TaxTMI Updates e-Newsletter
Jan 23,2020

Writ jurisdiction under Article 226 - Maintainability of writ when alternative statutory remedy is available - Alternative remedy by way of appeal under Section 107 of the U.P. GST Act, 2017 - Penalty order under Section 129(3) of the CGST Act, 2017

Writ jurisdiction under Article 226 - Maintainability of writ when alternative statutory remedy is available - Alternative remedy by way of appeal under Section 107 of the U.P. GST Act, 2017 - Penalty order under Section 129(3) of the CGST Act, 2017 - Challenge to penalty order dated 26.09.2019 under Section 129(3) CGST Act, 2017 by way of writ petition under Article 226 dismissed for want of maintainability in view of available statutory appeal. - HELD THAT: - The petitioner sought to challenge the impugned penalty order by filing a writ petition under Article 226. The Court noted that a specific statutory remedy exists in the form of an appeal under Section 107 of the U.P. GST Act, 2017. In the presence of this alternate remedy, the High Court declined to exercise its discretionary writ jurisdiction at this stage and was not inclined to entertain the petition. No adjudication on the merits of the penalty order was undertaken; the dismissal is on maintainability grounds because of the availability of the statutory appeal.

Writ petition dismissed as not maintainable; petitioner is left to pursue the statutory appeal under Section 107 of the U.P. GST Act, 2017.

Final Conclusion: The High Court dismissed the writ petition challenging the penalty order under Section 129(3) CGST Act, 2017, on the ground that the petitioner has a statutory alternative remedy by way of appeal under Section 107 of the U.P. GST Act, 2017.

Enlargement on bail during trial - conditions of bail including non tampering with prosecution evidence - non prejudice to merits of prosecution - jurisdictional challenge of special enactment overriding general criminal law - alleged non availability of offence under copyright for lack of 'artistic work'

Enlargement on bail during trial - conditions of bail including non tampering with prosecution evidence - attendance at trial and conduct conditions - Application for enlargement on bail during trial was allowed subject to conditions. - HELD THAT: - The Court, having considered the nature of the offence, evidence on record, the submissions of learned counsel and the fact that the applicant has been in custody since 02.12.2019, concluded that the applicant has made out a fit case for grant of bail. The order grants release on furnishing a personal bond and two sureties to the satisfaction of the trial court and imposes conditions directing the applicant not to tamper with prosecution evidence, not to harm or harass the victim/complainant, to attend court on all dates, not to indulge in unlawful activities, and not to misuse the liberty of bail. The identity and residential proof of sureties are to be verified by the trial court, which is empowered to cancel bail on breach of conditions.

Bail allowed on specified conditions; sureties and verification to be furnished and compliance monitored by the trial court.

Non prejudice to merits of prosecution - jurisdictional challenge of special enactment overriding general criminal law - alleged non availability of offence under copyright for lack of 'artistic work' - The Court did not decide the merits of the prosecution or adjudicate the contention that special enactments (Trade Marks Act / Copyright Act) displace general criminal law; such matters are left for trial. - HELD THAT: - While the applicant challenged the prosecution on grounds including jurisdictional defects, alleged non infringement under copyright law for lack of 'artistic work', and alleged non compliance with statutory seizure provisions, the Court expressly limited the order to determination of the bail application and declined to express any view on the merits. The trial court is left free to evaluate legal and factual disputes, including the applicant's contentions regarding purchase of defective/waste bags, compliance with statutory procedures for seizure, and applicability of special enactments, and to reach independent conclusions on the basis of evidence led.

Merits and all substantive legal contentions remitted to and to be decided by the trial court; this bail order does not constitute an expression on merits.

Final Conclusion: Bail application allowed and applicant released on furnishing a personal bond and two sureties subject to specified conditions; the order is confined to the bail determination and does not decide the substantive merits, which remain open for the trial court to decide.

Refund of tax wrongfully paid under wrong head - no interest where tax paid bona fide under wrong head - use of electronic cash ledger versus electronic credit ledger - adjustment/claim of refund under rule sanctioning refund - bona fide payment in early phase of tax regime

Refund of tax wrongfully paid under wrong head - no interest where tax paid bona fide under wrong head - bona fide payment in early phase of tax regime - Entitlement to relief under Section 77(1) of the CGST Act read with Section 19(2) of the IGST Act where tax was paid to the Central Government under the CGST head though the transaction was an inter State supply, and whether interest is payable. - HELD THAT: - The Court found that the petitioner had discharged the tax liability to the Central Government but did so under the CGST head instead of the IGST head; there was no concealment or fraud and, given the initial confusion in the early phase of the GST regime, the petitioner's conduct was to be regarded as bona fide. Section 77(1) of the CGST Act entitles a registered person who paid Central tax treating a transaction as intra State but which is subsequently held to be inter State, to refund of the tax so paid; Section 19(2) of the IGST Act provides that a person who paid central and State tax treating a transaction as intra State but which is subsequently held to be inter State shall not be required to pay any interest on the integrated tax payable. Applying these provisions to the facts, the Court held that the petitioner was entitled to the benefit of refund/adjustment and could not be saddled with liability for interest. [Paras 14, 15, 17]

The petitioner is entitled to deposit the IGST liability for September, 2017 within the time directed and shall not be liable to pay any interest; the petitioner is entitled to claim refund of the amount deposited under the CGST head or get it adjusted against future liabilities.

Use of electronic cash ledger versus electronic credit ledger - adjustment/claim of refund under rule sanctioning refund - Whether the amount wrongly paid under CGST cash ledger could be cross utilised or adjusted against IGST liability and the applicability of Rule 92/Section 49 provisions to effect such adjustment. - HELD THAT: - The Court noted the contentions of the revenue based on the language of Section 49(3) and (4) distinguishing the electronic cash ledger (limited to payments under the Act) and the electronic credit ledger (permitting cross utilisation for output tax), and the revenue's reliance on Article 269 A concerns. However, the Court expressly refrained from adjudicating the question whether the amount deposited under the CGST head could be adjusted to the IGST head, stating it would not enter into that question. Instead the Court directed the petitioner to deposit the IGST amount within the prescribed time and permitted the petitioner to claim refund or seek adjustment of the amount already deposited under the CGST head in accordance with law. [Paras 15, 16]

Question of cross utilisation/adjustment from the electronic cash ledger to IGST head not decided; petitioner permitted to deposit IGST and to pursue refund or adjustment of the CGST deposit in accordance with law and procedure.

Final Conclusion: Writ allowed. The impugned letter demanding payment of IGST with interest is quashed; petitioner directed to deposit the IGST liability for September, 2017 within the time directed and is not liable to pay interest; petitioner may claim refund of the amount paid under the CGST head or seek adjustment against future liabilities in accordance with law.

Disallowance under Section 40A(3) - use of electronic clearing system through a bank account - Rule 6DD exceptions - misrepresentation in return and audit report - reassessment under Section 147/148 - limited scope of review under Section 264 - judicial review limited to decision making process

Use of electronic clearing system through a bank account - Rule 6DD exceptions - disallowance under Section 40A(3) - Deposit of cash directly into the supplier's bank account does not constitute "use of electronic clearing system through a bank account" for the purposes of Rule 6DD(c)(v) and cannot avail the exception to disallowance under Section 40A(3). - HELD THAT: - The Court construed the phrase "use of electronic clearing system through a bank account" to mean transfer of funds by electronic mode through the clearing system (for example RTGS, NEFT, IMPS) involving inter bank or inter branch electronic transfer. A direct cash deposit into the beneficiary's bank account is not routed through a clearing house nor effected by electronic mode and therefore does not fall within Rule 6DD(c)(v). The assessee failed to lead evidence that the cash deposits were made on the instructions of the payee or due to any business exigency; consequently the assessing authority correctly declined the benefit of the Rule 6DD exception and disallowed the amount under Section 40A(3). [Paras 25, 26]

Benefit of Rule 6DD(c)(v) not available where payments were cash deposits directly into the seller's bank account; disallowance under Section 40A(3) upheld.

Misrepresentation in return and audit report - reassessment under Section 147/148 - limited scope of review under Section 264 - judicial review limited to decision making process - Principal Commissioner correctly rejected the assessee's application under Section 264 where reassessment was initiated on the basis of discovered misrepresentation and the impugned order displayed no procedural or decision making infirmity warranting interference under Article 226. - HELD THAT: - The Court observed that reassessment proceedings were triggered because the authorities found that the assessee had misrepresented payments in his return and audit report. The Principal Commissioner, exercising the limited inquiry permissible under Section 264, examined the submissions and recorded a finding of misrepresentation and absence of evidence that would attract Rule 6DD. Applying established principles limiting judicial review to the decision making process, the High Court found no failure to understand the governing law, no Wednesbury unreasonableness, and no procedural impropriety in the impugned order. The writ petitioner had not shown that the Principal Commissioner ignored relevant material or acted perversely. [Paras 27, 29, 30, 31]

Order rejecting the Section 264 application and the reassessment additions founded on discovered misrepresentation are sustainable; no grounds for interference under Article 226.

Final Conclusion: The High Court finds no merit in the petition; the Principal Commissioner's rejection of the Section 264 application and the reassessment addition under Section 40A(3)/Rule 6DD are upheld and the writ petition is dismissed.

Definition of "co-operative society" under section 2(19) of the Income Tax Act - eligibility for deduction under section 80P - purposive construction of tax exemption provisions - recognition of cooperative entities registered under state cooperative statutes - constitutional protection for formation of cooperatives under Article 19(1)(i) (97th Amendment)

Definition of "co-operative society" under section 2(19) of the Income Tax Act - eligibility for deduction under section 80P - purposive construction of tax exemption provisions - recognition of cooperative entities registered under state cooperative statutes - Entities registered under the Karnataka Souharda Sahakari Act, 1997 fall within the definition of "co-operative society" in section 2(19) of the Income Tax Act, 1961 and are therefore entitled to claim benefits under section 80P subject to applicable exceptions and conditions. - HELD THAT: - The court construed section 80P purposively, observing that section 2(19) defines "co-operative society" as one registered under the Co-operative Societies Act, 1912 or under any other law in force in a State for registration of co-operative societies. Both the Karnataka Co-operative Societies Act, 1959 and the Karnataka Souharda Sahakari Act, 1997 are state enactments enacted under Entry 32, List II, conferring on the State power to legislate for co-operatives. The objects and preambles of both Acts, the Statement of Objects and Reasons of the 1997 Bill, and the dictionary provisions in each Act demonstrate that the 1997 Act is cognate legislation dealing with co-operative societies notwithstanding differing nomenclature. Statutory definitions in each Act treat registered entities as "co-operative" and confer corporate status and perpetual succession on registration. Given the legislative purpose of promoting the co-operative movement (reinforced by constitutional protection for formation of co-operatives), a restrictive technical reading excluding entities registered under the 1997 Act would frustrate section 80P. Accordingly, entities registered under the 1997 Act fit within section 2(19) and may claim section 80P benefits subject to the statutory exceptions and requirements.

Declaration granted that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit the definition of "co-operative society" in section 2(19) of the Income Tax Act, 1961 and may claim benefits under section 80P, subject to applicable exceptions and conditions.

Application of other provisions of section 80P - Further determination of the applicability and effect of the remaining provisions of section 80P on claims by petitioner-like societies is to be considered and decided by the appropriate authorities. - HELD THAT: - The court expressly limited its decision to the question whether entities under the 1997 Act fall within the definition of "co-operative society" for claiming section 80P. It left open consideration of other provisions of section 80P and their effect on individual claims, remitting those matters to the concerned authorities for adjudication in the ordinary course.

Matters concerning the operation of the other provisions of section 80P and their effect on specific claims are remitted to the competent authorities for determination.

Final Conclusion: Writ petitions allowed insofar as a declaration was granted that entities registered under the Karnataka Souharda Sahakari Act, 1997 qualify as "co-operative society" under section 2(19) of the Income Tax Act, 1961 and may claim deductions under section 80P subject to statutory exceptions; impugned notice quashed and remaining issues under section 80P left to be decided by the authorities.

Deduction under section 57(iii) for operating expenses - admissibility of additional evidence filed post-assessment - rejection of claimed agricultural income for want of proof - treatment of unexplained cash deposits as taxable income - assessment completed for non-compliance with statutory notices

Deduction under section 57(iii) for operating expenses - onus to produce evidence for claimed expenses - The correctness of the Tribunal's finding that the assessee did not submit evidence before lower authorities to substantiate the claimed operating expenses. - HELD THAT: - The assessment record shows repeated notices under the relevant provisions and opportunities granted to the assessee, yet the assessing officer recorded non-compliance and completed the assessment by disallowing the operating expense deduction for want of evidence. The Commissioner (Appeals) considered the appellant's submissions and the remand report and found that although a break-up of expenses was furnished during appeal proceedings, no supporting evidences had been produced to establish nexus with the declared income. The Tribunal took note of these facts and the timing of documents, and observed that the assessee remained unable to substantiate the claimed operating expenses. On this factual matrix the Tribunal did not err in affirming the disallowance for lack of proof.

Finding that the operating expense deduction was not supported by evidence is upheld.

Admissibility of additional evidence filed post-assessment - treatment of unexplained cash deposits as taxable income - rejection of claimed agricultural income for want of proof - Whether the Tribunal was justified in holding that the assessee failed to explain the cash bank deposits and the declared agricultural income, and in rejecting post-assessment documentary evidence. - HELD THAT: - The Tribunal noted that the salary certificates and other documents relied upon by the assessee were dated after the impugned assessment order and therefore did not appropriately support the claims before the assessing officer or on remand. Both the CIT(A) and the Tribunal examined the written submissions and annexures and found no adequate contemporaneous evidence to explain the cash deposits or substantiate agricultural income. Given the repeated opportunities afforded to the assessee and the absence of timely supporting evidence, the Tribunal rightly concluded that the additions for unexplained bank deposits and treating agricultural receipts as income from other sources were sustainable.

Tribunal's conclusions that the cash deposits and agricultural income were unexplained and the post-assessment documents were ineffective are affirmed.

Final Conclusion: The Tribunal's order dated 12.03.2018 is affirmed; both questions framed on admission are answered in favour of the Revenue and the appeal is dismissed.

Allowability of commission under Section 37 of the Income Tax Act, 1961 - commission for introduction of customers constitutes "service" - addition to income on account of commission expense - substantial question of law

Allowability of commission under Section 37 of the Income Tax Act, 1961 - commission for introduction of customers constitutes "service" - Deletion of addition made on account of commission expense was correctly allowed because commission paid for introducing potential customers is deductible under Section 37 as a service. - HELD THAT: - The Tribunal held, and this Court agrees, that commission paid to persons for referring names of customers for the assessee falls within the ambit of "service" and is allowable under Section 37. The CIT(A) had sustained the addition on the sole ground that mere introduction of potential customers did not amount to a "service" eligible for deduction; the Tribunal reversed that view. This Court concurs with the Tribunal's application of the legal principle that referral/introduction services attracting commission are deductible under Section 37 and therefore the addition of the commission expense was not warranted. [Paras 5, 6]

Addition of Rs. 20,08,977 on account of commission expense deleted; commission for introducing customers is allowable under Section 37.

Substantial question of law - addition to income on account of commission expense - The proposed question framed by the revenue did not constitute a substantial question of law. - HELD THAT: - Having accepted the Tribunal's legal conclusion on the allowability of the commission under Section 37, the Court found that the solitary question posed by the revenue could not be characterised as a substantial question of law warranting interference. The Court recorded agreement with the Tribunal's view and declined to entertain the appeal further on that basis. [Paras 7, 8]

Proposed substantial question of law rejected; appeal dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal; the Tribunal's deletion of the addition in respect of commission paid for introducing customers (held to be a service deductible under Section 37) is upheld and the proposed question is not a substantial question of law.

Condonation of delay - Review under principles analogous to Order XLVII CPC - Error apparent on the face of the record - Dismissal of review petition for absence of review ingredients - Assessment of trading character by reference to volume and frequency of transactions

Condonation of delay - Delay in filing the review application - HELD THAT: - The Court examined the application for condonation of delay and the submissions of the applicant. It found that sufficient cause had been shown to explain the delay in filing the review and therefore exercised its discretion to condone the delay. The application for condonation of delay (Civil Miscellaneous Application No. 4140 of 2018) was allowed.

Delay in filing the review is condoned and the condonation application is allowed.

Review under principles analogous to Order XLVII CPC - Error apparent on the face of the record - Dismissal of review petition for absence of review ingredients - Assessment of trading character by reference to volume and frequency of transactions - Merits of the review application seeking recall/revision of the earlier judgment dismissing the income-tax appeal - HELD THAT: - On perusal of the review, the Court held that the statutory/analogous principles governing review (Order XLVII CPC) did not find application. The reviewer's contention rested on an alleged error apparent on the face of the record based on paragraph 9 of the earlier judgment; however paragraph 9 merely recorded the assessee's contention and did not demonstrate any error in the Court's ultimate analysis or conclusions. The earlier decision-dismissing the appeal after considering volume, frequency and other factors showing substantial participation of the assessee in share trading-was not shown to suffer from any such apparent error warranting review. Consequently, the review application lacked the necessary ingredients and was dismissed.

Review application dismissed for want of merit; no grounds made out for review under principles analogous to Order XLVII CPC.

Final Conclusion: Condonation of delay in filing the review was allowed; on merits the review was dismissed as there were no ingredients of error apparent on the face of the record or other grounds to warrant review of the earlier order which had upheld the trading character of the assessee's transactions.

Capital expenditure versus revenue expenditure - pre-operative expenses - allowability under section 37(1) of the Act - substantial question of law

Capital expenditure versus revenue expenditure - project development cost - Project development cost incurred in the preoperative period is to be treated as capital expenditure or as revenue expenditure for the Assessment Year 2010-2011. - HELD THAT: - The Court recorded that the question whether the project development cost is capital or revenue had already been considered and decided against the Revenue in the assessee's own cases for other assessment years, specifically in Income Tax Appeal No.892 of 2014 and Income Tax Appeal No.948 of 2014 by order dated 5 July, 2017. Having regard to those earlier decisions in the assessee's own case, the Court declined to entertain the contention raised by the Revenue on this point in the present appeal. [Paras 5]

Decided against the Revenue; no substantial question of law arises on classification of the project development cost.

Pre-operative expenses - allowability under section 37(1) of the Act - Whether preoperative expenses incurred by the assessee were admissible as deductions under section 37(1) of the Act for the Assessment Year 2010-2011. - HELD THAT: - The Court noted that the contention regarding allowability of preoperative expenses under section 37(1) had been considered and repelled against the Revenue in Income Tax Appeal No.197 of 2017. In view of that prior ruling in the assessee's favour, the Court held that the Revenue's challenge on this point did not raise any substantial question of law warranting interference in the present appeal. [Paras 6]

Decided against the Revenue; claim of inadmissibility of preoperative expenses under section 37(1) does not give rise to a substantial question of law.

Final Conclusion: Appeal dismissed. No substantial question of law arises in view of earlier decisions in the assessee's own cases which were relied upon by the Court and decided against the Revenue.

Penalty under Section 271-D of the Income Tax Act - limitation under Section 275 of the Income Tax Act - exercise of discretion by the Tribunal to admit fresh pleas requiring investigation of facts - remand for fresh consideration

Penalty under Section 271-D of the Income Tax Act - limitation under Section 275 of the Income Tax Act - exercise of discretion by the Tribunal to admit fresh pleas requiring investigation of facts - Whether the penalty order dated 31.03.1995 under Section 271-D is barred by limitation as prescribed under Section 275 of the Income Tax Act, and whether the Tribunal should decide that question despite absence of cross-objections. - HELD THAT: - The Tribunal recorded the assessee's plea on limitation but declined to admit it on the ground that its admission would require investigation of facts and the assessee had not filed cross-objections (para 12 of the Tribunal's order). This Court held that the question of limitation may go to the root of the matter and that the Tribunal could have examined the contention recorded in its order even in the absence of cross-objections. The Court therefore did not decide the substantive question on limitation but remitted the matter to the Tribunal for fresh consideration and for decision after hearing both parties. The Court further clarified that the Tribunal may decide the limitation question regardless of any monetary threshold in the Government's litigation policy (para 6-8). [Paras 6, 7, 8]

Matter remitted to the Income Tax Appellate Tribunal to decide, after hearing both parties, whether the penalty order dated 31.03.1995 under Section 271-D is barred by limitation under Section 275; appeal disposed of without deciding the substantial question of law.

Final Conclusion: The Tax Case Appeal is disposed of by remitting the limited issue of limitation to the Tribunal for fresh hearing and decision; the Court makes no order as to costs.

Allocation of donation for deduction between exempt units and other income - deduction under Chapter VI-A and claim under Section 80G - donation not deductible as business expenditure under Section 37(1) - order of appellate tribunal on allocation of Chapter VI-A deductions

Allocation of donation for deduction between exempt units and other income - deduction under Chapter VI-A and claim under Section 80G - donation not deductible as business expenditure under Section 37(1) - Donation paid by the assessee under Section 80G need not be allocated to the unit eligible for deduction under Section 80-IC and must be claimed in the manner prescribed under Chapter VI-A after computing gross total income. - HELD THAT: - The appellate tribunal found that the donation paid by the assessee had no connection with the unit eligible for deduction under Section 80-IC and therefore did not require allocation to that unit. The tribunal further observed that the scheme of the Act permits claiming a deduction under Chapter VI-A, including Section 80G, only after all other deductions under Chapter VI-A are considered against the gross total income. The tribunal also held that the donation could not be treated as a business expense under Section 37(1) because it was not incurred wholly and exclusively for the purposes of business; consequently, even if shown in the profit and loss account, it would be disallowed in computing business income and the proper recourse for claiming relief is under Section 80G in the manner provided by law. The High Court agreed with these conclusions and found no infirmity in the CIT(A)'s order upheld by the tribunal. [Paras 45]

The Revenue's ground contesting allocation of the donation to the 80-IC unit is dismissed; the tribunal's and CIT(A)'s conclusions on the matter are upheld.

Final Conclusion: The High Court admitted the appeal on the substantial questions framed as A, B and C but declined to admit and dismissed Revenue's question D, agreeing with the appellate tribunal and CIT(A) that the donation under Section 80G need not be allocated to the 80-IC unit and must be claimed under Chapter VI-A as held by the tribunal.

Characterisation of payments under section 194H and section 194J of the Income tax Act, 1961 - Substantial question of law - Admissibility of additional evidence under Rule 46A of the Income tax Rules - Right to be heard and opportunity to rebut - Precedential effect of a co ordinate decision for an adjacent assessment year

Characterisation of payments under section 194H and section 194J of the Income tax Act, 1961 - Substantial question of law - Precedential effect of a co ordinate decision for an adjacent assessment year - Questions framed on whether sub brokerage payments fell under section 194H or section 194J and whether the ITAT erred in allowing the sub brokerage under section 194H do not raise a substantial question of law. - HELD THAT: - The Tribunal applied the same approach adopted in the assessee's appeals for Assessment Year 2011-2012. The parties placed on record this Court's decision in Income Tax Appeal No. 1486 of 2016 concerning the assessee's 2011-2012 appeals, wherein identical questions were held not to give rise to any substantial question of law. In view of that co ordinate decision and the Tribunal's adherence to it, the contentions under questions A, B and C do not present a substantial question of law warranting interference. [Paras 5]

Questions A, B and C do not give rise to any substantial question of law and the Tribunal's conclusion is maintained.

Admissibility of additional evidence under Rule 46A of the Income tax Rules - Right to be heard and opportunity to rebut - Whether the Commissioner (Appeals) considered additional evidence of three creditors without affording the Assessing Officer an opportunity to rebut and thereby violated Rule 46A. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) forwarded the additional evidence to the Assessing Officer for comments and that the Assessing Officer, in his remand report, did not comment on that evidence. On that factual finding the Tribunal concluded there was no breach of Rule 46A and that the Assessing Officer had been given the opportunity to rebut but chose not to comment. The Court accepted the Tribunal's treatment of the matter. [Paras 6]

No violation of Rule 46A; opportunity to the Assessing Officer to rebut was afforded and the Tribunal rightly so held.

Final Conclusion: The appeal is dismissed; no substantial question of law arises in respect of the characterization of the payments or the admission of the additional evidence, and the Tribunal's conclusions are upheld.

Reopening of assessment - Section 147/148 jurisdiction - First proviso to section 147 - Failure to disclose material facts - Change of opinion - Section 194C and section 40(a)(ia) - Waiver or estoppel cannot confer jurisdiction

Section 147/148 jurisdiction - First proviso to section 147 - Failure to disclose material facts - Change of opinion - Section 194C and section 40(a)(ia) - Waiver or estoppel cannot confer jurisdiction - Validity of the notice under section 148 and the reassessment framed under section 147 of the Act in respect of AY 2010-11. - HELD THAT: - The Tribunal found that the reasons recorded for reopening merely asserted non-compliance with Chapter XVII-B (including s.194C) and absence of evidence, without alleging any failure by the assessee to disclose material facts fully and truly at the time of the original assessment. The original assessment under s.143(3) had specifically inquired into TDS deduction and was framed after that inquiry without disallowance, indicating that the issue had been examined and accepted. A mere later review of existing records by the same authority resulting in a changed conclusion amounts to impermissible change of opinion and does not satisfy the stringent conditions of section 147 or the additional embargo in the first proviso. Because the reasons recorded did not demonstrate non-disclosure of material facts (a prerequisite where reassessment is sought after four years), the proviso to section 147 was not complied with and the notice under section 148 and the consequent reassessment were vitiated. The Tribunal further held that challenge to jurisdiction can be raised before it even if not pressed below, since estoppel or waiver cannot confer jurisdiction on an authority lacking it. [Paras 7]

Notice issued under section 148 and reassessment under section 147 are void ab initio for want of jurisdiction; reassessment order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the reopening after four years was based on review/change of opinion without any allegation of failure to disclose material facts and therefore the notice under section 148 and reassessment under section 147 were void; the reassessment order was quashed.

Clubbing of income under section 64(1)(iv) - Explanation 3 to section 64(1) - apportionment of business income (or loss) where transferee invests gifts in a business - previous year proviso for newly set up business - figures to be taken as on date of setting up - income includes loss (Explanation 2 to section 64)

Clubbing of income under section 64(1)(iv) - Explanation 3 to section 64(1) - apportionment of business income (or loss) where transferee invests gifts in a business - previous year proviso for newly set up business - figures to be taken as on date of setting up - Whether the entire business loss of Mrs. Priti Bhaskarwar arising from the F&O business started on 18-09-2013 is liable to be clubbed in the hands of the assessee for AY 2014-15 or only a proportionate part determined under Explanation 3. - HELD THAT: - Explanation 3 to section 64(1) requires that, where gifts from an individual to his spouse are invested by the spouse in a business in which the spouse also has other investments, the part of income (or loss) to be clubbed is that proportion of the business income (or loss) which the value of the gifted assets invested in the business as on the first day of the previous year bears to the total investment in the business as on that day. For a business newly set up in the relevant financial year, the proviso to section 3 prescribes that the relevant date for taking those amounts is the date of setting up of the business. The Tribunal found on the material (derivative contract notes, margin ledger and bank account entries) that the F&O business was set up on 18-09-2013, and that as on that date the investment in the business (margin and opening loss) was fully financed by gifts from the assessee. Consequently, the numerator (gifts invested in the business) and the denominator (total investment in the business) are equal as on the first day of the previous year applicable to the newly set up business. Applying the formula in Explanation 3 therefore yields 100% of the business loss as attributable to the gifted funds. The Tribunal also noted that gifts made in earlier years, if invested in the business, would similarly be includible in the numerator, and that positive income from other gifted assets had already been clubbed by the assessee. On these findings, the Tribunal concluded that the entire loss arising from the F&O business is chargeable to the assessee under section 64(1)(iv) read with Explanation 3. [Paras 9, 12]

The Tribunal allowed the appeal and held that the full loss of Rs. 31,56,429/- from the F&O business carried on by the assessee's wife for AY 2014-15 is to be clubbed in the hands of the assessee.

Final Conclusion: Appeal allowed. On the facts found, the entire business loss of the spouse from the F&O business started on 18-09-2013 is clubbable in the hands of the assessee for AY 2014-15 under section 64(1)(iv) read with Explanation 3.

Arm's length price - international transaction with associated enterprises - benefit and rendition test for intra-group services - reimbursement versus expense distinction - mandatory reference to Transfer Pricing Officer under CBDT Instruction No. 3/2003

Arm's length price - benefit and rendition test for intra-group services - reimbursement versus expense distinction - Deletion of the addition made by the Assessing Officer on account of ALP was upheld on merits in view of absence of cogent material to disprove receipt and benefit of services and because certain amounts in the AO's computation represented income or reimbursements and were not expenses. - HELD THAT: - The Tribunal accepted the CIT(A)'s reappraisal that the assessee, previously operating with limited ports and incurring losses, became a profitable concern after collaboration with Arkadin SA through supply of equipment, trademark, know how and obtaining clientele. The Assessing Officer's conclusion that services were not actually provided or did not confer commensurate benefit was held to be unsupported by cogent material. The Tribunal noted that (i) payments were pursuant to written agreements and made through banking channels; (ii) part of the sum treated as disallowance by the AO in fact constituted income; and (iii) a large component represented reimbursements not claimed as expenses in the P&L. The Tribunal agreed with the CIT(A) that the AO failed to specify how the payments lacked business purpose or were disproportionate to services received, and that disallowance without proper verification of materials on record was unsustainable. On these findings the impugned addition was correctly deleted. [Paras 11, 12, 13, 14, 15]

Addition on account of ALP was not sustainable on merits; deletion by the CIT(A) upheld.

Mandatory reference to Transfer Pricing Officer under CBDT Instruction No. 3/2003 - arm's length price - Adjustment to ALP by the Assessing Officer could not be sustained because the AO failed to make reference to the Transfer Pricing Officer despite the aggregate value of international transactions exceeding the threshold specified in CBDT Instruction No. 3/2003. - HELD THAT: - The Tribunal agreed with the assessee's submission that where the value of international transactions exceeds the prescribed threshold, the Assessing Officer is to refer the matter to the Transfer Pricing Officer for determination of arm's length price, as mandated by CBDT Instruction No. 3/2003. The Tribunal relied on precedent holding that non reference to the TPO in such circumstances amounts to breach of mandatory instructions and renders any transfer pricing adjustment by the AO unsustainable. The Tribunal found this failure to be a separate and independent ground for upholding deletion of the AO's adjustment. [Paras 16, 17]

For want of mandatory reference to the TPO under CBDT Instruction No. 3/2003, the AO's ALP adjustment cannot be sustained.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s deletion of the ALP addition is upheld both on merits and for failure of the Assessing Officer to refer the matter to the Transfer Pricing Officer as required by CBDT Instruction No. 3/2003.

Penalty under section 271(1)(c) - concealment of income - furnishing inaccurate particulars of income - slump sale - valuation under section 50C - claim based on auditor's certificate in Form 3CEA - initiation of penalty proceedings must specify limb - acceptance of rival view to avoid litigation not amounting to concealment

Penalty under section 271(1)(c) - initiation of penalty proceedings must specify limb - furnishing inaccurate particulars of income - concealment of income - Validity of penalty where the notice and proceedings did not specify whether they were initiated for concealment of income or for furnishing inaccurate particulars of income under section 271(1)(c). - HELD THAT: - The Tribunal found that the penalty order and the notice did not clearly state under which limb of section 271(1)(c) proceedings were initiated. Relying on precedents of the High Courts and the reasoning that initiation and imposition must be on the same specified ground so that the assessee has an opportunity to meet the case made, the Tribunal held that initiation on one ground and imposition on another offends principles of natural justice. Prior decisions cited indicate that a notice which fails to specify the limb (concealment or furnishing inaccurate particulars) is vitiated and cannot sustain the penalty. In view of these authorities and the absence of clear specification in both the penalty order and the CIT(A)'s order, the Tribunal concluded the penalty could not be upheld. [Paras 13, 14, 15, 16]

Penalty deleted as the proceedings did not specify which limb of section 271(1)(c) was the basis of levy.

Slump sale - claim based on auditor's certificate in Form 3CEA - valuation under section 50C - acceptance of rival view to avoid litigation not amounting to concealment - Whether the assessee's initial claim of slump sale (supported by auditor's Form 3CEA) and subsequent voluntary revision to accept valuation under section 50C, after the Assessing Officer questioned the claim, amounted to concealment of income or furnishing inaccurate particulars. - HELD THAT: - The Tribunal noted that the assessee from the outset claimed a slump sale at a stated amount supported by the auditor's certificate and that there was no material on record showing suppression of the auditor's report or other facts. On receipt of the Assessing Officer's query, the assessee voluntarily withdrew the slump sale claim and furnished a revised computation adopting the section 50C valuation and paid the balance tax with interest. Relying on authoritative decisions, the Tribunal recognised that making a plausible, bona fide claim which is subsequently disbelieved or adjusted in assessment does not, by itself, attract penalty under section 271(1)(c). The record did not show factual concealment or that the assessee knowingly furnished inaccurate particulars; the revision was made to avoid litigation and to 'purchase peace', which is not penal in the circumstances presented. [Paras 9, 10, 11, 12]

The conduct of claiming slump sale on the basis of the auditor's certificate and later revising the return when questioned did not constitute concealment or furnishing of inaccurate particulars deserving of penalty.

Final Conclusion: The penalty imposed under section 271(1)(c) is unsustainable and is deleted; the assessee's appeal is allowed.

Disallowance under Section 14A read with Rule 8D(2)(iii) - taxability of dividend from foreign companies (no exemption) - inclusion of strategic/subsidiary/group investments for Section 14A disallowance (Maxopp principle) - consideration of only investments yielding dividend for Section 14A disallowance (Vireet SB principle) - disallowance under Section 14A cannot exceed exempt income (Joint Investments principle) - deductibility under Section 37(1) - expenses wholly and exclusively for business - non-deductibility of corporate social responsibility and non-business pooja expenses - allowability of provision for employee profit sharing - distinction between provision and actual payment; interplay with Section 36(1)(ii) and Section 43B( c )

Disallowance under Section 14A read with Rule 8D(2)(iii) - taxability of dividend from foreign companies (no exemption) - inclusion of strategic/subsidiary/group investments for Section 14A disallowance (Maxopp principle) - consideration of only investments yielding dividend for Section 14A disallowance (Vireet SB principle) - disallowance under Section 14A cannot exceed exempt income (Joint Investments principle) - Validity and quantum of disallowance under Section 14A read with Rule 8D(2)(iii) in respect of investments held as at 31.03.2012. - HELD THAT: - The authorities below applied a flat disallowance but did not analyze investments vis-a -vis the exempt dividend actually received. The Tribunal held that (a) where dividend from foreign companies is offered to tax in India, those foreign investments should be excluded from Section 14A disallowance and AO must verify taxability and exclusion, (b) investments in strategic, subsidiary or group/associated companies are includible for Section 14A disallowance in view of the Supreme Court's decision in Maxopp, and (c) in accordance with the Special Bench decision in Vireet Investment Pvt. Ltd., only investments which yielded dividend during the year under consideration should be considered for the purpose of disallowance. Further, the Tribunal directed that the AO must ensure that any disallowance made does not exceed the exempt income as held by the Delhi High Court in Joint Investments. In consequence, the matter was remitted to the AO for fresh adjudication in light of these principles and after giving the assessee opportunity to be heard and to adduce evidence/explanations. [Paras 3]

Order of CIT(A) set aside; issue remanded to AO for de novo adjudication applying the above principles and verifying taxability of foreign dividends, inclusion of strategic/subsidiary investments, consideration only of investments yielding dividend in the year, and ensuring disallowance does not exceed exempt income.

Deductibility under Section 37(1) - expenses wholly and exclusively for business - non-deductibility of corporate social responsibility and non-business pooja expenses - Allowability of claimed business deductions under Section 37(1) in respect of local area expenses and pooja expenses. - HELD THAT: - The assessee failed to furnish evidence to establish that the amounts spent on local area welfare and pooja at temples outside the factory were incurred wholly and exclusively for the purpose of business as required by Section 37(1). The Tribunal reiterated that the onus lies on the assessee to prove business nexus for the year under consideration and that consistency with earlier years does not relieve the assessee of this burden for a distinct assessment year. In absence of proof, the disallowance made by the AO and confirmed by the CIT(A) was sustained. [Paras 4]

Disallowance of the claimed expenses confirmed; deduction under Section 37(1) denied for ay: 2012-13 for lack of requisite evidence of business nexus.

Allowability of provision for employee profit sharing - distinction between provision and actual payment; interplay with Section 36(1)(ii) and Section 43B( c ) - deductibility under Section 37(1) - commercial expediency and precedent (Madras High Court decisions) - Treatability of a provision for profit incentive (debited to P&L but unpaid in the year) as an allowable deduction for ay: 2012-13. - HELD THAT: - While decisions of the Madras High Court recognise that payments made to avert industrial action or for commercial expediency may be allowable (thus attracting Section 37(1) rather than Section 36(1)(ii)), the documentary foundation relied upon by the assessee is a Memorandum of Settlement dated 04.09.1977 which was operative only until 31.12.1980. There is no finding or evidence that a valid settlement applicable to the relevant previous year existed. Given this lacuna, the Tribunal found it necessary to remit the matter to the AO for fresh adjudication. The AO was directed to require the assessee to produce any agreement/settlement effective for the year in question, verify whether TDS was in fact deducted and payments made in subsequent year(s), and ensure there is no double deduction in later years; and then to decide the allowability applying Sections 37(1), 36(1)(ii) and 43B and the cited Madras High Court precedents. [Paras 5]

Issue remanded to AO for de novo adjudication on production and verification of a settlement/agreement applicable to the year, TDS/payment verification, and application of relevant statutory provisions and precedents.

Final Conclusion: Appeal partly allowed for statistical purposes: disallowance under Section 14A and the claim for provision for profit incentive are remitted to the AO for fresh adjudication in accordance with the Tribunal's directions; the disallowance of claimed local area and pooja expenses under Section 37(1) is confirmed for ay: 2012-13.

Penalty under section 271E for repayment in cash in contravention of section 269T - Penalty under section 271D for acceptance in cash in contravention of section 269SS - Reasonable cause under section 273B - Transactions between close relatives/near relatives as constituting reasonable cause

Penalty under section 271D for acceptance in cash in contravention of section 269SS - Transactions between close relatives/near relatives as constituting reasonable cause - Reasonable cause under section 273B - Deletion of penalty under section 271D confirmed. - HELD THAT: - The Tribunal agreed with the CIT(A)'s finding that the impugned receipts and payments, pleaded as gifts but treated by the assessing authority as loans, involved transactions between the assessee and her husband (including HUF). Applying precedents which hold that cash transactions between near relatives or family members for non commercial or family purposes may constitute reasonable cause under section 273B and fall outside the mischief of section 269SS, the Tribunal held that penalty under section 271D could not be sustained. The Tribunal relied on the view taken in the coordinate-bench decision in Smt. Deepika vs. ACIT and other authorities (including M. Yeshodha , CIT v. Sunil Kumar Goel , ACIT v. Vardaan Fashion , ITO v. Tarlochan Singh ) to conclude that such family/near relative transactions attract a liberal view and constitute reasonable cause for non compliance with section 269SS, warranting deletion of the penalty. [Paras 3, 7, 8]

Penalty under section 271D deleted.

Penalty under section 271E for repayment in cash in contravention of section 269T - Transactions between close relatives/near relatives as constituting reasonable cause - Reasonable cause under section 273B - Penalty under section 271E for repayment in cash was held not sustainable and directed to be deleted. - HELD THAT: - Although the assessing officer and CIT(A) treated the transactions as loans and the CIT(A) confirmed penalty under section 271E, the Tribunal found that the same reasoning which supported deletion of penalty under section 271D applied equally to repayment in cash between close family members. Relying on the line of authorities treating familial cash transactions for non commercial/family purposes as giving rise to reasonable cause, the Tribunal held that penalty under section 271E could not be sustained and set aside the CIT(A)'s confirmation. The Tribunal therefore directed deletion of the penalty levied by the AO under section 271E. [Paras 3, 6, 9]

Penalty under section 271E deleted and AO directed to delete the penalty.

Final Conclusion: The appeal is allowed; the penalties levied under section 271D and section 271E are deleted and the assessing officer is directed to give effect to this order.

Admissibility of documents admitted in evidence - Burden of proof in benami transactions - Prohibition on suits or defenses based on benami transactions - Appellate appreciation of evidence and concurrent findings

Admissibility of documents admitted in evidence - Appellate appreciation of evidence and concurrent findings - High Court rightly relied upon a photocopy of an agreement which the defendant admitted in cross-examination and was justified in drawing consequent inferences. - HELD THAT: - The Court held that the plaintiff had put the photocopied document to the defendant in cross-examination and the defendant admitted its contents and that the original was with the purchaser. Once admitted in that manner, the document could not be dislodged on the ground of being a photocopy and the High Court was entitled to treat it as part of the record and to draw inferences therefrom. Consequently, the High Court's reliance upon the photocopied agreement and the consequential amendment application were not vitiated by inadmissibility. The impugned appreciation of evidence on this aspect was therefore sustainable. [Paras 16]

Photocopy admitted by the defendant in cross-examination was rightly relied upon by the High Court; no error in appreciation on admissibility.

Burden of proof in benami transactions - Prohibition on suits or defenses based on benami transactions - Plaintiff's contention that the real sale consideration was higher (Rs. 2,30,000) did not render the suit or its reliefs impermissible as a benami-based claim and was not barred in the suit for recovery of money. - HELD THAT: - The Court explained that Sections 3 and 4 of the Benami Transactions (Prohibition) Act prohibit benami transactions and bar suits or defenses founded on benami rights; however, the onus of proving that a transaction is benami rests on the party asserting it. Here, the defendants did not plead or prove that the transaction was benami nor did they show that the plaintiff was claiming rights as a benami owner. The plaintiff's averment about the real consideration was advanced only to demonstrate that the deposit in his bank account did not negate the loan to the defendant. Since the defendants failed to discharge the burden of establishing a benami transaction, the High Court was justified in rejecting the contention that the plaintiff's case was barred by the Benami Act. [Paras 17, 18, 21]

The plea that the real consideration being higher involved a benami transaction was without merit; defendants failed to prove any benami transaction and the claim for recovery was not barred.

Appellate appreciation of evidence and concurrent findings - The High Court correctly reversed the trial court's finding and decreed the suit for recovery of the loan amount on appreciation of the evidentiary material. - HELD THAT: - The High Court examined the documentary and oral evidence, including the agreements, receipts and the cheques, and concluded that the plaintiff had in fact advanced the loan and that the circumstances (absence of retrieval of the cheques and the receipt issued by the defendant) made the defendant's claim of immediate repayment improbable. The High Court's analysis rejected the trial court's reliance on the bank deposit as dispositive, holding that the deposit could be consistent with a larger true consideration and did not conclusively show repayment to the defendant. The Supreme Court found no error in this appellate appreciation and sustained the High Court's conclusion. [Paras 15, 16, 22]

High Court's reversal of the trial court and decree for recovery was justified on the evidence; the Supreme Court dismissed the appeal.

Final Conclusion: The appeal is dismissed. The High Court's decree in favour of the plaintiff for recovery of the loan was correctly upheld: the photocopied document admitted in cross-examination was admissible; the defendants failed to prove any benami transaction so as to bar the claim; and the appellate appreciation of evidence sustaining the decree was proper.

Summary order. Delay of 87 days in filing the appeals is condoned; the Revenue's applications to withdraw the appeals are allowed and the appeals are dismissed as withdrawn; miscellaneous applications and stay petitions stand disposed of.

Keep in abeyance of Section 34 proceedings owing to initiation of corporate insolvency resolution process - effect of moratorium under the Insolvency and Bankruptcy Code on pending arbitration challenge - pre-existing dispute as a bar to invocation of insolvency proceedings - use of insolvency proceedings as substitute for debt enforcement

Pre-existing dispute as a bar to invocation of insolvency proceedings - effect of moratorium under the Insolvency and Bankruptcy Code on pending arbitration challenge - Whether the petition under Section 34 of the Arbitration and Conciliation Act, 1996 should be kept in abeyance on account of initiation of corporate insolvency proceedings against the petitioner and the moratorium declared under the IBC. - HELD THAT: - The court found that the arbitral reference, appointment of the arbitrator and the award pre-dated the initiation of insolvency proceedings and that the challenge to the award under Section 34 was filed in 2008, long before operational creditors initiated proceedings in 2017. Relying on the principle that a pre-existing and genuine dispute must be given precedence over insolvency proceedings, the court held that the IBC cannot be used to defeat or put in terrorem a claim which is the subject-matter of a pending adjudication. The court further noted that the NCLT had, by order dated 19th July, 2018, declared that the moratorium under Section 14 shall cease to have effect; consequently, there was no embargo to continue suits or proceedings to which the corporate debtor is a party. Section 14(a) restrains institution or continuation of proceedings against the corporate debtor during moratorium, but where the moratorium is declared to have ceased, the restraint falls away. The court observed that the respondent could not, in 2017, have presented a finally adjudicated claim before the NCLT because the Section 34 challenge was then pending and no favourable adjudication had been rendered in the respondent's favour. Allowing the petitioner to relegate the respondent's claim to limbo by invoking insolvency provisions while a prior arbitration challenge was pending would be impermissible. On these grounds, the court declined to keep the Section 34 petition in abeyance and directed that the Section 34 proceedings continue. [Paras 8, 9, 10, 11]

The Section 34 petition shall not be kept in abeyance on account of the insolvency proceedings; the challenge to the Award may proceed as the moratorium has ceased to have effect and the arbitration dispute pre-existed the insolvency proceedings.

Final Conclusion: The High Court refused to stay or postpone the Section 34 proceedings on the ground of initiation of corporate insolvency resolution process; the arbitration challenge, being a pre-existing dispute and with the NCLT moratorium declared to have ceased, may proceed and the petition was listed for further hearing with liberty to file an affidavit in reply.

Validity of oral agreement between juristic persons - rejection of plaint under Order VII Rule 11 CPC - cause of action must be disclosed in the plaint - requirement of written contracts for companies under the Companies Act, 2013 - effect of repeal of Companies Act, 1956 provisions by the Companies Act, 2013

Validity of oral agreement between juristic persons - requirement of written contracts for companies under the Companies Act, 2013 - effect of repeal of Companies Act, 1956 provisions by the Companies Act, 2013 - Oral agreement of sale between private limited companies does not validly give rise to a cause of action for specific performance. - HELD THAT: - The Court held that companies, being juristic persons, act through authorised human agents and their contracts must conform to the form and manner prescribed by the Companies Act. Section 46(1)(b) of the Companies Act, 1956, which permitted contracts by parol on behalf of a company, has been displaced by the Companies Act, 2013; Section 465(2)(b) of the 2013 Act operates so that the mode of execution under the 1956 Act no longer governs where inconsistent with the 2013 Act. Section 21 of the 2013 Act prescribes the manner of authentication and signing of contracts by companies and does not preserve a free-standing right to enforce oral agreements between companies. Further, Section 10 of the Contract Act recognises that where law requires a contract to be in writing it must be so made. The plaint alleged an oral sale of a large extent of land between companies but did not disclose any board resolution or specific authorisation empowering any person to bind the defendant company; absence of such authorisation was a circumstance justifying disbelief of the alleged oral contract. Applying these principles, the Court concluded that the alleged oral agreement between the parties was not a valid basis for a suit for specific performance and therefore did not furnish a legally cognizable cause of action. [Paras 8, 9, 10, 12, 14]

The oral agreement alleged between the companies is not a valid basis for specific performance and the plaint does not disclose a cause of action on that footing.

Rejection of plaint under Order VII Rule 11 CPC - cause of action must be disclosed in the plaint - An application under Order VII Rule 11 CPC can be filed at any stage and must be decided on the basis of the averments in the plaint; the trial Court erred in dismissing the application merely because it was filed at the stage of arguments. - HELD THAT: - The Court restated the settled principle that rejection of the plaint under Order VII Rule 11 CPC is to be determined solely on the averments contained in the plaint and may be exercised at any stage if the plaint on its face does not disclose a cause of action or is otherwise barred by law. Reliance was placed on the enunciation in Raghvendra Sharan Singh that the power under Order VII Rule 11 is drastic and must be exercised strictly on the plaint's averments; averments in the written statement are immaterial for this exercise. The trial Court had declined to decide the IA on merits and dismissed it on the ground of its timing; that procedural approach was contrary to the statutory scheme because the application should have been considered on whether the plaint, read as a whole, disclosed a cause of action. In view of the Court's conclusion that the plaint did not disclose a cause of action (for want of a valid oral agreement between companies), the IA under Order VII Rule 11 ought to have been allowed. [Paras 11, 13]

The trial Court's dismissal of the application under Order VII Rule 11 on the ground of its being filed at the stage of arguments was erroneous; the IA should have been decided on the plaint's averments and is allowed.

Final Conclusion: Civil Revision Petition allowed; the trial Court's order dismissing I.A. No.491 of 2018 is set aside, the plaint in O.S. No.21 of 2009 is rejected for failing to disclose a cause of action based on an alleged oral agreement between companies, and connected miscellaneous petitions, if any, stand closed.

Refusal to register transfer of shares without sufficient cause - entitlement of legal heirs to rights issue allotment consequent to transmission - maintainability of petition under Section 58(5) of the Act - limitation and estoppel by representation (approbate reprobate) - letter of administration discharges company from further liability and obviates need for additional indemnity - award of costs for harassment/misconduct in share transfer dealings

Refusal to register transfer of shares without sufficient cause - entitlement of legal heirs to rights issue allotment consequent to transmission - Whether the company unreasonably refused to register the transfer and whether the legal heirs were entitled to allotment of 60,000 shares on payment of consideration. - HELD THAT: - The Tribunal found that the deceased shareholder's original holding converted into the entitlement claimed by the respondents and that the company, without sufficient cause, refused to register the transfer pursuant to the arrangement with the promoter company. Correspondence established that the company had accepted the procedure for transfer subject to production of court orders and other formalities, and later resiled from that position. Having regard to the respondent's production of the Letter of Administration and readiness to pay the consideration, the respondents were held entitled to the allotment/transfer of 60,000 shares on payment of the prescribed consideration and upon executing required transfer formalities. [Paras 12, 13]

The impugned order directing registration/transfer of 60,000 shares in favour of the respondent on payment of consideration is upheld and shall be given effect.

Maintainability of petition under Section 58(5) of the Act - limitation and estoppel by representation (approbate reprobate) - Whether the petition was maintainable despite delay and whether limitation barred the respondents' claim. - HELD THAT: - The Tribunal rejected the contention that the petition was barred by limitation. The company's correspondence led the respondent to pursue court orders and to comply with the process; the company never asserted the limitation defence in its communications and indicated that final decision would follow receipt of court orders. In these circumstances, the company could not approbate and re probate; estoppel arising from its representations and the conduct of insisting on court orders made the limitation plea untenable. Consequently, the petition was held maintainable and the limitation objection was repelled. [Paras 10]

The petition is maintainable and the defence of limitation is not accepted.

Letter of administration discharges company from further liability and obviates need for additional indemnity - Whether, after production of the Letter of Administration, the company was justified in further insisting on an Affidavit cum Indemnity Bond and repetition of formalities. - HELD THAT: - The Tribunal recorded that once the Letter of Administration was produced, the company's liability stood discharged in respect of transmission; continued insistence on an affidavit and indemnity bond after receipt of the Letter of Administration was unjustified. The company, being a listed entity and aware of legal formalities, could not thereby harass the legal heirs by repeatedly demanding the same documents; that conduct warranted adverse notice and was held to be improper. [Paras 12]

Insistence upon further indemnity after production of Letter of Administration was unjustified and amounted to harassment; the respondents' compliance with the court order discharged the requirement.

Award of costs for harassment/misconduct in share transfer dealings - Whether costs should be imposed for the appellants' conduct in the matter of share transfer. - HELD THAT: - Having found that the company repeatedly insisted on additional formalities despite production of Letter of Administration and thereby harassed the claimants, the Tribunal considered it appropriate to impose a penal cost. The appellate order directs payment into the National Defence Fund as a punitive measure for the appellants' conduct in resisting the transfer. [Paras 13]

Costs of Rs. 5,00,000 are imposed on the appellants to be deposited with the National Defence Fund within the stipulated time.

Final Conclusion: The appeal is dismissed; the impugned NCLT order is upheld. The respondent is directed to pay the consideration and the company to transfer 60,000 shares within the periods specified, the respondent to complete consequential transfer formalities, interim orders are vacated, and costs are imposed on the appellants to be deposited with the National Defence Fund.

Practice as a professional post-retirement - bias arising from prior employment - stay of the impugned order - service of notice by Speed Post and by e-mail

Practice as a professional post-retirement - bias arising from prior employment - A person who has retired and is otherwise qualified may practise as a professional (for example, as an Advocate or Resolution Professional) and mere prior employment does not, by itself, give rise to an allegation of bias affecting their professional engagements. - HELD THAT: - The Tribunal accepted the submission of the Appellant that retirement does not disqualify a person from practising a profession if they possess the requisite qualifications. The Court observed that mere status as an ex-employee cannot automatically be equated with bias in character or with bias attaching to the professional services rendered by such person in proceedings, including in the Corporate Insolvency Resolution Process. No further factual or legal finding was recorded on specific instances of alleged bias; the statement establishes the principle that prior employment alone is not a sufficient basis to impute bias to a retired professional engaged in such matters.

Retirement does not preclude qualified persons from practising as professionals and prior employment alone does not constitute bias.

Stay of the impugned order - service of notice by Speed Post and by e-mail - The operation of the impugned order dated 4th January, 2020 is stayed until further orders; notice to the respondent to be issued by Speed Post (and by e-mail if provided) with requisites filed by specified date. - HELD THAT: - The Tribunal directed issuance of notice on the respondent by Speed Post, permitted service by e-mail if the Appellant provides the respondents' e-mail addresses, allowed Dasti service, and required filing of requisites and process fee by 18th January, 2020. The Tribunal listed a date for further orders (3rd February, 2020) and, in the interim, ordered that the impugned order dated 4th January, 2020 remain stayed. These are procedural directions ancillary to the adjudication and effect an interim stay of the impugned order.

Notice to the respondent to be issued as directed, requisites to be filed by 18th January, 2020, and the operation of the impugned order dated 4th January, 2020 is stayed until further orders.

Final Conclusion: The Tribunal ruled that a retired but qualified person may practise as a professional and that prior employment alone does not establish bias; directed service of notice by Speed Post (and by e-mail if provided), fixed procedural timelines, listed the matter for further orders on 3rd February, 2020, and stayed the impugned order dated 4th January, 2020 until further orders.

Default under Insolvency and Bankruptcy Code, 2016 - allottee's contractual right to refund and liquidated damages - force majeure clause and contractual extension of possession period - effect of judicial stay on developer's delivery obligations - RERA extension/recognition of project completion date - prima facie case for initiation of insolvency proceedings by real estate allottee

Default under Insolvency and Bankruptcy Code, 2016 - prima facie case for initiation of insolvency proceedings by real estate allottee - Whether the petitioners had established a prima facie case of default by the corporate debtor such as would sustain an application under Section 7 of the Code. - HELD THAT: - The Tribunal examined the contractual timeline for delivery and the communications between the parties and concluded that the petitioners sought refund on 01.02.2019, immediately after the six month grace period lapsed. However, the corporate debtor had validly relied on events which delayed completion (a court stay affecting construction of an interdependent tower and resultant delay to the firefighting ramp and podium) and had recorded an extended completion date on Maha RERA to accommodate that delay. The corporate debtor offered possession for fit out and notified grant of part/occupation certification in May-June 2019, and thus there was no outstanding amount that had become due and payable by the corporate debtor as on 01.02.2019. Applying the principle that an allottee must make out a prima facie case of a financial debt/default before Section 7 can be invoked, the Tribunal found that the petitioners failed to establish such a case in view of the contractual force majeure/extension and the RERA filing and communications showing offer of possession shortly thereafter. [Paras 19, 20, 22]

Petitioners did not establish a prima facie default by the corporate debtor as required for a Section 7 petition.

Force majeure clause and contractual extension of possession period - effect of judicial stay on developer's delivery obligations - RERA extension/recognition of project completion date - Whether the corporate debtor was entitled to an extension of time for handing over possession by reason of the court stay and force majeure clause, thereby precluding the petitioners' claim for refund and liquidated damages. - HELD THAT: - The Tribunal analysed Clause 15(i) of the agreement which provided a six month grace period and further reasonable extension for delays on account of force majeure events, including injunctions or restraining orders. A stay granted by the City Civil Court in May 2017 (vacated in November 2017) stalled construction of Tower 3 and the common firefighting ramp, causing cascading delay to the subject tower. The corporate debtor updated Maha RERA to reflect a revised completion date to accommodate the delay. The Tribunal treated these events as falling within the contractual force majeure/extension mechanism and observed that possession was offered promptly upon receipt of part occupation certificate. Hence, the delay fell within the agreed extension and the petitioners were not entitled to trigger the refund/liquidated damages clause. [Paras 8, 9, 18, 19, 20]

The corporate debtor was entitled to the contractual extension of time on account of the stay/force majeure and RERA recorded extension; petitioners could not claim refund/liquidated damages on the basis of the asserted delay.

Final Conclusion: The petition under Section 7 was dismissed: the allottee petitioners failed to establish a prima facie default as on the date of their claim because the delay in handing over possession was covered by the agreement's force majeure/extension provisions and by the RERA recorded revision of completion, and possession was offered shortly thereafter.

Withdrawal of application under Section 7 - setting aside admission order - closure of Corporate Insolvency Resolution Process - handover by Interim Resolution Professional - release of corporate debtor from rigours of law - constitution of Committee of Creditors

Setting aside admission order - withdrawal of application under Section 7 - closure of Corporate Insolvency Resolution Process - Impugned order admitting the Section 7 application was set aside and the Section 7 application was permitted to be withdrawn, with the adjudicating authority directed to close the proceedings. - HELD THAT: - The parties informed the Appellate Tribunal that the claimed debt had been discharged by delivery of a banker's cheque for the entire amount claimed by the financial creditor and that the Committee of Creditors had not been constituted. In exercise of the Tribunal's powers under its rules, the Tribunal accepted the position of the parties and, having regard to these developments, set aside the admission order dated 6th November, 2019 and allowed the financial creditor to withdraw the Section 7 application. The consequence directed was the closure of the CIRP proceedings before the Adjudicating Authority. [Paras 5]

The admission order dated 6th November, 2019 is set aside; the Section 7 application is treated as withdrawn and the Adjudicating Authority shall close the proceeding.

Handover by Interim Resolution Professional - release of corporate debtor from rigours of law - constitution of Committee of Creditors - Directions were issued for the Interim Resolution Professional to hand over records and assets on receipt of his fee and for the corporate debtor to be released to its board to function independently. - HELD THAT: - The Interim Resolution Professional stated he had worked for nine days, had been paid the cost of publication by the financial creditor, and that his fee was fixed at a specified amount to be paid by the appellant within a week. The Tribunal directed that on receipt of the fee the Interim Resolution Professional shall immediately hand over the records and assets of the corporate debtor to its management. Consequent to the withdrawal and closure of the CIRP, the Tribunal released the corporate debtor from the rigours of the I&B Code and permitted the company to function through its board of directors with immediate effect. The absence of a constituted Committee of Creditors was noted as part of the factual matrix supporting these directions. [Paras 4, 5]

On payment of the Interim Resolution Professional's fee, he shall hand over records and assets to the corporate debtor's management; the company is released from the rigours of the Code and may function through its board immediately.

Final Conclusion: The appeal is allowed: the admission order under Section 7 is set aside and the Section 7 application is treated as withdrawn, the CIRP proceedings are closed, the IRP shall hand over records and assets on receipt of his fee, and the corporate debtor is released to function through its board; no order as to costs.

Independence of Interim Resolution Professional - perception of bias - disqualification of insolvency professional due to prior employment with the creditor - statutory obligation to substitute resolution professional

Independence of Interim Resolution Professional - perception of bias - disqualification of insolvency professional due to prior employment with the creditor - Appointment of the proposed Interim Resolution Professional was objectionable and substitution was required. - HELD THAT: - The Tribunal recorded that the proposed Interim Resolution Professional was an ex-employee of the financial creditor, having served with the bank for over 39 years until retirement in 2016. The respondent specifically objected to his appointment on the ground of apprehension of bias, a fact which the petitioner did not dispute in rejoinder. The Tribunal held that an insolvency professional who has such long-standing prior employment with the creditor is unlikely to act fairly or as an independent umpire. In view of this appearance of bias and lack of independence, the Tribunal directed that the financial creditor discharge its statutory obligation by substituting the name of the proposed Interim Resolution Professional with another person.

The Tribunal directed substitution of the proposed Interim Resolution Professional and adjourned the hearing for compliance.

Final Conclusion: The Tribunal sustained the objection to the proposed Interim Resolution Professional on grounds of prior long-standing employment with the financial creditor, directed the creditor to nominate a substitute IRP, and adjourned the matter for compliance.

CENVAT credit - reversal of CENVAT credit - sufficiency of unutilized CENVAT balance - interest liability and quantification - penalty under Rule 15(2) of CCR - bona fide mistake - verification of quantum

CENVAT credit - reversal of CENVAT credit - verification of quantum - sufficiency of unutilized CENVAT balance - Whether the reversal of CENVAT credit alleged to have been made by the appellant is established and whether there were sufficient unutilized CENVAT balances from the quarter of availment until reversal. - HELD THAT: - The Tribunal recorded that the appellant had reversed CENVAT credit of Rs. 24,14,131 in March 2017 and that this reversal occurred prior to issuance of the show cause notice dated 18.05.2017. The appellant produced ST-3 returns showing unutilized CENVAT balances for periods from the quarter of availment (October 2013 to March 2014) through the quarter of reversal (October 2016 to March 2017). However, the adjudicating order confirmed a demand of Rs. 25,84,886 and the appellant furnished proof only for reversal of Rs. 24,14,131. In view of the partial proof and the remaining disputed amount, the Tribunal did not adjudicate the quantum itself but directed that the Original Authority verify the quantum of the alleged reversal and whether sufficient unutilized balances were available in the intervening periods to cover the credit availed.

Appeal allowed in part by way of remand to the Original Authority to verify the quantum of reversal of Rs. 24,14,131 and to examine sufficiency of unutilized CENVAT balances for the periods stated.

Interest liability and quantification - CENVAT credit - Whether interest is payable in respect of the wrongly taken CENVAT credit and the extent of interest payable in respect of amounts not reversed. - HELD THAT: - The Tribunal noted that the appellant admitted a portion of the amount relating to Customs Cess (which had not been reversed) and that interest in respect of the balance required quantification. The Tribunal did not finally determine entitlement or waiver of interest on the admitted or reversed amounts but directed the Original Authority to quantify the interest payable, including interest on the amount of Rs. 1,70,755 which had not been reversed to date.

Appeal allowed by way of remand to the Original Authority to quantify interest payable, including on the unreversed amount identified by the Tribunal.

Final Conclusion: The appeal is allowed by way of remand: the matter is restored to the Original Authority for verification of the appellant's claimed reversal of CENVAT credit and sufficiency of unutilized balances for the stated periods, and for quantification of interest on the amounts not reversed; further adjudication and computation to follow on that verification.

Availability of CENVAT credit on input service - exclusion under the definition of input service - capital goods - requirement of registration in the name of the provider of output service - proof of registration and documentary burden for claiming capital goods - inadmissibility of documentary evidence produced for the first time before appellate forum - distinction between goods carrier and cash van under the Motor Vehicles Act and its relevance to Service Tax input credit

Availability of CENVAT credit on input service - capital goods - requirement of registration in the name of the provider of output service - proof of registration and documentary burden for claiming capital goods - inadmissibility of documentary evidence produced for the first time before appellate forum - Whether the appellant was entitled to CENVAT credit of service tax paid on General Insurance for cash vans by treating those vehicles as capital goods for the tax periods April 2013 to September 2015 and October 2015 to June 2017. - HELD THAT: - The Tribunal held that motor vehicles qualify as capital goods only if they fall within the definition and satisfy the express requirement that such vehicles be registered in the name of the provider of the output service. The appellant bore the burden of proving that the cash vans were so registered throughout the period under dispute. The adjudicating authority had found absence of supporting documentary evidence before it. Photocopies of registration certificates produced for the first time before the Tribunal were of no avail because their relevance and linkage to use during the disputed periods were not explained, and the registration dates on those documents (25.11.2014) did not establish entitlement for the entire contested periods. Consequently the appellant failed to prove that the vehicles were its capital goods and therefore the exclusion in the definition of "input service" applied to the General Insurance service, barring credit. The Tribunal further observed that classification issues decided under the Central Excise regime (as in the decision relied upon by the appellant) were not germane to the Service Tax question here, where the Motor Vehicles Act distinguishes between goods carriers and cash vans and that distinction is material to the availability of credit under the Service Tax/CENVAT framework.

The appellant failed to establish entitlement to CENVAT credit for General Insurance on the cash vans for the specified periods; the impugned order denying credit is upheld.

Final Conclusion: Appeal dismissed; impugned order denying CENVAT credit for insurance on cash vans sustained for the tax periods April 2013 to September 2015 and October 2015 to June 2017.

Penalty under Section 78 for fraud, suppression or willful misstatement - imposition of late fee for delayed ST-3 filing beyond the scope of show cause notice

Penalty under Section 78 for fraud, suppression or willful misstatement - Validity of imposition of penalty under Section 78 where short payment was detected from appellant's books and no fraud, suppression or willful misstatement was established - HELD THAT: - The Tribunal accepted the appellant's concession that the service tax and interest were not in dispute. The adjudicating authority had imposed penalty under Section 78 on account of short payment detected by the department during audit. The Court held that the statutory ingredients for invoking Section 78-fraud, suppression, or willful misstatement with intent to evade tax-must be specifically established by the department. Here, the short payment was detected from the records maintained by the appellant and there was no finding or material to demonstrate suppression or dishonest intention. In those circumstances the charges justifying invocation of Section 78 could not be sustained and the penalty under Section 78 was set aside.

Penalty imposed under Section 78 set aside for lack of establishment of fraud, suppression or willful misstatement.

Imposition of late fee for delayed ST-3 filing beyond the scope of show cause notice - Validity of levying late fee for delayed filing of ST-3 returns where show cause notice did not invoke the provision relied upon by the adjudicating authority - HELD THAT: - The Tribunal noted that the show cause notice did not specifically invoke the provision under which the late fee (section 74) was ultimately imposed by the adjudicating authority. The adjudication therefore travelled beyond the scope of the show cause notice by raising and imposing a liability not notified to the appellant for response. Such adjudication is impermissible, and consequential imposition of the late fee could not be sustained.

Late fee for delayed filing of ST-3 returns set aside as the adjudication went beyond the scope of the show cause notice.

Final Conclusion: The appeal is allowed insofar as the penalties under Section 78 and the late fee for delayed ST-3 filing are set aside; the confirmed service tax and interest demand stood uncontested by the appellant and were not disturbed.

Maintainability of appeal - appeal under Section 35G of the Central Excise Act, 1944 - monetary limit for departmental appeals - substantial question of law exception - constitutional validity of statutory provisions - legality of Notification/Instruction/Order or Circular

Maintainability of appeal - monetary limit for departmental appeals - appeal under Section 35G of the Central Excise Act, 1944 - The appeal under Section 35G was not maintainable before the High Court in view of the monetary limit prescribed by the Ministry of Finance Instruction dated 22nd August 2019. - HELD THAT: - The Court noted the Instruction dated 22nd August 2019 prescribing a monetary limit for contesting departmental adverse orders and observed that the appellants did not dispute the applicability of that monetary limit. Applying that Instruction, the Court held that the present appeal falls outside the class of appeals to be contested by the Department and therefore is not maintainable. The Court recorded the departmental concession as to applicability of the monetary limit and disposed of the appeal on that ground. [Paras 3]

Appeal not maintainable and disposed of in view of the monetary limit prescribed by the Ministry's Instruction dated 22nd August 2019.

Substantial question of law exception - constitutional validity of statutory provisions - legality of Notification/Instruction/Order or Circular - The exception allowing contest irrespective of monetary limits for matters involving substantial questions of law did not apply to this appeal. - HELD THAT: - The Court examined Clause 4 of the 22nd August 2019 Instruction which preserves contesting of matters involving substantial questions of law as described in Clause 1.3 of the earlier Instruction dated 17th August 2011. Clause 1.3 confines such exceptional contests to cases where either the constitutional validity of a provision is challenged or where a Notification/Instruction/Order/Circular has been held illegal or ultra vires. The Court found that the present proceedings involved neither a challenge to constitutional validity nor a challenge to the legality or vires of any Notification/Instruction/Order/Circular, and therefore the Clause 1.3 exception did not apply. The Court nevertheless kept the substantial question of law framed earlier open for adjudication in an appropriate appeal. [Paras 5, 8, 9]

Exception for substantial questions of law under the Instructions is inapplicable here; the substantial question framed earlier is left open to be adjudicated in an appropriate appeal.

Final Conclusion: The appeal was dismissed as not maintainable under the Ministry's Instruction on monetary limits; the Departmental exception for substantial questions of law was held inapplicable here, although the Court kept the previously framed substantial question of law open for adjudication in an appropriate appeal.

Admissibility of electronic evidence (pen drive data) - clandestine removal - onus of proof for clandestine clearances - requirement of corroborative evidence - corroboration of statements - CENVAT credit admissibility where invoices only are produced - penalty-requirement of proof

Admissibility of electronic evidence (pen drive data) - requirement of corroborative evidence - The pen drive data and associated secret records seized during investigation cannot by themselves sustain charges of clandestine removal. - HELD THAT: - The Tribunal analysed the pen drive material, handwritten sheets and statements and recorded that the department relied primarily on the pen drive data and on statements which were contradictory or not corroborated. Relying on established authorities and its own scrutiny, the Tribunal held that data extracted from pen drives and the secretledgers, without independent corroborative material (such as receipt/transportation/consumption records, supplier investigations or receipts from buyers), do not constitute sufficient cogent and unimpeachable evidence to prove clandestine removals. The High Court noted these findings of the Tribunal and accepted that the Tribunal considered the material before it and reached a fact-based conclusion that the pen drive data alone was not sustainable to make a demand. [Paras 6, 7, 8]

The Tribunal's finding that pen drive data alone is not sufficient to sustain clandestine removal charges is upheld and no substantial question of law arises.

Onus of proof for clandestine clearances - corroboration of statements - The onus to establish clandestine clearances rests on the revenue and must be discharged by cogent, unimpeachable and corroborative evidence. - HELD THAT: - The Tribunal reiterated the legal principle that clandestine clearance allegations must be proved by the revenue with sufficient cogent evidence. It observed that statements of directors and brokers were contradictory, that relevant persons (for example, representatives of the alleged dealer from whose godown deliveries were said to have been taken) were not examined, and that material corroborative evidence (such as independent supplier statements, receipts, transportation and factory records) was not brought on record. Consequently, the Tribunal concluded that the statutory onus was not satisfied. The High Court, after examining the Tribunal's fact-based reasoning and reliance on precedent, found no persisting substantial question of law in this conclusion. [Paras 7, 8]

The Tribunal correctly applied the legal standard on the onus to prove clandestine clearances and its conclusion is not interfered with.

CENVAT credit admissibility where invoices only are produced - requirement of corroborative evidence - Allegations of inadmissible CENVAT credit claimed on the basis of invoices without actual receipt of goods were not proved by the revenue on the material placed before the Tribunal. - HELD THAT: - The adjudicating authority had alleged availment of inadmissible CENVAT credit on invoices without receipt and proposed recoveries. The Tribunal examined the investigation material and observed that revenue did not carry out necessary enquiries at the suppliers' end, nor produce corroborative documents or supplier statements to substantiate non-receipt of goods. In the absence of such evidence and having regard to the contradictory nature of available statements, the Tribunal held that the allegation of inadmissible credit was not sustainable. The High Court, noting the Tribunal's factual appraisal and legal approach, found no substantial question of law warranting interference. [Paras 6, 7]

The Tribunal's conclusion that the allegation of inadmissible CENVAT credit was not proved is upheld.

Penalty-requirement of proof - requirement of corroborative evidence - The Tribunal's conclusion that no case for imposing penalty was made out follows from the absence of sufficient corroborative evidence establishing the alleged defaults. - HELD THAT: - Penalties upon the assessee and personal penalties upon directors were imposed by the adjudicating authority along with demand. The Tribunal, having found that the foundational allegations of clandestine removals, undervaluation and inadmissible credit were not established by cogent evidence, held that the consequential imposition of penalties could not be sustained. The High Court accepted the Tribunal's reasoning that, given the deficiency of proof, the penalty findings did not give rise to a substantial question of law. [Paras 6, 7]

The Tribunal was justified in holding that no case for penalty was made out in the absence of sufficient proof.

Final Conclusion: After considering the Tribunal's fact based findings-that the pen drive data and statements lacked necessary corroboration, that revenue failed to discharge the onus to prove clandestine removals or inadmissible CENVAT credit, and that penalties were consequently unsustainable-the High Court found no substantial question of law and summarily dismissed the appeals; the draft amendment tendered on behalf of the appellant was allowed to be carried out.

Cenvat credit on inputs used in job work - treatment of clearances under Notification No. 214/86 as not constituting exemption - non-application of Rule 57C / Rule 3(5) where final product is dutiable - job-worker entitlement to credit for inputs used directly in processing supplied goods - application of MODVAT/Cenvat ratio laid down by higher benches and Supreme Court

Cenvat credit on inputs used in job work - treatment of clearances under Notification No. 214/86 as not constituting exemption - Whether the appellant is entitled to avail Cenvat credit of duty paid on paints used in job work where processed blanks were cleared to the principal manufacturer under Notification No. 214/86 without payment of duty and the cost of paints was shown separately in invoices. - HELD THAT: - The Tribunal held that clearances made by a job worker under Notification No. 214/86 merely postpone payment of duty and shift liability to the principal manufacturer and therefore such clearances cannot be equated with exempted or nil-rated clearances that would attract the bar in Rule 57C (or its counterpart rule). Applying the ratio of the Larger Bench and subsequent judicial pronouncements under the MODVAT/CENVAT regime, including the Supreme Court's decision in Escorts, the Tribunal accepted that where the intermediate products are ultimately used in manufacture of a final product on which duty is paid by the principal manufacturer, Cenvat credit in respect of inputs used by the job worker (here, paints) is permissible. The Tribunal rejected the view that showing the cost of paint separately in invoices or not recovering it from the manufacturer disentitles the job worker to credit, and disagreed with the interpretation of Rule 3(5)/Rule 57C adopted by the authorities below. The reasoning follows earlier decisions which held that the procedural scheme prevents cascading of duty and allows credit where duty is ultimately discharged on the final product by the principal manufacturer. [Paras 9, 10, 14]

Cenvat credit of duty paid on paints used in the job work is admissible; the impugned orders disallowing such credit are set aside.

Final Conclusion: The appeal is allowed: the orders of the authorities below denying Cenvat credit on paints used in job work under Notification No. 214/86 are set aside and the appellant is entitled to the credit in accordance with the reasoning and authorities applied.

Sale in the course of import - deeming provision in Section 5(2) of the CST Act regarding sale in the course of import - crossing the customs frontiers of India - customs station / customs port / land customs station - bonded warehouse - appropriation of goods - sale occasioning import - strict interpretation of taxation statute - sale in the course of export / destination requirement for export

Sale in the course of import - deeming provision in Section 5(2) of the CST Act regarding sale in the course of import - crossing the customs frontiers of India - customs station / customs port / land customs station - bonded warehouse - appropriation of goods - sale occasioning import - strict interpretation of taxation statute - Whether sales of imported goods kept in a bonded warehouse and sold to masters of foreign-going ships as ship stores are 'sales in the course of import' and therefore not amenable to State sales tax. - HELD THAT: - The Court held that to qualify as a sale in the course of import three essential features must be satisfied: there must be a sale; the goods must actually be imported; and the sale must be part and parcel of the import such that the sale occasions the import. The authorities found, and this Court accepted, that the goods had been unloaded and kept in a bonded warehouse on the landmass of West Bengal and the appropriation (sale) occurred there. The statutory test in Section 5(2) CST Act applies only where the sale occurs before the goods have crossed the customs frontiers of India, the latter being defined by reference to the area of a notified customs station (customs port/airport/land customs station) under the Customs Act. There was no material to show that the bonded warehouse formed part of any notified customs station, and the goods had in law already passed beyond the customs station area. The sale did not occasion import into the territory of India and there was no direct linkage making the sale part of the import process. Decisions concerning duty-free shop sales at an airport were distinguishable because those sales took place within customs airport areas. Consequently, the legal fiction in Section 5(2) did not apply and, applying the principle in Madras Marine and related authorities, the appropriation at the bonded warehouse within the State constituted a sale within the territory of West Bengal and subject to State sales tax. [Paras 13, 14, 15, 16, 26]

The sales were not in the course of import and were sales effected within the territory of West Bengal by appropriation in the bonded warehouse; they are amenable to sales tax under the West Bengal sales tax laws.

Final Conclusion: Appeals dismissed; the sales of goods kept in the bonded warehouse and sold as ship stores were not in the course of import or export and were taxable by the State; no order as to costs.

Penalty under Section 54(1)(14) of U.P. Value Added Tax Act, 2008 - requirement of mens rea for imposition of penalty under the Act, 2008 - non-filling of declaration form column no. 6 (Form 38) and inference of intention to evade tax - duty of check-post officer to fill blank columns pursuant to departmental circular - distinguishing precedent on mandatory nature of declaration forms (M/s Guljag Industries)

Penalty under Section 54(1)(14) of U.P. Value Added Tax Act, 2008 - non-filling of declaration form column no. 6 (Form 38) and inference of intention to evade tax - duty of check-post officer to fill blank columns pursuant to departmental circular - Whether penalty could be sustained solely on account of non-filling of column no. 6 of Form 38 in respect of goods imported into the State for Assessment Year 2009-10. - HELD THAT: - The Court held that non-filling of column no. 6 (bill/cash memo/chalan/invoice number and date) of Form 38, by itself, is not a conclusive ground for imposing the penalty prescribed by the statute. The scheme of the Act contemplates that the declaration form accompanies goods and that where columns remain unfilled an inspecting officer, having regard to other accompanying documents, can verify and, in accordance with the departmental Circular dated 03.02.2009, fill up the blank entries and release the goods. Recurring omission of column no. 6 may permit an inference of possible reuse of the form to evade tax, but satisfaction recording an attempt to evade payment of tax must be based on relevant material and after affording opportunity of hearing. In the present case the vehicle carried Form 38 and other documents (bill/builty/challan) which tallied with the goods; the omission was attributed to human error and the Tribunal found no intention to evade tax. Given these facts the imposition of penalty by the Assessing Authority was not justified. [Paras 13, 20, 21, 22, 23]

Penalty set aside: impugned order of the Tribunal deleting the penalty is affirmed and the penalty cannot be sustained solely for the non-filling of column no. 6 where other documents corroborate the consignment and the Tribunal has found absence of intention to evade tax.

Requirement of mens rea for imposition of penalty under the Act, 2008 - distinguishing precedent on mandatory nature of declaration forms (M/s Guljag Industries) - Whether mens rea (intention to evade payment of tax) is an essential ingredient for imposing penalty under the corresponding provision of the Act, 2008, and whether the Apex Court's decision in M/s Guljag Industries is applicable. - HELD THAT: - The Court distinguished M/s Guljag Industries on the facts and statutory provisions applicable in Uttar Pradesh. While the Apex Court observed in that case that non-compliance with a mandatory declaration provision attracts penalty without proof of mens rea, the U.P. Act (and specifically the relevant sub section) requires that the detaining authority record satisfaction that the goods were being transported in an attempt to evade assessment or payment of tax and impose penalty after giving an opportunity of hearing. Therefore mens rea (or an evidentiary finding of an attempt to evade tax) is a necessary ingredient for imposing the penalty under Section 54(1)(14) read with the scheme of the U.P. Act. The Tribunal's factual finding that there was no intention to evade tax was not shown to be perverse and warranted no interference in revision. [Paras 17, 18, 19]

Mens rea / an evidentiary finding of intent to evade tax is necessary for imposing the penalty under the U.P. Act; Guljag Industries is distinguishable and does not mandate penalty without such satisfaction in the present statutory context.

Final Conclusion: The revision is dismissed; the Tribunal's order dated 31.01.2013 deleting the penalty for Assessment Year 2009-10 is affirmed. The Court held that omission to fill column no. 6 of Form 38, standing alone, does not justify imposing the statutory penalty and that an evidentiary finding of intention to evade tax is required under the U.P. Act, 2008.

Vicarious liability - criminal liability of company directors under Section 141 of the Negotiable Instruments Act - necessity of specific averments that a director was in charge of and responsible for conduct of company business - quashing of criminal proceedings under Section 482 Cr.P.C. for abuse of process

Criminal liability of company directors under Section 141 of the Negotiable Instruments Act - necessity of specific averments that a director was in charge of and responsible for conduct of company business - vicarious liability - Whether criminal proceedings under Section 138 of the Negotiable Instruments Act against the petitioner-director can be maintained when the complaint lacks specific averments showing she was in charge of and responsible for the conduct of the company's business at the relevant time. - HELD THAT: - The Court held that Section 141 creates vicarious liability and must be strictly construed. A bald or cursory allegation that a director was "in charge of and responsible to the company for the conduct of the business" is insufficient; the complaint must set out particulars as to how and in what manner the director was responsible for the conduct of the business at the time of the offence. The complaint before the Court contained no specific averments identifying the petitioner's role in issuance of the cheques, and it was not alleged that she signed the cheques or was involved in day-to-day management. Reliance placed on earlier decisions of the Supreme Court [Gunmala Sales Pvt Ltd Vs. Anu Mehta , Standard Chartered Bank Vs. State of Maharashtra , and Ashoke Mal Bafna Vs. Upper India Steel Mfg and Engg. Co. Ltd ] supports the requirement of particularised pleading to fasten vicarious liability on a director. In the absence of such particularised averments, proceeding against a director who is not shown to have been at the helm of affairs would amount to abuse of the process of law. [Paras 6, 7, 8, 9]

Criminal proceedings against the petitioner-director are not maintainable and are quashed for want of specific averments showing she was in charge of and responsible for the company's business when the alleged offence occurred.

Final Conclusion: Writ petition under Section 482 Cr.P.C. allowed; criminal complaint No. 4861/2013 insofar as it names the petitioner is quashed as an abuse of process for failure to plead particularised averments necessary to fasten vicarious liability under Section 141 of the Negotiable Instruments Act.