TaxTMI Updates e-Newsletter
Feb 15,2021

Validity of Section 171 of the Central Goods and Services Tax Act, 2017 - Validity of Chapter XV of the Central Goods and Services Tax Rules, 2017 - Stay of recovery subject to deposit in instalments - Deposit of the demanded amount less GST paid - Counter affidavit on legal issues dispensed where filed in related petitions - Service and acceptance of notice - Exemption application allowed subject to rules

Exemption application allowed subject to rules - Application for exemption under CM No.5082/2021 was allowed subject to just exception and as per extant Rules. - HELD THAT: - The Court granted the exemption sought in CM No.5082/2021, subject to the qualification 'just exception' and compliance with the extant rules. The order records allowance of the application and disposes of that application accordingly.

CM No.5082/2021 allowed subject to just exception and as per extant Rules; the application is disposed of.

Validity of Section 171 of the Central Goods and Services Tax Act, 2017 - Validity of Chapter XV of the Central Goods and Services Tax Rules, 2017 - Service and acceptance of notice - Petitions challenging Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017 were instituted and notice was issued and accepted. - HELD THAT: - The petitions (W.P.(C) 1765/2021 and W.P.(C) 1766/2021) impugn Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017. The Court issued notice in these matters and recorded that counsel for the respondents accepted service. Related petitions raising the same challenge were directed to be listed together for hearing on the specified date.

Notice issued in the petitions challenging Section 171 and Chapter XV; notice accepted by respondents' counsel; related petitions to be listed together.

Counter affidavit on legal issues dispensed where filed in related petitions - No fresh counter affidavit on legal issues was required in these petitions because counter affidavits on the same legal questions had been filed in other petitions. - HELD THAT: - The Court observed that counter affidavits addressing the legal issues under challenge had already been filed in other petitions raising the same contentions. Consequently, it dispensed with the requirement to file separate counter affidavits on legal issues in the present petitions, while permitting counter affidavits on factual matters, if necessary, to be filed within six weeks.

Counter affidavit on legal issues not required; factual counter affidavit, if needed, to be filed within six weeks.

Stay of recovery subject to deposit in instalments - Deposit of the demanded amount less GST paid - Stay of recovery was granted subject to the petitioners depositing the demanded amount (less GST paid) in specified equal monthly instalments. - HELD THAT: - The Court stayed recovery proceedings on condition that the petitioner in W.P.(C) No.1765/2021 deposits the demanded amount less GST paid in three equal monthly instalments, and that the petitioner in W.P.(C) No.1766/2021 deposits the demanded amount less GST paid in six equal monthly instalments. The stay of recovery is expressly made conditional upon these deposits as to each petition respectively.

Stay of recovery granted subject to specified instalment deposits by the respective petitioners (three instalments for W.P.(C) No.1765/2021; six instalments for W.P.(C) No.1766/2021).

Final Conclusion: The Court issued and accepted notice in petitions challenging Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017; allowed the exemption application (CM No.5082/2021) subject to rules; dispensed with fresh counter affidavits on legal issues already covered in related petitions while permitting factual counter affidavits within six weeks; and granted stay of recovery conditioned on deposit of the demanded amount less GST paid in three and six equal monthly instalments for the respective petitions. Related matters were listed for further hearing on the specified date.

Anticipatory bail under section 438 Cr.P.C. - custodial interrogation not required - cooperation with investigation as bail condition - prohibition on influencing witnesses and tampering with evidence - court's observations not to influence trial court

Anticipatory bail under section 438 Cr.P.C. - custodial interrogation not required - Grant of anticipatory bail to the petitioner and whether custodial interrogation/arrest was required. - HELD THAT: - The Court examined the material on record including statements, seizure activity and the conduct of investigation and found that custodial interrogation of the petitioner was not necessary. Having considered the facts and submissions, the Court allowed the petition for anticipatory bail and directed that in the event of arrest the petitioner shall be released on furnishing a personal bond of Rs. 25,000/-. The order emphasises that custodial detention is unnecessary given the circumstances of the investigation and the record before the Court. [Paras 18, 19, 23]

Petition for anticipatory bail is allowed; custodial interrogation is not required and the petitioner is to be released on furnishing a personal bond of Rs.25,000/- in the event of arrest.

Cooperation with investigation as bail condition - prohibition on influencing witnesses and tampering with evidence - court's observations not to influence trial court - Terms and conditions attached to the grant of anticipatory bail and the scope of the Court's observations vis-a -vis the trial court. - HELD THAT: - The Court imposed specific conditions on the grant of anticipatory bail: the petitioner must cooperate with the investigation and make herself available for interrogation when required, and must not directly or indirectly influence any witness or tamper with evidence. The Court further clarified that its observations in the order should not influence the Trial Court in the conduct of the trial. These conditions are imposed as measures to safeguard the investigation and the integrity of evidence while allowing pre-arrest protection. [Paras 19, 20, 21, 22]

Anticipatory bail is subject to conditions: furnishing a personal bond, cooperating with investigation, availability for interrogation, and abstention from influencing witnesses or tampering with evidence; Trial Court shall not be influenced by this Court's observations.

Reliability of suppliers' registrations and transactional records - veracity of export transactions and e-way bill/EGM checks - Whether suppliers alleged to be nonexistent and invoices fabricated, and whether goods were actually supplied and exported. - HELD THAT: - The Court reviewed the material and noted that suppliers had valid PANs and bank accounts and were registered by the respondent after verification. The suppliers had been filing requisite GSTR returns, and the Companies' records, ledgers and bank transfers indicated receipts from foreign buyers and further transfers to suppliers. The Court observed that e-way bill uploads, linkage with transport authorities and customs checks (including entry passes at ICD Tughlakabad and issuance of Export General Manifesto) provide multiple levels of verification for transport and export. On the basis of these records the Court found it established that suppliers had supplied goods which were subsequently exported by the Companies, and that the contention of non-existence of suppliers was misconceived. [Paras 11, 12, 13]

Material on record establishes that suppliers were registered and transactional records support actual supply and export; allegation of suppliers being non-existent is held to be misconceived.

Final Conclusion: Anticipatory bail under section 438 Cr.P.C. is granted to the petitioner with conditions: furnish a personal bond of Rs.25,000/-, cooperate with investigation, be available for interrogation, and refrain from influencing witnesses or tampering with evidence; the Court finds no need for custodial interrogation and records that documentary and transactional material establishes existence of suppliers and export transactions, while directing that its observations shall not influence the Trial Court.

Interest on delayed payment of GST - prospective application of amended provision - no recovery for past period - electronic credit ledger and cash ledger distinction - principles of natural justice

No recovery for past period - interest on delayed payment of GST - Whether recoveries shall be made for interest charged on gross liability for periods prior to the prospective amendment - HELD THAT: - The State, by affidavit, and the CBIC circular recorded by the Court state that the amendment in law has been made effective prospectively w.e.f. 01-09-2020 and that, in accordance with the decision of the GST Council, no recoveries shall be made for the past period. On this basis the Court closed the proceedings taking on record the assurance from the State and the explanatory circular of the CBIC that no past recoveries will be pursued.

No recovery will be made for interest charged on gross liability for the past period.

Prospective application of amended provision - electronic credit ledger and cash ledger distinction - Effect of the amendment and the manner in which interest shall be charged prospectively - HELD THAT: - The State's affidavit and the CBIC circular clarify that the amendment relating to interest applies prospectively from 01-09-2020. In view of the stated position, the Court recorded that interest under the amended provision would be payable in respect of net liability discharged from the cash ledger prospectively and that taxpayers who discharge tax by debiting the cash ledger may be required to pay interest on delayed payment going forward. The Court disposed of the petition on this recorded stand.

The amendment operates prospectively from 01-09-2020; interest prospectively will be attracted on net liability discharged from the cash ledger.

Final Conclusion: Proceedings disposed of on the recorded stand of the State and the CBIC circular: the amendment concerning interest is prospective from 01-09-2020, no recoveries for past periods will be made, and interest prospectively applies to net liability discharged from the cash ledger; petition closed on that basis.

Search proceedings - coercion during search - physical violence and torture during search - compelled payment during search - panch witness affidavit - interim notice and appearance by video conferencing

Search proceedings - coercion during search - physical violence and torture during search - panch witness affidavit - interim notice and appearance by video conferencing - Court entertained allegations of coercion, physical violence, forced switching off of CCTV and compelled payment during search proceedings and issued interim process against the responsible officers directing their appearance. - HELD THAT: - The writ petition and an affidavit by a panch witness alleged that during search proceedings at the petitioner's premises over two days the officers resorted to physical violence and torture on employees, forced CCTV cameras to be switched off, took statements under coercion and compelled the management to make payment by creating payment details in the system. The High Court observed these averments and the panch affidavit to be disturbing and prima facie material warranting judicial notice. Rather than adjudicating the merits on the affidavits at this stage, the Court directed issuance of notice to the respondents identified as responsible for the search and required respondents Nos.4 and 5 to appear by video conferencing on the returnable date, warning that failure to appear may invite appropriate legal steps. The petition was ordered to be tagged with related Special Civil Applications for hearing. [Paras 4]

Notice issued to respondents; respondents Nos.4 and 5 directed to appear by video conferencing on the returnable date; matter tagged with other Special Civil Applications.

Final Conclusion: The High Court took prima facie notice of the serious allegations relating to conduct of the search, issued notice to the officers concerned and directed their appearance by video conferencing; no adjudication on merits was made at this stage.

Anticipatory bail under Section 438 Cr.P.C. - interim protection from coercive action - attachment of bank accounts under Section 83 of the CGST Act - obligation to cooperate with investigation - deposit as conditional relief in investigative proceedings

Exemption from filing official certified copies - Application for exemption (CRL.M.A.No.2102/2021) was considered and allowed. - HELD THAT: - The Court allowed the exemption application and disposed of CRL.M.A.No.2102/2021, granting exemption subject to all just exceptions. No further reasoning on the merits of the underlying criminal/departmental investigation was recorded in respect of the exemption.

Exemption allowed and CRL.M.A.No.2102/2021 disposed of.

Anticipatory bail under Section 438 Cr.P.C. - interim protection from coercive action - obligation to cooperate with investigation - deposit as conditional relief in investigative proceedings - Prayer for anticipatory bail resulted in interim protection restraining coercive action against the petitioners until the next date, subject to conditions. - HELD THAT: - The petitioners, who are engaged in trading of non ferrous metals and whose bank accounts were attached under the departmental order, sought anticipatory bail. The Court recorded that the petitioners have cooperated with the investigation, complied with summons, and have deposited a sum with the department. On these facts the Court issued notice and granted interim protection from coercive steps till the next date of hearing, while directing the petitioners to join the investigation as and when directed. The respondent was directed to file a reply within four weeks with advance copy to the petitioners. The Court observed that the interim order applies only to the petitioners and is not to be treated as a precedent. [Paras 12, 13, 14]

No coercive steps to be taken against the petitioners until the next date of hearing provided they join the investigation when directed; respondent to file reply in four weeks; order limited to the petitioners and not precedent.

Final Conclusion: Exemption application allowed and disposed; on anticipatory bail application the Court granted limited interim protection from arrest or other coercive measures until the next hearing on condition that the petitioners cooperate with the investigation and subject to the directions given, with the respondent to file a reply within four weeks.

Judicial review of policy decisions - Scope of executive discretion in taxation - Reasonableness, arbitrariness and mala fide grounds for interference - Power to exclude goods from composition scheme - Reconsideration and remand for fresh decision

Judicial review of policy decisions - Scope of executive discretion in taxation - Power to exclude goods from composition scheme - Validity of the GST Council's recommendation and the Government's notification excluding ice cream from the benefit of the composition scheme under Section 10(1) of the CGST Act and the extent to which courts may review that decision. - HELD THAT: - The Court recorded that Section 10(2)(e) vests power in the Government, on the recommendation of the GST Council, to notify goods which shall not be eligible for the composition scheme, and no statutory parameters are prescribed limiting that recommendation. The GST Council, being a constitutionally established, representative body with Central and State membership, exercises a high level policy function involving economic and fiscal considerations. Established principles were reiterated that courts do not sit in appeal over executive policy choices and will not substitute their own assessment of economic wisdom, unless the action transgresses law or fundamental rights or is tainted by mala fide, unreasonableness, arbitrariness or unfairness. Prior authorities were applied to emphasize the limited scope of judicial interference in executive fiscal policy. On the material before it (minutes of the GST Council), the Court found the Council had recorded concern about taxation impact and revenue loss as a reason for exclusion. The Court therefore recognised the wide executive discretion in selecting goods for exclusion and indicated that absent a showing of illegality or arbitrariness on the record before it, the Court would not substitute its own policy judgment for that of the GST Council. [Paras 12, 13, 14, 15, 18]

The Court refrained from substituting its view for the GST Council's policy decision, recognising the broad executive discretion in tax policy and the limited scope of judicial review, but examined whether reconsideration was appropriate on the available material.

Reconsideration and remand for fresh decision - Reasonableness, arbitrariness and mala fide grounds for interference - Whether the GST Council should be directed to reconsider the exclusion of ice cream from the composition scheme and, if so, the parameters for such reconsideration. - HELD THAT: - Although acknowledging the Council's policy discretion, the Court noted that the minutes before it emphasized revenue/taxation effect as the prevailing reason for exclusion and that it was not apparent from the minutes whether the Council had undertaken a detailed comparative study of components of ice cream (notably the GST treatment of constituent inputs such as milk and other assessable ingredients) or whether similarly placed goods with comparable tax effects had been treated consistently. The Court observed that the Council also considers socio political factors, but concluded that in the circumstances the appropriate remedy was to direct the GST Council to re examine the exclusion specifically addressing (a) the composition of ice cream and the GST payable on its components and (b) whether other similar goods with comparable tax impact continue to enjoy composition benefits, so as to ensure that the decision is taken after consideration of these material aspects. [Paras 19, 20, 21, 22, 23]

Directed the GST Council to reconsider exclusion of small scale manufacturers of ice cream from the composition scheme, considering the components and GST payable thereon and the position of other similar goods, and to take a decision preferably within three months.

Final Conclusion: The petition was disposed of by refusing to substitute the Court's policy view for that of the GST Council while directing the GST Council to reconsider, at its next meeting and expeditiously (preferably within three months), the exclusion of small scale ice cream manufacturers from the composition scheme having regard to component wise GST incidence and comparative treatment of similar goods.

Exemption of transmission or distribution of electricity - composite supply and principal supply test under Section 8 of the CGST Act - bundled services and essential character test - clarificatory circular cannot override statutory notification - ultra vires exercise by issuing a clarification

Exemption of transmission or distribution of electricity - bundled services and essential character test - composite supply and principal supply test under Section 8 of the CGST Act - Validity of paragraph 4(1) of Circular No.34/8/2018-GST dated 01.03.2018 which seeks to make specific DISCOM services taxable despite Notification No.12/2017 exempting transmission or distribution of electricity. - HELD THAT: - The Court held that Notification No.12/2017-CT(R) unequivocally exempts the entire package of services described as transmission or distribution of electricity. The services enumerated in paragraph 4(1) of the impugned circular (application fee for release of connection, rental charges for metering equipment, testing fees, labour charges for shifting meters/service lines, and duplicate bill charges) are integral to and naturally bundled with the principal service of transmission and distribution of electricity. Applying the composite-supply/principal-supply test under Section 8 of the CGST Act and the bundled-services/essential-character doctrine, the tax liability of the composite transaction must be determined by the principal supply which imparts the bundle its essential character. Consequently, a clarificatory circular cannot carve out and render taxable constituent services when the parent notification exempts the principal supply; such an exercise is arbitrary and contrary to Section 8. The Court endorsed the reasoning in Torrent Power Ltd. (Gujarat High Court) and found paragraph 4(1) to be ultra vires the statutory scheme. [Paras 11, 12, 13, 15, 16]

Paragraph 4(1) of Circular No.34/8/2018-GST dated 01.03.2018 is quashed as being ultra vires and contrary to the exemption notification and Section 8.

Clarificatory circular cannot override statutory notification - ultra vires exercise by issuing a clarification - Relief and interim measures consequent to quashing of paragraph 4(1) of the impugned circular. - HELD THAT: - The Court granted mandatory injunctive relief restraining the respondents from raising any demand or taking coercive steps to recover tax based on the impugned paragraph 4(1) of the circular. The order thus protects the petitioner from enforcement actions premised on the quashed portion of the circular and disposes of the stay application accordingly. [Paras 16, 17]

Respondents are restrained from raising demands or taking coercive measures to recover tax on the basis of the quashed paragraph; stay application disposed of.

Final Conclusion: The writ petition succeeds: paragraph 4(1) of Circular No.34/8/2018-GST dated 01.03.2018 is quashed as ultra vires for attempting to tax services that form part of the exempted supply of transmission/distribution of electricity, and respondents are restrained from acting on that paragraph or recovering tax under it.

Cancellation of GST registration - service of show cause notice - principles of natural justice / procedural fairness - remand for fresh consideration - decision to be taken afresh in accordance with law

Service of show cause notice - principles of natural justice / procedural fairness - cancellation of GST registration - remand for fresh consideration - Validity of cancellation of the petitioner's GST registration in light of alleged non-service of the show cause notice and related procedural infirmity. - HELD THAT: - The Court found that although a show cause notice dated 22.7.2019 is recorded, the petitioner asserts that it was never actually served and that the notice simultaneously prescribed filing a reply within seven working days while requiring personal appearance before the issuing authority within three days. In view of this asserted non-service and the procedural irregularity evident from the timelines in the notice, the Court concluded that the impugned order of cancellation dated 24.8.2019 cannot stand without fresh consideration. The Court therefore set aside the cancellation order and remitted the matter to the competent authority for reconsideration in accordance with law, directing the petitioner to file a reply within a specified short period and requiring the authority to decide the matter afresh within a reasonable time.

Impugned cancellation order set aside; matter remitted to the Assistant Commissioner, GST (State Tax), Jabalpur-3 for fresh consideration in accordance with law; petitioner to file reply to the show cause notice within fifteen days and the authority to decide afresh within reasonable time.

Final Conclusion: Writ petition disposed by setting aside the cancellation of GST registration and remitting the matter to the competent authority for fresh consideration after the petitioner files a reply within fifteen days; authority to decide afresh in accordance with law within reasonable time.

Anticipatory bail under Section 438 Cr.P.C. - offence of issuance and use of fake input tax credit invoices - seriousness of economic offence and impact on the exchequer - deposit as a factor in grant of anticipatory bail - powers of arrest under GST and exercise of statutory power - precedential value of interim orders

Anticipatory bail under Section 438 Cr.P.C. - offence of issuance and use of fake input tax credit invoices - seriousness of economic offence and impact on the exchequer - Whether the applicants/accused Pawan Goel and Sushil Goel are entitled to anticipatory bail - HELD THAT: - The court found that the accused were directors of the company which is alleged to have obtained input tax credit on the basis of paper/fake invoices issued by a chain of firms. Investigation disclosed non-existent transporters, closed premises of purported suppliers, witnesses disowning actual supplies and an apparent modus operandi of layered fake invoicing resulting in substantial claimed ITC. Those factual findings demonstrate active corporate involvement and that the alleged offences caused grave economic loss to the exchequer. In view of the nature of the allegations, the modus operandi and the adverse impact on revenue, the court held that the applicants are not entitled to anticipatory bail. The fact that some amount was offered/deposited and that co-accused have been released on bail did not outweigh the seriousness of the alleged offences or militate in favour of anticipatory bail in the present case.

Anticipatory bail application of Pawan Goel and Sushil Goel dismissed.

Deposit as a factor in grant of anticipatory bail - precedential value of interim orders - powers of arrest under GST and exercise of statutory power - Whether deposit of a portion of the claimed liability or reliance on interim orders in other cases mandates grant of anticipatory bail in the facts of this case - HELD THAT: - The court observed that mere deposit of a sum (even if more than 10% of the claimed liability) is not an automatic ground for anticipatory bail where the allegations disclose a serious economic offence and an established modus operandi. The court noted that interim orders of higher courts in other matters (including deposit-linked interim relief) are fact-specific and do not lay down an obligatory proposition of law applicable in every case. Further, the exercise of powers of arrest under GST is a statutory power which cannot be fettered by a general mandate where the material discloses culpability and risk to the revenue. Consequently, the offer/deposit and reliance on interim orders did not entitle the applicants to anticipatory bail in the present circumstances.

Deposit and reliance on interim orders do not compel grant of anticipatory bail; the applicants are not entitled to protection on that basis.

Final Conclusion: The anticipatory bail application under Section 438 Cr.P.C. filed by Pawan Goel and Sushil Goel is dismissed on account of findings that the company and its directors are implicated in a scheme of paper/fake invoices causing grave loss to the exchequer; the deposit offered does not, in the facts of this case, outweigh the seriousness of the alleged offences and interim orders in other cases are not determinative here.

Detention, seizure and release of goods in transit under Section 129 - failure to deposit tax and penalty within the statutory seven-day period under Section 129(6) - confiscation of goods and conveyance under Section 130 - option to pay fine in lieu of confiscation

Detention, seizure and release of goods in transit under Section 129 - failure to deposit tax and penalty within the statutory seven-day period under Section 129(6) - confiscation of goods and conveyance under Section 130 - option to pay fine in lieu of confiscation - Whether the adjudicating authority erred in not initiating proceedings under Section 130 and not confiscating the goods and conveyance or imposing fine in lieu thereof after the respondent failed to deposit the tax and penalties within seven days as required by Section 129(6). - HELD THAT: - Section 129(6) mandates that where the person transporting goods or the owner of goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days of such detention or seizure, further proceedings shall be initiated in accordance with Section 130. Section 130 provides for confiscation of goods or conveyance and for a penalty under Section 122, and also contemplates an option to pay a fine in lieu of confiscation. In the present case the respondent did not deposit the proposed tax and penalties within the seven-day period prescribed by Section 129(6). Consequently the adjudicating authority was required to take action under Section 130. The adjudicating authority, however, released the goods and conveyance on payment of tax and penalty and did not proceed to confiscate the goods or impose a fine in lieu of confiscation. That omission is contrary to the statutory mandate and amounts to legal error. For these reasons the appeal filed by the department is allowed to the extent that the impugned order failed to initiate proceedings under Section 130 and failed to confiscate the goods and conveyance or impose a fine in lieu of confiscation. [Paras 6, 7, 8]

The adjudicating authority erred in not invoking Section 130 after non-deposit within seven days; the departmental appeal is allowed to that extent.

Final Conclusion: Appeal allowed in part: the impugned order is set aside to the extent it failed to initiate proceedings under Section 130 and did not confiscate the goods and conveyance or impose a fine in lieu of confiscation; other aspects of the impugned order stand unaffected.

Transitional credit under Section 140(1) of the CGST Act, 2017 - transitional credit under Section 140(5) of the CGST Act, 2017 - reverse charge mechanism payment and eligibility for transitional credit - disallowance and recovery under Section 73(1) of the CGST Act, 2017 - interest on wrongly availed credit under Section 50(3) of the CGST Act, 2017 - penalty under Section 122(2) of the CGST Act, 2017

Transitional credit under Section 140(1) of the CGST Act, 2017 - reverse charge mechanism payment and eligibility for transitional credit - disallowance and recovery under Section 73(1) of the CGST Act, 2017 - interest on wrongly availed credit under Section 50(3) of the CGST Act, 2017 - Disallowance of input tax credit of Rs. 2,32,334/- claimed in TRAN-1 in respect of Service Tax paid under RCM. - HELD THAT: - The appellant had claimed Cenvat credit in June 2017 and paid Service Tax under RCM on 6-7-2017, i.e. after the appointed day. Transitional provisions permit carrying forward Cenvat credit only insofar as it was legally admissible and reflected in returns prior to the appointed day. Since the credit was not lawfully available in the return before the appointed day and the RCM payment was made after the appointed day, the appellant was not entitled to transfer that credit in Table 5(a) of TRAN-1. The adjudicating authority therefore rightly disallowed the claimed credit and ordered recovery under the applicable provisions, with interest as provided by law. [Paras 2, 10]

Disallowance of the ITC of Rs. 2,32,334/- upheld and recovery with interest affirmed.

Transitional credit under Section 140(5) of the CGST Act, 2017 - transitional credit and timing of entry in books for inputs and input services - disallowance and recovery under Section 73(1) of the CGST Act, 2017 - interest on wrongly availed credit under Section 50(3) of the CGST Act, 2017 - Disallowance of input tax credit of Rs. 61,518/- shown in Table 7(b) of TRAN-1 relating to input services. - HELD THAT: - Section 140(5) permits credit for inputs/input services received on or after the appointed day only if the relevant tax-paying document was recorded in the books within thirty days (subject to limited extension) and appropriate statement furnished. Credits which should have been transferred in Table 5(a) (i.e. those available on or before 30-6-2017) were incorrectly placed in Table 7(b), and some credits were recorded in the books after the thirty-day window. These entries were therefore not in accordance with the transitional conditions and the adjudicating authority correctly disallowed and directed recovery with interest under the statutory provisions. [Paras 3, 10]

Disallowance of the ITC of Rs. 61,518/- upheld and recovery with interest directed.

Penalty under Section 122(2) of the CGST Act, 2017 - absence of mens rea / no intent to evade tax - Whether penalty under Section 122(2) should be sustained in respect of the reversed credit. - HELD THAT: - Although the claimed credit was disallowed, the appellant had reversed the credit and deposited interest prior to issuance of the show cause notice and explained the incorrect claim as a procedural lapse during the initial phase of GST. The adjudicator accepted that there was no intention to evade tax and that the violation arose from inexperience with the new law. In those circumstances the penalty imposed under Section 122(2) was held to be unwarranted and was set aside. [Paras 11, 12]

Penalty under Section 122(2) set aside for lack of intention to evade tax.

Final Conclusion: The appellate authority upheld the disallowance and recovery (with interest) of the two credits claimed in TRAN-1 as being contrary to the transitional provisions of the CGST Act, 2017, but set aside the penalty imposed under Section 122(2) on the ground that there was no intent to evade tax; the appeal is disposed accordingly.

Validity of e-way bill - Requirement to update Part-B of FORM GST EWB-01 - Detention and seizure under Section 129 - Imposition of tax and penalty for non-production of e-way bill - Technical or venial breach versus deliberate evasion in penalty assessment - Principles of natural justice in show-cause and adjudication

Validity of e-way bill - Requirement to update Part-B of FORM GST EWB-01 - Detention and seizure under Section 129 - Whether the goods could be detained and the e-way bill treated as invalid because Part-B (conveyance details) was not updated and the vehicle at the time of interception did not correspond to the vehicle in Part-B. - HELD THAT: - The adjudicating authority found that Part-A of the e-way bill showed the shipping address as Shivaji Nagar, Madanganj, Kishangarh, whereas Part-B recorded a different vehicle number (RJ-19-GF-0560) while the goods were found loaded in vehicle RJ-14-GE-4146. Rule 138(5) requires that where goods are transferred from one conveyance to another the details of conveyance must be updated in Part-B before further movement. The proviso to Rule 138 and Notification 12/2018-C.T. require updating Part-B where the onward transport exceeds fifty kilometres. The authority concluded that the distance involved (Kishangarh from Jaipur) exceeded fifty kilometres and the Part-B was not updated with the actual vehicle number; therefore the driver did not carry a valid e-way bill at the time of interception and detention under the statutory scheme was justified. The appellant's contention that the movement from the local transporter to Jaipur was within fifty kilometres and therefore updating was unnecessary was rejected on the basis that the e-way bill itself recorded Kishangarh as the shipping address, making the distance exceed fifty kilometres and making updating mandatory. The case law and submissions relied upon by the appellant were held not squarely applicable to these facts.

Detention and seizure were sustainable because Part-B was not updated with the actual conveyance and the e-way bill was therefore not valid for the movement observed.

Imposition of tax and penalty for non-production of e-way bill - Technical or venial breach versus deliberate evasion in penalty assessment - Principles of natural justice in show-cause and adjudication - Whether the tax demand and penalty (including claim that breach was merely technical and penalty excessive) were wrongly confirmed and whether the proceedings violated principles of natural justice. - HELD THAT: - The adjudicating authority noted that tax (IGST) and penalty were demanded and paid by the appellant but examined merits of the objections. The authority held that failure to carry a valid e-way bill and failure to update Part-B amounted to non-compliance warranting levy of tax and penalty under the statutory provisions applicable to detention and release. The appellant's submissions that the defects were merely technical, caused by the transporter, or without deliberate intent to evade tax were considered but rejected because the statutory requirement to update conveyance details and carry a valid e-way bill was not met in the circumstances shown by the e-way bill itself. The authority recorded that personal hearing was afforded (held on 25-2-2020) and considered written submissions; accordingly the contentions of denial of natural justice or inadequate notice were not accepted. Although judicial authorities and Circular No. 64/38/2018-GST were cited by the appellant to argue for nominal penalty in technical cases, the authority found those precedents and the circular not squarely applicable on the facts and therefore upheld the demand and penalty.

The demand of tax and confirmation of penalty were upheld and the appeal rejected; allegations of breach being merely technical and of violation of natural justice were not accepted.

Final Conclusion: The appeal is rejected: the e-way bill was held invalid for the observed movement because Part-B was not updated with the actual vehicle for a movement exceeding fifty kilometres, authorising detention under the statute; the tax demand and penalty were accordingly sustained after considering submissions and providing personal hearing.

Refund of unutilised input tax credit on zero-rated/deemed export supplies - Entitlement of recipient or supplier to claim refund under Rule 89 - Procedure for deemed exports to EOU including prior intimation in Form A and endorsement of tax invoice - Requirement of undertaking in respect of deemed export refunds - Mandatory compliance of Circulars as procedural safeguards for refund claims

Refund of unutilised input tax credit on zero-rated/deemed export supplies - Entitlement of recipient or supplier to claim refund under Rule 89 - Whether the appellant, as recipient of deemed export supplies, was entitled to claim refund of accumulated input tax credit for November, 2017 and whether the refund claim was maintainable under Section 54 read with Rule 89 - HELD THAT: - The Tribunal noted that Section 54 permits refund of unutilised input tax credit in respect of zero rated supplies and Rule 89 (as amended) permits either the recipient or the supplier of notified deemed export supplies to file a refund application. The appellant, being a 100% EOU and the recipient of deemed export supplies, prima facie falls within the class of persons entitled to claim refund under Rule 89 and Section 54. However, entitlement is subject to compliance with procedural safeguards and conditions prescribed for deemed exports. The adjudicating authority rejected the claim on account of non compliance with the procedures in Circular No. 14/14/2017 GST (Form A intimation and endorsement/records) and related directions. The Commissioner (Appeals) accepted that Rule 89 permits the recipient to file the claim but concluded that procedural requirements applicable to deemed exports must be complied with for maintainability of the refund application. The appellant's contention that no undertaking or Form A requirement applied to the recipient was rejected by reference to the Circulars prescribing the safeguards and subsequent clarificatory Circular which reiterated applicability. [Paras 5, 6, 9, 10]

The refund claim for November, 2017 was not maintainable in view of non compliance with the procedural requirements for deemed exports prescribed by the relevant Circulars; the appeal is rejected on this ground.

Procedure for deemed exports to EOU including prior intimation in Form A and endorsement of tax invoice - Requirement of undertaking in respect of deemed export refunds - Mandatory compliance of Circulars as procedural safeguards for refund claims - Whether non compliance with the procedural requirements in Circular No. 14/14/2017 GST (Form A/intimation and endorsement/records) and with the undertaking requirement in Circular No. 24/24/2017 GST is condonable or otherwise disentitles the appellant to refund - HELD THAT: - The appellant argued that the Form A prior intimation procedure was inapplicable to recipients or was not operative from its Development Commissioner and that the undertaking requirement was not mandated by the Rules and, in any event, was a mere procedural/technical requirement subject to condonation. The Commissioner (Appeals) examined the Circulars and found that the procedure in Circular No. 14/14/2017 GST applies to supplies to EOU units notified as deemed exports and prescribes prior intimation in Form A, endorsement of tax invoices and maintenance of digital records. Paragraph 4 of Circular No. 24/24/2017 GST requires undertakings in cases where supplier or recipient seeks refund, and later clarifications (Circular No. 125/44/2019 GST) reiterated compliance. On this basis the appellate authority held that these procedural safeguards are mandatory for deemed export refund claims and that non compliance could justify rejection of the refund application. The appellant's submissions on bonafides and subsequent procuring of supplier undertakings were noted but the adjudicator found the procedural non compliance decisive. [Paras 6, 8, 9, 10]

Non compliance with the Form A/intimation, endorsement/recording requirements and the undertaking obligations as laid down in the Circulars disentitled the appellant to the refund; the contention that such non compliance was merely technical and condonable was not accepted.

Final Conclusion: The Commissioner (Appeals) dismissed the appeal and upheld rejection of the refund claim for November, 2017 on the ground that the appellant had not complied with the procedural safeguards and mandatory undertaking/intimation requirements prescribed for deemed export supplies by the relevant Circulars, and therefore the refund application was not maintainable.

Disallowance of business expenditure - trade practice of payment of speed money - acceptance of books of account - documentary evidence supporting expenditure - perversity in findings

Disallowance of business expenditure - trade practice of payment of speed money - acceptance of books of account - documentary evidence supporting expenditure - perversity in findings - Validity of the Tribunal's upholding of a 10% disallowance of expenses claimed as speed money where the books of account were accepted and expenditure was supported by documentary evidence. - HELD THAT: - The Court found that the Assessing Officer had accepted the assessee's books of account and acknowledged that payment of speed money was a trade practice in the relevant line of business. The disallowance rested solely on the fact that payments were made in cash on self-made vouchers and that recipient identities were not verifiable; however, neither the books of account nor their entries were challenged under the Act. In these circumstances, and having regard to precedents relied upon by the parties, the Court held that sustaining a disallowance of 10% was perverse because the expenditure was evidenced in the books and by documentary material. The Court therefore set aside the portion of the Tribunal's order sustaining the 10% disallowance for the assessment years in question.

The Court quashed the Tribunal's finding sustaining the 10% disallowance and allowed the appeal in respect of the specified assessment years.

Final Conclusion: The impugned order of the Tribunal dated 29.05.2015 is quashed insofar as it upholds a 10% disallowance of expenses claimed as speed money for Assessment Years 2007-08, 2008-09 and 2009-10; the appeal is allowed.

Capital expenditure versus revenue expenditure - public issue expenditure - deferred revenue expenditure - remand to assessing authority - afterthought defence - proof and documentary foundation for classification of expenditure

Capital expenditure versus revenue expenditure - public issue expenditure - deferred revenue expenditure - proof and documentary foundation for classification of expenditure - Whether the expenditure claimed by the assessee as revenue (deferred revenue expenditure) was rightly treated as capital expenditure being public issue expenditure. - HELD THAT: - The Assessing Officer treated the amount claimed as deferred revenue expenditure as capital in nature on the view that it represented expenditure in connection with augmenting capital by way of public issue and relied on earlier authority. Before the CIT(A) the assessee for the first time sought to bifurcate the expenditure and averred that part related to a membership drive (revenue). The CIT(A) examined the printed accounts, prospectus and annual report and found no membership subscriptions during the relevant accounting year and that plans for bulk marketing were shelved; on that basis the CIT(A) held the membership plea to be an afterthought. The Tribunal independently examined the accounts, board approvals, auditors' certification and the paper book produced at the hearing and concluded that the accounts consistently classified the expenditure as public issue expenditure and the assessee failed to establish that any part of the expenditure was revenue in nature. The High Court reviewed these findings and found that the factual matrix had been fully examined at each stage and that the assessee had not established tenability or truthfulness of the claim that the expenditure was revenue in nature. [Paras 15, 16, 17, 18, 20]

The characterization of the expenditure as capital expenditure (public issue expenditure) was upheld; the assessee failed to prove that the expenditure, or any part thereof, was revenue in nature.

Remand to assessing authority - afterthought defence - proof and documentary foundation for classification of expenditure - Whether the Tribunal erred in refusing to remand the matter to the Assessing Officer for fresh consideration of the assessee's claim that part of the expenditure related to a membership drive. - HELD THAT: - The Tribunal considered the assessee's request for remand and reviewed authorities warning that remand should not be used to permit filling gaps or lacunae in a case. On facts the Tribunal concluded there was no justification for remand: the Assessing Officer had considered the original return, the CIT(A) had examined the newly-pleaded material and rejected it as an afterthought, and the Tribunal itself had perused the documents and evidence filed. The Tribunal also accepted the Revenue's submission that a belated remand risked tinkering with evidence and would be prejudicial. The High Court agreed that remand is not an automatic remedy and that no sufficient reason existed to remand the matter for further inquiry. [Paras 19, 21, 22]

The Tribunal did not err in refusing to remand the matter; the prayer for remand was properly rejected on the facts and law.

Final Conclusion: The High Court dismissed the appeal: the Tribunal's factual conclusions upholding the classification of the contested expenditure as public issue (capital) expenditure were affirmed, and the Tribunal rightly refused to remand the matter to the Assessing Officer; no substantial question of law was made out.

Depreciation on roads as a building versus plant and machinery - depreciation under Section 32(1)(ii) on leasehold/lease rights - leasehold rights as an intangible asset eligible for depreciation - applicability of Section 14A read with Rule 8D where no exempt income is received

Depreciation on roads as a building versus plant and machinery - Whether roads developed and maintained by the assessee under agreement with the Government qualify for depreciation as a building (and thereby at 10%) rather than as plant and machinery. - HELD THAT: - The Court examined competing High Court and tribunal authorities and the factual posture that the assessee did not challenge the grant of depreciation at 10%. Having regard to precedents (including North Karnataka Expressway Ltd. and GVK Jaipur Expressway Ltd.) and the Tribunal's earlier decision in the assessee's own case, the Court found no reason to interfere with the Tribunal/CIT(A)'s conclusion that the development constituted a building for depreciation purposes. The reasoning emphasises that the nature of the asset and the rights conferred must be determined on facts and existing authorities; since the assessee did not press for a higher rate on appeal, the Court limited itself to upholding entitlement to depreciation at the rate allowed by the lower authorities. [Paras 28, 60]

Answered against the Revenue and in favour of the assessee: the assessee is entitled to depreciation at the rate of 10%.

Depreciation under Section 32(1)(ii) on leasehold/lease rights - leasehold rights as an intangible asset eligible for depreciation - Whether the assessee's claim for depreciation on leasehold rights (99 years) should be allowed as depreciation under Section 32(1)(ii) or as deduction/amortisation, having regard to the terms of the lease agreement. - HELD THAT: - The Court observed that the Assessing Officer, CIT(A) and the Tribunal did not undertake a detailed factual analysis of the lease deed dated 21.9.2005 and that decision-making was based largely on limited extracts and on nomenclature. The Court held that the true nature of the transaction (whether it created an intangible capital asset qualifying for depreciation or was to be treated differently, including as revenue amortisation) required a threadbare examination of the agreement and factual matrix. For these reasons the Court declined to decide the merits and remanded the matter for fresh adjudication by the Assessing Officer (and thereafter the appellate fora) with opportunity to examine the agreement and the alternate plea advanced by the assessee. [Paras 59, 60]

Finding of the Tribunal/CIT(A)/AO on depreciation of leasehold rights for AYs 2007-08 and 2008-09 set aside and remitted for fresh consideration on merits and in accordance with law.

Applicability of Section 14A read with Rule 8D where no exempt income is received - Whether disallowance under Section 14A read with Rule 8D is applicable where no exempt income was received in the relevant year though the expenditure related to investments yielding exempt income. - HELD THAT: - The Court followed its earlier decisions in the assessee's own cases and the precedents cited, holding that Rule 8D cannot be read so as to extend Section 14A beyond its scope when no exempt income is received. The Court rejected the Revenue's contention that disallowance under Section 14A/Rule 8D is independent of receipt of exempt income and applied the Tribunal/Court precedents which resulted in answering the substantial question against the Revenue. [Paras 11, 60]

Answered against the Revenue: Section 14A read with Rule 8D not applicable where no exempt income was received in the relevant year.

Final Conclusion: The appeals are partly allowed: the Tribunal's finding that roads qualify for depreciation as a building (entitling the assessee to depreciation at 10%) is upheld; the question of depreciation on leasehold rights for AYs 2007-08 and 2008-09 is remanded for fresh factual and legal consideration by the Assessing Officer; and the Revenue's challenge to the non-application of Section 14A/Rule 8D where no exempt income was received is rejected.

Reimbursement of expenses - tax deduction at source (TDS) liability on cross charges - disallowance under section 40(a)(ia) - first proviso to section 201(1) - deeming as not assessee in default - retrospective operation of remedial proviso - cost sharing agreement - cost to cost without mark up

Reimbursement of expenses - cost sharing agreement - cost to cost without mark up - tax deduction at source (TDS) liability on cross charges - The cross charges paid by the assessee to Pfizer Ltd. were in the nature of reimbursement of expenses and did not attract TDS, therefore disallowance under section 40(a)(ia) was not warranted. - HELD THAT: - The Tribunal examined the cost sharing and supplemental agreements and accepted that the payments were for shared services and reimbursement of expenses incurred by Pfizer Ltd. on behalf of the assessee. The Court relied on the certificate issued by Pfizer Ltd. confirming (a) the payments were reimbursements made on a cost to cost basis without mark up, (b) tax where applicable had been deducted by Pfizer on payments to vendors/employees, and (c) Pfizer had not claimed deduction for those expenses. The Tribunal noted that reimbursements of expenses incurred on behalf of the payer do not constitute income chargeable to tax in the hands of the payee and thus do not mandate TDS. The Tribunal further followed its coordinate Bench decisions in the assessee's own cases and relevant precedents holding that exact reimbursal without element of income does not give rise to TDS withholding obligation. [Paras 6]

Disallowance under section 40(a)(ia) in respect of the cross charges was deleted as the payments were reimbursements not requiring TDS.

First proviso to section 201(1) - deeming as not assessee in default - second proviso to section 40(a)(ia) - remedial/ declaratory retrospective effect - disallowance under section 40(a)(ia) - The Tribunal held that the second proviso to section 40(a)(ia), read with the first proviso to section 201(1) as inserted by the Finance Act, 2012, operates retrospectively and shields the payer from being treated as an assessee in default where the payee has complied with the proviso's conditions. - HELD THAT: - The Tribunal observed that the payee (Pfizer Ltd.) had furnished return of income, taken the sums into account in computing income, paid the tax due on the income returned and there was a Chartered Accountant's certificate to that effect as required by the proviso. Reliance was placed on judicial pronouncements treating the second proviso as declaratory and curative with retrospective effect. Since the conditions of the first proviso to section 201(1) were satisfied by the payee, the assessee (payer) could not be treated as an assessee in default and consequently no disallowance under section 40(a)(ia) was warranted. [Paras 6]

The remedial proviso applied retrospectively; the assessee was not an assessee in default and the disallowance under section 40(a)(ia) was not sustainable.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the disallowance under section 40(a)(ia) in respect of cross charges paid to Pfizer Ltd., holding the payments to be reimbursements not requiring TDS and that the remedial proviso removes any deeming as an assessee in default; Revenue's appeal is dismissed.

Treatment of pigmy deposit collectors' remuneration as salary liable to TDS under section 192 - Payments to pigmy deposit collectors as commission liable to TDS under section 194H - Disallowance under section 40(a)(ia) for non-deduction of TDS - Deduction under section 36(1)(viia) - allowable limits (7.5% of total income and 10% of aggregate average rural advances) - Remand for verification of NPA provision deduction

Treatment of pigmy deposit collectors' remuneration as salary liable to TDS under section 192 - Payments to pigmy deposit collectors as commission liable to TDS under section 194H - Disallowance under section 40(a)(ia) for non-deduction of TDS - Whether disallowance under section 40(a)(ia) for non-deduction of TDS on amounts paid to pigmy deposit collectors is sustainable where CBDT has classified such remuneration as salary - HELD THAT: - The Tribunal examined the CBDT communications which consistently treated remuneration of pigmy deposit collectors as salary and subject to TDS under section 192. The authorities below treated the payments as commission liable to TDS under section 194H and made disallowance under section 40(a)(ia). In view of the CBDT clarifications and subsequent confirmations, the Tribunal held that the payments ought not to have been treated as commission for invoking section 40(a)(ia) and that the disallowance could not be sustained. The Tribunal therefore deleted the disallowance, applying the departmental clarifications and the reasoning in the appellate proceedings to both assessment years. [Paras 15, 16]

Disallowance under section 40(a)(ia) in respect of payments to pigmy deposit collectors deleted; appeals allowed on this ground.

Deduction under section 36(1)(viia) - allowable limits (7.5% of total income and 10% of aggregate average rural advances) - Remand for verification of NPA provision deduction - Extent to which deduction under section 36(1)(viia) for provisions for bad and doubtful debts is allowable and whether the claimed provision requires verification - HELD THAT: - The Tribunal noted that section 36(1)(viia) provides two distinct limbs of deduction - (i) up to 7.5% of total income and (ii) up to 10% of aggregate average advances of rural branches. The CIT(A) limited the assessee to the 7.5% limb and directed verification of claimed reversals and recreations of provisions. The Tribunal observed that where the opening balance of provision is reversed and a new provision is purportedly created, the net recreation must be verified as a new provision. Given the factual matrix and the need to ascertain whether the claimed provision represents a permissible new provision, the Tribunal remanded the matter to the Assessing Officer for verification in accordance with law and relevant precedents. [Paras 20, 21, 22, 23]

Claim under section 36(1)(viia) remitted to the Assessing Officer for verification; ground allowed for statistical purposes and remanded.

Final Conclusion: Both appeals for assessment years 2011-12 and 2015-16 are allowed insofar as the disallowance under section 40(a)(ia) for payments to pigmy collectors is deleted; the claim under section 36(1)(viia) is remanded to the Assessing Officer for verification and determination in accordance with law.

Anonymous donation - Section 115BBC - maintenance of record of identity indicating name and address of donors - exclusion from definition of anonymous donations upon maintenance of donor identity - notice and confirmation of donors

Anonymous donation - Section 115BBC - maintenance of record of identity indicating name and address of donors - notice and confirmation of donors - Whether donations received by the assessee from students and other donors were 'anonymous donations' within the meaning of Section 115BBC and liable to tax as held by the AO. - HELD THAT: - Section 115BBC(3) defines 'anonymous donation' by reference to the receiver's failure to maintain a record indicating the name and address of the person making the contribution (and such other particulars as may be prescribed). The section does not, in its present form, prescribe additional particulars beyond name and address. The Tribunal found as an undisputed fact that the assessee maintained complete records of donors, including names, addresses and in many cases PAN numbers, and filed these records in the assessment proceedings (paper book pages 6 to 24). On that basis, the donations fall outside the statutory definition of 'anonymous donation'. The Tribunal observed that the AO's exercise of issuing notices to a limited sample of persons and the return of some confirmation letters did not negate the statutory compliance of retaining donor identity records; the mere inability to obtain confirmations from all addressees in the course of verification did not convert otherwise recorded donations into anonymous donations. The Tribunal relied on earlier decisions of coordinate Benches which held that compliance with the requirement to maintain name and address suffices to exclude donations from s.115BBC. Applying that statutory meaning and precedent, the Tribunal concluded that the CIT(A) was right to delete most additions and that the AO's classification of the receipts as anonymous donations was not justified. [Paras 5, 8]

Donations for which the assessee maintained the identity (name and address) of donors are not 'anonymous donations' within Section 115BBC; the assessee's appeal is allowed and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal held that, as the assessee maintained donor identity details (names and addresses, and in many cases PAN), the receipts could not be treated as anonymous donations under Section 115BBC; the assessee's appeal was allowed and the Revenue's appeal dismissed.

Additions made on estimation basis - penalty under Section 271(1)(c) of the Income Tax Act - concealment of particulars of income - furnishing inaccurate particulars of income - bogus purchases / accommodation entries - onus on assessee to prove genuineness of purchases

Additions made on estimation basis - penalty under Section 271(1)(c) of the Income Tax Act - concealment of particulars of income - furnishing inaccurate particulars of income - bogus purchases / accommodation entries - onus on assessee to prove genuineness of purchases - Whether penalty under Section 271(1)(c) was leviable where the Assessing Officer made additions by estimating profit on alleged bogus purchases. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the AO's additions were made on an estimated basis (applying a profit rate to alleged non-genuine purchases) and that there was no finding by the AO that the assessee had concealed particulars of income or furnished inaccurate particulars of income. The purchases in question were recorded in the assessee's books, and the CIT(A) relied on precedents holding that imposition of penalty under Section 271(1)(c) is not justified where income or profit has been determined by estimation without proof of concealment or inaccurate particulars. In the absence of a conclusive finding that the impugned purchases were bogus or that the return contained inaccurate particulars, the conditions for invoking Section 271(1)(c) were not satisfied. Applying these principles, the Tribunal found no infirmity in the deletion of the penalty by the CIT(A) and declined to interfere.

Penalty under Section 271(1)(c) deleted as additions were made on estimation basis and there was no finding of concealment or furnishing of inaccurate particulars of income.

Final Conclusion: The revenue's appeal is dismissed; the CIT(A)'s deletion of the penalty is upheld.

Revenue expenditure - capital expenditure - lease-holder versus owner - consistency in assessment - deductibility under section 37 - commercial expediency

Revenue expenditure - capital expenditure - lease-holder versus owner - consistency in assessment - Whether the repair and maintenance expenditures debited to profit and loss account for A.Y.2013-14 are revenue in nature and deductible or capital in nature and to be disallowed. - HELD THAT: - The Tribunal examined the nature of the expenditures in the factual matrix that the assessee acts as a managing association/lease-holder of the building 'Nirmal' rather than as its owner, and that similar claims were admitted as revenue expenditure in the previous and subsequent assessment years. Reliance was placed on the assessee's earlier reported decision which treats the assessee's receipts and payments in the context of its business and recognizes deductibility where payments are made in the ordinary course of business or by commercial expediency (including discussion of deductibility under section 37). The Tribunal found no plausible reason recorded by the Assessing Officer or the CIT(A) to treat the nature of the expenditure as having changed for the year in question. In view of the assessee's lease-holder status, the established precedent favouring allowance where payments are made for business purposes, and the consistency of treatment across years, the Tribunal held that the repairs and maintenance expenditure should be treated as revenue expenditure and allowed. [Paras 5]

The finding of the CIT(A) that the expenditures were capital is set aside and the claim of the assessee for treating the repair and maintenance expenditures as revenue expenditure is allowed.

Final Conclusion: The appeal is allowed and the repair and maintenance expenditures for A.Y.2013-14 are to be treated as revenue expenditure; the assessment is to be adjusted accordingly.

Rejection of books of accounts - valuation of closing stock at lower of cost or market price - application of an estimated gross profit rate - finality of Tribunal's earlier decision on stock valuation - assessment framed under revisional jurisdiction - penalty under section 271(1)(c) consequent to additions

Rejection of books of accounts - application of an estimated gross profit rate - valuation of closing stock at lower of cost or market price - finality of Tribunal's earlier decision on stock valuation - Rejection of the assessee's books of accounts and application of an estimated gross profit rate for determining income - HELD THAT: - The Tribunal held that the rejection of books u/s 145 was unjustified. The assessee's books were audited and quantitative details, vouchers and registers were furnished; no specific defects were pointed out by the AO to justify rejection. Discrepancies related only to physical stock of frames and were covered by the assessee's voluntary declaration of additional income during survey, which was credited in the accounts. The contention that lenses were overvalued was rendered infructuous by the Tribunal's earlier decision deleting the addition relating to valuation of lenses (thereby accepting valuation at market price/lower of cost and market), and that decision had attained finality. In these circumstances applying the provisional gross profit rate of 42.36% to post-survey sales and rejecting the books to estimate income was not sustainable. The AO was directed to accept the assessee's computation of income. [Paras 4, 5, 7]

Books of accounts shall not be rejected; income declared by the assessee as per its computation is to be accepted.

Penalty under section 271(1)(c) consequent to additions - Sustainability of penalty imposed u/s 271(1)(c) following assessment additions - HELD THAT: - The Tribunal observed that since the quantum additions have been deleted/are not sustained, the basis for imposing penalty under section 271(1)(c) collapses. Consequently the penalty confirmed by the lower authorities could not survive. [Paras 8]

Penalty under section 271(1)(c) is deleted.

Final Conclusion: The appeals are allowed: the rejection of books and estimation of income by applying the provisional gross profit rate is set aside and the assessee's returned/computed income is to be accepted; consequentially the penalty under section 271(1)(c) is deleted.

Classification of receipts as Business Income versus Income from House Property and Income from Other Sources - Doctrine of consistency in income tax assessments - Entitlement to depreciation when receipts are assessed as Business Income - Treatment of retrenchment compensation under Sec.35DDA - amortisation in five equal instalments - Condonation of delay in filing appeal

Classification of receipts as Business Income versus Income from House Property and Income from Other Sources - Doctrine of consistency in income tax assessments - Entitlement to depreciation when receipts are assessed as Business Income - Whether lease/rental receipts from buildings and plant & machinery are assessable as Business Income and consequences thereof including entitlement to depreciation and invalidity of notional rental addition. - HELD THAT: - The Tribunal found that the assessee had historically and consistently offered rent/lease receipts as business income from AY 1999-2000 onwards and that the department had accepted that position in multiple years. Applying the rule of consistency (as recognised by higher precedent), and noting absence of any pointed change in law or material facts in the assessment order, the Tribunal held that the Assessing Officer was not justified in reclassifying the receipts as Income from House Property and Income from Other Sources for the years under appeal. Because the receipts were to be treated as Business Income, the assessee was entitled to claim depreciation on the relevant assets. Once depreciation and business character were accepted, the computation of notional rent (worked out by the AO on an interest free deposit) fell away and could not be sustained. The Tribunal therefore set aside the reclassification, directed recomputation in accordance with the business income character, and granted relief for set offs and business deductions where disallowed solely because of the AO's reclassification. [Paras 8, 11, 12, 13, 14]

Lease/rental receipts from buildings and plant & machinery are assessable as Business Income; entitlement to depreciation upheld; notional rental addition consequentially disallowed and AO directed to recompute income accordingly.

Treatment of retrenchment compensation under Sec.35DDA - amortisation in five equal instalments - Allowability and manner of deduction of retrenchment compensation paid by the assessee. - HELD THAT: - The Tribunal accepted the assessee's contention that the retrenchment compensation paid fell within the ambit of Sec.35DDA and therefore should not be wholly disallowed as a capital expenditure or under section 37(1). Applying Sec.35DDA, the Tribunal directed that the retrenchment compensation be allowed as deduction by amortising it over five equal instalments and directed the Assessing Officer to permit one fifth in the relevant year. [Paras 4, 9]

Retrenchment compensation to be allowed under Sec.35DDA by amortisation over five years; one fifth allowed in the year.

Condonation of delay in filing appeal - Whether the delay of 392 days in filing the appeal for AY 2007-08 should be condoned. - HELD THAT: - The Tribunal examined the condonation petition and supporting affidavit attributing the delay to a lapse by the tax consultant and noted that identical issues were pending and had been timely filed in the companion appeal (AY 2004 05). Observing these circumstances and relevant authorities on condonation, the Tribunal found the explanation plausible and exercised discretion to condone the delay, permitting adjudication of the appeal on merits. [Paras 10]

Delay of 392 days in filing the appeal for AY 2007 08 condoned; appeal admitted for adjudication.

Final Conclusion: The appeal for AY 2004 05 is partly allowed (reclassification and depreciation issues allowed; retrenchment compensation allowed one fifth in the year) and the appeals for AY 2007 08 and AY 2008 09 are allowed in terms of treating lease/rental receipts as Business Income and directing recomputation accordingly; delay in AY 2007 08 appeal is condoned.

Long term capital gain - accommodation entries - addition under section 68 of the Income-tax Act - exemption under section 10(38) of the Income-tax Act - dematerialised shares and Demat account as independently verifiable evidence - statements of investigation wing and requirement of cross-examination / principles of natural justice - preponderance of probabilities and surrounding circumstances insufficient without corroborative material - addition under section 69C of the Income-tax Act

Long term capital gain - accommodation entries - addition under section 68 of the Income-tax Act - exemption under section 10(38) of the Income-tax Act - dematerialised shares and Demat account as independently verifiable evidence - statements of investigation wing and requirement of cross-examination / principles of natural justice - preponderance of probabilities and surrounding circumstances insufficient without corroborative material - Whether the long term capital gain claimed on sale of shares could be treated as sham accommodation entries and assessed as unexplained cash credit by invoking section 68. - HELD THAT: - The Tribunal examined the documentary material produced by the assessee - share purchase invoice, bank payment reflected in the assessee's bank account, demat account entries showing dematerialisation and subsequent credit of shares following the court approved amalgamation, contract notes for sale on the stock exchange, STT payment and receipt of sale proceeds in the assessee's bank account. The Assessing Officer mainly relied on investigation wing reports and statements of third parties which did not mention the assessee and which were not placed for cross examination. The Tribunal held that where the assessee produces independent, third party verifiable records (bank statements, depository/demat records, allotment documentation) and the AO does not bring any contrary material to show those documents are fabricated or manipulated, mere suspicion, surrounding circumstances or untested statements cannot suffice to treat genuine transactions as accommodation entries. Reliance solely on investigation statements not confronted with or subjected to cross examination of the declarants is a breach of principles of natural justice and cannot be the basis for additions. Applying these principles to the facts, and following coordinate decisions considering identical transactions, the Tribunal found no cogent material to impugn the assessee's claim and deleted the addition under section 68. [Paras 7, 11, 13]

Addition treating the long term capital gain as unexplained cash credit under section 68 deleted; claim of exemption under section 10(38) accepted.

Addition under section 69C of the Income-tax Act - consequential addition - Whether the notional commission added as unexplained expenditure under section 69C ought to be sustained. - HELD THAT: - The addition under section 69C was consequential to the assessment treating the capital gain as an accommodation entry. Having held that the capital gain could not be treated as bogus and that the primary addition under section 68 was not sustainable, the consequential unexplained commission addition lacked any independent foundation. Accordingly, the Tribunal allowed the consequential deletion of the section 69C addition. [Paras 15]

Consequential addition under section 69C deleted; ground decided in favour of the assessee.

Final Conclusion: Appeals allowed. Additions made by the Assessing Officer treating the claimed long term capital gain as accommodation entries and the consequential commission addition were deleted in light of independently verifiable documentary evidence produced by the assessee and absence of contrary material or opportunity to test investigation statements.

Characterisation of income from sale of shares as capital gains or business income - intention at the time of purchase as determinative of investment or stock-in-trade - treatment in books of account and balance-sheet classification as evidence of intention - CBDT Circular No.4/2007 principle that ledger classification is not conclusive - factors distinguishing investment from trading: frequency of transactions, use of own or borrowed funds, purpose of purchase (retention/dividend v. resale), and portfolio segregation - onus of proof: primary onus on assessee to show investment character, thereafter burden shifts to Revenue

Characterisation of income from sale of shares as capital gains or business income - intention at the time of purchase as determinative of investment or stock-in-trade - treatment in books of account and balance-sheet classification as evidence of intention - factors distinguishing investment from trading: frequency of transactions, use of own or borrowed funds, purpose of purchase (retention/dividend v. resale) - CBDT Circular No.4/2007 principle that ledger classification is not conclusive - Profit on sale of shares of M/s. Nakoda Textile Industries Ltd. in AY 2010-2011 is to be assessed as income from capital gains and not as business income. - HELD THAT: - The Tribunal examined the cumulative facts and applied established tests to determine whether the shares were held as investment or as stock-in-trade. Relevant considerations were the assessee's intention at time of purchase as evidenced by treatment in the books and balance sheet (shares consistently shown as investments), the corporate objects (assessee originally an investment company and trading object did not expressly include shares), the pattern of dealings (single script, purchases and sales in instalments rather than repetitive frequent trading), financing (acquisition from own surplus funds, not borrowed money), the purpose of purchase (to retain earlier holdings and realise gains on appreciation rather than habitual trading), and the absence of intermingled portfolios or contrary indicia. The Tribunal noted the CBDT Circular No.4/2007 which cautions that mere ledger classification is not conclusive, but held that cumulative factors disclosed an investment intent. Applying authority and the multi-factor tests reproduced in the order, the Tribunal concluded that the profit on sale was a capital receipt taxable under the head capital gains. The Tribunal also observed that the Assessing Officer and CIT(A) had not addressed the assessee's contention regarding set-off of carried forward business loss; however, having held the income to be capital gains, the question of set-off against business loss did not arise for decision. [Paras 7, 8]

Held that profits on sale of the shares are taxable as short-term capital gains (AY 2010-2011); appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2010-2011, holding that, on the cumulative facts and established tests, the receipts from sale of the shares constitute capital gains and not business income.

Functional comparability - transfer pricing - comparable selection - arm's length price - TNMM - Knowledge Process Outsourcing (KPO) classification - Safe Harbour Rules - exclusion of comparables

Functional comparability - Knowledge Process Outsourcing (KPO) classification - exclusion of comparables - arm's length price - transfer pricing - comparable selection - Eclerx Services Ltd. is not a functionally comparable company for benchmarking the assessee's engineering design services and must be excluded from the comparable set. - HELD THAT: - The Tribunal examined the DRP/TPO reasoning that grouped Eclerx Services Ltd. with engineering design service providers under the common head of KPO as per the Safe Harbour Rules. On review of the company's annual report and management discussion and analysis, the Tribunal found Eclerx primarily engaged in data analytics, process outsourcing and distinct market-focused units (financial services, sales and marketing support, digital/cable/telecom activities) whose functions and revenue model differ materially from the assessee's engineering design (CAD/CAE) and product/process validation services. The Tribunal placed weight on its earlier decision in the assessee's own case for A.Y. 2011-12 and the decision in MACOM Technology Solutions (India) Limited, where similar functional dissimilarity led to exclusion of Eclerx. Given the identical facts and circumstances, the Tribunal followed the earlier reasoning and concluded that Eclerx is functionally dissimilar and should be excluded from the comparable set. The AO/TPO was directed to re-determine the arm's length price for the design engineering services segment after excluding Eclerx from comparables. [Paras 11, 12]

Eclerx Services Ltd. excluded from comparables; assessment set aside on this issue and AO/TPO directed to determine arm's length price after exclusion.

Final Conclusion: The assessee's appeal is allowed: Eclerx Services Ltd. is excluded from the comparable set for benchmarking the engineering design services, and the AO/TPO is directed to re-compute the arm's length price for AY 2014-15 excluding that company.

Royalty - Business income - Permanent Establishment - Right to use copyright - Supply of software licenses to end-users, distributors and resellers - DTAA India USA Article 12

Royalty - Business income - Right to use copyright - Supply of software licenses to end-users, distributors and resellers - DTAA India USA Article 12 - Whether consideration received by the non-resident assessee from sale of software licenses to Indian end users, distributors or resellers constitutes Royalty taxable in India or business income not taxable in India in absence of a Permanent Establishment. - HELD THAT: - The Tribunal applied the definition of 'Royalties' under the India USA DTAA (Article 12) and held that royalty entails payment for the use of, or the right to use, a copyright in a manner that permits copying or commercial exploitation of the work by the licensee. The Tribunal examined the contractual documents (end user license, distributor and reseller agreements) and found that title to intellectual property, trademarks and copyrights remained with the assessee; distributors and resellers merely purchased discrete product copies for resale and were not granted any right to copy, sub license or commercially exploit the software. The Tribunal concluded that one to one sales of software products for internal use by purchasers do not amount to granting a right to copy or a right to use the copyright in the sense contemplated by Article 12, and thus the receipts are business income. Because the non resident assessee did not have a Permanent Establishment in India, such business income did not attract Indian taxation. The Tribunal therefore set aside the assessment to the extent it characterised the receipts as royalty and held them to be non taxable in India. [Paras 11, 12, 15]

Receipts from sale of software licenses to end users, distributors and resellers are business income and not Royalty; consequently, in absence of a Permanent Establishment in India, such income is not taxable in India.

Business income - Effect of the decision on the additional ground (ground No. 1(b)). - HELD THAT: - Having decided that the consideration from sale of software licenses is business income and not royalty (and therefore not taxable in India for a non resident without a PE), the Tribunal found that ground No. 1(b) required no separate adjudication and was rendered infructuous. [Paras 13]

Ground No. 1(b) dismissed as infructuous.

Business income - Applicability of findings to the assessment year 2017-18. - HELD THAT: - The Tribunal recorded that the facts and issues for A.Y. 2017 18 are identical to those in A.Y. 2012 13 and that the reasoning and conclusions reached in ITA No. 505/PUN/2020 apply mutatis mutandis to ITA No. 506/PUN/2020; accordingly, the appeal for A.Y. 2017 18 was allowed on the same basis. [Paras 15]

Findings for A.Y. 2012 13 applied to A.Y. 2017 18; appeal allowed.

Final Conclusion: The Tribunal allowed the appeals for A.Y. 2012 13 and A.Y. 2017 18, holding that receipts from sale of software licenses to end users, distributors and resellers constitute business income and not royalty; in absence of a Permanent Establishment in India the income is not taxable in India, and the assessment order treating the receipts as royalty is set aside.

Permissible accumulation under section 11(1)(b) - application of income - capital expenditure financed by loan not application of income - remand for speaking order

Permissible accumulation under section 11(1)(b) - remand for speaking order - Whether the computation of the permissible accumulation of 15% was correctly made by the CIT(A) and whether the matter requires further adjudication. - HELD THAT: - The Tribunal observed that the CIT(A) recomputed the application amount and referred to an asset value of Rs. 7,15,540 but did not explain how that figure was arrived at. The authorised representative sought remand to enable the CIT(A) to pass a speaking order addressing the application of income. Given the absence of an explained basis for the recomputation in the appellate order, the Tribunal concluded that the matter required further consideration by the CIT(A). [Paras 5, 7]

Referred back for fresh/speaking consideration by the CIT(A); appeal allowed for statistical purposes.

Application of income - capital expenditure financed by loan not application of income - Whether purchase of capital asset by availing a bank loan constitutes application of income of the Trust for the purposes of section 11. - HELD THAT: - The Tribunal held that there is a distinction between application of income and the use of borrowed funds as a source to acquire a capital asset. Acquisition of a capital asset by obtaining a loan does not, by itself, amount to application of the Trust's income. Only repayments of the loan out of the Trust's income would qualify as application of income. This principle was applied to the facts, leading to the conclusion that the mere purchase of printing machinery financed by bank loan cannot be treated as application of income. [Paras 5]

Purchase of capital asset funded by loan is not application of income; only repayment out of income qualifies as application.

Final Conclusion: The Tribunal concluded that the CIT(A)'s recomputation lacked explanation and remitted the matter to the CIT(A) for a speaking order; it also held as a legal principle that acquisition of capital assets by availing loan funds does not constitute application of income, and only repayment of such loan out of income can be treated as application.

Provisional release under section 110A of the Customs Act - discretion of the adjudicating authority in granting provisional release - requirement of bond and security for provisional release - definition of "exporter" and "beneficial owner" under the Customs Act - prohibition on prejudging adjudication by pre-emptive security conditions - jurisdiction of writ court to examine conditions of provisional release

Provisional release under section 110A of the Customs Act - discretion of the adjudicating authority in granting provisional release - jurisdiction of writ court to examine conditions of provisional release - Power and duty to consider provisional release of seized export goods under section 110A and whether petitioners must be relegated to the appellate forum to challenge conditions of release. - HELD THAT: - The Court held that there was no impediment to the Commissioner of Customs exercising power under section 110A to provisionally release seized goods pending adjudication and accordingly directed the Commissioner to pass orders for provisional release. Having itself issued that direction, the High Court declined the respondents' submission that petitioners be relegated to the appellate forum to challenge conditions imposed in the provisional release orders; where the High Court has directed provisional release and the authority has passed such orders in compliance, the Court is entitled to examine and, if necessary, modify the conditions rather than require initial exhaustion of appellate remedies. The Court noted that the goods (cut and polished diamonds) were freely exportable and that the petitioners' IECs were not suspended or cancelled, facts relevant to exercise of the power to release pending adjudication. [Paras 7, 8, 12, 13]

Commissioner of Customs may act under section 110A to consider provisional release; petitioners need not be relegated to the appellate forum to challenge the conditions imposed and the High Court may adjudicate the legality of those conditions.

Requirement of bond and security for provisional release - definition of "exporter" and "beneficial owner" under the Customs Act - prohibition on prejudging adjudication by pre-emptive security conditions - Validity of the specific conditions imposed by the Principal Commissioner in the provisional release orders dated 2nd February, 2021 and modification of those conditions. - HELD THAT: - The Court examined the impugned conditions. Applying the statutory definitions, it observed that the term "exporter" is wide and includes owner, beneficial owner or persons holding themselves out as exporter; thus a condition restricting release to the "actual owner" alone was unjustified. The insistence on security in the form of bank guarantee or revenue deposit equal to the full declared FOB value to cover probable redemption fines and penalties was held to be harsh, oppressive and prejudicial as it presupposed the adjudicating authority's finding of liability and penalty, thereby impermissibly prejudging adjudication. Respecting the discretionary and quasi-judicial role of the adjudicating authority, the Court declined to allow conditions that negate that function. For these reasons the Court modified the conditions: petitioners to furnish a bond equal to the FOB value; a bank guarantee equal to 20% of the FOB value; an undertaking to cooperate with the investigation and pay any amount found due relatable to the exports; and a prohibition on claiming duty drawback or other export benefits until disposal of the writ petitions. Subject to these modified conditions, the goods were ordered to be provisionally released within seven days. [Paras 17, 19, 20, 21, 22]

The conditions in the provisional release orders dated 2nd February, 2021 are modified as set out by the Court and, subject to the modified conditions, the seized exportable goods shall be provisionally released within seven days.

Final Conclusion: The High Court directed provisional release of the seized exportable goods under section 110A, refused to relegate petitioners to the appellate forum to challenge release-conditions, and modified the conditions of provisional release (bond equal to FOB, bank guarantee of 20% of FOB, undertaking to cooperate and discharge any liability found, and bar on duty drawback/benefits) with release to follow within seven days.

Liability for loss of seized/confiscated goods - custody and bailee liability of bonded warehouse operator - vesting of property in confiscated goods under Section 126 - competence of writ jurisdiction under Article 226 to award compensation for disputed factual claims - limitation and laches in claims for compensation - preponderance of probability standard in departmental adjudication based on documentary records

Liability for loss of seized/confiscated goods - custody and bailee liability of bonded warehouse operator - Whether the petitioner is entitled to compensation for the alleged loss of 297.06 MT of seized/confiscated scrap - HELD THAT: - The Court found that although the goods were ordered to be confiscated, physical possession was not taken over by the department and the petitioner continued as bailee/custodian of the seized quantity. The petitioner had been informed at the mahazar that the goods were not to be dealt with except with prior written permission of the SIIB, and the lock and key of the bonded premises apparently remained with the petitioner. Given that physical control of the bonded premises and safe custody of the goods rested with the petitioner after the change in practice post-1998, the Court held that the petitioner bore responsibility for loss of the seized/confiscated goods. The Court observed doubts as to the exact quantity missing because the seized quantities were arrived at from documents rather than by physical verification, and that the petitioner had not established theft attributable to the respondent or otherwise discharged any burden entitling it to compensation. [Paras 29, 30, 32, 33, 34]

Petitioner is not entitled to compensation for the alleged loss because custody remained with the petitioner and liability for safe custody therefore rested on it.

Vesting of property in confiscated goods under Section 126 - preponderance of probability standard in departmental adjudication based on documentary records - Effect of Section 126 and the absence of departmental physical possession on the claim for compensation - HELD THAT: - The Court noted the statutory principle that once goods are ordered to be confiscated property vests in the Central Government under Section 126, but also recorded that in the present case the department had not taken physical possession of the goods. The consequence was that notwithstanding the statutory vesting, the practical custody remained with the petitioner. The Court further observed that authorities under the Customs Act operate on preponderance of probability and may rely on documentary evidence; here the quantity figures were derived from documents and not by contemporaneous physical measurement, giving rise to doubt about exact quantities. [Paras 25, 29, 32, 33]

Statutory vesting under Section 126 did not translate into departmental physical custody here; therefore the petitioner's custody made it responsible for the loss and documentary determinations based on preponderance of probability did not establish entitlement to compensation.

Competence of writ jurisdiction under Article 226 to award compensation for disputed factual claims - limitation and laches in claims for compensation - Whether the writ court ought to entertain and decide the petitioner's claim for compensation or direct trial/other proceedings - HELD THAT: - The Court held that the relief sought - a determination of liability and quantification of compensation for alleged loss - involved disputed questions of fact which required a proper trial and recording of evidence. A writ court under Article 226 is not to be converted into a civil court to adjudicate such factual controversies. The Court also observed that the petitioner delayed pursuing a civil remedy, filed a private complaint and an FIR which was closed as 'undetected', and that the present proceedings seeking compensation were belated and potentially time-barred under the Limitation Act. The petitioner had also not disclosed the alleged missing quantity before the Tribunal, thereby contributing to the procedural posture. [Paras 20, 23, 34, 35, 36]

Writ jurisdiction is inappropriate to determine the disputed factual claim for compensation; the petitioner should have pursued a civil suit or other appropriate proceedings and the claim is belated.

Preponderance of probability standard in departmental adjudication based on documentary records - Whether the CESTAT findings regarding quantities are conclusive for the purpose of the compensation claim - HELD THAT: - The Court observed that the CESTAT's findings on quantities were not conclusive for the compensation claim because there was uncertainty about exact quantities seized and the CESTAT's conclusions were based on documentary records rather than contemporaneous physical verification. The petitioner had also failed to bring to the Tribunal's notice the fuller facts about the alleged larger shortage during the pendency of the appeal. Consequently, the Court declined to treat the Tribunal's order as determinative of the compensation claim in these proceedings. [Paras 19, 24, 25]

CESTAT findings on quantities are not dispositive for the present compensation claim because of documentary basis of measurement and unresolved doubts as to exact quantities.

Final Conclusion: The writ petition challenging Order-in-Original No.12417 of 2010 is dismissed. The Court found no merit in the claim for compensation: custody and responsibility for safe-keeping of the seized/confiscated goods rested with the petitioner, disputed factual questions as to loss and quantity require trial or appropriate proceedings rather than writ adjudication, and the claim was belated; accordingly the relief for compensation was refused and the petition dismissed.

Drawback of customs duty under Section 74 of the Customs Act, 1962 - identification of exported goods to the satisfaction of customs authorities - proviso to Rule 4(a) of the Re Export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - conversion of free shipping bill to drawback/EP scheme shipping bill - limitation for request for conversion/claim under Rule 5(1) of the 1995 Rules - CBDT Circular dated 23.09.2010 on conversion and permitting duty drawback on free shipping bills

Drawback of customs duty under Section 74 of the Customs Act, 1962 - identification of exported goods to the satisfaction of customs authorities - proviso to Rule 4(a) of the Re Export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - CBDT Circular dated 23.09.2010 on conversion and permitting duty drawback on free shipping bills - Whether entitlement to duty drawback can be denied solely because there was no physical examination/identification of the exported goods where documentary evidence exists and proviso to Rule 4(a) and the CBDT Circular provide for case by case exemption or allowance - HELD THAT: - The court held that the statutory requirement of identification of exported goods is not an absolute bar to claiming drawback where the conditions for exemption under the proviso to Rule 4(a) are satisfied. The proviso empowers the Principal Commissioner/Commissioner of Customs to exempt an exporter or his authorised agent, for reasons to be recorded, where failure to comply with identification requirements was for reasons beyond the exporter's control. Further, paragraphs 3 and 4 of the CBDT Circular dated 23.09.2010 permit, on a case to case basis and subject to satisfaction of the Commissioner on documentary evidence existing at the time of export, conversion between schemes or allowance of industry rates of drawback on goods exported under a free shipping bill without conversion. Applying these provisions, the tribunal was entitled to find that the identity of the product could be established from pre existing documentary evidence and that lack of physical examination at export could not, by itself, justify rejection of the drawback claim. [Paras 7]

Claim for drawback could not be denied solely on the ground that the export consignment was not physically examined; exemption/allowance under proviso to Rule 4(a) and the CBDT Circular justified the tribunal's decision to permit drawback/conversion on the basis of documentary evidence.

Limitation for request for conversion/claim under Rule 5(1) of the 1995 Rules - conversion of free shipping bill to drawback/EP scheme shipping bill - Whether the respondent's claim for drawback was time barred because the conversion/claim was made after three months from export - HELD THAT: - The court accepted the tribunal's finding that the original request for conversion/claim was made within the prescribed period. While Rule 5(1) contemplates a three month period with possible extension by the Assistant/Deputy Commissioner, the material facts showed that an initial request was submitted within limitation (letter dated 30.09.2006 and subsequent communications), and the tribunal correctly held that the demand for conversion was within the prescribed period. Consequently the claim was not time barred. [Paras 8]

The drawback request was not time barred; the original demand was made within the prescribed period and therefore the tribunal rightly declined to treat the claim as barred by limitation.

Final Conclusion: The substantial questions of law were answered against the appellant and in favour of the respondent; the tribunal's order allowing duty drawback/conversion on the basis of documentary evidence and holding the claim not time barred is sustained and the appeal is dismissed.

Time barred show cause notice - limitation under Section 28 of the Customs Act - extended limitation under Section 28AAA of the Customs Act - suppression of facts and willful mis statement - entertainment of writ at show cause notice stage - administrative decision and opportunity to reply - jurisdiction and authority to issue show cause notice

Time barred show cause notice - extended limitation under Section 28AAA of the Customs Act - Prima facie conclusion that the show cause notice dated 24.01.2020 is not time barred. - HELD THAT: - Having examined the allegations of fraudulent availing of SFMS benefits through forged documents and the attendant multi departmental investigation into 203 shipping bills, the Court accepted at the prima facie stage that investigation into alleged fraud, collusion and manual alteration of shipping documents was time consuming. In view of the nature of the allegations and the extended limitation mechanism under Section 28AAA, the Court found no merit in the contention that the SCN was time barred and recorded a prima facie view that the SCN is not barred by limitation. [Paras 4, 5, 6, 9]

At the prima facie stage the SCN is not time barred; the Court is not persuaded to quash it on limitation grounds.

Entertainment of writ at show cause notice stage - administrative decision and opportunity to reply - Writ petition seeking quashal of the SCN is premature and not to be entertained at the show cause notice stage. - HELD THAT: - Relying on Supreme Court authority and consistent precedents, the Court reiterated that where a statutory remedial code exists and no jurisdictional violation or breach of natural justice is made out, it is ordinarily inappropriate to entertain a writ against a mere show cause notice. The petitioner had not yet filed a reply to the SCN; the Court held that objections should first be pressed before the authority in response to the SCN and any challenge to an adverse order can thereafter be pursued as provided by law. [Paras 8, 9]

The writ petition is premature; the Court declines to entertain it at SCN stage and directs the petitioner to file a reply.

Jurisdiction and authority to issue show cause notice - Objections regarding the issuing authority's power, jurisdiction and authority are left open for decision by the respondent authority. - HELD THAT: - The Court did not adjudicate on the petitioner's contention that respondent No.2 lacked power or jurisdiction to issue the SCN. Instead, it left those contentions to be raised and decided in the proceedings before the authority in accordance with law, permitting the petitioner to include such grounds in its reply to the SCN. [Paras 4, 10]

Objection to jurisdiction/power of the issuing authority is not decided and is left open for determination by the respondent authority.

Administrative decision and opportunity to reply - Direction to the respondents to decide the SCN in accordance with law after giving due consideration to the petitioner's reply and evidence. - HELD THAT: - The Court directed the respondents to take a decision pursuant to the SCN dated 24.01.2020 in accordance with law, rules, regulations and government policy, and on the basis of the evidence on record, as early as practicable. The Court expressly stated that its prima facie observations, including on limitation, should not influence the departmental decision. [Paras 10, 11, 12]

Respondents directed to decide the SCN in accordance with law after due process; the Court's prima facie views are not binding on that decision.

Final Conclusion: Writ petition disposed of as premature; the Court declined to quash the SCN at the show cause stage, recorded a prima facie view that the SCN is not time barred, permitted the petitioner to file a reply and directed the respondents to decide the SCN in accordance with law, leaving questions of applicability of Sections 28(1) and 28AAA and of jurisdiction to be determined by the authority.

Appointment of Provisional Liquidator as an interim power in winding up proceedings - principles of natural justice in the grant of ad interim relief - locus of a shareholder as an aggrieved person under the appeal provision - tribunal's inherent and statutory power to pass interim orders to preserve company property - impleadment / adding of parties as a procedural remedy before the Tribunal - compliance with prescribed procedure for seeking provisional liquidation (Form WIN 7 / Rule 14)

Principles of natural justice in the grant of ad interim relief - appointment of Provisional Liquidator as an interim power in winding up proceedings - Whether the Tribunal committed a patent violation of natural justice in appointing a Provisional Liquidator and whether appointment at admission stage was impermissible - HELD THAT: - The Appellate Tribunal examined the impugned NCLT order and the circumstances in which an ad interim Provisional Liquidator was appointed. It observed that Courts/Tribunals are empowered to pass appropriate ad interim orders at the stage of admission where circumstances justify such relief and that the Tribunal has wide powers under the Companies Act to pass interim orders to preserve company property and prevent abuse of process. The record showed that notice had been served on the company, its counsels appeared and made submissions before the NCLT, and the NCLT recorded that a prima facie case of fraud was made out; therefore the short notice did not, on the material placed before this Appellate Tribunal, amount to a patent denial of natural justice warranting immediate interference with the interim order. The Appellate Tribunal did not traverse into the merits of the fraud allegations; it confined itself to the legality of interim exercise of power and procedural fairness at the admission stage. [Paras 60, 68, 69, 72]

No immediate interference with the appointment of the Provisional Liquidator on grounds of denial of natural justice; Tribunal's exercise of power to appoint a Provisional Liquidator at admission stage was within its statutory and inherent jurisdiction.

Locus of a shareholder as an aggrieved person under the appeal provision - impleadment / adding of parties as a procedural remedy before the Tribunal - Whether the Appellant (a minority shareholder) is an aggrieved person entitled to challenge the NCLT order and the appropriate procedural remedy for its grievance - HELD THAT: - The Appellate Tribunal recognised that a shareholder may be affected by an order appointing a Provisional Liquidator because such an order can impact shareholders' rights. Rather than finally deciding maintainability of the appeal or the Appellant's locus, the Tribunal directed the Appellant to pursue the proper procedural course before the NCLT by filing an interlocutory application for impleadment, setting out supporting facts and reasons. The Tribunal emphasised that adding/impleading parties is a matter of judicial discretion and that, if an application to be put on record is filed and found in order, the Tribunal should number it and provide reasonable opportunity to be heard and decide on merits in accordance with law. The Appellate Tribunal therefore left the question of the Appellant's formal locus and entitlement to relief to be considered afresh by the NCLT upon such application. [Paras 71, 73, 74, 75, 78]

Appellant is directed to move the NCLT by an interlocutory application for impleadment; the NCLT shall consider the application, provide hearing and decide on the question of impleadment and any related relief in accordance with law.

Compliance with prescribed procedure for seeking provisional liquidation (Form WIN 7 / Rule 14) - tribunal's power to preserve company property - Whether non compliance with the procedural requirements (such as separate application in Form WIN 7 and supporting affidavit under Rule 14) rendered the Company Petition and the order appointing a Provisional Liquidator invalid - HELD THAT: - The Appellate Tribunal noted submissions about alleged non compliance with Form WIN 7/Rule 14 and other procedural formalities in filing the petition. However, instead of setting aside the NCLT order on that ground, the Tribunal directed that the Appellant seek appropriate relief before the NCLT by way of an interlocutory application so that the Tribunal can examine procedural compliance and any consequences thereof. The Appellate Tribunal did not finally adjudicate the procedural compliance issue but left it to the NCLT to consider when the impleadment/application is placed on record. [Paras 59, 76, 78]

Procedural non compliance allegations not finally decided; issue to be considered afresh by the NCLT upon filing of the directed interlocutory application.

Final Conclusion: The appeal is disposed of by directing the Appellant to seek impleadment before the NCLT by filing an interlocutory application setting out facts and grounds; the NCLT is to admit/number the application if in order, afford reasonable opportunity of hearing and decide on impleadment and related procedural and substantive issues (including any alleged Rule/Form non compliance) in accordance with law. No costs.

Interim injunction to preserve status quo - prima facie case, balance of convenience and irreparable harm - vacation of office by operation of law under Section 167 - disclosure obligations of directors under Section 184 - quasi partnership considerations in closely held/listed companies

Interim injunction to preserve status quo - prima facie case, balance of convenience and irreparable harm - Application for interim reliefs restraining implementation of the notice dated 30/07/2020 and restraining respondents from interfering with Applicant No.1's role as Director and Vice Chairman of R1. - HELD THAT: - On consideration of the pleadings and oral submissions, the Tribunal found that the Applicants have established a prima facie case and that the balance of convenience lies in their favour. The Tribunal noted the family settlement, the Applicants' historic participation in management, the Applicants' aggregate shareholding and that material facts indicate informal participation by Applicant No.1 in management decisions. The Tribunal also observed that the Company Secretary had been informed of Applicant No.1's interest in AGT and, as compliance officer, was expected to advise on formalities. The Tribunal declined to finally adjudicate the merits of competing factual and legal contentions but concluded that, on the interim application, refusal of relief would cause irreparable loss to the Applicants. Accordingly, the amended interim prayers (as limited in para 2(a) and 2(b) of the application) were allowed on contest; the remaining prayers were not pressed and rejected without prejudice to agitate them afresh in accordance with law. No order as to costs.

Amended interim prayers seeking (a) restraint on implementation of the notice dated 30/07/2020 and (b) restraint on interference with Applicant No.1 acting as Director and Vice Chairman of R1 were allowed on contest; other prayers were rejected as not pressed.

Vacation of office by operation of law under Section 167 - disclosure obligations of directors under Section 184 - quasi partnership considerations in closely held/listed companies - Whether Applicant No.1 had vacated office by operation of law for breach of disclosure obligations and whether the company is a quasi partnership - reserved for final adjudication. - HELD THAT: - The Tribunal expressly declined to decide on the merits whether there was contravention of Section 184 or whether Section 167 consequences follow. It recorded that whether there was a contravention of Section 184 and whether Applicant No.1 thereby vacated office can be decided only after final hearing of the company petition. Similarly, the question whether R1 is to be treated as a quasi partnership was not determined at the interim stage and is left for consideration in the main petition. The Tribunal therefore remitted those substantive questions for full hearing and determination.

Merits on alleged contravention of Sections 184 and 167 and on the quasi partnership character of R1 were not decided at the interim stage and are remitted for final hearing.

Final Conclusion: On the interim application the Tribunal granted limited reliefs: it restrained the respondents from implementing the notice dated 30/07/2020 and from interfering with Applicant No.1 acting as Director and Vice Chairman of R1 (amended prayers at para 2(a) & (b) allowed on contest). The remaining prayers were rejected as not pressed. Substantive questions regarding alleged breach of Sections 184/167 and the characterisation of the company as a quasi partnership are left for determination at the final hearing; there is no order as to costs.

Extension of mandate of arbitral tribunal - Section 29A(5) of the Arbitration and Conciliation Act, 1996 - Resolution Professional's authority under the Insolvency and Bankruptcy Code, 2016 - exclusion of lockdown period from Corporate Insolvency Resolution Process timelines - moratorium under the Insolvency and Bankruptcy Code

Section 29A(5) of the Arbitration and Conciliation Act, 1996 - extension of mandate of arbitral tribunal - Maintainability of petition under Section 29A(5) filed by the Resolution Professional seeking extension of the arbitral tribunal's mandate - HELD THAT: - The Court held that it was not necessary, in exercise of its jurisdiction under Section 29A(5), to adjudicate in detail the contested questions raised by the respondent about the RP's competence or the interplay with IBC proceedings. On the materials before it, including the NCLAT order of 30 March 2020 excluding lockdown period from CIRP timelines and the State orders indicating continuing restrictions, the petition could not be said to be plainly not maintainable and therefore was not to be dismissed on that ground. Other challenges to maintainability could be pursued before the arbitral tribunal but did not justify striking the petition at this stage. [Paras 11, 12, 14]

Petition under Section 29A(5) is maintainable and not liable to be dismissed on the competence grounds raised by respondent.

Resolution Professional's authority under the Insolvency and Bankruptcy Code, 2016 - Whether the Resolution Professional, appointed by the Committee of Creditors, had authority to file the present petition and seek extension of the arbitral tribunal's mandate - HELD THAT: - The Court examined the CoC resolution which approved the appointment of Mr. Anish Niranjan Nanavaty as Resolution Professional and found no provision in the IBC that limits the RP's authority so as to preclude him from applying for extension of the arbitral tribunal's mandate or from filing the present petition. The objection to the RP's competence to institute the petition was accordingly rejected. [Paras 17, 18]

The objection to the RP's competence to file the petition is rejected; the RP is competent to seek the relief prayed.

Extension of mandate of arbitral tribunal - Whether the Court should extend the mandate of the three-member Arbitral Tribunal to enable conclusion of arbitral proceedings - HELD THAT: - Recognising that arbitral proceedings were ongoing and that no sustainable ground was shown by the respondent to refuse continuation, the Court exercised its power under Section 29A(5) to extend the mandate. The Court expressly refrained from expressing any final view on matters pending before the NCLT/NCLAT or on the ultimate effect of IBC proceedings on the arbitration; those questions were left to be addressed by the Arbitral Tribunal or the relevant adjudicatory fora as appropriate. [Paras 13, 14, 19]

Mandate of the Arbitral Tribunal extended for 12 months with effect from 8th September, 2020; other IBC-related issues left open.

Effect of lockdown on timelines under Section 12 IBC - exclusion of lockdown period from Corporate Insolvency Resolution Process timelines - Treatment of lockdown period in relation to CIRP timelines and its bearing on RP's authority (left open for other fora) - HELD THAT: - The Court noted the NCLAT order of 30 March 2020 directing exclusion of lockdown period for counting CIRP timelines and the State orders concerning lockdown, observing that a prima facie lockdown continued to some extent in Maharashtra. However, whether that order and the State orders operated so as to extend the RP's authority or otherwise affect the arbitration was an involved question not required to be decided under Section 29A(5) and therefore was left to be considered by the Arbitral Tribunal and/or the NCLT/NCLAT. [Paras 6, 7, 11, 14]

Impact of lockdown-related orders on CIRP timelines and on the RP's authority is not finally adjudicated and is to be addressed by the Arbitral Tribunal or the appropriate insolvency fora.

Final Conclusion: The petition under Section 29A(5) is allowed: the mandate of the three-member Arbitral Tribunal is extended for 12 months from 8 September 2020. Challenges concerning the RP's authority, the interplay between the arbitration and IBC proceedings, and the effect of lockdown exclusions on CIRP timelines are not finally decided and are left open for determination by the Arbitral Tribunal and/or the insolvency adjudicatory authorities.

Maintainability of interlocutory applications prior to admission of main petition - power to grant interim orders under Section 242(4) of the Companies Act, 2013 - requirement of reasonable opportunity of hearing before disposal of interim applications - restoration of interlocutory applications for fresh adjudication

Maintainability of interlocutory applications prior to admission of main petition - power to grant interim orders under Section 242(4) of the Companies Act, 2013 - Interlocutory applications filed by the appellants were maintainable notwithstanding that the main petition had not been admitted and the Tribunal erred in summarily disposing of them. - HELD THAT: - The Tribunal held that interim applications are maintainable only after admission of the main petition and accordingly disposed of the interlocutory applications. The Appellate Tribunal examined the statutory scheme and observed that there is no provision in the Act or the NCLT Rules prescribing that separate interim applications are maintainable only after admission of the main case. Section 242(4) empowers the Tribunal to make any interim order it thinks fit for regulating the conduct of the company's affairs. In light of this provision, it cannot be said that interim applications are incompetent prior to admission of the main petition or must be deferred merely because similar reliefs are sought in the main petition. The Tribunal's procedure of disposing of the IAs without legal foundation, and at the same time posting the matter for consideration of interim reliefs without having admitted the petition, was held to be inconsistent and impermissible. The impugned summary disposal was therefore set aside and the interlocutory applications were restored for fresh consideration after affording parties a reasonable opportunity to be heard. [Paras 9, 10, 12, 13]

Impugned order in CP No. 78/BB/2020 set aside; interlocutory applications restored and directed to be decided on merits after giving reasonable opportunity to parties.

Requirement of reasonable opportunity of hearing before disposal of interim applications - restoration of interlocutory applications for fresh adjudication - The Tribunal's admission of the respondent's petition CP No. 77/BB/2020 for final hearing did not call for interference. - HELD THAT: - The Appellants challenged differential treatment in that the Respondents' petition was admitted while the Appellants' interlocutory applications were summarily disposed. The Appellate Tribunal, after reviewing the record and submissions, found no infirmity in the order admitting CP No. 77/BB/2020 for final hearing. There was therefore no reason to interfere with that admission. The appeal challenging CP No. 77/BB/2020 was accordingly dismissed. [Paras 4, 14]

Impugned order in CP No. 77/BB/2020 upheld; appeal against that order dismissed.

Final Conclusion: Company Appeal (AT) No. 134 of 2020 is allowed insofar as the interlocutory applications in CP No. 78/BB/2020 are restored for fresh adjudication after giving parties reasonable opportunity to be heard; the Tribunal is directed to decide them expeditiously. Company Appeal (AT) No. 135 of 2020 is dismissed and the admission of CP No. 77/BB/2020 for final hearing is left undisturbed.

Voluntary liquidation - dissolution of the corporate person - declaration of solvency - compliance with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - liquidator's statutory duties - public announcement of liquidation - preservation of liquidation records

Voluntary liquidation - declaration of solvency - The Company satisfied the statutory pre-conditions for voluntary liquidation and the declaration of solvency was in order. - HELD THAT: - The Tribunal recorded that the Board passed a resolution to voluntarily liquidate the Company and that two directors filed affidavits after making full enquiry into the affairs of the Company, forming the opinion that the Company would be able to pay its debts in full and was not being liquidated to defraud any person. The affidavits were supported by audited financial statements for the preceding two financial years and an Independent Auditor's Report indicating absence of fixed assets and inventory. The members passed the requisite special resolution within the prescribed time and appointed a registered Insolvency Professional as Liquidator. These facts satisfy the conditions for voluntary liquidation under the Code and Regulations as recorded in the application papers and annexures. [Paras 4, 5, 6]

Found that statutory pre-conditions for voluntary liquidation and the declaration of solvency were fulfilled.

Compliance with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - public announcement of liquidation - liquidator's statutory duties - The Liquidator complied with the procedural requirements of the Regulations and statutory authorities were duly informed. - HELD THAT: - The Tribunal noted that the Corporate Person notified the ROC and IBBI within the prescribed period; the Liquidator made the public announcement inviting claims in the prescribed Form; intimation of the Liquidator's appointment was given to the Income Tax Officer; and the Liquidator submitted a preliminary and final report detailing the conduct of the liquidation. The ROC's reply confirmed filing of the special resolution, declaration of solvency, and final report, and stated no objection to dissolution. The bank account in the name of the Company in liquidation was opened and subsequently closed in accordance with the liquidation process. These compliances demonstrate adherence to the IBBI Regulations and related statutory requirements. [Paras 9, 10, 11, 13, 14]

Found that the Liquidator and Corporate Person complied with the procedural and statutory requirements under the Regulations and informed the relevant authorities.

Dissolution of the corporate person - preservation of liquidation records - The affairs of the Company have been wound up and the Corporate Person is dissolved with directions to the Liquidator regarding filing of the order and preservation of records. - HELD THAT: - On examination of the documents and the Liquidator's final report, the Tribunal recorded that all assets had been liquidated, payments to stakeholders made, and only cash and cash equivalents had been applied to liquidation costs and distribution to members. The Liquidator applied for dissolution after concluding the liquidation process. Exercising powers under the Code, the Tribunal ordered dissolution of the Corporate Person and directed the Liquidator to file the order with the ROC, Income Tax Department and IBBI, to file the order with other statutory authorities, and to preserve physical or electronic copies of reports, registers and books of account for at least eight years after dissolution either with himself or with an information utility. [Paras 13, 15, 16]

Company dissolved and Liquidator directed to file the order with statutory authorities and to preserve liquidation records for eight years.

Final Conclusion: The Tribunal allowed the application for voluntary liquidation, held that the statutory conditions and procedural compliances were satisfied, ordered dissolution of India Steamship Limited with directions to the Liquidator to file the order with concerned authorities and to preserve liquidation records for eight years.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Prohibition on institution or continuation of proceedings and execution of orders during moratorium - Doctrine that the Code overrides inconsistent laws under Section 238 - Unauthorized transfer or recovery of corporate debtor's funds during CIRP - Waterfall mechanism for distribution of corporate debtor's assets

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Doctrine that the Code overrides inconsistent laws under Section 238 - Unauthorized transfer or recovery of corporate debtor's funds during CIRP - Prohibition on institution or continuation of proceedings and execution of orders during moratorium - Validity of the State Tax authority's direction under GVAT Act to the bank to transfer funds from the corporate debtor's account during the CIRP and entitlement to refund of the transferred amount. - HELD THAT: - The Tribunal found that the moratorium under Section 14(1)(a) of the Code prohibits institution or continuation of proceedings and execution of any order against the corporate debtor during the CIRP. By a conjoint reading of Section 14(1)(a) and Section 238 of the Code, the Code's moratorium overrides inconsistent provisions of other laws; therefore actions under the GVAT Act which effect recovery during moratorium are barred. The Tribunal accepted that the admitted claim of the revenue was already part of the CIRP process and that the transfer effected by the bank pursuant to the tax authority's direction was in violation of the moratorium. Having concluded that the CIRP continues (the RP managing the company as a going concern pursuant to the appellate stay), the Tribunal directed refund of the sum transferred to the corporate debtor's account. The reasoning also noted that unilateral recovery undermines the statutory insolvency distribution mechanism (waterfall) established under the Code. [Paras 10, 13, 14]

The Tribunal held the tax authority's action to be contrary to the moratorium and directed refund of the amount transferred to the corporate debtor's account.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Prohibition on institution or continuation of proceedings and execution of orders during moratorium - Claim for ancillary directions: whether the Tribunal should direct the bank to follow only the RP's instructions and require the tax authority to file an affidavit refraining from further action during moratorium. - HELD THAT: - The Tribunal declined to grant the claimed advance or omnibus directions sought by the RP as prayers in the nature of advance rulings. While the moratorium and overriding effect of the Code were recognized for the specific dispute about the transferred amount, the Tribunal observed that it would not issue the broader prospective directions sought in prayers (ii) and (iii) at this stage. The RP was left free to seek specific directions from the Bench as and when required. [Paras 15]

No relief granted in respect of the advance/directional prayers; the application is partially allowed insofar as refund is directed and otherwise disposed of, with liberty to approach the Bench for further specific directions.

Final Conclusion: The Tribunal held that the moratorium under the Code precluded the tax authority's recovery by directing the bank to transfer funds during CIRP; the transferred amount was ordered to be refunded to the corporate debtor's account. Broader advance directions sought against the tax authority and the bank were refused, with liberty to seek specific future relief.

Quantification of tax liability for eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - written communication as 'quantified' - admission of liability during inquiry, investigation or audit - eligibility under the enquiry, investigation or audit category of the Scheme - principles of natural justice - requirement of hearing and speaking order before rejecting declaration

Quantification of tax liability for eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - written communication as 'quantified' - admission of liability during inquiry, investigation or audit - eligibility under the enquiry, investigation or audit category of the Scheme - Petitioner's declaration was eligible under the enquiry, investigation or audit category because tax liability was quantified by written admission before 30.06.2019. - HELD THAT: - The court held that the Scheme's definition of 'quantified' (a written communication of the amount of duty payable) includes admission of liability by the person during inquiry, investigation or audit and need not await adjudication or issuance of a show-cause notice. Prior statements of the petitioner admitting service tax dues around Rs. 1.93 crores (statement dated 06.07.2018 and 06.06.2019) satisfy the requirement of written communication for quantification before the cut-off date. Discrepancies in exact figures between pre-cut-off admissions and later departmental quantification do not defeat eligibility so long as the admission bears some resemblance to actual dues. Applying these principles and the Board's circular and FAQs, the court found petitioner fulfilled the Scheme's quantification requirement and therefore was eligible to file the declaration under the relevant category. [Paras 21, 22]

Declaration was eligible because petitioner had admitted tax liability by written communication prior to 30.06.2019; rejection on ground of ineligibility was not justified.

Principles of natural justice - requirement of hearing and speaking order before rejecting declaration - eligibility under the enquiry, investigation or audit category of the Scheme - Order rejecting the declaration was set aside and the matter remanded for fresh consideration with an opportunity of hearing and a speaking order. - HELD THAT: - Relying on precedents, the court concluded that where the Designated Committee estimates an amount higher than declared, the Scheme requires giving the declarant an opportunity of hearing before insisting on payment of any excess; similarly, summary rejection of a declaration on eligibility grounds without hearing violates natural justice. Therefore the rejection dated 31.01.2020 was set aside and the designated committee was directed to reconsider the declaration afresh, afford personal hearing, and pass a speaking order communicating its decision. [Paras 23, 24]

Order dated 31.01.2020 set aside; matter remanded to respondent No.1 to reconsider the declaration with an opportunity of hearing and to pass a speaking order within eight weeks.

Final Conclusion: Writ petition allowed to the extent that the order rejecting the petitioner's declaration is set aside; the designated committee shall reconsider the declaration as valid under the enquiry/investigation/audit category, afford hearing, and pass a speaking order within eight weeks; no order as to costs.

Levy of late fee under Rule 7C of the Service Tax Rules, 1994 - scope of Settlement Commission's power to settle cases as applied to the Finance Act, 1994 - perimeter of a show cause notice and liability beyond the notice - finality of Settlement Commission orders under the settlement scheme - judicial review for perversity or material irregularity under Article 226 of the Constitution

Levy of late fee under Rule 7C of the Service Tax Rules, 1994 - perimeter of a show cause notice and liability beyond the notice - Validity of imposition of late fee by the Settlement Commission where the Show Cause Notice did not expressly propose recovery of such late fee - HELD THAT: - The Court held that the contention that the Settlement Commission imposed late fee beyond the scope of the Show Cause Notice was not sustainable on the facts. The determinative finding is that the petitioner filed periodical returns belatedly after issuance of the Show Cause Notice; had the returns been filed belatedly prior to the Show Cause Notice and there been a deficit in late fee not proposed in the notice, the petitioner's argument might have been tenable. The Settlement Commission, after considering rival computations and the amendment to the law, recorded the amounts and directed payment of late fee. The petitioner had itself offered to pay a quantified late fee before the Commission and alternatively sought waiver or time to pay; in those circumstances the Court found no illegality in the Commission directing payment of late fee for delayed filing of returns. [Paras 16, 17]

Levy of late fee by the Settlement Commission was valid on the facts and not beyond the scope of the Show Cause Notice; petitioner's challenge to that levy fails.

Scope of Settlement Commission's power to settle cases as applied to the Finance Act, 1994 - finality of Settlement Commission orders under the settlement scheme - judicial review for perversity or material irregularity under Article 226 of the Constitution - Whether the writ court should interfere with the Settlement Commission's final order in absence of perversity, material irregularity, or breach of natural justice - HELD THAT: - The Court reiterated that orders of the Settlement Commission under the scheme are final and conclusive, and interference under Article 226 is warranted only where there is perversity, material irregularity in procedure causing prejudice, or violation of principles of natural justice. The impugned order recorded submissions of both parties, considered competing calculations and statutory amendments, and did not suffer from any of the recognised infirmities that attract judicial interference. The petitioner's voluntary offer to pay a late fee and his alternative requests before the Commission further militated against intervention. [Paras 17, 18, 19]

No ground made out for interference with the Settlement Commission's order; writ petition dismissed.

Final Conclusion: Writ petition dismissed; the Settlement Commission's order directing payment of late fee is upheld and no interference is warranted in the absence of perversity, material irregularity or breach of natural justice.

Maintenance of computer software not exigible to service tax prior to 01.06.2007 - exemption of information technology services from the definition of business auxiliary service - effect of Finance Act, 2007 treating computer software as goods with effect from 01.06.2007 - limitation under Section 73 of the Finance Act, 1994 - extended period of limitation not applicable in absence of fraud, collusion, misstatement or suppression

Maintenance of computer software not exigible to service tax prior to 01.06.2007 - exemption of information technology services from the definition of business auxiliary service - effect of Finance Act, 2007 treating computer software as goods with effect from 01.06.2007 - Liability to service tax for maintenance of computer software for the period 09.07.2004 to 06.10.2005. - HELD THAT: - The Court accepted the reasoning of the High Court of Madras that, prior to the Finance Act, 2007 (effective 01.06.2007), information technology services, including maintenance of computer software, fell outside the scope of the relevant taxable "business auxiliary service" and were exempt from service tax. The Court noted that the statutory amendment in 2007 expressly included computer software within the definition of "goods" and thereby rendered such services exigible only from 01.06.2007. Applying that statutory and precedential framework, the Tribunal was held to be correct in concluding that maintenance of computer software was not exigible to service tax for the period 09.07.2004 to 06.10.2005, and the appellate finding in favour of the respondent on this point was affirmed. [Paras 7]

Respondent not liable to service tax for maintenance of computer software for the period 09.07.2004 to 06.10.2005.

Limitation under Section 73 of the Finance Act, 1994 - extended period of limitation not applicable in absence of fraud, collusion, misstatement or suppression - Whether the demand for service tax for 09.07.2004 to 06.10.2005 was barred by limitation and whether extended limitation applied. - HELD THAT: - The Court observed that the show cause notice and adjudication did not allege fraud, collusion, misstatement or suppression of facts by the respondent. In the absence of such allegations, the extended period of limitation could not be invoked. Consequently, the demand was held to be time-barred under the limitation provisions (Section 73 of the Finance Act, 1994), and the Tribunal's conclusion that the demand was barred by limitation was upheld. [Paras 7]

Demand for the period 09.07.2004 to 06.10.2005 is barred by limitation; extended period not attracted in absence of fraud or suppression.

Final Conclusion: The appeal is dismissed; the Tribunal's allowance of the respondent's appeal is affirmed on the grounds that maintenance of computer software was not exigible to service tax for the period 09.07.2004 to 06.10.2005 and the demand is time barred under Section 73 in the absence of any allegation of fraud, collusion, misstatement or suppression.

Limitation under Section 11B of the Central Excise Act, 1944 - accrual of refund claim upon reversal of TRANS-1 credit - treatment of excess tax as deposit vs tax paid - verification of unjust enrichment before sanction of refund

Limitation under Section 11B of the Central Excise Act, 1944 - accrual of refund claim upon reversal of TRANS-1 credit - Refund claim whether barred by limitation - HELD THAT: - The appellant paid service tax for the quarter April to June'17 and thereafter credited the excess paid amount into TRANS-1. On objection the TRANS-1 credit was reversed and interest paid on 27.02.2019. The Tribunal held that no cause of action for refund existed so long as the excess remained transferred in TRANS-1; the refund claim therefore accrued only upon reversal on 27.02.2019. The refund application filed on 05.04.2019 was within one year from accrual and thus not barred by Section 11B. The determinative reasoning is that accrual of right to claim refund is governed by the date on which the appellant was entitled to the refund (i.e., after reversal), not the earlier date of original payment.

Refund claim is not time barred; appeal allowed on limitation ground.

Verification of unjust enrichment before sanction of refund - treatment of excess tax as deposit vs tax paid - Whether the refund may be sanctioned without examining unjust enrichment - HELD THAT: - Although the Tribunal found the refund application to be timely, it recognised that the question of whether the appellant has passed on the incidence of the tax (unjust enrichment) remains open. The Court directed that the adjudicating authority must examine and determine unjust enrichment before allowing the refund. The remand is limited to verification of unjust enrichment and disposal of the refund claim in accordance with law.

Matter remanded to the adjudicating authority to verify unjust enrichment and dispose of the refund claim accordingly.

Final Conclusion: The impugned orders are set aside on the ground of limitation; the matter is remitted to the adjudicating authority to verify unjust enrichment and to decide the refund claim in accordance with law.

Return defaults under Section 25 of the Tripura Value Added Tax Act, 2004 - scope of scrutiny and assessment under Chapter V of the TVAT Act - distinction between summary adjustments and audit/assessment powers - limitation for audit assessment and for assessment of turnover escaping assessment - prerequisite of notice under Section 24 for exercise of powers under Section 27

Return defaults under Section 25 of the Tripura Value Added Tax Act, 2004 - distinction between summary adjustments and audit/assessment powers - limitation for audit assessment and for assessment of turnover escaping assessment - Whether the Superintendent of Taxes could invoke Section 25 to raise demands by recharacterising a disputed element of taxable turnover where audit/assessment or turnover escaping assessment powers were time barred. - HELD THAT: - The Court held that Section 25 addresses limited situations of 'return defaults' - failure to pay tax shown as due in a return, furnishing a revised return showing higher tax, or failure to furnish a return - and is intended to charge interest and, in specified circumstances, penalty. It is not a provision for adjudicating disputed elements of declared turnover or for conducting detailed scrutiny akin to audit assessment. Disputes as to the correctness of taxable turnover, claims of exemption, deductions or other contested items in a return must be adjudicated in assessment proceedings under the scheme of Chapter V (notably under provisions for audit assessment and turnover escaping assessment). Those assessment powers are subject to express limitation periods; permitting the Assessing Officer to treat Section 25 as a vehicle to re assess disputed elements would subvert the limitation scheme and improperly expand the scope of Section 25 into an assessment power. The Court also recalled that powers of summary scrutiny under Section 27 require the precondition of a notice under Section 24, and that earlier attempts to use Section 27 in absence of that precondition had been quashed. On the admitted facts the department sought, by invoking Section 25, to tax a disputed discount component of turnover after the time for audit/turnover escaping assessment had passed; that use of Section 25 was impermissible. [Paras 16, 17, 18, 19, 20]

The impugned orders raising tax demands under Section 25 were set aside; the demand notices and penalty orders were quashed and attachments on the petitioner's bank accounts were lifted.

Final Conclusion: The petitions are allowed: the orders of tax demand and penalty issued under Section 25 of the TVAT Act in respect of the assessment periods 2010-11, 2011-12 and 2012-13 are quashed, consequential demand notices are set aside, attachments are lifted and the penalty orders are quashed.

Appealable orders under section 37(1)(c) - Effect doctrine: order refusing condonation operates as refusal to set aside - Interpretation of the expression "under section 34" - Limitation and condonation under section 34(3) - Parity with section 39 of the Arbitration Act, 1940

Appealable orders under section 37(1)(c) - Effect doctrine: order refusing condonation operates as refusal to set aside - Interpretation of the expression "under section 34" - Limitation and condonation under section 34(3) - Parity with section 39 of the Arbitration Act, 1940 - Whether an order of a Single Judge refusing to condone delay in filing an application under section 34 to set aside an arbitral award is appealable under section 37(1)(c) of the Arbitration and Conciliation Act, 1996. - HELD THAT: - The Court held that section 37(1)(c) must be read with the qualifying words "under section 34", and section 34 is not limited to the merits under section 34(2) but includes the time bar and condonation regime under section 34(3). Applying the "effect doctrine" (as recognised in Essar Constructions under the pari materia provision of the 1940 Act) an order which, by refusing to condone delay, effectively disposes of the application to set aside the award, constitutes a refusal to set aside within section 37(1)(c) and is therefore appealable. The Court rejected narrower readings that would confine appealability to merits-only refusals, disapproved prior High Court decisions to the contrary (including the reasoning in Ramdas Construction Co. and Radha Krishna Seth), and emphasised that the statutory scheme and language support inclusion of refusals based on section 34(3). The decision in BGS SGS Soma was held to be context-specific and not controlling on the present question. [Paras 9, 19, 22, 37]

An order refusing to condone delay in filing a section 34 application to set aside an award is appealable under section 37(1)(c).

Remand for fresh consideration - Disposition of the case following the finding on appealability. - HELD THAT: - Having held that the Single Judge's refusal to condone delay is appealable, the Supreme Court set aside the impugned Division Bench judgment that had dismissed the appeal as not maintainable and remitted the matter to a Division Bench of the High Court of Delhi to decide whether the Single Judge's refusal to condone delay was correct on merits. The remit is for determination of the condonation question and attendant consequences, not for re litigation of appellate maintainability. [Paras 38]

Impugned judgment set aside; matter remitted to a Division Bench of the High Court of Delhi to decide the correctness of the Single Judge's refusal to condone delay.

Final Conclusion: The appeal is allowed: the Supreme Court held that an order refusing condonation of delay in filing a section 34 application is appealable under section 37(1)(c), set aside the impugned Division Bench order dismissing the appeal as not maintainable, and remitted the matter to a Division Bench of the High Court of Delhi to decide whether the Single Judge's refusal to condone delay was correct.

Inherent powers under Section 482 of Cr.P.C. - power under Section 91 Cr.P.C. to summon documents - relevancy of documents - marking of documents as evidence - necessity of production of original documents where certified copies are on record - abuse of process/protraction of proceedings

Power under Section 91 Cr.P.C. to summon documents - marking of documents as evidence - abuse of process/protraction of proceedings - Whether the accused's application under Section 91 Cr.P.C. for production of documents should be granted when the same documents are already marked and the witness has been cross examined. - HELD THAT: - The High Court held that an application under Section 91 Cr.P.C. for summoning documents does not arise where the documents sought to be summoned have already been marked as exhibits and form part of the Trial Court record, and the witness has been cross examined. The Court accepted the Trial Judge's finding that several documents (Exs.P.20 to P.33) were already on record and that no objection had been raised when they were marked. It further noted that the accused did not adequately explain the relevancy of additional documents sought to be summoned and that the timing of the application-after cross examination-indicated an attempt to protract proceedings. On these bases the Court found no infirmity in the Trial Court's rejection of the Section 91 application. [Paras 6, 7]

The application under Section 91 Cr.P.C. was rightly rejected as the documents sought were already marked and the application amounted to unjustified prolongation of the trial.

Necessity of production of original documents where certified copies are on record - relevancy of documents - Whether the Trial Court erred in refusing to summon originals when a certified copy of the board resolution (Ex.P.18) and other relevant documents were already on record. - HELD THAT: - The Court upheld the Trial Judge's conclusion that the certified copy of the board resolution marked as Ex.P.18 was sufficient and that demanding production of the original was unnecessary. The Trial Judge had observed that while certain documents were relevant, the accused failed to demonstrate why originals were essential for adjudication of the dispute; the High Court found no error in this reasoning. Consequently, the request for originals (including invoices, challans and returns) was unnecessary in light of the existing record and the lack of a proper explanation of their distinct relevancy. [Paras 3, 6]

The Trial Court correctly held that production of originals was not necessary where certified copies were on record and relevancy of originals was not satisfactorily demonstrated.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the Trial Court's order dated 23.10.2019 rejecting the application under Section 91 Cr.P.C. is upheld.