TaxTMI Updates e-Newsletter
Feb 12,2022

Regular bail in GST evasion case where pre-trial detention exceeds half of maximum sentence - Non-indefinite detention and proportionality of pre-trial custody - Concession of bail subject to conditions to prevent flight or witness tampering - Application of Supreme Court precedent concerning custody period in GST evasion - Offence punishable with maximum five years under GST evasion

Regular bail in GST evasion case where pre-trial detention exceeds half of maximum sentence - Non-indefinite detention and proportionality of pre-trial custody - Concession of bail subject to conditions to prevent flight or witness tampering - Grant of regular bail to the petitioner in the GST evasion complaint case subject to conditions to secure attendance and protect the trial process. - HELD THAT: - The Court found that the petitioner, accused of evading goods and service tax punishable with a maximum sentence of five years, had undergone custody for 02 years and 08 months, which exceeds roughly half of the maximum sentence that could be imposed on conviction. Relying upon the principle that an accused cannot be indefinitely detained where pre-trial custody approaches a substantial portion of the maximum sentence, and having regard to the recent Supreme Court decision cited by the Court, the allegations being unproven at trial, the petitioner's undertaking not to obstruct the trial or influence witnesses, the State's concession as to the detention period, the asserted discharge of the alleged wrongful tax credit by the recipient, and likely trial delays (including pandemic-related constraints), the Court held that the petitioner had made out a case for regular bail. The Court directed that appropriate conditions be imposed by the trial Court/Duty Magistrate to ensure the petitioner does not abscond or interfere with the trial, and observed that breach of the undertaking would permit the State to seek appropriate orders. The Court expressly declined to express any opinion on the merits of the case.

Regular bail granted to the petitioner on terms and conditions to be imposed by the trial Court/Duty Magistrate to ensure attendance and prevent interference with the trial.

Final Conclusion: The petition for regular bail is allowed; the petitioner is granted bail subject to appropriate conditions to secure trial attendance and prevent obstruction, without any expression on the merits.

Provisional attachment under Section 83 of the CGST Act, 2017 - cessation of provisional attachment after one year - release/defreezing of attached bank accounts and immovable property - show-cause notice under Section 74 of the CGST Act, 2017

Provisional attachment under Section 83 of the CGST Act, 2017 - cessation of provisional attachment after one year - release/defreezing of attached bank accounts and immovable property - Provisional attachment made on 27th November, 2020 has ceased to have effect after one year and, in absence of any renewal, the attached bank accounts and immovable properties must be released. - HELD THAT: - The Court noted that every provisional order made under Section 83(1) of the CGST Act ceases to have effect after the expiry of one year from the date of the order. Respondent accepted that the impugned attachment orders have neither been renewed nor have fresh attachment orders been passed. In those circumstances the Court directed that the respondent shall defreeze the petitioner's bank account(s) and release the immovable properties within three days from the date of uploading the order. The Court observed the existence of a show-cause notice under Section 74 but proceeded to order release because the provisional attachment itself had lapsed and no renewal had been effected.

Directed release/defreezing of the petitioner's bank accounts and immovable properties within three days as the provisional attachment had lapsed and was not renewed.

Final Conclusion: Writ petition disposed of with directions to the Respondent to defreeze the petitioner's bank account(s) and release the immovable properties within three days; ancillary show-cause proceedings remain unaffected.

Stay of show cause notice - interim relief - chargeability of GST on minerals where royalty has been paid - pendency of higher court reference

Stay of show cause notice - interim relief - chargeability of GST on minerals where royalty has been paid - pendency of higher court reference - Interim protection in the form of stay of the show cause notice dated 07.12.2021 issued to the petitioner. - HELD THAT: - The Court observed that the central question - whether GST is chargeable on minerals in respect of which royalty has already been paid - is actively under consideration before the higher courts including a reference to a larger Bench. Having regard to that pendency and to interim orders in related proceedings, the petitioner was held to have made out a prima facie case for interim relief. For these reasons the Court granted an interim stay of the impugned show cause notice dated 07.12.2021 and directed that the matter be listed after disposal of the connected proceedings in the Supreme Court. The parties were left free to mention the matter upon disposal of the referenced Supreme Court cases, and meanwhile pleadings were directed to be completed. [Paras 7, 8, 9]

Stay of the show cause notice dated 07.12.2021 issued to the petitioner is granted until disposal of the specified Supreme Court proceedings; matter to be listed thereafter and pleadings to be completed in the interim.

Final Conclusion: Interim stay granted on the show cause notice dated 07.12.2021 concerning GST demand on minerals where royalty was paid; matter adjourned for listing after disposal of the connected Supreme Court proceedings, with pleadings to be completed in the meantime.

Refund in cases of zero-rated supply under Section 54(6) and 54(7) of the CGST Act - provisional refund of at least ninety per cent pending final adjudication - refund with interest under Section 56 of the CGST Act - time limits for refund disposal under Rule 91(2) of the CGST Rules - judicial enforcement by acceptance of undertaking

Refund in cases of zero-rated supply under Section 54(6) and 54(7) of the CGST Act - provisional refund of at least ninety per cent pending final adjudication - refund with interest under Section 56 of the CGST Act - time limits for refund disposal under Rule 91(2) of the CGST Rules - judicial enforcement by acceptance of undertaking - Petition seeking refund for April to September, 2020 disposed of on the basis of respondents' undertaking to decide the refund application within three weeks. - HELD THAT: - The petitioner, a registrant engaged in zero-rated exports, claimed refund for the months of April to September, 2020 and alleged non-compliance with statutory time-limits for provisional and final refund prescribed by Section 54(6) and 54(7) of the CGST Act read with Rule 91(2) of the CGST Rules, and sought interest under Section 56. The respondents accepted notice and, on instructions, gave an express undertaking to decide the petitioner's refund application in accordance with law within three weeks. The Court accepted that undertaking as binding on the respondents and disposed of the writ petition subject to the undertaking. The Court recorded the undertaking and directed listing for compliance, thereby providing a judicially enforceable timetable for decision without deciding the merits of the refund claim on the merits. [Paras 4, 5, 6]

The respondents' undertaking to decide the refund application in accordance with law within three weeks was accepted and the writ petition was disposed of; matter listed for compliance on 09th March, 2022.

Final Conclusion: Writ petition disposed of by acceptance of respondents' undertaking to decide the petitioner's refund application for April to September, 2020 in accordance with law within three weeks; compliance listed on 09th March, 2022.

Detention, seizure and release of goods and conveyances in transit under A.P. GST - provisional release of seized vehicle - relegation to statutory authority for compliance with release procedure - non-interference by High Court where statutory remedy exists - principles of natural justice in seizure proceedings

Detention, seizure and release of goods and conveyances in transit under A.P. GST - non-interference by High Court where statutory remedy exists - provisional release of seized vehicle - Court will not interfere with detention of the vehicle and disposes the writ petition, leaving the petitioner to pursue the statutory proceedings and application for provisional release. - HELD THAT: - The High Court declined to interfere with the seizure of the vehicle, observing that the detention and seizure fall under the statutory scheme governing goods and conveyances in transit and that once proceedings under that scheme have been initiated they must be taken to their logical conclusion. The court relied on the principle that writ jurisdiction should be exercised cautiously where a statutory remedy exists and referred to precedent that High Courts should normally relegate assessees to the appropriate authority for compliance with the procedure for release (including provisional release) rather than directly ordering release. The petitioner was accordingly permitted to pursue the ongoing proceedings before the authorities and to apply for provisional release, which the authorities are directed to consider expeditiously and in accordance with law. The Court recorded no interference with the seizure but granted liberty to seek statutory relief. [Paras 5, 8, 9]

Writ petition dismissed in terms of earlier order; petitioner granted liberty to pursue the statutory proceedings and apply for provisional release, to be considered by the authorities expeditiously in accordance with law; no order as to costs.

Final Conclusion: The petition is disposed of by refusing to interfere with the seizure and by permitting the petitioner to pursue the statutory proceedings and seek provisional release of the vehicle, the authorities being directed to consider such application expeditiously and in accordance with law.

One Nation-One Tax-One Market - E-Way Bill - verification of E-Way Bill on Central Portal - inspection powers of tax officials - hassle free movement of goods

E-Way Bill - inspection powers of tax officials - The Joint Commissioner, Sales Tax (I.B.) declined to disclose consignment-related details from the E-Way Bill portal and the Court found the report inadequate. - HELD THAT: - The Court observed that the report submitted by the Joint Commissioner was devoid of any consideration whether an E-Way Bill was generated in respect of the vehicles from which illicit liquor was seized. Emphasising the objective of GST as One Nation-One Tax-One Market and that transaction details uploaded on the common portal are trackable, the Court treated the Joint Commissioner's unwillingness to provide portal-derived details as insufficient. The Court noted that E-Way Bill records on the Central Portal enable verification of consignment particulars and are material to establish complicity of dealers and transporters in illicit trade.

The Court found the Joint Commissioner's report inadequate and recorded that refusal to disclose the portal-based E-Way Bill details was not acceptable.

Verification of E-Way Bill on Central Portal - E-Way Bill - The Commissioner, Commercial Taxes, Bihar was directed to verify from the National Informatics Portal the E-Way Bill history of the specified vehicle(s), including whether any E-Way Bill was generated prior to the seizure dated 23.03.2021, and to report back to the Court. - HELD THAT: - Rather than adjudicating the merits of culpability, the Court remanded factual verification to the Commissioner, Commercial Taxes, Bihar, directing him to (a) ascertain how many E-Way Bills were generated for the vehicle bearing Registration No. UP 78 DN-7877 since its registration and how many occasions it moved inside Bihar, and (b) state specifically whether any E-Way Bill was generated before the seizure on 23.03.2021. The order requires the Commissioner to obtain these details from the National Informatics Portal where E-Way Bill data is centrally uploaded, so as to enable further consideration of involvement of dealers and transporters.

The matter was remanded for verification of E-Way Bill records by the Commissioner and for submission of a report to the Court by 15.02.2022.

Final Conclusion: The Court directed the Commissioner, Commercial Taxes, Bihar to obtain and verify E-Way Bill details from the National Informatics Portal concerning the specified vehicle(s), including any E-Way Bill generated prior to the seizure on 23.03.2021, and to file a report by 15.02.2022; the Joint Commissioner's earlier report was held inadequate.

Refusal to comply with appellate order - duty to comply with orders of Commissioner (Appeals) - no prerogative to decline compliance on ground of departmental intention to appeal - requirement to decide refund claim after granting opportunity of hearing

Refusal to comply with appellate order - duty to comply with orders of Commissioner (Appeals) - no prerogative to decline compliance on ground of departmental intention to appeal - requirement to decide refund claim after granting opportunity of hearing - Validity of the Assistant Commissioner's refusal to comply with the Commissioner (Appeals) orders and the consequent direction in respect of the refund claims for Q2 and Q3 (July to September 2018 and October to December 2018). - HELD THAT: - The Assistant Commissioner declined to give effect to the Commissioner (Appeals-II)'s orders dated 14/10/2019 and 29/10/2020, recording reasons as if sitting in appeal and relying on the department's decision to challenge that appellate order before the GST Tribunal. The High Court held that the Assistant Commissioner had no authority to refuse compliance with his superior authority's orders on the ground that those orders were allegedly erroneous or were intended to be impugned; such conduct effectively amounts to acting as an appellate forum. The Court quashed the impugned order and directed that the Assistant Commissioner must comply with the Commissioner (Appeals-II)'s orders, pass an appropriate order in accordance with law, and do so only after granting the petitioner an opportunity of being heard. Timelines for compliance and communication of the fresh order were imposed to secure finality; the Assistant Commissioner was expressly admonished not to refuse compliance on the basis of any departmental intention to appeal the appellate order. [Paras 11, 12]

Impugned order quashed; Assistant Commissioner directed to comply with the Commissioner (Appeals-II)'s orders, hear the petitioner and pass an appropriate order in accordance with law within the stipulated time, and communicate the same to the petitioner.

Final Conclusion: Writ petition allowed; the Assistant Commissioner's order dated 12/02/2021 is quashed and set aside, and the Assistant Commissioner is directed to comply with the Commissioner (Appeals-II)'s orders in relation to the refund claims for Q2 and Q3 (July to September 2018 and October to December 2018), after hearing the petitioner and within the time prescribed by the Court.

Invocation of bank guarantee - detention and release under Section 129 of the Central Goods and Services Tax Act, 2017 - statutory right of appeal and stay upon compliance with Section 107 of the CGST Act - interim withholding of enforcement action pending exercise of appellate remedy

Invocation of bank guarantee - statutory right of appeal and stay upon compliance with Section 107 of the CGST Act - interim withholding of enforcement action pending exercise of appellate remedy - Whether invocation of the bank guarantee furnished by the petitioner should be withheld pending expiry of the statutory appeal period against the order passed under Section 129 CGST Act. - HELD THAT: - The Court observed that the petitioner has a statutory period of three months to prefer an appeal against the order passed under Section 129 of the CGST Act and that, by reason of the statutory scheme, compliance with the conditions in Section 107 can operate to stay proceedings. Although the impugned order (Ext.P3) records invocation of the bank guarantee, the respondents stated that the guarantee has not in fact been invoked and that there is no intention to do so before the appeal period expires. In the interests of justice, and to enable the petitioner to pursue the appellate remedy, the Court found it necessary to restrain invocation of the bank guarantee until the expiry of the appeal period. The Court therefore directed an interim withholding of enforcement action for a limited specified period and required the petitioner to keep the bank guarantee alive for that period so that the appellate remedy remains meaningful.

Invocation of the bank guarantee is to be withheld for a period of four months from 20.12.2021, and the petitioner shall keep the bank guarantee alive for that period to enable pursuit of the appellate remedy.

Final Conclusion: Writ petition disposed by directing the 1st respondent to withhold invocation of the bank guarantee for four months from 20.12.2021 and directing the petitioner to keep the bank guarantee alive for the same period to enable filing and prosecution of the appeal.

Composite supply - works contract - transfer of property in goods (whether as goods or in some other form) - composite supply of works contract for construction of a tunnel - classification under Entry 3(iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017

Composite supply - works contract - transfer of property in goods (whether as goods or in some other form) - The nature of the impugned activity - whether it is supply of goods, supply of services, or a composite supply of a works contract. - HELD THAT: - The applicant was engaged as a sub-contractor by the main contractor to perform drilling and blasting for construction of tunnels and approach roads. The activity involves both services (drilling, blasting, clearing rubble, scaling, initial ground support) and goods (explosives, tools and materials) which are used and incorporated in the execution of the tunneling work. Applying the definition of works contract and the principles in Larsen & Toubro and subsequent authority, goods used in execution and incorporated in immovable works are treated as goods 'in some other form', satisfying the elements of a works contract. The service of drilling and blasting cannot be performed without the use of explosives and other materials, and the supplies are naturally bundled with a principal supply of construction. On these findings, the activity is a composite supply of a works contract rather than a pure supply of goods or pure supply of services. [Paras 5]

The impugned activity is a composite supply of a works contract.

Composite supply of works contract for construction of a tunnel - classification under Entry 3(iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 - Whether the impugned composite supply of works contract is covered by Entry 3(iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 and taxable at the rate specified therein. - HELD THAT: - The work order describes the supply as 'drilling and blasting including all tools, materials, explosive vans etc. complete for approach roads and Tunnel Works' and the activity forms part of construction of tunnels (immovable property) for the main EPC contract. Having held that the supply is a composite works contract for construction of a tunnel, the activity falls within the description in Entry 3(iv) of Notification No. 11/2017-CT (Rate) which covers composite supplies of works contracts supplied by way of construction of a tunnel for road transportation for use by general public. The Authority also noted consistent precedent from an Advance Ruling in Gujarat treating blasting with explosives as a composite supply. Considering the classification and the notified entry, the composite supply is covered by Entry 3(iv). [Paras 5]

The impugned composite supply of works contract for construction of a tunnel is covered by Entry 3(iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017.

Final Conclusion: The Advance Ruling Authority holds that the applicant's drilling and blasting activity for tunnel and approach road works is a composite supply constituting a works contract, and that such supply falls within Entry 3(iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017.

Charitable purpose and public utility - informal education through museums, science centres and planetaria as "education" under the definition of charitable purpose - exemption under Section 11 of the Income Tax Act, 1961 - application for registration under Section 12AA and effect of registration - company registered under Section 25 of the Companies Act as indicia of non profit nature - surplus ploughed back/application of income for objects (prohibition on distribution) - turn key projects and the curator/keeper role vis a vis contractor characterization - Proviso to Section 2(15) - commercial activity test

Application for registration under Section 12AA and effect of registration - company registered under Section 25 of the Companies Act as indicia of non profit nature - exemption under Section 11 of the Income Tax Act, 1961 - Whether exemption under Section 11 can be denied on the basis of the assessee's activities when its charitable character was accepted at the time of registration under Section 12AA and it is a Section 25 company. - HELD THAT: - The Court held that the tribunal and revenue authorities failed to give due weight to the assessee's registration under Section 12AA and its incorporation under Section 25 of the Companies Act, which constitute relevant indicia of a non profit, charitable purpose. The memorandum of association and the Section 25 licence conditions demonstrate an obligation to apply income solely for the objects and to prohibit distribution to members, and these features must be read into the assessment of charitable status. The tribunal erred by focusing on incidental objects and by ignoring the main objects and the prohibitions in the memorandum which show the assessee is not established for profit but to promote public education through museums and related activities. For these reasons the denial of exemption on the basis of the authorities' characterisation was not tenable. [Paras 9, 10, 11, 14, 15]

Registration under Section 12AA and the assessee's Section 25 status are relevant and the exemption under Section 11 could not be denied on the basis adopted by the authorities; finding in favour of the assessee.

Informal education through museums, science centres and planetaria as "education" under the definition of charitable purpose - Proviso to Section 2(15) - commercial activity test - turn key projects and the curator/keeper role vis a vis contractor characterization - Whether activities of setting up museums, science parks, planetaria, interactive galleries and similar knowledge dissemination centres constitute commercial activity within the proviso to Section 2(15) or fall within "education"/charitable purpose. - HELD THAT: - The Court rejected the tribunal's narrow view that the assessee was merely a contractor executing turn key projects for consideration. It analysed the nature of museum work - conception, research, curatorial content, training of personnel and interpretation - and held that such activities amount to dissemination of knowledge and informal education. Citing precedent that "education" in Section 2(15) is to be given a wide meaning beyond formal schooling, the Court concluded that establishing and developing museums and related centres are educational and of general public utility. The mere generation of a surplus does not convert such activities into commercial ones, particularly where the memorandum and licence mandate application of income for objects and prohibit distribution. [Paras 11, 12, 13, 15]

The activities in question amount to education and public utility and are not commercial in nature for the purposes of the proviso to Section 2(15); the tribunal's contrary conclusion is erroneous.

Surplus ploughed back/application of income for objects (prohibition on distribution) - charitable purpose and public utility - Whether the Tribunal was justified in denying exemption under Section 11 and in holding that the assessee's objects and activities were commercial and profit oriented. - HELD THAT: - The Court found the tribunal's conclusion arbitrary and perverse because it stemmed from a misreading of the memorandum of association and an erroneous focus on incidental objects and price bids rather than on the substantive nature of the assessee's activities and its statutory/licence constraints. The memorandum's clauses requiring application of income for objects and prohibiting distribution, together with the curatorial, research and educational character of the projects, demonstrate the non profit, charitable character. The tribunal's reliance on the fact that the projects were executed for payment and on the presence of a surplus failed to consider that the surplus is to be applied to the objects and does not indicate profit motivated commercial activity. [Paras 11, 12, 15, 16]

The tribunal's denial of exemption and its findings of commerciality and profit intent were erroneous and liable to be set aside; appeal allowed.

Final Conclusion: The High Court allowed the appeal, holding that the assessee's establishment and operation of museums and related knowledge centres amount to education and public utility within the meaning of charitable purpose; the tribunal's characterization of the activities as commercial and the consequent denial of exemption under Section 11 was set aside, with the substantial questions of law answered in favour of the assessee.

Penalty under Section 271(1)(c) of the Income Tax Act - Concealment of particulars of income and furnishing inaccurate particulars - Wilful or contumacious conduct as prerequisite for penalty - Validity of notice under section 274 where language contains mistake or inaccurate portion not struck off

Penalty under Section 271(1)(c) of the Income Tax Act - Concealment of particulars of income and furnishing inaccurate particulars - Wilful or contumacious conduct as prerequisite for penalty - Whether penalty under Section 271(1)(c) could be sustained for the assessee in respect of (i) treatment of compound wall expenditure as capital and (ii) alleged unexplained purchase and sale. - HELD THAT: - The assessing officer imposed penalty on the grounds that the assessee had concealed particulars and made wrong claims - treating expenditure on a compound wall as capital and having unexplained purchase/sale. The Commissioner (Appeals) examined the explanations: the assessee asserted the compound wall expenditure had enduring effect and was therefore claimed as capital; for the purchase/sale discrepancies the assessee attributed the error to computer reconciliation issues and denied wilful conduct. The CIT(A) found that making a wrong claim about capital expenditure did not ipso facto justify imposing penalty and accepted that the assessee's conduct in relation to the transaction discrepancies was not contumacious or wilful. The Tribunal re-examined the matter, noted decisions on the circumstances under which Section 271(1)(c) applies, and found no material to show purposeful or wilful wrongdoing by the assessee. In the absence of evidence of wilful concealment or furnishing of inaccurate particulars, the confirmation of penalty was unsustainable. The court found no error in the conclusions of the CIT(A) and the Tribunal and declined to interfere.

Penalty imposed under Section 271(1)(c) was vacated in respect of both heads; the order of the Tribunal confirming deletion of penalty was upheld.

Final Conclusion: The revenue's appeal under Section 260A was dismissed; the penalties under Section 271(1)(c) were held to have been rightly vacated by the CIT(A) and the Tribunal because there was no material of wilful or contumacious concealment, and the substantial questions of law were answered against the revenue.

Re-opening of assessment - natural justice - non-provision of documents/affidavits to the assessee - remand for de novo consideration - rectification of court/tribunal order for mistake apparent from record - retrospective effect of subsequent judicial decisions - admissions by accommodation entry providers as material

Re-opening of assessment - admissions by accommodation entry providers as material - natural justice - non-provision of documents/affidavits to the assessee - Whether the order of the Income Tax Appellate Tribunal disposing the Miscellaneous Application of the assessee without dealing with the contention that statements/affidavits and other material from accommodation entry providers were not furnished to the assessee deserves setting aside and remand for fresh consideration. - HELD THAT: - The High Court found that the ITAT's order dated 11th October, 2019 did not address the assessee's complaint that material, including admissions by accommodation entry providers recorded before the Maharashtra Sales Tax Authority, was not furnished to the assessee despite requests. The court recorded that ITAT had failed to consider this objection and had declined to treat a subsequent Bombay High Court decision as a ground apparent from record. Applying principles permitting rectification or recall where an order is passed under mistake and in the interest of justice, and having regard to the retrospective operation of judicial decisions, the High Court set aside the ITAT order and remanded the matter for de novo consideration. The ITAT is directed to decide the grounds raised in the Miscellaneous Application, including consideration of the cited Bombay High Court judgment, to give express findings on (a) the effect of non-provision of the documents/affidavits/declarations by the accommodation entry providers to the assessee, and (b) how principles of natural justice are satisfied if such material was not furnished, explaining its conclusions. [Paras 3, 5, 7]

Order dated 11th October, 2019 set aside; matter remanded to ITAT for de novo adjudication on the Miscellaneous Application including the issue of non-provision of material and consideration of the Bombay High Court judgment.

Rectification of court/tribunal order for mistake apparent from record - retrospective effect of subsequent judicial decisions - Whether the High Court will exercise its power to rectify/disturb the finality of the impugned order in the interest of justice by applying subsequent judicial pronouncements retrospectively. - HELD THAT: - The court relied on settled principles that judicial decisions operate retrospectively and that where an earlier order reflects a mistake or fails to consider a subsequent binding decision, relief by way of rectification/remand may be appropriate to prevent miscarriage of justice. The court expressly invoked the principle that justice may require recalling or setting aside an order passed under an erroneous assumption and directed reconsideration consistent with that principle and the subsequent Bombay High Court decision relied upon by the assessee. [Paras 6, 7]

The High Court exercised its power to set aside the impugned order and remand for fresh consideration, invoking the remedial principle that rectification may be ordered to avoid injustice and to give effect to subsequent judicial rulings.

Procedural liberty to withdraw appeal - Whether the petitioner may withdraw the Income Tax Appeal (L) No. 4270 of 2020 with liberty to file afresh if the original order is not modified. - HELD THAT: - Following the remand direction, the petitioner sought leave to withdraw the present appeal with liberty to file a fresh appeal in the event the original order remains unaltered after reconsideration. The Court granted the prayer and disposed of the appeal as withdrawn, also disposing of the interim application accordingly. [Paras 10, 11, 12]

Appeal dismissed as withdrawn with liberty to file a fresh appeal; interim application disposed.

Merits not adjudicated - Whether the High Court made any observation on the merits of the underlying tax additions. - HELD THAT: - The court expressly clarified that it made no observations on the merits of the case and limited its order to setting aside the ITAT's miscellaneous-application dismissal and remanding the matter for de novo consideration on specified grounds. [Paras 9]

No observation on the merits was made by the High Court.

Final Conclusion: The High Court set aside the ITAT order dated 11th October, 2019 and remanded the matter for de novo consideration, directing ITAT to decide the Miscellaneous Application grounds (including the effect of non-provision of statements/affidavits by accommodation entry providers and the applicability of the subsequent Bombay High Court decision) and explaining how principles of natural justice are met; the petitioner's appeal was allowed to be withdrawn with liberty to file afresh if the original order is not modified; no observation was made on the merits.

Exemption under Sections 11 and 12 - Charitable purpose under Section 2(15) - Principle of consistency and uniformity - Tribunal as last fact finding authority - Effect of operational and management transfer on charitable status

Exemption under Sections 11 and 12 - Charitable purpose under Section 2(15) - Tribunal as last fact finding authority - Principle of consistency and uniformity - Effect of operational and management transfer on charitable status - Validity of the Tribunal's grant of exemption under Sections 11 and 12 for Assessment Year 2012 13 in view of the nature of the assessee's activities and the transfer of management of the hospital. - HELD THAT: - The Court accepted the Tribunal's factual finding that the Revenue failed to establish that the impugned activities were undertaken only in the assessment year under consideration and noted that such activities had been undertaken by the respondent since 2007 08. The Tribunal, as the final fact finding authority, had recorded that exemptions were allowed for earlier and subsequent assessment years in similar circumstances. The Court found no perversity in the Tribunal's conclusion and observed that the principle of consistency and uniformity militated against upsetting the Tribunal's order. Although the Revenue sought to rely on an alleged transfer of management under an operational and management agreement to show commercial character, the Court noted that additional documents purportedly relied upon were not placed on record. In the absence of a demonstrable legal error or perversity in the Tribunal's factual findings and having regard to consistent treatment in other years, no substantial question of law arose warranting interference.

Appeal dismissed on the ground that the Tribunal's factual findings and grant of exemption conform to the principle of consistency and uniformity and are not perverse.

Final Conclusion: The appeal is dismissed; the Tribunal's order granting exemption for Assessment Year 2012 13 is upheld on the basis that the Revenue did not establish a perverse finding and the exemption was consistently allowed in earlier and subsequent assessment years.

Application of Section 153A of the Income Tax Act - Effect of search under Section 132 on completed assessments - Requirement of incriminating material for reopening completed assessments under Section 153A - Reiteration of completed assessment in absence of incriminating material - Finality of assessment

Application of Section 153A of the Income Tax Act - Requirement of incriminating material for reopening completed assessments under Section 153A - Reiteration of completed assessment in absence of incriminating material - Whether additions under Section 153A could be made in respect of completed assessments for the stated assessment years when no incriminating material was found during the search - HELD THAT: - The Division Bench held that the legal position, as summarised in the earlier decision in Commissioner of Income Tax v. Kabul Chawla and followed in PCIT v. Neeta Gutgutia, is that Section 153A cannot be used to disturb a completed assessment unless some incriminating material is unearthed in the course of the search or by requisition of documents or other post-search material relatable to the seized evidence. The Tribunal correctly concluded that where the assessment had attained finality before the search and no incriminating material was found or seized, Section 153A had no application and no addition could be made. The Court observed that pending challenges to earlier decisions before the Supreme Court did not stay those precedents and, therefore, the settled position as applied by the Tribunal governs the present appeals. [Paras 4, 5, 6, 8]

The Tribunal's deletion of the disallowance under Section 80HHC made in proceedings under Section 153A is sustained for the assessment years in question as no incriminating material was found to warrant reopening of completed assessments.

Final Conclusion: Appeals dismissed; the deletions made by the Tribunal are sustained because completed assessments for the specified assessment years could not be reopened under Section 153A in absence of incriminating material unearthed during the search.

Scope of notice under Section 263 - Commissioner's power under Section 263 - department cannot travel beyond show cause notice - limitation to allegations in show cause notice

Scope of notice under Section 263 - department cannot travel beyond show cause notice - Whether the Commissioner, while issuing and adjudicating a notice under Section 263 of the Income Tax Act, 1961, can examine matters beyond the allegations contained in the notice. - HELD THAT: - The court examined whether the CIT could travel beyond the terms of the notice under Section 263 and held that the exercise of power must be confined to the allegations set out in the notice. The Tribunal's reliance on the principle that the department cannot go beyond the show cause notice was endorsed, noting prior authority including the decision in Commissioner of Customs v. Toyo Engg. India Ltd., and its adoption in subsequent decisions. Having found that the Tribunal correctly applied this principle and decided the issue in favour of the assessee, the High Court found no error in the Tribunal's conclusion.

The Commissioner cannot travel beyond the allegations in the Section 263 notice; the Tribunal correctly confined itself to the terms of the notice and its decision in favour of the assessee is upheld.

Final Conclusion: The appeal is dismissed; the substantial question of law is answered against the revenue and the Tribunal's order for assessment year 2009-10 is upheld.

Jurisdiction to initiate reassessment under Section 147 of the Income Tax Act, 1961 - treatment of unexplained investment and addition under Section 68 - application of discretionary satisfaction and concurrent findings of fact by assessing authorities

Jurisdiction to initiate reassessment under Section 147 of the Income Tax Act, 1961 - Whether the assessee can urge lack of jurisdiction in initiation of proceedings under Section 147 when that ground was not pressed before the ITAT. - HELD THAT: - The assessee did not press the jurisdictional plea under Section 147 before the ITAT and did not seek rectification or review of the ITAT order under Section 254. The High Court refused to permit revival of that plea at this stage, treating the concession before the ITAT as definitive for these proceedings. Consequently the question of validity of initiation under Section 147 was not entertained in the assessee's favour and the point is decided against the assessee.

Assessee precluded from raising the Section 147 jurisdictional plea; question answered against the assessee and in favour of the Department.

Treatment of unexplained investment and addition under Section 68 - application of discretionary satisfaction and concurrent findings of fact by assessing authorities - Whether the additions treated as unexplained investment and sustained under Section 68 (and related findings on source of funds) for AY 2004-05 were warranted or were made mechanically. - HELD THAT: - The Assessing Officer made additions treating certain sums as unexplained investment; the CIT(A) and the ITAT granted partial relief but sustained overall additions, ultimately reducing the addition but leaving a confirmed amount. The High Court examined the record and concurrent findings of the AO, CIT(A) and ITAT and found that each order contained reasons and that the authorities had not acted mechanically. The court noted that relief had been granted at successive stages, but declined to interfere with concurrent factual conclusions regarding the unexplained sums, including the applicability of Section 68, observing that the departmental invocation of reassessment and the additions were justified on the material before the authorities.

Additions and their sustention under Section 68 upheld; questions on merits answered against the assessee and in favour of the Department.

Final Conclusion: The High Court dismissed the appeal: the assessee is precluded from raising the Section 147 jurisdictional plea (not pressed before ITAT), and the concurrent factual findings sustaining additions treated as unexplained investments under Section 68 for AY 2004-05 are upheld.

Reopening under section 148 of the Income Tax Act - Escapement of income - Reason to believe - Change of opinion - Tangible material - Reassessment versus review - Prior consideration in assessment under section 143(3) and rectification under section 154 - Approval under section 151

Reopening under section 148 of the Income Tax Act - Reason to believe - Change of opinion - Tangible material - Reassessment versus review - Prior consideration in assessment under section 143(3) and rectification under section 154 - Approval under section 151 - Validity of the notice dated 31.03.2010 under section 148 reopening assessment for A.Y.2005-06 and validity of the order dated 29.10.2010 rejecting objections to that notice. - HELD THAT: - The Court held that the reasons recorded for reopening were founded on incorrect facts and conclusions, including an erroneous computation of the amount alleged to have escaped assessment; on the record the only item arguably relevant was the long-term capital gains on sale of TCS shares and not the larger figure stated in the reasons. The reasons therefore demonstrated non-application of mind and a failure to form a proper reason to believe. The assessment point relied upon had already been considered in the scrutiny assessment under section 143(3) and subsequently on rectification under section 154, so the proposed reopening amounted to a prohibited review or change of opinion unless supported by fresh tangible material. The approving authority under section 151 also ought to have detected the flawed reasoning. Applying settled principles that reassessment cannot be based on mere change of opinion and requires live link to tangible material, the Court found the reopening notice and the order rejecting objections to be unsustainable. [Paras 6, 7, 8, 9, 10]

Notice dated 31.03.2010 under section 148 and the order dated 29.10.2010 rejecting objections were quashed and set aside; Petition allowed.

Final Conclusion: The writ petition is allowed: the reopening notice under section 148 for A.Y.2005-06 and the order rejecting objections are quashed for being based on incorrect facts, non-application of mind and mere change of opinion without fresh tangible material; petition disposed of with no order as to costs.

Reopening of assessment - notice under Section 148 of the Income Tax Act - assumption of jurisdiction - disclosed income and claimed exemption - reassessment bad in law

Notice under Section 148 of the Income Tax Act - disclosed income and claimed exemption - assumption of jurisdiction - Validity of issuance of notice under Section 148 for reassessment where the income (Long Term Capital Gain) was disclosed in the original return and claimed to be exempt, and material relied upon was already available on record. - HELD THAT: - The Tribunal's finding that the reassessment proceeding could not be validly initiated was accepted. The record showed that the Long Term Capital Gain had been disclosed in the return of income and claimed as exempt, and the Assessing Officer was aware of those particulars when framing the assessment under Section 153A. The reassessment notice under Section 148 was issued on the basis of material from the Investigation Directorate alleging trading in penny stocks and bogus claims, but that material merely sought to re-open and verify details already on record. The Court agreed with the Tribunal that assuming jurisdiction to reopen the assessment in those circumstances was impermissible. Consequently, the notice under Section 148 was held to be invalid and the Tribunal's rejection of the appellant's appeal was affirmed. [Paras 4, 5, 6, 7]

The assumption of jurisdiction by issuing notice under Section 148 was bad in law and the reassessment could not be validly initiated; the Tribunal's order rejecting the appellant's appeal is upheld.

Final Conclusion: Appeal dismissed; reassessment notice under Section 148 held invalid insofar as it sought to reopen disclosed Long Term Capital Gain which had been claimed exempt and where the material relied upon was already available on record.

Income deemed as unexplained cash credit under Section 69A - unexplained cash deposits in bank account - concurrent finding of fact by income-tax authorities - absence of documentary evidence to substantiate source - no substantial question of law

Income deemed as unexplained cash credit under Section 69A - unexplained cash deposits in bank account - absence of documentary evidence to substantiate source - concurrent finding of fact by income-tax authorities - Confirmation of addition of unexplained bank deposits to the assessee's income under Section 69A for assessment year 2017-18. - HELD THAT: - The Assessing Officer found cash deposits aggregating to Rs.13,16,304 and made an addition of Rs.12,75,000 treating unexplained deposits as income under Section 69A. The assessee's explanation that Rs.10,00,000 was constituted of long standing personal and son's savings and/or receipts from a chit fund was unsupported by documentary evidence. The first appellate authority recorded the assessee's statement under Section 131 and granted limited relief for an amount identified as withdrawal from GPF but sustained the Rs.10,00,000 addition. The Tribunal examined submissions, the bank statements, the recorded statement and monthly expenditure, observed absence of documentary proof for the chit fund claim and noted restrictions on a government employee entering chit transactions, and upheld the addition. Given concurrent findings of fact by the revenue authorities and the Tribunal's acceptance of the absence of proof for the claimed source of deposits, the High Court found no error in the appellate view and observed that no substantial question of law arises for consideration. [Paras 6, 7]

Addition of Rs.10,00,000 (part of the unexplained deposits) treated as income under Section 69A confirmed by the Tribunal and sustained by the High Court.

Final Conclusion: The appeal is dismissed; the Tribunal's confirmation of the addition under Section 69A for AY 2017-18 is upheld and no substantial question of law is shown.

Disallowance under section 14A - Requirement to record satisfaction before making disallowance - Inapplicability of Rule 8D for Assessment Year 2007-08 - Apportionment of administrative expenses for exempt income

Disallowance under section 14A - Inapplicability of Rule 8D for Assessment Year 2007-08 - Apportionment of administrative expenses for exempt income - Sustainability and quantum of disallowance under section 14A in respect of administrative expenses for AY 2007-08. - HELD THAT: - The Tribunal held that Rule 8D was not applicable to AY 2007-08 and that the Assessing Officer erred in applying Rule 8D to compute the disallowance. It reaffirmed the legal requirement that the AO must record satisfaction, having regard to the assessee's accounts, before making a disallowance under section 14A. The Tribunal accepted the factual finding (unattacked by revenue) that the assessee's opening and closing funds exceeded the average investments, and noted the assessee failed to demonstrate the portion of administrative expenditure attributable to earning exempt income. Given the absence of a reliable apportionment established on record and in the interest of justice the Tribunal exercised judgment to restrict the disallowance to a fair estimated sum rather than uphold the AO's Rule 8D based computation or the CIT(A)'s reliance on the AO's percentage without a demonstrable basis. [Paras 10, 11]

Disallowance under section 14A in respect of administrative expenses is sustained in principle but restricted to Rs. 2,50,00,000; application of Rule 8D was incorrect for AY 2007-08.

Disallowance under section 14A - Requirement to record satisfaction before making disallowance - Whether interest expenditure should be disallowed under section 14A for AY 2007-08. - HELD THAT: - The CIT(A) had deleted the disallowance relating to interest expenditure on the basis that the assessee's free reserves and surplus (opening and closing funds) far exceeded the average investments, and the Assessing Officer did not bring material to show borrowings were used for earning exempt income. The Tribunal noted this factual finding was not challenged by the Revenue and agreed that interest disallowance could not be sustained in the circumstances. [Paras 5, 10]

Disallowance of interest expenditure under section 14A is deleted.

Final Conclusion: The appeal is partly allowed: in principle disallowance under section 14A is sustained for administrative expenses but, given Rule 8D's inapplicability and lack of a reliable apportionment on record, the Tribunal restricts the disallowance to Rs. 2,50,00,000; the disallowance of interest expenditure is deleted.

Allowability of deduction for employees' contributions where payment made after statutory due date but before filing of return - disallowance under 36(1)(va) for delayed deposit of employees' contribution to ESIC - binding effect of jurisdictional High Court precedents

Allowability of deduction for employees' contributions where payment made after statutory due date but before filing of return - disallowance under 36(1)(va) for delayed deposit of employees' contribution to ESIC - binding effect of jurisdictional High Court precedents - Whether the disallowance of the employees' contribution to ESIC under section 36(1)(va) is justified where the contributions were deposited after the statutory due date under ESIC but before filing of the income tax return. - HELD THAT: - The Tribunal examined the factual position that the assessee had deposited employees' contributions to ESIC after the dates prescribed under the ESIC statute but before filing the original return of income for AY 2019-20. Noting conflicting decisions relied upon by the parties, the Tribunal held that the question is governed by binding decisions of the jurisdictional High Court, notably AIMIL Ltd. and the decision in PCIT vs Pro Interactive Service (India) Pvt. Ltd., which apply the principle that an employer is entitled to the deduction if the actual payment is made before filing the return. The Tribunal considered the Revenue's reliance on contrary authorities but concluded that the jurisdictional High Court ratio is determinative and must be followed. Applying that precedent, the Tribunal held that the disallowance under 36(1)(va) could not be sustained where payment was made before filing the return, and accordingly directed deletion of the disallowance made in the intimation. [Paras 11, 12]

Disallowance of the employees' contribution to ESIC of Rs. 21,96,923/- under section 36(1)(va) is deleted as the contributions were paid before filing the return; appeal allowed.

Final Conclusion: Following binding decisions of the jurisdictional High Court, the Tribunal allowed the appeal and directed deletion of the disallowance under section 36(1)(va) since employees' contributions were deposited before filing the return for AY 2019-20.

Mistake apparent from the record - rectification under Section 154 - rectification limited to obvious and patent errors - typographical/clerical error - duty of Assessing Officer to verify and make inquiry

Rectification under Section 154 - mistake apparent from the record - typographical/clerical error - duty of Assessing Officer to verify and make inquiry - Validity of rectification order passed by the Assessing Officer under Section 154 when a mismatch existed between the assessee's books and the tax auditor's report and no certificate from the tax auditor was produced - HELD THAT: - The Tribunal examined whether the AO correctly exercised powers under Section 154 which are confined to correcting a mistake apparent from the record. The undisputed factual matrix showed a mismatch between the figure for provision for leave encashment as per the assessee's Profit & Loss account and the figure certified in the tax audit report, and the assessee did not furnish any certificate from the tax auditor to corroborate its plea of a clerical/typographical mistake. While the case law relied upon by the assessee establishes that rectification cannot be used to reopen debatable issues and is limited to obvious and patent errors, the Tribunal found those precedents distinguishable on facts. Given that the AO initiated rectification to enhance the assessment but did not obtain any independent verification from the tax auditor, the Tribunal held that the AO ought to have made requisite inquiries and verification before invoking Section 154. Consequently, the Tribunal did not decide the correctness of the increased figure on merits but set aside the impugned order and directed the AO to verify the facts (including making enquiries of the tax auditor) and decide the matter afresh. [Paras 8, 9, 10]

Impugned rectification order set aside; matter remitted to the Assessing Officer to verify the discrepancy (including making inquiries of the tax auditor) and to decide the issue afresh; grounds allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the order passed under Section 154 and remitted the matter to the Assessing Officer for fresh inquiry and verification (including from the tax auditor) and fresh decision; the appeal is allowed for statistical purposes.

Revision under section 263 - erroneous and prejudicial to the revenue - power to revise where AO failed to make proper enquiry - adequacy of AO's enquiry - deduction under Rule 7A(2) - remand for fresh consideration

Revision under section 263 - erroneous and prejudicial to the revenue - power to revise where AO failed to make proper enquiry - adequacy of AO's enquiry - Validity of the PCIT's exercise of jurisdiction under section 263 to set aside the assessment order. - HELD THAT: - The Tribunal upheld the PCIT's invocation of section 263 because revision is permissible where the Assessing Officer either takes a wrong decision without considering material on record or takes a decision without making a proper enquiry when such enquiry was prima facie warranted. The AO had accepted various claims in the return without conducting necessary enquiries into the genuineness and allowability of expenditures; consequently the PCIT was justified in concluding that the assessment order was prima facie erroneous and prejudicial to the revenue and in remitting the matters for fresh consideration. Endless inquiry is a matter for the AO to determine, but absence of requisite enquiries when prima facie warranted sustains revision under section 263. [Paras 8, 9]

The PCIT was justified in invoking section 263 and setting aside the assessment order for issues where the AO failed to make proper enquiries.

Deduction under Rule 7A(2) - remand for fresh consideration - Treatment of the deduction claimed under Rule 7A(2) and the extent to which the AO may allow it on reconsideration. - HELD THAT: - The PCIT remitted the Rule 7A(2) issue to the AO for re-examination. The Tribunal confirmed that the allowability of the deduction is to be re-examined by the AO in accordance with law after giving the assessee an opportunity of being heard. However, the PCIT's direction that the AO should not allow a deduction in excess of the amount allowed in the original assessment order (i.e., the deduction claimed in that order) was endorsed: even if the AO finds the higher amount to be allowable on reconsideration, the AO is to restrict the deduction to the amount claimed in the original assessment order. The AO must act independently on merits on remand and not be influenced by the PCIT's observations, subject to the stated restriction. [Paras 19]

Issue remitted to the AO for fresh consideration; AO shall re-examine Rule 7A(2) claims but shall not allow deduction exceeding the amount allowed in the original assessment order.

Remand for fresh consideration - adequacy of AO's enquiry - Disposition of prior period expenses and amounts written off (including interest receivable, bamboo plantation, interest on loan, agricultural income tax recoverable and sundry balances). - HELD THAT: - The Tribunal observed that the PCIT remitted several specific items - prior period expenses, components of expenses written off (interest receivable from Karnataka Cashew Development Corporation including voluntarily waived interest, bamboo plantation write-off, interest on loan to Mysore Paper Mills Ltd., agricultural income tax recoverable from Government of Karnataka, and sundry balances) - because the AO had not made the requisite enquiries. The PCIT did not pronounce on the merits of these items but sent them back to the AO for re-examination in accordance with law after giving the assessee adequate opportunity of being heard. The remand is for fresh consideration and verification; the Tribunal confirmed the remand as within the PCIT's power. [Paras 19]

These items are remitted to the Assessing Officer for fresh consideration and verification; the PCIT's remand is sustained.

Final Conclusion: The Tribunal dismissed the assessee's appeal: it sustained the PCIT's exercise of revisionary jurisdiction under section 263 where the AO had failed to make proper enquiries, confirmed the remand of specified issues for fresh consideration by the AO, and directed that the AO shall not allow a Rule 7A(2) deduction in excess of the amount allowed in the original assessment order while re-examining the claim.

Revision under section 263 - deduction under section 80P(2)(d) - exclusion of co-operative banks under section 80P(4) - income from other sources - attributable income - allowance of proportionate expenses on taxable interest

Revision under section 263 - deduction under section 80P(2)(d) - exclusion of co-operative banks under section 80P(4) - income from other sources - Whether the Principal Commissioner was justified in holding the assessment order erroneous and prejudicial to revenue and directing withdrawal of deduction claimed under section 80P(2)(d) in respect of interest earned on deposits with a co-operative bank. - HELD THAT: - The Tribunal examined the rival authorities and the scheme of Section 80P, including the Karnataka High Court's later decision in PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER v. TOTAGARS COOPERATIVE SALE SOCIETY (395 ITR 611 (Karn)), which construed the effect of Section 80P(4) as excluding co-operative banks from the beneficial provisions of Section 80P. Applying that view, interest earned on deposits with a bank (including a co-operative bank) is income chargeable under the head 'Income from other sources' and does not fall within the categories covered by Section 80P(2)(a) or 80P(2)(d). Where the AO allowed the deduction under Section 80P(2)(d) for interest on deposits with a co-operative bank, the Tribunal held that the assessment order involved an incorrect application of law and was therefore erroneous and prejudicial to the interests of the revenue; consequently the Commissioner was justified in invoking his revisionary power under Section 263 and directing that the deduction be withdrawn and the interest be taxed. [Paras 11, 12, 13, 14, 15]

The CIT's exercise of revisionary jurisdiction under Section 263 was justified and the deduction claimed under Section 80P(2)(d) for interest on deposits with the co-operative bank was to be disallowed and taxed as income from other sources.

Allowance of proportionate expenses on taxable interest - income from other sources - Whether, after denial of deduction under Section 80P(2)(d), the assessee is entitled to claim proportionate expenses against the interest income when assessed as income from other sources. - HELD THAT: - The Tribunal, having set aside the deduction under Section 80P(2)(d), followed precedent of the co-ordinate Bench (Puttur Primary Co-operative Agriculture and Rural Development Bank Ltd. and Karkala Co-op S Bank Ltd. decisions) and the Karnataka High Court approach which permits allowance of proportionate cost, administrative and other expenses attributable to earning the interest, if the AO proposes to assess the interest as 'income from other sources'. The AO was directed to allow such deductions upon verification of appropriate evidence and after affording the assessee an opportunity of being heard. [Paras 16, 17]

The matter was remitted to the AO to assess the interest as income from other sources; while denying the Section 80P(2)(d) deduction, the AO shall allow proportionate expenses and administrative costs (subject to evidence and hearing) in computing the taxable interest.

Final Conclusion: The Tribunal partly allowed the appeal: upholding the Principal Commissioner's revision under Section 263 to disallow the deduction under Section 80P(2)(d) for interest on deposits with the co-operative bank and directing taxation of that interest as income from other sources, but modifying the order to remit to the AO for assessment after allowing proportionate cost and administrative expenses on the lines indicated, with opportunity to the assessee to produce evidence.

Clarificatory vs amendatory circular - served from India scheme eligibility - retrospective application of clarificatory circular - reopening settled claims - authority of DGFT to interpret FTP - suppression of material fact and clean hands doctrine - ultra vires challenge to executive clarification

Suppression of material fact and clean hands doctrine - Non-disclosure of the application and declaration/undertaking by the petitioner does not disentitle it from seeking discretionary writ relief in the present challenge to the Circular and demand notices. - HELD THAT: - The Court applied the settled test that suppression must be of a material fact which would have materially affected the merits of the relief claimed. The decisive question was whether the petitioner's non-disclosure of its application/undertaking had bearing on the core issue - the authority of DGFT to issue the Circular and the legality of the reopening exercise by the third respondent. Since the demand notice and reminder were issued only pursuant to the Circular and not on the ground of the application/undertaking alone, the Court found it too far-fetched to dismiss the petition for suppression. Consequently, non-disclosure did not amount to suppression of a material fact warranting dismissal of the writ petition. [Paras 33, 34]

Petitioner's non-disclosure does not bar relief; issue answered against respondents.

Clarificatory vs amendatory circular - authority of DGFT to interpret FTP - served from India scheme eligibility - ultra vires challenge to executive clarification - The Policy Circular No.25/2007 (01/01/2008) is a clarificatory exercise by the DGFT and not an amendment of the FTP, and therefore is not, per se, ultra vires Articles 14 and 19(1)(g) or section 5 of the FTDR Act or paragraph 3.6.4 of the FTP 2004-2009. - HELD THAT: - Having examined relevant Supreme Court authority distinguishing clarificatory from amendatory actions, and paragraph 2.3 of the FTP conferring interpretative power on DGFT, the Court held that a DGFT clarification is permissible. The Court analysed the Circular's language and purpose, concluding it merely elucidated that only services originating from India qualify for SFIS benefits. The Court observed that recitals describing the Circular as a clarification are not conclusive, but on substantive analysis the Circular highlighted what was implicit in the SFI Scheme and thus was clarificatory rather than an impermissible amendment of policy by administrative action. [Paras 42, 43]

The Circular is clarificatory and not ultra vires on the grounds urged.

Retrospective application of clarificatory circular - reopening settled claims - clarificatory vs amendatory circular - Although clarificatory circulars may operate retrospectively in principle, this Circular, when read as a whole, was intended to apply only to claims 'while finalizing the claims' and not to reopen settled or closed claims; therefore it could not be used to recover benefits already granted and finally settled. - HELD THAT: - The Court scrutinised paragraphs 2 and 3 of the Circular and the Port Officers' Minutes. Paragraph 2 records receipt of applications where export from India did not take place, and paragraph 3 prescribes principles to be applied 'while finalizing the claims.' The phrase indicates application to pending claims. The Court found that the Circular departs from the broader direction in the Port Officers' meeting to pursue recoveries even for past grants; where the Circular and those minutes conflict, the Circular governs. As the Circular did not expressly or by necessary implication authorize reopening of finalized claims, the respondents could not validly reopen settled matters based on it. [Paras 46, 47, 48, 49]

The Circular does not operate to reopen settled or closed claims; it applies to claims pending finalisation only.

Reopening settled claims - authority of DGFT to interpret FTP - The demand notice dated 28th January 2010 and the reminder dated 31st May 2010 issued by the third respondent to recover SFIS benefits from the petitioner are invalid and inoperative because they were issued pursuant to the Circular in a manner that reopens settled claims which the Circular did not authorize. - HELD THAT: - The demand notices expressly relied on the Circular for authority. Because the Circular, as construed by the Court, was applicable only to claims in the course of finalisation and did not authorize reopening of settled grants, the third respondent lacked authority to issue the demand notice and reminder invoking the Circular to recover benefits previously granted and finally settled. The Court emphasised that erroneous official grants can be recovered only if there is legal authority; absent such authority the recovery notices are unauthorized. [Paras 51, 52]

The demand notice and reminder are invalid and are set aside.

Relief and consequential directions - Consequential reliefs: the demand notice and reminder are set aside; petitioner is discharged from the interim undertaking; respondents remain free to proceed against the petitioner only if any such action is permissible in law on proper grounds. - HELD THAT: - The Court quashed the recovery notices as unauthorized and discharged the petitioner from the undertaking given on admission of the writ petition. However, the Court noted the respondents' contention that the petitioner may have been disqualified on grounds apparent from its own application/declaration; the Court left open respondents' power to proceed if such recovery or action is otherwise permissible in law (i.e., pursuant to statutory authority), thereby not foreclosing lawful recovery proceedings under appropriate legal provisions. [Paras 54, 55, 56, 57]

Demand notice and reminder set aside; petitioner discharged from undertaking; respondents may proceed only if law permits.

Final Conclusion: Writ petition allowed to the extent that Policy Circular No.25/2007 is held to be clarificatory (not ultra vires) but not operative to reopen or rescind benefits already finally granted; the demand notice dated 28.01.2010 and reminder dated 31.05.2010 issued to recover SFIS benefits are invalid and are set aside; petitioner discharged from its interim undertaking; respondents may only proceed further if lawful authority to do so exists. Parties to bear their own costs; stay of the order refused.

Voluntary statement under Section 108 of the Customs Act, 1962 - presence of advocate at visible but not audible distance during recording of statement - videography of interrogation at the cost of the person being recorded - summons already issued - no requirement to issue fresh summons - interim protection from coercive action by Supreme Court - recording of statements during office hours

Voluntary statement under Section 108 of the Customs Act, 1962 - presence of advocate at visible but not audible distance during recording of statement - Petitioners permitted to have their advocate present at visible but not audible distance while their voluntary statements under Section 108 of the Customs Act, 1962 are recorded. - HELD THAT: - The Court, following this Court's decision in Rajuram Purohit (and Supreme Court precedent referenced therein), held that petitioners summoned for recording voluntary statements under Section 108 are entitled to have their advocates present at a visible but not audible distance. That principle was applied to the present petitions and the Court observed that the rule in Rajuram Purohit and the governing Supreme Court authority are binding on this Bench. The petitioners had represented readiness to appear for recording of statements and sought the specific procedural accommodation of counsel's visible presence; the Court found no reason to refuse that relief and granted it. [Paras 11, 15]

Advocates of the petitioners are allowed to be present at visible but not audible distance during recording of voluntary statements.

Videography of interrogation at the cost of the person being recorded - Videography of the interrogation is permitted at the cost of the petitioners. - HELD THAT: - The Court accepted the petitioners' request to have the interrogation videographed and, following the reasoning in earlier decisions permitting such recording, authorised videography subject to the petitioners bearing the cost. The grant was limited to recording of the interrogation and did not alter other investigative safeguards. [Paras 11, 15]

Videography of the petitioners' interrogation is permitted, to be carried out at the petitioners' cost.

Summons already issued - no requirement to issue fresh summons - No fresh summons need be issued where summonses have already been issued; respondents to fix dates in response to existing summonses. - HELD THAT: - The Court noted that summonses under Section 108 had already been issued (annexures A-F) and held that in view of those existing summonses the respondents were not required to issue fresh summons. The respondents were, however, directed to give the petitioners clear notice of the date fixed for their appearance in response to those summonses. [Paras 3, 12, 14]

Respondents need not issue fresh summons; they must fix dates in response to the existing summonses and give 72 hours clear notice.

Interim protection from coercive action by Supreme Court - The existence of an interim order from the Supreme Court restraining coercive action was recorded but did not preclude the grant of the limited relief sought in this petition. - HELD THAT: - The Court recorded that the petitioners have an interim protection order from the Supreme Court restraining coercive steps, and noted the pending Article 32 petition. Notwithstanding that pending petition, the High Court exercised its power to grant the limited procedural relief sought (advocate presence, videography, notice), while observing that the Supreme Court's interim order remained in force. [Paras 4, 5, 9]

The Supreme Court's interim protection against coercive action is noted; the High Court nonetheless granted the limited procedural directions requested.

Recording of statements during office hours - Interrogation and recording of the petitioners' statements shall be undertaken during office hours. - HELD THAT: - To ensure orderly and non-coercive recording of statements, the Court directed that interrogation and recording shall take place during office hours. This procedural limitation was imposed as part of the conditions for permitting appearance, counsel's visible presence and videography. [Paras 16]

Statements shall be recorded during office hours.

72 hours clear notice before fixing date for appearance - Respondents are directed to give the petitioners at least 72 hours clear notice before fixing the date for their appearance in response to existing summonses. - HELD THAT: - Balancing the respondents' investigatory needs and the petitioners' right to fair procedure, the Court directed that a minimum 72 hours clear notice be provided before any date is fixed for appearance. The petitioners were also directed not to seek unnecessary adjournments. [Paras 14]

Respondents must give 72 hours clear notice before fixing the date of appearance; petitioners shall not seek unnecessary adjournments.

Final Conclusion: The writ petition is allowed: petitioners summoned under Section 108 may appear to record voluntary statements with their advocates present at visible but not audible distance and with videography at their cost; no fresh summons is required, respondents shall give 72 hours clear notice and ensure recording during office hours; all other terms as ordered.

Misdeclaration of description and value - misdeclaration of quantity - redemption fine - penalty under Section 117 of the Customs Act, 1962 - assessable value

Misdeclaration of quantity - misdeclaration of description and value - Whether the Commissioner (Appeal) was correct in holding that there was no misdeclaration of quantity while upholding misdeclaration of description and value. - HELD THAT: - The Tribunal found from the record that the consignment's quantity was declared in weight and there was no variation in the weight of the consignment; further, the show cause notice did not allege misdeclaration of quantity. On these facts the Commissioner (Appeal) rightly held that no discrepancy in quantity was established, while separately upholding the charge of misdeclaration of description and enhanced assessable value. [Paras 7]

Finding of no misdeclaration of quantity upheld; charge of misdeclaration of description and enhanced assessable value sustained.

Redemption fine - assessable value - Whether reduction of the redemption fine from the adjudicating authority's amount to the sum imposed by the Commissioner (Appeal) was justified. - HELD THAT: - The Tribunal noted that the respondent had accepted the declared price and paid the differential duty (as reflected in the record) and that the Commissioner (Appeal) considered the duty paid and margin of profit in exercising discretion. The Tribunal accepted that the quantum of a redemption fine depends on case-specific facts (including quantity, value and duty paid) and that the precedent relied upon by the Revenue did not dictate a different result on the facts of this case. In view of the adjudicatory exercise recorded by the Commissioner (Appeal), the reduced redemption fine was held sufficient in the interest of justice. [Paras 7]

Reduction of redemption fine by the Commissioner (Appeal) is upheld as justified on the facts.

Penalty under Section 117 of the Customs Act, 1962 - Whether the Commissioner (Appeal) was correct in setting aside the penalty imposed under Section 117. - HELD THAT: - The Commissioner (Appeal) recorded that the adjudicating authority had not given the requisite findings to justify imposition of penalty under Section 117. The Tribunal agreed that absence of recorded findings by the adjudicating authority rendered imposition of the penalty unsustainable, and therefore the penalty was rightly dropped by the Commissioner (Appeal). [Paras 7]

Penalty under Section 117 set aside for lack of recorded findings by the adjudicating authority; the Commissioner (Appeal)'s order in this respect is upheld.

Final Conclusion: The appeal filed by the Revenue is dismissed; the Commissioner (Appeal)'s order upholding misdeclaration of description and enhanced assessable value, while rejecting misdeclaration of quantity, reducing the redemption fine and setting aside the penalty under Section 117, is upheld.

Denial of exemption under the Special Economic Zone Act and recovery of duty under Section 28 of the Customs Act - allegation of mis-declaration and clandestine removal of imported goods from SEZ - confiscation under Section 111(j) and 111(o) of the Customs Act - rejection of declared transaction value under the Customs Valuation Rules/Section 14 - presumption under Section 139 of the Customs Act in adjudication proceedings - admissibility of statements recorded during investigation and right to cross-examination under Section 138B - jurisdiction of Directorate of Revenue Intelligence officers to issue show cause notices prior to Notification dated 05.08.2016 (Canon India principle)

Allegation of mis-declaration and clandestine removal of imported goods from SEZ - denial of exemption under the Special Economic Zone Act and recovery of duty under Section 28 of the Customs Act - Whether the denial of exemption under the SEZ Act and the recovery of duty under Section 28 can be upheld on the basis of alleged mis-declaration and clandestine removal. - HELD THAT: - The Tribunal examined the Revenue's case that the appellants imported finished/new branded jewellery under the guise of old/outdated jewellery and clandestinely diverted such goods to the DTA, failing to fulfil SEZ export obligations. The jewellery-appraiser's report only recorded that certain imported jewellery "appeared as new" but did not rule out that goods could be "outdated" or "out of fashion" as permitted by the SEZ approvals. The Bills of Entry were regularly assessed and cleared by the proper Officer at the time of import and no allegation of connivance with Customs officers was made. The Coordinate Bench's earlier findings were held to be supportive that routine Customs examination at import and export had occurred and no discrepancy was identified contemporaneously. On the totality of evidence, the charge of mis-declaration and clandestine removal was found to be presumptive and unsupported by cogent material; accordingly denial of exemption and recovery under Section 28 could not be sustained on merits and were set aside. [Paras 62, 64]

Allegations of mis-declaration and clandestine removal not proved; denial of SEZ exemption and recovery under Section 28 set aside on merits.

Rejection of declared transaction value under the Customs Valuation Rules/Section 14 - Whether the declared transaction value could be rejected under Section 14/read with Rule 12 of Valuation Rules. - HELD THAT: - The Tribunal held that rejection of declared value requires the proper Officer to have reason to doubt the declared value. Given that the Bills of Entry were routinely assessed by the proper Officer without prior finding of mis-declaration at import, and in view of the Tribunal's conclusion that allegations of mis-declaration were not sustainable, there was no basis to doubt the truth or accuracy of the declared transaction value and therefore the rejection of value under Section 14/Valuation Rules did not survive. [Paras 62]

Rejection of declared transaction value unsustainable; valuation finding set aside.

Presumption under Section 139 of the Customs Act in adjudication proceedings - Whether the Adjudicating Authority validly invoked Section 139 presumptions to treat seized documents, fax messages and private notings as conclusive evidence in adjudication proceedings. - HELD THAT: - Section 139 creates presumptions for use in prosecution trials when seized documents are tendered before a Court; it does not apply to adjudication proceedings before a quasi-judicial authority. The Tribunal relied on precedent to hold that applying Section 139 in adjudication was impermissible and that the Adjudicating Authority erred in treating the contents of fax messages, parallel invoices and private notings as presumed true under Section 139. [Paras 64]

Invocation of Section 139 in adjudication was erroneous; such presumptions could not be applied by the Adjudicating Authority.

Admissibility of statements recorded during investigation and right to cross-examination under Section 138B - Whether statements recorded during investigation could be relied upon in adjudication when witnesses were not produced for cross-examination and Section 138B procedures were not complied with. - HELD THAT: - The Tribunal found that Revenue relied on statements recorded during investigation without producing those witnesses for examination and cross-examination before the Adjudicating Authority. No exceptions under Section 138B were recorded to justify non-examination. Citing Supreme Court and High Court authorities, the Tribunal held that refusal to allow cross-examination renders such statements inadmissible in adjudication and reliance on them violates principles of natural justice. Consequently, investigatory statements could not sustain the clandestine removal charge. [Paras 64]

Statements recorded during investigation, not subjected to cross-examination and without invocation of exceptions in Section 138B, cannot be read as evidence; such material was excluded.

Confiscation under Section 111(j) and 111(o) of the Customs Act - Whether confiscation of goods seized from the SEZ unit and from the partner's residence could be sustained under clauses (j) and (o) of Section 111. - HELD THAT: - Confiscation under Section 111(j)/(o) attaches where dutiable goods are removed from Customs area or where exemption conditions are violated. The two import consignments seized were admitted to have been cleared by the proper Officer for reprocessing in the SEZ unit and were seized before being opened or used; thus there was no removal without permission nor opportunity to breach exemption conditions. Since the clandestine removal finding was set aside, confiscation of goods seized from factory and residence could not be sustained. [Paras 65, 66]

Confiscation under Section 111(j) and 111(o) not attracted; confiscation set aside.

Jurisdiction of Directorate of Revenue Intelligence officers to issue show cause notices prior to Notification dated 05.08.2016 (Canon India principle) - Whether show cause notices and consequent adjudication by DRI officers prior to Notification No. 2666 dated 05.08.2016 were within jurisdiction. - HELD THAT: - Relying on the Supreme Court's reasoning in Canon India, the Tribunal observed that appointment of DRI officers as "proper officer" must be by appropriate authority and that the statutory power to invest customs functions could not be validly exercised by an authority lacking competence. The Tribunal noted that the power to authorize DRI/DGCEI officers for SEZ inspections, searches and seizures was conferred only by Notification dated 05.08.2016, whereas the present searches/investigations and show cause notices occurred prior to that date. Therefore the show cause notices issued and adjudication based on DRI action prior to 05.08.2016 were held to be without jurisdiction. [Paras 67, 68, 69]

Show cause notices and consequent adjudication by DRI officers for actions taken prior to 05.08.2016 were without jurisdiction; orders based on such notices set aside.

Penalties as consequential relief - Whether penalties imposed on the appellants could be sustained once denial of exemption, value rejection and confiscation were set aside. - HELD THAT: - Given the Tribunal's findings that mis-declaration, clandestine removal and confiscation could not be proved and that the show cause notices were without jurisdiction, the imposition of penalties under Sections 112, 114 and related provisions was held to be unsustainable. The Tribunal further observed that even on the narrow contention of mis-declaration of export consignments (if accepted), the penalties would be limited and, in any event, could not stand without foundational proof; consequently all penalties imposed upon these appellants were set aside. [Paras 64, 70]

Penalties set aside as consequential relief.

Final Conclusion: The Tribunal allowed the appeals: on merits it found that allegations of mis-declaration and clandestine removal were not established, rejection of declared value and confiscation could not be sustained, and penalties could not stand; additionally, relying on the Canon India principle and the fact that DRI powers for SEZ investigations were conferred only by notification dated 05.08.2016, the show cause notices issued and adjudicated for actions prior to that notification were held to be without jurisdiction. The impugned adjudication was set aside and relief granted to the appellants, including return of confiscated goods and consequential benefits.

Sanction of scheme of amalgamation - Appointed date - Transfer of assets, rights and liabilities on amalgamation - Carry forward and set off of accumulated losses and unabsorbed depreciation subject to statutory conditions of Section 72A of the Income Tax Act, 1961 - Protection of revenue and recoverability of tax dues post-amalgamation - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Sanction of scheme of amalgamation - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Appointed date - Sanction of the Scheme of Amalgamation and fixation of the appointed date. - HELD THAT: - The Tribunal examined statutory compliances, affidavits of publication and service, reports of Registrar of Companies/Regional Director and Official Liquidator, and the statutory auditor's certificate on accounting treatment. In the absence of adverse observations sufficient to preclude sanction and since requisite procedural requirements under the Act and Rules were fulfilled, the Scheme appended to the petition is sanctioned. The Scheme's appointed date is fixed as 01.04.2018 as specified therein. [Paras 10, 13]

Scheme sanctioned and appointed date fixed as 01.04.2018.

Transfer of assets, rights and liabilities on amalgamation - Continuation of proceedings against transferee - Transfer of employees - Legal effect of sanction: vesting of properties, transfer of liabilities, continuation of pending proceedings and transfer of employees to the transferee company. - HELD THAT: - On sanction, all properties, rights and powers of the transferor companies are to be transferred to and vested in the transferee company; all liabilities and duties of the transferors become those of the transferee; pending proceedings, if any, to be continued by or against the transferee; and employees of the transferor companies shall be transferred to the transferee as per the Scheme. These operative consequences follow from Sections 230-232 and are reflected in the Tribunal's directions. [Paras 13]

Assets, rights, liabilities and employees stand transferred to the transferee; pending proceedings continue against/for the transferee.

Carry forward and set off of accumulated losses and unabsorbed depreciation subject to statutory conditions of Section 72A of the Income Tax Act, 1961 - Effect of appointed date vis-a -vis pre-appointed-date losses - Whether carry forward and set off of accumulated losses and unabsorbed depreciation of transferor companies are permitted under the Scheme. - HELD THAT: - The Tribunal noted there is no specific clause in the Scheme expressly granting carry forward of pre-appointed-date losses. Having considered the Income Tax Department's report and the Scheme clauses, the Tribunal directed that carry forward and set off of accumulated losses and unabsorbed depreciation of the transferor companies will be allowed only upon fulfillment of the statutory conditions of Section 72A of the Income Tax Act, 1961. Losses of periods prior to the appointed date cannot be treated as eligible unless statutory requirements are met. [Paras 7, 13]

Carry forward and set off of accumulated losses and unabsorbed depreciation allowed only on satisfaction of Section 72A conditions.

Protection of revenue and recoverability of tax dues post-amalgamation - Undertaking by transferee regarding satisfaction of demands - Whether sanction of the Scheme impinges on the Income Tax Department's right to recover tax dues. - HELD THAT: - The Tribunal recorded that the transferee company is not being dissolved and that the Scheme preserves rights of tax authorities. It relied on precedent and the Scheme's undertakings to conclude that legitimate interests of the tax authorities remain intact and they may proceed against the transferee (or others liable) for recovery of lawful dues as determined by competent forums. The Tribunal therefore did not preclude action by revenue authorities under law. [Paras 7, 10]

Sanction does not bar the Income Tax Department from recovering dues; rights of revenue are preserved.

Filing and procedural directions following sanction - Regulatory compliances and consequential filings - Post-sanction procedural and compliance directions to be followed by the parties. - HELD THAT: - The Tribunal directed the transferee to file revised memorandum and articles and make requisite filings with the Registrar of Companies, required deposit to the local Tribunal Bar Association, and submission of certified copy of the order to the RoC for registration leading to dissolution of transferor companies without winding up. The petitioners were also directed to file the Schedule of Assets in prescribed form and to ensure regulatory authorities act on the order copy. The Tribunal clarified the order does not grant exemptions from stamp duty, taxes or other charges. [Paras 13, 14, 15]

Directed specific filings, payments and compliance steps consequent to sanction; no exemption from statutory duties or charges implied.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation with appointed date 01.04.2018, directed vesting of assets, liabilities and employees in the transferee, preserved the Income Tax Department's rights to recover dues, and permitted carry forward/set off of transferor companies' losses and unabsorbed depreciation only upon fulfillment of Section 72A conditions; post-sanction procedural filings and compliance were ordered.

Application of Part II of the IBC - minimum amount of default - prospectivity of statutory amendment - jurisdiction of the Adjudicating Authority - maintainability of an application under Section 9 - writ jurisdiction under Article 226

Application of Part II of the IBC - minimum amount of default - prospectivity of statutory amendment - maintainability of an application under Section 9 - Whether after the amendment of Section 4 by notification dated 24.03.2020 Part II of the IBC applies only where the minimum amount of default is Rs. 1 Crore and whether an application filed after that amendment in respect of a default less than Rs. 1 Crore is maintainable. - HELD THAT: - Section 4, as amended by the notification of 24.03.2020, fixes the applicability of Part II to matters where the minimum amount of default is Rs. 1 Crore. The term 'default' remains the statutory concept of non-payment as defined in the Code; however, whether Part II may be invoked depends on whether the default meets the statutory monetary threshold in force. From the date of amendment Part II applies only to defaults meeting the new minimum; consequently an application filed on or after 24.03.2020 in respect of a default below Rs. 1 Crore cannot invoke Part II. The court applied the principle that the law in force at the relevant time for determining applicability of Part II is decisive and treated the amendment as modifying the right to invoke the insolvency process; since the amendment removed Part II's applicability to defaults below Rs. 1 Crore with effect from 24.03.2020, such applications filed thereafter are not maintainable. The Court relied on the interpretive approach that the litmus test for jurisdiction under the Code is the existence of a default as defined in Section 4, read with the amended monetary threshold, and that this test is common to Sections 7, 9 and 10 and to the Part as a whole. [Paras 23, 25]

Ext. P1 application (filed after 24.03.2020) in respect of a default below Rs. 1 Crore is not maintainable and Part II of the IBC cannot be invoked for such defaults.

Jurisdiction of the Adjudicating Authority - writ jurisdiction under Article 226 - maintainability of an application under Section 9 - Whether the petitioner is entitled to challenge the NCLT's maintainability order under Article 226 and whether the NCLT had jurisdiction to entertain Ext. P1 after the amendment. - HELD THAT: - The Adjudicating Authority (NCLT) is a creature of statute and its jurisdiction is defined by the Code; Section 4 prescribes the threshold for Part II's applicability and thus the jurisdictional boundary. Since the amended Section 4 removed Part II's applicability for defaults below Rs. 1 Crore with effect from 24.03.2020, the Tribunal lacked jurisdiction to entertain an application filed after that date in respect of such lesser default. Where a statutory adjudicatory body acts wholly without jurisdiction by entertaining a matter that the statute no longer permits, relief by way of writ under Article 226 is not precluded by the existence of an alternative remedy and the court may exercise its supervisory jurisdiction. Applying these principles, the Court found the NCLT's Ext. P7 order to be vitiated by total want of jurisdiction and entertained the challenge under Article 226. [Paras 17, 23, 26]

The writ petition challenging Ext. P7 is maintainable; the NCLT had no jurisdiction to entertain Ext. P1 in light of the amendment and Ext. P7 is susceptible to being set aside.

Final Conclusion: W.P.(C) No. 27636 of 2020 is allowed: Ext. P7 of the NCLT is set aside and Ext. P1 cannot be entertained after the amendment to Section 4 fixing the minimum amount of default at Rs. 1 Crore. W.P.(C) No. 14158 of 2021 is dismissed as the declaration sought is not permissible in view of the conclusion that the applicability of Part II depends on the existence of a default meeting the statutory threshold.

Financial creditor - debt in default - right of lender to convert debt into equity as an option - maintainability of Section 7 application - authorization of filing by agent / power of attorney

Financial creditor - maintainability of Section 7 application - Respondent No.1 (TFCI) is a financial creditor and entitled to file the application under Section 7 of the IBC. - HELD THAT: - The Tribunal found on the material placed that TFCI had disbursed a loan of Rs.50 crores to the corporate debtor under the loan agreement dated 28.3.2018 and therefore fulfills the essential ingredient of disbursement against the time value of money required to qualify as a financial creditor. The Adjudicating Authority's admission of the Section 7 application was upheld because the claimant was not merely a holder of collateral security but the actual lender who had granted the loan to the corporate debtor. The ratio in Anuj Jain, distinguishing collateral creditors from lenders who disbursed funds, was applied to conclude that TFCI is properly before the Tribunal as a financial creditor. [Paras 11, 19, 21]

TFCI is a financial creditor and its Section 7 application was maintainable.

Debt in default - events of default - There was a default in repayment of the loan as on 15.2.2020 and the debt was in default. - HELD THAT: - The Tribunal examined the loan account ledger, the repayment amortization schedule and Article X (Events of Default) of the General Conditions (GC 1 91), and noted that default in payment of interest/principal as defined in those provisions had occurred. The Section 13(2) notice dated 18.2.2020 declared the aggregate amount as due and payable with record date 15.2.2020. Applying the contractual definition of events of default and the documentary evidence, the Tribunal held that the debt was in default on the specified date. [Paras 11, 12, 13, 14, 20]

The loan stood in default on 15.2.2020 and the amount claimed was due and payable.

Right of lender to convert debt into equity as an option - The existence of an express conversion right in the loan agreement did not preclude the financial creditor from proceeding under Section 7 on occurrence of default. - HELD THAT: - The Tribunal construed Clause 2.6 of the loan agreement and the General Conditions to conclude that the right to convert the outstanding loan into equity was an option available to the lender and not an obligation. The General Conditions also set out consequences of default and notice requirements. Given the ledger evidence of overdue interest and the Section 13(2) notice, the lender lawfully exercised its statutory remedy under the IBC rather than the conversion option, which is permissible under the contractual scheme. [Paras 6, 15, 16]

The lender's option to convert did not bar invocation of Section 7; filing under IBC was permissible on default.

Authorization of filing by agent / power of attorney - The person who filed the Section 7 application on behalf of TFCI had valid authorization and the application was not defective for want of proper authorization. - HELD THAT: - The Tribunal reviewed the Board minutes dated 17.5.2004 which authorized Shri N. Ramachandran, Manager (Law), to initiate legal proceedings and the subsequent power of attorney issued on that basis. On this foundation the Tribunal held that the filing was supported by valid corporate authorization and rejected the contention that the Section 7 application was defective for lack of proper authorization. [Paras 18]

The filing was properly authorized and not defective on authorization grounds.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's admission of the Section 7 application against Aryavir Buildcon Pvt. Ltd. was appropriate because TFCI is a financial creditor, the loan was in default as on 15.2.2020, the conversion option did not preclude proceeding under IBC, and the filing was duly authorized.

Bona fide dispute - existence of debt and default - summary jurisdiction under the I&B Code - reconciliation of accounts - admission of liability - relegation to civil proceedings or arbitration

Bona fide dispute - existence of debt and default - Whether a genuine dispute existed between the parties such that the Section 9 application could not be admitted. - HELD THAT: - The Tribunal examined the record and accepted the Adjudicating Authority's finding that the Corporate Debtor had raised tenable, substantive contentions touching quality of goods and account differences which were not mere evasions or bare denials. The parties' ledger statements diverged markedly (Operational Creditor's ledger showing the claimed sum and the Corporate Debtor's books showing a much smaller balance) and several debit/credit notes required reconciliation. The email relied upon by the Operational Creditor did not constitute an unequivocal admission of liability. Given these circumstances, the dispute was genuine and required further investigation, not resolution in the summary proceedings under the Code. The Tribunal held that where such a plausible dispute exists, the Adjudicating Authority properly refrained from admitting the Section 9 petition and directed that the parties pursue civil proceedings or arbitration if so advised. [Paras 23, 24, 25, 27, 29]

A bona fide dispute existed and the Section 9 application could not be admitted in summary proceedings.

Summary jurisdiction under the I&B Code - reconciliation of accounts - admission of liability - relegation to civil proceedings or arbitration - Whether the Adjudicating Authority erred in dismissing the Section 9 application without admitting it and whether reconciliation or further civil/arbitral proceedings were appropriate. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's approach that the I&B Code's summary mechanism is not a substitute for adjudication of triable civil disputes. The Adjudicating Authority had given multiple opportunities for reconciliation of accounts without result and correctly concluded that exact debt and default could not be ascertained without reconciliation; it was not open to make assumptions in favour of the Operational Creditor. The Tribunal agreed that the email relied upon did not amount to acceptance of the claimed sum or the contractual rate of interest. In these circumstances, dismissal of the Section 9 petition and direction to pursue civil or arbitral remedies was appropriate and did not call for interference. [Paras 24, 25, 28, 29, 30]

No error in dismissing the Section 9 application; reconciliation or civil/arbitral adjudication was the appropriate course.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly found a genuine dispute and, having afforded opportunities for reconciliation, rightly dismissed the Section 9 petition and directed the parties to pursue civil or arbitral remedies; no costs.

Appropriation of security deposit - security deposit held in trust - moratorium under Section 14 of the Insolvency and Bankruptcy Code - claim admitted by the resolution professional - reconciliation and evidentiary proof of set-off - rights of the corporate debtor during CIRP

Appropriation of security deposit - moratorium under Section 14 of the Insolvency and Bankruptcy Code - reconciliation and evidentiary proof of set-off - claim admitted by the resolution professional - Rental dues could not be appropriated against the security deposit after commencement of CIRP and the security deposit was liable to be returned to the corporate debtor. - HELD THAT: - It was undisputed that the security deposit was held by the respondent. The respondent contended that rental arrears had been appropriated against the deposit before the CIRP commenced; the applicant contended no such appropriation had been effected and that after commencement of CIRP no appropriation could be made in view of the moratorium. The material evidence before the Tribunal did not show any clear appropriation prior to the CIRP commencement date. The ledger attached to the respondent's claim form reflected the rental dues as outstanding up to the CIRP commencement date, and the respondent's claim for the arrears was admitted by the resolution professional. Correspondence between the parties showed the applicant demanding refund of the deposit and did not demonstrate acquiescence to any set-off. In the absence of documentary proof of appropriation before CIRP, and having regard to the moratorium principle embodied in Section 14 of the I&B Code which prevents post-commencement adjustments adverse to the corporate debtor, the respondent was not entitled to appropriate the deposit after CIRP commenced. The Tribunal therefore rejected the respondent's contention that part of the deposit had been properly appropriated and held that the full deposit was liable to be refunded to the corporate debtor.

The respondent is not entitled to appropriate the deposit after CIRP commenced; the security deposit must be returned to the corporate debtor.

Final Conclusion: The application is allowed and the Tribunal directed the respondent to return the entire security deposit to the corporate debtor.

Default - admission under Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 - limitation - Corporate Insolvency Resolution Process - moratorium - interim resolution professional - Committee of Creditors - SARFAESI notice as evidence of default

Default - SARFAESI notice as evidence of default - Existence of default by the corporate debtor in repayment of financial debt - HELD THAT: - The Tribunal found that default was established on the basis of loan agreements, power of attorney, hypothecation deeds, sanction letters and a demand notice issued under Section 13(2) of the SARFAESI Act calling for recovery. The corporate debtor had defaulted in regular payments of sanctioned credit facilities and its accounts had been classified as NPA, and it had later sought one-time settlement which also amounted to an acknowledgement of debt. [Paras 11]

Default is established and proved by the documentary record including the SARFAESI demand notice.

Limitation - admission under Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 - Whether the Section 7 petition was filed within the period of limitation and is maintainable - HELD THAT: - The Tribunal noted the corporate debtor's acknowledgement of liability by offering a one-time settlement vide letter dated 20.02.2019 and observed that the petition was filed on 13.05.2019. On this basis the application was held to have been filed within the period of limitation. The petition in Form No.1 was also found to be complete as required by the Code. [Paras 12, 13]

The petition is within limitation and the application is complete and maintainable under Section 7.

Admission under Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 - moratorium - Corporate Insolvency Resolution Process - Admission of the Section 7 petition and imposition of moratorium - HELD THAT: - Having found default and completeness of the application, and having noted no adverse disciplinary material against the proposed resolution professional, the Tribunal applied Section 7(5) to admit the petition. Consequentially, the moratorium under Section 14 was declared with the statutory prohibitions on institution or continuation of suits, transfer or disposition of assets, enforcement of security including actions under SARFAESI, recovery of property by owners/lessors, and protection of supply of essential goods or services, to operate from the date of the order until completion of CIRP or other terminal orders under the Code. [Paras 14]

The petition is admitted under Section 7(5) and moratorium is declared under Section 14 of the Code.

Interim resolution professional - Committee of Creditors - Appointment of Interim Resolution Professional and directions regarding constitution of Committee of Creditors and reporting - HELD THAT: - The Tribunal, after verification of credentials of the nominated professional, appointed the proposed Interim Resolution Professional. The IRP was directed to perform statutory functions under the Code, collate claims, determine the financial position of the corporate debtor, constitute the Committee of Creditors and file a constitution report within thirty days, convene the first meeting of the CoC within seven days of filing that report, and to send regular fortnightly progress reports to the Tribunal. [Paras 15, 16]

Mr. Darshan Singh Anand is appointed as Interim Resolution Professional with directions to constitute the CoC and report as prescribed.

Corporate Insolvency Resolution Process - Interim funding of CIRP expenses - HELD THAT: - The Tribunal directed the petitioner to deposit an amount to meet immediate CIRP expenses with the Interim Resolution Professional within two weeks; the deposit is to be accountable and reimbursable as CIRP cost by the Committee of Creditors. [Paras 17]

Petitioner directed to deposit the specified amount to meet immediate CIRP expenses, to be accounted for and reimbursed by the CoC.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted: default and limitation were found in favour of the petitioner, moratorium under Section 14 is imposed, the nominated Interim Resolution Professional is appointed with directions to constitute the Committee of Creditors and report within statutorily prescribed timelines, and the petitioner is directed to furnish interim funds for CIRP expenses.

Liquidation costs - liability of secured creditor to contribute to liquidation costs despite realisation of security - distribution of proceeds under Section 53 - presumption of security interest and treatment under Regulation 21A - entitlement of stakeholders to information and documents under Regulation 5 - confidentiality of asset memorandum under Regulation 34(5)

Liquidation costs - liability of secured creditor to contribute to liquidation costs despite realisation of security - distribution of proceeds under Section 53 - presumption of security interest and treatment under Regulation 21A - Whether the applicant-secured creditor is exempt from or liable to pay its share of liquidation costs as contended, including contention that liability arises only from date of admission, only upon realisation of security, or only in proportion to amounts realised. - HELD THAT: - The Tribunal examined the applicant's contentions in light of Section 53 of the I&B Code and Regulation 21A of the Liquidation Regulations and found no provision supporting the submission that a claimant in liquidation need not pay CIRP or liquidation costs, or that such liability arises only from the date of admission, only after realisation of security, or only in proportion to amounts actually recovered. The statutory scheme requires distribution of proceeds in the order specified in Section 53 and permits the liquidator to deduct fees proportionately; Regulation 21A addresses the treatment of secured creditors who realise or relinquish security but does not exempt admitted claimants from their share of costs in the manner urged. Consequently, the applicant's legal contentions on exemption or delayed/contingent liability were rejected and the impugned direction in the liquidator's letter was upheld. [Paras 8, 9, 12]

Applicant's contentions regarding non-liability or conditional liability to pay liquidation costs were rejected; the impugned direction to remit the share of liquidation costs is sustained.

Entitlement of stakeholders to information and documents under Regulation 5 - confidentiality of asset memorandum under Regulation 34(5) - Whether the applicant, having its claim admitted but choosing to stand outside liquidation proceedings to realise security, is entitled to receive information and documents from the liquidator on par with other stakeholders, and whether access to the asset memorandum must be denied. - HELD THAT: - The Tribunal recognised that the applicant's claim was admitted and held that, notwithstanding the applicant's choice to realise its security and thereby not be a member of the stakeholders' committee, the admitted claimant is nevertheless entitled to receive the information and documents that a stakeholder is entitled to under Regulation 5. The liquidator's submissions that certain day-to-day documents fall outside Regulation 5 and that the asset memorandum is confidential under Regulation 34(5) were noted; however, the Tribunal directed that the liquidator share information and furnish documents to the applicant on par with any other stakeholder of the liquidation process. The decision preserves the special confidentiality treatment of the asset memorandum insofar as Regulation 34(5) requires tribunal permission for access, while directing disclosure of stakeholder-level materials. [Paras 10, 11, 12]

Liquidator directed to share information and furnish documents to the applicant on par with other stakeholders; access to the asset memorandum remains subject to Regulation 34(5) and tribunal permission as applicable.

Final Conclusion: I.A. disposed of: the applicant's challenges to its liability to pay its share of liquidation costs are rejected; the liquidator is directed to provide the applicant, as an admitted claimant, with the information and documents available to stakeholders, subject to the confidentiality constraints and tribunal oversight regarding the asset memorandum.

Interim Moratorium in respect of debts of a Personal Guarantor - Stay of legal proceedings against a Personal Guarantor during Interim Moratorium - Appointment and confirmation of Interim Resolution Professional for a Personal Guarantor - Powers and duties of the Resolution Professional under Section 99 of the Code

Interim Moratorium in respect of debts of a Personal Guarantor - Stay of legal proceedings against a Personal Guarantor during Interim Moratorium - Interim moratorium commences from the date of filing the application by the personal guarantor and its immediate effects on legal proceedings and creditor actions. - HELD THAT: - The Tribunal held that on filing of the application under Section 94(1) read with the relevant Rules by the personal guarantor, Interim Moratorium as stipulated under Section 96(1) of the Code commences from the date of filing (03.12.2021). During the Interim Moratorium period any legal action or proceedings pending in respect of any debt are deemed stayed and creditors shall not initiate any legal action or proceedings in respect of any debt, subject to the exceptions notified under Section 96(3). The order records this commencement and the legal consequences as operative from the filing date. [Paras 8]

Interim moratorium commences from 03.12.2021 and stays pending or new legal proceedings in respect of the debts of the personal guarantor, subject to statutory exceptions.

Appointment and confirmation of Interim Resolution Professional for a Personal Guarantor - Confirmation of the proposed Interim Resolution Professional and appointment to manage the insolvency process of the personal guarantor. - HELD THAT: - The Tribunal examined Part IV of Form A in which Mr. Madhu Desikan (registration details recorded in the file) was proposed as Interim Resolution Professional. The Bench confirmed the appointment of the Resolution Professional in the matter, noting the criticality of such appointment both for the applicant and to safeguard the assets of the personal guarantor under the Code. The confirmation effectuates the constitutionally and statutorily required office to oversee the process during moratorium and subsequent steps. [Paras 9]

Mr. Madhu Desikan is appointed and confirmed as Interim Resolution Professional for the insolvency proceedings of the personal guarantor.

Powers and duties of the Resolution Professional under Section 99 of the Code - Resolution Professional to exercise statutory powers under Section 99 and to file recommendations on the application within the time stipulated by the Code; directions for service of order and records. - HELD THAT: - The Tribunal directed the Resolution Professional to exercise all powers enumerated under Section 99 of the Code read with the Rules. The RP is required to make recommendations with reasons in writing for acceptance or rejection of the application within the time envisaged under Section 99, and to furnish the report under sub section (7) of Section 99 to the creditors and the corporate applicant once filed. The applicant/guarantor was directed to serve a copy of the order, application and documents on the Resolution Professional immediately by all modes to enable the RP to act. These directions operationalise the RP's duties to assess the application and report to the Adjudicating Authority. [Paras 10, 11]

The Resolution Professional shall exercise powers under Section 99, submit written recommendations within the statutory time, and furnish the report to creditors and the corporate applicant; the applicant must serve the RP immediately with the order and documents.

Final Conclusion: The application filed by the personal guarantor triggered the Interim Moratorium from the date of filing; the Tribunal confirmed the appointment of the named Interim Resolution Professional and directed him to exercise statutory powers under Section 99 and to file recommendations and reports within the prescribed time, with the applicant directed to serve the RP forthwith; further proceedings listed for 15.03.2022.

Initiation of Corporate Insolvency Resolution Process - admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and vesting of management - powers and duties of the Interim Resolution Professional under Sections 13(2), 15, 17, 18 and 20 of the Code - duty of directors, promoters and management to cooperate with the IRP

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - The Section 9 petition filed by the Operational Creditor was admitted and the Corporate Insolvency Resolution Process against the Corporate Debtor was ordered to commence. - HELD THAT: - The Operational Creditor issued a demand notice and the Corporate Debtor did not reply; the Corporate Debtor admitted the debt in its pleadings and its counsel accepted inability to discharge the liability and agreed to initiation of CIRP. On these facts the Tribunal found the statutory preconditions for admission under Section 9 satisfied and held the matter fit for initiation of the Corporate Insolvency Resolution Process. [Paras 5]

Company Petition admitted and CIRP commenced.

Appointment of Interim Resolution Professional and vesting of management - powers and duties of the Interim Resolution Professional under Sections 13(2), 15, 17, 18 and 20 of the Code - An Interim Resolution Professional was appointed and directed to take charge of the Corporate Debtor's management and to exercise powers under the Code. - HELD THAT: - The Operational Creditor proposed Mr. Bala Subrahmanya Siva Prasad Varanasi as IRP. The Tribunal appointed him as Interim Resolution Professional, recording that no disciplinary proceedings were pending against him on the IBBI website, and directed him to take charge forthwith and to take necessary steps in furtherance of the CIRP in terms of the statutory provisions cited.

Mr. Bala Subrahmanya Siva Prasad Varanasi appointed as IRP and directed to assume management and perform functions under the Code.

Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - duty of directors, promoters and management to cooperate with the IRP - Moratorium under Section 14 was declared and the directors, promoters and persons associated with management were directed to extend cooperation to the IRP. - HELD THAT: - Upon admission of the petition and commencement of CIRP the Tribunal declared the moratorium in terms of Section 14 and ordered that the Corporate Debtor's directors, promoters and others associated with its management shall extend all assistance and cooperation to the IRP to enable effective discharge of his functions under the Code. The Registry and Operational Creditor were directed to communicate the order to the parties and to the IRP for compliance.

Moratorium declared; management directed to cooperate with the IRP; registry to communicate the order.

Final Conclusion: The Tribunal admitted the Section 9 petition, ordered commencement of CIRP against the Corporate Debtor, appointed an Interim Resolution Professional to take charge and exercise statutory powers, declared moratorium under the Code and directed the management to cooperate with the IRP; consequential communications were directed to be effected by the Registry and Operational Creditor.

Grant of regular bail under section 439 Cr.P.C. read with section 45 of the PMLA - Constitutionality and applicability of the twin conditions in section 45 of the PMLA post-amendment - Effect of Nikesh Tarachand Shah declaration on the operation of amended section 45 - Flight risk, tampering with evidence and influencing witnesses as bail considerations in economic offences - Reverse burden under section 24 of the PMLA and its stage of application - Gravity of economic offences as a factor in bail jurisprudence

Constitutionality and applicability of the twin conditions in section 45 of the PMLA post-amendment - Effect of Nikesh Tarachand Shah declaration on the operation of amended section 45 - Whether the twin conditions in section 45(1) of the PMLA operate in the present bail proceeding after the amendment with effect from 19.04.2018. - HELD THAT: - The Court held that the decision in Nikesh Tarachand Shah declared the twin conditions in section 45(1) unconstitutional and, in consequence, treated those conditions as inoperative. The amending Act and the Notification dated 29.03.2018 are silent as to retrospective application; on comparative reading the original subsection imposing twin conditions has not been resurrected by the amending Act. Having regard to the declaration of unconstitutionality and the lack of retrospective saving in the notification, the Court proceeded to consider the bail application on the premise that the twin conditions of section 45(1) do not apply in this proceeding. [Paras 5, 6]

Twin conditions in section 45(1) were not applied; the bail application was considered without imposing the twin conditions.

Grant of regular bail under section 439 Cr.P.C. read with section 45 of the PMLA - Gravity of economic offences as a factor in bail jurisprudence - Whether, on merits and in view of the material placed before the Court, the applicant should be enlarged on regular bail in the PMLA proceedings. - HELD THAT: - The Court balanced the relevant considerations applicable to bail in economic offences - including the gravity of the alleged offence and the period already spent in custody - and observed that the applicant had undergone substantial custody (20 months on the present arrest and 47 months cumulatively). The Court noted that post-Nikesh jurisprudence treats bail considerations in PMLA cases akin to ordinary bail principles and that numerous High Court and other orders have granted bail in similar circumstances. Applying these principles, and having regard to the facts and available safeguards, the Court exercised its discretion in favour of release. Conditions were imposed to secure attendance and to allay concerns relating to misuse of liberty. [Paras 8, 9, 10]

The application for regular bail was allowed subject to execution of bond and specified conditions (including surrender of passport, restriction on travel abroad without court permission, provision of address and surety).

Flight risk, tampering with evidence and influencing witnesses as bail considerations in economic offences - Whether the applicant is a flight risk or likely to tamper with evidence or influence witnesses so as to preclude grant of bail. - HELD THAT: - The Court examined the submissions and materials relating to flight risk and risk of tampering or influencing witnesses. It observed that earlier proceedings had addressed flight risk (including extradition and earlier grants of interim bail) and that surrender of passport and conditions to be imposed would secure the applicant's presence. The Court further observed that the documentary evidence is largely in custody of the investigating agency and that there is no overt act alleged showing present risk of tampering or influencing witnesses that would justify denying bail. Accordingly these considerations did not preclude bail in this case. [Paras 8]

Flight risk and risk of tampering/influencing witnesses were held not to be a bar to bail subject to appropriate conditions (passport surrender, bond, residence disclosure).

Reverse burden under section 24 of the PMLA and its stage of application - Whether the reverse onus under section 24 of the PMLA is to be applied at the bail stage. - HELD THAT: - The Court noted the submission that the reverse burden under section 24 PMLA applies at trial and not at the stage of bail. The Court accepted that the reverse burden and other statutory provisions relevant to proof would operate at trial and are not a ground to deny bail at the interlocutory stage. [Paras 3]

Section 24 PMLA's reverse burden is a matter for trial and does not foreclose consideration of bail in the present proceeding.

Final Conclusion: The High Court allowed the regular bail application in the PMLA proceedings, holding that the twin conditions in section 45(1) are not to be applied in this bail exercise and directing release on furnishing bond and surety with specified conditions (including surrender of passport, residence disclosure and restriction on foreign travel) while observing that other statutory provisions such as reverse burden under section 24 pertain to trial.

Place of provision of taxable service / service tax liability to be discharged in the State from which services are provided - separate legal entity of firm/LLP and proprietor as indicated by PAN - taxability of mining services prior to 01.06.2007 and effect of CBEC clarifications - remand for verification and computation of demand by the adjudicating authority - registration under Chapter V of the Finance Act, 1994

Place of provision of taxable service / service tax liability to be discharged in the State from which services are provided - registration under Chapter V of the Finance Act, 1994 - Services provided from the appellant's premises in Jharkhand were taxable in Jharkhand and tax could not be discharged by payment in Odisha. - HELD THAT: - The Tribunal found from work orders and invoices that work orders were accepted and invoices were raised showing the Jharkhand address during the relevant period (2007-2010), which establishes that taxable services were being provided from Jharkhand prior to registration there. Consequently payments of service tax made in Odisha could not be treated as discharging liabilities which arose in respect of services provided from the premises in Jharkhand. The Revenue's case that services were provided from Jharkhand prior to registration was supported by documentary evidence of address on orders and invoices; the appellant's contrary contention that services were provided only from Odisha was disbelieved for lack of cogent explanation for the Jharkhand address on invoices and work orders. [Paras 10, 11, 12]

The Tribunal upheld that taxable services were provided from Jharkhand prior to registration there and that tax liabilities arising in Jharkhand could not be regarded as discharged by payments made in Odisha.

Separate legal entity of firm/LLP and proprietor as indicated by PAN - M/s Interstate Syndicate (PAN AAAFI4408C) and Proprietor Shri Bhim Sharma (PAN AEIPS7146F) are distinct legal entities and cannot be treated as the same taxable person for the purpose of service tax. - HELD THAT: - The Tribunal examined the PAN structure and observed that the fourth and fifth characters of PANs denote the status and name initials; PAN AAAFI4408C denotes a firm/LLP named Interstate Syndicate, whereas PAN AEIPS7146F denotes an individual (Sri Bhim Sharma). No documents were produced to establish that Interstate Syndicate was a proprietorship of Shri Bhim Sharma. On this basis the Tribunal concluded that, as a matter of law, the two registrations represent separate taxable persons and that the appellant's plea that both offices were mere premises of the same proprietorship was factually incorrect and misleading. [Paras 9]

The Tribunal held that M/s Interstate Syndicate and Prop. Bhim Sharma are separate legal entities and services provided under the respective registrations must be treated as those of different entities.

Taxability of mining services prior to 01.06.2007 and effect of CBEC clarifications - remand for verification and computation of demand - The question of tax liability in respect of mining services provided prior to 01.06.2007 is not finally adjudicated and is remanded to the adjudicating authority for verification and computation in light of CBEC clarifications. - HELD THAT: - The Tribunal observed that various CBEC circulars and notifications issued prior to 01.06.2007 clarified the treatment of specific services falling within the ambit of 'Mining Services'. Given those clarifications, the Tribunal considered it appropriate not to finally determine the demand attributable to services provided before 01.06.2007 on the record before it. The Tribunal therefore directed remand so that the adjudicating authority may ascertain the exact nature of services provided prior to that date and calculate the correct service tax demand after applying the relevant CBEC clarifications. [Paras 13, 14]

The Tribunal remanded the matter to the adjudicating authority to verify and calculate the service tax demand in respect of mining services provided prior to 01.06.2007.

Final Conclusion: The appeal was disposed of by (i) upholding that taxable services were provided from Jharkhand prior to registration there and that the firm and the proprietor are distinct taxable entities, and (ii) remanding the issue of service tax liability in respect of mining services prior to 01.06.2007 to the adjudicating authority for verification and computation in light of CBEC clarifications.

Refund of unutilized Cenvat credit on closure of operations - cash refund entitlement - Rule 5 of Cenvat Credit Rules, 2004

Refund of unutilized Cenvat credit on closure of operations - cash refund entitlement - Rule 5 of Cenvat Credit Rules, 2004 - Whether the appellant is entitled to cash refund under Rule 5 of Cenvat Credit Rules, 2004 of the credit lying unutilized in their Cenvat credit account on closure of operations. - HELD THAT: - The Tribunal examined competing authorities and earlier decisions of this Tribunal which have considered the legal position under Rule 5 as amended. After noting precedents where cash refund of unutilized credits on closure was allowed by this Tribunal (including Shri Guru Hargobind Steel Industries, M/s. Shree Krishna Paper Mills Ltd., JU Pesticides, Kirlosker Toyota Textile Machinery and Nichiplast India), the Tribunal concluded that those judicial pronouncements support grant of cash refund. The Revenue's reliance on decisions denying cash refund in the absence of explicit statutory provision was considered but, on balance of the Tribunal's precedents and the judicial examination of Rule 5, the Tribunal held that the appellant is entitled to cash refund of the unutilized Cenvat credit on closure of operations. The Tribunal thus set aside the orders rejecting the refund claim and allowed the appeal, granting consequential relief. [Paras 8, 9]

The appellant is entitled to cash refund under Rule 5 of Cenvat Credit Rules, 2004 of the credit lying unutilized on closure of operations; impugned order set aside and appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and directed grant of cash refund of the unutilized Cenvat credit on closure of operations under Rule 5 of the Cenvat Credit Rules, 2004, setting aside the orders rejecting the refund claim.

Taxability of markup on ocean freight - taxability of container detention charges as penal rent/liquidated damages - taxability of reimbursements (toll tax) - absence of service element - extended period of limitation under proviso to Section 73 - suppression of facts - suppression of facts requires mens rea (willful suppression) to invoke extended limitation and penalty - applicability of Section 73(3) where service tax is paid with interest before issuance of notice - penalty under Section 78 for fraud, collusion, willful mis-statement or suppression - waiver of penalty under Section 80 where reasonable cause or conduct during investigation

Taxability of markup on ocean freight - Markup/differential earned by appellant from purchase and resale of ocean space is not exigible to service tax. - HELD THAT: - The appellant purchased space from shipping lines (Master BL in appellant's name) and resold that space to its customers (issuing House BLs). The margin arising from such trading is a business profit arising from buying low and selling high and not consideration for any service. The activity is a commercial business of trading in space and involves risk of loss or gain; it cannot be characterized as rendering a taxable service. The Tribunal respectfully follows earlier benches cited in the impugned order and holds that service tax is not leviable on such markup/differential. [Paras 9]

Demand of service tax on mark up on ocean freight is set aside.

Taxability of container detention charges as penal rent/liquidated damages - applicability of CBEC Circular on detention charges - Container detention charges reimbursed by customers are not consideration for a taxable service and are not exigible to service tax. - HELD THAT: - Detention charges are levied by container-owners when containers are not returned within the contractually specified pre-holding period; they operate as penal rent or liquidated damages for breach of contract and not as consideration for a service. The Tribunal notes the Board's clarification (Circular No.121/3/2010-ST) that such detention charges are not classifiable as Business Support Service or Business Auxiliary Service and directs that such amounts are not chargeable to service tax. Consequently, the demand on detention charges is unsustainable. [Paras 10, 11, 12]

Demand of service tax on container detention charges is set aside.

Taxability of reimbursements (toll tax) - absence of service element - Toll tax amounts paid to authorities and recovered from customers are reimbursements and not consideration for a service; hence not taxable. - HELD THAT: - Toll tax is a statutory collection by authorities which the appellant paid on behalf of customers and subsequently recovered. The transaction lacks the essential elements of a taxable service - there is no service rendered for such receipt and no consideration flowing for a service; thus service tax cannot be levied on reimbursements of toll tax. [Paras 13]

Demand of service tax on toll taxes reimbursed by the appellant is set aside.

Extended period of limitation under proviso to Section 73 - suppression of facts - suppression of facts requires mens rea (willful suppression) to invoke extended limitation and penalty - applicability of Section 73(3) where service tax is paid with interest before issuance of notice - Extended period of limitation under the proviso to Section 73 cannot be invoked where alleged 'suppression' is mere omission without mens rea; Section 73(3) applies to amounts on which service tax (with interest) was paid before issuance of the SCN and the SCN is invalid to that extent. - HELD THAT: - The Commissioner invoked extended limitation on the footing that the appellant suppressed facts by not disclosing full value in ST-3 returns (paragraphs 167 and 174 of the impugned order). The Tribunal finds that suppression of facts requires a deliberate act with mens rea to evade tax; mere non-disclosure or omission, particularly where transactions were recorded in specified records and information was provided during investigation, does not amount to suppression. The appellant had recorded the transactions and, for the services it did not dispute, paid service tax with interest prior to service of notice. Therefore Section 73(3) applies in respect of sums so paid and the SCN is invalid to that extent; Section 73(4) is inapplicable as intention is not established. [Paras 17, 18, 21]

Extended period of limitation is not invokable on the ground of suppression in this case; SCN is invalid insofar as it concerns amounts voluntarily paid with interest before issuance of notice.

Penalty under Section 78 for fraud, collusion, willful mis-statement or suppression - waiver of penalty under Section 80 where reasonable cause or conduct during investigation - Penalty under Section 78 is not sustainable as suppression (or requisite intent) is not proved; penalties under Section 77(1) and 77(2) are set aside invoking Section 80. - HELD THAT: - Section 78 applies only where fraud, collusion, willful mis-statement or suppression with intent to evade are established. The impugned order's finding rested on alleged suppression by non-disclosure in returns, despite transactions being recorded and information furnished during investigation. The Tribunal holds suppression with mens rea is not demonstrated; accordingly the penalty under Section 78 is set aside. Further, having regard to the appellant's conduct in investigation and payment of tax with interest on undisputed services, the Tribunal allows waiver under Section 80 and sets aside penalties under Section 77(1) and 77(2). [Paras 17, 18, 22]

Penalty under Section 78 is set aside; penalties under Section 77(1) and 77(2) are set aside invoking Section 80.

Applicability of Section 73(3) where service tax is paid with interest before issuance of notice - Claim for refund of service tax already paid is rejected despite the finding that Section 73(3) applied and the SCN was invalid to that extent. - HELD THAT: - The Tribunal recognizes that although Section 73(3) precludes issuance of notice where tax (with interest) was paid before notice, the voluntary payment does not extinguish the underlying charge. Limitation affects the remedy, not the existence of the liability. Once the appellant accepted the charge by paying the tax, it cannot seek refund merely because the right to issue an SCN lapsed. The analogy of a time-barred debt is applied: repayment of a time-barred liability does not entitle the payer to refund merely because the remedy was barred. [Paras 20, 21]

Prayer for refund of service tax already paid is rejected.

Final Conclusion: Appeal partly allowed: demands of service tax on markup of ocean freight, container detention charges and toll taxes set aside; SCN held invalid insofar as it related to amounts voluntarily paid with interest before notice (Section 73(3) applies) and extended limitation/Section 73(4) not attracted for lack of proved suppression; penalty under Section 78 set aside and penalties under Section 77(1) and 77(2) waived under Section 80; refund claim rejected. Appeal disposed accordingly.

Exemption under Central Excise notification - intention to evade duty - onus of proof on department to deny benefit - factual verification of designated area for exemption - brand ownership disqualification for exemption - SSI exemption turnover threshold - remand for fresh consideration

Factual verification of designated area for exemption - exemption under Central Excise notification - Whether the appellant's manufacturing unit falls within the area designated by the applicable notification so as to qualify for exemption by way of reimbursement - HELD THAT: - The Court observed that entitlement to exemption by reimbursement depends on whether the manufacturing unit is located within areas designated under the relevant notifications, and that this was not considered in the order-in-original or by the Appellate Tribunal. Because this is a question of fact requiring physical verification and cannot be resolved on the summary affidavit record before the High Court, the matter must be examined afresh by the Appellate Tribunal with appropriate factual inquiry into the unit's geographical location vis-a -vis the designated areas specified in the notifications. [Paras 7, 8, 12]

Remanded to the Appellate Tribunal for factual verification and fresh consideration whether the manufacturing unit is within the area designated for exemption.

Brand ownership disqualification for exemption - onus of proof on department to deny benefit - Whether the appellant manufactured the product under the Gulab brand prior to 1 December 2006 so as to disqualify it from claiming exemption - HELD THAT: - The Court recorded the appellant's consistent case that manufacture under the Gulab brand began on 1 December 2006 and noted that the Appellate Tribunal had relied upon an oral statement of a regular customer and certain director statements without documentary support. The Court emphasised the legal principle that when an assessee claims a benefit under a scheme, the department bears the onus of producing cogent material to show disqualification. Given the absence of unimpeachable documentary evidence before the Tribunal to prove manufacture under the brand prior to the claimed date, the question must be re-examined by the Tribunal and decided on the basis of cogent material. [Paras 2, 9, 10]

Remanded to the Appellate Tribunal to determine, on proper evidentiary basis, whether the appellant manufactured under the Gulab brand prior to 1 December 2006 and thus was disqualified from exemption.

SSI exemption turnover threshold - exemption under Central Excise notification - When the appellant's manufacturing unit exceeded the turnover threshold of Rs. 1 crore for SSI status, affecting entitlement to exemption - HELD THAT: - The Court noted that the applicable notification exempts a manufacturing unit as an SSI only until it attains a specified turnover (stated in the order as Rs. 1 crore) and that in this case turnover was initially very low and rose in subsequent years. Determination of the precise point at which the unit crossed the turnover threshold is a factual question essential to decide entitlement and cannot be resolved on the summary record before the High Court. The Tribunal must therefore ascertain, on the material, the period up to which SSI exemption applied and when it ceased. [Paras 11, 12]

Remanded to the Appellate Tribunal to ascertain, on the evidence, when the unit exceeded the turnover threshold and accordingly the period of any entitlement to SSI exemption.

Final Conclusion: The impugned order dated 23 January 2019 is set aside and the matters identified are remitted to the Appellate Tribunal for fresh, reasoned consideration on the factual and evidentiary questions indicated; the Tribunal is requested to pass a reasoned order within three months of receipt of the authenticated copy. Appeals disposed of without costs.

Error apparent on the face of the order - scope of review petition - distinction between appeal and review - opportunity to cross-examine - finality of statement vis-a -vis criminal proceedings - interference with Tribunal order

Scope of review petition - distinction between appeal and review - error apparent on the face of the order - Whether the review petition disclosed an error apparent on the face of the Court's order of November 29, 2021 so as to justify review. - HELD THAT: - The Court explained that review is a limited remedy and must be confined to matters constituting an error apparent on the face of the order, material facts overlooked, or truly new evidence that could not have been produced earlier. Mere dissatisfaction with the merits of an adjudication or an attempt to obtain a second hearing of contested facts amounts to an appeal in disguise and is not a ground for review. The Court held that although some inferences drawn earlier might be open to criticism, those did not amount to an obvious error discernible on the plain reading of the order. Consequently, the facts and conclusions relied upon by the petitioner did not meet the strict threshold for review relief. [Paras 3, 4, 7]

Review petition did not disclose any error apparent on the face of the order and is not maintainable on merits.

Opportunity to cross-examine - finality of statement vis-a -vis criminal proceedings - Whether absence of an opportunity to cross-examine witnesses in the earlier proceedings amounted to a ground for review and whether the petitioner was precluded from cross-examination in subsequent criminal proceedings. - HELD THAT: - The Court noted that while an opportunity to cross-examine some witnesses had not been afforded, the petitioner did not raise an immediate objection in the earlier proceedings. Crucially, the Court observed that criminal proceedings were pending, and in those proceedings the petitioner would have the statutory and procedural right to cross-examine any witness whose statement was sought to be used against him. That observation, the Court found, removed any finality from the earlier statement and afforded the petitioner an adequate forum to test the evidence. Thus, absence of prior cross-examination did not constitute an error apparent warranting review where a full opportunity to cross-examine existed in pending criminal proceedings. [Paras 5, 6]

Non-grant of prior cross-examination was not an error apparent justifying review because the petitioner retains the right to cross-examine witnesses in the pending criminal proceedings.

Interference with Tribunal order - error apparent on the face of the order - Whether this Court should interfere with the Tribunal's order which had reduced the penalty and recorded seizure and subsequent confiscation from the petitioner's possession. - HELD THAT: - The Court recorded that the Tribunal had reduced the penalty to a nominal amount while being satisfied that contraband had been recovered from the petitioner's possession and subsequently confiscated. The petitioner had not, at any stage, clearly disputed that recovery was from his possession. Although the High Court might have drawn inferences from the facts that the petitioner considers erroneous, such inferential errors do not amount to a manifest, obvious error on the face of the order. In the absence of such an error and given the limited nature of review jurisdiction, no interference with the Tribunal's order was warranted. [Paras 1, 5, 7]

No interference with the Tribunal's order; the Tribunal's reduction of penalty and findings on seizure/ confiscation are retained.

Final Conclusion: The review petition is dismissed for failure to establish any error apparent on the face of the November 29, 2021 order; the petitioner retains the right to cross-examine witnesses in the pending criminal proceedings; no order as to costs.

Condonation of delay in filing appeal - Service deemed by postal refusal - Exercise of discretion to admit revenue appeal under Section 35(G) only if a question of law arises - Extended period of limitation under the Proviso to Section 11A(1) of the Central Excise Act - Reliance on internal Annual Dispatch Summary as non-statutory record - Requirement to establish that the alleged manufacturing/clearance pertains to the assessee - Demand based solely on discrepancy between management records and statutory ER-1 returns - No substantial question of law arising for admission of appeal

Condonation of delay in filing appeal - Service deemed by postal refusal - Exercise of discretion to admit revenue appeal under Section 35(G) only if a question of law arises - Delay of 1031 days in filing the appeal was condoned and the appeal admitted for hearing on merits. - HELD THAT: - The Court found that notice to the respondent, returned with postal endorsement 'refused by dispatch', is to be treated as deemed service and accordingly heard the condonation application and the appeal on merits. Although the affidavit supporting condonation was criticised for lack of particulars and for shifting blame to erstwhile counsel, the Court exercised its discretion to condone delay because the appeal by the revenue under Section 35(G) can be entertained only if a question of law arises and the merits warranted consideration. The Court recorded reproach of the manner in which the affidavit was drafted but refrained from further action while directing communication of the order to the concerned authorities.

Delay condoned; appeal admitted for consideration on merits.

Reliance on internal Annual Dispatch Summary as non-statutory record - Requirement to establish that the alleged manufacturing/clearance pertains to the assessee - Demand based solely on discrepancy between management records and statutory ER-1 returns - Extended period of limitation under the Proviso to Section 11A(1) of the Central Excise Act - No substantial question of law arising for admission of appeal - The Tribunal rightly allowed the assessee's appeal; there is no question of law arising for the High Court to entertain the revenue's challenge to the Tribunal's order. - HELD THAT: - On merits the Court agreed with the Tribunal's factual and legal conclusions. The demand was founded solely on a discrepancy between quantities shown in the appellant's Annual Operational Statistical Report (annual dispatch summary) and the monthly ER-1 returns. The Tribunal accepted the respondent's consistent explanation-supported by the agreement with M/s. ACC DCSL-that molten slag was sold to DCSL which operated a separate granulation plant on lease within the premises, that DCSL was separately registered and cleared granulated slag on payment of duty, and that the annual dispatch summary was an internal management/accounting document and not a statutory record. No evidence of removal from the respondent's factory or of the respondent's manufacture/clearance of the disputed additional quantity was placed on record; moreover, molten slag supplied to DCSL was subject to exemption by notification noted by the Tribunal. Given these factual findings and the absence of legal error, the Tribunal's grant of relief was sustained and the Court concluded that no question of law arises under Section 35(G) warranting interference.

Appeal dismissed on merits; Tribunal's order in favour of the respondent upheld and no question of law found to admit the revenue appeal.

Final Conclusion: The application for condonation of delay is allowed and the appeal was admitted; on merits the Tribunal's decision in favour of the respondent is upheld as correctly based on the factual finding that the Annual Dispatch Summary is a non statutory internal record, the disputed clearances pertained to a separately registered party (DCSL) which paid duty, and no evidence supported the extended period demand-consequently the revenue appeal fails and the stay application is dismissed.

Cenvat credit on capital goods - captiv e power plant - user test for admissibility of credit - turnkey project and excisability of goods - remand for de novo adjudication - penalty for non-deliberate default

Cenvat credit on capital goods - captiv e power plant - user test for admissibility of credit - turnkey project and excisability of goods - Eligibility of cenvat credit claimed on items used for repair, maintenance or replacement of components/spares of the captive power plant remanded for fresh consideration. - HELD THAT: - The Tribunal noted that identical issues for different periods had earlier been remanded to the adjudicating authority and that several judicial decisions bearing on whether components, spares and accessories used in a captive power plant qualify as capital goods and are eligible for credit must be considered. The question is treated as interpretational and requires application of the legal principles (including the user test for admissibility of credit) laid down in the authorities cited to determine whether the specific items qualify as capital goods within the relevant rules. In view of these considerations the Tribunal directed a de novo adjudication by the adjudicating authority to examine eligibility of credit in accordance with the precedents and principles relied upon. [Paras 9, 10]

Impugned order set aside to the extent the eligibility of credit is concerned and the matter remanded to the adjudicating authority for de novo adjudication to decide admissibility of the claimed credit in light of the cited decisions and applicable legal tests.

Penalty for non-deliberate default - remand for de novo adjudication - Validity of penalty imposed for wrongful availment of credit. - HELD THAT: - Having treated the primary issue as interpretational and noting that the appellant had declared the credit in statutory returns and there was no finding of deliberate evasion, the Tribunal concluded that imposition of penalty was not warranted. The Division Bench had previously set aside penalty while remanding similar matters, and the Tribunal followed that approach, observing absence of deliberate act to evade duty as the basis for excluding penalty. [Paras 10]

Penalty imposed by the authorities is set aside.

Final Conclusion: Appeal partly allowed: the adjudicating authority's order is set aside and the matter remanded for de novo adjudication on the question of eligibility of cenvat credit on items used in the captive power plant; the penalty imposed is set aside.

Remand for fresh consideration - principles of natural justice - supply of co-noticees' replies - cross-examination of co-noticees - joint adjudication of connected show cause notices

Principles of natural justice - supply of co-noticees' replies - cross-examination of co-noticees - Whether the adjudication suffered from violation of natural justice by not supplying replies of co-noticees and by denying requested cross-examination - HELD THAT: - The Tribunal's earlier order (reproduced at para 3.2 of the present order) recorded that the appellants' grievance - non-supply of replies of co-noticees and denial of cross-examination sought by them - was not addressed by the adjudicating authority and constituted a gross violation of the principles of natural justice. The present Bench accepted the parties' submissions that those aspects were remitted by the Tribunal for fresh consideration and that the adjudicating authority must decide the specific requests for supply of co-noticees' replies and for cross-examination and then pass an appropriate order in accordance with law. [Paras 3]

The Tribunal's finding of violation of natural justice is recorded and the matter concerning supply of co-noticees' replies and cross-examination is to be considered afresh by the adjudicating authority.

Remand for fresh consideration - joint adjudication of connected show cause notices - Whether the appeals should be remitted to the original authority for consideration along with the matters of other co-noticees pending in remand proceedings - HELD THAT: - Both parties agreed that several co-noticees' matters were previously remanded to the Commissioner (Palghar) by the Tribunal's order dated 29.01.2013 and remain pending in remand proceedings. Having considered the impugned order and the submissions, the Bench concluded that the matters left undecided against the present appellants should be remitted to the same adjudicating authority so that they may be considered together with the other co-noticees' matters in the remand proceedings, ensuring consistent and comprehensive adjudication. [Paras 3, 4]

Appeals are allowed and the matters are remanded to the original authority for consideration along with the co-noticees' matters already in remand.

Final Conclusion: Appeals allowed; impugned adjudication set aside insofar as it failed to address requests for supply of co-noticees' replies and for cross-examination, and the matters are remanded to the original authority (Commissioner, Palghar) for fresh consideration together with the other co-noticees' matters.

Unjust-enrichment - provisional assessment - refund of duty paid on provisional assessment - retrospective application of legislation - insertion of sub-rule (5) of Rule 9B w.e.f. 25.06.1999

Unjust-enrichment - provisional assessment - refund of duty paid on provisional assessment - insertion of sub-rule (5) of Rule 9B w.e.f. 25.06.1999 - retrospective application of legislation - Unjust-enrichment cannot be applied to deny refund of duty paid under provisional assessment prior to insertion of sub rule (5) of Rule 9B w.e.f. 25.06.1999. - HELD THAT: - The duty in dispute was paid under provisional assessment in the period December 1998 to May 1999 (with duty pertaining to December 1998 paid on 05.06.1999). Sub rule (5) of Rule 9B of the Central Excise Rules, 1944, introducing an unjust enrichment provision in cases of provisional assessment, was inserted into the statute with effect from 25.06.1999. The provision did not exist at the time the duty was paid; therefore it cannot be given retrospective effect to defeat a refund claim arising from payment made before 25.06.1999. The Tribunal applied its earlier decision in identical facts and the Larger Bench precedent cited, treating those authorities as directly applicable to the present facts and precluding application of unjust enrichment to the refund claim. [Paras 4, 5]

Impugned order set aside; appeal allowed and refund claim cannot be rejected on the ground of unjust enrichment for duty paid under provisional assessment prior to 25.06.1999.

Final Conclusion: The Tribunal allowed the appeal, holding that the unjust enrichment provision inserted by sub rule (5) of Rule 9B w.e.f. 25.06.1999 cannot be applied to deny refund of duty paid under provisional assessment in December 1998 to May 1999; the impugned order was set aside.

Principles of natural justice - input tax credit - remand for fresh consideration - alternate statutory remedy

Principles of natural justice - remand for fresh consideration - input tax credit - alternate statutory remedy - Impugned assessment orders set aside for breach of principles of natural justice and remitted for fresh decision - HELD THAT: - The Court found that the assessment proceedings involved earlier notices, written replies and a personal hearing conducted by an officer, but the final assessment orders were ultimately passed much later by a different officer without affording fresh opportunity to the petitioner. Given that disputed questions of fact cannot be gone into in a writ jurisdiction, the appropriate remedy was to quash the impugned orders and remit the matters for fresh consideration. The petitioner was granted liberty to file additional representations and written submissions within thirty days, after which the respondent is to call the petitioner for personal hearing and pass fresh orders within sixty days. Although the respondent relied on availability of alternate statutory remedies and on merits regarding belated claim of input tax credit, the Court exercised supervisory jurisdiction solely on the ground that principles of natural justice were not followed and directed a fresh decision rather than resolving factual disputes on merits. [Paras 8, 9, 10, 11]

Impugned assessment orders quashed and remitted for fresh orders; petitioner may file additional submissions within 30 days; respondent to hold personal hearing and pass fresh orders within 60 days.

Final Conclusion: The writ petitions are allowed to the extent that the impugned assessment orders for the assessment years 2007-2008, 2008-2009 and 2009-2010 are quashed for breach of natural justice and the matters are remitted for fresh decision in accordance with the directions given; no costs.

Redeeming mortgaged property by tendering entire dues under Section 13(8) of the SARFAESI Act - effect of partial payment or highest auction bid on discharge of borrower's liability - power of secured creditor to sell secured asset by public auction - interim relief under Section 17 of the SARFAESI Act and its effect on auction proceedings

Redeeming mortgaged property by tendering entire dues under Section 13(8) of the SARFAESI Act - power of secured creditor to sell secured asset by public auction - Validity of the Division Bench order directing release of the mortgaged residential property on payment of Rs. 65.65 lakhs in light of Sub section (8) of Section 13 of the SARFAESI Act. - HELD THAT: - The Court held that Sub section (8) of Section 13 contemplates that the secured asset shall not be sold by the secured creditor only where the borrower tenders the amount due to the secured creditor together with all costs, charges and expenses incurred by the secured creditor before publication of the auction notice. In the present case the dues as on 07.01.2013 were Rs. 1,85,37,218.80 and the amounts ordered by the High Court (total Rs. 65.65 lakhs) did not constitute tender of entire dues with costs and expenses. The Division Bench treated the highest bid as equivalent to market value and directed release on partial payment, but the Court found this to be contrary to the statutory scheme which permits the secured creditor to proceed with public auction where the borrower has not paid the entire amount recoverable. Consequently the High Court order directing release of the property on payment of the partial amount was held to be contrary to Section 13(8) and unsustainable. [Paras 6, 7]

The Division Bench's direction to release the mortgaged property on payment of Rs. 65.65 lakhs was quashed and set aside; the Single Judge's order restoring the position under Section 13 was restored.

Effect of partial payment or highest auction bid on discharge of borrower's liability - Whether payment of the amount ordered by the High Court (or realization of the highest bid at auction) discharges the borrower's entire liability. - HELD THAT: - The Court held that even if the mortgaged property were sold for the highest bid (for example Rs. 71 lakhs), realization of that sum does not discharge the borrower from the balance outstanding against him. Sale proceeds reduce the secured creditor's claim but do not extinguish unpaid liability unless the full dues including costs and expenses are satisfied. Therefore directing release of the mortgaged property on partial payment could not be treated as discharging the borrower's entire liability. [Paras 7]

Payment of the partial amount does not discharge the borrower's entire liability; the bank remains entitled to recover the balance.

Interim relief under Section 17 of the SARFAESI Act and its effect on auction proceedings - Treatment of the DRT's interim order in SA No.9/2014 and subsequent directions regarding further proceedings. - HELD THAT: - The Court observed that the DRT's order dated 17.01.2014 was an interim order. While the interim order directing release on base price was set aside, the Court directed that SA No.9/2014 be decided by the DRT on merits and on available grounds. Meanwhile, the bank is at liberty to recommence auction proceedings by inviting fresh bids; amounts already paid by the borrower pursuant to interim orders or the High Court order are to be adjusted against the borrower's dues. The Court also directed that if the borrower remains in possession pursuant to earlier orders and until a fresh auction is finalized, his possession should not be disturbed, but original title deeds are to be retained by the bank and the borrower shall not alienate the property. [Paras 7, 8]

DRT to decide SA No.9/2014 on merits; bank permitted to proceed with fresh auction and adjust amounts already paid against dues, with interim safeguards for possession and retention of title deeds.

Final Conclusion: The appeal is allowed. The High Court's order directing release of the mortgaged residential property on payment of a partial amount is set aside as contrary to Section 13(8) of the SARFAESI Act; the Single Judge's order is restored. The bank may recommence auction proceedings, amounts already paid shall be adjusted against the borrower's dues, and the DRT is directed to decide SA No.9/2014 on merits, subject to interim protective directions regarding possession and title deeds.

Section 138 of the Negotiable Instruments Act - enforceable debt - settlement/compromise agreements and their effect on liability under Section 138 - maintainability of complaint under Section 138 - issuance of process under Section 204 of the Code of Criminal Procedure - prima facie satisfaction for issuance of process

Section 138 of the Negotiable Instruments Act - enforceable debt - settlement/compromise agreements and their effect on liability under Section 138 - maintainability of complaint under Section 138 - Whether the complaints under Section 138 of the N.I. Act are maintainable in view of prior agreements, subsequent compromise settlements and the demand made in the statutory notices - HELD THAT: - The Court examined the factual sequence: initial cheques dishonoured leading to statutory notice of 13.12.2016 for Rs.75 lacs; thereupon parties executed successive settlement/compromise agreements (16.03.2017, 14.07.2017 and 12.02.2018) in which the petitioner agreed to pay an additional sum and issued fresh cheques aggregating Rs.85 lacs; those cheques were dishonoured and the statutory notice dated 20.02.2019 raised demand of Rs.85 lacs (distinctly bifurcated from alleged legal fees). The court held that the additional amount claimed arose from the duly executed settlement agreement of 16.03.2017 and thus the demand in the later notice corresponded to the cheque amount and reflected a legally enforceable debt. Distinguishing Lalit Kumar Sharma on its facts (where a compromise cheque was given during pendency of a complaint and did not create new liability), the court found that here the complaint was registered only after failure of subsequent compromise and therefore the debt became enforceable. Consequently the contention that the notice exceeded the original demand or was defective was rejected. [Paras 13, 15, 16]

The complaints under Section 138 are maintainable because the demand in the statutory notice corresponds to the cheque amount arising from the parties' settlement agreements, and the claim reflects a legally enforceable debt.

Issuance of process under Section 204 of the Code of Criminal Procedure - prima facie satisfaction for issuance of process - Whether the order of the trial Court issuing process under Section 204 Cr.P.C., and the revisional confirmation thereof, could be interfered with at the stage of prayer made in these petitions - HELD THAT: - The trial Court recorded a prima facie case on the basis of averments in the complaints and issued process under Section 204 Cr.P.C., an order which was confirmed by the revisional Court. The respondent contended that maintainability and other defenses are open to the petitioners to be tried during trial and that premature quashing at the stage of issuance of process was not justified. Having considered the material and concurrent findings of the courts below, this Court found no reason to interfere with the issuance of process at the prima facie stage. The petitions were therefore dismissed as being premature and because the lower courts' concurrent satisfaction was not shown to be perverse or legally unsupportable. [Paras 8, 17, 18]

No interference with the order issuing process under Section 204 Cr.P.C.; petitions dismissed and the concurrent findings of the courts below upheld.

Final Conclusion: Writ petitions under Articles 226/227 and Section 482 Cr.P.C. challenging issuance of process in complaints under Section 138 N.I. Act are dismissed: the Court upheld that the demand corresponded to legally enforceable cheques issued pursuant to settlement agreements and declined to quash the orders of issuance of process; the trial Court directed to conclude proceedings within one year.

Discharge application after issuance of process - power to recall or review summons - application of Section 141 of the Negotiable Instruments Act to proprietorship concerns - evidence under Section 202 Cr.P.C. in complaints under Section 138 NI Act - Section 145 of the Negotiable Instruments Act - evidence on affidavit

Discharge application after issuance of process - power to recall or review summons - Maintainability of an application for discharge filed by accused after the Magistrate had taken cognizance and issued process in a complaint under Section 138 NI Act and whether the Trial Court has inherent power to recall or review its order summoning the accused. - HELD THAT: - The Court held that the order dated 22.06.2021 merely granted liberty to move an application; it did not confer immunity from the law governing maintainability. Once the Magistrate, after inquiry under Sections 200/202 Cr.P.C., is satisfied that there are sufficient grounds and issues process, there is no provision for a summoned accused to seek reconsideration by way of discharge application at that stage. The statutory scheme and settled precedents (Adalat Prasad and subsequent decisions) establish that the Magistrate cannot review or recall the issuance of process, and inherent power to do so is not available. Section 258 Cr.P.C. applies only to summons-cases instituted otherwise than upon complaint and has been held inapplicable to complaints under Section 138 NI Act. The Trial Court therefore correctly examined maintainability and rightly rejected the application insofar as it sought recall/review of the summoning order. [Paras 18, 20, 21, 22, 23]

Application for discharge filed after issuance of process was not maintainable as a mechanism to recall or review the summons; the Trial Court rightly refused to recall or review its summoning order.

Application of Section 141 of the Negotiable Instruments Act to proprietorship concerns - Whether Section 141 of the Negotiable Instruments Act applies to a proprietorship concern described in the complaint and whether the proprietorship as such can be proceeded against. - HELD THAT: - The Court noted that Section 141 deals with offences by 'company' but its Explanation defines 'company' to include bodies corporate and includes a firm or other association of individuals; however a proprietorship concern is not a juristic person. A proprietorship is merely the trade name of an individual who alone bears legal responsibility. The complaint specifically pleaded that revisionist No.1 is a proprietorship and revisionist No.2 its proprietor, a fact not disputed. Therefore Section 141 has no application to the proprietorship as an independent legal entity; proceedings cannot be instituted against the proprietorship as a separate juristic person. The proprietor (revisionist No.2), having been specifically arrayed and summoned, remains liable to be tried for the offence under Section 138 since he drew the cheque and is responsible for the proprietorship's actions. [Paras 24, 25, 26, 27, 29]

Section 141 does not apply to a proprietorship concern; the proprietorship cannot be treated as a separate juristic defendant, but the proprietor (revisionist No.2) may be proceeded against under Section 138.

Evidence under Section 202 Cr.P.C. in complaints under Section 138 NI Act - Section 145 of the Negotiable Instruments Act - evidence on affidavit - Whether the Trial Court erred in issuing summons without recording the complainant's statement under Section 202 Cr.P.C. and whether documentary evidence and affidavit evidence suffice in complaints under Section 138 NI Act. - HELD THAT: - The Court observed that the Trial Court considered the complainant's affidavit filed under Section 200 Cr.P.C. and the accompanying documentary evidence (original cheque, bank memo, registered notice, postal receipt) as material under Section 202 Cr.P.C. Sub-section (2) of Section 202 Cr.P.C. (examination of witnesses on oath) is not applicable to complaints under Section 138 NI Act because Section 145 of the NI Act permits the complainant's evidence to be given by affidavit and to be read in evidence. The Supreme Court's decision in In Re: Expeditious Trial of Cases Under Section 138 NI Act confirms that Magistrates may, in suitable cases, examine documents and rely on affidavit evidence for satisfaction under Section 202 without oral examination of witnesses. Hence the Trial Court did not commit legal error in summoning the accused without recording oral statements under Section 202(2). [Paras 11, 30, 31, 32]

The Trial Court lawfully relied on affidavit and documentary evidence under Section 145 NI Act and Section 202 Cr.P.C. for issuing summons; non-examination under Section 202(2) Cr.P.C. does not vitiate the summoning in a Section 138 NI Act complaint.

Final Conclusion: The Criminal Revision is dismissed. The impugned order rejecting the application is lawful; the Trial Court may proceed with the trial under Section 138 of the Negotiable Instruments Act against the proprietor (revisionist No.2), the person legally liable for the proprietorship's actions.

Existence of arbitration agreement - incorporation by reference of arbitration clause - survival of arbitration clause after termination - Doctrine of Severability - group of companies doctrine and binding non-signatories - prima facie satisfaction under Section 11 of the Arbitration and Conciliation Act, 1996 - appointment of sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996

Existence of arbitration agreement - prima facie satisfaction under Section 11 of the Arbitration and Conciliation Act, 1996 - The Court was prima facie satisfied that an arbitration agreement exists between the parties for the purpose of appointing an arbitrator under Section 11. - HELD THAT: - The Court examined the notice under Section 21 and the MOUs and concluded that it was sufficient at the prima facie stage to indicate disputes regarding entitlement to equity in RSIL. The Court applied the limited scope of inquiry under Section 11, relying on the approach that only a prima facie view is required before appointing an arbitrator, and referenced the Law Commission exposition supporting such limited intervention. The Court observed that an arbitration clause undisputedly exists in MOU-I and that respondents could contest existence and scope before the Arbitral Tribunal, but this did not preclude appointment at the prima facie stage. [Paras 24, 25, 26, 66, 67]

Petition allowed insofar as the Court is prima facie satisfied that an arbitration agreement exists and that an arbitrator may be appointed; respondents remain free to contest existence and scope before the arbitral tribunal.

Incorporation by reference of arbitration clause - survival of arbitration clause after termination - Doctrine of Severability - Clause 15 of MOU-II incorporates documents executed on 25.11.2019, and on a prima facie view the Arbitration Agreement in Clause 15 of MOU-I is incorporated in MOU-II. - HELD THAT: - The Court analysed Clause 15 of MOU-II, which expressly incorporates 'all other documents executed on 25.11.2019', and noted that the Arbitration Agreement in MOU-I was executed on that date. The Court rejected respondents' narrow reading that 'documents' excluded agreements, observing that related ICD agreements, pledge agreements and guarantees executed the same day were incorporated and that the arbitration clause, being severable, could not be plausibly excluded. The Court also noted Clause 16.12 of MOU-I which preserves Article 15 on termination, supporting continuity of the dispute-resolution mechanism. While recognising authority that incorporation must evidence intention, the Court concluded on prima facie facts and surrounding circumstances that the parties intended to carry forward the transaction and attendant documents (including the arbitration clause) into MOU-II. [Paras 45, 49, 50, 52, 63]

On a prima facie view, the arbitration agreement in MOU-I is incorporated into MOU-II by reference to documents executed on 25.11.2019 and by the parties' conduct and surrounding circumstances.

Successor liability and succession to contractual obligations - existence of arbitration agreement - RSIL, having succeeded to the SPV by merger, is prima facie bound by the Arbitration Agreement in MOU-I. - HELD THAT: - The Court noted that the SPV, which was party to MOU-I, merged with RSIL and that RSIL assumed obligations of the SPV under contracts entered into by it. Given this succession, the Court held that RSIL is a party to the Arbitration Agreement in MOU-I for the purpose of prima facie satisfaction under Section 11. [Paras 13, 26]

RSIL is prima facie a party to the arbitration agreement by virtue of its succession to the SPV.

Group of companies doctrine and binding non-signatories - agency, estoppel and implied consent theories for binding non-signatories - DYMT and PGN can be prima facie compelled to arbitrate: they are either bound through incorporation in MOU-II and/or under the group of companies doctrine and related principles. - HELD THAT: - The Court examined the factual matrix-common control by the same individuals, signatures by the same authorised signatory on multiple documents, recital A describing the 'P Group' consortium, and the use of funds for a common objective-and concluded that the respondents formed a single cohesive group acting in concert. The Court accepted that doctrines recognised by the Supreme Court (implied consent/third party beneficiary, agency/alter-ego, estoppel, succession) may bind non-signatories and observed that DYMT and PGN are, in any event, parties to MOU-II and therefore incorporated documents executed on 25.11.2019. On a prima facie basis the Court found sufficient connection to require DYMT and PGN to be parties to arbitration. [Paras 54, 57, 59, 62]

On a prima facie view, DYMT and PGN are bound to arbitrate either by incorporation of the 25.11.2019 documents into MOU-II or under the group of companies/related doctrines.

Appointment of sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 - A Sole Arbitrator is appointed to adjudicate the disputes between the parties. - HELD THAT: - Having formed a prima facie view that an arbitration agreement exists and that the arbitration clause is incorporated in MOU-II and binds the relevant parties (including RSIL, DYMT and PGN), the Court appointed Justice (Retd.) Aftab Alam as Sole Arbitrator, subject to the arbitrator's disclosures and eligibility under the Act, and made consequential directions permitting the parties to proceed before the arbitrator while preserving their right to contest existence and scope of the arbitration agreement before the Tribunal. [Paras 67, 68, 69]

Justice (Retd.) Aftab Alam is appointed as the Sole Arbitrator; parties may raise all objections and contestations before the Arbitral Tribunal.

Final Conclusion: The petition under Section 11 is allowed on a prima facie view that an arbitration agreement exists (the arbitration clause in MOU-I is incorporated into MOU-II and binds the relevant parties, including RSIL, DYMT and PGN); Justice (Retd.) Aftab Alam is appointed as Sole Arbitrator subject to statutory disclosures and eligibility, while respondents remain free to contest existence and scope of the arbitration agreement before the arbitral tribunal.

Distinctive character of a trade mark - registrability of a mark as a matter of right - definition of trade mark as capable of graphical representation and capable of distinguishing - statutory grounds for refusal under the Trade Marks Act are exhaustive - requirement of reasoned decision for denial of registration - constitutional dimension under Article 19(1)(g) - remand to Registrar for fresh administrative action subject to absence of other infirmities

Distinctive character of a trade mark - definition of trade mark as capable of graphical representation and capable of distinguishing - Applied mark "AND THEN THERE WERE NONE" is not devoid of distinctive character and is prima facie registrable for the services in Classes 9, 16 and 41. - HELD THAT: - The Registrar's solitary conclusion that the applied mark "AND THEN THERE WERE NONE" lacked distinctiveness is unsupported. The impugned order did not find that the mark was incapable of graphical representation, descriptive of the applied-for services, identical or confusingly similar to any earlier mark, or customary in trade. The Act defines a mark and a trade mark to include names and words which are capable of graphical representation and capable of distinguishing goods or services; the applied title, being the well-known title of a literary work and associated with the appellant company, is capable prima facie of creating association with the appellant and of distinguishing its services. Registration, where not barred by any statutory infirmity, is a right and the Registrar may not refuse registration on a ground not contemplated by the Act. [Paras 13, 14, 15, 17, 18]

The refusal to register the mark on the ground of lack of distinctiveness is unsustainable and the mark is prima facie registrable for the services in Classes 9, 16 and 41.

Statutory grounds for refusal under the Trade Marks Act are exhaustive - registrability of a mark as a matter of right - Registration of a mark can be refused only where one of the specific statutory grounds in the Trade Marks Act is attracted, and absent such a ground registration must ordinarily be allowed. - HELD THAT: - The Court observed that Sections 9, 11 and 13 enumerate the circumstances in which registration may be refused and these are to be treated as exhaustive. The impugned order did not invoke any enumerated statutory bar (such as descriptiveness, customary use, deceptive similarity, earlier registered marks, or other specified prohibitions). Therefore, refusal cannot be sustained on an extraneous or unspecified notion of non-distinctiveness. Where none of the statutory infirmities apply, entitlement to registration is a right that should be respected. [Paras 11, 12, 17]

Registration cannot be refused except on the statutorily enumerated grounds; absent any such infirmity the applicant is entitled to registration.

Requirement of reasoned decision for denial of registration - constitutional dimension under Article 19(1)(g) - The impugned order is vitiated for lack of adequate reasons; denial of registration requires reasoned findings which are apparent on the face of the decision. - HELD THAT: - The Court held that the right to register a mark partakes of the character of Article 19(1)(g) and that any denial of registration is a valuable right which must be accompanied by reasons. The impugned order was found to be unreasoned and bereft of sufficient explanation to justify refusal. Administrative decisions refusing registration must disclose their rationale so as to permit meaningful judicial review. [Paras 19]

Impugned order set aside for being unreasoned; refusal unsupported by adequate reasons.

Remand to Registrar for fresh administrative action subject to absence of other infirmities - The matter is remitted to the Registrar of Trade Marks with a direction to register the mark if no other fatal infirmity is found on reconsideration. - HELD THAT: - Having quashed the impugned order, the Court directed remittal to the Registrar for administrative action consistent with its findings. The Registrar is to examine whether any other statutory bar exists; if none is found, the mark "AND THEN THERE WERE NONE" is to be registered in Classes 9, 16 and 41 as applied for. The direction preserves the Registrar's duty to verify absence of other infirmities before registration. [Paras 21]

Matter remitted to the Registrar to register the mark if the application does not suffer from any other fatal infirmity.

Final Conclusion: The impugned refusal to register the mark "AND THEN THERE WERE NONE" is quashed for want of valid statutory grounds and for being unreasoned; the matter is remitted to the Registrar with a direction to allow registration in Classes 9, 16 and 41 if no other statutory infirmity is found.