TaxTMI Updates e-Newsletter
Jan 15,2022

Cross-empowerment of tax authorities and prohibition on parallel proceedings under Section 6(2)(b) of the CGST Act - Circular dated 05.10.2018 (CBEC) regarding intelligence-based enforcement and completion of proceedings by the initiating authority - limits of territorial jurisdiction and transfer/centralisation of investigations - pan-India jurisdiction of DGGI and centralisation of related investigations - harmonised GST regime and cooperative federalism

Cross-empowerment of tax authorities and prohibition on parallel proceedings under Section 6(2)(b) of the CGST Act - Circular dated 05.10.2018 (CBEC) regarding intelligence-based enforcement and completion of proceedings by the initiating authority - limits of territorial jurisdiction and transfer/centralisation of investigations - Applicability of Section 6(2)(b) of the CGST Act and the CBEC Circular dated 05.10.2018 to bar transfer or centralisation of multiple intelligence based investigations involving taxpayers beyond the territorial jurisdiction of the initiating officer. - HELD THAT: - The court held that Section 6 and the Circular are intended to prevent overlapping jurisdiction and multiple proceedings against the same taxpayer by providing for cross empowerment and for the initiating authority to complete intelligence based enforcement action. However, neither Section 6 nor the Circular was intended to have an overarching effect in all situations; their operation is limited. They do not apply so as to preclude transfer or centralisation where the intelligence based investigations have repercussions, involve taxpayers beyond the territorial limits of the initiating officer, or where multiple distinct investigations with a common thread (for example, a nationwide alleged conspiracy) require consolidation to avoid incomplete, conflicting or multiplicative inquiries. A strict application that compels each territorial officer to confine investigation to his area would produce impractical and discordant results, contrary to the statutory purpose of harmony and efficient investigation. On the facts, multiple authorities had initiated related investigations and, in order to consolidate and make the inquiry comprehensive, transfer to the DGGI, AZU was effected; Section 6(2)(b) and the Circular therefore did not apply to prevent that transfer. [Paras 67, 68, 70, 75, 76]

Section 6(2)(b) and the CBEC Circular dated 05.10.2018 have only limited application and do not bar transfer or centralisation of investigations in the factual matrix before the Court; they are not applicable to the petitions.

Pan-India jurisdiction of DGGI and centralisation of related investigations - limits of territorial jurisdiction and transfer/centralisation of investigations - Validity of transfer of multiple related investigations to DGGI, Ahmedabad Zonal Unit (AZU) and whether such centralisation was prohibited by statute or otherwise lacked jurisdiction. - HELD THAT: - The court observed that Notifications under the CGST framework create officers with limited territorial jurisdiction and some with all India jurisdiction, and that transfers of investigation to achieve a consolidated inquiry are not prohibited by the CGST or SGST Acts. On the facts, the DGGI, AZU (a Central Tax formation) possesses pan India jurisdiction, the concerned formations requested consolidation, and there was no contention that DGGI, AZU lacked jurisdiction. The court rejected the submission that a territorial officer must invariably transfer a case to a pan India officer whenever investigative threads extend beyond local limits; whether transfer is warranted depends on the facts. Given the record that investigations were transferred to DGGI, AZU and that no statutory bar was shown, the centralisation was permissible and addressed petitioners' grievance about multiplicity of agencies. [Paras 32, 33, 69, 75, 76]

Transfer and centralisation of the investigations to DGGI, AZU was permissible and not barred by the CGST/SGST Acts; DGGI, AZU had jurisdiction to consolidate and pursue the investigations.

Harmonised GST regime and cooperative federalism - Disposition of the writ petitions and the connected contempt petition. - HELD THAT: - Applying the foregoing conclusions, the court found no merit in the writ petitions which challenged the multiplicity of searches and summons in the context of the consolidated investigative approach. The petitions were dismissed. The related contempt proceeding was also not pursued and was dismissed. [Paras 76, 77, 78]

Writ petitions dismissed; contempt case dismissed.

Final Conclusion: The High Court dismissed the writ petitions and the connected contempt petition, holding that Section 6(2)(b) of the CGST Act and the CBEC Circular dated 05.10.2018 have limited application and do not preclude transfer or centralisation of related intelligence based investigations to a pan India DGGI formation where consolidation is factually warranted; the transfer to DGGI, AZU was permissible and not statutorily barred.

Grant of bail under Section 439 Cr.P.C. - Economic offences and bail considerations - Prima facie case based on seized documents and GST records - Claimed ineligible input tax credit and fake invoices - Reversal of input tax credit and absence of appropriation - Risk of tampering with evidence and abscondance - Final prosecution report submitted - Local residence as factor against absconding

Prima facie case based on seized documents and GST records - Claimed ineligible input tax credit and fake invoices - Reversal of input tax credit and absence of appropriation - Existence of a prima facie case for prosecution under the CGST provisions based on investigation materials. - HELD THAT: - The Court found that documents seized during search and the GST records prima facie indicate that the firm availed ineligible input tax credit on the strength of invoices without physical receipt or supply of goods and that fake business entities have been identified. The investigation and quantification relied on GST returns and ITC ledgers; all relevant material required to subject the petitioner to prosecution appears to have been collected and a final prosecution report was submitted. At the same time, the petitioner's plea that wrongly availed ITC was reversed or used for payment of tax was noted but did not lead the Court to hold that there was no prima facie case-the extent of illegality and the contention of non-appropriation are matters to be examined at trial. [Paras 11]

Materials on record disclose a prima facie case to proceed with prosecution, notwithstanding the petitioner's contention regarding reversal of ITC.

Grant of bail under Section 439 Cr.P.C. - Economic offences and bail considerations - Risk of tampering with evidence and abscondance - Final prosecution report submitted - Local residence as factor against absconding - Whether the petitioner should be released on bail despite the prima facie case in an economic offence involving alleged fake ITC. - HELD THAT: - Applying settled principles governing bail in economic offences, the Court balanced the nature and gravity of the accusation, the materials on record, the risk of tampering with evidence or absconding, and the stage of investigation. The Court observed that the investigation spanned nearly two years, material evidence has been collected and a final prosecution report submitted, and the petitioner is a local resident of Sambalpur, which reduced the likelihood of absconding. While acknowledging the seriousness and magnitude of the alleged fraud, the Court concluded that detailed evidence appraisal must await trial and that continued custody was not necessary in the circumstances. Consequently, bail was granted subject to stringent conditions aimed at preventing tampering with evidence and ensuring presence at trial. [Paras 11, 12, 13]

Bail under Section 439 Cr.P.C. granted with conditions, including bail bond and sureties, restrictions on contacting witnesses, surrender of passport and permission to leave the court's jurisdiction.

Final Conclusion: Application under Section 439 Cr.P.C. allowed; petitioner enlarged on bail on execution of a bail bond with two sureties and subject to conditions to prevent tampering with evidence, ensure attendance at trial and restrict travel, the order to be cancelled on any breach.

Summons as a measure of last resort - Requirement to state purpose and reasonable notice for summons - Permissibility of authorised representatives/consultants to furnish documents and give explanations - Non-coercive exercise of statutory inquiry powers

Summons as a measure of last resort - Non-coercive exercise of statutory inquiry powers - Validity of issuance of summons to the director when documents have been sought and whether summons may be issued casually. - HELD THAT: - The Court noted the departmental FAQ (Question 34) which indicates that summons should be resorted to only as a last measure and not issued in a casual manner. There were no specific allegations of non-cooperation by the petitioner recorded by the respondents. Although the respondents rely upon a statement attributed to the accounts manager that decision-making rested with the director, the petitioner disputes that averment. In view of the petitioner's willingness to cooperate and to have its consultants furnish documents and information, the Court held that the impugned summons to the director could not be allowed to stand and that the respondents must first specify further documents and queries to be produced before resorting to personal summons. [Paras 10, 11, 13]

Summons dated 23 December 2021 to the director does not survive; respondents directed to list further documents and queries and not to issue summons casually.

Permissibility of authorised representatives/consultants to furnish documents and give explanations - Whether the petitioner's consultants/authorised representatives may furnish the required documents and provide explanations on behalf of the petitioner instead of the director personally appearing. - HELD THAT: - The petitioner offered to have its consultants (M/s MGB & Co.) furnish all documents and provide necessary particulars. The Court accepted this practical and cooperative approach and directed that the consultants may furnish documents and respond to requisitions within the prescribed or extended time, and must cooperate with the respondents. The Court left it to the respondents to decide, after receipt of the consultant's submissions, whether the director still needs to be called for recording of evidence. [Paras 12]

Consultants authorised by the petitioner may furnish documents and information; respondents to decide thereafter whether the director's personal attendance is still necessary.

Requirement to state purpose and reasonable notice for summons - Procedural requirements for any future summons to the director. - HELD THAT: - The Court directed that any summons issued by the respondents must indicate the purpose for which the summons is issued and must give a clear seven days' notice before fixing the date for recording the director's statement. This direction flows from the principle that summons should not be used to coerce or harass and that addressees are entitled to be informed of the object of attendance and afforded reasonable time to prepare or to arrange authorised representation. [Paras 12]

Any future summons must state its purpose and give seven days' notice before the date fixed for recording the director's statement.

Final Conclusion: Writ petition allowed; impugned summons to the director quashed in view of petitioner's undertaking and directions; respondents directed to furnish a list of further documents and queries within one week, to accept documents and explanations from the petitioner's consultants, and to ensure any summons (if issued) states purpose and gives seven days' notice.

Meaningful pre-consultation - pre-consultation not to be mere eye-wash - issuance of show cause notice following pre-consultation - ad-interim relief - permission for direct service

Meaningful pre-consultation - pre-consultation not to be mere eye-wash - issuance of show cause notice following pre-consultation - Pre-consultation must be meaningful and should not be rendered ineffective by issuing a show cause notice immediately after giving a very short notice for pre-consultation. - HELD THAT: - The Court noted the factual matrix that the writ applicant received a pre-consultation notice by email on 22.10.2021 at 6:47 p.m. requiring presence on 23.10.2021, and that the impugned show cause notice was issued on 24.10.2021. Relying on the proposition in Dharamshil Agencies v. Union of India that pre-consultation should not be a mere eye-wash, the Court observed that pre-consultation must be meaningful. The proximity of the show cause notice to the pre-consultation call into question the efficacy and purpose of the pre-consultation exercise undertaken by the revenue. [Paras 2, 3, 5]

Notice issued to the respondents for consideration of the legality and validity of the pre-consultation and subsequent show cause notice.

Ad-interim relief - permission for direct service - Interim relief was granted and direct service on the respondents was permitted pending further consideration. - HELD THAT: - Pending adjudication of the challenge to the pre-consultation and the impugned notice, the Court directed issuance of notice returnable on 23.02.2022 and granted ad-interim protection in the terms recorded in paragraph 15(c) of the writ petition (as referenced by the Court). The Court also permitted direct service of the petition on the respondents. [Paras 6, 7, 8]

Writ petition admitted; notice returnable on 23.02.2022; ad-interim relief granted as per paragraph 15(c); direct service permitted.

Final Conclusion: The writ petition was admitted for consideration: the Court held that pre-consultation must be meaningful and not a mere eye-wash, issued notice to the respondents returnable on 23.02.2022, granted ad-interim relief in the terms indicated and permitted direct service.

Violation of principles of natural justice - ex parte order - quashing of assessment order - remand for fresh adjudication - requirement of speaking order and reasons - deposit as condition for interim relief - stay on coercive recovery pending proceedings

Violation of principles of natural justice - ex parte order - quashing of assessment order - Impugned assessment order dated 08.02.2021 and summary in Form GST DRC-07 were quashed. - HELD THAT: - The Court found that the order passed by the Assistant Commissioner was ex parte and did not afford the petitioner sufficient time or opportunity to represent its case, thereby violating the principles of natural justice. The order also failed to assign decipherable reasons showing how the amount claimed was determined. In view of these legal defects, the writ court held that interference was justified notwithstanding the existence of statutory remedies and set aside the impugned order as being bad in law for want of a fair hearing and absence of reasons. Consequential interim reliefs were granted, including direction for de-freezing/de-attaching bank account(s) if attached, a prohibition on coercive recovery during pendency of proceedings, and a condition that the petitioner deposit ten per cent of the amount of demand within four weeks subject to final adjudication and refund if found excessive.

Impugned order dated 08.02.2021 and Form GST DRC-07 quashed; interim directions issued including deposit of ten per cent, de-freezing of bank accounts, and stay on coercive recovery.

Remand for fresh adjudication - requirement of speaking order and reasons - stay on coercive recovery pending proceedings - Matter remanded to the Assessing Authority for fresh decision on merits after affording opportunity and passing a speaking order. - HELD THAT: - The Court directed that the Assessing Authority decide the case afresh on merits after complying with principles of natural justice by affording the petitioner an opportunity to place on record all essential documents and materials. The Assessing Authority was directed to hear the petitioner (appearance fixed on 28.01.2022, enabling digital mode if possible), to decide expeditiously preferably within two months of appearance, and to pass a speaking order assigning reasons, a copy of which shall be supplied to the parties. Liberty was reserved to the petitioner to challenge the fresh order and to the parties to pursue other legal remedies. The Court expressly refrained from expressing any opinion on the merits.

Proceedings remitted to the Assessing Authority to decide afresh on merits after affording adequate hearing and passing a speaking order within the directed timeline; no coercive steps meanwhile.

Final Conclusion: Writ petition disposed by quashing the ex parte assessment order dated 08.02.2021 for tax period 2019-20 on grounds of breach of natural justice and non-speaking character; matter remitted for fresh adjudication with interim directions including deposit of ten per cent, de-freezing of accounts, prohibition on coercive recovery and requirement that the Assessing Authority pass a reasoned order after hearing the petitioner within the time stipulated.

Principle of natural justice - scope of show cause notice - refund of unutilised input tax credit - virtual hearing - quashing and remittal for fresh adjudication

Principle of natural justice - scope of show cause notice - quashing and remittal for fresh adjudication - Whether the order rejecting the entire refund claim, passed without affording a fresh opportunity of hearing and exceeding the amount specified in the show cause notice, was sustainable. - HELD THAT: - The Court found that the show cause notice issued under the CGST Rules was limited to a specified amount and that an adjudication can only lawfully reject to the extent specified in the notice. The authority passed an order rejecting the entire refund claim which travelled beyond the scope of the show cause notice, constituting a gross and apparent error. Further, the officer who ultimately passed the impugned order did so without affording the petitioner any fresh opportunity of hearing after the matter was re-assigned; this amounted to a breach of the principle of natural justice. Given that the defect is procedural and relates to non availment of hearing and excess beyond the show cause notice, the appropriate remedial course is to quash the impugned order and remit the matter to the respondent to grant an opportunity of hearing and decide the limited dispute framed by the show cause notice. The Court directed that if physical hearing is not permitted, the authority shall provide a virtual hearing, and decide the matter in accordance with law while keeping to the basic requirements of adjudication. [Paras 10, 11, 12, 13, 14]

The order rejecting the entire refund claim was quashed and the matter remitted to the respondent for fresh adjudication limited to the scope of the show cause notice after affording opportunity of hearing (physical or virtual).

Final Conclusion: The petition is allowed: the rejection order dated 11/13.05.2021 is quashed and the matter is remitted to the respondent to schedule and conduct a hearing (physical or virtual) on the show cause notice dated 16/18.03.2021 and decide the refund claim in accordance with law; direct service by speed post and e-mode is permitted.

Zero-rated supply - Refund of IGST - Deeming fiction under Rule 96 - Withholding of refund limited to specified contingencies - Circulars not overriding statutory rule - Interest on delayed refunds under Section 56

Zero-rated supply - Refund of IGST - Deeming fiction under Rule 96 - Withholding of refund limited to specified contingencies - Circulars not overriding statutory rule - Entitlement to refund of IGST paid on zero-rated exports where exporter initially claimed higher drawback but amended shipping bills and repaid the differential drawback. - HELD THAT: - The Court found that the exported goods were zero-rated supplies and that Rule 96 casts a deeming fiction whereby the shipping bill is an application for refund of integrated tax paid on exported goods, subject to the limited contingencies in Rule 96(4). On the facts, the shipping bills were amended under Section 149 of the Customs Act and the differential drawback was repaid and realised by Customs. The respondents' reliance on Board Circular No.37/2018-Customs and related notifications to deny refund was held untenable: circulars or departmental instructions cannot override the statutory scheme under Rule 96 and Section 54. The Court followed its earlier decision in Amit Cotton Industries (and noted the dismissal/continuance of challenges before the Apex Court) holding that withholding refund on the ground that the exporter had, initially of its own volition, claimed higher drawback is not justified where the statutory grounds for withholding under Rule 96(4) are not engaged. The adjudicating authority's failure to follow the binding precedent and to decide the refund application was held to be arbitrary. [Paras 11, 12, 13, 14, 16]

Respondent authorities directed to immediately sanction the refund of IGST paid in respect of the shipping bills dated 05.07.2017 to 10.08.2017.

Interest on delayed refunds under Section 56 - Entitlement to interest on delayed refund and the rate of interest to be awarded in the peculiar facts of the case. - HELD THAT: - Section 56 provides for interest where tax ordered to be refunded is not paid within sixty days of a complete application, with the statutory ceiling for such interest specified. Applying Section 56 and having regard to the delay caused by respondent authorities in deciding and releasing the refund despite binding judicial precedent, the Court awarded interest. Considering the factual matrix and precedents relied upon, the Court granted interest at 9% from the date the bills for refund were raised until actual payment, directing payment of refund and interest within eight weeks and providing for further interest at 9% in case of default beyond that period. [Paras 16, 17]

Interest at 9% directed from the date of raising the refund bills until actual payment; refund with interest to be paid within eight weeks, failing which further interest at 9% shall accrue.

Final Conclusion: Writ petition allowed. Respondents directed to sanction and pay the IGST refund claimed in relation to the shipping bills dated 05.07.2017 to 10.08.2017, with interest at 9% from the date of raising the refund bills until actual payment; payment to be made within eight weeks, failing which further interest at 9% shall accrue.

Withdrawal of petition - Disposal on withdrawal - Permission for direct service

Withdrawal of petition - Disposal on withdrawal - The petition challenging the show cause notice was withdrawn and disposed of on the petitioner's request. - HELD THAT: - The petitioner sought judicial review of a show cause notice issued under Section 74(1) of the Central Goods and Services Tax Act, 2017 primarily contending that the incorrect provision had been invoked and that there was no suppression or tax evasion. During hearing the petitioner elected to withdraw the writ petition while reserving the right to raise all contentions, including jurisdictional objections, before the authority in reply to the show cause notice. The Court accepted the prayer to withdraw and accordingly disposed of the petition without adjudicating the merits of the challenge to the notice or the correctness of the invocation of the statutory provision. [Paras 5, 6]

Petition disposed of as withdrawn; petitioner permitted to raise its contentions before the authority.

Permission for direct service - Direct service of the petition and related papers was permitted. - HELD THAT: - Along with allowing withdrawal and disposal of the petition, the Court granted permission for direct service of process. This procedural direction was recorded and permitted the petitioner to effect service directly on respondents as part of the concluded proceedings. [Paras 6]

Direct service permitted.

Final Conclusion: The writ petition contesting the show cause notice was allowed to be withdrawn and stands disposed of; the Court did not decide the merits of the jurisdictional challenge and the petitioner remains entitled to raise its objections before the authority; direct service was permitted.

Rectified TRAN-1 filing - transition of input tax credit to Electronic Credit Ledger - precedential effect of Division Bench decision - extension of time for statutory/filing compliance - verification of genuineness of credit claims by revenue

Rectified TRAN-1 filing - extension of time for statutory/filing compliance - precedential effect of Division Bench decision - Petitioner permitted to re-file rectified TRAN-1 electronically or manually and respondents directed to consider and decide the claim. - HELD THAT: - The Court observed that the petitioner's prayer for permission to re-file the rectified TRAN-1 form and to transition the claimed credit to the Electronic Credit Ledger is directly covered by the Division Bench decision in Union of India v. Asaid Paints Limited and Ors., which allowed assessees an opportunity to file/revise TRAN-1 within an extended timeline and permitted verification by revenue. Having regard to that precedent and the submissions of parties, the Court held that the present petition should be disposed of in the same terms. The petitioner is granted a one-time opportunity to file the rectified TRAN-1 either electronically or manually within 30 days, and upon filing the respondents are directed to consider the claim and pass appropriate orders in accordance with law. The Court left open the respondents' right to verify the genuineness and merits of the claim in the exercise of their statutory functions.

Petition allowed in terms of the Division Bench decision; petitioner permitted to file rectified TRAN-1 electronically or manually within 30 days and respondents to consider and decide the claim in accordance with law.

Final Conclusion: The petition is allowed in terms of the Division Bench judgment in Union of India v. Asaid Paints Limited and Ors.; the petitioner may re-file the rectified TRAN-1 within 30 days and the respondents shall consider and decide the claim lawfully, with liberty to verify its genuineness.

Non-application of mind - Quashing and remand for de novo consideration - Right to personal hearing - Assessment order set aside - Notice under Sections 156 and 270A quashed - Costs by way of personal payment and compliance affidavit

Non-application of mind - Assessment order set aside - Assessment order dated 23/09/2021 was passed without application of mind and is quashed. - HELD THAT: - The Court found that the Assessing Officer proceeded to pass the final assessment order by effectively reproducing the earlier draft order despite the petitioner having responded to the draft on 12/05/2021 and having sought a personal hearing. The final order repeated the assertion that the assessee did not respond, ignored the petitioner's written reply and did not grant personal hearing, demonstrating total non-application of mind and abuse of process. For these reasons the assessment order could not stand.

Assessment order dated 23/09/2021 quashed and set aside.

Quashing and remand for de novo consideration - Right to personal hearing - Matter remanded for de novo consideration with directions as to procedure and timeline. - HELD THAT: - The Court directed that the matter be remanded for fresh adjudication by a different Assessing Officer who shall consider the petitioner's reply dated 12/05/2021, give the petitioner a personal hearing after issuing notice of the personal hearing at least one week in advance, and pass an assessment order in accordance with law. The Court fixed an outer timeline of eight weeks from the date the order is uploaded for completion of the fresh assessment, thereby ensuring prompt re-adjudication and adherence to principles of fair hearing.

Remanded for de novo consideration by a different Assessing Officer; personal hearing to be granted and order to be passed within eight weeks of order upload with at least one week's advance notice of hearing.

Notice under Sections 156 and 270A quashed - Notices issued under Sections 156 and 270A consequential to the quashed assessment order are quashed. - HELD THAT: - As the underlying assessment order has been quashed for want of application of mind, consequential notices issued under the referenced provisions were also set aside to remove the legal consequences arising from the invalid order.

Notices under Sections 156 and 270A quashed and set aside.

Costs by way of personal payment and compliance affidavit - Cost ordered against the Assessing Officer who passed the impugned order requiring personal payment as donation and filing of proof of payment. - HELD THAT: - The Court imposed costs on the Assessing Officer responsible for the impugned order, directing payment from the officer's personal account by way of donation to the specified public fund and requiring the officer to file an affidavit proving payment and annexing a bank statement within two weeks of the order being uploaded. The Court also granted liberty to the petitioner to seek further compliance mention if the affidavit is not filed within the stipulated period. The order does not record operational account particulars in the headnote.

Assessing Officer directed to make the prescribed personal donation to the public fund and to file an affidavit and bank proof within two weeks; petitioner granted liberty to mention for compliance if affidavit not filed.

Final Conclusion: The assessment order dated 23/09/2021 is quashed for non-application of mind and the matter is remitted for fresh consideration by a different Assessing Officer who shall consider the petitioner's reply, grant a personal hearing with at least one week's advance notice and pass a fresh order within eight weeks of upload; consequential notices are quashed and costs in the form of a personal donation and proof thereof are directed against the Assessing Officer responsible for the impugned order.

Judicial review of administrative issuance of Look Out Circulars - Scope of OM dated 27.10.2010 as amended by OM dated 05.12.2017 - Validity period and automatic lapse of LOC versus continued operation under consolidated guidelines dated 22.02.2021 - Exceptional invocation of Clause 'detrimental to the economic interests of India' as ground for curtailing right to travel - Requirement of reasonable belief and contemporaneous material before restricting fundamental right to travel

Judicial review of administrative issuance of Look Out Circulars - Extent to which the Court may review the administrative decision to issue a LOC - HELD THAT: - The Court held that judicial review of a LOC is limited but not excluded; while courts will be circumspect and will not substitute their view where the issuing authority's decision is reasonable, there is no blanket bar to examination of the reasons for issuance. If the decision is without application of mind to relevant factors or improperly curtails fundamental rights, the writ court must intervene to protect the individual. The Court therefore rejected the contention that it could not examine the legality of the impugned LOC. (paras 29) [Paras 29]

Judicial review available - the Court may examine whether the authority applied its mind and formed a reasonable belief before issuing a LOC

Scope of OM dated 27.10.2010 as amended by OM dated 05.12.2017 - Whether a request made under the OM dated 27.10.2010 could be defended by invoking the exception introduced by the OM dated 05.12.2017 - HELD THAT: - The Court held that the OM of 2017 is an amendment to the OM of 2010 and therefore, requests made after the amendment must be read in the context of the OM 2010 together with subsequent amendments. A request for a LOC made in February 2019 could legitimately be justified by reference to the Clause introduced by the OM dated 05.12.2017; reliance on the 2010 OM alone in a restrictive manner was untenable. (paras 30-33) [Paras 30, 31, 32, 33]

The 2017 amendment is part of the governing OM; the originating agency could rely on the Clause introduced in OM 05.12.2017 when seeking issuance of the LOC

Validity period and automatic lapse of LOC versus continued operation under consolidated guidelines dated 22.02.2021 - Whether the LOC issued on 25.02.2019 had lapsed after one year under OM 27.10.2010 or remained in force by virtue of subsequent guidelines dated 22.02.2021 - HELD THAT: - Under OM 27.10.2010 a LOC was valid for one year unless renewed; however, the consolidated guidelines of 22.02.2021 reversed the concept of automatic deletion and provided that a LOC shall remain in force until deletion is requested by the originator. The Court accepted the respondents' categorical stand that the LOC was in force on 22.02.2021 and that it had been extended from time to time, and therefore the 2021 guidelines, which prevent automatic deletion, could operate in the present case. The petitioner failed to show otherwise. (paras 33-36) [Paras 33, 34, 35, 36]

LOC did not automatically lapse after one year in the present case because it was in force when the 22.02.2021 guidelines came into effect

Exceptional invocation of Clause 'detrimental to the economic interests of India' as ground for curtailing right to travel - Requirement of reasonable belief and contemporaneous material before restricting fundamental right to travel - Whether the respondents had formed a reasonable belief that the petitioner's departure would be 'detrimental to the economic interests of India' so as to justify issuance and continued operation of the LOC for nearly three years - HELD THAT: - The Court emphasised that the Clause introduced in 2017 is to be used only in exceptional circumstances and requires a formation of reasonable belief, supported by material of sufficient gravity, that permitting departure would harm the country's economic interests to an extent justifying curtailment of the right to travel. On the facts, the respondents' case rested largely on an unsigned draft agreement and WhatsApp chats, and they were awaiting FT & TR responses from Dubai; the petitioner had produced Dubai government certificates denying ownership and had cooperated by appearing 19 times. No prosecution under penal statutes had been initiated even after nearly three years and the additional income assessed in income-tax proceedings was subject to challenge. The Court found the premise of the LOC to be founded on mere suspicion which had remained unsubstantiated, and held that continuing the LOC indefinitely in such circumstances impermissibly fettered the petitioner's rights and livelihood. (paras 36-41, 37-39) [Paras 37, 38, 39, 40, 41]

The exceptional Clause was not justifiably invoked on the material before the authorities; continuation of the LOC for nearly three years without sufficient evidence was unsustainable and violated the petitioner's rights

Final Conclusion: The writ petition is allowed. The impugned LOC and its extension are quashed as unsustainable on the facts; however, in the interest of justice the petitioner is directed to intimate respondent no.3 whenever he departs from or enters the country for the next one year. The order does not affect any past or future proceedings that may be initiated against the petitioner.

Charitable purpose - proviso to Section 2(15) of the Income Tax Act, 1961 - exemption under Section 10(23C)(iv) of the Income Tax Act, 1961 - precedent binding effect of a Division Bench mandamus - effect of pending Special Leave Petition and absence of stay - dismissal of appeals covered by earlier judgment

Precedent binding effect of a Division Bench mandamus - effect of pending Special Leave Petition and absence of stay - dismissal of appeals covered by earlier judgment - Whether the appeals filed by the Revenue could be entertained notwithstanding the earlier Division Bench mandamus directing grant of approval to the assessee and a pending Special Leave Petition in the Supreme Court without any stay. - HELD THAT: - The Court recorded that a predecessor Division Bench in [2015 (1) TMI 928 - DELHI HIGH COURT] had issued a mandamus directing the Revenue to grant approval to the assessee under the relevant exemption provision and had set aside the impugned order. The Revenue has preferred a Special Leave Petition against that writ judgment and leave has been granted, but there is no stay of the Division Bench judgment. In these circumstances, and having regard to authoritative principles that a coordinate bench's binding direction must be given effect in the absence of a stay, the Court held that the present appeals are governed by the earlier Division Bench decision. Reliance was placed on the principles in Kunhayammed [2000 (7) TMI 67 - SUPREME COURT (LB)] and Shree Chamundi Mopeds [1992 (4) TMI 183 - SUPREME COURT] establishing that where a prior judgment of a coordinate bench has issued a mandate and is not stayed, subsequent proceedings covered by that judgment must yield to it. Applying those principles, the Court concluded that the appeals and pending applications are dismissed as being covered by the predecessor Division Bench's judgment. [Paras 6]

Appeals dismissed as covered by the earlier Division Bench judgment directing grant of approval; dismissal is warranted because the writ judgment is not stayed despite a pending SLP.

Final Conclusion: The High Court dismissed the Revenue's appeals for the assessment years 2009-10, 2010-11 and 2011-12 on the ground that they are covered by a prior Division Bench mandamus directing grant of approval to the assessee, and that the existence of a pending Special Leave Petition without a stay does not affect the binding operation of that Division Bench judgment.

Reopening of assessment - proviso to section 147 of the Income Tax Act, 1961 - failure to truly and fully disclose material facts - change of opinion - consideration of queries and replies during scrutiny assessment completed under section 143(3) - reimbursement of employee costs - reference to Transfer Pricing Officer under section 92CA(3)

Reopening of assessment - proviso to section 147 of the Income Tax Act, 1961 - change of opinion - consideration of queries and replies during scrutiny assessment completed under section 143(3) - Validity of notice dated 6th March 2019 under section 148 to reopen assessment for Assessment Year 2013-14 more than four years after the end of the relevant assessment year. - HELD THAT: - The proviso to section 147 applies where the original assessment under section 143(3) was completed, placing the burden on the Revenue to demonstrate failure by the assessee to truly and fully disclose material facts. The court examined the assessment record and the assessee's communications (including the letter dated 6th December 2016 and its annexures) showing that queries about foreign remittances and reimbursements of payroll expenses were raised during the original scrutiny and were answered with supporting documents. The Transfer Pricing Officer's report under section 92CA(3) was on record and the subject was referred to and noted in the assessment order, indicating active consideration. A later Assessing Officer taking a different view in a subsequent year (A.Y. 2015-16) amounted to a change of opinion and does not, by itself, satisfy the proviso to section 147. Reliance was placed on the proposition in Aroni Commercials Ltd. Vs. Deputy Commissioner of Income-Tax-2(1) that a query raised during assessment and answered by the assessee is a matter that was under consideration even if the assessment order does not recite the discussion. On these findings, the Court held that the respondents failed to show non-disclosure of material facts justifying reopening beyond four years and that the reassessment notice is therefore invalid. [Paras 15, 16, 17, 18, 19]

Notice dated 6th March 2019 under section 148 for Assessment Year 2013-14 is invalid and quashed.

Failure to truly and fully disclose material facts - reimbursement of employee costs - reference to Transfer Pricing Officer under section 92CA(3) - Whether the assessee had failed to disclose material facts regarding payments described as reimbursements of employee costs so as to permit reassessment beyond four years. - HELD THAT: - The Court found that the assessee had disclosed the nature of foreign remittances and submitted supporting documents including Forms 15CA/15CB and invoices indicating that payments were reimbursements of payroll expenses incurred by overseas subsidiaries. The matter was considered in the original scrutiny by reference to the TPO and by the Assessing Officer, even if the assessment order did not detail the discussion. A subsequent divergent view taken in a later assessment year, supported by additional material obtained in that year, did not establish that the assessee had concealed or failed to disclose material facts in A.Y. 2013-14. Consequently, the statutory threshold under the proviso to section 147 was not met. [Paras 14, 15, 16, 19]

No failure to truly and fully disclose material facts found; reassessment on that ground unsustainable.

Final Conclusion: Writ petition allowed; the notice dated 6th March 2019 under section 148 and the order dated 18th October 2019 rejecting objections are quashed as reopening beyond four years was not justified since the issue was considered in the original scrutiny and the reopening amounted to a prohibited change of opinion.

Reopening assessment - change of opinion - reasonable belief that income has escaped assessment - no power of Assessing Officer to review a concluded assessment - deduction under section 80IB(10)

Reopening assessment - change of opinion - no power of Assessing Officer to review a concluded assessment - reasonable belief that income has escaped assessment - Validity of notice issued under section 148 where reassessment is sought on the basis of the same material on record and an apparent change of opinion by the Assessing Officer. - HELD THAT: - The Court held that the Assessing Officer had before passing the original assessment all primary facts necessary for assessment and had given careful consideration to the claim of deduction; the assessment order records that show-cause was issued and detailed submissions were considered. Where the reopening is founded entirely on the assessment records and seeks to take a different view on matters already considered, it amounts to a change of opinion which does not justify reopening. The Court relied on the principle that an Assessing Officer has no power to review a concluded assessment merely because he forms a different view subsequently, and that a notice under section 148 predicated on the same material already placed before and considered by the AO is unsustainable because the prerequisite of a reasonable belief that income has escaped assessment is not established independently of the prior assessment proceedings. [Paras 6, 7, 8]

Notice dated 12th December 2007 issued under section 148 was quashed as it was based on a change of opinion arising from the same material already considered in the original assessment.

Final Conclusion: The petition is allowed; the notice under section 148 dated 12th December 2007 is quashed and the matter is disposed of with no order as to costs.

Summary order. Notice issued to the respondent returnable on 24.01.2022 and ad interim relief granted in terms of paragraph 10(C); writ petition admitted for further hearing.

Definition of "co-operative society" under Section 2(19) of the Income Tax Act - eligibility for deduction under Section 80P of the Income Tax Act - State law registration as the test for a "co-operative society" under Section 2(19) - deeming provision / legal fiction and its ejusdem generis application - harmonious construction of overlapping State enactments promoting co-operative movement - amendment to statutory definition and relation-back of amendment - repugnancy under Article 254 and limits of its application in the present proceedings

Definition of "co-operative society" under Section 2(19) of the Income Tax Act - eligibility for deduction under Section 80P of the Income Tax Act - State law registration as the test for a "co-operative society" under Section 2(19) - Entities registered under the Karnataka Souharda Sahakari Act, 1997 qualify as "co-operative society" within the meaning of Section 2(19) of the Income Tax Act and are entitled to claim deductions under Section 80P, subject to the statutory scheme. - HELD THAT: - The Court held that the test in Section 2(19) of the Income Tax Act is the fact of registration under the Co-operative Societies Act, 1912 or "under any other law for the time being in force in any State for the registration of co-operative societies." A harmonious reading of the Souharda Act and the Cooperative Societies Act shows both enactments further the cooperative movement; a hyper-technical exclusion of Souharda entities would frustrate the statutory object of Section 80P. The Supreme Court's approach in Mavilayi Service Cooperative Bank Ltd. (interpreting Section 2(19) and Section 80P) supports that registration under a State law enacted for cooperative registration brings the entity within Section 2(19). The Court therefore affirmed the Single Judge's conclusion that the writ petitioners registered under the Souharda Act fall within the definition of "co-operative society" for purposes of Section 80P and may stake a claim to the deduction, subject to other statutory conditions. [Paras 5, 23, 33]

Assessees registered under the Souharda Act are co-operative societies for the purposes of Section 2(19) of the Income Tax Act and may claim benefits under Section 80P.

Amendment to statutory definition and relation-back of amendment - harmonious construction of overlapping State enactments promoting co-operative movement - The substitution to Section 2(e) of the Souharda Act effected by the Karnataka Amendment (No.35/2021) - expressly referencing the Income Tax Act among other enactments - clarifies that Souharda co-operatives are to be treated as co-operative societies for the purposes of the Income Tax Act, and, in the absence of an express prospective date, the amendment relates back to the date of original enactment. - HELD THAT: - The Court noted the substituted definition in Section 2(e) of the Souharda Act includes express deeming for the purposes of the Income Tax Act. The amended provision therefore fortifies the interpretation that Souharda co-operatives are within the ambit of Section 2(19) of the Income Tax Act. The Court observed that, absent an express saving or prospective commencement, the amendment relates back to the original enactment and is applicable to the case at hand. The Court declined to adjudicate on the constitutional validity of the State amendment or on any asserted repugnancy with central legislation, treating the amended provision as applicable for present purposes. [Paras 23, 32]

The amended definition in the Souharda Act applies and, lacking a specified prospective date, relates back to the date of original enactment, supporting the conclusion that Souharda entities are co-operative societies for Income Tax Act purposes.

Deeming provision / legal fiction and its ejusdem generis application - repugnancy under Article 254 and limits of its application in the present proceedings - Arguments that the Souharda Act's deeming provisions or its separate nomenclature produce a legal fiction that cannot be applied to the Income Tax Act were rejected for the purposes of these proceedings; the Court did not decide constitutional challenges of repugnancy but found no basis to deny Section 80P benefits on such grounds. - HELD THAT: - Relying on principles that legal fictions are to be confined to their legislative purpose, the Revenue contended that the deeming language could not be extended to treat a Souharda cooperative as a co-operative society for other statutes. The Court, however, observed that the amended Section 2(e) expressly includes the Income Tax Act among enactments for which a Souharda cooperative shall be deemed a co-operative society. The Court further recorded that it is not adjudicating the constitutional validity of the State amendment; therefore arguments founded on Articles 246 and 254 do not assist the Revenue in this appeal. The Court also emphasised the statutory purpose of Section 80P to promote the cooperative movement and declined to adopt a narrow, hyper-technical construction that would frustrate that object. [Paras 31, 32, 33]

The Revenue's contention that the deeming provision cannot be extended to the Income Tax Act and that repugnancy vitiates the amendment is not accepted for the present adjudication; the Court applied the amended deeming provision to allow the claim under Section 80P.

Tribunal remand and jurisdictional error - administrative remand versus adjudication by the Tribunal - The Court found no jurisdictional error in the Single Judge's order and answered the substantial questions in the Income Tax Appeals in favour of the assessee; the appeals by Revenue were dismissed. - HELD THAT: - The appeals challenged the Tribunal's approach in dealing with the status question and remanding aspects to the Assessing Officer. The High Court, after considering the statutory definitions, constitutional context and the substituted definition in the Souharda Act, concluded there was no infirmity in the Single Judge's order which held that Souharda-registered entities fit within Section 2(19) and thus could claim Section 80P benefits. Consequently the High Court dismissed the writ appeals and answered the substantial questions in the Income Tax Appeals in favour of the assessee and against the Revenue. [Paras 34]

No jurisdictional error was found in the Single Judge's order; Revenue's appeals dismissed and Income Tax Appeals decided in favour of assessees.

Final Conclusion: The High Court dismissed the Revenue's writ appeals and answered the substantial questions in the Income Tax Appeals in favour of the assessees, holding that entities registered under the Karnataka Souharda Sahakari Act are co-operative societies within the meaning of Section 2(19) of the Income Tax Act and may claim deductions under Section 80P; the amended definition in the Souharda Act (Substitution to Section 2(e)) is applicable and relates back in the absence of a specified commencement date.

Exemption under Section 10(5) read with Rule 2B - leave travel concession / leave fare concession - assessee-in-default under Section 201(1) - interest under Section 201(1A) - shortest route / air economy fare of the national carrier - vicarious liability of deductor under Section 192 - bonafide belief / departmental circulars not a defence to statutory non-compliance

Assessee-in-default under Section 201(1) - interest under Section 201(1A) - vicarious liability of deductor under Section 192 - Liability of the Bank as deductor to be declared an assessee-in-default and interest under Section 201(1A) to be levied for failure to deduct tax on LTC reimbursements which did not qualify for exemption. - HELD THAT: - The Court held that the liability under Sections 201(1) and 201(1A) arises when a person responsible for deducting tax under Section 192 fails to do so and is declared an assessee-in-default; interest under Section 201(1A) is compensatory and mandatory once default is established. The Court relied on the principle that the obligation to deduct is a vicarious one and that assessment of default and recovery of tax/interest must follow the statutory scheme. The plea of bonafide belief based on internal service rules or industry circulars does not negate the statutory obligation to deduct tax where the reimbursement is not covered by the statutory exemption. In view of this statutory framework and the factual finding that the reimbursements related to travel arrangements not qualifying for exemption, the authorities were right in holding the Bank to be an assessee-in-default and in applying interest under Section 201(1A). [Paras 20, 21, 22, 26]

The Bank is rightly held an assessee-in-default under Section 201(1) and liable to interest under Section 201(1A).

Exemption under Section 10(5) read with Rule 2B - leave travel concession / leave fare concession - shortest route / air economy fare of the national carrier - Denial of exemption under Section 10(5) read with Rule 2B for reimbursements where the employee undertook journeys including foreign legs or direct overseas travel as part of a consolidated itinerary. - HELD THAT: - The Court interpreted Section 10(5) and Rule 2B as conferring exemption only for travel 'in connection with proceeding on leave to any place in India' and subject to limits such as air economy fare of the national carrier by the shortest route. The Legislature's intention was held to include promotion of domestic travel and refreshment of employees; travel abroad in the guise of LTC is not intended to be covered. Where the itinerary shows direct overseas travel (foreign legs) and the package constitutes consolidated charges for an international tour with incidental Indian travel on return, the exemption cannot be allowed. The Court further held that such consolidated international travel cannot be split for the purpose of claiming exemption under Rule 2B, and reliance on non-statutory circulars or service rules does not confer entitlement to the statutory exemption. [Paras 11, 16, 18, 19, 25]

Exemption under Section 10(5) read with Rule 2B is not available for the LTC reimbursements in question and the denial of exemption was justified.

Bonafide belief / departmental circulars not a defence to statutory non-compliance - exemption under Section 10(5) read with Rule 2B - The Bank's reliance on Indian Banks' Association guidance and internal service rules as a bonafide basis for reimbursing consolidated international tour charges does not absolve it from statutory liability where the reimbursement does not satisfy Section 10(5)/Rule 2B conditions. - HELD THAT: - The Court rejected the contention that accepted banking norms or IBA circulars could substitute for the statutory conditions of exemption. It observed that non-statutory circulars do not govern the tax department and that no departmental clarification was sought by the assessee; consequently, a claimed bonafide belief in existing practice cannot negate the statutory test for exemption. Prior Tribunal orders accepting bonafide estimates in other factual contexts were distinguished and found inapplicable where the itinerary plainly involved foreign travel as part of a consolidated package. [Paras 12, 16, 17, 19, 22]

Reliance on IBA circulars and service regulations does not relieve the Bank from statutory liability; the plea of bonafide belief is untenable in the facts of these cases.

Final Conclusion: All substantial questions of law were answered against the assessee: reimbursements for LTC that include foreign legs in consolidated international itineraries do not qualify for exemption under Section 10(5) read with Rule 2B, the Bank was correctly held an assessee-in-default under Section 201(1) and liable to interest under Section 201(1A), and reliance on non statutory circulars or bonafide belief does not defeat the statutory obligation to deduct tax; appeals dismissed.

Disallowance under section 37(1) as enhancement of profits for Chapter VI-A deduction - deduction under Chapter VI-A / section 80IA on enhanced profits - application of CBDT Circular No.37/2016 regarding allowance of Chapter VI-A deduction on enhanced profits - disallowance under section 14A read with Rule 8D limited to exempt income - MAT credit not forming part of profits eligible for section 80IA deduction

Disallowance under section 37(1) as enhancement of profits for Chapter VI-A deduction - deduction under Chapter VI-A / section 80IA on enhanced profits - application of CBDT Circular No.37/2016 regarding allowance of Chapter VI-A deduction on enhanced profits - Whether the disallowance made by the Assessing Officer by treating cash withdrawals from subcontractors as inflated subcontract payments (added to assessable income) precludes allowance of deduction under section 80IA on the enhanced profits. - HELD THAT: - The Tribunal found the issue materially identical to a coordinate-bench decision in the assessee's own earlier years where the AO's disallowance represented a disallowance under section 37(1) and the payments to subcontractors were business expenditure accepted as turnover by those subcontractors. Applying CBDT Circular No.37/2016, which recognises that disallowances that enhance profits of the eligible business should not ordinarily preclude Chapter VI-A deductions on those enhanced profits, the Tribunal directed that the expenditure disallowed as inflated subcontract payments be treated as enhancing business profits for the purpose of deduction under section 80IA(4) and remitted to the AO to give/allow the deduction accordingly. The Tribunal therefore allowed the assessee's ground and set aside the contrary conclusion of the lower authorities in respect of the specified addition. [Paras 9]

Addition of Rs. 5,45,60,000 treated as disallowance under section 37(1) results in enhanced profits eligible for deduction under section 80IA(4); directed AO to allow deduction.

Disallowance under section 14A read with Rule 8D limited to exempt income - Whether the disallowance under section 14A as computed by the AO can exceed the exempt income (dividend) received by the assessee. - HELD THAT: - On consideration of the material and authorities relied upon by the CIT(A), the Tribunal found no infirmity in the restriction of the disallowance to the extent of the exempt dividend actually received by the assessee. The CIT(A) had accordingly limited the disallowance to the amount of dividend received and deleted the balance of the AO's computation under section 14A. The Tribunal upheld the CIT(A)'s approach and dismissed the assessee's challenge to that restriction. [Paras 11, 12]

Disallowance under section 14A/Rule 8D restricted to the exempt income; CIT(A)'s deletion of the excess disallowance is upheld.

MAT credit not forming part of profits eligible for section 80IA deduction - Whether the MAT credit included in other income is eligible for deduction under section 80IA as part of profits of the eligible business. - HELD THAT: - The CIT(A) held, following the Supreme Court's decision in Liberty India (as applied by the CIT(A)), that MAT credit arises by operation of statutory provisions and is not derived from the eligible business; therefore it does not form part of 'profits' eligible for section 80IA deduction. The Tribunal found no reason to interfere with the CIT(A)'s conclusion and upheld the disallowance of the claimed section 80IA deduction in respect of the MAT credit component. [Paras 17, 18]

MAT credit is not eligible for deduction under section 80IA; CIT(A)'s confirmation of disallowance is upheld.

Deduction under Chapter VI-A / section 80IA on enhanced profits - Revenue's challenge to the CIT(A)'s allowance of section 80IA deduction (i.e., deletion of AO's disallowance) for the assessment years in issue. - HELD THAT: - The CIT(A) allowed the assessee's claim for section 80IA deduction for the relevant projects following earlier decisions in the assessee's own case for adjacent assessment years; the revenue did not place contrary binding authority before the Tribunal. On review of the facts and the CIT(A)'s reasoning, the Tribunal found no infirmity in the CIT(A)'s conclusions and dismissed the revenue's appeals against the allowance of section 80IA in both assessment years. [Paras 21, 23]

Revenue appeals against CIT(A)'s allowance of section 80IA deduction dismissed.

Final Conclusion: The assessee's appeals are partly allowed for AY 2012-13 (deduction under section 80IA allowed on the expenditure disallowed as inflated subcontract payments; section 14A disallowance restricted to exempt income and upheld), and dismissed for AY 2013-14 (MAT credit not eligible for section 80IA). Revenue's appeals against allowance of section 80IA are dismissed; directions issued to the AO to give effect to the Tribunal's findings.

Set off and carry forward of long term capital loss - exemption under section 10(38) - application of section 70(3) to capital gains set off - disallowance under section 14A and Rule 8D - limitation of section 14A disallowance to quantum of exempt income - software licence renewal - capital v. revenue expenditure - apportionment of personal use of helicopter expenses

Set off and carry forward of long term capital loss - exemption under section 10(38) - application of section 70(3) to capital gains set off - Long term capital loss on sale of equity shares (where STT paid) is admissible for set off against long term capital gain and for carry forward despite exemption of certain long term capital gain under section 10(38). - HELD THAT: - The Tribunal accepted the Coordinate Bench reasoning in Raptakos Brett that section 10(38) exempts only a particular stream of capital gain arising from transfer of specified long term equity assets and does not exclude the entire source of capital gains from computation. As shares are capital assets and capital gains/losses on transfer fall within the charging and computation provisions (sections 45, 48, and the set off mechanism in sections 70/71), a loss on such transfer (even where STT was paid on the transaction that may produce exempt gain under section 10(38)) enters the computation and may be set off against other long term capital gains in accordance with section 70(3). The Tribunal found the facts and legal position indistinguishable from Raptakos Brett, noted that the departmental appeal against that decision was dismissed, and rejected the department's contrary precedents as distinguishable or not authoritative in the facts of this case. [Paras 10, 11]

Claim for carry forward and set off of the long term capital loss arising from sale of equity shares is allowed; revenue ground dismissed.

Disallowance under section 14A and Rule 8D - limitation of section 14A disallowance to quantum of exempt income - Disallowance under section 14A read with Rule 8D cannot exceed the amount of exempt income actually earned by the assessee in the year. - HELD THAT: - The Assessing Officer computed a Rule 8D based disallowance exceeding the exempt receipts. The Tribunal agreed with the Commissioner (Appeals) and the line of authority that the section 14A/Rule 8D disallowance should not exceed the exempt income actually received; consequently the higher disallowance made by the AO was restricted to the amount of exempt income declared by the assessee. [Paras 19]

Disallowance under section 14A/Rule 8D restricted to the exempt income actually earned; revenue ground dismissed.

Software licence renewal - capital v. revenue expenditure - Recurring software licence renewal charges paid for use and upgrade of group ERP software are revenue expenditure and not capital in the hands of the assessee. - HELD THAT: - Having regard to the nature of the expenditure - recurring licence renewal for use and upgradation where ownership remained with the software vendor and the assessee's payment preserved the right to use - the Tribunal upheld the Commissioner (Appeals) which treated the expense as revenue. The Tribunal relied on coordinate decisions recognising that most business software requires periodic upgrades, has a short useful life for commercial purposes, and that mere presence of a depreciation rate in the Schedule is not determinative of capital character. [Paras 23, 25]

Software licence renewal charges treated as revenue expenditure; AO's disallowance deleted and revenue ground dismissed.

Apportionment of personal use of helicopter expenses - A portion of helicopter expenses was properly disallowed as personal use; the Commissioner (Appeals) correctly applied the earlier judicial apportionment in the assessee's case (1/7th) and reduced the AO's disallowance accordingly. - HELD THAT: - The AO disallowed 25% of helicopter expenses as non business/personal. The Commissioner (Appeals) relied on the coordinate/earlier assessment year finding in the assessee's own case which quantified personal use at 1/7th. The Tribunal found no reason to disturb that apportionment and sustained the reduction made by the Commissioner (Appeals). [Paras 30, 32]

Disallowance on account of helicopter expenses restricted in accordance with prior apportionment (1/7th); revenue ground dismissed.

Final Conclusion: All revenue appeals against the Commissioner (Appeals) orders for the assessment years in issue (A.Y. 2015 16, A.Y. 2016 17 and A.Y. 2018 19) are dismissed: carry forward and set off of the long term capital loss allowed; section 14A/Rule 8D disallowance limited to exempt income; software licence renewal charges held to be revenue expenditure; and the apportionment of helicopter expenses sustained.

Reopening of assessment under Section 147 read with Section 148 beyond four years - failure to disclose fully and truly all material facts as basis for reassessment - tangible material requirement for reopening - reappraisal of material already on record not a ground for reassessment - deduction under Section 10AA claimed by SEZ unit

Reopening of assessment under Section 147 read with Section 148 beyond four years - failure to disclose fully and truly all material facts as basis for reassessment - tangible material requirement for reopening - reappraisal of material already on record not a ground for reassessment - Validity of reassessment initiated beyond four years on the ground of alleged failure to disclose material facts - HELD THAT: - The Tribunal examined the reasons recorded for issuance of notice under Section 148 and found that the assessing officer relied upon the assessee's own statements of sales and purchases which were furnished during the original assessment proceedings. Reopening beyond four years is permissible only upon satisfaction that there was a failure to disclose fully and truly all material facts; such a serious allegation must be supported by tangible material not previously available. The assessing officer's calculation comparing inter-unit transfers and purchases, without any material showing transfer at non-market rates or other tangible evidence, amounted to mere reappraisal of information already on record. The reasons recorded therefore did not demonstrate the requisite failure to disclose or any new tangible material to justify invoking Section 147, and the reassessment jurisdiction was held to be improperly assumed. [Paras 15, 16, 17, 18, 19]

Jurisdictional assumption for reopening the assessment is invalid; ground allowing reassessment is set aside and the reassessment quashed.

Deduction under Section 10AA claimed by SEZ unit - Claim of deduction under Section 10AA (merits) with respect to the SEZ unit - HELD THAT: - The Tribunal did not adjudicate the substantive correctness of the addition/disallowance under Section 10AA because it quashed the reopening on jurisdictional grounds. The question of entitlement to the claimed deduction, including the assessments of manufacturing activity, inter-unit transfers and value addition, was therefore not examined or decided by the Tribunal and remains undetermined.

Left open for adjudication as the reassessment itself has been held invalid.

Final Conclusion: Appeal allowed: reassessment under Section 147/148 for assessment year 2010 - 11 is quashed for want of tangible material and for being based on reappraisal of material already on record; consequential merits of the Section 10AA claim remain undecided and are left open.

Deeming provision under Section 50C - determination of fair market value by District Valuation Officer - apparent error and rectification under Section 154 - condonation of delay and time bar in filing appeal - consistency in treatment of co owners

Condonation of delay and time bar in filing appeal - deeming provision under Section 50C - Whether the appeal against the order confirming addition under the deeming provision of Section 50C could be entertained despite long delay. - HELD THAT: - The Tribunal applied its earlier reasoning in the appeal of a co owner where the appeal against the CIT(A)'s order under section 143(3) had been held to be time barred for lack of a plausible explanation for delay. The present appeal raises identical facts and issues as the co owner's case and no material distinction was pointed out by Revenue. Applying the principle of consistency and the precedent recorded by the Bench, the Tribunal declined to condone the delay and dismissed the appeal challenging the addition under the deeming provision of Section 50C. [Paras 6]

Appeal dismissed as time barred; addition confirmed.

Apparent error and rectification under Section 154 - determination of fair market value by District Valuation Officer - consistency in treatment of co owners - Whether the order could be rectified under Section 154 by adopting the value determined by the DVO in the co owner's case instead of the higher stamp valuation taken under Section 50C. - HELD THAT: - The Tribunal noted that in a co owner's case the District Valuation Officer had determined a substantially lower value and that the valuation report, though obtained in another co owner's proceedings, was in existence and pertinent to the identical factual matrix. The First Appellate Authority's refusal to treat that DVO valuation as an apparent error was held to be erroneous. For doing complete justice and treating co owners alike, the Tribunal held that rectification under Section 154 was permissible and directed that the Assessing Officer adopt the sale consideration equivalent to that taken in the co owners' cases as determined by the DVO. [Paras 5, 6]

Rectification under Section 154 allowed; Assessing Officer directed to adopt DVO value for computation of capital gains.

Final Conclusion: Appeal against the assessment/CIT(A) order is dismissed as time barred, whereas the rectification petition under Section 154 is allowed and the matter is remitted to the Assessing Officer to compute capital gains adopting the DVO determined value applicable to the co owners.

Concealment of income or furnishing inaccurate particulars of income - requirement of specifying the particular limb of penalty invoked in the penalty notice - principles of natural justice in penalty proceedings (opportunity of hearing) - exemption of capital gain on agricultural land under the definition of capital asset - applicability of penalty framework specific to search cases (Section 271AAA) - assessment and penalty proceedings under notice issued under search and seizure provisions

Requirement of specifying the particular limb of penalty invoked in the penalty notice - principles of natural justice in penalty proceedings (opportunity of hearing) - concealment of income or furnishing inaccurate particulars of income - Validity of penalty under Section 271(1)(c) levied for Assessment Year 2007-08 - HELD THAT: - The Tribunal held that the Revenue failed to identify which limb of the penal provision (whether concealment of income or furnishing inaccurate particulars) was being invoked in the penalty notice, and such vagueness is impermissible. The penalty was also imposed without affording the assessee a hearing, violating the principles of natural justice. On merits the Tribunal accepted the assessee's contention that the land-sale profit was exempt as agricultural land within the statutory definition of capital asset, and therefore the foundation for penalty did not survive. For these reasons the penalty was set aside. [Paras 8, 9]

Penalty set aside for AY 2007-08; appeal allowed.

Requirement of specifying the particular limb of penalty invoked in the penalty notice - principles of natural justice in penalty proceedings (opportunity of hearing) - Validity of penalty under Section 271(1)(c) for Assessment Year 2009-10 - HELD THAT: - The Tribunal found the issues in AY 2009-10 to be identical to AY 2007-08. Because the Revenue did not specify the penal limb in the penalty notice and did not comply with natural justice by affording a proper hearing, the penalty could not be sustained. [Paras 10]

Penalty set aside for AY 2009-10; appeal allowed.

Requirement of specifying the particular limb of penalty invoked in the penalty notice - principles of natural justice in penalty proceedings (opportunity of hearing) - assessment and penalty proceedings under notice issued under search and seizure provisions - Validity of penalty under Section 271(1)(c) for Assessment Year 2010-11 and adequacy of the Revenue's reasoning on claimed expenses - HELD THAT: - The Tribunal held that in AY 2010-11 the penalty notice likewise failed to specify the correct limb and the assessee was not given an adequate hearing, rendering the penalty unsustainable. On the merits the Tribunal accepted the assessee's explanation for the foreign travel expenses (explained as withdrawals from capital account and supported during appellate proceedings), noting that Revenue's imposition of penalty lacked cogent reasoning. [Paras 11]

Penalty set aside for AY 2010-11; appeal allowed.

Applicability of penalty framework specific to search cases (Section 271AAA) - requirement of specifying the particular limb of penalty invoked in the penalty notice - Whether penalty under Section 271(1)(c) could be levied for Assessment Year 2011-12 (search year) - HELD THAT: - The Tribunal concluded that AY 2011-12 was a search year (search dated 21.09.2010) and therefore the special penalty regime for search cases governed the liability; invoking ordinary Section 271(1)(c) was incorrect. Relying on precedent, the Tribunal held that the Revenue invoked incorrect provisions and the error could not be attributed to the assessee. [Paras 12]

Penalty under Section 271(1)(c) not sustainable for AY 2011-12; appeal allowed.

Final Conclusion: All four appeals (AYs 2007-08, 2009-10, 2010-11 and 2011-12) allowed; penalties set aside because the penalty notices failed to specify the penal limb, principles of natural justice were not followed, the capital-gain exemption on agricultural land was upheld for the lead year, and the search-year penalty regime applied for 2011-12.

Disallowance of expenditure on cost of production of feature films - rule 9A compliance for claiming film production expenses - onus of verification and production of supporting particulars by the assessee - reasonableness of ad-hoc disallowance where duplication and lack of verification observed

Disallowance of expenditure on cost of production of feature films - rule 9A compliance for claiming film production expenses - onus of verification and production of supporting particulars by the assessee - reasonableness of ad-hoc disallowance where duplication and lack of verification observed - Validity of confirming 50% disallowance of claimed film production expenses by the Commissioner (Appeals). - HELD THAT: - The Tribunal upheld the stand of the Commissioner (Appeals) that although the assessee was legally entitled to revenue from the feature film, the claimed production expenditure required verification. The Assessing Officer sought further particulars and noted non-compliance with rule 9A, and the remand report recorded that only a ledger was furnished while other details called for were not produced. The Commissioner (Appeals) also relied on the fact that substantial production expenses were claimed by another party in respect of the same film, raising the possibility of duplicative claims. In those circumstances, and in the absence of any material from the assessee to controvert these findings, the Commissioner (Appeals) was justified in applying a fair and reasonable ad hoc measure - disallowing 50% of the claimed expenses - because the expenditures had not been subjected to adequate verification and duplicity could not be ruled out. The Tribunal found no reason to interfere with this conclusion.

The confirmation of a 50% disallowance of the claimed film production expenses by the Commissioner (Appeals) is sustained and the assessee's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal for Assessment Year 2012-13, upholding the Commissioner (Appeals)'s confirmation of a 50% disallowance of the claimed film production expenses on grounds of non verification and potential duplication, in absence of contrary material from the assessee.

Registration under section 12A - genuineness of objects - satisfaction of registering authority at registration stage - principles of natural justice - reconsideration and remand for fresh examination

Registration under section 12A - genuineness of objects - principles of natural justice - The rejection of the assessee's application for registration was not sustainable because the Memorandum of Association and bye-laws filed with Form No.10A were not considered and the registering authority failed to satisfy itself about the genuineness of the objects before refusing registration. - HELD THAT: - The Tribunal found on the record that the assessee had filed the amended Memorandum of Association and bye-laws along with Form No.10A. The Registering Authority (CIT(E)) did not draw any adverse inference from the objects but rejected the application on the ground that the pre-amended MOA was not filed and on other matters such as non-filing of Receipt and Payment Account and unveracity of income and expenditure, without calling for explanation or considering the objects already submitted. The Tribunal emphasised that at the registration stage the Authority must be satisfied about the charitable nature and genuineness of the objects and cannot refuse registration without proper consideration of the material furnished and without affording opportunity to explain disputed aspects. For these reasons the Tribunal held the rejection to be improper and unsupportable on the materials placed before the CIT(E). [Paras 5]

Rejection set aside insofar as it proceeded without proper consideration of the MOA and objects and without affording requisite opportunity.

Reconsideration and remand for fresh examination - satisfaction of registering authority at registration stage - The matter was remitted to the CIT(E) for fresh consideration of the application limited to examination of the objects and satisfaction about genuineness, with direction to grant the assessee adequate opportunity. - HELD THAT: - Having concluded that the CIT(E) failed to consider the MOA and bye-laws in proper perspective and relied on irrelevant grounds, the Tribunal restored the file to the CIT(E) for reconsideration. The scope of the remand is confined to examining the objects of the society and satisfying itself about the genuineness of those objects at the registration stage; the CIT(E) must grant the assessee adequate opportunity to support its claims before passing a fresh order. The Tribunal did not decide the merits of registration but directed a de novo administrative consideration confined to these aspects. [Paras 5, 6]

File restored to CIT(E) for fresh consideration limited to objects and genuineness; assessee to be given adequate opportunity.

Final Conclusion: Appeal allowed for statistical purposes; the order refusing registration is set aside and the file is remitted to the CIT(E) for fresh consideration of the assessee's objects and their genuineness, with opportunity to the assessee before a fresh order is passed.

Proper officer - jurisdiction of the Directorate of Revenue Intelligence to issue show-cause notices - notice under Section 28 of the Customs Act - invalidity of notifications purporting to assign customs functions when issued without statutory power - entrustment of functions under Section 6 of the Customs Act

Proper officer - jurisdiction of the Directorate of Revenue Intelligence to issue show-cause notices - notice under Section 28 of the Customs Act - Impugned show-cause notice issued by the Additional Director General, Directorate of Revenue Intelligence, is invalid for want of jurisdiction as the DRI officer was not a 'proper officer' competent to issue a notice under Section 28 of the Customs Act. - HELD THAT: - Having applied the law as laid down by the Supreme Court in Canon India Private Limited, the court accepted the principle that only an officer of customs who is specifically assigned the functions in terms of Section 2(34) can be a 'proper officer' to issue a notice under Section 28. A notification by the Board purporting to assign functions under Section 2(34) cannot validly confer powers that the Board lacks; where entrustment of functions upon officers who are not customs officers was intended, it had to be done by the Central Government in exercise of Section 6. Consequently, show-cause proceedings initiated by the Additional Director General, DRI, which lack statutory authority to act as a 'proper officer' under Section 28, are invalid. The court further noted that pendency of a review petition against the Supreme Court decision does not diminish its precedential effect for the purpose of these proceedings.

Impugned show-cause notice issued by the Additional Director General, DRI, set aside as invalid for want of jurisdiction; consequential reliefs granted (discharge of guarantees and refund of any deposits).

Final Conclusion: The petition is allowed: the show-cause notice issued by the Additional Director General, DRI, is quashed for lack of authority to act as a 'proper officer' under Section 28 of the Customs Act; guarantees, if any, stand discharged and deposits, if any, are refundable.

Eligibility clause - strict compliance of conditions of exemption notification - essentiality certificate - authority prescribed under an exemption notification - effect of expiry/rescission of a notification and Section 159A - rescinded/expired temporary notification - alternative claim under subsequent exemption notification - smuggling/confiscation under Section 111 of the Customs Act, 1962

Eligibility clause - essentiality certificate - strict compliance of conditions of exemption notification - authority prescribed under an exemption notification - Entitlement of the Rig Trident II (imported April 1988) to exemption under Notification No.516/86 on the strength of an Essentiality Certificate issued on 21.12.2001 - HELD THAT: - Notification No.516/86 granted exemption subject to production of an essentiality certificate from an officer not below the rank of Deputy Secretary in the Ministry of Petroleum and Natural Gas and a certificate from an authorised officer of the Directorate General of Technical Development. The Tribunal and this Bench examined whether an Essentiality Certificate issued on 21.12.2001 by a Deputy General Manager (EC), Directorate General of Hydrocarbons, satisfied those prescribed conditions. The Court held that conditions of an exemption notification must be strictly complied with and that where the legislature prescribes a particular authority to issue a certificate, that requirement cannot be dispensed with by internal executive action. Since the certificate was not issued by the authority specified in Notification No.516/86 and there was no legislative sanction for an alternate issuing authority, the certificate could not establish the appellants' entitlement. The factual matrix reinforced this conclusion: at the time of import no bill of entry was filed, the rig had been seized and the confiscation finding was affirmed by this Bench and by the Apex Court; the essentiality certificate was applied for and issued long after the rescission/expiry of the Notification and after final assessment. The Court distinguished precedents relied upon by the appellants (where applications for certificates were made before or at the time of filing of bills of entry and assessments remained provisional), observing that each case turns on its facts. For these reasons the condition precedent in Notification No.516/86 was not fulfilled and the appellants were not entitled to the exemption. [Paras 26, 32, 33, 34, 35]

Claim of exemption under Notification No.516/86 on the basis of the Essentiality Certificate dated 21.12.2001 is rejected; conditions of the notification were not complied with and the certificate is not effective to confer exemption.

Effect of expiry/rescission of a notification and Section 159A - rescinded/expired temporary notification - strict compliance of conditions of exemption notification - Whether a vested right to exemption under Notification No.516/86 survived its expiry/rescission so as to entitle the appellants to exemption - HELD THAT: - The appellants relied on Section 159A and on authorities holding that an accrued right to exemption may survive rescission of a notification. The Bench considered those submissions but found that, on the facts of this case, the substantive conditions of the notification (notably possession of the prescribed essentiality certificate issued by the specified authority and proper importal/assessment procedure) were not met at the relevant time. Additionally, the impugned goods had been seized and confiscation upheld, features that distinguish this case from precedents where delayed certificates were accepted. Given the non fulfillment of the notification's conditions and the particular factual findings (no bill of entry at import, seizure, affirmed confiscation), the Court held that the appellants could not rely on any supposed accrued right to secure the exemption. [Paras 32, 33, 35]

No surviving entitlement to exemption on the facts; rescission/expiry of the notification does not assist when the notification's conditions were not fulfilled at the relevant time.

Alternative claim under subsequent exemption notification - strict compliance of conditions of exemption notification - Maintainability of the appellants' alternative claim for exemption under Notification No.17/2001 - HELD THAT: - The appellants advanced an alternative case under Notification No.17/2001 (and earlier successor notifications). The Bench examined the conditions of that notification (including applicability only to certain contracts and temporal conditions such as contracts issued or renewed after specified dates) and the factual matrix (contract expiry in 1994, classification of the rig, and absence of necessary contractual links required by the notification). The Tribunal found that the cumulative conditions of Notification No.17/2001 were not satisfied on the facts of the case, and therefore the alternative claim could not succeed. Procedural objections about raising new grounds at a late stage were noted by the revenue but the Court disposed the alternative claim on merits by finding non compliance with the notification's conditions. [Paras 37, 38]

Alternative plea under Notification No.17/2001 is not maintainable as its conditions are not satisfied on the facts.

Final Conclusion: The appeal is dismissed. The appellants are not entitled to exemption under Notification No.516/86 based on the Essentiality Certificate dated 21.12.2001, and the alternative claim under Notification No.17/2001 also fails; the impugned order upholding rejection of the exemption and related reliefs is upheld.

Penalty under Section 114(iii) of the Customs Act - Confiscation under Section 113 of the Customs Act - Redemption fine under Section 125 of the Customs Act - Vicarious liability of an employee / authorised signatory - Knowledge/mens rea for imposition of penalty - Role of Custom House Agent in preparation of Shipping Bill

Penalty under Section 114(iii) of the Customs Act - Vicarious liability of an employee / authorised signatory - Knowledge/mens rea for imposition of penalty - Role of Custom House Agent in preparation of Shipping Bill - Whether the appellant, an employee who signed the shipping bill on employer's instruction, was liable to the penalty imposed under Section 114(iii) for alleged overvaluation of export goods - HELD THAT: - The Tribunal found on the material before it that the value of the goods was fixed by the proprietor and documented in an invoice signed by the proprietor and transmitted to the appellant by the manager. The shipping bill was prepared by a Custom House Agent using the invoice and additional details supplied by the manager; the appellant, who had limited education and no expertise in valuation or manufacture, merely signed the shipping bill on authorization and at the employer's direction. There was no finding that the appellant participated in manufacturing, valuation, or in creating the modus operandi of the fraudulent export, nor that he derived any benefit from the overvaluation. The adjudicating authority had attributed the mastermind of the scheme to the proprietor and the manager. In these circumstances the Tribunal held that imposing the full penal measure was not justified: liability for penalty under Section 114(iii) requires a connection between the person's act or omission and the goods being rendered liable to confiscation, which on the facts was established against the proprietor and manager but not against the appellant beyond his act of signing the shipping bill prepared by others. While the appellant's signature did expose him to some culpability, the Tribunal considered only a token punishment appropriate given his subordinate role, lack of knowledge of valuation, reliance on employer's documents and instructions, and absence of evidence of personal involvement in the fraudulent scheme. [Paras 4, 5]

Penalty reduced from Rs. 75,00,000 to a token penalty of Rs. 25,000; appeal partly allowed.

Final Conclusion: On the facts the appellant, a low educated subordinate who signed the shipping bill on his employer's instruction and on the basis of documents prepared and signed by the proprietor and filled by the CHA, was not the architect of the overvaluation; the Tribunal accordingly reduced the penalty to a token amount and partly allowed the appeal.

Maintainability of appeal - Appellate Tribunal's jurisdiction - Prohibition on appeals to Appellate Tribunal in respect of baggage under proviso to Section 129A(1) - Availability of revision before Central Government under Section 129DD

Maintainability of appeal - Appellate Tribunal's jurisdiction - Prohibition on appeals to Appellate Tribunal in respect of baggage under proviso to Section 129A(1) - Whether the appeal before the Appellate Tribunal under Section 129A of the Customs Act is maintainable where the order relates to goods imported as baggage. - HELD THAT: - The Tribunal examined the facts that the impugned action arose from a baggage search in which yellow material was found in the appellant's baggage. The proviso to Section 129A(1) expressly bars appeals to the Appellate Tribunal in respect of orders falling under Clause (b) of Section 129A(1) when such orders relate to goods imported or exported as baggage. Given that the present order concerns goods imported as baggage, the proviso removes the Tribunal's jurisdiction to entertain the appeal. The bench also noted that the statutory scheme provides for revision to the Central Government under Section 129DD, indicating an alternative remedy rather than an appeal to the Tribunal. Applying these provisions and the facts as found, the Tribunal concluded it had no jurisdiction to decide the appeal.

The appeal is not maintainable before the Appellate Tribunal as the proviso to Section 129A(1) bars appeals in respect of orders relating to baggage; appeal dismissed for want of jurisdiction.

Final Conclusion: The Appellate Tribunal dismissed the appeal for want of jurisdiction because the proviso to Section 129A(1) precludes appellate jurisdiction in respect of orders relating to goods imported as baggage; a revision remedy before the Central Government under Section 129DD remains available.

Admissibility of advance ruling where question is pending before customs, appellate tribunal or court - Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases - Automatic regulating or controlling instruments and apparatus - Classification determined by the terms of the headings and any relative Section or Chapter Notes - Preference for the most specific heading under Rule 3 of the General Rules for Interpretation - Determination of classification by the condition of the goods at the time of import - Application of HSN Explanatory Notes in tariff classification

Admissibility of advance ruling where question is pending before customs, appellate tribunal or court - Advance ruling as a facilitative mechanism - Whether the Authority should decline the advance ruling applications on the ground that a related appeal by the applicant is pending before the Tribunal. - HELD THAT: - Section 28-I(2) bars allowing an application where the question raised is already pending in the applicant's case before a customs officer, the Appellate Tribunal or any Court. The Authority also noted the WCO Technical Guidelines that an advance ruling application should relate to one good. However, rejecting the present applications solely because a similar dispute is pending would frustrate the purpose of advance rulings, which are facilitative and intended to provide certainty prior to importation. The pending appeal relates to different products not included in these twelve applications. On that basis, and having regard to the facilitative object of the advance ruling process, the Authority proceeded to consider the applications on merits rather than rejecting them as inadmissible under Section 28-I(2). [Paras 8]

Applications were admitted for consideration on merits despite the existence of a pending appeal concerning different products.

Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases - Automatic regulating or controlling instruments and apparatus - Classification determined by the terms of the headings and any relative Section or Chapter Notes - Preference for the most specific heading under Rule 3 of the General Rules for Interpretation - Determination of classification by the condition of the goods at the time of import - Application of HSN Explanatory Notes in tariff classification - Classification of the listed flowmeters whether under Heading 90.26 (measuring instruments) or Heading 90.32 (automatic regulating or controlling instruments). - HELD THAT: - The products are Coriolis-based multi-variable flowmeters which measure mass flow (and other parameters such as density and temperature) and provide the measured values visually or as electrical/digital outputs. The HSN Explanatory Notes to Heading 90.26 expressly cover flowmeters and permit instruments of this heading to be fitted with transmitters providing electrical outputs. Heading 90.32, by contrast, requires a system comprising a device for measuring, a device for controlling, and a starting/stopping/operating device. The Authority found no material in the product catalogues or submissions to show that the goods imported are themselves capable of independently performing automatic controlling or regulating functions; rather they are measuring instruments whose outputs may be used by separate control systems. Classification must be based on the state and principal function of the goods at importation. Applying Rule 1 and Rule 3 of the General Rules for Interpretation and the HSN Explanatory Notes, the flowmeters fall squarely within Heading 90.26 and are not per se automatic regulating or controlling apparatus under Heading 90.32. The Authority also considered and rejected the reasoning of the earlier Commissioner (Appeals) decision to the extent it classified certain measuring devices as parts of control systems, reiterating that subsequent use or incorporation into a control system does not alter classification of the imported goods themselves. [Paras 9, 10]

The listed instruments are classifiable as measuring flowmeters under Heading 90.26 and specifically under sub-heading 9026 10 10.

Final Conclusion: The Authority admitted the applications for hearing notwithstanding a pending appeal concerning different products, and ruled that the listed Coriolis flowmeters are classifiable as measuring instruments under Heading 90.26, specifically under sub heading 9026 10 10, and not as automatic regulating or controlling apparatus under Heading 90.32.

Advance ruling - concessional rate of duty for scrap of stainless steel - classification of stainless steel scrap under Heading 7204 - supersession of exemption notification and change of law - infructuousness of proceedings - advance ruling under Section 28H and validity under Section 28J(2) of the Customs Act - prohibition on issuing rulings on hypothetical questions

Advance ruling - concessional rate of duty for scrap of stainless steel - classification of stainless steel scrap under Heading 7204 - supersession of exemption notification and change of law - infructuousness of proceedings - prohibition on issuing rulings on hypothetical questions - advance ruling under Section 28H and validity under Section 28J(2) of the Customs Act - Whether the applicant's advance ruling application seeking concessional duty treatment for stainless steel scrap remains maintainable in view of subsequent amendments to the exemption notifications and whether an advance ruling can be issued on the original request. - HELD THAT: - The Authority examined the factual and legal matrix and found that the exemption notification relied upon in the original 2013 application had been superseded by subsequent notifications and amendments which materially changed the tariff treatment of goods under Heading 7204. The amending notification altered the entries so that the earlier 'Nil' concession no longer existed for the relevant goods with effect from the date specified, and consequentially the law and facts as they stood at the time of the original application are no longer extant. The Authority applied the statutory scheme governing advance rulings, noting that such rulings may be given only in respect of issues covered by Section 28H and remain in force only so long as the law and facts remain unchanged under Section 28J(2). On that basis the Authority held that it is not permissible to entertain a request to issue an advance ruling on a hypothetical proposition predicated on a superseded notification or on facts/law that no longer exist. Given that the operative legal position had changed, the application had become infructuous and could not be adjudicated on its original basis.

The application is rejected as infructuous because the exemption notification relied upon has been superseded and an advance ruling cannot be issued on a hypothetical or non existent legal/factual basis.

Final Conclusion: The Advance Ruling application of M/s. ELG India Pvt. Ltd. is dismissed as infructuous: the exemption relied upon was superseded and the Authority cannot issue a ruling on a hypothetical or changed legal position.

Manufacture - repacking and labelling as manufacture under Foreign Trade Policy - scope of "manufacture" wider than Section 2(f) of the Central Excise Act - inter-unit transfer between 100% EOUs - similar goods versus same goods under CBEC Circular No.7/2006 - application of CBEC Circular No.314/30/97 to EOUs

Manufacture - repacking and labelling as manufacture under Foreign Trade Policy - scope of "manufacture" wider than Section 2(f) of the Central Excise Act - application of CBEC Circular No.314/30/97 to EOUs - Repacking and labelling of imported goods by a 100% EOU amounts to "manufacture" for purposes of export policy and exemption notifications. - HELD THAT: - The Court held that for a 100% EOU the definition of "manufacture" in the Foreign Trade Policy (Chapter 9.37) is wide and expressly includes processes such as re-packing and labelling. Circular No.314/30/97-CX clarifies that the term "manufacture" for the purpose of export notifications is broader than the definition under Section 2(f) of the Central Excise Act, 1944, and exemption under EOU/FTP provisions may extend to such activities. Earlier decisions interpreting Section 2(f) narrowly (e.g., requiring repacking from bulk to retail packs to constitute manufacture) do not restrict the wider FTP meaning applicable to EOUs. Applying these provisions and the Circular, the Tribunal's conclusion that labelling/repacking amounts to manufacture in the present EOU context was upheld. [Paras 16, 17, 18]

The finding that repacking and labelling constitute manufacture for the purposes of the Foreign Trade Policy and relevant notifications is upheld.

Inter-unit transfer between 100% EOUs - application of precedent on diversion between EOUs - Transfer/diversion of raw materials from one 100% EOU unit to another 100% EOU unit is covered by precedent and cannot be treated as denial of exemption where both units are EOUs. - HELD THAT: - The Court noted that the goods diverted from the Bengaluru unit to the Venkatapura unit, both being 100% EOUs, fall squarely within the principle laid down in Sunil Kumar Jain and Others (as relied upon by the Tribunal and affirmed by the Apex Court). The Tribunal's reliance on that precedent in holding the inter-unit transfer to be permissible (and that failure to obtain prior permission was a procedural lapse not warranting denial of exemption) was accepted. The Revenue's contention that inter-transfer benefits are limited to manufactured and capital goods and not raw materials was not sustained in light of the cited authority. [Paras 11]

The Tribunal's acceptance of inter-unit transfer between EOUs, based on the cited precedent, is upheld.

Similar goods versus same goods under CBEC Circular No.7/2006 - CBEC Circular No.7/2006-Cus. legitimately permits treating DTA sales of goods as commercially "similar" to export goods for eligibility purposes; the Tribunal's application of the Circular to olives was correct. - HELD THAT: - The Court found no fault with the Tribunal's reasoning that the Circular's explanation of "similar goods"-goods having like characteristics and being commercially interchangeable with exported goods produced by the same unit-applies to the facts. The Tribunal's conclusion that olives sold in the domestic tariff area could be treated as similar to previously exported olives under the same licence/LOP and hence eligible under the FTP/Circular was sustained. [Paras 12]

The Tribunal's reliance on CBEC Circular No.7/2006 and its conclusion on eligibility of the domestic sales as involving "similar goods" is upheld.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding the Tribunal's findings that (a) repacking and labelling constitute "manufacture" under the Foreign Trade Policy and relevant Circulars for a 100% EOU, (b) inter-unit transfer between two 100% EOUs is governed by the cited precedent and does not by itself defeat exemption, and (c) CBEC Circular No.7/2006 was correctly applied to treat the domestic sales as involving "similar goods".

Maintainability of company petition under Section 130 and related exclusions under Notification No. 464(E) of MCA - fiduciary duty of directors and management under Articles of Association - related party transactions and compliance with Section 188 - requirement to convene Annual General Meetings under Section 96 - invalidity and consequences of contracts entered into in breach of Articles and Section 188

Maintainability of company petition under Section 130 and related exclusions under Notification No. 464(E) of MCA - Company Petitions are maintainable and the claim of exemption under Notification No. 464(E) cannot be availed by the respondents on the facts of these petitions - HELD THAT: - The Tribunal considered the respondents' reliance on Notification No. 464(E) and held that the respondents bore the burden of proving eligibility for any statutory exemption; the record did not establish satisfaction of the notification's conditions. The Tribunal found from the documents and statements that related party transactions had been used to the prejudice of other shareholders and therefore the claimed exemption could not be invoked as a cloak to siphon funds. The technical objection to maintainability was accordingly rejected as a mere foil to contest the petitions (see reasoning at paras 41 and following). [Paras 41]

Objection on maintainability based on Notification No. 464(E) is rejected and the petitions are held maintainable

Fiduciary duty of directors and management under Articles of Association - requirement to convene Annual General Meetings under Section 96 - The 2nd Respondent acted in breach of the Articles of Association and failed to comply with the statutory requirement to hold Annual General Meetings for the relevant years - HELD THAT: - The Tribunal examined the Articles (Clauses 34 and 44) and authoritative authorities on the binding nature of Articles and the trusteeship/fiduciary role of directors. It found that AGMs for the years in question were not convened in compliance with the Companies Act and the Articles, and that notices and procedures required by statute were not shown to have been observed. The conduct complained of demonstrated exercise of management powers in a manner contrary to the Articles and to the duty of directors to act for the company's benefit (see paras 42-49). [Paras 48]

Findings recorded that the AGMs were not conducted as required and that the 2nd Respondent breached the Articles and attendant fiduciary duties

Related party transactions and compliance with Section 188 - invalidity and consequences of contracts entered into in breach of Articles and Section 188 - The transactions between the companies and identified related parties fall within Section 188 and, having been entered into without requisite board or shareholder approval, are in breach of law and the Articles and are declared invalid - HELD THAT: - Applying the statutory definition of 'related party' and the requirements of Section 188, the Tribunal analysed the companies' accounts and found loans, leases/occupations and payments involving persons and entities within the related-party ambit. The Tribunal rejected the respondents' characterisation of those dealings as mere commercial transactions outside Section 188, observing that requisite board resolutions and, where applicable, shareholder approvals were not obtained and the contracts were not properly disclosed. Consequently the Tribunal held such related party transactions and any proceedings done in violation of the Articles to be contrary to law and invalid. As the finding of illegality was dispositive, the Tribunal declined to order a further investigation or impose penalties in these petitions, treating other reliefs as consequential (see paras 50-56). [Paras 56]

Related party transactions identified are contrary to Section 188 and the Articles and are declared invalid; consequential reliefs follow but no separate investigation or penalties were ordered in these petitions

Final Conclusion: The Tribunal dismissed the technical objection to maintainability, found breaches of the Articles and statutory AGM requirements by the management, and held that the identified related party transactions entered without requisite approvals are invalid; the three Company Petitions are disposed of accordingly and interlocutory applications are closed.

Sanction of Scheme of Amalgamation under Section 230(6) read with Section 232(3) of the Companies Act, 2013 - Vesting of assets and liabilities upon amalgamation - Service and compliance with regulatory authorities (including Reserve Bank of India and Income tax authorities) - Requirement of shareholder consents and dispensation of meetings - Adjustment of authorized share capital and allotment of shares - Compliance with accounting standards and payment of stamp duty - Filing of schedule of assets and dissolution of transferor companies

Sanction of Scheme of Amalgamation under Section 230(6) read with Section 232(3) of the Companies Act, 2013 - Requirement of shareholder consents and dispensation of meetings - The Scheme of Amalgamation between Citizen Tracom Private Limited and Kalptaru Commodity Private Limited with Asish Finance Private Limited is sanctioned with appointed date 1 April 2020. - HELD THAT: - The Tribunal examined the petition, the statutory compliance affidavits, the report of the Official Liquidator (which recorded no complaints and that affairs of the transferor companies did not appear prejudicial to members or public interest), and the representations of the Regional Director. The Tribunal noted that the scheme had been approved by the respective boards, that all shareholders of the petitioner companies had given affidavits of consent and that meetings of equity shareholders and of secured and unsecured creditors had been dispensed with where appropriate. On considering these materials and the submissions of the parties, the Tribunal found that statutory formalities requisite for sanctioning the scheme were complied with and that the scheme was bona fide and in the interests of all concerned, and therefore sanctioned the scheme.

Scheme sanctioned by the Tribunal with appointed date fixed as 1 April 2020.

Vesting of assets and liabilities upon amalgamation - Continuation of pending proceedings by transferee company - All properties, rights, interests, liabilities and duties of the transferor companies stand transferred to and vested in Asish Finance Private Limited without further act or deed; suits and proceedings by or against the transferor companies shall continue by or against the transferee company. - HELD THAT: - Pursuant to the sanctioned scheme and under Section 232 of the Companies Act, 2013 read with the relevant rules, the Tribunal ordered that all estates, interests and obligations of Citizen Tracom Private Limited and Kalptaru Commodity Private Limited be transferred to and become those of Asish Finance Private Limited, subject to existing charges. The order provides for the continuation of any proceedings and appeals by or against the transferor companies in the name of the transferee company.

Assets, rights and liabilities transferred and suits/proceedings to continue by or against the transferee company.

Adjustment of authorized share capital and allotment of shares - Compliance with accounting standards and payment of stamp duty - Service and compliance with regulatory authorities (including Reserve Bank of India and Income tax authorities) - Filing of schedule of assets and dissolution of transferor companies - Transferee company to issue and allot shares as per the scheme (and increase authorized share capital if necessary); undertakings given regarding accounting standards, stamp duty and fee adjustments; schedule of assets to be filed and transferor companies to be dissolved from the effective date. - HELD THAT: - The Tribunal directed Asish Finance Private Limited to issue and allot shares to the shareholders of the transferor companies in accordance with the scheme and to increase its authorized share capital if necessary. The transferee company gave undertakings to comply with applicable accounting standards (AS 14/Ind AS 103 and other relevant standards), to adjust filing fees on clubbing of authorized capital and to pay applicable stamp duty on transfer of immovable properties. The record shows service upon regulatory authorities, an application to the Reserve Bank of India for no objection (NOC) and that Income tax authorities had not filed objections; the Tribunal accepted the undertakings and compliance affidavits. The Tribunal further ordered that the schedule of assets be filed within 60 days and that certified copies of the order be delivered to the Registrar of Companies within 30 days; on the effective date the transferor companies shall stand dissolved.

Directions issued for allotment/increase of authorized capital if required, compliance with accounting and stamp duty obligations, filing of schedule of assets, and dissolution of transferor companies.

Final Conclusion: The Tribunal allowed the petition and sanctioned the Scheme of Amalgamation between the two transferor companies and Asish Finance Private Limited with appointed date 1 April 2020, ordered vesting of assets and liabilities in the transferee, directed allotment of shares and related compliance (including filings, accounting standards, stamp duty and fee adjustments), required filing of the schedule of assets and directed dissolution of the transferor companies from the effective date.

Maintainability of Section 7 application despite existence of mortgage security - overriding effect of the Insolvency and Bankruptcy Code under Section 238 on instruments - choice of remedy vested in mortgagee - realisation of security versus initiation of insolvency proceedings - doctrine of stare decisis and per incuriam exception for coordinate Bench decisions

Maintainability of Section 7 application despite existence of mortgage security - overriding effect of the Insolvency and Bankruptcy Code under Section 238 on instruments - choice of remedy vested in mortgagee - realisation of security versus initiation of insolvency proceedings - Section 7 application by the Financial Creditor was maintainable notwithstanding the existence of a registered mortgage and provisions in the mortgage deed prescribing sale/realisation of secured assets. - HELD THAT: - The Tribunal found there was no dispute as to debt or default by the Corporate Debtor (recorded at paragraph 29). Examination of the mortgage deed showed no embargo preventing the mortgagee from pursuing other remedies; clauses relied on by the Appellant (including clause 11.3 and clause 19.4) expressly preserved other rights and remedies available to the mortgagee (paras 6-9). More fundamentally, the I&B Code contains an overriding provision: Section 238 renders the Code effective notwithstanding anything inconsistent in any other law or instrument. A registered mortgage is an instrument and therefore cannot prevail over the Code where inconsistent; accordingly the Financial Creditor was entitled to invoke the special remedy under Section 7 once default occurred (paras 10-11, 20-21). The Adjudicating Authority therefore did not err in admitting the Section 7 petition. [Paras 11, 21, 29]

Application under Section 7 was maintainable and rightly admitted; the mortgage did not bar initiation of insolvency proceedings.

Doctrine of stare decisis and per incuriam exception for coordinate Bench decisions - The co ordinate Bench decision in Beacon Trusteeship Limited was not a binding precedent on the Adjudicating Authority in the present matter and need not be followed. - HELD THAT: - While the doctrine of stare decisis ordinarily binds coordinate Benches of the Tribunal, a decision rendered in ignorance of a binding statute or authority is per incuriam and is an exception to that rule. The Adjudicating Authority had given reasons for not following a particular co ordinate Bench decision (para 28). More significantly, the Tribunal observed that the Beacon decision did not advert to Section 238 of the I&B Code and therefore was rendered per incuriam; a judgment so rendered is not a binding precedent (paras 12, 18). The Tribunal also noted that NCLT judgments from other jurisdictions are of persuasive value only. On that basis, no error arises from the Adjudicating Authority's refusal to follow Beacon Trusteeship Limited. [Paras 18, 21, 28]

The co ordinate Bench decision relied upon was not followed; it was not binding in the circumstances and did not require the Adjudicating Authority to reject the Section 7 petition.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly admitted the Section 7 application: the mortgage did not bar initiation of insolvency proceedings and the co ordinate Bench decision relied upon was not binding as it failed to consider the overriding effect of Section 238 of the I&B Code.

Maintainability of insolvency application in view of increased jurisdictional threshold - jurisdiction of the adjudicating authority raised by notification - bar under Section 10A of the IBC and its cut off date - distinction between initiation of CIRP and commencement/insolvency commencement date - change in law regarded as procedural and its application to pending causes of action

Maintainability of insolvency application in view of increased jurisdictional threshold - jurisdiction of the adjudicating authority raised by notification - change in law regarded as procedural and its application to pending causes of action - Application filed before the Adjudicating Authority on 15.09.2020 for recovery of the claimed debt (amount below the revised threshold) is not maintainable in view of the notification raising the jurisdictional threshold. - HELD THAT: - The Tribunal noted that the Central Government notification dated 24.03.2020 raised the monetary threshold for jurisdiction under the Code, thereby increasing the jurisdictional limit applicable to applications filed after that date. The application before the Adjudicating Authority, though relating to earlier invoices, was filed on 15.09.2020 when the increased threshold was in force. The Tribunal treated the change in threshold as a procedural change which a party must accept even if the actionable cause arose before the amendment. Applying these principles, and having regard to the object's compatibility with the reasoning in the cited Supreme Court decision on Section 10A and related distinctions, the Tribunal concurred with the Adjudicating Authority's conclusion that the application was not maintainable.

The application is not maintainable; the appeal is dismissed.

Bar under Section 10A of the IBC and its cut off date - distinction between initiation of CIRP and commencement/insolvency commencement date - The legal distinction between initiation of CIRP (filing of application) and commencement (admission) and the operation of the legislative bar enacted by Section 10A as explained in the cited Supreme Court authority was accepted and applied by the Tribunal. - HELD THAT: - Relying on the Supreme Court's exposition that the 'initiation date' refers to filing of the application while the 'commencement/insolvency commencement date' refers to admission, the Tribunal observed that Parliament intended a bar on filing applications in respect of defaults occurring on or after the statutory cut off. The Tribunal observed that the language and object of Section 10A and the related explanation preclude initiation in respect of defaults from the cut off date and that this distinction supports the view taken by the Adjudicating Authority in dismissing the application as not maintainable in the changed legal landscape.

The Tribunal accepted and applied the distinction and the bar as explained in the cited authority; no interference with the Adjudicating Authority's order.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's finding that the application filed on 15.09.2020 was not maintainable in view of the notification raising the jurisdictional threshold and in light of the accepted principles regarding the operation of the statutory bar and the distinction between initiation and commencement of CIRP.

Initiation of liquidation - committee of creditors' commercial decision - sale as a going concern - Regulation 39C of the IBBI (CIRP) Regulations - appointment of liquidator - liquidator's duties and powers under the Code

Initiation of liquidation - committee of creditors' commercial decision - Liquidation of the corporate debtor is to be ordered pursuant to Section 33 of the Code on account of absence of an approved resolution plan and the CoC's decision to liquidate. - HELD THAT: - The Tribunal recorded that despite the steps taken during CIRP no viable resolution plan was received and the Committee of Creditors, in its 4th meeting, resolved with the requisite voting to liquidate and to recommend sale as a going concern. In view of Section 33 and the CoC's decision, the Adjudicating Authority had no reason to take a contrary view and accordingly ordered liquidation of the Corporate Debtor. [Paras 7]

Application allowed and liquidation ordered under Section 33 of the Code.

Appointment of liquidator - Appointment of an independent liquidator (not the incumbent RP) to conduct the liquidation process. - HELD THAT: - The Tribunal noted that the CoC resolved not to consider the incumbent Resolution Professional as Liquidator. Exercising its powers, the Bench appointed Mr. Kamal Kishor Gurnani as Liquidator and directed that he shall be entitled to fees as payable under the Liquidation Process Regulations. [Paras 6]

Mr. Kamal Kishor Gurnani is appointed as Liquidator and shall be entitled to fees under the Regulations.

Sale as a going concern - Regulation 39C of the IBBI (CIRP) Regulations - Regulation 32 of the Liquidation Process Regulations - Direction to the Liquidator to endeavour to sell the Corporate Debtor as a going concern in terms of Regulation 39C, with a 90 day period to attempt such sale and fallback procedures under Regulation 32 if unsuccessful. - HELD THAT: - The CoC had recommended sale of the corporate debtor as a going concern under Regulation 39C. The Tribunal directed the Liquidator to first explore sale as a going concern and, if unable to effect such sale within 90 days from the date of the order, to proceed in accordance with clauses (a)-(d) of Regulation 32 of the Liquidation Process Regulations.

Liquidator to attempt sale as a going concern within 90 days; if unsuccessful, to proceed under Regulation 32.

Public announcement of liquidation - cessation of moratorium - vesting of powers in the liquidator - liquidator's duties and powers under the Code - Ancillary directions attendant on a liquidation order: public announcement, cessation of moratorium, cessation of board powers, liquidator to exercise duties under the Code, and communication of the order to regulatory authorities. - HELD THAT: - Following the liquidation order the Tribunal directed the Liquidator to issue a public announcement, stated that the moratorium under Section 14 shall cease to operate henceforth, and that all powers of the board, KMP and partners shall vest in the Liquidator. The Liquidator was directed to exercise powers and perform duties under the relevant sections of the Code and to send a copy of the order to the Registrar of Companies and the Insolvency and Bankruptcy Board of India. [Paras 7]

Ancillary directions issued: public announcement, moratorium ceased, board powers vested in Liquidator, Liquidator to perform statutory duties and to notify RoC and IBBI.

Final Conclusion: The Tribunal allowed the application under Section 33, ordered liquidation of the Corporate Debtor with directions to the appointed Liquidator to attempt sale as a going concern (with a 90 day window) and to carry out statutory duties including public announcement, cessation of moratorium, vesting of management powers in the Liquidator, and communication of the order to Registrar of Companies and IBBI.

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Decision of the Committee of Creditors to liquidate - Appointment of Resolution Professional as Liquidator with consent in Form AA - Publication of Form G and withdrawal of Expression of Interest - Commencement of liquidation consequences: moratorium, discharge of employees and vesting of powers in liquidator - Liquidator's duties: custody and control of assets, public announcement, submission of preliminary and periodic reports, and recovery actions

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Decision of the Committee of Creditors to liquidate - Publication of Form G and withdrawal of Expression of Interest - Satisfaction of conditions under Section 33(2) for passing a liquidation order and whether liquidation should be ordered. - HELD THAT: - The Tribunal recorded that Form G was issued and prospective resolution applicants filed EOIs but subsequently withdrew them before submission of resolution plans. The Committee of Creditors in its 7th meeting on 30.12.2020 resolved to liquidate the corporate debtor and to appoint the Resolution Professional as Liquidator. The Resolution Professional intimated the Adjudicating Authority of the CoC's decision to liquidate. In view of these facts and the statutory scheme in Section 33(2) - permitting liquidation where the RP intimates the CoC-approved decision to liquidate before confirmation of a resolution plan - the Tribunal found the conditions for initiation of liquidation to be satisfied.

The corporate debtor, M/s. Sainsons Pulp and Papers Limited, is ordered to be liquidated with immediate effect under Chapter III of the IBC, 2016.

Appointment of Resolution Professional as Liquidator with consent in Form AA - Committee of Creditors' resolution regarding liquidator's fees and liquidation costs - Whether the incumbent Resolution Professional may be appointed as Liquidator and on what basis. - HELD THAT: - The CoC resolved to appoint Mr. Manjul Mittal (the incumbent RP) as Liquidator and the RP filed his consent in Form AA dated 30.12.2020. The CoC also recorded entitlement of the Liquidator to specified fees and that the sole financial creditor would bear upfront liquidation costs. Having regard to the CoC resolution and the RP's expressed consent, the Tribunal exercised its authority to appoint the RP as Liquidator.

Mr. Manjul Mittal is appointed as Liquidator and shall act in that capacity in accordance with the Code and Regulations.

Commencement of liquidation consequences: moratorium, discharge of employees and vesting of powers in liquidator - Liquidator's duties: custody and control of assets, public announcement, submission of preliminary and periodic reports, and recovery actions - Scope of immediate consequences and directions on commencement of liquidation and conduct of the liquidation process. - HELD THAT: - On initiation of liquidation the Tribunal directed that the provisions of Sections 33(5)-(7) come into force: the prior moratorium under Section 14 ceases and a fresh moratorium under Section 33(5) commences; the order is treated as notice of discharge to officers, employees and workmen; powers of the board and key managerial personnel cease and vest in the liquidator. The liquidator was directed to take custody and control of assets, make the public announcement required by the Regulations, submit a preliminary report within seventy five days from commencement, file fortnightly progress reports thereafter, and take legal steps to recover receivables reflected in the latest balance sheet. The Tribunal also provided that, subject to Section 52, no suits shall be instituted by or against the corporate debtor except as permitted and that the liquidator may seek directions from the Tribunal as necessary.

The Tribunal issued directions implementing the statutory consequences of liquidation and prescribed procedural steps for the liquidator to follow during the liquidation process.

Final Conclusion: IA No. 212/2021 is disposed of by ordering immediate liquidation of the corporate debtor; the incumbent Resolution Professional is appointed as Liquidator with directions to take custody of assets, make statutory public announcement, submit the preliminary report and periodic progress reports, pursue recoveries, and act in accordance with the IBC and Liquidation Regulations.

Substantiation of claims - requirement of documentary evidence for interest claims - admission and verification of claims by liquidator - powers and duties of liquidator - limitation for appeal under Section 42 of IBC

Requirement of documentary evidence for interest claims - substantiation of claims - admission and verification of claims by liquidator - The interest portion of the operational creditor's claim was correctly rejected for want of adequate documentary substantiation that the corporate debtor had agreed to pay interest prior to supply. - HELD THAT: - The Tribunal applied Regulation 23 of the Liquidation Process Regulations and held that the liquidator may call for evidence or clarification to substantiate a claim. The applicant failed to produce documents demonstrating an agreement by the corporate debtor to pay interest before purchases began; only two invoices mentioned a contractual interest term and those could support a lesser quantified claim. In the absence of documentary proof of prior agreement and adequate substantiation in response to queries, the liquidator was justified in rejecting the interest component of the claim. [Paras 15, 16]

Interest claim rejected for lack of documentary substantiation; no interference with the liquidator's order on this ground.

Limitation for appeal under Section 42 of IBC - admission and verification of claims by liquidator - The application under Section 42 was barred by delay as it was filed beyond the 14 day period prescribed for appeals. - HELD THAT: - The Tribunal noted the period excluded by the Supreme Court order and calculated the outer limit for filing under Section 42. After exclusion, the applicant was required to file within 14 days but filed the MA after that period. Filing beyond the prescribed limitation without sufficient justification rendered the application time barred. [Paras 9, 16]

MA dismissed as filed beyond the 14 day limitation for appeals under Section 42.

Powers and duties of liquidator - admission and verification of claims by liquidator - The liquidator was not under a legal duty to investigate or realise assets of personal guarantors as part of the corporate debtor's liquidation beyond the functions conferred by the Code. - HELD THAT: - Relying on the statutory scheme, the Tribunal observed that the liquidator's duties are confined to realization of the corporate debtor's assets and distribution of proceeds under the Code and Regulations. There is no obligation placed on the liquidator to pursue realization from personal guarantors' properties in the manner contended by the applicant, and absence of such steps did not vitiate the liquidator's actions requiring interference. [Paras 12]

No error in the liquidator's conduct regarding investigation or realization of personal guarantors' assets that would warrant setting aside his order.

Final Conclusion: The Tribunal found no error in the liquidator's order of 17.03.2021 rejecting the interest claim for lack of substantiation, held the application under Section 42 to be time barred, and dismissed the MA.

Anticipatory bail under Section 438 of the Code of Criminal Procedure in proceedings relating to offences under the Prevention of Money Laundering Act - application of Section 45 of the Prevention of Money Laundering Act - obligation of the court to examine jurisdictional facts - dependency of PMLA offence on predicate offence under ordinary law

Application of Section 45 of the Prevention of Money Laundering Act - anticipatory bail under Section 438 CrPC in PMLA matters - Section 45 of the PMLA Act must be kept in mind and its underlying principles applied when a prayer for anticipatory bail under Section 438 CrPC is made in connection with an alleged PMLA offence. - HELD THAT: - The High Court treated the petition as if it were for anticipatory bail in respect of an ordinary penal offence and did not consider the implications of Section 45 of the PMLA Act. Although a PMLA offence is dependent on a predicate offence under ordinary law, that dependency does not negate the operation of Section 45 when anticipatory bail is sought in proceedings connected to the PMLA. It is the duty of the court considering such a prayer to examine the jurisdictional facts and the mandate of Section 45; failure to do so renders the exercise of jurisdiction inadequate. The court noted that observations in Nikesh Tarachand Shah v. Union of India were misunderstood by the respondent: the cited authority does not exempt courts from applying the rigors of Section 45 where anticipatory bail is sought in a PMLA matter.

The High Court's grant of anticipatory bail without applying Section 45 was incorrect; Section 45 must be considered in such applications.

Obligation of the court to examine jurisdictional facts - remand for fresh consideration - The impugned High Court order granting anticipatory bail is set aside and the matter is remitted for fresh consideration by the High Court with directions to apply Section 45 and decide the petition on merits in accordance with law. - HELD THAT: - Given the omission to consider Section 45 and the related jurisdictional aspects, the Supreme Court found it appropriate to set aside the High Court's order and direct that the petition be heard afresh. The remand requires the High Court to examine the petition in light of the PMLA framework and the particular statutory mandate, and to proceed expeditiously. Interim protection previously granted is continued for a limited period to preserve the status quo pending redetermination.

Impugned order set aside; petition remanded to the High Court for fresh, expeditious consideration with interim protection continued for four weeks.

Final Conclusion: Impugned High Court order granting anticipatory bail in connection with proceedings under the PMLA set aside and matter remitted for fresh consideration; the High Court must apply Section 45 of the PMLA and decide the petition on its merits expeditiously; interim protection extended for four weeks.

Appealability of adjudication order - availability of statutory remedy by appeal - entertainment of writ when alternative remedy exists - pre-deposit in statutory appeal - waiver of pre-deposit

Appealability of adjudication order - availability of statutory remedy by appeal - entertainment of writ when alternative remedy exists - Whether the writ-application challenging the original adjudication order should be entertained when a statutory appeal remedy is available. - HELD THAT: - The Court held that the common impugned order passed by the Joint Commissioner is appealable under the statutory scheme (Section 73 of the GST Act read with Section 84 of the Finance Act). In view of the availability of the statutory appeal, there is no sufficient ground to exercise writ jurisdiction to entertain a direct challenge to the order. The fact that the petitioner may face difficulty in making the statutory pre-deposit does not, by itself, justify bypassing the appellate remedy. The petitioner was afforded the opportunity to raise all contentions in the statutory appeal before the appellate authority. [Paras 7, 8, 9]

Writ-application declined; petitioner directed to pursue the statutory appeal remedy and may raise all legal contentions therein.

Pre-deposit in statutory appeal - waiver of pre-deposit - Whether the petitioner's application for waiver of the statutory pre-deposit should be considered by the appellate authority. - HELD THAT: - The Court did not decide the merits of any request for waiver but granted liberty to the petitioner to file an application for waiver of pre-deposit before the appellate authority. The appellate authority was directed to consider any such application expeditiously and in accordance with law, thereby leaving the question of waiver to be determined on the appeal record by the competent forum. [Paras 8, 9]

Liberty granted to apply for waiver of pre-deposit; appellate authority to consider such application expeditiously in accordance with law.

Final Conclusion: Writ petition dismissed on the ground of alternative statutory remedy; petitioner permitted to prefer statutory appeal against the adjudication order and to seek waiver of pre-deposit before the appellate authority, which shall be considered expeditiously.

Works Contract Service - Optional valuation methods under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Deduction of value of goods from the value of a works contract - Abatement versus deduction in valuation of works contracts - Composition scheme under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is optional - Separable supply and service components with determinable invoice value

Optional valuation methods under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Deduction of value of goods from the value of a works contract - Separable supply and service components with determinable invoice value - Abatement versus deduction in valuation of works contracts - Valuation under Rule 2A affords optional methods and where the contract/invoice separately identifies the supply (goods) value, that amount is deductible from the total contract value so that only the erection/commissioning service component is taxable. - HELD THAT: - The Tribunal examined the contract papers and found that the contracts provided separate values for supply of materials and that transfer of property in goods to the beneficiary was shown and thus the value of goods was clearly determinable from invoices. Applying the legal position elaborated in Tribunal precedents (including Pragati Edifice) and the statutory scheme, the Bench held that Rule 2A does not oust the option available to an assessee to exclude the value of goods when such value is separately ascertainable. The adjudicating authority correctly concluded that the Show Cause Notice curtailed the Respondent's option by offering only an abatement route and not permitting deduction of the goods component; consequently the demand could not be sustained. The Tribunal also noted that the Revenue did not contend short-payment of tax on the erection/commissioning component itself, but disputed inclusion of the supply value in the taxable base. The Tribunal reiterated that the composition scheme remains optional and cannot be forced on an assessee, and that where the service component has been taxed at full rate as shown in records, the demand cannot be upheld merely because the department framed valuation differently in the SCN. [Paras 9, 11]

Impugned order dropping the demand is justified and is upheld; departmental appeal dismissed.

Final Conclusion: The Tribunal upheld the adjudicating authority's order dropping the Service Tax demand for the period April 2010 to March 2015, holding that where contracts/invoices separately disclose the value of goods, that value is deductible and only the service component (erection/commissioning) is taxable; the composition scheme is optional and the SCN's failure to offer the appropriate valuation option rendered the demand unsustainable.

Classification of toll collection as Business Auxiliary Service - agency versus independent acquisition of toll collection rights - taxability of toll collection activity - precedent and stare decisis in tariff classification - relevance of Board Circular No.152/3/2012 ST to SPV arrangements - time bar/limitation in service tax demands

Classification of toll collection as Business Auxiliary Service - agency versus independent acquisition of toll collection rights - relevance of Board Circular No.152/3/2012 ST to SPV arrangements - precedent and stare decisis in tariff classification - Whether the appellant's activity of collecting toll under an agreement with Cochin Port Road Company Ltd. is taxable as Business Auxiliary Service and whether the demand and penalties confirmed by the Commissioner are sustainable. - HELD THAT: - The Tribunal examined the agreement and relied on coordinate-bench decisions which held that entities who acquire the right to collect toll (by bidding or lump sum payment) carry on an independent business of toll collection and do not act as agents charging commission for the principal. The Bench cited and applied the reasoning in Ideal Road Builders Pvt. Ltd. and subsequent Tribunal decisions which found that where all toll receipts belong to the collector and the collector is liable to pay a fixed bid amount or instalments irrespective of collections, the activity cannot be characterised as rendering a Business Auxiliary Service to the authority. The Tribunal noted that the Board Circular relied upon by Revenue does not alter this conclusion where the contractual right is one of independent toll collection and not commission based agency. Having found the factual and legal position indistinguishable from the cited precedents and no contrary order placed before it, the Tribunal held that the demand and penalties could not be sustained and therefore set aside the impugned order. The Tribunal also observed that the issue was no longer res integra in view of the consistent precedents followed.

Demand and penalties confirmed by the Commissioner set aside; appeal allowed and consequential relief granted.

Final Conclusion: The Tribunal, following binding coordinate bench precedents, held that the appellant's toll collection activity is not taxable as Business Auxiliary Service where the right to collect toll is independently acquired and proceeds belong to the collector; the demand, interest and penalties confirmed by the Commissioner were set aside and the appeal was allowed with consequential relief.

Interest on delayed refund of deposit made during investigation - Deposit under protest versus pre-deposit - Pre-deposit for stay under Section 35 - Interest on refundable amount under Section 35FF - Rate of interest on delayed refund (12% per annum)

Interest on delayed refund of deposit made during investigation - Interest on refundable amount under Section 35FF - Rate of interest on delayed refund (12% per annum) - Entitlement to interest on sums deposited during investigation from the date of deposit until refund and the applicable rate. - HELD THAT: - The Tribunal held that the amounts paid by the appellants during the course of investigation were deposits made under protest and, having been ordered to be refunded, attract interest from the date of deposit until the date of realisation. The Tribunal considered earlier decisions of various High Courts and this Tribunal, noted a recent Tribunal decision directing interest at 12% p.a., and followed that approach. The Tribunal therefore applied the principle that interest on refundable amounts should be granted from the date of deposit (not limited to post-adjudication) and directed payment at 12% per annum until refund. [Paras 8]

Appellants entitled to interest @12% per annum from date of deposit until date of refund.

Deposit under protest versus pre-deposit - Pre-deposit for stay under Section 35 - Whether the amount deposited during investigation had, by operation of the Tribunal's earlier stay order, become a pre-deposit and thus not qualify as a deposit under protest attracting interest from the date of payment. - HELD THAT: - The Tribunal examined the stay order and observed that the earlier order treated the amounts as 'sufficient for the purpose of Section 35' and dispensed with further pre-deposit requirement, but did not convert investigative deposits into pre-deposits. The adjudicating authority's finding that cheques were tendered 'under pressure' did not negate payment under protest. On the facts, the Tribunal concluded that the sums were paid under protest during investigation and were not rendered incapable of attracting interest merely because the Tribunal later considered them for stay purposes. [Paras 6]

Amounts deposited during investigation held to be deposits under protest and not converted into pre-deposits by the stay order; therefore eligible for interest from date of deposit.

Final Conclusion: Appeals allowed; appellants are entitled to interest at 12% per annum on amounts deposited during investigation from the date of deposit until the date of realisation, with consequential relief as applicable.

Manufacture - excisable goods - marketability/ deeming fiction in definition of goods - Rule 6(3) of the Cenvat Credit Rules, 2004 - denial of CENVAT credit where output is not manufacture - penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC

Manufacture - excisable goods - marketability/ deeming fiction in definition of goods - Characterisation of bagasse and press mud as manufactured excisable goods under the Central Excise Act, 1944 - HELD THAT: - Following the decision of the Hon'ble Supreme Court in DSCL Sugar Ltd., the Tribunal held that the amended definitions operate only if the process falls within the definition of "manufacture" under Section 2(f). Bagasse/press mud are agricultural residues and not the result of any process specified in the Section or Chapter notes of the First Schedule; therefore the deeming fiction that treats goods as marketable and excisable cannot be invoked. In the absence of "manufacture" as defined in Section 2(f), bagasse/press mud cannot be treated as excisable goods and no excise duty can be levied on them.

Bagasse and press mud are not manufactured excisable goods; they are not liable to excise duty.

Rule 6(3) of the Cenvat Credit Rules, 2004 - denial of CENVAT credit where output is not manufacture - penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC - Applicability of Rule 6(3) and consequential denial of CENVAT credit and imposition of penalty for inputs/services attributable to exempted goods - HELD THAT: - Because bagasse/press mud were held not to be manufactured excisable goods, Rule 6 (and its provisos) of the Cenvat Credit Rules, 2004-invoked to deny CENVAT credit where common inputs/input services are used for both dutiable and exempted goods-has no application. Consequently, the denial of CENVAT credit and the penalty imposed under Rule 15(2) read with Section 11AC, premised on application of Rule 6(3), cannot be sustained. The Tribunal applied the Supreme Court's reasoning to set aside the adjudicating authority's demands, interest and penalty based on those provisions.

Denial of CENVAT credit and penalties founded on Rule 6(3) (and consequent orders) are unsustainable and the impugned demand and penalty are set aside.

Final Conclusion: The impugned order confirming demand, interest and penalty in respect of bagasse/press mud was set aside because those materials are not manufactured excisable goods and Rule 6 of the Cenvat Credit Rules, 2004 therefore does not apply; the appeal is allowed.

Applicability of Rule 6(3) of the Cenvat Credit Rules to exempted services - Deemed consideration for renting of residential accommodation - Absorption of employer-provided facilities in manufacture - Liability under Rule 6(3) in respect of removal of waste, scrap, refuse or by product

Applicability of Rule 6(3) of the Cenvat Credit Rules to exempted services - Deemed consideration for renting of residential accommodation - Demand of 6%/7% under Rule 6(3) cannot be levied where no amount is recovered from employees for residential accommodation provided free of rent. - HELD THAT: - The Tribunal held that Rule 6(3) permits charging the specified percentage only on the value of exempted services. In the present facts the appellant did not receive any rent or other consideration from employees for residential quarters provided within the factory premises; consequently there was no taxable value on which to apply the deemed percentage. The absence of any flow of value from employees to the appellant precludes invocation of Rule 6(3) to compute deemed consideration and demand duty/credit reversal. [Paras 4]

Demand under Rule 6(3) on account of renting residential quarters provided free to employees is unsustainable and set aside.

Absorption of employer-provided facilities in manufacture - Residential accommodation provided to employees engaged in manufacture is absorbed in the manufacturing activity and does not give rise to a separate exempted service value for the purpose of Rule 6(3). - HELD THAT: - The Tribunal found that where houses are provided to employees who are engaged in the manufacture of the final product, the activity of providing such accommodation is ultimately absorbed in the manufacturing process and the manufacture of the final product (cement) is the relevant economic activity. Therefore, the provision of such accommodation does not create an independent value of exempted service on which Rule 6(3) can be invoked. [Paras 4]

Provision of residential houses to employees engaged in manufacture does not generate a separate value liable under Rule 6(3).

Liability under Rule 6(3) in respect of removal of waste, scrap, refuse or by product - Rule 6(3) is not applicable to removal of waste, scrap, refuse or by product; demands under Rule 6(3) in respect of such removals are unsustainable. - HELD THAT: - Relying on the settled position as noted by the Tribunal and consistent with the decision of the Hon'ble Bombay High Court upheld by the Supreme Court, the Tribunal observed that Rule 6(3) cannot be applied to the removal of waste, scrap, refuse or by product. Consequently, any demand framed under Rule 6(3) in respect of scrap or by products cannot be sustained. [Paras 4]

Demand under Rule 6(3) in respect of removal of waste, scrap, refuse or by product is not sustainable.

Final Conclusion: For the reasons stated, the impugned demand under Rule 6(3) is unsustainable; the order is set aside and the appeal is allowed.

Principles of natural justice - opportunity of personal hearing - compliance with administrative circular - show cause notice and opportunity to confront/cross-examine - quashing of order and remand for fresh consideration

Principles of natural justice - opportunity of personal hearing - compliance with administrative circular - show cause notice and opportunity to confront/cross-examine - quashing of order and remand for fresh consideration - Impugned assessment orders dated 23.08.2021 for Assessment Year 2009-10 and Assessment Year 2014-15 were passed without affording personal hearing and without full compliance with Circular No.5 of 2021, and hence whether they are liable to be quashed and remitted for fresh consideration. - HELD THAT: - The Court found that although notices were issued and copies of relied documents were available for collection, it was incumbent on the assessing authority to call upon the petitioner for a personal hearing before passing the impugned assessment orders. The Court noted that the petitioner had challenged the pre-assessment notices in earlier writ petitions, and that key procedural provisions of Circular No.5 of 2021 (notably paras. 3.3.3 and 3.3.5 regarding show cause notices, opportunity to reconcile mismatches, personal hearing, and cross-examination) had not been fully complied with by the respondent prior to finalising the assessments. For these reasons the impugned orders were held to be contrary to the principles of natural justice and the procedural safeguards envisaged by the circular. The Court therefore quashed the impugned assessment orders and directed that they be treated as corrigenda to the pre-assessment notices; the respondent was directed to furnish the relied documents to the petitioner, afford personal hearing in terms of the circular, permit filing of a reply within 30 days, and thereafter pass fresh orders after considering the reply within 30 days. [Paras 12, 13, 14]

Impugned assessment orders dated 23.08.2021 quashed and matters remitted to the respondent for fresh consideration after furnishing relied documents and affording personal hearing in terms of Circular No.5 of 2021; petitioner to file reply within 30 days and respondent to pass fresh orders within 30 days thereafter.

Final Conclusion: Writ petitions allowed; impugned assessment orders quashed and remitted for fresh consideration in accordance with Circular No.5 of 2021 and principles of natural justice; no costs.

Maintainability of writ under Article 226 against private parties/non-state actors - Alternative statutory remedy under Section 17 of the SARFAESI Act - Rule of exhaustion of alternative remedies / prohibition on entertaining writ where efficacious remedy exists - Security Interest (Enforcement) Rules, 2002 - Rule 8(1) and Rule 8(2) - Abuse of process of court - Interim stay of SARFAESI proceedings and prejudice to secured creditor

Maintainability of writ under Article 226 against private parties/non-state actors - Interim stay of SARFAESI proceedings and prejudice to secured creditor - High Court erred in entertaining writ petitions under Article 226 against the ARC and in granting / continuing the ex-parte ad-interim orders restraining SARFAESI action. - HELD THAT: - The Court held that the writ petitions filed by the borrowers against the communication dated 13.08.2015 (purported possession notice/proposed action under Section 13(4) of the SARFAESI Act) amounted to an abuse of process. By passing and extending the ex-parte ad-interim orders the High Court effectively stalled SARFAESI proceedings and caused serious prejudice to the secured creditor, who was entitled to recover sums due. The Court emphasised that High Courts must exercise caution before granting stay in matters concerning recovery of dues by financial institutions because such stays adversely affect the financial health of creditors and public interest. In the facts of the case, the interim relief (conditional deposits aggregating a small fraction of the dues) was unjustifiable and ought to have been vacated. Consequently the proceedings before the High Court were dismissed and the interim orders vacated. [Paras 10, 13, 14]

Writ petitions were not maintainable in the circumstances; High Court's interim orders were unjustified and are vacated.

Alternative statutory remedy under Section 17 of the SARFAESI Act - Rule of exhaustion of alternative remedies / prohibition on entertaining writ where efficacious remedy exists - Availability of appeal under Section 17 of the SARFAESI Act bars the entertainability of writ petitions under Article 226 in respect of actions referred to in Section 13(4). - HELD THAT: - Applying settled precedents, the Court held that where an effective statutory remedy exists (here, an appeal to the Debts Recovery Tribunal under Section 17 against measures under Section 13(4) / 14), the High Court ordinarily should not entertain writ petitions under Article 226. The rule of self-imposed restraint requires exhaustion of the statutory remedy absent exceptional circumstances. Even assuming the 13.08.2015 communication was a Section 13(4) notice, the borrowers had an efficacious alternative remedy and the High Court should not have exercised writ jurisdiction; therefore the petitions were improperly entertained and interim relief should not have been granted. [Paras 9, 10, 13]

Existence of efficacious remedy under Section 17 precluded entertainability of the writ petitions; High Court erred in not insisting on statutory remedy.

Security Interest (Enforcement) Rules, 2002 - Rule 8(1) and Rule 8(2) - Maintainability of writ under Article 226 against private parties/non-state actors - Abuse of process of court - The borrowers' contention that the ARC's alleged non-compliance with Rules 8(1)/8(2) rendered it amenable to writ jurisdiction as a public functionary was rejected; the ARC is not performing State functions that would justify bypassing the statutory remedy. - HELD THAT: - The Court considered the borrowers' reliance on decisions permitting writs against private bodies performing public functions, but found those authorities inapplicable. The ARC, as assignee and secured creditor in a commercial lending transaction, was not performing functions normally performed by the State; its actions in seeking enforcement under the SARFAESI Act arose from a commercial contract and statutory debt-recovery regime. Consequently, the mere allegation of non-compliance with Rules 8(1)/8(2) did not convert the ARC into a State instrumentality for the purpose of Article 226, nor justify entertaining the writ petitions outside the statutory appellate mechanism. [Paras 11, 12]

Writ jurisdiction could not be invoked against the ARC on the ground that it was performing public functions; statutory remedy remained the appropriate course.

Final Conclusion: Appeals allowed. The High Court writ petitions are dismissed as not maintainable; the ex-parte ad-interim order dated 26.08.2015 and its subsequent extensions are vacated. Costs awarded to the appellants.

Compounding of offence under Section 138 of the Negotiable Instruments Act - Inherent jurisdiction under Section 482 of the Code of Criminal Procedure - Application of Damodar S. Prabhu guidelines on composition and costs - Quashing of conviction by High Court in the interest of justice upon settlement

Compounding of offence under Section 138 of the Negotiable Instruments Act - Inherent jurisdiction under Section 482 of the Code of Criminal Procedure - Quashing of conviction by High Court in the interest of justice upon settlement - Whether the High Court should quash the conviction and consequential proceedings in view of the amicable settlement between the parties and permit compounding under its inherent jurisdiction. - HELD THAT: - The Court found that the parties have amicably settled the dispute and the complainant has filed an affidavit recording no objection to quashing of the conviction. Relying on this Court's earlier decision in Khokhar Iliyas Bismilla Khan and the principles reflected in Damodar S. Prabhu, the Court held that where the parties have settled and the offence is essentially a private transaction not affecting the State's core interest, the High Court may invoke its inherent powers under Section 482 of the Code to quash convictions and related proceedings so as to bring finality and secure justice between the parties. Having considered the material on record and the settled position that offences under the N.I. Act are compoundable, the Court exercised its powers and quashed the conviction and all consequential proceedings, directing release of the applicant if not required in other cases. [Paras 5, 6, 8]

Conviction dated 9.7.2019 and ensuing appellate order dated 7.9.2021 and all consequential proceedings quashed and set aside; applicant to be set at liberty if not required in any other case.

Application of Damodar S. Prabhu guidelines on composition and costs - Judicial discretion to reduce prescribed costs - What monetary condition should be imposed for compounding in this case having regard to Damodar S. Prabhu and the facts of the applicant's circumstances. - HELD THAT: - The Court noted that Damodar S. Prabhu prescribes a sliding scale of costs (10% at Magistrate stage, 15% at Sessions/High Court stage, 20% at Supreme Court) to be deposited with a Legal Services Authority as a condition for compounding at appellate stages. While the general rule would require deposit of 15% where compounding is allowed at the Sessions/High Court stage, the Supreme Court has recognised that the competent court may reduce the scale of costs for reasons to be recorded. Considering the applicant's age, incarceration since 7.9.2021, the large cheque amount and the parties' settlement, the Court exercised its discretion to reduce the amount to 10% of the cheque value. The Court further structured payment in two instalments-5% within one month and the remaining 5% within five months thereafter-and warned that non-compliance may invite appropriate action. [Paras 7, 9, 10, 11]

Applicant directed to deposit 10% of the cheque amount with the Gujarat State Legal Services Authority (5% within one month and remaining 5% within five months); non-compliance may attract appropriate action.

Final Conclusion: The High Court, invoking its inherent jurisdiction under Section 482 CrPC and applying the principles in Damodar S. Prabhu and this Court's precedents, quashed the conviction and consequential orders in the Section 138 N.I. Act prosecution pursuant to an amicable settlement, and permitted compounding subject to payment of 10% of the cheque amount to the Gujarat State Legal Services Authority in two instalments.

Amendment of criminal complaint to correct curable infirmity - Curable legal infirmity and prejudice test - Application of precedent permitting formal amendment - Dishonour of cheque under Negotiable Instruments Act

Amendment of criminal complaint to correct curable infirmity - Curable legal infirmity and prejudice test - Application of precedent permitting formal amendment - Whether the trial court rightly allowed amendment to correct the cheque number in the complaint during trial. - HELD THAT: - The Court found that the cheque (Ex. P1) bore both numbers relied upon and the return memorandum (Ex. P2) recorded the incorrect number which the complainant had followed in the notice, complaint and proof affidavit. The discrepancy was therefore a bona fide, curable error and did not amount to an attempt to introduce a wholly different cheque number into the proceedings. Applying the principle that a simple, curable infirmity may be corrected by formal amendment where no prejudice would be caused to the opposite party, the Court followed the ratio of the cited precedents permitting such amendments. In the facts of this case permitting the amendment simply corrects a clerical/clerical-type error arising from the bank's memorandum and does not change the substance of the complaint or cause prejudice to the accused. [Paras 7, 8, 9]

Amendment to correct the cheque number permitted; order of the trial court allowing the amendment is upheld and the revision is dismissed.

Final Conclusion: The Criminal Revision is dismissed; the trial court correctly permitted a formal amendment to rectify a bona fide, curable error in the cheque number as no prejudice would be caused to the accused.

Right to lead defence evidence - setting aside trial court order closing defence evidence - court's duty to verify status of process for summoning witnesses - grant of further opportunity in the interest of justice - conditioning judicial indulgence on payment of costs

Right to lead defence evidence - setting aside trial court order closing defence evidence - grant of further opportunity in the interest of justice - Order of the learned Trial Court dated 18.01.2020 closing the accused's defence evidence was set aside and the accused was granted one more opportunity to lead defence evidence with court assistance. - HELD THAT: - The High Court found that although the accused failed to produce defence witnesses on the listed dates, he had earlier filed an application and deposited diet money for summoning two witnesses; the Trial Court did not ascertain the fate of the process for summoning those witnesses before recording the order closing defence evidence. The Court held that there was lapse on the part of the accused but the Trial Court also erred by not reviewing its prior orders and the process undertaken to summon witnesses. In these circumstances and in the interest of justice, the High Court exercised its supervisory jurisdiction to set aside the order impugned and directed that the parties appear before the Trial Court on the specified date so that the accused may be afforded an opportunity to summon and lead his witnesses; failure to avail that opportunity will result in closure of his right to lead evidence. The Court also permitted the accused to file a fresh list of witnesses (limited to the previously named witnesses) and to deposit fresh diet money as a procedural step to summon those witnesses. [Paras 8, 9]

Order dated 18.01.2020 is set aside; parties directed to appear before the Trial Court on 06.01.2022 for summoning of accused's witnesses and the accused granted one final opportunity to lead defence evidence subject to conditions.

Court's duty to verify status of process for summoning witnesses - conditioning judicial indulgence on payment of costs - The High Court imposed a conditional cost for the indulgence granted and specified consequences of non-payment. - HELD THAT: - The Court directed that the indulgence shown to the accused (i.e., permitting another opportunity to lead evidence) would be subject to payment of costs to the complainants. The petitioner was ordered to pay a specified cost to the complainants on the next date of hearing; the Court clarified that failure to pay the cost would render the indulgence ineffective automatically. This condition was imposed to balance the grant of relief given the lapse and to protect the complainants' interests. [Paras 10]

The accused's opportunity to lead evidence is subject to payment of the directed cost to the complainants, and non-payment will cause the indulgence to cease.

Final Conclusion: The High Court set aside the Trial Court's order of 18.01.2020 closing defence evidence, granted the accused one final opportunity to lead his defence (subject to filing a fresh witness list and deposit of diet money), directed appearance before the Trial Court on 06.01.2022 for summoning witnesses, and conditioned the indulgence on payment of a cost to the complainants, failure of which will terminate the relief.

Limitation for filing written statement - grace period of ninety days - forfeiture of right to file written statement after 120 days - extension of limitation by Supreme Court suo motu orders - discretion to condone delay

Limitation for filing written statement - grace period of ninety days - forfeiture of right to file written statement after 120 days - Whether the defendant could rely on the Supreme Court's orders extending limitation to file the written statement after the prescribed thirty days and within the aggregate one hundred and twenty days period - HELD THAT: - The Court held that the prescribed period for filing a written statement under the proviso to Order VIII Rule 1 is thirty days from service of summons, and the additional ninety days is a grace period in which the court may allow filing for reasons to be recorded and on payment of costs; the additional ninety days is not part of the prescribed limitation. The Supreme Court's suo motu orders extended the period of limitation (i.e., the time within which proceedings could be instituted or acts done) for the pandemic period, but did not enlarge the statutory outer limit in provisos conferring the court's discretion to condone delay beyond that outer limit. On the facts, service was on 30.1.2020 and the thirty-day prescribed period expired before the pandemic-extension window would operate; consequently the defendant could not avail the benefit of the Supreme Court extension to file the written statement within the statutory outer period of 120 days, and the Commercial Court's allowance was unsustainable. [Paras 5, 6, 7, 9, 10]

The defendant was not entitled to rely on the Supreme Court extension to file the written statement after the prescribed thirty days and beyond the statutory outer period; the filing was impermissible.

Extension of limitation by Supreme Court suo motu orders - discretion to condone delay - Whether the Commercial Court correctly permitted the defendant to file the written statement on payment of delayed costs - HELD THAT: - Applying the legal principle that the pandemic-related orders extended only the period of limitation and did not expand the outer statutory window for condonation, the High Court found that the Commercial Court erred in allowing the belated written statement. The Commercial Court's order permitting the defendant to file the written statement on payment of costs (by order dated 25.6.2021) could not be sustained because the defendant's opportunity to seek condonation under the proviso had already lapsed; accordingly the impugned order was quashed and set aside. [Paras 3, 10]

The Commercial Court's order dated 25.6.2021 permitting the respondent to file the written statement is quashed and set aside.

Final Conclusion: The petition is allowed: the High Court quashed the Commercial Court's order permitting the defendant to file the written statement because the statutory thirty-day limitation and the outer 120-day period had expired and the Supreme Court's pandemic-era extension did not enlarge the court's discretion to condone delay beyond the statutory outer limit.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal onus and standard of proof - preponderance of probabilities - presumptions under Section 118 of the Negotiable Instruments Act - probative value of improbabilities in the complainant's case - acquittal under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal onus and standard of proof - preponderance of probabilities - probative value of improbabilities in the complainant's case - acquittal under Section 138 of the Negotiable Instruments Act - Whether the appellate Court rightly acquitted the accused of the offence under Section 138 N.I. Act by holding that the presumption in favour of the complainant was successfully rebutted on the preponderance of probabilities. - HELD THAT: - The High Court examined the mandatory presumptions under Sections 118 and 139 of the Negotiable Instruments Act and applied the settled principle that once execution of the cheque is admitted an initial rebuttable presumption arises in favour of the holder. The Court reiterated that the accused's burden under Section 139 is evidentiary and the standard to rebut is preponderance of probabilities rather than proof beyond reasonable doubt. Applying these principles to the material facts, the Court accepted that the defence had produced materials and pointed to improbabilities in the complainant's case - including prior dishonour of an earlier cheque, absence of proof of the complainant's financial capacity to lend the alleged amount, contemporaneous documents (receipt/ex.D2) indicating earlier settlement between the parties, and other documentary and oral evidence - which together made the defence more probable. The Court noted that the accused had also given evidence and that the improbabilities arising from the complainant's own material were sufficient to dislodge the presumption required by Section 139. On this factual and legal appraisal the appellate court's conclusion that the presumption was rebutted on preponderance grounds was held to be free from legal or factual infirmity. [Paras 18, 21, 22]

The appellate Court's acquittal is fair and proper; the presumption under Section 139 was rebutted on the preponderance of probabilities and the conviction recorded by the trial Court was rightly set aside.

Final Conclusion: Criminal Appeal dismissed; the judgment of the II Additional District and Sessions Judge dated 02.06.2017 in C.A.No.179 of 2016 acquitting the accused of the offence under Section 138 N.I. Act is upheld.

Offence under Section 138 of the Negotiable Instruments Act - Requirement of statutory notice under Section 138 - Liability of a company and vicarious liability of persons in charge under Section 141 - Service of summons and appearance on behalf of a company

Requirement of statutory notice under Section 138 - Liability of a company and vicarious liability of persons in charge under Section 141 - Whether a separate statutory notice under Section 138 must be issued individually to a manager or director of a company before proceeding against them for offences under Section 138. - HELD THAT: - The High Court held that Section 138, read with Section 141, does not require that individual notices be issued to directors or managers of a company in addition to the notice sent to the company. The court relied on the reasoning that persons who are in charge of and responsible for the company's affairs would be aware of the demand notice sent to the company, and that requiring separate notices to all such persons would frustrate the summary remedy provided by Section 138. If those persons seek to raise a defence that the offence was committed without their knowledge or that they exercised due diligence to prevent it, such contentions are matters of defence for trial and not for deciding sufficiency of notice at the pre-trial stage. Applying these principles to the facts, the court observed that the summons were issued to the company's director and the manager entered appearance on receipt of those summons; therefore, no separate statutory notice to the manager was necessary and the complaint could be proceeded with against the company and persons deemed guilty under Section 141. [Paras 15, 16]

No separate statutory notice under Section 138 need be served individually on the manager; the complaint is maintainable and may proceed against the company and those deemed liable under Section 141.

Service of summons and appearance on behalf of a company - Whether appearance by the company's manager upon service of summons on the director cures any alleged defect in prior service and permits trial to proceed. - HELD THAT: - The court found that the manager entered appearance before the trial court after summons were issued to the director and copies were served on the manager. Given that the director had been validly summoned and liability of persons in charge is contemplated by Section 141, the manager's appearance in response to the director's summons meant that no separate notice was required and the trial could proceed. The court therefore rejected the petitioner's contention that the complaint as against the manager was time-barred or invalid for lack of individual statutory notice. [Paras 14, 16]

Appearance by the manager following service of summons on the director does not vitiate proceedings; the complaint may be proceeded with against the company and persons in charge.

Offence under Section 138 of the Negotiable Instruments Act - Service of summons and appearance on behalf of a company - Direction for expeditious disposal of trial given the antiquity of the dispute. - HELD THAT: - Noting that the events date from 2003, the High Court directed the trial Magistrate to complete the trial within six months from receipt of the copy of the order and observed that the petitioner is at liberty to produce documents in support of its defence. This is a procedural directive intended to secure timely adjudication. [Paras 17]

Trial to be completed within six months from receipt of a copy of this order; petitioner may produce its documents.

Final Conclusion: The Criminal Original Petition challenging the complaint under Section 138 is dismissed; the trial may proceed against the company and persons deemed liable under Section 141, and the trial court is directed to conclude the trial within six months.