TaxTMI Updates e-Newsletter
Feb 05,2021

Provisional attachment of bank accounts under the GST regime - availability of alternate efficacious statutory remedy - objections under Rule 159(5) of the CGST Rules, 2017 - judicial restraint and non-examination of merits where alternate remedy exists

Availability of alternate efficacious statutory remedy - objections under Rule 159(5) of the CGST Rules, 2017 - Petitioners must avail the remedy of filing objections under Rule 159(5) against provisional attachment/freezing of bank accounts instead of seeking writ relief. - HELD THAT: - The Court observed that following search action, provisional attachments were effected and that the statutory scheme provides for filing objections under Rule 159(5). Having regard to the existence of this efficacious alternate remedy, and consistent with earlier orders in similar circumstances, the Court declined to entertain the writ petitions on merits and relegated the petitioners to invoke the statutory procedure. The petitioners were granted liberty and time to file objections and to appear before the designated authority to furnish documents and information as required under Rule 159(5). The Court emphasised judicial restraint by leaving substantive contentions open for the statutory authority to decide. [Paras 3]

Petitions disposed of without prejudice; petitioners directed to file objections under Rule 159(5) before the Deputy Commissioner, Anti Evasion, CGST East.

Provisional attachment of bank accounts under the GST regime - judicial restraint and non-examination of merits where alternate remedy exists - Authority directed to consider and dispose of the objections filed under Rule 159(5) within a specified time-frame, with merits not examined by the Court. - HELD THAT: - The Court mandated a time bound procedure: the petitioners were to appear and file objections on the specified date and supply information as required; the concerned authority was directed to decide the objections within two weeks of receipt by passing necessary orders after due intimation to the petitioners. The Court expressly refrained from adjudicating the merits and left all contentions open for the authority's consideration, to be decided in accordance with law and uninfluenced by the Court's observations. [Paras 3, 4]

Directed the designated authority to decide the objections under Rule 159(5) within two weeks; clarified that the Court has not examined merits and that parties retain remedies against the authority's order.

Final Conclusion: Writ petitions seeking quashing of Form GST DRC 22 and de freezing of bank accounts were disposed of without adjudication on merits; petitioners granted liberty to file objections under Rule 159(5) before the Deputy Commissioner, Anti Evasion, CGST East, and the authority directed to decide those objections within two weeks, with the Court leaving substantive contentions open.

Return of seized documents not relied upon in the show cause notice - service to assessee of show cause notice together with documents relied upon - right to obtain copies/photocopies of seized records for audit and filing of returns - administrative guidance in master circular on seizure and return of records - duty to record and communicate cogent reasons if seized documents are not returned

Return of seized documents not relied upon in the show cause notice - administrative guidance in master circular on seizure and return of records - Seized documents/records which are not relied upon in the show cause notice are to be returned to the person from whom they were seized. - HELD THAT: - The Court noted the master circular (referred to in the petition) which directs that a show cause notice and the documents relied upon in it should be served on the assessee for initiation of adjudication, whereas documents/records not relied upon in the show cause notice are to be returned under proper receipt. Applying this administrative guidance and the principle that once a show cause notice is issued only the records relied upon need to be retained for adjudication, the Court held that documents not relied upon ought to be returned to the writ applicants so that they can carry on their business and comply with audit and filing obligations. [Paras 6]

Documents/records not relied upon in the show cause notice should be returned to the party, in accordance with the master circular.

Right to obtain copies/photocopies of seized records for audit and filing of returns - duty to record and communicate cogent reasons if seized documents are not returned - Respondent is directed to consider the representation seeking return or provision of photocopies of the seized documents and to communicate a decision; if documents cannot be returned, cogent reasons must be recorded and communicated. - HELD THAT: - The Court observed that the writ applicants had repeatedly sought return or copies of seized records and specifically referred to a representation dated 21.12.2020. Rather than adjudicating factual minutiae itself, the Court directed respondent No.2 to examine that representation and take an appropriate decision in accordance with law within one week of communication of the order. The Court emphasised that if the authority decides not to return the documents sought, it must assign cogent reasons in writing so that the applicants may pursue available legal remedies. [Paras 7, 9]

Respondent to consider the representation and decide within one week; if documents are not returned, provide cogent written reasons to the writ applicants.

Final Conclusion: Writ petition disposed with directions to respondent No.2 to consider the representation dated 21.12.2020 and, in accordance with the master circular and law, either return documents not relied upon in the show cause notice or supply copies, and if documents are not returned, to communicate cogent reasons in writing within one week; direct service of the order permitted.

Direction to consider representation - speaking order after hearing - transitional application of indirect tax regime to pre-existing contracts - tax deduction at source in respect of running bills under transitional contracts - equal treatment of contractors engaged by State-owned corporations and other State departments

Direction to consider representation - speaking order after hearing - The petition that the representation dated 02.01.2021 be considered and decided by the appropriate authority - HELD THAT: - The High Court did not adjudicate the substantive merits of the tax contentions raised in the representation. Having noted that the petitioner had filed a comprehensive representation with supporting documents, the Court directed the Chief Secretary, Government of Madhya Pradesh, to decide the representation by a speaking order and to afford the petitioner an opportunity of hearing. The direction is procedural and remedial in nature, requiring a fresh administrative decision within a prescribed timeframe rather than pronouncing on the legal issues raised in the representation.

Chief Secretary directed to decide the petitioner's representation by a speaking order after providing opportunity of hearing within three months from production of the order.

Transitional application of indirect tax regime to pre-existing contracts - tax deduction at source in respect of running bills under transitional contracts - equal treatment of contractors engaged by State-owned corporations and other State departments - Substantive questions concerning whether GST applies to contracts entered into before 01.07.2017, the consequence of GST vis-a -vis earlier VAT regime, and the practice of TDS deduction from running bills - HELD THAT: - These substantive tax issues were not finally adjudicated by the Court. The petitioners contended that implementation of GST from 01.07.2017 imposed additional liability on contractors under contracts executed prior to that date, and that TDS practices changed after the transition. The Court observed examples of State-owned corporations (MP Urban Development Corporation Limited and M.P. Road Development Corporation Limited) adopting measures to address GST impact, but did not resolve the legal questions on the merits. Instead, the Court remitted consideration of the representation - which encapsulates these contentions - to the administrative authority for decision. Thus, the legal controversies remain open for determination by the competent authority upon hearing the petitioner.

Substantive issues concerning transitional application of GST and TDS practices were left for fresh consideration by the administrative authority and were not decided on merits by the Court.

Final Conclusion: Writ petition disposed of by directing the Chief Secretary, Government of Madhya Pradesh, to decide the petitioner's representation dated 02.01.2021 by a speaking order after hearing the petitioner, within three months from production of a copy of this order; substantive tax issues raised in the representation were not decided and stand referred to the authority for fresh consideration.

Quashing of trade notice requiring payment of IGST - refund of IGST paid - effect of amendment to Section 49 with insertion of Section 49A and 49B and Rule 88A on utilization of IGST credit - reversal of electronic credit ledger entries to facilitate refund - application of precedent in M/s. Prince Spintex Pvt. Ltd.

Quashing of trade notice requiring payment of IGST - refund of IGST paid - effect of amendment to Section 49 with insertion of Section 49A and 49B and Rule 88A on utilization of IGST credit - reversal of electronic credit ledger entries to facilitate refund - application of precedent in M/s. Prince Spintex Pvt. Ltd. - Writ petition allowed and direction issued for refund of IGST paid after reversal of subsequent utilization entries created by operation of amended CGST provisions - HELD THAT: - The Court accepted the petitioners' contention, noting that the question raised was squarely covered by this Court's earlier decision in M/s. Prince Spintex Pvt. Ltd. The Court observed that subsequent amendments to Section 49 (and insertion of Sections 49A, 49B and Rule 88A) effected a change in the order of utilization of IGST credit w.e.f. 01/02/2019, and that the GST portal began operating under the amended mechanism from 01/06/2019, causing automatic utilization of the petitioners' accumulated IGST credit and corresponding inflation of CGST/SGST balances during the pendency of the writ. Despite that automatic appropriation, the Court held that the petitioners remain entitled to the refund claimed and directed the respondents to reverse the entries reflecting utilization of the IGST credit and debit the corresponding amount from the credit ledger available to the petitioners so the refund can be sanctioned. The Court ordered that this exercise be completed within four weeks from receipt of the order.

The writ is allowed; respondents to reverse the utilization entries and sanction refund of the IGST claimed (Rs. 3,37,79,196/-) within four weeks.

Final Conclusion: Writ petition allowed; respondents directed to reverse appropriation of IGST credit effected under the amended CGST regime and to sanction the refund of the IGST claimed within four weeks.

Refund of unutilised input tax credit - prospective operation of circular - no retrospective application of circular/notification - statutory interest on delayed refund - maintainability of writ remedy where Tribunal is not constituted

Prospective operation of circular - no retrospective application of circular/notification - Circular No.14/14/2017-GST dated 06.11.2017 and the related notification do not apply retrospectively to transactions entered into prior to their issuance. - HELD THAT: - The Court accepted the Department's categorical assertion that the circular came into effect on 06.11.2017 and therefore cannot be applied retrospectively to transactions which occurred before that date. The circular and notification were held to operate prospectively from their respective effective dates and could not be used to impose retrospective compliance requirements on the assessee. Consequently, the procedural requirements introduced by that circular/notification are inapplicable to refund claims relating to the period prior to 06.11.2017. [Paras 7, 10]

The circular/notification do not govern transactions prior to 06.11.2017 and cannot lawfully justify denial of the refund claimed for July to October, 2017.

Refund of unutilised input tax credit - statutory interest on delayed refund - The petitioner is entitled to the refund of unutilised input tax credit for the period July to October, 2017 and to statutory interest for delayed payment; the impugned order refusing refund was set aside and respondents directed to pay refund with interest within two weeks. - HELD THAT: - Applying the conclusion that the circular/notification did not apply to the relevant period, the Court found no lawful impediment to the grant of refund for the specified period. The impugned appellate order denying refund was quashed and respondents were directed to sanction and disburse the refund along with any statutory interest that may be payable, within a specified short timeframe, thereby providing the substantive relief sought by the petitioner. [Paras 3, 10, 11]

Impugned order dated 03.01.2020 set aside; respondents directed to effect refund of unutilised ITC for July to October, 2017 with statutory interest within two weeks of service of certified copy of the order.

Maintainability of writ remedy where Tribunal is not constituted - In the absence of a constituted Appellate Tribunal, the petitioner was not remediless and was entitled to approach the High Court by writ petition. - HELD THAT: - The Court observed that although an appeal against the impugned order lies to the Appellate Tribunal, the non-constitution of the Tribunal means the petitioner would have no effective remedy before that forum. The High Court therefore accepted the petitioner's invocation of writ jurisdiction and entertained the challenge to the appellate order. [Paras 5]

Petitioner entitled to approach the High Court in view of the Tribunal not being constituted; writ petition entertained.

Final Conclusion: Writ petition allowed: the appellate order refusing refund dated 03.01.2020 is quashed; respondents directed to sanction and disburse the refund of unutilised input tax credit for July to October, 2017 together with statutory interest within two weeks; Circular No.14/14/2017-GST and the related notification operate prospectively and do not apply to transactions prior to 06.11.2017; High Court jurisdiction was appropriately invoked as the Appellate Tribunal was not constituted.

Grant of bail - Release on furnishing personal recognizance bond and local surety - Bank guarantee as condition for bail - Offence under the Central Goods and Services Tax Act involving alleged wrongful availment of input tax credit - Nature of offence triable by Magistrate and sentence as factor in bail - Restriction on leaving the country without permission - Obligation to make oneself available for investigation and not to tamper with evidence

Grant of bail - Nature of offence triable by Magistrate and sentence as factor in bail - Release on furnishing personal recognizance bond and local surety - Bank guarantee as condition for bail - Obligation to make oneself available for investigation and not to tamper with evidence - Application for bail by the accused charged in proceedings under the Central Goods and Services Tax regime - HELD THAT: - The Court examined whether the applicant should be detained pending trial for an offence alleging wrongful availment of input tax credit. Noting that the offence attracts imprisonment which may extend to five years but is triable by a Magistrate, and that the applicant had been in custody for over a month, the Court observed that there was no argued apprehension of tampering with evidence or of absconsion. The Court recorded the applicant's readiness to cooperate and appear when required. Balancing these factors, the Court held that the applicant could be released on bail subject to stringent conditions to secure attendance and prevent interference with the prosecution, including furnishing a personal recognizance bond with a local surety, deposition of a bank guarantee, restriction on leaving the country without permission, provision of address and contact details, availability to the investigating authority on notice, and a prohibition on tampering with evidence. The Court expressly refrained from adjudicating the substantive tax liability or questions relating to adjudication under the statutory procedure for determination of wrongful availment of input tax credit, recording that its observations are confined to the grant of bail and shall not prejudice the trial court. [Paras 6, 7, 8, 9, 10]

Bail allowed subject to conditions: furnishing PR bond with one local surety, deposit of bank guarantee within four weeks, prohibition on leaving India without permission, provision of contact details, requirement to be available to authorities on notice, and not to tamper with prosecution evidence; observations confined to bail and not to affect trial.

Final Conclusion: The criminal application for grant of bail is allowed; the applicant is directed to be released on bail subject to specified conditions, and the Court's observations are restricted to the bail grant and shall not prejudice the trial on merits.

Applicability of Section 14A where no exempt income has accrued - Comparability adjustments under Rule 10B(1)(e)(iii) and Rule 10B(3) for differences in accounting policies (depreciation) - Exclusion of depreciation from cost base where depreciation has no bearing on benchmarked captive service transactions

Applicability of Section 14A where no exempt income has accrued - Whether Section 14A applies to the assessee where no exempt income has accrued - HELD THAT: - The Court held that where no exempt income has accrued to the assessee, the provisions of Section 14A do not apply. The Court examined earlier decisions relied upon by the revenue and observed that the authority principally relied upon (MAXOPP INVESTMENT LTD.) did not deal with the applicability of Section 14A to situations where no exempt income had accrued. Having regard to subsequent affirmations of the contrary view by higher courts, the Court agreed with the view that Section 14A is not attracted when there is no exempt income, and accordingly deleted the disallowance under Section 14A in the facts of this case. [Paras 6]

Section 14A does not apply because no exempt income accrued; the disallowance under Section 14A is deleted.

Comparability adjustments under Rule 10B(1)(e)(iii) and Rule 10B(3) for differences in accounting policies (depreciation) - Exclusion of depreciation from cost base where depreciation has no bearing on benchmarked captive service transactions - Whether depreciation may be adjusted/excluded for comparability purposes under Rule 10B when the assessee's accounting policy (higher depreciation rate) materially affects net margins vis-a -vis comparables - HELD THAT: - The Court analysed Rule 10B which prescribes the manner of conducting comparability under the transactional net margin method. Rule 10B(1)(e)(i) requires computing the taxpayer's net margin with regard to an appropriate base; sub-clause (ii) requires the same base for comparables; and sub-clause (iii) mandates adjustments to the comparables' net margins to eliminate differences likely to materially affect margins. Rule 10B(3) similarly allows considering an uncontrolled transaction comparable if differences are unlikely to materially affect profit or can be reasonably adjusted. Given that the assessee applied a higher rate of depreciation than the selected comparables, the Court found a definite impact on net margins and concluded that adjustments to eliminate accounting-policy differences were required. The Court further accepted that in the benchmarked international transaction (sales by a captive service provider to its associated enterprise), depreciation would have no bearing and could be excluded from the cost base. The Tribunal's reliance on the Market Research Tools decision in allowing such treatment was held not to be perverse. [Paras 7, 8, 9]

Depreciation differences that materially affect net margins must be adjusted under Rule 10B; exclusion of depreciation from the cost base is permissible where depreciation has no bearing on the benchmarked captive service transaction; the Tribunal's direction is not perverse.

Final Conclusion: The appeal is dismissed. The Court answered the questions of law in favour of the assessee: Section 14A is inapplicable as no exempt income accrued, and the Tribunal's approach permitting adjustment/exclusion of depreciation under Rule 10B for comparability was upheld.

Exclusion of comparables on functional dissimilarity - perversity standard for appellate interference with findings of fact - Related Party Transaction (RPT) filter in transfer pricing comparability - turnover as a comparability criterion in transfer pricing for service providers - Rule 10B(3) enquiry for elimination of material differences and Rule 10B(4) multiple year data

Exclusion of comparables on functional dissimilarity - perversity standard for appellate interference with findings of fact - Validity of the Tribunal's exclusion of certain comparables on the ground of functional dissimilarity - HELD THAT: - The Court found the first substantial question imprecise for not identifying the specific companies challenged, but proceeded to examine the Tribunal's reasoning. The Tribunal recorded cogent findings in paras 11.1-11.8 (ITE services) and paras 12-13 (SWD services) explaining why those entities were functionally dissimilar to the assessee. The revenue did not establish that those factual findings were perverse nor placed material on record demonstrating perversity. In the absence of perversity, appellate interference with the Tribunal's factual conclusions was inappropriate. Consequently the Tribunal's exclusion of the comparables on the stated factual grounds was upheld. [Paras 7]

First substantial question answered against the revenue; the Tribunal's factual findings upholding exclusion of the comparables are sustained.

Related Party Transaction (RPT) filter in transfer pricing comparability - turnover as a comparability criterion in transfer pricing for service providers - Rule 10B(3) enquiry for elimination of material differences and Rule 10B(4) multiple year data - Whether the Tribunal erred in excluding comparables on the basis of RPT filter or turnover filter such that the substantial questions framed required determination - HELD THAT: - The Court observed that the Tribunal did not apply the RPT filter and, in fact, rejected its applicability (see Tribunal para 11.4). Given that the Tribunal's decision did not rest on the RPT filter, the second substantial question regarding RPT thresholds and the third regarding turnover as a filter did not arise for adjudication in the present factual matrix. The submissions about Rule 10B(3) and Rule 10B(4) and the request for remand were considered unnecessary because the Tribunal's reasons on comparability were factual and unchallenged for perversity. [Paras 8]

Second and third substantial questions do not arise on the facts of this case; no interference warranted.

Final Conclusion: The revenue's appeal is dismissed; the Tribunal's exclusion of the specified comparables on factual grounds of functional dissimilarity is sustained and the other framed substantial questions were held not to arise on the record.

Condonation of delay - extension of limitation by CBDT Circular - e-filing requirement under IT rules - substantive right of appeal - remittance to Commissioner (Appeals) for disposal on merits

Condonation of delay - extension of limitation by CBDT Circular - e-filing requirement under IT rules - substantive right of appeal - remittance to Commissioner (Appeals) for disposal on merits - Whether the Tribunal was justified in treating the belated e-appeal as within time by applying the CBDT circular, condoning delay and remitting the matter to the CIT(A) for decision on merits. - HELD THAT: - The Court followed its earlier decision in The Commissioner of Income Tax v. A.A. Antony (TCA.No.432 of 2020) and applied the reasoning therein. Noting that the CBDT Circular (Circular No.20/2016) operated as a one-time remedial measure at the relevant time, the Court held that the substantive right of appeal should not be defeated on a technicality where the circular extended the e-filing timelines and the procedural mechanism was nascent. The Court observed that directing the assessees back to the CIT(A) to file fresh condonation applications would cause unnecessary multiplicity of litigation and be unduly harsh, given the factual situation in 2016 when the e-filing regime was being rolled out. For these reasons the Tribunal's discretion in favour of the assessees was upheld and the appeals were remitted to the CIT(A) to be decided on merits in accordance with law. [Paras 4, 5]

The appeal is dismissed; the Tribunal's order condoning delay and remitting the matter to the CIT(A) is upheld and the case is to be heard and decided on merits by the CIT(A).

Final Conclusion: The Revenue's appeal is dismissed; following the Court's precedent and in view of the CBDT circularal relief at the relevant time, the Tribunal's exercise of discretion to condone delay is upheld and the matter is remitted to the Commissioner of Income Tax (Appeals) for adjudication on merits in accordance with law.

Pre-deposit for filing statutory appeal - modification of pre-deposit direction - principles of natural justice and opportunity to be heard - exercise of writ jurisdiction under Article 226 where alternative remedy is available - discretion of appellate authority to fix pre-deposit amount

Exercise of writ jurisdiction under Article 226 where alternative remedy is available - Whether the High Court should exercise writ jurisdiction under Article 226 to quash the assessment order when an appeal against the order has already been filed - HELD THAT: - The Court declined to entertain the challenge to the assessment order under Article 226 because the petitioner had availed the statutory remedy of appeal. The petitioner's remedy by way of appeal renders writ relief inappropriate in the discretionary jurisdiction of the High Court; the petitioner was directed to prosecute the appeal before the appellate authority in accordance with law. The Court therefore refused to set aside the assessment order in exercise of its writ jurisdiction and left the substantive challenge to the appellate forum. [Paras 5]

Petition challenging the assessment order not entertained under Article 226; petitioner to prosecute the appeal.

Pre-deposit for filing statutory appeal - principles of natural justice and opportunity to be heard - discretion of appellate authority to fix pre-deposit amount - modification of pre-deposit direction - Whether the appellate authority's direction to the petitioner to deposit 20% as pre-deposit should be maintained having regard to the contention that the assessment was passed without affording adequate opportunity - HELD THAT: - The Court examined the factual matrix showing a short window between service of notice and the deadline to furnish information, and the subsequent passing of the assessment. While noting that the contention about inadequate opportunity and breach of natural justice is one for the appellate authority to consider on the record, the Court applied its supervisory discretion to moderate the pre-deposit directed by the appellate authority. Recognising that the appellate authority has discretion to fix a pre-deposit and that it need not be a rigid 20%, the Court found the 20% pre-deposit harsh on the facts presented and accordingly reduced the pre-deposit amount. The appellate authority's decision to require a pre-deposit was not wholly set aside; it was modified to a lower percentage to temper hardship while preserving the appellate process. [Paras 6, 7, 9]

Order directing deposit of 20% as pre-deposit modified to require deposit of 10% of the liability.

Final Conclusion: Writ petition disposed: challenge to assessment not entertained in view of available appeal; pre-deposit direction reduced from 20% to 10% and petitioner directed to prosecute appeal.

Reading of sub Sections (1) and (2) of Section 92A together - associated enterprise - application of transfer pricing / international transaction provisions where associated enterprise tests are satisfied - Section 92A(2)(g) - dependence on know how, licences or exclusive rights - avoidance of rendering statutory provisions otiose

Reading of sub Sections (1) and (2) of Section 92A together - associated enterprise - Section 92A(2)(g) - dependence on know how, licences or exclusive rights - application of transfer pricing / international transaction provisions where associated enterprise tests are satisfied - Whether the provisions of Section 92A apply to the assessee's transactions or whether sub Sections (1) and (2) must both be satisfied so that transfer pricing adjustments could be made. - HELD THAT: - The Court examined the legislative history and the Memorandum to the Finance Bill, 2002 which clarified the scope of sub section (2) and confirmed that mere participation in management, control or capital does not automatically make enterprises associated unless the criteria of sub section (2) are satisfied. The text of sub sections (1) and (2) of Section 92A are interlinked and must be read together; treating them independently would risk rendering one provision otiose, which is impermissible. The Tribunal had found that the assessee did not satisfy the requirements of sub section (1) and therefore the provisions of Section 92A were not attracted; that finding was not challenged by the revenue. In those circumstances, the Tribunal's conclusion that the transfer pricing provisions did not apply to the transactions in question was correct and should be upheld. [Paras 9, 10]

Sub sections (1) and (2) of Section 92A must be read together; since the assessee did not meet the requirement of sub section (1) and that finding was unchallenged, the transfer pricing provisions did not apply and the Tribunal's order was upheld.

Final Conclusion: The substantial question of law is answered against the revenue and in favour of the assessee; the appeal is dismissed.

Exception to Tax Deduction at Source for income paid by a co-operative society to its members - Provisions of Section 194A(1) of the Income-tax Act and its non-application under Section 194A(3) - Effect and prospective operation of the Finance Act, 2015 amendment restricting exemption to co-operative societies other than co-operative banks - Principle that withdrawal of an appeal does not attract res judicata

Exception to Tax Deduction at Source for income paid by a co-operative society to its members - Provisions of Section 194A(1) of the Income-tax Act and its non-application under Section 194A(3) - Whether the provisions for deduction of tax at source under Section 194A(1) applied to interest paid by a co-operative bank to its members for Assessment Year 2012-2013. - HELD THAT: - The Court examined the statutory scheme as it stood for the Assessment Year 2012-2013 and noted that sub-clause (v) of the provisional exceptions in sub-section (3) of Section 194A excluded income credited or paid by a co-operative society to a member thereof from the operation of Section 194A(1). On that basis the CIT(A) and the ITAT correctly held that interest paid by the co-operative society to its members was not subject to TDS even where individual payments exceeded the monetary threshold. The Court accepted that position and found no error in the conclusions of the lower authorities. [Paras 11, 13]

Answered against the Revenue and in favour of the Assessee; no liability to deduct tax at source in respect of interest paid by the co-operative society to its members for AY 2012-2013.

Effect and prospective operation of the Finance Act, 2015 amendment restricting exemption to co-operative societies other than co-operative banks - Whether the amendment by the Finance Act, 2015 excluding co-operative banks from the exception applies to Assessment Year 2012-2013. - HELD THAT: - The Court observed that the Finance Act, 2015 amendment, which took effect from 01.06.2015 and restricted the exemption so that it would not cover co-operative banks, is a subsequent legislative change and therefore does not apply to the Assessment Year 2012-2013. The fact that the legislature later excluded co-operative banks was noted as supporting evidence that prior to the amendment co-operative banks enjoyed the benefit of the exception. [Paras 12]

The 2015 amendment does not affect the tax position for AY 2012-2013; the earlier exemption continued to apply for that year.

Principle that withdrawal of an appeal does not attract res judicata - Whether prior withdrawal by the Revenue of appeals in respect of related assessment years precludes the assesee from obtaining a favourable decision for Assessment Year 2012-2013. - HELD THAT: - The Court recorded the respondent's submission that appeals for AYs 2013-14 and 2014-15 had been withdrawn by the Revenue and that inconsistent decisions should be avoided. The Court noted the Revenue's reliance on that history but accepted the appellant's submission that the principle of res judicata is not attracted by the earlier withdrawals and that those withdrawals do not bar adjudication of the present appeal on its own merits. Consequently the Court proceeded to decide the substantial question framed for AY 2012-2013. [Paras 6]

Withdrawal of the Revenue's earlier appeals does not operate as res judicata to preclude a decision for AY 2012-2013; the present appeal was adjudicated on its merits.

Final Conclusion: The substantial question of law framed was answered against the Revenue and in favour of the Assessee for Assessment Year 2012-2013; the appeal is dismissed with no order as to costs.

Revisionary powers under section 263 - erroneous and prejudicial to the interest of the revenue - application of mind by the Assessing Officer - acceptance of valuation report as on the relevant date - two possible views doctrine

Revisionary powers under section 263 - erroneous and prejudicial to the interest of the revenue - application of mind by the Assessing Officer - acceptance of valuation report as on the relevant date - two possible views doctrine - Validity of the Pr. CIT's exercise of revisionary jurisdiction under section 263 in setting aside the assessment for A.Y. 2010-11 - HELD THAT: - The Tribunal held that the power under section 263 can be exercised only if the assessment order is both erroneous (contrary to law) and prejudicial to the revenue, and cannot be invoked where the Assessing Officer (AO) has applied his mind and taken one of two plausible views. The record showed that two valuation reports were filed, one valuing the property as on 15.12.2012 and a subsequent report valuing it as on 31.03.2010 (the year under consideration). The AO accepted the valuation that was correctly dated to the relevant valuation date and made enquiries regarding construction cost during scrutiny; therefore the AO had applied his mind and taken a permissible view. Reliance placed in the proceedings on earlier decisions including Toyota Motor Corporation, Shri Bhram Dev Gupta and CIT v. Anil Kumar supports the principle that section 263 cannot be used to substitute the Commissioner's view where the AO has conducted enquiry and arrived at a possible view. Given the presence of adequate enquiries and the AO's acceptance of the valuation relevant to the assessment year, the Tribunal concluded that the Pr. CIT erred in exercising revisional jurisdiction and in substituting his view for that of the AO. [Paras 18, 19, 20, 21, 22]

Order passed by the Pr. CIT under section 263 setting aside the assessment was not sustainable; the AO's assessment dated 31.03.2010 framed under section 143(3) is restored.

Final Conclusion: The Tribunal allowed the appeal, set aside the order of the Pr. CIT dated 31.03.2015, and restored the assessment order of the Assessing Officer dated 31.03.2010 for A.Y. 2010-11.

Reopening of assessment and limitation under the First proviso to section 147 - reassessment on mere change of opinion - disclosure of primary facts / failure to disclose fully and truly all material facts - addition under section 68 - unexplained share capital - addition under section 69C - unexplained expenditure (commission)

Reopening of assessment and limitation under the First proviso to section 147 - reassessment on mere change of opinion - disclosure of primary facts / failure to disclose fully and truly all material facts - Validity of reopening the assessment under section 147 read with the First proviso where original assessment was completed under section 143(3). - HELD THAT: - The Tribunal found that the assessee had disclosed, at the time of the original assessment order dated 14.12.2011, full details of share application money received from 11 parties along with confirmations, bank statements and income tax records which were examined by the A.O. during original assessment. The reasons recorded for reopening relied on information from the Investigation Wing but did not show any failure by the assessee to disclose material facts at the original assessment. Applying settled precedents that reassessment cannot be based on a mere change of opinion and that the assessee is required to disclose only primary facts, the Tribunal held that there was no valid ground under the First proviso to section 147 to reopen the assessment after four years. The A.O. failed to apply independent mind to the material already on record and to the assessment records of the investor entities whose assessments had been completed earlier, and therefore the reopening was held to be void ab initio. [Paras 6]

Reopening of the assessment is quashed as based on mere change of opinion and contrary to the First proviso to section 147; there was no failure to disclose fully and truly all material facts.

Addition under section 68 - unexplained share capital - addition under section 69C - unexplained expenditure (commission) - Validity of additions made under section 68 (share capital) and section 69C (commission) consequent to the reassessment. - HELD THAT: - Since the Tribunal quashed the reopening of assessment as invalid, the consequential additions under section 68 and section 69C could not stand. The A.O.'s addition of Rs. 95 lakhs as unexplained share capital and the addition of commission as unexplained expenditure were founded on the reopened proceedings; with reopening void, those additions were deleted. [Paras 6, 7]

Additions under section 68 and section 69C set aside; appeal allowed.

Final Conclusion: The reassessment notice and subsequent reopening were quashed as founded on a mere change of opinion and barred by the First proviso to section 147; consequential additions under section 68 and section 69C were deleted and the assessee's appeal was allowed.

Allowability of expenditure under section 37(1) of the Income Tax Act - Explanation 1 to section 37(1) - distinction between penal and compensatory payments - diversion of income by overriding title - application of income as business expenditure where payment is a precondition to resume business - compensatory payment for implementation of R&R plans and transfer to Special Purpose Vehicle (SPV) - Supreme Court's remedial directions under Article 32 and Article 142 and their effect on characterization of payments

Special Purpose Vehicle (SPV) contribution - allowability of expenditure under section 37(1) of the Income Tax Act - diversion of income by overriding title - Explanation 1 to section 37(1) - penal versus compensatory - Contribution of 15% of sale proceeds to SPV retained by the Monitoring Committee is allowable as business expenditure. - HELD THAT: - The Tribunal examined whether the 15% SPV contribution (Category B) is a penal payment hit by Explanation 1 to section 37(1) or a business expenditure allowable under section 37. Applying the principle in Sitaldas Tirathdas concerning diversion by overriding title, the Tribunal held that the entire sale proceeds accrued to the assessee and the obligation to contribute to SPV arose as a precondition imposed by the Supreme Court to enable resumption of mining. The contribution was characterised as a guarantee payment necessary for implementing R&R plans and for resuming and continuing the business; the funds were directed to be used by the SPV for ameliorative and mitigative measures. Reliance was placed on coordinate decisions (including Ramgad, Veerabhadrappa Sangapa, and NMDC) which reached the same conclusion. For these reasons the contribution was treated as an application of income incidental to carrying on business and not as a penalty within Explanation 1 to section 37(1).

Ground No.2 allowed; SPV contribution of 15% of sale proceeds held allowable as expenditure under section 37(1).

Compensatory payment for illegal mining and overburden dumps - allowability of expenditure under section 37(1) of the Income Tax Act - Explanation 1 to section 37(1) - penalty versus compensation - Supreme Court directions as determinative of nature of payment - Amounts retained/paid as compensatory payment for illegal mining and for implementation of R&R plans are compensatory in nature and allowable as revenue expenditure. - HELD THAT: - The Tribunal considered whether the sums retained by the Monitoring Committee (characterised in some communications as "penalty") were penal or compensatory. Noting the Supreme Court's acceptance of the CEC recommendations and its use of the term "compensation" for payments required for R&R implementation, the Tribunal concluded these payments were intended for remedial, environmental and socio economic measures and were necessary for the assessee to resume mining. Precedents of coordinate benches and the Karnataka High Court supported treatment of such payments as revenue expenditure. Explanation 1 to section 37(1) applies only where the purpose of the expenditure is an offence or prohibited by law; here the purpose was implementation of R&R measures and transfer to SPV for public/environmental objectives, therefore Explanation 1 did not apply and the payments were deductible.

Ground No.3 allowed; compensatory payments retained/paid for R&R and related measures held allowable as revenue expenditure under section 37(1).

Final Conclusion: The Tribunal allowed the appeal: the SPV contribution (15% of sale proceeds) and the compensatory payments retained/paid for implementation of R&R plans were held to be compensatory/application of income and allowable as expenditure under section 37(1); the additions disallowing these amounts were deleted and the appeal was allowed.

Exclusive jurisdiction under section 245F(2) - abatement of settlement application - revival of assessment proceedings upon abatement - condonation of delay - maintainability of appeal - rectification under section 254(2) - restoration to the file of the first appellate authority

Rectification under section 254(2) - maintainability of appeal - exclusive jurisdiction under section 245F(2) - Whether the Tribunal's order setting aside the CIT(A)'s order and restoring appeals to the file of the CIT(A) required rectification on the ground that the Settlement Commission had exclusive jurisdiction and therefore the appeals were not maintainable. - HELD THAT: - The Revenue raised for the first time before the Tribunal a contention that, by virtue of the admission of the assessee's settlement applications and pendency of proceedings under section 245D(4), the Settlement Commission had exclusive jurisdiction and the CIT(A) had no appealable order. The Tribunal had condoned delay and restored the appeals to the file of the CIT(A) without deciding them on merits. The Bench found that these jurisdictional/contention pleas were not pressed before the Tribunal when the appeals were heard and are raised for the first time in the Miscellaneous Applications seeking rectification. A rectification under section 254(2) is confined to obvious and patent mistakes and cannot be invoked to re-open debatable questions or matters requiring extended reasoning. Because the Revenue's objections amounted to fresh, debatable contentions (and were not shown to be an obvious patent mistake in the Tribunal's order), they were not amenable to correction under section 254(2). Accordingly the plea to recall or rectify the Tribunal's order on this ground was rejected.

Revenue's request to rectify the Tribunal's order on the ground of Settlement Commission's exclusive jurisdiction / non-maintainability of appeals is rejected; rectification under section 254(2) not available for debatable or newly raised contentions.

Condonation of delay - restoration to the file of the first appellate authority - abatement of settlement application - revival of assessment proceedings upon abatement - Whether reliance by the Tribunal on coordinate-bench orders to condone delay and to restore appeals to the CIT(A) was impermissible or amounted to a mistake apparent on the record. - HELD THAT: - The Tribunal had relied on coordinate-bench decisions for the limited purpose of condoning the long delay in filing the appeals and then restored the matters to the CIT(A) with directions; it did not adjudicate the appeals on merits. The Revenue did not challenge the condonation of delay itself. The present applications did not demonstrate that the Tribunal's reliance on coordinate-bench orders was an obvious or patent error; on the contrary, the Tribunal's use of those orders was confined to maintaining judicial consistency in condoning delay. Further, because no merits adjudication was undertaken by the Tribunal, the Revenue suffered no prejudice in substance. The Bench also noted existing practice and interim directions given in group cases where the effect of the High Court's orders on abatement was to be respected. In these circumstances the contention that the Tribunal made an apparent error in following its coordinate bench was rejected.

Revenue's challenge to the Tribunal's reliance on coordinate-bench orders for condonation and restoration is dismissed; the Tribunal's course did not exhibit a patent mistake requiring rectification.

Final Conclusion: All Miscellaneous Applications filed by the Revenue for rectification of the Tribunal's order dated 06.12.2019 are dismissed; the Tribunal's order condoning delay and restoring the appeals to the CIT(A) (without adjudicating merits) is upheld and not liable to recall under section 254(2).

Levy of penalty under section 271(1)(c) for furnishing inaccurate particulars of income - mere disallowance of a deduction claim does not amount to furnishing inaccurate particulars - requirement of a finding by assessing officer on how particulars are inaccurate - effect of subsequent deletion of addition in quantum appeal on penalty proceedings

Levy of penalty under section 271(1)(c) for furnishing inaccurate particulars of income - mere disallowance of a deduction claim does not amount to furnishing inaccurate particulars - Whether penalty under section 271(1)(c) could be sustained where the assessing officer disallowed a deduction under section 80IB(10) but made no specific finding that particulars furnished in the return were inaccurate. - HELD THAT: - The Tribunal examined the assessment and penalty records and found that the Assessing Officer denied the deduction on the ground that the area of the land was less than one acre, a factual conclusion disputed by the assessee. The quantum addition was later deleted in the Tribunal's decision in the related quantum appeal on the basis that entries in the 7/12 extract were not conclusive and the actual area in possession was greater than one acre (para 9). The Tribunal further observed that the AO's penalty proceedings contained only a bald allegation of furnishing inaccurate particulars without any specific finding as to which particulars were inaccurate or in what manner they were incorrect (para 10). Applying settled principles, including the ratio in Reliance Petroproducts Ltd., the Tribunal held that a debatable claim, or a claim which is merely disallowed, does not ipso facto amount to furnishing inaccurate particulars; the authorities must point to particulars that are false, incorrect or erroneous (para 11). Where the addition has been deleted in the quantum appeal, and no positive finding of inaccurate particulars is recorded by the AO, the imposition of penalty under section 271(1)(c) is unsustainable (paras 9-11). [Paras 9, 10, 11]

Penalty under section 271(1)(c) set aside as there was no finding of inaccurate particulars and the addition was deleted in the quantum appeal.

Effect of subsequent deletion of addition in quantum appeal on penalty proceedings - requirement of a finding by assessing officer on how particulars are inaccurate - Whether deletion of the addition in the quantum appeal and absence of specific findings by the AO require cancellation of the penalty already levied. - HELD THAT: - The Tribunal noted that the related quantum appeal was allowed on the ground that the 7/12 extracts were not conclusive and that the actual area warranted acceptance of the assessee's claim (para 9). Given that the addition forming the basis for penalty was deleted, and the AO had not recorded particulars that were inaccurate, the Tribunal held that the preconditions for sustaining a penalty under section 271(1)(c) were not satisfied. The Tribunal further rejected reliance by lower authorities on contrary High Court decisions as misplaced in the facts of this case where the AO's order lacked the necessary findings and the quantum addition was reversed (paras 11-12). [Paras 9, 12, 13]

Order of penalty cancelled and AO directed to delete the penalty levied under section 271(1)(c).

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) for assessment year 2007-08 is set aside because the addition was deleted in the quantum appeal and the Assessing Officer made no specific finding that the particulars furnished were inaccurate.

Deduction under section 37(1) - real income theory - prior period income reversal - CENVAT credit not available for amounts collected on behalf of AAI - allowability under section 43B - compensatory interest deductible - capital expenditure vs revenue expenditure - aborted project expenditure as revenue - TDS credit verification

Deduction under section 37(1) - real income theory - prior period income reversal - CENVAT credit not available for amounts collected on behalf of AAI - Reversal of amounts earlier offered as prior period income on account of presumed CENVAT credit is allowable as deduction in the impugned year where such income was not actually received by the assessee. - HELD THAT: - The Tribunal found that service-tax-related CENVAT credit on PSF/UDF and advertisement had been allowed as expenditure in earlier years and subsequently credited to prior period income in later years when the assessee, anticipating entitlement, created a CENVAT asset. On receiving legal advice that the credit was not the assessee's entitlement (being payable to AAI and merely collected by the assessee), the assessee reversed the prior-period income in the impugned year. Applying the real income theory, the Tribunal held that an item wrongly offered as income in earlier years which was never actually received can be reversed and allowed as deduction in a subsequent year because there was no real income to tax. The allowance was made subject to verification that the assessee has in fact forgone its claim to CENVAT credit before the concerned authority. [Paras 11]

Directed the Assessing Officer to delete the addition relating to the reversed CENVAT credit subject to verification that the assessee has actually forgone its claim of CENVAT credit before the concerned authority.

Allowability under section 43B - Service tax component included in income from chartered flights and in discounts on PSF/UDF is deductible in the impugned year if the service tax was actually paid to the government in that year. - HELD THAT: - The assessee contended that income in earlier years had been offered on a gross basis without segregating the service-tax component and that the service tax was subsequently paid in the impugned year. The Tribunal accepted that claim in principle and applied the statutory provision governing allowable deduction on actual payment, directing verification of payment to government in the impugned year. If payment is established, the amounts are to be allowed as deduction. [Paras 12]

Directed the Assessing Officer to verify payment of the service tax components and allow the claimed deductions if payment to the government account in the impugned year is established.

Compensatory interest deductible - Interest on delayed payment of service tax, being compensatory in nature, is deductible if it was actually paid in the impugned year. - HELD THAT: - The Commissioner (Appeals) had accepted that the interest was compensatory rather than penal but had sought proof that the liability arose in the impugned year. The Tribunal directed the Assessing Officer to verify the date of actual payment; if the interest was paid in the impugned year it should be allowed as a deduction. [Paras 13]

Directed the Assessing Officer to verify the date of actual payment of interest and allow deduction if payment was made in the impugned year.

Capital expenditure vs revenue expenditure - aborted project expenditure as revenue - amortisation under section 35D - Expenditure incurred in relation to a proposed IPO, which was later aborted and did not result in any enduring asset, is revenue expenditure and deductible; disallowance sustained by the Assessing Officer is to be deleted. - HELD THAT: - The Assessing Officer treated IPO-related fees as capital and allowed only amortisation under the relevant provision. The Tribunal, however, noted that the IPO was not completed and no enduring asset arose; treating the expenditure as akin to an aborted project it held the expense to be revenue in nature. Relying on judicial precedents accepting similar treatment, the Tribunal concluded that the full expenditure should be allowed rather than being capitalised or only partially amortised. [Paras 18]

Deleted the disallowance made by the Assessing Officer and allowed the expenditure as revenue in nature.

TDS credit verification - Short grant of TDS credit is remitted to the Assessing Officer for verification and, if found correct, to be granted in accordance with law. - HELD THAT: - The Tribunal did not decide the quantification on the record but directed the Assessing Officer to verify the assessee's claim and allow TDS credit after proper verification of facts and materials on record. [Paras 20]

Directed the Assessing Officer to verify the claim and allow due credit of TDS in accordance with law after proper verification.

Final Conclusion: The appeal is partly allowed: additions relating to reversed CENVAT credit are deleted subject to verification that the assessee has forgone its CENVAT claim; service-tax components and interest are to be allowed if verified as paid in the impugned year; IPO-related expenditure disallowance is deleted; and TDS credit shortfall is remitted for verification and grant if established.

Penalty under section 271(1)(c) - Estimation of income and penalty - Concealment or furnishing inaccurate particulars - Onus of proof on the revenue - Evidence of genuineness of purchases - Precedential weight of judicial decisions in penalty proceedings

Penalty under section 271(1)(c) - Estimation of income and penalty - Concealment or furnishing inaccurate particulars - Onus of proof on the revenue - Evidence of genuineness of purchases - The penalty levied under section 271(1)(c) on the addition made by the AO was not sustainable and was rightly deleted by the CIT(A). - HELD THAT: - The Tribunal examined whether the addition on account of disputed purchases (reduced by the CIT(A) to Rs. 63,398/-) attracted penalty under section 271(1)(c). The AO's disallowance was based on an estimate of bogus purchases. During penalty proceedings the assessee submitted ledger copies, bills, delivery challans and bank statements and stated that the suppliers were registered dealers (TIN holders), but could not produce the parties because there were no transactions with them during the relevant year. Applying the principle in Harigopal Singh (as followed by the CIT(A)), the Tribunal held that where income is assessed on an estimate basis and there is no positive evidence of concealment or furnishing of inaccurate particulars by the assessee, penalty under section 271(1)(c) cannot be sustained; the onus to prove concealment rests on the department. The Tribunal considered and distinguished the decision in Bhansali Trading Corporation, where the addition was specific, parties were unverifiable and summons remained unserved, facts which supported restoration of penalty in that case. On the facts here, the AO failed to produce concrete evidence to show that the estimated addition represented concealed income, and therefore the deletion of penalty by the CIT(A) was correct. [Paras 6, 7]

Revenue's appeal dismissed; penalty of Rs. 19,590/- deleted and CIT(A)'s order affirmed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for AY 2009-10 and upheld the CIT(A)'s deletion of the penalty under section 271(1)(c), holding that an addition made on estimate without evidence of positive concealment does not sustain penalty.

Revisionary jurisdiction under section 263 - lack of enquiry versus inadequate enquiry - due application of mind by the Assessing Officer - assessment order need not record findings on accepted claims - quashing of revision order founded on incorrect factual assumption

Revisionary jurisdiction under section 263 - lack of enquiry versus inadequate enquiry - due application of mind by the Assessing Officer - assessment order need not record findings on accepted claims - Whether the Principal Commissioner of Income Tax was justified in invoking revisionary jurisdiction under section 263 in respect of the assessment for A.Y.2015-16. - HELD THAT: - The Tribunal held that the PCIT erred in invoking revisionary jurisdiction because the Assessing Officer had made enquiries during scrutiny proceedings and the assessee had furnished detailed particulars and supporting documents for long-term borrowings and other current liabilities which the AO accepted and accordingly made no additions. The law distinguishes 'no enquiry' from 'inadequate enquiry' and s.263 may be invoked only for lack of enquiry; mere absence of express discussion in the assessment order on items accepted by the AO does not demonstrate non-application of mind. The Tribunal noted that the AO issued queries under s.142(1), the assessee responded with confirmations, ITR acknowledgements and balance sheets, and the AO examined these materials before reaching a conclusion. Reliance was placed on the jurisprudence that an assessment order need not record reasons for every accepted claim and that the PCIT cannot substitute an appellate re-examination where the AO has applied his mind. Further, the PCIT's order was founded on an incorrect factual assumption regarding timing of filings (the letter dated 19/04/2018 related to penalty proceedings), and a revision order based on such incorrect factual premise must be quashed. Applying these principles, the Tribunal concluded that the exercise of s.263 was not justified and the revision order must be set aside. [Paras 5, 6]

The revision order under section 263 is quashed and the assessee's appeal is allowed.

Final Conclusion: The Tribunal quashed the PCIT's revision order under section 263 for A.Y.2015-16, holding that the Assessing Officer had made requisite enquiries and applied his mind to the assessee's submissions, and that the PCIT's action was based on an incorrect factual assumption.

Terrorist act - smuggling as threat to economic security - smuggling of "any other material" under Section 15(1)(a)(iiia) - distinct offences - separate prosecutions maintainable - prima facie basis for registration of FIR - no interim protection as anticipatory bail

Terrorist act - smuggling as threat to economic security - smuggling of "any other material" under Section 15(1)(a)(iiia) - Whether smuggling of gold can constitute a "terrorist act" under the statutory definition (including Section 15(1)(a)(iiia)) by threatening or likely to threaten the economic security of India. - HELD THAT: - The Court held that the definition of "Terrorist act" expressly includes acts done with intent to threaten or likely to threaten the economic security of the country, and that Section 15(1)(a)(iiia) contemplates damage to monetary stability by way of smuggling of "any other material." The legislature did not specify particular materials; smuggling of valuable material such as gold can, depending on intent and effect, amount to conduct that threatens economic security and monetary stability. On the material before it (including the petitioner's statement under the Customs Act and statements of co-accused), the petitioner was prima facie found to have smuggled and to have acted as facilitator, and therefore the contention that gold is excluded from "any other material" was rejected.

Smuggling of gold can fall within the definition of "Terrorist act" under Section 15(1)(a)(iiia) where done with intent to threaten or likely to threaten economic security; the petitioner's challenge on this ground is rejected.

Distinct offences - separate prosecutions maintainable - prima facie basis for registration of FIR - Whether registration of an NIA FIR under the Act of 1967 is impermissible because prosecution under the Customs Act is already pending. - HELD THAT: - The Court observed that the offences under the Customs Act and under Section 16 of the Act of 1967 are legally distinct, permitting separate prosecutions. Registration of the impugned FIR by the NIA was supported by material that had come to its notice, including the petitioner's own statement under the Customs Act and statements of co-accused; on that basis the FIR was found to have a prima facie foundation and could not be quashed at this stage. The Court declined to undertake a meticulous merits inquiry at the quashing stage, noting the NIA must investigate and, if filing a challan, the petitioner would have the normal legal remedies before the trial court.

Registration and continuation of the NIA FIR is maintainable notwithstanding pending Customs prosecution; the challenge on grounds of double prosecution/Article 20 and Section 300 Cr.P.C. fails.

Prima facie basis for registration of FIR - no interim protection as anticipatory bail - Whether the FIR should be quashed for lack of prima facie basis or whether interim protection (stay) should be granted to the petitioner. - HELD THAT: - The Court found sufficient material on record to show prima facie involvement of the petitioner in smuggling and facilitation, and therefore held that the FIR was not without basis and did not merit quashing. Given the serious nature of the alleged offences and the statutory scheme imposing stringent bail standards, the Court declined to grant any interim protection which would amount to anticipatory bail, observing that such relief was not permissible at this stage.

The petition for quashing the FIR and the stay application are dismissed; no interim protection is granted.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the NIA FIR is dismissed: smuggling of gold can fall within the statutory "Terrorist act" when it threatens economic security; the NIA's registration of a separate prosecution is maintainable on the prima facie material available; and no interim protection or anticipatory relief is granted.

Power to punish for contempt under Section 425 of the Companies Act - maintainability of interlocutory application seeking restriction despite interim orders - status quo obligation under interim orders - remedy by contempt proceedings for breach of tribunal order

Maintainability of interlocutory application seeking restriction despite interim orders - status quo obligation under interim orders - remedy by contempt proceedings for breach of tribunal order - power to punish for contempt under Section 425 of the Companies Act - Whether the interlocutory application seeking restraint on corporate restructuring and injunctions to maintain shareholding pattern and prevent alienation of assets is maintainable before the Tribunal in presence of existing interim orders. - HELD THAT: - The Tribunal examined its interim orders directing maintenance of status quo as to shareholding and non-alienation of assets and considered the appropriate remedy for any breach. Reliance was placed on the Tribunal's contempt jurisdiction derived from the Companies Act, which confers on the Tribunal powers analogous to those of the High Court to punish for contempt. Where the respondents are alleged to have acted contrary to the Tribunal's interim directions, the proper remedy is to invoke contempt proceedings rather than seek the reliefs claimed by way of the present interlocutory application. Consequently, the application seeking fresh injunctive relief to restrain the proposed corporate restructuring and alleged consequent actions is not maintainable before the Tribunal. [Paras 12, 13]

IA/156/KOB/2020 is dismissed as not maintainable; applicants are at liberty to initiate contempt or other appropriate proceedings if aggrieved.

Final Conclusion: The Tribunal dismissed the interlocutory application as not maintainable, holding that alleged breaches of its interim orders should be pursued by contempt proceedings under the Tribunal's contempt jurisdiction; applicants remain free to initiate such proceedings.

Rectification of clerical or typographical error in judicial orders - mistake apparent on the face of the record - power to amend cause title - appointment and recall of NCLT-appointed chairman - reasonable apprehension of bias or conflict of interest affecting an appointee - use of company officers to assist an NCLT-appointed chairman - consistency with concurrent orders of higher judicial fora and cooperation with appointed officer

Rectification of clerical or typographical error in judicial orders - power to amend cause title - mistake apparent on the face of the record - Cause title of the order dated 29.11.2019 requires correction where a typographical error misidentified the applicant. - HELD THAT: - On verification of the record the Tribunal found that IA 66/KOB/2019 had in fact been filed by Mr. Shibu Prabhakaran (Respondent No.13 in TCP/22/KOB/2019) but the order incorrectly recorded M/s Tap World as the applicant. This is a typographical error susceptible of rectification as a mistake apparent on the face of the record. The registry was directed to correct the cause title to reflect the true applicant. [Paras 7, 12]

Prayer (i) allowed; registry directed to correct the cause title of the order dated 29.11.2019.

Mistake apparent on the face of the record - rectification of clerical or typographical error in judicial orders - Whether Paragraph 2 of the impugned order which refers to IA/66/KOB/2019 being filed in place of IA/6/KOB/2019 requires rectification. - HELD THAT: - A review of the daily order dated 25.11.2019 shows that the Kerala Chamber of Commerce & Industry had filed IA 6/KOB/2019 and thereafter the chamber filed IA 66/KOB/2019 adopting the same contentions. The words "in place of IA/6/KOB/2019" accurately reflect the sequence on record and do not constitute an apparent clerical mistake. As such, no error apparent on the face of the record was made out that would justify rectification under the applicable principle limiting correction to prima facie visible and obvious mistakes. [Paras 8, 12]

Prayer (ii) rejected; no rectification necessary in Paragraph 2.

Appointment and recall of NCLT-appointed chairman - reasonable apprehension of bias or conflict of interest affecting an appointee - consistency with concurrent orders of higher judicial fora and cooperation with appointed officer - Whether the appointment of Mr. Justice K. Narayana Kurup as the NCLT-appointed Chairman to conduct the AGMs should be recalled or revised. - HELD THAT: - The Tribunal considered the absence of consensus on a chairman and the recorded reasons for appointing an independent and impartial person. It evaluated the objection that the appointee had a son in law who was a member of the Chamber and the contention of possible conflict or bias. The bench noted that the son's membership had been resigned earlier and that mere familial relationship did not establish a reasonable apprehension of bias affecting the functioning of a retired Acting Chief Justice. The Tribunal observed that the appointment was made after hearing parties and in view of urgency and previous non-cooperation with earlier chairmen; consequently, no error apparent on the face of the record warranted recall of the appointment. [Paras 9, 11, 12]

Prayer (iii) rejected; appointment of Mr. Justice K. Narayana Kurup upheld and not recalled.

Use of company officers to assist an NCLT-appointed chairman - rectification of clerical or typographical error in judicial orders - Whether Para 11 of the impugned order that permits the Chairman to utilize the services of the Secretary Mr. A.J. Rajan should be rectified because his appointment was not properly made. - HELD THAT: - The Tribunal examined the minutes of the urgent Board meeting which recorded the re-appointment of Mr. A.J. Rajan as Secretary and found that the impugned order's provision allowing the Chairman to utilize the company's facilities, including the Secretary, for conducting AGMs was consistent with those records. The bench accepted that Mr. A.J. Rajan had experience and had expressed willingness to assist; no apparent clerical error or misapplication of procedure was shown that required rectification of Para 11. [Paras 10, 12]

Prayer (iv) rejected; no modification of Para 11 required.

Consistency with concurrent orders of higher judicial fora and cooperation with appointed officer - appointment and recall of NCLT-appointed chairman - Whether the Chamber should be permitted to hold its AGM following the High Court order dated 2.9.2019 instead of under the supervision of the NCLT-appointed Chairman. - HELD THAT: - The Tribunal found that the orders in IA.66/KOB/2019 had taken into account the High Court direction that AGMs be convened in accordance with rules and bylaws within an outer limit, and had expressly permitted the NCLT-appointed Chairman to seek extension from the High Court if necessary. Given that the Chairman had taken charge and there was no error apparent on the face of the record, the Tribunal would not grant a direction allowing the Chamber to proceed independently; instead it directed cooperation with the Chairman to enable conduct of the AGMs. [Paras 11, 12]

Prayer (v) rejected; Chamber not permitted to hold AGM outside supervision of the NCLT-appointed Chairman and parties directed to cooperate with the Chairman.

Final Conclusion: IA No. 99/KOB/2020 is partly allowed solely to correct a typographical error in the cause title of the order dated 29.11.2019; all other prayers seeking further rectification, recall of the appointed Chairman, modification regarding the Secretary, or permission to hold AGMs independently are rejected as no mistake apparent on the face of the record or reasonable apprehension of bias was shown.

Competency of a power of attorney holder to file an application under the IBC - maintainability of a section 9 petition - operational debt as defined in section 5(21) of the IBC - debt and default under sections 3(11) and 3(12) of the IBC - enforcement of agreements for sale / specific performance vis-a -vis insolvency jurisdiction

Competency of a power of attorney holder to file an application under the IBC - maintainability of a section 9 petition - Petition filed by a power of attorney holder on behalf of the operational creditor is not maintainable. - HELD THAT: - The Tribunal applied the binding precedent of the NCLAT which holds that a power of attorney holder is not competent to file an application on behalf of a financial or operational creditor under the IBC. Having regard to that authoritative view, the petition filed through a power of attorney was held not maintainable. The Bench nonetheless proceeded to consider the merits but recorded that the present petition, as filed by a PoA holder, fails on maintainability in light of the stated precedent. [Paras 10, 11]

Petition is not maintainable insofar as it is filed by a power of attorney holder; on that ground the petition fails.

Operational debt as defined in section 5(21) of the IBC - debt and default under sections 3(11) and 3(12) of the IBC - enforcement of agreements for sale / specific performance vis-a -vis insolvency jurisdiction - The claim for the balance sale consideration arising out of an MoU/agreement for sale is not an operational debt under section 5(21) and cannot be enforced by initiating CIRP under section 9. - HELD THAT: - The Tribunal examined the nature of the transaction and found it to be akin to a sale agreement (the petitioner being obliged to deliver the new flat), rather than a claim arising from provision of goods or services by the petitioner to the respondent. Applying the definition of operational debt in section 5(21) and the definitions of debt and default in sections 3(11) and 3(12), the Bench concluded that no operational debt arose in favour of the petitioner. The dispute was characterised as one concerning specific performance or enforcement of a sale agreement, which is within the domain of civil courts and not a proper matter for initiation of CIRP under the IBC. Consequently the section 9 petition seeking initiation of CIRP on that basis was held to be unsustainable on merits. [Paras 12, 13, 16, 17]

Claim for balance purchase price does not constitute an operational debt under the IBC and the section 9 petition is rejected on merits for being an impermissible vehicle to enforce a sale agreement.

Final Conclusion: The petition under section 9 is rejected: it is not maintainable as filed by a power of attorney holder and, on merits, the claimed balance sale consideration is not an operational debt within the IBC and cannot be enforced by initiating CIRP; the petitioner's rights in other judicial forums remain unaffected.

Limitation under Article 137 of the Limitation Act - accrual of right to apply from the date of default - condonation under Section 5 of the Limitation Act - pre-existing dispute - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - application under Section 9 of the Insolvency and Bankruptcy Code, 2016

Limitation under Article 137 of the Limitation Act - accrual of right to apply from the date of default - condonation under Section 5 of the Limitation Act - Whether the Section 9 application is barred by limitation. - HELD THAT: - The Adjudicating Authority applied the principle that the Limitation Act is applicable to applications under the IBC and that the right to apply accrues from the date of default. The petition was filed on 18.11.2019 while the last invoice and date of default recorded in the application is 09.02.2015, which is beyond the three year period under Article 137. The operational creditor did not place any material invoking Section 5 of the Limitation Act or other grounds to condone or extend limitation. The authority therefore found that the application is time-barred and liable to be dismissed on the sole ground of limitation. [Paras 10, 11, 12]

The Section 9 application is barred by limitation and is liable to be dismissed.

Pre-existing dispute - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Whether there existed a pre-existing dispute between the parties prior to issuance of the demand notice. - HELD THAT: - The authority considered contemporaneous correspondence and extracted the email dated 28.04.2015 from the corporate debtor complaining of non attendance and stating that third party arrangements were made to complete the works. That communication predates the demand notice and constitutes a pre-existing dispute. Having found such a dispute raised prior to the demand notice, the authority held that the dispute disentitles the operational creditor to initiate the insolvency process under Section 9 on that basis as well. [Paras 13, 14, 15]

A pre-existing dispute was established from earlier communications; the Section 9 application is not maintainable on this ground.

Final Conclusion: CP(IB) No. 748/09/HDB/2019 is rejected; the petition under Section 9 is dismissed on the grounds of being time barred and on account of a pre existing dispute raised prior to the demand notice.

Power of review - mistake apparent on the face of the record - pre-existing dispute in proceedings under the Insolvency and Bankruptcy Code - inherent powers of the Appellate Tribunal - Rule 11 of the NCLAT Rules - Section 420(2) of the Companies Act, 2013 - correction of mistake apparent - admission of application under Section 9 of the IBC

Power of review - inherent powers of the Appellate Tribunal - Rule 11 of the NCLAT Rules - Section 420(2) of the Companies Act, 2013 - correction of mistake apparent - Whether this Tribunal can entertain a review of its earlier appellate order under Section 22 RDBA and Rule 11 NCLAT Rules or by exercise of inherent powers or under Section 420(2) Companies Act. - HELD THAT: - The Tribunal held that it has no inherent power to undertake a review of its appellate judgment unless such power is specifically conferred by statute or arises by necessary implication. Rule 11 of the NCLAT Rules is declaratory of inherent powers to meet ends of justice or to prevent abuse of process and cannot be invoked to re-open or re-appreciate findings of fact or to substitute a fresh view on merits. Section 420(2) of the Companies Act permits amendment of an order only to rectify a mistake apparent from the record within two years and does not provide for rehearing of contested factual findings once the order has attained finality. The Tribunal therefore found the Review Application not maintainable insofar as it seeks a re-hearing or re-appraisal of merits under the guise of inherent or review powers. [Paras 6, 10, 11, 13]

The Review Application is not maintainable as this Tribunal cannot review its appellate order by exercise of inherent powers or Rule 11, and the statutory power under Section 420(2) is limited to correcting patent mistakes only.

Mistake apparent on the face of the record - pre-existing dispute in proceedings under the Insolvency and Bankruptcy Code - admission of application under Section 9 of the IBC - power of review - Whether there was any mistake apparent on the face of the record or other ground warranting interference with the Tribunal's earlier conclusion that no real dispute existed and that the Section 9 application was rightly admitted. - HELD THAT: - Applying settled principles that review lies only for patent, self-evident errors and not for re-appreciation of evidence or substitution of opinion, the Tribunal examined the materials relied upon by the applicant and the findings recorded in its earlier order (including discrepancies in dates, signatures and timing of reconciliation documents). The Tribunal observed that the present review attempt amounted to re-arguing factual contentions and seeking a de novo consideration which is impermissible. There was no manifest or self-evident mistake on the face of the record; the earlier findings that the pleaded 'dispute' was spurious and that the ledger and confirmation documents inspired no confidence were not displaced by the grounds advanced in the review. [Paras 17, 18]

No mistake apparent from the record was shown; the Review Application, which sought re-hearing or re-appraisal of factual findings concerning the existence of a pre-existing dispute, is dismissed.

Final Conclusion: The Review Application is dismissed: the Tribunal has no power to review its appellate order by invoking inherent powers or Rule 11 for re examining merits, Section 420(2) permits only correction of patent errors and no such error is shown; the application amounted to an impermissible re hearing and is therefore rejected. No order as to costs.

Financial creditor - financial debt - pledge as security versus contract of guarantee - disbursal against consideration for time value of money - collateral security and secured creditor distinction - interpretation of Section 5(7) and Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - reliance on Jaypee Infratech Ltd. precedent

Financial creditor - financial debt - pledge as security versus contract of guarantee - interpretation of Section 5(7) and Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - disbursal against consideration for time value of money - collateral security and secured creditor distinction - Whether appellant is a financial creditor of the corporate debtor under Section 5(7) read with Section 5(8) of the Code on the basis of the Pledge Agreement and Deed of Undertaking dated 10.01.2012 - HELD THAT: - The Court examined the Facility Agreement, the Pledge Agreement and the Deed of Undertaking and construed the definition of "financial debt" in Section 5(8) which begins with the requirement of a debt "disbursed against the consideration for the time value of money". Section 5(8) enumerates illustrations but does not dispense with this root requirement. A contract of guarantee under Section 126 of the Indian Contract Act is a contract to perform the promise or discharge the liability of a third person on his default; a pledge, as defined in Section 172, is bailment of goods as security for payment or performance. The Pledge Agreement and Deed of Undertaking here created a security interest in 40,160 shares of Gondwana Engineers Ltd. and did not contain any undertaking by the corporate debtor to perform the borrower's promise or discharge the borrower's liability. Following the reasoning in Jaypee Infratech Ltd. v. Axis Bank Ltd., the Court held that a person who has only a security interest in assets of the corporate debtor as collateral for a third-party debt may at best be a secured creditor qua that security but does not thereby become a "financial creditor" under Section 5(7)/5(8). The Court rejected attempts to characterise the pledge as a guarantee or indemnity sufficient to attract clause (i) of Section 5(8), noting that the factual matrix here shows only collateral security and no contractual guarantee by the corporate debtor to discharge the borrower's debt. [Paras 13, 24, 30, 31, 32]

Appellant is not a financial creditor of the corporate debtor; the Pledge Agreement and Deed of Undertaking constitute collateral security making the appellant, at best, a secured creditor qua that security and not a financial creditor under Sections 5(7) and 5(8) of the Code.

Final Conclusion: The appeal is dismissed. The Court upholds the Adjudicating Authority's rejection of the Miscellaneous Application: the appellant, on the facts and documents before the Court, is not a financial creditor of the corporate debtor under Sections 5(7) and 5(8) of the Insolvency and Bankruptcy Code, 2016; observations are confined to this question and shall not affect other remedies available to the appellant.

Impleading additional corporate debtor - Joint maintainability of Section 9 proceedings against holding company and subsidiary - Control of operations as basis for extending liability to holding company - Application under Section 9 of the Insolvency and Bankruptcy Code - Reliance on precedent for treating two corporate entities as one for CIRP

Impleading additional corporate debtor - Joint maintainability of Section 9 proceedings against holding company and subsidiary - Control of operations as basis for extending liability to holding company - Whether M/s. Inkel Limited could be impleaded as an additional Corporate Debtor in the Section 9 application against M/s. Seguro Foundations & Structures Pvt. Ltd. - HELD THAT: - The Tribunal examined the record showing that M/s. Inkel Limited held a controlling stake (65%) in the Corporate Debtor and that operational affairs of the Corporate Debtor were being managed by INKEL executives. The Directors' Report and other material on record indicated that INKEL had assumed management control and had taken steps (including providing guarantees and appointing its Managing Director to oversee the subsidiary) that demonstrated de facto control over the subsidiary's operations. Applying the principle in the cited AMB Infrabuild decision, where two corporate entities collaborating or functioning as a single enterprise may be jointly treated for initiation of CIRP, the Tribunal concluded that the Section 9 application is maintainable against both the subsidiary and its holding company jointly. On this basis, the Tribunal directed impleadment of M/s. Inkel Limited as additional Corporate Debtor, directed registry action to effect impleadment and service (including by e-mail), and required the additional corporate debtor to file a counter within two weeks. [Paras 13, 14, 16, 17, 18]

M/s. Inkel Limited is impleaded as additional Corporate Debtor in IBA/30/KOB/2020 and the Registry and parties were directed to effect service and proceed accordingly.

Final Conclusion: The Interlocutory Application to implead M/s. Inkel Limited as an additional Corporate Debtor is allowed; INKEL is impleaded in the Section 9 IBA and directed to be served and to file its counter within two weeks.

Voluntary liquidation under Section 59 - dissolution of corporate person under Section 59(7) - liquidator's compliance with IBBI Regulations - public announcement and claim verification - final report and closure of liquidation account - intimation to Registrar of Companies and IBBI - No Objection Certificate from tax authorities

Voluntary liquidation under Section 59 - dissolution of corporate person under Section 59(7) - final report and closure of liquidation account - intimation to Registrar of Companies and IBBI - No Objection Certificate from tax authorities - Whether the Corporate Person has completed voluntary liquidation in compliance with law and whether its dissolution under Section 59(7) should be approved. - HELD THAT: - The Tribunal found that the company followed the statutory scheme for voluntary liquidation: the board resolved to liquidate and the directors made the prescribed declaration; members passed the special resolution and appointed a liquidator; the liquidator made the public announcement and called for claims; a liquidation bank account was opened; the liquidator submitted the preliminary and final reports, realised the assets and distributed proceeds; the liquidation account was closed and the bank closure certificate produced; and intimation together with IBBI approval and NOCs from Income Tax and Central Tax authorities were filed. The audited financial statements and filings with the Registrar confirm there were no creditors and that requisite filings (forms GNL-2/MGT-14, IP-1, and notifications to IBBI and ROC) were made. Having considered these materials, the Tribunal concluded that the affairs were completely wound up and the statutory formalities for voluntary liquidation and dissolution under Section 59(7) have been complied with. [Paras 11, 12]

Approval granted for dissolution of the Corporate Person under Section 59(7); liquidator directed to file a copy of the order with the Registrar of Companies and IBBI within fourteen days.

Final Conclusion: The Tribunal allowed the application under Section 59 and approved the voluntary dissolution of M/s Living Springs Private Limited, directing the liquidator to file this order with the Registrar of Companies and the Insolvency and Bankruptcy Board of India within fourteen days.

Freezing of property and records under Section 17 of the Prevention of Money Laundering Act, 2002 - requirement to record reasons and forward material to the Adjudicating Authority - due process under the Prevention of Money Laundering Act, 2002 - seizure versus freezing and statutory timeline for retention application - principle that a special enactment's procedure must be followed and displaces recourse to general law

Freezing of property and records under Section 17 of the Prevention of Money Laundering Act, 2002 - requirement to record reasons and forward material to the Adjudicating Authority - seizure versus freezing and statutory timeline for retention application - Validity of the freezing of the appellant's bank accounts under PMLA in the absence of compliance with the procedure prescribed by Section 17. - HELD THAT: - The Court held that exercise of power to freeze bank accounts falls within the ambit of Section 17 of PMLA and that the statutory procedure prescribed therein is mandatory. Section 17 requires the Director or an authorised officer to have and record a reason to believe (on the basis of information in possession) that money laundering acts have been committed and, where freezing is ordered under sub section (1A), to forward the recorded reasons along with material to the Adjudicating Authority and, within thirty days of freezing, file an application for retention/continuation. The impugned communication of 15.05.2020 merely requested banks to 'debit freeze/stop operations' without demonstrating that the Authorised Officer had recorded the requisite belief in the file, or that the procedures of Section 17(2) and 17(4) had been complied with. For these reasons the freezing (and its continuation) was held unsustainable for want of compliance with the mandatory statutory procedure, irrespective of whether the PMLA otherwise empowered the authority to act. [Paras 6, 7, 9, 11, 15]

Freezing of the accounts was quashed as having been effected without due compliance with Section 17 of the PMLA.

Due process under the Prevention of Money Laundering Act, 2002 - seizure versus freezing and statutory timeline for retention application - Whether the banks should be directed to defreeze the accounts to enable payment of statutory dues. - HELD THAT: - The Court recognised the appellant's need to make statutory payments (TDS, PF, ESI, Professional Tax, Gratuity and employees' LIC deductions) and, having found the freezing procedurally defective, directed respondents No.1 to 3 to defreeze the specified accounts and honour cheques/payments towards those statutory dues to the extent of available funds. The Court made clear that any remaining funds would remain subject to action by the Directorate, which is at liberty to initiate fresh proceedings in accordance with law and after compliance of the prescribed procedure. [Paras 16, 17]

Respondents directed to defreeze the accounts and permit payment of the stated statutory dues; respondent No.4 granted liberty to proceed afresh in accordance with law.

Principle that a special enactment's procedure must be followed and displaces recourse to general law - Validity of attempting to justify the freezing by reference to seizure powers under Section 102 CrPC. - HELD THAT: - The Court rejected the contention that the freezing could be validated by invoking Section 102 CrPC. It observed that the Directorate treated PMLA as a standalone special enactment that itself provides for seizure and freezing; where a special statute prescribes a procedure, that procedure must be followed and the general law cannot be resorted to as a post hoc justification. Moreover, Section 102 CrPC has a different scheme (including reporting seizures to a Magistrate) and the impugned communication did not assert reliance on Section 102, nor was such reliance pleaded earlier, so the contention could not be entertained. [Paras 12, 13]

Invocation of Section 102 CrPC cannot validate the freezing; the contention was repelled.

Final Conclusion: The appeal is allowed to the limited extent that the communication dated 15.05.2020 is quashed; the three bank accounts are to be defrozen and payments towards the appellant's statutory dues honored from available funds, while the Enforcement Directorate remains free to initiate fresh proceedings in accordance with the mandatory procedure under PMLA. No order as to costs.

Composite contract - Works contract - Commercial or industrial construction service - Abatement benefit conditional on non availment of CENVAT credit - Taxability of works contract effective from June 1, 2007

Composite contract - Works contract - Commercial or industrial construction service - Taxability of works contract effective from June 1, 2007 - Whether the contract between the appellant and Gautami was a composite contract liable as a works contract and consequently whether service tax under the head commercial or industrial construction service could be demanded for the period in dispute. - HELD THAT: - The agreement between the appellant and Gautami, when read in its relevant provisions, showed a lumpsum contract including engineering, construction, supply related delivery obligations and provision of labour, materials and other inputs, thereby constituting a composite contract involving both goods and services. The Tribunal applied the legal position that works contracts are taxable only with effect from June 1, 2007 and that prior to that date indivisible works contracts were not subject to service tax. On the facts and contract terms the services rendered fell within the ambit of a works contract; therefore no service tax liability under the head commercial or industrial construction service arose for the period prior to June 1, 2007, and for the period after June 1, 2007 the contract must be treated as a works contract rather than as CICS. The Department's contention that the appellant, having registered and paid tax under CICS, could not contest classification was rejected in light of precedent holding that voluntary registration does not preclude an assessee from establishing that services rendered were classifiable as works contract and thus not taxable before 01.06.2007.

The contract was a composite works contract; service tax under commercial or industrial construction service could not be sustained for the disputed period (April 1, 2006 to October 31, 2007), and the demand confirmed by the Commissioner was set aside.

Abatement benefit conditional on non availment of CENVAT credit - Commercial or industrial construction service - Whether the appellant's utilisation of CENVAT credit disentitled it from claiming the abatement under the Notification while being assessed under commercial or industrial construction service. - HELD THAT: - The Commissioner's finding was that the abatement under the Notification was admissible only where the service provider had not availed CENVAT credit, and therefore utilisation of credit rendered the abatement inadmissible. However, because the primary classification issue was determinative - the contract being a works contract and not CICS for the relevant period - the confirmation of demand based on denial of abatement and credit utilisation could not be sustained. The Tribunal relied on authoritative decisions holding that where the service rendered is a works contract, issues as to abatement claimed under the CICS notification and credit utilisation cannot support a demand under CICS for periods when works contracts were not taxable.

The denial of abatement and confirmation of demand on the ground of CENVAT credit utilisation could not be sustained in view of the contract being a works contract for the relevant period; the impugned demand was set aside.

Final Conclusion: The Commissioner's order confirming service tax demand, interest and penalty was set aside and the appeal allowed: the contract was held to be a composite works contract, precluding liability to service tax under commercial or industrial construction service for the period April 1, 2006 to October 31, 2007 (with works contracts being taxable only from June 1, 2007), and the demand based on denial of abatement due to CENVAT credit utilisation could not be sustained.

Refund of input tax to units located in Special Economic Zone - scope of "inputs" including "any other use in business" - eligibility under Rule 130(A) for inputs purchased for setting up, operation and maintenance of SEZ unit - limits on exercise of revisional power under Section 64(1) - order must be erroneous or prejudicial to revenue

Refund of input tax to units located in Special Economic Zone - eligibility under Rule 130(A) for inputs purchased for setting up, operation and maintenance of SEZ unit - scope of "inputs" including "any other use in business" - Entitlement of the appellant to refund of tax paid on purchase of inputs for the period May 2012 to December 2012, including items used for operation and maintenance of the SEZ unit. - HELD THAT: - The Court accepted the reasoning of the Joint Commissioner that Section 20(2) read with Rule 130(A) entitles SEZ developers and units to claim refund of tax paid on inputs purchased for setting up, operation and maintenance of a unit in the SEZ and not only for inputs used directly in manufacture or processing. The definition of "inputs" in Section 2(19), which includes goods purchased for "any other use in the business", has a wide ambit and covers purchases such as food and beverages, housekeeping, office maintenance, printing and stationery, maintenance of photocopying machine, sports goods and events, and car lease rentals when they are for business use of the SEZ unit. The Joint Commissioner applied these provisions and relevant precedents to hold that the appellant satisfied conditions of Rule 130(A)(1)(b) and was therefore entitled to the refund claimed. The High Court found no error in that conclusion and endorsed the Appellate Authority's allowance of the claim. [Paras 7, 8]

The appellant is entitled to refund of input tax claimed, including on inputs used for operation and maintenance of the SEZ unit, as admissible under Section 20(2) and Rule 130(A).

Limits on exercise of revisional power under Section 64(1) - order must be erroneous or prejudicial to revenue - Validity of the Additional Commissioner invoking Section 64(1) to revise and reduce the refund allowed by the Joint Commissioner and Appellate Authority. - HELD THAT: - Section 64(1) permits revision only if the Commissioner forms an opinion that an order passed by a subordinate officer is erroneous or prejudicial to the interests of revenue. The Additional Commissioner proceeded on the incorrect premise that refund benefits were confined to inputs used in manufacture or processing, a restriction not imposed by Section 20(2) or Rule 130(A). Since the Joint Commissioner had considered the statutory provisions, Rule 130(A) and the definition of "inputs" and reached a reasoned conclusion that the appellant was entitled to refund, the High Court held that the Additional Commissioner had no justification to invoke revisional power in the facts of the case and that the revisional order was unsustainable. [Paras 7, 9]

The invocation of Section 64(1) by the Additional Commissioner was unjustified and the revisional order is quashed.

Final Conclusion: The order dated 03.10.2016 of the Additional Commissioner is quashed; the appeal is allowed and the refund as allowed by the Joint Commissioner/Appellate Authority is restored.

Requirement of specific averment of being in charge and responsible under Section 141 of the Negotiable Instruments Act - vicarious liability of partners and liability by consent or connivance - quashing proceedings under inherent jurisdiction of High Court (Section 482 CrPC) - indubitable / incontrovertible material test for exercise of Section 482 jurisdiction - High Court's discretion to quash despite basic averment where unimpeachable evidence negates the substratum

Requirement of specific averment of being in charge and responsible under Section 141 of the Negotiable Instruments Act - vicarious liability of partners and liability by consent or connivance - High Court's discretion to quash despite basic averment where unimpeachable evidence negates the substratum - Sufficiency of the averments in the complaint to proceed against the accused as a partner of the firm under section 141 of the Negotiable Instruments Act and whether the Magistrate was justified in issuing process. - HELD THAT: - The court applied the settled law in S.M.S. Pharmaceuticals Ltd. and subsequent decisions to hold that a specific averment that a person was "in charge of, and responsible for, the conduct of business" is an essential allegation in complaints under Section 141. However, the High Court may, on an overall reading of the complaint and factual substratum, refuse to quash proceedings despite the basic averment unless unimpeachable evidence negates the averment. Here the reproduced averments (paras. 1, 2 and 7) adequately allege that accused nos. 2 to 5 were in charge of and responsible for the firm and that the offence was committed with their consent or connivance. On the face of the complaint, therefore, a case was made out to proceed against the accused and the learned Magistrate was entitled to consider issuing process and later to determine the accused's role on evidence at trial. [Paras 14, 15, 16, 17, 20]

The complaint's averments are sufficient to impel the Magistrate to issue process; no quashing on this ground.

Indubitable / incontrovertible material test for exercise of Section 482 jurisdiction - quashing proceedings under inherent jurisdiction of High Court (Section 482 CrPC) - Whether the partnership deed dated 9.1.2013 relied upon by the accused constituted incontrovertible or indubitable material warranting quashing of proceedings under Section 482 CrPC. - HELD THAT: - The court explained that only indubitable or incontrovertible material - ordinarily public documents or private documents not disputed and irrefutable - can justify exercise of the High Court's inherent jurisdiction to quash. The partnership deed relied upon is a private document not in the public domain, and it was specifically disputed; thus it does not meet the high threshold of being indubitable. The court rejected the contention that the deed conclusively negates the complaint's averments, noting also that the complainant had not admitted the deed in a manner rendering it incontrovertible. Applying the Rajeev Thapar four-step test in principle, the material produced by the accused failed the tests of being sterling, of ruling out the complaint's assertions, and of being incapable of justifiable refutation by the prosecution. [Paras 8, 9, 10, 11, 25]

The partnership deed is not incontrovertible material; it does not justify quashing the proceedings under Section 482.

Final Conclusion: On the facts and settled authorities, the High Court declined to exercise its inherent jurisdiction to quash the complaint: the complaint contains sufficient averments to proceed against the accused partners and the partnership deed relied upon is not indubitable material sufficient to render continuation of the proceedings an abuse of the process of court; the application is dismissed.

Offence under Section 138 of the Negotiable Instruments Act - cognizance under Section 142 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - Doctrine of preponderance of probability - Doctrine of beyond reasonable doubt - power under Section 482 Cr.P.C. - restoration of dismissed criminal complaint - dismissal for non-prosecution

Offence under Section 138 of the Negotiable Instruments Act - dismissal for non-prosecution - restoration of dismissed criminal complaint - power under Section 482 Cr.P.C. - Impugned orders dismissing the private complaint for non-prosecution and refusing restoration were assailed and whether they should be set aside and the criminal complaint restored. - HELD THAT: - The High Court examined the record of the trial court (C.C.No.675/2013 arising out of PCR No.127/2013), noted that cognizance had been taken under the Negotiable Instruments Act after recording the complainant's sworn statement and production of material including the bounced cheque with bank endorsement. The trial court had dismissed the complaint for non-prosecution on 22.08.2016 and later declined the complainant's application for restoration on 31.08.2016. Having regard to the material placed before the trial court at the stage of prosecution and the statutory scheme under the Negotiable Instruments Act (including the pre-cognizance and post-cognizance roles of the court), the High Court exercised its inherent jurisdiction under Section 482 Cr.P.C. to set aside the impugned orders. The Court observed that the complainant had complied with the statutory prerequisites for initiating proceedings under Section 138 and that dismissal for non-prosecution, followed by refusal to restore, would cause prejudice to the complainant; accordingly the High Court restored the criminal case to the file for adjudication on merits by the trial court.

Impugned orders dated 22.08.2016 and 31.08.2016 are set aside and C.C.No.675/2013 (arising out of PCR No.127/2013) is restored to the file for disposal on merits.

Cognizance under Section 142 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - Doctrine of preponderance of probability - Doctrine of beyond reasonable doubt - Extent and manner in which the trial court is to proceed after restoration and whether the High Court's observations would influence the trial court's adjudication on merits. - HELD THAT: - The High Court emphasised that the Negotiable Instruments Act is a special enactment and delineated the stages of proceedings: pre-cognizance, cognizance (under Section 142), and post-cognizance trial where the complainant must adduce evidence to meet the standards applicable in criminal adjudication. The Court recorded that statutory presumptions (Section 139) and principles relating to burden and standard of proof (preponderance at preliminary stages and beyond reasonable doubt at conviction stage) remain for the trial court to apply. The High Court directed the trial court to proceed to dispose of the matter on merits in accordance with law and expressly disclaimed that observations made in the High Court's order should influence the mind of the trial court. The High Court also directed expeditious disposal in view of the elapsed time and COVID-19 SOPs.

The trial court is directed to expedite disposal of C.C.No.675/2013 and to decide the complaint on merits in accordance with law, uninfluenced by the High Court's observations; procedural directions to follow COVID-19 SOPs were given.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed: the trial court's orders dated 22.08.2016 and 31.08.2016 dismissing the criminal complaint for non-prosecution and refusing restoration are set aside, C.C.No.675/2013 (arising out of PCR No.127/2013) is restored for adjudication on merits, and the trial court is directed to expedite the proceedings and decide the matter in accordance with law without being influenced by this order.