded under section 148(2) and requirement of application of mind - Borrowed satisfaction - Requirement to disclose failure to disclose material facts necessary for assessment - Condonation of delay in filing appeal

Condonation of delay in filing appeal - Delay in filing the appeal was condoned. - HELD THAT: - The Tribunal considered the assessee's explanation that the Memorandum of Appeal had been sent for signature but could not be signed in time because the assessee was unwell. After hearing both sides and evaluating the reasons for delay, the Tribunal found the delay to be for a reasonable cause and exercised its discretion to condone the delay. [Paras 3]

Delay of 11 days in filing the appeal is condoned.

Reopening of assessment under section 147 - Reasons recorded under section 148(2) and requirement of application of mind - Borrowed satisfaction - Requirement to disclose failure to disclose material facts necessary for assessment - Reopening of assessment was quashed for want of valid reasons and non-application of mind by the Assessing Officer. - HELD THAT: - The Tribunal examined the reasons recorded under section 148(2) which purported to rely on information from the Investigation Wing about alleged bogus long-term capital gains from penny-stock transactions. The reasons were held to be casual, mechanically reproduced, and internally inconsistent (notably conflicting figures and gender references), demonstrating that the Assessing Officer had acted on a borrowed satisfaction without independent application of mind. Relying on the principle that reasons must disclose the AO's mind and establish a vital link between the material and the conclusion (as explained in Hindustan Lever Ltd. -v- R.B. Wadkar), the Tribunal found the recorded reasons inadequate to justify reopening. Consequently, the reopening notice and the reassessment were quashed and the addition deleted. The Tribunal did not adjudicate the merits of the additions as the appeal succeeded on this legal ground. [Paras 6, 7]

Reopening under section 147 is quashed for lack of valid reasons; the addition is directed to be deleted and the appeal is allowed on this legal issue.

Final Conclusion: The appeal is allowed: the 11-day delay in filing the appeal is condoned; the reassessment/reopening under section 147 is quashed for lack of proper reasons and non-application of mind by the Assessing Officer, and the addition is deleted; grounds on merit were not adjudicated.

Advancement of any other object of general public utility vis-a -vis commercial activities - proviso to section 2(15) excluding charitable purpose where trade/commercial activity or rendering of service for consideration exceeds the monetary threshold - principle of dominant or primary object (dominant purpose test) - principle of mutuality - incidental or ancillary activities not amounting to business unless an independent profit motive is established - allocation/apportionment of administrative expenses between business and charitable receipts - application and accumulation under section 11(1)(a) and section 11(2) - treatment of cost of acquisition and depreciation of fixed assets as application of income up to AY 2015-16 - treatment of sale proceeds of asset where cost was claimed as application of income - entitlement to WDV deduction

Advancement of any other object of general public utility vis-a -vis commercial activities - proviso to section 2(15) excluding charitable purpose where trade/commercial activity or rendering of service for consideration exceeds the monetary threshold - principle of dominant or primary object (dominant purpose test) - incidental or ancillary activities not amounting to business unless an independent profit motive is established - allocation/apportionment of administrative expenses between business and charitable receipts - Whether the assessee's receipts from organizing meetings, conferences and seminars are hit by the proviso to section 2(15) and therefore not entitled to exemption under section 11, or whether such activities are ancillary to its dominant charitable object and the entire receipts are exempt under section 11. - HELD THAT: - The Tribunal found that the assessee is a non-profit company registered under section 12A whose dominant object is promotion and protection of trade, commerce and industry. The activities of holding meetings, seminars and conferences were held to be ancillary/supportive to that main object and, on the facts, were carried out on a cost or nominally-above-cost basis. The AO's computation showing a small profit (2% of receipts) and the subsequent year showing a loss corroborate that no independent profit motive exists in these activities; administrative expenses were being met from other charitable income. Applying the dominant purpose test, and following the Tribunal's earlier coordinate-bench decision in the assessee's own case and the authorities reviewed, the proviso to section 2(15) does not apply where the activity is incidental and not pursued with independent profit motive; accordingly the entire receipts were held eligible for exemption under section 11 and the CIT(A)'s enhancement treating all receipts as business income was set aside. The Tribunal also applied the principle of consistency given there was no change in facts or law vis-a -vis earlier years decided in favour of the assessee. [Paras 13, 15, 16, 17, 20]

Assessee's receipts from meetings, conferences and seminars are not hit by the proviso to section 2(15); entire receipts allowed exemption under section 11.

Principle of mutuality - incidental or ancillary activities not amounting to business unless an independent profit motive is established - Whether membership subscription and entrance fees received by the assessee are taxable or excluded by the principle of mutuality. - HELD THAT: - The Tribunal accepted that subscription and admission fees paid by members satisfy the tests of mutuality (identity between contributors and participators, action in furtherance of the association's mandate, and absence of profiteering). On the facts and authorities cited, such receipts were not taxable business income and, if reduced from the so-called business receipts, would further demonstrate absence of profit from the events. [Paras 10, 18]

Membership subscription and entrance fees are excluded from taxable income by the principle of mutuality.

Treatment of cost of acquisition and depreciation of fixed assets as application of income up to AY 2015-16 - treatment of sale proceeds of asset where cost was claimed as application of income - entitlement to WDV deduction - Whether depreciation on fixed assets claimed by the assessee is allowable as application of income, and whether sale proceeds of an asset (whose cost was earlier claimed as application of income) must be treated as income without permitting WDV deduction. - HELD THAT: - Relying on the Supreme Court authority concerning the law up to AY 2015-16, the Tribunal held that cost of acquisition of fixed assets could be claimed as application of income and depreciation in subsequent years is allowable; consequently depreciation claimed for AY 2013-14 and AY 2014-15 must be allowed as application of income. Further, even where the cost was claimed as application of income in the year of purchase, the assessee is entitled to reduce the sale consideration by the written down value to compute capital gain; treating the entire sale proceeds as income without WDV adjustment amounted to double deduction and was disallowed. [Paras 23, 24, 25, 26, 28]

Depreciation claimed is allowable as application of income; WDV deduction from sale proceeds is permitted and the addition is deleted.

Application and accumulation under section 11(1)(a) and section 11(2) - Whether the statutory accumulation under section 11(1)(a) is to be computed on gross receipts or on net receipts. - HELD THAT: - Following Supreme Court precedents, the Tribunal held that the statutory accumulation under section 11(1)(a) must be computed on gross receipts of the trust (not on net income after expenses). The Tribunal directed the AO to allow accumulation under section 11(1)(a) on gross receipts, observing that section 11(2) operates distinctly and does not curtail the unqualified exemption under section 11(1)(a). [Paras 29, 31, 32]

Accumulation under section 11(1)(a) is to be computed on gross receipts; AO directed to compute accordingly.

Application of dominant purpose test and principle of consistency - Whether the findings and directions given for AY 2013-14 apply mutatis mutandis to AY 2014-15. - HELD THAT: - The Tribunal noted that the issues for AY 2014-15 are similar to those decided for AY 2013-14 and, since the factual and legal position remained unchanged and the earlier findings in favour of the assessee were applicable, directed that the same conclusions apply to AY 2014-15. [Paras 33]

Findings for AY 2013-14 are applied mutatis mutandis to AY 2014-15; appeal for 2014-15 allowed.

Final Conclusion: Both appeals for AY 2013-14 and AY 2014-15 are allowed: the Tribunal held that the assessee's activities in organising meetings, conferences and seminars are ancillary to its dominant charitable object and not hit by the proviso to section 2(15), allowed exemption under section 11 for entire receipts, permitted depreciation as application of income and WDV adjustment on sale of asset, and directed accumulation under section 11(1)(a) to be computed on gross receipts.

Revisional jurisdiction under Section 263 - Erroneous assessment prejudicial to the revenue due to lack of inquiry - Applicability of higher tax rate under Section 115BBE on additions made under Sections 68/69/69A/69B/69C - Treatment of surrendered excess stock as unexplained investment within Sections 69/69A - Requirement of proper inquiry by the Assessing Officer before accepting surrendered income - Power to set aside assessment for limited issues and remit for fresh adjudication including penalty proceedings

Revisional jurisdiction under Section 263 - Erroneous assessment prejudicial to the revenue due to lack of inquiry - Requirement of proper inquiry by the Assessing Officer before accepting surrendered income - Whether the Principal Commissioner of Income Tax rightly invoked Section 263 to set aside the assessment for AY 2018-19 on the ground that the Assessing Officer failed to make requisite inquiry regarding the tax treatment of surrendered excess stock. - HELD THAT: - The Tribunal found that during survey the assessee surrendered excess stock and declared the amount in return; however the assessing officer's record and assessment order are silent on any inquiry into the nature of the surrender or the applicability of higher taxation under Section 115BBE. The AO had issued a limited query under Section 142(1) which only sought quantum details and the assessee replied with the surrender particulars; there is no material to show the AO considered or decided the question of applicability of Section 115BBE. Explanation 2 to Section 263 (as introduced in 2015) permits revision where the AO omits inquiries which should have been made; precedents and the impugned reasons establish that an assessment passed without requisite inquiry can be erroneous and prejudicial to revenue. The Tribunal agreed with the Pr. CIT that the AO did not apply his mind to the issue and therefore the exercise of revisional jurisdiction was justified. The Tribunal expressly refrained from expressing any view on the merits of whether Section 115BBE applies, directing that the AO consider and decide that question afresh in accordance with law after giving the assessee an opportunity of being heard, and also to consider initiation of penalty proceedings under the appropriate provision. [Paras 5, 6]

The exercise of jurisdiction under Section 263 was upheld; the assessment order is set aside on the limited issue of applicability of Section 115BBE and the matter is remitted to the Assessing Officer for fresh consideration after proper inquiry and opportunity to the assessee.

Final Conclusion: Appeal dismissed; Tribunal upholds Pr. CIT's order under Section 263 setting aside the assessment for AY 2018-19 on the limited ground of lack of requisite inquiry into the tax treatment of surrendered excess stock and directs fresh adjudication by the Assessing Officer including consideration of Section 115BBE and appropriate penalty proceedings.

Condonation of delay for sufficient cause (COVID-19 and ill health) - reopening of assessment - disposal of objections to notice under Section 148 by passing a speaking order - reasons to believe - quashing of reassessment for failure to dispose objections and for arbitrary reasons - treatment of unexplained bank deposits as income - ad hoc addition at the rate of 5% of cash deposits for small assessee

Condonation of delay for sufficient cause (COVID-19 and ill health) - Condonation of delay in filing the appeals for AYs 2010-11 and 2011-12 - HELD THAT: - The Tribunal examined the affidavit and materials filed in support of the application for condonation of delay and noted that the period from 15.03.2020 to 28.02.2022 (with an additional 90 days) had been the subject of relief by the Hon'ble Supreme Court. The assessee additionally relied on serious ill-health and continuous medical treatment as the cause for the residual delay. Applying the established principles for condonation of delay (as summarised from B. Madhuri Goud), the Tribunal found the explanations convincing, observed no deliberate or culpable negligence on the part of the assessee and held that substantial justice required condonation. On these facts and in the interest of justice the delay in both appeals was condoned. [Paras 8, 9, 10]

Delay in filing both appeals is condoned.

Reopening of assessment - disposal of objections to notice under Section 148 by passing a speaking order - reasons to believe - quashing of reassessment for failure to dispose objections and for arbitrary reasons - Validity of reopening of assessment for AY 2010-11 and consequential quashing of reassessment proceedings - HELD THAT: - The assessee had filed objections to the notice under section 148 and furnished documents asserting regular compliance. The Assessing Officer, however, did not dispose of those objections by a speaking order and the reasons recorded for reopening were shown to be arbitrary and lacking application of mind (the reasons misstated amounts). Relying on the binding ratio in GKN Driveshafts that an assessing officer must furnish reasons and dispose of objections by a speaking order before completing reassessment, and on the record showing failure to do so plus arbitrariness in the reasons recorded, the Tribunal held the reassessment proceedings to be void. As the reassessment was quashed, all consequential merits issues became academic. [Paras 20, 21, 22, 23, 24]

Reassessment proceedings for AY 2010-11 are quashed; appeal for AY 2010-11 is allowed and other merits issues are rendered academic.

Treatment of unexplained bank deposits as income - ad hoc addition at the rate of 5% of cash deposits for small assessee - Merits of additions made on account of bank deposits for AY 2011-12 (deletion of cheque deposits and restricted ad hoc addition on cash deposits) - HELD THAT: - For AY 2011-12 the Assessing Officer made additions on account of cash and cheque deposits. On facts the Tribunal found that amounts deposited by cheque were from known sources and therefore deleted that portion of the addition. With regard to cash deposits, having regard to the smallness of the amounts and consistent coordinate-bench practice, the Tribunal applied a limited ad hoc approach and directed an addition equal to 5% of total cash deposits. The Tribunal thus reduced the addition: cheque deposits deleted and cash deposits taxed at 5% (calculated in the order). The appeal was accordingly partly allowed. [Paras 33, 35, 36]

Addition on account of cheque deposits is deleted; cash deposits are taxed by way of an ad hoc addition at 5% of cash deposits (appeal partly allowed for AY 2011-12).

Final Conclusion: The Tribunal condoned the delay in filing both appeals; the reassessment for AY 2010-11 was quashed for lack of disposal of objections and arbitrary reasons and that appeal is allowed; the appeal for AY 2011-12 is partly allowed by deleting the addition relating to cheque deposits and restricting the addition on cash deposits to 5%.

Limitation under section 275(1)(c) - date of "action for imposition of penalty" - initiation of penalty proceedings by reference to competent authority (joint/addl. CIT) - reasonable cause under section 273B for penalty under sections 271D and 271E - application of sections 269SS/269T to co-operative societies operating as para-banks

Limitation under section 275(1)(c) - date of "action for imposition of penalty" - initiation of penalty proceedings by reference to competent authority (joint/addl. CIT) - Whether the penalty orders dated 26.07.2018 are barred by limitation under section 275(1)(c) of the Income tax Act. - HELD THAT: - The Tribunal held that the relevant date for computing limitation under section 275(1)(c) is the date on which "action for imposition of penalty" is initiated, which means the date on which the Assessing Officer refers the matter to the competent authority proposing initiation of penalty proceedings, and not necessarily the date of assessment order or the later notice under section 274. Where the AO referred the matter to the Joint Commissioner on 01.01.2018, that reference constituted initiation of the action for imposition of penalty. Applying section 275(1)(c), the later of the financial year cutoff and six months from the end of the month in which action was initiated governed limitation; therefore the penalty orders passed on 26.07.2018 were within time and not barred by limitation. [Paras 4]

Penalty orders are not time barred; limitation is computed from the date of reference to the competent authority (01.01.2018 in this case).

Reasonable cause under section 273B for penalty under sections 271D and 271E - application of sections 269SS/269T to co-operative societies operating as para-banks - Whether the assessee had reasonable cause under section 273B to escape penalty under sections 271D and 271E for cash acceptance/repayment transactions. - HELD THAT: - On the facts the Tribunal found that although the assessee is registered as a PACS, it in substance carries on banking business and operates as a para bank: it accepts deposits and grants loans, offers cheque facilities and deals with the public at large in its ordinary course. The conduct and legal competence to act as a financial intermediary, combined with a long history of operating in that manner, furnished a bona fide and reasonable cause for the breaches of sections 269SS/269T. The Tribunal also noted absence of any suggestion by Revenue that the assessee failed to maintain proper records or KYC that would necessitate remand. Applying section 273B, the Tribunal held that penalty should not be imposed. [Paras 5]

Assessee established reasonable cause; penalties under sections 271D and 271E are not leviable in the facts of the case.

Final Conclusion: Appeals allowed: penalty orders under sections 271D and 271E set aside - limitation held to run from the date of reference to the competent authority and, on facts, the assessee entitled to relief under section 273B.

Search and seizure: conduct and proof of search - Validity of assessments under section 153A where no incriminating material is found - Incriminating material requirement for invoking section 153A and for additions in completed assessments - Addition under section 68 based on seized documents

Search and seizure: conduct and proof of search - Whether a search was conducted on the assessee's premises - HELD THAT: - The Tribunal examined the material on record including the warrant of authorization and the panchanama and found that a search action had been effected; on this narrow point the finding of the ld. CIT(A) that no search was conducted was incorrect. The Tribunal therefore held that a search was in fact conducted, reversing the CIT(A)'s conclusion on that factual aspect (see para 11). [Paras 11]

A search was conducted on the assessee; the ld. CIT(A) erred in holding otherwise.

Validity of assessments under section 153A where no incriminating material is found - Incriminating material requirement for invoking section 153A and for additions in completed assessments - Addition under section 68 based on seized documents - Whether additions under section 68 could be sustained in the absence of incriminating seized material relating to the relevant assessment year - HELD THAT: - The Tribunal found no seized or impounded document on record that formed the basis for the addition made by the AO for A.Y. 2012-13; the assessment order did not refer to any incriminating material for that year (para 12). The AO himself had recorded that the share capital was received in November 2011 (prior to 01/01/2012), and the assessment proceedings for A.Y. 2012-13 were not pending on the date of search (para 12). Reliance was placed on the jurisdictional High Court decisions (notably Kabul Chawla) and subsequently the Apex Court in M/s. Abhisar Buildwell P. Ltd., establishing that completed assessments cannot be disturbed under section 153A in the absence of incriminating material unearthed during search. Applying these authorities and the facts, the Tribunal agreed with the ld. CIT(A) that the addition under section 68 could not be sustained sans relevant seized material and therefore affirmed deletion of the addition (see paras 13-18). [Paras 14, 15, 16, 17, 18]

The addition under section 68 for A.Y. 2012-13 cannot be sustained in the absence of incriminating material seized for that year; the assessment under section 153A/143(3) is not in accordance with law and the addition is deleted.

Final Conclusion: The Tribunal held that although a search was conducted, there was no incriminating seized material relating to A.Y. 2012-13 to justify disturbing the completed assessment under section 153A; consequently the addition under section 68 was unsustainable and the revenue appeals were dismissed.

Refund of Additional Duty of Customs (SAD) paid by using DEPB scrips - validity of circulars imposing conditions inconsistent with an exemption notification - exemption notification issued under Section 25(1) cannot be amended or its scope reduced by administrative circulars - entitlement to refund upon fulfilment of conditions of Notification No.102/2007-Customs

Refund of Additional Duty of Customs (SAD) paid by using DEPB scrips - validity of circulars imposing conditions inconsistent with an exemption notification - entitlement to refund upon fulfilment of conditions of Notification No.102/2007-Customs - Refund claim of SAD paid by debiting DEPB scrips cannot be denied on the basis of departmental circulars which introduce conditions not contained in Notification No.102/2007-Customs; refund is payable if the notification's conditions are fulfilled. - HELD THAT: - The Tribunal examined earlier judicial decisions, including the Delhi High Court in Allen Diesels and this Tribunal's precedents (Virgo Suitings and others), which held that circulars issued by the Board cannot impose additional or stricter conditions contrary to an exemption notification issued under Section 25(1) of the Customs Act. The circulars relied upon by the Revenue sought to deny cash refund where SAD had been discharged by using DEPB scrips, thereby effectively amending the notification by administrative direction. The Tribunal applied the settled principle that an exemption notification being statutory in character can be amended only by a fresh notification under the same statutory power and not by circulars; administrative instructions cannot whittle down or add conditions to the notification. Since the respondent had fulfilled the conditions stipulated in Notification No.102/2007-Customs, the Commissioner (Appeals) correctly allowed the refund component attributable to DEPB payment and there was no infirmity in that conclusion. In view of the binding precedents and the absence of any contrary material from the Revenue, the appeal against the Commissioner (Appeals) order failed. [Paras 6, 7]

Impugned order upholding the refund of SAD paid through DEPB scrips is correct; Revenue's appeal dismissed.

Final Conclusion: The Tribunal, applying binding precedents that administrative circulars cannot impose conditions inconsistent with an exemption notification, upheld the Commissioner (Appeals) order allowing refund of SAD paid by DEPB scrips and dismissed the Revenue's appeal.

Investigation by inspectors under Section 237 of the Companies Act - Scope and threshold for ordering investigation by SFIO - Powers and duties of the Official Liquidator under Section 456 (Act, 1956) and corresponding provisions - Appropriate forum for investigation where winding up order has been passed - Requirement of cogent and specific material to justify referral to SFIO

Scope and threshold for ordering investigation by SFIO - Requirement of cogent and specific material to justify referral to SFIO - Whether the material placed by the Official Liquidator justified directing reference to the SFIO for investigation. - HELD THAT: - The Court examined the Official Liquidator's reports and the materials placed on record and found no specific entries or cogent evidence demonstrating intent to defraud, diversion of funds, or conduct amounting to fraud, misfeasance or other misconduct by the ex-directors. Relying on the statutory scheme and precedents, the Court held that powers to direct an investigation under Section 237/related provisions must be exercised with caution and only on the basis of strong and specific material rather than vague averments or conjecture. The Official Liquidator's general assertions about a 'web of intrigue' and the plea of lack of expertise/resources, without identifying documentary entries or particular transactions showing diversion, were insufficient to warrant referral to the SFIO. [Paras 3, 8, 36, 37, 41]

The Court held that the material before it did not justify referring the matter to the SFIO.

Powers and duties of the Official Liquidator under Section 456 (Act, 1956) and corresponding provisions - Appropriate forum for investigation where winding up order has been passed - Whether the Official Liquidator had adequate powers and means to investigate alleged diversion and whether referral to SFIO was warranted in view of the liquidator's statutory powers and the existence of a winding up order. - HELD THAT: - The Court noted the wide statutory powers vested in the Official Liquidator (under Section 456 of the Act, 1956 and corresponding provisions of the Act, 2013) to take custody of company property, examine accounts and engage experts (including a panel of chartered accountants). It observed that many assets and statements of affairs had been filed and that possession of several properties had been taken by the Official Liquidator. The Court rejected the shortfall argument that the Official Liquidator lacked capacity or expertise, finding that the Official Liquidator had at its disposal accountants and statutory powers to investigate alleged irregularities. Further, the Court analysed the statutory scheme and held that where a winding up order has already been passed by the Court or Tribunal, initiation of investigation under the provisions akin to Chapter XIV (Act, 2013) is not appropriate as a matter of principle, and the Special Investigation machinery should not be invoked as a substitute for the liquidator exercising his statutory powers. [Paras 31, 32, 38, 45, 46]

The Court held that the Official Liquidator's statutory powers were adequate and that the existence of a prior winding up order militated against initiation of SFIO investigation on the material then before the Court.

Investigation by inspectors under Section 237 of the Companies Act - Requirement of cogent and specific material to justify referral to SFIO - Whether the earlier ex parte order referring the matter to SFIO (dated 18.7.2008 and recalled earlier) should be reinstated by reason of reports filed subsequently by the Official Liquidator. - HELD THAT: - The Court recounted the procedural history, including an earlier ex parte reference to the SFIO which had been recalled and subsequent filings by ex-directors and the Official Liquidator. After reviewing the Official Liquidator's reports and auxiliary material (including the 'Allegations Table'), the Court found that the subsequent reports did not supply the specific, persuasive material required to revive a direction for investigation. The Court emphasised that general or vague allegations, or assertions that the Official Liquidator lacks expertise, cannot form the basis for directing inspection under Section 237 or equivalent provisions. [Paras 7, 8, 37, 38]

The Court declined to reinstate or continue a reference to the SFIO on the basis of the reports then before it.

Scope and threshold for ordering investigation by SFIO - Appropriate forum for investigation where winding up order has been passed - Whether the Court should recall its prior order dated 13.12.2019 directing the SFIO to recommence investigation. - HELD THAT: - Applying the legal principles that investigations under Sections 235-247 (Act, 1956) and corresponding provisions of the Act, 2013 require specific, convincing material and that the liquidator possesses statutory powers to investigate and recover assets, the Court concluded that the 13.12.2019 order directing recommencement of SFIO investigation was not warranted on the available material. The Court observed that the Official Liquidator had not demonstrated that it had exhausted its statutory powers or that there existed particular documentary or account entries showing diversion that only the SFIO could probe. [Paras 36, 37, 46, 47]

The Court recalled the order dated 13.12.2019 and allowed the recall application.

Final Conclusion: The recall application was allowed; the High Court recalled its order dated 13.12.2019 directing recommencement of SFIO investigation, holding that the material before the Court did not justify referring the matter to the SFIO and that the Official Liquidator possessed statutory powers and available resources to pursue enquiries into the affairs of the company.

Discretionary jurisdiction under Article 136 of the Constitution - Non-compliance with interim court directions - Condonation of delay in complying with court-ordered deposit - Dismissal for failure to comply with interim direction - Exercise of judicial discretion influenced by litigant's conduct

Non-compliance with interim court directions - Condonation of delay in complying with court-ordered deposit - Dismissal for failure to comply with interim direction - Whether petition should be permitted to proceed despite failure to comply with the Court's interim direction to deposit the specified amount and without seeking condonation of delay or permission to pay in installments. - HELD THAT: - The Court recorded that an earlier interim direction dated 9 August 2019 required the petitioner to deposit the specified amount with the Registrar of Companies. The petitioner neither made the deposit nor filed any application seeking condonation of the delay or seeking permission to deposit by installments. The Court held that the petitioner's failure to comply with the interim direction and the absence of any request for condonation or alternate relief adversely affected the exercise of the Court's discretionary jurisdiction. In view of the petitioner's conduct, the Court concluded that discretion under Article 136 ought not to be exercised in the petitioner's favour and accordingly declined to permit the petition to proceed on that basis.

Petition dismissed for failure to comply with the interim deposit direction and for not seeking condonation or permission for installment payment.

Discretionary jurisdiction under Article 136 of the Constitution - Exercise of judicial discretion influenced by litigant's conduct - Whether the Court should exercise its discretionary jurisdiction under Article 136 on the merits despite non-compliance with the interim order. - HELD THAT: - In addition to the procedural non-compliance, the Court indicated that it was not satisfied with the petitioner's case on merits. The combined assessment-both the petitioner's conduct in failing to comply with the interim direction and the Court's evaluation of the merits-led to the conclusion that the extraordinary jurisdiction under Article 136 should not be exercised in favour of the petitioner. The Court therefore dismissed the petition on discretionary and substantive grounds.

Petition dismissed on merits and in exercise of the Court's discretionary jurisdiction under Article 136.

Final Conclusion: The petition under Article 136 is dismissed: the petitioner failed to comply with the interim deposit direction and did not seek condonation or alternate relief, and the Court was also not satisfied with the merits of the petition; all pending applications are disposed of.

Retrospective jurisdiction of NFRA under Section 132(4) - Professional misconduct for lack of auditor independence - Non-compliance with Standards on Auditing including SA 705 - Violation of quality control and independence obligations under SQC 1, SA 220 and the Code of Ethics - Imposition of penalty and debarment under Section 132(4)(c)

Retrospective jurisdiction of NFRA under Section 132(4) - NFRA has jurisdiction to investigate alleged professional or other misconduct which occurred prior to its constitution and the coming into force of Section 132(4). - HELD THAT: - NFRA held that the statutory duties of auditors and the requirement to comply with auditing and accounting standards existed independently of NFRA's creation; Section 132(4) designates NFRA as the forum to investigate and enforce those obligations and its proviso bars other institutes from continuing proceedings once NFRA initiates investigation. The Authority concluded that retrospective jurisdiction is consistent with the statutory language and purpose, supported by precedent recognising NFRA's jurisdiction, and that no vested right of an auditor to commit misconduct exists so as to bar retrospective application for enforcement of existing standards. [Paras 19, 21, 22, 23, 24]

Jurisdictional challenge rejected; NFRA may investigate and decide misconduct occurring prior to its establishment.

Professional misconduct for lack of auditor independence - Violation of quality control and independence obligations under SQC 1, SA 220 and the Code of Ethics - CA Shyam Malpani performed the statutory audit while having a direct financial interest in the auditee and thereby compromised independence, amounting to professional misconduct. - HELD THAT: - NFRA found that the Engagement Partner held shares of the auditee through a family-owned company with the same address, demonstrating control and a direct financial interest. Applicable provisions of SQC 1, SA 220 and the Code of Ethics require independence of mind and appearance and prescribe safeguards (including disposal of the interest or resignation) which were not adopted. The Authority concluded that the auditor's ownership interest impaired independence and constituted failure to exercise due diligence and gross negligence in the conduct of professional duties. [Paras 34, 35, 36, 37, 43]

Charge of professional misconduct for lack of independence proved against CA Shyam Malpani.

Non-compliance with Standards on Auditing including SA 705 - The qualified opinions issued by the auditor were inappropriate because the effects of the matters qualified were material and pervasive, and thus, under SA 705 the auditor should have issued either an adverse opinion or a disclaimer of opinion. - HELD THAT: - On examination of the financial statements and the qualifications in the Independent Auditor's Reports, NFRA concluded that the qualifications related to substantial proportions of sales, purchases, receivables, inventories, liabilities and non-provision of interest such that their collective effect was material and pervasive. The Authority applied SA 705 and held that mere qualified opinions were non conforming where pervasiveness required adverse opinion or disclaimer. The finding established gross negligence and failure to exercise due diligence in issuing appropriate audit opinions. [Paras 39, 41, 42]

Non-compliance with SA 705 proved; the qualified audit opinions were inappropriate.

Imposition of penalty and debarment under Section 132(4)(c) - Monetary penalty of Rs. Five Lakh and debarment for five years imposed on CA Shyam Malpani; sanctions to take effect after 30 days. - HELD THAT: - Exercising powers under Section 132(4)(c), NFRA imposed sanctions taking into account the nature of the company audited, public interest, and proportionality. Having regard to the NCLAT decision and the period of the misconduct, the Authority limited monetary penalty to Rs. Five Lakh and ordered debarment from appointment as auditor, internal auditor or undertaking audits for five years. The Order specifies effectiveness after 30 days from issuance. [Paras 4, 45, 46, 48, 49]

Penalty of Rs. Five Lakh and debarment for five years imposed on CA Shyam Malpani; order effective after 30 days.

Final Conclusion: NFRA rejected the auditors' jurisdictional objection, found CA Shyam Malpani guilty of professional misconduct for compromised independence and for issuing inappropriate qualified opinions contrary to SA 705 and related standards, and imposed a monetary penalty of Rs. Five Lakh and a five year debarment, with the Order to take effect after 30 days.

Ineligibility under Section 29A - disqualification at the time of submission of resolution plan - non-performing asset (NPA) classification and temporal test - exemption of MSMEs under Section 240A - effect of post commencement acquisition of MSME certificate - curative proviso to Section 29A(c)

Ineligibility under Section 29A - non-performing asset (NPA) classification and temporal test - curative proviso to Section 29A(c) - Whether the resolution applicant or promoter was disqualified under Section 29A on the facts of the case. - HELD THAT: - The Court examined Clauses (c), (g) and (h) of Section 29A and the factual material on record. On the facts before the Court there were no bank dues/outstanding that would attract the concept of an NPA and no order under the Code identifying preferential or fraudulent transactions as would invoke Clauses (g) or (h). The Court therefore held that there was no per se disqualification of the promoter or resolution applicant under Section 29A in the present factual scenario. The Court also observed that even where Clause (c) would otherwise apply, the first proviso permits cure by payment of overdue amounts with interest and charges before submission of the resolution plan, making the date of submission a determinative moment for eligibility. [Paras 6, 7, 8, 9, 24]

No disqualification under Section 29A was attracted on the facts of this case; any defect under Clause (c) is curable prior to submission of the plan.

Exemption of MSMEs under Section 240A - disqualification at the time of submission of resolution plan - effect of post commencement acquisition of MSME certificate - Whether lack of MSME status at the commencement of CIRP would disqualify a resolution applicant, or whether Section 240A exempts MSME corporate debtors with the relevant test tied to the date of submission of the resolution plan. - HELD THAT: - The Court analysed Section 240A (a 'notwithstanding' provision) and the legislative history including the Insolvency Law Committee Report and the Minister's statement. It held that the exemption in Section 240A was intended to protect MSMEs and to prevent liquidation where a promoter is the likely bidder. Reading Section 240A together with Section 29A(c), and having regard to the opening wording of Section 29A which fixes the disqualification at the time a person "shall not be eligible to submit a resolution plan", the Court concluded that the relevant cut off for testing disqualification - including the benefit of Section 240A - is the date of submission of the resolution plan. Consequently, obtaining an MSME certificate prior to submission of the plan (even if not existing at CIRP commencement) can determine applicability of the exemption; the Tribunal's view in Digamber Anand Rao Pingle to the contrary was held not to state the correct position of law. [Paras 14, 15, 21, 22, 23]

Section 240A exempts MSME corporate debtors from Clauses (c) and (h) of Section 29A; the relevant date for testing disqualification is the date of submission of the resolution plan, not the commencement of CIRP.

Reconsideration by Adjudicating Authority - Whether the matter should be remitted for fresh consideration by the Adjudicating Authority. - HELD THAT: - In view of the conclusions on eligibility and Section 240A, the Supreme Court set aside the impugned NCLT and NCLAT orders and restored IA No.192/2022 in C.P. (IB) No.196/BB/2020 to the National Company Law Tribunal for reconsideration in light of the legal principles laid down by this Court. The Court also directed that any consequential action taken by the IBBI against the appellant pursuant to the impugned orders would not survive. [Paras 25, 27, 28]

Impugned orders set aside; the related application is restored to the NCLT for reconsideration and consequential actions pursuant to the impugned orders will not survive.

Final Conclusion: The appeal is allowed. On the facts there was no disqualification under Section 29A; where relevant, defects under Clause (c) are curable before submission of the plan. Section 240A exempts MSME corporate debtors from Clauses (c) and (h) and the relevant cut off for testing eligibility is the date of submission of the resolution plan. The NCLT and NCLAT orders are set aside, the matter is remanded to the NCLT for reconsideration, and consequential actions under the impugned orders do not survive.

Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Forms 3 and 5 - leave to file additional written statement - appellate interference

Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Forms 3 and 5 - appellate interference - Whether the appeal warrants interference with the impugned judgment allowing the respondent's application under Section 60(5) IBC after reference to Forms 3 and 5. - HELD THAT: - The Supreme Court found no sufficient ground to interfere with the impugned judgment which had allowed the respondent's application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, after considering Forms 3 and 5. The Court accordingly dismissed the appeal and affirmed the impugned order. The Court's decision rests on its satisfaction with the reasons recorded in the impugned judgment and the manner in which Forms 3 and 5 were taken into account by the forum below.

Appeal dismissed; impugned judgment allowing the application under Section 60(5) IBC after reference to Forms 3 and 5 is upheld.

Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - leave to file additional written statement - Whether the Court expresses any opinion on the timeliness of the petition under Section 9 and on the appellant's prospective application to file an additional written statement. - HELD THAT: - The Court expressly declined to pronounce on whether the petition under Section 9 of the IBC was within time, stating that the dismissal of the appeal and the impugned judgment shall not be construed as an opinion on that question. Separately, the Court permitted the appellant to move an application seeking leave to file an additional written statement in light of an amendment allowed by the National Company Law Appellate Tribunal, Chennai Bench, and directed that any such application shall be considered and decided in accordance with law. The Court expressly refrained from expressing any view on the merits of such an application.

No opinion expressed on the timeliness of the Section 9 petition; liberty granted to the appellant to apply for permission to file an additional written statement, to be decided according to law.

Final Conclusion: The appeal is dismissed and the impugned judgment allowing the respondent's application under Section 60(5) IBC (after referring to Forms 3 and 5) is upheld. The Supreme Court has not expressed any view on the timeliness of the Section 9 petition; the appellant is granted liberty to seek leave to file an additional written statement, and any such application shall be decided in accordance with law. Pending applications, if any, are disposed of.

Condonation of delay - permission to file appeal - payment of admitted claim to the Resolution Professional - remittal to the adjudicating authority for examination of interest and disputed claims - adjudicating authority to decide interest from specified date - adjudicating authority to examine fee/cost of Resolution Professional - setting aside impugned orders of NCLAT and NCLT

Condonation of delay - permission to file appeal - Application for condonation of delay and grant of permission to file the appeal - HELD THAT: - The Court exercised its discretion to condone the delay in filing and granted permission to file the appeal. The order records the grant of leave to proceed despite the delay and admits the appeal for hearing.

Delay condoned and permission to file the appeal granted.

Payment of admitted claim to the Resolution Professional - adjudicating authority to decide interest from specified date - Submission by respondent no.1 to pay the amount claimed due as of 31.12.2017 to the Resolution Professional and the question of interest thereafter - HELD THAT: - Respondent no.1 (White Water Hospitality Private Limited) stated its willingness to pay the amount claimed as due on 31.12.2017 to the Resolution Professional within three weeks. The Court recorded this statement and left the determination of interest payable from 01.01.2018 until the actual payment date to the adjudicating authority. The respondent agreed to pay whatever interest the adjudicating authority calculates and determines to be payable to the Resolution Professional.

Recorded respondent's undertaking to pay the admitted amount to the Resolution Professional within three weeks; remitted determination of interest from 01.01.2018 to the adjudicating authority.

Remittal to the adjudicating authority for examination of interest and disputed claims - adjudicating authority to examine fee/cost of Resolution Professional - examination of disputed claims during CIRP - Scope of remand to the adjudicating authority to examine disputed claims, interest, and fee/cost of the Resolution Professional - HELD THAT: - The Court set aside the impugned orders and remitted the matter to the adjudicating authority (NCLT) to examine and decide: (a) the interest due and payable from 01.01.2018 until the date of payment; (b) the disputed claims made by the appellants and those raised by White Water Hospitality Private Limited during the Corporate Insolvency Resolution Process, including issues that arose before the Committee of Creditors; and (c) the question of the fee/cost of the Resolution Professional. The remand requires the adjudicating authority to consider the parties' contentions afresh while keeping in view the directions recorded by the Court.

Impugned orders set aside and matter remitted to the adjudicating authority to examine disputed claims, interest from 01.01.2018, and the fee/cost of the Resolution Professional.

Setting aside impugned orders of NCLAT and NCLT - Whether the impugned orders of the NCLAT and NCLT should be maintained - HELD THAT: - Having recorded the parties' undertakings and directed remand for fresh consideration of the contested issues, the Court set aside the impugned judgment dated 17.08.2023 of the NCLAT and the order dated 21.11.2019 of the NCLT. The effect is to vacate those orders and require the adjudicating authority to adjudicate the outstanding questions in accordance with the directions given by the Court.

Impugned NCLAT and NCLT orders set aside.

Final Conclusion: The appeals are allowed: delay in filing is condoned and permission to prosecute the appeal granted; respondent no.1's undertaking to pay the admitted claim to the Resolution Professional is recorded; the matter is remitted to the adjudicating authority to determine interest from 01.01.2018, to examine the disputed claims and the fee/cost of the Resolution Professional; impugned NCLAT and NCLT orders are set aside; pending applications disposed of.

Section 9 insolvency application and pre-existing dispute - plausible dispute - use of Jangad receipt as evidence of settlement - email correspondence as defence to demand notice - satisfaction of the Adjudicating Authority on existence of dispute

Section 9 insolvency application and pre-existing dispute - plausible dispute - email correspondence as defence to demand notice - use of Jangad receipt as evidence of settlement - Whether the Adjudicating Authority rightly dismissed the Section 9 application on the ground of a pre-existing/plausible dispute between the parties. - HELD THAT: - The Adjudicating Authority relied on documentary material produced by the Corporate Debtor - notably a Jangad receipt and two emails (including the communication dated 03.05.2019 and an earlier email dated 04.01.2019) - which asserted that the claimed debt had been squared up by delivery of polished diamonds and by subsequent dealings between the parties. The Authority noted that those emails were addressed to the Operational Creditor and remained unanswered, and concluded that the defence raised by the Corporate Debtor could not be ignored. The Appellate Tribunal examined the submissions that the 03.05.2019 email was not directly addressed to the Appellant and that the Jangad receipt was not signed by the Appellant, but held that the material on record sufficiently demonstrated a pre-existing dispute. Applying the standard for admission of a Section 9 petition, the Tribunal agreed with the Adjudicating Authority that a plausible dispute existed which precluded admission of the insolvency application. The Tribunal thereby affirmed the assessment of the Adjudicating Authority that the Operational Creditor had not established an undisputed debt entitling it to proceed under Section 9. [Paras 14, 17]

Appellate Tribunal dismissed the appeal and held that the Section 9 application was rightly rejected by the Adjudicating Authority on account of a pre-existing/plausible dispute.

Final Conclusion: Appeal dismissed; the Adjudicating Authority correctly found existence of a pre-existing plausible dispute based on the Jangad receipt and email correspondence, and the Appellant is at liberty to pursue other remedies available in law.

Limitation and condonation under Section 61(2) of the Code - sufficient cause for extension of time - no condonation beyond fifteen days - appeal maintainability and constitution of appeal

Limitation and condonation under Section 61(2) of the Code - sufficient cause for extension of time - no condonation beyond fifteen days - Application for condonation of delay of 15 days in filing the appeal was rejected and the appeal was held not maintainable for want of timely filing. - HELD THAT: - The Tribunal examined Section 61(2) which prescribes a thirty day period for filing appeals with a proviso permitting a further extension not exceeding fifteen days upon satisfaction of 'sufficient cause'. The appeals in question were filed on the 45th day (i.e. after the thirty day period plus the fifteen day window) and applications for condonation were sought. The appellant's explanations-that delay arose from efforts to procure documents and that counsel could not obtain instructions-were treated as excuses rather than sufficient cause. The Tribunal noted that additional documents could in any event be placed on record by separate application, and therefore the inability to procure certain documents did not justify missing the prescribed limitation. Reliance was placed on the principle that the Tribunal cannot condone delay beyond the fifteen day extension. On these grounds the applications for condonation were dismissed and the appeals were held not to be duly constituted and therefore dismissed. [Paras 6, 7, 8, 9]

Condonation of delay refused; appeals not maintainable and dismissed for being not duly constituted.

Final Conclusion: Applications for condonation of delay were dismissed for lack of sufficient cause under Section 61(2) proviso; consequentially the appeals were held not duly constituted and dismissed.

Limitation period - pronouncement of order - date of upload of the order - condonation of delay - e-filing stops limitation - due diligence in obtaining certified copy - NCLT Rules on pronouncement and cause list

Limitation period - pronouncement of order - date of upload of the order - NCLT Rules on pronouncement and cause list - Commencement of the limitation period for filing an appeal under Section 61(2) of the IBC where hearings concluded on one date but no substantive order was pronounced until it was uploaded later. - HELD THAT: - The Court held that where no order is pronounced in open court on the day of hearing, limitation does not commence from the date of hearing. The NCLT Rules distinguish between 'hearing' and 'pronouncement'; Rule 150(1) requires that an order be made and pronounced and Rule 151 contemplates a note in the order sheet when an order is pronounced. Where an order was not pronounced on the hearing date and was uploaded later, time for filing an appeal begins only when the order is pronounced or, in the present factual matrix, when the order was uploaded since prior to that date no order existed to be challenged. The decision in V Nagarajan is confined to cases where there was an unequivocal pronouncement in open court before upload; it is not applicable where no pronouncement took place on the hearing date. The Court emphasised that the NCLT should not affix the date of hearing on an order pronounced later as that would contravene the distinction between hearing and pronouncement created by the NCLT Rules. [Paras 16, 17, 18, 19, 20]

Limitation began to run on 30 May 2023, the date the order was uploaded (and thus regarded as pronounced for these purposes), not on 17 May 2023 when hearings concluded but no order was pronounced.

Condonation of delay - e-filing stops limitation - due diligence in obtaining certified copy - Whether the appeal, filed beyond thirty days but within the outer limit of forty-five days, ought to be remitted for consideration of condonation of delay. - HELD THAT: - Applying Section 61(2) IBC and the principles in Sanket Agarwal (that e-filing stops limitation and time taken to supply a certified copy may be excluded where due diligence is shown), the Court found that the appeal was filed within the condonable period of fifteen days counted from the date limitation began to run (30 May 2023). The NCLAT's refusal to condone delay was set aside and the matter was restored to the NCLAT to determine whether sufficient cause has been shown to condone the delay beyond thirty days. The Court directed expeditious disposal and declined to stay the CIRP. [Paras 21, 22, 23]

Impugned order declining condonation of delay set aside; appeal restored to NCLAT for fresh consideration of whether sufficient cause exists to condone delay.

Final Conclusion: The appeals were admitted; limitation for filing the appeal commenced on the date the NCLT order was uploaded (30 May 2023) because no pronouncement had been made on the earlier hearing date. The NCLAT's order refusing condonation of delay was set aside and the appeal was restored to the NCLAT for expeditious reconsideration of condonation; the CIRP was not stayed.

Interim order made absolute - investigation without arrest - grant of leave

Interim order made absolute - investigation without arrest - Interim order dated 16th October, 2023 to be made absolute in view of investigation conducted without arrest of the appellant - HELD THAT: - The Court recorded that during the course of the investigation the appellant was not arrested. Having heard the parties, the Court held that, in the facts and circumstances of the case, the interim order passed on 16th October, 2023 should be made absolute. The order was therefore confirmed on the same terms and conditions as the interim order, and the appeal was allowed. [Paras 3, 4, 5]

Interim order dated 16th October, 2023 is made absolute on the same terms and conditions; appeal allowed.

Final Conclusion: Leave granted; interim order dated 16th October, 2023 made absolute on the same terms and conditions; appeal allowed.

Anticipatory bail - offence of money laundering - proceeds of crime - Scheduled offence threshold under Section 2(y)(ii) of PMLA - continuing activity under the Explanation to Section 3 - absence of scheduled offence negates offence under Section 3

Scheduled offence threshold under Section 2(y)(ii) of PMLA - offence of money laundering - proceeds of crime - absence of scheduled offence negates offence under Section 3 - Whether, on the facts alleged, an offence under Section 3 of the PMLA is made out where the total value involved is below the statutory threshold for a scheduled offence. - HELD THAT: - The Court examined the statutory scheme and the Explanation to Section 3 which explains the continuing nature of activities connected with proceeds of crime, but emphasised that for the offence under Section 3 to be made out the proceeds must be derived from a scheduled offence. At the relevant time the definition of "scheduled offence" in Section 2(y)(ii) required the total value involved to exceed the prescribed monetary threshold (Rs. 30 lakhs as then applicable). The Directorate itself alleged that the total amount involved was Rs. 7,30,620/-, which is far below the threshold. In absence of any scheduled offence as defined at the relevant time, there could be no generation of proceeds of crime for the purpose of Section 3; consequently the ingredients of the offence of money laundering were not established on the admitted totals. [Paras 9]

On the admitted totals, no scheduled offence existed as defined under Section 2(y)(ii) at the relevant time, and therefore the offence under Section 3 of the PMLA was not made out.

Anticipatory bail - age and absence of prior criminal history - grant of bail to co-accused as a relevant circumstance - Whether the applicant should be granted anticipatory bail in the proceedings instituted by the Directorate of Enforcement. - HELD THAT: - Taking into account that the applicant is about 63 years old, has no other criminal involvement, had already been granted anticipatory bail in the scheduled offence, and that several co-accused have been granted anticipatory bail, the Court found these circumstances, coupled with the legal conclusion that the PMLA offence was not made out on the admitted amounts, to justify grant of anticipatory bail. The Court considered the contention raised by the Directorate but observed that the core legal point was determinable without further affidavit, since the admitted monetary totals were relied upon by the Directorate itself. Bail was therefore allowed subject to furnishing of personal bond and solvent sureties and certain conditions governing attendance, non-tampering with witnesses and evidence. [Paras 11, 12, 13]

The anticipatory bail application is allowed and the applicant is to be released on furnishing bonds and sureties, subject to the specified conditions.

Final Conclusion: The Court held that, on the admitted totals, the monetary threshold for a scheduled offence was not met and therefore the offence under Section 3 PMLA was not established; accordingly the applicant was granted anticipatory bail on furnishing the prescribed bonds and sureties and subject to specified conditions.

Consideration for tolerating an act - liquidated damages/compensation not consideration - declared service under section 66E(e)

Consideration for tolerating an act - liquidated damages/compensation not consideration - declared service under section 66E(e) - Relinquishment charges collected by the appellant are not taxable as consideration for tolerating an act under section 66E(e) of the Finance Act. - HELD THAT: - The Tribunal held that amounts recovered as compensation or liquidated damages for breach or premature termination of contractual rights cannot be treated as consideration for any service and therefore are not leviable to service tax under section 66E(e). The court disagreed with the Principal Commissioner's conclusion that relinquishment charges were standalone consideration for tolerating non-performance, observing that established authorities have treated such recoveries as punitive or compensatory events in the contract rather than payment for an agreed activity of toleration. Reliance was placed on earlier Tribunal decisions which explained that a taxable supply under the provision requires an express or implied agreement to do or abstain from an act against payment, and mere flow of money on account of breach does not establish such an agreement. The Departmental Circular emphasizing that liquidated damages, compensation and penalties arising from breach do not constitute consideration for tolerating an act unless there is an independent arrangement to tolerate an act was also noted. Applying these principles to the appellant's agreements and the nature of relinquishment charges, the court concluded that the charges are compensatory and not consideration for rendition of a declared service under section 66E(e). [Paras 19, 23, 25]

Relinquishment charges are not taxable under section 66E(e); the demand confirmed by the Principal Commissioner is unsustainable.

Final Conclusion: The order dated 04.03.2021 confirming service tax demand on relinquishment charges is set aside and the appeal is allowed.

Declared service - liquidated damages or penalty as consideration for service - tolerating an act or situation - definition of service and consideration - service tax liability on compensation for breach of contract

Declared service - liquidated damages or penalty as consideration for service - tolerating an act or situation - definition of service and consideration - Whether amounts recovered as liquidated damages/penalties for breach of contract constitute consideration for a declared service under Section 66E(e) of the Finance Act, 1994 and are liable to service tax. - HELD THAT: - The Tribunal examined the statutory meaning of "service" and the concept of a "declared service" under Section 66E(e), and applied principles from contract law regarding liquidated damages and compensation for breach. Following its earlier final order in the assessee's own case, the Tribunal observed that liquidated damages/compensation are awarded to make good loss likely to result from breach and are not synonymous with "tolerating" an act or situation. The conclusion in the earlier decision, which the department conceded, was that sums received as liquidated damages do not constitute consideration for "agreeing to tolerate an act or a situation" under Section 66E(e). Consequently, the amounts in question cannot be characterized as consideration for a declared service and are not leviable to service tax under that provision. The Tribunal found the facts in the present appeals to be substantially identical to those considered in the prior final order and therefore applied the same reasoning to set aside the demand. [Paras 7]

Amounts recovered as liquidated damages/penalties for breach of contract are not consideration for a declared service under Section 66E(e) and the tax demand is unsustainable.

Final Conclusion: Following the Tribunal's prior final decision and applying contract-law principles, the appeals are allowed and the demand of service tax on the liquidated damages/penalties is set aside.

Refund claim - proof of payment of duty - requirement of original TR-6 challan - documentation prescribed under section 11B of Central Excise Act, 1944 - departmental records as evidence of payment - remand for fresh determination

Requirement of original TR-6 challan - proof of payment of duty - departmental records as evidence of payment - refund claim - Whether insistence on production of the original TR-6 challan as sole proof of discharge of duty was justified when departmental records indicated payment, affecting the refund claim. - HELD THAT: - The Tribunal held that the lower authorities erred in rejecting the refund solely for want of production of the original TR-6 challan when the department's own records reflected payment of duty. Relying on the reasoning in Maharashtra State Electricity Board v. Commissioner of Central Excise, Nagpur, the Tribunal observed that intra-departmental correspondence and departmental records may lawfully constitute proof of payment and that it is unjust to burden the claimant with production of further original documents when such originals are available within department files. The Tribunal therefore set aside the impugned order to the extent it dismissed the refund claim for lack of the original TR-6 and directed restoration of the application to the original authority for fresh determination in light of the judicial finding that the goods were not excisable.

Impugned order set aside; matter remanded to the original authority for fresh determination of the refund application in consequence of the judicial determination of non-excisability.

Final Conclusion: The appeal is allowed by way of remand: the order rejecting the refund for want of the original TR-6 challan is set aside and the application is restored to the original authority for fresh adjudication in light of departmental records and the Tribunal's findings.

Includability of sales tax concession in assessable value for central excise - treatment of amount collected as inclusive of duty (cum-duty) - invocability of extended period of limitation where assessees retained sales tax concession - penalty under Section 11AC of the CEA, 1944 - remand for computation of duty for the normal period of limitation

Includability of sales tax concession in assessable value for central excise - Sales tax concession retained by the assessee is required to be added to the assessable value for the purpose of levy of Central Excise duty. - HELD THAT: - The Tribunal held that the question is no longer res integra in view of the Hon'ble Supreme Court decision in Super Synotex (India) Ltd. v. CCE, Jaipur, which requires addition of sales tax concession retained by the assessee to the assessable value. Relying on that binding precedent, the retained sales tax concession in the present case must be included in the assessable value for levy of duty. [Paras 6]

Sales tax concession retained by the appellant is to be added to the assessable value for central excise duty.

Treatment of amount collected as inclusive of duty (cum-duty) - Where the assessee has not collected duty separately from customers, the amount collected is to be treated as inclusive of duty (cum-duty) for computing duty for the normal period of limitation. - HELD THAT: - The appellant agreed to pay duty for the normal period but contended that the amounts realized from customers were inclusive of duty since no separate duty was collected. The Tribunal accepted this contention and held that computation of duty for the normal limitation period must treat the amounts collected as cum-duty and calculate liability accordingly. [Paras 7]

Demand for the normal period is to be computed by treating the amount collected as cum-duty.

Invocability of extended period of limitation where assessees retained sales tax concession - Extended period of limitation is not invocable in the present circumstances. - HELD THAT: - The Tribunal noted prior Tribunal decisions and subsequent Board Circular No. 1063/2/2018-CX dated 16.02.2018 which accepted certain orders including the effect of Super Synotex and indicated that, where there was no clarity earlier, the assessee could not be said to be at fault; consequently extended period would not apply. The adjudicating authority had in fact dropped the extended period demand; the Tribunal endorsed that extended period is not invocable here. [Paras 5, 9, 10]

Extended period of limitation is not invocable in this case.

Penalty under Section 11AC of the CEA, 1944 - Penalty under Section 11AC imposed by the adjudicating authority is not tenable and is set aside. - HELD THAT: - The adjudicating authority imposed penalty equal to the duty confirmed but did not record any proper finding of positive suppression by the appellant. Given that earlier conflicting Tribunal decisions existed and Board guidance indicated lack of clarity, the assessee cannot be faulted for omission. The Tribunal found absence of requisite findings to sustain penalty and, for the additional reason that extended period was not invocable, set aside the penalty under Section 11AC. [Paras 8, 10, 11]

The penalty imposed under Section 11AC of the CEA, 1944 is set aside.

Remand for computation of duty for the normal period of limitation - Computation of duty payable for the normal period of limitation is remanded for determination. - HELD THAT: - Having decided the legal questions of includability and cum-duty treatment and having set aside the penalty, the Tribunal remanded the matter to compute the duty payable for the normal period of limitation, to be calculated by treating the amounts collected as cum-duty and to give consequential relief, if any, as per law. [Paras 11]

Appeal is remanded for calculation of duty payable for the normal period of limitation.

Final Conclusion: Appeal partially allowed: sales tax concession retained by the appellant is includable in assessable value; amounts collected treated as cum-duty for computing liability for the normal limitation period; extended period is not invocable; penalty under Section 11AC set aside; matter remanded for computation of duty for the normal period with consequential relief as per law.

Applicability of Rule 3(5A) of the Cenvat Credit Rules, 2004 to capital goods on which Cenvat credit has been taken - Requirement to reverse Cenvat credit under Rule 3(5) - Demand of excise duty on clearance of used/rejected capital goods as waste and scrap - Penalty and interest contingent upon sustenance of duty demand

Applicability of Rule 3(5A) of the Cenvat Credit Rules, 2004 to capital goods on which Cenvat credit has been taken - Demand of excise duty on clearance of used/rejected capital goods as waste and scrap - Whether Rule 3(5) and Rule 3(5A) apply where used/rejected capital goods cleared as waste and scrap have not been availed of for Cenvat credit - HELD THAT: - The Tribunal examined Rules 3(5) and 3(5A) of the Cenvat Credit Rules and held that both provisions are directed to situations concerning capital goods on which Cenvat credit has been taken. Rule 3(5) contemplates removal of such capital goods "as such" and Rule 3(5A) deals with clearance as waste and scrap; the expression "the capital goods" in Rule 3(5A) therefore refers to capital goods on which credit was availed. The Tribunal also relied on the Board Instruction F. No. 267141/09-CX.8 dated December 7, 2009, which clarifies that Rule 3(5A) is applicable only to capital goods on which Cenvat credit has been taken and which are cleared as waste and scrap. As the Appellant had not availed any Cenvat credit on the old/used machineries disposed of by auction, the statutory scheme and the Board instruction render Rules 3(5) and 3(5A) inapplicable to the present clearances; consequently the demand of Central Excise duty under Rule 3(5A) could not be sustained. [Paras 7]

Rules 3(5) and 3(5A) are not applicable where no Cenvat credit was taken on the capital goods cleared as scrap; the duty demand is not sustainable.

Penalty and interest contingent upon sustenance of duty demand - Whether interest and penalty confirmed in the impugned order survive where the duty demand is held unsustainable - HELD THAT: - The Tribunal held that since the substantive demand of duty under Rule 3(5A) is unsustainable for want of availed credit on the capital goods, the consequential imposition of interest and penalty cannot be sustained. The inexistence of a valid duty demand removes the foundation for charging interest or imposing penalty in the matter adjudicated. [Paras 7, 8]

Interest and penalty confirmed in the impugned order do not survive once the duty demand is set aside.

Final Conclusion: The impugned order confirming duty, interest and penalty is set aside; the appeal is allowed.

Cenvat Credit on inputs used for repairs and maintenance - Welding electrodes as inputs used in or in relation to manufacture - Scope of the expression "in the manufacture of goods" to include activities integrally connected with production - Principle that inputs need not be ingredients or directly incorporated in final product

Cenvat Credit on inputs used for repairs and maintenance - Welding electrodes as inputs used in or in relation to manufacture - Principle that inputs need not be ingredients or directly incorporated in final product - Denial of Cenvat credit in respect of welding electrodes used in the factory for repairs and maintenance was not sustainable; such goods qualify as inputs and credit is allowable. - HELD THAT: - The Tribunal examined whether welding electrodes employed in repairs and maintenance at the factory fall within the definition of "input" and thus attract Cenvat credit. It relied on and followed preceding High Court and Tribunal decisions which interpret the expression "in the manufacture of goods" broadly to include processes and activities integrally connected with production, and which hold that inputs need not be ingredients or directly incorporated into the final product. The Tribunal noted the ratio in JK Cottons viewed in the cited authorities that goods used for purposes such as lighting, exhaust, or other factory auxiliaries were held necessary for effective manufacturing and therefore within the scope of inputs. The Tribunal also relied on decisions considering welding electrodes as inputs used in the manufacturing process [Panipat Co-operative Sugar Mills Ltd. ; Hindustan Zinc Ltd. v. UOI ; CST, Bilaspur v. Singhal Enterprises Pvt. Ltd. ; CCE v. Ace Glass Container Ltd. ] and, applying that reasoning, held that welding electrodes used for repairs and maintenance are goods used in or in relation to manufacture of final products and hence eligible for Cenvat credit. Concluding that the issue is squarely covered by those decisions, the Tribunal allowed the appeal.

Appeal allowed; denial of Cenvat credit in respect of welding electrodes set aside and credit held admissible.

Final Conclusion: The Tribunal allowed the appeal and held that welding electrodes used in factory repairs and maintenance qualify as inputs used in or in relation to manufacture, entitling the assessee to Cenvat credit.

Priority of secured creditor - first charge on secured assets - overriding effect of the SARFAESI Act - lien entered in CERSAI - red entry/rapat in revenue records

Priority of secured creditor - first charge on secured assets - overriding effect of the SARFAESI Act - red entry/rapat in revenue records - lien entered in CERSAI - Whether the revenue department entries (rapat) and the claimed statutory first charge of the State have priority over the secured creditor's charge created and registered earlier, and whether such rapat entries must be removed. - HELD THAT: - The Court found that the petitioner-Bank had earlier created and registered a security interest as a secured creditor, with lien noted in CERSAI in 2013, whereas the revenue rapat entries were recorded later (2015 and 2018). Relying on authoritative precedent including Punjab National Bank v. Union of India and other decisions discussed at length, the Court held that a secured creditor having a first charge on secured assets under the SARFAESI regime enjoys priority over revenue, taxes and other statutory claims by virtue of the SARFAESI Act's overriding provision. The judgment accepted the line of authorities which distinguish Crown or revenue preference as applying to unsecured creditors and which confirm that where statutory provisions (as amended) confer priority on secured creditors, the State's statutory first charge cannot prevail against a previously created secured interest. Applying these principles to the facts, and noting the unchallenged CERSAI entry, the Court concluded that the rapat entries impinged on the Bank's rights under SARFAESI and directed their removal so as not to frustrate the secured creditor's statutory rights. [Paras 10, 11, 12, 13]

The petition is allowed; the rapat entries (Rapat No. 459 dated 09.07.2015 and Rapat No. 173 dated 05.02.2018) are to be removed and the Bank's priority as secured creditor under SARFAESI recognized.

Final Conclusion: The writ petition is allowed: the Court held that the petitioner-Bank, being a secured creditor with a registered charge, has priority under the SARFAESI Act over the State's asserted revenue charges and directed removal of the revenue rapat entries impinging on the secured assets.

Presumption under Section 139 of the Negotiable Instruments Act - burden to rebut presumption by preponderance of probabilities - execution of cheque and proof of signature - handwriting comparison and evidence of handwriting expert immaterial to Section 139 presumption - revisional jurisdiction under Section 401 CrPC limited to legality, regularity and propriety

Presumption under Section 139 of the Negotiable Instruments Act - execution of cheque and proof of signature - burden to rebut presumption by preponderance of probabilities - Whether execution of Ext.P1 was proved so as to attract the presumption under Section 139 of the Negotiable Instruments Act and whether the petitioner succeeded in rebutting that presumption. - HELD THAT: - The accused admitted putting his signature on Ext.P1 but contended the cheque was given only as security and that execution and consideration were not proved. The courts below on appreciation of testimony (including PW1 who saw the petitioner signing the cheque) and documentary evidence (Exts.P5, P6 and bank intimation Ext.X1) found execution proved and that the complainant established existence of an obligation. Once the cheque signed by the drawer and handed over is shown, Section 139 presumption arises and shifts the onus to the accused to rebut it. The petitioner adducing no defence evidence and relying on cross-examination and denials failed to discharge that onus on the preponderance of probabilities. The concurrent findings that the petitioner did not rebut the presumption were supported by evidence and not vitiated by any legal infirmity. [Paras 7, 8, 11, 13]

Execution of Ext.P1 was proved, the presumption under Section 139 applied and the petitioner failed to rebut it.

Handwriting comparison and evidence of handwriting expert immaterial to Section 139 presumption - execution of cheque and proof of signature - Whether the similarity of handwriting between entries in Ext.P1 and Ext.X1 and the petitioner's request for handwriting comparison or expert evidence vitiated the prosecution case. - HELD THAT: - The court applied the principle that even if the entries on a cheque are filled by someone other than the drawer, if the drawer has signed and handed over the cheque the presumption under Section 139 is attracted; handwriting expert evidence as to who filled the particulars is irrelevant to the question whether the cheque was issued in discharge of a debt or liability. The trial court's omission to compare handwriting was not material; the appellate court undertook comparison and concluded the handwritings were unlikely of the same person. Consequently, the contention that the cheque was manipulated or that the petitioner was denied opportunity to adduce handwriting evidence did not undermine the conviction. [Paras 9, 10]

Similarity of handwriting and absence of handwriting expert report did not vitiate the prosecution; such evidence is immaterial to rebutting the Section 139 presumption.

Revisional jurisdiction under Section 401 CrPC limited to legality, regularity and propriety - Whether this Court in revisional jurisdiction could re-appreciate evidence and substitute its view for the concurrent findings of the trial and appellate courts. - HELD THAT: - The Court reiterated that the power of revision under Section 401 CrPC is confined to examining legality, regularity and propriety of the impugned order and does not permit re-appreciation of evidence to arrive at a different conclusion where concurrent findings are supported by evidence and are not perverse. The findings of the courts below in this case were based on proper appreciation of material on record and therefore not interfered with in revision. [Paras 12, 13]

High Court will not interfere with concurrent findings of trial and appellate courts unless they are perverse; revision cannot re-appreciate evidence to substitute its view.

Final Conclusion: Concurrent findings of the trial and appellate courts that execution of the cheque was proved, the presumption under Section 139 applied and was not rebutted, are sustainable; the revision under Section 401 CrPC is without merit and is dismissed.