TaxTMI Updates e-Newsletter
Jan 31,2020

Definition of "intermediary" under Section 2(13) of the IGST Act - arranges or facilitates the supply - exclusion - person who supplies on his own account - application of noscitur a sociis and ejusdem generis - liaison/liaison capacity as facilitation - destination based consumption tax (GST) - territorial nexus

Definition of "intermediary" under Section 2(13) of the IGST Act - arranges or facilitates the supply - exclusion - person who supplies on his own account - application of noscitur a sociis and ejusdem generis - liaison/liaison capacity as facilitation - Whether the pre sale and marketing activities carried out by the appellant qualify as an "intermediary" under Section 2(13) of the IGST Act. - HELD THAT: - The Authority examined the Pre Sales and Marketing Agreement and the Statement of Work together with the BAPA description of actual activities. The statutory definition requires (i) that the person be a broker, agent or "any other person, by whatever name called", (ii) that such person "arranges or facilitates" the supply of goods or services between two or more persons, and (iii) that the person does not supply such goods or services on his own account. The terms "broker" and "agent" are different in character and do not create a single genus; consequently the residual phrase "any other person, by whatever name called" is not restricted by the immediately preceding words. The canons noscitur a sociis and ejusdem generis were held inapplicable because the legislature has used wider words deliberately to expand, not restrict, the scope of "intermediary". The Authority construed "arrange" and "facilitate" broadly to include marketing, sales promotion, identifying prospective customers, product demonstrations, obtaining and communicating customer feedback and coordinating between the principal and customers. Applying that construction to the facts, the appellant, though contractually described as an independent contractor without authority to bind the principal, in practice performed liaison and coordination functions that facilitated the supply of the principal's products to customers in India. The services were not supplies of the products on the appellant's own account; therefore the exclusion clause did not apply. On these grounds the pre sale and marketing services were held to be intermediary services within Section 2(13). [Paras 20, 21, 22, 23, 25]

The pre sale and marketing services rendered by the appellant qualify as "intermediary" services under Section 2(13) of the IGST Act and do not fall within the exclusion for supplies made on one's own account.

Final Conclusion: The Appellate Authority upholds the AAR ruling that the appellant's pre sales and marketing activities constitute intermediary services under Section 2(13) IGST Act; the appeal is dismissed and the Advance Ruling affirmed.

Supply - Service - in the course or furtherance of business - Business - Input Tax Credit - Pure Agent

Supply - Service - in the course or furtherance of business - Business - Recovery from employees towards parental insurance premium is a 'supply of service' by the applicant to its employees - HELD THAT: - The Authority examined whether amounts collected from employees towards parental mediclaim premium and remitted to the insurer constitute a supply under Section 7 read with the definition of 'service' and the requirement that supply be made in the course or furtherance of business. The applicant is engaged in software development and export and not in providing insurance. The Authority found that the applicant merely transfers the collected amount to the insurance company, and providing insurance for employees' parents is not incidental, ancillary or integrally connected to the applicant's business of software development so as to be in the course or furtherance of that business. Reliance was placed on the Maharashtra AAR decision in M/s. Posco India Pune Processing Center Private Limited to the effect that recovery of employees' share of premium paid over to the insurer does not amount to supply of service. On these facts and reasoning the Authority held that the recovery cannot be treated as a supply of service by the applicant to its employees. [Paras 16, 18, 19]

Answered in negative: the recovery is not a 'supply of service' by the applicant to its employees.

Input Tax Credit - Supply - Admissibility of input tax credit of proportionate GST paid to the insurer in respect of parental insurance where amount is recovered from employees - HELD THAT: - Since the Authority concluded that the recovery from employees does not constitute a supply of service by the applicant, the corresponding question of entitlement to input tax credit in respect of the proportionate GST paid to the insurance company was considered in that factual context. Given the negative finding on existence of supply by the applicant, the Authority ruled that input tax credit is not admissible against a supply of insurance services for employees' parents in respect of amounts purportedly recovered from employees and passed on to the insurer. [Paras 20]

Answered in negative: proportionate GST paid to the insurance company is not admissible as input tax credit in the circumstances.

Final Conclusion: The Authority ruled that the sums recovered from employees towards parental mediclaim premium and remitted to the insurer do not amount to a 'supply of service' by the applicant and, accordingly, the proportionate GST paid to the insurer in respect of such parental insurance is not admissible as input tax credit.

Classification of goods - Chapter Heading 0402 - essential character - Rule 3(a) and Rule 3(b) of the General Rules for the Interpretation of the First Schedule - GST rate under Notification No. 01/2017-Central Tax (Rate)

Classification of goods - Chapter Heading 0402 - essential character - Rule 3(a) and Rule 3(b) of the General Rules for the Interpretation of the First Schedule - The proper tariff classification of the product 'Instant Tea Whitener' manufactured and proposed to be supplied by the applicant. - HELD THAT: - The Authority examined the product composition and manufacturing process and found that the product is manufactured from standard liquid milk which, after processes such as filtration, separation, pasteurization, evaporation and homogenization, is converted into a powdered form with ancillary additives. Applying Rule 3(a) (preference to the most specific heading) and, where necessary, Rule 3(b) (classification according to the material giving the essential character), the Authority held that milk imparts the essential character to the product and that other ingredients are ancillary. In common trade parlance the product is milk powder/instant tea whitener. Having regard to the Chapter 4 exclusions and the tariff descriptions, the Authority concluded that the product falls within Chapter Heading 0402. [Paras 12, 13]

The product 'Instant Tea Whitener' is classifiable under Chapter Heading 0402.

GST rate under Notification No. 01/2017-Central Tax (Rate) - classification of goods - Chapter Heading 0402 - The GST rate applicable to the product in terms of its classification. - HELD THAT: - Having classified the product under Chapter Heading 0402, the Authority applied the relevant tariff entry as incorporated in the GST rate notifications. The Authority noted the Schedule-I entry at Sl. No. 08 which includes milk and cream, concentrated or containing added sugar or other sweetening matter, and observed that the GST rate applicable to goods classifiable under Chapter Heading 0402 is the rate prescribed under Notification No. 01/2017-Central Tax (Rate), dated 28-6-2017 (as amended). The jurisdictional officer's report indicating classification under 0402 and an applicable rate was consistent with this conclusion. [Paras 11, 14]

The product will be chargeable to GST at the rate applicable to Chapter Heading 0402 as per Notification No. 01/2017-Central Tax (Rate), dated 28-6-2017.

Final Conclusion: The Authority admitted the application and ruled that the applicant's 'Instant Tea Whitener' is classifiable under Chapter Heading 0402; consequently it shall attract the GST rate applicable to that tariff entry as specified in Notification No. 01/2017-Central Tax (Rate), dated 28-6-2017.

Classification under Heading 2106 90 - GST rate on namkeens packed in unit containers - Reduction in tax rate subject to forfeiture of brand rights - Voluntary forego of actionable claim or enforceable right on a brand name

Classification under Heading 2106 90 - GST rate on namkeens packed in unit containers - Final product 'Namkeen' packed and sealed in printed retail pouches is classifiable under Heading 2106 90 and attracts GST at 12% (6% CGST + 6% SGST). - HELD THAT: - The product description, packaging and ingredients provided by the applicant correspond to goods described as 'namkeens, bhujia, mixture, chabena and similar edible preparations' in Heading 2106 90 of Notification No. 01/2017-Central Tax (Rate). Accordingly, the tariff classification is 2106 90 and the applicable rate under the current tariff is 12% GST, i.e., 6% CGST and 6% SGST. [Paras 10, 15]

The goods are classifiable under Heading 2106 90 and taxable at 12% GST (6% CGST + 6% SGST).

Reduction in tax rate subject to forfeiture of brand rights - Voluntary forego of actionable claim or enforceable right on a brand name - The applicant may be eligible to sell the product at the reduced rate (as envisaged by the amended notification) only if the applicant voluntarily foregoes the enforceable right to the brand name in the manner and subject to the conditions specified in the Annexure to Notification No. 28/2017-Central Tax (Rate), dated 22-9-2017. - HELD THAT: - Notification 34/2017 and the amendment to Notification No. 28/2017 carve out unit containers bearing a registered brand name or a brand name on which an actionable claim or enforceable right exists from the reduced rate. The definition of 'registered brand name' includes a manufacturer's name used in trade. Therefore the presence of the manufacturer's name on the packaging constitutes a brand name giving rise to an enforceable right. However, the amended notification permits availing the reduced rate only if the person undertaking packing files the affidavit and voluntarily foregoes the actionable claim/enforceable right on the brand name, complying with the conditions in the Annexure. Absent such forfeiture in the prescribed manner, the reduced rate cannot be claimed. [Paras 11, 13, 16]

Selling at the reduced rate is permissible only if the applicant voluntarily foregoes the enforceable right to the brand name in accordance with the Annexure to Notification No. 28/2017 and files the requisite affidavit; otherwise the standard 12% rate applies.

Final Conclusion: The Authority rules that namkeens packed in printed retail pouches are classifiable under Heading 2106 90 and taxable at 12% GST (6% CGST + 6% SGST); the applicant can claim the reduced rate contemplated by the amended notifications only upon voluntarily foregoing enforceable rights in the brand name in the manner and subject to the conditions specified in the Annexure to Notification No. 28/2017.

Input tax credit on closing stock - Rectification of TRAN-1 - Representation to Nodal Officer/Principal Commissioner - Consideration of relevant judicial precedents - Opportunity of hearing before passing order

Input tax credit on closing stock - Rectification of TRAN-1 - Representation to Nodal Officer/Principal Commissioner - Consideration of relevant judicial precedents - Opportunity of hearing before passing order - Petitioner's claim for right to have representation considered by the designated Nodal Officer for allowing credit on closing stock by rectifying TRAN-1 was remitted for fresh consideration. - HELD THAT: - The High Court did not adjudicate the substantive entitlement to input tax credit on the closing stock or the correctness of any decision on TRAN-1. Instead, the Court granted liberty to the petitioner to make an appropriate representation to the Nodal Officer (Principal Commissioner of GST at Nungambakkam) specifically citing the judicial decisions relied upon by the petitioner. The Court directed that, upon receipt of such representation, the Nodal Officer shall consider the claim afresh and pass appropriate orders. The Court expressly required that the petitioner be heard before any order is passed and fixed a time-bound mandate for disposal. The Court thereby remitted the controversy for administrative determination in light of the precedents invoked, without expressing any view on the merits. [Paras 2, 4]

Representation to the Nodal Officer is permitted; the Nodal Officer shall consider the petitioner's claim (with the petitioner heard) and pass appropriate orders within 30 days of receipt of the representation.

Final Conclusion: Writ petition disposed by directing the petitioner to represent to the Principal Commissioner of GST (Nungambakkam); the Nodal Officer to consider the representation (with hearing) and pass orders within 30 days; no decision on merits of entitlement to credit.

Liability to deduct TDS on discount/commission made u/s 194H - sale of SIM Cards - Trade discount for bulk sales within the scope or not - assessee is a Public Limited Company engaged in the business of telecom operations - Relationship of assessee or distributor or not - Scope of term ‘income’ u/s 2(24) – Survey conducted for verification of compliance of TDS provisions - HELD THAT:- Appellant(s), on instructions issued by the Department of Revenue, Ministry of Finance vide F.No.390/Misc./116/2017-JC dated 22.08.2019, seeks permission to withdraw these appeal(s) along with pending application(s) therein due to low tax effect.

Permission granted, subject to just exceptions. The appeal(s) and pending application(s) are dismissed as withdrawn, leaving question(s) of law open.

Relevance of pending excise proceedings to income-tax assessment - Tribunal dismissing the appeal of the revenue - roving inquiry - set-aside matter is pending with the Commissioner of Central Excise for fresh adjudication and findings of the Central Excise department regarding under invoicing is not negated or quashed till dated by any higher appellate authority - HELD THAT:- Special leave petition is dismissed.

Deduction of interest on borrowed fund when the same is utilised to give interest free loan/share application money to subsidiary companies - nexus between expenditure and business purpose - commercial expediency - advances/interest free loans to subsidiary companies - revenue cannot substitute business judgment of the assessee

Revenue's appeal is dismissed [2019 (12) TMI 506 - BOMBAY HIGH COURT] Tribunal correctly applied the principle of commercial expediency and nexus to uphold deduction of interest on borrowed funds used to finance related concerns, and the Assessing Officer cannot supplant the assessee's business judgment.

HELD THAT:- SLP dismissed.

CBDT circulars and their binding conditions - Revenue audit objection accepted by the Department - scope of review jurisdiction under Section 114 CPC and Order 47 Rule 1 CPC - error apparent on the face of the record - prohibition on rehearing or re appreciation of evidence in review

CBDT circulars and their binding conditions - Revenue audit objection accepted by the Department - Validity of disposing the income tax appeal in view of CBDT circulars where an audit objection had been raised but no record was produced to show that the audit objection was accepted by the Department. - HELD THAT: - The Court applied the principle that the CBDT circulars cited by the appellate Bench conditionally permit disposal of appeals and, where a circular contains a proviso requiring that a Revenue audit objection be accepted by the Department before an appeal is contested on merits, mere mention or raising of that objection is insufficient. The Revenue bore the onus to show that the audit objection had in fact been accepted by the Department and to place supporting records. No such record was produced before this Court. In those circumstances the appeal was properly disposed of in accordance with the CBDT circulars.

The appeal was rightly disposed of in view of the CBDT circulars because the Revenue did not demonstrate that the audit objection had been accepted by the Department.

Scope of review jurisdiction under Section 114 CPC and Order 47 Rule 1 CPC - error apparent on the face of the record - prohibition on rehearing or re appreciation of evidence in review - Maintainability of the review petition challenging the order dated 12.12.2019 and whether any ground for review (error apparent on the face of the record or other sufficient reason) was made out. - HELD THAT: - The Court reviewed authoritative propositions on review jurisdiction and reiterated that a review lies only for a mistake or an error apparent on the face of the record or for other narrowly construed sufficient reasons; it is not a forum for rehearing, re appreciation of evidence, or for correcting an erroneous decision on merits. The petitioner failed to point to any self evident error in the impugned order; instead the petition amounted to an attempt to re open the merits. Subsequent events or unproduced material could not be relied upon to establish an apparent error. Applying these principles, the Court found no ground to exercise review jurisdiction.

The review petition is dismissed for lack of any error apparent on the face of the record or any other sufficient reason warranting review.

Final Conclusion: The Review Petition is dismissed: the appeal had been correctly disposed of under the CBDT circulars since the Revenue did not prove acceptance of the audit objection by the Department, and no error apparent on the face of the record or other valid ground for review was shown.

Rectification under Section 154 - deduction under Section 80P - expeditious disposal of pending rectification applications - opportunity of hearing - abeyance of coercive recovery pending adjudication

Rectification under Section 154 - expeditious disposal of pending rectification applications - opportunity of hearing - Pending rectification applications filed before the appellate authority shall be considered and disposed of without undue delay and after affording a reasonable opportunity of hearing. - HELD THAT: - The Court, upon taking note of the pendency of the statutory rectification petitions (Exts.P-8, P-15 and P-21) before the 3rd respondent, directed that those applications be taken up for consideration and decided without much delay. The authority is required to afford the petitioner a reasonable opportunity of being heard through an authorised representative or counsel before passing orders. A specific, preferably short, time-frame (4 to 6 weeks from production of a certified copy of the judgment) was indicated for disposal to ensure expeditious adjudication of the rectification petitions.

The 3rd respondent is directed to consider and dispose of Exts.P-8, P-15 and P-21 after hearing the petitioner, preferably within 4 to 6 weeks from production of a certified copy of the judgment.

Abeyance of coercive recovery pending adjudication - deduction under Section 80P - Further coercive steps for enforcement of the impugned orders shall be kept in abeyance until the rectification petitions are decided. - HELD THAT: - In view of the pendency of the rectification proceedings challenging assessments and the petitioner's objections (including contentions relating to entitlement to deduction under Section 80P), the Court restrained the respondents from taking further coercive enforcement action. This interim measure is linked temporally to the disposal of the rectification petitions by the 3rd respondent, and remains in force until those applications are finally disposed of as directed.

Respondents are restrained from initiating or continuing coercive recovery proceedings in respect of the impugned orders until the rectification petitions are decided as directed.

Final Conclusion: Writ petition disposed directing the appellate authority to decide the pending rectification applications after hearing the petitioner, preferably within 4-6 weeks from production of certified copy of the judgment, and ordering that further coercive recovery steps in relation to the impugned orders be kept in abeyance until such disposal.

Applicability of minimum alternate tax under Section 115JB - Preparation of profit and loss account in accordance with Schedule VI vis-a -vis regulatory Acts - Legal fiction in proviso to Section 115JB(2) - Incompatibility of Companies Act requirements with Banking Regulation Act accounting regime - Allowability of amortisation of investments held to maturity under income computation - Instruction No.17/2008 - CBIT/RBI guidance

Applicability of minimum alternate tax under Section 115JB - Preparation of profit and loss account in accordance with Schedule VI vis-a -vis regulatory Acts - Legal fiction in proviso to Section 115JB(2) - Incompatibility of Companies Act requirements with Banking Regulation Act accounting regime - Section 115JB(2) of the Income Tax Act does not apply to banking companies. - HELD THAT: - Section 115JB requires companies to prepare profit and loss accounts in accordance with Parts II and III of Schedule VI to the Companies Act, 1956 and to follow the proviso relating to accounts laid before the annual general meeting under Section 210. Banking companies prepare accounts under the Banking Regulation Act, 1949 and are not obliged to convene the annual general meeting or place accounts under Section 210; consequently they cannot practicably comply with both regimes. The machinery and computation provisions of Section 115JB(2) would be unworkable for banking companies and where computation provisions cannot apply the charging provision was not intended to cover such cases. The proviso does not operate as a legal fiction enabling both sets of requirements to be simultaneously fulfilled. The legislative amendment with effect from 01.04.2013 (and the explanatory memorandum) recognising regulatory Acts for banks confirms that Section 115JB(2) was not intended to apply to banking companies. For these reasons the provisions of Section 115JB(2) are held not to apply to banking companies. [Paras 7, 8, 9, 10, 11]

Provisions of Section 115JB(2) do not apply to banking companies; appeal allowed on this point.

Allowability of amortisation of investments held to maturity under income computation - Instruction No.17/2008 - CBIT/RBI guidance - Deduction in respect of amortisation/write off of investments held to maturity (done in terms of RBI/CBIT guidance) is allowable to the banking assessee. - HELD THAT: - The claim for amortisation/write off of investments held to maturity maintained in accordance with Reserve Bank of India directions is governed by Instruction No.17/2008 (clause (vii)) issued by the Central Board of Direct Taxes/RBI. Earlier decisions and a division bench ruling of this High Court have held that where accounts are maintained in terms of RBI regulations the corresponding deductions cannot be denied merely because of presentation in the balance sheet. Applying Instruction No.17/2008 and the precedents considered, the tribunal was correct in allowing the deduction for amortisation/write off of the investment held to maturity. [Paras 12]

Second substantial question answered in favour of the assessee; deduction allowed.

Final Conclusion: Common substantial questions are answered in favour of the assessee: Section 115JB(2) does not apply to banking companies, and the claim for amortisation/write off of investments held to maturity in accordance with RBI/CBIT guidance is allowable. Appeals disposed of accordingly.

Reopening of assessment - reassessment on basis of Commission report - burden of proof on the Assessing Officer to establish under invoicing - inadmissibility of a Commission's tentative report as sole basis for income addition - finality of customs assessment and its bearing on income tax adjudication - computation of income in accordance with method of accountancy

Inadmissibility of a Commission's tentative report as sole basis for income addition - burden of proof on the Assessing Officer to establish under invoicing - Addition on account of alleged under invoicing of exports deleted where based solely on the Justice M.B. Shah Commission report and without independent evidentiary foundation by the Assessing Officer. - HELD THAT: - The Tribunal examined whether the Justice M.B. Shah Commission report alone could justify treating the assessee's export invoices as under invoiced and making an addition. It held that the report was a tentative investigative document and, in view of the Supreme Court's treatment and the State's stance that findings required further inquiry and opportunity of hearing, the Commission's report could not be equated to conclusive proof. The Assessing Officer had relied primarily on the Commission report and failed to collect independent, reliable evidence to demonstrate under invoicing or to rebut the assessee's documentary records (contracts, letters of credit, shipping bills, bills of lading, certificates of analysis, invoices, bank realisation advices, and customs correspondence). The Tribunal observed that the AO impermissibly shifted the burden onto the assessee to disprove under invoicing instead of first establishing a prima facie case. On this basis the Tribunal deleted the addition for undisclosed sales. The High Court agreed with these conclusions.

Addition for alleged under invoicing deleted; Commission report alone insufficient and AO failed to prove under invoicing.

Reopening of assessment - computation of income in accordance with method of accountancy - finality of customs assessment and its bearing on income tax adjudication - Validity of reopening was upheld, but on merits the addition could not be sustained; customs finalisation and the assessee's maintained books were relevant to reject the addition. - HELD THAT: - While the Tribunal accepted that the Assessing Officer had recorded reasons and therefore the reopening of assessment was not vitiated, it proceeded to examine the merits. Under Section 145 principles the assessee's accounting method and audited books were available and not rejected by the AO; the AO did not demonstrate inability to deduce true income from books as required before rejecting book results. Further, the assessee produced evidence that customs had finally assessed the export value for the shipping bill and the limitation to reopen customs duty had expired, diminishing the force of the AO's contention based on declared customs value. The Tribunal thus confirmed the competence to reopen but found no evidentiary basis to make the addition and deleted it. The High Court concurred with these findings.

Reopening sustained but addition on merits deleted; books and final customs assessment undermined AO's case.

Final Conclusion: The Tribunal's deletion of the addition for alleged under invoicing was affirmed: the Justice Shah Commission's tentative report could not, by itself, support an income tax addition in the absence of independent evidence by the Assessing Officer, and the reopening-though held valid-did not cure the absence of proof. Appeal dismissed.

Search and seizure under Section 132 of the Income Tax Act - reason to believe - formation of satisfaction / application of mind before authorization - ex post facto satisfaction note - proviso excluding seizure of stock in trade - release of seized assets under Section 132B and 120 days limit

Search and seizure under Section 132 of the Income Tax Act - reason to believe - formation of satisfaction / application of mind before authorization - Validity of the search and seizure authorization under Section 132 in light of requirement to have pre existing 'reason to believe' formed on relevant material before conducting the search. - HELD THAT: - The court held that authorization under Section 132 requires a recorded 'reason to believe' based on relevant material existing prior to the exercise of power and that the opinion must reflect honest application of mind. The satisfaction note produced showed only post facto recording after the petitioner was intercepted and jewellery found; there was no cogent material demonstrating that a reasonable belief existed before interception. The court found that the record disclosed formation of belief after the seizure (ex post facto), equating to mere suspicion and conjecture rather than tangible reasons to believe that the jewellery represented undisclosed income. Consequently the action was arbitrary, lacked the mandatory pre authorization satisfaction and was vitiated and unlawful. [Paras 13, 17, 18, 19, 27]

The search authorization under Section 132 is quashed as the reason to believe was not formed on relevant material prior to the search and was recorded ex post facto.

Proviso excluding seizure of stock in trade - search and seizure under Section 132 of the Income Tax Act - Whether the jewellery seized was immune from seizure as stock in trade under the proviso to Section 132(1)(iii) and related provisos. - HELD THAT: - The court noted the proviso to Section 132(1)(iii) (and the related proviso to clause (v)) prohibits seizure of bullion, jewellery or other valuable articles being stock in trade, requiring only inventorying. The record showed the petitioner asserted the items were stock in trade and produced books and vouchers; the officers proceeded to seize despite knowledge of claimed stock in trade and without applying the statutory protection. The court found the seizure ignored the statutory mandate and the officer misdirected himself by treating mere possession as establishing undisclosed income without material to displace the stock in trade claim. [Paras 20, 21, 26]

The seizure was impermissible in respect of articles claimed as stock in trade and the statutory proviso against seizure was not complied with.

Release of seized assets under Section 132B and 120 days limit - Whether the respondents were entitled to retain the seized jewellery beyond the period and procedure prescribed under Section 132B(1) including the 120 day outer limit for release. - HELD THAT: - The court examined Section 132B(1) which permits release of seized assets if the assessee applies within the prescribed time and explains nature and source to the AO's satisfaction, and prescribes release within 120 days from execution of authorisation. The petitioner repeatedly applied and furnished documents correlating seized articles with books of account; respondents failed to proffer a plausible refutation and asserted only that bulk purchase invoices could not be matched to individual items. Given the respondents' failure to justify continued retention and the expiry of the 120 day period, the court held there was no authority to retain the jewellery beyond the statutory limit. [Paras 23, 24, 25, 26]

Respondents were not entitled to retain the seized jewellery beyond the statutory procedure and 120 day period under Section 132B; continued retention was unlawful.

Search and seizure under Section 132 of the Income Tax Act - Relief to be granted consequent to invalid search and seizure and imposition of costs. - HELD THAT: - Having found the search authorization and consequent actions illegal and arbitrary, the court declared all actions pursuant to the search and seizure illegal, ordered immediate return of the seized jewellery to the petitioner and awarded costs against the respondents to discourage unwarranted search actions. Costs were quantified and directed to be paid to the Delhi Legal Services Authority within a specified period. [Paras 29]

Warrant of authorization and all actions pursuant thereto quashed; seized jewellery to be returned forthwith; respondents directed to pay costs.

Final Conclusion: Writ petition allowed: the search and seizure under Section 132 was quashed as unauthorized and arbitrary (reason to believe recorded ex post facto), the statutory protection for stock in trade and the release regime under Section 132B (including the 120 day limit) were not observed; seized jewellery is to be returned forthwith and respondents ordered to pay costs to the Delhi Legal Services Authority.

Characterisation of receipts and timing of sale for revenue recognition - treatment of fitment/renovation charges as revenue expenditure because costs are part of stock-in-trade - disallowance under Section 36(1)(iii) for interest on borrowed funds applied to interest-free advances - treatment of advances to sister concern and requirement of nexus with borrowed funds - remand for fresh consideration by appellate authority where lower appellate order does not record specific factual findings

Characterisation of receipts and timing of sale for revenue recognition - remand for fresh consideration by appellate authority where lower appellate order does not record specific factual findings - Deletion of addition on estimated gross profit for alleged anti-dated sale to M/s. Bansal Corporation Ltd. was set aside and remanded to Ld. CIT(A) for fresh decision. - HELD THAT: - The Assessing Officer treated an agreement dated 31.03.2007 as an anti-dated arrangement and made an addition by estimating gross profit at 15% on deemed sales, observing that the alleged transfer had not occurred in substance and had the effect of avoiding MAT. The Ld. CIT(A) deleted the addition by relying on the preceding year's assessment which treated the transaction as sale. The Tribunal found that the assessment order for A.Y. 2007-2008 placed on record is silent on the disputed matter and that the AO in the impugned assessment had recorded specific factual findings distinguishing the present year from the preceding year. Because the CIT(A) did not address those factual findings and gave no specific reasons while simply following the earlier order, the Tribunal concluded that the matter requires reconsideration. The Tribunal therefore set aside the CIT(A)'s decision and restored the issue to the CIT(A) to decide afresh after giving the assessee reasonable opportunity of being heard and after recording specific findings of fact and reasons for decision. [Paras 6]

Issue remanded to Ld. CIT(A) for fresh adjudication with directions to consider the AO's factual findings and to record reasons while deciding the deletion of the addition.

Treatment of fitment/renovation charges as revenue expenditure because costs are part of stock-in-trade - Deletion of addition disallowing fitment and project/construction expenses incurred for developed commercial shops, held to be revenue in nature and not capital. - HELD THAT: - The assessee, a developer of commercial complexes, incurred fitment charges and payments for renovation, civil work and interior to facilitate leasing. The AO characterised these payments as capital and disallowed them. The CIT(A) accepted the assessee's explanation that the costs form part of stock-in-trade of the commercial project, that no new capital asset came into existence, and that such expenditures are incurred to secure and maintain occupancy (revenue purpose). The Tribunal agreed that in the context of the assessee's business and accounting treatment (costs included in inventory and charged to profit and loss), the expenditures pertained to business income and were therefore revenue in nature. The AO had given no finding of creation of a new capital asset to justify capitalisation. [Paras 10]

Addition deleted; fitment and related construction expenses treated as revenue expenditure and allowable.

Disallowance under Section 36(1)(iii) for interest on borrowed funds applied to interest-free advances - treatment of advances to sister concern and requirement of nexus with borrowed funds - Deletion of addition disallowing proportionate interest on account of interest-free advances to sister concern upheld. - HELD THAT: - The AO proportionately disallowed interest invoking Section 36(1)(iii), treating advances as made out of borrowed funds. The assessee produced details showing that borrowed funds had decreased during the year and advances to sister concern had substantially reduced; further, the assessee had sufficient own funds (share capital and reserves) to account for the advances. The CIT(A) deleted the addition and the Tribunal found no reason to interfere: the facts showed reduction of advances and availability of own funds, the AO did not establish any nexus showing utilisation of interest-bearing borrowed funds for the advances, and the approach is in line with the principle that interest-free advances out of own funds are not hit by Section 36(1)(iii). The Tribunal treated the matter as covered by Supreme Court authority permitting allowance where own funds suffice. [Paras 15]

Addition deleted; no disallowance of interest justified in absence of proof that interest-bearing borrowed funds were used for interest-free advances.

Final Conclusion: The Department's appeal is allowed in part for statistical purposes by remanding the issue of estimated gross profit on the alleged sale to M/s. Bansal Corporation Ltd. to the Ld. CIT(A) for fresh consideration; the challenges to the deletions relating to fitment/construction expenses and the disallowance of interest are dismissed and the additions deleted.

Presumptive taxation under section 44AD - addition under section 68 - bank statement not book of assessee - reopening of assessment under section 148

Presumptive taxation under section 44AD - addition under section 68 - Whether additions made as unexplained cash credits could be sustained where the assessee's income was accepted on presumptive basis under section 44AD. - HELD THAT: - The Tribunal held that section 44AD is a special deeming provision permitting an eligible assessee to declare income at a prescribed percentage of gross receipts and exempts such assessee from maintenance of books of account unless the assessee elects otherwise. Once income is accepted under section 44AD, making additions by dissecting presumed receipts and treating deposits as unexplained cash credits runs counter to the object of presumptive taxation. The Assessing Officer must bring material beyond suspicion, surmise or conjecture to reject the presumptive return and to make additions; mere general observations about cash deposits without specific evidence are insufficient. Accordingly, additions made under section 68 founded on such conjecture were deleted. [Paras 7, 14]

Additions under section 68/related provisions based on unexplained bank deposits were deleted where the assessee's income was accepted under section 44AD.

Bank statement not book of assessee - cash credits in bank account - Whether amounts shown only in bank statements can be treated as sums credited in the assessee's books for the purpose of invoking section 68. - HELD THAT: - The Tribunal held that bank statements are records of the bank reflecting the banker-customer debtor-creditor relationship and do not constitute books maintained by the assessee or under his instructions. In the absence of sums being shown in the assessee's own books, additions by treating entries in bank statements as cash credits in the assessee's books under section 68 could not be sustained. Reliance was placed on the principle that entries solely in bank records do not amount to credits in the assessee's books. [Paras 7, 14]

Amounts appearing only in bank statements cannot be treated as sums credited in the assessee's books for invoking section 68; the additions were deleted.

Reopening of assessment under section 148 - Whether the grounds challenging reopening of assessment were entertainable before the Tribunal in these appeals. - HELD THAT: - The Tribunal recorded that challenges to reopening (notice under section 148) were not emanating from the orders of the CIT(A) as presented in these appeals and accordingly such grounds were dismissed as not being within the scope of the appeals decided by the CIT(A). [Paras 4, 11]

Grounds attacking reopening under section 148 were dismissed as not emanating from the CIT(A)'s orders before the Tribunal.

Final Conclusion: Both appeals were partly allowed: the additions made by the Assessing Officer treating bank deposits as unexplained cash credits were deleted and the assessments were to stand on the basis of income accepted under section 44AD; grounds challenging reopening were dismissed as not sustaining before the Tribunal.

Penalty under section 271(1)(c) - concealment of income - furnishing inaccurate particulars of income - bona fide belief - disallowance under section 43B - deductibility of employer's contribution under section 36(1)(v) - interest on capital borrowed - section 36(1)(iii) - allowability of penalty/compensatory payment as business expenditure - Reliance Petro principle on inaccurate particulars

Disallowance under section 43B - penalty under section 271(1)(c) - bona fide belief - Whether penalty under section 271(1)(c) could be levied for claiming deduction of consolidated tax paid after the due date (disallowance under section 43B). - HELD THAT: - The Tribunal found that the consolidated tax claim, though ineligible for deduction in the relevant year by operation of section 43B, was not a false claim but a wrong claim susceptible to being allowed in the year of actual payment. The amount was disclosed in Profit & Loss and neither the assessee nor the AO claimed/allowed it in the subsequent year. There was no finding of deliberate concealment or furnishing of inaccurate particulars; the claim arose from a bona fide position rather than mala fide intent. A mere unsustainable claim does not automatically attract penalty under section 271(1)(c).

Penalty deleted; no penalty under section 271(1)(c) as the claim under section 43B was a bona fide/wrong claim, not concealment or inaccurate particulars.

Deductibility of employer's contribution under section 36(1)(v) - penalty under section 271(1)(c) - bona fide belief - Whether penalty under section 271(1)(c) could be imposed for claiming delayed payment of ESI/PF as deduction under section 36(1)(v). - HELD THAT: - The Tribunal recorded that the assessee filed a revised return claiming the deduction before the jurisdictional High Court decision adverse to the assessee was rendered, and that there existed contrary High Court authority (AIMIL Ltd.) in favour of the assessee. Given these circumstances the assessee acted on a debatable point under a bona fide belief. There was no evidence of knowledge of an adverse binding decision at the time of claim or of mala fide concealment; consequently penalty for furnishing inaccurate particulars was not warranted.

Penalty deleted; claim made under bona fide belief on a debatable point, not concealment or inaccurate particulars.

Interest on capital borrowed - section 36(1)(iii) - penalty under section 271(1)(c) - bona fide belief - Whether penalty under section 271(1)(c) could be levied for claiming interest on money borrowed for acquisition of capital asset as a revenue deduction when the interest was claimed as revenue in the accounts. - HELD THAT: - The Tribunal noted there was no allegation that the interest related to extension of business or to a period when the asset was not put to use as contemplated by the proviso to section 36(1)(iii). The interest was disclosed in the financial statements and the claim was not shown to be false. In absence of concealment or inaccurate particulars and given the disclosure and bona fide nature of the claim, imposition of penalty was not justified.

Penalty deleted; claim disclosed and bona fide, not constituting concealment or inaccurate particulars.

Allowability of penalty/compensatory payment as business expenditure - penalty under section 271(1)(c) - bona fide belief - Whether penalty under section 271(1)(c) could be imposed for claiming as business expenditure an amount paid to Sales Tax and Excise Department described in accounts as penalty. - HELD THAT: - The Tribunal observed that while penal payments for contravention are generally not deductible, compensatory payments may be allowable; the authorities below made no finding that the payment was false or that the assessee acted mala fide. The assessee had disclosed requisite details in its financial statements and claimed the amount bona fide. Given lack of any finding of deliberate concealment or inaccurate particulars, the imposition of penalty was not sustainable. The Tribunal relied on the principle that a merely unsustainable claim does not attract penalty (Reliance Petro).

Penalty deleted; claim made bona fide and disclosed, not amounting to concealment or furnishing inaccurate particulars.

Final Conclusion: All penalties levied under section 271(1)(c) in respect of the additions for Assessment Year 2010-2011 are deleted; the appeal is allowed as the disputed claims were wrong or debatable and made/disclosed bona fide, not amounting to concealment or furnishing inaccurate particulars.

Eligibility for deduction under section 10B - manufacturing activity versus trading - reliance on statements recorded under section 132(4) and section 133(6) - requirement of corroborative evidence for disclosures during search/survey - outsourcing and the value addition test for manufacturing exemption - acceptance of books of account and consequence under section 145(3)

Eligibility for deduction under section 10B - manufacturing activity versus trading - reliance on statements recorded under section 132(4) and section 133(6) - requirement of corroborative evidence for disclosures during search/survey - outsourcing and the value addition test for manufacturing exemption - acceptance of books of account and consequence under section 145(3) - Whether the assessee was engaged in manufacturing activity in respect of CT/PT and thus entitled to deduction under section 10B for the relevant assessment period - HELD THAT: - The Assessing Officer denied exemption on the basis of videography, statements recorded during search/survey and alleged absence of job work payments, treating the appellant's activity as trading. The Tribunal held that statements recorded under section 132(4)/133(6) cannot sustain denial unless supported by corroborative material, having regard to CBDT instructions warning against relying on coerced or uncorroborated admissions. The AO did not controvert documentary evidence filed by the assessee showing in house processes, machinery entries in audited financials, independent engineering certificates, excise movement records and job work ledgers evidencing payments to associated concerns. The AO also accepted the books of account without invoking section 145(3), which undermines reliance on isolated extraneous statements. The CIT(A) examined these materials, found the statements to be of little evidentiary value (including retraction of the partner's statement), and concluded that outsourcing of certain operations does not ipso facto disentitle the assessee so long as there is conclusive value addition and other conditions of section 10B are satisfied. The Tribunal, after reviewing the materials and authorities, concurred with the CIT(A) that the denial was based on non credible oral evidence and failure to deal with documentary evidence; accordingly the assessee fulfilled eligibility conditions for exemption under section 10B for the period in dispute. [Paras 8]

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision that the assessee was engaged in manufacturing of CT/PT and entitled to deduction under section 10B for the assessment period.

Final Conclusion: The Revenue's appeal is dismissed; on appreciation of documentary evidence, retraction of search statements, and absence of corroboration for the Assessing Officer's adverse view, the assessee is held to have satisfied the eligibility conditions for deduction under section 10B for the assessment period, and the CIT(A) order is sustained.

Arms length price - comparable uncontrolled price (CUP) method - written down value not determinative for ALP - valuation by independent valuer / DVO referral obligation - addition on account of unaccounted sales based on production discrepancies

Arms length price - written down value not determinative for ALP - comparable uncontrolled price (CUP) method - Admissibility of adopting written down value (WDV) as the arms length price for inter-company sale of plant and machinery. - HELD THAT: - The Tribunal found that the TPO and AO adopted the written down value from the assessee's books as the arms length price without identifying or applying any comparable uncontrolled transactions. Reliance was placed on judicial authorities holding that WDV may be a factor but cannot be the determinative ALP under the CUP method and that valuation should be grounded on identified uncontrolled market transactions or appropriate valuation exercises (including referral to DVO where applicable). Because the TPO did not undertake any exercise to ascertain fair market comparables and merely equated WDV with uncontrolled price, the upward adjustment on this basis was held unjustified. [Paras 7]

Upward adjustment made by adopting written down value as ALP is not justified; ground of appeal allowed.

Addition on account of unaccounted sales based on production discrepancies - Sustenance of addition for alleged suppressed sales computed from differences between excise records and cost audit report. - HELD THAT: - The Tribunal examined the excise returns, the cost audit report and the submissions of the assessee showing that certain pieces were excluded in excise summary as duty-paid items (samples, free distributions). The assessing officer's computation treated these as unaccounted sales. On review the Tribunal accepted the assessee's explanation and reconciliations, observed that the apparent discrepancy arose from the AO's inclusion of items already accounted in excise records, and found the lower appellate authority was not justified in upholding the addition. Accordingly the addition was deleted. [Paras 12]

Addition held to be unjustified and deleted; ground of appeal allowed.

Final Conclusion: Appeal allowed: the Tribunal set aside the upward transfer-pricing adjustment based on written down value and deleted the addition for alleged suppressed sales, allowing the assessee's grounds on both contested issues.

Validity of proceedings under section 153A following a search under section 132 - Rebuttable presumption as to documents found in search under section 292C - Evidentiary value of loose sheets/seized documents and requirement of independent corroboration - Onus and proof for additions as unexplained expenditure under section 69C - Explanation of unexplained money by reconciliation and treatment under section 69A

Validity of proceedings under section 153A following a search under section 132 - Proceedings under section 153A could not be sustained in respect of Assessment Year 2013-2014. - HELD THAT: - The Tribunal noted that a search was conducted on 03-01-2013 and the scheme of section 153A confines assessment/reassessment to the six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted. The assessment for the year under consideration had already been completed under section 143(3) and therefore the year in question did not fall within the period covered by clause (b) of section 153A(1). On these factual and legal foundations the Tribunal held that there were no proceedings under section 153A for the assessment year in dispute and that the assessee's challenge to the notice/proceedings under section 153A had no merit.

Grounds challenging validity of proceedings under section 153A dismissed; no application of section 153A to Assessment Year 2013-2014.

Rebuttable presumption as to documents found in search under section 292C - Evidentiary value of loose sheets/seized documents and requirement of independent corroboration - Onus and proof for additions as unexplained expenditure under section 69C - Addition under section 69C based on figures in seized loose papers could not be sustained and was deleted. - HELD THAT: - The Tribunal accepted that while section 292C creates a presumption that documents found during search belong to the person in whose premises they were found, that presumption is rebuttable. The seized material here consisted of loose sheets/rough estimates which, without corroborative material, have little or no evidentiary value. The AO treated figures in the loose papers as unexplained expenditure without carrying out necessary verification (for example, inquiries as to ownership/registration of the survey numbers or other corroboration). Citing authorities and principles that loose sheets require independent corroboration before they can be acted upon, the Tribunal concluded that the revenue failed to establish that the amounts represented unexplained expenditure chargeable to the assessee. Consequently the addition under section 69C was held to be unsustainable and deleted.

Addition made under section 69C set aside and directed to be deleted.

Explanation of unexplained money by reconciliation and treatment under section 69A - Addition under section 69A in respect of cash found (Rs. 10 lakhs) was deleted as the cash was satisfactorily explained. - HELD THAT: - The assessee furnished a reconciliation statement explaining the cash found at residential and business premises and stated that the cash represented business cash/amounts belonging to family members. The authorities below did not point out any defect in the reconciliation nor supply contradicting material. In the absence of any defect or credible rebuttal of the reconciliation, the Tribunal held that the cash was adequately explained and that the addition under section 69A was not justified.

Addition under section 69A in respect of the seized cash deleted.

Final Conclusion: The appeal is allowed in part: the Tribunal dismissed the challenge to section 153A only to the extent the provision did not apply to Assessment Year 2013-2014, deleted the additions made under sections 69C and 69A (relating to amounts alleged in seized loose papers and the seized cash respectively), and directed the Assessing Officer to give effect to this decision.

Income treated as business income vs income from other sources - Capitalization of interest to capital work-in-progress - Extricable linkage test between borrowed funds and project - Pre-operative expenditure capitalization

Income treated as business income vs income from other sources - Capitalization of interest to capital work-in-progress - Extricable linkage test between borrowed funds and project - Pre-operative expenditure capitalization - Whether interest earned on short-term bank deposits during project implementation is business income capitalizable to work-in-progress or taxable as "Income from Other Sources", and whether the addition made by the Assessing Officer/DRP should be deleted. - HELD THAT: - The Tribunal examined whether the interest on fixed deposits, arising while the assessee was setting up an infrastructure project under a BOT/BOOM contract, was extricably linked to the project and hence required to be capitalized to capital work-in-progress or treated as taxable under "Income from Other Sources". Having regard to coordinate-bench decisions in the assessee's own and analogous cases, and following the principle applied by the Delhi High Court in Indian Oil Panipat Consortium Ltd., the Tribunal held that where borrowed funds (or funds compulsorily parked in an escrow) are tied to the project and the income therefrom is generated from such extricably linked funds during the course of setting up the project, that income must be capitalized as pre-operative expenditure and not taxed as income from other sources. The Tribunal distinguished the decision in Tuticorin Alkali Chemicals & Fertilizers Ltd. on the basis that in that case surplus borrowed funds were not similarly extricably linked for capitalization. Applying these authorities and the extricable linkage test to the facts, the Tribunal concluded that the interest earned was correctly to be treated as business income/capitalized and that the addition directed by the DRP and made by the Assessing Officer was unsustainable. [Paras 7, 8, 9]

Grounds 1 to 3 are allowed; the interest income is to be treated as business income and capitalized to work-in-progress, and the addition made under "Income from Other Sources" is deleted.

Final Conclusion: The appeal is allowed: the interest earned during project implementation is treated as business income capitalizable to capital work-in-progress and the addition made by the Assessing Officer/DRP under "Income from Other Sources" is deleted; alternative and consequential grounds were rendered academic or need no separate adjudication.

Quashing of prosecution under Section 138 of the Negotiable Instruments Act - Effect of moratorium under Section 14 of the Insolvency and Bankruptcy Code on criminal prosecutions - Binding effect of an approved resolution plan under Section 31 of the Insolvency and Bankruptcy Code - Vicarious/co extensive liability of persons in charge under Section 141 of the Negotiable Instruments Act - Right of accused to production of documents and witnesses under Sections 243 and 247 Cr.P.C. - Inherent powers of High Court under Section 482 Cr.P.C. to quash prosecution - Prevailing effect of the Insolvency and Bankruptcy Code under Section 238 in relation to post conviction recovery

Effect of moratorium under Section 14 of the Insolvency and Bankruptcy Code on criminal prosecutions - Quashing of prosecution under Section 138 of the Negotiable Instruments Act - Declaration of moratorium under Section 14 IBC does not bar continuation of criminal prosecution under Section 138 r/w.141 NI Act. - HELD THAT: - The Court held that Section 14's prohibition on institution or continuation of suits or proceedings against the corporate debtor does not expressly include 'prosecution', and the omission is deliberate given the use of the word 'prosecution' elsewhere in the Code. Authorities including High Court and NCLT decisions were considered and the Court agreed that moratorium under Section 14 does not create a bar to criminal proceedings under Section 138/141 of the Negotiable Instruments Act; therefore the prosecutions can continue against the corporate debtor and the persons liable under Section 141. [Paras 9, 16, 17]

Continuation of the criminal complaints under Section 138 r/w.141 is not barred by the moratorium under Section 14 of the IBC.

Binding effect of an approved resolution plan under Section 31 of the Insolvency and Bankruptcy Code - Quashing of prosecution under Section 138 of the Negotiable Instruments Act - Approval of a resolution plan under Section 31 IBC does not extinguish or automatically terminate criminal prosecution under Section 138 NI Act. - HELD THAT: - The Court observed that Section 31 binds the corporate debtor, its employees and creditors with respect to the resolution plan and assets/management, but it cannot oust the jurisdiction of criminal courts or extinguish penal liability. Reliance was placed on JIK Industries v. Amarlal V. Jumani to note that schemes or plans do not automatically compound offences absent complainant's consent. Consequently, neither Section 14 nor Section 31 operate to terminate criminal proceedings initiated under Section 138 r/w.141. [Paras 11, 16]

The approved resolution plan does not extinguish the criminal prosecution or the penal liability under Section 138/141 NI Act.

Vicarious/co extensive liability of persons in charge under Section 141 of the Negotiable Instruments Act - Quashing of prosecution under Section 138 of the Negotiable Instruments Act - Erstwhile directors/management cannot claim the protective effect of IBC to escape personal liability under Section 141; they cannot maintain a petition to quash the entire prosecution on behalf of the company once management has changed. - HELD THAT: - Section 141 imputes co extensive criminal liability on persons in charge and responsible for company business. Once an insolvency professional or new management is in place, erstwhile directors cease to represent the company and thus lack locus to seek quashing of prosecution on behalf of the corporate debtor; at best they may seek relief confined to themselves. Further, the Court rejected the contention that approval of the resolution plan affords protection to the erstwhile director against criminal prosecution. [Paras 14, 25]

The petitioner (erstwhile managing director) cannot avail the resolution plan as a shield against prosecution and cannot maintain quashing of the entire prosecution on behalf of the company.

Right of accused to production of documents and witnesses under Sections 243 and 247 Cr.P.C. - Fair trial and access to company records - Lack of access to company records due to change of management does not deny the accused a fair trial; statutory criminal procedure remedies are available to obtain documents and witnesses. - HELD THAT: - The Court held that Sections 243 and 247 Cr.P.C. permit the accused, when entering defence, to produce evidence and apply for process to compel attendance of witnesses or production of documents; the Magistrate must issue such process unless it is vexatious or for delay. Thus the petitioner's apprehension about inability to lead documentary evidence because of changed management is not a ground to quash prosecution, as the criminal court can order production or attendance as necessary for defence. [Paras 21, 22]

The accused can secure production of company records and witnesses under the Cr.P.C. and his claim of denial of fair trial on that basis is not a ground for quashing.

Prevailing effect of the Insolvency and Bankruptcy Code under Section 238 - Recovery of fine/compensation post conviction and interplay with IBC - While criminal courts may impose fine/compensation under Section 138, post conviction recovery from corporate assets must be governed by the Insolvency and Bankruptcy Code in view of Section 238. - HELD THAT: - The Court recognised that Section 138 contemplates punishment and fine/compensation and that Cr.P.C. provides for modes of recovery (Section 421). However, by reason of Section 238 of the IBC, the process of recovery from corporate assets post conviction must conform to the IBC framework; the Code overrides inconsistent provisions of other laws in respect of recovery from corporate debtor assets. [Paras 24]

Recovery of fines/compensation from assets of a corporate debtor after conviction must proceed in terms of the IBC; IBC has overriding effect in that respect.

Final Conclusion: The petitions under Section 482 Cr.P.C. seeking quashing of complaints under Section 138 r/w.141 NI Act were dismissed. The Court held that moratorium under Section 14 IBC and approval of a resolution plan under Section 31 IBC do not bar continuation of criminal prosecution or extinguish personal criminal liability of persons in charge; statutory provisions of Cr.P.C. afford remedies to secure documents and witnesses, and post conviction recovery from corporate assets must conform to the IBC framework.

Service tax - service - declared services - provision of service by an employee to the employer - agreement to refrain from an act / forbearance to act - facilitation of termination of employment

Service tax - facilitation of termination of employment - agreement to refrain from an act / forbearance to act - provision of service by an employee to the employer - Whether amounts received by the employer from employees in lieu of the notice period constitute a taxable service under Section 66E(e) as 'facilitation of termination of employment'. - HELD THAT: - The Assessing Officer characterised payments received by the petitioner from outgoing employees in lieu of serving a contractual notice period as a taxable service described as facilitation of termination of employment under Section 66E(e). The Court examined the statutory definition of 'service' and the declared services in Section 66E, and relied on the CBEC Guidance Note which treats amounts paid by an employer to an employee for premature termination of employment as relating to services provided by the employee to the employer and thus not chargeable as a service by the employer. Applying the same principle in the converse situation, the Court held that the employer does not render a service by permitting an employee's sudden exit in exchange for payment; the employer merely accepts compensation for the employee's failure to serve the contractual notice. The Court found that clause (e) of Section 66E is not attracted because the employer has not 'tolerated' an act in the sense of providing a forbearance service; rather, the arrangement is a contractual mechanism to permit exit on payment and does not constitute rendition of a taxable service by either party. The Court further distinguished situations where separate obligations (such as non compete stipulations) may amount to rendition of service, observing that notice pay in lieu of service of notice does not fall within that class. [Paras 11, 12]

Payments made to the petitioner by employees in lieu of serving a contractual notice period do not constitute a taxable service under Section 66E(e) and are not liable to service tax as 'facilitation of termination of employment'.

Service tax - alternate remedy - Whether the writ petitions should be relegated to the statutory appellate remedy instead of being entertained by the High Court. - HELD THAT: - The Revenue urged that the petitioner should be directed to pursue the statutory appeal remedy. The Court observed that the dispute principally involved interpretation of the statutory provision in light of undisputed facts and that there was no need to remand the matter to the appellate forum for determination. Accordingly, the plea for relegation to the alternate remedy was rejected. [Paras 13]

The High Court entertained the petitions and declined to remit the matter to the statutory appellate forum; the plea for relegation to alternate remedy is rejected.

Final Conclusion: Writ petitions allowed: the impugned orders confirming service tax on payments made by employees in lieu of notice periods are set aside; connected miscellaneous petitions closed; no costs.

Refund of CVD/Cenvat credit - requirement of show cause notice for appropriation/recovery - deposit under protest - limitation for recovery (five years) - effect of a subsequent letter stating voluntary deposit on preservation of protest - right to refund where no show cause notice issued

Refund of CVD/Cenvat credit - requirement of show cause notice for appropriation/recovery - limitation for recovery (five years) - Whether the appellant is entitled to refund of Cenvat/CVD paid in respect of inputs imported during 16.6.1997 to 03.9.1997 where no show cause notice was issued for appropriation within the statutory period. - HELD THAT: - The Tribunal found that the department's letter dated 25.2.2005 itself recorded that the appellant had wrongly availed Cenvat credit for the period 16.6.1997 to 03.9.1997 and that no show cause notice was issued to the appellant for appropriation of the said amount. The appellant had reversed part of the amount under protest and the balance was adjusted against refund claims; there is no evidence that the appropriation/adjustment was preceded by or communicated through a show cause notice. As more than five years had elapsed since 03.9.1997 and no show cause notice had been issued within the limitation period, recovery could not be sustained. The Tribunal relied on the principle that where statutory process including issuance of a show cause notice has not been followed within the prescribed period, the revenue cannot appropriate the sum and the amount paid under protest is refundable. The Tribunal further held that issuance of a subsequent letter by the department and the passage of time did not cure the absence of a show cause notice required for appropriation, and therefore extended limitation could not be invoked to validate recovery at this stage. [Paras 12, 14, 15, 16, 17]

Refund allowed because no show cause notice was issued within five years for appropriation of the Cenvat/CVD credit availed during 16.6.1997 to 03.9.1997; the impugned rejection set aside.

Deposit under protest - effect of a subsequent letter stating voluntary deposit on preservation of protest - Whether the appellant's letter of 10.8.2007 stating that the amount was deposited voluntarily and in a bonafide manner operated to vacate the earlier protest and disentitle the appellant to refund. - HELD THAT: - The Tribunal examined the letter dated 10.8.2007 and concluded that it was a reply to a demand for interest and did not amount to an unequivocal vacation of the protest made earlier by the appellant in letters dated 26.2.2005, 31.3.2005 and 30.9.2005. The Tribunal held that the phrase relied upon in the 10.8.2007 letter did not alter the factual position that no show cause notice had been issued and therefore could not be read as validating appropriation or as depriving the appellant of the right to seek refund. Consequently, the refund claim could not be rejected solely on the basis of the 10.8.2007 letter. [Paras 13, 18]

The 10.8.2007 letter did not operate to vacate the earlier protest and could not be a valid ground to deny the refund claim.

Final Conclusion: The impugned order rejecting the refund claim is set aside and the appellant's refund claim is allowed with consequential reliefs, the Tribunal holding that in absence of issuance of a show cause notice within the applicable five year period and given the preservation of protest, the amount recovered must be refunded.

Interpretation of administrative order - pay scale-to-pay scale fixation under a government order - entitlement to Selection Grade and Special Grade pay - parity claims and limits of Article 14 (positive equality not negative equality) - non-speaking dismissal of Special Leave Petitions and doctrine of merger - judicial discipline and reference to a larger Bench on conflicting coordinate Bench decisions

Entitlement to Selection Grade and Special Grade pay - pay scale-to-pay scale fixation under a government order - Drivers are not entitled to Selection Grade and Special Grade pay as per Serial No. 8 of Schedule II (Rs. 5000-8000 and Rs. 5500-9000); the correct scales in terms of G.O. Ms. No. 162 are those in Serial No. 6 of Schedule II (Selection Grade Rs. 4000-6000 and Special Grade Rs. 4300-6000). - HELD THAT: - The Court examined the evolution of drivers' pay scales through the successive government orders culminating in G.O. Ms. No. 162 and the 1998 Rules. Under Schedule I the pre-revision scale for drivers (Rs. 975-1660) corresponds to the revised Ordinary Grade Rs. 3200-4900 (Entry No. XX of Schedule I). Schedule II accordingly prescribes Selection and Special Grade scales corresponding to that Ordinary Grade, namely Serial No. 6 (Selection Grade Rs. 4000-6000; Special Grade Rs. 4300-6000). The claim to the higher scales in Serial No. 8 was not supported by the pay-scale mapping in the 1998 Rules or the antecedent pay-revision history. The departmental letters which treated certain higher fixations as erroneous did not alter the operative determination in the G.O., and the Court found that the Appellants failed to establish a lawful entitlement to Serial No. 8 scales. On that basis the Court held the Appellants' claim to the Serial No. 8 scales unsustainable and confirmed entitlement only to the scales in Serial No. 6 of Schedule II. [Paras 20, 21, 24, 25]

Claim to Selection and Special Grade scales in Serial No. 8 rejected; entitlement confined to Serial No. 6 scales under G.O. Ms. No. 162.

Non-speaking dismissal of Special Leave Petitions and doctrine of merger - Dismissals of Special Leave Petitions by this Court at the admission stage which are non-speaking do not constitute a declaration of law under Article 141 nor do they attract the doctrine of merger. - HELD THAT: - The Court noted several prior orders dismissing SLPs at the admission stage and reiterated settled principles from this Court's jurisprudence that a refusal of special leave, when non-speaking, is not an affirmation of the order under challenge and does not operate as a binding declaration of law or merge the subordinate forum's order into a Supreme Court ruling. The distinction between discretionary refusal of leave and appellate exercise of jurisdiction was emphasised, and it was held that non-speaking dismissals cannot be treated as precedent to determine entitlement under the G.O. [Paras 5, 6, 7, 8]

Non-speaking SLP dismissals relied upon by parties do not decide the legal question and are not binding declarations under Article 141.

Parity claims and limits of Article 14 (positive equality not negative equality) - The Appellants cannot invoke Article 14 to claim the higher pay scales enjoyed by some drivers where the Appellants themselves are not lawfully entitled to those scales. - HELD THAT: - The Court applied the principle that Article 14 embodies positive equality and cannot be used to perpetuate an illegality or irregularity. If earlier grants to some persons arose inadvertently or without lawful basis, others cannot invoke equality to claim the same illegitimate benefit. Citing settled decisions, the Court held that mere existence of higher fixation to some similarly placed persons does not confer a legal right on others unless a lawful entitlement is shown. [Paras 22, 23, 24]

Article 14 cannot be invoked to claim benefits flowing from an earlier wrong or irregular fixation; parity claim rejected.

Judicial discipline and reference to a larger Bench on conflicting coordinate Bench decisions - Although the High Court, upon disagreeing with a coordinate Bench's view, ought to have referred the matter to a larger Bench, the Supreme Court, in the interest of expedition, declined to remand and proceeded to decide the dispute on merits. - HELD THAT: - The Court observed that the impugned judgment diverged from prior coordinate Bench decisions and that, properly speaking, a High Court bench differing from a coordinate bench should refer the issue for consideration by a larger Bench to maintain judicial discipline. Notwithstanding that principle, the Supreme Court chose not to remit the matter for fresh consideration and instead resolved the entitlement issue itself on merits to avoid further delay. [Paras 18, 19]

High Court should have referred the conflict to a larger Bench, but the Supreme Court adjudicated the matter on merits without remand.

Pay scale fixation for employees of a specific department under a government order - entitlement to pay scales for High Court-employed drivers - Drivers employed at the High Court who were directed to be fixed under Serial No. 8 are only entitled to pay scales in terms of Serial No. 6 of Schedule II of the 1998 Rules under G.O. Ms. No. 162. - HELD THAT: - Applying the same pay-scale mapping and legal conclusions to drivers employed by the High Court, the Court found that the Division Bench's direction to fix pay in terms of Serial No. 8 was erroneous. Because the drivers have no promotional avenues and their Ordinary Grade corresponds to Entry No. XX / Serial No. 6 under the 1998 Rules, the State was directed to fix pay for these drivers in accordance with Serial No. 6 (Selection Grade and Special Grade as Rs. 4000-6000 and Rs. 4300-6000 respectively). [Paras 5, 6]

Appeals in respect of High Court-employed drivers partly allowed; pay fixation to be made in terms of Serial No. 6 of Schedule II.

Final Conclusion: The appeals contesting fixation of Selection Grade and Special Grade pay in Serial No. 8 of Schedule II are dismissed to the extent that claimants are not lawfully entitled to those higher scales; entitlement is confined to the scales in Serial No. 6 of Schedule II of the 1998 Rules under G.O. Ms. No. 162 (Selection Grade Rs. 4000-6000 and Special Grade Rs. 4300-6000). Non-speaking SLP dismissals relied upon do not bind, Article 14 cannot be used to perpetuate an illegality, and although the High Court should have referred the conflict with a coordinate Bench to a larger Bench, the Supreme Court has decided the matter on merits and directed fixation accordingly.

Impleadment of parties - interlocutory appeal maintainability - jurisdictional limits of a civil court - prohibition on restraining proceedings before other fora - exercise of Article 142 vis-a -vis subordinate procedural law

Impleadment of parties - Application to implead 125 Plaintiffs as co Appellants (and to treat others as proforma Respondents) in the appeal was allowed and the amended memo of parties taken on record. - HELD THAT: - The Court considered the preliminary objection to locus standi and, observing that the applicants are themselves Plaintiffs in the suit and share the common submission challenged in the appeal, found impleadment appropriate. The amended memo of parties was accepted and recorded. [Paras 2, 3]

Impleadment application allowed and amended memo of parties taken on record.

Interlocutory appeal maintainability - The portion of the impugned interlocutory order challenged in the appeal is amenable to hearing by a Division Bench; the appeal is maintainable as the order is ex facie legally erroneous. - HELD THAT: - The Court rejected the submission that an appeal against the interim order was not maintainable under CPC or the Delhi High Court Act. Reliance was placed on the principle that a Division Bench may entertain an appeal against a Single Judge's interlocutory order where the order is ex facie legally erroneous or causes grave and substantial injustice. Having examined the impugned order, the Court concluded that the challenged portion met that threshold and thus the appeal was properly entertainable. [Paras 10, 11, 12]

Appeal entertained as maintainable in respect of the challenged portion of the interlocutory order.

Jurisdictional limits of a civil court - prohibition on restraining proceedings before other fora - exercise of Article 142 vis-a -vis subordinate procedural law - To the extent the Single Judge's order restrained Plaintiffs from pursuing 'other coercive proceedings' (including Section 138 NI Act complaints, NCLT proceedings, contempt and execution proceedings), that restraint was beyond the civil court's jurisdiction, ex facie illegal and was set aside. - HELD THAT: - The Court explained that a civil court exercising original jurisdiction is bound by the CPC (and the Delhi High Court Act where applicable) and cannot preemptively bar proceedings in other fora or tribunals which have their own jurisdiction and procedural rules. While the Supreme Court's Article 142 power is broadly framed, subordinate civil courts must act within statutory bounds and cannot pass orders restraining criminal courts, tribunals or contempt jurisdictions. Accordingly, the portion of the impugned order directing that 'the Plaintiffs herein will not proceed with other coercive proceedings against the Defendants in respect of the dues claimed in the suit' was held entirely without jurisdiction and set aside. The Court clarified that this ruling is not an expression on the merits of those other proceedings, which remain for the respective fora to decide; the Single Judge will continue with the suit and adjudicate applications concerning pro rata disbursal in accordance with law. [Paras 14, 15, 16, 17]

Impugned restraint on other coercive proceedings set aside; Single Judge's direction on that aspect quashed.

Final Conclusion: Impleadment allowed; appeal entertained as maintainable in respect of the challenged portion; the Single Judge's direction restraining Plaintiffs from pursuing other coercive proceedings (Section 138 complaints, NCLT, contempt and execution proceedings) is without jurisdiction and is set aside; other aspects of the suit and pending applications to be decided by the learned Single Judge in accordance with law.

Inherent jurisdiction under Section 482 Cr.P.C. - Bar on second revision under Section 397(3) Cr.P.C. - Defect in statutory demand notice under Section 138 of the Negotiable Instruments Act - Scope of summary trial and recall of witnesses under Sections 143-147 and Section 145(2) of the Negotiable Instruments Act - Burden of proof and presumptions under Sections 118 and 139 of the Negotiable Instruments Act and Section 106 of the Indian Evidence Act

Inherent jurisdiction under Section 482 Cr.P.C. - Bar on second revision under Section 397(3) Cr.P.C. - Whether the High Court may entertain a petition under Section 482 Cr.P.C. after the petitioner has already availed revisional remedy under Section 397 Cr.P.C. - HELD THAT: - The Court held that although the High Court's inherent power under Section 482 Cr.P.C. is wide, it must be exercised sparingly and not as a substitute for a second revision barred by Section 397(3) Cr.P.C. Reliance on precedents establishes that Section 482 may be invoked only in cases of failure of justice, abuse of the judicial process, non-compliance with mandatory provisions, or apparent mistake by the revisional court. The facts in the present case do not disclose any such exceptional circumstance warranting exercise of inherent jurisdiction; there is no material showing serious miscarriage of justice or abuse of process that would justify circumventing the statutory bar on a second revision. [Paras 6, 7, 8, 19]

The petition under Section 482 Cr.P.C. cannot be entertained as a substitute for a second revision; exercise of inherent jurisdiction is not warranted and the petition is dismissed.

Defect in statutory demand notice under Section 138 of the Negotiable Instruments Act - Whether the demand notice dated 2 March 2017 was defective, vague or ambiguous so as to vitiate the complaint under Section 138 NI Act. - HELD THAT: - The Court examined the notice as a whole and held that it sets out the details of the dishonoured cheques sufficiently. There was no denial that the cheques were issued or were dishonoured for insufficient funds. The principles laid down in cited authorities regarding defects in demand notices were noted, but the Court found them inapplicable on the facts: the notice here was not ambiguous or confusing and did not render the complaint bad in law. [Paras 5, 9]

The demand notice is not defective or ambiguous; the objection to the notice does not warrant quashing of the complaint.

Scope of summary trial under NI Act - Recall of complainant for cross-examination under Section 145(2) NI Act - Burden of proof under Section 106 of the Indian Evidence Act - Procedural forum for raising defences to an offence under Section 138 NI Act and the manner in which such defences are to be adjudicated. - HELD THAT: - The Court reiterated that offences under Section 138 NI Act are to be tried under the special code in Sections 142-147, which prescribe an expeditious summary trial procedure. An accused must raise his defence before the Metropolitan Magistrate, enter his plea under Section 251 Cr.P.C., and, where necessary, apply under Section 145(2) NI Act to recall complainant witnesses for cross-examination on the specific points of defence. Defences are primarily within the accused's special knowledge and the onus to disclose and prove them rests on the accused (Section 106 Evidence Act). The High Court should not usurp the trial court's role by adjudicating such defences at the inherent jurisdiction stage where evaluation of evidence is required. [Paras 14, 15, 16, 17, 18]

Defences to prosecution under Section 138 NI Act must be raised and adjudicated in the trial court according to the procedure in the NI Act and Cr.P.C.; the High Court will not substitute itself for the trial court to evaluate those defences in exercise of Section 482.

Direction to trial court to consider defence - Whether further consideration of the petitioners' contentions should be entrusted to the trial court. - HELD THAT: - While finding no infirmity in the proceedings before the trial court that would justify interference under Section 482 Cr.P.C., the High Court directed that the trial court shall consider and deal with the petitioners' contentions and defences in accordance with law. The Court observed that the defences require evidence and cannot be finally adjudicated in inherent jurisdiction proceedings. [Paras 20]

The trial court is directed to consider and deal with the contentions and defences of the petitioners in accordance with law.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed for want of merit and as an improper substitute for a second revision barred by Section 397(3) Cr.P.C.; no notice is issued to the respondent, and the Trial Court is directed to proceed to consider and decide the petitioners' defences in accordance with law.