TaxTMI Updates e-Newsletter
Jan 04,2022

Reimbursement of differential tax arising from change to GST - application of revised guidelines relating to works contract under GST - representation for redressal and expeditious disposal - interim protection from coercive action pending decision

Reimbursement of differential tax arising from change to GST - application of revised guidelines relating to works contract under GST - representation for redressal and expeditious disposal - Petitioner's claim for reimbursement of additional tax on account of transition from VAT to GST remitted to the appropriate authority for consideration in light of the revised government guidelines dated 10th December, 2018. - HELD THAT: - The petition challenges non-reimbursement of the differential tax liability allegedly occasioned by the change in tax regime w.e.f. 01.07.2017. The State has issued revised guidelines dated 10.12.2018 governing adjustment for works contracts executed partly or wholly after implementation of GST, prescribing a method to compute GST-inclusive value for balance work, supplementation agreements and reimbursement where applicable. Rather than adjudicating the substantive claim on merits, the Court directed the petitioner to file a comprehensive representation within four weeks and directed the competent authority to consider and dispose of the representation expeditiously and in the light of the revised guidelines, preferably within three months from receipt of certified copy of the order. The matter is therefore remitted for fresh consideration by the authority applying the stated guidelines. [Paras 7]

Representation to be filed within four weeks; authority to consider and decide expeditiously in light of revised guidelines dated 10.12.2018 (remitted for fresh consideration).

Interim protection from coercive action pending decision - representation for redressal and expeditious disposal - Petitioner's entitlement to protection from coercive action until the authority decides the representation. - HELD THAT: - Alongside remitting the substantive grievance for consideration, the Court granted interim relief preventing any coercive action against the petitioner until the competent authority takes a decision on the representation. This preserves the petitioner's position while the authority follows the prescribed procedure under the revised guidelines and completes disposal within the stipulated timeframe. [Paras 9, 10]

No coercive action shall be taken against the petitioner until decision by the authority; writ petition disposed accordingly.

Final Conclusion: The writ petition challenging non-reimbursement of differential tax on account of the shift to GST is disposed of by directing the petitioner to submit a representation and by remitting the matter to the competent authority to decide expeditiously in accordance with the revised guidelines dated 10.12.2018; interim protection from coercive action is granted until such decision is rendered.

Jurisdictional scope of revision under Section 263 of the Income Tax Act - requirement of specific findings before exercise of revisional power - adequacy of inquiry by Assessing Officer in scrutiny assessment - nexus of expenditure to business for allowability - treatment of sundry income for computation of book profit under Section 40(b)

Jurisdictional scope of revision under Section 263 of the Income Tax Act - requirement of specific findings before exercise of revisional power - adequacy of inquiry by Assessing Officer in scrutiny assessment - nexus of expenditure to business for allowability - treatment of sundry income for computation of book profit under Section 40(b) - Whether the order passed by the Commissioner under Section 263 holding the assessment to be erroneous and prejudicial to the interest of revenue was sustainable, having regard to the inquiries made by the Assessing Officer and the factual material on record concerning classification of sundry income and allowability of certain expenses. - HELD THAT: - The Tribunal found on the material on record that the Assessing Officer conducted the necessary inquiries during the scrutiny assessment, had obtained details relating to the sundry receipts and the payments to Price Waterhouse Coopers and had raised specific queries which were answered. The Tribunal noted that items such as sale of scrap and foreign exchange fluctuation gains were factually inextricably linked to the professional/business receipts and were treated as business income; earlier assessments had allowed similar claims in preceding years which supported the factual nexus. Details relating to the service charges and the accountant's risk insurance premium were available before the Assessing Officer and dealt with in the assessment proceedings. The Tribunal held that mere assertion by the Commissioner that no inquiry was made was insufficient to justify invoking revisional jurisdiction under Section 263; the Commissioner was required to indicate how and in what manner the Assessing Officer had erred but failed to do so. On these findings the Tribunal concluded that the assessment order could not be characterised as erroneous or prejudicial to the revenue. The High Court, on review of the Tribunal's reasoning and the factual conclusions recorded, found no error in the Tribunal's conclusion and did not interfere.

The Tribunal's quashing of the revision order under Section 263 was upheld; the assessment order was not held to be erroneous or prejudicial to the interest of revenue on the grounds relied upon by the Commissioner.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order setting aside the Commissioner's revisional order under Section 263 is affirmed and the substantial questions of law are answered against the Revenue.

Income from business - deduction under Section 80IB(10) - revised return and after thought objection - business income derived from interest on investments made out of accumulated profits and reserves - application of wide connotation of "business"

Income from business - deduction under Section 80IB(10) - business income derived from interest on investments made out of accumulated profits and reserves - application of wide connotation of "business" - Interest accrued on fixed deposits made out of the assessee's accumulated profits and reserves is to be treated as income from business and eligible for deduction under Section 80IB(10). - HELD THAT: - The Court upheld the findings of the CIT(A) and the Tribunal that the interest earned on fixed deposits originated from funds which were the product of the assessee's business activities (sale of flats) and that the assessee had no other source of income. Applying the settled principle that the word "business" bears a wide connotation, as noted from CIT v. Calcutta National Bank Ltd., the interest in question was properly characterized as business income. The Tribunal's acceptance was further reinforced by the fact that the Assessing Officer had itself allowed a similar deduction in the assessment for AY 2006-07. On these facts the Tribunal correctly sustained the allowance of deduction under the statutory provision relied upon by the assessee.

The characterization of the accrued interest as business income and allowance of deduction under Section 80IB(10) was upheld; the revenue's appeal on this point was dismissed.

Revised return and after thought objection - The Assessing Officer's rejection of the assessee's claim on the ground that it was made only in a revised return as an after thought was not justified. - HELD THAT: - The Court agreed with the CIT(A)'s conclusion that the interest earnings were not from a 'first degree source' such that they could have been shown as income from other sources in the original computation, and therefore the filing of a revised computation during assessment proceedings could not be treated as an after thought warranting denial of the claim. Consequently, the reason assigned by the Assessing Officer to reject the revised return was held to be incorrect.

The Assessing Officer's objection to the revised return was rejected and the allowance made by the CIT(A) was sustained.

Final Conclusion: The revenue's appeal was dismissed: the Tribunal and CIT(A) were correct in treating the interest on fixed deposits (arising from accumulated business profits) as business income eligible for deduction under Section 80IB(10), and in holding that the claim made in the revised return could not be denied as an after thought.

Addition as unexplained income - proof of source for cash deposits - acceptability of sale deeds mentioning receipt of advance - duty to verify disputed facts with third-party witnesses/purchasers

Addition as unexplained income - acceptability of sale deeds mentioning receipt of advance - duty to verify disputed facts with third-party witnesses/purchasers - Whether the addition of Rs. 55.01 lakh as unexplained income could be sustained where the assessee claimed the cash deposits were sourced from advance sale proceeds described in sale deeds. - HELD THAT: - The Tribunal examined the AO's treatment of the cash deposits as unexplained income and the concurrent holding of the CIT(A). The sale deeds produced by the assessee mentioned that money had been given in advance, but did not specify the date or manner of payment. The AO related receipt of sale consideration to the date of registration and disbelieved the assessee's claim of earlier receipt; the CIT(A) concurred, observing lack of proof as to when and how cash was handed over. The Tribunal found this reasoning insufficient. It noted that the sale deeds did mention advances and that there was no material on record establishing that the consideration was necessarily received only at registration. Where the lower authorities had doubts about the genuineness or timing of receipt, the Tribunal held it was incumbent upon them to carry out further verifications, including making inquiries from the purchasers, rather than rejecting the assessee's explanation on the basis of inferences. Absent any departmental contention that the sale proceeds were diverted to some other investment or expenditure, and given the admitted mention of advances in the deeds, the Tribunal concluded there was substance in the assessee's explanation and that the addition could not be sustained without proper verification. [Paras 8, 9, 10]

The orders of the lower authorities are set aside; the addition of Rs. 55.01 lakh is vacated and the appeal is allowed.

Final Conclusion: The Tribunal found the assessee's explanation that the cash deposits were sourced from advances on sale of two properties to be prima facie plausible and held that the AO/CIT(A) should have conducted requisite verifications (including from purchasers) before making the addition; accordingly the addition of Rs. 55.01 lakh is vacated and the appeal is allowed.

Revenue expenditure - capital expenditure - abandoned/aborted IPO expenses - deduction under section 37 of the Income tax Act - disallowance under section 14A of the Income tax Act - computation under Rule 8D(2)(iii) of the Income tax Rules - disallowance not to exceed exempt income - allowability of education cess as business expenditure under Section 40(a)(ii)

Abandoned/aborted IPO expenses - revenue expenditure - deduction under section 37 of the Income tax Act - Allowability of expenditure incurred on an aborted initial public offer (IPO) as revenue expenditure under section 37. - HELD THAT: - The Tribunal held that the facts in the assessment year 2013 14 are identical to the immediately preceding year and are covered by the Coordinate Bench decision and by jurisdictional High Court precedents which treated aborted IPO and similar abandoned project expenses as revenue in nature where no new asset came into existence and no enduring capital benefit accrued. The Tribunal applied the established tests distinguishing capital and revenue expenditure (enduring benefit, creation of new asset, and whether the expenditure merely facilitates trading operations) and found those parameters for treating the expenditure as capital were not fulfilled. Following parity with the earlier decision in the assessee's own case and the cited authorities, the Assessing Officer was directed to allow the IPO expenses as revenue expenditure under section 37. [Paras 6, 7, 8]

Expenditure on aborted IPO is revenue in nature and is allowable under section 37; Ground No.1 allowed.

Disallowance under section 14A of the Income tax Act - computation under Rule 8D(2)(iii) of the Income tax Rules - disallowance not to exceed exempt income - Validity and quantification of disallowance under section 14A and remittance for computation under Rule 8D(2)(iii) consistent with prior findings. - HELD THAT: - The Tribunal noted no change in facts or law and followed the Coordinate Bench's earlier findings for the immediately preceding year that no interest bearing funds were used for making the investments, directing that no addition on account of interest under Rule 8D(2)(ii) be made. As to indirect expenses, the Tribunal reiterated settled law that any section 14A disallowance cannot exceed the exempt income and that the average value for Rule 8D(2)(iii) should consider only investments yielding exempt income. Consequently, the matter was remitted to the Assessing Officer to compute the disallowance under clause (iii) of Rule 8D(2) in conformity with these principles and precedents. [Paras 9, 10, 11]

Disallowance under section 14A partly upheld in principle but remitted to AO for computation under Rule 8D(2)(iii) in accordance with the directions; Ground No.2 partly allowed.

Allowability of education cess as business expenditure under Section 40(a)(ii) - Whether education cess paid is allowable as deduction while computing business income. - HELD THAT: - Raising the ground for the first time before the Tribunal, the assessee relied on the Bombay High Court decision which held that 'cess' is not within the scope of 'any rate or tax' as used in Section 40(a)(ii) and therefore is not disallowed by that provision. The Tribunal accepted that the legal issue does not require further factual inquiry, applied the Bombay High Court's reasoning that legislature did not intend to include 'cess' within clause (ii) of Section 40(a), and directed the Assessing Officer to allow deduction of the education cess paid. [Paras 12, 13, 14]

Deduction for education cess allowed; the additional ground is allowed.

Final Conclusion: The appeal is partly allowed: aborted IPO expenses are held to be revenue and allowable; the section 14A disallowance is remitted for recomputation under the specified principles (with no interest disallowance under Rule 8D(2)(ii) on recorded facts); and deduction of education cess is directed to be allowed.

Appeal becomes infructuous - principles of natural justice - power of appellate authority to issue directions to assessing officer when appeal is infructuous - merger of intimation under section 143(1) with assessment under section 143(3) - timely filing of Form 10/Form 10B and conformity with section 11(2)(c)

Appeal becomes infructuous - power of appellate authority to issue directions to assessing officer when appeal is infructuous - principles of natural justice - Whether the CIT(A) could, after treating the appeal against intimation under section 143(1) as infructuous, direct the assessing officer to verify filing of Form 10/Form 10B and seek condonation. - HELD THAT: - The Tribunal found that the learned CIT(A) expressly treated the appeal as infructuous because the assessing officer had rectified the intimation and a subsequent assessment under section 143(3) had been passed. Once an appeal is held to be infructuous the appellate authority has no jurisdiction to pass directions to the assessing officer in respect of matters not being decided on the merits by him. Further, by issuing directions without deciding the appeal on merits the CIT(A) failed to afford an opportunity to the assessee under the scheme of section 250(2), thereby violating the principles of natural justice. The Tribunal therefore held that the directions issued by the CIT(A) in those circumstances were without authority and unsustainable. [Paras 12]

Directions of the CIT(A) to the assessing officer were unwarranted and are deleted; the CIT(A) lacked power to issue those directions after treating the appeal as infructuous and having not decided the matter on merits.

Merger of intimation under section 143(1) with assessment under section 143(3) - timely filing of Form 10/Form 10B and conformity with section 11(2)(c) - Whether the assessee had filed Form 10 and Form 10B within the prescribed time and whether any direction for verification was necessary after the assessing officer's order under section 143(3) which granted benefits under sections 11 and 12. - HELD THAT: - The Tribunal recorded that the assessee filed Form 10 on 20/08/2016 and Form 10B on 24/08/2016 and supplied evidence of online submission to the assessing officer. The Central Processing Unit had rectified the earlier intimation by allowing deductions and the subsequent assessment under section 143(3) granted the benefit of accumulation under sections 11 and 12. Given that the rectification and the assessment addressed the grievance, and that the forms were filed before the due date of return, there was no justification for the CIT(A) to direct further verification of filing or condonation proceedings. [Paras 6, 12, 13]

Assessee had filed the requisite forms in time and the CIT(A)'s direction for further verification/condonation was unnecessary; those directions are deleted.

Final Conclusion: The appeal is allowed; the directions given by the CIT(A) to verify filing of Form 10 and Form 10B (and to ascertain any condonation) are deleted as unwarranted, the CIT(A) having no authority to issue such directions after treating the appeal as infructuous and without deciding the matter on merits.

Fees for technical services - Fees for included services - make available - Permanent Establishment - Business profits - Royalties - sale of software license - DTAA precedence over domestic law

Fees for technical services - Fees for included services - make available - Permanent Establishment - Business profits - DTAA precedence over domestic law - Chargeability of Rs. 52,73,977 as fees for technical services/fees for included services under the DTAA and the Act - HELD THAT: - The Tribunal examined the contract and Project Variation Request (PVR) and found that the assessee (a US company) provided manpower support of two personnel (Project Engineer and Design Lead) to TTL for supervision, milestone delivery, issue resolution and participation in reviews. While TTL's deliverables to TML included technical designs and engineering outputs satisfying the test of making available technical knowledge, the services actually rendered by the assessee were supervisory and consumed in the course of performance, with no deliverable or transfer of technical know-how that could be used later by TTL or TML. Article 12(4) of the DTAA confines 'fees for included services' to payments that make available technical knowledge, experience or skill or consist of development/transfer of technical plans/designs; the assessee's services did not satisfy that 'make available' test. Applying section 90(2) and the DTAA definition, the Tribunal held that the amount could not be taxed as 'fees for included services' despite the AO's invocation of section 9(1)(vii). Further, the assessee had denied and the AO did not controvert absence of a Permanent Establishment in India; consequently the receipts could not be taxed as business profits under Article 7. Therefore the contested sum was not chargeable to tax in India. [Paras 9, 10]

The sum of Rs. 52.73 lakh is not taxable as fees for included services/fees for technical services or as business profits in India and the ground is allowed.

Royalties - sale of software license - Taxability of Rs. 65,28,405 received on sale of software licenses as 'royalties' under Article 12 of the DTAA and the Act - HELD THAT: - The Tribunal accepted the factual position that the assessee purchased software packages from third parties and distributed them to Indian entities. Applying the legal test in the Supreme Court's decision in Engineering Analysis Centre of Excellence (distinguishing ownership of copyright from ownership of the physical medium and holding that licences which merely authorise use without transferring copyright do not amount to parting with copyright), the Tribunal held that the transactions involved sale of software licenses and did not effect transfer of copyright. Consequently the receipts did not fall within the definition of 'royalties' under Article 12(3) and were not taxable as such. [Paras 14, 15]

The amount of Rs. 65.28 lakh received on sale of software licenses is not taxable as royalties under the DTAA/Act and the ground is accepted.

Final Conclusion: Both grounds of appeal are allowed: the amount of Rs. 52.73 lakh paid for manpower/supervisory support is not chargeable as fees for included services/fees for technical services or as business profits in India, and the amount of Rs. 65.28 lakh from sale of software licenses is not taxable as royalties; the appeal is allowed.

Validity of reopening of assessment under Section 147 based on investigation wing information - Additions under Section 68 where sale proceeds arose from transactions on a recognized stock exchange - Additions under Section 69C by way of estimated commission consequential to disallowance under Section 68 - Onus on revenue to disprove genuineness after assessee discharges primary onus - Failure to afford cross examination of third party witnesses and effect on admissibility of adverse statements - Application of test of human probabilities in evaluating documentary evidence

Validity of reopening of assessment under Section 147 based on investigation wing information - Reopening of assessment under Section 147 was validly invoked by the Assessing Officer. - HELD THAT: - The Tribunal held that after completion of assessment under section 143(3) read with section 153A, the Assessing Officer came into possession of tangible information from the investigation wing indicating possible escapement of income. Such credible and actionable information was sufficient to invoke section 147 and to issue notice under section 148. Accordingly, the reopening was not a mere change of opinion but was founded on fresh material received after the earlier assessment and therefore lawful. The appellate challenge to the validity of reopening was dismissed. [Paras 4]

Reopening upheld; legal ground challenging reopening dismissed.

Additions under Section 68 where sale proceeds arose from transactions on a recognized stock exchange - Additions under Section 69C by way of estimated commission consequential to disallowance under Section 68 - Onus on revenue to disprove genuineness after assessee discharges primary onus - Failure to afford cross examination of third party witnesses and effect on admissibility of adverse statements - Application of test of human probabilities in evaluating documentary evidence - Additions made by the Assessing Officer under Sections 68 and 69C were not sustainable and were deleted. - HELD THAT: - On the merits the Tribunal found that the assessee had produced documentary evidence - contract notes, broker ledger, demat statements, balance sheet entries and bank statements showing settlement through banking channels and delivery from demat account - establishing that purchases and sales were effected on a recognized stock exchange through registered brokers and that STT was paid. These materials satisfied the primary onus regarding identity, creditworthiness and genuineness of transactions. The revenue relied primarily on general investigation wing findings and third party statements alleging manipulation of a penny stock scrip, none of which specifically named or linked the assessee, nor were they supported by corroborative evidence showing any exchange of cash or collusion with the assessee. Crucially, the assessee was not afforded an opportunity to cross examine the third party declarants whose statements formed the basis of the additions. Applying settled principles, including that suspicion or conjecture cannot substitute proof and that adverse third party statements relied upon must be confronted with the assessee, the Tribunal concluded that the revenue failed to discharge the onus to rebut the assessee's documentary proof. Consequently, the addition under Section 68 could not be sustained and the consequential estimated commission added under Section 69C also fell away. [Paras 4]

Additions under Sections 68 and 69C deleted; appeal on merits allowed.

Final Conclusion: The appeals for AY 2012-13 and 2013-14 are partly allowed: the reopening under Section 147 was held valid, but the additions made under Sections 68 and 69C were deleted for want of cogent corroborative evidence and for failure to afford opportunity to cross examine the third party witnesses.

Disallowance on estimation - substantiation of expenditure under section 37 - burden to produce bills, vouchers and confirmations - judicial moderation of ad hoc disallowance

Disallowance on estimation - substantiation of expenditure under section 37 - burden to produce bills, vouchers and confirmations - Validity of 20% disallowance of cost of material made by the Assessing Officer and whether CIT(A) was correct in restricting it to 2% - HELD THAT: - The Tribunal noted that the assessee did not produce all supporting bills, vouchers or confirmations for the cost of material debited. While the Assessing Officer made an ad hoc disallowance of 20% on estimation, the CIT(A) reduced it to 2% without specifying or quantifying the particular items not vouched. The Tribunal held that disallowance on estimation must have a basis; however, given the assessee's failure of full substantiation and absence of a pinpointed abnormality in expenditure, the Tribunal found the CIT(A)'s drastic reduction unexplained. In the interests of justice and as a moderating measure, the Tribunal partly upheld the Assessing Officer's estimate and restored the disallowance to 50% of the amount added by the Assessing Officer, to be applied as a lumpsum adjustment, with a direction that this judgment not be treated as a precedent.

The 20% disallowance is partly sustained: restored to 50% of the Assessing Officer's addition (in place of CIT(A)'s 2%).

Disallowance on estimation - substantiation of expenditure under section 37 - burden to produce bills, vouchers and confirmations - Validity of 10% disallowance of construction costs made by the Assessing Officer and whether CIT(A) was correct in restricting it to 1% - HELD THAT: - The Tribunal observed that the assessee failed to furnish complete vouchers for construction-related debits. The Assessing Officer made an estimate of 10% disallowance while the CIT(A) reduced it to 1% without identifying specific unsupported items. Applying the principle that estimation must be founded on some basis and acknowledging the assessee's lack of full substantiation, the Tribunal concluded that an intermediate corrective measure was warranted. Consequently, the Tribunal restored the disallowance to 50% of the Assessing Officer's addition, as a lumpsum adjustment, thereby partially reversing the CIT(A).

The 10% disallowance is partly sustained: restored to 50% of the Assessing Officer's addition (in place of CIT(A)'s 1%).

Judicial moderation of ad hoc disallowance - disallowance on estimation - substantiation of expenditure under section 37 - Validity of ad hoc disallowance of other expenses by the Assessing Officer and whether CIT(A) was correct in restricting it to 2% of the balance - HELD THAT: - The Assessing Officer disallowed a lumpsum amount in respect of 'Other expenses' after finding the assessee unable to justify portions of the claim; the CIT(A) reduced the disallowance to 2% of the residual amount without itemwise quantification. The Tribunal reiterated that estimation requires a basis and that the assessee failed to produce complete supporting particulars. Balancing the need for justification and avoidance of excessive ad hoc cuts, the Tribunal exercised judicial moderation and directed that 50% of the Assessing Officer's disallowance be restored as a lumpsum addition, reversing the CIT(A)'s minimal adjustment, and noting that the direction is not to be treated as precedent.

The ad hoc disallowance is partly sustained: restored to 50% of the Assessing Officer's addition (in place of CIT(A)'s restricted allowance).

Final Conclusion: The Revenue appeal is partly allowed. The Tribunal, finding that the assessee failed to fully substantiate material, construction and other expense claims, set aside the CIT(A)'s low percentage reductions and restored 50% of each of the Assessing Officer's respective additions as lumpsum disallowances, with computations to follow and a direction that the order not be treated as precedent.

Genuineness of purchases and bogus accommodation entries - onus of proof and shifting burden after primary evidence - reassessment under section 147 - compliance with notices under section 133(6) for verification - disallowance of purchases by estimation - back-to-back trading: corresponding purchases and sales principle

Genuineness of purchases and bogus accommodation entries - onus of proof and shifting burden after primary evidence - back-to-back trading: corresponding purchases and sales principle - disallowance of purchases by estimation - Whether the CIT(A) was justified in restricting the Assessing Officer's 25% disallowance of purchases from M/s Highland Industries Ltd. to the extent of the net profit declared in the books - HELD THAT: - The Tribunal found that the assessee was a trader in TMT bars and had recorded corresponding purchases and sales in its return, offered the net profit to tax, and had submitted documentary material including invoices, purchase/sale registers and bank payment traces. The Revenue had accepted 75% of the purchases in assessment and did not dispute sales or the quantitative figures; the Assessing Officer nevertheless made an estimated 25% disallowance relying on information from the investigation wing and on non-compliance of summons to third parties. The Tribunal held that such an estimated disallowance was inconsistent with the Revenue's acceptance of the balance of purchases and the sales, and that where the assessee had discharged the primary onus by filing material showing banking payments and recorded sales, the result was that only the profit element warranted being brought to tax (to the extent reflected in books). The Tribunal also noted the mutual inconsistency in permitting 75% of purchases while seeking to reinstate the remaining 25% on estimation without rejecting the book results. Applying the principle that corresponding purchases cannot be summarily disallowed where sales and banking transactions are recorded and profits offered to tax, the CIT(A)'s restriction of the disallowance to the profit element was upheld and the Revenue's plea to revive the full 25% addition was rejected. [Paras 5, 6]

The CIT(A)'s restriction of the 25% disallowance to the extent of the profit shown in books was upheld and the Revenue's appeal to restore the full disallowance was dismissed.

Final Conclusion: Revenue's appeal against the CIT(A)'s restriction of the Assessing Officer's 25% disallowance of purchases (A.Y. 2011-12) was dismissed; the disallowance was confined to the profit element reflected in the books and the balance disallowance was not restored.

Addition under section 68 read with section 115BBE - remand for fresh adjudication - double taxation - determination of income under presumptive scheme section 44AF - principles of natural justice - condonation of delay - limited scrutiny converted into complete scrutiny

Limited scrutiny converted into complete scrutiny - challenge to conversion of limited scrutiny into complete scrutiny was not pressed and is dismissed - HELD THAT: - The appellant expressly did not press Ground No.1 which challenged the Assessing Officer's conversion of limited scrutiny into complete scrutiny. The Tribunal recorded that Ground No.1 is not pressed and dismissed it accordingly, without adjudicating the substantive merits of that contention. [Paras 11]

Ground No.1 dismissed as not pressed.

Addition under section 68 read with section 115BBE - remand for fresh adjudication - principles of natural justice - addition made by treating opening cash balance as unexplained remanded to Assessing Officer for fresh adjudication - HELD THAT: - The Tribunal noted that the opening balance of Rs. 72,728/- was not traced to any earlier closing balance before the Revenue and that returns for AYs 2013-14 and 2014-15 were not filed, so the AO had no earlier balance-sheet verification material. The appellant submitted that the matter can be demonstrated to the AO. In view of the absence of verification and the opportunity to explain, the Tribunal remanded the issue to the file of the Assessing Officer for fresh adjudication, directing that the assessee be given an opportunity of hearing in accordance with principles of natural justice. The remand was treated as partly allowing Ground No.2 for statistical purposes. [Paras 12]

Issue remanded to the Assessing Officer for fresh adjudication; assessee to be heard; Ground No.2 partly allowed for statistical purposes.

Addition under section 68 read with section 115BBE - double taxation - determination of income under presumptive scheme section 44AF - remand for fresh adjudication - principles of natural justice - addition made by treating cash sales as bogus remanded to Assessing Officer for fresh adjudication - HELD THAT: - The Tribunal observed that the Assessing Officer made an addition in respect of cash sales without clearly demonstrating the basis for doubting those sales, whereas purchases and profit element had been accepted. The records produced by the assessee were not properly considered by the AO. Given the lack of cogent material in the assessment order and the need to verify the evidence already on record, the Tribunal remanded the matter to the Assessing Officer for fresh adjudication after verifying the evidences and granting the assessee an opportunity of hearing. The Tribunal noted the appellant's alternative submission that net income could be determined under section 44AF, but remanded the factual and evidentiary determination to the AO. [Paras 13]

Issue remanded to the Assessing Officer for fresh adjudication; assessee to be heard; Ground No.3 partly allowed for statistical purposes.

Principles of natural justice - grounds 4, 5 and 6 not adjudicated as they are consequential - HELD THAT: - The Tribunal held that Grounds Nos.4 (alleged breach of natural justice and non-consideration of submissions), 5 (levy of interest) and 6 (initiation of penalty) are consequential upon the remand/decisions on the primary additions and therefore are not adjudicated at this stage. [Paras 14]

Grounds Nos.4, 5 and 6 left undecided as consequential.

Final Conclusion: Delay in filing the appeal is condoned. The appeal is partly allowed for statistical purposes: the challenge to conversion of scrutiny is dismissed as not pressed; additions in respect of opening cash balance and cash sales are remanded to the Assessing Officer for fresh adjudication with opportunity of hearing; consequential grounds are left undecided.

Validity of reopening assessment under Section 147 - Treatment of cash deposits as unexplained income and burden to explain under Section 68 - Assessment by default under Section 144 in absence of assessee - Remand for verification of additional evidence and source documents - Transfer of assessment record and jurisdiction under Section 127(1)

Remand for verification of additional evidence and source documents - Treatment of cash deposits as unexplained income and burden to explain under Section 68 - Whether the addition of cash deposits should stand in view of additional evidence filed before the Tribunal and whether the matter requires remand for verification of IPO details and source of deposits. - HELD THAT: - The Tribunal noted that the assessee had not produced details of IPOs or supporting evidence before the Assessing Officer or the CIT(A), but additional evidence was filed before the Tribunal. Given the absence of verification at the assessment and appellate stages, the Tribunal considered it appropriate to remit the matter to the Assessing Officer to examine the additional evidence, verify the source and genuineness of the cash deposits and the related IPO details, and thereafter decide the claim in accordance with law. The Tribunal recorded that the Assessing Officer should adjudicate after due verification and process. [Paras 11]

Matter remanded to the Assessing Officer for verification of the additional evidence and IPO details and for fresh adjudication of the claim regarding cash deposits under the due process of law.

Transfer of assessment record and jurisdiction under Section 127(1) - Validity of reopening assessment under Section 147 - Whether the transfer of the case from the Assessing Officer, Unjha to Assessing Officer, Patan without the assessee's consent was improper and vitiated jurisdiction to reopen the assessment. - HELD THAT: - The Tribunal examined the contention that the transfer was effected without following procedures under Section 127(1) and that such transfer deprived the Assessing Officer of jurisdiction. On the materials, the Tribunal held that the Revenue authorities properly invoked jurisdiction and that the transfer was correctly effected. Consequently, the challenge to jurisdiction and the transfer was rejected. [Paras 13]

Ground challenging transfer and jurisdiction dismissed; transfer and invocation of jurisdiction upheld.

Assessment by default under Section 144 in absence of assessee - Treatment of cash deposits as unexplained income and burden to explain under Section 68 - Whether the addition of the total cash deposits as unexplained income under Section 68 was justified where the assessee did not appear before the Assessing Officer and no documentary explanation was on file at assessment time. - HELD THAT: - The Assessing Officer, after issuing notices and receiving no response, proceeded under Section 144 and made the addition treating the bank credits as unexplained income under Section 68. The CIT(A) confirmed the addition. The Tribunal observed that the assessee failed to produce evidence before the lower authorities, which led to the addition. However, since additional evidence was subsequently produced before the Tribunal (including alleged IPO-related particulars), the Tribunal did not finally adjudicate the merit of addition but remitted the matter to allow the Assessing Officer to verify the newly produced evidence and determine whether the deposits are explained. [Paras 4, 11, 14]

Addition confirmed by lower authorities but remitted to the Assessing Officer for verification of newly filed evidence; grounds relating to the addition are partly allowed for statistical purposes pending fresh adjudication.

Final Conclusion: The appeal is partly allowed for statistical purposes: the challenge to transfer and jurisdiction is dismissed, while the question of treatment of cash deposits as unexplained income under Section 68 is remitted to the Assessing Officer for verification of the additional evidence and IPO details and fresh decision in accordance with law.

Treatment of corpus fund receipts as income - exemption under section 11 and section 10(23C)(iii ad) - processing of return under section 143(1) - adjustment for incorrect claim apparent from the return - applicability of proviso to section 12A(2) - retrospective effect of registration where assessment proceedings are pending before the Assessing Officer - voluntary contributions as income under section 2(24)(iia)

Treatment of corpus fund receipts as income - processing of return under section 143(1) - adjustment for incorrect claim apparent from the return - voluntary contributions as income under section 2(24)(iia) - Whether corpus fund receipts disclosed in the return could be treated as income by AO while processing the return and whether the rectification under section 154 was rightly rejected. - HELD THAT: - The Tribunal held that the CPC correctly made adjustment under section 143(1)(a)(ii) because the assessee, though filing ITR-7, had not been registered under section 12A/12AA at the time of filing and yet claimed exemptions and set-apart/ corpus entries in the return. Such claims amounted to incorrect claims apparent from the return and were therefore amenable to adjustment at processing stage. The Tribunal accepted the CIT(A)'s conclusion that the corpus receipts could not be allowed as exempt under section 11 in the absence of registration, and that the definition of income in section 2(24)(iia) brings voluntary contributions within taxable income. However, the Tribunal observed that the AO had taxed the entire gross receipts without allowing corresponding expenses and statutory depreciation; it upheld the CIT(A)'s direction to allow the expenses attributable to the taxed receipts and the claimed depreciation as allowed by the CIT(A). [Paras 7]

Adjustment of corpus fund receipts as assessable income at processing was upheld; rectification rejected; AO/CPC's addition confirmed as regards corpus, subject to allowing corresponding expenses and depreciation as directed by CIT(A).

Applicability of proviso to section 12A(2) - retrospective effect of registration where assessment proceedings are pending before the Assessing Officer - exemption under section 11 and section 10(23C)(iii ad) - Whether registration subsequently granted under section 12AA during pendency of appellate proceedings before the CIT(A) confers benefit under the proviso to section 12A(2) for the impugned assessment year. - HELD THAT: - The Tribunal admitted the additional legal ground but rejected the assessee's contention. Relying on the statutory scheme of section 12A(2) and judicial authorities discussed, the Tribunal held that the proviso applies only where assessment proceedings are pending before the Assessing Officer on the date of registration. An appeal or proceedings before the CIT(A) do not, for this purpose, convert the position into assessment proceedings pending before the Assessing Officer. Consequently, registration granted after the relevant period did not entitle the assessee to retrospective exemption for the impugned assessment year under the proviso to section 12A(2). [Paras 7]

Claim that subsequent registration under section 12AA entitles assessee to retrospective benefit under proviso to section 12A(2) for AY 2014-15 was rejected.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the CIT(A)'s confirmation that corpus fund receipts are assessable in the absence of registration under section 12A/12AA and rejected the plea for retrospective application of exemption based on subsequent registration, while directing that corresponding expenses and claimed depreciation attributable to the taxed receipts be allowed as directed by the CIT(A).

Addition under section 68 of the Income-tax Act on account of alleged bogus share transactions - penny stock manipulation and bogus LTCG/STCG scheme - addition founded on surmise and conjecture - use of demat account and banking channels as evidentiary basis to rebut unexplained credits

Addition under section 68 of the Income-tax Act on account of alleged bogus share transactions - penny stock manipulation and bogus LTCG/STCG scheme - use of demat account and banking channels as evidentiary basis to rebut unexplained credits - addition founded on surmise and conjecture - Deletion of addition under section 68 in respect of transactions in SVC Resource Ltd. upheld. - HELD THAT: - The Assessing Officer added the entire amount under section 68 relying on information from the Investigation wing that the scrip was used in a penny stock scheme to generate bogus LTCG/STCG. On appeal the assessee produced broker notes, ledger copies, global trading report, demat statements and bank account evidence showing that purchases and sales were routed through demat and banking channels. The Commissioner (Appeals) found that the transactions could not be treated as uniformly fictitious merely because the scrip was under investigation, noting that each case must be examined on its own facts and that the assessee had traded in other scrips and had not claimed the short term capital loss. The Tribunal found that the AO made the addition on the basis of surmise and conjecture without computing gain or cost or showing any adverse finding such as penal action by SEBI against the assessee; the appellate findings that the gain from the particular scrip was meagre and that the transactions were through demat and banking channels were accepted as rebuttal of the AO's conclusion. For these reasons the addition was rightly deleted by the Commissioner (Appeals) and the Tribunal saw no infirmity in that conclusion. [Paras 3, 4, 6]

Tribunal upholds CIT(A)'s deletion of the section 68 addition; revenue appeal dismissed.

Final Conclusion: The Tribunal affirms the CIT(A)'s deletion of the addition made under section 68 in respect of the assessee's transactions in SVC Resource Ltd. for AY 2011-12, holding that the AO's addition rested on surmise and conjecture and that the assessee's demat, broker and banking records rebutted the presumption of fictitious transactions; revenue appeal dismissed.

Unexplained cash credits - best judgment assessment - application of gross profit margin to estimate unexplained receipts - vendor confirmations as corroborative evidence - remand for verification and consequential deletion of additions

Unexplained cash credits - vendor confirmations as corroborative evidence - application of gross profit margin to estimate unexplained receipts - Whether the addition of Rs. 3,16,715 made as unexplained cash credit was sustainable. - HELD THAT: - The Assessing Officer completed assessment under best judgment assessment and added cash bank deposits aggregating Rs. 34,60,500 as unexplained for lack of source. On remand, vendor confirmations and the appellant's cash books were examined; the Commissioner (Appeals) accepted explanation for a substantial portion but found purchases of Rs. 10.24 lakhs unconfirmed. Allowing for a 25% disallowance of the unconfirmed purchases and applying the appellant's business gross profit margin of 23.66% to that disallowed amount, the CIT(A) quantified the unexplained cash sales at Rs. 3,16,715 and confirmed the addition as unexplained cash credit. The Tribunal found the CIT(A)'s approach-relying on available vendor confirmations as corroboration, making a reasonable proportionate disallowance for unconfirmed transactions, and applying the computed gross profit margin to estimate unexplained cash-to be a permissible and reasonable inference on the material placed before the authorities and therefore declined to interfere.

Addition of Rs. 3,16,715 as unexplained cash credit sustained and appeal dismissed.

Final Conclusion: The order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs. 3,16,715 as unexplained cash credit for AY 2008-09 is upheld and the assessee's appeal is dismissed.

Omnibus show-cause notice - non-application of mind in issuance of penalty notice - penalty under section 271(1)(c) - concealment of income vs furnishing inaccurate particulars of income - primacy of statutory notice to inform charge in penalty proceedings - prejudicial vagueness in penal notice

Omnibus show-cause notice - non-application of mind in issuance of penalty notice - primacy of statutory notice to inform charge in penalty proceedings - Validity of the penalty notice which did not strike off inapplicable portions and therefore was omnibus and ambiguous - HELD THAT: - The Tribunal applied the Full Bench decision of the Hon'ble Bombay High Court in Mohammed Farhan A. Shaikh and allied authority holding that a penalty notice issued in printed omnibus form without striking off irrelevant portions betrays non-application of mind and is vitiated. The Tribunal held that assessment proceedings cannot cure the vice in the statutory notice and that the primary obligation lies on the Revenue to specify the precise charge by the statutory notice; ambiguity in such penal communication must be resolved in favour of the assessee. On these grounds the notice in the present case was held unsustainable and the Assessing Officer lacked jurisdiction to sustain penalty arising from that notice. The Tribunal expressly followed the Full Bench reasoning that Dilip N. Shroff and related precedents disapprove routine omnibus show cause notices and treat the omission as fatal where it results in non-application of mind and prejudicial vagueness. [Paras 6, 8]

Penalty proceedings invalidated because the statutory notice was an omnibus show-cause notice that did not strike off inapplicable portions and therefore suffered from non-application of mind.

Penalty under section 271(1)(c) - concealment of income vs furnishing inaccurate particulars of income - prejudicial vagueness in penal notice - Deletion of penalty on merits in view of the small amount of addition finally sustained by the Tribunal - HELD THAT: - Independently of the procedural defect in the notice, the Tribunal considered the substantive merits and noted that only a very small addition was ultimately sustained by the ITAT on estimate basis. The Tribunal found that the learned CIT(A) erred in treating the additions as substantial and that, on facts and circumstances, the rigours of section 271(1)(c) were not warranted. Consequently, even on merits the levy of penalty was held not sustainable and was deleted. [Paras 9]

Penalty deleted on merits because only a small addition was finally sustained and the conditions warranting penalty under section 271(1)(c) were not made out.

Final Conclusion: The appeals are allowed: the penalty proceedings were held void for being initiated by an omnibus, ambiguous notice that betrayed non-application of mind; additionally, the penalty was deleted on merits since only a nominal addition was sustained.

MEIS benefits under Foreign Trade Policy - curable procedural defect in shipping bill - substantive entitlement not to be defeated by technical lacuna in electronic/EDI system - power to amend shipping bill under Section 149 of the Customs Act - prohibition on imposing late cut charges where claim within limitation and error is technical

MEIS benefits under Foreign Trade Policy - curable procedural defect in shipping bill - substantive entitlement not to be defeated by technical lacuna in electronic/EDI system - power to amend shipping bill under Section 149 of the Customs Act - prohibition on imposing late cut charges where claim within limitation and error is technical - Entitlement to MEIS benefit cannot be denied due to a technical/EDI-system inability to reflect a bona fide amendment of the shipping bill and the petitioner must be granted MEIS benefits without imposition of late cut charges. - HELD THAT: - The Court found that the petitioner duly exported goods and declared intent for MEIS; a clerical error in the bifurcation of commission in the EDI-filed shipping bill was a curable procedural defect. The petitioner sought amendment under Section 149 of the Customs Act within the stipulated period and the Customs officer recorded and allowed the correction, but the amendment did not reflect in the DGFT/EDI system for technical reasons. The Policy Relaxation Committee recognised the genuineness of the error and sought EDI adjustments, but the automated system limitations prevented implementation. Relying on the principle that a substantive right to benefit under the Foreign Trade Policy cannot be defeated by a technical defect in an electronic transmission-as reflected in the Court's earlier decision in Bombardier Transportation India Pvt. Ltd.-the Court held that the procedural lacuna in the EDI system cannot obstruct entitlement. Consequently, the petitioner must be accorded MEIS benefits as per the manually amended shipping bill and manual consideration is permissible in the circumstances. The Court further held that, since the claim was made within the period of limitation and the failure was due to a technical impediment, late cut charges should not be imposed.

Petitioner entitled to MEIS benefits on the basis of the manually amended shipping bill; benefits to be granted without imposing late cut charges.

Final Conclusion: Writ petition allowed; MEIS benefit to be granted to the petitioner in accordance with the manually amended shipping bill dated 14.06.2018 and without levying late cut charges, the technical inability of the EDI system notwithstanding.

Proof of production ratio - evidence versus conjecture - comparative extrapolation of production data - reliability of departmental inference

Proof of production ratio - comparative extrapolation of production data - evidence versus conjecture - Whether the Tribunal was justified in holding that the ratio of 1:1.3 of Charge Chrome to Charge Chrome Slag for the assessee was not established by the Department. - HELD THAT: - The Tribunal correctly required acceptable evidence specific to the assessee to establish the claimed production ratio. The Department relied on the production ratio of another company (FACOR) and, from that, extrapolated the expected production of Charge Chrome for the assessee. The Court concurred with the Tribunal that such comparative extrapolation amounted to surmise and conjecture because material variables-such as the quality of ore and the type of machinery used-differ between units and are relevant to the yield of Charge Chrome vis-a -vis Charge Chrome Slag. Absent direct, reliable evidence concerning the assessee's own production over time, the departmental inference that quantities were clandestinely removed was not established on a safe or reliable basis. [Paras 6, 7, 8]

The Tribunal was justified in holding that the 1:1.3 ratio was not established by the Department; the reference is disposed of.

Final Conclusion: The High Court upheld the Tribunal's conclusion that the Department failed to establish the asserted production ratio for the assessee by reliable evidence and dismissed the reference accordingly.

Dismissal for default - non-prosecution - peremptory listing - opportunity to be heard - discretion to impose costs

Dismissal for default - non-prosecution - peremptory listing - opportunity to be heard - Whether the writ petition and the miscellaneous petition should be dismissed for default/non-prosecution in view of repeated non-appearance of the petitioner despite multiple listings including a peremptory listing 'FOR DISMISSAL'. - HELD THAT: - The Court recorded that on four earlier consecutive listings the writ petitioner failed to appear although counsel for several respondents were present and the Registry had repeatedly listed the matter to afford opportunity to the petitioner. The matter was then listed under the cause list caption 'FOR DISMISSAL' as a peremptory listing. Having observed that the petitioner did not appear in the fifth successive listing and that adequate opportunity had been given to pursue the matter, the Court concluded that dismissal for default/non-prosecution was warranted. [Paras 4, 5]

The writ petition and the miscellaneous petition are dismissed for default/non-prosecution.

Discretion to impose costs - Whether costs should be imposed on the petitioner in relation to the dismissal for default. - HELD THAT: - Although the Court dismissed the matters for non-prosecution, it exercised its discretion in relation to costs and refrained from imposing any costs on the petitioner. [Paras 5]

The Court refrained from imposing costs.

Final Conclusion: The writ petition and the miscellaneous petition were dismissed for default/non-prosecution after repeated non-appearances by the petitioner despite peremptory listing; the Court exercised its discretion and did not impose costs.

Order XVI Rule 1 C.P.C. - summoning of witnesses and production of documents - Judicial discretion to permit belated witnesses - Relevance and possession as precondition for production of documents - Requirement to follow prescribed procedural steps for production of public authority records

Order XVI Rule 1 C.P.C. - summoning of witnesses and production of documents - Requirement to obtain certified copies of public authority orders - Relevance and possession as precondition for production of documents - Whether the trial court erred in rejecting the plaintiffs' application under Order XVI Rule 1 C.P.C. to summon the Collector, Central Excise & Customs to produce the adjudication order and file. - HELD THAT: - The Court held that the adjudication order and the order-sheet sought were records of proceedings before the Collector, Central Excise & Customs and therefore the plaintiffs could and should have procured certified copies for production before the trial Court to enable it to determine relevance. The Civil Procedure Code prescribes specific procedures for summoning witnesses and production of documents and these procedures exist to ensure orderly adjudication; deviation from them is not warranted unless a party demonstrates that strict compliance will cause prejudice or obstruct the free flow of justice. No material was placed before the High Court to show that the documents called for were relevant to the real controversy or that sufficient cause was shown in the petition under Order XVI Rule 1 C.P.C. for summoning the Collector. The Collector (Defendant No.6) was a party contesting the suit and could produce witnesses and documents during trial, which would permit the plaintiffs to cross-examine and test those materials. The Court distinguished the cited authorities as not applicable since the impugned petition was not rejected on grounds of delay and because here the proper course was procurement and production of certified copies or reliance on the defendant to produce documents at trial. [Paras 9, 10]

The impugned order refusing to summon the Collector to produce the adjudication file is without infirmity and the writ petition is dismissed.

Final Conclusion: Writ petition dismissed. The trial Court correctly required adherence to prescribed procedural steps and to production of certified copies or presentation of documents at trial; parties directed to cooperate for early adjudication and the trial Court may grant reasonable time to the plaintiffs to produce certified copies if applied for.

Scheme of Amalgamation - sanction - Vesting of assets and liabilities by operation of law - Dissolution without winding up on amalgamation - Continuity of employment on amalgamation - Cancellation of shares of wholly owned subsidiary - Treatment of taxes, refunds and claims on amalgamation - Procedural compliance for convening meetings and service of notices on statutory authorities - Compliance with FEMA and RBI requirements - Filing of certified copy of order with Registrar of Companies - Direction to deposit amounts to statutory/relief funds and registry fees

Scheme of Amalgamation - sanction - Vesting of assets and liabilities by operation of law - Dissolution without winding up on amalgamation - Cancellation of shares of wholly owned subsidiary - Continuity of employment on amalgamation - Treatment of taxes, refunds and claims on amalgamation - Sanction of the Scheme of Amalgamation and the legal consequences on assets, liabilities, shares, employees and tax entitlements. - HELD THAT: - Having considered the documents on record, the approvals by members and creditors, the affidavits of no objection filed by statutory authorities and the certificate placed under the proviso to sub section (7) of Section 230, the Tribunal found no impediment to sanctioning the Scheme. The Scheme is declared binding on shareholders and creditors. Pursuant to the Scheme and with effect from the Appointed Date, all assets, rights, titles and interests of the Transferor Company stand transferred and vested in the Transferee Company by operation of law; all debts, liabilities, duties and obligations stand transferred to the Transferee Company; pending proceedings shall continue in the name of the Transferee Company; employees in service on the Effective Date shall become employees of the Transferee Company on the same terms without interruption; equity shares of the Transferor Company held by the Transferee Company shall stand cancelled without further act; and taxes, cess and duties paid or payable, and refunds or claims, shall be treated as those of the Transferee Company. The Tribunal clarified that its sanction does not imply any exemption from payment of stamp duty, taxes or other charges, or from obtaining permissions required under any law. [Paras 13, 14]

Scheme sanctioned; assets and liabilities vested in Transferee Company; Transferor Company to be dissolved without winding up upon filing; employees, shares and tax consequences governed as per Scheme.

Procedural compliance for convening meetings and service of notices on statutory authorities - Compliance with FEMA and RBI requirements - Filing of certified copy of order with Registrar of Companies - Direction to deposit amounts to statutory/relief funds and registry fees - Satisfaction of procedural requirements and directions for post sanction compliance. - HELD THAT: - The Tribunal recorded compliance with the directions issued earlier regarding notice publication and service on statutory authorities, and took note of the Regional Director's report and the Petitioner Company's response, including its undertaking regarding FEMA/RBI compliances and the absence of objections from Income Tax and SEBI. The Petitioner Company was directed to: file the Schedule of Property in Form CAA 7 by affidavit; within 30 days of receipt of the certified copy deliver the certified copy to the Registrars of Companies of Maharashtra and Rajasthan for registration, upon which the Transferor Company shall be dissolved without winding up; and deposit the specified amounts to the Prime Minister's National Relief Fund and the Online Miscellaneous Fee account of the Ministry of Corporate Affairs within the time stipulated. The Petitioner remains bound to comply with statutory requirements noted by the Regional Director. [Paras 3, 5, 6, 11, 15]

Procedural compliances accepted as satisfied; petitioner directed to file Form CAA 7 schedule of property, file certified copy of order with ROCs, make specified deposits and to comply with FEMA/RBI and other statutory requirements.

Final Conclusion: The Tribunal granted sanction to the Scheme of Amalgamation between ISAGRO (Asia) Agrochemicals Private Limited and PI Industries Limited, declaring the Scheme binding and giving effect to the transfer and vesting of assets, liabilities, employees and tax entitlements in the Transferee Company, directing dissolution of the Transferor Company without winding up upon filing of the certified order with the Registrars of Companies, and imposing specified post sanction procedural steps and deposits while requiring compliance with FEMA/RBI and other statutory obligations.

Sanction of Scheme of Amalgamation - Share exchange ratio and valuation by registered valuer - Dispensing with meetings of shareholders and creditors - Effect of Appointed Date - Dissolution of transferor companies without winding up - Statutory notices to Regional Director, Registrar of Companies, Official Liquidator and Income-Tax Department - No objection presumed from Income-Tax Department under notice rules - Compliance with Accounting Standards under Section 133 - No exemption from stamp duty or taxes

Sanction of Scheme of Amalgamation - The proposed Scheme of Amalgamation stands approved and sanctioned. - HELD THAT: - The Tribunal examined the petition, accompanying documents and statutory reports and found no reservation to grant sanction. The Scheme was held not to be against public policy nor prejudicial to public interest and statutory compliance required for sanction was found to have been observed. Consequentially the Scheme annexed to the petition was sanctioned and ordered to be binding on all shareholders and creditors with effect from the Appointed Date. [Paras 17, 18, 19]

Scheme approved and sanctioned; binding on shareholders and creditors from the Appointed Date.

Dispensing with meetings of shareholders and creditors - The requirement to convene meetings of equity shareholders and creditors was dispensed with as per earlier order. - HELD THAT: - The Transferor and Transferee Companies had sought and obtained directions to dispense with convening the meetings; the Tribunal recorded that CA (CAA) No. 8/ALD/2021 had been allowed and meetings were dispensed with by order dated 02 July 2021. [Paras 11]

Tribunal had dispensed with convening meetings of equity shareholders and creditors as previously ordered.

Statutory notices to Regional Director, Registrar of Companies, Official Liquidator and Income-Tax Department - No objection presumed from Income-Tax Department under notice rules - Statutory notices were issued, reports were filed by the Regional Director and Official Liquidator, and no objection was received from the Income-Tax Department within the prescribed period. - HELD THAT: - The Tribunal directed service of notice and publication; affidavits of service and publication were filed. The Regional Director (Northern Region) filed a report noting the Appointed Date and employee protection clause and made no major observation. The Official Liquidator reported no objection to dissolution without winding up. The Income-Tax Department did not file any representation within 30 days and, therefore, under the statutory scheme its non-representation was treated as no objection. [Paras 12, 13, 14, 15, 16]

Statutory authorities notified; RD and OL raised no objection; Income-Tax Department deemed to have no objection.

Share exchange ratio and valuation by registered valuer - Compliance with Accounting Standards under Section 133 - The share exchange ratios were determined by the boards based on a valuation report by an IBBI registered valuer, and the accounting treatment in the Scheme was certified as conforming with prescribed Accounting Standards. - HELD THAT: - The boards of the Transferor and Transferee Companies fixed specific share exchange ratios as set out in the petition. A valuation report dated 16 December 2020 by an IBBI Registered Valuer was annexed for determination of the ratio. The petition stated, and auditors certified, that the accounting treatment proposed in the Scheme conformed with the Accounting Standards under Section 133. [Paras 5, 9, 10]

Share exchange ratios accepted as determined by boards supported by registered valuer's report; accounting treatment certified to conform with Accounting Standards.

Effect of Appointed Date - Dissolution of transferor companies without winding up - The sanctioned Scheme is to operate with effect from the Appointed Date, 1st April 2020, and the Transferor Companies shall stand dissolved without undergoing winding up. - HELD THAT: - The Tribunal declared that the Scheme shall be binding with effect from the Appointed Date specified in the Scheme as 1st April 2020. Further, it recorded that Transferor Company Nos. 1 to 4 shall stand dissolved without undergoing the process of winding up in accordance with the Scheme and order. [Paras 19, 20]

Scheme effective from 1st April 2020; transferor companies dissolved without winding up.

No exemption from stamp duty or taxes - The order of sanction does not grant any exemption from payment of stamp duty, taxes or other statutory charges or compliance under any other law. - HELD THAT: - While sanctioning the Scheme the Tribunal expressly clarified that its order should not be construed as exempting any party from payment of stamp duty, income-tax, GST or other charges or from obtaining any permissions or complying with other statutory requirements which may be applicable under law. [Paras 20]

No exemption from stamp duty, taxes or other statutory compliances is granted by this order.

Final Conclusion: The Tribunal allowed the joint petition and sanctioned the Scheme of Amalgamation as presented, subject to statutory compliances; the Scheme operates from the Appointed Date (1st April 2020), the transferor companies stand dissolved without winding up, and the order does not exempt the parties from any stamp duty, tax or other legal obligations.

Power under Section 252(3) of the Companies Act, 2013 to restore struck off companies - restoration of struck off company - carrying on business or in operation at the time of striking off - scope of the expression 'or otherwise' in restoration petitions - effect of non-filing of financial statements and annual returns - reliance on post-striking off documents for restoration

Carrying on business or in operation at the time of striking off - restoration of struck off company - effect of non-filing of financial statements and annual returns - power under Section 252(3) of the Companies Act, 2013 to restore struck off companies - Whether the name of the company should be restored to the register having regard to its carrying on business or being in operation at the time of striking off and whether it is otherwise just and fair to order restoration. - HELD THAT: - The Tribunal examined the audited balance sheets placed on record and observed that the financial statements for the financial years 2015-16, 2016-17 and 2017-18 showed revenue from operations as 'NIL', indicating the company was not in operation when its name was struck off. The appellants also produced particulars of intended land purchases but failed to produce any sale deeds or other evidence of ownership or of real estate development or holding of fixed assets in furtherance of the company's objects. Applying the principle that restoration under Section 252(3) is conditioned upon satisfaction that the company was carrying on business or in operation at the relevant time, or that it is otherwise just and fair to restore the company, the Tribunal relied on the NCLAT authority emphasising that the phrase 'or otherwise' cannot be used to permit arbitrary restoration where there is a specific finding of non-operation. In the absence of concrete evidence demonstrating operation or other compelling circumstances making restoration just and fair, the Tribunal concluded that the RoC's action of striking off was lawful and justified. [Paras 8, 9, 11, 12]

The appeal for restoration was dismissed; the striking off by the Registrar of Companies is not interfered with.

Reliance on post-striking off documents for restoration - restoration of struck off company - Whether the Income Tax acknowledgement for a period after the date of striking off can be relied upon to show the company was in operation at the time of striking off. - HELD THAT: - The Tribunal noted that the Income Tax Acknowledgement placed on record related to the period after the company's name had been struck off and therefore could not be relied upon to demonstrate that the company was carrying on business or in operation at the time of striking off. Documents post-dating the striking off do not establish the company's status at the relevant time and are not a substitute for contemporaneous evidence of operation or assets. [Paras 8, 9]

The post-striking off Income Tax acknowledgement is not a basis for restoration.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Registrar of Companies' action of striking off the company's name from the register; restoration was refused for lack of evidence that the company was carrying on business or that it was otherwise just and fair to restore its name.

Binding effect of an approved resolution plan under the I&B Code - extinguishment of claims not included in the resolution plan - role of information memorandum and admission of claims by the resolution professional - freezing of liabilities upon approval of resolution plan

Binding effect of an approved resolution plan under the I&B Code - role of information memorandum and admission of claims by the resolution professional - extinguishment of claims not included in the resolution plan - Whether an employee's claim, not admitted by the resolution professional and not included in the information memorandum or the approved resolution plan, survives for payment after approval of the resolution plan. - HELD THAT: - The Tribunal examined the information placed on record including the employee claim list published on the resolution professional's website and the Information Memorandum. The Resolution Professional had not admitted the applicant's claim; Annexure A6 expressly showed verification with books of account was pending and the Information Memorandum recorded that the claim was rejected in full. Relying on the reasoning in Ghanashyam Mishra and Sons Pvt. Ltd. (supra), the Tribunal applied the legal principle that once a resolution plan is approved by the Adjudicating Authority it becomes binding on the corporate debtor and its employees and that claims which are not part of the approved resolution plan stand frozen or extinguished. The legislative scheme and the Information Memorandum process require claim admission and inclusion in the plan so that the successful resolution applicant proceeds free of surprise liabilities. Since the applicant's claim was not admitted and did not form part of the Information Memorandum or the approved plan, it could not be enforced after approval of the resolution plan. [Paras 3, 4, 5, 6]

The application was dismissed as the applicant's claim was not admitted by the resolution professional and, being not part of the approved resolution plan, stood extinguished.

Final Conclusion: Application dismissed: employee's claim rejected by the resolution professional and not included in the Information Memorandum or the approved resolution plan cannot be enforced after approval of the plan; no costs.

Extinguishment of pre-effective date claims - finality of resolution plan - bar on fresh claims relating to pre-effective date - claims to be adjudicated during CIRP by the Resolution Professional - implementation and monitoring of resolution plan - operation of corporate bank account post-approval

Extinguishment of pre-effective date claims - finality of resolution plan - The demand raised by the Respondent in respect of six tea gardens relating to the period prior to 20.09.2018 is extinguished. - HELD THAT: - The Tribunal found that the approved Resolution Plan expressly provided that all claims of Government Authorities relating to the period prior to the Effective Date shall stand fully and finally discharged and settled. Relying on the terms of the Resolution Plan and the Supreme Court's articulation of the need for finality of claims post-approval of a resolution plan, the Bench held that the specific demands raised for the pre-Effective Date period cannot be enforced against the Corporate Debtor. The Tribunal also noted that the Respondent had not filed claims during the CIRP and had failed to respond to opportunities to be heard. [Paras 4, 13, 18]

The demand in respect of the six tea gardens for the period prior to 20.09.2018 is extinguished and shall not be enforced.

Bar on fresh claims relating to pre-effective date - claims to be adjudicated during CIRP by the Resolution Professional - Any claim filed now or in future by the Respondent relating to the period prior to 20.09.2018 need not be entertained by the Resolution Applicant or Corporate Debtor. - HELD THAT: - The Tribunal applied the Resolution Plan clause making all pre-Effective Date claims (whether disputed, undisputed, contingent or not notified) discharged and settled, and reiterated the principle from the Supreme Court decision that unresolved claims cannot be allowed to resurface after approval of a resolution plan. Given that the Respondent did not submit its claims during the CIRP (except for specific earlier years already admitted and paid), the Bench held that any subsequent attempts to file or pursue claims for periods before 20.09.2018 are barred and should not be entertained by the Resolution Applicant or Corporate Debtor. [Paras 13, 17, 18]

Claims relating to the period prior to 20.09.2018 filed now or in future shall not be entertained by the Resolution Applicant/Corporate Debtor.

Operation of corporate bank account post-approval - implementation and monitoring of resolution plan - Ancillary directions were issued to permit the Company to operate its bank account, to implement the Resolution Plan without obstruction, and to file compliance reports and status reports by the Resolution Applicant and Monitoring Committee. - HELD THAT: - In addition to extinguishing pre-Effective Date claims, the Tribunal gave practical directions to effectuate the approved Resolution Plan. The Company was permitted to operate its bank account without obstruction from the Respondent. The Resolution Applicant/Corporate Debtor was directed to strictly implement the Resolution Plan and to file an affidavit detailing month-wise statutory payments since approval of the Resolution Plan. The Monitoring and Supervising Committee was directed to submit a status report on implementation within a prescribed time. These directions were framed to secure the effectiveness and oversight of the approved plan. [Paras 18, 19]

The Company may operate its bank account; the Resolution Applicant must implement the Resolution Plan and file the compliance affidavit; the Monitoring and Supervising Committee must submit a status report within the specified timelines.

Final Conclusion: The application is allowed: pre-Effective Date claims (including the demand in respect of six tea gardens) are extinguished and barred from future enforcement, and the Resolution Applicant/Corporate Debtor is directed to implement the approved Resolution Plan and comply with the Tribunal's reporting and monitoring directions.

Admission of Section 9 petition under IBC - existence of debt and default - pre-existing dispute and its plausibility - effect of admission in memorandum of understanding as admission of liability - quantum of claim immaterial for admission under Section 9 - appointment of Interim Resolution Professional - moratorium under Section 14

Admission of Section 9 petition under IBC - existence of debt and default - The Section 9 petition filed by the operational creditor is admissible and is to be admitted on the ground of existence of debt and default. - HELD THAT: - The Tribunal found that a valid M.O.U dated 16.02.2018 was executed between the parties and that the corporate debtor admitted a liability thereunder. The adjudicating authority is required at this stage to determine whether there is a debt and default and not to conduct a full merits inquiry. Having regard to the admitted M.O.U and the respondent's acknowledgement of a sum due, the Tribunal held that the statutory threshold under the Code (including the minimum amount requirement) is met and the petition merits admission. [Paras 6, 7, 9]

Section 9 petition admitted as debt and default are established on the material before the Tribunal.

Pre-existing dispute and its plausibility - Allegations of defective or bad quality goods do not constitute a bona fide pre-existing dispute preventing admission of the Section 9 petition. - HELD THAT: - The respondent's plea that faulty goods were supplied was considered in light of the record. The Tribunal noted the legal test from the Supreme Court requiring that a plausible dispute, not merely a spurious or illusory plea, must exist to bar admission. The operational creditor's rejoinder that its representatives attended to the respondent's emails and the goods were thereafter utilized led the Tribunal to conclude there was no genuine pre-existing dispute capable of defeating the petition at this stage. [Paras 8, 9]

The plea of defective supply is not a bona fide dispute for the purpose of rejecting the Section 9 application.

Quantum of claim immaterial for admission under Section 9 - Discrepancy between the amount in the demand notice and the amount claimed in the Section 9 petition is not fatal to admission where debt and default exist and the admitted liability exceeds the statutory minimum. - HELD THAT: - The Tribunal observed that the forum under Section 9 is not for detailed recovery; what matters is whether there is a debt and default. Since the respondent had admitted at least a portion of the liability under the M.O.U and the amount in default exceeded the statutory threshold, the difference in claimed amounts did not preclude admission of the petition. [Paras 7]

Discrepancy in amounts between demand notice and petition does not defeat admission where debt and default are established.

Appointment of Interim Resolution Professional - moratorium under Section 14 - On admission of the petition the Tribunal appointed an Interim Resolution Professional and directed deposit for IRP's expenses, and declared the moratorium under the Code. - HELD THAT: - As the petition was admitted under Section 9(5), the Tribunal appointed Mr. Rahul Khanna as Interim Resolution Professional subject to statutory conditions and required him to file the requisite consent and disclosures. The operational creditor was directed to deposit a specified sum with the IRP to meet initial expenses, subject to adjustment by the Committee of Creditors. Consequent to admission, the moratorium envisaged under Section 14(1) was directed to follow, with the attendant provisions of Sections 14(2) to 14(4) to operate during the moratorium. [Paras 10, 11, 12]

IRP appointed, deposit directed to meet IRP's expenses, and moratorium imposed upon the corporate debtor.

Final Conclusion: The petition under Section 9 of the IBC is admitted on the basis of the M.O.U and admitted liability; the alleged dispute about goods was not found to be a bona fide impediment; an Interim Resolution Professional is appointed, a deposit for initial expenses is directed, and the moratorium under Section 14 is imposed.

Financial debt - financial creditor - consideration for the time value of money - Section 5(8) interpretation - del credere agent - rejection of claim by resolution professional - proof of claim (Form C) - effect of post-dated cheques issued after initiation of CIRP - deduction of TDS not conclusive of financial debt - maintainability of claim after initiation of CIRP

Financial debt - financial creditor - Section 5(8) interpretation - del credere agent - rejection of claim by resolution professional - proof of claim (Form C) - deduction of TDS not conclusive of financial debt - effect of post-dated cheques issued after initiation of CIRP - The Resolution Professional was right in rejecting the Applicant's claim on the ground that the Applicant does not qualify as a 'financial creditor' under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal examined the definition of "financial debt" under Section 5(8) and held that a claim must fall within the categories enumerated therein to qualify as a financial debt. The Applicant asserted status as a Del Credere Agent who paid suppliers on behalf of the Corporate Debtor, but there was no explicit agreement between the Applicant and the Corporate Debtor evidencing any legally binding obligation to advance funds or constitute a financial debt. The clauses in the Del Credere agreements produced (which were agreements with third party mills) did not authorize the Applicant to proceed against the Corporate Debtor nor did they establish a debt as contemplated by Section 5(8). The issuance of post dated cheques after initiation of CIRP did not, in itself, confer the status of financial creditor. Further, deduction and remittance of TDS by the Corporate Debtor was held not to be determinative of the existence of a financial debt, a proposition supported by earlier NCLAT precedents relied upon by the Tribunal. On these grounds the Tribunal found no legal infirmity in the RP's rejection of the claim. [Paras 9, 10, 11, 12, 15]

The rejection of the Applicant's claim by the Resolution Professional on the ground that the Applicant is not a financial creditor is upheld.

Maintainability of claim after initiation of CIRP - rejection of claim by resolution professional - The Applicant's long delay in prosecuting a fresh application after liberty was granted militated against the maintainability of the belated claim. - HELD THAT: - The Tribunal noted that after IA/255/IB/2020 was dismissed with liberty to file afresh, the Applicant waited approximately twelve months before filing the present application and failed to offer any satisfactory explanation for the delay. The present application was filed at a late stage when the Resolution Plan had been approved by the Committee of Creditors and adjudication was pending, indicating that the Applicant lay dormant and sought relief only at the fag end of the CIRP. This delay and laches were considered in assessing the application and formation of the overall view that interference with the RP's rejection was not warranted. [Paras 13, 14]

The unexplained delay in filing the fresh application after liberty was granted was an additional factor against entertaining the belated claim.

Final Conclusion: The Tribunal dismissed IA(IBC)/1108(CHE)/2021, upholding the Resolution Professional's rejection of the Applicant's claim for lack of status as a financial creditor and noting the Applicant's unexplained delay in seeking relief; no costs were awarded.

Default - financial debt - admission of debt - recourse undertaking - corporate insolvency resolution process - insolvency versus solvency assessment - not a substitute for recovery forum - discretion to refuse initiation where debtor solvent - impact of pandemic on insolvency proceedings

Financial debt - admission of debt - recourse undertaking - Existence and quantum of the claimed financial debt owing from the corporate debtor to the petitioner. - HELD THAT: - The Tribunal examined the receivables purchase factoring agreement, the irrevocable recourse undertaking and the demand promissory note. The promissory note executed by the corporate debtor acknowledged an obligation of USD 4,00,000 or rupee equivalent along with specified interest, thereby establishing the existence of a financial debt and an admission thereof in favour of the petitioner. The contractual matrix including the assignment on a with-recourse basis and the demand made under the undertaking support the petitioner's claim of default. [Paras 6]

The petitioner has established the existence of the claimed financial debt by virtue of the documents and admission recorded in the promissory note.

Default - corporate insolvency resolution process - insolvency versus solvency assessment - not a substitute for recovery forum - impact of pandemic on insolvency proceedings - discretion to refuse initiation where debtor solvent - Whether the petition under the Code should be admitted to initiate CIRP despite the established debt. - HELD THAT: - Applying the principle that the Code is not intended as a substitute for ordinary recovery proceedings and noting authorities to that effect, the Tribunal assessed the corporate debtor's financial position from MCA master data. The respondent-company was shown to be an active manufacturing concern with significant current assets, growing revenues, positive net profit and tangible assets, indicating prima facie capacity to meet its liabilities. The Tribunal also took cognisance of the changed legislative and economic context arising from the pandemic, including measures raising the default threshold and other steps to protect businesses. Balancing the petitioner's entitlement to recover a proved debt against the object of the Code to avoid pushing otherwise solvent companies into insolvency, the Tribunal exercised its discretion to decline admission of CIRP at this stage and instead directed a limited, time-bound opportunity for repayment. [Paras 7, 8, 9, 10, 11]

Petition not admitted; the corporate debtor is not prima facie insolvent and, in view of the commercial and pandemic context, shall be given six months to repay the debt failing which the petitioner may file a fresh petition.

Final Conclusion: The Tribunal found that the petitioner proved the existence of the financial debt but, applying the principle that the IBC is not a substitute for recovery and having regard to the corporate debtor's prima facie solvency and pandemic-related considerations, declined to admit the petition and disposed it by directing repayment within six months, with liberty to the petitioner to file afresh on default.

Giving of an opportunity to the owner of gold - Notice to owner under Section 79 - Requirement of prior notice before confiscation or penalty - Validity of confiscation in absence of notice to declared owner

Notice to owner under Section 79 - Requirement of prior notice before confiscation or penalty - Validity of confiscation in absence of notice to declared owner - Whether the confiscation of primary gold could be sustained where the person who was identified by the detenue as the owner (his wife) was not given notice under Section 79 before adjudication. - HELD THAT: - The Court examined the mandatory language of Section 79 which requires that no order of adjudication of confiscation or penalty shall be made unless the owner of the gold is given written notice of the grounds of proposed confiscation and a reasonable opportunity to make representations (with provisos permitting oral notice on request and prescribing return where notice is not given within six months). The record shows that on the very first day of the raid the detenue stated that the primary gold resulted from melting of his wife's ornaments, thereby informing officers that he was not claiming ownership. Despite this disclosure, no notice was issued to the wife under Section 79. Section 79 contemplates that notice must be given to the owner irrespective of the person from whom possession is recovered; the provision does not extend the meaning of 'owner' to an ostensible owner or simply to the person in possession. Given these facts and the statutory requirement, the CEGAT's conclusion that confiscation could not be sustained in the absence of notice to the declared owner was a permissible view and not legally impermissible. [Paras 9, 10, 11, 12]

The Court concurred with the CEGAT that confiscation could not be sustained without issuing notice to the declared owner under Section 79 and declined to interfere with the CEGAT's refusal to refer questions to this Court.

Final Conclusion: The petition is dismissed; the High Court upheld the CEGAT's view that Section 79 mandates notice to the owner and that failure to issue such notice to the person identified as owner vitiated the confiscation, so no reference was ordered.

Pre-deposit of duty - waiver of pre-deposit under the power under Section 35F of the Central Excise Act - financial hardship - protection of the interests of the Revenue - partial waiver/pre-deposit of 50% - stay of recovery on deposit - interim stay and its vacation

Pre-deposit of duty - waiver of pre-deposit under the power under Section 35F of the Central Excise Act - financial hardship - protection of the interests of the Revenue - partial waiver/pre-deposit of 50% - Order of the CESTAT directing a 50% pre-deposit and refusing a complete waiver was appropriate and is sustained. - HELD THAT: - The court confined its review to the correctness of the CESTAT's refusal to grant a full waiver of the pre-deposit. It applied settled principles that financial hardship of the assessee is a relevant consideration but cannot alone determine exercise of the power to waive pre-deposit; the interests of the Revenue must also be protected. The court noted precedents explaining this balance and observed that the adjudication order impugned was passed after compliance with procedural requirements. On the facts and having regard to the demanded amount and the nature of the activity, directing a partial pre-deposit of 50% for stay of recovery during the appeal was not harsh or unreasonable. Consequently the CESTAT's direction for a 50% pre-deposit was upheld and no interference with that exercise of discretion was warranted. [Paras 10, 11, 12, 13]

Writ petition dismissed; interim order vacated; CESTAT's direction to pre-deposit 50% sustained.

Final Conclusion: The High Court declined to interfere with the CESTAT's refusal to grant a full waiver of the pre-deposit, holding that financial hardship alone is insufficient and that a 50% pre-deposit for stay of recovery was not unreasonable; the writ petition is dismissed and the interim stay is vacated.

Definition of "input service" - inclusion of modernization, renovation or repairs - exclusion of construction service/works contract from "input service" after 01.04.2011 - eligibility of Cenvat credit for construction services used for modernization of an existing factory - harmonious reading of inclusive and exclusive clauses of Rule 2(l) - limitation on adjudication to the scope of the show cause notice

Definition of "input service" - inclusion of modernization, renovation or repairs - eligibility of Cenvat credit for construction services used for modernization of an existing factory - Construction service availed for installation of Effluent Treatment Plant in an existing running factory is eligible for Cenvat credit as modernization/repair of the factory. - HELD THAT: - The Tribunal found on the facts that the appellant installed an Effluent Treatment Plant in an already existing and running factory and availed construction services for that purpose. Rule 2(l) of the Cenvat Credit Rules, 2004 continues to include services used in relation to modernization, renovation or repairs of a factory within the meaning of "input service". Applying a plain and harmonious reading of the inclusive part of the definition, the Tribunal held that construction work undertaken as modernization/renovation/repair of an existing factory falls within the inclusion clause and is therefore eligible for Cenvat credit. The Tribunal relied on precedents considering the amended definition and similar facts to support this interpretation and allowed credit accordingly. [Paras 4, 5, 7]

Credit allowed for construction services used in modernization/repair (installation of ETP) in the existing factory; impugned order set aside on this ground.

Exclusion of construction service/works contract from "input service" after 01.04.2011 - harmonious reading of inclusive and exclusive clauses of Rule 2(l) - limitation on adjudication to the scope of the show cause notice - The exclusion of "construction service" post 01.04.2011 does not bar credit where the service relates to modernization/renovation/repair; and adjudication based on the exclusion when the show cause notice did not charge exclusion is beyond the scope of the notice. - HELD THAT: - The Tribunal examined the amendment to Rule 2(l) effective 01.04.2011 which placed construction service/works contract in the exclusion clause but retained "modernisation, renovation or repairs" in the inclusion clause. The correct approach is a harmonious reading: the exclusion targets construction/new setting up of buildings or civil structures, while construction activities that amount to modernization, renovation or repair remain within the inclusive ambit of "input service". Further, the Tribunal observed that the show cause notice in the case did not raise a charge under the exclusion clause; therefore an adjudication founded on that exclusion would exceed the scope of the notice. For these reasons, the exclusion did not operate to deny credit in the present facts. [Paras 5, 6]

Exclusion clause does not deny credit for modernization/repair; adjudication based on exclusion where not pleaded in the show cause notice is improper.

Final Conclusion: The appeal is allowed; the impugned adjudication is set aside and Cenvat credit is permitted for the construction services used for installation of the Effluent Treatment Plant in the existing factory as modernization/repair, with consequential relief as per law.

Rectification of mistake - error apparent on face of record - scope of remedy under rectification vis-a -vis review - jurisdictional challenge by modification of respondent - transitional application of existing law under Section 142 of the CGST Act, 2017

Rectification of mistake - error apparent on face of record - scope of remedy under rectification vis-a -vis review - Application by the Revenue for rectification of apparent mistake in the Tribunal's final order dated 07.01.2020 - HELD THAT: - The Tribunal examined the Revenue's plea that the Final Order dated 07.01.2020 wrongly relied upon certain judicial decisions and that a mistake apparent on the face of record required rectification. Applying the test from the Apex Court definition of an "error apparent on face of the record" - viz., an error that strikes on mere looking and does not require a long-drawn process of reasoning - the Tribunal found no such manifest or self-evident mistake. The application instead sought to re-open and challenge the merits of the final order, which would amount to a review of the Tribunal's own decision. Rectification cannot be used as a vehicle to re-agitate substantive errors of law or fact that require consideration of competing judgments and detailed reasoning. In the absence of any error so apparent that no further reasoning is necessary, the rectification application was not maintainable and was dismissed. [Paras 7, 8]

Rectification application dismissed for want of any mistake apparent on the face of the record; remedy cannot be used to review the merits of the Tribunal's order.

Jurisdictional challenge by modification of respondent - transitional application of existing law under Section 142 of the CGST Act, 2017 - Miscellaneous application by the Revenue to modify the rectification application to substitute Commissioner, CGST, Rohtak as respondent and to recall the order on grounds of changed jurisdiction - HELD THAT: - The Tribunal considered the Revenue's contention that the appellant fell under the administrative control of Commissionerate Rohtak w.e.f. 01.07.2017 and therefore the respondent named in the Final Order was incorrect. The Tribunal examined the 13.07.2012 order showing the appellant had been within the jurisdiction of DC Range Panipat and that DC Panipat falls under Commissioner, CGST, Panchkula. Reliance was placed on the transitional provisions in Section 142 of the CGST Act, 2017 which provide that claims for refund and proceedings of appeal, review or reference initiated on or before the appointed day shall be disposed of in accordance with the provisions of the existing law. Applying Section 142, the Tribunal held that the proceedings before it must be governed by the Central Excise law as they were initiated prior to the appointed day, and accordingly the challenge to substitute the respondent and to recall the Final Order on jurisdictional grounds lacked merit. The Tribunal also noted inconsistent averments by the Revenue in earlier filings about the applicable Commissionerate and that the issue could not be raised by way of a modification of the rectification application to revisit adjudication already concluded. [Paras 18, 21, 22]

Modification application and related miscellaneous applications dismissed; jurisdiction for the subject proceedings remains with Commissioner, CGST, Panchkula and transitional law requires disposal under existing Central Excise law.

Final Conclusion: The Revenue's applications - (i) for early hearing (declared infructuous), (ii) for rectification of mistake in the Final Order dated 07.01.2020, and (iii) for modification to substitute the respondent and recall the order on jurisdictional grounds - are dismissed. The Tribunal held there was no error apparent on the face of the record warranting rectification, and that transitional provisions (Section 142, CGST Act, 2017) require disposal of the appeal under the existing Central Excise law, leaving jurisdiction with Commissioner, CGST, Panchkula.

Priority of secured creditor under Section 26E of the SARFAESI Act - first charge under Section 48 of the Gujarat Value Added Tax Act - non-obstante clause and harmonious construction of statutes - registered deed of assignment conferring rights of secured creditor - priority conferred by insertion of Section 31B of the RDB Act

Priority of secured creditor under Section 26E of the SARFAESI Act - first charge under Section 48 of the Gujarat Value Added Tax Act - registered deed of assignment conferring rights of secured creditor - non-obstante clause and harmonious construction of statutes - priority conferred by insertion of Section 31B of the RDB Act - Whether the petitioner, as assignee and secured creditor, has priority to recover dues over the statutory first charge claimed by the State under Section 48 of the GVAT Act. - HELD THAT: - The Court found on the material that the petitioner derives rights as a secured creditor by a registered deed of assignment and that possession of the secured assets had been taken under the SARFAESI Act prior to crystallisation of the State's assessed liability. The Court applied earlier precedents, including the ratio in Kalupur Commercial Cooperative Bank and related decisions, and construed the non-obstante clauses in the enactments harmoniously. It held that Section 48 of the GVAT Act operates only when the tax liability is finally assessed and becomes due; it therefore could not prevail where the secured creditor's rights and possession pre-existed or where the amended central provisions providing priority to secured creditors (Section 26E of the SARFAESI Act and pari materia Section 31B of the RDB Act) apply. The Court noted the legislative intent reflected by the later-in-time amendments that give secured creditors priority over other government dues and, applying those principles, concluded that the petitioner's priority under the SARFAESI regime overrides the claim of first charge under Section 48 insofar as the subject properties and the specified assessed periods are concerned. The Court accordingly declared the petitioner's priority and directed removal of the charge created by the State, while leaving open any legally permissible remedy the State may have against the original dealer. [Paras 11, 13, 14, 15, 16]

The petitioner, as secured creditor by virtue of the registered deed of assignment and possession under SARFAESI, has first priority over the subject properties; Section 26E of the SARFAESI Act overrides the charge claimed under Section 48 of the GVAT Act and the State must remove the charge.

Final Conclusion: Writ petition allowed: petitioner declared to have first charge over the subject properties under Section 26E of the SARFAESI Act; respondent authorities directed to remove the charge, without prejudice to any legal remedy available to the State against the original dealer.

Classification of goods as Ayurvedic medicine - exigibility to sales tax under List A - popular meaning test for classification - precedential weight of tribunal and appellate authorities

Classification of goods as Ayurvedic medicine - exigibility to sales tax under List A - popular meaning test for classification - precedential weight of tribunal and appellate authorities - Hajmola candy is exigible to tax as an Ayurvedic medicine under List A of the Orissa Sales Tax Act, 1947 for the specified periods. - HELD THAT: - The Tribunal's contrary conclusion rested primarily on a decision of the West Bengal Taxation Tribunal which did not address or distinguish earlier authoritative decisions holding Hajmola to be an Ayurvedic medicament. The Court examined earlier determinations including the CEGAT decisions and the Madhya Pradesh High Court authority relied upon therein, which classified Hajmola (and identical products) as Ayurvedic medicines after reference to ingredients, Ayurvedic texts and expert opinion. The Supreme Court's approach in prior precedents was applied: classification should reflect the popular meaning attached to the product by those using it and be supported by licensing and evidence of medicinal use. In the present case the assessee had demonstrated that the product is an Ayurvedic medicine and possessed the appropriate trade licence and supporting evidence. The Tribunal erred in failing to follow the consistent line of authority and in treating Hajmola as confectionery. For these reasons the Court answered the question in favour of the assessee and set aside the impugned orders of the Tribunal and the Sales Tax Officer. [Paras 9, 11, 12, 14, 15]

The orders of the Tribunal and the Sales Tax Officer are set aside and Hajmola candy is held exigible to tax as an Ayurvedic medicine under List A for the periods in question.

Final Conclusion: The revision petitions are allowed; the Tribunal's and STO's orders are set aside and Hajmola candy is held to be exigible to tax as an Ayurvedic medicine for the stated periods.

Sales tax exemption under Entry 30-FFF of the Tax Free Schedule - eligibility certificate / DIC certificate as determinative of entitlement to exemption - definition of "manufacture" including processing and repair - works contract as deemed sale after insertion of Article 366(29-A) - re-opening of assessment under Section 12(8) of the Orissa Sales Tax Act

Sales tax exemption under Entry 30-FFF of the Tax Free Schedule - eligibility certificate / DIC certificate as determinative of entitlement to exemption - definition of "manufacture" including processing and repair - repairing and assembling of distribution transformers undertaken by the assessee are eligible for sales tax exemption under the IPR scheme as covered by Entry 30-FFF - HELD THAT: - The Court examined the certificate issued by the District Industries Centre and the permanent registration certificate which expressly recorded the assessee's activity as assembling and repairing of distribution transformers and the eligibility certificate entitling the assessee to exemption under Entry 30-FFF for the relevant period. The statutory definition of "manufacture" in the OST Act includes "processing" and activities such as altering, finishing or otherwise processing goods; consequently repair/assembly operations fall within the scope of manufacturing activity contemplated by the Act. Having been granted by the DIC, the eligibility certificate and registration certificate determine the entitlement to the concession under the IPR and could not properly be ignored by revenue authorities. The Assessing Officer, the Assistant Commissioner and the Tribunal were in error in denying the exemption by treating the activities as ineligible, contrary to the certificates issued in favour of the assessee and applicable legal principles recognising repair/processing within "manufacture." [Paras 11, 12, 15, 16, 17]

The Court set aside the orders of the AO, ACST and Tribunal and held that repairing/assembling of transformers by the assessee is eligible for sales tax exemption under Entry 30-FFF.

Works contract as deemed sale after insertion of Article 366(29-A) - treatment of repair works and implication for sales tax liability - the departmental contention that repair of transformers constituted a works contract (and therefore a deemed sale) did not justify denial of the exemption where DIC certification covered the activity - HELD THAT: - While recognising that, by constitutional amendment and judicial exposition, a works contract may be treated as a deemed sale, the Court observed that such classificatory consequences do not permit the revenue to ignore the eligibility certification issued by the DIC under the IPR. The Tribunal's reliance on the characterisation of the activity as a works contract to deny the exemption was misplaced because the DIC certificate and registration expressly covered repair/assembly activity and conferred entitlement to the tax-free status for the stated period. Thus the characterisation as a works contract could not override the certificatory entitlement granted under the IPR scheme. [Paras 12, 13, 14, 15, 17]

The Court rejected the Department's classification-based denial and held that the works-contract characterization did not defeat the exemption where DIC certification covered the activity.

Final Conclusion: The revisions are allowed: the impugned reassessment, appellate and tribunal orders denying sales tax exemption are set aside and the question framed is answered in favour of the assessee, holding that repairing and assembling of transformers are eligible for exemption under Entry 30-FFF and the IPR-related DIC certification must be given effect to; order passed with no costs.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement to arraign the company as accused before fastened vicarious liability - strict construction of penal provisions - elements of offence under Section 138 of the Negotiable Instruments Act - quashing of criminal proceedings as abuse of process

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement to arraign the company as accused before fastened vicarious liability - strict construction of penal provisions - Whether the complaint adequately averred and sustained vicarious liability of the petitioners under Section 141 so as to prosecute them without arraigning the corporate entity (Indus Hospital). - HELD THAT: - The Court applied the principle in Aneeta Hada that Section 141 contemplates offences by a company and makes specified persons vicariously liable only when the condition precedent - commission of the offence by the company - is satisfied. The complaint did not disclose the corporate status of Indus Hospital nor how the petitioners were connected with it (for example as directors or officers). The averments were therefore insufficient to invoke vicarious liability against A1 and A3. Construing the penal provisions strictly, arraignment of the company is imperative before vicarious liability under Section 141 can be fastened on individuals. [Paras 5, 6]

Complaint failed to disclose the necessary foundation for vicarious liability; the company (Indus Hospital) must be arraigned before persons can be held vicariously liable under Section 141.

Elements of offence under Section 138 of the Negotiable Instruments Act - quashing of criminal proceedings as abuse of process - Whether continued prosecution of A1 and A3 under Section 138 was maintainable when they were not the drawers/signatories of the dishonoured cheques nor shown to maintain the account on which the cheques were drawn. - HELD THAT: - Section 138 emphasises that the cheque must be drawn by a person on an account maintained by him and issued in discharge of his liability. The record showed the cheque was issued by A2 on behalf of Indus Hospitals; A1 and A3 were not signatories and were not shown to have drawn the cheques or maintained the account. In the absence of averments establishing that they drew the cheques or were liable in the requisite statutory sense, continuation of proceedings against A1 and A3 amounted to an abuse of the process of law. [Paras 6, 7]

Proceedings against A1 and A3 under Section 138 are not maintainable and are quashed as an abuse of process.

Final Conclusion: The petition is allowed; proceedings in C.C. No.646 of 2013 against the petitioners A1 and A3 are quashed because the complaint did not establish vicarious liability by arraigning the company nor show that the petitioners drew or maintained the account on which the dishonoured cheques were drawn.

Criminal liability under Section 138 of Negotiable Instruments Act - presumption under Section 139 of Negotiable Instruments Act - rebuttal of statutory presumption by raising probable defence - onus of proof and preponderance of probabilities - withholding best evidence and adverse inference

Criminal liability under Section 138 of Negotiable Instruments Act - presumption under Section 139 of Negotiable Instruments Act - rebuttal of statutory presumption by raising probable defence - onus of proof and preponderance of probabilities - withholding best evidence and adverse inference - Whether the conviction under Section 138 of the Negotiable Instruments Act was sustainable where the complainant admitted lack of personal funds and failed to examine persons alleged to have contributed the loan, thereby affecting the statutory presumption under Section 139. - HELD THAT: - The Court examined the materials and concluded that although the execution of the cheques was not disputed and the presumption under Section 139 arose, that presumption is rebuttable. The accused consistently pleaded that the complainant lacked the means to lend the alleged amount and the complainant admitted raising funds from friends and a relative. The complainant did not examine those persons whose contributions were relied upon to establish that he could have lent the sum; withholding such persons amounted to withholding the best evidence and entitled the defence to rely on preponderance of probabilities. Applying the accepted principles that the statutory presumption can be displaced by a probable defence, and that the burden may shift back to the complainant if the presumption is successfully attacked, the Court found that the shortfall in the complainant's evidence made it improbable that he had lent the large sum within the short period alleged. The appellate courts' appreciation of evidence was held to be inadequate in not giving effect to the preponderance of probabilities in favour of the accused; consequently the conviction could not be sustained. [Paras 10, 11, 12]

Conviction and sentence under Section 138 of the Negotiable Instruments Act set aside as the statutory presumption under Section 139 was effectively rebutted by the probabilities arising from the complainant's incomplete evidence.

Final Conclusion: Criminal Revision allowed; the judgment of the Sessions Court confirming conviction under Section 138 is set aside.