TaxTMI Updates e-Newsletter
Jan 14,2022

Interim anticipatory bail - conditions for grant of bail - personal bond with sureties - availability for interrogation - prohibition on inducement, threat or promise - restriction on leaving India and deposit of passport - application for cancellation of bail - verification of computerized court order

Interim anticipatory bail - personal bond with sureties - conditions for grant of bail - application for cancellation of bail - Grant of interim anticipatory bail to applicant no. 2, Vipin Kumar, subject to specified conditions. - HELD THAT: - The High Court allowed interim anticipatory bail to applicant no. 2 in respect of the summoning order dated 22.3.2021 under the Central Goods and Services Tax Act, on furnishing a fresh personal bond of the prescribed amount with two sureties each in the like amount. The bail is conditional and co-extensive with the Court's directions: (a) the applicant must make himself available for interrogation by the concerned officer as and when required; (b) he must not directly or indirectly induce, threaten or promise any person acquainted with the facts so as to dissuade disclosure to the Court or officers; and (c) he must not leave India without prior permission of the Court and, if holding a passport, must deposit it with the concerned officer. The order expressly permits the concerned officer to move for cancellation of the interim anticipatory bail in the event of default of any condition. The grant is limited to the next date, and compliance directions were given for production of the order before the concerned officer.

Interim anticipatory bail granted to applicant no. 2 on furnishing the ordered bond and sureties, subject to the stated conditions and liberty to the concerned officer to apply for cancellation on breach.

Verification of computerized court order - Procedure for verification and transmission of the Court's order to the concerned authority and requirements for the applicant's compliance. - HELD THAT: - The Court directed that the applicant must produce a copy of the order before the concerned officer within ten days, and that the party shall file a computer-generated copy downloaded from the High Court website, self-attested by the applicant together with a self-attested identity proof (preferably Aadhar Card) indicating the linked mobile number. The concerned Court/Authority/Official is required to verify the authenticity of the computerized copy from the High Court's official website and to make a written declaration of such verification. These directions are procedural measures to ensure authentication and identification before the concerned authority acts on the interim bail order.

Applicant to furnish a self-attested computerized copy of the order with identity proof; concerned authority to verify authenticity from the High Court website and record the verification in writing.

Final Conclusion: Interim anticipatory bail was granted to applicant no. 2, Vipin Kumar, until the next date on terms of a fresh personal bond with two sureties and specified conditions regarding interrogation, non-interference with witnesses, and travel; procedural directions were given for production and electronic verification of the order by the concerned authority.

Exclusion of limitation period between 15th March 2020 and 2nd October 2021 - extension of limitation by Supreme Court under Article 142 - computation of limitation for refund under Section 54(1) of the CGST Act - quashing of order rejecting refund as time barred - restoration and merit consideration of refund application

Exclusion of limitation period between 15th March 2020 and 2nd October 2021 - extension of limitation by Supreme Court under Article 142 - computation of limitation for refund under Section 54(1) of the CGST Act - The period of limitation falling between 15th March 2020 and 2nd October 2021 is excluded for computing time for filing the refund application under the Circular dated 18th November 2019 read with Section 54(1) of the CGST Act, and therefore the third refund application dated 30th September 2020 was within time. - HELD THAT: - The court applied the Supreme Court's Orders in Re: Cognizance for Extension of Limitation (Orders dated 23rd March 2020 and 23rd September 2021) which excluded the period from 15th March 2020 to 2nd October 2021 for computing limitation. The court held that those Orders, issued under Article 142 and declared binding under Article 141, required authorities to exclude that period when computing limitation under special statutes, including the timeline prescribed by the Circular issued under Section 54(1) of the CGST Act. As the limitation period for the petitioner's third refund application fell within the excluded period, the application could not be treated as time barred. [Paras 12, 13, 14]

The period from 15th March 2020 to 2nd October 2021 is to be excluded in computing limitation for the refund application, rendering the third refund application of 30th September 2020 within time.

Quashing of order rejecting refund as time barred - restoration and merit consideration of refund application - The impugned Order dated 26th November 2020 rejecting the third refund application as time barred is quashed; the third refund application is restored and the authority is directed to consider it on merits. - HELD THAT: - Having concluded that the limitation period was excluded as per the Supreme Court's Orders, the court found the respondent's rejection of the third refund application on time-bar grounds to be contrary to those Orders. Consequently, the court set aside the impugned rejection, restored the third refund application to the file of Respondent No.2 and directed that it be decided expeditiously on its merits and in accordance with law. [Paras 15]

Impugned order quashed; third refund application dated 30th September 2020 restored and directed to be considered on merits.

Leave to amend prayer clause and correction of application date - Leave to amend the petition to correct the date of the third refund application and to amend the prayer was granted; re-verification was dispensed with. - HELD THAT: - The court permitted the petitioner to amend the prayer Clause (c) and to correct the date '3.9.2020' to '30.9.2020' within two days and dispensed with re-verification as part of procedural directions. [Paras 1]

Amendment permitted and re-verification dispensed with.

Final Conclusion: The writ petition is allowed: the rejection order dated 26th November 2020 is quashed, the third refund application dated 30th September 2020 is restored and Respondent No.2 is directed to consider it on merits; procedural amendment sought is permitted. The court did not decide the validity of the Circular or Rule 90(3) and left those questions open for appropriate cases.

Confiscation proceedings under the Central Goods and Services Tax Act, 2017 - proceedings under Section 129 of the CGST Act - appeal under Section 107 of the CGST Act - administrative remedy as exclusive recourse prior to writ relief

Confiscation proceedings under the Central Goods and Services Tax Act, 2017 - proceedings under Section 129 of the CGST Act - appeal under Section 107 of the CGST Act - Writ petition challenging initiation of proceedings under Sections 129 and 130 of the CGST Act dismissed and petitioner directed to pursue statutory remedy of appeal under Section 107. - HELD THAT: - Petitioner challenged proceedings initiated under Section 129 and subsequent confiscation proceedings under Section 130 of the CGST Act. The Court noted that a final order had been passed by the proper officer on 13.12.2021 after the hearing directed by this Court, and that the order had been uploaded. Although counsel for the petitioner submitted that a copy of the final order was not served on the petitioner, the Government Pleader stated the order was uploaded and that the appropriate remedy was to prefer an appeal. Having regard to these facts and submissions, the Court relegated the petitioner to the statutory appellate remedy and declined to entertain the writ petition on merits. The dismissal was without prejudice to the petitioner's right to pursue the appeal in accordance with law.

Writ petition dismissed without prejudice; petitioner directed to pursue appeal under Section 107 of the CGST Act.

Final Conclusion: The writ petition challenging the proceedings under Sections 129 and 130 of the CGST Act is dismissed without prejudice, and the petitioner is relegated to the statutory remedy of filing an appeal under Section 107 of the Act.

Refund under Section 54 of the CGST Act - relevant date as date of payment - two year limitation for refund claims - refund for supply not provided / where invoice not issued - rectification of returns under proviso to section 39(9) - Circular No.26/26/2017-GST - rectification/offset and refund procedure

Refund under Section 54 of the CGST Act - relevant date as date of payment - two year limitation for refund claims - The refund claim filed by the petitioner is barred by limitation under Section 54(1) of the CGST Act as the relevant date is the date of payment and the claim was filed after two years. - HELD THAT: - The Court examined Section 54 and its Explanation which defines 'relevant date' and provides that in any other case the relevant date is the date of payment of tax. The tax in issue was paid on 20.12.2017; therefore the petitioner was required to file the refund application within two years, i.e., on or before 19.12.2019. The petitioner filed the refund claim on 30.05.2020 which is beyond the statutory limitation. Reliance on general principles or other authorities could not override the statutory limitation. Consequently the refund claim could not be entertained as time barred under Section 54(1). [Paras 16, 17, 19, 23, 24]

Refund claim rejected as barred by limitation under Section 54(1) of the CGST Act.

Circular No.26/26/2017-GST - rectification/offset and refund procedure - rectification of returns under proviso to section 39(9) - refund for supply not provided / where invoice not issued - The Circular relied upon by the petitioner does not render the belated refund claim maintainable; instead the circular and statutory provisions indicated alternative remedies such as rectification or obtaining credit notes from the recipient. - HELD THAT: - The Court considered Circular No.26/26/2017-GST and the illustrations therein which address system errors and steps for rectification, offset or refund when a liability is reported twice. However, the facts show that invoice numbers and dates (01.11.2017) were generated and tax was paid; the circular's illustrations apply where supply was reported twice and system reconciliation/edits could be used. The petitioner could have sought rectification under the proviso to section 39(9) or requested the recipient to issue appropriate credit notes to neutralize the tax incidence. Sub section (8)(c) of Section 54 applies only where a refund claim is otherwise admissible and within the two year period. Given the claim was time barred, the circular could not cure the limitation bar. [Paras 18, 21, 22]

Circular and rectification alternatives do not render the late refund claim maintainable; petitioner was required to pursue rectification/credit note remedy within the statutory regime.

Final Conclusion: Writ petition dismissed; the refund claim was held time barred under Section 54(1) of the CGST Act and the petitioner must pursue adjustment with its customer by way of credit note or other rectification mechanisms as available under the law.

Refund of taxes on export of services - manual filing of refund applications despite electronic filing regime - rule 97A as a non obstante provision preserving manual filing - administrative circulars cannot override statutory rules - judicial direction to consider representation without expressing opinion on merits

Manual filing of refund applications despite electronic filing regime - rule 97A as a non obstante provision preserving manual filing - administrative circulars cannot override statutory rules - Respondents were directed to consider the petitioner's representation seeking acceptance of manual declarations for refund claims for February 2019 to December 2019 in light of the Bombay High Court decision. - HELD THAT: - The High Court observed that the Bombay High Court in Lakshmi Organic Industries Ltd. construed rule 97A as a non obstante provision which preserves the availability of manual filing for refund applications notwithstanding the electronic filing regime, and held that administrative circulars cannot operate to override or derogate from such a statutory rule. Although the present Court did not express any opinion on the merits, it found the Bombay High Court's decision to be prima facie favourable to the petitioner and, in view of the pending rejection/deficiencies in earlier proceedings, directed that the petitioner's representation dated 10.12.2021 seeking acceptance of manual declarations for the specified period be considered. The Court limited its order to a direction for fresh consideration in light of the cited decision, preserved the petitioner's remedy against any adverse outcome, and required the respondents to examine the representation within four weeks of receipt of the order.

Respondents are directed to consider the representation dated 10.12.2021 for manual filing of refund claims for February 2019 to December 2019 in light of the Bombay High Court decision and decide the same within four weeks; no opinion on merits expressed and the petitioner's right to challenge any adverse order is preserved.

Final Conclusion: Writ petition disposed directing respondents to consider the petitioner's representation seeking acceptance of manual refund declarations for February 2019 to December 2019 in light of the Bombay High Court decision, to be decided within four weeks; no order on merits and rights to further challenge preserved; no costs.

Re-opening of assessment under section 148 - Reason to believe - Change of opinion - Information from Investigation Wing - High-value bank transactions not indicative of escaped income - Nexus between material and escapement of income

Re-opening of assessment under section 148 - Reason to believe - Change of opinion - Nexus between material and escapement of income - Validity of the notice issued under section 148 and the order rejecting the petitioner's objection to reopening - HELD THAT: - The Court held that the reopening of assessment was unsustainable because the reasons recorded do not establish a legally cognizable reason to believe that income chargeable to tax had escaped assessment. The material relied upon - primarily information from the Investigation Wing about certain transactions - was not linked by the Assessing Officer to any conclusion that the petitioner had undisclosed taxable income. The authorities recorded credits and identical debits of Rs. 744 lakhs, and the reasons ignored material placed on record showing corresponding liabilities and interest payments. The Court emphasised that mere receipt of information from the Investigation Wing or the existence of high-value deposits in a bank account, without a nexus demonstrating escapement of income, cannot justify reopening; doing so amounted to a change of opinion rather than formation of an independent reason to believe. Consequently, the notice under section 148 and the order upholding the reopening were quashed. [Paras 5, 6, 7]

Notice dated 31st March, 2019 under section 148 and the order rejecting the objection are quashed for want of permissible reason to believe, the reopening being based on information without requisite nexus and amounting to a change of opinion.

High-value bank transactions not indicative of escaped income - Information from Investigation Wing - Whether credit and matching debit transactions and disclosed interest receipts/payments establish escapement of income - HELD THAT: - The Court found that where large credits into the petitioner's bank account were matched by corresponding debits, there was no material to infer undisclosed income merely from the existence of such transactions. The reasons for reopening neglected the petitioner's disclosures in the balance-sheet and computation - including recorded liabilities and nearly equal interest paid - which demonstrated that the credited sums were not retained as assessable income. The Court reiterated that mere high-value cheque deposits or investigational intimation, absent further linking material, do not constitute grounds to form a belief of escapement of income. [Paras 6, 7]

Credits matched by corresponding debits and disclosure of liabilities and interest payments negate a finding of escapement; such transactions alone do not justify reopening.

Final Conclusion: The petition is allowed; the notice under section 148 dated 31st March, 2019 and the order dated 15th November, 2019 rejecting the petitioner's objection are quashed for lack of legally sustainable reasons to believe that income chargeable to tax for A.Y. 2012-2013 had escaped assessment.

Addition on account of bad debts - reliance on audited accounts to determine claimed expenditure - appellate authority's power to re examine assessment and affirm or set aside additions - perversity standard for judicial interference with findings of fact - exercise of powers under Section 254(1) of the Income tax Act - deletion of penalty under Section 271(1)(c) and relevance of Section 292B

Addition on account of bad debts - reliance on audited accounts to determine claimed expenditure - perversity standard for judicial interference with findings of fact - Whether the addition of Rs. 5,97,61,000 as bad debts could be sustained when the audited accounts did not claim the expenditure and the Assessing Officer had worked from provisional (unaudited) accounts. - HELD THAT: - The Tribunal and the Commissioner found on the material on record that the assessee had filed provisional accounts when audit was pending but subsequently furnished audited accounts which did not claim the bad debt expenditure. The Assessing Officer had made the addition on the basis of the provisional accounts without having regard to the audited balance sheet. The appellate authorities, exercising the powers conferred on them, recorded a categorical finding of fact that no claim for bad debts appeared in the audited profit & loss account or balance sheet and accordingly deleted the addition. The High Court held that no material was placed before it to show the factual finding was perverse and, invoking the settled standard that appellate or judicial interference is inappropriate in the absence of perversity, declined to disturb the concurrent findings of the Commissioner and the Tribunal. [Paras 10, 11, 12, 14, 15]

The deletion of the addition was upheld; the Assessing Officer's addition based on provisional accounts was set aside because audited accounts did not claim the bad debts and the finding of the appellate authorities was not perverse.

Appellate authority's power to re examine assessment and affirm or set aside additions - deletion of penalty under Section 271(1)(c) and relevance of Section 292B - exercise of powers under Section 254(1) of the Income tax Act - Whether the Tribunal was justified in dismissing the Department's appeals against the Commissioner's order deleting the penalty under Section 271(1)(c), including in the context of the contention based on Section 292B. - HELD THAT: - The Tribunal dismissed the revenue's appeals against the Commissioner who had set aside the penalty, and the High Court noted that because the substantive assessment issue (deletion of the addition) had been decided in favour of the assessee and affirmed on appeal, the consequential challenge to deletion of the penalty could not be sustained. The Court observed that the Commissioner and the Tribunal acted within the scope of their appellate powers; there was no error of law shown to justify interference, and the separate contention regarding Section 292B did not alter the outcome where the primary finding on the claim/expenditure had been affirmed in favour of the assessee. [Paras 16, 17, 18, 19]

The Tribunal's dismissal of the revenue's appeals and the deletion of the penalty were upheld; no legal error or misapplication of Section 292B was shown that would render the appellate orders perverse.

Final Conclusion: Both Income tax Appeals are dismissed; the concurrent findings of the Commissioner and the Tribunal in favour of the assessee-deleting the addition for bad debts and upholding the deletion of the penalty-are sustained as not being perverse or legally untenable.

Reopening of assessment - formation of valid belief under section 148 of the Income Tax Act - reassessment based on same material prohibited - change of opinion - full and true disclosure - no new information principle - non-application of mind - approval under section 151 of the Income Tax Act

Reopening of assessment - formation of valid belief under section 148 of the Income Tax Act - reassessment based on same material prohibited - change of opinion - full and true disclosure - no new information principle - Validity of the notice dated 31st March 2009 under section 148 reopening the assessment for Assessment Year 2004-05. - HELD THAT: - The Court found that the Assessing Officer possessed the primary facts and had raised the relevant query during the original assessment proceedings, to which the assessee had responded, and the assessment order was thereafter passed. The material relied upon for reopening was already on record at the time of the original assessment and no new or fresh information surfaced subsequently. Where the Assessing Officer, after considering the material on record and the explanation offered, had arrived at a conclusion allowing the deduction, it was impermissible to reopen the assessment on the basis of the identical material to take an alternative view. Reopening in such circumstances amounts to a mere change of opinion, which is not a valid ground for initiation of reassessment beyond the statutory period. The Court relied on the principle that a reopening founded solely on material already disclosed and considered in the assessment cannot satisfy the condition precedent for invoking section 148, and applied the precedents cited to hold the reopening notice invalid on merits. [Paras 7, 8, 9, 10]

Notice dated 31st March 2009 under section 148 insofar as it seeks to reopen Assessment Year 2004-05 is quashed as based on the same material and a mere change of opinion; no valid formation of belief to reopen the assessment.

Non-application of mind - approval under section 151 of the Income Tax Act - Validity of the reasons recorded for reopening and adequacy of the approval under section 151. - HELD THAT: - The reasons recorded contained evident errors (including an uncited reference to an Apex Court decision and an incorrect monetary figure), admitted by the respondents as typographical mistakes. Such errors demonstrate that the recording authority did not apply its mind to the reasons for reopening. The absence of the approving order on record, coupled with the nature of mistakes in the reasons, indicated that the Approving Authority under section 151 likewise would not have applied its mind before granting approval. Non-application of mind in recording reasons and in the approval process vitiates the reopening proceedings. [Paras 11, 12]

Reasons for reopening and the consequent approval are vitiated by non-application of mind; the reopening notice and the objection order are quashed on this ground.

Final Conclusion: The petition is allowed; the notice dated 31st March 2009 under section 148 and the order dated 16th October 2009 dealing with the objection are quashed and set aside for being based on the same material (mere change of opinion) and for non-application of mind; rule made absolute with no order as to costs.

Low tax effect - retrospective application of administrative circulars - organized tax evasion/penny stock bogus LTCG exception to monetary limits - requirement of specific CBDT special order to override monetary limits

Low tax effect - Whether the Income Tax Appellate Tribunal was justified in dismissing the Revenue's appeal on the ground of low tax effect without deciding the appeal on merits. - HELD THAT: - The Court noted that the Tribunal had dismissed the Revenue's appeal on the sole ground of low tax effect. Having examined the materials and subsequent administrative pronouncements, and in view of coordinate-bench decisions interpreting the CBDT circular and office memorandum, the Court upheld the Tribunal's approach. The coordinate-bench reasoning, relied upon by this Court, establishes that appeals involving low tax effect may be disposed of by the Tribunal under existing monetary-limit regimes unless a specific exception is validly triggered by the Board. There was no demonstration that the Tribunal erred in applying the low-tax-effect principle in the facts of this case.

The Tribunal was justified in dismissing the appeal on the ground of low tax effect; the appeal is dismissed.

Retrospective application of administrative circulars - organized tax evasion/penny stock bogus LTCG exception to monetary limits - requirement of specific CBDT special order to override monetary limits - Whether CBDT Circular No.23 of 2019 and the Office Memorandum dated 16.09.2019 operated retrospectively to remove monetary limits for filing departmental appeals in cases of alleged bogus LTCG on penny stocks. - HELD THAT: - The Court accepted the view of a Coordinate Bench that the Circular and Office Memorandum do not indicate any retrospective operation. The language of the Circular manifests that it provides for appeals to be filed on merits as an exception to earlier circulars only where the Board, by a special order, directs filing of appeals in cases involving organized tax-evasion activity. Thus, the Circular contemplates future invocation by specific Board orders and cannot be read as automatically applying retrospectively to appeals decided before the issuance and operation of those administrative directions.

The CBDT Circular and Office Memorandum do not have retrospective effect and require a specific special order of the Board to override monetary limits.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's dismissal on the ground of low tax effect stands, and the CBDT Circular/Office Memorandum of 2019 cannot be construed to have retrospective effect or to apply in the absence of a specific special order by the Board.

Assessment under section 153A - Reassessment and abatement arising from search under section 132 - Requirement of incriminating material for initiation of proceedings under section 153A - Onus under section 68 - Identity, creditworthiness and genuineness of credits - Use of investigation reports and responses to notices under section 133(6) - Drawing adverse inference where creditor is a paper/accommodation entry entity - Principle of audi alteram partem in assessment proceedings

Assessment under section 153A - Requirement of incriminating material for initiation of proceedings under section 153A - Reassessment and abatement arising from search under section 132 - Validity of notices issued under section 153A in absence of incriminating material found during search - HELD THAT: - The Tribunal upheld the view that issuance of notice under section 153A is triggered by initiation of search under section 132 and that section 153A does not make existence of incriminating material an essential precondition for exercising reassessment powers. The Bench relied on statutory language of section 153A and binding judicial pronouncements recognising that assessments for the six years must be made or reassessed once search is conducted, and that the AO may assess total income of those years on the material available to him. On this basis the legal challenge to jurisdiction under section 153A was dismissed. [Paras 8]

Challenge to notices and assessments under section 153A for the relevant assessment years dismissed; section 153A proceedings held not to require seized incriminating material as a precondition.

Onus under section 68 - Identity, creditworthiness and genuineness of credits - Use of investigation reports and responses to notices under section 133(6) - Addition under section 68 in A.Y. 2010-11 in respect of unsecured loan from Kaypee Mercantile Pvt. Ltd. - HELD THAT: - Revenue had treated the ICD received as unexplained cash credit relying on investigation reports and low declared income of the lender. The Tribunal found that the assessee produced ledger confirmations, bank statements, ITRs and an inter-corporate deposit agreement and that the lender had furnished a comprehensive reply to AO's notice under section 133(6) during assessment proceedings. The Tribunal noted the receipts and subsequent repayment with interest and observed that the AO did not pursue further enquiries after receiving the lender's response. On these facts the Tribunal held that the assessee discharged the onus under section 68 and that the reasons recorded by the revenue for bringing the amount to tax were not factually or legally sustainable. [Paras 19, 23, 24]

Addition under section 68 in A.Y. 2010-11 on account of unsecured loan from Kaypee Mercantile Pvt. Ltd. deleted; appeal allowed.

Onus under section 68 - Identity, creditworthiness and genuineness of credits - Drawing adverse inference where creditor is a paper/accommodation entry entity - Use of investigation reports and responses to notices under section 133(6) - Additions under section 68 in A.Y. 2011-12 and A.Y. 2012-13 in respect of unsecured loans from Cindy Goods & Supply Pvt. Ltd. - HELD THAT: - AO and CIT(A) relied on investigation reports alleging the lender was used by accommodation entry operators and on contemporaneous bank transaction patterns and relatively low returned incomes to conclude lack of creditworthiness and non-genuineness. The Tribunal examined the record and also the co ordinate Bench's earlier detailed scrutiny of Cindy Goods & Supply Pvt. Ltd. (including incorporation, bank statements, ITRs, responses to section 133(6) notices and statements recorded under section 131). The Tribunal found that the lender had been in existence since 1995, had filed returns showing significant income in relevant years and had responded to statutory notices; statements and documentary material supported genuineness. On that basis the Tribunal held the revenue's conclusion contrary to the facts and directed deletion of the additions. [Paras 32, 41, 42, 43]

Additions under section 68 relating to loans from Cindy Goods & Supply Pvt. Ltd. for A.Y. 2011-12 and A.Y. 2012-13 deleted; appeals allowed.

Onus under section 68 - Identity, creditworthiness and genuineness of credits - Drawing adverse inference where creditor is a paper/accommodation entry entity - Use of investigation reports and seized incriminating material - Additions under section 68 in A.Y. 2013-14 and A.Y. 2014-15 in respect of share capital/premium received from Giri Financial Services Pvt. Ltd. and Pabla Leasing & Finance Pvt. Ltd. - HELD THAT: - For these years the AO relied on investigation reports, statements and seized documents (including an incriminating diary) and noted patterns of back to back credits in the creditors' bank accounts, low declared incomes and absence of substantial business presence at given addresses to conclude the creditors were paper/accommodation entities and that transactions were sham. CIT(A) sustained the additions after examining these facts and relevant case law. The Tribunal reviewed a co ordinate Bench decision in which the same investor companies had been examined and found, on the full record (including ITRs, audited accounts, responses to notices and statements recorded under section 131), that the investors' identity and creditworthiness were substantiated and that amounts had been accepted as genuine in preceding/subsequent assessment years. Applying that factual appreciation, the Tribunal concluded the revenue's adverse findings were contrary to the material on record and deleted the additions. [Paras 52, 56, 57, 58, 59]

Additions under section 68 for A.Y. 2013-14 and A.Y. 2014-15 in respect of investments from Giri Financial Services Pvt. Ltd. and Pabla Leasing & Finance Pvt. Ltd. set aside; appeals allowed.

Onus under section 68 - Identity, creditworthiness and genuineness of credits - Use of investigation reports and responses to notices under section 133(6) - Additions under section 68 in respect of loans from Cindy Goods & Supply Pvt. Ltd. in appeals by Nimbus Multicommodity Brokers Pvt. Ltd. and by Bipin Agarwal for A.Y. 2012-13 - HELD THAT: - The Tribunal applied the reasoning adopted for the principal appeals concerning Cindy Goods & Supply Pvt. Ltd., noting that the identity and creditworthiness of that lender had been examined and accepted on the available record (ITRs, bank statements, confirmations and responses to statutory notices). Following that assessment, the Tribunal held the additions made by the AO in the related appeals were not sustainable and directed their deletion. [Paras 61, 62, 64, 66]

Additions under section 68 in the related appeals for A.Y. 2012-13 (Nimbus Multicommodity Brokers Pvt. Ltd. and Bipin Agarwal) in respect of Cindy Goods & Supply Pvt. Ltd. deleted; appeals allowed.

Final Conclusion: The Tribunal dismissed the jurisdictional challenge to assessments made under section 153A and proceeded to decide the appeals on merits. On factual evaluation it deleted section 68 additions where the assessee had, on the record before the AO, satisfactorily established identity, genuineness and creditworthiness of certain lenders (Kaypee Mercantile Pvt. Ltd. and Cindy Goods & Supply Pvt. Ltd. and related investor companies), and set aside additions in respect of preference share investments where the co ordinate Bench had examined and accepted the investor companies' documentation; corresponding appeals were allowed for the assessment years shown above.

Deduction/exemption under section 54F as applicable to investment in residential property - Conversion of two adjacent flats into a single residential unit for purposes of exemption - Contiguous/adjacent units treated as one house where physically combined and used as single residence - Application of precedential ratio permitting exemption where separate flats are merged for residential use

Deduction/exemption under section 54F as applicable to investment in residential property - Conversion of two adjacent flats into a single residential unit for purposes of exemption - Contiguous/adjacent units treated as one house where physically combined and used as single residence - Whether the assessee is entitled to claim exemption under section 54F in respect of investment in two adjacent flats treated as a single residential unit. - HELD THAT: - The assessee sold land and invested the capital gain in two adjacent flats (Flat Nos. 701 and 702). The Assessing Officer and the CIT(A) denied exemption for one of the flats on the basis that they were independent units transferred by separate sale deeds, had separate property tax payments and the building plan did not permit conversion into a single unit. The Tribunal examined the registered sale documents, the typical floor plans and the material at Page No. 58 showing that the assessee opened a common wall between the living/dining areas so that the two adjacent flats are being used as a single residential unit. The Tribunal relied on the established line of authority which permits allowance of exemption where adjacent/contiguous units are converted and intended to be used as a single house for residence. Applying that principle to the facts, and finding that the flats were physically combined and used as one residential unit, the Tribunal held that the investment in both flats qualifies for exemption under section 54F. Consequently the CIT(A)'s confirmation of the AO's partial denial was set aside. [Paras 6, 8]

Assessee entitled to exemption under section 54F in respect of the entire investment in Flat Nos. 701 and 702 treated as a single residential unit; CIT(A)'s order set aside.

Final Conclusion: The appeal is allowed: the Tribunal held that the two adjacent flats, having been physically combined and used as a single residence, qualify as a single residential house for the purpose of exemption under section 54F for AY 2013-14, and accordingly set aside the CIT(A)'s denial.

Capital receipt vs. business receipt - relinquishment of rights in immovable property - liquidated damages/compensation for breach of contract - taxability limited to actual amount received - colourable device - brought forward losses - remand for fresh adjudication

Capital receipt vs. business receipt - relinquishment of rights in immovable property - liquidated damages/compensation for breach of contract - taxability limited to actual amount received - Whether the amount received under the relinquishment deed is a capital receipt not chargeable to tax and, if so, whether taxability (if any) should be measured by Rs.4.89 crores actually received or by the Rs.40 crores shown in the deed. - HELD THAT: - The Tribunal examined authorities distinguishing receipts for surrender/relinquishment of rights in property from ordinary business receipts and noted that compensation paid for sterilisation or extinguishment of a capital right is not income. Applying those principles to the facts, the Tribunal accepted the assessee's case that the amount represented compensation arising from relinquishment (sterilisation) of rights under the MOU and accordingly is a capital receipt not liable to tax. Separately, the Tribunal addressed the quantum question: although the relinquishment deed recited Rs.40 crores, the record showed that the assessee actually received Rs.4.89 crores (cash and sale proceeds of allotted shares) and there was no material to show receipt of the balance. The Tribunal therefore held that only the real amount actually received (Rs.4.89 crores) could be brought to tax, if at all. [Paras 8]

Amount received held to be a capital receipt not chargeable to tax; in any event tax consequences, if any, are to be determined only with reference to the actual receipt of Rs.4.89 crores.

Colourable device - taxability limited to actual amount received - Whether the transaction was a colourable device devised with M/s JRPL to divert income and enable JRPL to claim a larger deduction, and if so whether the assessee should be taxed on that basis. - HELD THAT: - The Tribunal noted facts indicating adjustments in documentation and the large discrepancy between the deed amount and actual sums received, and observed that JRPL claimed the larger amount as an expense in its books. On these facts the Tribunal concluded that a colourable device had been employed to benefit JRPL and to divert major economic benefit to JRPL while the assessee acted as conduit. However, the Tribunal held that tax consequences of such a device should be visited on the party that ultimately benefited (JRPL). Consequently, though a colourable device was found, the assessee itself would not be made liable to tax on the basis of that arrangement; the Revenue remained at liberty to proceed against JRPL under law. [Paras 8]

Colourable device found, but the assessee will not be taxed on that basis; Revenue may pursue JRPL, and the assessee's appeal is allowed on this ground.

Brought forward losses - remand for fresh adjudication - Whether the brought forward losses claimed by the assessee should be allowed. - HELD THAT: - The Tribunal observed that the assessee is entitled to claim brought forward losses subject to statutory conditions and that supporting documents and details needed to be placed on record. As the assessee undertook to furnish necessary documents and the Revenue did not oppose restoration, the Tribunal considered it appropriate in the interests of justice to remit this issue to the Assessing Officer for fresh adjudication in accordance with law. [Paras 12]

Issue remitted to the file of the Assessing Officer for fresh adjudication; assessee directed to cooperate and furnish documents.

Final Conclusion: The appeal is partly allowed: the compensation received on relinquishment of rights is held to be a capital receipt not chargeable to tax, and in any event tax consequences (if any) are to be determined only with reference to the actual receipt of Rs.4.89 crores; although a colourable device was found, the assessee is not made liable on that account and Revenue may proceed against JRPL; brought forward losses are remitted to the Assessing Officer for fresh adjudication.

Disallowance of interest expenditure - addition under section 68 (unexplained loans/credits) - characterisation of receipts as professional fees or managerial remuneration - exercise of revisional power under section 263

Disallowance of interest expenditure - nexus between borrowed funds and profession - allowability under business/profession expenditure principles - Deletion of disallowance of interest of Rs. 80,96,491/- made by the Assessing Officer and sustained by the Commissioner (Appeals). - HELD THAT: - The Tribunal found that the Assessing Officer had not explained the basis for quantifying only a portion of the total interest expenditure for disallowance and had not considered the assessee's own funds and interest-free borrowings which could affect attribution of interest. The Tribunal observed that the AO and the CIT(A) failed to take into account that the assessee was entitled to withdraw his own capital (interest-free) and that further enquiries or reasoning were absent for partial disallowance. In view of these lacunae and absence of appropriate consideration of available funds and the basis for apportionment, the addition was held to be inappropriate and deleted. [Paras 6]

Addition of Rs. 80,96,491/- towards disallowance of interest deleted.

Addition under section 68 (unexplained loans/credits) - onus to prove identity, genuineness and creditworthiness of creditors - requirement of further inquiry by Revenue - Deletion of the addition of Rs. 3 crores made under section 68 towards loans from M/s. Kawrat Associates and Sri Ganesh Associates. - HELD THAT: - Although the AO and CIT(A) held that the assessee failed to discharge the onus under section 68 (noting deficiencies in confirmation letters and absence of interest payments), the Tribunal noted that the assessee had produced particulars (name, address, PAN) and that transactions were routed through banking channels, including repayment by cheque and RTGS and a confirmation statement. Given these facts, the Tribunal held that the Revenue ought to have made further enquiries (such as contacting the creditors) before invoking section 68. In the absence of adequate inquiry and having regard to bankers' routes and partial repayment/confirmations on record, the Tribunal set aside the addition and directed deletion. [Paras 10]

Addition of Rs. 3 crores under section 68 deleted and the CIT(A) order on this issue set aside.

Characterisation of receipts as professional fees or managerial remuneration - exercise of revisional power under section 263 - scope of reassessment of nature of receipts where evidence supports professional character - Setting aside of the Principal Commissioner of Income Tax's order under section 263 directing re-examination of the nature of Rs. 3 crores received by the assessee. - HELD THAT: - The Tribunal held that there was no merit in the revisionary order. The Assessing Officer had examined and treated the amount as professional fees, granting appropriate deductions while disallowing certain interest; the assessee, a practising doctor, had submitted service agreement, board resolution and TDS evidence supporting the claim. There was no material to infer managerial remuneration, and the PCIT could not draw adverse inference from the evidences produced. Therefore, the section 263 order was devoid of merit and was set aside. [Paras 12]

Order passed under section 263 set aside; no re-examination directed and the assessment treatment treating the receipt as professional fees upheld.

Final Conclusion: The Tribunal allowed both appeals for AY 2013-14: the disallowance of interest of Rs. 80,96,491/- and the addition of Rs. 3 crores under section 68 were deleted, and the revisional order under section 263 directing re-examination of the Rs. 3 crores receipt was set aside.

Nexus of expenditure with income - deductibility of business expenditure as wholly and exclusively for business - maintenance of corporate establishment as legitimate business expense - adhoc disallowance and requirement of specific verification of expenses

Nexus of expenditure with income - deductibility of business expenditure as wholly and exclusively for business - adhoc disallowance and requirement of specific verification of expenses - Whether the ad hoc disallowance of 50% of employee benefit expenses and other expenses should be sustained for lack of nexus with income - HELD THAT: - The Tribunal found that the genuineness of the claimed expenses was not disputed and that the assessee-company, being in operation, was required to maintain an establishment and discharge statutory obligations; such expenditure (including salaries, legal/professional fees and administrative costs) could therefore be wholly and exclusively for business purposes. The A.O. and CIT(A) had disallowed 50% of the expenses on an ad hoc basis for want of specific nexus with the predominantly other-source income of the year. Applying precedent in which expenses incurred to retain company status and to meet statutory obligations were held allowable, the Tribunal held that the ad hoc disallowance was not justified where the expenditure is bona fide and the company continued corporate activities. Consequently the Tribunal set aside the CIT(A)'s order and directed deletion of the addition made by the A.O. [Paras 6, 7]

Ad hoc disallowance of 50% of employee benefit expenses and other expenses deleted; appeal allowed and assessing officer directed to delete the addition.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2014-15, setting aside the ad hoc 50% disallowance of employee benefit and other expenses and directing deletion of the addition, on the basis that the bona fide expenses of an operative company to maintain its establishment are deductible as incurred wholly and exclusively for business purposes.

Compensation on cancellation of lease as capital receipt - treatment as long-term capital gains - leasehold rights as profit-making apparatus - plausible view doctrine in exercise of revisional power under section 263 - absence of error prejudicial to revenue

Compensation on cancellation of lease as capital receipt - treatment as long-term capital gains - leasehold rights as profit-making apparatus - Amount received on cancellation/extinguishment of long-term lease right is taxable as capital receipt and may be assessed under the head "Long Term Capital Gain" where the leasehold constituted the source of profit-making. - HELD THAT: - The Tribunal examined the nature of the receipts received on cancellation of the assessee's lease of a plot and noted undisputed facts: allotment, possession, execution of a lease deed for an initial term of 30 years (extendable), commencement of project activities, treatment of the plot as fixed asset in books, and payment of compensation on statutory cancellation. Earlier decisions of coordinate benches and higher courts were held to support the view that compensation for cancellation of long-term lease rights, when the leased subject formed the source of the assessee's profit making apparatus, is a capital receipt and not taxable as business income. Applying that principle, the Tribunal found the view taken by the assessing officer - that the receipt qualified as capital gain - to be a tenable and informed conclusion reached after calling for and examining relevant material, including the lease deed, computations, and statutory enactment leading to cancellation. Further, following the Apex Court's jurisprudence, where two views are possible the exercise of revisional power under section 263 is not justified unless the view taken by the assessing officer is unsustainable in law. The Tribunal concluded that the assessing officer's conclusion was at least one plausible view and therefore not erroneous or prejudicial to the revenue. [Paras 11, 12, 13, 14, 15]

The compensation on cancellation of the lease was properly offered and accepted as long-term capital gain; the assessing officer's view was a plausible view and not erroneous.

Plausible view doctrine in exercise of revisional power under section 263 - absence of error prejudicial to revenue - The revision under section 263 could not be sustained because the assessing officer had taken a plausible view after considering material, and the view was not unsustainable in law. - HELD THAT: - The Tribunal reviewed the material placed before the assessing officer, including the assessee's explanations, working of capital gains, lease deed and the enactment cancelling rights, and noted that the assessing officer had specifically called for details and examined them before accepting the returned income. Relying on the principle that section 263 cannot be invoked merely because the Commissioner disagrees with one of the possible views when the assessing officer's view is tenable, the Tribunal held that the Ld. PCIT's conclusion that the assessment order was erroneous and prejudicial was not sustainable. Reference was made to the Apex Court precedent that intervention is justified only where the assessing officer's view is unsustainable in law. [Paras 13, 14, 15]

Order passed under section 263 quashing the assessment could not be sustained; the revisional exercise was unwarranted.

Final Conclusion: The Tribunal allowed the appeal, held that the compensation on cancellation of the long term lease was properly taxable as capital receipt/long term capital gain and that the order passed by the Principal Commissioner under section 263 was unsustainable; consequently the section 263 order was quashed.

Disallowance under section 14A read with Rule 8D - Absence of exempt income as a bar to section 14A disallowance - Reliance on High Court precedent for section 14A

Disallowance under section 14A read with Rule 8D - Absence of exempt income - Reliance on High Court precedent for section 14A - Deletion of addition under section 14A read with Rule 8D where assessee had not earned any exempt income was affirmed. - HELD THAT: - The Tribunal noted that the CIT(A) found that the assessee had not earned any exempt income and, relying on the decision of the High Court in Lakhani Marketing, held that in the absence of any exempt income no disallowance under section 14A can be made. Revenue did not point out any error in the CIT(A)'s finding nor place any contrary binding decision on record. Having regard to the factual conclusion that no exempt income was earned and to the precedent relied upon by the CIT(A), the Tribunal found no reason to interfere with the deletion of the disallowance made by the Assessing Officer under Rule 8D read with section 14A.

The deletion of the addition under section 14A read with Rule 8D was upheld.

Final Conclusion: The appeal filed by the Revenue is dismissed and the order of the CIT(A) deleting the disallowance for Assessment Year 2015-16 is upheld.

Reopening of assessment - tangible material for reopening - audit objection as fresh tangible material - change of opinion - application of Rule 9A and Rule 9B - allowability under section 37(1) - estimation of income from resale of set materials - unexplained cash credit under section 68 - remand for verification

Reopening of assessment - tangible material for reopening - audit objection as fresh tangible material - change of opinion - application of Rule 9A and Rule 9B - Validity of reassessment for AY 2004-05 - HELD THAT: - The Assessing Officer reopened assessment after four years relying on an audit objection which questioned the application of Rule 9A and 9B. The Tribunal held that while audit objections pointing to factual differences may constitute fresh tangible material, an audit objection that merely raises a legal issue on application of Rule 9A/9B cannot be treated as fresh tangible material. Reopening after four years invoked the proviso and required failure by the assessee to disclose material facts; here the legal point was available at the time of original assessment and the reopening amounted to a change of opinion by the Assessing Officer. Consequently the reassessment for AY 2004-05 was quashed. [Paras 10, 11, 12]

Reopening for AY 2004-05 is invalid; reassessment quashed and revenue appeal dismissed for that year.

Application of Rule 9A and Rule 9B - allowability under section 37(1) - Disallowance of post-production expenses (AY 2005-06) - HELD THAT: - The Assessing Officer disallowed post-production expenses invoking Rule 9A/9B on the ground the assessee did not act as distributor/exhibitor. The Tribunal examined the capacity in which the assessee acted for each film: where the assessee functioned as producer and distributor (but not exhibitor), post-production/publicity expenses are not governed by Rule 9A/9B and are to be considered under section 37(1) as business expenditure. Relying on precedents, the Tribunal upheld the CIT(A)'s deletion of the disallowance for the film 7G Brindavan Colony and similar films. [Paras 15, 16]

Deletion of additions for post-production expenses upheld for AY 2005-06.

Estimation of income from resale of set materials - Estimation of resale value of set materials (AY 2005-06) - HELD THAT: - Both AO and CIT(A) adopted differing percentage rates (10% and 2%) without furnishing reasons or comparable data. The Tribunal, noting absence of material from either party to justify a particular rate, fixed an appropriate estimate for resale realizations at 5% of total set cost and directed the AO to adopt that rate. [Paras 17, 18]

Resale realization to be estimated at 5% of total set cost; matter remitted to AO for computation.

Unexplained cash credit under section 68 - remand for verification - Additions relating to interest on loans and genuineness of loans (AY 2005-06) - HELD THAT: - AO disallowed interest where earlier assessments allegedly treated the principal as unexplained; CIT(A) deleted the additions without clear factual findings on whether the principal had been disallowed in prior year. The Tribunal found factual lacunae in the record on both sides and directed that the issue be restored to the file of the AO for fresh consideration after affording the assessee an opportunity of hearing, to determine identity, genuineness and creditworthiness of lenders and the treatment of principal in earlier years. [Paras 19, 20]

Issue remitted to the Assessing Officer for fresh adjudication with opportunity to the assessee.

Application of Rule 9A and Rule 9B - allowability under section 37(1) - Disallowance of post-production expenses (AY 2006-07) - HELD THAT: - For films where the assessee released and realized revenue, the Tribunal agreed with the CIT(A) that post-production expenses are allowable because the assessee acted in capacities that take the expenditure outside the strict ambit of Rule 9A/9B, and such expenses are deductible as business expenditure under section 37(1). The Tribunal applied the same reasoning as in AY 2005-06 and upheld deletion of additions for the named films. [Paras 22, 23]

Deletion of additions for post-production expenses upheld for AY 2006-07.

Estimation of income from resale of set materials - Estimation of resale value of set materials (AY 2006-07) - HELD THAT: - As with AY 2005-06, the Tribunal applied the same approach and directed the AO to estimate resale realizations at 5% of total set cost in the absence of reasoned basis by either party for a different rate. [Paras 24]

Resale realization to be estimated at 5% of total set cost; AO directed to compute accordingly.

Unexplained cash credit under section 68 - remand for verification - Additions relating to unsecured loans and consequential interest (AY 2006-07) - HELD THAT: - The AO made additions for want of evidence; CIT(A) deleted them but records did not show clear factual findings or supporting material. The Tribunal found inadequate factual clarity on whether loans were proved and whether prior years had dealt with them, and therefore set aside the issue to the AO for fresh consideration in accordance with law after giving the assessee a reasonable opportunity of hearing. [Paras 25, 26]

Issue remanded to the Assessing Officer for fresh adjudication with opportunity to the assessee.

Final Conclusion: Revenue appeal for AY 2004-05 dismissed; revenue appeals for AYs 2005-06 and 2006-07 partly allowed for statistical purposes-post-production disallowances deleted where applicable, resale realizations fixed at 5% of set costs, and issues concerning loans/interest remitted to the Assessing Officer for fresh consideration.

Attribution of ledger entries in third party seized cloud data - Validity of proceedings initiated under Section 153C based on third party seized data - Rebuttable presumption arising from search records - Admissibility and evidentiary weight of cloud/tally data vis a vis corroborative evidence - Effect of admissions before the Settlement Commission on subsequent assessments - Principle of consistency - followings of co ordinate bench decisions absent stay or overruling

Attribution of ledger entries in third party seized cloud data - Validity of proceedings initiated under Section 153C based on third party seized data - Admissibility and evidentiary weight of cloud/tally data vis a vis corroborative evidence - Whether entries in the N. Trading cloud data in the name of 'RGS' could be attributed to the assessee and justify initiation of proceedings under Section 153C. - HELD THAT: - The Tribunal upheld the finding that mere mention of a name or heading in the seized cloud ledger is not sufficient to prove that the entries pertain to the assessee when there is no corroborative detail (such as address or PAN) or other independent evidence linking those entries to him. The CIT(A) found that the adequacy of the seized material to attribute the transactions to the assessee was not established, and the Tribunal agreed. On that basis the CIT(A)'s conclusion that the transactions in the cloud data could not be attributed to the assessee and that the action under Section 153C could not stand was affirmed. [Paras 10]

Entries in the cloud data in the name of 'RGS' were not proved to be the assessee's; initiation of proceedings under Section 153C based on those entries cannot be sustained.

Effect of admissions before the Settlement Commission on subsequent assessments - Admissibility and evidentiary weight of cloud/tally data vis a vis corroborative evidence - Rebuttable presumption arising from search records - Whether additions made by the Assessing Officer on account of unaccounted capital and interest based on N. Trading cloud data could be sustained after Manglam Builder & Developer Ltd. had owned up and offered the same transactions before the Settlement Commission. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that M/s MBDL had owned up the cloud data and had offered the relevant amounts for taxation before the Settlement Commission, which accepted the offer. Given that the same transactions were subjected to tax in the hands of MBDL and related entities, the Tribunal held that making identical additions in the hands of the assessee was not warranted in the absence of independent corroboration linking the entries to the assessee. The Tribunal therefore affirmed deletion of the additions on the merits. [Paras 11, 23]

Additions based on the cloud data were deleted because the same transactions had been owned up and taxed in the hands of MBDL and no independent evidence linked those entries to the assessee.

Principle of consistency - followings of co ordinate bench decisions absent stay or overruling - Effect of admissions before the Settlement Commission on subsequent assessments - Whether the Tribunal should follow the Coordinate Jaipur Bench decision (and the Settlement Commission's findings) in identical facts where the Revenue's challenges by writ were pending. - HELD THAT: - The Tribunal applied the principle of consistency and followed the Coordinate Bench decision which had dealt with identical facts and concluded that the entries belonged to MBDL and had been accepted in settlement. The Tribunal observed that mere filing of writ petitions by the Revenue does not negate the binding effect of the Coordinate Bench decision unless stayed or overturned by a higher court. In absence of any stay or specific grounds showing why that precedent should not be followed, the Tribunal declined to deviate and affirmed the CIT(A)'s reliance on the Coordinate Bench and Settlement Commission findings. [Paras 21, 24]

The Coordinate Bench decision and the Settlement Commission's acceptance were followed; Revenue's appeals dismissed on the ground of consistency in identical cases pending any stay or reversal.

Final Conclusion: The Tribunal affirmed the CIT(A)'s findings: the cloud ledger entries could not be attributed to the assessee on the available evidence; entries accepted and taxed in the hands of MBDL in the Settlement Commission proceedings precluded identical additions in the assessee's hands; and the Coordinate Jaipur Bench precedent was followed. All three Revenue appeals for AYs 2014-15 to 2016-17 are dismissed.

Presumption under section 292C - admissibility of seized cloud data - use of third party seized documents against an assessee - taxation of 'on money' and double taxation avoidance where amount has been offered by another party - binding effect of a coordinate bench decision / principle of consistency

Admissibility of seized cloud data - presumption under section 292C - use of third party seized documents against an assessee - taxation of 'on money' and double taxation avoidance where amount has been offered by another party - Addition of 'on money' to the assessee's income based on N. Trading cloud data was correctly deleted where MBDL had owned up the cloud entries and the amounts had been offered and accepted in settlement by MBDL. - HELD THAT: - The Tribunal examined the Assessing Officer's reliance on cloud data seized from MBDL and the AO's application of the presumption under section 292C. The CIT(A) found no material seized from the assessee's premises showing receipt of 'on money' and accepted that the cloud data pertained to MBDL, which had itself filed a settlement petition and admitted the entries. The Tribunal noted that MBDL had offered the on money relating to JEM in the Settlement Commission and the Commission accepted the offer; where the amounts have already been subjected to tax in the hands of MBDL and related entities, taxing the same amounts again in the hands of the assessee would result in double addition. In these circumstances, and in the absence of specific evidence of parting with 'on money' to the assessee, the presumption arising from third party documents seized from MBDL could not be applied to make the addition against the assessee. The Tribunal therefore affirmed the deletion of the addition on merits. [Paras 15, 16]

Addition of Rs. 1,90,08,157/ on account of alleged 'on money' deleted; Revenue's ground in respect of on money dismissed.

Binding effect of a coordinate bench decision / principle of consistency - use of third party seized documents against an assessee - Decision of the Coordinate Jaipur Bench in related proceedings (finding that MBDL owned up the cloud data and had offered the amounts in settlement) is to be followed in the present appeals until that decision or the Settlement Commission order is stayed or set aside. - HELD THAT: - The Tribunal observed that the present appeals arise from the same search action and the same seized N. Trading cloud data as adjudicated by the Coordinate Jaipur Benches in the case of Shri Jugal Kishore Garg. That bench had recorded that MBDL owned up the cloud data and had offered the on money receipts before the Settlement Commission, which accepted the offer. No stay or overruling of that coordinate bench decision or of the Settlement Commission order was shown to be in place. The Tribunal held that, in the absence of any specific grounds disclosed for disturbing those decisions and until the High Court stays or overrules them, the principle of consistency requires following the coordinate bench view; accordingly the CIT(A)'s deletion was affirmed and the Revenue's appeals were dismissed. [Paras 13, 16, 17]

Coordinate bench ruling and Settlement Commission acceptance followed; Revenue's appeals dismissed on this basis.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of additions based on N. Trading cloud data for AYs 2013 14, 2014 15 and 2015 16, holding that the relevant 'on money' had been owned up and subjected to tax by MBDL in settlement and that the coordinate bench decision ought to be followed; all three Revenue appeals are dismissed.

Reopening of assessment and requirement of independent application of mind to information from Investigation Wing - Quashing reassessment proceedings for mechanical reopening - Burden under Section 68 - identity, creditworthiness and genuineness of share applicants - Effect of assessments completed under Section 153A/153C on reassessment proceedings - Application of Section 69C to expenditure incurred for obtaining accommodation entries - Disallowance under Section 14A read with Rule 8D - investments vis-a -vis advances - Allowability of claimed salary and other business expenses - relevance of employer employee relationship and compliance by NBFC

Reopening of assessment and requirement of independent application of mind to information from Investigation Wing - Effect of assessments completed under Section 153A/153C on reassessment proceedings - Quashing reassessment proceedings for mechanical reopening - Validity of reassessment proceedings initiated for A.Y. 2010-2011 on the basis of information from the Investigation Wing. - HELD THAT: - The Tribunal examined the satisfaction note and the communication received from the Director of Income Tax (Investigation) and found that the Assessing Officer recorded reasons and issued notice essentially by mechanically acting on the Investigation Wing's communication without applying independent mind or verifying tangible material on record. The AO did not take into account that several investor companies had already been assessed under sections 153A/153C prior to recording reasons, nor did he consider the returns filed by the assessee. Reliance was placed on precedent requiring an AO's independent application of mind and on authorities holding that information from the Investigation Wing is not tangible material per se unless further inquiry establishes a link to escapement of income. In view of the absence of an independent satisfaction and of inquiries that could link the seized material to escapement of income, the reopening was held not in accordance with law and the reassessment proceedings were quashed. [Paras 12, 13]

Reassessment proceedings for A.Y. 2010-2011 quashed for mechanical reopening without independent application of mind.

Burden under Section 68 - identity, creditworthiness and genuineness of share applicants - Validity of addition made under Section 68 in respect of share application money for A.Y. 2010-2011. - HELD THAT: - On merits the Tribunal upheld the Commissioner (Appeals)'s finding that the assessee had produced detailed documentary evidence - returns and audited financials of the share applicants, bank statements, confirmations, ROC filings showing allotment, and assessment orders of the applicants - which satisfied the ingredients of Section 68 relating to identity, creditworthiness and genuineness of the transactions. The AO had not produced material to displace the appellants' evidentiary showing and had ignored statements and confirmations available on record. The Tribunal accordingly found no infirmity in deleting the addition. [Paras 6, 13]

Addition under Section 68 for A.Y. 2010-2011 deleted on merits for failure of AO to rebut the assessee's evidence.

Application of Section 69C to expenditure incurred for obtaining accommodation entries - Sustainability of addition under Section 69C for commission/expenses attributed to arranging accommodation entries for A.Y. 2010-2011. - HELD THAT: - Because the reassessment proceedings were quashed and, independently on merits, the substantive addition under Section 68 was deleted, the consequential addition under Section 69C could not be sustained. The Tribunal upheld the appellate deletion of the expenditure addition. [Paras 2, 14]

Addition under Section 69C for A.Y. 2010-2011 deleted; revenue's ground dismissed.

Disallowance under Section 14A read with Rule 8D - investments vis-a -vis advances - Correctness of disallowance under Section 14A read with Rule 8D for A.Y. 2010-2011. - HELD THAT: - The Commissioner (Appeals) found and the Tribunal accepted that the amount in question related to an advance against property and not to investment in shares. The AO's disallowance under Section 14A/Rule 8D was therefore held to be contrary to the factual finding; the revenue did not controvert that factual conclusion. Even apart from quashing, on merits the disallowance was unsustainable. [Paras 2, 5, 15]

Disallowance under Section 14A/Rule 8D for A.Y. 2010-2011 deleted.

Allowability of claimed salary and other business expenses - relevance of employer employee relationship and compliance by NBFC - Validity of addition in respect of salary expenses disallowed by AO for A.Y. 2010-2011. - HELD THAT: - The Commissioner (Appeals) found that the AO had not raised necessary queries and that, as an NBFC registered with the Reserve Bank of India, the assessee had to comply with statutory requirements; the AO had offered no cogent reason to disallow entire salary payments. The Tribunal agreed that, even disregarding quashing, the AO's wholesale disallowance was unjustified and upheld deletion. [Paras 2, 6, 16]

Addition in respect of salary expenses for A.Y. 2010-2011 deleted.

Burden under Section 68 - identity, creditworthiness and genuineness of share applicants - Validity of addition under Section 68 in respect of amounts received from Transnational Growth Fund Ltd. for A.Y. 2011-2012. - HELD THAT: - For A.Y. 2011-2012 the Tribunal found no infirmity in the Commissioner (Appeals)'s conclusion that the assessee had furnished complete particulars regarding the transactions with Transnational - including returns, balance-sheet, bank statements, confirmations and the assessment order of Transnational - and that the sum represented repayment of earlier loans/advances rather than unexplained cash credit. The AO's contrary conclusion was found to be a misdirection. The appellate deletion was therefore upheld. [Paras 19, 23]

Addition under Section 68 for A.Y. 2011-2012 deleted.

Application of Section 69C to expenditure incurred for obtaining accommodation entries - Sustainability of addition under Section 69C (commission) for A.Y. 2011-2012. - HELD THAT: - Because the substantive addition under Section 68 was deleted on the facts and merits, the consequential addition under Section 69C for commission/arranging entries could not be sustained. The Tribunal affirmed the Commissioner (Appeals) on this point. [Paras 18, 19, 24]

Addition under Section 69C for A.Y. 2011-2012 deleted.

Allowability of claimed salary and other business expenses - relevance of employer employee relationship and compliance by NBFC - Correctness of additions in respect of salary and other expenses for A.Y. 2011-2012. - HELD THAT: - The Commissioner (Appeals) examined the material and directed production of supporting date wise payments; he sustained a limited portion of the disputed salary claim as reasonable and deleted the balance, noting the assessee's regulatory status as an NBFC and that outstanding salaries were subsequently paid. As to other expenses, the Commissioner (Appeals) allowed most of the claim, sustaining a modest proportion as disallowance. The Tribunal found no infirmity in these appellate adjustments and upheld them. [Paras 19, 25, 27]

Commissioner (Appeals)'s partial sustainment of salary and limited sustainment of other expenses for A.Y. 2011-2012 upheld; remaining additions deleted.

Final Conclusion: The Tribunal quashed the reassessment proceedings for A.Y. 2010-2011 for lack of independent application of mind by the Assessing Officer and, on merits, upheld the Commissioner (Appeals) in deleting additions under Section 68 (for both assessment years) and consequential additions; disallowances under Section 14A/Rule 8D and salary/other expense additions were also set aside or adjusted as recorded, resulting in dismissal of the revenue appeals and allowance of the assessee's appeal.

Confiscation - antiquity designation - Disposal Manual 2019 - handing over to Archaeological Survey of India - abatement of proceedings - writ of certiorari under Article 226

Disposal Manual 2019 - handing over to Archaeological Survey of India - confiscation - Whether the Revenue could decline to auction the confiscated idol and instead hand it over to the Archaeological Survey of India for disposal under the Disposal Manual 2019. - HELD THAT: - The Court recorded that the department, pursuant to the Disposal Manual 2019 and following consultation with the Superintendent, Archaeological Survey of India, took the view that confiscated antiquities which become ripe for disposal should be handed over to the Archaeological Survey of India free of charge, which would be responsible for disposal. The Revenue applied to modify the earlier court direction to auction the idol on that basis and undertook to hand the idol to the Archaeological Survey of India in accordance with Point No.17.9 of the Disposal Manual 2019. The petitioner expressly consented to that course and disavowed any objection to the idol being handed over to the Archaeological Survey of India free of charge for disposal under the Disposal Manual. Having recorded both the departmental position and the petitioner's consent, the Court authorised the Revenue to hand over the idol to the Archaeological Survey of India for disposal as per the Disposal Manual 2019 instead of proceeding with auction. [Paras 6, 8, 9]

The Court permitted the Revenue to hand over the confiscated idol to the Archaeological Survey of India for disposal in accordance with Point No.17.9 of the Disposal Manual 2019.

Abatement of proceedings - writ of certiorari under Article 226 - Whether the pending proceedings against the petitioner should be continued or abated in view of the petitioner's relinquishment of claim and the agreed handover to the Archaeological Survey of India. - HELD THAT: - The petitioner stipulated that he would neither claim ownership of the idol/statue nor seek its release, and the Revenue agreed to hand the idol to the Archaeological Survey of India for disposal. In light of these admissions and the departmental undertaking, the Court directed that the Revenue shall not precipitate the pending proceedings nor initiate fresh proceedings in furtherance of the same, and recorded that the proceedings described in the writ petition's prayer clause (a) stand abated. The Court thereupon made the Rule absolute and disposed of the petition and interim application on these terms. [Paras 9, 10, 11]

Proceedings against the petitioner stood abated; the Court made the Rule absolute and disposed of the petition and interim application on the basis that the petitioner would not claim ownership and the Revenue would hand over the idol to the Archaeological Survey of India.

Final Conclusion: The Court authorised the Revenue to hand over the confiscated idol to the Archaeological Survey of India for disposal under Point No.17.9 of the Disposal Manual 2019, accepted the petitioner's relinquishment of any claim or right to the idol, and directed that the pending proceedings against the petitioner stand abated; the Rule was made absolute and the petition and interim application were disposed of accordingly.

Jurisdiction to issue notice - principles of natural justice - stay of action pending higher court review - prima facie applicability of precedent - res integra

Jurisdiction to issue notice - prima facie applicability of precedent - Validity of the impugned demand notices issued by respondent no.5 in respect of 13 vessels already assessed by respondent no.3 at Mumbai and whether respondent no.5 had jurisdiction to proceed. - HELD THAT: - The Court examined the impugned demand notices and the contention that the assessments for the 13 vessels were already completed by respondent no.3 at Mumbai with bill of entries filed and duties paid at Mumbai. Relying on the Hon'ble Supreme Court decision in M/s. Canon India Pvt. Ltd. and consistent High Court authorities cited by the parties, the Court took the view that the issue is not res integra and that, on a prima facie consideration, the notices impinge upon matters already assessed at Mumbai. In that factual and legal matrix the Court found it appropriate to restrain steps by respondent nos.4 and 5 in respect of the impugned notices and any investigation pursuant thereto, pending further orders or final adjudication by a higher court on the controlling precedent. The Court observed that the Revenue has sought review of the Supreme Court decision and permitted the respondents liberty to seek vacating the interim order if that review succeeds. [Paras 3, 6, 7, 8]

The impugned demand notices dated 18th August, 2021 and 30th August, 2021 issued by respondent no.5 are restrained and respondent nos.4 and 5 (and subordinate officers) are directed not to proceed with the notices or any investigation pursuant thereto in respect of the 13 vessels assessed by respondent no.3 at Mumbai until 31st March, 2022, subject to the respondents' liberty to apply for vacation of the order if a review succeeds.

Final Conclusion: Interim relief granted restraining the respondents from acting on the challenged demand notices or pursuing investigation in respect of the 13 vessels assessed at Mumbai until 31st March, 2022; respondents may apply to vacate the injunction if the Supreme Court review succeeds, and the petitioner may seek extension of relief if the review is not decided by that date.

Personal hearing - Right to fair opportunity / audi alteram partem - Non-speaking order - Quashing and remand for speaking order - Compliance with Board Circular No.1053/2/2017-CX paragraph 14.3 - Maintainability of writ despite alternate statutory remedy

Personal hearing - Right to fair opportunity / audi alteram partem - Compliance with Board Circular No.1053/2/2017-CX paragraph 14.3 - Whether the adjudicating authority violated the noticee's right to a fair opportunity of hearing by fixing personal hearing immediately after issuance of the show cause notice and passing an order without affording adequate opportunity to reply. - HELD THAT: - The Court found that the notice of personal hearing was received only on the first date fixed and that the petitioner had furnished an interim reply and sought further time. Paragraph 14.3 of the Board Circular requires that at least three opportunities of personal hearing be given with separate communications and sufficient intervals to enable the noticee to be heard. The impugned order was passed without giving adequate opportunity to reply and thus ran contrary to the procedure envisaged in the Circular. The manner in which the personal hearing was fixed immediately after issuance of the show cause notice demonstrated a mechanical and hasty approach inconsistent with the requirement of affording a fair opportunity to the noticee. [Paras 4, 5, 10, 11, 13]

The impugned order was held to be contrary to the Board Circular and in violation of the noticee's right to a fair opportunity of hearing.

Non-speaking order - Quashing and remand for speaking order - Whether the impugned order, being non-speaking and mechanically passed, warrants quashing and remand for a speaking decision. - HELD THAT: - The Court examined the impugned order and observed it lacked discussion of the determinative reasoning, noting the limited and formulaic paragraphs relied upon by the adjudicating authority. Finding the order to be non-speaking and mechanical, the Court held that it could not be sustained. In the interests of fair adjudication and compliance with procedural safeguards, the Court quashed the impugned order and remitted the matter to the respondent for rendition of a speaking order after considering the existing interim and final replies and after affording personal hearing to the petitioner. [Paras 9, 12, 14]

Impugned order quashed; matter remitted for a speaking order to be passed within four weeks after considering the petitioner's interim and final replies and after granting personal hearing.

Maintainability of writ despite alternate statutory remedy - Whether the writ petition should be dismissed on the ground of availability of an alternate statutory remedy before the Appellate Commissioner. - HELD THAT: - The respondent urged dismissal of the writ petition on the basis of an alternate remedy under the Customs Act. However, the Court noted that the impugned order was a non-speaking order and, for that reason, was prepared to entertain the writ petition despite the availability of an alternate statutory remedy. The Court therefore proceeded to decide the matter on merits rather than dismissing the petition solely on the ground of alternative remedy. [Paras 7, 9]

Writ petition entertained and not dismissed on account of alternate remedy because the impugned order was non-speaking.

Quashing and remand for speaking order - Directions on the scope of remand and conduct on remand. - HELD THAT: - The Court directed that on remand the respondent shall pass a speaking order within four weeks from receipt of a copy of the judgment, consider the interim reply dated 30.09.2021 and the final reply dated 11.10.2021, and afford the petitioner an opportunity of personal hearing before passing the fresh order. The remand was for fresh consideration and rendition of a speaking order, not merely for computation or quantification. [Paras 14]

Respondent directed to pass a speaking order within four weeks after considering the replies and granting personal hearing; matter remitted for fresh consideration.

Final Conclusion: The High Court quashed the non-speaking impugned order as contrary to the Board Circular and the noticee's right to a fair opportunity, entertained the writ despite the existence of an alternate remedy, and remitted the matter to the respondent to pass a speaking order within four weeks after considering the interim and final replies and after affording personal hearing; writ petition disposed accordingly.

Maintainability of statutory appeal under Section 130 of the Customs Act - operation of the Insolvency and Bankruptcy Code as overriding other laws - requirement to present claim and obtain adjudicating authority's approval in liquidation proceedings - non justiciability of classification and exemption issues under Section 130

Maintainability of statutory appeal under Section 130 of the Customs Act - operation of the Insolvency and Bankruptcy Code as overriding other laws - requirement to present claim and obtain adjudicating authority's approval in liquidation proceedings - non justiciability of classification and exemption issues under Section 130 - Appeal under Section 130 of the Customs Act filed by Revenue was not maintainable because the company was in liquidation, no claim had been presented to the Liquidator and the Code overrides inconsistent remedies under other laws; further, classification/exemption questions are not amenable to jurisdiction under Section 130. - HELD THAT: - The respondent company was under liquidation before the NCLT and the Liquidator was authorised to represent it. The Revenue had not submitted a claim to the Liquidator nor obtained any approval from the insolvency adjudicating authority. The Court applied the primacy of the Code (including Section 238) to hold that proceedings in liquidation and the statutory scheme for claims and distribution take precedence over alternate remedies. The Court further relied on the principle that questions of tariff classification and entitlement to exemption notifications do not fall within the scope of Section 130 jurisdiction, as explained by the Apex Court in the cited authority. In these circumstances, instituting an appeal under Section 130 after the liquidation process and distribution had progressed was held to be untenable, and the appeal was dismissed as not maintainable with liberty to pursue appropriate remedies in accordance with the Code and other applicable law. [Paras 11, 12]

Appeal dismissed as not maintainable; liberty left to seek redress before the appropriate forum in accordance with law.

Final Conclusion: The appeal under Section 130 of the Customs Act was dismissed as not maintainable because the company was under liquidation, the Revenue had not pursued the prescribed claim process before the Liquidator or obtained requisite approvals, and classification/exemption disputes are not properly entertained under Section 130; liberty granted to seek relief before the appropriate forum.

Inter-unit transfer between 100% EOUs - Exemption under Notification No.140/91-Cus - Condition of use of capital goods on inter-unit transfer - Non-retrospective operation of exemption notifications - Deemed renewal/extension of warehousing licence in light of Circular No.7/2005-Cus - Limitation for invocation of demand under Customs law

Inter-unit transfer between 100% EOUs - Exemption under Notification No.140/91-Cus - Inter unit transfer of capital goods between two 100% EOUs falls within the exemption under Notification No.140/91 Cus and does not attract denial of exemption on that ground. - HELD THAT: - The Court affirmed the Tribunal's finding that transfers of goods between two 100% EOUs are covered by the exemption contemplated by Notification No.140/91 Cus. Reliance was placed on the Coordinate Bench decision in Commissioner of Customs, Bangalore v. M/s Global Green Company Ltd., which applied the principle in Sunil Kumar Jain v. CCE & C (CESTAT-Mumbai) as affirmed by the Apex Court, holding that inter unit transfers between EOUs do not disentitle the recipient to exemption. Given that the notification itself does not treat such intra EOU transfers as importations attracting denial of exemption, the Tribunal's acceptance of the exemption was upheld.

The exemption under Notification No.140/91 Cus applies to inter unit transfers of capital goods between two 100% EOUs; the Tribunal's allowance on this ground is sustained.

Condition of use of capital goods on inter-unit transfer - Non-retrospective operation of exemption notifications - The condition inserted later by Notification No.64/2002 Cus imposing use restrictions on capital goods cannot be applied retrospectively to govern transfers effected under Notification No.140/91 Cus prior to such amendment. - HELD THAT: - The Court agreed with the Tribunal that Notification No.140/91 Cus did not prescribe the additional 'use' condition relied upon by the Revenue, and that Notification No.64/2002 Cus, being subsequent, cannot be given retrospective effect in the absence of an express provision to that effect. The settled principle that exemption notifications are prospective unless retrospective effect is clearly provided was applied to reject the Revenue's attempt to invoke the later amendment against the respondent for earlier transactions.

The later amendment (Notification No.64/2002 Cus) imposing a condition of use is not applicable retrospectively; it cannot be read into Notification No.140/91 Cus for the facts of this case.

Deemed renewal/extension of warehousing licence in light of Circular No.7/2005-Cus - The warehousing licence in respect of the goods in question was validly extended in accordance with Circular No.7/2005 Cus, and the assertion that no warehousing period was extended is unjustified. - HELD THAT: - The Tribunal examined the warehousing licence and held that its renewal/extension up to the relevant date complied with Circular No.7/2005 Cus issued by the Board. The High Court found no infirmity in that factual and legal conclusion and accepted the Tribunal's view that the licence extension dispensed with the Revenue's contention that warehousing period had lapsed, thereby negating one of the bases for the demand.

The Tribunal's finding that the warehousing licence was extended as per Circular No.7/2005 Cus is upheld; the Revenue's objection on this ground fails.

Limitation for invocation of demand under Customs law - The demand raised by the Revenue is barred by limitation; the Tribunal's allowance on limitation grounds is sustainable. - HELD THAT: - The Court accepted the Tribunal's conclusion that the demand could not be sustained on limitation grounds. The High Court treated the limitation objection as properly decided by the Tribunal on the facts and evidence, and found no perversity or arbitrariness in that finding which would warrant interference.

The Tribunal's decision setting aside the demand on limitation grounds is affirmed.

Final Conclusion: All substantial questions of law raised by the Revenue were answered in favour of the assessee; the Tribunal's order setting aside the demand and related penalties is upheld and the appeal is dismissed.

Anti-Dumping Duty - completion of import under common law - assessment under Section 28 of the Customs Act, 1962 - amount paid under protest - finalisation of Bill of Entry assessment - statutory appeal under Section 128 of the Customs Act, 1962 - refund where no liability

Anti-Dumping Duty - completion of import under common law - assessment under Section 28 of the Customs Act, 1962 - amount paid under protest - finalisation of Bill of Entry assessment - refund where no liability - Whether the petitioner is liable to pay Anti Dumping Duty on the imported Clear Float Glass and the manner in which that question is to be adjudicated. - HELD THAT: - The Court declined to adjudicate the substantive question of liability for Anti Dumping Duty, noting that determination whether the imports occurred before issuance of the impugned Notification must be made by the proper officer after assessment of the Bills of Entry by issuance of notice under Section 28 of the Customs Act, 1962 and after affording the petitioner an opportunity to reply. The amount deposited pursuant to the interim order is to be treated as paid "under protest" to protect the revenue pending final assessment. The Court directed finalisation of assessment for the relevant Bills of Entry for 2014 15 if not already finalised. Where assessments have already been finalised, the petitioner was granted liberty to file statutory appeals under Section 128 of the Customs Act, 1962 within 30 days from receipt of the order, and the Appellate Commissioner was directed to decide such appeals on merits within three months. If the adjudicating authority holds the petitioner not liable to pay Anti Dumping Duty, any amount paid shall be refunded in accordance with law. The Court left all issues open for consideration and determination by the appropriate authorities and appellate forum on merits. [Paras 8, 9, 10]

Writ court refused to decide liability on merits; directed finalisation of Bill of Entry assessments (or permitted statutory appeal if already finalised), treated deposit as paid under protest, and ordered refund if liability is negatived on adjudication.

Final Conclusion: Writ petition disposed. Adjudication of liability for Anti Dumping Duty remitted for assessment under the Customs Act; deposits treated as under protest; statutory appeal permitted within 30 days where assessments are finalised and to be decided within three months; refund to follow if no liability is found.

Classification of textile made-ups versus polyester woven fabric - interpretation of tariff classification using Chapter Notes and HSN Notes - onus of proof on revenue to establish alternate classification - reliance on expert/test laboratory reports and requirement of conclusive testing - requirement of retesting/resampling where technical reports are inconclusive - distinguishability of precedent where factual/technical reports differ

Classification of textile made-ups versus polyester woven fabric - interpretation of tariff classification using Chapter Notes and HSN Notes - reliance on expert/test laboratory reports and requirement of conclusive testing - onus of proof on revenue to establish alternate classification - Whether the goods imported, described by the appellants as 100% polyester bed covers and declared under CTH 63041930, could be reclassified by revenue as polyester woven fabric under CTH 54075490 - HELD THAT: - The Tribunal examined the competing technical reports obtained by the revenue and the appellants. Except for one report which classified the sample as a made-up (quilt/bed cover), the reports obtained by the revenue (including Textile Committee and ATIRA) were inconclusive because the weft ruptured on testing and the percentage composition required to invoke the subheadings covering fabrics with 85% or more textured polyester filaments could not be ascertained. The revenue alleged tampering of the favourable report without providing particulars or taking steps to establish the allegation. The adjudicating authority also declined resampling/retesting despite the inconclusive nature of the technical evidence. Applying the settled principle that the burden of proof to establish an alternate classification lies on revenue, and in light of authorities recognising that inconclusive or tentative expert reports cannot sustain a demand, the Tribunal found that the revenue had not discharged its onus to justify reclassification under CTH 54075490. The Tribunal further observed that where the classification advanced by revenue is shown to be inappropriate, the classification declared by the importer at clearance cannot be disturbed on the basis of unestablished technical evidence, and that precedents relied upon by revenue were distinguishable because they rested on conclusive expert findings.

Revenue failed to discharge the burden of proof; the goods declared by the appellants as polyester bed covers under CTH 63041930 cannot be reclassified as polyester woven fabric under CTH 54075490.

Final Conclusion: The impugned orders confirming demand and reclassification are set aside for lack of conclusive technical evidence and failure of the revenue to discharge the onus; the appeals are allowed with consequential relief in accordance with law.

Refund of customs duty - certificate of origin - benefit under Notification No. 46/2011-Cus - re-assessment as a prerequisite for refund - remand for fresh consideration

Certificate of origin - benefit under Notification No. 46/2011-Cus - Whether rejection of the refund claim on the ground of non-filing of the certificate of origin was sustainable. - HELD THAT: - The Tribunal found that the certificate of origin, a condition for claiming the notification benefit, was in fact produced before the Original Adjudicating Authority on 26.2.2019 and was acknowledged by that authority but was not given effect to in the order rejecting the refund claim. The appellate record shows the refund was rejected partly on the ground of non-production of the certificate; the Tribunal held that this ground was incorrect in view of the acknowledged production of the certificate to the original authority and therefore that basis for rejection could not be sustained. [Paras 7]

The rejection of the refund claim on account of non-filing of the certificate of origin was held to be wrong and cannot sustain the order under challenge.

Re-assessment as a prerequisite for refund - refund of customs duty - Whether the request for re-assessment required consideration prior to adjudication of the refund claim and whether the matter should be remanded. - HELD THAT: - The Tribunal noted that a request for re-assessment had been made by the appellant and remained pending before the department since 2018. Reliance was placed on the mandate of the Apex Court in ITC Ltd. (as referred to in the record) that re-assessment is a mandatory pre-requisite for considering refund claims of duties not otherwise leviable. The Original Adjudicating Authority failed to appreciate the pendency of the re-assessment request and rejected the refund without first deciding re-assessment. The Department offered no objection to remand. In these circumstances the Tribunal directed that the Original Adjudicating Authority must first consider the appellant's request for re-assessment and thereafter decide the refund claim afresh. [Paras 7, 8]

Matter remanded to the Original Adjudicating Authority to decide the re-assessment request first and thereafter adjudicate the refund claim afresh.

Final Conclusion: The appeal is allowed by way of remand: the Original Adjudicating Authority is directed to consider the appellant's request for re-assessment and, having done so, to decide the refund claim afresh, the rejection being set aside for the reasons recorded.

Classification and rate of customs duty on seized gold - town seizure versus import of baggage - applicability of baggage tariff (Chapter heading 9803 / effective baggage duty) - refund of excess duty with interest

Town seizure versus import of baggage - classification and rate of customs duty on seized gold - Whether the rate of duty applicable to the seized gold is the baggage-import rate (effective 35%) or the tariff rate for gold under CTH 71081300 (12.5%). - HELD THAT: - The Tribunal found on the material that the seizure was a town seizure while the appellant was traveling by bus within India and there was no evidence that he had entered India from abroad. Consequently, the provisions and rates applicable to import of baggage (and the effective baggage rate applied by Revenue) are inapplicable. The seized gold was admitted to be classifiable under chapter heading 71081300 and, having regard to the customs tariff as on the date of assessment, the correct rate of duty is 12.5% (with applicable IGST), not the 35% effective baggage rate relied on by Revenue. The Tribunal therefore held that the baggage rules could not be invoked to alter the tariff applicable to this town seizure, and that the appellant is entitled to refund of any excess duty deposited. [Paras 6, 7]

Appeal allowed; duty payable at 12.5% under CTH 71081300 (not baggage rate); appellant entitled to refund of excess duty with interest and consequential relief within eight weeks.

Final Conclusion: The Tribunal allowed the appeal, holding the seizure to be a town seizure and applying the customs tariff rate of 12.5% for gold under CTH 71081300 (not the baggage/import rate); directed refund of excess duty deposited with interest within eight weeks.

Show-cause notice - jurisdiction - interim injunction restraining recovery of disputed duty, interest and penalty - prima facie satisfaction for grant of interim relief - impact of pending review before the Supreme Court on interlocutory relief

Show-cause notice - jurisdiction - interim injunction restraining recovery of disputed duty, interest and penalty - prima facie satisfaction for grant of interim relief - Interim injunction restraining respondents from taking steps to recover differential duty with interest and penalty under the show-cause notice dated 28.02.2019 was granted on prima facie grounds. - HELD THAT: - The Court noted reliance placed by the petitioner on earlier Supreme Court and High Court decisions addressing jurisdictional validity of show-cause notices and was informed that a review of the Supreme Court decision relied upon is pending and that no interim order has been passed in that review. Applying a prima facie assessment of the materials and having regard to the pendency of proceedings touching the same question in the Supreme Court, the Court considered that the petitioner had made out a strong case for interim relief. Accordingly, the Court granted interim relief in the terms of the petitioners' prayer clause (b), restraining the respondents, their servants and agents from taking any steps for recovery of the differential duty with interest and the penalty claimed in the impugned show-cause notice dated 28.02.2019. The Court directed the respondents to file a reply affidavit within six weeks and permitted the petitioner to file a rejoinder within two weeks thereafter, while also granting liberty to seek early disposal of the petition depending on the outcome of the review pending before the Supreme Court. [Paras 3, 5, 6]

Interim injunction granted in terms of prayer clause (b) restraining recovery under the show-cause notice dated 28.02.2019; respondents to file reply in six weeks and rejoinder in two weeks; liberty to apply for early disposal.

Final Conclusion: Petition allowed for interim purposes: respondents restrained from taking steps to recover the duty, interest and penalty claimed in the show-cause notice dated 28.02.2019 until final disposal of the writ petition (subject to the directions for filing pleadings and liberty for early hearing).

Sanction of scheme of amalgamation - transfer and vesting of assets and liabilities on amalgamation - protection of revenue's right to recover tax dues post-amalgamation - appreciation of appointed date for consequential effect - transfer of employees on amalgamation - set-off of fees paid on authorized capital upon consolidation - filing of certified copy and dissolution without winding up - compliance with Sections 230 to 232 of the Companies Act, 2013 - dispensing with meetings on the basis of consent affidavits and statutory notices

Sanction of scheme of amalgamation - compliance with Sections 230 to 232 of the Companies Act, 2013 - Sanction of the Scheme of Amalgamation between the petitioner companies. - HELD THAT: - Having considered the compliance affidavits, statutory notices, reports of the Registrar of Companies/Regional Director, Official Liquidator and Competition Commission of India, and in the absence of any objection, the Tribunal found the proposed Scheme to be prima facie in compliance with the requirements of the Companies Act, 2013 and sanctioned the Scheme appended to the petition. The Tribunal recorded that requisite statutory compliances had been fulfilled and that sanction did not preclude action for any statutory violations discovered later. The sanction was thus granted subject to the directions contained in the order. [Paras 7, 8, 10, 11, 13]

Scheme of Amalgamation sanctioned.

Transfer and vesting of assets and liabilities on amalgamation - appreciation of appointed date for consequential effect - Legal effect of amalgamation insofar as transfer of property, rights, liabilities and the appointed date are concerned. - HELD THAT: - The Tribunal directed that all property, rights and powers of the Transferor Company shall stand transferred to and vested in the Transferee Company and that all liabilities and duties of the Transferor Company shall become the liabilities and duties of the Transferee Company pursuant to Sections 230 to 232 of the Companies Act, 2013. The Appointed Date for the Scheme was fixed as 05.07.2019 as specified in the Scheme, with the consequence that proceedings pending by or against the Transferor Company shall be continued by or against the Transferee Company from that date. [Paras 13, 16]

Assets and liabilities stand transferred to and vested in the Transferee Company with effect from the Appointed Date 05.07.2019.

Protection of revenue's right to recover tax dues post-amalgamation - Treatment of outstanding income-tax demands and protection of the revenue's rights after sanction of the Scheme. - HELD THAT: - The Tribunal noted the Income Tax Department's report listing outstanding demands for specified assessment years against both companies. It accepted the Scheme provisions whereby pending litigations and liabilities of the Transferor Company would stand transferred to the Transferee Company and recorded the Transferee Company's undertaking to satisfy such demands as finally determined. The Tribunal emphasised that sanctioning the Scheme does not impede the legitimate rights of tax authorities to recover lawful dues; such rights remain intact and may be enforced against the Transferee Company in accordance with law. The Tribunal relied on precedent and earlier orders to give effect to this protective position for the revenue. [Paras 9]

Outstanding tax demands remain enforceable against the Transferee Company as per law; the Scheme does not bar recovery of revenue dues.

Transfer of employees on amalgamation - Status of employees of the Transferor Company after amalgamation. - HELD THAT: - The Tribunal recorded the Regional Director's observation that Clause 9 of the Scheme protects employees' interests and ordered that employees of the Transferor Company shall be transferred to the Transferee Company in terms of the Scheme. This ensures continuity of employment in the transferee entity pursuant to the sanctioned Scheme. [Paras 7, 16]

Employees of the Transferor Company to be transferred to the Transferee Company as per the Scheme.

Set-off of fees paid on authorized capital upon consolidation - filing of revised memorandum and articles and payment of differential fee - Obligation to pay differential fees on consolidation of authorized share capital and set-off of fees already paid by Transferor Company. - HELD THAT: - The Tribunal noted the Regional Director's observation regarding compliance with the requirement to pay differential fees on the consolidated authorized share capital and accepted the petitioners' undertaking to comply with Section 232(3)(i) and pay applicable fees after setting off fees already paid by the Transferor Company. The order directed the Transferee Company to file revised memorandum and articles with the Registrar and make requisite payments of differential fee (if any) after allowing the set-off. [Paras 7, 16]

Transferee Company to file revised constitutional documents and pay differential fee, after setting off fees paid by the Transferor Company.

Dispensing with meetings on the basis of consent affidavits and statutory notices - filing of certified copy and dissolution without winding up - Procedural compliances relating to dispensation of meetings, service of statutory notices, and post-sanction formalities including dissolution of the Transferor Company. - HELD THAT: - The Tribunal recorded that meetings of equity shareholders and secured creditors were dispensed with based on consent affidavits and that notices to unsecured creditors and statutory authorities had been issued with newspaper publications. It directed that within 30 days of receipt of the certified copy of the order the petitioners shall deliver the certified copy to the Registrar of Companies for registration and, upon registration, the Transferor Company shall be dissolved without undergoing winding up; the Registrar was also directed to consolidate company files. Additional procedural directions included deposit by the Transferee Company towards the Tribunal Bar Association and that Form CAA-7 formal orders be issued upon filing of schedules of properties. [Paras 3, 5, 11, 16, 17]

Dispensation of meetings upheld; certified copy to be filed with Registrar and Transferor Company to be dissolved without winding up after registration.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Comstar Automotive Technologies Pvt. Ltd. and Sona BLW Precision Forgings Ltd., directed transfer and vesting of assets, rights, liabilities and employees to the Transferee Company with effect from the Appointed Date 05.07.2019, preserved the revenue's rights to recover outstanding tax dues against the transferee as per law, required compliance with fee set-off and filing formalities, and ordered post-sanction procedural steps including filing of certified copy for registration and dissolution of the Transferor Company.

Power to direct convening of general meeting for limited purposes - Appointment of independent chairperson and scrutinizer to conduct meetings - Waiver of short notice by consent of parties - Chairperson's authority to regulate meetings, decide objections summarily and seek auditor input - Directive to file joint report of proceedings with the Tribunal - Restriction on consequential actions until Tribunal considers the meeting report - Obligation of directors, shareholders and company staff to cooperate with tribunal-appointed officers

Power to direct convening of general meeting for limited purposes - Waiver of short notice by consent of parties - Directing holding of one AGM on 30.12.2021 for the limited purpose of considering, approving and adopting accounts for the financial years ending on 31.03.2020 and 31.03.2021 and ratification of the statutory auditor and payment terms. - HELD THAT: - In view of the deadlock between equally divided shareholder groups and the exigency arising from non-finalisation of statutory accounts and impending filing timelines, the Tribunal directed a single AGM to be held for the two stated financial years for the limited purposes of presentation/finalisation of accounts and appointment/ratification of the auditor. The Tribunal authorised a shortened notice for the Board meeting and AGM, recording that counsels for both groups have consented and that such consent shall be deemed waiver of short notice. The Tribunal specified the base opening balances framework and ordered that the agenda for the two years be taken up sequentially under two financial-year clusters so as to enable finalisation of outstanding statutory compliances. [Paras 2, 5]

AGM to be convened on 30.12.2021 for the stated limited purposes; short notice deemed waived by consent.

Appointment of independent chairperson and scrutinizer to conduct meetings - Directive to file joint report of proceedings with the Tribunal - Appointment of an independent Chairperson to conduct the Board meeting and AGM, with power to co-opt a Scrutinizer, and requirement that they jointly file a report of proceedings before the Bench. - HELD THAT: - To ensure orderly conduct of the meetings amid stalemate and acrimony, the Tribunal appointed an independent Chairperson (a practising chartered accountant) to preside over the Board meeting and AGM and to nominate or co-opt a Scrutinizer to assist with secretarial functions including attendance, proxy and polling. The Tribunal directed that the meetings be held by video-conferencing/online modes with hybrid option if the Chairperson so directs and that the Chairperson and Scrutinizer file a report of the proceedings within a week after the AGM. The Chairperson and Scrutinizer were to be remunerated and their logistical expenses shared by the shareholder groups or borne by the company; no motion for removal or suspension of the Chairperson or Scrutinizer was to be moved prior to or at the AGM. [Paras 4, 5]

Independent Chairperson and Scrutinizer appointed; meetings to be conducted under their supervision and a joint report filed with the Tribunal.

Chairperson's authority to regulate meetings, decide objections summarily and seek auditor input - Restriction on consequential actions until Tribunal considers the meeting report - Obligation of directors, shareholders and company staff to cooperate with tribunal-appointed officers - Extent of powers and duties of the Chairperson and interim restraints on parties after the meeting pending Tribunal's consideration of the report. - HELD THAT: - The Tribunal invested the Chairperson with authority to seek input from internal and statutory auditors, the principal officer in-charge of accounts, and to suggest courses of action including finalisation of specific ledgers. In case of conflicting viewpoints or objections during the meetings, the Chairperson was authorised to decide such matters summarily and include them in the report; the Chairperson could regulate or restrict entry, video-disconnect obstructive persons and complete proceedings notwithstanding technical objections intended to stall the meeting. The Tribunal further directed that uploading/filing of statutory forms pertaining to financial results and annual returns should be jointly signed by the two principal shareholders or, if they are unable to act jointly, authorised by the Chairperson. Parties were restrained from taking consequential actions arising from the Board Meeting/AGM until the Tribunal has considered the Chairperson's report and given directions. All directors, shareholders and company staff were directed to cooperate with the Chairperson and Scrutinizer, and non-cooperation was to be viewed seriously. [Paras 3, 5, 6, 7]

Chairperson empowered to regulate meetings, decide objections summarily, seek auditor input and authorise certain filings; parties restrained from further action until Tribunal considers the report and directed to cooperate with tribunal-appointed officers.

Final Conclusion: The Tribunal, addressing a deadlock between equal shareholder groups, directed a single AGM (with an antecedent Board meeting if required) to finalise and adopt accounts for the financial years ending 31.03.2020 and 31.03.2021, appointed an independent Chairperson and Scrutinizer to conduct and supervise the meetings (including by VC/hybrid mode), vested the Chairperson with summary powers to regulate proceedings and decide objections, required filing of a joint report with the Tribunal, and restrained parties from taking consequential steps until the Tribunal disposes of that report; parties and company personnel were directed to cooperate with the nominated officers.

Filling casual vacancies by the board versus appointment of additional directors - ultra vires appointments to the board - effectiveness of resignation of a director upon receipt by the company - disqualification and vacation of office under Section 283(1)(h) of the Companies Act, 1956 consequent to contravention of Section 295 of the 1956 Act - inquiry by Registrar of Companies and consequential administrative action - deferment/remand of reliefs pending ROC report

Filling casual vacancies by the board versus appointment of additional directors - ultra vires appointments to the board - Validity of the appointments of Respondents Nos. 7, 8 and 9 as Directors by the Board in its meeting dated 13.12.2017 purportedly to fill casual vacancies - HELD THAT: - The Tribunal examined Article 51 of the Articles of Association which permits the Board to fill only 'casual vacancies'. Having considered that neither the Companies Act nor the Articles define 'casual vacancy', the Tribunal construed the term to mean an unforeseen vacancy arising by death, resignation, disqualification or failure to meet statutory minimums, and held that appointments made to fill a casual vacancy must follow that principle and not be used to fill vacancies by efflux of time or routine retirement. The material on record did not show any unforeseen vacancy on 13.12.2017; the Board had 9 retirements at the AGM and elected only 5 directors leaving vacancies which were not shown to be casual in nature. Accordingly the appointments of four Additional Directors on 13.12.2017 (including Respondents 7, 8 and 9) were beyond the powers conferred by the Articles and were declared ultra vires and illegal.

Appointments of Respondents Nos. 7, 8 and 9 are invalid and they are liable to be removed from the Board with immediate effect.

Effectiveness of resignation of a director upon receipt by the company - Whether the resignation of Respondent No. 11 dated 26.06.2018 was effective and whether the Board could validly refuse to accept or reinstate her - HELD THAT: - Applying Section 168 of the Companies Act, 2013 and authoritative principles on resignation, the Tribunal held that resignation is a unilateral act which becomes effective on receipt by the company unless a later date is specified. The Tribunal noted that R11's resignation was communicated and received with no subsequent letter revoking it; Rule 16 and Form DIR-11/12 requirements do not render an otherwise effective resignation invalid for failure of registry formalities. While a director may withdraw a prospective resignation before it takes effect, no such revocation was produced. The Board's resolution of 13.09.2018 purporting to not recommend the resignation to ROC and to continue R11 was therefore invalid.

Resignation of Respondent No. 11 took effect on 26.06.2018; the attempted reinstatement is void ab initio and she is liable to be removed from the Board with immediate effect.

Disqualification and vacation of office under Section 283(1)(h) of the Companies Act, 1956 consequent to contravention of Section 295 of the 1956 Act - inquiry by Registrar of Companies and consequential administrative action - Effect of the Registrar of Companies' inquiry report dated 03.10.2019 regarding advances given without prior Central Government approval and the consequent disqualification of certain directors - HELD THAT: - The Tribunal accepted the ROC inquiry which found that the company had given advances to India Middle East Broadcasting Network Pvt. Ltd. without prior Central Government approval as required by Section 295 of the 1956 Act, and noted that persons knowingly party to such contravention attract liabilities and that such contravention gives rise to disqualification under Section 283(1)(h). On the basis of the ROC report produced in the IA, the Tribunal held that Respondent Nos. 4, 5 and 15 stand disqualified under Section 283(1)(h) and directed that their offices be vacated and their DINs be blocked as a consequence.

Respondent Nos. 4, 5 and 15 are disqualified under Section 283(1)(h) and shall vacate office with immediate effect; their DINs are liable to be blocked.

Deferment/remand of reliefs pending ROC report - Whether the Tribunal could grant the declaration and relief sought against Respondent No. 10 for disqualification under Section 167 of the Companies Act, 2013 - HELD THAT: - The Tribunal recorded that the ROC had initiated an inquiry against Respondent No. 10 and that the inquiry report was pending with the Ministry of Corporate Affairs. No conclusive material was placed before the Tribunal in the IA to establish disqualification under Section 167. In view of the pending ROC proceedings and absence of conclusive evidence in the instant application, the Tribunal refrained from adjudicating the declared relief against Respondent No. 10 and reserved the matter to be dealt with when the main Company Petition is taken up, provided the ROC report is produced.

Relief against Respondent No. 10 is not granted at present and is deferred/remanded for consideration when the ROC report is produced in the main Company Petition.

Inquiry by Registrar of Companies and consequential administrative action - Direction to the Ministry of Corporate Affairs to conduct an inquiry into the present status of the existing directors and to file a report - HELD THAT: - Given the findings in the ROC inquiry and the unsettled questions as to the present status of several directors, the Tribunal considered administrative verification necessary. The Tribunal therefore directed the Ministry of Corporate Affairs to conduct an inquiry into the present status of the existing directors and to file a report to assist determination of the main Company Petition.

Ministry of Corporate Affairs is directed to conduct an inquiry into the present status of the existing directors of Respondent No.1 and to file a report for the purposes of deciding the main Company Petition.

Final Conclusion: IA/150/KOB/2020 is allowed in part: the Tribunal declared appointments of Respondents 7, 8 and 9 on 13.12.2017 ultra vires and ordered their removal; held Respondent 11's resignation effective from 26.06.2018 and ordered her removal; accepted the ROC finding disqualifying Respondent Nos. 4, 5 and 15 under Section 283(1)(h) and directed vacatur and blocking of their DINs; relief against Respondent 10 is deferred pending ROC report; and the Ministry of Corporate Affairs was directed to inquire into and report on the present status of the directors to facilitate adjudication of the main Company Petition.

Inspection of minutes book - maintenance of minutes at registered office - entitlement to copies of minutes on request within seven working days - penalty for refusal to inspect or furnish copies - minutes may be maintained in physical or electronic form - police investigation affecting production of company records

Inspection of minutes book - entitlement to copies of minutes on request within seven working days - Petitioner entitled to be furnished with copies and inspection of minutes for financial years from 2016-2017 onwards, subject to payment of prescribed fee. - HELD THAT: - The Tribunal found that minutes are required to be kept at the registered office and made available for inspection. The company itself stated that records/minutes pertaining to financial years from 2018 onwards are available with it. The Tribunal declined to conduct a probing inquiry into the disputed question whether the petitioner's request was received, but directed the respondents to supply the documents sought from Financial Year 2016-2017 onwards upon payment of the appropriate fee. The respondents are to intimate the fee within seven days and supply the documents immediately on receipt of the fee. [Paras 15, 17, 18, 19, 20]

Respondents directed to provide the documents sought from Financial Year 2016-2017 onwards to the petitioner on payment of appropriate fee, with fee to be intimated within seven days.

Police investigation affecting production of company records - maintenance of minutes at registered office - Minutes and records for the period earlier than Financial Year 2016-2017 are not directed to be produced because they are the subject of an ongoing police investigation. - HELD THAT: - The Tribunal noted that records/minutes up to 2015-2016 are reported to be in alleged theft and that investigation by police is pending. In view of the ongoing police inquiries and absence of allegation of mismanagement in the petition, the Tribunal declined to direct production of those earlier records and observed that supply would be subject to the outcome of the police investigation. [Paras 5, 7, 11, 18, 21]

Petitioner must await completion of the police investigation for access to records earlier than Financial Year 2016-2017.

Penalty for refusal to inspect or furnish copies - entitlement to copies of minutes on request within seven working days - No penalty ordered against respondents for alleged refusal to furnish or permit inspection of minutes. - HELD THAT: - Section 119 and the relevant rules prescribe a penalty for refusal or failure to furnish copies. However, because the receipt of the petitioner's request was in dispute and the Tribunal declined to make a finding on that factual issue, it exercised its discretion not to impose any penalty. [Paras 15, 22]

No penalty imposed on the respondents.

Final Conclusion: The petition is disposed by directing supply of minutes/records from Financial Year 2016-2017 onwards on payment of the prescribed fee; access to earlier records is withheld pending the outcome of the police investigation; no penalty is imposed due to dispute over receipt of the request.

Financial debt - financial creditor - default - collusive transactions - sham transaction - related party / group transactions affecting financial creditor status - application of M/s. Innoventive Industries ratio versus Phoenix ARC principle - definition of financial debt under Section 5(8) of the Code

Financial debt - default - collusive transactions - related party / group transactions affecting financial creditor status - application of M/s. Innoventive Industries ratio versus Phoenix ARC principle - Whether the transaction between the appellant and the corporate debtor constituted a 'financial debt' with a corresponding default entitling the appellant to initiate CIRP under Section 7 of the Code. - HELD THAT: - The Tribunal examined the nature of the transactions and contemporaneous records and found pervasive internal and circular transactions between the appellant and entities of the erstwhile Satra Group, common directorships, and related party entries in the audited accounts. The statement of account relied upon was signed by the erstwhile director of the corporate debtor and recorded multiple transactions on the same dates indicating internal adjustments. In light of these features the Tribunal held that the impugned transactions bore the hallmarks of collusive or sham arrangements and therefore did not satisfy the requirement of a genuine financial debt as contemplated by the definition of financial debt under Section 5(8) of the Code. Applying the principle in Phoenix ARC Pvt. Ltd. rather than treating the matter as one where the Adjudicating Authority need only establish existence of debt and default under M/s. Innoventive Industries, the Tribunal observed that collusive transactions do not create a financial debt and consequently the appellant failed to establish that a default had occurred which would justify admission of the Section 7 petition. For these reasons the appellant's contention that the Innoventive ratio alone governs admission of the petition was rejected and the Adjudicating Authority's conclusion sustained. The Tribunal expressly avoided adjudicating technicalities concerning authorisation to file the petition and the genuineness of the MOU since the primary threshold of a financial debt was not satisfied. [Paras 11, 15]

The transaction is not a financial debt due to collusive/related party features and no default is established; the Section 7 petition was rightly dismissed.

Final Conclusion: Appeal dismissed; the impugned order dismissing the Section 7 application is confirmed (no order as to costs).

Sale as a going concern includes transfer of liabilities - Bidder bound by terms of e auction; unconditional acceptance - Forfeiture of earnest money deposit for failure to perform - Liquidation Process Regulations - Regulation 32A interpretation

Sale as a going concern includes transfer of liabilities - Liquidation Process Regulations - Regulation 32A interpretation - Sale of the corporate debtor as a 'going concern' in liquidation includes its liabilities and not assets alone. - HELD THAT: - The Tribunal examined Regulation 32A and the IBBI Discussion Paper (paras reproduced in the judgment) which describe going concern sales as transfers of the business together with assets and liabilities so that the acquirer can run the business without disruption. The reasoning notes paragraphs 3.2.1 and 4.2.1 of the discussion paper and Regulation 32A(2)-(3) to conclude that a going concern sale on an 'as is where is' basis imports transfer of liabilities along with assets. The Tribunal thus rejected the appellants' contention that pre existing pecuniary liabilities cannot be transferred where sale is stated to be as a going concern and on 'as is where is' basis, and held that the liquidator and consultation committee must identify and group assets and liabilities to be sold together. [Paras 9]

Sale as a going concern includes transfer of both assets and liabilities where so stated and identified under Regulation 32A.

Bidder bound by terms of e auction; unconditional acceptance - Forfeiture of earnest money deposit for failure to perform - A successful bidder who submitted EMD and accepted the e auction terms cannot withdraw by treating its bid as conditional; failure to perform attracts forfeiture of EMD and related consequences. - HELD THAT: - The Tribunal relied on the bid document clauses (noting clauses requiring unconditional acceptance, prohibition on withdrawal, and clause on forfeiture) and the liquidator's pre auction communications that terms could not be changed after public notification. Applying established auction and tender principles cited in precedents reproduced in the judgment, the Tribunal held that a bid is an offer which, once submitted and accepted, creates contractual obligations. The Appellant's later attempts to treat its bid as conditional and to withdraw were held unsustainable; permitting such withdrawal would frustrate the liquidation process and the objectives of the Code. Consequently the appellant was not entitled to refund of EMD or the bid document purchase amount when it failed to perform. [Paras 15, 16, 18]

The appellant cannot withdraw after acceptance by treating its bid as conditional; EMD and related amounts are not refundable where the bidder fails to perform.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's order that sale as a going concern includes liabilities and that the successful bidder cannot repudiate accepted bid as conditional; forfeiture/claim consequences under the auction terms follow.

Service of statutory demand notice - existence of operational debt and default - pre-existing dispute - limitation for filing Section 9 application - admission under Section 9(5)(i) of the IBC and initiation of CIRP - declaration of moratorium under Section 14 - appointment of Interim Resolution Professional and vesting of management under Section 17

Service of statutory demand notice - Demand notice in Form 3 dated 15.02.2019 was duly served on the corporate debtor. - HELD THAT: - The demand notice, though returned undelivered by postal service, was delivered via e-mail and substituted service by publication was effected. The petition records electronic delivery and publication (diary entries and annexures) and, on that basis, the Adjudicating Authority held the notice to have been duly served for the purposes of proceeding under the Code. [Paras 8]

Demand notice treated as duly served.

Pre-existing dispute - existence of operational debt and default - There was no proved pre-existing dispute and the operational debt and default stood established. - HELD THAT: - The corporate debtor did not file any reply despite being granted time and did not appear; no reply to the demand notice or any pending dispute before any forum was shown. The operational creditor produced invoices, ledger entries and interest workings which, on the material on record, established an unpaid operational debt and default exceeding the jurisdictional threshold applicable at the time. On these findings the Authority concluded the liability was undisputed and the debt and default were proved. [Paras 9, 11, 12, 13]

No pre-existing dispute; operational debt and default established.

Limitation for filing Section 9 application - The Section 9 petition was filed within the prescribed limitation period. - HELD THAT: - The limitation period was held to commence from the date of default as recorded in Part IV of Form 5 (08.02.2018). The petition was filed on 21.05.2019 and therefore, on the stated facts and dates in the petition, was found to be within limitation. [Paras 10]

Application is within limitation.

Admission under Section 9(5)(i) of the IBC and initiation of CIRP - The petition under Section 9 of the Code was admitted and CIRP was initiated against the corporate debtor. - HELD THAT: - Having found the demand notice duly served, the petition complete in form, no pre-existing dispute, debt and default proved and the petition within limitation, the Adjudicating Authority was satisfied that the conditions in Section 9(5)(i) were met. Consequently, the petition was admitted and initiation of the corporate insolvency resolution process was ordered. [Paras 11, 12, 13, 14]

Section 9 petition admitted and CIRP initiated.

Declaration of moratorium under Section 14 - Moratorium under Section 14 of the Code was declared from the date of the order till completion of CIRP or further orders. - HELD THAT: - On admission of the petition and initiation of CIRP, the Adjudicating Authority declared the statutory moratorium, detailing the prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security, and recovery of property as set out under Section 14. The scope and temporal effect of the moratorium were specified consistent with the Code. [Paras 15, 16, 17]

Moratorium declared in terms of Section 14.

Appointment of Interim Resolution Professional and vesting of management under Section 17 - Mr. Anurag Nirbhaya was appointed as Interim Resolution Professional with the management of the corporate debtor vesting in him under the Code. - HELD THAT: - After verification of credentials and absence of adverse record, the Tribunal appointed the proposed professional as IRP. Directions were given regarding the term of appointment, suspension and vesting of management in the IRP, preparation of inventory, public announcement, constitution of Committee of Creditors, reporting obligations and cooperation to be extended by the corporate debtor's directors and personnel. [Paras 5, 18]

Mr. Anurag Nirbhaya appointed as IRP and management vested in him.

Operational requirements pending CIRP - Interim directions as to payment for immediate CIRP expenses and communication of order were issued. - HELD THAT: - The petitioner was directed to deposit an amount to meet immediate CIRP expenses to be accountable to and recoverable from the Committee of Creditors; copies of the order were directed to be communicated to the parties and the IRP forthwith, and the IRP was to be provided access and cooperation to manage affairs. [Paras 19, 20]

Petitioner to deposit interim CIRP expenses and order to be communicated as directed.

Final Conclusion: The Tribunal held that the Form 3 demand notice was duly served, no pre-existing dispute existed, the operational debt and default were proved and the Section 9 petition was within limitation; accordingly the petition was admitted, CIRP initiated, moratorium declared and Mr. Anurag Nirbhaya appointed as Interim Resolution Professional with consequential directions including deposit for interim CIRP expenses.

Operational debt - Corporate Insolvency Resolution Process (CIRP) - operational creditor - maintainability of section 9 petition against a partner for firm's liability - joint and several liability of partners - claims between partners / retired partner not cognizable under IBC

Operational debt - maintainability of section 9 petition against a partner for firm's liability - claims between partners / retired partner not cognizable under IBC - Whether the retirement amount arising out of a partnership firm constitutes an operational debt enforceable under section 9 of the IBC against a partner (the corporate debtor) and whether the section 9 petition is maintainable. - HELD THAT: - The Tribunal found that the Operational Creditor and the Corporate Debtor were partners of the same partnership firm and that the claimed liability arose from transactions between partners and/or from the partnership firm. While accepting that partners may be jointly and severally liable, the Bench held that the IBC does not provide a remedy for claims inter se between partners or for enforcement of a partner's retirement claim against another partner or the firm through initiation of CIRP. The Tribunal relied on NCLAT precedent (Gammon India Ltd v. Neelkanth Mansions and Infrastructure Pvt. Ltd.) which recognises that where the debt is due from a partnership firm, an application under section 9 against one of the partners is not maintainable. Consequently, the petition under section 9 was held not maintainable in law and the Operational Creditor was directed to seek relief, if any, under other appropriate fora or laws that govern partnership disputes. [Paras 9, 10, 11, 12, 13]

The section 9 petition is not maintainable as the retirement claim arising from the partnership firm cannot be enforced under the IBC against a partner; petition dismissed.

Final Conclusion: The Company Petition under section 9 is dismissed as not maintainable; the Operational Creditor's remedy, if any, lies under other law and the petition is dismissed with no cost.

Limitation - acknowledgement and part-payment extending limitation - excise duty reimbursement under contractual purchase order term - failure to produce exemption certificate prior to dispatch - establishment of legally enforceable debt and default for initiation of CIRP - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Limitation - acknowledgement and part-payment extending limitation - The claim is not barred by limitation. - HELD THAT: - The Tribunal found that the ledger account demonstrates part-payments by the Corporate Debtor in respect of the relevant purchase orders up to 30.03.2017, which extended the period of limitation by three years from that date. The subsequent payment of a sum by the Corporate Debtor on 23.10.2019 was treated as an acknowledgement of liability. On these bases the application filed on 15/16.10.2019 was held to be within the prescribed period and the plea of limitation was rejected. [Paras 9, 10]

Limitation defence overruled; claim held within limitation as on date of filing.

Excise duty reimbursement under contractual purchase order term - failure to produce exemption certificate prior to dispatch - establishment of legally enforceable debt and default for initiation of CIRP - The operational creditor established a legally enforceable debt including reimbursement for excise duty; the Corporate Debtor failed to prove submission of exemption certificate prior to dispatch, and default existed. - HELD THAT: - The Tribunal examined the purchase order clause requiring the Corporate Debtor to furnish Excise Duty Exemption Certificates (EDEC) prior to dispatch. Although exemption orders in favour of the Corporate Debtor existed effective 27.05.2015, the Corporate Debtor did not produce contemporaneous evidence that the EDECs were submitted to the Operational Creditor before dispatch. The Operational Creditor produced LRs and an Office Memorandum dated 02.01.2016 indicating belated submission. In absence of record to show compliance with clause 4.0 before dispatch, the Tribunal rejected the Corporate Debtor's belated contention of prior submission and held that the amount paid by the Operational Creditor towards excise duty was recoverable. On the finding that a legally enforceable debt existed and was in default, the Tribunal concluded that the threshold for initiation of CIRP was satisfied. [Paras 13, 15, 17, 19, 20]

Debt including excise duty reimbursement established; default proved; petition merits admission for CIRP.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - On admission of the petition, moratorium was declared and an Interim Resolution Professional appointed. - HELD THAT: - Having admitted the petition under section 9, the Tribunal directed the declaration of moratorium as contemplated by section 14 of the Code and issued ancillary directions forbidding continuation or initiation of proceedings against the Corporate Debtor and preserving supplies of essential goods and services. The Bench appointed the named IBBI-registered professional as Interim Resolution Professional after noting compliance with the relevant regulation. [Paras 22, 23]

CIRP admitted; moratorium ordered; specified IRP appointed.

Final Conclusion: The Tribunal held the application maintainable and within limitation, found that the Operational Creditor had established a recoverable debt (including excise duty reimbursable for want of prior submission of exemption certificates), admitted the petition under section 9 of the IBC, declared moratorium under section 14 and appointed the named Interim Resolution Professional.

Existence of an operational debt and default - validity of demand notice and service under Section 8 - admission of petition under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - moratorium upon initiation of corporate insolvency process under Section 14 - appointment of Interim Resolution Professional and his duties - jurisdiction of the Adjudicating Authority - limitation for filing Section 9 petition

Existence of an operational debt and default - Petition under Section 9 is maintainable because an operational debt was due and the Corporate Debtor committed default. - HELD THAT: - The Tribunal examined the invoices raised between 25.05.2017 and 16.12.2017 and the bank statement and material on record. The petitioner established that amounts claimed remained unpaid and that no payment or part-payment had been received on its behalf. In view of the documentary material and the uncontroverted position owing to non-appearance of the Corporate Debtor, the Tribunal found that the respondent committed default in payment of the claimed operational debt and that the requirements for admission under Section 9 were satisfied. [Paras 4, 6, 9, 12, 16]

Operational debt and default established; petition is liable to be admitted.

Validity of demand notice and service under Section 8 - Demand notice under Section 8 was validly issued and served, and no dispute was raised in response. - HELD THAT: - The petitioner issued the demand notice dated 31.01.2019 by speed post to the registered address and by email which did not bounce back. The petition and notice served upon the Corporate Debtor were returned with remark 'refused' but service by email was effective as it did not bounce. The Corporate Debtor did not file any reply or reply to the demand notice nor raise a dispute before filing of the petition. Given the service evidence and absence of any contest, the Tribunal held that the demand notice requirements under Section 8 were complied with and no pre-existing dispute stood on record. [Paras 5, 7, 8, 9]

Demand notice validly issued and served; no dispute disclosed.

Limitation for filing Section 9 petition - The petition was filed within the period of limitation and the debt was not time-barred. - HELD THAT: - The Tribunal noted the date of default as 25.05.2017 and that the petition was filed on 01.03.2019. On this basis the Tribunal concluded that the claim was brought within the statutory limitation applicable to the petition and therefore the petition was not barred by time. [Paras 11]

Petition filed within limitation; debt not time-barred.

Jurisdiction of the Adjudicating Authority - This Tribunal has jurisdiction to entertain and try the petition. - HELD THAT: - The registered office of the Corporate Debtor was situated in Ludhiana, Punjab, bringing the petition within the territorial jurisdiction of the Chandigarh Bench of the National Company Law Tribunal. The Tribunal recorded jurisdiction accordingly and proceeded to adjudicate the petition. [Paras 10]

Tribunal has territorial jurisdiction to hear the petition.

Admission of petition under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - The petition under Section 9 was admitted and the Corporate Insolvency Resolution Process (CIRP) initiated. - HELD THAT: - Applying the test set out in precedent regarding Section 9 - that there exists an operational debt, documentary evidence of non-payment, and absence of a pre-existing dispute or pending proceedings - the Tribunal found all prerequisites satisfied. Consequently, the petition was admitted under Section 9(5) and the CIRP was ordered to commence in respect of the Corporate Debtor. [Paras 12, 15, 16]

Petition admitted under Section 9(5); CIRP initiated.

Appointment of Interim Resolution Professional and his duties - An Interim Resolution Professional (IRP) was appointed and directed to perform specific duties, and the Operational Creditor directed to deposit funds to meet IRP expenses. - HELD THAT: - As the petitioner had not nominated an IRP, the Tribunal appointed Mr. Deepankur Sharma from the IBBI list subject to his consent and disclosures. The Tribunal spelled out the IRP's term in accordance with Section 16(5), suspension of board powers under Section 17, duties under Section 18, requirement to prepare inventory of assets, to cause public announcement under Regulation 6, to constitute the Committee of Creditors after collation of claims, to convene meetings, and to file fortnightly progress reports. The Operational Creditor was directed to deposit a specified sum with the IRP within three days to meet initial expenses, subject to adjustment by the Committee of Creditors. [Paras 13, 14]

IRP appointed with directions; Operational Creditor to deposit funds for IRP expenses.

Moratorium upon initiation of corporate insolvency process under Section 14 - Moratorium under Section 14 was declared with its consequences as prescribed by the Code. - HELD THAT: - Upon admission of the petition, the Tribunal declared the moratorium contemplated by Section 14(1), thereby prohibiting institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interest and recovery of property occupied by the Corporate Debtor, subject to the exceptions and provisions of Sections 14(2)-(4). The Tribunal recorded that the moratorium would operate from the date of the order until completion of the CIRP, unless superseded by approval of a resolution plan or order for liquidation. [Paras 17]

Moratorium under Section 14 declared and shall operate from the date of the order during CIRP.

Final Conclusion: The Section 9 petition was admitted: the Tribunal found an operational debt and unpaid default, valid service of the demand notice, territorial jurisdiction and timely filing; the CIRP was initiated, an Interim Resolution Professional was appointed with specified duties, a moratorium under Section 14 was declared, and the Operational Creditor was directed to deposit funds to meet IRP's initial expenses.

Voluntary liquidation - dissolution of the corporate person - declaration of solvency - final report and audited accounts of liquidation - public announcement and claims procedure - filing with Registrar of Companies and IBBI - no creditor claims - compliance with Section 59 of the Insolvency and Bankruptcy Code, 2016

Voluntary liquidation - declaration of solvency - public announcement and claims procedure - final report and audited accounts of liquidation - filing with Registrar of Companies and IBBI - no creditor claims - dissolution under Section 59(7) of the Code - Whether the Corporate Person complied with the statutory and regulatory requirements for voluntary liquidation and whether it should be dissolved under Section 59(7) of the Code. - HELD THAT: - The Tribunal recorded that the Board and the shareholders passed the requisite resolutions to initiate voluntary winding up, accompanied by a declaration of solvency and audited financial statements for the latest two years. A liquidator was appointed by special resolution and notified the Registrar of Companies and the IBBI; public announcements were made inviting creditor claims under the IBBI Regulations and no claims were received. The liquidator opened and subsequently closed the liquidation bank account, prepared preliminary and audited accounts of liquidation, disbursed available funds to shareholders after meeting liquidation expenses, obtained an income-tax no-dues certificate, and filed the final report with the Registrar and IBBI in compliance with the statutory scheme. On these findings the Tribunal concluded that the affairs of the company had been completely wound up and that the voluntary liquidation process had been lawfully completed. [Paras 11, 12, 13, 14, 15]

Petition under Section 59(7) of the Code allowed; the Corporate Person is dissolved and the Liquidator directed to file this order with the Registrar of Companies and the IBBI.

Final Conclusion: The Tribunal held that Broadway Contractors and Developers Private Limited complied with the statutory and regulatory requirements for voluntary liquidation and, having found its affairs wound up and assets liquidated, allowed the petition and dissolved the company, directing the liquidator to file the order with the Registrar of Companies and the IBBI.

Operational Creditor by assignment - Operational Debt and Default - Pre-existing dispute and maintainability under Section 9 - Admission of Section 9 application and initiation of CIRP - Moratorium under Section 14(1) - Appointment of Interim Resolution Professional - Deposit for IRP initial expenses

Operational Creditor by assignment - Korea Trade Insurance Corporation is an Operational Creditor by virtue of the Letter of Assignment dated 08.09.2020. - HELD THAT: - The Tribunal found that Samsung C & T Corporation legally assigned to Korea Trade Insurance Corporation the operational debt due and payable by the corporate debtor. In view of the statutory definition of "Operational Creditor" which includes a person to whom such debt has been legally assigned, the assignee is deemed an operational creditor entitled to pursue remedies under the Code. The Tribunal accepted the assignment as valid and effective for the purposes of Section 9 proceedings. [Paras 10]

The assignee, Korea Trade Insurance Corporation, is held to be an Operational Creditor by virtue of the valid Letter of Assignment dated 08.09.2020.

Operational Debt and Default - Pre-existing dispute and maintainability under Section 9 - The claimed dues constitute an operational debt and there was no pre-existing dispute sufficient to defeat the Section 9 application. - HELD THAT: - The Tribunal examined the respondent's contention as to defective goods and detention charges and observed that the corporate debtor failed to produce documentary evidence supporting a pre-existing dispute. On the material before it, the Tribunal held that the nature of the claim falls within the definition of "Operational Debt" and that a "Default" as defined in the Code existed. The absence of substantiating documentation for the alleged defects and disputed amounts led to rejection of the plea that a pre-existing dispute rendered the Section 9 application non-maintainable. [Paras 11, 12, 13]

The debt is an operational debt and default is established; the plea of pre-existing dispute is not accepted.

Admission of Section 9 application and initiation of CIRP - The Section 9 application filed by the Operational Creditor is complete and is to be admitted for initiation of the Corporate Insolvency Resolution Process (CIRP). - HELD THAT: - Having found that the applicant qualifies as an operational creditor, that operational debt and default existed, and that the application complied with the requirements of the Code and Rules, the Tribunal concluded that the Section 9 application was complete in all respects. Consequently, the Tribunal exercised its power under Section 9(5) to admit the petition and initiate CIRP against the corporate debtor. [Paras 13, 14]

The application under Section 9 is admitted and CIRP is ordered to be initiated against the corporate debtor.

Moratorium under Section 14(1) - Appointment of Interim Resolution Professional - Deposit for IRP initial expenses - On admission, moratorium is imposed; an Interim Resolution Professional is appointed and the Operational Creditor is directed to deposit initial funds for IRP expenses. - HELD THAT: - Pursuant to admission, the Tribunal directed the application of the moratorium as envisaged under Section 14(1), prohibiting institution or continuation of suits, disposition of assets, enforcement of security, and recovery of property by owners/lessors, subject to statutory exceptions. The Tribunal appointed the named insolvency professional as Interim Resolution Professional and required the Operational Creditor to deposit a specified sum to meet initial expenses, to be adjusted by the Committee of Creditors. Directions were given for public announcement and communication of the order to the parties and the IRP. [Paras 15, 16, 17, 18, 19]

Moratorium is declared; the named IRP is appointed; the Operational Creditor must deposit the directed amount for initial IRP expenses and the Registry shall communicate the order.

Final Conclusion: The Tribunal held that the assignee is an Operational Creditor, found the claim to be an operational debt with default and no substantiated pre-existing dispute, admitted the Section 9 application and initiated CIRP, imposed the statutory moratorium, appointed an Interim Resolution Professional and directed the Operational Creditor to deposit initial funds for the IRP.

Initiation of Corporate Insolvency Resolution Process - operational debt and default - service of demand notice in Form 3 - pre-existing dispute - jurisdiction of the Adjudicating Authority - law of limitation - appointment of Interim Resolution Professional - moratorium under Section 14 of the IBC, 2016

Jurisdiction of the Adjudicating Authority - law of limitation - This Adjudicating Authority has territorial jurisdiction and the application is within the period of limitation. - HELD THAT: - The Registered Office of the Corporate Debtor is situated in Jaipur, bringing the matter within the jurisdiction of this Bench. The date of default is recorded as 22.08.2017 and the application was filed on 13.01.2020; on that basis the Adjudicating Authority found the petition to be within the law of limitation and hence maintainable on these grounds. [Paras 9]

Jurisdiction established and the application held to be within limitation.

Service of demand notice in Form 3 - The demand notice in Form No. 3 dated 05.11.2019 was properly served on the Corporate Debtor. - HELD THAT: - The demand notice was dispatched by registered post to the registered office of the Corporate Debtor and the postal receipt and tracking report are on record. The Adjudicating Authority found the evidence of service to be in order. [Paras 10]

Service of the statutory demand notice was validly effected.

Operational debt and default - pre-existing dispute - There exists an unpaid operational debt and no pre-existing dispute was established by the Corporate Debtor. - HELD THAT: - The Applicant filed Form No. 5 with the invoice dated 27.06.2017 and a demand notice dated 05.11.2019; an affidavit under Section 9(3)(b) of the Code was produced stating no notice of dispute had been received. The Corporate Debtor did not reply to the demand notice or the application and did not appear in proceedings. On this basis the Adjudicating Authority concluded that an operational debt in default exists and no dispute has been proved. [Paras 11, 12]

Unpaid operational debt established and no pre-existing dispute proved.

Initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14 of the IBC, 2016 - The application under Section 9 is admitted, CIRP is initiated, an IRP is appointed and consequential directions including moratorium and deposit for IRP are issued. - HELD THAT: - Having found service, default and absence of dispute, and satisfaction of conditions under Section 9, the Adjudicating Authority admitted CP No. (IB)-23/9/JPR/2020 and initiated CIRP. As the Operational Creditor did not propose an IRP, the Tribunal appointed Mr. Rajendra Singh Sunda as Interim Resolution Professional and directed him to perform statutory duties. The order invoked moratorium as contemplated under the Code and directed the Applicant to deposit a specified sum to meet IRP expenses; further communications to the parties and IBBI were ordered. [Paras 13, 14, 15, 16]

Application admitted; CIRP initiated; IRP appointed; moratorium imposed and ancillary directions issued.

Final Conclusion: The Section 9 application is admitted: the Tribunal found valid service, established an unpaid operational debt with no pre-existing dispute, held the petition within jurisdiction and limitation, initiated CIRP against the Corporate Debtor, appointed an Interim Resolution Professional and directed implementation of the moratorium and related procedural steps.

Admission of Company Petition under Section 9 of the Insolvency and Bankruptcy Code - establishment of debt and default - demand notice and service for triggering insolvency proceedings - moratorium on suits and enforcement during CIRP - appointment of Interim Resolution Professional and vesting of management

Admission of Company Petition under Section 9 of the Insolvency and Bankruptcy Code - establishment of debt and default - demand notice and service for triggering insolvency proceedings - Whether the Company Petition filed by the Operational Creditor under Section 9 is liable to be admitted on proof of debt, default and service of demand notice - HELD THAT: - The Tribunal found on the record that the Operational Creditor furnished invoices and email correspondence evidencing supply of services and parts and an admission of outstanding dues by the Corporate Debtor. The Corporate Debtor failed to appear or file a reply despite opportunities; the Tribunal treated non-appearance and absence of a dispute under section 5(6) as reinforcing that the amount was due and payable. The Tribunal also recorded that the Operational Creditor took steps to notify the Corporate Debtor of hearings (including newspaper publications and private notice) and placed an affidavit of service on record; on that basis the Tribunal was satisfied regarding requisite notice and proceeded ex parte. Applying these findings, the Tribunal concluded that the petition met the legal ingredients for admission under Section 9 and therefore admitted the Company Petition and ordered initiation of CIRP. [Paras 5, 6, 7, 8]

Company Petition admitted and CIRP ordered against the Corporate Debtor.

Appointment of Interim Resolution Professional and vesting of management - moratorium on suits and enforcement during CIRP - public announcement of CIRP - Reliefs and consequential orders following admission of the petition - HELD THAT: - On admission, the Tribunal appointed the proposed Insolvency Professional as Interim Resolution Professional to perform functions under the Code. The Tribunal directed the Operational Creditor to deposit initial CIRP costs and promulgated the statutory moratorium restraining institution or continuation of suits, execution, transfer or disposition of assets and enforcement of security, while preserving supply of essential goods and services and exceptions as notified by the Central Government. The Tribunal further directed immediate public announcement of the CIRP and that management of the corporate debtor shall vest in the IRP/RP with suspended directors and employees required to cooperate; registry was directed to inform the Registrar of Companies. [Paras 8, 9]

Interim Resolution Professional appointed; moratorium, public announcement and ancillary directions ordered; registry directed to communicate the order.

Final Conclusion: The Tribunal admitted the Section 9 Company Petition on the basis that debt and default were established and requisite notice given; CIRP was ordered to commence, an Interim Resolution Professional was appointed and moratorium and associated directions were imposed.

Natural justice - personal hearing - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection of SVLDRS-1 declaration without opportunity to be heard - remand for fresh consideration on merits

Natural justice - personal hearing - rejection of SVLDRS-1 declaration without opportunity to be heard - Impugned orders rejecting the petitioner's Form SVLDRS-1 declarations were passed without affording an opportunity of personal hearing and therefore violated principles of natural justice. - HELD THAT: - The averments in the petition that the tax liability had been quantified were not controverted in the affidavit-in-reply. The impugned orders indicate rejection of the applications without granting any opportunity to the petitioner. Where eligibility to file a declaration under the SVS Scheme 2019 is disputed by the authority, the question of eligibility must be considered only after affording the petitioner a personal hearing; to treat ineligibility as a ground to deny hearing is an absence of application of mind. The Court held that earlier decisions of this Court (including Saksham Facility Services Pvt. Ltd.) bind the Bench and require grant of hearing before rejecting SVLDRS-1 applications on eligibility grounds. [Paras 12, 13, 14, 15, 16]

The impugned orders rejecting the applications are quashed and set aside; both SVLDRS-1 applications are restored to file and the authority must grant personal hearing and reconsider the applications on merits.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - remand for fresh consideration on merits - Whether the tax liabilities were quantified as on 30th June 2019 is a matter in dispute which must be considered afresh by the authority after hearing the petitioner. - HELD THAT: - The factual question regarding quantification of tax liability as on the cut-off date for eligibility under the SVS Scheme 2019 was raised by the petitioner and contested by respondents. The Court did not decide the merits of quantification, instead directed that the authority must examine and decide the question after granting the petitioner an opportunity of personal hearing, and pass a fresh reasoned order without being influenced by prior conclusions. [Paras 13, 16]

The question of whether liabilities were quantified as on 30th June 2019 is remanded to the authority for fresh consideration after personal hearing; the authority to pass a fresh reasoned order within the time directed by the Court.

Final Conclusion: Writ petition allowed: impugned rejections of the petitioner's SVLDRS-1 declarations quashed; declarations restored to file; Respondent No.5 directed to give 72 hours' notice, grant personal hearing, and decide both applications afresh on merits within two months of hearing, communicate the order within one week, and the petitioner given a brief respite before any coercive action if the fresh order is adverse.

Classification of service as Works Contract Service - Commercial and Industrial Construction Service - payment of VAT under works contract as evidence of works contract service - non-taxability of works contract service prior to 01.06.2007 - remand for verification of VAT/Sales Tax records

Classification of service as Works Contract Service - payment of VAT under works contract as evidence of works contract service - remand for verification of VAT/Sales Tax records - Whether the services rendered by the appellant are to be treated as Works Contract Service (and hence not liable to service tax as Commercial and Industrial Construction Service) and whether the matter should be remanded for verification of VAT/Sales Tax records. - HELD THAT: - The Tribunal examined contracts and records and noted that CBEC guidance treats payment of VAT under the category of works contract as evidence that the transaction is a works contract service, with the question of transfer of possession and control to be decided on contract terms and related material. The appellant produced registration showing classification as works contract with Sales Tax authorities and submitted VAT/Sales Tax challans, but from the challans it could not be ascertained whether VAT was paid under the head of "Works Contract". Because the classification turns on whether VAT/Sales Tax was actually paid under the works contract category for the contracts in question, the Tribunal found it necessary to remit the matter to the original adjudicating authority for ascertainment of that fact. The Tribunal held that if it is shown that VAT/Sales Tax was paid under the head of Works Contract for the relevant contracts, the services would qualify as Works Contract Service and not as Commercial & Industrial Construction Service. [Paras 4, 5]

Matter remanded to the Original Adjudicating Authority to ascertain whether VAT/Sales Tax for the contracts was paid under the category of Works Contract; if so, services to be treated as Works Contract Service and not Commercial & Industrial Construction Service.

Non-taxability of works contract service prior to 01.06.2007 - classification of service as Works Contract Service - Consequences, for the period prior to 01.06.2007, if the services are held to be Works Contract Service. - HELD THAT: - The Tribunal applied the legal position in the decision of the Apex Court in Larsen & Toubro Ltd to hold that works contract services were not chargeable to service tax prior to 01.06.2007. Accordingly, if the Original Adjudicating Authority finds on remand that VAT/Sales Tax was paid under the head of Works Contract for the contracts in issue, any demand framed under the head of Commercial & Industrial Construction Service cannot be sustained, and demand of service tax for the period prior to 01.06.2007 cannot be confirmed. [Paras 2, 5]

If VAT/Sales Tax is shown to have been paid under Works Contract, demands under Commercial & Industrial Construction Service are to be set aside and demands for the period prior to 01.06.2007 cannot be confirmed.

Final Conclusion: The impugned order is set aside and the appeal is allowed by way of remand: the matter is sent to the Original Adjudicating Authority to verify whether VAT/Sales Tax was paid under the works contract category for the relevant contracts; a finding that VAT was so paid will require treating the services as Works Contract Service (displacing the demand under Commercial & Industrial Construction Service) and will preclude confirmation of any demand for the period prior to 01.06.2007.

Entitlement to cenvat credit on input services despite non receipt of consideration/write off of bad debts - interpretation of Rule 3 of the Cenvat Credit Rules, 2004 regarding entitlement to credit - absence of any provision for reversal of cenvat credit on account of non receipt of consideration - classification of services received from a third party (IRCTC) as advertisement services and not catering services - temporal effect of change from tax on receipt to tax on provision of service with effect from 01.04.2011

Entitlement to cenvat credit on input services despite non receipt of consideration/write off of bad debts - interpretation of Rule 3 of the Cenvat Credit Rules, 2004 regarding entitlement to credit - absence of any provision for reversal of cenvat credit on account of non receipt of consideration - temporal effect of change from tax on receipt to tax on provision of service with effect from 01.04.2011 - Appellant entitled to retain cenvat credit on input services despite having written off unrecovered consideration for services for the period prior to 01.04.2011; and no reversal is warranted for services after 01.04.2011 where service tax was paid at time of provision. - HELD THAT: - The Tribunal found that the appellant undisputedly received input services as defined under Rule 2(l) and was a provider of taxable output services, thereby satisfying entitlement under Rule 3 of the Cenvat Credit Rules, 2004. Prior to 01.04.2011 service tax was payable on receipt of consideration, so failure to receive consideration did not convert the output into an exempt or non taxable service; consequently there is no provision in the Cenvat Credit Rules, 2004 or the Finance Act, 1994 requiring reversal of cenvat credit merely because consideration was not realized and the amount written off as bad debt. The appellant also admitted payment of service tax on services rendered after 01.04.2011 (when tax became leviable at the time of provision), and thus no reversal can be sustained for the post 01.04.2011 period either. The Tribunal accordingly held that cenvat credit was correctly availed and that the impugned demand for reversal on this ground was unsustainable. [Paras 7]

Credit retained for amounts written off prior to 01.04.2011 and no reversal for services on which tax was paid after 01.04.2011.

Classification of services received from a third party (IRCTC) as advertisement services and not catering services - entitlement to cenvat credit on advertisement services received from IRCTC - Invoices and supporting material established that services provided by IRCTC were for co branding/advertisement and not catering, and cenvat credit on those services is admissible. - HELD THAT: - On examination of the sample invoice and the documents produced, the Tribunal observed that the service description indicated SBI co brand registration and promotional activity, not catering. The lower authority's denial rested on assumption that IRCTC supplied catering services; that conclusion was found to be erroneous. As the services fall within input/advertisement services used in providing taxable output, cenvat credit on such invoices was allowable. [Paras 7]

Cenvat credit allowed on services invoiced by IRCTC as advertisement/co branding services.

Final Conclusion: Impugned orders confirming demand for reversal of cenvat credit (for April 2009 to March 2012) are set aside; appeals allowed with consequential relief.

Repacking and relabeling amounts to manufacture - definition of 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944 - Chapter Note 10 to Chapter 29 - post-2008 amendment - Rule 3(5) of the Cenvat Credit Rules, 2004 - reversal liability on removal of inputs "as such" - Cenvat credit of CVD and Special Additional Duty (SAD) on imports - invocation of extended period of limitation

Repacking and relabeling amounts to manufacture - Chapter Note 10 to Chapter 29 - post-2008 amendment - definition of 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944 - Rule 3(5) of the Cenvat Credit Rules, 2004 - reversal liability on removal of inputs "as such" - Cenvat credit of CVD and Special Additional Duty (SAD) on imports - Repacking imported chemicals from bulk to smaller retail packs and relabeling thereof amounts to "manufacture" and therefore Rule 3(5) CCR, 2004 (applicable when inputs are removed "as such") does not apply; Cenvat credit of duties paid on such imports was properly available to the appellant. - HELD THAT: - The Tribunal examined the definition of "manufacture" in Section 2(f)(iii) of the Central Excise Act, 1944 and the amended Chapter Note 10 to Chapter 29 (post 01.03.2008). The amended Chapter Note treats labeling, relabeling or repacking from bulk to retail packs as amounting to manufacture. Applying this amendment together with the statutory definition, the activity of repacking and relabeling imported Butanol and Acetic Acid into smaller branded packs constituted manufacture rather than mere trading. Rule 3(5) of the Cenvat Credit Rules, 2004 imposes reversal only where inputs on which credit was availed are removed "as such"; since the inputs underwent repacking/relabeling amounting to manufacture before clearance, the condition for Rule 3(5) was not satisfied. The adjudicating authority therefore erred in treating the clearances as removals of inputs "as such" and in denying/recalling credit on that ground. Reliance on pre-amendment case law did not justify ignoring the post-2008 amendment. Consequently the demand founded on Rule 3(5) was set aside. [Paras 5, 8, 9, 11]

Findings that clearances were removals of inputs "as such" were set aside; repacking and relabeling were held to be manufacture and the Cenvat credit claimed on duties paid at import stood valid.

Invocation of extended period of limitation - Cenvat credit of CVD and Special Additional Duty (SAD) on imports - The extended period of limitation was wrongly invoked by the Department; the show cause notice was time-barred. - HELD THAT: - The Tribunal noted that the appellant had been regularly filing returns and that similar show cause proceedings for prior periods had been pending before the Tribunal with stay orders. There was no indication of suppression or mala fide intent to evade duty by the appellant. Further, the dispute was largely revenue neutral given that a substantial portion of the alleged credit had been utilized for paying duty on final products and some credit had already been reversed. On these facts the Department's invocation of the extended period was unjustified and the show cause notice was hit by limitation. [Paras 10, 11]

Extended period held wrongly invoked; show cause notice barred by limitation and the demand could not be sustained on that ground.

Final Conclusion: The adjudicating authority's order confirming demand was set aside: repacking and relabeling of imported chemicals into smaller branded packs was held to be manufacture (so Rule 3(5) CCR, 2004 did not apply) and the invocation of the extended period of limitation was held improper; appeal allowed.

Determination of actual production under Section 3A(4) - delegation of quasi-judicial powers to subordinate officers - remand for computation and verification - refund of excess duty with interest

Determination of actual production under Section 3A(4) - delegation of quasi-judicial powers to subordinate officers - Whether the Commissioner erred in remanding the matter to the Deputy/Assistant Commissioner for re-determination of duty under Section 3A(4) instead of deciding the matter himself. - HELD THAT: - The Tribunal held that the Commissioner complied with the Final Order of the Tribunal by deciding the issue in principle under Section 3A(4) and remitting the matter only for calculation of duty. The Commissioner exercised quasi-judicial power to determine entitlement in principle and, for administrative and practical purposes, directed subordinate officers to carry out computation/verification of documents not readily available with him. The remand was therefore not a forbidden delegation of the statutory function but a limited administrative direction consistent with the Tribunal's remand; the interest of justice was not prejudiced. [Paras 6]

Remand to the jurisdictional Deputy/Assistant Commissioner for computation and verification was valid and not contrary to Section 3A(4) or the Tribunal's Final Order.

Remand for computation and verification - refund of excess duty with interest - Directions to the Deputy/Assistant Commissioner as to time-frame for determination and entitlement to refund of excess duty. - HELD THAT: - The Tribunal observed that redetermination of duty for the period in question had not been finalised and therefore directed the jurisdictional Deputy/Assistant Commissioner to determine duty on the basis of actual production at rates specified under Section 3A(3) within 12 weeks from service/receipt of the order. Upon quantification, any excess duty paid is to be refunded with applicable interest. The Tribunal also directed that the refund be effected within four weeks of quantification and relied on its earlier exposition of law (Parle Agro Ltd.) in directing prompt compliance. [Paras 7]

Deputy/Assistant Commissioner to re-determine duty within 12 weeks and refund any excess duty with interest within 4 weeks of quantification.

Final Conclusion: The appeal is disposed of by upholding the Commissioner's remand to the jurisdictional Deputy/Assistant Commissioner for computation and verification, directing completion of re determination of duty for September, 1997 to March, 2000 within 12 weeks and refund of any excess duty with interest within 4 weeks of quantification.

Validity of show cause notice: requirement of specificity and particulars - Principles of natural justice in adjudication - Requirement for a speaking and well reasoned show cause notice - Quashing of cancellation of registration for vague allegations - Power to block input tax credit and statutory life of blocking order

Validity of show cause notice: requirement of specificity and particulars - Requirement for a speaking and well reasoned show cause notice - Principles of natural justice in adjudication - Quashing of cancellation of registration for vague allegations - The cancellation of GST registration was quashed on the ground that the show cause notice was vague, lacked material particulars and reasons, and therefore failed to afford a meaningful opportunity to the assessee in breach of principles of natural justice. - HELD THAT: - The Court held that a show cause notice is foundational to adjudication and must set out brief facts, grounds relied upon and documentary support so the recipient can understand and meet the allegations. The notice in Form GSTREG 17/31 in the present case merely recited a statutory provision and alleged 'bogus billing' without furnishing supplier details, documentary basis or particularised reasons. The final order cancelling registration consisted of a one line finding that the dealer was engaged in bogus billing. Such vague and non speaking notice and order do not satisfy the requirements of natural justice or the statutory scheme; consequently the adjudicatory action based on that notice cannot stand. The Court applied settled principles that notice must be intelligible and supported by material and cited the need for particulars to enable effective reply. [Paras 6, 7, 8, 9, 11]

The order cancelling the registration is quashed and set aside for want of a speaking and particularised show cause notice and inadequate reasons in the cancellation order.

Power to block input tax credit and statutory life of blocking order - The Court observed that blocking of input tax credit is subject to a statutory life and, if the blocking order has outlived that one year period, the block would cease; the authority may, however, issue a fresh notice with particulars for reconsideration. - HELD THAT: - The Court noted the writ applicant's contention that input tax credit had been blocked and observed that, even assuming the authority had power to block the credit at the relevant time, such blocking is limited by statute to a maximum period of one year. Where that period has expired, the blocking ceases. Independently, having quashed the cancellation for the defective show cause notice, the Court left open the authority's right to initiate fresh proceedings but mandated that any fresh show cause notice must furnish necessary details and documentary basis regarding the alleged bogus billing to enable an effective reply. [Paras 10, 11]

The Court observed that a blocking order that has exceeded its statutory one year life ceases to operate and permitted the authority to issue a fresh, particularised show cause notice if it so elects.

Final Conclusion: Writ petition allowed. The cancellation order is quashed and set aside for want of a speaking and particularised show cause notice; the authority is at liberty to issue a fresh notice containing necessary details and documentary basis to enable an effective reply. The Court observed that any block on input tax credit exceeding the statutory one year period would cease to operate.

Penalty under Section 53(12) of the Karnataka Value Added Tax Act, 2003 - breach of Section 53(2) of the Karnataka Value Added Tax Act, 2003 - suo moto revisional powers of the Additional Commissioner - inter-State transit and transit pass requirements - genuineness of consignment and documentary discrepancies

Penalty under Section 53(12) of the Karnataka Value Added Tax Act, 2003 - breach of Section 53(2) of the Karnataka Value Added Tax Act, 2003 - inter-State transit and transit pass requirements - genuineness of consignment and documentary discrepancies - Validity of the suo moto revision and correctness of restoring the penalty imposed for non-compliance with inter-State transit formalities - HELD THAT: - The revisional authority validly invoked suo moto powers to set aside the first appellate order which had allowed the appeal on the ground that original documents were not traceable due to theft. The enforcement authorities had conducted independent verification and recorded that the consignment was loaded in Karnataka, the movement was not established by necessary documents at the Karnataka inward check post, the invoices lacked the check post seal and the requisite transit pass, and there were material discrepancies including issues as to the consignee's address and mismatch in identification particulars. Those documentary deficiencies fall within the ambit of a breach of the inter-State transit provisions and Section 53(2) of the Act, thereby justifying imposition of penalty under Section 53(12). The Coordinate Bench decision in a connected matter, examining identical factual and documentary deficiencies, supported treating the movement as tax-evasive and upholding the penalty. In these circumstances the revisional authority was justified in restoring the penalty and in holding the first appellate order to be erroneous and prejudicial to the Revenue's interest. [Paras 7, 8]

The revisional order restoring the penalty for breach of transit formalities was justified and the appellate order allowing the appeal was set aside.

Final Conclusion: The appeal is dismissed; the Additional Commissioner's suo moto revision restoring the penalty for non-compliance with inter State transit/documentary requirements is upheld.

Burden of proof - Genuineness of transaction - Input tax credit - Denial of input tax credit due to seller's non-filing - Revisional jurisdiction under Section 64(1) of the Karnataka Value Added Tax Act, 2003 - Remand for fresh consideration

Burden of proof - Genuineness of transaction - Input tax credit - Denial of input tax credit due to seller's non-filing - Whether input tax credit can be denied solely because the selling dealers did not file returns or remit collected tax, without a finding that the transactions were not genuine or invoices were bogus. - HELD THAT: - The Court held that the burden of proving the correctness of any claim to input tax credit lies on the dealer. Mere non-filing of returns or non-payment of tax by the selling dealers, without any finding that the transactions are fictitious or the invoices bogus, is not a sufficient ground to deny input tax credit. Denial of credit is justified only where the transaction is shown to be not genuine or documents are fabricated. The first appellate authority ought to have examined the status and existence of the selling dealers and recorded reasons if denial of credit was warranted on account of dealers being non-existent or deregistered. Absent such analysis, the assessing authority's disallowance cannot stand merely on the ground of the sellers' non-compliance. [Paras 9, 10]

Input tax credit cannot be denied solely because selling dealers did not file returns or remit collected tax; denial requires a finding of non-genuineness or bogus documents, and reasons must be recorded where sellers are non-existent or deregistered.

Revisional jurisdiction under Section 64(1) of the Karnataka Value Added Tax Act, 2003 - Remand for fresh consideration - Whether the revisional authority was justified in setting aside the first appellate authority's order and restoring the reassessment, and what relief or further procedure should follow. - HELD THAT: - The Court found that in the absence of adequate reasons and without the necessary factual analysis by the lower authorities (particularly regarding the existence or registration status of selling dealers and the genuineness of transactions), the revisional authority's suo motu exercise under Section 64(1) could not properly substitute for that analysis. Given the material now placed before the Court and the lacunae in the earlier orders, the appropriate course is to set aside both the revisional order and the appellate order and remit the matter to the first appellate authority for fresh consideration. The first appellate authority is to reconsider the matter in the light of the material and legal principles cited, after giving the assessee an opportunity of hearing and decide the issue expeditiously. [Paras 4, 11]

Orders of the revisional authority and the first appellate authority are set aside and the matter is remitted to the first appellate authority for fresh consideration after providing opportunity of hearing, to be decided preferably within eight weeks.

Final Conclusion: Appeal allowed in part. The orders of the revisional authority and the first appellate authority are set aside and the matter is remanded to the first appellate authority to reconsider the claim for input tax credit in light of the material before the Court and the legal principles regarding burden of proof and genuineness of transactions, with liberty to parties and a direction for expedition (preferably within eight weeks).

Entertainment tax versus service tax - requirement of proof of separate collection of service tax - separability of composite transaction for levy - value added destination based consumption tax - remand for fresh consideration on production of documents

Remand for fresh consideration on production of documents - requirement of proof of separate collection of service tax - entertainment tax versus service tax - value added destination based consumption tax - Whether the Tribunal's confirmation of assessment and re assessment orders should be set aside and the matters remitted for fresh adjudication after permitting production of invoices and consideration of specified notifications/circular. - HELD THAT: - The Court did not decide the substantive legal questions raised by the petitioner regarding levy of entertainment tax vis a vis service tax or the State's legislative competence. Noting that the authorities below proceeded in the absence of invoices or other material clearly showing separate collection of service tax, and that the petitioner's case relied on certain notifications/circulars and on the legal characterisation of service tax as a value added, destination based consumption tax, the Court concluded that the ends of justice required fresh consideration. Consequently, the common order of the Tribunal confirming the assessments was set aside and the matters remitted to the Tribunal with directions to afford the petitioner an opportunity to produce all relevant documents (including invoices raised against subscribers) and to re adjudge the appeals in the light of the notifications/circulars relied upon by the petitioner, without the High Court answering the questions of law formulated in the petition.

The Tribunal's common order dated 10.03.2016 is set aside and the matters are remitted to the Tribunal for fresh consideration after giving the petitioner opportunity to produce relevant documents and in light of the notifications/circulars relied upon; all rights and contentions are left open.

Final Conclusion: Revision petition allowed in part; the common order of the Tribunal is set aside and the appeals remanded for re consideration after permitting the petitioner to produce invoices and other relevant documents and for the Tribunal to consider the specified notifications/circulars; substantive legal questions left open for determination on fresh adjudication.

Treatment of credit notes and trade discounts for deduction from taxable turnover - requirement of reflection of discount in tax invoice for claim of deduction - correct determination of taxable turnover under Section 30 of the Karnataka Value Added Tax Act, 2003 - compliance of Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 - application of the principle in Southern Motors v. State of Karnataka to claims of post invoice discounts

Treatment of credit notes and trade discounts for deduction from taxable turnover - compliance of Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 - correct determination of taxable turnover under Section 30 of the Karnataka Value Added Tax Act, 2003 - Claim for deduction of value by issuing credit notes (treated as discount) held allowable despite not being reflected in the original tax invoice. - HELD THAT: - The Tribunal and lower authorities disallowed the assessee's claim by treating the reduction as ineligible because the trade discount (by way of credit notes) was not reflected in the original tax invoice, relying on Rule 3(2)(c) and the proviso. The High Court applied the Apex Court's ruling in Southern Motors , holding that denying deduction solely for failure to reflect a contemporaneous trade discount in the original invoice would ignore the actual commercial transaction and frustrate correct determination of taxable turnover under Section 30 read with Rule 3(2)(c) as they stood for the relevant period. On the facts, the credit notes evidenced the price difference actually realized; therefore the denial of the claim on the ground of omission in the original invoice was contrary to the legal principle enunciated in Southern Motors and impermissible. [Paras 11, 12, 13]

Questions of law No.1 and No.3 answered in favour of the assessee; the deduction represented by the credit notes/discounts is allowable notwithstanding omission in the original tax invoice.

Application of the principle in Southern Motors v. State of Karnataka to claims of post invoice discounts - requirement of reflection of discount in tax invoice for claim of deduction - The Tribunal's reliance on omission to reflect discount in the original invoice as a complete bar to deduction is displaced by the Southern Motors principle and cannot sustain denial of the claim. - HELD THAT: - Although the Tribunal characterised the reduction as a discount which must be reflected in the tax invoice under Rule 3(2)(c) and the proviso, the High Court held that Southern Motors requires construing the rule in light of the transaction's commercial reality. Where a discount is actually granted and evidenced (here by credit notes), refusal to recognise the deduction solely because it was not shown in the original invoice is unrealistic and contrary to the objective of correctly ascertaining taxable turnover. The Court therefore set aside the Tribunal's conclusion to that effect. [Paras 12, 13]

The Tribunal's denial on the sole ground of non reflection in the original invoice is unsustainable; the principle in Southern Motors governs and supports the assessee's claim.

Final Conclusion: Revision petition allowed: the claims represented by credit notes/discounts for assessment years 2007 2008 and 2008 2009 are to be recognised for determining taxable turnover; questions answered in favour of the assessee and against the Revenue, rendering the second question of law academic.

Exhaustion of alternative remedy - principles of natural justice - jurisdictional error - judicial review under Article 226 - powers of appellate authorities - doctrine of separation of powers

Exhaustion of alternative remedy - powers of appellate authorities - principles of natural justice - jurisdictional error - judicial review under Article 226 - Whether the High Court should entertain writ petitions under Article 226 without requiring exhaustion of the statutory appellate remedy where the assessment orders for AYs 2010-11 and 2011-12 allegedly apply a post amendment provision and violate principles of natural justice. - HELD THAT: - The Court held that the statutory scheme provides a multi tiered appellate mechanism (including appeal to the Appellate Deputy Commissioner and further remedies up to the High Court) and that exhausting the appellate remedy is the general rule. Dispensing with the alternative remedy is an exception to be exercised sparingly only where there is imminent or irremediable prejudice, gross injustice, violation of fundamental rights, proceedings taken under an ultra vires provision, or total violation of natural justice that cannot be cured by the appellate forum. Allegations that the Assessing Officer applied an amended provision to pre amendment assessment years and thereby committed jurisdictional error do not, by themselves, warrant bypassing the appellate process because appellate authorities are empowered to correct such legal and jurisdictional errors after affording opportunity and examining original records. The High Court's power under Article 226 is supervisory: it scrutinises the legality of the process and not substitute fact finding on mixed questions of law and fact which the appellate bodies are better placed to decide. Institutional respect and separation of powers require that, unless exceptional circumstances are made out, writ petitions should not be entertained in lieu of statutory appeals. Applying these principles, the Court concluded that the petitioner must first avail the prescribed appellate remedies, with the appellate authority empowered to condone any delay and adjudicate the issues on merits. [Paras 11, 12, 16, 19, 20]

Writ petitions not entertained; petitioner directed to exhaust statutory appellate remedy and is at liberty to file appeals/revisions which shall be taken on file and adjudicated on merits.

Final Conclusion: The writ petitions were disposed of by directing the petitioner to approach the statutory appellate authorities in accordance with the TNVAT Act for assessment years 2010-11 and 2011-12; the alternative remedy must be exhausted and the appellate authority may condone any delay and decide the appeals on merits.