TaxTMI Updates e-Newsletter
Jan 31,2022

Writ of mandamus - transfer of investigation - separate causes of action - investigating agency's discretion

Writ of mandamus - transfer of investigation - separate causes of action - investigating agency's discretion - Petition for direction to transfer an ongoing GST investigation from Delhi Zonal Unit to Surat Zonal Unit - HELD THAT: - The petition sought a mandamus directing respondents to transfer Summons No. F.NO.DZU/INV/A/GST/27/2021 from the Delhi Zonal Unit to the Surat Zonal Unit on the ground that a separate investigation against the petitioner was pending before Surat. The respondents have sworn that the two investigations arise from different causes of action and have asserted that it is for the investigating agency to decide whether to conduct a joint investigation. In view of this factual stance and the attendant discretion of the investigating agency, the Court declined to issue a writ of mandamus directing transfer of the investigation. No further adjudication on merits of the investigations was undertaken.

Writ petition disposed; no mandamus issued directing transfer and the investigating agency may decide on joint or separate investigation.

Final Conclusion: The petition for mandatory transfer of the investigation was dismissed; the Court left it to the investigating agency to decide on joint or separate handling of investigations, and disposed of the writ petition and pending applications.

Mandatory requirement to record reasons under Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - refund application - opportunity of personal hearing - quashing of administrative order for non-compliance with statutory procedure

Mandatory requirement to record reasons under Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - refund application - opportunity of personal hearing - quashing of administrative order for non-compliance with statutory procedure - Whether the order rejecting the petitioner's refund application was invalid for failing to record reasons as mandated by Rule 92(3) and required fresh consideration after affording hearing. - HELD THAT: - The Court found that the impugned order rejected the petitioner's refund application without recording any reasons, contrary to the mandatory requirement of Rule 92(3) of the Central Goods and Services Tax Rules, 2017. This procedural omission rendered the order in breach of the statutory mandate. The respondents undertook to afford the petitioner an opportunity of being heard and to pass a fresh order in compliance with the Rule. In view of the mandatory nature of the requirement to record reasons and the absence of such reasons in the impugned order, the appropriate remedy was to quash the impugned order, restore the refund application to file, and direct the authority to hear the petitioner and pass a fresh order uninfluenced by the earlier conclusions. The Court directed that the fresh order be passed expeditiously and within a specified timeframe after personal hearing, and be communicated to the petitioner promptly. [Paras 5, 6, 7]

Impugned order quashed and set aside; refund application for July 2017 to March 2018 restored to file; respondent directed to afford personal hearing and pass a fresh order in accordance with Rule 92(3) expeditiously and to communicate the order to the petitioner.

Final Conclusion: Impugned order rejecting the refund application was quashed for failure to record reasons as mandated by Rule 92(3); the matter is remitted for fresh consideration after personal hearing, with directions for expeditious disposal and communication of the fresh order.

Blocking of Electronic Credit Ledger - Automatic unblocking after one year under sub-rule 3 of Rule 86A - Duty to permit utilisation of input tax credit - Discretion of authority ceases after statutory period - Personal liability of authority for failure to act

Automatic unblocking after one year under sub-rule 3 of Rule 86A - Duty to permit utilisation of input tax credit - Discretion of authority ceases after statutory period - Personal liability of authority for failure to act - Whether the Electronic Credit Ledger must be unblocked and the assessee permitted to avail input tax credit once the one year period under sub-rule 3 of Rule 86A has elapsed, and the consequences of the authority's failure to act thereafter. - HELD THAT: - The Court accepted the concession of the State that the one year period prescribed by sub-rule 3 of Rule 86A of the CGST/GGST Rules had elapsed. The rule provides that the Electronic Credit Ledger, once blocked, can remain blocked only for a period of one year and on expiry it automatically gets unblocked. Consequently, after the statutory period ends, the authority has no discretion to continue to prevent the assessee from availing the input credit unless a fresh order validly re-imposes a block. In the present case the authority failed to permit the writ-applicant to utilise the ledger even after the statutory period had expired and did not respond to representations; the ledger remained inaccessible for about two and a half months beyond the statutory life of the blocking order. The Court recorded that such inaction was impermissible, directed compliance with the statutory consequence of expiry, and warned that in future the concerned authority may be held personally liable for losses suffered by an assessee during such an interregnum. [Paras 3, 4, 5, 6]

The writ is allowed; respondent no.3 is directed to unblock the Electronic Credit Ledger and permit utilisation of the input credit immediately; failure to act after expiry of the statutory period is impermissible and may attract personal liability of the authority.

Final Conclusion: Writ allowed; Electronic Credit Ledger to be unblocked forthwith as the one year period under sub-rule 3 of Rule 86A had elapsed; authority warned about consequences of future inaction.

Definition of 'financial company' for determining a taxable person under the Interest Tax Act, 1974 - classification as a 'residuary non-banking finance company' versus as 'any other financial company' - requirement to identify the specific sub-clause of the definition when imposing interest tax - principle that a charging provision applies only if the person clearly falls within its ambit - reopening of assessment beyond four years under the Interest Tax Act, 1974

Definition of 'financial company' for determining a taxable person under the Interest Tax Act, 1974 - classification as a 'residuary non-banking finance company' versus as 'any other financial company' - requirement to identify the specific sub-clause of the definition when imposing interest tax - principle that a charging provision applies only if the person clearly falls within its ambit - Whether the authorities correctly classified the appellant under the appropriate sub-clause of the definition of "financial company" and thereby validly attracted charge under the Interest Tax Act, 1974. - HELD THAT: - The Tribunal and the first appellate authority reached differing characterisations of the appellant - the assessing officer treated it as a residuary non-banking finance company while the first appellate authority treated it as "any other financial company" - but neither appellate authority identified the specific sub-clause of the statutory definition in section 2(5B) under which the appellant was held taxable. Identification of the precise sub-clause is an essential prerequisite to attract the charge, since a charging provision must be shown to apply by clear words and not by implication. In view of the omission to state under which sub-clause the appellant falls and the absence of determinative findings applying the correct limb of the definition to the appellant's activities and memorandum of association, the Tribunal's affirmance of the lower order without independent consideration is unsustainable. The matter requires fresh examination of the appellant's activities and records to determine under which sub-clause of the definition of "financial company" the appellant falls, if at all, so as to justify the charge under the Interest Tax Act. The court relied on the established rule that a person can be taxed under a charging provision only if it is clearly shown that the person falls within the provision's ambit. [Paras 11, 12, 13]

Order of the Tribunal set aside; matter remanded to the Tribunal to determine afresh under which sub-clause of the definition of "financial company" the appellant falls and whether the charge under the Interest Tax Act is attracted, with the exercise to be completed within twelve weeks.

Final Conclusion: The Tribunal's order is set aside and the matters for the assessment years 1997-1998 to 2000-2001 are remitted to the Tribunal for fresh consideration to identify the correct sub-clause of the definition of "financial company" and to decide whether the appellant is liable to interest tax; the Tribunal is directed to complete the exercise within twelve weeks.

Release of seized assets - Section 132B(3) of the Income Tax Act, 1961 - CBDT Circular F.No.286/6/2008-IT (Inv. II) dated 21st January, 2009 - transfer to Assessing Officer - refund in accordance with assessment order

Release of seized assets - Section 132B(3) of the Income Tax Act, 1961 - CBDT Circular F.No.286/6/2008-IT (Inv. II) dated 21st January, 2009 - transfer to Assessing Officer - refund in accordance with assessment order - Direction to respondents to transfer the seized amount to the petitioner's Assessing Officer and facilitation of refund in accordance with law and the assessment order. - HELD THAT: - The court recorded that assessment proceedings against the petitioner were complete and that the petitioner had established lawful ownership of the seized amount. Reliance was placed on the statutory scheme embodied in Section 132B(3) of the Income Tax Act, 1961 and the CBDT Circular governing release of seized assets to show that any amount remaining after discharge of liabilities must be made over to the person from whose custody it was seized. The factual dispute as to the location of the seized funds was resolved by the respondents' admission that the amount was held in the PD Account of Pr.CIT-10 in Delhi. Given that the petitioner's PAN is based in Ahmedabad, the court directed Pr.CIT-10 to transfer the seized amount to the petitioner's Assessing Officer in accordance with law within two weeks, and left it open to the petitioner to apply to that Assessing Officer for refund pursuant to the assessment order dated 2nd November, 2010. [Paras 3, 5, 6]

Pr.CIT-10 to transfer the seized amount to the petitioner's Assessing Officer within two weeks; petitioner permitted to apply to the Assessing Officer for refund in accordance with the assessment order.

Final Conclusion: Writ petition disposed of with direction to transfer the seized amount to the petitioner's Assessing Officer within two weeks and liberty to seek refund from the Assessing Officer in accordance with the assessment order.

Stay of recovery on payment of 20% of disputed demand - adjustment of refunds against outstanding tax demand - office memorandum dated 29th February, 2016 read with office memorandum dated 25th August, 2017 - power of Assessing Officer under Section 220(6) of the Income Tax Act, 1961 - restrictive stay order contrary to CBDT directions

Stay of recovery on payment of 20% of disputed demand - adjustment of refunds against outstanding tax demand - office memorandum dated 29th February, 2016 read with office memorandum dated 25th August, 2017 - Petitioner entitled to refund of amounts adjusted in excess of 20% of the disputed tax demand for Assessment Year 2016-17 where no reasons under paragraph 4(B) of the Office Memorandum were recorded. - HELD THAT: - The Court applied the binding guidance in the CBDT Office Memorandum dated 29th February, 2016 as amended by the Office Memorandum dated 25th August, 2017, which contemplates that ordinarily the Assessing Officer shall grant stay of recovery until disposal of the first appeal on payment of 20% of the disputed demand. The Court found that the authority adjusted refunds in excess of the 20% standard without recording any particularised reasons that the case falls within paragraph 4(B) of the 29th February, 2016 Office Memorandum, and without passing any order under Section 245. In line with earlier precedent of this Court applying the same Office Memorandum, the respondents therefore were not entitled to retain adjustments beyond the 20% threshold absent the requisite reasons or authority to do so. [Paras 8]

Respondents to verify the factual position and, if the adjustments in excess of 20% are found to be true, refund the excess amounts adjusted for Assessment Year 2016-17 within four weeks.

Power of Assessing Officer under Section 220(6) of the Income Tax Act, 1961 - restrictive stay order contrary to CBDT directions - stay of recovery on payment of 20% of disputed demand - Restrictive stay order limiting the stay to a fixed date (31st December, 2019) held to be contrary to CBDT directions and previous orders of this Court; stay ought to remain till disposal of the first appeal. - HELD THAT: - The Court noted that the CBDT Office Memorandum mandates that, on payment of the prescribed pre-deposit (normally 20%), the Assessing Officer shall grant stay of recovery until disposal of the first appeal unless specific reasons under paragraph 4(B) justify a higher pre-deposit. The stay order dated 11th February, 2019 which limited the stay to a fixed earlier date did not conform with that mandate. Relying on the Court's prior exposition of the Office Memorandum and the need for governmental authorities to follow standards they set, the Court held that such a restrictive, time-limited stay was unlawful insofar as it conflicted with the CBDT directions requiring stay till disposal of the first appeal. [Paras 9, 10]

The restrictive stay order is inconsistent with CBDT directions and earlier decisions; the respondents must act in accordance with the Office Memorandum and maintain stay till disposal of the first appeal unless reasons under paragraph 4(B) are recorded.

Final Conclusion: Writ petition disposed of with directions that the respondents shall verify the petitioner's factual assertions and, if found correct, refund amounts adjusted in excess of 20% of the disputed demand for Assessment Year 2016-17 within four weeks; the stay on recovery must conform to the CBDT Office Memorandum and remain operative until disposal of the first appeal unless paragraph 4(B) reasons are recorded.

Reopening of assessment - proviso to Section 147 - failure to truly and fully disclose material facts - change of opinion - audit objections cannot substitute for Assessing Officer's own reasons to believe - mercantile system of accounting - statutory liability deductible in the year to which the taxable event pertains - Assessing Officer cannot reopen assessment to remedy his own oversight - voluntary payment without admission - payment without initiation of penalty proceedings

Reopening of assessment - proviso to Section 147 - failure to truly and fully disclose material facts - Validity of notice dated 28th March 2019 under Section 148 read with proviso to Section 147 for A.Y.-2012-2013. - HELD THAT: - The notice was issued after the four year period and assessment under Section 143(3) had been completed, bringing the proviso to Section 147 into play. The respondents were required to show failure by the petitioner to truly and fully disclose material facts relevant to assessment. On examination of the reasons recorded and documents on record, the Court found that the Revenue failed to discharge this onus. The material relied upon by the Jurisdictional Assessment Officer (JAO) was already on assessment records and did not demonstrate non-disclosure by the petitioner. Consequently the jurisdictional prerequisite for reopening under the proviso was not satisfied. [Paras 1, 2, 3, 8, 9]

Impugned notice under Section 148 and the order rejecting objections are quashed and set aside.

Change of opinion - Assessing Officer cannot reopen assessment to remedy his own oversight - Whether items (2) and (4) in the reasons for reopening disclose escapement of income or merely reflect a change of opinion/oversight. - HELD THAT: - Items (2) and (4) relied upon the assessment record and alleged that amounts which were considered one way by the Assessing Officer should have been treated differently. The Court held that these amounted to a change of opinion on the part of the Revenue (the AO/JAO) and that reopening an assessment on account of such change of opinion is impermissible. The assessment cannot be reopened merely because the Revenue wishes to adopt a different view than that taken at the original assessment; the JAO's attempt to re-evaluate conclusions already reached by the AO exposes the classic vice of change of opinion. [Paras 4, 8, 9]

Reopening insofar as it is based on items (2) and (4) is invalid as founded on change of opinion.

Audit objections cannot substitute for Assessing Officer's own reasons to believe - mercantile system of accounting - statutory liability deductible in the year to which the taxable event pertains - Whether audit objections (items (1) and (3)) furnished reasons to believe that income had escaped assessment, and whether payments characterized as sales tax deposits were deductible in A.Y.-2012-2013. - HELD THAT: - The JAO primarily relied on audit objections and documents already in the assessment record. For item (1) the petitioner had explained that the amount represented interest paid on security deposits (a revenue expenditure) and not capitalized security deposits; the Court accepted this explanation and noted that an audit party's characterization cannot supplant the Income-tax Officer's own evaluation of the law. For item (3) concerning payments under sales tax laws, the Court applied the established principle that under the mercantile system a statutory liability arises in the year of the taxable event and, even if not debited to P&L, statutory liabilities payable in that year are deductible in that assessment year. Consequently these audit objections did not demonstrate failure to disclose material facts warranting reopening. [Paras 5, 6, 7]

Reopening insofar as based on audit objections (items (1) and (3)) is unsustainable; the payments in question are deductible for A.Y.-2012-2013 and the AO/JAO cannot rely on audit's characterization to reopen assessment.

Voluntary payment without admission - payment without initiation of penalty proceedings - Assessing Officer cannot reopen assessment to remedy his own oversight - Whether the petitioner may be directed to pay the tax and whether penalty proceedings may be initiated in respect of the admitted/claimed error. - HELD THAT: - Although the entire notice under Section 148 was quashed, the petitioner made a without prejudice offer to rectify an apparent error (addition of export incentive difference). The Court, treating the offer as without prejudice and not as an admission, directed the petitioner to pay the amount quantified in the revenue audit objections and directed the Revenue to raise demand accordingly. Simultaneously, relying on the principle that reopening cannot be used to remedy the Assessing Officer's own oversight, the Court expressly barred initiation of penalty proceedings under that head. [Paras 10, 11, 12]

Petitioner directed to pay the specified amount on demand; payment treated without admission and no penalty proceedings to be initiated in respect of that matter.

Final Conclusion: The Section 148 notice and the order rejecting objections for A.Y.-2012-2013 are quashed and set aside as the Revenue failed to show failure to truly and fully disclose material facts; the reopening was principally based on change of opinion and audit objections which are insufficient to found jurisdiction to reopen. The petitioner is directed to pay the quantified tax demand on a without-prejudice basis and no penalty proceedings shall be initiated in respect of that matter. Petition disposed of with no order as to costs.

Quashing of assessment order - remand for fresh consideration - opportunity of hearing - failure to furnish documents due to technical glitches - reconsideration in accordance with law

Failure to furnish documents due to technical glitches - quashing of assessment order - Impugned assessment order passed on premise that petitioner did not furnish/upload relevant documents despite petitioner's representation of technical glitches and inability to upload. - HELD THAT: - The Court examined the petitioner's representation that technical glitches and constraints in the department's portal prevented uploading of required documents and noted the impugned order proceeded on the premise that documents were not furnished. Having considered the petitioner's specific assertion and his undertaking to furnish/upload the documents if given another opportunity, the Court concluded that in the interest of justice the impugned order could not stand. The Court therefore set aside the assessment order to enable the petitioner to present the relevant material which was not before the assessing authority at the time of passing the order.

Impugned assessment order dated 24.09.2021 is set aside.

Remand for fresh consideration - opportunity of hearing - reconsideration in accordance with law - Whether the matter should be remitted for fresh consideration and the terms on which reconsideration is to be conducted. - HELD THAT: - The Court remitted the matter to the assessing authority for fresh consideration, directing that the petitioner be provided an opportunity to upload or furnish hard copies of the relevant information/documents and be afforded a hearing. The authority is required to reconsider the matter afresh and conclude the proceedings in accordance with law. All rival contentions were kept open and no opinion was expressed on their merits, leaving the assessing authority to decide after receiving and considering the material to be furnished by the petitioner.

Matter remitted to respondent No.1 for reconsideration after providing the petitioner opportunity to furnish/upload documents and an opportunity of hearing; proceedings to be concluded in accordance with law.

Final Conclusion: Petition allowed; impugned assessment order set aside and matter remitted to the assessing authority for fresh consideration after the petitioner is permitted to upload or furnish the relevant documents and is given an opportunity of hearing; rival contentions left open for decision by the authority.

Mandatory procedure under Section 144C - filing objections before Dispute Resolution Panel (DRP) - obligation of Assessing Officer to await DRP directions - quashing of assessment passed without awaiting DRP directions - condonation of delay and effect of extension of limitation - faceless assessment scheme and intimation to Assessing Officer

Mandatory procedure under Section 144C - filing objections before Dispute Resolution Panel (DRP) - obligation of Assessing Officer to await DRP directions - condonation of delay and effect of extension of limitation - Whether the assessment order passed without awaiting directions of the DRP was valid where the assessee had filed objections to the draft assessment order before the DRP within the prescribed period and had intimated the Assessing Officer thereafter. - HELD THAT: - The Court found on the undisputed material that the petitioner submitted objections to the draft assessment order to the DRP on 28.10.2021 within the prescribed period and, when queried by the Assessing Officer on 12.11.2021, informed the Assessing Officer on 15.11.2021 that objections had been filed before the DRP. The statutory scheme under Section 144C grants the assessee the option to file objections before the DRP, and subsections (5) to (13) mandate that the Assessing Officer proceed only after receiving directions from the DRP. Given the change to the faceless assessment mechanism and the pandemic-related extension of limitation, the petitioner's explanation for not earlier intimating the Assessing Officer was accepted and any omission warranted leniency. The Assessing Officer's passing of the final assessment order without awaiting the DRP's directions was therefore held to be arbitrary, illegal and without jurisdiction. The Court quashed the impugned assessment, demand notice and related notice, and directed that the DRP examine the objections filed by the petitioner in accordance with law; thereafter the Assessing Officer was to proceed to pass appropriate orders in conformity with the DRP's directions and Section 144C. [Paras 7, 8]

Impugned assessment order, demand notice and notice quashed; matter remitted to the DRP to consider the objections filed by the petitioner in accordance with Section 144C, after which the Assessing Officer shall pass appropriate orders.

Final Conclusion: The petition is allowed: the assessment order dated 15.11.2021 and consequential notices are quashed as having been passed without awaiting DRP directions; the DRP is directed to consider the petitioner's objections and thereafter the Assessing Officer shall pass orders in accordance with law under Section 144C.

Levy of penalty under section 271(1)(c) - requirement of specifying limb in notice issued under section 274 r.w.s. 271(1)(c) - non-application of mind in issuing penalty notice - principles of natural justice in quasi-criminal penalty proceedings

Levy of penalty under section 271(1)(c) - requirement of specifying limb in notice issued under section 274 r.w.s. 271(1)(c) - non-application of mind in issuing penalty notice - principles of natural justice in quasi-criminal penalty proceedings - Validity of the penalty levied under section 271(1)(c) for A.Y. 2007-08 in view of the penalty notice which reproduced both limbs without striking off the irrelevant limb and thereby failed to specify the charge. - HELD THAT: - The Tribunal examined whether the penalty could be sustained where the notice issued under section 274 r.w.s. 271(1)(c) reproduced both limbs of section 271(1)(c) (concealment of particulars of income and furnishing inaccurate particulars of income) without striking off the irrelevant limb, leaving the assessee unaware which limb was being alleged. Relying on the ratio of the Hon'ble Supreme Court in Dilip N. Shroff and the decisions of coordinate benches and the Bombay High Court (as discussed in Samson Perinchery and the reproduced ITAT reasoning), the Tribunal held that non striking off the irrelevant clause in a standard proforma notice is indicative of non application of mind by the Assessing Officer. Quasi criminal penalty proceedings under section 271(1)(c) must comply with principles of natural justice and convey a clear, crystallised charge so that the assessee can defend. Here the assessment order's internal comments that proceedings were for one limb contrasted with the omnibus notice reproducing both limbs demonstrates diffidence and lack of a clear charge. Consequently the notice was held untenable and the penalty could not be sustained. [Paras 7, 8]

Penalty under section 271(1)(c) deleted as the notice under section 274 r.w.s. 271(1)(c) suffered from non application of mind and failed to specify the limb, resulting in non compliance with principles of natural justice.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271(1)(c) for A.Y. 2007-08 is deleted on the ground that the penalty notice failed to specify the limb and showed non-application of mind, thereby violating principles of natural justice.

Deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 - co-operative society carrying on credit business - interest income from deposits with banks - precedential treatment of conflicting High Court decisions on eligibility of section 80P deduction - distinction between section 80P(2)(a)(i) and section 80P(2)(d) claims

Deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 - interest income from deposits with banks - co-operative society carrying on credit business - Whether the assessee-cooperative society is entitled to deduction under section 80P(2)(a)(i) on interest earned from bank deposits for AY 2011-12. - HELD THAT: - The Tribunal, applying earlier decisions of the Pune Benches and preferring the view of the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd., held that interest earned on bank deposits by a co-operative society engaged in providing credit facilities to its members falls within the ambit of deduction under section 80P(2)(a)(i). The Tribunal noted the existence of conflicting High Court decisions on the point but, in absence of a binding contrary decision of the jurisdictional High Court, followed the line favourable to the assessee as adopted by the Pune Benches. The Revenue's reliance on the decision in Totagar's Co-operative Sales Society was held inapposite because that case concerned eligibility under section 80P(2)(d) in a different factual matrix; accordingly that authority did not govern the present claim under section 80P(2)(a)(i). On these grounds the Tribunal upheld the CIT(A)'s allowance of the deduction. [Paras 3, 4, 5]

Deduction under section 80P(2)(a)(i) allowed on interest income from bank deposits; appellate order upholding CIT(A) sustained and Revenue appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order allowing the assessee, a co-operative society engaged in providing credit facilities, the deduction under section 80P(2)(a)(i) on interest income from bank deposits for Assessment Year 2011-12.

Proportionate deduction under section 80IB(10) - violation of section 80IB(10)(f) - disallowance limited to the portion attributable to non-compliant units - application of jurisdictional High Court precedent in M/s. Kamat Constructions Pvt. Ltd.

Proportionate deduction under section 80IB(10) - violation of section 80IB(10)(f) - disallowance limited to the portion attributable to non-compliant units - Whether deduction under section 80IB(10) is to be disallowed in full on account of sale of two flats to one person in contravention of section 80IB(10)(f), or whether deduction is to be allowed on a proportionate basis. - HELD THAT: - The Assessment Officer disallowed the entire deduction claiming contravention of section 80IB(10)(f) because two flats were sold to the same person. The Tribunal accepted the view that where a part of a project violates the conditions of section 80IB(10), the disallowance must be confined to the portion attributable to that violation and not to the entire claimed deduction. The assessee had itself reduced the claimed deduction in the return filed under section 153C by excluding one flat; the CIT(A) therefore correctly allowed the deduction as claimed in the reduced return. The view is supported by the jurisdictional High Court decision in M/s. Kamat Constructions Pvt. Ltd., which approved granting deduction on a proportionate basis in identical circumstances. Applying this principle, the Tribunal upheld the CIT(A)'s allowance of the proportionate deduction. [Paras 3, 4]

Deduction under section 80IB(10) allowed on a proportionate basis; disallowance confined to the portion attributable to the sale(s) in violation of section 80IB(10)(f).

Proportionate deduction under section 80IB(10) - application of jurisdictional High Court precedent in M/s. Kamat Constructions Pvt. Ltd. - Whether the same principle of allowing proportionate deduction applies to the assessment years 2013-14 to 2015-16 where facts are mutatis mutandis similar to 2012-13. - HELD THAT: - Both parties agreed that the facts and circumstances for assessment years 2013-14 to 2015-16 are similar to those in 2012-13. Having accepted the reasoning and precedent applied in the earlier year, the Tribunal applied the same legal principle to these years and affirmed the CIT(A)'s orders allowing the proportionate deduction. [Paras 5]

The CIT(A)'s orders allowing proportionate deduction under section 80IB(10) are affirmed for assessment years 2013-14 to 2015-16.

Final Conclusion: All the Revenue appeals are dismissed; the Tribunal affirms that where part of a housing project breaches the conditions of section 80IB(10) the disallowance is limited to the non-compliant portion and the deduction may be allowed proportionately, following the jurisdictional High Court precedent.

Principle of mutuality - treatment of losses arising from mutuality and non-applicability of set-off under section 71 - non-recognition of mutuality deficits as business loss under section 28(iii) - inapplicability of carry forward and set-off provisions for losses from exempt sources - analogy between mutuality transactions and exempt agricultural income

Principle of mutuality - treatment of losses arising from mutuality and non-applicability of set-off under section 71 - non-recognition of mutuality deficits as business loss under section 28(iii) - inapplicability of carry forward and set-off provisions for losses from exempt sources - Whether the operational deficit claimed by the club arising from transactions within the principle of mutuality can be treated as a loss for income-tax purposes, set off against income from Other Sources and House Property, treated as business loss under section 28(iii), or carried forward/adjusted under sections 71/72. - HELD THAT: - The Tribunal, following the detailed reasoning of the CIT(A), held that transactions satisfying the principle of mutuality must be aggregated so that both surplus and deficit arising within the mutuality sphere are outside the charge to tax; consequently a deficit in mutual transactions does not qualify as a taxable 'loss' for purposes of set-off under the statutory scheme. The authorities relied upon establish that income for tax purposes includes losses only when they arise under a head chargeable to tax; by parity of reasoning a negative result from an exempt (mutuality) source does not enter the computation of total income and cannot be set off against income chargeable under other heads. The Tribunal applied the analogy with exempt agricultural income and followed Supreme Court precedents (as discussed by the CIT(A)) that losses from exempt sources are not available for set-off or carry forward. It further held that such mutuality deficits cannot be treated as business/professional loss under section 28(iii) because they arise from transactions falling within the doctrine of mutuality and not from a chargeable business activity. The Tribunal noted prior decisions (including its own lead order for earlier years) affirming that once mutuality applies to receipts, the corresponding expenses forming part of mutual transactions must be netted within that sphere and cannot be selectively excluded to create a deductible loss against taxable income. Having considered these principles and the assessee's accounts (subscriptions excluded from taxation but expenditure claimed as operational loss), the claim for set-off, characterization as business loss, and carry forward were rejected. [Paras 4, 5, 8, 9]

The operational deficit arising from mutuality transactions is not a taxable loss and cannot be set off against income from Other Sources or House Property, cannot be treated as a business loss under section 28(iii), and is not eligible for carry forward or set-off under sections 71/72; the assessee's grounds on this issue are dismissed.

Final Conclusion: Assessee's appeal for AY.2016-17 is dismissed: the Tribunal upheld the CIT(A)'s conclusion that deficits arising within the principle of mutuality do not constitute allowable losses for set-off, business loss classification, or carry forward under the Income-tax Act.

Assessment under Section 153A - unabated assessment - finality of return - requirement of incriminating material for additions following search

Assessment under Section 153A - unabated assessment - requirement of incriminating material for additions following search - finality of return - Whether additions in assessments framed under Section 153A can be sustained where the return for the assessment year had attained finality before the search and no incriminating material was found during the search. - HELD THAT: - The Tribunal found as an admitted fact that the assessee had filed returns which had attained finality for the assessment years in question prior to the search dated 7.01.2010, and therefore those assessments qualified as unabated assessments in terms of the second proviso to Section 153A. In such circumstances, the Assessing Officer had made disallowances and additions without relying on any incriminating material or documents discovered during the search; instead routine disallowances were made on information already disclosed in the original returns. The Tribunal applied the settled principle, as recognised by the jurisdictional High Court in the cited decisions, that where an assessment has attained finality before the date of search, additions under Section 153A cannot be sustained in the absence of incriminating material found during the search. The Tribunal further noted that the Commissioner (Appeals) did not dispute the fact of finality nor the absence of seized incriminating material and accordingly held that the additions made by the Assessing Officer were beyond the scope of proceedings under Section 153A. The same reasoning was applied uniformly to all four assessment years on similar facts. [Paras 5, 6, 7, 8]

Additions and disallowances made under assessments framed under Section 153A for the relevant assessment years are quashed as they were not based on any incriminating material found during the search and the assessments had attained finality prior to the search.

Final Conclusion: All appeals filed by the assessee for assessment years 2004-05, 2005-06, 2006-07 and 2008-09 are allowed; the additions made in assessments under Section 153A are quashed for lack of incriminating material in respect of unabated assessments.

Validity of reassessment under section 147/148 - Genuineness of share application money under Section 68 of the Income tax Act, 1961 - Satisfaction of sanctioning authority under section 151 for reopening - Principles of natural justice - opportunity to rebut and to cross examine third party witness

Validity of reassessment under section 147/148 - Satisfaction of sanctioning authority under section 151 for reopening - Reopening of assessment under section 147/148 upheld - HELD THAT: - The Tribunal affirmed the validity of reopening. The survey under section 133A was carried out at the assessee's own premises where introduction of share application/share premium of Rs. 1 crore for FY 2011-12 was noticed and the assessee failed during survey and post-survey proceedings to produce supporting documents envisaged by Section 68. The Director and accountant disclaimed knowledge of share application forms, allotment registers or other documentary evidence. Investigations, including inquiries by the DDIT (Inv.), recorded that the entry provider admitted supplying accommodation entries and many purported share applicant concerns were not found at given addresses. The Addl. CIT granted sanction after recording satisfaction. On these facts the Tribunal found no infirmity in the A.O.'s recording of reasons or in the sanctioning authority's approval and rejected the contention that reopening was mechanical or based on borrowed satisfaction. (See paragraph 6.) [Paras 6]

Assessee's challenge to reopening under section 147/148 dismissed; reopening held valid.

Genuineness of share application money under Section 68 of the Income tax Act, 1961 - Principles of natural justice - opportunity to rebut and to cross examine third party witness - Addition under Section 68 remitted for fresh consideration after granting opportunity to the assessee - HELD THAT: - Although the addition was sustained by the A.O. and the CIT(A) on the basis of the investigation and the alleged statement of an entry operator, the Tribunal noted that the assessee was not shown the third party statement nor afforded an opportunity to cross examine the third party whose statement formed the basis of the addition. Principles of natural justice require that the assessee be given an opportunity to rebut such statement and to seek cross examination. In the interests of justice the Tribunal directed restoration of the issue to the A.O. to grant one more opportunity to the assessee to substantiate the introduction of the share capital/share premium and to decide the matter on facts and law, giving due opportunity of hearing. (See paragraph 6.1.) [Paras 6]

Addition on account of unexplained share capital/share premium remitted to the A.O. for de novo consideration after affording opportunity to the assessee, including to rebut and seek cross examination of the third party statement.

Final Conclusion: The appeal is partly allowed for statistical purposes: the reopening of assessment under section 147/148 was upheld, but the addition under Section 68 was set aside and remitted to the Assessing Officer for fresh adjudication after giving the assessee an opportunity to substantiate the share capital/share premium and to rebut/cross examine the third party statement.

Revisionary jurisdiction under Section 263 - requirement of an assessment order being erroneous and prejudicial to the interest of Revenue - Acceptance of assessee's explanation - distinction between lack of enquiry and difference of opinion / adequacy of inquiry - Limited scrutiny under CASS - scope and limits of verification - Duty of revisional authority to prima facie dislodge the AO's conclusion by independent verification before exercising jurisdiction

Revisionary jurisdiction under Section 263 - requirement of an assessment order being erroneous and prejudicial to the interest of Revenue - Acceptance of assessee's explanation - distinction between lack of enquiry and difference of opinion / adequacy of inquiry - Duty of revisional authority to prima facie dislodge the AO's conclusion by independent verification before exercising jurisdiction - Validity of the Pr. CIT's exercise of revisionary jurisdiction under Section 263 in setting aside the assessment for AY 2014-15 on the ground that the AO erred in accepting cash deposits as explained by the assessee. - HELD THAT: - The Tribunal found that the assessee's case was selected for limited scrutiny under CASS and the AO had raised specific queries about large cash deposits. The assessee furnished detailed replies, a list of parties, and confirmations which the AO considered and on that basis passed an order under section 143(3) accepting the returned income. The Pr. CIT's order under section 263 merely criticised the AO for not making further enquiries and concluded that the AO should not have accepted the explanations, without himself carrying out any prima facie verification or adducing material to show that the AO's conclusion was erroneous or prejudicial to Revenue. Where the AO has considered the material and taken a view, the revisional power under section 263 can be invoked only if the assessment order is shown to be erroneous and prejudicial to Revenue; mere existence of an alternative view or an argument that further inquiries could have been made does not suffice. The revisional authority must, before setting aside an assessment, demonstrate by independent examination or material that the AO's conclusion is unsustainable; absent such dislodgement, setting aside on the ground of inadequate inquiry amounts to impermissible change of opinion. [Paras 12, 13]

The Pr. CIT's order under Section 263 is unjustified and is set aside; the assessment order passed under section 143(3) is restored.

Final Conclusion: The appeal is allowed; the revision order passed by the Pr. CIT under Section 263 is set aside for failure to show that the assessment order was erroneous and prejudicial to the revenue and for lack of independent enquiry to dislodge the AO's findings; the assessment for AY 2014-15 is restored.

Disallowance under Section 14A - Rule 8D methodology - No disallowance where no exempt income in the relevant previous year - CBDT Circular No.5/2014 vis-a -vis interpretation of Section 14A and Rule 8D - Effect of dominant purpose of investment (Maxopp) on Section 14A - Allowability of additional statutory deduction during assessment proceedings (Goetze principle) - Admission of new legal claims by appellate authorities - Remand for verification of qualifying assets and claims

Disallowance under Section 14A - Rule 8D methodology - No disallowance where no exempt income in the relevant previous year - CBDT Circular No.5/2014 vis-a -vis interpretation of Section 14A and Rule 8D - Deletion of the disallowance of Rs. 2,15,04,044/- made under Section 14A read with Rule 8D - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the Section 14A/Rule 8D disallowance on the basis that the assessee did not earn any exempt income in the relevant previous year. Interpreting Section 14A together with Rule 8D(1), the Bench accepted the view that Rule 8D refers to expenditure 'in relation to income which does not form part of the total income for such previous year', thereby requiring a correlation between exempt income earned in that previous year and expenditure relatable thereto. The Tribunal declined to follow the CBDT Circular No.5/2014 to the extent it would trigger disallowance even when no exempt income was earned, holding that the Circular conflicted with the statutory text and the concept of 'real income' under Section 5. The Tribunal also relied on supporting decisions of coordinate benches and the Gujarat High Court applying the same principle, and therefore found no error in CIT(A)'s conclusion that, on the facts, no disallowance could be made. [Paras 7]

Disallowance under Section 14A read with Rule 8D deleted; Revenue's ground dismissed.

Effect of dominant purpose of investment (Maxopp) on Section 14A - Allegation that CIT(A) failed to consider the Supreme Court decision in Maxopp Investment Ltd. - HELD THAT: - The Tribunal observed that CIT(A) did consider the Maxopp decision and its holding that dominant purpose is not relevant for applicability of Section 14A. Notwithstanding that principle, the Tribunal's decision to delete the disallowance was founded on the absence of exempt income in the relevant year rather than on the dominant-purpose rationale. Consequently the Revenue's contention that Maxopp was not considered was rejected. [Paras 8]

Ground alleging non-consideration of Maxopp dismissed.

Allowability of additional statutory deduction during assessment proceedings (Goetze principle) - Remand for verification of qualifying assets and claims - Claim for additional deduction under Section 32AC of Rs. 40,30,472/- - HELD THAT: - The Tribunal accepted that the assessee had already claimed a statutory deduction under Section 32AC and that the present assertion was a differential/quantificatory claim rather than an entirely new claim. While recognising Goetze (India) Ltd. as limiting fresh claims before the AO, the Tribunal held that judicial authorities may admit such a differential claim. Because verification of the qualifying assets was necessary, the Tribunal remanded the matter to the Assessing Officer to verify details, afford opportunity to the assessee and allow the additional deduction if supported by verification. [Paras 11]

Additional Section 32AC claim admitted; matter remanded to AO for verification and consequential allowance (allowed for statistical purposes).

Admission of new legal claims by appellate authorities - Remand for verification of qualifying assets and claims - Claim for deduction of cess on income-tax and DDT (new claim) amounting to Rs. 63,48,052/- - HELD THAT: - The Tribunal exercised its power to admit a new legal claim raised for the first time on appeal, observing that Goetze does not preclude judicial authorities from admitting new legal claims. Because the claim required verification in light of judicial developments relied upon by the assessee, the Tribunal remanded the matter to the Assessing Officer to verify particulars and decide the claim in accordance with law. [Paras 12]

New claim for cess and DDT admitted; matter remanded to AO for verification and adjudication (allowed for statistical purposes).

Final Conclusion: Revenue's appeal dismissed: Section 14A/Rule 8D disallowance deleted because no exempt income was earned in the relevant year; allegation of non-consideration of Maxopp rejected. Assessee's cross-objections admitted in part and remitted to the Assessing Officer for verification - additional Section 32AC deduction and the cess/DDT claim to be examined and decided by the AO.

Conversion of a capital asset into stock-in-trade - chargeability of capital gains under section 45(2) - deemed fair market value for computation under section 48 upon conversion - revisional jurisdiction under section 263 exercised for assessment erroneous and prejudicial to the revenue - taxability of profit on part-sale of converted stock-in-trade in the year of such part-sale - failure of Assessing Officer to make enquiry / no enquiry

Conversion of a capital asset into stock-in-trade - chargeability of capital gains under section 45(2) - deemed fair market value for computation under section 48 upon conversion - taxability of profit on part-sale of converted stock-in-trade in the year of such part-sale - Whether sub-section (2) of Section 45 applies to the part-sale of land earlier converted from capital asset to stock-in-trade, and if so, whether the capital gain attributable to the part sold is chargeable in the year of such part-sale. - HELD THAT: - The Tribunal interpreted sub-section (2) of Section 45 to mean that profits or gains arising from conversion of a capital asset into, or its treatment as, stock-in-trade are chargeable as income in the previous year in which such stock-in-trade is sold or otherwise transferred. Although the provision does not expressly mention part-sales, the Court held it was not the legislature's intention that taxation of gains should be deferred until the entire converted stock is disposed of. The correct tax principle requires taxing the right income in the right year; accordingly, when a part of the converted asset is sold, the profits or gains attributable to that part are chargeable to tax in the previous year in which that part-sale occurs. For computation of capital gains on such conversion, the fair market value on the date of conversion/treatment is to be treated as the full value of consideration for purposes of section 48. Applying these principles, the Tribunal found that the Assessing Officer failed to make any enquiry during assessment about the conversion and part-sale and therefore did not examine or tax the gains attributable to the part sold. That failure rendered the assessment order erroneous and prejudicial to the revenue, justifying exercise of revisional jurisdiction under section 263 to direct a fresh assessment taking these aspects into account. [Paras 10, 11]

Sub-section (2) of Section 45 applies to part-sales of land converted into stock-in-trade, taxing the gains attributable to the part sold in the year of such sale; the AO's failure to enquire made the assessment erroneous and prejudicial, and the Pr. CIT rightly exercised revisional power under section 263.

Revisional jurisdiction under section 263 exercised for assessment erroneous and prejudicial to the revenue - failure of Assessing Officer to make enquiry / no enquiry - Whether the Pr. CIT was justified in invoking section 263 to set aside the assessment and direct the Assessing Officer to recompute gains and business income after appropriate enquiry. - HELD THAT: - The Tribunal examined the record and concluded that the Assessing Officer had not examined the issue of conversion and subsequent part-sale while completing the assessment under section 143(3). Given that the AO conducted no enquiry into the chargeability under section 45(2) (and the attendant valuation under section 48) the assessment was found to be erroneous and prejudicial to the revenue. In these circumstances the Pr. CIT validly invoked the revisional jurisdiction under section 263 and directed the AO to pass a fresh assessment after computing capital gains on the part-sale and examining the basis of valuation of closing stock. The Tribunal found no perversity or illegality in the Pr. CIT's order and confirmed it. [Paras 3, 10, 11]

Pr. CIT rightly exercised revisional jurisdiction under section 263 because the AO's non-enquiry rendered the assessment erroneous and prejudicial to the revenue; the direction to the AO to re-assess the capital gains on the part-sale and examine valuation of closing stock is confirmed.

Final Conclusion: Appeal dismissed; order of the Pr. CIT under section 263 setting aside the assessment and directing fresh assessment to compute capital gains on the part-sale of land converted into stock-in-trade and to examine valuation of closing stock is confirmed.

Validity of Show Cause Notice issued by the Directorate of Revenue Intelligence (DRI) - Proper officer under Section 2(34) of the Customs Act and assignment of functions - Validity of notifications purporting to assign 'proper officer' functions by the Board (CBEC) instead of the Central Government - Binding effect of Canon India Pvt. Ltd. precedent on proceedings initiated by DRI - Abatement of appeal on death of sole proprietor

Validity of Show Cause Notice issued by the Directorate of Revenue Intelligence (DRI) - Proper officer under Section 2(34) of the Customs Act and assignment of functions - Validity of notifications purporting to assign 'proper officer' functions by the Board (CBEC) instead of the Central Government - Binding effect of Canon India Pvt. Ltd. precedent on proceedings initiated by DRI - Show Cause Notices issued by officers of the DRI (Additional Director General / DRI officers) and proceedings emanating therefrom are invalid for want of lawful authority and the consequent adjudication orders cannot be sustained. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Canon India Pvt. Ltd., holding that only an officer of customs who has been specifically assigned the requisite functions by the Board or the Commissioner of Customs as a 'proper officer' under Section 2(34) can issue notices under Section 28. The Canon India decision was accepted as establishing that notifications issued by the Board purporting to confer 'proper officer' functions on DRI officers, in the absence of exercise of power by the Central Government under Section 6, are invalid. In view of that precedent and the subsequent High Court and Tribunal decisions following it, the Show Cause Notices issued by DRI in these matters were held to be ab initio void and the ensuing demands and adjudication orders were set aside. [Paras 6, 10, 11]

Show Cause Notices issued by DRI are void for lack of authority and the impugned adjudication orders are set aside.

Abatement of appeal on death of sole proprietor - Effect of the death of the proprietor on the maintainability of the appeal filed by M/s. Mining Machinery Service. - HELD THAT: - The appellant produced the death certificate of the sole proprietor. Applying Rule 22 of the CESTAT (Procedure) Rules, 1982, the Tribunal recorded that the appeal filed by the firm whose sole proprietor is deceased stands abated. [Paras 9]

The appeal filed by M/s. Mining Machinery Service stands abated on account of the death of its proprietor.

Final Conclusion: Following the binding Supreme Court authority in Canon India Pvt. Ltd. and consistent judicial decisions, the Tribunal held the Show Cause Notices issued by DRI to be without lawful authority and set aside the impugned orders; separately, the appeal by M/s. Mining Machinery Service was held to be abated on account of the proprietor's death.

Jurisdiction to issue show cause notice - proper officer under Section 28 of the Customs Act - power of re-assessment/recovery under Section 28(4) as an administrative review - invalidity of proceedings initiated by Directorate of Revenue Intelligence officers who are not appointed as Customs proper officers - competent authority to entrust functions under Section 6 of the Customs Act

Jurisdiction to issue show cause notice - proper officer under Section 28 of the Customs Act - invalidity of proceedings initiated by Directorate of Revenue Intelligence officers who are not appointed as Customs proper officers - Whether the Principal Additional Director General, DRI had jurisdiction to issue the show cause notice under Section 28 and whether proceedings initiated thereby are valid. - HELD THAT: - The Tribunal accepted the Supreme Court's reasoning in M/s. Canon India Private Limited that the power to recover duties not paid or short paid after assessment is a power of administrative review conferred on "the proper officer" who made the original assessment (Section 28(4)). That power must be exercised by the same assessing officer or his successor or an officer specifically entrusted with the function of assessment; it cannot be exercised by an officer of another department merely by virtue of rank. The Supreme Court held that Additional Director General, DRI was not shown to be a Customs officer appointed or entrusted with functions under Section 6, and that the notifications purporting to confer such functions were invalid; consequently, proceedings initiated by the ADG, DRI issuing show cause notices under Section 28 were without authority of law and liable to be set aside. The Tribunal noted that the Supreme Court's decision in Canon India was subsequently followed in Agarwal Metals and Alloys and by several High Courts and Benches of the Tribunal which set aside proceedings initiated by DRI officers on the same ground. The Department's request to defer hearing because a review petition in Canon India is pending was rejected as not warranting delay, following precedent. Having concluded that the show cause notice dated 30.01.2009 issued by the Principal Additional Director General, DRI was without jurisdiction, the Tribunal found all proceedings founded on that notice invalid and declined to examine the merits. [Paras 7, 8, 16, 19]

The show cause notice issued by the Principal Additional Director General, DRI was without jurisdiction; proceedings arising therefrom are invalid and are set aside; appeals by the assessee allowed and the departmental appeal dismissed.

Final Conclusion: The Tribunal set aside all proceedings initiated by the Additional Director General, DRI for lack of jurisdiction to issue the show cause notice under Section 28, allowed the appeals filed by the assessee and dismissed the departmental appeal; no adjudication on the merits was necessary.

Rejection of declared export value - Customs valuation - Report of independent chartered engineers - Acceptance of declared consideration / receipt of payment - Requirement of independent evidence to displace declared value - Confiscation and penalty under Customs Act

Rejection of declared export value - Report of independent chartered engineers - Requirement of independent evidence to displace declared value - Acceptance of declared consideration / receipt of payment - Whether the declared FOB value of the export consignment could be rejected and re-determined on the basis of the reports of chartered engineers in the absence of independent evidence that the consideration received was not the true value. - HELD THAT: - The show cause notice alleged only that the declared value was incorrect; there was no allegation that the description of goods was false or that payment had been received through illicit channels. The appellant had received the declared consideration and no evidence was produced by the Revenue to show that the payment did not represent the true value. The authorities relied upon three successive chartered engineer reports which estimated values of the machines as falling within a relatively narrow band (approximately Rs. 55,00,000; Rs. 43-45 lakhs; and Rs. 35-38 lakhs). The adjudicating authority shifted between these expert reports and ultimately adopted the lowest estimate without any additional independent material to displace the declared value. The Tribunal found that the absence of substantial disparity among the engineers' estimates, taken together with lack of any evidence contesting the receipt of consideration, did not justify rejection of the declared value. Consequently, the re-determination of value and consequential measures based solely on those reports were unsustainable. [Paras 6, 7]

The rejection and re-determination of the declared export value is set aside and the impugned order is quashed.

Final Conclusion: The appeal is allowed; the adjudicating authority's re-determination of the export value and related measures are set aside, with consequential relief to the appellant.

Bail under Section 439 Cr.P.C. - Twin conditions under Section 212(6) of the Companies Act, 2013 - Economic offences require a stringent approach in grant of bail - Prima facie satisfaction based on nature and gravity of allegations - Medical grounds for bail require documentary proof

Bail under Section 439 Cr.P.C. - Twin conditions under Section 212(6) of the Companies Act, 2013 - Economic offences require a stringent approach in grant of bail - Prima facie satisfaction based on nature and gravity of allegations - Applicant's entitlement to regular bail in Sessions Trial No.577 of 2020 - HELD THAT: - The Court examined the allegations, investigative outcome and material on record and concluded that the applicant, arraigned as accused No.44 and alleged to be Managing Director and signatory of the financial statements of Frost International Limited, is implicated in a large-scale fraudulent Merchanting Trade scheme which resulted in substantial NPAs and alleged wrongful loss to public sector banks. Having regard to the role attributed to the applicant, the nature and gravity of the offences, the documentary material showing alleged falsified financial statements, rotation of LC funds, siphoning and speculative trading with bank funds, the Court found that there are reasonable grounds to believe the accused guilty and that the twin conditions in Section 212(6)(ii) are not satisfied. Even if the Section 212(6) test is not applied, the Court held that, because the offences are serious economic offences affecting public interest and the national economy, a stringent approach to bail is warranted and the applicant is not entitled to bail under Section 439 Cr.P.C. The Court therefore declined to release the applicant, without expressing any opinion on the merits of the prosecution case. [Paras 15, 17, 20]

Bail rejected on merits; twin conditions under Section 212(6) not satisfied and bail denied under Section 439 Cr.P.C. given the grave nature of economic offences.

Medical grounds for bail require documentary proof - Claim for bail on medical/COVID-19 grounds - HELD THAT: - The applicant contended he suffers from diabetes and other ailments and sought bail on health/COVID-19 grounds. The Court found no documentary evidence demonstrating inadequate medical care in custody or need for treatment only available outside prison. In absence of such proof, the medical plea did not warrant grant of bail, particularly in view of the serious allegations against the applicant. [Paras 18, 19]

Medical/COVID-19 ground for bail rejected for want of supporting documentary evidence.

Final Conclusion: Bail application rejected. Trial court directed to make sincere efforts to conclude the trial expeditiously, preferably within six months.

Dispensing with convening of shareholders' meeting - Dispensing with convening of creditors' meeting under section 230(9) of the Companies Act, 2013 - No secured creditors - requirement to convene secured creditors' meeting does not arise - Scheme of Amalgamation - compliance with statutory safeguards (board resolutions, auditors' certificates, financial statements, affidavits of shareholders/creditors)

Dispensing with convening of shareholders' meeting - Scheme of Amalgamation - compliance with statutory safeguards (board resolutions, auditors' certificates) - Dispensing with convening of shareholders' meeting of Transferor Company 1, Transferor Company 2, Transferor Company 3 and Transferee Company - HELD THAT: - The Tribunal recorded that each applicant company's board had unanimously approved the proposed Scheme of Amalgamation and had placed certified lists of equity shareholders together with their consent affidavits on record. For each of the four companies the shareholders (2 in each Transferor; 7 in the Transferee) gave 100% written consent by affidavit for the proposed merger. The applicants also filed auditors' certificates and audited/provisional financial statements and stated that no proceedings under the Companies Act were pending. On this foundation the Tribunal exercised its power to dispense with convening shareholders' meetings and directed that meetings of the equity shareholders of all applicant companies be dispensed with.

Meetings of the equity shareholders of Transferor Company 1, Transferor Company 2, Transferor Company 3 and the Transferee Company are dispensed with.

Dispensing with convening of creditors' meeting under section 230(9) of the Companies Act, 2013 - Scheme of Amalgamation - creditors' consent by affidavit - Dispensing with convening of unsecured creditors' meetings of Transferor Company 1, Transferor Company 2, Transferor Company 3 and the Transferee Company - HELD THAT: - The Tribunal examined the lists of unsecured creditors and the affidavits evidencing their consent placed on record. For Transferor Company 1, 95.1% in value of unsecured creditors (1 of 2) gave written consent; for Transferor Company 2, 99.2% in value (1 of 5) gave written consent; for Transferor Company 3, 90.93% in value (2 of 310) gave written consent; and for the Transferee Company, 90.82% in value (12 of 139) gave written consent. Having regard to these affidavits and the other supporting material, the Tribunal invoked its power under section 230(9) to dispense with convening the meetings of unsecured creditors in respect of each company and directed accordingly.

Meetings of unsecured creditors of Transferor Company 1, Transferor Company 2, Transferor Company 3 and the Transferee Company are dispensed with.

No secured creditors - requirement to convene secured creditors' meeting does not arise - Requirement to convene secured creditors' meetings in each applicant company - HELD THAT: - The applicants produced auditor certificates and affidavits confirming that none of the applicant companies had secured creditors. The Tribunal therefore held that the requirement to convene meetings of secured creditors did not arise for any of the Transferor Companies or the Transferee Company.

No meetings of secured creditors are required to be convened for any of the applicant companies.

Final Conclusion: The joint CA(CAA) 82 (ND) of 2021 is allowed: meetings of equity shareholders and unsecured creditors of the applicant companies are dispensed with as directed; meetings of secured creditors are not required; the Scheme of Amalgamation may proceed in accordance with the directions recorded.

Finality of tribunal order - execution of Tribunal/NCLT order - determination and enforcement of fair value of shares - mean value (average valuation) as binding price - sealed offer procedure for buy out - appointment and report of independent valuer - refusal to remand for fresh valuation

Finality of tribunal order - execution of Tribunal/NCLT order - appointment and report of independent valuer - determination and enforcement of fair value of shares - mean value (average valuation) as binding price - sealed offer procedure for buy out - refusal to remand for fresh valuation - Whether the NCLT's directions for determining and implementing the fair value of shares (including use of independent valuer reports, mean/average value and sealed offer mechanism) are binding and require compliance, and whether the matter should be remanded for further valuation. - HELD THAT: - The Tribunal observed that the main order dated 13.04.2017 contemplated either a mutual agreement on fair value or, failing that, appointment of an independent valuer and sale/transfer of shares as per the valuer's determination. The order dated 27.09.2019 directing that the respondent either purchase at the mean value or allow the petitioner to purchase the shares was not appealed and has attained finality. The NCLT thereafter appointed an independent valuer whose report used guideline/Jantri values; objections and alternative valuer reports were placed on record and the NCLT directed the parties to submit sealed offers so that the higher offeror could buy out the other, and afforded the parties the option of purchase/sale at the mean (average) value or at 5% above the mean where offered. This Tribunal held that, in light of the finality of the earlier order and the prolonged pendency and attempts at settlement, it was not a fit case to remit the matter back to NCLT for further evaluation. The Tribunal clarified that 'Mean Value' means 'average value' as specified in the earlier order, that the respondent remains ready to sell at the average value or to purchase at 5% above it, and directed the appellant to comply by choosing an option and filing an affidavit of compliance within four weeks. The Tribunal therefore upheld the NCLT's execution oriented directions and refused remand for fresh valuation, declining to reopen the determination of fair value after the opportunity afforded and after the earlier order attained finality. [Paras 7, 11, 12]

The Tribunal upheld the NCLT directions as binding, refused to remit the matter for further valuation, directed compliance with the option to buy or sell at the average value (or at 5% above where offered), and disposed of the appeal with a requirement that the appellant file an affidavit of compliance within four weeks.

Final Conclusion: Appeal dismissed; NCLT's execution oriented directions upheld as binding and final, no remand for fresh valuation, parties directed to comply with the option to buy or sell at the specified average/mean value (or purchase at 5% above) and to file an affidavit of compliance within four weeks.

Default - time barred debt and limitation under Article 137 - right to apply upon successive causes of action - acceleration of facility - admissibility of unstamped instruments and curable stamp deficiency - proof of financial debt from alternative documentary evidence

Default - time barred debt and limitation under Article 137 - right to apply upon successive causes of action - acceleration of facility - Whether the Section 7 application was barred by limitation because an earlier interest default occurred on 30 June, 2015. - HELD THAT: - The Tribunal accepted that non payment of interest on 30 June, 2015 amounted to a default within the definition of Section 3(12). However, it held that Section 7 permits initiation of insolvency proceedings when any default has occurred and does not mandate filing on the first ever default. A creditor who omits to file on an earlier partial default is not precluded from filing on a later cause of action (for example, when the first principal instalment fell due on 30 November, 2015 or when the lender accelerated the facility on 5 January, 2017), provided the application is filed within three years of the particular default relied upon. The Tribunal relied on authorities recognising that there may be successive causes of action giving rise to fresh rights to apply and that limitation operates from the date of the cause of action actually relied upon in the application. Applying that principle, the Section 7 application dated 28 November, 2018, which computed default from 30 November, 2015, fell within three years of the defaults relied upon and was not time barred. [Paras 19, 21, 25, 32, 33]

The Section 7 application was not barred by limitation; the Financial Creditor validly relied on the 30 November, 2015 instalment default and/or the post acceleration default.

Admissibility of unstamped instruments and curable stamp deficiency - proof of financial debt from alternative documentary evidence - Whether the Section 7 application could be admitted despite the Facility Agreement and Supplemental Agreement being insufficiently stamped. - HELD THAT: - The Tribunal noted binding precedents that unstamped or insufficiently stamped instruments are not admissible until stamp deficiency is cured, but such deficiency does not automatically negate the existence of the underlying contract or the creditor's claim where independent, admissible materials establish the debt. Here the Financial Creditor placed on record a registered mortgage deed and other correspondence (including RBI No Objection for acceleration and evidence of disbursements), and the Corporate Debtor did not deny receipt of the facilities or disbursements. On that basis the Adjudicating Authority had sufficient admissible material to satisfy itself that a default had occurred and that the debt was payable. Consequently, the insufficiency of stamp duty on the facility agreements did not vitiate admission of the Section 7 application. [Paras 35, 36, 37, 41, 42]

Admission of the Section 7 application was permissible notwithstanding the unstamped facility agreements because alternative admissible evidence proved the financial debt and default.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the admission of the Section 7 petition: the claim was within limitation as pleaded from the 30 November, 2015 default (and/or post acceleration default), and the Adjudicating Authority rightly proceeded on available admissible evidence despite the facility agreements being insufficiently stamped.

Operational debt - operational creditor - existence of dispute / pre-existing dispute - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice

Operational debt - operational creditor - Whether the Respondent is an Operational Creditor and the claim constitutes an Operational Debt. - HELD THAT: - The Tribunal examined the Memorandum of Understanding dated 08.06.2015 in which the Corporate Debtor admitted a liability to pay Rs. 6 crores for services rendered and issued twelve post dated cheques in discharge of that liability. Applying the statutory definitions of 'claim', 'debt' and 'operational debt', the Tribunal held that the services rendered and the admission of liability in the MOU attract the definition of operational debt and that the Respondent accordingly qualifies as an operational creditor. The Tribunal treated the MOU and the associated cheques as evidencing a liability for services and therefore falling within the scope of an operational debt for the purposes of admission under Section 9. [Paras 36]

Respondent is an Operational Creditor and the claim is an Operational Debt.

Existence of dispute / pre-existing dispute - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether there was a pre-existing dispute which would bar admission of the Section 9 application. - HELD THAT: - The Tribunal considered the contentions and the Adjudicating Authority's reasoning that the MOU was signed by both parties and recorded a clear liability, and that the Corporate Debtor's denials amounted to a disputed assertion rather than a demonstrable pre-existing dispute. Applying the guidance in Mobilox and subsequent authorities, the Tribunal assessed whether the Corporate Debtor had demonstrated a plausible, non spurious dispute requiring further investigation. Concluding that the MOU and related documents established a prima facie liability and that the objections raised were not sufficient to show a pre existing dispute, the Tribunal found no pre existing dispute to defeat admission under Section 9. [Paras 41]

No pre-existing dispute existed; admission under Section 9 was proper.

Demand notice - existence of dispute / pre-existing dispute - Whether the claim was time barred or otherwise foreclosed by limitation. - HELD THAT: - The Tribunal noted the issuance of the demand notice in Form 3 and the Corporate Debtor's reply thereto. On the materials before it, the Tribunal found that the claim was not time barred and that the demand notice and the response did not disclose any limitation bar that would preclude admission. Accordingly, limitation did not operate to defeat the Section 9 application. [Paras 41]

The claim is not time barred; limitation does not preclude admission.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's admission of the Section 9 application: the Respondent is an operational creditor, the claim for services under the MOU is an operational debt, there was no demonstrable pre existing dispute or limitation bar, and the appeal is dismissed.

Corporate Insolvency Resolution Process - pre-existence of dispute - statutory demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - summary jurisdiction

Pre-existence of dispute - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - statutory demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Existence of a pre-existing dispute between the operational creditor and the corporate debtor and its effect on the maintainability of the Section 9 application. - HELD THAT: - The Tribunal found that documentary evidence supplied by the parties, in particular emails dated 25.03.2017 and 25.07.2017 from the corporate debtor to the operational creditor complaining of deficient services, established a dispute that pre-dated the statutory demand notice dated 08.04.2019. Applying the test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (P) Ltd., the adjudicating authority must determine whether any dispute or record of pendency of suit/arbitration existed before receipt of the demand notice; if so, the Section 9 application is not maintainable. The corporate debtor's contention regarding adjustment of outstanding dues by allotment of a shop from a sister concern was held to be extraneous to the contract between the operational creditor and the corporate debtor and, in any event, the authenticity of that transaction (including allegations of forgery) could not be resolved under the summary jurisdiction exercised in these Section 9 proceedings. Given the established pre-existing dispute, the statutory precondition for admitting the Section 9 petition was absent.

Application under Section 9 dismissed for want of maintainability due to a pre-existing dispute between the parties.

Final Conclusion: The Tribunal dismissed the application for initiation of CIRP under Section 9 of the IBC, 2016, holding that a pre-existing dispute (evidenced by prior communications) existed before the demand notice, rendering the Section 9 petition not maintainable.

Existence of a real and plausible dispute - operational debt must be undisputed for initiation of CIRP - running account and extension of limitation - Adjudicating Authority's limited scrutiny of disputes (Mobilox principle) - IBC not a substitute for recovery proceedings

Existence of a real and plausible dispute - operational debt must be undisputed for initiation of CIRP - Adjudicating Authority's limited scrutiny of disputes (Mobilox principle) - Whether the application under Section 9 was maintainable in view of the Corporate Debtor having raised a dispute regarding quality of goods. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the Corporate Debtor had raised a dispute relating to the quality of goods by communications dated 09.10.2015 and 16.10.2015, and that the Operational Creditor failed to satisfactorily rebut that dispute. Applying the principle in Mobilox Innovations Pvt. Ltd., the Adjudicating Authority and the Tribunal confined their scrutiny to whether a plausible dispute existed which was not a patently feeble, spurious or illusory contention. Because the dispute was shown by documentary material and was not answered by inspection or collection of goods by the Operational Creditor, the application under Section 9 could not be admitted. The Tribunal also reiterated that where a real dispute exists the provisions of the Code cannot be invoked to convert the mechanism into a recovery forum. [Paras 6, 7]

Application under Section 9 was not maintainable as the Corporate Debtor had raised a genuine dispute on quality of goods which the Operational Creditor failed to dispel.

Running account and extension of limitation - Whether the Section 9 application was barred by limitation. - HELD THAT: - The Tribunal accepted the Appellant's submission and material showing that while the last invoice dated 05.10.2015, subsequent receipts/payments occurred up to 19.06.2017 and the account was operated as a running account. On that basis the Tribunal held that the claim was within three years from the last transaction of June 2017 and therefore the petition filed in June 2019 was not barred by limitation. [Paras 6]

Section 9 application was not time-barred because the running account and last payment in June 2017 brought the filing within the period of limitation.

Final Conclusion: The appeal is dismissed; the Tribunal affirms the Adjudicating Authority's rejection of the Section 9 application because the Corporate Debtor had raised a plausible dispute on quality of goods which the Operational Creditor failed to rebut, and the petition was held to be within limitation in view of the running account.

Admission of insolvency petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of financial debt and default - initiation of corporate insolvency resolution process (CIRP) - imposition of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment and confirmation of interim resolution professional

Existence of financial debt and default - admission of insolvency petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Section 7 petition filed by the applicant was admitted after finding existence of financial debt and default by the corporate debtor. - HELD THAT: - The Tribunal examined the balance-sheet entries and related averments showing unsecured loans advanced by the applicant to the corporate debtor over multiple years and found that the unsecured loans were repayable on expiry of 12 months from grant and that default occurred in Financial Year 2016-17 and continued thereafter. The corporate debtor failed to file a substantive reply despite notice and opportunities to be heard, and was proceeded with ex-parte. On the materials filed and the respondent's non-participation, the Tribunal was satisfied that the statutory conditions for admission under Section 7 were fulfilled and accordingly admitted the petition and initiated CIRP. [Paras 1, 2, 3]

Petition under Section 7 admitted and CIRP initiated against the corporate debtor.

Imposition of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium was imposed on proceedings and actions against the corporate debtor in terms of Section 14 of the Code. - HELD THAT: - Upon admission of the Section 7 petition and initiation of CIRP, the Tribunal ordered the moratorium to operate forthwith. The moratorium bars institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of its assets, actions to enforce security interests including under SARFAESI, and recovery of property occupied by the corporate debtor; it also protects supply of specified essential goods or services during the moratorium and notes exceptions as may be notified by the Central Government. [Paras 4]

Moratorium under Section 14 imposed with immediate effect until completion of CIRP.

Appointment and confirmation of interim resolution professional - duties of interim resolution professional under Sections 15, 17 and 18 - The proposed interim resolution professional was confirmed and directed to perform statutory duties and file his report within the specified time. - HELD THAT: - The Applicant had proposed an IRP who was earlier provisionally appointed; the Tribunal confirmed Mr. Pawan Garg as IRP. The IRP was directed to take steps required under the Code, particularly those under Sections 15, 17 and 18, and to file his report before the Bench within 30 days, thereby vesting the IRP with the responsibilities to manage the affairs of the corporate debtor during CIRP. [Paras 5]

Proposed IRP confirmed and directed to perform statutory functions and submit report within 30 days.

Final Conclusion: The Tribunal admitted the Section 7 petition, initiated CIRP against the corporate debtor, imposed the moratorium under Section 14 forthwith, and confirmed the interim resolution professional with directions to act under the provisions of the Code and file his report within 30 days.

Admission under section 9 of the Insolvency and Bankruptcy Code, 2016 - No pre-existing dispute / dispute raised for first time in reply - Acknowledgement of debt by confirmation of balance - Date of default and limitation - Appointment of Interim Resolution Professional - Operational Creditor's interim deposit for IRP costs - Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Tribunal jurisdiction to entertain section 9 application

Admission under section 9 of the Insolvency and Bankruptcy Code, 2016 - No pre-existing dispute / dispute raised for first time in reply - Acknowledgement of debt by confirmation of balance - Application under section 9 of IBC, 2016 was maintainable and admitted. - HELD THAT: - The Tribunal found that the corporate debtor did not produce any contemporaneous documents evidencing a pre-existing dispute regarding alleged defects or shortages and had raised such contentions for the first time in its reply. The corporate debtor had earlier acknowledged the outstanding liability by signing and stamping a confirmation of balance dated 06.12.2016. On these findings the Tribunal concluded that the debt remained uncontroverted and established default in payment, rendering the section 9 application fit for admission. [Paras 3, 6, 9]

Section 9 application admitted.

Date of default and limitation - The date of default was fixed and the application held within limitation. - HELD THAT: - Relying on the confirmation of balance, the Tribunal recorded the date of default as 06.12.2016 and noted that the present application filed on 06.12.2019 was within the period of limitation. Consequently, the debt was not time-barred. [Paras 7]

Default dated 06.12.2016; application not barred by limitation.

Tribunal jurisdiction to entertain section 9 application - The Tribunal had jurisdiction to hear and decide the application. - HELD THAT: - The Tribunal recorded that the registered office of the corporate debtor is situated in Delhi and accordingly concluded that the National Company Law Tribunal, New Delhi Bench, has jurisdiction to entertain and try the section 9 application. [Paras 8]

Tribunal has jurisdiction to entertain the petition.

Appointment of Interim Resolution Professional - Operational Creditor's interim deposit for IRP costs - Interim Resolution Professional appointed and interim deposit directed. - HELD THAT: - As the operational creditor had not proposed an IRP, the Tribunal appointed Mr. Atul Jagnani as Interim Resolution Professional subject to the usual conditions of no pending disciplinary proceedings and filing of consent and disclosures. The operational creditor was directed to deposit Rs. 2 lacs with the IRP within one week to meet out expenses, with provision for adjustment by the Committee of Creditors. [Paras 10, 11]

IRP appointed and operational creditor directed to make the interim deposit.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under section 14 follows upon admission and specified actions are prohibited. - HELD THAT: - On admission under section 9, the Tribunal declared that the moratorium under section 14 of the IBC shall follow in relation to the corporate debtor. It specified the prohibitions during moratorium, including institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interests and recovery of property occupied by the corporate debtor, while noting that provisions of section 14(2) to 14(4) apply. [Paras 12]

Moratorium under section 14 declared; specified actions prohibited during moratorium.

Final Conclusion: The Tribunal admitted the section 9 petition: the corporate debtor's acknowledgment of debt and absence of a pre-existing dispute established default dated 06.12.2016; the application was within limitation; the NCLT, New Delhi has jurisdiction; an IRP was appointed and the operational creditor directed to deposit interim funds; and the moratorium under section 14 of the IBC was declared.

Entitlement to initiate CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016 - bar of claims by failure to submit proof of claim in earlier CIRP and binding effect of approved resolution plan - requirement of cogent evidence to prove operational debt and invoices - allegation of fabricated invoices and relevance of GST registration - pre-existing dispute and arbitration clause as defence to Section 9 claim

Bar of claims by failure to submit proof of claim in earlier CIRP and binding effect of approved resolution plan - Claim based on Invoice No. 5 dated 30.09.2017 is not maintainable because the claimant did not submit its claim in the earlier CIRP and the approved resolution plan is binding. - HELD THAT: - The Tribunal noted that CIRP against the corporate debtor was initiated earlier and a public call for claims was made; the Resolution Plan was subsequently approved. Invoice No. 5 predates the approval of the Resolution Plan but the Operational Creditor did not submit its claim before the Interim/Resolution Professional during that CIRP. The Tribunal treated non-submission before the Resolution Professional as fatal to the present claim in respect of Invoice No. 5 and therefore held that the petitioner is not entitled to press that claim at this stage. [Paras 4, 10]

Claim in respect of Invoice No. 5 is not maintainable as the Operational Creditor failed to submit the claim during the earlier CIRP and the approved Resolution Plan is binding.

Requirement of cogent evidence to prove operational debt and invoices - allegation of fabricated invoices and relevance of GST registration - pre-existing dispute and arbitration clause as defence to Section 9 claim - The Operational Creditor failed to prove that work was carried out for Invoice Nos. 5 and 6 and failed to rebut contentions of fabricated invoices, pre-existing disputes and arbitration; consequently the Section 9 application was dismissed. - HELD THAT: - The Tribunal examined the material relied upon by the Operational Creditor and found no cogent evidence to substantiate performance of work for Invoice Nos. 5 and 6. The only documents were an email and a letter dated 20.07.2018, the latter bearing an endorsement that was not properly stamped and therefore of limited probative value. The corporate debtor had raised contentions that invoices carried GST particulars for periods prior to GST registration and that disputes and arbitration proceedings existed; the Tribunal treated these contentions as relevant and observed absence of adequate evidence from the Operational Creditor to overcome them. In view of the lack of cogent supporting evidence and the pleaded defences, the Tribunal concluded the claimant failed to prove the existence of an enforceable operational debt arising from Invoice Nos. 5 and 6. [Paras 5, 6, 11, 12]

Application under Section 9 is dismissed for want of proof in respect of Invoice Nos. 5 and 6 and on account of pleaded fabrication, pre-existing disputes and the arbitration defence.

Final Conclusion: The Tribunal dismissed the Section 9 application: Invoice No. 5 was held not maintainable due to non-submission of claim in the earlier CIRP and the claimant failed to produce cogent evidence to establish entitlement in respect of Invoice Nos. 5 and 6, including in the face of allegations of fabrication, pre-existing disputes and arbitration.

Extended period of limitation under proviso to Section 73 of the Finance Act, 1994 - wilful suppression of material facts - jurisdiction to invoke extended limitation - competence of adjudicating authority to decide limitation - prematurity of writ where alternate remedy exists

Extended period of limitation under proviso to Section 73 of the Finance Act, 1994 - wilful suppression of material facts - jurisdiction to invoke extended limitation - competence of adjudicating authority to decide limitation - Whether the Show Cause Notice impugned for invoking the proviso to Section 73 of the Finance Act, 1994 was issued without jurisdiction or could be adjudicated by the authority. - HELD THAT: - The Court held that invocation of the extended five year limitation under the proviso to Section 73 cannot be treated as a jurisdictional defect warranting interference at the writ stage. A bare recital alleging wilful suppression is not automatically sufficient, but the question of whether particulars exist or suppression is established is a factual one for the adjudicating authority to determine on the petitioner's reply and on evidence. The petitioner was not shown to have demonstrated on the papers that the proviso was inapplicable as a matter of law such that the Show Cause Notice was void for want of jurisdiction. Consequently, the adjudicating authority is competent to decide the limitation issue in the course of adjudication. [Paras 6, 7]

Petitioner must raise and substantiate before the adjudicating authority that the extended period under the proviso is not invocable; the adjudicating authority is competent to decide the limitation issue.

Prematurity of writ where alternate remedy exists - Whether the writ petition seeking to quash the Show Cause Notice was maintainable notwithstanding availability of alternate remedies. - HELD THAT: - The Court found the writ to be premature and lacking merit because the petitioner has efficacious alternate remedies before the adjudicating authority and, if adverse, by way of appeal. The petitioner cannot short circuit the statutory adjudicatory process merely by challenging invocation of the proviso at the threshold without having first urged and had the matter considered in the statutory forum. Given availability of those remedies and absence of a compelling jurisdictional defect established on the record, exercise of writ jurisdiction was declined. [Paras 8, 9]

Writ petition dismissed as premature; petitioner to pursue remedies before the adjudicating authority and appellate forum.

Final Conclusion: Writ petition dismissed. The adjudicating authority is competent to examine invocation of the proviso to Section 73 on the facts; the petitioner must substantiate lack of suppression before that authority. As alternate remedies exist, the High Court declined to interfere at this stage.

Quashing of certificate in Form SVLDRS-3 - adjustment of payments under SVLDRS - non-speaking/unreasoned order - remand for fresh consideration - opportunity of personal hearing - setting aside garnishee order

Quashing of certificate in Form SVLDRS-3 - adjustment of payments under SVLDRS - non-speaking/unreasoned order - remand for fresh consideration - Validity of the impugned certificate in Form SVLDRS-3 which did not record reasons for not adjusting payments allegedly made by the petitioner under the SVLDRS. - HELD THAT: - The Court found that although the impugned certificate acknowledged in its remarks that certain payments had been made by the petitioner, it did not explain why those payments were not adjusted against the liability computed under the SVLDRS. The certificate was held to be cryptic, laconic and non-speaking, lacking any application of mind or reasons for non-adjustment. In view of this absence of reasoning, the Court declined to adjudicate the merits of the underlying contentions and instead set aside the certificate and remitted the matter to the respondents for fresh consideration in accordance with law and the provisions of the SVLDRS, directing that the payments said to have been made be borne in mind and that the petitioner be given an opportunity of personal hearing and to furnish supporting documents or objections. [Paras 5, 6, 7]

Impugned Form SVLDRS-3 certificate set aside and matter remitted for fresh consideration after taking into account payments claimed by petitioner and after affording personal hearing.

Setting aside garnishee order - opportunity of personal hearing - remand for fresh consideration - Consequential status of the garnishee order issued pursuant to the impugned certificate and procedural directions on remand. - HELD THAT: - As a direct consequence of setting aside the impugned certificate, the Court also set aside the garnishee order made in Form GST DRC 13. The matter was remitted to the concerned respondents with instructions to reconsider afresh in accordance with law and the provisions of the SVLDRS, to take into account the payments claimed by the petitioner, and to give the petitioner an opportunity for personal hearing and to furnish documents or objections in support of his contentions. [Paras 7]

Garnishee order set aside; respondents directed to reconsider afresh, afford hearing and examine claimed payments.

Final Conclusion: Writ petition allowed; impugned Form SVLDRS-3 certificate dated 27.01.2021 and the consequential garnishee order set aside, and the matter remitted to respondents for fresh consideration in accordance with law and the SVLDRS after taking into account the payments claimed by the petitioner and after affording personal hearing; all rival contentions on merits kept open.

Exemption from service tax for advancement of yoga - entity registered under section 12AA of the Income Tax Act - exemption under Notification No. 25/2012-S.T. (as amended) - non-levy direction under Notification No. 42/2016-S.T. - reverse charge liability for goods transport agency service - requirement of consignment note for goods transport agency service

Exemption from service tax for advancement of yoga - entity registered under section 12AA of the Income Tax Act - exemption under Notification No. 25/2012-S.T. (as amended) - non-levy direction under Notification No. 42/2016-S.T. - Whether membership donations received by the appellant for providing yoga education/training are liable to service tax - HELD THAT: - The appellant is registered under section 12AA and provides education and training in yoga, which falls within the activity of advancement of yoga. Notification No. 42/2016 directed non-recovery of service tax for services by way of advancement of yoga provided by entities registered under section 12AA for the period commencing 01.07.2012 and ending 20.10.2015. Further, Notification No. 25/2012-S.T., as amended by notification dated 21.10.2015, expanded the definition of 'charitable activities' to include advancement of yoga w.e.f. 21.10.2015. Both conditions required by the exemptions - registration under section 12AA and carrying out activities by way of charitable activities (advancement of yoga) - are satisfied. Consequently the membership donations collected by the appellant are not exigible to service tax for the stated periods.

Membership donations for advancement of yoga by the appellant are exempt from service tax for the period 01.07.2012 to 20.10.2015 and thereafter by virtue of the amendment w.e.f. 21.10.2015.

Reverse charge liability for goods transport agency service - requirement of consignment note for goods transport agency service - Whether the appellant is liable to pay service tax under reverse charge on freight amounts paid - HELD THAT: - The definition of 'goods transport agency' contemplates a person providing service in relation to transport of goods by road and issuing consignment notes. In the present case consignment notes have not been issued; therefore the activity does not fall within the definition of 'goods transport agency' service. The Tribunal's earlier view that service tax under this head can be levied only if consignment notes are issued was applied, and accordingly the reverse charge mechanism could not be invoked to fasten service tax liability on the appellant for freight paid.

Service tax under the reverse charge mechanism on freight amounts paid by the appellant cannot be sustained in absence of consignment notes.

Final Conclusion: The Commissioner's order confirming service tax demand is set aside: the demand relating to membership donations is rejected as exempt for the periods covered by Notification No. 42/2016 and the amendment to Notification No. 25/2012, and the demand under reverse charge for freight fails for want of consignment notes; the appeal is allowed.

Composite works contract - works contract service - construction of residential complex service - Board Circular dated 29.1.2009 - classification of taxable service

Composite works contract - works contract service - construction of residential complex service - Board Circular dated 29.1.2009 - Demand of service tax under construction of residential complex service could not be sustained where the contracts were composite in nature and involved transfer of property in goods. - HELD THAT: - The Tribunal noted that the appellants' construction activities were composite, involving both supply of goods and provision of services. The jurisdictional authorities and the parties relied upon the Board Circular dated 29.1.2009, but the determinative legal position recognised by the Supreme Court in Larsen & Toubro and followed by this Tribunal in Real Value Promoters is that services classified as Commercial or Industrial Construction Service or Construction of Complex Service cover only pure service contracts without transfer of property in goods. Where an indivisible composite contract exists, the taxable component must be treated as Works Contract Service, with valuation and liability determined under the applicable rules and composition scheme introduced for works contracts. Applying that legal principle to the facts and evidence on record, the Tribunal held that the demand framed under the head of construction of residential complex service could not be sustained and therefore had to be set aside. [Paras 7, 8]

The demand under construction of residential complex service is unsustainable in respect of the composite contracts and is set aside.

Final Conclusion: The impugned order of the Commissioner (Appeals) is set aside and the appeal is allowed; consequential relief, if any, to follow.

Intermediary - Place of Provision of Service Rules, 2012 - Rule 2(f) of POPSR, 2012 - export of service - Business Auxiliary Service - facility/arrangement of sale of goods vs provision of service

Intermediary - Rule 2(f) of POPSR, 2012 - facility/arrangement of sale of goods vs provision of service - Whether the services rendered by the appellant qualify as "intermediary" services under Rule 2(f) of the Place of Provision of Service Rules, 2012. - HELD THAT: - The Tribunal found as admitted facts that the appellant was contracted to set up the overseas principal's local office, recruit service and advertisement agencies and staff, and to appoint distribution partners; separate contracts for import and resale were entered into between the overseas principal and the distribution partners who imported and sold goods in their own names. The appellant did not undertake the sale or import of goods nor receive payment for those goods. Applying the definition in Rule 2(f), which requires arranging or facilitating the provision of the main service or supply of goods between two or more persons (but not where the person provides the main service on his own account), the Tribunal held that the appellant was providing services to its principal (setting up local operations, recruitment, appointment of distributors) and was not arranging or facilitating the main service or supply of goods between other persons. The Tribunal relied on its earlier reasoning in a similar case to conclude that such business-promotion or support activities do not convert the provider into an "intermediary" under Rule 2(f). Consequently the appellant's services do not fall within the intermediary definition and are not taxable as such. [Paras 6]

The appellant does not qualify as an "intermediary" under Rule 2(f) of POPSR, 2012; the demand of service tax on that ground is unsustainable.

Export of service - Business Auxiliary Service - Place of Provision of Service Rules, 2012 - Whether the impugned demands and consequent confirmation of service tax can be sustained, and whether the appellate order allowing refund was to be maintained. - HELD THAT: - Because the Tribunal concluded that the appellant's activities did not make it an intermediary, the taxable character ascribed by the lower authority could not be sustained. The Tribunal observed that the appellant had earlier paid service tax characterising the service as Business Auxiliary Service and had sought refund on the ground of export of service; the Commissioner (Appeal) had allowed refund applying the law up to 30.09.2014. The Tribunal found no infirmity in treating the appellant's service as not being intermediary services and therefore upheld the conclusion that the demand was not sustainable. The Tribunal set aside the impugned adjudication orders that confirmed demand, interest and penalties, and allowed the appeals with consequential relief. [Paras 6, 7]

Impugned orders confirming service tax demand, interest and penalties are set aside; appeals allowed and relief granted to the appellant.

Final Conclusion: The Tribunal held that the appellant's activities of setting up the principal's local office, recruiting vendors and appointing distributors did not constitute arranging or facilitating the main service or supply of goods between other persons and thus did not make the appellant an "intermediary" under Rule 2(f) of POPSR, 2012; accordingly the service tax demand was unsustainable and the appeals were allowed with consequential relief.

Taxability of services provided by a club to its members - service rendered to themselves - Club or Association Services - Mandap Keeper Services - absence of service provider-service recipient relationship between club and members

Taxability of services provided by a club to its members - service rendered to themselves - absence of service provider-service recipient relationship between club and members - Whether the services rendered by the appellant club to its members are taxable as 'Club or Association Services' or are services rendered to themselves and therefore not taxable. - HELD THAT: - The Tribunal examined the nature of services rendered by the appellant club to its members and applied earlier decisions of coordinate benches and High Courts (as cited by the appellant). Those precedents hold that services provided by a club to its own members are services rendered to themselves and there is no relation of service provider and service recipient that would render such activities taxable as 'Club or Association Services'. Applying that legal principle to the facts on record, the Tribunal found that the impugned confirmation of demand in respect of 'Club or Association Services' could not be sustained. The separate claim relating to 'Mandap Keeper Services' had already been dropped by the original officer and is not pressed. In view of binding and persuasive precedents, the Tribunal concluded that the impugned order does not survive and the demand must be set aside.

Demand confirmed by the original authority in respect of 'Club or Association Services' is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed: the demand in respect of services rendered by the club to its members as 'Club or Association Services' is set aside on the basis that such services are rendered to themselves and do not establish a taxable service provider-recipient relationship; consequential relief, if any, to follow as per law.

Eligibility of cenvat credit for commissioning and installation services - post-manufacturing activity test - binding effect of prior Tribunal decision in identical facts - centralised registration and invoice issuance - scope of show cause notice and limitation on new allegations

Eligibility of cenvat credit for commissioning and installation services - post-manufacturing activity test - binding effect of prior Tribunal decision in identical facts - scope of show cause notice and limitation on new allegations - Disallowance of cenvat credit availed on commissioning and installation services upheld below was unsustainable where identical issue had been decided in favour of the appellant in earlier Tribunal orders and no fresh allegation was made in the impugned SCNs/SODs. - HELD THAT: - The Tribunal had earlier examined the same contention and held that the assembling/installation activity sub-contracted by the appellant was not a disqualifying post-manufacturing activity and therefore the credit was allowable. The Statement of Demand under challenge expressly stated that the facts and circumstances were identical to the earlier show cause notices. The adjudicating authority nevertheless denied credit on a new factual premise that the invoice was issued in the name of the appellant's head office while services were rendered at the Ambattur plant. The Court observed there is no legal prohibition on invoices being issued in the name of a head office which has centralised registration; centralised registration facilitates availment and distribution of credit. Further, where the SCN/SOD did not raise the alleged ground (non-registration as ISD or invoice in head office name), denial of credit on that unalleged basis could not be sustained. Applying the earlier Tribunal decision to the identical facts, the disallowance lacked legal and factual basis. [Paras 5, 6, 7]

Impugned orders disallowing the credit are set aside and the appeals are allowed with consequential relief as per law.

Final Conclusion: The Tribunal's earlier decision in the appellant's case on identical facts governs the present periods; the adjudicating authority's fresh basis for denial (invoice in head office name) could not sustain where it was not pleaded in the SCN and centralised registration permits such invoicing. The disallowance was therefore set aside and the appeals allowed.

Remission of duty - Principles of Natural Justice - reconsideration and de novo adjudication - remand for fresh consideration - reversal of Cenvat credit

Remission of duty - Principles of Natural Justice - reconsideration and de novo adjudication - Whether the Commissioner's rejection of the remission application without informing the appellant of the reasons and without giving an opportunity to respond was a violation of the Principles of Natural Justice requiring remand for fresh adjudication. - HELD THAT: - The Tribunal noted that the Commissioner recorded that the fire in the present case was similar to an earlier incident but nonetheless rejected the remission application on the basis that the appellant had not submitted certain documents and explanations regarding avoidability of the fire. The Tribunal held that when the adjudicating authority is not inclined to grant remission, it must communicate the points on which it proposes to reject the application so that the applicant can make submissions and produce documents in reply. Failure to furnish the appellant with the Commissioner's views and to give an opportunity to meet those points amounted to a breach of the Principles of Natural Justice. In view of this procedural defect, the Tribunal set aside the impugned order and remanded the matter to the Commissioner for a fresh de novo adjudication, directing that the Commissioner must put the appellant in writing on any explanations or documents required before disposing of the remission application. [Paras 4]

Impugned order set aside and the matter remanded to the Commissioner for fresh de novo adjudication after affording the appellant an opportunity to make submissions; appeal allowed by way of remand.

Reversal of Cenvat credit - remand for fresh consideration - Whether the appellant's contention regarding reversal of Cenvat credit and its adjustment against any duty arising requires reconsideration by the adjudicating authority. - HELD THAT: - The appellant raised an additional ground that reversal of Cenvat credit in respect of the destroyed goods was not required and, if any duty arises, such reversal should be adjusted against that duty. The Tribunal observed that this contention, which relied on earlier Tribunal and Larger Bench authorities cited by the appellant, has not been finally adjudicated in the impugned order and thus also requires fresh consideration. Consequently, the Tribunal directed that the Commissioner reconsider this ground while conducting the de novo adjudication and afford the appellant an opportunity to present supporting submissions and documents. [Paras 4]

The question of reversal/adjustment of Cenvat credit is remanded to the Commissioner for fresh consideration in the course of the de novo adjudication.

Final Conclusion: The impugned order is set aside; the appeal is allowed by way of remand to the Commissioner for fresh de novo adjudication on the remission application and the appellant's claim regarding reversal/adjustment of Cenvat credit, after affording the appellant written notice of the points requiring explanation and a fair opportunity to be heard; miscellaneous application disposed of.

CENVAT credit - utilization of Education Cess and Secondary and Higher Education Cess - abolition of cess and effect of notifications - Rule 3(7)(b) of the CENVAT Credit Rules, 2004 - ER-1 returns and statutory disclosure - extended period of limitation and wilful suppression

CENVAT credit - utilization of Education Cess and Secondary and Higher Education Cess - Rule 3(7)(b) of the CENVAT Credit Rules, 2004 - abolition of cess and effect of notifications - Validity of utilizing Education Cess and Secondary and Higher Education Cess credit for payment of Central Excise Duty after 01.03.2015. - HELD THAT: - The Tribunal considered whether credit of Education Cess and Secondary and Higher Education Cess lying in balance could be lawfully used for payment of basic excise duty after 01.03.2015. The Tribunal noted the amendments and provisos inserted in the CENVAT Credit Rules which permitted utilization of such cess credit only in specified circumstances (inputs, capital goods or input services received on or after 1 March 2015) and observed that the balance of cess credit lying prior to that date was not covered by those provisos. Relying on the decision of the Hon'ble High Court of Delhi in M/s. Cellular Operators Association of India and on the Tribunal's view in M/s. The Ramco Cements Ltd., the Tribunal held that a plain reading of the rules did not permit utilization of the pre-1 March 2015 cess balances for payment of basic excise duty and therefore the utilization contested on merits was not lawful. The Tribunal concluded that the merits answer against the assessee and in favour of the Revenue. [Paras 6, 7, 8]

Utilization of the cess credit after 01.03.2015 was held not to be lawful; issue decided against the assessee.

Extended period of limitation and wilful suppression - ER-1 returns and statutory disclosure - Whether the demand could be sustained by invoking the extended period of limitation on the ground of wilful suppression. - HELD THAT: - The Tribunal examined the returns filed by the appellant which recorded the utilization of the cess credit in the ER-1 returns for the period including May 2017 and noted that the Department had accepted the returns and the duty paid. The Tribunal found no positive act of suppression established by the Department to prove wilful suppression of facts with intent to evade duty. In the absence of such suppression, invocation of the extended period of limitation was not warranted. On this ground alone the Tribunal set aside the demand raised under the extended limitation period. [Paras 9]

Demand invoking the extended period of limitation set aside because wilful suppression was not established; appellant succeeds on limitation ground.

Final Conclusion: Though the utilization of pre-1 March 2015 cess credit was held unlawful on merits, the demand was set aside because the Department failed to establish wilful suppression and therefore could not invoke the extended period of limitation; the appeal is allowed on limitation grounds and the impugned order is set aside.

Clandestine manufacture and clearance - onus of corroborative evidence for clandestine production - reliance on third party statements and recovered documents - absence of corroboration by procurement of other inputs and consumption data - right to cross examine adverse witnesses - presumption versus proof in revenue demands

Clandestine manufacture and clearance - reliance on third party statements and recovered documents - onus of corroborative evidence for clandestine production - absence of corroboration by procurement of other inputs and consumption data - right to cross examine adverse witnesses - Whether the charge of clandestine manufacture and clearance of goods without payment of duty against the appellants is sustainable on the basis of supplier statements and documents recovered from third parties. - HELD THAT: - The Tribunal found that the case against the appellants rested primarily on statements of the suppliers and weighment slips/documents recovered from third parties. To sustain a charge of clandestine manufacture and removal of large quantities of finished goods the Revenue must furnish cogent corroborative evidence showing how the appellants could have produced and cleared such quantities - for example, procurement records of other essential inputs, stock taking, electricity consumption or statements of buyers. The record did not disclose any effort to establish sources of other raw materials or quantify electricity consumption, nor were any buyer statements produced to prove clandestine removals. Further, the appellants were not permitted to cross examine the supplier whose statement implicated them. In these circumstances the findings against the appellants were held to be founded on assumptions and presumptions drawn from third party records and statements without independent or corroborative proof, and therefore insufficient to sustain the demand and penalties. [Paras 6, 7, 8]

Charge of clandestine manufacture and clearance cannot be sustained for lack of corroborative evidence and denial of opportunity to cross examine; proceedings set aside.

Final Conclusion: Appeals allowed; impugned order confirming duty and imposing penalties set aside for want of evidence; consequential relief, if any, to follow.

Cenvat credit on capital goods - Definition of capital goods under Rule 2(a) of the Cenvat Credit Rules - Eligibility of credit where goods are installed and become fixed to earth - Ownership of goods at time of receipt not a condition for credit - Precedent application / follow own tribunal order

Cenvat credit on capital goods - Definition of capital goods under Rule 2(a) of the Cenvat Credit Rules - Eligibility of credit where goods are installed and become fixed to earth - Ownership of goods at time of receipt not a condition for credit - Entitlement to Cenvat credit in respect of capital goods brought/installed by contractors under turnkey EPCC contracts and subsequently forming part of a plant fixed to earth. - HELD THAT: - The Tribunal held that items covered by the list in Rule 2(a) of the Cenvat Credit Rules which (other than office equipment) are used in the factory qualify as 'capital goods' and are eligible for Cenvat credit. There is no requirement in Rule 2(a) that the capital goods must be owned by the manufacturer at the time of receipt. Nor does the fact that, after installation, the machinery and equipment become part of a plant fixed to earth deprive them of their character as capital goods or disentitle the manufacturer from claiming Cenvat credit. The Department's contention that goods brought by contractors or goods that become immovable upon installation are not eligible is contrary to the language and purpose of Rule 2(a). The Tribunal followed its earlier decision in the appellant's own case dated 17.12.2019, applying the same reasoning to allow the credit. [Paras 6, 7, 8]

The appellant is entitled to Cenvat credit on the capital goods in question; the impugned order is set aside and the appeal is allowed with consequential relief, if any.

Final Conclusion: The Tribunal, following its earlier order dated 17.12.2019, allowed the appeal and set aside the adjudicating authority's denial of Cenvat credit on capital goods installed through turnkey contractors, holding that ownership at receipt and subsequent fixation to earth do not defeat entitlement to credit.

Abatement of deceased appellant - violation of principles of natural justice by denial of cross examination - reliability of prosecution witness statements and retraction in cross examination - proof of clandestine manufacture/removal of goods requiring corroborative evidence of procurement of raw and packing materials - scope of remand and obligation to comply with Tribunal's directions for cross examination

Abatement of deceased appellant - procedural effect of death on pending appeal - Appeal of Shri Harish Kumar Sachdeva abates on account of his death. - HELD THAT: - The counsel for the appellant produced the death certificate of Shri Harish Kumar Sachdeva (died 18.4.2021) and the Tribunal recorded that the appeal in his name abates. The fact of death was placed on record and the consequence of abatement was noted without further adjudication in respect of that appellant. [Paras 1, 4]

Appeal of Shri Harish Kumar Sachdeva abates.

Scope of remand and obligation to comply with Tribunal's directions for cross examination - violation of principles of natural justice by denial of cross examination - Adjudicating authority failed to comply with this Tribunal's remand direction by effectively denying meaningful cross examination of Shri Pawan Kumar, thereby violating principles of natural justice. - HELD THAT: - This Tribunal's earlier order dated 28.1.2013 remitted the matter for fresh decision after affording opportunity for cross examination of specified witnesses. In the remand proceedings the adjudicating authority limited cross examination to only two witnesses and concluded that cross examination of other persons was not relevant. The authority recorded that although Shri Pawan Kumar attended on a later date, it would not permit further cross examination after unsuccessfully urging the partner of the noticee to conduct it and after conducting examination in chief in the partner's presence. The Tribunal held that concluding the proceedings on that basis denied the noticee a genuine opportunity to cross examine and thereby violated natural justice, particularly where the case against the appellants rested predominantly on those witness statements. [Paras 14, 15, 16]

Proceedings in remand infringed natural justice by denying effective cross examination of Shri Pawan Kumar; remand directions were not properly implemented.

Reliability of prosecution witness statements and retraction in cross examination - proof of clandestine manufacture/removal of goods requiring corroborative evidence of procurement of raw and packing materials - Statements of Shri Roshan Lal and Shri Pawan Kumar are inconsistent and not sufficiently corroborated; on the record before the Tribunal the charge of clandestine manufacture/removal of snuff is not sustainable. - HELD THAT: - The Tribunal examined the investigation statements and cross examination of Shri Roshan Lal and found material contradictions: during cross examination he retracted parts of his investigation statement, admitted he was not authorised to speak for the firm, and stated facts inconsistent with earlier assertions. The Tribunal also observed that large scale manufacture of snuff would require additional raw and packing materials, for which no procurement evidence was placed on record. Because the departmental case rested chiefly on the statements of these two witnesses, and those statements are neither cogent nor adequately corroborated by evidence of procurement, transport or packing material, the Tribunal concluded that the charge of clandestine removal could not be sustained. [Paras 17, 18]

Statements relied upon by the Revenue are contradictory and uncorroborated; clandestine removal charge unsustainable on the record.

Setting aside of impugned order for failure of proof and natural justice - Impugned adjudication confirming demand and imposing penalties is set aside and appeals are allowed. - HELD THAT: - Having found violation of the remand direction and that the departmental case depends on unreliable and uncorroborated witness statements without evidence of requisite procurement of other materials, the Tribunal held that the impugned order cannot stand. The Tribunal therefore allowed the appeals and set aside the impugned order, granting consequential relief as may be due. [Paras 18, 19]

Impugned order set aside; appeals allowed with consequential relief.

Final Conclusion: The appeal in the name of the deceased appellant abates. On merits the Tribunal finds failure to implement the remand direction and denial of effective cross examination, and that the departmental case rests on contradictory and uncorroborated witness statements without evidence of necessary procurement; consequently the impugned order confirming demand and imposing penalties is set aside and the appeals are allowed with consequential relief.

Sale in the course of export under Section 5(1) of the CST Act - stock transfer - inextricable link between local movement/contract and export - F-Forms as evidentiary proof of export - remand for fresh consideration

Sale in the course of export under Section 5(1) of the CST Act - stock transfer - inextricable link between local movement/contract and export - Whether the movement of goods from the Bangalore branch to Navi Mumbai/Head Office is to be treated as a sale in the course of export under Section 5(1) of the CST Act or as a stock transfer. - HELD THAT: - The Court found that the Tribunal did not properly examine whether the contract of the foreign buyers with the Head Office occasioned the movement of goods from the Bangalore branch-i.e., whether there exists an unseverable or inextricable link between the local movement and the actual export. The Court reviewed precedent establishing that to attract exemption under Section 5(1) there must be intention and obligation to export and a bond between the local sale/transfer and the export such that the local transaction occasions the export. Because the Tribunal treated the movement as a stock transfer without adequately testing the inextricable link against the documentary material placed on record, the matter could not be finally determined on the existing record by this Court. [Paras 14]

Issue not finally decided on merits; matter restored to the Tribunal for fresh consideration of whether the movement occasions the export in the light of the documents and authorities cited.

F-Forms as evidentiary proof of export - sale in the course of export under Section 5(1) of the CST Act - Whether absence of F-Forms (despite documentary proof of export) precludes exemption under Section 5(1) and whether filing of F-Forms is mandatory where goods are sent to head office for export. - HELD THAT: - The Court noted the factual position that F-Forms were not uniformly accepted by the Tribunal and that the Tribunal ignored certain F-Forms and documentary material. Rather than resolving the legal consequences of absence or presence of F-Forms on the claim under Section 5(1), the Court directed re-examination of the documentary evidence (including F-Forms and Excise pass) to determine whether they establish the requisite inextricable link between the movement from the branch and the export. The Court refrained from answering the posed questions of law and left the determination to the Tribunal on fresh consideration of evidence. [Paras 4, 14]

Issue remanded to the Tribunal for verification of documents and fresh adjudication; no conclusive finding by this Court on mandatory effect of F-Forms.

Final Conclusion: Revision petition allowed in part; the Tribunal's judgment dated 15.10.2015 is set aside and the matter is restored to the Tribunal for expeditious reconsideration of whether the branch-to-head-office movement occasions export under Section 5(1) of the CST Act, having regard to the documents (including F-Forms and Excise pass) placed on record; all rights and contentions are left open.