TaxTMI Updates e-Newsletter
Feb 13,2023

Classification under Tariff Heading (Chapter 39 vs Chapter 63) - Advance Ruling and Appellate Authority for Advance Ruling - Writ jurisdiction under Article 226 - Change of classification to avail lower tax rate - Doctrine of equitable estoppel - Bindingness of prior classification accepted by revenue - Role of expert/test reports in tariff classification

Classification under Tariff Heading (Chapter 39 vs Chapter 63) - Bindingness of prior classification accepted by revenue - Validity of the Appellate Authority for Advance Ruling's classification of the petitioner's Polypropylene Leno Bags under Chapter Heading 3923 rather than Chapter Heading 6305 - HELD THAT: - The Court accepted the reasoning of the Appellate Authority that the PP Leno Bags are manufactured by weaving polypropylene strips (tapes) made from plastic granules and hence are plastic articles falling under Chapter 39 rather than textile articles under Chapter 63. The Appellate Authority's reliance on test reports, consistency with prior authorities including Raj Pack Well Ltd., and the petitioner's long-standing voluntary declaration of the product under Tariff Heading 3923 supported classification under 3923. The Court held that there was no change in the product, composition or manufacturing process after introduction of GST that would justify reclassification, and that subordinate appellate authorities across States adopting the same view were convincing. The Court therefore found the Appellate Authority's order setting aside the AAR and classifying the goods under 3923 to be justifiable in law.

Appellate Authority's order classifying the goods under Tariff Heading 3923 is upheld and the petitioner's claim for classification under 6305 is rejected.

Change of classification to avail lower tax rate - Doctrine of equitable estoppel - Permissibility of the petitioner changing its earlier accepted classification after introduction of GST to avail a lower rate - HELD THAT: - The Court observed that the petitioner had voluntarily declared the finished product under Heading 3923 prior to GST and enjoyed duty drawback, but sought to change the Tariff Heading only after GST when the alternative heading carried a lower rate. No cogent reason was offered for the sudden suo motu change for the domestic market. Applying equitable estoppel principles and citing precedent treating longstanding accepted classifications as relevant, the Court refused to permit the petitioner to alter its classification merely to obtain a lower tax rate where the product, its composition and manufacturing process remained unchanged.

Petitioner's attempt to change classification post-GST for the purpose of obtaining a lower rate is not permitted.

Advance Ruling and Appellate Authority for Advance Ruling - Writ jurisdiction under Article 226 - Scope of interference by the High Court under Article 226 in relation to orders of the Appellate Authority for Advance Ruling - HELD THAT: - The Court held that the scope of supervisory writ jurisdiction under Article 226 does not permit substitution of findings of the Appellate Authority unless the order is without jurisdiction, violative of principles of natural justice, or patently contrary to any specific provision of law. In the absence of such defects in the impugned appellate order, the High Court would not interfere simply because a different view might be open or because no further statutory appeal is provided.

No interference under Article 226 with the Appellate Authority's order as no jurisdictional defect, breach of natural justice or patent illegality was shown.

Role of expert/test reports in tariff classification - Weight to be accorded to test reports and expert evidence relied upon by the petitioner - HELD THAT: - The Appellate Authority considered test reports placed on record and observed limitations noted in some reports. The Court found that the totality of evidence, consistent prior classification, and legal authorities favouring classification as plastic articles outweighed the petitioner's expert reports which did not establish a basis for reclassification. The petitioner also failed to produce any higher court authority taking a contrary view on the same facts.

The petitioner's test reports did not warrant reclassification and were insufficient to displace the Appellate Authority's conclusion.

Change of classification to avail lower tax rate - Challenge to Circular No. 80/54/2018-GST dated 31st December, 2018 - HELD THAT: - The petitioner expressly did not press its prayer challenging the constitutionality or legality of the Board's circular during hearing. The Court recorded that the petitioner had waived its right to challenge the circular and that, in any event, it would not rewrite or modify the Board's explanatory circular in the writ petition.

The challenge to Circular No. 80/54/2018-GST was not pressed/has been waived and is not entertained.

Final Conclusion: Writ petition dismissed. The Appellate Authority for Advance Ruling's classification of the petitioner's Polypropylene Leno Bags under Tariff Heading 3923 is upheld, the petitioner is not permitted to change classification post-GST to seek a lower rate, and the challenge to the Board's explanatory circular was not pressed and is not entertained.

Mandamus - payment of GST by contracting authority - government orders on contractual tax burden - clarificatory communication relating to GST liability - direction for fresh consideration and reasoned speaking order

Payment of GST by contracting authority - government orders on contractual tax burden - clarificatory communication relating to GST liability - direction for fresh consideration and reasoned speaking order - Pending claim for payment of GST-related amounts by respondents pursuant to government orders and clarifications was not adjudicated on merits but directed to be reconsidered. - HELD THAT: - The petitioners sought a mandamus to direct respondents to pay GST amounts withheld/not disbursed in respect of running bills, relying on the Government Order dated 09.11.2017 and the clarification dated 26.10.2021. The Court did not decide the substantive entitlement on merits. Instead, the Court disposed of the petition by directing procedural redress: the petitioner is to file a fresh representation to respondent no.2; respondent no.2 must seek clarification from the Engineer in Chief and respondent no.1 and thereafter decide the representation by a reasoned and speaking order. The Court imposed a two month timeframe for this exercise from the date of the fresh representation. This direction leaves the substantive question of liability and payment for fresh adjudication by the administrative authorities. [Paras 4]

Petition disposed by remanding the grievance for fresh representation and reasoned decision by respondent no.2 after seeking necessary clarification, to be completed within two months.

Final Conclusion: The petition is disposed of: the petitioner must make a fresh representation and respondent no.2 shall obtain clarification from the Engineer in Chief and respondent no.1 and decide the representation by a reasoned, speaking order within two months; no substantive adjudication on the entitlement to GST amounts was undertaken by the Court.

Validity of a Show Cause Notice - Requirement of specifying allegations to enable reply - Requirement of signature on statutory notices and orders - Setting aside unsigned orders - Opportunity to be heard and remand for fresh adjudication

Requirement of signature on statutory notices and orders - Setting aside unsigned orders - Impugned adjudication order dated 07.06.2022 is invalid and set aside because it is unsigned. - HELD THAT: - The Court noted that neither the impugned order nor the antecedent Show Cause Notice bears the signature of the concerned officer. Reliance was placed on coordinate decisions holding that an unsigned order or notice cannot be treated as a valid order. In consequence, the impugned order dated 07.06.2022 could not be sustained and was set aside. [Paras 10, 14, 15, 16]

Impugned order dated 07.06.2022 set aside as unsigned and hence invalid.

Validity of a Show Cause Notice - Requirement of specifying allegations to enable reply - Opportunity to be heard and remand for fresh adjudication - Show Cause Notice dated 06.02.2021 is deficient in particulars but is not set aside; petitioner granted opportunity to reply and the authority directed to pass a fresh order after hearing. - HELD THAT: - The Court observed that the Show Cause Notice is a general notice stating that tax was not paid/short paid or ITC wrongly availed or refund erroneously released, without specifying the reasons or particulars necessary for the petitioner to formulate a meaningful reply. The notice dated 01.01.2021, which allegedly contained specific discrepancies, was also unsigned but identified as the source of particulars. Rather than quashing the Show Cause Notice, the Court confined the scope to the discrepancies pointed out in the notice dated 01.01.2021 and directed the petitioner to file a reply to the notices within two weeks. The authority was directed to afford the petitioner an opportunity of hearing and to pass a fresh order thereafter, thereby remanding the matter for fresh consideration limited to the stated discrepancies and after hearing. [Paras 11, 12, 13, 17, 18]

Show Cause Notice not quashed; petitioner to file reply within two weeks and authority to decide afresh after hearing.

Final Conclusion: The petition is disposed of by setting aside the unsigned adjudication order dated 07.06.2022; the Show Cause Notice proceedings are permitted to continue but confined to discrepancies indicated in the earlier notice, with liberty to the petitioner to file a reply within two weeks and the authority directed to pass a fresh order after affording an opportunity of hearing.

Procedure for availing input tax credit - communication of discrepancy under matching of input tax credit - joint and several liability of supplier and recipient for undisclosed outward supplies - personal hearing before passing final orders - maintainability of writ petition challenging a show cause notice at admission stage

Communication of discrepancy under matching of input tax credit - Procedure for availing input tax credit - personal hearing before passing final orders - maintainability of writ petition challenging a show cause notice at admission stage - Whether the writ petition can be entertained at the admission stage against a show cause notice in FORM GST DRC-01 and the procedure to be followed before passing final orders. - HELD THAT: - The Court declined to adjudicate the merits of the show cause notice at the admission stage. It noted that the impugned notice alleges non-payment of tax by either the buyer or the supplier and that the supplier's registration had been cancelled. Reliance was placed upon the statutory scheme which requires communication of discrepancies under the matching provisions and specified procedures for availing input tax credit. The petitioner must first submit a detailed reply to the show cause notice raising its contentions; on receipt of such reply the respondents are obliged to consider the matter on merits and in accordance with law. The Court directed that the respondents must adhere to the requirements of the matching procedure and the prescribed safeguards (including giving due consideration to decisions of this Court) and afford the petitioner a personal hearing before passing final orders. The petition was therefore not decided on merits but returned for statutory procedure to be followed by the authority. [Paras 8, 9]

Petition dismissed at admission stage; petitioner directed to file an additional reply within three weeks and respondents directed to afford personal hearing and pass final orders on merits in accordance with Sections 42(3), 43 A and 16(2) and relevant judicial precedents.

Final Conclusion: Writ petition disposed of: petitioner to submit additional reply within three weeks; on receipt the respondents shall afford personal hearing and decide the matter on merits and in accordance with law, having regard to matching/verification procedures and precedents; no costs.

Transition of VAT credit under Section 140 of the TNGST Act, 2017 - carry forward of unutilized VAT TDS - character of TDS as tax-credit under sales tax regime - non-speaking order - purposive interpretation of transitional provisions

Transition of VAT credit under Section 140 of the TNGST Act, 2017 - carry forward of unutilized VAT TDS - non-speaking order - Validity of the respondent's rejection of the petitioner's request under Section 140(1) for carrying forward unutilized VAT TDS from the TNVAT regime to the GST regime. - HELD THAT: - The respondent's order rejecting the petitioner's application for carrying forward unutilized VAT TDS was a non speaking order, containing no reasons. The Court relied on the reasoning in M/s. DMR Constructions (Madras High Court) which held that amounts collected/deducted and captured in returns under the TNVAT regime fall within the transitional credit contemplated by Section 140 of the TNGST Act, 2017. The decision distinguished the position under the Income Tax Act (where advance tax and TDS do not operate as carry forward credit across assessment years) from the Sales Tax/VAT scheme in which credits are carried forward and reflected automatically against output liability. The Court also noted supportive authority from the Telangana High Court applying a purposive construction to Section 140 to permit carry forward of such credits. Applying those settled principles, and because the impugned order gave no reasons and conflicted with the view taken in the cited precedents (which have attained finality), the Court concluded that the rejection could not stand and that the petitioner is entitled to transition of VAT TDS in terms of Section 140 of the TNGST Act, 2017.

Impugned order quashed; petitioner entitled to carry forward/transition TDS under the TNVAT regime in terms of Section 140 of the TNGST Act, 2017.

Final Conclusion: The non-speaking rejection of the petitioner's claim to carry forward unutilized VAT TDS to the GST regime is quashed; the petitioner is entitled to transition of such TDS-credit under Section 140 of the TNGST Act, 2017.

Claim of long-term capital gains exemption under Section 10(38) - right to rectify omission / file revised return to claim exemption - principles of natural justice - right to cross-examine adverse witnesses - inadmissibility of survey-obtained admissions - reliance on statements of third-party entry providers for additions under Sections 68 and 69

Claim of long-term capital gains exemption under Section 10(38) - right to rectify omission / file revised return to claim exemption - inadmissibility of survey-obtained admissions - Whether the assessee could claim exemption under Section 10(38) at the assessment/appeal stage despite earlier statements and initial omission. - HELD THAT: - The Court accepted the factual findings of the tribunals that the assessee had filed a revised return claiming exemption under Section 10(38) and that the CIT(A) was satisfied on the material facts that the shares had been purchased through account payee cheques, held in demat for more than 12 months and sold on a recognized stock exchange after payment of STT. The impugned orders also relied on the CBDT circulars and the settled principle that an assessee who has wrongly offered income or omitted a deduction in the return is entitled to correct that mistake by requesting the assessing officer. The AO's failure to notice the circular permitting revision and the factual findings accepting the genuineness of the transactions meant that the ITAT rightly upheld the claim. The Court found no error in these conclusions and treated the question as one of fact on the material on record. [Paras 5, 7]

The claim for exemption under Section 10(38) was properly entertained and upheld on the facts; no interference was warranted.

Principles of natural justice - right to cross-examine adverse witnesses - reliance on statements of third-party entry providers for additions under Sections 68 and 69 - Whether additions based on statements of so-called entry operators could be sustained where the assessee had no opportunity to challenge or cross-examine those witnesses and the statements were recorded in unrelated proceedings. - HELD THAT: - The Court noted the ITAT's finding that the statements of the alleged entry operators were recorded on dates and in proceedings unconnected with the assessee and prior to the survey. The Department did not dispute that the assessee had no opportunity to challenge those statements or to cross-examine the declarants. The ITAT correctly held that reliance on such third party statements without giving the assessee an opportunity to test them violated principles of natural justice and went to the root of the matter; accordingly the additions under Sections 68 and 69 could not be sustained on that basis. The Court declined to disturb the ITAT's factual and legal conclusion that denial of the opportunity to cross-examine prejudiced the assessee. [Paras 6, 7]

Additions based on the entry providers' statements were unsustainable in the absence of opportunity to challenge or cross-examine; the ITAT's rejection of those additions was upheld.

Final Conclusion: The High Court dismissed the Revenue's appeals, holding that the ITAT correctly affirmed the CIT(A)'s findings on the assessee's entitlement to the Section 10(38) exemption and on the invalidity of additions founded on untested statements of third parties; no substantial question of law arose requiring interference.

Condonation of delay in filing revision petitions by Government/Revenue - prima facie case for prosecution under Section 276C (wilful attempt to evade tax) - distinction between penalty proceedings under Section 271(1)(c) and criminal prosecution under Section 276C - double jeopardy and non-application of Section 300 Cr.P.C. where statutory provisions and consequences differ - presumption under Section 278E and its limited role at the prima facie stage - entitlement to exemption under Section 11/registration under Section 12AA as relevant to criminal culpability - Economic Offences (Inapplicability of Limitation) Act, 1974 - limitation not a bar to prosecution

Condonation of delay in filing revision petitions by Government/Revenue - Application for condonation of delay in filing the revisional petitions by the Revenue was allowed. - HELD THAT: - The Court considered the detailed chronology of file movements, administrative approvals and consultations with the Ministry of Law and Justice and DGIT for vetting and appointment of counsel. While observing that bureaucratic delay is not a virtue and that the State is not a preferred litigant, the Court accepted that governmental approvals and consideration of legal, practical and financial aspects can account for delay. Reliance was placed on the principle that delay may be condoned liberally in appropriate cases involving the State. Having examined the painstaking particulars of steps taken, the Court held the explanation sufficient to merit indulgence and allowed the applications for condonation. [Paras 2, 4, 5, 6, 7]

Condonation of delay granted and the revision petitions taken on record.

Prima facie case for prosecution under Section 276C (wilful attempt to evade tax) - distinction between penalty proceedings under Section 271(1)(c) and criminal prosecution under Section 276C - presumption under Section 278E and its limited role at the prima facie stage - entitlement to exemption under Section 11/registration under Section 12AA as relevant to criminal culpability - double jeopardy and non-application of Section 300 Cr.P.C. where statutory provisions and consequences differ - Economic Offences (Inapplicability of Limitation) Act, 1974 - limitation not a bar to prosecution - Whether the revisional Court erred in discharging the accused by finding no prima facie case for prosecution under Section 276C and whether the prosecution was barred by double jeopardy or delay. - HELD THAT: - The Court held that prosecution under Section 276C requires material showing a 'wilful' attempt to evade tax or payment of tax - a higher threshold than that for imposition of penalty under Section 271(1)(c). Penalty proceedings and criminal prosecution are different in scope and consequence; hence Section 300 Cr.P.C. does not bar prosecution merely because penalty proceedings had been conducted. However, at the stage of considering a challenge to an order of discharge, the Court must ascertain whether a prima facie case exists. The principal prosecution materials relied upon (a seized cash allegation and an alleged statement of a now-deceased director) were rendered weak: the former was later claimed by the individual and not pressed, and the latter could not be tested in court. The entities involved held registration and certificates under the Income Tax Act and retained their charitable status; corpus donations and the entitlement under Section 11/Section 12(1) were central to the factual matrix. The assessed facts showed that revised returns were filed within the statutory window, exemption claims were waived to avoid protracted litigation and tax was paid; such conduct, while possibly attracting penalty, did not, on the material before the revisional court, amount to cogent material of a wilful attempt to evade tax. The Court observed that presumptions like Section 278E may shift onus at trial but cannot substitute for the prosecution's initial burden to establish a prima facie case. Considering the weakness of the evidence and the statutory context, the Court found the prosecution failed to demonstrate a prima facie case sufficient to set aside the discharge order. [Paras 28, 29, 30, 31, 32]

Revision petitions dismissed; the order of discharge by the revisional Court is upheld and the prosecution record does not disclose a prima facie case to warrant setting aside the discharge.

Final Conclusion: The Court allowed the Revenue's applications for condonation of delay in filing revisional petitions, but after full consideration dismissed the revisions challenging the order of discharge. The High Court held that, on the material before it, the prosecution had not made out a prima facie case of a wilful attempt to evade tax under Section 276C and that penalty proceedings under Section 271(1)(c) did not automatically justify criminal prosecution; accordingly the discharge granted by the revisional Court was maintained. No order as to costs.

Entitlement to TDS credit despite deduction under deceased person's PAN - Form 26AS as conclusive record for allowing TDS credit - ITBA system limitation cannot defeat appellate direction - compliance with appellate order and grant of refund with interest

Entitlement to TDS credit despite deduction under deceased person's PAN - Form 26AS as conclusive record for allowing TDS credit - ITBA system limitation cannot defeat appellate direction - compliance with appellate order and grant of refund with interest - Credit for TDS reflected in Form 26AS in respect of interest income of the deceased husband is allowable to the petitioner and the Assessing Officer must give effect to the order of the CIT(A) and grant the refund with interest. - HELD THAT: - The Commissioner (Appeals) found that the petitioner had declared the interest income of her deceased husband in her return for AY 2017-18 and that the corresponding TDS was reflected in Form 26AS, making the TDS credit allowable. The Assessing Officer resisted on the basis that the TDS was recorded under the husband's PAN on the ITBA system and therefore could not be credited to the petitioner. The High Court held that where Form 26AS reflects the income and corresponding TDS and the appellate authority has directed verification and grant of credit, the departmental system limitation on ITBA cannot be permitted to defeat the petitioner's right to credit and consequential refund. The Court noted that, even if the credit could not be effected through the system, a physical compliance with the appellate direction and grant of refund was available. Accordingly the AO was directed to comply with the CIT(A)'s order and grant the TDS credit and refund with interest and consequential reliefs within the time directed by the Court. [Paras 9, 10, 11, 12, 13]

The petition is allowed; the Assessing Officer shall give effect to the CIT(A) order and grant the TDS credit and refund with interest and consequential reliefs within 12 weeks.

Final Conclusion: The High Court allowed the petition and directed the department to comply with the CIT(A)'s order by granting the TDS credit shown in Form 26AS and issuing the refund with interest and consequential reliefs within 12 weeks.

True and full disclosure - Jurisdiction of Settlement Commission to adjudicate undisclosed income already assessed in regular proceedings - Rectification under Section 245D(6B) and prohibition on revising settled disclosures - Power of Settlement Commission to waive statutory interest - Violation of principles of natural justice / audi alteram partem

True and full disclosure - Applicants did not make a true and full disclosure of undisclosed income in their settlement applications. - HELD THAT: - The Court applied the scheme of Chapter XIX A and the binding precedent that a 'full and true' disclosure in the prescribed form is a precondition for a valid application. Material recovered during search and the reports filed by the department showed substantial variations between amounts surrendered during search and the disclosures made in the applications; further undisclosed receipts were later sought to be introduced in a rectification application. The Settlement Commission merely noted the department's objections without dealing with them or examining the seized material. Given the statutory framework which does not contemplate revision of the disclosure in the application and the failure to consider the department's material, the applications should have been rejected for lack of full and true disclosure. The issue is decided for the petitioner. [Paras 26]

Application before the Settlement Commission deserved to be rejected for not making a full and true disclosure; issue decided in favour of the petitioner.

Jurisdiction of Settlement Commission to adjudicate undisclosed income already assessed in regular proceedings - Violation of principles of natural justice / audi alteram partem - Settlement Commission exceeded jurisdiction and acted arbitrarily in treating receipts in bank accounts of Dr. A. K. Sachan as income of the applicants despite those receipts having been assessed to Dr. Sachan in regular proceedings and Dr. Sachan not being a party before the Commission. - HELD THAT: - The Court noted that the assessing officer had added the unexplained deposits in the hands of Dr. A. K. Sachan in regular assessment proceedings and that Dr. Sachan neither applied to the Commission nor gave evidence before it. The Commission nevertheless adjudicated that those receipts pertained to the applicants and adjusted them accordingly without addressing the department's objections or providing reasons. Once income has been assessed in the hands of another person in regular proceedings it could not be treated as undisclosed income of the applicants before the Commission. The Commission's failure to examine and decide the department's objections and its determination in favour of persons not before it amounted to non application of mind, arbitrariness and excess of jurisdiction. The impugned order was therefore set aside on this ground. [Paras 31, 32]

Order of the Settlement Commission in so far as it attributed receipts in Dr. A. K. Sachan's accounts to the applicants and redistributed income was beyond jurisdiction, arbitrary and is set aside.

Rectification under Section 245D(6B) and prohibition on revising settled disclosures - The Settlement Commission exceeded its jurisdiction by entertaining a rectification application to materially revise and re determine the applicants' disclosures after passing the final settlement order. - HELD THAT: - The Court reiterated that Chapter XIX A contains no provision for revision of the disclosure filed under item No.11 of the prescribed form and that permitting revision would render the prohibition on withdrawal and the scheme meaningless. The rectification application sought to re compute and re allocate undisclosed income and introduced receipts not disclosed earlier; the Commission, under the guise of rectification, materially altered its earlier order and redetermined liabilities. Such a review of the final order went beyond permissible rectification and amounted to excess of jurisdiction. Accordingly the rectification order was invalid. [Paras 36]

Rectification application could not be used to revise the disclosures or materially review the earlier settlement; the Commission exceeded its jurisdiction and the rectification order is invalid.

Power of Settlement Commission to waive statutory interest - The Settlement Commission erred in mechanically waiving interest; it lacked jurisdiction to reduce or waive statutory interest except as permissible under Board circulars. - HELD THAT: - Relying on the settled position that the Commission cannot reduce or waive interest payable under sections 234A, 234B and 234C except to the extent covered by Board circulars, the Court found that the Commission waived interest without considering whether the case fell within such circulars or giving reasons. The mechanical waiver indicated an exercise of power beyond competence. This issue was decided in favour of the petitioner. [Paras 39]

Waiver of interest by the Settlement Commission was beyond its competence and is set aside.

Final Conclusion: The writ petition is allowed. The impugned Settlement Commission orders dated 19/22.08.2016 and 17.02.2017 are set aside as tainted by arbitrariness, non consideration of the department's objections, excess of jurisdiction in attributing assessed receipts to applicants, impermissible revision by rectification and improper waiver of statutory interest; liberty granted to the department to pursue appropriate remedies as indicated by the Court.

Revisionary jurisdiction under section 263 of the Income-tax Act - quashing of revision where Assessing Officer has examined and accepted explanation - limited scope of reassessment/revision where AO has not recorded examination - treatment of cash deposits during the demonetisation period - onus on AO to record findings and examination of cash transactions

Quashing of revision where Assessing Officer has examined and accepted explanation - treatment of cash deposits during the demonetisation period - Validity of revision under section 263 in respect of cash deposit of Rs.35,66,000 in account No.11291750287 (SBI Joda) which related to Joshi Enterprises - HELD THAT: - The Tribunal found on record that the Assessing Officer in the assessment of Joshi Enterprises specifically examined the cash deposits in the relevant bank account and recorded that the cash deposits were reflected in the cash book. Joshi Enterprises, running a petrol pump, was entitled to accept specified bank notes during the demonetisation period. The Principal CIT's order itself noted that no adverse conclusion was drawn by the AO and that the corresponding bank transaction details were shared with the concerned AO. Where the AO has examined the cash deposits and reached a finding accepting the entries, the exercise of revision under section 263 cannot be sustained. Applying this principle, the revision in respect of the Rs.35,66,000 deposit related to Joshi Enterprises was quashed.

Revision under section 263 quashed insofar as it relates to the Rs.35,66,000 deposit in the SBI Joda account belonging to Joshi Enterprises.

Limited scope of reassessment/revision where AO has not recorded examination - onus on AO to record findings and examination of cash transactions - Validity of revision under section 263 in respect of cash deposit of Rs.2,50,000 in the assessee's Bank of Baroda account No.00480600013248 - HELD THAT: - The Tribunal observed that, unlike the Joshi Enterprises account, there is no record in the assessee's assessment order that the AO examined the deposit of Rs.2,50,000. The assessee was unable to produce evidence that the AO had examined this cash deposit during the assessment proceedings. Where the AO has not recorded examination or reached any finding on a transaction, the Principal CIT's exercise of revision for the limited purpose of directing fresh examination is permissible. Consequently, the Tribunal upheld the revision only to the extent necessary for the AO to examine the Rs.2,50,000 deposit afresh.

Revision under section 263 upheld for the limited purpose of examination of the Rs.2,50,000 deposit in the assessee's Bank of Baroda account.

Final Conclusion: The appeal is partly allowed: the exercise of revision under section 263 is quashed in respect of the Rs.35,66,000 deposit belonging to Joshi Enterprises, and is upheld only to the limited extent of directing fresh examination of the Rs.2,50,000 deposit in the assessee's bank account.

Condonation of delay - dismissal of application as time barred - recall/reopening of tribunal order - limitation for rectification/rehearings - exercise of powers under section 254(1) - lackadaisical conduct of litigant and its consequences

Condonation of delay - dismissal of application as time barred - lackadaisical conduct of litigant and its consequences - Whether the Miscellaneous Application seeking recall of the Tribunal's earlier order filed after a delay of 923 days should be entertained by condoning the delay. - HELD THAT: - The Tribunal examined the explanation offered for the 923 day delay and found it unreasonable. The assessee's stated cause - that the order was not perused when first received and was examined only later upon observing its application in a subsequent assessment year - was held to reflect lackadaisical conduct. The Bench emphasised that while remedies exist to correct orders, such recourse must be invoked within the time prescribed by law and any excess delay must be supported by a reasonable cause. In the absence of any satisfactory or legally tenable explanation for the prolonged delay, the Tribunal declined to exercise discretion to condone the delay and entertain the application. The request to re adjudicate the appeal on merits was therefore not considered because the application was non maintainable being time barred. [Paras 4, 5]

Application dismissed as non maintainable for being filed beyond the period of limitation; delay not condoned.

Recall/reopening of tribunal order - exercise of powers under section 254(1) - Whether the Tribunal should recall its earlier order and re adjudicate the appeal on merits invoking corrective powers. - HELD THAT: - The assessee sought recall and re adjudication, invoking the correctness of Supreme Court precedent and requesting exercise of section 254(1). The Tribunal observed that substantive contention about correctness of earlier reasoning, however meritorious, could not override the requirement of timely availment of corrective remedies. Since the miscellaneous application was dismissed as time barred for want of a reasonable explanation for delay, the plea for recall and re adjudication was not entertained on merits. [Paras 2, 4]

Prayer for recall and re adjudication refused for want of maintainability due to inordinate delay.

Final Conclusion: The Miscellaneous Application to recall the Tribunal's order and re adjudicate the appeal was dismissed as non maintainable; the delay of 923 days was not condoned for lack of a reasonable explanation and the request to reopen the matter was refused.

Mandatory nature of statutory pre-condition for claiming tax deduction - furnishing of accountant's audit report in Form 56F as condition precedent to allowance of deduction under section 10AA - applicability of section 10A(5) to section 10AA(1) via section 10AA(8) - binding effect of Supreme Court decision in Pr. CIT v. Wipro Ltd. on interpretation of time linked/filing conditions for tax exemptions/deductions

Furnishing of accountant's audit report in Form 56F as condition precedent to allowance of deduction under section 10AA - applicability of section 10A(5) to section 10AA(1) via section 10AA(8) - Deduction under section 10AA is not admissible where the audit report in Form 56F, required by section 10A(5) as made applicable by section 10AA(8), was not furnished along with the return of income. - HELD THAT: - The Tribunal examined the plain language of section 10AA(8), which makes subsection (5) of section 10A applicable to deductions under section 10AA. Section 10A(5) requires the accountant's report in the prescribed form to be filed along with the return of income; Rule 16D prescribes Form 56F. Following the Supreme Court's recent ruling in Pr. CIT v. Wipro Ltd., which held that analogous time linked/filing conditions for claiming exemption under section 10B(8) are mandatory and must be literally complied with, the Tribunal held that the condition of filing the audit report in Form 56F along with the return is a mandatory condition precedent for admissibility of the deduction under section 10AA. The Tribunal rejected the assessee's contention that the requirement is merely procedural or directory and emphasised that exemption/deduction provisions must be strictly complied with. As the undisputed fact was that Form 56F was not furnished with the return for the relevant year, the mandatory pre condition was not satisfied and the claim could not be allowed. [Paras 7, 8, 10, 11]

Claim of deduction under section 10AA disallowed for non furnishing of Form 56F with the return; the disallowance in the intimation under section 143(1) is sustained.

Effect of belated filing of Form 56F on admissibility of deduction - binding effect of Supreme Court decision in Pr. CIT v. Wipro Ltd. on prior contrary precedents - Belated filing of the audit report in Form 56F (filed after completion of assessment and many years later) does not cure the failure to satisfy the mandatory statutory condition and does not entitle the assessee to the deduction under section 10AA. - HELD THAT: - The Tribunal noted that the assessee filed Form 56F on 01.03.2022, long after the return was filed and after processing under section 143(1). Reliance on earlier decisions treating filing requirements as directory was held to be superseded by the Supreme Court's decision in Pr. CIT v. Wipro Ltd., which requires literal compliance with time linked filing conditions for exemption/deduction claims. The Tribunal therefore held that belated compliance cannot retrospectively satisfy the statutory requirement of furnishing the accountant's report along with the return and cannot validate the deduction claim. [Paras 7, 8, 9, 10]

Belated filing of Form 56F does not validate the deduction; the assessee remains disentitled to the claimed deduction.

Final Conclusion: Appeals for AY 2016-17 and AY 2019-20 dismissed; deduction under section 10AA denied because the mandatory requirement of furnishing the audit report in Form 56F with the return was not complied with, and belated filing did not cure the defect in view of the binding precedent in Pr. CIT v. Wipro Ltd.

Taxability of satellite transmission services as "royalties" - interpretation and application of Article 12(3) of India-USA DTAA - expanded definition of "royalties" under domestic law vis-a -vis DTAA - precedential effect of coordinate Bench and High Court decisions in assessee's own case - credit for tax deducted at source (TDS)

Taxability of satellite transmission services as "royalties" - interpretation and application of Article 12(3) of India-USA DTAA - expanded definition of "royalties" under domestic law vis-a -vis DTAA - precedential effect of coordinate Bench and High Court decisions in assessee's own case - Amount received by the assessee from satellite transmission services is not taxable in India as "royalty". - HELD THAT: - The Tribunal examined the issue in the context of its consistent earlier decisions in the assessee's own case for assessment years beginning 2006-07 onwards, and the affirmation of Tribunal orders for A.Y.2014-15 and A.Y.2015-16 by the Hon'ble High Court. Having regard to those coordinate Bench and High Court decisions and the Tribunal's recent treatment of identical issues for immediately preceding assessment years (including A.Y.2016-17 and A.Y.2017-18), the Tribunal followed the consistent view that receipts from satellite transmission services do not constitute taxable "royalties" in India. The Tribunal rejected the revenue's contrary approach adopted by the lower authorities and applied the settled precedent in favour of the assessee.

Grounds 1 to 6 allowed; receipts from satellite transmission services are not taxable in India as "royalty".

Credit for tax deducted at source (TDS) - Assessee entitled to credit for taxes deducted at source subject to production of evidence. - HELD THAT: - The Tribunal noted that the Assessing Officer incorrectly granted short credit of TDS. It directed the AO to allow the credit of taxes deducted at source in accordance with law upon the assessee furnishing necessary evidence to substantiate the claim for credit.

Direction to the AO to allow TDS credit to the assessee on production of requisite evidence; appeal allowed.

Final Conclusion: Following the consistent decisions of the Tribunal and the Hon'ble High Court in the assessee's own case, the receipts from satellite transmission services were held not to be taxable in India as "royalty", the appeal is allowed and the Assessing Officer is directed to allow credit for tax deducted at source upon production of necessary evidence.

Amendment under Order 6 Rule 17 CPC - Examination of limitation and merits at amendment stage - Prohibition of Benami Property Transactions Act - prohibition on suits and defences - Right to file suit subject to subsequent adjudication of statutory bar - Defence under Order 7 Rule 11 CPC

Amendment under Order 6 Rule 17 CPC - Examination of limitation and merits at amendment stage - Validity of dismissal of the application for amendment of the counterclaim on grounds of delay and on merits at the stage of considering amendment under Order 6 Rule 17 CPC. - HELD THAT: - The High Court held that the trial Court erred in dismissing the petitioner's application for amendment of the counterclaim on the ground of delay and by going into merits of the proposed pleading. The Court observed that once a suit (or counterclaim) is filed, the propriety of pleadings being barred by law or limitation is a matter to be examined in due course and not a reason to preclude seeking amendment at the interlocutory stage. Consequently, the impugned order dismissing the amendment application on those bases was quashed and the trial Court was directed to permit incorporation of the amendment. [Paras 2, 3, 8]

Order dated 20.09.2021 dismissing the amendment application under Order 6 Rule 17 CPC on grounds of delay and on merits is quashed; petitioner directed to be permitted to amend the counterclaim.

Prohibition of Benami Property Transactions Act - prohibition on suits and defences - Right to file suit subject to subsequent adjudication of statutory bar - Whether Section 4 of the Prohibition of Benami Property Transactions Act, 1988 precludes filing of a suit or an application for amendment alleging benami transactions. - HELD THAT: - The Court considered Section 4 which disallows suits or defences based on rights in respect of benami property. It held that the provision operates as a bar to maintainability which is to be examined after a suit (or pleading) is filed; it does not operate to prevent a person from filing a suit or seeking amendment. Thus pleadings or amended pleadings that invoke rights alleged to be based on benami transactions must be tested subsequently on law, and the mere possibility that they may be barred under the Act is not a ground for summary rejection of an amendment application. [Paras 6, 7, 8]

Section 4 does not preclude filing of the suit or an amendment; the question of bar under the Act is for subsequent adjudication, not for refusal of amendment at the interlocutory stage.

Defence under Order 7 Rule 11 CPC - Whether respondents may challenge the amended pleading by appropriate application. - HELD THAT: - Having permitted the amendment, the High Court expressly left respondents free to seek available remedies against the amended pleading. The Court noted that respondents may file an application under Order 7, Rule 11 CPC to raise a preliminary objection to the amended plaint/counterclaim on grounds of law or maintainability. [Paras 9]

Respondents are at liberty to file an application under Order 7, Rule 11 CPC to challenge the amended pleading.

Final Conclusion: Impugned order dated 20.09.2021 is quashed; petitioner permitted to amend the counterclaim; respondents may pursue objections, including by filing an application under Order 7, Rule 11 CPC; writ petition disposed of.

Benami transaction - Prohibition of the right to recover property held benami - Exception for Karta and family members under the definition of benami transaction - Order 7 Rule 11 CPC - demurrer test - Question of fact requiring trial and evidence

Order 7 Rule 11 CPC - demurrer test - Prohibition of the right to recover property held benami - Question of fact requiring trial and evidence - Whether the plaint could be rejected under Order 7 Rule 11 CPC as barred by Section 4 of the Benami Transaction (Prohibition) Act, 1988. - HELD THAT: - The Court examined the plaint and held that determination whether the suit property is benami and therefore barred by Section 4, or whether it falls within exceptions in the definition of 'benami transaction' (including the first exception relating to a Karta or family arrangements), requires evidence. Under Order 7 Rule 11 CPC the court must proceed on a demurrer basis and accept the averments in the plaint; disputed questions of fact cannot be decided at that stage. The impugned application under Order 7 Rule 11 CPC sought rejection of the plaint on the ground of the Benami Act, but a bare reading of Section 4 and the exceptions in Section 2(9) shows that factual inquiry is necessary. Reliance on authoritative precedent confirming that issues of benami status and exceptions are questions of fact for trial supports the conclusion that the plaint could not be rejected on that ground at the pleading stage.

Application under Order 7 Rule 11 CPC rightly dismissed; plaint not liable to be rejected on the ground of being barred by the Benami Act without trial and evidence.

Final Conclusion: Revision petition dismissed; impugned order refusing rejection of the plaint under Order 7 Rule 11 CPC is upheld and the suit proceeds to trial to decide whether the transaction is benami or falls within statutory exceptions.

Adjustment of duty drawback against pre-deposit for appeal - pre-deposit requirement under Section 129E of the Customs Act, 1962 - nature of duty drawback vis-a -vis pre-deposit for maintaining an appeal - release of duty drawback where foreign exchange remittance is outstanding - interim restraint on rejection of appeal for want of pre-deposit

Adjustment of duty drawback against pre-deposit for appeal - pre-deposit requirement under Section 129E of the Customs Act, 1962 - nature of duty drawback vis-a -vis pre-deposit for maintaining an appeal - Adjustment of duty drawback against the petitioner's obligation to make a pre-deposit under Section 129E is not permissible. - HELD THAT: - The Court held that the statutory pre-deposit required to pursue an appeal under Section 129E has a character and purpose distinct from a claim for duty drawback. There is no provision in the Customs Act permitting adjustment of amounts payable to an exporter (duty drawback) against the obligation to make a pre-deposit for maintaining an appeal. Consequently, the relief seeking direction to adjust pending drawback claims towards the pre-deposit was not permissible. [Paras 9]

Relief for adjustment of duty drawback against the pre-deposit obligation under Section 129E rejected.

Release of duty drawback where foreign exchange remittance is outstanding - Directions for release of duty drawback in respect of specified Shipping Bills where no foreign exchange remittance issue subsists. - HELD THAT: - Having distinguished the impermissibility of adjustment, the Court directed release of duty drawback in respect of five of the nine Shipping Bills uploaded on 28.07.2015, noting that proceedings for recovery in respect of those bills had been dropped by the order dated 15.09.2021. The Court left the petitioner free to use the funds so released for meeting any pre-deposit obligation. With regard to the remaining Shipping Bills, the record indicated that foreign exchange remittances in respect of some bills had not been received; release in respect of such bills could not be ordered. [Paras 8, 10]

Respondent directed to forthwith release duty drawback in respect of five Shipping Bills; release withheld for bills where foreign exchange remittance has not been received.

Interim restraint on rejection of appeal for want of pre-deposit - pre-deposit requirement under Section 129E of the Customs Act, 1962 - Interim protection against dismissal of the petitioner's appeal to CESTAT for non-payment of pre-deposit for a limited period. - HELD THAT: - The Court considered it appropriate to afford the petitioner short-term relief to enable utilisation of any released drawback amounts to meet the pre-deposit requirement. Accordingly, the Court directed that CESTAT should not reject the petitioner's appeal (diary no. 52123/2021) for want of pre-deposit for a period of four weeks from the date of the order. [Paras 10, 11]

CESTAT directed not to reject the appeal for want of pre-deposit for four weeks.

Release of duty drawback where foreign exchange remittance is outstanding - Petitioner's remedy in respect of remaining duty drawback where foreign exchange remittance is not received. - HELD THAT: - The Court did not adjudicate further on release of drawback where foreign exchange remittance for certain Shipping Bills remained outstanding. Instead, it left the petitioner at liberty to pursue alternate remedies for release of those amounts, acknowledging the factual impediment noted in the counter-affidavit regarding non-receipt of remittances. [Paras 7, 12]

Petitioner permitted to pursue alternate remedy for release of duty drawback in respect of the remaining Shipping Bills.

Final Conclusion: The writ petition is disposed of by (a) holding that duty drawback cannot be adjusted against the statutory pre-deposit required under Section 129E, (b) directing release of drawback in respect of five Shipping Bills forthwith, (c) restraining CESTAT from rejecting the petitioner's appeal for want of pre-deposit for four weeks, and (d) leaving the petitioner free to seek release of drawback in respect of the remaining Shipping Bills by alternate remedies.

Interim stay pending appeal - prima facie evaluation of impugned order - abuse of dominance - jurisdictional sufficiency of findings at interlocutory stage - administrative directions for expeditious disposal of appeal

Interim stay pending appeal - prima facie evaluation of impugned order - Whether interim relief should be granted to the appellants pending disposal of the appeal before NCLAT - HELD THAT: - The Court considered the alternative of remitting the matter to NCLAT for a fresh hearing of the interim application or conducting a prima facie evaluation itself and adopted the latter course in order to avoid delay. On a limited, interlocutory appraisal of the material on record, the Court observed that NCLAT had not entered into the merits but that the findings recorded by the CCI could not be said, at this stage, to be without jurisdiction or to suffer from any manifest error warranting interference. Having undertaken the prima facie review, the Court declined to grant interim relief and affirmed the NCLAT order refusing interim stay. [Paras 6, 7, 12, 16]

Affirmed the NCLAT's refusal to grant interim relief; no interim stay granted.

Abuse of dominance - jurisdictional sufficiency of findings at interlocutory stage - Whether the CCI's findings of anti-competitive conduct and abuse of dominance are so vitiated as to require immediate appellate interference - HELD THAT: - The Court recorded the principal findings of the CCI concerning pre-installation, tying, market effects and commercial compulsion on OEMs, and noted that dominance of Google was not in dispute. At the interlocutory stage, having regard to the material before it, the Court held that those findings could not be characterised as manifestly erroneous or beyond the CCI's jurisdiction so as to justify overturning or staying the operative directions pending appeal. The Court refrained from expressing any final view on the merits, preserving the substantive adjudication for the appellate forum. [Paras 10, 11, 12]

CCI's findings are not shown, at the interlocutory stage, to be without jurisdiction or manifestly erroneous; merits to be adjudicated by NCLAT.

Administrative directions for expeditious disposal of appeal - What interim administrative directions should be given to the NCLAT and what adjustments to the compliance timeline are appropriate - HELD THAT: - The Court directed that the appeal pending before NCLAT be listed for final hearing and requested NCLAT to dispose of the appeal by 31 March 2023. The Court asked the parties to place a certified copy of this order before NCLAT within three working days and requested the President of NCLAT to issue administrative directions for an early time schedule. In view of interlocutory contestation, the Court extended the time for compliance with the CCI order by a further week, clarifying that actions taken in the interim shall abide by the result of the appeal. [Paras 13, 14, 15, 17]

Directed NCLAT to expedite disposal (by 31 March 2023 as requested), required parties to move NCLAT with certified copy, and extended compliance time by one week.

Final Conclusion: The Supreme Court, after a limited prima facie appraisal, declined to grant interim relief and affirmed NCLAT's refusal to stay the CCI order; it found no basis at the interlocutory stage to hold the CCI findings to be manifestly erroneous or beyond jurisdiction, directed NCLAT to expedite disposal of the appeal and granted a one week extension for compliance with the CCI directions.

Appointed date as fixed in the scheme - Effective date versus appointed date - Sanction of scheme of amalgamation by NCLT - Shareholders' approval and commercial wisdom - Judicial modification of appointed date

Appointed date as fixed in the scheme - Effective date versus appointed date - Sanction of scheme of amalgamation by NCLT - Whether the appointed date of the scheme should be the date expressly defined in the scheme (01.04.2019) or whether the NCLT correctly fixed the appointed date as the effective date as defined in the scheme. - HELD THAT: - The Tribunal examined the scheme's definitions which expressly defined the "Appointed Date" as 01.04.2019 and the "Effective Date" as the date on which certified copies of the NCLT orders are filed with the Registrar. The Board of Directors had approved the scheme with the appointed date of 01.04.2019 and the Regional Director's report recognised the appointed date as 01.04.2019. The Tribunal held that when a scheme, approved by the shareholders, specifies an appointed date, the NCLT lacks jurisdiction to substitute the appointed date by treating the effective date as the appointed date absent any statutory or scheme-based justification. Reliance was placed on the Tribunal's earlier decision in Accelyst Solutions Pvt. Ltd. v. Freecharge Payment Technologies Pvt. Ltd., which affirmed that the court/tribunal must ensure statutory compliance but should not sit in appeal over the commercial wisdom of shareholders and that modification of an appointed date approved by shareholders was unwarranted in that case. Applying these principles, the NCLT's fixation of the appointed date as the effective date was contrary to the scheme's clear definitions, the shareholders' approval and the Regional Director's observations, and thus required correction.

The appointed date of the scheme is fixed as 01.04.2019 as defined in the scheme; the NCLT order insofar as it fixed the appointed date as the effective date is modified and the NCLT order dated 16.09.2021 is set aside.

Final Conclusion: The appeal is allowed to the extent of modifying the NCLT order: the appointed date is declared to be 01.04.2019 as per the scheme and the Tribunal's order sets aside the impugned NCLT order; no order as to costs.

Striking off and restoration of company name - company not carrying on business or operations - compliance with removal of name procedure under Section 248 - restoration subject to compliance and costs

Company not carrying on business or operations - striking off and restoration of company name - Whether striking off of the company's name was justified on the ground that the company was not carrying on any business or operations. - HELD THAT: - The Appellate Tribunal examined the Balance Sheets and Income Tax Returns for the Financial Years 2015-16 to 2018-19 and concluded that the records disclose substantial movable and immovable assets, ongoing projects and prospects of revenue, and filed Income Tax Returns for 2016-17 to 2018-19. On that recorded material the Tribunal found that it could not be said that the company was not carrying on any business or operations and held that the orders of the Registrar of Companies and the National Company Law Tribunal striking off the company's name were not sustainable in law. [Paras 8, 9]

Impugned orders striking off the company's name set aside; on merits the company found not to be non-operational.

Compliance with removal of name procedure under Section 248 - restoration subject to compliance and costs - Consequent relief and conditions for restoration of the company's name in the Register of Companies. - HELD THAT: - Having set aside the strike-off, the Tribunal directed restoration of the company's name subject to specified conditions: payment of costs to the Registrar within eight weeks; filing of all outstanding Annual Returns and Balance Sheets and payment of requisite fees and late charges; and preservation of the Registrar's liberty to take any other punitive or regulatory steps under the Companies Act for non-filing or late filing. The order therefore restores the company but makes restoration conditional on compliance and payment of costs. [Paras 9]

Company's name to be restored to the Register subject to payment of costs and compliance with filing and fee requirements; RoC permitted to take further steps as permissible under the Act.

Final Conclusion: The appeal is allowed to the extent that the orders striking off the company's name are set aside and the company's name is ordered to be restored to the Register of Companies, subject to payment of costs and compliance with filing and fee conditions, while preserving the Registrar's authority to initiate further action under the Companies Act.

Validity of put/call option in shareholders agreement - Distinction between intra-shareholder option and a forward contract - Contracts in derivatives and applicability of Section 18A of SCRA - Scope and effect of SEBI notification dated 1st March 2000 under Section 16 of SCRA - Principle that an option in a shareholders' agreement gives rise to a contract only upon exercise - Appellate scope under Section 37 read with Section 34 of the Arbitration and Conciliation Act, 1996 - Precedent in MCX on options arising only upon exercise

Validity of put/call option in shareholders agreement - Distinction between intra-shareholder option and a forward contract - Precedent in MCX on options arising only upon exercise - Clauses 8.5 and 8.5.1 of the Share Purchase Agreement are not illegal or unenforceable as forward contracts. - HELD THAT: - The Court upheld the Single Judge's conclusion that clauses 8.5 and 8.5.1 merely grant Edelweiss an option to require repurchase upon the occurrence of specified contingencies and do not constitute a present contract for sale or purchase of shares. Relying on the principle in MCX, the obligation to buy or sell arises only when (i) the condition subsequent is breached and (ii) Edelweiss elects to exercise the option. There was no factual or legal basis to treat the clauses as a forward contract prohibited by the SEBI circular of 1 March 2000, because on the SPA date there was no existing sale/purchase obligation; the contract of sale would arise only on exercise of the option. [Paras 11, 12, 17]

Clauses 8.5 and 8.5.1 are not forward contracts and are not void or unenforceable on that ground.

Contracts in derivatives and applicability of Section 18A of SCRA - Scope and effect of SEBI notification dated 1st March 2000 under Section 16 of SCRA - Distinction between intra-shareholder option and a tradable derivative - Clauses 8.5 and 8.5.1 do not constitute trading in derivatives prohibited by Section 18A of SCRA and are not invalid on that ground. - HELD THAT: - Section 18A declares that contracts in derivatives shall be legal and valid only if they satisfy the conditions therein; it does not itself invalidate contracts. The Court accepted the Single Judge's reasoning that an option in a shareholders' agreement which may or may not be exercised is not necessarily a tradable derivative. A derivative, as envisaged by SCRA and explained in Rakhi Trading, is an instrument whose value is derived and which is traded in the securities market. The statutory prohibition targets trading or dealing in such derivative contracts as securities; merely creating a put/right of repurchase between shareholders does not amount to trading in derivatives and is not caught by Section 18A or the SEBI circular, absent dealing/trading as a derivative on the market. [Paras 10, 18, 19, 20]

Clauses 8.5 and 8.5.1 are not contracts in derivatives within the meaning of Section 18A and are not rendered illegal by the SEBI notification or SCRA.

Final Conclusion: The Court dismissed the appeal. The Single Judge correctly set aside the Arbitrator's finding that clauses 8.5 and 8.5.1 were illegal; those clauses are legally valid and not struck down under the SEBI circular or Section 18A of SCRA. Costs awarded to respondent.

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' commercial wisdom and voting decision - Role and duties of the Resolution Professional in CIRP - Protections and special treatment for MSMEs under Section 240-A

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' commercial wisdom and voting decision - Role and duties of the Resolution Professional in CIRP - Protections and special treatment for MSMEs under Section 240-A - Validity of the Adjudicating Authority's order initiating liquidation of Gourmet Renaissance Private Limited and appointment of the Liquidator. - HELD THAT: - The Tribunal examined the conduct of the CIRP, the actions of the Resolution Professional and the minutes and correspondence of the Committee of Creditors (CoC). It found that the CIRP had proceeded through the prescribed steps, expression of interest was published, multiple opportunities were afforded to the prospective resolution applicant to submit and revise its plan, and the CoC considered the plan and related communications. The CoC, in its commercial judgment and by an overwhelming voting share, resolved to liquidate the corporate debtor after rejection of the resolution plan. The Appellant's contentions that he (as an MSME promoter) was improperly sidelined, that protections under the statutory regime for MSMEs were violated, that he was wrongly branded a wilful defaulter, and that there were mala fide acts or material irregularities by the Resolution Professional were considered but not found to establish a legal basis for setting aside the Adjudicating Authority's order. There was no material before the Tribunal to demonstrate that the CoC's decision to proceed to liquidation was vitiated or that the Adjudicating Authority erred in law in passing the liquidation order under Section 33; accordingly the Tribunal found no reason to interfere with the impugned order. [Paras 15]

The order dated 05.08.2021 initiating liquidation and appointing the Liquidator is affirmed and the appeal is dismissed.

Final Conclusion: The Appellate Tribunal affirmed the National Company Law Tribunal's order initiating liquidation of Gourmet Renaissance Private Limited under the IBC, holding that the CIRP and CoC process had been conducted and that there was no ground to interfere with the CoC's decision to liquidate; the appeal is dismissed.

Fraudulent trading or wrongful trading under the Insolvency & Bankruptcy Code, 2016 (Section 66) - Criminal prosecution under the Insolvency & Bankruptcy Code, 2016 (Section 69) - Right to be heard and principles of natural justice - Service of notice and closure of right to file reply - Transaction audit report and identification of related party/sham transactions - Recovery directions and contributors' joint and several liability

Right to be heard and principles of natural justice - Service of notice and closure of right to file reply - Whether the Adjudicating Authority erred in passing the impugned order ex parte and without affording the Appellant a fair opportunity to be heard. - HELD THAT: - The Tribunal examined the service and appearance chronology placed before the Adjudicating Authority and the Additional Affidavit which recorded date wise appearances of advocates for the respondents. The record shows service by email and speed post and repeated listing on multiple dates. The Adjudicating Authority closed the right to file a reply after noting non filing despite opportunities, and an additional affidavit was filed by the resolution professional. The Appellant's counsel had appeared through advocates on several listed dates. On this basis the Tribunal concluded that adequate opportunities were afforded and that the impugned order was not rendered ex parte for want of service or denial of hearing; the Appellant's choice not to respond did not vitiate the order. [Paras 17]

No error in the impugned order on grounds of denial of hearing; adequate opportunity to be heard was available and the right to file reply had been closed after opportunities.

Fraudulent trading or wrongful trading under the Insolvency & Bankruptcy Code, 2016 (Section 66) - Transaction audit report and identification of related party/sham transactions - Recovery directions and contributors' joint and several liability - Criminal prosecution under the Insolvency & Bankruptcy Code, 2016 (Section 69) - Whether the Appellants had discharged the onus of proving no dues outstanding and whether the Adjudicating Authority was justified in holding the transactions to be covered by Section 66 and directing recovery and prosecution under Section 69. - HELD THAT: - The Appellant asserted repayment and produced a ledger and an alleged adjustment letter. The Tribunal queried the provenance and authorisation of the letter and noted absence of convincing answers, company seal, or board authorisation. The Adjudicating Authority relied on the independent transaction audit by the appointed auditors which recorded an outstanding amount and characterized transactions as sham, concocted and fraudulent, and also referred to prior findings regarding misappropriation by promoters. Having examined the ledger, the audit report and the Appellant's inability to satisfactorily establish repayment or documentary proof, the Tribunal found no error in the Adjudicating Authority's conclusion that the transactions fell within Section 66 and in its directions for recovery and institution of prosecution under Section 69. [Paras 17, 18]

The Appellant failed to prove that no dues remained; the Adjudicating Authority rightly held the transactions to be covered by Section 66 and directed recovery and criminal proceedings under Section 69.

Final Conclusion: The appeal is dismissed as devoid of merit; the impugned order dated 13.12.2021 is upheld and connected interlocutory applications are closed.

Replacement of resolution professional by committee of creditors - committee of creditors' commercial wisdom - limited judicial review of CoC decisions - scope of 'during the corporate insolvency resolution process' - Regulation 18 Explanation - meetings of the CoC till approval of resolution plan

Replacement of resolution professional by committee of creditors - scope of 'during the corporate insolvency resolution process' - Regulation 18 Explanation - meetings of the CoC till approval of resolution plan - Validity of CoC resolution to replace the Resolution Professional in the facts of this case - HELD THAT: - Section 27 read with Section 22 authorises the CoC to replace a Resolution Professional "at any time during the CIRP." The CoC in the 21st meeting validly passed a resolution with the statutory threshold (76.69% against the required 66%), obtained the written consent of the proposed Resolution Professional and authorised VIAF to file the application before the Adjudicating Authority. Those procedural preconditions in the statute and Regulations were complied with. The Explanation to Regulation 18, which clarifies that CoC meetings may be convened till the resolution plan is approved and to decide matters not affecting the pending resolution plan, supports the position that the CIRP continues until the plan is approved by the Adjudicating Authority; the Explanation is clarificatory and not to be read as prospective so as to deny CoC meetings held prior to its insertion where the plan remains unapproved. The Adjudicating Authority erred in treating the expiry of the 330-day CIRP timeline as rendering the CoC functus officio where the resolution plan remained pending approval. The CoC had also deliberated on the performance of the incumbent before voting; Section 27 does not mandate the CoC to record reasons for replacement. Extraneous factual observations in the impugned order which were unsupported by pleadings or record are unsustainable. Having met statutory and regulatory requirements, the CoC's resolution to replace the Resolution Professional was not in breach of the IBC or the Regulations. [Paras 20, 21, 29, 33, 36]

CoC's resolution for replacement of the Resolution Professional was valid and not in breach of the IBC or Regulations.

Committee of creditors' commercial wisdom - limited judicial review of CoC decisions - Permissible scope of judicial review of the CoC's decision to replace the Resolution Professional - HELD THAT: - The IBC establishes a creditor-in-control regime in which major decisions are entrusted to the CoC and the Resolution Professional acts under the CoC's guidance. Where a CoC resolves to replace the Resolution Professional by achieving the statutory voting threshold and the proposed professional gives written consent, the Adjudicating Authority's role is confined to ensuring compliance with those statutory preconditions. The Adjudicating Authority cannot substitute its own assessment of commercial expediency for the collective wisdom of the CoC unless the CoC's decision is vitiated by material irregularity or is dehors the statutory scheme. In the present case the Adjudicating Authority exceeded its jurisdiction by displacing the CoC's majority decision as merely "prudent and advisable" to continue with the incumbent, thereby improperly substituting its view for the CoC's commercial judgment. Interference was not justified on the facts. [Paras 23, 24, 25, 35]

Adjudicating Authority's substitution of its view for the CoC's commercial wisdom was impermissible; judicial interference is limited and not warranted on these facts.

Final Conclusion: Impugned order dated 14.10.2022 set aside; replacement of Mr. Suresh Kumar Jain by Mr. Sapan Mohan Garg is allowed as the CoC's resolution met statutory requirements and Adjudicating Authority's interference was beyond permissible judicial review; outgoing Resolution Professional may submit claims for fees and costs to the CoC for expeditious consideration.

Acknowledgement under Section 18 of the Limitation Act, 1963 - limitation-barred claim - part-acceptance of claim by Resolution Professional not amounting to acknowledgement - acknowledgement in the balance sheet - adjudicating authority's finding on limitation

Acknowledgement under Section 18 of the Limitation Act, 1963 - part-acceptance of claim by Resolution Professional not amounting to acknowledgement - limitation-barred claim - acknowledgement in the balance sheet - Whether the Adjudicating Authority erred in holding the appellant's claim to be time-barred in the absence of an acknowledgement sufficient to revive limitation. - HELD THAT: - The Tribunal affirmed the Adjudicating Authority's conclusion that the claim arising from the agreement of sale dated 27.06.2014 was barred by limitation. The appellant relied on partial admission of the claim by the Resolution Professional and authorities holding that clear acknowledgements in balance sheets can renew limitation under Section 18. The Tribunal observed that no acknowledgement by the corporate debtor in a balance sheet or other material within the meaning of Section 18 was placed on record. A statement in the RP's affidavit recording part acceptance of the claim cannot be treated as an acknowledgement by the corporate debtor under Section 18, particularly where the part-acceptance itself was not the subject-matter of challenge before the Adjudicating Authority. In these circumstances there was no material to attract Section 18 and no basis to interfere with the Adjudicating Authority's finding that the claim was time-barred; the decisions cited did not assist the appellant on the facts of this case. [Paras 7, 9, 10]

Upheld the Adjudicating Authority's finding that the claim is barred by limitation; part-acceptance by the Resolution Professional did not operate as an acknowledgement under Section 18.

Final Conclusion: The appeal is dismissed; the impugned order holding the claim time-barred is affirmed and no benefit under Section 18 of the Limitation Act was available on the materials before the Tribunal.

Twin conditions under Section 45(1)(ii) of the PMLA - prima facie test for reasonable grounds to believe guilt - admissibility and reliability of statements recorded under Section 50 of the PMLA - right to speedy trial and deprivation of liberty under Article 21 - conditions for grant of bail in PMLA cases post Vijay Madanlal

Twin conditions under Section 45(1)(ii) of the PMLA - prima facie test for reasonable grounds to believe guilt - Whether, on the material before the Court, there are reasonable grounds for believing that the applicant is guilty such that the twin conditions of Section 45(1)(ii) of the PMLA are not satisfied - HELD THAT: - The Court applied the post-Vijay Madanlal statutory framework and held that the satisfaction required under Section 45(1)(ii) is a prima facie satisfaction based on available material and need not be a conclusive determination of guilt. The evidence relied upon by the Enforcement Directorate primarily comprises statements recorded under Section 50 of the PMLA and a few documentary items (emails, certain bank and audit records). The applicant was not named in the FIR or in the ECIR and the documentary material on record does not, prima facie, demonstrate his role as the alleged "mastermind". Several documentary items either do not directly implicate him (e.g., where he was only copied in an email) or, on prima facie scrutiny, do not establish that he created or routed the fictitious entries. The Investigating Officer's note in column 12 of the FIR indicating commercial reasons for NPA and absence of apparent mala fides also weighs against a prima facie finding of guilt. On the totality of these materials, the Court concluded that the applicant has made out reasonable grounds for believing that he is not guilty for the limited purpose of bail under Section 45(1)(ii). [Paras 46, 51, 52, 53, 63]

Twin conditions under Section 45(1)(ii) are satisfied on a prima facie basis and do not preclude grant of bail.

Admissibility and reliability of statements recorded under Section 50 of the PMLA - Whether the statements recorded under Section 50 of the PMLA relied upon by the prosecution are reliable for the purpose of opposing bail - HELD THAT: - While Section 50 statements are admissible, the Court distinguished admissibility from reliability. Multiple key prosecution witnesses/statements that named the applicant were subsequently retracted. The Court noted that retractions diminish the reliability of such statements and, as a matter of prudence, retracted statements warrant corroboration by independent material before being treated as conclusive. The record showed that several of these statements were near-identical in wording (raising concerns of tutored or copied statements) and were later retracted; further, some documentary material that the ED relied upon did not, prima facie, establish the applicant's complicity. Given the centrality of the Section 50 statements to the ED's case and their retraction, the Court found it difficult to place prima facie guilt on the applicant solely on that basis. [Paras 55, 56, 57, 58, 59]

Retracted Section 50 statements are of questionable reliability and do not, prima facie, establish the applicant's guilt for the purpose of opposing bail.

Right to speedy trial and deprivation of liberty under Article 21 - conditions for grant of bail in PMLA cases post Vijay Madanlal - Whether the delay in investigation and prolonged pre-trial detention justify release on bail notwithstanding the seriousness of the allegations - HELD THAT: - The Court examined the progress of investigation and trial-related steps and noted that the applicant had been in custody for a substantial period (17 months as recorded) while being interrogated only once during judicial custody. Investigation remained ongoing with the ED seeking to file additional documents and numerous witnesses listed; trial had not commenced. Drawing on Vijay Madanlal and principles relating to the right to speedy trial and the limited application of Section 45 in bail proceedings, the Court observed that continued pre-trial incarceration where investigation and trial are protracted can amount to deprivation of personal liberty. Considering the limited inculpatory material, retracted statements, absence of direct documentary proof of the applicant's role, and the delay in progressing the prosecution case, the Court found that the balance of interests justified bail subject to stringent conditions to secure the investigation and trial. [Paras 68, 69, 70, 71, 72]

Delay and the state of investigation, coupled with paucity of reliable incriminating material, warrant grant of bail with stringent conditions to protect the prosecution's ability to proceed.

Conditions for grant of bail in PMLA cases post Vijay Madanlal - What conditions should be imposed if bail is granted to safeguard the investigation and trial - HELD THAT: - The Court accepted that concerns of flight, tampering with evidence or influencing witnesses can be addressed by imposing specific and stringent conditions. Accordingly, the Court specified conditions tailored to monitoring and availability of the applicant (personal bond with surety, surrender of passport, furnishing and maintaining contact number, providing live Google pin location, prohibition from unlawful acts or prejudicial conduct, and requirement to join investigation and appear in court when directed). The Court recorded that these conditions would enable the ED to continue its investigation while protecting the applicant's liberty. [Paras 72, 73, 74, 75]

Bail is granted subject to specified conditions to secure the prosecution's interest and ensure the applicant's availability.

Final Conclusion: The petition is allowed: the applicant is granted regular bail on the conditions specified by the Court (personal bond with surety, surrender of passport, provision of contact details and live location, non-interference with investigation or witnesses, and cooperation with investigation and court appearances). No expression of opinion is made on the merits of the case.

Applicability of the rigour of Section 45 of the Prevention of Money Laundering Act, 2002 - quashing of summoning order under PMLA - consideration of regular bail on surrender - predicate offence investigation and concurrent ED proceeding

Applicability of the rigour of Section 45 of the Prevention of Money Laundering Act, 2002 - predicate offence investigation and concurrent ED proceeding - Rigour of Section 45 PMLA, 2002 does not apply in the facts of the case where the total amount involved is less than One Crore. - HELD THAT: - The learned counsel for the petitioner declined to press the petition on merits. Both the Enforcement Directorate and the Union of India did not dispute that the rigour of Section 45 of the Prevention of Money Laundering Act, 2002 would not apply because the total amount involved in the case is less than One Crore. Having noted the concurrence of the parties on this legal position, the Court recorded that Section 45's rigour would not apply in the facts and circumstances of the case and proceeded to dispose of the petition accordingly.

Section 45 PMLA, 2002's rigour held inapplicable in the present case where the amount involved is below One Crore.

Quashing of summoning order under PMLA - consideration of regular bail on surrender - Petition for quashing of the summoning order disposed of with liberty to surrender and apply for regular bail; bail application to be considered promptly. - HELD THAT: - The petitioner was granted liberty to surrender before the competent PMLA court within ten days and to apply for regular bail. The Court directed that if the petitioner applies for bail within the stipulated period, the bail application should be considered and decided preferably on the same day, keeping in view the Court's finding that Section 45's rigour does not apply in the circumstances of the case. The petition under Section 482 Cr.P.C. was therefore disposed of without adjudication on merits.

Petition disposed of with liberty to surrender and apply for regular bail; the bail application to be considered expeditiously.

Final Conclusion: Petition under Section 482 Cr.P.C. disposed of: Court recorded that Section 45 PMLA, 2002 does not apply as the amount involved is below One Crore and granted liberty to the petitioner to surrender and seek regular bail, directing expeditious consideration of the bail application.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - extension of time for remittance - condonation of delay - compliance with terms of the Scheme - manual processing of declarations - interest at the rate of 15% - judicial consistency and following earlier orders

Admission of fresh evidence in review - email as proof of prior request for time - Admissibility and effect of the e-mail produced in support of the petitioners' request for more time to remit under SVLDRS. - HELD THAT: - The petitioners placed on record an e-mail and a screenshot of the outbox/sent folder establishing that an e-mail had been sent to the authorities seeking more time. The Court found no ambiguity in the production and authenticity of the e-mail and rejected the Revenue's objection that the e-mail was not received. On that basis the Court accepted that there had been a prior communication seeking an extension and that non-production before the original order was a bona fide inadvertence. The finding on the veracity of the e-mail underpins the grant of review relief. [Paras 6]

The e-mail and accompanying outbox screenshot are accepted as evidence and admitted in review.

Extension of time for remittance - compliance with terms of the Scheme - judicial consistency and following earlier orders - interest at the rate of 15% - Whether, despite the Scheme's closure, relief by way of permitting remittance after the deadline could be granted to assessees who had sought extension prior to the deadline. - HELD THAT: - The Court considered the Supreme Court decision relied upon by the Revenue but noted that this Court had earlier, in N. Sundararajan (Writ Appeal No.2047 to 2098 of 2021 dated 26.08.2021), extended the time for remittance under SVLDRS to 30.09.2020 for assessees who had sought extension prior to 30.06.2020, subject to payment of interest at 15%. That order had not been challenged by the Revenue. The Board's subsequent instructions permitting manual processing of declarations and communications from departmental offices indicating willingness to permit remittance until 30.09.2020 were also relied upon. In the interests of consistency and in light of accepted Board instructions and prior High Court orders, the Court concluded that assessees who had sought extension prior to the deadline were entitled to have the remittance accepted upon being put to terms (payment with interest). [Paras 11, 12, 13, 14, 15]

Where an assessee had sought extension prior to the Scheme's closing date, time could be extended and remittance accepted subject to payment of interest at 15%, consistent with earlier orders and Board instructions.

Manual processing of declarations - acceptance of declarations under the Scheme - Appropriate relief to be granted in review following admission of the e-mail and application of earlier orders and Board instructions. - HELD THAT: - Having admitted the e-mail and noting that the petitioner had thereafter remitted the outstanding amount with interest at 15% (as evidenced by the memo and challans filed on 27.10.2022), the Court directed that appropriate orders accepting the petitioner's declarations under the Scheme be passed. The Court imposed a time-bound direction to effect compliance by the authorities, reflecting the combined effect of the Court's earlier approach, Board instructions allowing manual processing, and the petitioner's payment. [Paras 16, 17]

The review is allowed; authorities directed to pass orders accepting the petitioner's declarations under SVLDRS within four weeks.

Final Conclusion: The review applications are allowed: the e-mail sent by the petitioners is accepted as evidence of a prior request for time; having regard to this Court's earlier orders and Board instructions, assessees who sought extension before the Scheme's closure may have remittance accepted on terms (payment with interest at 15%); the petitioner having produced challans is to have its declaration accepted and the authorities are directed to pass appropriate orders within four weeks.

Includability of value of free supplies in gross amount charged for levy of service tax - benefit of exemption notification subject to non availment of cenvat credit of inputs - veracity of adjustments shown in ST 3 returns and reliance on annexures to show cause notice - imposition of penalty for suppression or mis declaration under Section 78

Includability of value of free supplies in gross amount charged for levy of service tax - benefit of notification No.1/2006 ST dated 01.03.2006 - Denial of benefit of notification No.1/2006 ST on the ground that value of goods/materials supplied free by the service recipient must be included in gross amount charged. - HELD THAT: - The Tribunal applied the decision of the Hon'ble Apex Court in BHAYANA BUILDERS (P) LTD. and observed that the notifications compute service tax on 33% of the gross amount 'charged' from the service recipient. Since no amount is 'charged' in respect of goods/materials supplied free by the service recipient, such value cannot be included in the gross amount for levy of service tax. The Apex Court reasoning that exemption notifications must be read with the causal connection to the amount charged and that value of materials supplied by the service recipient is not includable was followed. Accordingly, the Commissioner's demand insofar as it seeks duty on the value of free supplies was set aside and the appeal on this point allowed. [Paras 4]

Order of the Commissioner raising duty on value of free supplies set aside; appeal allowed to that extent.

Benefit of exemption notification subject to non availment of cenvat credit of inputs - interpretation of Notification No.32/2007 ST dated 22.05.2007 - Whether the Commissioner correctly concluded that the appellant did not avail cenvat credit of inputs before allowing benefit of Notification No.32/2007 ST. - HELD THAT: - The Tribunal found that the Commissioner reached his conclusion on the basis of examination of only a few invoices and selected ST 3 returns, whereas the question of availment of cenvat credit of inputs requires complete verification. The notifications must be strictly construed and if any input credit of inputs was availed while claiming the notification, the benefit would not be permissible. Given the inadequate examination by the Commissioner, the Tribunal found merit in the Revenue's contention and set aside the impugned finding, remanding the matter to the original adjudicating authority for fresh adjudication after full verification of facts. [Paras 4]

Impugned order set aside and matter remanded for fresh adjudication and complete verification regarding availment of input cenvat credit.

Veracity of adjustments shown in ST 3 returns and reliance on annexures to show cause notice - rejection of amount of excess adjustment - Whether the Commissioner correctly rejected the amount of adjustment of Rs.1,43,72,143/ as stated in the show cause notice. - HELD THAT: - The Tribunal observed that the Commissioner's conclusion that the stated adjustment amount was incorrect was reached without fully examining Annexure D to the show cause notice, which contained month wise details supporting the adjustments. Because Annexure D was not fully examined and no reasoning was given for rejection of the amount shown in the show cause notice, the Tribunal found merit in the Revenue's appeal and set aside the Commissioner's finding, remanding the matter for fresh consideration with proper examination of Annexure D and supporting records. [Paras 4]

Order rejecting the amount of adjustment set aside; matter remanded for fresh adjudication with full examination of Annexure D.

Imposition of penalty for suppression or mis declaration under Section 78 - limitation and belated filing as relevant to suppression - Whether the Commissioner was justified in dropping penalty under Section 78 solely on the ground that the demand falls within the normal period of limitation and because penalty had been imposed for an earlier period. - HELD THAT: - The Tribunal held that the Commissioner's stated reasons for non imposition of penalty under Section 78 were misplaced. Filing of periodical returns belatedly for portions of the period can be indicative of suppression, and the fact that penalty was imposed for an earlier period does not preclude imposition for subsequent periods. Section 78 does not support the Commissioner's notion that a prior penalty bars a subsequent imposition. The Tribunal concluded that if the requisite elements for imposing penalty under Section 78 are present, penalty may be imposed even for periods within normal limitation. In view of these legal conclusions, the Tribunal indicated that the question of penalty requires fresh consideration in light of proper factual verification. [Paras 4]

Commissioner's ground for dropping penalty found unsustainable; matter remanded for fresh adjudication on penalty under Section 78 after factual verification.

Final Conclusion: Partly allowing the appeal, the Tribunal set aside the demand insofar as it sought service tax on value of free supplies and remanded the remaining contested matters-availability of input cenvat credit for notification benefit, correctness of the adjustments shown in Annexure D, and the question of liability to penalty under Section 78-for fresh adjudication by the original authority after full verification of records.

Constitutional validity of Section 9-D of the Central Excise and Salt Act, 1944 - Principles for invocation of Section 9 D - Right to cross examination and fairness of adjudicatory procedure - Availability of statutory appeal and judicial review

Constitutional validity of Section 9-D of the Central Excise and Salt Act, 1944 - Section 9 D of the Central Excise and Salt Act, 1944 is intra vires the Constitution. - HELD THAT: - The High Court, on remand, examined the challenge to the vires of Section 9 D and concluded that the provision is not unconstitutional. This Court endorses the High Court's conclusion and refuses to disturb the finding that Section 9 D(2) is within legislative competence. The Court noted that the question of constitutionality had been considered after remand and that no live controversy remained which would require a different result. The endorsement reflects that the provision, properly read, permits administrative action subject to judicial review and safeguards outlined by the High Court. [Paras 17, 28]

Validity of Section 9 D upheld; High Court's conclusion that Section 9 D is not ultra vires is endorsed.

Principles for invocation of Section 9 D - Right to cross examination and fairness of adjudicatory procedure - Availability of statutory appeal and judicial review - Parameters required for lawful invocation of Section 9 D and whether the High Court erred in not applying those parameters to the appellants' cases on remand. - HELD THAT: - The High Court summarized the prerequisites for invocation of Section 9 D as follows: the authority must form an opinion based on material on record that a stipulated ground exists; the opinion must be supported by reasons; the affected party must be given opportunity to make submissions on the material; and the affected party may challenge invocation by filing the statutory appeal which affords judicial review. This Court accepted those principles as the correct legal parameters. However, the Court held that there was no live lis in which those parameters could now be applied to grant relief to the appellants because all departmental and appellate proceedings arising from the impugned adjudications have been finally disposed of against the appellants (including appeals dismissed for non compliance). Given the absence of any pending proceeding in which the High Court's parameters could operate, it was unnecessary and would be purely academic to direct application of those parameters to the appellants' matters. [Paras 17, 26, 27]

High Court correctly stated the conditions precedent for invoking Section 9 D but was not obliged to apply them to the appellants' cases because no live proceedings remained; therefore no further relief was available.

Final Conclusion: The Supreme Court dismisses the appeals, endorses the High Court's conclusion that Section 9 D is constitutionally valid and its articulation of the prerequisites for invoking Section 9 D, and records that no live lis exists in which those prerequisites can now be applied; costs are imposed on the appellants.

Liability of person who gets goods produced on job work basis under Rule 7AA - supersession and repeal of subordinate rules by the Central Excise (No.2) Rules, 2001 - registration and procedural regime under Rule 9 of the Central Excise (No.2) Rules, 2001

Liability of person who gets goods produced on job work basis under Rule 7AA - supersession and repeal of subordinate rules by the Central Excise (No.2) Rules, 2001 - registration and procedural regime under Rule 9 of the Central Excise (No.2) Rules, 2001 - Whether Rule 7AA could be invoked to fasten liability on the assessee for duties on goods produced by job workers, when the Central Excise (No.2) Rules, 2001 had come into force. - HELD THAT: - The tribunal correctly found that Rule 7AA, inserted in the Central Excise Rules, 1944, had been superseded by the Central Excise (No.2) Rules, 2001, which replaced the earlier rule regime and enacted a different registration and procedural framework. The assessment proceedings and the show-cause notice proceeded as if Rule 7AA remained effective; neither the notice nor the order-in-original acknowledged or applied the changed legal regime under the 2001 Rules. The 2001 Rules, including the registration provisions now embodied (set out in Rule 9), displaced the earlier provision relied upon by the Commissioner. Because the assessing authority proceeded on the basis of the superseded provision, the Commissioner's confirmation of demand based on Rule 7AA was in error. The CESTAT's setting aside of that determination was justified for want of application of the then-operative rule framework. [Paras 6, 8, 9]

The Commissioner's reliance on Rule 7AA was misplaced since that provision was superseded by the Central Excise (No.2) Rules, 2001; the CESTAT order setting aside the demand is upheld and the appeal fails.

Final Conclusion: The appeal is dismissed. The CESTAT rightly held that Rule 7AA could not be invoked after the Central Excise (No.2) Rules, 2001 superseded the earlier rule, and the Commissioner's order based on the superseded provision was set aside.

Deeming provision of section 74(9) of the DVAT Act - peremptory notice under section 74(8) of the DVAT Act - limitation for reassessment under section 34(2) of the DVAT Act - remand to the Objection Hearing Authority for fresh consideration

Deeming provision of section 74(9) of the DVAT Act - peremptory notice under section 74(8) of the DVAT Act - Whether objections are to be deemed allowed under section 74(9) of the DVAT Act in absence of an order by the OHA where no notice under section 74(8) was issued. - HELD THAT: - The Court held that the deeming consequence in section 74(9) is contingent on the two conditions specified by the statute: service of a written notice under section 74(8) requiring decision within fifteen days, and failure of the Commissioner/OHA to decide by the end of that period. The failure of the OHA to decide within the statutory time prescribed by section 74(7) alone does not trigger section 74(9). Reliance on precedent in BEHL Construction confirms that the notice under section 74(8) is mandatory to invoke the deeming rule and an objector cannot claim the benefit of section 74(9) without having issued the peremptory notice after expiry of the prescribed period. [Paras 18, 19, 20]

Deeming under section 74(9) does not apply because no notice under section 74(8) was served; the petitioner cannot treat objections as allowed on that ground.

Limitation for reassessment under section 34(2) of the DVAT Act - remand to the Objection Hearing Authority for fresh consideration - Whether the one-year limitation in section 34(2) applies where the Tribunal remands the matter to the OHA without setting aside the assessment. - HELD THAT: - The Court explained that section 34(2) obliges the Commissioner to make an assessment within one year only where an assessment is required to be made in consequence of, or to give effect to, an appellate or court decision that requires reassessment. Where a tribunal quashes an OHA order and remands objections for fresh consideration without disturbing the assessment, section 34(2) is not engaged. The Court relied on the reasoning in Combined Traders and related authorities to hold that the time limit for making an assessment under section 34(2) does not apply to a remand directed to the OHA to reconsider objections while the underlying assessment remains intact. [Paras 12, 15, 16]

Section 34(2) does not apply to the present remand to the OHA because the assessment was not set aside and no reassessment was required to give effect to the appellate decision.

Remand to the Objection Hearing Authority for fresh consideration - Remand of the petitioner's objections to the OHA for fresh decision as directed by the Tribunal. - HELD THAT: - The Tribunal quashed the OHA's earlier order and remitted the matter so that the OHA may consider the documents produced before it and decide the objections afresh in accordance with the provisions of the DVAT Act and Rules, after affording a reasonable opportunity of hearing. The High Court noted that the OHA has not yet complied with that remand and directed the concerned OHA to pass an appropriate order expeditiously in compliance with the Tribunal's order dated 17.09.2021. The Court also clarified that the petitioner remains free to issue the statutory notice under section 74(8) if it chooses to invoke the deeming provision thereafter. [Paras 4, 5, 21, 22]

The matter is remanded for fresh consideration by the OHA in terms of the Tribunal's order; the Court directs the OHA to decide the objections expeditiously and permits the petitioner to issue a notice under section 74(8) if so desired.

Final Conclusion: The petition for refund is dismissed at this stage because the deeming provision of section 74(9) was not triggered in absence of a section 74(8) notice; the Court directs the OHA to comply with the Tribunal's remand and decide the objections afresh expeditiously and notes that the petitioner may issue a section 74(8) notice if it chooses.

Locus standi to claim refund of excess tax by purchasing dealer - concessional rate of tax and filing of Form C declaration - time limit for filing Form C is directory and not mandatory - rejection of Form C declarations unlawful - entitlement to concessional rate under Section 8 of the Central Sales Tax Act, 1956 - direct refund by State to purchasing dealer (no requirement to claim through selling dealer) - refund where excess tax paid under compelling circumstances (non-issuance of Form C) - binding effect of Union of India circular dated 01.11.2018 on State as agent for CST collection - interest payable under the WBST Act from day after assessment order until refund

Locus standi to claim refund of excess tax by purchasing dealer - The purchasing dealer (writ petitioner) has locus standi to maintain a direct claim for refund of excess tax and the writ petition is maintainable. - HELD THAT: - The Court affirmed that the writ petitioner, being the party which bore the burden of the tax collected and deposited with the State Exchequer, is entitled to maintain a direct claim for refund against the State. The decision endorses the Single Bench conclusion that the purchaser need not proceed through the selling dealer to seek restitution of tax paid in excess. [Paras 106, 107]

Writ petition maintainable; purchasing dealer may directly claim refund from the State.

Concessional rate of tax and filing of Form C declaration - time limit for filing Form C is directory and not mandatory - Filing of Form C declaration is mandatory to obtain concessional rate, but the statutory time limit for filing is directory; delayed filing may be excused. - HELD THAT: - The Court held that entitlement to the concessional rate requires filing Form C, yet the prescribed time limit for submission is directory rather than mandatory. Where the assessing authority has accepted and considered Form C declarations, it is to be treated as satisfied that sufficient cause existed for any delay in filing, and the declarations cannot be rejected solely on the ground of delay. [Paras 106, 107]

Form C is necessary for concessional rate, but delay in filing is not automatically fatal where the assessing officer has accepted the declarations.

Rejection of Form C declarations unlawful - The rejection of the Form C declarations was erroneous, unsustainable and illegal; the assessment order to that extent is set aside. - HELD THAT: - Having found that Form C declarations were filed and accepted for consideration, the Court concluded that their rejection in the assessment was not sustainable. Consequently, insofar as the assessment denied the concessional rate by disallowing the declarations, that portion of the assessment order was quashed. [Paras 106, 107]

Assessment order dated 30.06.2020 is set aside to the extent it rejected the Form C declarations.

Entitlement to concessional rate under Section 8 of the Central Sales Tax Act, 1956 - The writ petitioner is entitled to the concessional rate of tax, having fulfilled the conditions in Section 8 of the Central Sales Tax Act, 1956 and with Form C declarations verified and found in order. - HELD THAT: - The Court found that the conditions for concessional treatment under the cited provision were satisfied and that the concerned authority of the State of West Bengal had verified and found the Form C declarations to be in order. On that basis, the concessional rate was held to be payable to the petitioner. [Paras 106, 107]

Petitioner entitled to concessional rate under Section 8 CST Act, 1956.

Direct refund by State to purchasing dealer (no requirement to claim through selling dealer) - Writ petitioners are entitled to claim refund of tax directly from the State of West Bengal and are not required to claim through the selling dealer. - HELD THAT: - The Court held that where the purchaser has borne the incidence of tax collected and deposited by the selling dealer, equitable restitution requires that the purchaser may seek refund directly from the State. The obligation of the State to refund is not contingent upon a claim routed through the selling dealer. [Paras 106, 107]

Purchasing dealer may claim refund directly from the State without involving the selling dealer.

Refund where excess tax paid under compelling circumstances (non-issuance of Form C) - Refund cannot be denied where excess tax was paid under compelling circumstances such as non-issuance of Form C declarations. - HELD THAT: - The Court recognized that where excess tax was paid because Form C declarations were not issued or could not be produced despite circumstances preventing their issuance, the State cannot refuse refund on that basis. The factual occurrence of non-issuance constituted compelling circumstances warranting restitution. [Paras 106, 107]

Excess tax paid under compelling circumstances must be refunded; denial on that ground is impermissible.

Direct refund by State to purchasing dealer (no requirement to claim through selling dealer) - The writ petitioner can claim refund directly from the State of West Bengal having borne the burden of tax collected and deposited by IOCL. - HELD THAT: - Reiterating that the incidence of tax borne by the purchaser confers on it the right to restitution, the Court directed the State to effect refund directly to the petitioner. The conclusion is grounded on the equitable principle that the burdened party is entitled to recover the overpaid tax from the collecting authority. [Paras 106, 107]

Direct refund by State to the party who bore the tax is warranted.

State unjustified in refusing refund where concessional rate previously allowed - The State of West Bengal was unjustified in refusing to refund excess tax as it had been allowing the concessional rate to the writ petitioners before and after the disputed period. - HELD THAT: - The Court observed that the State's prior and subsequent practice of allowing the concessional rate to the petitioners undermined the basis for refusal during the disputed period. Consistent treatment indicates that denial for the period in question lacked justification. [Paras 106, 107]

State's refusal to refund was unjustified in view of consistent allowance of concessional rate.

Binding effect of Union of India circular dated 01.11.2018 on State as agent for CST collection - interest payable under the WBST Act from day after assessment order until refund - The Union of India circular dated 01.11.2018 is binding on the State for purposes of CST collection and non-refunding contrary to that instruction is impermissible; refund must be accompanied by statutory interest from the day after the assessment order until payment. - HELD THAT: - The Court held that the circular issued by the Union of India is binding on the State of West Bengal in its capacity as agent for levy and collection of Central Sales Tax, and that failure to refund in contravention of the instruction was improper. The court directed refund with interest at the statutory rate prescribed under the WBST Act from 01.07.2020 (the day after the assessment order dated 30.06.2020) until the date of refund. [Paras 106, 107]

Circular binds the State; refund to be made with statutory interest from the day after the assessment order until payment.

Final Conclusion: The departmental appeal is dismissed; the Single Bench order is affirmed and the State of West Bengal is directed to refund the excess tax directly to the purchasing dealers with statutory interest from the day after the assessment order until payment, within 45 days of receipt of the order copy.

Writ jurisdiction in contractual disputes - State as party under Article 12 - Public law element permitting exercise of Article 226 - Arbitrariness and discrimination under Article 14 - Unequal bargaining power / unconscionability in contract - Limitation governing monetary relief and refund - Arbitration clause not ousting writ jurisdiction where public element exists

Writ jurisdiction in contractual disputes - State as party under Article 12 - Public law element permitting exercise of Article 226 - Arbitration clause not ousting writ jurisdiction where public element exists - Maintainability of the writ petition filed by IPCL challenging contractual clauses. - HELD THAT: - The Court held the writ petition was maintainable despite arising from a commercial contract because GAIL was a Public Sector Undertaking and therefore 'State' under Article 12. The contract was entered into in the context of an allocation by the Ministry (MoPNG) which imposed mandatory conditions (notably that IPCL lay its own pipelines), and GAIL occupied a monopolistic position in supply of gas at the relevant time. These factors injected a public law element into the contractual relationship, permitting exercise of writ jurisdiction under Article 226. The presence of an arbitration clause did not preclude writ relief where the challenge raised issues of unfair state action and discrimination; reliance on alternative remedies did not automatically oust supervisory jurisdiction when public law aspects were entrenched in the dispute. [Paras 19]

The writ petition was maintainable and could be entertained by the High Court notwithstanding the arbitration clause and availability of alternative remedies.

Arbitrariness and discrimination under Article 14 - Unequal bargaining power / unconscionability in contract - Validity of Clauses 4.04 and 10.01 of the gas supply contract insofar as they imposed 'loss of transportation charges' on IPCL. - HELD THAT: - The Court found the clauses to be arbitrary and violative of Article 14. IPCL had been mandated by the allocation letter from MoPNG to lay and use its own pipelines and therefore did not use GAIL's HBJ pipeline; yet the contract treated IPCL at par with users of the HBJ pipeline by levying transportation (loss) charges. Given the monopolistic position of GAIL, the time pressure on IPCL and the substantial investments made by IPCL in plant and pipelines, the contractual imposition of such charges evidenced unequal bargaining power and amounted to manifest arbitrariness and discrimination. Consequently, the challenged clauses were quashed as contrary to the allocation terms and the principle of non-discrimination. [Paras 20, 21, 22, 23]

Clauses 4.04 and 10.01 insofar as they authorised levy of 'loss of transportation charges' on IPCL were quashed as arbitrary, discriminatory and founded on unequal bargaining power.

Limitation governing monetary relief and refund - Extent of monetary relief - temporal limitation on refund of amounts collected under the quashed clauses. - HELD THAT: - While the quashing of the clauses entailed that amounts collected should be refunded, the Court restricted the period for refund to three years prior to the filing of the writ petition (filed on 09.03.2006). The Court reasoned that although IPCL had raised the issue in inter-party communications earlier, delay in approaching the court could not be permitted to expand the remedy; accordingly, the refund was confined to the period available by limitation principles, drawing support from precedent that monetary relief in such proceedings may be limited to what would have been recoverable in suit. [Paras 25, 26]

Refund limited to amounts collected in the three years preceding 09.03.2006.

Limitation governing monetary relief and refund - Modality and timeline for refund and consequence of non-compliance. - HELD THAT: - The Court affirmed the High Court's consequential direction for refund and ordered that the restricted refund be paid within two months from the date of the judgment. If refund was not made within that period, it would carry interest at 8% per annum from the date it became due; however, if paid within the stipulated time, no interest would be leviable. The Court treated the refund direction as a natural sequitur to quashing the offending clauses and did not interfere with the High Court's consequential relief except for temporally limiting the amount recoverable. [Paras 24, 27]

Refund to be made within two months; delayed refund to bear interest at 8% per annum; no interest if refunded within the stipulated time.

Final Conclusion: The appeals were allowed in part: the High Court's quashing of the clauses levying 'loss of transportation charges' was upheld on grounds of arbitrariness, discrimination and unequal bargaining power, the writ petition was held maintainable, but monetary relief was confined to refunds for the three years preceding 09.03.2006; the refund must be paid within two months or else bear interest at 8% per annum; parties to bear their own costs.

Quashing of summoning orders under Section 482 Cr.P.C. - Trial under Section 138 N.I. Act and procedure before the Magistrate - Presumption of legally enforceable debt under Section 139 N.I. Act - Summary trial procedure and defence by accused under Sections 143 and 145 of the N.I. Act - Duty to raise defence and seek recall/cross examination before the trial court - Delay in seeking extraordinary relief and requirement of satisfactory explanation

Quashing of summoning orders under Section 482 Cr.P.C. - Trial under Section 138 N.I. Act and procedure before the Magistrate - Duty to raise defence and seek recall/cross examination before the trial court - Whether the High Court should quash the summoning orders issued under Section 138 of the Negotiable Instruments Act by exercising jurisdiction under Section 482 Cr.P.C. - HELD THAT: - The Court held that it will not usurp the jurisdiction of the Magistrate by entertaining an application under Section 482 Cr.P.C. to pre-empt the trial in offences under Section 138 N.I. Act. The summoning orders show that the Magistrate considered the complaints, affidavits and documents on record; consequently no error is made out to justify quashing. The procedure under the Cr.P.C. and the N.I. Act contemplates that an accused who wishes to assert a defence must appear before the Magistrate, enter notice under the relevant provisions, file defence evidence and, if necessary, apply for recalling complainant witnesses for cross-examination under the statutory summary trial mechanism. The High Court cannot act as a trial court to examine the accused's defence at the stage of quashing where the statutory procedure for defence and cross-examination before the Magistrate is available.

Petitions for quashing the summoning orders were dismissed; the accused must raise and prove defences before the Magistrate in accordance with the statutory procedure.

Presumption of legally enforceable debt under Section 139 N.I. Act - Delay in seeking extraordinary relief and requirement of satisfactory explanation - Whether the petitioner's contentions of forged/misused or lost cheques and the delay in approaching the High Court justified interference with the summoning orders. - HELD THAT: - The Court observed that the complainant had presented the cheques within validity, received dishonour intimation and issued statutory notice, and that more than fifteen days elapsed without payment. The petitioner alleged theft/loss of cheques and forgery but had not lodged any police complaint earlier nor offered a satisfactory explanation for prolonged delay in challenging the complaints. In the factual matrix, and having regard to the statutory presumption that a cheque issued is evidence of a legally enforceable debt, the High Court found the petitioner's contentions improbable and not satisfactorily explained so as to warrant quashing of the proceedings at this stage.

The allegations of forgery/loss and the delay in filing the petitions were rejected as insufficiently explained; no interference with the summoning orders was made on these grounds.

Final Conclusion: The petitions under Section 482 Cr.P.C. seeking quashing of summons issued in complaints under Section 138 N.I. Act were dismissed as devoid of merit; the accused is directed to raise and prove his defence before the Magistrate in accordance with the statutory summary trial procedure, and the High Court declined to interfere in the exercise of the Magistrate's fact finding and trial jurisdiction.