TaxTMI Updates e-Newsletter
Jan 13,2022

E-way bill requirement under Rule 138 - requirement of e-way bill for consignments over Rs. 50,000 - documents accompanying goods / tax invoice - seizure of goods in transit - security for release of seized goods - fair adjudication in show cause proceedings - detention/seizure of entire consignment for partial discrepancy - inspection/survey as alternative to seizure

Documents accompanying goods / tax invoice - e-way bill requirement under Rule 138 - requirement of e-way bill for consignments over Rs. 50,000 - Validity of seizure and demand of security for the consignments which were accompanied by tax invoices and for which e-way bill was not required as value was below Rs. 50,000 - HELD THAT: - The Court found that the petitioner had issued tax invoices for the transactions and produced the tax invoice for the three bags in reply to the show cause notice. Rule 138 requires an e-way bill only where the value of the transaction exceeds Rs. 50,000; therefore no e-way bill was mandatory for the transaction in question. Having received the tax invoice before the seizure order, the authorities were obliged to act fairly and could not treat the reply as a mere formality. Where the documents accompanying the goods and those subsequently produced adequately covered the transactions and no statutory contravention under the UPGST Act or Rule was shown, detention, seizure and demand of security were unjustified. The Court emphasised that, if authorities suspected non-recording in books or contraventions, they could resort to inspection or survey at business premises instead of immediate seizure. [Paras 7, 8, 11, 12, 13]

Seizure of the goods and demand of security were quashed insofar as the consignments were accompanied by proper tax invoices and no e-way bill was required.

Detention/seizure of entire consignment for partial discrepancy - seizure of goods in transit - Whether the entire consignment can be detained/seized and security demanded where only part of the consignment allegedly lacked proper documentation - HELD THAT: - The Court rejected the contention that a consignment comprising goods meant for different buyers may be wholly seized because of a discrepancy relating to a part of it. Each transaction must be considered independently; seizure of the entire consignment on account of a discrepancy in respect of goods sold to a different registered dealer was not supported by any provision of the Act and was therefore unsustainable. [Paras 5, 10, 11]

Detention/seizure of the whole consignment on account of alleged discrepancy in part of it was unwarranted and set aside.

Fair adjudication in show cause proceedings - documents accompanying goods / tax invoice - Whether the authorities acted fairly in treating the taxpayer's reply (which included the tax invoice) as inadequate and proceeding to confirm seizure - HELD THAT: - The Court held that quasi judicial authorities must exercise statutory powers with fairness and an open mind. Where the taxpayer furnished the tax invoice in response to the show cause notice and the invoice contained required particulars, no adverse inference could be drawn merely because it was produced after detention. The authorities failed to show any legal basis for rejecting the submitted documents and proceeding to confirm seizure; such conduct rendered the adjudication unfair. [Paras 7, 8, 12, 13]

The order confirming seizure was quashed insofar as it proceeded despite production of the tax invoice in reply to the show cause notice.

Seizure of goods in transit - security for release of seized goods - Whether alleged non-compliance with Food Safety labelling requirements justified seizure under the UPGST Act - HELD THAT: - The authorities relied on alleged absence of batch number, packing date and other labelling particulars under Food Safety Regulations. The Court noted that no provision of the UPGST Act was pointed out which would justify seizure on that ground, and the Standing Counsel accepted he could show no provision permitting seizure for those grounds. Thus such regulatory non-compliance could not, without statutory backing, validate seizure under the GST statute. [Paras 12, 13]

Seizure could not be justified on the basis of alleged Food Safety labelling deficiencies in the absence of a statutory provision under the GST regime.

Documents accompanying goods / tax invoice - inspection/survey as alternative to seizure - Remedy available to revenue when suspected contraventions relate to business records rather than transit documents - HELD THAT: - The Court observed that if authorities suspected that transactions were not reflected in books of account or other contraventions of the Act, they were equipped to conduct inspection or survey at the business premises pursuant to statute, rather than effect immediate seizure of goods in transit. This alternative was identified as the appropriate course where documentary or record discrepancies are suspected. [Paras 8]

Revenue should, where appropriate, resort to inspection/survey provisions rather than seizure when discrepancies pertain to business records.

Security for release of seized goods - Grant of costs and refund of any amounts deposited under the impugned orders - HELD THAT: - The Court allowed the writ petition, quashed the impugned orders, directed refund of any amounts deposited in accordance with law within two months and awarded costs to the petitioner, permitting the respondents to recover the costs from the erring officer. [Paras 14, 16, 17]

Writ petition allowed, impugned orders quashed, refund directed and costs awarded to the petitioner.

Final Conclusion: The High Court quashed the orders confirming detention/seizure and demand of security because the consignments were accompanied by requisite tax invoices and no e way bill was required; the authorities were directed to refund any deposited amounts and pay costs to the petitioner, with liberty to recover the cost from the erring officer.

Provisional attachment of bank accounts - cash credit account - powers under Section 83 of the CGST Act, 2017 - binding effect of coordinate bench decisions - contempt for non-compliance with judicial precedent

Provisional attachment of bank accounts - cash credit account - powers under Section 83 of the CGST Act, 2017 - Whether a cash credit account can be provisionally attached under the powers exercised in Form DRC-22 under Section 83 of the CGST Act, 2017. - HELD THAT: - The Court recorded that the question is not res integra and referred to earlier coordinate-bench decisions of this Court which held that a cash credit account cannot be provisionally attached. The cash credit facility is a means by which the bank advances loan/credit to the account-holder; monies available in the cash credit account are in the nature of borrowing and do not create the requisite debtor-creditor relationship with third parties for provisional attachment. The Principal Commissioner's orders were noted to have ignored and attempted to distinguish the consistent line of authority which forbids provisional attachment of a cash credit account under Section 83, treating the settled position as having been overlooked. [Paras 2, 3, 4]

The court recorded the settled legal position that a cash credit account cannot be provisionally attached under Section 83 and observed that the Principal Commissioner had overlooked this position.

Binding effect of coordinate bench decisions - contempt for non-compliance with judicial precedent - Whether the Principal Commissioner's conduct in distinguishing and declining to follow the earlier judgments constituted a matter requiring explanation and whether proceedings should be initiated. - HELD THAT: - The Court expressed prima facie view that the Principal Commissioner, CGST, Surat had acted in disregard of the settled position of law and therefore owed an explanation for treating earlier decisions as distinguishable. The Court noted specific passages in the impugned order where the Principal Commissioner justified non-application of the earlier rulings by reference to the rank of the officer passing the earlier orders and to purported factual distinctions. In view of this prima facie finding, the Court directed issuance of notice to the respondents, permitted direct service on the bank, and sought an explanation by the Principal Commissioner at the next hearing. [Paras 5, 6, 7, 10]

The court prima facie treated the Principal Commissioner's action as amounting to contempt of the settled precedent, issued notice to the respondents, permitted service on the bank, and directed the Principal Commissioner to explain the basis of the impugned order on the returnable date.

Final Conclusion: The High Court recorded the settled view that cash credit accounts are not amenable to provisional attachment under Section 83, treated the Principal Commissioner's contrary approach as prima facie contempt requiring explanation, issued notice to the respondents (permitting direct service on the bank) and listed the matter for urgent hearing on the returnable date.

Provisional release of seized goods - security under Section 67(6) read with Rule 140 - bank guarantee for penalty - pre-deposit for challenging tax and penalty - alternative remedy by appeal under Section 107

Provisional release of seized goods - security under Section 67(6) read with Rule 140 - bank guarantee for penalty - pre-deposit for challenging tax and penalty - Provisional release of the seized oxygen cylinders subject to deposit and bank guarantee - HELD THAT: - The Court took into account the statutory scheme permitting provisional release of goods on furnishing security or payment of tax and, having regard to the urgent public health need (Omicron threat), directed provisional release for transit to Karnataka on specified conditions. The petitioner was ordered to deposit Rs. 7,52,087/- towards CGST and SGST to the Government account and to furnish a Bank Guarantee for an equal amount corresponding to the penalty imposed under the respective enactments. The Court treated the amount paid as a pre-deposit and made it subject to appropriation upon final adjudication in the appeal to be filed by the petitioner. The direction balances the statutory mechanism for provisional release with the exigency asserted by the petitioner while preserving the respondents' revenue rights by requiring pre-deposit and security. [Paras 8, 9]

Provisional release allowed on deposit of tax and furnishing of Bank Guarantee for penalty; amount deposited to be treated as pre-deposit and liable to appropriation on final outcome.

Alternative remedy by appeal under Section 107 - Availability of statutory appellate remedy for tax and penalty - HELD THAT: - The Court noted that the petitioner has an alternative statutory remedy in the form of an appeal under Section 107 of the respective enactments against the levy of tax and penalty. That remedy was recorded as available and material to the petitioner's course of action challenging the order of the authority. [Paras 6]

Petitioner entitled to prosecute appeal under Section 107; reliance on alternate appellate remedy recorded.

Final Conclusion: Writ petition disposed by permitting provisional release of the seized goods for transit to Karnataka on condition of deposit of the specified tax amount and furnishing Bank Guarantee for the equal penalty amount; deposited amount to be treated as pre-deposit, and petitioner remains free to pursue an appeal under Section 107.

Reopening of assessment - reason to believe - change of opinion - consideration of query during original assessment - reasons recorded under section 148 of the Income Tax Act, 1961

Reopening of assessment - change of opinion - consideration of query during original assessment - reason to believe - Validity of the notice under section 148 reopening assessment for assessment year 2003-2004 - HELD THAT: - The Court examined whether the Assessing Officer had 'reason to believe' that income chargeable to tax had escaped assessment when issuing the notice dated 26 March 2008 under section 148. Where reopening falls within four years, the AO must have tangible material giving reason to believe; reopening cannot be founded on mere change of opinion. The recorded reasons for reopening are to be tested on the basis of the reasons recorded at the time of issuing the section 148 notice and cannot be supplemented by affidavits or oral submissions. The five specific grounds relied upon in the reasons for reopening (depreciation on property sharing residential units; write-off of unrecoverable amounts on sale of equity shares; bad debts in two companies despite arbitration awards; deduction for liability on increase in value of third party securities under settlement; and claim of large bad debts written off) were each the subject of queries issued to the assessee by the AO in the notice under section 142(1) dated 17 February 2006 and were answered by the assessee on 7 March 2006. Several of these items were specifically considered in the original assessment order dated 17 March 2006. Following the principle that a query raised during assessment which is replied to is a matter considered by the AO even if the assessment order does not record detailed discussion, the Court held that the impugned reopening amounted to a mere change of opinion. Further, item No.5 overlapped with item No.3 and a portion of the bad debts had already been added in the original assessment, indicating non-application of mind in framing the reasons to believe. On these bases the AO lacked the requisite reasonable belief that income had escaped assessment.

The undated order rejecting objections was set aside and the notice dated 26 March 2008 under section 148 together with consequential notices dated 4 December 2008 under sections 142(1) and 143(2) and the purported order disposing objections were quashed for want of reason to believe.

Final Conclusion: Writ petition allowed; the reopening notice for assessment year 2003-2004 and consequential notices and the order rejecting objections are quashed as the reopening was based on mere change of opinion and there was no reasonable belief that income chargeable to tax had escaped assessment.

Reopening of assessment - reason to believe - jurisdiction under Section 147 of the Income-tax Act - notice under Section 148 of the Income-tax Act - Explanation 3 to Section 147 - power to assess or reassess income subsequently noticed

Reopening of assessment - reason to believe - notice under Section 148 of the Income-tax Act - Validity of the notice dated 16th March, 2019 and the order disposing objections where the reasons for reopening were based on incorrect factual material - HELD THAT: - The Assessing Officer issued notice under Section 148 for A.Y. 2012-13 on the basis that the petitioner had deposited cash of Rs.13,40,000, thereby forming a reason to believe that income had escaped assessment. The petitioner produced bank statements and explained that the bank had erroneously reported withdrawals as deposits and that actual cash deposits were only Rs.18,000. The respondents, in the order disposing objections, accepted that the alleged cash deposits of Rs.13,40,000 did not exist and that only Rs.18,000 was deposited in cash; the notice's foundational factual basis therefore failed. Jurisdiction under Section 147 requires a genuine reason to believe that income chargeable to tax has escaped assessment; where that reason is founded on incorrect facts and is abandoned by the Assessing Officer on objections, the assumption of jurisdiction collapses. On that basis the Court held the notice and the consequential order disposing objections to be invalid and liable to be quashed. [Paras 3, 4, 7]

Notice dated 16.03.2019 under Section 148 and the order dated 06.11.2019 disposing objections quashed for want of jurisdiction as the reasons for reopening were based on incorrect facts.

Explanation 3 to Section 147 - power to assess or reassess income subsequently noticed - jurisdiction under Section 147 of the Income-tax Act - Whether Explanation 3 permits the Assessing Officer to proceed to assess other income noticed during reassessment proceedings when the original basis for reopening is found to be nonexistent - HELD THAT: - Explanation 3 to Section 147 (inserted by Finance (No.2) Act, 2009) allows the Assessing Officer to assess or reassess income in respect of any issue that comes to his notice subsequently during proceedings under Section 147, even if that issue was not specified in the reasons recorded under Section 148. However, Explanation 3 presupposes that the notice under Section 148 was valid and that the Assessing Officer proceeds to assess the income in respect of which he had formed a reason to believe that it had escaped assessment. If, on objections, the Assessing Officer accepts that the foundational escapement does not exist and thus does not assess that income, he cannot proceed to independently assess other income that came to notice during the proceedings without issuing a fresh valid notice under Section 148. The Court relied on the reasoning in Jet Airways to the same effect and held that Explanation 3 does not override the substantive requirement that the original escapement forming the basis for the notice be assessed; absent that, assessment of other issues requires a fresh valid notice. [Paras 5, 6]

Explanation 3 cannot be invoked to independently assess other income when the notice under Section 148 was issued on a basis later found to be incorrect; a fresh notice would be necessary to assess such other income.

Final Conclusion: The petition is allowed: the notice dated 16.03.2019 under Section 148 and the order dated 06.11.2019 disposing objections are quashed and set aside; petition disposed of with no order as to costs.

Reopening of assessment - jurisdictional facts for issuance of notice under section 148 - proviso to section 147 of the Income Tax Act - failure to disclose fully and truly all material facts - change of opinion

Proviso to section 147 of the Income Tax Act - failure to disclose fully and truly all material facts - jurisdictional facts for issuance of notice under section 148 - Validity of the notice dated 15/03/2019 under section 148 for AY 2012-13 and whether the reopening met the proviso to section 147 - HELD THAT: - The Court held that where an assessment under section 143(3) has been completed and a notice is issued after four years, the proviso to section 147 operates to restrict reopening unless there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Those jurisdictional facts required by Section 147 must exist before a notice under Section 148 can be validly issued. The reasons recorded by the Assessing Officer did not identify any specific material fact which the petitioner failed to disclose; the use of a generic statement that there was a failure to disclose could not satisfy the proviso. The Assessing Officer's attempt to rely on a bald assertion that false particulars were furnished was inadequate, and the Assessing Officer's contrary view that only a belief of escapement was sufficient was accepted by respondents as incorrect. The Court relied on the principle in Sesa Goa Limited V/s. Joint Commissioner of Income Tax and Ors. that the conditions in section 147 are jurisdictional and must be satisfied prior to issuance of a notice under section 148. Consequently, the notice dated 15/03/2019 and the order rejecting objections were without jurisdiction and liable to be set aside. [Paras 2, 3, 4]

Notice dated 15/03/2019 under section 148 and the order dated 25/11/2019 rejecting objections quashed for AY 2012-13 for want of jurisdiction.

Reopening of assessment - change of opinion - Whether the Assessing Officer's action amounted to permissible reassessment or an impermissible change of opinion - HELD THAT: - The Court found that the reasons recorded demonstrated merely a change of opinion by the revenue (seeking to revisit an allowance claimed and accepted earlier) rather than the existence of any undisclosed material fact. A change of opinion is not a permissible ground for reopening an assessment under the proviso to section 147. In view of that impermissible change of opinion, the reopening could not be sustained and required quashing. [Paras 5]

Reopening based on a mere change of opinion was impermissible and provided no basis for issuing the impugned notice.

Final Conclusion: The petition is allowed: the notice dated 15/03/2019 under section 148 and the order dated 25/11/2019 rejecting objections are quashed in relation to AY 2012-13; petition disposed with no order as to costs.

Re-opening of assessment - Proviso to section 147 - failure to disclose material facts - Change of opinion as impermissible ground for reassessment - Assessment completed under section 143(3) - Transfer Pricing Officer's findings relied upon in assessment - Consideration of material on record during original assessment

Proviso to section 147 - failure to disclose material facts - Re-opening of assessment - Consideration of material on record during original assessment - Change of opinion as impermissible ground for reassessment - Transfer Pricing Officer's findings relied upon in assessment - Validity of notice issued under section 148 to reopen assessment for Assessment Year 2012-13 on the ground of alleged failure to truly and fully disclose material facts - HELD THAT: - The Court examined the reasons recorded for issuing the notice under section 148 and the material available to the Assessing Officer at the time of original assessment completed under section 143(3). The material shows that facts relating to acquisition of goodwill, trademarks, patents and brands, including master agreements, slump sale agreements, assignment deeds and valuation and due diligence reports, were placed before and specifically queried by the Assessing Officer during the assessment proceedings. The Transfer Pricing Officer's order accepting the arm's length price was also part of the assessment material. The Assessing Officer, after considering the documents and explanations, accepted the transfer and the claimed capitalization and depreciation in the assessment order. The recorded reasons for reopening relied on information received later from an intelligence source but do not disclose any omission by the assessee to truly and fully furnish material facts that were available and considered earlier. Where the primary facts were fully and truly disclosed and the Assessing Officer conclusively took a view on them, a later change of opinion by the Department does not furnish jurisdictional basis to reopen the assessment. Consequently, no case of failure to disclose material facts is made out from the reasons, and the reopening is impermissible as it seeks to take a different view on the same material already considered in the original assessment. [Paras 6, 7, 8, 9, 10]

Notice under section 148 and the order on objections quashed; reopening held to be without jurisdiction as failure to disclose material facts was not established.

Final Conclusion: The High Court quashed the notice dated 28th March, 2019 under section 148 and the related order of 11th November, 2019 for Assessment Year 2012-13, holding that no failure to truly and fully disclose material facts was shown and that reopening the assessment on the same material - effectively a change of opinion - was impermissible.

Reopening of assessment under Section 148 - Change of opinion - New tangible material / material on record - Redemption of preference shares as transfer under Section 2(47) - Applicability of Section 47(iv) and (v) - Validity and sufficiency of reasons recorded for reopening

Reopening of assessment under Section 148 - Change of opinion - New tangible material / material on record - Validity of reopening the assessment where reassessment is said to be based on material already on record and where the reopening allegedly arises from a change of opinion. - HELD THAT: - The Court held that reopening under Section 148 was not justified because there was no new tangible material coming to the knowledge of the revenue after completion of the original assessment. The record shows that details of the transaction (including the statement of long term capital loss and the subsidiary status of Greatship India Ltd.) were placed on record during the regular assessment and considered by the Assessing Officer. The existence of a query during assessment, and an assessee's response thereto, indicates that the matter was within the scope of original consideration; a mere change of opinion is not a valid ground for reopening. Having found that the reassessment proceeded on material already available and considered at the time of the Section 143(3) assessment, the jurisdictional conditions for reopening were not satisfied. [Paras 6, 8]

Reopening of assessment quashed for want of any new tangible material and because reassessment amounted to impermissible change of opinion.

Redemption of preference shares as transfer under Section 2(47) - Applicability of Section 47(iv) and (v) - Whether redemption of preference shares in the petitioner's case falls within the exceptions carved out by Section 47(iv) and (v) so as to disallow the claimed long term capital loss. - HELD THAT: - The Court analysed the statutory scheme and observed that Section 47(iv) contemplates transfers other than by extinguishment of the asset or rights therein, whereas on redemption preference shares are cancelled and the capital asset is extinguished. Therefore, the Court concluded that Section 47(iv) is not applicable to redemption of preference shares because the asset ceases to exist on redemption. The revenue's attempt to treat the transaction as falling within Section 47(iv)/(v) in the petitioner's factual matrix was held to be misconceived. [Paras 4, 5]

Redemption of preference shares cannot be treated as a transfer under Section 47(iv) in the facts of this case; the statutory exception does not apply to extinguishment by redemption.

Validity and sufficiency of reasons recorded for reopening - Reopening of assessment under Section 148 - Whether the reasons recorded for reopening were valid, consistent and properly communicated to the assessee. - HELD THAT: - The Court emphasised that only the reasons actually furnished to the assessee can be tested for validity. It found that the reasons initially communicated to the petitioner and the reasons reproduced in the order rejecting objections materially differed; further, an undated and unsigned set of reasons was produced later which had not been furnished earlier. The initial reasons mischaracterised the nature of the transaction (confusing acquisition and redemption/sale) and thus demonstrated a lack of appreciation of the correct facts before issuing the notice. For these reasons, the recorded satisfaction for reopening was held to be legally inadequate. [Paras 7]

Reasons for reopening were invalid and inconsistent; reopening could not be sustained on the basis of the reasons furnished.

Final Conclusion: The notice dated 17th March 2020 under Section 148 and the order rejecting objections dated 17th May 2021 were quashed and set aside; the petition is allowed in respect of A.Y.-2015-2016.

Validity of notice under Section 148 of the Income Tax Act, 1961 - Reasoned approval for reopening assessment - Non-application of mind / perfunctory approval - Requirement to verify prior return disclosure before approval - Quashing of reassessment notice for lack of application of mind - Approval under Section 151 of the Income Tax Act, 1961

Validity of notice under Section 148 of the Income Tax Act, 1961 - Reasoned approval for reopening assessment - Non-application of mind / perfunctory approval - Requirement to verify prior return disclosure before approval - Impugned notice under Section 148 and the order disposing of objections were invalid and liable to be quashed because the reasons and the approval suffered from non-application of mind. - HELD THAT: - The Court found multiple, inconsistent sets of reasons for reopening with different signatories and a letter enclosing documents that did not reflect the petition record, indicating mechanical preparation. The form for recording reasons contained material errors (the entry in Column No.8 stating 'Yes' for proposed first-time assessment while the reasons expressly noted an earlier e-filed return) and left Column No.9 blank when it ought to have recorded the declared income, demonstrating carelessness in preparation. The Additional Commissioner and Principal Commissioner endorsed and approved the reopening despite these defects, evidencing routine and perfunctory action. Reliance was placed on the principle that the Principal Commissioner must verify whether there was a failure by the assessee to disclose material facts in the return before granting approval; had such verification been done, the file would have been returned for correction. Given the absence of such application of mind and the presence of contradictory and erroneous records, the reasons and the consequent approval could not sustain a valid notice under Section 148. Accordingly, the reassessment notice and the order upholding initiation of reassessment were held unsustainable and were quashed.

Impugned notice under Section 148 and the order disposing of objections set aside for lack of application of mind in recording reasons and granting approval.

Final Conclusion: The petition is allowed; the notice dated 29.03.2019 issued under Section 148 and the order dated 31.10.2019 disposing of objections are quashed and set aside for being founded on reasons and approvals that suffered from non-application of mind.

Pre-deposit for stay of recovery pending appeal - application under Section 220(6) of the Income Tax Act, 1961 - conditional stay subject to deposit - installment pre-deposit mechanism - attachment of bank accounts for recovery - revival of assessment order on non-payment - CBDT circulars as guidance for pre-deposit conditions

Pre-deposit for stay of recovery pending appeal - installment pre-deposit mechanism - Permissibility and terms of allowing the assessee to pay the pre-deposit in installments as a condition for grant of stay of recovery. - HELD THAT: - The High Court, while disposing the writ petition at admission, directed that the petitioner is permitted to discharge the pre-deposit obligation by paying a fixed monthly instalment until the entire pre-deposit demanded in respect of the assessment is paid. The court fixed the instalment amount and specified the due date for monthly payments, thereby modifying the respondent's requirement of an immediate lump-sum pre-deposit. This direction was given as an exercise of the court's supervisory jurisdiction to protect the petitioner's business operations while preserving the recovery demand until full payment is made. [Paras 6, 8]

Petitioner directed to pay Rs.30,00,000 per month by the 5th of each month until the pre-deposit is fully paid; first instalment due by 05.01.2022.

Conditional stay subject to deposit - attachment of bank accounts for recovery - revival of assessment order on non-payment - Consequences of non-payment of the stipulated instalments and protection against attachment while instalments are being paid. - HELD THAT: - The court provided that protection from attachment granted by the order would cease if the petitioner failed to pay any instalment by the due date; upon such failure the assessment order would stand revived without further reference and the respondent would be at liberty to attach the petitioner's bank accounts. This preserves the respondent's statutory recovery powers while conditioning continued protection on punctual compliance with the instalment schedule. [Paras 6]

Failure to pay any instalment by the due date terminates the protection and permits immediate revival of the assessment order and attachment of bank accounts.

Pre-deposit for stay of recovery pending appeal - CBDT circulars as guidance for pre-deposit conditions - Effect of the court-ordered instalment payment on the pending appeal before the Commissioner of Income Tax (Appeals). - HELD THAT: - The court directed that the appeal pending before the Commissioner of Income Tax (Appeals) shall be taken up for final hearing only after the petitioner has paid the entire pre-deposit amount in terms of the court's order. Thus, although interim protection was granted subject to instalments, final adjudication by the appellate authority is deferred until the pre-deposit is fully discharged, consistent with the conditional nature of the stay and the departmental reliance on CBDT guidance regarding pre-deposits. [Paras 7]

The appeal will be heard finally by the CIT(A) only after full payment of the pre-deposit as directed.

Pre-deposit for stay of recovery pending appeal - Whether the court's directions on payment affect the petitioner's substantive rights in the pending appeal. - HELD THAT: - The court expressly stated that the payments ordered are without prejudice to the petitioner's rights in the pending appeal, clarifying that compliance with the instalment regime for obtaining interim protection does not constitute a waiver of the petitioner's appellate contentions or substantive rights. [Paras 8]

Ordered payments are without prejudice to the petitioner's rights in the appeal pending before the Commissioner of Income Tax (Appeals).

Final Conclusion: Writ petition disposed of at admission by permitting the petitioner to secure interim protection from attachment through a court ordered instalment pre deposit schedule (Rs.30,00,000 per month by the 5th), with the caveat that failure to pay any instalment will terminate protection and revive the assessment order permitting attachment; the appellate authority will hear the appeal finally only after full payment, and the payments are without prejudice to the petitioner's appellate rights.

Mandatory show cause notice and draft assessment under Section 144B of the Income Tax Act, 1961 - quashing and remand for fresh assessment - treatment of impugned order as show cause notice and draft assessment order - liberty to issue corrigendum and opportunity to reply - right to personal hearing through video conferencing / authorised representative

Mandatory show cause notice and draft assessment under Section 144B of the Income Tax Act, 1961 - Validity of the assessment order passed without issuance of the show cause notice and mandatory draft assessment order under Section 144B. - HELD THAT: - The Court found that the impugned assessment order was passed without the prerequisite issuance of a show cause notice and the mandatory draft assessment order contemplated by Section 144B which came into effect on 01.04.2021. In view of that procedural lapse the impugned order could not be sustained. The petitioner's personal circumstances (advanced age, residence abroad, bereavement and illness) were recorded but the determinative legal finding rests on absence of the mandatory pre-conditions under Section 144B. The Court therefore set aside the impugned order. [Paras 6]

Impugned assessment order quashed for lack of the mandatory show cause notice and draft assessment order.

Quashing and remand for fresh assessment - treatment of impugned order as show cause notice and draft assessment order - liberty to issue corrigendum and opportunity to reply - right to personal hearing through video conferencing / authorised representative - Remedial directions and procedure to be followed on remand including whether the impugned order may be treated as the requisite show cause notice and draft assessment and the timelines for further action. - HELD THAT: - Having quashed the impugned order, the Court remitted the matter to the first respondent for passing a speaking order within a specified period. The Court directed that the impugned order shall be treated as a show cause notice and draft assessment order. Respondents were permitted to issue any corrigendum within 15 days of receipt of the order, and the petitioner was allowed 30 days thereafter to file an appropriate reply. The first respondent was directed to pass the final order preferably within 60 days from receipt of the judgment. The respondents were also directed to facilitate filing of reply and attendance at personal hearing by video conferencing either by the petitioner or her authorised representative via the web portal. [Paras 7, 8]

Matter remitted for fresh consideration with the impugned order treated as show cause notice/draft assessment; directions given for corrigendum, opportunity to reply and VC-enabled personal hearing and timelines for final order.

Final Conclusion: Writ petition allowed: impugned assessment order quashed for non-compliance with the mandatory show cause notice and draft assessment requirements; matter remitted to the assessing authority to proceed in accordance with the directions and timelines set out by the Court, with facility for video-conferencing and opportunity to reply.

Duty drawback - notice before treating third-party import-export data as basis for assessment - speaking order - remand for fresh consideration - show cause notice under Section 144B of the Income Tax Act, 1961

Duty drawback - notice before treating third-party import-export data as basis for assessment - speaking order - Validity of the impugned assessment order which confirmed a demand based on import-export data without putting the assessee to notice and without a speaking order. - HELD THAT: - The Court found that the impugned order confirming a demand which relied on information from CBEC import-export data required that the petitioner be put to notice since the petitioner specifically contested the quantum of duty drawback received. The impugned order was therefore set aside and remitted because the respondents must pass a speaking order on the merits and in accordance with law after giving the assessee an opportunity to reply to the material relied upon. The Court recorded that the petitioner asserted receipt of a lesser amount as duty drawback (distinct from the amount treated as received by the Department), and that such contention ought to have been addressed by a notice and explained reasons in a speaking order rather than by summary confirmation based on third party data alone. [Paras 3, 4, 5]

Impugned order set aside and matter remitted to respondents to pass a speaking order on merits after giving notice and opportunity to the petitioner.

Show cause notice under Section 144B of the Income Tax Act, 1961 - remand for fresh consideration - Directions and procedure to be followed on remand including issuance of a show cause notice and timelines for reply and final order. - HELD THAT: - The Court directed that respondents shall issue the show cause notice as contemplated under Section 144B within thirty days of receipt of the copy of the order, and the petitioner shall file a reply within fifteen days of receipt of that notice. Thereafter the respondents are to pass appropriate orders on merits in a speaking manner within forty five days from receipt of the copy of this order. All substantive issues were left open for consideration by the respondents in the proceedings initiated by the show cause notice; the Court did not decide the merits of the tax demand but remitted the matter for fresh adjudication in accordance with law and the prescribed timelines. [Paras 5, 6, 7]

Respondents to issue Section 144B show cause notice within 30 days, petitioner to reply within 15 days, and respondents to pass speaking orders within 45 days; substantive issues remitted for fresh consideration.

Final Conclusion: Writ petition disposed by setting aside the impugned order and remitting the matter to the respondents for issuance of a show cause notice under Section 144B, with timelines for reply and for passing a speaking order; substantive issues left open for fresh adjudication.

Set-off of unabsorbed depreciation against income under any head - dispensing with requirement of continuance of same business for carry forward and set-off of unabsorbed depreciation - carry forward and set-off of unabsorbed depreciation not confined to eight-year limit - precedential application of earlier High Court decisions

Set-off of unabsorbed depreciation against income under any head - carry forward and set-off of unabsorbed depreciation not confined to eight-year limit - Unabsorbed depreciation relevant to assessment year 1996-97 can be set off against income (including capital gains) in assessment year 2007-08. - HELD THAT: - The Court followed earlier High Court decisions which held that, by virtue of the amendment and clarifications effected by Finance Act, 2001 and the departmental circular, the condition requiring continuance of the same business was dispensed with and unabsorbed depreciation carried forward becomes part of the subsequent year's depreciation and is allowable against income under any head. Those precedents concluded that unabsorbed depreciation available from earlier years may be set off against income including long-term or short-term capital gains in subsequent years and that the erstwhile eight-year restriction does not bar such carry forward and set-off. Applying these authorities to the facts, the Tribunal's conclusion permitting set-off of unabsorbed depreciation of AY 1996-97 against the assessee's income in AY 2007-08 was upheld.

Accepted; the Tribunal's allowance of set-off of the 1996-97 unabsorbed depreciation against income in 2007-08 is upheld.

Dispensing with requirement of continuance of same business for carry forward and set-off of unabsorbed depreciation - precedential application of earlier High Court decisions - The Tribunal's finding that the legislative intention did not restrict set-off of unabsorbed depreciation to eight years was affirmed. - HELD THAT: - The Court relied on binding or persuasive decisions of High Courts which interpreted the Finance Act, 2001 amendment and the Board's circular to mean that the restrictive eight-year provision no longer prevented carry forward and set-off of unabsorbed depreciation beyond that period. Consequently, the Tribunal's interpretation rejecting the Revenue's contention about a statutory eight-year limit was accepted.

Accepted; the Tribunal's interpretation rejecting an eight-year limitation on carry forward and set-off of unabsorbed depreciation is upheld.

Precedential application of earlier High Court decisions - The Tribunal was right in setting aside the assessment order under Section 263 as challenged by the Revenue. - HELD THAT: - The High Court applied its prior decisions and those of other High Courts which had considered identical contentions and found in favour of the assessee. By following those precedents, the Court held that the Tribunal correctly set aside the order under Section 263, and there was no infirmity warranting interference by the High Court in the Revenue's appeal.

Accepted; the Tribunal's order setting aside the assessment under Section 263 is sustained.

Final Conclusion: The Revenue's appeal is dismissed; the substantial questions of law are answered against the Revenue and the Tribunal's orders allowing set-off of unabsorbed depreciation and setting aside the assessment under Section 263 are upheld.

Incriminating material - search and seizure - assessment under section 153A - unexplained credit under section 68 - beneficiary of bogus share capital - entries in books of account as incriminating material - Kabul Chawla and Meeta Gutgutia precedents

Incriminating material - assessment under section 153A - unexplained credit under section 68 - entries in books of account as incriminating material - Kabul Chawla and Meeta Gutgutia precedents - Validity of addition treated as unexplained cash credit under section 68 in assessment framed under section 153A for Assessment Year 2010-11 in absence of incriminating material found during search. - HELD THAT: - The Tribunal examined whether the seized documents relied upon by the Assessing Officer constituted incriminating material for the year under consideration. The Assessing Officer treated amounts received as share capital and share premium as unexplained cash credit on the basis of statements and seized lists. The Tribunal observed that the specific list relied upon is headed as relating to the period 10.04.2010 to 31.03.2011, i.e., financial year 2010-11 relevant to Assessment Year 2011-12, and therefore does not constitute incriminating material for Assessment Year 2010-11. The Tribunal further noted absence of any other incriminating evidence found during the search pertinent to AY 2010-11. Applying the legal principle in the cited decisions of the jurisdictional High Court relied upon by the CIT(A) (Kabul Chawla and Meeta Gutgutia), and following a like conclusion in a related Tribunal order, the Tribunal held that the addition based on unexplained credit could not be sustained where no incriminating material relating to the year was found as a result of the search. Consequently, the CIT(A)'s deletion of the addition was affirmed. [Paras 9, 10, 12, 13, 14]

The addition treated as unexplained credit under section 68 was not sustained for AY 2010-11 in absence of incriminating material for that year; the CIT(A)'s deletion of the addition is affirmed and the appeals/cross objections are dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition for Assessment Year 2010-11 on the ground that no incriminating material relating to that year was found during search; revenue appeals and the assessees' cross objections are dismissed.

Adventure in the nature of trade - treatment of short-term capital gain as business income - treatment of unexplained cash deposits - opportunity of hearing before imposition of penalty

Adventure in the nature of trade - treatment of short-term capital gain as business income - Sale of land within four months of purchase treated as an adventure in the nature of trade and resultant share of profit taxable as business income. - HELD THAT: - The assessee purchased land for a low consideration and sold it four months later to a third party. There was no evidence that the land was acquired as an investment or with intention to hold. The Tribunal agreed with the CIT(A)'s conclusion that the rapid resale and surrounding circumstances demonstrated an intention to resell and constituted an adventure in the nature of trade. Accordingly the profit attributable to the assessee was taxable as business income rather than capital gain. [Paras 5]

The order of the lower authorities treating the assessee's share of profit of Rs. 21,25,000 as business income is upheld.

Treatment of unexplained cash deposits - Whether cash deposits in bank account constitute unexplained income; extent of addition sustained. - HELD THAT: - For Sudhir Angre the AO had added cash deposits of Rs. 3 lakhs as unexplained. The CIT(A) accepted explanation to the extent of Rs. 75,000 and sustained the balance. The Tribunal found no basis for the unexplained residual figure of Rs. 75,000 and concluded the deposits could not be treated as from undisclosed source to that extent, deleting the remaining addition. For Sunil Angre the AO had made additions based solely on debit entries without considering withdrawals or the assessee's long-standing cash-intensive business claim; the CIT(A) allowed only a small part without elaboration. The Tribunal held the matter was one-sided and required fresh consideration by the AO after affording opportunity to the assessee and examining withdrawals and business explanation. [Paras 6, 7, 15]

For Sudhir Angre the addition of Rs. 2,25,000 is deleted. For Sunil Angre the addition is set aside and the issue is restored to the AO for fresh adjudication after affording reasonable opportunity to the assessee and considering withdrawals and the claimed sources.

Opportunity of hearing before imposition of penalty - Validity of penalty proceedings where assessment and penalty orders were passed ex parte and whether penalty should be sustained. - HELD THAT: - In both cases assessment and penalty proceedings were conducted ex parte because the assessees did not participate, allegedly due to disputes with their counsel. The CIT(A) reduced penalty only to the extent of deletions he made. The Tribunal found that the assessees were not given adequate opportunity to show cause against penalty, and considering the circumstances it would be appropriate to remit the penalty matters to the AO for fresh adjudication after providing a proper opportunity of hearing. [Paras 10, 18]

Penalty orders are set aside and the penalty matters are restored to the file of the AO for fresh decision after affording the assessees reasonable opportunity of hearing.

Final Conclusion: For A.Y. 2012-13 the Tribunal upheld the CIT(A)'s characterization of the rapid resale as an adventure in the nature of trade and confirmed the business-income addition of Rs. 21,25,000; deleted the residual unexplained cash-deposit addition in Sudhir Angre and remitted the unexplained-deposit issue in Sunil Angre to the AO for fresh consideration; and set aside the penalty orders in both cases, directing fresh penalty proceedings after affording the assessees a proper opportunity of hearing.

Depreciation on goodwill - Intangible assets as "business or commercial rights of similar nature" - Precedent of coordinate bench / binding effect of earlier tribunal decisions in assessee's own case - Allowability of education cess and higher and secondary education cess as business expenditure - Mandatory and consequential grounds

Depreciation on goodwill - Intangible assets as "business or commercial rights of similar nature" - Precedent of coordinate bench / binding effect of earlier tribunal decisions in assessee's own case - Claim of depreciation on goodwill capitalised pursuant to acquisition of IBM's logistics business was allowable for A.Y. 2013-2014. - HELD THAT: - The Tribunal found the facts of the year under appeal identical to those in the immediately preceding assessment years where coordinate-bench decisions in the assessee's own case had allowed depreciation on the amount capitalised as goodwill arising from acquisition of workforce, supplier contracts and the right to provide logistics services. In view of those consistent Tribunal rulings (relied upon and reproduced in the order) and absence of distinguishing material, the Tribunal held that the CIT(A)'s confirmation of the A.O.'s disallowance could not be sustained. The Tribunal directed the Assessing Officer to allow depreciation on goodwill, setting aside the CIT(A) order and following the earlier decisions which treated the acquired intangible components as falling within the ambit of "business or commercial rights of similar nature" eligible for depreciation under the statutory provision. [Paras 5, 9]

Order of the CIT(A) disallowing depreciation on goodwill is set aside and the Assessing Officer is directed to allow the claim.

Allowability of education cess and higher and secondary education cess as business expenditure - Interpretation of disallowance under section 40(a)(ii) by reference to omission of "cess" - Education cess and higher and secondary education cess on income tax are allowable as expenditure for computing income under the head profits and gains of business or profession. - HELD THAT: - After hearing the parties, the Tribunal relied on authoritative High Court decisions and coordinate-bench Tribunal rulings which held that the term "cess" is not included within the statutory provision that disallows certain expenditures (section 40(a)(ii) as considered by the courts cited in the order). Applying those precedents, the Tribunal concluded that education cess and secondary education cess paid on income tax are not disallowable under the provision relied upon by the Revenue and are therefore allowable deductions for computing business income. The additional ground raising this legal point was admitted and decided in favour of the assessee. [Paras 11]

Additional ground allowing education cess and higher and secondary education cess as deductible business expenditure is allowed.

Mandatory and consequential grounds - Grounds relating to interest under sections 234B and 234D were dismissed as mandatory and consequential. - HELD THAT: - The Tribunal treated the ground relating to levy of interest as consequential to the primary relief granted. Having allowed the principal relief (depreciation on goodwill), the Tribunal dismissed the interest ground as being consequential and no separate adjudication on merits of interest was undertaken. [Paras 9]

Ground relating to interest under sections 234B and 234D is dismissed as mandatory and consequential.

Final Conclusion: Appeal allowed. The Tribunal set aside the CIT(A) order and directed the Assessing Officer to allow depreciation on goodwill for A.Y. 2013-2014; the additional ground that education cess and higher and secondary education cess are allowable business expenditure was allowed; the ground as to interest was dismissed as consequential.

Deductibility of interest under the head "Income from Other Sources" - nexus between borrowed funds and income sought to be matched for deduction - application of the rule of consistency in recurring allowance of deductions - limitations on scope of limited scrutiny and requirement of prior approval to expand scrutiny - section 57(iii) - expenditure wholly and exclusively for purpose of making or earning income

Deductibility of interest under the head "Income from Other Sources" - nexus between borrowed funds and income sought to be matched for deduction - section 57(iii) - expenditure wholly and exclusively for purpose of making or earning income - application of the rule of consistency in recurring allowance of deductions - Whether the deduction of interest of Rs. 5,41,397/- claimed against interest income was rightly disallowed under section 57(iii) when similar interest deductions were allowed in preceding and succeeding assessment years and no fresh loans were raised in the relevant year. - HELD THAT: - The Tribunal examined the A.O.'s finding that the borrowed funds (on which interest was paid at a higher rate) were invested in agricultural land and used to repay earlier loans and therefore had no direct nexus with the interest-bearing investments. The Tribunal placed weight on the assessee's chart showing no fresh borrowings in the relevant year and on the factual position that similar interest deductions had been allowed in earlier and later assessment years. Relying on authority and principles that Revenue ought not to depart from an approach accepted in concluded assessments, and on precedents where availability of own funds or consistent treatment precluded retrospective disallowance, the Tribunal held that in the facts of the case no disallowance was warranted. Consequently the Tribunal set aside the appellate order upholding the disallowance and directed deletion of the addition. [Paras 6]

Addition disallowing interest expense deleted; deduction of interest allowed for A.Y. 2014-15.

Limitations on scope of limited scrutiny and requirement of prior approval to expand scrutiny - consistency and finality of concluded assessments - Whether the Assessing Officer exceeded the scope of limited scrutiny without requisite approval and whether that procedural overreach vitiated the disallowance made. - HELD THAT: - The Tribunal noted the case was selected for limited scrutiny for specific reasons and observed that the impugned addition was not one of those reasons. There was no record that the A.O. obtained prior approval from the PCIT/CIT to broaden scrutiny. In these circumstances, the Tribunal found that the A.O. was not justified in making the disallowance on an issue outside the limited scrutiny scope. This procedural defect reinforced the conclusion that the addition should be deleted. [Paras 6]

Procedure followed for limited scrutiny held to have been exceeded; disallowance made outside the selected scope set aside.

Final Conclusion: The appeal is allowed: the disallowance of interest under section 57(iii) for A.Y. 2014-15 is deleted on merits and in view of the A.O.'s exceeding the scope of limited scrutiny without requisite approval; the Assessment Officer is directed to give effect to this order.

Peak bank credits - cyclical deposits and withdrawals - profit on peak credit (business profit on cyclical banking transactions) - credit for agricultural income - cryptic/non-speaking appellate order - remand for fresh consideration

Cryptic/non-speaking appellate order - remand for fresh consideration - Impugned appellate order of the Ld. CIT(A) set aside for inadequate consideration and remitted for fresh adjudication. - HELD THAT: - The Tribunal found that the Ld. CIT(A) recorded a conclusion on peak credits but failed to consider material pleas urged by the assessee - in particular, the request to treat only profit on peak amounts as income and the claim for credit of declared agricultural income. The appellate order was characterised as cryptic and lacking proper analysis of relevant facts. For these reasons the Tribunal set aside the impugned appellate order and directed a fresh appellate decision to be passed after providing the assessee a reasonable opportunity to be heard.

Impugned appellate order set aside and matter remitted to the Ld. CIT(A) for fresh adjudication after affording opportunity to the assessee.

Credit for agricultural income - remand for fresh consideration - Assessee's claim for credit of declared agricultural income to be considered afresh by the Ld. CIT(A). - HELD THAT: - The Tribunal noted that the assessee had disclosed agricultural income in the return and had consistently relied upon that figure in submissions, but the Ld. CIT(A) did not record any finding on whether such agricultural income should be credited against the alleged unexplained bank deposits. The Tribunal directed that the Ld. CIT(A) must examine this claim on the merits, give specific findings based on the facts and documents on record, and adjust the addition if warranted.

Claim for credit of declared agricultural income remitted to the Ld. CIT(A) for fresh consideration and specific findings.

Peak bank credits - cyclical deposits and withdrawals - profit on peak credit (business profit on cyclical banking transactions) - remand for fresh consideration - Whether cyclical pattern of deposits and withdrawals should be treated as business activity and, if so, whether only a reasonable profit on the peak credit (and not the entire peak amount) should be brought to tax - remitted for fresh examination. - HELD THAT: - The Tribunal accepted that the Ld. CIT(A) observed a cyclical pattern of deposits and withdrawals but did not examine the assessee's submission that such transactions were in the nature of business and that only profit on the peak amounts ought to be assessed. The Tribunal directed the Ld. CIT(A) to consider, in the light of facts and submissions (including bank statements, licences and other documents), whether the cyclical transactions constitute business receipts and, if they do, to compute a reasonable profit to be taxed rather than treating the entire peak credit as income. The Tribunal clarified that it did not pre-judge the issue or direct a specific treatment, leaving the appropriate conclusion to the Ld. CIT(A) on fresh consideration.

Issue remitted to the Ld. CIT(A) to examine whether bank transactions amount to business activity and, if so, to determine a reasonable profit on peak credits to be brought to tax.

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal set aside the Ld. CIT(A)'s order and remitted the matter for fresh adjudication requiring the Ld. CIT(A) to (a) consider the assessee's claim for credit of declared agricultural income and (b) examine whether the cyclical bank transactions constitute business activity and, if so, determine a reasonable profit on peak credits to be assessed, after affording the assessee a reasonable opportunity of being heard.

Writ of mandamus - Article 226 - disputed facts not adjudicable in writ proceedings - contractual disputes to be adjudicated by competent forum - Handling of Cargo in Customs Areas Regulations, 2009 - detention certificate - infructuous writ

Detention certificate - infructuous writ - Whether the original relief seeking release of detained goods and issuance of detention certificate had been satisfied, rendering the writ petition infructuous. - HELD THAT: - The Court recorded that during the pendency of the writ petition 100% of the goods were released and the detention certificate, which was the original relief sought, had been issued and produced by the petitioner. Given that the principal relief claimed in the writ had been granted by the authorities, there remained no live controversy in respect of the original prayers. The consequence of compliance with the relief sought is that the writ petition could not be maintained for the same cause of action and accordingly stood liable to be dismissed as infructuous. [Paras 3, 9]

Original relief had been granted (release of goods and issuance of detention certificate); the writ petition was rendered infructuous and is dismissed.

Article 226 - disputed facts not adjudicable in writ proceedings - contractual disputes to be adjudicated by competent forum - Handling of Cargo in Customs Areas Regulations, 2009 - Whether the petitioner could, by amendment to the writ petition, seek directions to respondents 1 and 2 to initiate action against private/customs service providers (respondents 3 and 4) on the basis of the detention certificate and complaints. - HELD THAT: - The Court held that contested factual and contractual issues between the parties, including alleged violations of terms by the customs service provider, cannot be adjudicated in writ proceedings under Article 226. Such matters require scrutiny of original documents and evidence and trial-type adjudication before the appropriate forum. The Court emphasised that it cannot conduct a roving inquiry based on affidavits in a writ petition and that the proposed amendment, which sought fresh substantive relief against respondents 3 and 4, was beyond the scope of the original relief and therefore not maintainable in the present writ. The petitioner was directed to pursue remedies before the competent forum if grievances remained. [Paras 5, 8]

Amendment seeking direction to initiate action against respondents 3 and 4 is not maintainable in writ proceedings; petitioner may pursue appropriate remedies before the competent forum.

Final Conclusion: The writ petition is dismissed as infructuous because the original relief (release of goods and issuance of detention certificate) was granted; the proposed amendment seeking enforcement action against the customs service providers is not maintainable in writ jurisdiction and the petitioner is at liberty to seek remedy before the appropriate forum.

Exclusion of time from the corporate insolvency resolution process - treatment of interim resolution professional's appointment date for computation of CIRP timeline - appointment of interim resolution professional on the insolvency commencement date - substitution/appointment of IRP by the Adjudicating Authority

Exclusion of time from the corporate insolvency resolution process - treatment of interim resolution professional's appointment date for computation of CIRP timeline - Exclusion of the period from 12th February, 2021 to 28th February, 2021 from the CIRP period was to be allowed. - HELD THAT: - The Adjudicating Authority had appointed an IRP on 12th February, 2021 but subsequently, on 24th February, 2021, substituted the earlier appointee by appointing the IRP proposed by the applicant (Mr. Anil Tayal). The Tribunal found that, in the circumstances, the IRP ought to be treated as having been appointed on 24th February, 2021 and that information of that appointment was received by the IRP on 1st March, 2021. Given these facts, there were substantial grounds to exclude the period from 12th February, 2021 to 28th February, 2021 for computation of the CIRP timeline. The Adjudicating Authority erred in rejecting the application for exclusion and its order was set aside, with I.A. No. 1304 of 2021 being allowed to grant the exclusion. [Paras 4, 5]

I.A. No. 1304 of 2021 allowed and period from 12th February, 2021 to 28th February, 2021 excluded.

Appointment of interim resolution professional on the insolvency commencement date - substitution/appointment of IRP by the Adjudicating Authority - Effect of the amendment to Section 16 placing the obligation on the Adjudicating Authority to appoint the IRP on the insolvency commencement date was recognised and applied. - HELD THAT: - The Tribunal noted the amendment to Section 16 (by Act No. 1 of 2020) which provides that the Adjudicating Authority shall appoint an interim resolution professional on the insolvency commencement date. The Amicus Curiae submitted that, in view of this amendment (effective 28th December, 2019), the earlier inconsistency of having separate dates for initiation of CIRP and for appointment of the IRP no longer subsists; the IRP must be appointed on the insolvency commencement date. The Tribunal accepted this position as obviating the earlier difficulty and relied on it in disposing of the appeal. [Paras 7, 8]

The amendment to Section 16 was held to remove inconsistency so that the IRP is to be appointed on the insolvency commencement date and that this understanding informs the allowance of the exclusion.

Final Conclusion: The appeal is allowed; the Adjudicating Authority's order dated 17.03.2021 is set aside, I.A. No. 1304 of 2021 is allowed and the period from 12th February, 2021 to 28th February, 2021 is excluded; the Tribunal observed that the statutory amendment requires appointment of the IRP on the insolvency commencement date.

Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 (admission of application by operational creditor) - notice under Section 8 and Section 5(6) - notice of dispute - summary jurisdiction of the Adjudicating Authority under the IBC - acknowledgement of debt - plausible dispute requiring further investigation

Pre-existing dispute - notice under Section 8 and Section 5(6) - notice of dispute - Existence of a pre existing dispute between the parties as a bar to admission of the Section 9 application. - HELD THAT: - The Tribunal held that the Adjudicating Authority correctly examined the correspondence, pleadings and the reply to the demand notice and found material supporting a pre existing dispute. The email of 31.05.2019 and the reply dated 17.06.2019 were treated as raising contentions going to enforcement and performance of the contract, including alleged defaults, entitlement to forfeit security and adjustment of losses. The Tribunal reiterated that the definition of 'dispute' under Section 5(6) is inclusive and that where a corporate debtor brings to notice a dispute within the meaning of Section 5(6) before or within the period prescribed by Section 8(2), the operational creditor cannot invoke summary admission under Section 9. The Tribunal accepted that the dispute was not an imaginary or spurious one but a tangible contention requiring further investigation and therefore was a valid bar to admission of the Section 9 petition. [Paras 41, 43, 46]

The finding of a pre existing dispute was upheld and therefore Section 9 could not be invoked in the summary proceeding.

Summary jurisdiction of the Adjudicating Authority under the IBC - plausible dispute requiring further investigation - acknowledgement of debt - Whether the Adjudicating Authority's dismissal of the Section 9 application was vitiated by legal infirmity. - HELD THAT: - The Tribunal reviewed the Adjudicating Authority's reasons (including paragraphs 8 and 9 of the impugned order) which recorded parties' contentions, the alleged admissions and the documentary material. The Tribunal observed that issues raised - disputes over vessel particulars, quantity lifted, alleged breaches, claims for forfeiture and adjustment of losses - were matters that could not be resolved in a summary IBC proceeding. The Tribunal noted that alleged acknowledgements in correspondence did not amount to unassailable admission of an undisputed debt such as would mandate admission of the Section 9 petition. On this basis the Tribunal found no legal infirmity in the Adjudicating Authority's conclusion and refused to interfere. [Paras 44, 45, 47]

The Adjudicating Authority's dismissal of the Section 9 petition is free from legal infirmity and is upheld.

Final Conclusion: The appeal is dismissed; the impugned order dismissing the Section 9 application is affirmed and the Appellant remains free to pursue other appropriate recovery remedies.

Initiation of corporate insolvency resolution process by a financial creditor - maintainability of an application under Section 7 filed individually by a consortium member - existence of debt and default as threshold for admission under Section 7 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional upon admission of Section 7 petition - effect of pending recovery proceedings after commencement of moratorium

Maintainability of an application under Section 7 filed individually by a consortium member - initiation of corporate insolvency resolution process by a financial creditor - Whether a financial creditor who is a member of a consortium can individually file an application under Section 7 of the IBC for initiation of CIRP. - HELD THAT: - The Tribunal examined Section 7(1) of the Insolvency and Bankruptcy Code, 2016, which permits a financial creditor to file an application either by itself or jointly with other financial creditors. The provision therefore contemplates individual filing by a financial creditor as well as joint filings; specific provisos apply only to identified classes of creditors and do not create a bar for an individual consortium member to file. On this statutory basis the objection to maintainability raised by the corporate debtor was rejected. The Tribunal held that there is no legal impediment to PNB, as a member of the consortium, filing the Section 7 petition individually and accordingly dismissed the contention that the petition is not maintainable. [Paras 11]

Application by the financial creditor filed individually is maintainable; the objection to maintainability is rejected.

Existence of debt and default as threshold for admission under Section 7 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional upon admission of Section 7 petition - effect of pending recovery proceedings after commencement of moratorium - Whether the applicant has established existence of a debt and default warranting admission of the Section 7 petition and consequent CIRP, moratorium and appointment of an IRP. - HELD THAT: - The Tribunal confined its enquiry under Section 7 to whether a debt exists and whether there is a default. The corporate debtor did not dispute availing the credit facilities and had acknowledged liability, including by a revival letter dated 15.03.2017 which acknowledged securities and liabilities. The financial creditor also placed on record an undisputed demand notice issued under Section 13(2) of the SARFAESI Act evidencing classification of the account as NPA on 31.03.2018. On this material the Tribunal found that both the existence of debt and default were established and therefore the statutory thresholds for admission under Section 7 were satisfied. The Tribunal admitted the petition, declared moratorium under Section 14 (prohibiting institution or continuation of suits or enforcement of security etc.), directed public announcement of CIRP, and appointed an Interim Resolution Professional, finding compliance with relevant IBBI regulations regarding the proposed IRP's authorisation. [Paras 12, 13, 14, 15, 18]

Section 7 petition is admitted; CIRP is initiated, moratorium is declared and an Interim Resolution Professional is appointed.

Final Conclusion: The Tribunal held that an individual financial creditor who is a consortium member may maintain a Section 7 petition; on the materials (including admission of liability and an uncontested SARFAESI demand notice showing NPA classification) the requirements of existence of debt and default were satisfied. The Section 7 petition was admitted, moratorium declared and an Interim Resolution Professional appointed.

Maintainability of petition under Section 9 after settlement/MOU - effect of MOU incorporated in court order - right to reopen or file fresh insolvency proceedings on default under MOU - finality of adjudicated debt and default - inflation of claim and pecuniary jurisdiction - admission under Section 9 IBC and moratorium under Section 14 - appointment of Interim Resolution Professional

Maintainability of petition under Section 9 after settlement/MOU - effect of MOU incorporated in court order - right to reopen or file fresh insolvency proceedings on default under MOU - Present petition under Section 9 is maintainable despite the order allowing withdrawal of earlier CIRP application not expressly granting leave to file a fresh petition. - HELD THAT: - The Tribunal found that the MOU dated 16.12.2019 formed the basis of the earlier IA and was made part of the record. Clause 'e' of the MOU expressly granted the Operational Creditor the entitlement to initiate civil, criminal or insolvency proceedings (including reopening CP(IB) No. 463/9/HDB/2018 or filing a fresh company petition) in the event of default. The Tribunal observed that a typographical error in the clause's party-reference did not vitiate its plain operation. Since the Corporate Debtor's default under the MOU was admitted and the debt had already been adjudicated and attained finality, the Corporate Debtor could not contend that absence of an express grant of leave in IA 1162/2019 rendered the present petition non maintainable. The Tribunal therefore held the present petition maintainable and rejected the challenge based on lack of express leave. [Paras 7, 8, 9]

Petition under Section 9 is maintainable; the Operational Creditor was entitled to file the present petition on default under the MOU.

Finality of adjudicated debt and default - inflation of claim and pecuniary jurisdiction - Allegation that the Operational Creditor inflated the claim to meet pecuniary jurisdiction is not required to be re adjudicated because the existence of debt and default had attained finality in the earlier proceedings. - HELD THAT: - The Tribunal noted that the earlier proceedings under CP(IB) No. 463/9/HDB/2018 had already adjudicated the existence of the debt and default, and those findings had attained finality. Consequently, the contention that the claim had been inflated to attract pecuniary jurisdiction was not required to be examined afresh in the present petition. The Tribunal declined to reopen or relitigate the question of the quantum that had previously been finally determined. [Paras 10]

The challenge alleging inflation of the claim is not entertained; prior findings on debt and default stand.

Admission under Section 9 IBC and moratorium under Section 14 - appointment of Interim Resolution Professional - The petition is admitted under Section 9; moratorium is declared under Section 14 and an Interim Resolution Professional is appointed. - HELD THAT: - Having been satisfied about the existence of default, completeness of the application and absence of disciplinary impediments regarding the proposed IRP, the Tribunal admitted the petition under Section 9 of the IBC. The Tribunal declared moratorium with the statutory consequences specified in Section 14 and directed public announcement under Section 13. The Tribunal appointed the proposed IRP whose consent and IBBI authorisation validity were on record and directed consequential steps including updating the Registrar of Companies. [Paras 11, 12]

Petition admitted; moratorium imposed; Interim Resolution Professional appointed and consequential directions issued.

Final Conclusion: The Tribunal admitted the Section 9 petition: it held the petition maintainable despite the earlier withdrawal order because the MOU (incorporated in the record) entitled the Operational Creditor to reopen or file fresh proceedings on default; declined to reopen earlier final findings on existence of debt and default or entertain the inflation plea; declared moratorium and appointed the named Interim Resolution Professional with directions to make the public announcement and notify the Registrar of Companies.

Pre-existing dispute - maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code - notice under Section 8 of the Insolvency and Bankruptcy Code - plausible defence standard as laid down in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. - rejection of application under Section 9

Pre-existing dispute - plausible defence standard as laid down in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. - notice under Section 8 of the Insolvency and Bankruptcy Code - maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code - Whether a pre-existing dispute existed between the parties such as to render the Section 9 petition not maintainable - HELD THAT: - The Adjudicating Authority applied the test in Mobilox to determine whether the Corporate Debtor's defence amounted to a plausible, bona fide dispute or was merely a spurious, hypothetical or fanciful plea. The Corporate Debtor relied on written communications issued prior to receipt of the demand notice (letters dated 9th and 11th July 2019) and pleaded defects, discrepancies in measurements and bills, and consequent rectification and counterclaims, as well as contemporaneous steps including institution of a civil suit and a criminal complaint. The Authority examined the chronology, noting that the Corporate Debtor had served a reply to the Section 8 notice dated 3rd October 2019 which invoked the earlier communications and the suit; the Authority further observed that even if the suit and complaint were filed immediately after receipt of the Section 8 notice, the letters disputing the claim existed prior to service of the demand notice. Applying the Mobilox standard, the Authority found that the defence was not patently frivolous or vexatious but raised a prima facie bona fide dispute supported by contemporaneous communications and documentary material. Consequently the Section 9 petition was not maintainable and was liable to be rejected. [Paras 29]

The plea of pre-existing dispute raised by the Corporate Debtor is held to be prima facie bona fide and the Section 9 petition is rejected.

Final Conclusion: The petition under Section 9 is dismissed on the ground of a pre-existing dispute which, on the material placed, satisfies the Mobilox test; the operational creditor is left free to pursue other available legal remedies.

Maintainability of an application under Section 12A of the Insolvency and Bankruptcy Code, 2016 during the liquidation period - withdrawal of insolvency application on satisfaction of claims during liquidation - role of Committee of Creditors' 90% voting and acceptance of offer - closure of liquidation process - restoration of board of directors on closure of liquidation - discharge of liquidator and handing over of assets and records - satisfaction of creditors' claims as basis for withdrawal

Maintainability of an application under Section 12A of the Insolvency and Bankruptcy Code, 2016 during the liquidation period - withdrawal of insolvency application on satisfaction of claims during liquidation - role of Committee of Creditors' 90% voting and acceptance of offer - satisfaction of creditors' claims as basis for withdrawal - Application under Section 12A seeking withdrawal of the insolvency petition during the liquidation period is maintainable and may be allowed where creditors' claims are satisfied and no other claims remain. - HELD THAT: - The Tribunal examined the applicability of the principle that a Section 12A application may be considered even during liquidation if the demands of creditors are satisfied, relying on the proposition recorded by the Appellate Authority that an offer acceptable to the Committee of Creditors (by requisite voting) and satisfaction of claims does not preclude the Adjudicating Authority from permitting withdrawal. On the facts placed before the Tribunal, there was a single claim by ESIC which had been paid by the ex-directors and no other financial or operational creditor had lodged claims with the Resolution Professional or Liquidator. Fees and expenses of the Resolution Professional and Liquidator were shown to have been paid. Having regard to these undisputed factual averments and the legal position that satisfaction of creditors' claims furnishes a basis for withdrawal even during liquidation, the Tribunal concluded that the Section 12A application was maintainable and merited acceptance.

Section 12A application allowed and withdrawal of the insolvency petition permitted on the stated factual basis.

Closure of liquidation process - restoration of board of directors on closure of liquidation - discharge of liquidator and handing over of assets and records - Consequential reliefs flowing from allowance of the Section 12A application: closure of liquidation, restoration of the board, discharge of the liquidator, and direction to hand over assets and records were ordered. - HELD THAT: - Upon accepting the Section 12A application and recalling the admission and liquidation orders, the Tribunal directed closure of the liquidation process and restored the Board of Directors to its original position. The Liquidator was discharged and directed to hand over all assets, books of account and other documents to the Board immediately. These directions were issued as the appropriate consequential orders once the Tribunal found that creditors' claims had been satisfied and there were no outstanding claims or dues shown to be pending before the Liquidator.

Liquidation closed; Board of Directors restored; Liquidator discharged; Liquidator directed to hand over assets and records.

Final Conclusion: The Section 12A application seeking withdrawal of the insolvency proceedings was allowed on the basis that the sole claim had been satisfied and no other claims remained; accordingly the admission and liquidation orders were recalled, the liquidation process was closed, the Board of Directors was restored, the Liquidator was discharged and directed to hand over assets and records, and the related applications were disposed of.

Extension of corporate insolvency resolution process beyond the statutory outer limit - exceptional circumstances doctrine for extending 330 days - object and purpose of the Insolvency and Bankruptcy Code favouring revival over liquidation - exclusion of time for CIRP timelines on account of lockdown and pendency of judicial proceedings - committee of creditors' mandate and resolution professional's authority to seek extension/exclusion

Extension of corporate insolvency resolution process beyond the statutory outer limit - exceptional circumstances doctrine for extending 330 days - object and purpose of the Insolvency and Bankruptcy Code favouring revival over liquidation - Extension of time for completion of the corporate insolvency resolution process until November 30, 2021 was warranted and should be allowed. - HELD THAT: - The Tribunal found that exceptional circumstances existed - including earlier judicial stay, nationwide lockdowns during the COVID-19 pandemic, change of resolution professional, fresh expression of interest and the geographic spread and nature of the corporate debtor's business - which impeded continuous conduct of the CIRP and justified extending time beyond the ordinary outer limit. The Tribunal applied the Supreme Court's principle that the word 'mandatorily' was struck down and that, in exceptional cases, the Adjudicating Authority/Appellate Tribunal may extend time beyond 330 days to preserve the corporate debtor as a going concern rather than push it into liquidation. The Committee of Creditors had passed requisite resolutions authorising the RP to seek extension/exclusion and several prospective resolution applicants had submitted plans after the second EoI, indicating a realistic prospect of revival; on these considerations the Tribunal exercised its discretion to extend the CIRP period to November 30, 2021 to enable consideration of the plans and to further the Code's object of maximisation of asset value and revival. [Paras 15, 20, 21, 22]

Order of the Adjudicating Authority dated August 3, 2021 is set aside and time for completing the CIRP is extended to November 30, 2021.

Exclusion of time for CIRP timelines on account of lockdown and pendency of judicial proceedings - committee of creditors' mandate and resolution professional's authority to seek extension/exclusion - Time spent in filing these appeals before the Tribunal from August 18, 2021 to November 25, 2021 is to be excluded from CIRP timelines. - HELD THAT: - The Tribunal expressly excluded the period during which the appeals were pending before it (from August 18, 2021 to November 25, 2021) from the CIRP timelines. This exclusion was granted in the exercise of the Tribunal's discretion while extending the CIRP period, consistent with the approach that time taken in legal proceedings and pandemic-related disruptions may be excluded when assessing timelines for completion of the resolution process in exceptional cases. [Paras 22, 23]

The period August 18, 2021 to November 25, 2021 is excluded from the CIRP timelines.

Final Conclusion: The Tribunal set aside the Adjudicating Authority's order of August 3, 2021, allowed the application filed by the resolution professional, extended the CIRP period until November 30, 2021 and excluded the period of pendency of the appeals (August 18, 2021 to November 25, 2021); interveners' applications were disposed of and no costs were ordered.

Compliance with statutory demand notice under the Insolvency and Bankruptcy Code - existence of operational debt proved by memorandum of understanding and dishonoured cheques - pre-existing dispute and spurious-dispute doctrine - admission under section 9 of the Insolvency and Bankruptcy Code and initiation of corporate insolvency resolution process - appointment of interim resolution professional and declaration of moratorium

Compliance with statutory demand notice under the Insolvency and Bankruptcy Code - admissibility of documents filed by way of interlocutory application - Whether the operational creditor complied with the statutory notice requirement (Form 3/section 8 regime) and whether the demand notice filed by way of I.A. could be relied upon. - HELD THAT: - The Tribunal considered the Form 3 demand notice placed on record by the operational creditor (I.A. No. 79 of 2021) and the accompanying certificate and documents. The corporate debtor did not effectively controvert the existence of the demand notice or the details of the debt filed with the information utility; the Tribunal found that the Form 3 demand notice and its enclosures could be taken into account. The Tribunal therefore held that the operational creditor had fulfilled the statutory pre-filing requirements and that the belated filing of the Form 3 documents at the stage of arguments did not defeat admissibility in the circumstances. [Paras 10, 16]

Form 3 demand notice and related documents were treated as compliant for the purposes of proceeding under section 9.

Existence of operational debt proved by memorandum of understanding and dishonoured cheques - effect of admission in memorandum of understanding on default - Whether a debt and default existed such that the petition under section 9 was maintainable. - HELD THAT: - The Tribunal examined the invoices, ledger, the memorandum of understanding (MOU) entered into between the parties and the cheques issued pursuant thereto. The MOU recorded the corporate debtor's admission of the debt and an agreement to pay by a specified date, and the cheques issued in terms of the MOU were dishonoured when presented. The Tribunal found the corporate debtor's contentions that the MOU was executed under coercion and that the cheques were mere security to be unpersuasive, noting that dishonour of the cheques and the MOU together substantiated the existence of the debt and default. [Paras 8, 15]

The operational creditor established existence of a debt and default by documentary evidence and the MOU; the defence that the MOU/cheques were coerced was rejected.

Pre-existing dispute and spurious-dispute doctrine - application of Mobilox test to operational disputes - Whether the corporate debtor's plea of a pre-existing dispute (quality of goods, pending civil suits and NI Act proceedings) barred admission of the section 9 petition. - HELD THAT: - The Tribunal considered the corporate debtor's assertions that defective goods, pending civil suits and proceedings under the Negotiable Instruments Act established a pre-existing dispute. It examined the timeline and the record and observed that no bona fide dispute over quality had been raised prior to the demand; the civil suit had been dismissed for default and the corporate debtor's restoration application was pending. On the material before it the Tribunal treated the dispute pleaded by the corporate debtor as a tactical or spurious defence aimed at evading liability, and not a substantive bar to admission. The Tribunal also noted non-denial of the debt details filed with the information utility, which further weakened the plea of a genuine dispute. [Paras 11, 14, 16]

The plea of a pre-existing dispute was held to be spurious and did not preclude admission of the section 9 petition.

Admission under section 9 of the Insolvency and Bankruptcy Code and initiation of corporate insolvency resolution process - Whether the company petition under section 9 should be admitted and CIRP initiated. - HELD THAT: - Applying the findings that the operational creditor had complied with the demand notice requirement, that the debt and default were substantiated by the MOU and dishonoured cheques, and that the asserted disputes were not genuine, the Tribunal concluded that the conditions for admission under section 9 were satisfied. The Tribunal therefore admitted the petition and directed initiation of the corporate insolvency resolution process. [Paras 17]

The section 9 petition was admitted and CIRP was ordered to be initiated.

Appointment of interim resolution professional and declaration of moratorium - directions ancillary to moratorium and interim management - Appointment of an interim resolution professional and the scope and consequences of the moratorium following admission. - HELD THAT: - The Tribunal appointed an interim resolution professional from the IBBI-recommended panel and directed him to file written communication and papers. The Tribunal declared the moratorium with the usual statutory prohibitions (institution or continuation of suits, transfer or disposal of assets, enforcement of security, and related protections), gave directions regarding continuation of essential supplies and non-suspension of licences subject to payment of current dues, required the petitioner to deposit an amount for IRP expenses, and ordered public announcement and communication to the Registrar of Companies. These directions were issued to give effect to the CIRP regime upon admission. [Paras 18, 19]

An IRP was appointed and moratorium and ancillary directions were declared to operate from the date of the order.

Final Conclusion: The Tribunal found that the operational creditor complied with the pre-filing notice requirements, established existence of an operational debt and default by reference to invoices, ledger entries, the memorandum of understanding and dishonoured cheques, and that the corporate debtor's asserted disputes were spurious; the section 9 petition was admitted, CIRP was ordered, an interim resolution professional was appointed from the IBBI panel and moratorium and ancillary directions were declared.

Cenvat credit utilisation for payment of service tax - Rule 3(4)(e) of the Cenvat Credit Rules, 2004 - utilisation restricted to payment of service tax on output service - Fiction under Section 68(2) of the Finance Act, 1994 treating recipient as person liable to pay - Definition of "output service" under Rule 2(p) of the Cenvat Credit Rules, 2004 - Person liable for paying service tax under Rule 2(1)(d) of the Service Tax Rules, 1994

Cenvat credit utilisation for payment of service tax - Rule 3(4)(e) of the Cenvat Credit Rules, 2004 - utilisation restricted to payment of service tax on output service - Whether Cenvat credit could be utilised for payment of service tax on the services in question for the period under consideration. - HELD THAT: - The Court held that Rule 3(4)(e) permits utilisation of Cenvat credit for payment of service tax on any output service, and the Explanation which bars credit for services where the recipient is liable was inserted w.e.f. 1.7.2012 and therefore does not apply to the period April-August 2006. Applying the law as it stood during the relevant period, the Court accepted the view in earlier Coordinate Bench decisions that where the statutory scheme (including the fiction in Section 68(2) and the Service Tax Rules) treats the recipient as the person liable, the recipient is entitled to discharge that liability by utilising available Cenvat credit. [Paras 12, 16, 19]

Cenvat credit utilisation for payment of service tax on the services in issue during April-August 2006 was permissible; the post 2012 Explanation to Rule 3(4)(e) did not apply.

Fiction under Section 68(2) of the Finance Act, 1994 treating recipient as person liable to pay - Person liable for paying service tax under Rule 2(1)(d) of the Service Tax Rules, 1994 - Whether a service recipient who is made liable by statute under Section 68(2) and related rules is entitled to utilise Cenvat credit to pay service tax. - HELD THAT: - The Court relied on the statutory fiction created by Section 68(2) read with Rule 2(1)(d) of the Service Tax Rules and the scheme of the Cenvat Credit Rules to hold that when the law fixes the liability to pay service tax on the recipient (including services from outside India and certain GTA services), the recipient may use available Cenvat credit to discharge that liability. The Court followed the Coordinate Bench decisions applying this principle and rejected the Revenue's contention that utilisation was impermissible merely because the recipient was not the provider of the output service. [Paras 14, 15, 16, 17, 19]

Where the recipient is statutorily made liable to pay service tax (as under Section 68(2) and Rule 2(1)(d)), the recipient is entitled to utilise Cenvat credit to discharge that liability for the relevant period.

Definition of "output service" under Rule 2(p) of the Cenvat Credit Rules, 2004 - Cenvat credit admissibility conditions - provider of taxable service and utilisation only if input services utilised in providing an output service - Whether the conditions in the Cenvat Credit Rules regarding 'provider of taxable service' and admissibility only where input services are utilised in providing an output service were applicable to deny utilisation in the present facts. - HELD THAT: - The Court considered the definitions in Rule 2 (including Rule 2(p)) and the scheme of the Rules alongside judicial precedents. It accepted the Coordinate Bench rulings which recognised that, in light of the statutory scheme and the fiction of liability, the recipient's utilisation of Cenvat credit for discharging tax on specified services (including services from abroad and GTA services where liability is cast on recipient) cannot be faulted. The Court found no reason to depart from those decisions and held that the conditions relied upon by the Revenue did not preclude utilisation in the factual and legal matrix of the present case. [Paras 13, 16, 17, 19]

The admissibility conditions in the Cenvat Credit Rules do not preclude utilisation of Cenvat credit by the recipient under the statutory scheme and the applicable law for the period in question.

Final Conclusion: Following prior decisions of the Court and applying the statutory fiction under Section 68(2) read with the Service Tax Rules and the Cenvat Credit Rules as they stood for April-August 2006, the appeal is dismissed and the CESTAT order allowing the assessee is affirmed.

Export of services - Technical Testing and Analysis Services delivered outside India - CENVAT credit - nexus with output services - CENVAT credit on rent used for business purpose - maintainability of appeal - jurisdiction to adjudicate issues pending before the Supreme Court - Rule 3(1) of Export of Services Rules

Maintainability of appeal - jurisdiction to adjudicate issues pending before the Supreme Court - export of services - Whether the High Court could adjudicate the question whether services rendered by volunteers in India qualify as export of services when substantially the same question was the subject matter of a pending appeal before the Supreme Court. - HELD THAT: - The Court noted that the Revenue had itself placed on record that an appeal on substantially similar questions - including treatment of cross border character of services such as software/technical services and the taxability of consideration received - was pending before the Hon'ble Supreme Court (manifested by appeals arising from decisions of CESTAT/Tribunal as referred to by the Revenue). Given that the identical legal controversy concerning whether services provided by human volunteers in India could be treated as export of services and thereby escape tax was sub judice before the Apex Court, the High Court declined to entertain the matter. Consequently the adjudication of the core controversy fell outside this Court's jurisdiction in view of the pending higher forum proceedings, and the appeal was dismissed as not maintainable with liberty to the Revenue to pursue remedy before the appropriate court in accordance with law. [Paras 5]

Appeal dismissed as not maintainable for want of jurisdiction to adjudicate an issue substantially the same as that pending before the Supreme Court; liberty granted to the Revenue to seek appropriate remedy.

Final Conclusion: The High Court dismissed the Revenue's appeal as not maintainable because the determinative question-whether services rendered by volunteers in India constitute export of services-was substantially the same as an issue pending before the Hon'ble Supreme Court; the Revenue was granted liberty to pursue remedy before the appropriate forum.

Composite works contract - works contract service - construction service - commercial or industrial construction service - taxable service - charge must correspond to the category pleaded in the show cause notice

Composite works contract - works contract service - taxable service - Whether service tax could be levied on the appellant's composite turnkey construction contract as 'construction service' or 'commercial or industrial construction service' for the period prior to 01.06.2007. - HELD THAT: - The Tribunal held that the appellant's engagement was a composite 'works contract' for a lumpsum contract price and that the statutory charging of 'works contract' service was introduced only w.e.f. 01.06.2007 by insertion of clause (zzzza) in section 65(105). Relying on the reasoning of the Supreme Court in Larsen & Toubro, the Tribunal accepted that the charging provisions prior to 01.06.2007 applied only to contracts for service simpliciter and not to composite works contracts; consequently a works contract could not be taxed under the heads of 'construction service' or 'commercial or industrial construction service' before 01.06.2007. The Tribunal therefore concluded that service tax could not validly be levied on the appellant's works contract for the period prior to 01.06.2007. [Paras 8, 9, 10, 11]

Service tax could not be levied on the appellant's composite works contract as 'construction service' or related heads for the period prior to 01.06.2007; the demand for that period is unsustainable.

Construction service - commercial or industrial construction service - charge must correspond to the category pleaded in the show cause notice - Whether the demand confirmed for the period after 01.06.2007 could be sustained where the show cause notice and adjudication proceeded under heads of 'construction service' or 'commercial or industrial construction service' rather than under the statutory category of 'works contract' service. - HELD THAT: - The Tribunal found that even for the post-01.06.2007 period the impugned demand and confirmation were made under 'construction service'/'commercial or industrial construction service' and not under the newly inserted 'works contract' service clause. Applying the established principle that revenue cannot be permitted to sustain a demand on a basis different from that set out in the show cause notice (as explained in Hindustan Polymers and Reckitt & Colman), the Tribunal held that a demand confirmed under a category not pleaded in the show cause notice and not the one applied in adjudication could not be upheld. Consequently the confirmation for the post-01.06.2007 period could not be sustained on the basis invoked by the Commissioner. [Paras 12, 13, 14, 15]

The post-01.06.2007 demand confirmed under the category of 'construction service'/'commercial or industrial construction service' (rather than under 'works contract' service) is unsustainable and cannot be upheld.

Final Conclusion: The order dated 30.03.2010 confirming service tax demand is set aside and the appeal is allowed.

Maintainability of revenue appeal - service tax liability on construction forming part of airport - leave to appeal to the Supreme Court under Section 35L of the Central Excise Act, 1944

Maintainability of revenue appeal - service tax liability on construction forming part of airport - Whether the revenue appeal against the CESTAT order was maintainable. - HELD THAT: - The High Court dismissed the appeal by the Revenue as not maintainable because an appeal relating to the same assessee on the same subject matter (CEA No.13/2021) had been disposed of. In consequence, the Court did not decide the substantive question whether construction of multi-level car parking adjacent to the airport forms part of the airport and is not liable to service tax, but declined to admit the present appeal on maintainability grounds. The Court granted liberty to the Revenue to seek leave to appeal to the Supreme Court under Section 35L of the Central Excise Act, 1944. The Registry was directed to return original/certified annexures to the appellant's counsel while retaining photocopies for record.

Appeal dismissed as not maintainable with liberty to seek leave to appeal to the Supreme Court under Section 35L; original/certified annexures returned to appellant's counsel.

Final Conclusion: The High Court dismissed the revenue appeal as not maintainable in view of disposal of a related appeal, declined to decide the substantive service-tax question, and granted liberty to the Revenue to apply for leave to appeal to the Supreme Court under Section 35L; original/certified annexures were returned to the appellant's counsel.

Maintainability of an appeal under Section 35G of the Central Excise Act, 1944 - appeal seeking adjudication of classification of service and liability to service tax - questions directly relating to determination of applicable rate of tax, valuation or classification are matters for the Supreme Court - liberty to prefer appeal to the Supreme Court under Section 35L of the Central Excise Act, 1944

Maintainability of an appeal under Section 35G of the Central Excise Act, 1944 - appeal seeking adjudication of classification of service and liability to service tax - questions directly relating to determination of applicable rate of tax, valuation or classification are matters for the Supreme Court - The appeal under Section 35G of the Central Excise Act, 1944 is not maintainable and is dismissed. - HELD THAT: - The Court applied the principle that only certain categories of disputes - those directly and proximately concerning determination of the applicable rate of duty/tax, valuation for assessment, classification or coverage by an exemption - are intended to be entertained by the High Court under the special appellate provision. Where the substantial questions raised go to the root issue of liability to service tax and classification of the service (thereby affecting the rate or scope of tax), such matters fall within the limited class of cases requiring determination by the Supreme Court. Having regard to the Tribunal's findings and the nature of the substantial questions framed by the Revenue, the dispute transcends a purely inter se factual controversy and effectively involves matters ascribable to determination of rate/classification; accordingly the High Court will not entertain the appeal under Section 35G. The Court therefore dismissed the appeal as not maintainable while preserving the Revenue's liberty to approach the Supreme Court under the appropriate statutory provision. [Paras 7]

Appeal dismissed as not maintainable; liberty reserved to the appellant to present the appeal to the Supreme Court under Section 35L of the Central Excise Act, 1944.

Final Conclusion: The High Court dismissed the Revenue's appeal under Section 35G as not maintainable because the substantial questions raised concern classification and liability to service tax (matters affecting rate/scope of tax) and therefore fall within the jurisdictional ambit for the Supreme Court; liberty granted to present the appeal before the Supreme Court under Section 35L, and the Registry ordered to return original/certified annexures to the appellant's counsel.

Entitlement to CENVAT/MODVAT credit for inputs sent directly to a job-worker - principle against double taxation in excise credit denial - binding effect of earlier tribunal decision in the assessee's own case - requirement of documentary proof to sustain credit where inputs are processed by a job-worker

Binding effect of earlier tribunal decision in the assessee's own case - The Tribunal erred in denying credit without following its earlier decision in the assessee's own case. - HELD THAT: - The High Court noted that the Tribunal had previously decided in favour of the assessee on the same question and failed to consider or distinguish that earlier decision. The Tribunal's cryptic treatment and lack of valid reasons for departing from the prior finding rendered its conclusion unsustainable. The Court held that the Tribunal ought to have followed or meaningfully distinguished its earlier order before denying the credit. [Paras 11, 12]

Answered in favour of the assessee; the Tribunal's order set aside insofar as it denied credit.

Entitlement to CENVAT/MODVAT credit for inputs sent directly to a job-worker - requirement of documentary proof to sustain credit where inputs are processed by a job-worker - Credit cannot be denied merely because inputs were sent directly to the job-worker and not routed through the assessee's factory where the job-worker had no facility for manufacture. - HELD THAT: - Relying on authority that inputs forwarded to a job-worker for manufacture of intermediate goods do not lose their character as inputs for the manufacturer, the Court observed that the Tin Sheets were sent to a job-worker for printing and cutting and thereafter returned to the assessee. It was not disputed that duty on inputs was paid. Mere non-intimation to the department or direct despatch to the job-worker, without other substantive proof of diversion or clandestine manufacture, was not a valid ground to deny CENVAT/MODVAT credit. The Tribunal's confirmation, without assigning valid reasons, was held to be unjustifiable. [Paras 8, 9, 11]

Answered in favour of the assessee; denial of credit set aside.

Principle against double taxation in excise credit denial - Denial of CENVAT credit in the circumstances amounted to double taxation. - HELD THAT: - The Court found that since the duty on the inputs had been paid and the job-worker lacked infrastructure to manufacture finished goods independently, withholding credit on the asserted ground of direct supply to the job-worker resulted in taxation of the same inputs twice. The tribunal's brief and unexplained observations did not justify such an outcome. [Paras 11]

Answered in favour of the assessee; denial constituted double taxation and was set aside.

Requirement of documentary proof to sustain credit where inputs are processed by a job-worker - The Tribunal's conclusion that no proof was produced to sustain the credit was inadequately reasoned and could not support denial of credit. - HELD THAT: - While the Tribunal had noted absence of statutory or private records to substantiate the credit, the High Court examined the material and authorities and concluded that the Tribunal did not provide valid reasons for rejecting the credit claim in the face of evidence that inputs were returned after job work and duty had been paid. The mere statement of lack of proof without considered analysis was held insufficient. [Paras 11]

Answered in favour of the assessee; Tribunal's finding on lack of proof set aside.

Final Conclusion: The appeal allowed; the Tribunal's order dated 26.09.2018 and the adjudicating authority's denial of CENVAT credit of Rs. 3,57,314.05 and penalty of Rs. 1,00,000/- are set aside. Substantial questions of law Nos.1 to 4 answered in favour of the assessee; question No.5 rendered academic.

Extended period of limitation - Suppression of facts - Disclosure to department

Extended period of limitation - Suppression of facts - Disclosure to department - The demand could not be sustained by invoking the extended period where the assessee had already disclosed to the department its procurement of duty-free material under invalidation of advance authorisation. - HELD THAT: - The Tribunal held that the matter could be decided on limitation alone and therefore did not examine the merits. It found the allegation that the assessee had not disclosed procurement of duty-free material from the supplier to be contrary to the record, since the assessee had, by letters acknowledged by the department, informed the department of such procurement and had also submitted the relevant application, copies of the advance licence and bond. Subsequent letters also clarified the assessee's stand regarding compliance with the applicable procedure. In these circumstances, the foundation for invoking the extended period, namely suppression or misdeclaration, was absent. [Paras 4, 5]

The entire demand, having been raised only under the extended period, was held barred by limitation and unsustainable.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that the extended period was wrongly invoked since the material facts had been disclosed to the department.

Refund of pre-deposit - applicability of time limit under Section 11B to pre-deposit - binding nature of Board Circulars on departmental officers - procedure for refund of pre-deposit (simple letter and supporting documents) - delay in filing refund where appellate proceedings pending

Refund of pre-deposit - applicability of time limit under Section 11B to pre-deposit - binding nature of Board Circulars on departmental officers - delay in filing refund where appellate proceedings pending - Whether the refund claim of the pre-deposit could be rejected as time barred under the one year limit of Section 11B. - HELD THAT: - The amount paid by the appellant was a pre-deposit made pursuant to the stay order of the Commissioner (Appeals). The Board Circulars dated 02.01.2002 and 16.09.2014 clarify that pre deposit for filing an appeal is not payment of duty and that refund of such pre deposit need not be processed under the time limit regime of Section 11B; a simple letter with attested copy of the appellate order and proof of payment suffices. Those Circulars are binding on departmental officers. Applying those circulars, the one year period under Section 11B does not apply to refunds of pre deposits arising from appellate orders. Further, the appellant filed the refund claim immediately after the Tribunal dismissed the department's appeal, the departmental appeal having been pending before CESTAT until 26.04.2018; the claim filed on 25.05.2018 was therefore not liable to be rejected as time barred. For these reasons the impugned rejection on the ground of time bar was unsustainable. [Paras 4, 5]

Impugned order set aside; refund rejection on ground of time bar held unsustainable and appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: refund of the pre deposit cannot be rejected as time barred under Section 11B in view of binding Board Circulars permitting a simple refund request after the appellate order; the impugned order is set aside and consequential relief granted.

Retrospective effect of statutory explanation - Admissibility of CENVAT credit on commission paid to overseas agents as input service - Binding effect of Tribunal (CESTAT) precedent on lower authorities - Judicial discipline in following appellate tribunal ratio

Admissibility of CENVAT credit on commission paid to overseas agents as input service - Retrospective effect of statutory explanation - Services of foreign commission agents qualify as "sales promotion" and the explanation inserted by Notification No.2/2016-ST operates retrospectively to permit CENVAT credit of service tax paid on such commission. - HELD THAT: - The Assistant Commissioner applied the Division Bench decision of the Tribunal in Essar Steel India Ltd (Tribunal Ahmedabad) holding that the explanation inserted into the definition of "sales promotion" clarifies and explains the meaning of the rule and, being beneficial, should be construed to have retrospective effect. Applying that ratio, the Assistant Commissioner concluded that commission paid to foreign agents is covered by "sales promotion" and therefore the related service tax paid under reverse charge is admissible as CENVAT credit as an input service. The Appellate Tribunal (AT) below found no reason to depart from that binding Tribunal ratio and accepted the Assistant Commissioner's view that the explanation is clarificatory and retrospective, bringing the disputed period within its scope. The Court therefore upheld entitlement to CENVAT credit on the commission paid to overseas agents.

Entitlement to CENVAT credit of service tax paid on commission to foreign agents upheld; explanation inserted by Notification No.2/2016-ST treated as having retrospective effect for this purpose.

Binding effect of Tribunal (CESTAT) precedent on lower authorities - Judicial discipline in following appellate tribunal ratio - Whether the Commissioner (Appeals) was entitled to set aside the Assistant Commissioner's order despite the binding Tribunal precedent and without discussing that precedent. - HELD THAT: - The impugned order of the Commissioner (Appeals) set aside the Assistant Commissioner's order and denied retrospective effect to the explanation, but the Commissioner (Appeals) did not address or distinguish the Tribunal Ahmedabad decision relied upon by the Assistant Commissioner. The AT held that the ratio of the Tribunal is binding on lower authorities and that the Commissioner (Appeals) erred in ignoring that precedent and in failing to give reasons as to why Essar Steel did not apply. For that reason the Commissioner (Appeals) order was contrary to judicial discipline and warranted being set aside. The appellate order was therefore quashed and the Assistant Commissioner's decision restored.

Order of the Commissioner (Appeals) set aside for failing to follow and to consider the binding Tribunal precedent; appeal allowed and Assistant Commissioner's order restored.

Final Conclusion: The appeal is allowed: the Assistant Commissioner's order granting CENVAT credit of service tax paid on commission to foreign agents (treating such services as input service under "sales promotion") is restored; the Commissioner (Appeals) order is set aside for ignoring binding Tribunal precedent and failing to give reasons.

Direction for expeditious adjudication of pending revision applications - conditional interim relief by defreezing of bank accounts - disposal without entering into merits

Direction for expeditious adjudication of pending revision applications - statutory revision - Revision Application Nos.54 & 55 of 2021 pending before respondent No.2 shall be decided within a stipulated time. - HELD THAT: - The Court noted that the petitioner has filed two revision applications which are pending adjudication before the authority and that demands have been raised for the Assessment Years specified in the record. Without entering into the merits of the tax demand, the Court directed that the two pending revision applications shall be decided within two weeks from receipt of a copy of the order. The direction is an exercise of supervisory jurisdiction to secure expeditious disposal by the statutory authority and does not constitute an adjudication on the substantive claims or defenses raised by the petitioner. [Paras 6]

The respondent shall decide Revision Application Nos.54 & 55 of 2021 within two weeks from receipt of a copy of this order.

Conditional interim relief by defreezing of bank accounts - final adjudication timeline following administrative action - Procedure for defreezing bank accounts and timeline for final adjudication if authority accedes to defreezing request. - HELD THAT: - The Court recorded that the authority had frozen amounts from the petitioner's bank accounts and permitted that if the petitioner makes a request for defreezing and the authority accedes to such request, the authority should complete final adjudication thereafter within eight weeks. This direction preserves the authority's power to decide the request to defreeze and links any administrative compliance to a firm timeline for concluding the substantive proceedings, while expressly refraining from pronouncing on the merits of the underlying tax demand. [Paras 6, 7]

If the petitioner requests defreezing and the authority accedes, final adjudication shall be completed within eight weeks; the petition is disposed of without deciding merits.

Final Conclusion: The writ petition is disposed of by directing the authority to decide Revision Application Nos.54 & 55 of 2021 within two weeks; if the petitioner seeks defreezing of bank accounts and the authority agrees, final adjudication shall follow within eight weeks; no adjudication on merits has been made.

Principles of natural justice - Personal hearing - Right to be heard - Remand for fresh consideration - Adjournment and notice requirements

Principles of natural justice - Personal hearing - Right to be heard - Adjournment and notice requirements - Remand for fresh consideration - Impugned assessment order was passed without affording the petitioner an effective opportunity of personal hearing, resulting in a violation of principles of natural justice. - HELD THAT: - The Court found that although personal hearing had been fixed and an extension was granted, the petitioner received notice of the first hearing late and had sought further time; the respondent thereafter refixed the hearing but did not intimate the petitioner and proceeded to pass the impugned order. The impugned order was passed on merits but effectively without hearing the petitioner on a matter pending for a long period. In these circumstances the respondent ought to have awaited the petitioner's appearance or ensured proper intimation before concluding the assessment. For this reason the order is set aside and the matter is remitted for fresh consideration with directions to afford a personal hearing and decide the matter on merits within the specified timeframe. [Paras 7, 8, 9]

Impugned order set aside; matter remitted to respondent for fresh adjudication after affording personal hearing and passing a fresh order by the end of January 2022, with specific hearing date directed.

Final Conclusion: Writ petition disposed; impugned assessment order quashed and remitted for fresh consideration after affording the petitioner personal hearing; directions issued for hearing on 23.12.2021 (or after proper intimation) and to pass a fresh order by end of January 2022.

Prospective or retrospective effect of departmental clarification - remand for fresh consideration of applicability of administrative clarification - interpretation of concessional tax notification and classification of goods - setting aside appellate tribunal order and restoring matter to assessing authority

Prospective or retrospective effect of departmental clarification - remand for fresh consideration of applicability of administrative clarification - interpretation of concessional tax notification and classification of goods - Whether the matter should be remitted to the assessing authority for examination of the applicability and temporal effect of the Commissioner's clarification dated 10.05.2010 and consequent tax treatment of the product for the assessment period June 2011 to March 2012. - HELD THAT: - The Court observed that a coordinate bench in STA No.118/2013 and allied matters had considered identical questions concerning the applicability of the Commissioner's clarification dated 10.05.2010 and had remanded those matters to the assessing authority to determine whether the clarification operated prospectively or retrospectively. Having regard to the similarity of facts and issues in the present petition, the Court found no ground to differ from the coordinate bench's approach. Consequently, rather than adjudicating the taxability or classification of the product on merits, the Court set aside the Tribunal's order and restored the matter to the assessing authority for fresh consideration in the light of the observations made by the coordinate bench, keeping the parties' rights and contentions open and directing the assessing authority to afford opportunity of hearing and to decide the matter expeditiously. [Paras 7]

The matter is remitted to the assessing authority for fresh consideration of the applicability and temporal effect of the Commissioner's clarification dated 10.05.2010, with the Tribunal's order set aside.

Final Conclusion: Revision petition allowed in part; the Tribunal's order dated 31.03.2021 is set aside and the matter is restored to the assessing authority to examine, after hearing the parties, whether the Commissioner's clarification dated 10.05.2010 is prospective or retrospective and to pass appropriate orders within two months; all rights and contentions left open.

Violation of principles of natural justice - maintainability of writ petition despite availability of alternate remedy where principles of natural justice are violated - quashing of assessment orders and remand for fresh assessment - right to peruse and obtain copies of documents relied upon in assessment - direction to afford personal hearing before completing assessment - TNVAT assessment under the Tamil Nadu Value Added Tax Act, 2006

Violation of principles of natural justice - maintainability of writ petition despite availability of alternate remedy where principles of natural justice are violated - Writ petition was maintainable because the assessment was completed in breach of principles of natural justice. - HELD THAT: - The Court followed the reasoning in the earlier writ appeals which held that where the Assessing Officer received the taxpayer's replies/objections but proceeded to complete assessments without addressing requests for documents, details and a personal hearing, such conduct amounts to gross violation of principles of natural justice. On that basis the extraordinary jurisdiction under Article 226 could be invoked notwithstanding the existence of alternate remedies. Applying that principle to the present facts, the Court found no material to distinguish the case and held the writ petition maintainable for adjudication of the grievance arising from denial of a fair opportunity.

The writ petition was held maintainable because of violation of principles of natural justice.

Quashing of assessment orders and remand for fresh assessment - right to peruse and obtain copies of documents relied upon in assessment - direction to afford personal hearing before completing assessment - Impugned assessment orders under the TNVAT were quashed and the matters remitted to the Assessing Officer with directions to provide access to documents and to afford personal hearing before redoing the assessment. - HELD THAT: - Relying on the earlier appellate directions, the Court quashed the challenged assessment order and remitted the matter for de novo assessment. The Assessing Officer is directed to issue notice to the appellant to appear in person; the appellant must specify in writing the documents and details required; on such written request the Assessing Officer shall provide copies of available documents or permit perusal in the office where voluminous; thereafter the appellant shall furnish fresh objections within a specified short period and be afforded personal hearing through an authorised representative before the assessment is re-done in accordance with law. The directions ensure compliance with the requirements of natural justice and orderly exchange of documents prior to finalisation.

Assessment orders quashed and matter remitted with directions for provision/perusal of documents, written specification of required documents, fresh objections and an opportunity of personal hearing before reassessment.

Final Conclusion: The Court allowed the writ appeal, quashed the impugned TNVAT assessment order for AY 2011-12 as affected by breach of natural justice, and remitted the matter to the Assessing Officer with directions to provide access to documents and to afford personal hearing before redoing the assessment.

Extension of period of limitation - exclusion of period for computation of limitation - restoration of earlier limitation orders - availability of balance limitation period - fixed 90-day limitation where original expiry fell within excluded period - application to arbitration and specified statutory provisions

Restoration of earlier limitation orders - extension of period of limitation - Restoration and continuation of the Court's earlier order relaxing limitation from 15.03.2020. - HELD THAT: - Having considered the surge of the COVID-19 virus and its impact on public health and litigants' ability to access courts, the Court restored the order dated 23.03.2020 and continued the earlier relaxations. The Court observed that, in light of prevailing conditions and submissions, it is appropriate to treat the period affected by the pandemic as excluded for limitation purposes and to reinstate the relief previously granted by its orders of 23.03.2020 and subsequent directions. [Paras 5]

Order dated 23.03.2020 restored and the period from 15.03.2020 till 28.02.2022 excluded for purposes of limitation.

Availability of balance limitation period - fixed 90-day limitation where original expiry fell within excluded period - Allocation of the balance period of limitation and imposition of a 90-day limitation where limitation would have expired during the excluded period. - HELD THAT: - The Court directed that any balance period of limitation remaining as on 03.10.2021 shall become available with effect from 01.03.2022. Further, where limitation would have expired during 15.03.2020 to 28.02.2022, every person shall have a limitation period of 90 days from 01.03.2022; however, if the actual balance period available from 01.03.2022 exceeds 90 days, that longer period will apply. These measures are intended to provide a uniform and protective mechanism for commencement of actions delayed by the pandemic period. [Paras 5]

Balance limitation period available from 01.03.2022; where original expiry fell within excluded period, a 90-day period from 01.03.2022 applies unless a longer balance period exists.

Exclusion of period for computation of limitation - application to arbitration and specified statutory provisions - Extent of exclusion to statutory regimes including arbitration, Commercial Courts Act and Negotiable Instruments Act. - HELD THAT: - The Court clarified that the excluded period (15.03.2020 to 28.02.2022) is to be disregarded not only for ordinary limitation statutes but also in computing periods and outer limits under specific provisions: Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015, provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881, and any other laws prescribing periods for instituting proceedings, outer limits for condoning delay, and termination of proceedings. The exclusion therefore operates for instituting actions, condonation outer limits and termination timelines across these specified statutes and any similar statutory prescriptions. [Paras 5]

Excluded period applies in computing limitation and outer limits under the stated provisions of the Arbitration Act, Commercial Courts Act, Negotiable Instruments Act and any other laws prescribing similar limitation or termination periods.

Final Conclusion: The Supreme Court restored its 23.03.2020 order and directed that the period from 15.03.2020 to 28.02.2022 be excluded for limitation purposes; balance limitation stands available from 01.03.2022 with a 90-day protective period where applicable, and the exclusion applies to the specified provisions of the Arbitration Act, Commercial Courts Act, Negotiable Instruments Act and other laws prescribing limitation, outer limits or termination periods.

Compounding of offence under Section 138 of the Negotiable Instruments Act - effect of Section 147 of the Negotiable Instruments Act on compounding - acquittal on compromise - waiver of costs on settlement at an advanced stage

Compounding of offence under Section 138 of the Negotiable Instruments Act - acquittal on compromise - Whether the offence under Section 138 of the Negotiable Instruments Act can be compounded after conviction by the trial court and affirmation by the appellate court, resulting in setting aside of convictions and acquittal on compromise. - HELD THAT: - The Court held that even after conviction by the trial Magistrate and its affirmation by the Appellate Court, the parties are permitted to compound the offence under Section 138 of the Negotiable Instruments Act and the conviction can be set aside on the basis of a valid compromise. The Court relied on the principles laid down in Damodar S. Prabhu vs. Sayed Babalal H. , which recognises that conviction in proceedings under Section 138 can be set aside at the appellate stage and the accused may be acquitted on the basis of compromise between the parties. Applying that principle to the present facts, where the parties have executed a voluntary settlement and the statements in proof of the settlement were recorded, the Court accepted the compromise and set aside the judgments of both courts below, acquitting the petitioner.

Settlement accepted; convictions set aside and petitioner acquitted on the basis of compromise.

Effect of Section 147 of the Negotiable Instruments Act on compounding - waiver of costs on settlement at an advanced stage - Whether Section 147 of the Negotiable Instruments Act bars compounding at the appellate/post-conviction stage and whether costs ought to be imposed or waived in the circumstances. - HELD THAT: - The Court noted that Section 147 does not operate as an absolute bar to compounding even at the appellate stage, following the observation in K.M. Ibrahim vs. K.P. Mohammed & anr. . Considering the parties' compromise arrived at after the Appellate Court had upheld conviction, and having regard to the spirit of Section 147, the Court held that compounding was permissible. In view of the parties' admission of settlement and the respondent's willingness to accept the agreed amounts in light of the petitioner's precarious financial condition, the Court exercised its discretion to waive costs. The Court also noted that in appropriate cases costs can be waived as indicated in Rajendra vs. Nand Lal .

Section 147 does not bar compounding in the facts; compounding permitted and costs waived.

Final Conclusion: The high court accepted the parties' compromise arrived at after appellate affirmation of conviction, set aside the judgments below, acquitted the petitioner by compounding the offence under Section 138 of the Negotiable Instruments Act, directed release of amounts deposited subject to verification, and waived costs.