TaxTMI Updates e-Newsletter
Feb 02,2023

Cancellation of GST registration without hearing - right to reasonable opportunity of hearing - revival of GST registration on payment of dues with interest and penalty - direction to facilitate payment and compliance for restoration

Cancellation of GST registration without hearing - right to reasonable opportunity of hearing - Validity of the order cancelling the petitioner's GST registration where no opportunity of hearing was afforded. - HELD THAT: - The Court found on the facts that the petitioner was not given an opportunity of hearing before his GST registration was cancelled. The petitioner adduced evidence of serious physical illness and acute mental stress during the relevant period, which prevented him from filing returns or replying to the show-cause notice. The Court observed that reasons and communication of opportunity are integral to avoid miscarriage of justice and concluded that the cancellation order was flawed for want of affording a hearing to the petitioner.

Cancellation quashed insofar as it was effected without giving the petitioner an opportunity of hearing; petitioner entitled to be heard.

Revival of GST registration on payment of dues with interest and penalty - direction to facilitate payment and compliance for restoration - Whether and on what conditions the petitioner's GST registration should be reinstated. - HELD THAT: - Balancing the petitioner's failure to comply with statutory return obligations against the absence of a hearing, the Court directed conditional relief. The petitioner must first make payment of the up-to-date GST dues along with statutory interest and penalty within three weeks. Upon such payment, the competent authority (respondent Nos.1 and 2) is directed to revive the petitioner's GST registration within one week. The Court further directed the authorities to furnish bank details to enable payment and to allow the petitioner to file the pending returns after revival, thereby facilitating compliance rather than permanently debarment.

Registration to be revived on receipt of outstanding tax, interest and penalty within specified time; authorities to provide payment details and permit filing of pending returns thereafter.

Final Conclusion: Writ petition allowed in part: the cancellation order is set aside for lack of hearing and the petitioner is granted a conditional opportunity to regularise dues and have the GST registration revived upon payment of outstanding tax with interest and penalty, subject to the timelines and facilitation directed by the Court.

Show Cause Notice - principles of natural justice - opportunity to be heard / right to a meaningful response - cancellation of registration under GST - validity of electronic notices issued via statutory/administrative portal

Show Cause Notice - principles of natural justice - opportunity to be heard / right to a meaningful response - Impugned Show Cause Notice dated 06.10.2022 does not disclose reasons and is not a valid show cause notice. - HELD THAT: - The Court found that the impugned notice merely recorded the reason as "others" and failed to communicate the allegations or the contents of the letter said to furnish the grounds. A show cause notice must enable the noticee to understand the allegations so as to make a meaningful response; such notices are not to be issued mechanically. The respondent's explanation that the officer selected an option from a drop-down menu and that additional remarks were visible on the issuing officer's portal does not cure the defect where those remarks and the referenced letter were not part of the notice actually communicated to the petitioner. If the electronic system cannot communicate the substance of allegations, authorities must consider issuing a physical notice; otherwise the notice would be rendered meaningless and would fail to serve the object of affording a fair opportunity to be heard. [Paras 4, 8, 9, 10, 11]

Impugned Show Cause Notice dated 06.10.2022 is set aside as invalid for failure to disclose reasons and to afford a meaningful opportunity to respond.

Cancellation of registration under GST - opportunity to be heard / right to a meaningful response - validity of electronic notices issued via statutory/administrative portal - Consequential cancellation order dated 21.10.2022 set aside and matter remitted to issuing authority for fresh consideration after valid notice. - HELD THAT: - Because the foundational Show Cause Notice was invalid, the cancellation order based on that notice could not stand. The Court set aside the cancellation order and permitted the authority to issue a fresh show cause notice and to take an appropriate decision in accordance with law after affording the petitioner a reasonable opportunity to be heard. The remand is directed for fresh consideration and compliance with the requirements of fair notice and natural justice, not for determination of the merits underlying cancellation on the present record. [Paras 11, 12]

Impugned order cancelling registration dated 21.10.2022 is set aside; authority may issue a fresh valid show cause notice and decide after affording a reasonable opportunity to be heard.

Final Conclusion: The petition is allowed: the impugned Show Cause Notice (06.10.2022) and the consequential cancellation order (21.10.2022) are set aside for failure to disclose reasons and to afford a meaningful opportunity to respond; the authorities are permitted to issue a fresh valid notice and decide in accordance with law after giving the petitioner a reasonable hearing.

Refund under section 54 of the CGST Act - appellate authority exceeding jurisdiction by raising suo motu issue - power under section 107(2) of the CGST Act and its conditional exercise - principles of natural justice and notice requirement

Refund under section 54 of the CGST Act - The appellants, as persons who ultimately bore the incidence of tax, were entitled to maintain the refund claim. - HELD THAT: - The appellate authority had expressly held the first issue in favour of the appellants, recognising that a person who has borne the incidence of tax can file a refund claim under section 54 of the CGST Act. The High Court did not disturb that finding of the appellate authority and treated the entitlement of the appellants to maintain the refund application as upheld. The Court noted the grounds advanced by the appellants and the authorities cited in support, and accepted the appellate authority's conclusion on this issue. [Paras 7]

The finding that the appellants are entitled to maintain the refund claim is accepted and retained.

Appellate authority exceeding jurisdiction by raising suo motu issue - power under section 107(2) of the CGST Act and its conditional exercise - principles of natural justice and notice requirement - The appellate authority had no jurisdiction to frame and decide, suo motu, a new issue (taxability of the building) which did not arise from the original order rejecting the refund; that portion of its order is quashed and the matter is remitted to the original authority for fresh consideration. - HELD THAT: - The appeal before the appellate authority challenged only the rejection of the refund on the ground that the tax was paid by another entity. The appellate authority, however, framed a second issue on its own concerning taxability of the building and decided it against the appellants. The High Court held that the appellate authority could not, in an appeal filed by the appellants against a specific rejection, put the appellants in a worse position by entertaining and deciding an issue which did not emanate from the original order and without putting the appellants on notice. Even if power under section 107(2) was relied upon, such power must be exercised in accordance with the statutory provision and with observance of the principles of natural justice; no notice was recorded and no direction was made to any authority to raise the issue. Therefore the second issue and the appellate authority's decision thereon were set aside. The Court directed that the appellants' refund application be entertained afresh by the original authority and appropriate orders be passed within a stipulated time. [Paras 7, 8, 10, 11]

The appellate authority's suo motu finding on the second issue is quashed; the refund application is remitted to the original authority for fresh consideration and disposal within four weeks.

Final Conclusion: The intra Court appeal is allowed: the appellate authority's acceptance that the appellants could maintain the refund claim is retained, but the appellate authority's suo motu decision on the separate question of taxability is quashed for lack of jurisdiction and violation of natural justice; the original authority is directed to entertain and decide the refund application afresh within four weeks.

Input tax credit denial due to cancellation of supplier's registration - adjudication under Section 74(9) of the WBGST Act, 2017 - opportunity of personal hearing - treatment of order as show cause notice - remand for fresh consideration - speaking order on merits

Input tax credit denial due to cancellation of supplier's registration - opportunity of personal hearing - remand for fresh consideration - speaking order on merits - Whether the adjudicating authority should be directed to afford the appellant another opportunity of personal hearing and decide the denial of input tax credit on merits after considering documents produced by the appellant. - HELD THAT: - The appellant failed to appear at the fixed personal hearing and, upon inadvertence, tendered an unconditional apology and a request for another chance. The impugned order denied input tax credit on the ground that the other party's registration was cancelled; the appellant, however, asserted availability of sufficient documents to demonstrate the genuineness of the transactions. The Court held that, in these circumstances, the matter required fresh consideration on merits and that the adjudicating authority should be given the opportunity to examine the appellant's explanations and documentary evidence. Consequently the Court remanded the matter, directed that the order dated 21st June, 2022 be treated as a show cause notice, required the appellant to file a reply/further reply with supporting documents within a stipulated time, and directed the authority to fix a personal hearing and thereafter pass a speaking order after considering the submissions and documents without granting adjournment. [Paras 2, 3, 4]

Matter remanded for fresh consideration; order dated 21st June, 2022 to be treated as a show cause notice; appellant to file reply/further reply with documents by 10th February, 2023; adjudicating authority to fix personal hearing, receive submissions without adjournment and pass a speaking order on merits.

Final Conclusion: The intra Court appeal is disposed by remanding the matter for fresh adjudication: the impugned order is to be treated as a show cause notice, the appellant granted a final opportunity to file reply and documents within the specified time, and the adjudicating authority directed to hold a personal hearing and pass a reasoned order on merits; no order as to costs.

Reopening of assessment u/s 147 - Unexplained gain on sale of shares of company abroad - assessee claimed gains earned by it on sale of Agile shares were not taxable in India by virtue of Article 13(4) the Double Tax Avoidance Agreement entered into and subsisting between India and Singapore (“India-Singapore DTAA”) based on the Tax Residency Certificate (‘TRC’) - Relevance of information from a third party - borrowed satisfaction - Limitation of benefit (LOB) clause - objective expenditure test - AO got information about the petitioner’s income from the TDS officer of Igarashi, as all the details were available in the petitioner’s return which had been processed under Section 143(1) - whether the respondent-revenue can go behind the tax residency certificate issued by the other tax jurisdiction and issue re-assessment notice under Section 147 to determine issues of residence status, treaty eligibility and legal ownership? -

Tax residency certificate (TRC) - double taxation avoidance agreement (DTAA) treaty eligibility - tax treaty residence and beneficial ownership - Whether the Revenue can go behind a Tax Residency Certificate and deny treaty benefits claimed under the India Singapore DTAA. - HELD THAT: - The Court held that a TRC issued by the competent authority of the treaty State is sufficient evidence of residence and treaty entitlement and the Revenue cannot, as a matter of routine, go behind the TRC to deny treaty benefits. The conclusion is grounded on CBDT circulars and the consistent line of authority including Union of India v. Azadi Bachao Andolan and Vodafone International Holdings B.V., the Government's clarificatory press release of 1 March 2013, and the statutory scheme under Section 90 which makes a TRC the prescribed certificate for claiming DTAA relief. The Court observed that permitting the Revenue to routinely question a TRC would defeat governmental assurances to foreign investors and the settled treaty framework; any exceptional enquiry into the genuineness of a TRC must be anchored in tangible material and not mere suspicion. The Court therefore accepted the petitioner's TRC as establishing eligibility for treaty benefits in the facts of this case. [Paras 76, 80, 83, 89, 93]

Revenue cannot go behind the TRC issued by the foreign tax authority to deny treaty residence and eligibility; the petitioner's TRC establishes treaty entitlement in the present case.

Reopening of assessment under Section 147/148 - reason to believe - borrowed satisfaction - live link or close nexus - Whether the notice under Section 148/147 was validly issued on the material produced and whether the reasons recorded disclose a live link to form a 'reason to believe'. - HELD THAT: - The Court held that reopening an assessment requires a recorded "reason to believe" based on material on which a reasonable person could form such belief and there must be a live link between that material and the alleged escapement. Reopening cannot be founded on mere suspicion, surmise, or on unverified cut and paste information from another office (borrowed satisfaction). The impugned reasons were held to be a verbatim reproduction of communication from another Income tax office and online third party information, without independent application of mind or verification by the Assessing Officer; consequently there was no adequate live nexus between the material relied on and the belief of escapement. The Court emphasised that reasons recorded cannot be enlarged after the event and can only be judged on what was actually recorded when forming the belief. [Paras 55, 56, 57, 65, 94]

The reopening notice was issued on borrowed satisfaction and without the requisite live link; the formation of belief was invalid and the reassessment proceedings are unsustainable.

Explanation 2(b) to Section 147 - claim of treaty benefit as allocation of taxing rights - Whether Explanation 2(b) to Section 147 applies because the assessee understated income or claimed excessive relief by relying on the DTAA provision for capital gains. - HELD THAT: - The Court found Explanation 2(b) inapplicable. The claim under Article 13(4) of the India Singapore DTAA concerned allocation of taxing rights (i.e. capital gains taxable only in the resident State) and did not constitute an understatement of income, excessive loss, deduction, allowance or relief within the scope of Explanation 2(b). The impugned order failed to demonstrate how Explanation 2(b) was engaged or to give reasons showing its applicability. [Paras 62, 63, 64]

Explanation 2(b) to Section 147 does not apply to the petitioner's DTAA claim and cannot serve as a basis for reopening in this case.

Limitation of benefit (LOB) clause - objective expenditure test - Whether the petitioner satisfied the LOB criterion in the India Singapore Protocol and whether the Assessing Officer had contested satisfaction of that clause on the record. - HELD THAT: - The Court observed that the amended Protocol contains an objective LOB test based on incurrence of specified annual expenditure in Singapore. The petitioner had placed on record audited financial statements, operational expense details and an independent chartered accountant's certificate confirming incurrence of the relevant expenditure, and such compliance was not effectively challenged by the Assessing Officer in the reasons recorded. The Court further noted that the Assessing Officer did not question the LOB satisfaction during the objections disposal and could not raise new disputes belatedly. [Paras 67, 69, 70]

On the material before the Assessing Officer, the petitioner satisfied the objective LOB test and the Assessing Officer did not rebut that satisfaction in the recorded reasons.

Final Conclusion: The Court concluded that no income chargeable to tax had escaped assessment for Assessment Year 2016 17, quashed the notice dated 31 March 2021 under Section 148, the impugned reasons and the order disposing objections dated 10 January 2022, and set aside the draft assessment order dated 31 March 2022.

Double taxation of the same receipt - revision under Section 264 of the Income Tax Act, 1961 - duty to exercise revisional power to do real justice - assessed income cannot be taxed twice

Double taxation of the same receipt - assessed income cannot be taxed twice - revision under Section 264 of the Income Tax Act, 1961 - Whether the Commissioner erred in rejecting the assessee's application under Section 264 to revise the assessment for Assessment Year 2014-15 so as to exclude interest which had been subsequently taxed in Assessment Year 2012-13. - HELD THAT: - The Court observed that the sum of Rs.1,51,67,868 received as interest on income tax refunds was included in the income assessed for Assessment Year 2014 15, and that the same amount was later brought to tax in Assessment Year 2012 13. It is a settled principle that an assessee is liable to tax only on income chargeable under the Act and that an amount cannot be taxed twice. The powers under Section 264 are wide and include the power to correct errors whether committed by the authorities or the assessee, and must be exercised judicially and in the interest of doing real justice between the parties. Given that the amount had been taxed in an earlier assessment year, the Commissioner ought to have revisited the Assessment Year 2014 15 record to prevent double taxation. The Commissioner's conclusion that the interest issue did not form part of the order under Section 143(3) was found to be erroneous on the facts, and the rejection of the Section 264 application was therefore unsustainable. [Paras 18, 19, 20, 21, 22]

Impugned order rejecting the Section 264 application set aside; matter remanded to the Commissioner to pass fresh order in light of observations that the amount cannot be taxed twice and Section 264 powers should be exercised to prevent such double taxation.

Final Conclusion: The petition is allowed: the order dated 04.10.2021 rejecting the application under Section 264 is set aside and the matter is remanded to the concerned Commissioner to pass a fresh order to address the double taxation of the interest amount, in accordance with the Court's observations.

Constitutional validity of amendment to section 115BBE - interim stay of enforcement of tax demand - assessment under section 143(3) of the Income Tax Act - stay of recovery notice - service by electronic mode

Interim stay of enforcement of tax demand - stay of recovery notice - assessment under section 143(3) of the Income Tax Act - Grant of interim relief restraining respondents from enforcing the tax demand for A.Y.2017-18 and stay of the recovery notice dated 15.12.2022. - HELD THAT: - The petition challenges the assessment and the subsequent recovery notice issued pursuant to the assessment order dated 29.12.2019 for A.Y.2017-18 and also assails the constitutional validity of the amendment to section 115BBE. The Court noted that the matter forms part of a group of matters already before the Court and issued notice. Pending final hearing and admission, the Court granted interim relief in terms of prayer clause 23(d), restraining the respondents from enforcing the demand for A.Y.2017-18 and staying the impugned recovery notice dated 15.12.2022. [Paras 5]

Interim stay granted restraining respondents from enforcing the demand for A.Y.2017-18 and staying the recovery notice dated 15.12.2022.

Service by electronic mode - Permitting service of court processes on the respondents through electronic mode in addition to the regular mode of service. - HELD THAT: - The Court directed that, over and above the regular mode of service, service may also be effected by e-mode on official email addresses of the respondents to ensure effective notice in the group proceedings and the present petition. [Paras 6]

Service permitted through electronic mode on official email addresses in addition to the regular mode.

Final Conclusion: Notice issued; interim relief granted restraining enforcement of the demand for A.Y.2017-18 and staying the recovery notice dated 15.12.2022; service by e-mode on official email addresses permitted.

Ownership as a precondition for allowance of depreciation - tangible asset versus intangible asset for depreciation - scope of "plant" and "building" for depreciation - concessionaire rights under BOT agreements not constituting assets for depreciation - interpretation of Explanation 3 to section 32 - limits on exercise of revisional power under section 263 where no error prejudicial to revenue is shown - reopening assessments under sections 147/148 - requirement of fresh tangible material

Tangible asset versus intangible asset for depreciation - concessionaire rights under BOT agreements not constituting assets for depreciation - interpretation of Explanation 3 to section 32 - Whether toll roads and toll bridges constructed under concessionaire/BOT agreements are "assets" (tangible or intangible) within Explanation 3 to section 32 so as to permit depreciation claims - HELD THAT: - The Court examined Explanation 3 to section 32 and held that neither the toll roads nor toll bridges constructed under the concessionaire/BOT agreements fall within the definition of tangible assets (buildings, machinery, plant or furniture) nor do the concession rights amount to intangible assets (know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature). The Court applied principles of statutory construction (including nocitur a sociis) to construe the phrase "any other business or commercial rights of similar nature" and concluded that the concessionaire agreements merely conferred a limited right to collect tolls as deferred consideration for construction and maintenance, without transfer of ownership or proprietary rights in the infrastructure. The Court relied on the statutory scheme, the nature of BOT arrangements and relevant authorities, and concluded that ownership (or equivalent dominion) is a sine qua non for claiming depreciation under section 32; such ownership was not present in these BOT concession structures.

Answered against the assessees: toll roads and toll bridges under the concessionaire agreements are not "tangible" or "intangible" assets for the purpose of claiming depreciation under section 32.

Scope of "plant" and "building" for depreciation - ownership as a precondition for allowance of depreciation - If toll roads and toll bridges were treated as "tangible assets", whether they qualify as "plant" or as "building" for determining the rate of depreciation - HELD THAT: - The Court considered the statutory definition of "plant" in section 43(3) and the entries and notes in Appendix I (Part A) to the Rules. It held that the statutory definition of "plant" does not encompass toll roads or toll bridges. Although Appendix I's notes list roads and bridges under the rubric of "buildings" for rate purposes, the Court found that mere listing does not override the requirement of ownership and the definition of assets under Explanation 3. Applying the statutory scheme and authorities, the Court concluded that toll roads/bridges are neither "plant" (as defined) nor buildings owned by the assessee; consequently they are not eligible for depreciation either at rates applicable to plant or those applicable to buildings.

Answered against the assessees: toll roads and toll bridges do not qualify as "plant" or as "building" owned by the assessee for depreciation purposes under section 32.

Limits on exercise of revisional power under section 263 where no error prejudicial to revenue is shown - reopening assessments under sections 147/148 - requirement of fresh tangible material - Whether the Income Tax Appellate Tribunal was justified in setting aside Commissioner orders passed under section 263 (and relatedly whether reassessment under sections 147/148 was sustainable) in the particular appeals - HELD THAT: - The Court differentiated between cases on the basis of procedural posture and prior conduct of the revenue. It held that where the Assessing Officer had taken a view and that view was not challenged by the Department by invoking section 263 in time (specifically in the matters corresponding to T.C.A.Nos.868-870 of 2009), the benefit conferred by the Assessing Officer could not be disturbed even though the Court answered the substantive questions of law against the assessee. Conversely, in other matters (including those embodied in T.C.A.Nos.756 and 1201 of 2010 and certain appeals for subsequent assessment years) the Tribunal had erred in setting aside revisional orders because (on the Court's substantive findings that the assets/rights did not qualify for depreciation) the Assessing Officer's earlier view was not a plausible view warranting protection under section 263. The Court also addressed reopening under sections 147/148, observing that reopening requires fresh tangible material directly relevant to escaping assessment; absent such material reassessment is incorrect.

Mixed: where Revenue failed to invoke section 263 earlier and benefit was allowed by the Assessing Officer and remained unchallenged, that benefit was protected; in other appeals the Tribunal's interference with revisional orders or allowance of depreciation was set aside and the appeals of the Revenue were allowed.

Interpretation of Explanation 3 to section 32 - concessionaire rights under BOT agreements not constituting assets for depreciation - Whether, as a result of the above conclusions, the impugned Tribunal orders permitting depreciation at 10% (treating assets as buildings) or 25% (treating as plant) were sustainable - HELD THAT: - Applying the statutory definitions and reasoning above, the Court held that the Tribunal's findings that allowed depreciation (either at building rates or plant rates) were unsustainable because toll roads and bridges under BOT/concession agreements are not assets (tangible or intangible) owned by the assessees. The Court reviewed precedent authorities and comparative decisions, accepted the reasoning of some High Courts (notably Bombay High Court decisions) and rejected others where inconsistent with the statutory scheme. On that basis the Court concluded that the Tribunal orders upholding depreciation on the project assets were erroneous and unwarranted under the Income Tax Act.

Tribunal orders allowing depreciation on the toll roads/bridges were held to be erroneous and, where appropriate and procedurally open, were set aside in favour of the Revenue; however, in specific matters where the Revenue had not timely invoked revisional power the Assessing Officer's earlier allowance remained protected.

Final Conclusion: All ten tax case appeals were disposed of: the Court answered the core legal questions against the assessees by holding that toll roads and toll bridges under the BOT/concessionaire agreements are not assets (neither tangible nor intangible) owned by the assessees for purposes of depreciation under section 32; Tribunal orders permitting depreciation were therefore erroneous. However, where the Revenue had failed to invoke revisional power earlier, the benefit already conferred by the Assessing Officer could not be disturbed (T.C.A.Nos.868-870 and 206/2014 dismissed); in the remaining appeals the Revenue's appeals were allowed and the impugned tribunal orders set aside.

Re-opening of assessment under the Income Tax Act, 1961 (Section 147) - doctrine of change of opinion - availability of alternative statutory remedy / efficacy of appellate remedy - use of material obtained during alleged illegal survey - scope of escaped assessment under Explanation 1 to Section 147

Availability of alternative statutory remedy / efficacy of appellate remedy - parallel remedies and discretionary refusal of writ jurisdiction - Whether writ petitions filed by the Trustees could be entertained despite appeals having been filed before the Commissioner of Income Tax (Appeals). - HELD THAT: - The Court held that the Trustees had pursued the alternative statutory remedy by filing appeals before the Appellate Authority and, therefore, the High Court would not exercise its discretionary writ jurisdiction under Article 226 to entertain their writ petitions. While recognizing that the rule against pursuing parallel remedies is not absolute, the Court observed that ordinarily courts refuse to permit a litigant to 'ride two horses' and decline interference where an efficacious statutory remedy exists. The Court declined to express any opinion on the merits of the assessment or on the ground of lack of jurisdiction, leaving those contentions to be agitated before the Appellate Authority. [Paras 3, 4, 5]

Writ petitions filed by the Trustees dismissed as not maintainable in view of available alternative remedy by appeal; trustees may pursue those appeals and agitate all grounds there.

Re-opening of assessment under the Income Tax Act, 1961 (Section 147) - doctrine of change of opinion - scope of escaped assessment under Explanation 1 to Section 147 - use of material obtained during alleged illegal survey - Whether the writ petitions filed by the Trust challenging rejection of its objections to the reopening of assessment could be entertained and whether the reopening was impermissible as a mere change of opinion or barred because survey materials were illegally obtained. - HELD THAT: - The Court declined to adjudicate the disputed factual questions in a writ petition and held that the correctness of reopening-including whether it was based on mere change of opinion or on fresh material, whether Explanation 1 to Section 147 applied, and whether materials from the alleged illegal survey could be relied upon-required close scrutiny of books, documents and evidence by the assessing authority. The assessment order for AY 2013-14 did not on its face deal with undervaluation of land or source of construction funds, and determination whether reassessment amounts to change of opinion may necessitate detailed factual investigation. The Court also observed that illegality in conducting a survey does not necessarily bar use of material gathered, and that these contentions are best raised and decided in the statutory proceeding. Consequently, the Court considered the writ challenge premature and inappropriate for exercise of Article 226. [Paras 10, 11, 12, 13, 14]

Writ petitions by the Trust dismissed; Assessing Officer may proceed with assessment from stage of rejection of objections and decide all contentions (including change of opinion and admissibility of survey material) on merits in the statutory proceedings.

Final Conclusion: The writ petitions filed by the Trustees are dismissed as not maintainable in view of available appellate remedy; the writ petitions filed by the Trust challenging rejection of objections to reopening are dismissed as premature and raising disputed questions of fact for the assessing authority; the Revenue is permitted to proceed with assessment from the stage of disposal of objections and the petitioners remain free to raise all grounds before the appellate forum.

Stay of demand under Section 220(6) of the Income Tax Act, 1961 - application of departmental Instruction No.1914 as modified by Office Memoranda dated 29.02.2016 and 31.07.2017 - quashing of administrative order for proceeding on a lone erroneous basis - remand for fresh consideration of interim relief

Stay of demand under Section 220(6) of the Income Tax Act, 1961 - application of departmental Instruction No.1914 as modified by Office Memoranda dated 29.02.2016 and 31.07.2017 - Validity of the Assessing Officer's refusal of interim stay of demand where refusal was founded solely on belief that the departmental instruction did not apply to the petitioner - HELD THAT: - The impugned order declining the petitioner's interim prayer was set aside because it proceeded on a single, erroneous basis - namely, that the petitioner was not covered by the cited Instruction No.1914 as modified. There was no dispute between the parties that the correctness of that premise was open to question. The High Court did not adjudicate the merits of entitlement to stay under Section 220(6) but held that the Assessing Officer must reconsider the petitioner's request on its own merits and in accordance with law, including by applying the said departmental instruction. The Court directed that the Assessing Officer undertake that exercise afresh and decide the petition for abeyance of demand within the specified timeframe, preserving the petitioner's revived application for interim relief pending the appeal under Section 246A.

Order dated 12.12.2022 set aside; matter remitted to the Assessing Officer for fresh consideration in accordance with law and Instruction No.1914 (as modified), to be completed within three weeks.

Final Conclusion: The High Court set aside the Assessing Officer's terse order which rested solely on the incorrect premise that the departmental instruction did not apply, and remitted the petition for interim abeyance of demand to the Assessing Officer for fresh consideration in accordance with law and the said instruction, within the prescribed time.

Opportunity of hearing - Section 144B(9) procedure - best judgment assessment under Section 144 - quash and set aside assessment order

Opportunity of hearing - Section 144B(9) procedure - quash and set aside assessment order - Validity of the assessment order dated 12.03.2022 in view of denial of opportunity of hearing under the procedure prescribed by Section 144B(9). - HELD THAT: - The assessing officer finalized the assessment on the basis of material received and invoked best judgment assessment without granting the petitioner the opportunity of hearing after the petitioner had requested personal hearing by video conference. The Court found that non-grant of the hearing amounted to a clear violation of the procedure mandated by Section 144B(9). For that reason the assessment order is non-est in law. The Court therefore quashed and set aside the impugned assessment order and directed that the officer take the matter up from the stage at which the petitioner had sought the opportunity of hearing, fixing short timelines for further proceedings. [Paras 6]

Impugned assessment order dated 12.03.2022 quashed and set aside for breach of the hearing procedure under Section 144B(9); matter to be taken up from the stage of the request for hearing.

Opportunity of hearing - Scope of adjudication on merits following quashing of the assessment order. - HELD THAT: - The Court expressly refrained from examining or deciding the merits of the assessment. It remitted the matter for fresh adjudication after affording the hearing that was requested by the petitioner. Timelines were prescribed: petitioner to make the request within two weeks, the officer to respond within two weeks, and the adjudication to be completed within twelve weeks. The remand is for fresh consideration and not a decision on merits. [Paras 7]

Merits not decided; matter remitted for fresh adjudication after providing the requested opportunity of hearing within the prescribed timelines.

Final Conclusion: The assessment order dated 12.03.2022 for Assessment Year 2017-2018 is quashed and set aside for failure to afford the opportunity of hearing under Section 144B(9); the matter is remitted to the assessing officer to proceed from the stage where the hearing was sought, with specified timelines, and the Court has not adjudicated the merits.

Reassessment proceedings - notice under section 148 - treatment of cash deposits as unexplained cash credit u/s 68 - onus of proof regarding identity, creditworthiness and genuineness of creditor - ex parte disposal

Reassessment proceedings - notice under section 148 - ex parte disposal - Validity of initiation of reassessment proceedings by issuance of notice under section 148 and decision to proceed ex parte after non-appearance of the assessee - HELD THAT: - The Tribunal examined the record and noted that earlier postal notices returned with the remark that no person resided at the address in Form 36 and that the assessee failed to appear despite service of hearing notice by e-mail. The Commissioner considered material available to the AO, including information from ADIT(Inv.)-2, Kanpur and subsequent verification, and applied the amended provisions of section 147 in concluding that prima facie material existed to form belief that income had escaped assessment. The assessee did not furnish submissions before the Commissioner to contest initiation. Having regard to the factual record, the Commissioner's reasoning and authorities considered by him, the Tribunal found no reason to interfere with the conclusion that reassessment proceedings were validly initiated and that the case could be decided ex parte in the constrained circumstances. [Paras 2, 6]

Initiation of reassessment proceedings by notice under section 148 held valid and appeal proceeded ex parte due to non-appearance.

Treatment of cash deposits as unexplained cash credit u/s 68 - onus of proof regarding identity, creditworthiness and genuineness of creditor - Sustenance of addition under section 68 on account of unexplained cash deposits - HELD THAT: - On merits the AO made an addition treating cash deposits as unexplained cash credit under section 68 after verification based on STR and other information. The Commissioner, after considering the assessee's replies (which the record shows were not substantiated in appellate proceedings due to the assessee's non-appearance), applied settled law that the primary onus lies on the assessee to establish identity, creditworthiness and genuineness of creditors. Finding that the assessee failed to discharge this onus and that the AO had given detailed reasons for the addition, the Commissioner confirmed the addition. The Tribunal found no material to rebut those findings and declined to interfere with the confirmation of the addition under section 68. [Paras 5, 7]

Addition under section 68 on account of unexplained cash credit confirmed; assessee failed to discharge primary onus.

Final Conclusion: The appeal is dismissed: the initiation of reassessment proceedings by issuance of notice under section 148 was valid and the addition made under section 68 treating cash deposits as unexplained cash credit is upheld.

Liability to deduct tax at source on External Development Charges (EDC) paid to a development authority - Penalty under section 271C for failure to deduct TDS - Reasonable cause / bona fide belief negating contumacious conduct - Precedential weight of coordinate Benches of the Tribunal

Liability to deduct tax at source on External Development Charges (EDC) paid to a development authority - Precedential weight of coordinate Benches of the Tribunal - Whether tax was required to be deducted at source on payments of External Development Charges (EDC) made to HUDA. - HELD THAT: - The Tribunal considered the factual matrix that the payments of EDC were made pursuant to licences granted by the Directorate of Town and Country Planning (DTCP) and routed to HUDA, and that there was no privity of contract between the assessee and HUDA for carrying out specific work for the assessee. The Tribunal placed weight on decisions of coordinate Benches which had held on identical facts that EDC payments to HUDA were not subject to TDS, observing that these payments were directed by a Governmental authority (DTCP) and that, prior to CBDT clarification dated 23.12.2017, there was no settled view requiring deduction. In view of the consistent approach of coordinate Benches and the factual similarity, the Tribunal declined to interfere with the Commissioner (Appeals)'s conclusion that no TDS was exigible on the EDC payments. [Paras 5]

No tax was required to be deducted at source on the EDC payments to HUDA.

Penalty under section 271C for failure to deduct TDS - Reasonable cause / bona fide belief negating contumacious conduct - Whether the penalty under section 271C could be sustained for non-deduction of TDS on EDC payments. - HELD THAT: - Relying on the conclusion that EDC payments were not liable to TDS on the facts and the Tribunal's adherence to coordinate Bench precedents, the Tribunal accepted that the assessee had a bona fide belief that no TDS was required and that there was no contumacious conduct. The Commissioner (Appeals) had also considered High Court and Tribunal decisions holding that where a bona fide or debatable view exists, penalty under section 271C is not leviable. Given the consistent precedents and the factual alignment, the Tribunal found no reason to disturb the deletion of penalty by the Commissioner (Appeals). The Tribunal expressly refrained from adjudicating limitation and other grounds as unnecessary in view of the decision on merits. [Paras 3, 5, 6]

Penalty under section 271C was not sustainable and was deleted.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the Commissioner (Appeals)'s deletion of penalty under section 271C for Assessment Year 2015-16 on the ground that EDC payments to HUDA were not liable to TDS and that the assessee had a bona fide belief negating contumacious conduct.

Revisional jurisdiction under section 263 - Explanation 2(a) to section 263 - order passed without making enquiries or verification - Direct Tax Vivad Se Vishwas (DTVSV) Act - settlement precluding reopening of settled disputes - Immunity under DTVSV confined to proceedings in relation to which declaration is made

Direct Tax Vivad Se Vishwas (DTVSV) Act - settlement precluding reopening of settled disputes - Revisional jurisdiction under section 263 - Explanation 2(a) to section 263 - order passed without making enquiries or verification - Whether the Principal Commissioner of Income-tax could initiate revision proceedings under section 263 after the assessee had opted to settle the disputed additions under the DTVSV scheme and the designated authority had accepted the declaration. - HELD THAT: - The Tribunal held that where an assessee has filed the prescribed declarations under the DTVSV scheme and the designated authority has accepted the same (forms filed and Form No. 5 issued), the dispute in respect of the declared matter stands settled and proceedings thereafter under section 263 in relation to that matter are not sustainable. The Tribunal followed the ratio of the Hon'ble Madras High Court in Gopalakrishnan Rajkumar and the Coordinate Bench decision in Pavan Kandkur, noting that the legislative scheme intends finality for matters declared and accepted under DTVSV so as to bring closure to tax litigation. Although the PCIT relied on Explanation 2(a) to section 263 alleging that the AO failed to verify the face value of shares, the Tribunal accepted the assessee's submission that the face value and the premium were part of the same transaction for which DTVSV declarations were filed and accepted. Consequently, the PCIT was not justified in initiating revisionary proceedings under section 263 in respect of the matter already declared and settled under DTVSV; the impugned order under section 263 was therefore quashed. The Tribunal expressly applied the principle that immunity from reopening extends to proceedings in relation to which the declaration has been made and accepted, and that initiation of section 263 proceedings on the same declared issue defeats the statutory object of the DTVSV scheme. [Paras 10, 11, 12]

The PCIT's order under section 263 initiating revision proceedings in respect of the matter settled under DTVSV is quashed and the appeal is allowed in favour of the assessee.

Final Conclusion: The Tribunal, following the Madras High Court and Coordinate Bench precedents, held that once the assessee's declaration under the DTVSV scheme was accepted (forms filed and Form 5 issued), the PCIT could not validly initiate revision under section 263 in respect of the settled dispute; the PCIT's order was quashed and the appeal allowed.

Obligation to withhold tax at source under section 195 - disallowance under section 40(a)(i) - DTAA permanent establishment rule for taxation of business profits - characterisation as royalty and Fees for Technical Services (FTS) under DTAA - allowability of preliminary expenses for issue of capital under section 35D - revenue deductibility of ESOP-related expenses - deductibility linked to actual payment under section 43B(a)

Obligation to withhold tax at source under section 195 - disallowance under section 40(a)(i) - DTAA permanent establishment rule for taxation of business profits - characterisation as royalty and Fees for Technical Services (FTS) under DTAA - Validity of disallowance under section 40(a)(i) in respect of payment to a Malaysian entity for company incorporation services - HELD THAT: - The Tribunal held that the payment to the Malaysian entity constituted business profits of the non-resident and, in absence of any Permanent Establishment of that entity in India, such business profits could not be taxed in India under Article 7 of the India-Malaysia DTAA. The Assessing Officer's blanket observation that the payment was covered by Article 12 (royalty) was rejected on the facts. The Revenue also failed to establish that the payment qualified as managerial, technical or consultancy services attractable as FTS under Article 13; consequently there was no obligation on the assessee to deduct tax at source under section 195 and the disallowance under section 40(a)(i) was deleted. [Paras 4, 5, 6]

Disallowance deleted; no requirement to withhold tax under section 195 in respect of the payment to the Malaysian entity.

Obligation to withhold tax at source under section 195 - disallowance under section 40(a)(i) - DTAA permanent establishment rule for taxation of business profits - characterisation as independent professional services under DTAA - Validity of disallowance under section 40(a)(i) in respect of payment to a Bangladeshi entity for legal services - HELD THAT: - The Tribunal found that Revenue's reasoning was vague and did not establish that the payment was taxable in India. Under the India-Bangladesh DTAA business profits are taxable in the source State only if the recipient has a Permanent Establishment there; the Bangladesh firm had no PE in India. The payment did not amount to royalty under Article 13 and, if characterised as independent professional services, such income is taxable in the residence State unless the recipient has a fixed base in the source State; no fixed base was shown. Accordingly, there was no obligation to withhold under section 195 and the disallowance under section 40(a)(i) could not be sustained. [Paras 7, 8, 9]

Disallowance deleted; no requirement to withhold tax under section 195 in respect of the payment to the Bangladesh entity.

Allowability of preliminary expenses for issue of capital under section 35D - alternative revenue deductibility under section 37 - Allowability of deduction claimed under section 35D in respect of expenses incurred for proposed IPO - HELD THAT: - The Tribunal noted the expenditure was incurred for the purpose of expansion of business by seeking an IPO. Having regard to the nature of the expenses and the precedent relied upon, the Tribunal held the expenditure falls within the scope of section 35D and is allowable; the fact that the IPO did not materialise did not negate the purpose of the expenditure. The assessee's alternative contention under section 37 was noted but the claim was allowed under section 35D. [Paras 15, 16, 17]

Deduction under section 35D allowed.

Revenue deductibility of ESOP-related expenses - Allowability of ESOP expenses debited to profit and loss account - HELD THAT: - The Tribunal observed that the assessee had granted ESOPs at a discounted value and debited the difference to the profit and loss account; portions were subsequently reversed and taxed in later assessment years. On this basis the Tribunal treated the booked ESOP expenses as allowable revenue deductions rather than as unascertained provisions and deleted the disallowance. [Paras 18, 20, 21]

ESOP-related expense disallowance deleted; deduction allowed.

Deductibility linked to actual payment under section 43B(a) - Sustainability of disallowance in respect of write-off of sundry balances (Swachh Bharat Cess receivable) - HELD THAT: - The Tribunal noted that the amount written off related to an alleged Swachh Bharat Cess receivable and that the assessee failed to demonstrate that the amount had been actually paid during the year as required by section 43B(a). In absence of evidence of actual payment the Assessing Officer's disallowance was upheld. [Paras 22, 23]

Disallowance upheld in respect of the write-off; ground dismissed.

Final Conclusion: The appeal is partly allowed: disallowances under section 40(a)(i) in respect of payments to the Malaysian and Bangladeshi entities are deleted; deduction under section 35D and ESOP expense deduction are allowed; the disallowance relating to write-off of sundry balances (Swachh Bharat Cess receivable) is upheld.

Onus on assessee under section 68 to prove genuineness and creditworthiness - inquiry into source of source - gifts from relatives under Explanation (e) to section 56(2) treated as receipts requiring proof of identity and genuineness - deletion of additions where identity and source are established and no contrary material exists

Onus on assessee under section 68 to prove genuineness and creditworthiness - inquiry into source of source - deletion of additions where identity and source are established and no contrary material exists - Whether additions made by the Assessing Officer under section 68 in respect of gifts received from two relatives could be sustained where the assessee produced gift deeds, bank statements, affidavits and other material to establish identity and source. - HELD THAT: - The Tribunal examined the material placed on record by the assessee, which included gift deeds, bank statements, affidavits of the donors and evidence of the donors' agricultural income and land holding. The Assessing Officer had disallowed the receipts as unexplained cash credits on the ground that the donors' returns and bank statements were not filed, effectively questioning the "source of source." The CIT(A) sustained the additions observing that the donors were not assessed to tax and their source was not established. The Tribunal, applying settled principle that an assessee who furnishes the identity, genuineness and source of funds need not be required to establish the source of source in the absence of contrary material, found the AO/CIT(A) had made additions by impermissible presumption without cogent enquiry. The Tribunal placed reliance on a coordinate bench decision in similar facts (Ushaben H. Ghadia v. DCIT) which held that where the revenue had the information about the donor and there was no evidence contradicting the genuineness, addition could not be sustained. On that basis the Tribunal directed deletion of the additions. [Paras 7, 8]

Additions made under section 68 in respect of the gifts were deleted and the ground of appeal allowed.

Final Conclusion: The appeal is allowed; the additions made in respect of the gifts received from the two relatives are set aside and deleted.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Effect of payee's inclusion of income and payment of tax on payer's liability - Reliance on Rule 31ACB certificate as proof of tax having been paid by the payee - Precedential rule that no disallowance under section 40(a)(ia) is called for where the payee has included the income and paid tax

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Effect of payee's inclusion of income and payment of tax on payer's liability - Reliance on Rule 31ACB certificate as proof of tax having been paid by the payee - Deletion of the disallowance of Rs.1,97,194/- under section 40(a)(ia) upheld where the payee had included the income and paid tax and the payer filed the certificate under Rule 31ACB. - HELD THAT: - The ld.CIT(A) recorded that although the assessee had not deducted tax at source, the payee (India Infoline Investment Services Ltd.) had included the relevant income in its return and paid tax thereon, and the assessee filed the certificate prescribed by Rule 31ACB certifying payment by the payee. The ld.CIT(A) followed rulings which hold that where the payee has paid tax on the income, no disallowance under section 40(a)(ia) is warranted in the hands of the payer. The Department was unable to controvert the factual finding regarding payment by the payee or distinguish the authorities relied upon. On that basis the Tribunal found no reason to interfere with the appellate authority's conclusion and dismissed the Revenue's ground of appeal. [Paras 3, 7]

The deletion of the disallowance under section 40(a)(ia) is sustained and the Revenue's appeal is dismissed.

Final Conclusion: Revenue's appeal dismissed; Tribunal upholds deletion of the disallowance under section 40(a)(ia) because the payee had included the income and paid tax, supported by the Rule 31ACB certificate, and the Department failed to rebut the finding or distinguish the precedents relied upon.

Characterisation of payments as 'royalty' - use of or right to use copyright/computer software - use of trade marks and Brand Features incidental to distribution - beneficial owner - business profits under Article 7 and permanent establishment - application of the Engineering Analysis (Supreme Court) ratio on software/royalty - OECD Technical Advisory Group guidance and Equalisation Levy as interpretative/contextual aids

Characterisation of payments as 'royalty' - use of or right to use copyright/computer software - application of the Engineering Analysis (Supreme Court) ratio on software/royalty - use of trade marks and Brand Features incidental to distribution - business profits under Article 7 and permanent establishment - Impugned payments made by the assessee to Google Ireland Ltd. for purchase of online advertisement space for onward resale are not 'royalty' under Article 12(3)(a) of the India-Ireland DTAA. - HELD THAT: - Applying the Supreme Court's reasoning in Engineering Analysis, the Tribunal held that mere use of or access to the Google AdWords Program by the distributor, without transfer of any of the exclusive rights enumerated in the Copyright Act (sections corresponding to rights under sections 14/30), does not amount to a licence that vests copyright or an interest therein. The distribution and services agreements show Google Ireland retains ownership of software, confidential information and Brand Features; the distributor received a non exclusive, non sublicensable, limited licence to display Brand Features solely for marketing and distribution, and customer facing advertising content and keywords are provided by advertisers. The use of Brand Features and training were held incidental and ancillary to the commercial purpose of distributing ad space and not independent consideration for use of IP. The Tribunal also noted international guidance (OECD TAG) and the policy context of the Equalisation Levy, which support treating online advertising receipts as business profits taxable under Article 7 only if the non resident has a PE in India. In light of these legal and factual findings, the payments cannot be characterised as royalty under Article 12(3)(a) of the India-Ireland DTAA.

Assessee's appeals allowed on this issue; impugned payments are not royalty under the India-Ireland DTAA.

Beneficial owner - characterisation of payments as 'royalty' - Revenue's contention that Google Ireland was not the beneficial owner of the amounts was rendered academic and the related revenue appeal dismissed as infructuous. - HELD THAT: - Because the Tribunal concluded that the payments were not chargeable as royalty under the DTAA, the question of beneficial ownership (advance or withholding liability consequences) became consequential. The Tribunal followed its earlier detailed findings on the substantive characterisation and, as a result, held that the revenue's appeal on beneficial ownership did not survive and was dismissed as infructuous.

Revenue's appeal dismissed as infructuous; consequential beneficial ownership contention not adjudicated on merits.

Final Conclusion: Applying the Supreme Court's Engineering Analysis ratio and the contractual and factual matrix, the Tribunal held that amounts paid by Google India Pvt. Ltd. to Google Ireland Ltd. for purchase and resale of online advertisement space do not constitute 'royalty' under Article 12(3)(a) of the India Ireland DTAA; the assessee's appeals for the stated assessment years are allowed and the revenue's appeal on beneficial ownership is dismissed as infructuous.

Erroneous and prejudicial to the interests of revenue - Revisional jurisdiction under Section 263 of the Income tax Act - Failure to verify bank statements leading to under assessment - Reasonable opportunity to be heard before reassessment

Revisional jurisdiction under Section 263 of the Income tax Act - Erroneous and prejudicial to the interests of revenue - Failure to verify bank statements leading to under assessment - Reasonable opportunity to be heard before reassessment - Validity of the order passed under Section 263 setting aside the assessment in part on account of an omission in treating the correct bank deposit figure and directing reassessment limited to the discrepancy. - HELD THAT: - The Tribunal found that the Assessing Officer, though having the bank statement, adopted an incorrect figure for cash deposits in the ICICI Bank account and thereby failed to take into account the correct deposit admitted by the assessee. That omission resulted in a short assessment to the extent of the difference identified (Rs.4,98,576), rendering the assessment order erroneous and prejudicial to the interests of revenue. In those circumstances the Principal CIT was justified in invoking Section 263 to set aside the assessment only to the extent of that omission and directing the AO to make appropriate inquiries and verification in respect of the identified difference. Any wider observations by the revisional authority concerning the assessee's inability to substantiate the source of deposits were held to be superfluous for purposes of compliance; the AO is bound to implement the operative direction to examine and verify the identified shortfall and to afford the assessee a reasonable opportunity of being heard. Other substantive disputes as to the explanation for deposits remain open for adjudication in the pending appeal against the assessment and were not finally decided by the revisional order. [Paras 12, 13, 14]

The Section 263 order was upheld insofar as it set aside the assessment in part for failure to take the correct bank deposit figure and directed the AO to verify and make assessment in respect of the identified difference, with the AO to afford the assessee a reasonable opportunity of being heard; the assessee's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the revisional exercise under Section 263 insofar as the assessment was set aside in part for omission to take correct bank deposit figures, directing the Assessing Officer to verify and recompute the assessment for the identified shortfall while observing that other contested factual and legal issues remain open in the pending appeal against the assessment.

Import under fake BIS certificate - prohibition on import without requisite BIS licence and conformity to Indian standards - evidentiary value of admissions and recovered electronic records - corroboration by manufacturer/authorised representative - deference to findings of fact by adjudicatory authorities and Tribunal

Import under fake BIS certificate - evidentiary value of admissions and recovered electronic records - corroboration by manufacturer/authorised representative - Whether the goods were imported under a fake BIS certificate and whether the findings of the Adjudicating Authority, Commissioner (Appeals) and Tribunal upholding confiscation/detention were sustainable. - HELD THAT: - The Tribunal's findings that the BIS certificate was fake were founded on the appellant's employee's recorded admission that he prepared the editable template of the BIS certificate, and on electronic records recovered from his laptop indicating an excel workbook named 'BIS Certificate' prepared by him. Those admissions were not controverted before this Court. Further corroboration came from the manufacturer's Indian representative, who confirmed after examination that the certificate was not issued by the manufacturer and provided the template of the genuine certificate; the impugned certificate lacked the competent signature and bore an outdated standard mark. The Tribunal considered these materials and the proprietor's acknowledgement that the employee prepared import documents, and found the appellant's defence untenable. Given the admitted preparation of the documents, the recovered editable formats, and the manufacturer's communication negating authenticity, the courts below did not err in concluding that the import was under a fake BIS certificate and in upholding the consequential order.

Findings that the BIS certificate was fake are upheld and the appeal is dismissed.

Final Conclusion: The appellate challenge fails; the courts below correctly found the BIS certificate to be fake on the basis of admissions, recovered electronic records and corroboration by the manufacturer's representative, and no substantial question of law arises - appeal dismissed.

Locus standi of a member under Section 241 and 244 of the Companies Act, 2013 - eligibility of a director who is not a shareholder to maintain a petition for oppression and mismanagement - waiver of the statutory threshold under Section 244 - conversion of a petition into a proceeding under Section 213(2) - maintainability of remedies across multiple fora

Locus standi of a member under Section 241 and 244 of the Companies Act, 2013 - eligibility of a director who is not a shareholder to maintain a petition for oppression and mismanagement - Whether the appellant, not being a registered member/shareholder, was entitled to invoke Sections 241 and 242 by obtaining waiver of Section 244 requirements. - HELD THAT: - The Tribunal held that the Companies Act recognises a 'member' for the purposes of Section 241 as a person whose name appears in the Register of Members and who satisfies the conditions for membership; mere directorship does not confer membership rights where the name is not entered on the Register. The court emphasised that eligibility under Section 244 is a fundamental criterion and that a directorial complaint cannot stand in lieu of member status for a petition under Sections 241/242. Consequently, where the appellant admitted that he was not a shareholder, he lacked locus to seek relief under Sections 241/242 or to obtain waiver of the threshold conditions in Section 244. The determinative legal reasoning is that the right to prefer an oppression/mismanagement petition is predicated on membership as defined by the Act and register entry, and this prerequisite cannot be bypassed by equating the trappings of directorship with membership in the absence of statutory recognition. [Paras 31, 34, 63, 64, 66]

The appellant, not being a registered member/shareholder, had no locus to invoke Sections 241/242 and to seek waiver under Section 244; the waiver application was unsustainable.

Waiver of the statutory threshold under Section 244 - maintainability of remedies across multiple fora - Whether the National Company Law Tribunal was in error in dismissing the application seeking waiver of the numerical/threshold requirements of Section 244. - HELD THAT: - The Tribunal applied established criteria for considering waiver applications under Section 244, including the petitioner's interest in the company, whether Section 241 is the appropriate forum for the grievances, and whether the cause is of primordial importance to the petitioner, a class of members, the company or public interest. It found that because the appellant was not a member and similar reliefs were simultaneously pursued in other fora (labour authorities and civil court), the waiver could not be granted. The appellate forum concluded there was no legal infirmity in the NCLT's dismissal of the waiver IA, observing that eligibility and the pendency of parallel proceedings negatived the case for excusing statutory qualifications. [Paras 32, 33, 58, 65, 67]

The NCLT's dismissal of the waiver application under Section 244 was free from legal error and is upheld.

Conversion of a petition into a proceeding under Section 213(2) - Whether the appellant's petition under Sections 241/242 could be converted into a petition under Section 213(2) to avoid membership qualification. - HELD THAT: - The Tribunal considered the appellant's plea for conversion to a Section 213 proceeding but noted that the reliefs pleaded in the main petition predominantly related to oppression and mismanagement under Sections 241/242. Section 213 operates on a different footing and is not a substitute to bypass the member-qualification for oppression/mismanagement reliefs. Given the nature of the reliefs sought and the appellant's admitted non-membership, the Tribunal declined to accede to conversion, finding the request untenable in law. [Paras 37, 42, 65]

The request to convert the petition into a proceeding under Section 213(2) is not acceded to.

Maintainability of remedies across multiple fora - Whether pursuing substantially similar reliefs concurrently before labour authorities, civil court and the NCLT affected the appellant's case for relief before the Tribunal. - HELD THAT: - The Tribunal observed that the appellant had sought substantially similar reliefs in three different forums-labour proceedings, civil suit and the company petition-indicating the remedies were being pursued simultaneously. This multiplicity of proceedings undermined the appellant's claim to exceptional treatment by the Tribunal and formed part of the reasoning for denying waiver and for upholding non-maintainability. The Tribunal treated the concurrent proceedings as relevant to the assessment of bona fides and the appropriateness of exercising discretionary reliefs. [Paras 58, 59, 61, 65]

The existence of substantially similar proceedings in other fora weighed against granting the waiver or entertaining the petition in the NCLT.

Final Conclusion: The appeal is dismissed. The National Company Law Tribunal's order refusing the waiver under Section 244 and dismissing IA No.644/2020 in CP/289/2020 is free from legal error: a non shareholder director lacks locus to seek oppression/mismanagement relief under Sections 241/242 or to obtain waiver of the statutory membership threshold, and the petition could not be converted into a Section 213(2) proceeding.

Power and jurisdiction of the Adjudicating Authority under FERA/FEMA - continuity of offences and proceedings under the sunset provision of FEMA - availability of efficacious alternative remedy by way of appeal under FEMA - principles of natural justice in adjudication proceedings - credit of time under Section 14 of the Limitation Act for pending writ proceedings

Power and jurisdiction of the Adjudicating Authority under FERA/FEMA - continuity of offences and proceedings under the sunset provision of FEMA - Validity of the Special Director of Enforcement's jurisdiction to adjudicate violations initiated under FERA and the treatment of the adjudication under FEMA. - HELD THAT: - Proceedings were initiated in 1993 under FERA. With repeal of FERA and enactment of FEMA, Section 49 of FEMA preserves offences and proceedings under the repealed Act and deems actions under the repealed Act to be taken under corresponding provisions of FEMA insofar as not inconsistent. The adjudication in the present matter was conducted by the Special Director of Enforcement himself; therefore no separate empowerment by the Central Government was required. The court held that the Special Director had jurisdiction and power to adjudicate and impose penalty under the statutory scheme. [Paras 8, 9]

The adjudicating order dated 12.03.2009 was within the power and jurisdiction of the Special Director of Enforcement and is to be treated as an order under FEMA for the purpose of appellate remedies.

Principles of natural justice in adjudication proceedings - Whether the adjudication order suffered from breach of principles of natural justice. - HELD THAT: - The record shows that objections were considered and sufficient opportunity was afforded to the parties. On the material before the court, the Special Director's order does not suffer from denial of natural justice. [Paras 10]

The impugned order does not violate principles of natural justice.

Availability of efficacious alternative remedy by way of appeal under FEMA - credit of time under Section 14 of the Limitation Act for pending writ proceedings - Appropriateness of entertaining writ petitions in the face of an available appellate forum under FEMA and the consequent procedural directions. - HELD THAT: - Although High Court may in appropriate cases decide disputed questions of fact, this case involves contested factual issues requiring examination of documents and the statute provides specific appellate remedies (under Section 19 read with Section 49(5)(a) of FEMA and thereafter Section 35). There were no exceptional circumstances to forgo the alternative remedy. The court therefore declined to decide merits and relegated the petitioners to pursue the appellate remedy. The court granted time for filing appeal, extended interim protection until appeal is filed, directed that period of pendency of the writ petition be credited under Section 14 of the Limitation Act, and left all grounds open to be urged before the Appellate Tribunal; failure to file appeal within the stipulated time would render the adjudication final. [Paras 11, 12, 13, 14, 15]

Writ petitions disposed by relegating petitioners to file appeal before the Appellate Tribunal within 45 days, with interim protection extended until filing and credit of time given under Section 14 of the Limitation Act; absence of appeal within time will make the adjudication final.

Final Conclusion: Writ petitions dismissed without deciding merits; Special Director's adjudication upheld as within jurisdiction and not violative of natural justice, and petitioners relegated to the appellate remedy under FEMA with limited directions on time for filing appeal, interim protection and limitation-time credit.

Provisional attachment under PMLA - alternative remedy and maintainability of writ - adjudicating authority's power to adjudicate confirmation under PMLA - priority of secured creditor's charge vis-a -vis PMLA attachment - jurisdictional validity of provisional attachment

Alternative remedy and maintainability of writ - adjudicating authority's power to adjudicate confirmation under PMLA - Maintainability of the writ petitions in view of available alternate remedy before the Adjudicating Authority and appellate forum. - HELD THAT: - The Court held that the petitioners have an effective alternative and efficacious remedy by raising objections before the Adjudicating Authority, which can decide both facts and law while adjudicating the confirmation of the provisional attachment under PMLA. An appeal mechanism is available from the Adjudicating Authority to the Tribunal and thereafter to the High Court under the PMLA. While the existence of an alternative remedy is not an absolute bar to exercise of writ jurisdiction, the Court will ordinarily refrain from interfering in the absence of excess or lack of jurisdiction, serious violation of principles of natural justice, or other extraordinary circumstances. The petitioners have already placed their objections before the Adjudicating Authority and no infirmity of denial of hearing or jurisdiction was shown to justify exceptional interference under Article 226. [Paras 11, 16, 17, 18]

Writ petitions are not maintainable at this stage; petitioners must pursue remedies before the Adjudicating Authority and the statutory appellate route.

Provisional attachment under PMLA - jurisdictional validity of provisional attachment - Validity of the provisional attachment order passed under PMLA insofar as jurisdictional competence is concerned. - HELD THAT: - Relying on the binding authority of the Supreme Court, the Court observed that the provisional attachment order passed under Section 5 of the PMLA does not suffer from lack of jurisdiction. The provisional order has been placed before the Adjudicating Authority for confirmation under Section 8(3) of the PMLA, and the petitioners have been put on notice and have made their objections. In these circumstances there is no basis to hold that the provisional attachment was beyond the authority's jurisdiction or that natural justice was violated in issuing the attachment and referring it for adjudication. [Paras 16, 18]

Provisional attachment order is not vitiated for want of jurisdiction; challenges to its validity are to be considered by the Adjudicating Authority.

Priority of secured creditor's charge vis-a -vis PMLA attachment - provisional attachment under PMLA - Disposition of the dispute regarding whether a prior security interest of a secured creditor has primacy over attachment under the PMLA. - HELD THAT: - The Court declined to adjudicate the competing legal contentions on the primacy of SARFAESI/security interest vis-a -vis PMLA attachment, noting that conflicting High Court decisions exist and that the issue is pending consideration before the Supreme Court. It observed that rendering any adverse findings on that legal controversy could prejudice the pending adjudication before the Adjudicating Authority. Consequently, the Court left the legal issue open and directed that the question be raised and considered by the Adjudicating Authority in the adjudication proceedings already initiated. [Paras 9, 19, 20]

Court refrained from deciding the priority conflict; directed that the issue be considered by the Adjudicating Authority in the adjudication proceedings.

Final Conclusion: Writ petitions dismissed for want of maintainability; petitioners to pursue objections on facts and law before the Adjudicating Authority and follow the statutory appellate remedy; court refrained from deciding the dispute on priority of secured interest versus PMLA attachment.

Voluntary Disclosure - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - pending investigation as on 30 June 2019 - ineligibility under Section 125(1)(f)(i) of the Finance Act, 2019

Voluntary Disclosure - pending investigation as on 30 June 2019 - ineligibility under Section 125(1)(f)(i) of the Finance Act, 2019 - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Declarations filed under the voluntary disclosure category could not be rejected on the ground that investigation was initiated after 30 June 2019; petitioner's declarations for 2015-16, 2016-17 and 2017-18 are not ineligible merely because notices were issued on 28 August 2019. - HELD THAT: - The Court followed and applied the reasoning of the Division Bench decisions in New India Civil Erectors and UCC Infrastructure, which held that for the voluntary disclosure category under the Scheme the relevant enquiry is whether an investigation/enquiry was pending as on 30 June 2019. A liberal interpretation of Section 125(1)(f)(i) requires that pendency of investigation on 30 June 2019 determines ineligibility. In the present case the departmental action in the form of notice and anti-evasion visit occurred after 30 June 2019 (notice dated 28 August 2019 and subsequent search), and therefore the Designated Committee's rejections on the ground that investigation had been initiated are not sustainable. The impugned rejections of the declarations dated 15 January 2020 for the years 2015-16, 2016-17 and 2017-18 were quashed and set aside; the respondents were directed to process the declarations according to law within eight weeks and refrain from taking coercive action on the basis of the earlier rejections. [Paras 11, 12, 13]

Rejections of the voluntary disclosure declarations for 2015-16, 2016-17 and 2017-18 are quashed; respondents to process the declarations and not take coercive action.

Final Conclusion: Writ petition allowed; the Designated Committee's rejections are set aside and the respondents are directed to process the petitioner's Sabka Vishwas Scheme declarations for the specified years within eight weeks, with no coercive action to be taken on account of those rejections.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - declaration in form SVLDRS-1 and issuance of form SVLDRS-3 - acceptance of declared amount by the Designated Committee - obligation to pay within 30 days under section 127(5) of the Finance Act, 2019 - interest for delayed payment

Declaration in form SVLDRS-1 and issuance of form SVLDRS-3 - acceptance of declared amount by the Designated Committee - Petitioner entitled to the benefit of the Scheme where the Designated Committee accepted the declared amount but failed to issue form SVLDRS-3 due to error on the part of the Respondents. - HELD THAT: - The petitioner's declaration under the Scheme was accepted by the Designated Committee and the Committee's acceptance of the amount declared is admitted by the Respondents. It is an admitted fact that form SVLDRS-3 was not issued to the petitioner owing to an error on the part of the Respondents, and the petitioner was otherwise eligible for relief under the Scheme. Given the Designated Committee's acceptance of the declared amount, issuance of form SVLDRS-3 was necessary and its non-issuance cannot defeat the petitioner's entitlement to avail the Scheme. The court therefore directed the Respondents to accept the eligible amount and extend the benefit of the Scheme to the petitioner. [Paras 4, 6, 8]

Direction granted to respondents to accept the eligible amount and extend the benefit of the Scheme to the petitioner.

Obligation to pay within 30 days under section 127(5) of the Finance Act, 2019 - interest for delayed payment - Petitioner not liable to deposit the amount with interest at 9% because the statutory obligation to pay within 30 days did not arise in absence of issuance of form SVLDRS-3. - HELD THAT: - Section 127(5) and the Scheme rules require payment within 30 days from issuance of the electronic statement in form SVLDRS-3. In the present case no electronic form SVLDRS-3 was issued to the petitioner; consequently the petitioner's obligation under section 127(5) to pay within 30 days had not arisen. Reliance placed by the respondents on a Gujarat High Court decision where form SVLDRS-3 had been issued and payment failed for reasons attributable to the declarant or the banking system was distinguishable on facts. There being no fault on the part of the petitioner and no issuance of SVLDRS-3, the requirement to pay with interest at 9% was not imposed. [Paras 5, 7, 8]

No interest at 9% payable by the petitioner as the statutory payment obligation had not been triggered by issuance of SVLDRS-3.

Final Conclusion: Rule made absolute: respondents directed to accept the eligible declared amount and extend the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 to the petitioner; no interest at 9% is payable since form SVLDRS-3 was not issued and the statutory payment obligation had not arisen. No order as to costs.

Permissibility to pay under SVLDRS despite failed bank transfer - bona fide attempt to make payment - acceptance of payment and issuance of discharge certificate - interest on belated payment - condonation of delay

Permissibility to pay under SVLDRS despite failed bank transfer - bona fide attempt to make payment - acceptance of payment and issuance of discharge certificate - interest on belated payment - The Petitioner is entitled to be permitted to pay the declared dues under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and to obtain the discharge certificate, despite the earlier payment having been returned by the bank. - HELD THAT: - The Court accepted the undisputed record that Form SVLDRS-3 was issued to the Petitioner, that the deposit period was extended to 30 June 2020, and that the Petitioner effected a payment on 24 June 2020 which was returned by the bank, with supporting bank statements and RTGS acknowledgement not controverted in the reply affidavit. Having regard to the Petitioner's repeated attempts to make payment thereafter, the Petitioner's prompt email response dated 16 July 2020 offering to pay if permitted, and the absence of issuance of a new challan by the Respondents, the Court followed the reasoning in M/s L.G. Chaudhary (supra) that a bona fide attempt to make payment within the stipulated period warrants permitting the declarant to pay and receive the Scheme benefit. For fairness, the Court directed payment to be accepted subject to payment of interest at a specified rate, and ordered issuance of the necessary discharge certificate after compliance. [Paras 10, 11, 12, 13, 15]

Petitioner permitted to deposit the declared amount under the Scheme; upon deposit the Respondents shall issue the necessary discharge certificate.

Condonation of delay - interest on belated payment - The delay in filing the writ petition is condoned and interest on the belated payment is fixed at 6% per annum from 30 June 2020 until date of payment. - HELD THAT: - The Court noted the Petitioner's explanation that multiple attempts were made to effect payment and that it took time to obtain bank documents; having regard to identical factual situation and relief granted in M/s L.G. Chaudhary (supra), the Court exercised discretion to condone delay. Distinguishing the rate of interest awarded in that precedent, the Court considered the facts and directed interest at 6% per annum from 30 June 2020 till actual payment, to be deposited along with the declared amount within the timetable fixed by the Court. [Paras 14, 15]

Delay condoned; interest fixed at 6% per annum from 30 June 2020 until the date of payment.

Final Conclusion: The petition is allowed: the Petitioner shall deposit the declared amount under the SVLDRS-2019 together with interest at 6% per annum from 30 June 2020 within four weeks of the order being uploaded, and thereafter the Respondents shall issue the necessary discharge certificate within four weeks.

Unjust enrichment - refund of service tax - passing on of tax incidence - presumption under Section 12B of the Central Excise Act - paid under protest - credit to Consumer Welfare Fund

Unjust enrichment - passing on of tax incidence - refund of service tax - paid under protest - presumption under Section 12B of the Central Excise Act - Whether the refund could be denied and credited to the Consumer Welfare Fund on the ground of unjust enrichment by reason of alleged passing on of the service tax liability. - HELD THAT: - The Tribunal found that the appellant had not charged the disputed service tax in its invoices and that the amounts were deposited at the investigation stage under protest. In these circumstances the presumption envisaged by Section 12B (that a person who has paid duty is deemed to have passed on its incidence) is not attracted because the prerequisite-charging the tax in the invoice-was not satisfied. The Tribunal held that mere debiting of the amount in the profit and loss account does not establish that the incidence was passed on to customers; an assessee may write back such expenditure or adjust it in capital accounts. On these findings the Tribunal concluded that the case did not establish unjust enrichment warranting credit of the refund to the Consumer Welfare Fund. [Paras 8, 9]

The impugned Order-in-Appeal directing credit of the refund to the Consumer Welfare Fund is set aside and the appellant's refund claim is restored; consequential benefits to the appellant follow.

Final Conclusion: Appeal allowed. The Tribunal set aside the Commissioner (Appeals) order directing credit of the refund to the Consumer Welfare Fund, holding that unjust enrichment was not established where tax was not charged in invoices and amounts were paid under protest; consequential benefits granted to the appellant. A cost was imposed on the appellant's Chartered Accountant to be deposited in the Prime Minister's Cares Fund.

Unjust enrichment - refund of amounts deposited under protest during investigation or adjudication - incidence of tax and passing on - accounting treatment and admissibility of refund - price fixation by government and inability to pass on duty

Unjust enrichment - refund of amounts deposited under protest during investigation or adjudication - Whether the doctrine of unjust enrichment applies to a claim for refund of amounts deposited under protest during the pendency of investigation or adjudication. - HELD THAT: - The Tribunal held that amounts deposited during the pendency of adjudication or investigation are in the nature of a deposit made under protest and therefore are not payment of duty such that the bar of unjust enrichment would apply. The decision rests on consistent precedent from various High Courts and the Tribunal which treat deposits made during investigation/adjudication as refundable without invoking unjust enrichment. Applying that principle to the facts, the amount paid by the appellant while the demand was under challenge qualifies as a deposit made under protest and unjust enrichment cannot be used to deny refund. [Paras 16]

The principle of unjust enrichment does not apply to the refund claim in respect of the amount deposited under protest during investigation/adjudication; refund is allowable on that ground.

Accounting treatment and admissibility of refund - incidence of tax and passing on - Whether the appellant's booking of the deposit as an expense in its Profit & Loss account in 2006-07 precludes refund by establishing that the incidence of tax was passed on to buyers. - HELD THAT: - The Tribunal held that the method of accounting adopted by an assessee does not determine the legal admissibility of a refund claim or conclusively establish that the incidence of tax has been passed on. Reliance was placed on tribunal authorities to the effect that merely recording the duty as an expenditure does not prove that the burden was shifted to customers. Moreover, on the facts the appellant subsequently neutralised that entry by booking the amount as 'recoverable' under current assets in 2016-17 after the appeal was allowed, reinforcing that the earlier accounting entry cannot be treated as conclusive evidence of passing on. [Paras 18]

The accounting entry in 2006-07 does not preclude refund; it does not establish passing on of the incidence of tax for the purpose of denying refund.

Price fixation by government and inability to pass on duty - incidence of tax and passing on - Whether, given that the price of the appellant's goods was fixed by the Government, the appellant could have passed on the incidence of the questioned levy to ultimate buyers. - HELD THAT: - The Tribunal noted that where the sale price of goods is fixed by the Government (for purposes such as subsidy determination and maximum retail price fixation), that fixed price cannot be increased by the producer to pass on an additional duty. On the facts, the Government-fixed pricing mechanism for the appellant's products precluded adjustment of prices to reflect the duty, so the incidence of tax could not have been passed on. The Tribunal followed established precedent recognizing inability to pass on as a factor negating unjust enrichment. [Paras 19]

Because prices were fixed by the Government, the appellant could not have passed on the incidence of the levy to buyers; this supports allowance of the refund.

Final Conclusion: The appeal is allowed. The impugned order rejecting the refund is set aside and the appellant is entitled to refund of the amount deposited under protest together with interest at the applicable rate.

Refund of service tax - burden of tax borne by consumer - refund of credit under Rule 6(3) of Service Tax Rules, 1994 - travelling beyond the show cause notice - application of the law laid down in CCE v. Addison & Company Ltd.

Refund of service tax - application of the law laid down in CCE v. Addison & Company Ltd. - Whether the appellant is entitled to refund of service tax where no service was rendered and the tax incidence was borne by her. - HELD THAT: - The Tribunal found on the material on record - the builder's declarations, the builder's letter confirming payment of service tax and the ST-3 returns filed by the builder - that the service tax liability in respect of advances received from the appellant had been discharged by the builder and the builder had not adjusted or claimed refund of that tax. Relying on the principle in Addison & Company Ltd., that a consumer who has borne the burden of tax is entitled to refund, the Tribunal held that the appellant, having not received any service and having borne the incidence of the tax, is entitled to refund. The Tribunal further observed that the learned Commissioner's conclusion that no provision permits refund in such circumstances was contrary to the law laid down by the Supreme Court and therefore misdirected. [Paras 6, 7]

Appellant entitled to refund of the service tax claimed as she bore the tax burden and no service was provided.

Refund of credit under Rule 6(3) of Service Tax Rules, 1994 - Whether the builder's option under Rule 6(3) to adjust excess credit precludes refund to the appellant where the builder has neither adjusted nor claimed refund. - HELD THAT: - The Tribunal noted that Rule 6(3) permits a builder to take credit where he has refunded payment along with the service tax thereon, but in the present case the builder had declared that it had not adjusted the disputed amount under Rule 6(3) and had not claimed refund. Because the builder had neither refunded the service tax to the appellant nor adjusted/claimed refund for itself, the mechanism under Rule 6(3) did not operate to deny the appellant's claim. The factual finding that the builder had discharged the tax liability and had given a no-objection declaration supported allowing the refund to the appellant. [Paras 6]

Non-operation of Rule 6(3) does not bar refund to the appellant where the builder did not adjust or claim refund and the tax incidence was borne by the appellant.

Travelling beyond the show cause notice - Whether the adjudicating authorities erred by deciding issues beyond the scope of the show cause notice. - HELD THAT: - The show cause notice was confined to the accounting of Rs.2,26,800 as advance service tax not reflected in the builder's ST-3 returns. The Tribunal observed that both the Adjudicating Authority and the Commissioner rejected the entire refund claim, though the show cause notice related only to part of the claim. That departure from the limited notice was held to be improper. Given the builder's declarations, supporting ST-3 returns and admissions on record, the Tribunal treated the overreach as a ground to set aside the impugned decisions and to allow the refund claim. [Paras 5, 7]

Orders below set aside in part because they travelled beyond the scope of the show cause notice; the appellant's claim cannot be rejected on that extraneous ground.

Final Conclusion: The appeal is allowed; the appellant is entitled to the refund of service tax claimed, the orders of the authorities below are set aside for the reasons stated and consequential relief, if any, shall follow as per law.

Penalty under Section 78 - deliberate default - service tax liability on receipt basis - supplementary invoice for collection of tax - transactions recorded in books of account - reasonable cause for failure to pay tax

Penalty under Section 78 - deliberate default - supplementary invoice for collection of tax - transactions recorded in books of account - service tax liability on receipt basis - reasonable cause for failure to pay tax - Whether penalty under Section 78 was rightly imposed on the appellant for not depositing service tax on POP charges - HELD THAT: - The Tribunal found that although service tax was payable w.e.f. 1.6.2007 and the appellant did not deposit tax immediately, the default was not deliberate. On being advised that the service was taxable the appellant issued a supplementary invoice to collect the tax prior to audit, recorded all transactions in the books of account maintained in the ordinary course of business, received the tax amount from the service recipient on 26.08.2009 and deposited the same with the Exchequer on 19.09.2009. There is no evidence of fraud, collusion, willful mis-statement or suppression of facts; the default arose from lack of knowledge and a contested interpretation of the statutory incidence (receipt basis). Given these facts, the essential element required for imposing penalty under Section 78 - a deliberate default with intent to evade payment - was not established. The Tribunal therefore held that imposition of penalty under Section 78 was not justified. [Paras 8, 9]

Penalty under Section 78 set aside as no deliberate default was made out; appellant had taken steps to collect and deposit the tax and transactions were recorded in books of account.

Final Conclusion: The appeal is allowed and the penalty under Section 78 imposed on the appellant is set aside on the ground that there was no deliberate default or intent to evade payment; the appellant issued a supplementary invoice, recorded the transactions and deposited the tax upon receipt.

Disallowance of CENVAT/ISD credit - Liability of ISD vis-a -vis recipient unit - Revenue-neutrality - Wilful suppression and invocation of extended period of limitation - Burden to prove revenue loss

Disallowance of CENVAT/ISD credit - Liability of ISD vis-a -vis recipient unit - Revenue-neutrality - Disallowance of CENVAT credit and recovery from the recipient-appellant was not sustainable. - HELD THAT: - The Tribunal found that the audit which triggered the proceedings related to the Head Office-ISD unit and there is no material on record showing that any show cause notice was issued to the ISD unit for incorrect distribution. The recipient-appellant had consistently stated and the lower authorities did not deny that the Head Office-ISD regularly filed ER-1 returns and discharged service tax liability in cash, and that cash tax paid by the ISD exceeded any credit distributable to the Head Office. Under these circumstances the distribution resulted in a revenue-neutral position and there was no evidence that the recipient unit influenced distribution or engaged in any act of wilful suppression to evade duty. Reliance placed by the lower authorities on Rules 3 and 7 of the CCR, 2004 to deny credit at the recipient's end was held misplaced where the department had knowledge of the distribution at the ISD level and no loss to the revenue was shown. Applying these conclusions, the Tribunal set aside the disallowance and recovery upheld by the lower authorities. [Paras 7, 11]

Disallowance and recovery of CENVAT credit from the recipient-appellant quashed and set aside.

Wilful suppression and invocation of extended period of limitation - Burden to prove revenue loss - Demand based on invocation of the extended period of limitation could not be sustained in absence of evidence of wilful suppression or revenue loss. - HELD THAT: - The Tribunal observed that the only allegation to justify invocation of the extended period was wilful suppression by the recipient, but no supporting material or evidence was placed on record to establish suppression by the appellant. The department had actual knowledge of the ISD distribution from audit, and mere allegation of suppression without proof of resultant revenue loss is insufficient to sustain a time-barred demand. The Tribunal relied on precedents holding that recovery/demand cannot be fastened on the recipient where the ISD's actions are under scrutiny and where the department has not demonstrated loss to the exchequer or suppression by the recipient. [Paras 9, 10, 11]

Invocation of the extended period and resultant demand rejected for want of evidence of wilful suppression and revenue loss.

Final Conclusion: The appeal is allowed: the disallowance and recovery of CENVAT credit from the recipient-appellant are set aside, and the time-barred demand premised on alleged wilful suppression is held unsustainable for lack of evidence, with consequential benefits to the appellant as per law.

Inclusion of compensation in transaction value - extended period of limitation under section 11A(4) - suppression of facts with intent to evade duty - penalty under section 11AC(1)(c) - transaction value / assessable value - remand by higher forum for consideration of limitation

Extended period of limitation under section 11A(4) - suppression of facts with intent to evade duty - Validity of invoking the extended period of limitation under section 11A(4) for the demand raised by the department - HELD THAT: - The Tribunal's finding that the arrangement between the appellant, the buyer (Honda India) and the ultimate purchasers evidenced deliberate nondisclosure was accepted. The Supreme Court had earlier upheld the Tribunal's conclusion on the core valuation issue and relegated the appellant to seek review before the Tribunal only on the limited question of invocation of the extended period. On remand the Tribunal (and the Appellate Tribunal in the present order) examined the contemporaneous records, the nature of the business arrangement whereby goods specially manufactured for the buyer were sold and part consideration was routed as "compensation", and the absence of clear disclosure in statutory returns. The balance sheet entry "compensation from customers" without particulars was held insufficient to negativate the finding of suppression, and the departmental scrutiny which revealed the debit notes dated March 31, 2012 was held to show conscious concealment. In these circumstances the Tribunal concluded that the ingredients of section 11A(4) - namely fraud/ collusion/ wilful misstatement/ suppression with intent to evade duty - were attracted and that the extended five year limitation could be invoked for the period in question. [Paras 18]

Invocation of the extended period of limitation under section 11A(4) was correctly made in the facts of the case.

Penalty under section 11AC(1)(c) - transaction value / assessable value - Sustainability of penalty under section 11AC(1)(c) consequential upon the finding of suppression and extended limitation - HELD THAT: - Section 11AC(1)(c) prescribes penalty where non levy or short levy arises by reason of fraud, collusion, wilful misstatement or suppression of facts. The Tribunal accepted the Commissioner (Appeals)'s and the adjudicating authority's concurrent finding that the amount received as "compensation" formed part of the transaction value of the goods and that there was a concerted arrangement to evade duty by splitting consideration. Given the Tribunal's conclusion that the facts attracted the ingredients for invoking the extended period under section 11A(4), the same factual matrix supports imposition of penalty under section 11AC(1)(c). The appellate process, including the Supreme Court's confirmation on valuation, left the question of penalty and limitation for rehearing; on remand the Tribunal found no error in confirming the penalty. [Paras 19]

Penalty under section 11AC(1)(c) was justified and properly confirmed.

Final Conclusion: The application seeking to set aside invocation of the extended period of limitation and the consequential penalty is rejected: the Tribunal correctly held that the arrangement and nondisclosure attracted section 11A(4) and - on the same factual basis - penalty under section 11AC(1)(c) was maintainable.

Remission of duty - insurance claim and bifurcation of duty - duty on inputs/raw materials versus duty on finished goods - reversal of Cenvat/credit - consequential demand arising from denial of remission - remand for fresh adjudication

Remission of duty - duty on inputs/raw materials versus duty on finished goods - insurance claim and bifurcation of duty - Whether the Commissioner was correct in rejecting the appellant's claim for remission on the ground that the appellant had claimed excise duty on finished goods in the insurance settlement. - HELD THAT: - The Tribunal found on record that the appellant had neither paid excise duty on the finished goods nor made any claim in respect of excise duty on finished goods in the insurance settlement. The documentary material produced before the Tribunal, namely the surveyor's letter and detailed worksheet/chart, showed that the duty included in the insurance claim related to duty on raw materials contained in finished goods, work in progress and inputs, and not duty on the finished goods themselves. As the adjudicating authority had proceeded on an incorrect factual premise (that duty on finished goods was claimed), and the bifurcation showing the nature of duty claimed was not before the adjudicating authority when it rejected the remission claim, the Tribunal concluded that the matter requires fresh consideration by the adjudicating authority in the light of the correct factual position.

Impugned order rejecting remission set aside and matter remitted to the adjudicating authority for fresh adjudication in light of the surveyor's bifurcation and the admitted reversal of input credit.

Consequential demand arising from denial of remission - remand for fresh adjudication - Whether the consequential excise demand upheld by the Commissioner (Appeals) and confirmed in earlier orders, being consequent to the rejection of the remission claim, should stand without reconsideration. - HELD THAT: - The Tribunal held that the consequential demand is directly linked to the earlier rejection of the remission claim. Since the foundational order rejecting remission was set aside for fresh consideration on the basis that the adjudicating authority proceeded on an incorrect factual premise and did not have the detailed bifurcation chart, the consequential demand could not be sustained independently. The Tribunal therefore directed that the consequential appeal also be reconsidered by the appropriate adjudicating authority after fresh determination of the remission claim.

Impugned orders upholding the consequential demand set aside and remitted to the adjudicating authorities for fresh decision consequent upon the reconsideration of the remission claim.

Final Conclusion: Both impugned orders are set aside and the appeals are allowed by remanding the matters to the respective adjudicating authorities to pass fresh orders after considering the surveyor's bifurcation and the admitted reversal of input credit.

Definition of "dealer" under the A.P. VAT Act - concept of "business" and its components (trade, commerce or manufacture) for VAT liability - incidental or ancillary supply of goods in the course of a non-profit educational activity - liability of persons running restaurants, eating houses or hotels under Section 4(9) of the A.P. VAT Act - order passed without jurisdiction as ground for entertaining writ petition despite alternative remedy

Definition of "dealer" under the A.P. VAT Act - concept of "business" and its components (trade, commerce or manufacture) for VAT liability - incidental or ancillary supply of goods in the course of a non-profit educational activity - liability of persons running restaurants, eating houses or hotels under Section 4(9) of the A.P. VAT Act - Whether the petitioner school, run by a public trust for non-profit educational purposes, is a "dealer" under the A.P. VAT Act and liable to VAT in respect of mess/food supplies to resident students for the period 01.04.2005 to 31.12.2005. - HELD THAT: - The Court examined the statutory definition of "dealer" (Section 2(10)) and the definition of "business" (Section 2(6)) in the A.P. VAT Act, noting that a person must "carry on the business of" buying, selling or supplying goods to fall within the definition. The principal activity of the petitioner is imparting education on a non-profit basis under a public trust; maintenance of a hostel and supply of food to resident students is incidental and ancillary to that principal educational activity. The word "hostel" is not included within Section 2(10)(d)'s reference to restaurants, eating houses or hotels. The Court relied on the ratio of the Indian Institute of Technology decision where supply of food in a residential educational institution, being subsidiary, incidental and integral to the academic activity, did not render the institution a "dealer". Applying that reasoning, the supply of food by the petitioner in the hostel, collected by way of mess charges and serving the educational purpose, cannot be treated as commerce or trade constituting business for VAT; consequently Section 4(9) (liability of restaurants/hotels) does not apply to the petitioner in the facts of this case. The assessment under Section 21 and the direction to register as a dealer were therefore held to be beyond the scope of the Act as applied to the petitioner. [Paras 12, 13, 16]

Petitioner is not a "dealer" for the purposes of the A.P. VAT Act in respect of mess supplies to resident students for the period 01.04.2005 to 31.12.2005; the assessment and registration direction are illegal and set aside.

Order passed without jurisdiction as ground for entertaining writ petition despite alternative remedy - Whether the writ petition was maintainable notwithstanding the availability of an alternative statutory remedy of appeal. - HELD THAT: - The Court observed that availability of an alternative remedy does not oust writ jurisdiction where the impugned order is wholly without jurisdiction. Relying on established principles (as stated in Whirlpool and applied in the judgment), the Court found that since the assessment and registration direction were issued to an entity that, on statutory interpretation, did not fall within the definition of "dealer", the impugned order was without jurisdiction. In such circumstances constitutional jurisdiction could be exercised notwithstanding the alternative remedy. [Paras 14, 15, 16]

Writ petition is maintainable despite availability of alternative remedy because the impugned order was passed without jurisdiction.

Final Conclusion: Writ petition allowed: the respondents' direction to obtain dealer registration and the assessment of the petitioner under the A.P. VAT Act for 01.04.2005 to 31.12.2005 are held illegal and set aside; any amount deposited pursuant to that assessment shall be refunded.

Refund of VAT - claim via VAT audit report - expiry of assessment and reassessment period - statutory interest on refund - adjustment of outstanding refund

Refund of VAT - claim via VAT audit report - expiry of assessment and reassessment period - statutory interest on refund - Entitlement of the petitioner to refund of VAT for the year 2007-2008 claimed through the VAT audit report together with statutory interest. - HELD THAT: - The petitioner claimed a refund for the year 2007-2008 through the VAT audit report after contractees had deducted tax at source and the claim was not reflected in the composite scheme return. The Court noted that no assessment or reassessment for the relevant year is pending and that the time limit for assessment and reassessment under the VAT Act has expired. The Court accepted that the claim is squarely covered by earlier decisions of this Court relied upon by the petitioner. In view of the expiration of the assessment period and absence of any pending assessment, the petitioner is entitled to the refund as per the self-assessment return, together with the statutory interest payable on such refund. [Paras 5, 6]

Writ petition allowed; respondents directed to grant the refund due for 2007-2008 as per the self-assessment return together with statutory interest within six weeks from receipt of the order.

Final Conclusion: The petition is allowed and the State is directed to pay the VAT refund claimed for 2007-2008 with statutory interest within six weeks; no costs.

Refund of unutilized input tax credit - claim for refund after expiry of reassessment period - deemed assessment on filing of return under Section 33 of the VAT Act - precedent binding for grant of refund where assessment period expired - statutory interest payable on delayed refund

Refund of unutilized input tax credit - deemed assessment on filing of return under Section 33 of the VAT Act - precedent binding for grant of refund where assessment period expired - statutory interest payable on delayed refund - Petitioner entitled to refund of unutilized input tax credit claimed in the return for 2008-2009 together with statutory interest where no assessment or reassessment was made before expiry of the assessment period. - HELD THAT: - The Court found that after filing the annual return the time limit for assessment or reassessment under the VAT Act had expired and no assessment or reassessment was pending. Applying the principle in the earlier decisions of this Court relied upon by the parties, the consequence of expiry of the statutory period was that the assessment stood finalized on the basis of the return (deemed assessment under Section 33 of the VAT Act), thereby entitling the petitioner to the refund claimed in the return. In view of these findings and the precedents, the authorities were directed to grant the refund due as per the self-assessment return for the year 2008-2009 together with the statutory interest payable on such refund. [Paras 4, 5, 6]

Writ petition allowed; respondents directed to grant the refund due for 2008-2009 with statutory interest within six weeks from receipt of the writ; petition disposed of with no costs.

Final Conclusion: The petition was allowed and the State was directed to pay the refund of the unutilized input tax credit claimed for 2008-2009 along with statutory interest within six weeks; the petition is disposed of with no costs.

Compliance with Section 202 CrPC in complaints under Section 138 NI Act - Admissibility of affidavit evidence under Section 145 NI Act - Magistrate's power to examine documents instead of oral evidence in Section 202 inquiry - Vicarious liability of company directors in proceedings under Section 138 NI Act - Scope of revisional jurisdiction under Section 482 CrPC

Compliance with Section 202 CrPC in complaints under Section 138 NI Act - Magistrate's power to examine documents instead of oral evidence in Section 202 inquiry - Admissibility of affidavit evidence under Section 145 NI Act - Whether the order issuing process dated 13.03.2020 complied with the inquiry required under Section 202 CrPC before proceeding under Section 138 NI Act - HELD THAT: - The Court examined the petition of complaint, the affidavit filed under Section 145 of the Negotiable Instruments Act and the order dated 13.03.2020 in which the Magistrate recorded that he had "Perused the materials on record, affidavit in chief and documents". Having regard to the Larger Bench conclusions that a Magistrate holding an inquiry need not compulsorily examine witnesses and may, in suitable cases, examine documents to be satisfied about sufficiency of grounds, and to the approval in Sunil Todi that evidence of complainant and, in suitable cases, other evidence may be taken on affidavit or by examination of documents, the Court found that absence of the specific phrase "inquiry under Section 202 CrPC" in the order did not ipso facto establish non-compliance. The learned Magistrate's perusal of the complaint, affidavit and documents was held to constitute the exercise contemplated by Section 202 insofar as the record shows satisfaction of the inquiry function prior to issuance of process. The petitioners failed to demonstrate that any alleged non-application of mind produced a failure of justice or false implication arising from lack of the formal recital of enquiry.

No interference with the order issuing process; the proceedings under Section 138 may continue as the requisite inquiry under Section 202 CrPC was effectively undertaken.

Vicarious liability of company directors in proceedings under Section 138 NI Act - Scope of revisional jurisdiction under Section 482 CrPC - Whether proceedings should be quashed insofar as petitioner no.3 (a director) is concerned on the ground that he was implicated only by reason of directorship - HELD THAT: - The Court applied the principle from S.P. Mani and Mohan Dairy that vicarious liability of directors in complaints under Section 138 is essentially a question of fact. In the absence of unimpeachable additional materials on record to show that petitioner no.3 was implicated without any basis, the Court found no ground to exercise extraordinary revisional jurisdiction under Section 482 CrPC to quash the proceedings against him. The contention that the cheque was signed by petitioner no.2 and that petitioner no.3 was implicated solely due to directorship did not, on the material before the Court, warrant discharge or quashing at this stage.

No interference with continuation of proceedings as regards petitioner no.3; vicarious liability to be determined on merits at trial.

Final Conclusion: The revisional application is dismissed; there is no ground to set aside the order issuing process or to quash proceedings against petitioner no.3, and the criminal proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act shall continue.