TaxTMI Updates e-Newsletter
Feb 24,2021

Applicability of transitional provisions - Section 142(11)(b) - Section 142(11)(c) - time of supply - advance ruling-divergence between members (Section 101(3)) - scope of advance ruling (Section 97(2)) - eligibility for transitional credit

Applicability of transitional provisions - Section 142(11)(b) - Section 142(11)(c) - time of supply - advance ruling-divergence between members (Section 101(3)) - Whether Section 142(11)(c) or Section 142(11)(b) applies to the portion of mobilisation advance that transitioned into the GST regime and whether GST is leviable thereon - HELD THAT: - The members expressed conflicting views on whether GST is leviable on the portion of the mobilisation advance that transitioned into the GST regime and on which no tax was paid in the pre GST regime. The SGST Member held that where the supply (as to time) is deemed to have occurred before the appointed date the supply does not suffer GST and consequently Section 142(11)(b) has no application to a mobilisation advance which has been paid and deemed supplied prior to the appointed date; such mobilisation advance having already suffered service tax (to the extent applicable) will not be subject to GST. The CGST Member held that transition provisions must be applied to advances which constitute consideration for supplies made after the appointed date; the mobilisation advance accounted as advance on the appointed date and not adjusted in RA bills is consideration for supplies in the GST regime and GST is leviable on that amount reduced by service tax paid under the old law, invoking Section 142(11)(b). Because the two members differed on the determinative question of time of supply, the applicable transitional provision and the levy of GST, Section 101(3) operates: where the members differ on a point referred to in appeal, it is deemed that no advance ruling can be issued on that question. Accordingly no advance ruling is issued on the applicability of Section 142(11)(b) or Section 142(11)(c) and on the liability to pay GST in respect of the transitioned mobilisation advance which had not suffered tax in the pre GST regime.

On the question of which transitional provision applies and whether GST is leviable on the transitioned mobilisation advance that had not suffered pre GST tax, no advance ruling is issued because of divergence of opinion between the members under Section 101(3).

Scope of advance ruling (Section 97(2)) - eligibility for transitional credit - Whether the Appellate Authority can rule on the appellant's eligibility to avail transitional input tax credit transferred via TRAN 1 - HELD THAT: - The authority examined the scope of matters on which advance rulings may be given as confined by Section 97(2) and the eligibility to seek a ruling under Section 95. The Authority agreed with the lower authority's conclusion that questions relating to entitlement to transitional credit (eligibility to take credit based on transitional provisions) do not fall within the matters on which an advance ruling can be sought in the present proceedings. The appellate authority therefore declined to answer the question on eligibility to transitional credit, noting the limits of the advance ruling mechanism.

The question of eligibility to avail transitional credit is not within the purview of the Advance Ruling Authority and is not answered.

Final Conclusion: Because the two members reached divergent conclusions on the determinative question of time of supply and the applicability of Sections 142(11)(b)/(c), no advance ruling is issued on whether GST is leviable on the transitioned portion of the mobilisation advance; separately, the Authority holds that entitlement to transitional credit is not a question within the scope of the advance ruling and therefore is not decided.

Right to be heard - natural justice - ex parte proceeding - opportunity to file reply - remand for fresh consideration - proceedings under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017

Right to be heard - natural justice - ex parte proceeding - Validity of the order dated 20.02.2020 passed under Section 129(3) in the absence of a fresh notice or opportunity to be heard. - HELD THAT: - The Court found on the record that although notice for the proceeding fixed on 10.02.2020 was served, no order was passed on that date and the matter remained pending until 15.02.2020 when an order to proceed ex parte was recorded. In these circumstances the petitioner did not lose the right to be heard before the order of 20.02.2020 was passed. Denial of an opportunity to be heard rendered the order of 20.02.2020 unsustainable and the appellate authority erred in upholding it. The determinative reasoning is that a proper officer proposing to pass an order on a date other than that specified must afford the affected party an opportunity to appear or issue fresh notice; absence of such procedure violates principles of natural justice. [Paras 6, 7, 8]

Order dated 20.02.2020 is quashed for denial of opportunity to be heard; appellate authority erred in upholding it.

Remand for fresh consideration - opportunity to file reply - Relief and further course of action: whether the matter should be remitted for fresh decision and whether the petitioner should be granted an opportunity to file a reply. - HELD THAT: - Having set aside the impugned orders, the Court remitted the matter to the proper officer to pass a fresh order in accordance with law. In the interest of justice the petitioner was granted one last opportunity to file his reply to the notice dated 10.02.2020 within a week from the date of this order and to place a copy of the High Court order before the proper officer. The remand is for fresh consideration on merits after giving the petitioner the afforded opportunity. [Paras 9, 10]

Orders dated 03.06.2020 and 17.07.2020 set aside; matter remitted to the proper officer for fresh adjudication after giving the petitioner one final opportunity to file his reply.

Final Conclusion: Writ petition allowed; impugned orders set aside and the matter remitted to the proper officer for fresh decision in accordance with law after affording the petitioner one final opportunity to file his reply.

Attachment of bank account under Section 83 of the CGST Act, 2017 - search proceedings under Section 67 of the CGST Act, 2017 - undertaking to maintain minimum bank balance as tangible security - conditional lifting of provisional attachment and permission to operate bank account

Attachment of bank account under Section 83 of the CGST Act, 2017 - conditional lifting of provisional attachment and permission to operate bank account - undertaking to maintain minimum bank balance as tangible security - Attachment of the petitioner's bank account provisionally made under Section 83 was to be lifted on condition that the petitioner maintain a specified minimum balance and furnish an undertaking. - HELD THAT: - The Court noted that the impugned provisional attachment arose in the course of ongoing search and inquiry under Section 67, with potential tax liability asserted by the department. The Court observed prima facie that lifting an attachment could be considered if the writ-applicant furnished tangible security equivalent to the amount claimed by the department. Counsel for the petitioner offered that the petitioner would maintain the balance present at the time of attachment (Rs. 22 lac) in the attached account as security and undertake on oath to do so. The learned A.G.P. considered the proposal reasonable and asked that an undertaking be filed. The Court accepted this course, directing that on filing the undertaking on oath and maintaining the specified minimum balance up to the date ordered, the petitioner be permitted to operate the bank account pending the inquiry; the inquiry was to proceed in accordance with law and the respondents were to inform the bank of the Court's order.

The provisional attachment is lifted conditionally: the petitioner may operate the bank account provided the petitioner maintains a minimum balance of Rs. 22 lac up to 21st September 2021 and files an on oath undertaking, and the respondents shall inform the bank; the inquiry shall continue.

Final Conclusion: Writ petition disposed of by permitting the petitioner to operate the attached bank account on the specific condition of maintaining the stated minimum balance and filing the required undertaking, with the departmental inquiry to continue in accordance with law.

Impleadment of the Central Board of Indirect Taxes and Customs as party respondent - issuance of guidelines by way of Circular/Instructions - search proceedings under Section-67 to be conducted strictly in accordance with law - officers to act within the four corners of law and refrain from undue harassment

Impleadment of the Central Board of Indirect Taxes and Customs as party respondent - issuance of guidelines by way of Circular/Instructions - CBIC to be impleaded as party respondent and put on notice regarding issuance of guidelines as directed in the order dated 16th February 2021. - HELD THAT: - The Court directed that all counsel in the respective writ-applications shall implead the Central Board of Indirect Taxes and Customs as a party respondent and amend the cause-title accordingly. The Court put the CBIC to notice to show cause why the guidelines referred to in the Court's earlier order dated 16th February 2021 should not be issued by way of a Circular or administrative instructions. The Additional Solicitor General waived service on behalf of the CBIC and was directed to consult the highest authority of the CBIC on the matter. [Paras 3]

CBIC to be impleaded and is put on notice to consider issuance of the guidelines by Circular/Instructions; ASG waived service and to consult CBIC authorities.

Officers to act within the four corners of law and refrain from undue harassment - search proceedings under Section-67 to be conducted strictly in accordance with law - Allegations of undue harassment by the officers shall be inquired into and officers were cautioned to perform duties within law; search proceedings under Section-67 remain permissible but must comply with legal requirements. - HELD THAT: - The Court recorded an assurance from the Additional Director General that an appropriate inquiry has been initiated into the allegations of undue harassment and that any inquiry or investigation will be conducted in accordance with law. The Court made clear that, while it appreciates enforcement efforts against fraud and tax evasion, officers must not take law into their hands and must act within the four corners of law. It further clarified that officers remain at liberty to conduct search proceedings under Section-67, provided such proceedings are strictly in accordance with law. [Paras 1, 4, 5]

Inquiry into allegations to be carried out according to law; officers warned to desist from harassment and may conduct searches under Section-67 only in strict compliance with legal norms.

Judicial oversight by way of directions in public interest - Court summoned officers to address the allegations by joining the video conference and recorded its stance on not discouraging officers while warning them to observe legal limits. - HELD THAT: - Because of the serious allegations, the Court required senior officers of the DGGI, Surat to join the video conference and respond to the writ-applications. The Court emphasized that the purpose was not to lower officers' morale but to remind them to perform duties lawfully. The officers were informed that they need not attend the next hearing, and the Court's message to them was reiterated. [Paras 1, 5, 6]

Senior officers were called to address complaints; Court reiterated support for lawful enforcement while warning against unlawful conduct and dispensed with their attendance at the next hearing.

Final Conclusion: The Court ordered impleadment of the CBIC and put it on notice to consider issuing the earlier-directed guidelines by Circular/Instructions; recorded that an inquiry will be conducted into allegations of harassment and cautioned officers to perform searches and other enforcement actions strictly within legal limits.

Withholding of refund under section 54(11) of the Central Goods and Services Tax Act, 2017 - mandatory recording of reasons in Part B of Form GST RFD-07 under Rule 92(2) of the CGST Rules, 2017 - provisional refund under Rule 91 of the CGST Rules, 2017 - communication of order and facilitation of right of appeal under section 107 of the Act - expedited completion of investigation affecting refund - unblocking of Electronic Credit Ledger and procedural remedy

Withholding of refund under section 54(11) of the Central Goods and Services Tax Act, 2017 - mandatory recording of reasons in Part B of Form GST RFD-07 under Rule 92(2) of the CGST Rules, 2017 - Validity of the Principal Commissioner's decision dated 13.10.2020 withholding the refund and conformity of that decision with section 54(11) of the Act and Rule 92(2) read with Part B of Form GST RFD-07. - HELD THAT: - Section 54(11) authorises withholding of refund only where the authority forms an opinion that grant of refund is likely to adversely affect the revenue on account of malfeasance or fraud, and such opinion must be formed after giving the taxable person an opportunity of being heard. Rule 92(2) mandates that where the proper officer or Commissioner is of the opinion that refund is liable to be withheld under sub-section (10) or (11), an order must be passed in Part B of Form GST RFD-07 stating the reasons for withholding. Part B thus has statutory force as integral to the Rules and requires specific reasons linking the withholding to malfeasance or fraud and to the risk to revenue. The Court examined the original file and found only a conclusory note that refund may be withheld 'till completion of the investigation' without recording the requisite opinion or assigning the reasons in Part B of FORM GST RFD-07, and that the decision was not communicated to the petitioner. The absence of recorded reasons in the prescribed form and lack of communication frustrates the statutory safeguards and the assessee's appellate rights.

The decision dated 13.10.2020 is quashed and the matter remitted for fresh decision; the competent authority must decide afresh within 15 days on the question of withholding, record reasons in Part B of Form GST RFD-07 in conformity with section 54(11) and Rule 92(2), and communicate the order to the petitioner.

Provisional refund under Rule 91 of the CGST Rules, 2017 - Entitlement to consideration of provisional refund and requirement to decide the prayer for provisional refund when the authority reconsiders withholding. - HELD THAT: - Rule 91(2) provides for passing an order sanctioning provisional refund within the prescribed period after acknowledgement where the officer is prima facie satisfied. The Court directed that while the competent authority re-examines the question of withholding under section 54(11), it shall also decide the petitioner's prayer for provisional refund. The fresh decision is to be taken on the basis of the record already available since hearing has been afforded and the 'record of personal hearing' is on file.

On remand the authority shall concurrently consider and decide the petitioner's claim for provisional refund, and pass appropriate orders while disposing the withholding question.

Expedited completion of investigation affecting refund - Requirement to expedite and conclude the investigation said to be pending so that final refund proceedings can be completed. - HELD THAT: - The withholding decision was premised on an investigation said to be pending. The Court directed that the investigation be expedited and completed as far as possible within four months from the date of the order, and that once the investigation is completed, requisite orders for final refund be passed by the competent authority. This direction is aimed at preventing undue prejudice to the petitioner's business from prolonged non-finalisation of the refund process.

The department shall expedite and, as far as possible, complete the investigation within four months and thereafter pass final orders on refund.

Unblocking of Electronic Credit Ledger and procedural remedy - Procedure for consideration of the petitioner's grievance about the Electronic Credit Ledger being blocked and the remedial steps to be followed. - HELD THAT: - The petitioner contended that because the Electronic Credit Ledger was blocked, it could not cure deficiencies in certain other refund applications. The Court directed that the petitioner shall make an application for unblocking to the Principal Commissioner within ten days, and upon such application the Principal Commissioner or any other competent authority shall take an appropriate decision and communicate it forthwith. The direction confines the matter to a prompt administrative decision rather than directing immediate unblocking without application.

The petitioner to apply for unblocking within ten days; the competent authority must decide and communicate the decision forthwith.

Final Conclusion: The Principal Commissioner's decision dated 13.10.2020 withholding refund is quashed; the matter is remitted for fresh decision within 15 days with reasons recorded in Part B of Form GST RFD-07 and communicated to the petitioner; the authority shall decide the provisional refund claim while reassessing withholding, expedite and complete the investigation within four months and thereafter decide final refund, and the petitioner may apply for unblocking the Electronic Credit Ledger to which the department must promptly respond.

IGST refund on zero-rated supplies - Shipping bill deemed application for refund (Rule 96) - Withholding refund limited to contingencies in Rule 96(4) - Higher duty drawback vs IGST refund - double benefit principle - Circulars subordinate to statutory rules - Refund claim under Section 54 read with Rule 96

IGST refund on zero-rated supplies - Shipping bill deemed application for refund (Rule 96) - Higher duty drawback vs IGST refund - double benefit principle - Circulars subordinate to statutory rules - Whether the IGST refund could be denied on the ground that the exporter had claimed higher duty drawback in the shipping bill - HELD THAT: - The Court followed the Division Bench decision in M/s. Amit Cotton Industries and the Bench's own order in Awadkrupa Plastomech, holding that the shipping bill is a deemed application for refund under Rule 96 and that the circumstances in which a refund can be withheld are limited to the contingencies enumerated in Rule 96(4). A departmental circular (Circular No.37/2018) cannot override or supplant the statutory scheme in Rule 96. Where the higher and lower drawback rates are identical, the claimed drawback represents only the Customs component and does not amount to availing the erstwhile Central Excise or Service Tax elements; consequently there is no double benefit that would justify denial of the IGST refund. The Court rejected the revenue's submission that absence of system mechanism or non return of any differential amount precluded refund, observing that the circular is not legally sustainable to defeat the statutory deeming provision and the limited withholding grounds in Rule 96. [Paras 6, 7, 8, 9]

The writ applicants are entitled to the IGST refund; denial based solely on the claim of higher drawback or on Circular No.37/2018 is not sustainable.

Direction to decide in accordance with precedent - Mandamus to sanction refund - Whether the respondent should be directed to reconsider and sanction the IGST refund in accordance with the Court's precedents - HELD THAT: - Noting that the ratio in Amit Cotton Industries and the order in Awadkrupa Plastomech apply to the facts of these matters, the Court directed the respondent to immediately examine the refund claims afresh and pass appropriate orders in accordance with law and those decisions. The Court fixed a time bound mechanism for compliance and indicated that the petitioner may press the refund claim before the authority with a copy of this order. [Paras 10, 11]

Respondent No.1 to reconsider and pass appropriate orders on the IGST refund claims within six weeks from receipt of the writ, in accordance with the cited precedents; petitioners may pursue refund with the authority.

Final Conclusion: Writ applications disposed directing respondent to reconsider and decide the IGST refund claims in accordance with the ratio of Amit Cotton Industries and Awadkrupa Plastomech within six weeks; denial based solely on Circular No.37/2018 or on claiming higher drawback where drawback columns reflect only the Customs component is unsustainable.

Provisional attachment under Section 83 of the CGST Act - initiation of proceedings under Section 74 of the CGST Act - requirement of issuance of notice under Section 74(1) - effect of voluntary deposit under Section 74(5)-(7) - exercise of attachment power sparingly to protect revenue and not to ruin business

Provisional attachment under Section 83 of the CGST Act - requirement of issuance of notice under Section 74(1) - Validity of provisional attachment of the petitioner's bank accounts under Section 83 where no notice under Section 74(1) has been issued - HELD THAT: - The Court found that, in the present matter, no notice under sub section (1) of Section 74 had been issued prior to the provisional attachment. The petitioner's challenge to the freeze of its bank account was upheld because pendency of proceedings under Section 83, insofar as they are predicated on Section 74, arises only after issuance of the show cause notice contemplated by Section 74(1). The Court relied on precedent reasoning that the attachment power under Section 83 is drastic and must be exercised sparingly to protect the revenue and not to destroy a running business. In the absence of any material showing that the statutory requirement for issuance of notice under Section 74(1) has been satisfied, the attachment could not be sustained and was set aside, while leaving the revenue free to initiate proceedings in accordance with law. [Paras 6, 10, 12]

Impugned order attaching the bank accounts set aside for want of issuance of notice under Section 74(1); revenue at liberty to proceed in accordance with law.

Effect of voluntary deposit under Section 74(5)-(7) - requirement of issuance of notice under Section 74(1) - Whether a voluntary deposit by the assessee negates the requirement of issuing a notice under Section 74(1) or renders sub section (7) otiose - HELD THAT: - The Court examined sub sections (5) and (7) of Section 74 and held that a voluntary payment under sub section (5) does not eliminate the statutory role of the show cause notice. Sub section (7) expressly contemplates that if the proper officer concludes the voluntary payment falls short of the amount actually payable, he must proceed to issue the notice provided for in sub section (1). Thus, acceptance of the respondent's contention that a voluntary deposit completely obviates issuance of notice would render sub section (7) meaningless. The Court rejected the revenue's contention that the department acted pursuant to the petitioner's letter requesting a lien, noting that the petitioner's communication was made under compulsion of frozen accounts and without prejudice to its rights. [Paras 4, 6, 9]

Voluntary deposit under Section 74(5) does not dispense with issuance of notice; where deposit is insufficient, the proper officer must issue notice under Section 74(1) as envisaged by Section 74(7).

Final Conclusion: Writ petition allowed; attachment of the petitioner's bank accounts set aside for lack of issuance of the statutory notice under Section 74(1). The revenue remains free to initiate proceedings in accordance with law, including issuing the appropriate notice and then taking steps consistent with statutory provisions.

Bail under Section 439 Cr.P.C. - Pre-charge evidence stage - Custodial period as factor in grant of bail - Maximum sentence as relevant to bail - Seriousness of offence and impact on economy - Reliance on coordinate bench precedents - Second bail application

Bail under Section 439 Cr.P.C. - Custodial period as factor in grant of bail - Maximum sentence as relevant to bail - Pre-charge evidence stage - Reliance on coordinate bench precedents - Seriousness of offence and impact on economy - Grant of second bail application of the accused arrested for offences under the Central Goods and Services Tax Act, 2017. - HELD THAT: - The Court considered that the petitioner had remained in custody for one year and two months and that the maximum sentence under the statute is five years. The matter was at the stage of pre-charge evidence with most witnesses not yet examined. While the prosecution urged the gravity of the offence and its impact on the economy, the Court placed weight on the period of custody, the limited stage of investigation and proceedings, and the fact that Coordinate Benches had in similar GST Act cases granted bail. Balancing these factors, the Court found it appropriate to permit the second bail application despite the prosecution's submissions on seriousness. [Paras 6, 7]

Second bail application allowed; accused to be released on bail on furnishing a personal bond and two sureties and subject to appearance on all hearing dates and as and when called.

Final Conclusion: The petition is allowed and the accused is directed to be released on bail on specified bond and surety conditions, subject to attendance on all dates and further orders of the trial court or any court to which the matter is transferred.

Mandamus - refund of tax and penalty deposited under protest - administrative direction to decide representation expeditiously - Circular prescribing procedure for detention, release and upload of FORM GST MOV-09 - non-adjudication on merits

Refund of tax and penalty deposited under protest - Circular prescribing procedure for detention, release and upload of FORM GST MOV-09 - mandamus - administrative direction to decide representation expeditiously - non-adjudication on merits - Petitioner's claim for refund of tax and penalty deposited under protest and related representation was remanded to the concerned authority for consideration and decision. - HELD THAT: - The High Court did not examine or adjudicate the merits of the petitioner's substantive claim, including the contention that the penalty/MOV09 order contravened the cited circulars. Instead, the Court disposed of the writ petition by directing respondent no. 2 to consider and decide the representation already filed by the petitioner. The direction is administrative and interlocutory: the authority is expected to examine the petitioner's claim in the light of the material and applicable instructions (including the circulars relied upon by the petitioner) and pass appropriate orders. No substantive finding was recorded by the Court either accepting or rejecting the petitioner's legal contentions.

The petition is disposed of by remanding the petitioner's representation to respondent no. 2 for expeditious consideration and decision, preferably within two weeks; no adjudication on merits.

Final Conclusion: Writ petition disposed by administrative direction: respondent no. 2 to consider and decide the petitioner's representation (seeking refund of tax and penalty and related reliefs) expeditiously, preferably within two weeks; Court made no merit determination.

Bail in non-bailable offence - Judicial discretion in granting bail - Prima facie satisfaction - Misappropriation of GST funds - Forged GST challans and false GSTR-3B returns - Obstruction or evasion of investigation

Bail in non-bailable offence - Prima facie satisfaction - Misappropriation of GST funds - Forged GST challans and false GSTR-3B returns - Obstruction or evasion of investigation - Judicial discretion in granting bail - Bail application of the accused Harish Kumar Rampal rejected - HELD THAT: - The Court applied established principles governing grant of bail in non-bailable offences as discussed in Dipak Subhash Chandra Mehta Vs. CBI and the discretionary approach described in Anil Mahajan Vs. Commissioner of Customs . The Court found prima facie that the accused, a practising Chartered Accountant and statutory auditor for M/s Starcrest Services Pvt. Ltd., collected GST amounts and misappropriated a substantial portion instead of depositing it to the government. The impugned conduct included generation of forged GST challans and false GSTR-3B returns which misled the company into believing government dues were paid. The Court also relied on material showing substantial receipts into the accused's firm's bank account during July, 2017 to November, 2020 and limited deposits to the exchequer, together with admissions by employees about creation of forged documents on the accused's directions. The Court rejected the accused's plea of cooperation and medical avoidance of investigation, concluding there was evidence of attempt to evade investigation and risk of tampering with evidence. Weighing the nature and gravity of the accusation, the supporting material and the accused's conduct, the Court was not prima facie satisfied to release the accused on bail.

Bail denied and the application disposed of.

Final Conclusion: Bail application rejected: on prima facie examination the Court found misappropriation of GST funds, fabrication of GST documents, and conduct indicative of evasion of investigation; accordingly bail was refused.

Exemption u/s 11 - Rejection of application of registration u/s 12AA - Object of Trust charitable or not u/s 2(15) - Receipt of capitation fee for admission of students found during search - HELD THAT:- As appellant seeks leave to withdraw this appeal in view of the fact that the appellant has resolved its dispute under Vivad Se Vishwas Scheme, 2020.

The civil appeal is, accordingly, dismissed as withdrawn.

Treatment of perquisites arising from foreign stock options - interpretation of residency for taxability under Section 5(1)(c) and 6(6)(a) - income arising outside India - effect of Form-16 and TDS deduction on return processing - remand for fresh consideration on mixed question of fact and law

Treatment of perquisites arising from foreign stock options - interpretation of residency for taxability under Section 5(1)(c) and 6(6)(a) - effect of Form-16 and TDS deduction on return processing - remand for fresh consideration on mixed question of fact and law - Whether the claim of exemption of income from sale of stock options (claimed as income arising outside India by an NOR assessee) requires fresh adjudication and verification and whether the matter should be remitted to the Assessing Officer for fresh decision. - HELD THAT: - The Court observed that the assessee asserted NOR status and that the stock options were granted, vested and sold while he was resident in the USA and that proceeds were routed to a US bank account. The Tribunal and revenue had relied upon Form-16 and TDS entries to treat the proceeds as taxable perquisites and to reject the exemption claimed under Section 5(1)(c) read with the residency provision. The Court noted that the question of NOR status and the origin/time of acquisition of the stock options involves a mixed question of fact and law and that relevant documentary material (including the worksheet and passport particulars) had been tendered by the assessee. In view of these considerations, and in the interest of justice, the Court held that the matter ought not to be finally decided on the material then before the Tribunal but remitted the issue to the Assessing Officer for fresh enquiry and decision on merits, permitting the assessee to produce all relevant documents and vesting the Assessing Officer with the duty to decide in accordance with law. [Paras 20]

The Tribunal's order is set aside and the matter is remitted to the Assessing Officer for fresh adjudication on merits regarding the NOR status and taxability of the stock option proceeds; the assessee is granted liberty to produce relevant documents.

Final Conclusion: The appeal is allowed; the Tribunal's order is set aside and the matter is remitted to the Assessing Officer for fresh consideration on merits of the NOR/residency and taxability issues concerning the foreign stock option proceeds, with liberty to the assessee to produce relevant documents; no costs.

Rectification of order - limitation under Section 254(2) of the I.T. Act - power to condone delay - recall of order as consequence of rectification - order passed in breach of Tribunal Rules (Rule 24)

Rectification of order - limitation under Section 254(2) of the I.T. Act - power to condone delay - Miscellaneous Application under Section 254(2) filed by the Revenue is barred by limitation and is not maintainable. - HELD THAT: - The Tribunal found that the Miscellaneous Application was filed beyond the time prescribed by Section 254(2) of the I.T. Act (the order having been passed on 30.8.2019 and the M.A. filed on 24.9.2020), and therefore is barred by limitation. The Revenue's request for condonation of delay was rejected following coordinate-bench precedent holding that the Tribunal has no power to condone delay beyond the statutory period for filing an application under Section 254(2). The decision relies on earlier authorities recognising that while rectification under Section 254(2) may lead to recall of an order as a consequence, the statutory limitation period governs the maintainability of such rectification applications; even where an order may be irregular or void for breach of Rule 24, limitation applies and the order remains effective until set aside by competent proceedings. Applying these principles, the Tribunal dismissed the M.A. as non-maintainable.

M.A. dismissed as barred by limitation and non-maintainable.

Final Conclusion: Following coordinate-bench and higher-court authority, the Tribunal dismissed the Revenue's Miscellaneous Application under Section 254(2) as time-barred and refused condonation of delay; the application was held non-maintainable.

Exemption under Section 54F - constructive ownership and purchase in name of family member - nexus between sale consideration and investment in new residential house - purposive construction of tax statute - remand for verification of selling expenses

Exemption under Section 54F - constructive ownership and purchase in name of family member - nexus between sale consideration and investment in new residential house - purposive construction of tax statute - Assessee entitled to deduction under Section 54F though the new residential property was purchased in the name of his married widowed daughter who is a dependent legal heir. - HELD THAT: - The Tribunal examined Section 54F and the statutory requirement that the assessee purchase or construct a residential house within the specified period. It found no express requirement in the section that the new asset must be registered only in the name of the assessee. The assessee paid the purchase consideration out of the sale proceeds of the original asset and there was a direct nexus between the sale consideration and the investment in the new residential house. The daughter in whose name the property was purchased was a dependent, married widowed daughter and a legal heir, with no independent source of income; this fact was supported by a joint affidavit. Applying a purposive and liberal construction to advance the object of Section 54F and relying on precedents recognising constructive ownership where payment is made by the assessee and the acquisition is part of the same scheme, the Tribunal held that the investment qualifies for exemption under Section 54F and directed the Assessing Officer to grant the exemption to the assessee to the extent of the amount invested in the residential house in the daughter's name. [Paras 9]

Exemption under Section 54F granted on the amount invested in the residential house purchased in the name of the assessee's married widowed dependent daughter.

Remand for verification of selling expenses - Disallowance of selling/transfer expenses remitted to Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal noted that the assessee had not furnished full details or documentary breakup of the selling/transfer expenses before the lower authorities. In the interest of justice and for proper appreciation of evidence, the Tribunal did not decide the allowability on merits but remitted the issue to the Assessing Officer with a direction to the assessee to produce the requisite details and documents for fresh adjudication. [Paras 10]

Issue of selling expenses remitted to the Assessing Officer for reconsideration and adjudication on production of particulars.

Final Conclusion: Assessee's appeal partly allowed: exemption under Section 54F directed in respect of investment in the residential property purchased in the name of the assessee's dependent married widowed daughter; the claim for selling/transfer expenses is remanded to the Assessing Officer for fresh adjudication.

Reopening of assessment - reason to believe - change of opinion - power to reopen under Section 147 - requirement of tangible material and objective reason - survey under Section 133A and discovery of un reconciled stock - metal loan / custody of third party gold

Reopening of assessment - reason to believe - change of opinion - power to reopen under Section 147 - requirement of tangible material and objective reason - survey under Section 133A and discovery of un reconciled stock - metal loan / custody of third party gold - Validity of reopening assessments for AYs 2006-07 to 2012-13 on the basis of survey finding of 17.319 kgs of un reconciled gold. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer following a survey under Section 133A which noted 17.319 kgs of gold described as belonging to customers and family members. The AO's reasons accept that the impugned gold belonged to family members and proceed on the opinion that such gold should have been treated as transferred to the firm and brought to tax; no specific allegation of escapement of income was articulated in the recorded reasons. Section 147 permits reopening only where the AO has a reason to believe that income chargeable to tax has escaped assessment; post amendment jurisprudence requires that such belief be supported by objective material having a live link to the belief and not mere change of opinion. Applying these principles, the Tribunal found both the 'reason' and the 'belief' in this case to be subjective because the AO merely advanced an alternative view as to the accounting treatment of metal taken on loan from family members, without adducing tangible material to show escapement of income. The Tribunal further noted prior acceptance by revenue of the metal loan character (earlier survey reconciliations, treatment in AY 2005 06, payment of user fees and related agreements), which undercuts any contention that the stock was unexplained. In those circumstances reopening amounted to a review or change of opinion by the AO rather than a reassessment justified by reason to believe that income had escaped, and therefore was not valid. [Paras 9, 10, 13, 14, 16]

Reopening of assessment for each of the years 2006-07 to 2012-13 is invalid as it is founded on mere change of opinion and absence of objective reasons to believe that income had escaped assessment; the reopening is quashed.

Final Conclusion: All appeals are allowed; the reopening and consequent assessment orders for assessment years 2006-07 to 2012-13 are quashed.

Explanation of source of deposits - Unexplained credits / unexplained cash credits - Creditworthiness and genuineness of depositors - Additions in the hands of the firm vis-a -vis partner - Acceptance of source in reassessment of the creditor - Principles of natural justice - notice before making additions

Explanation of source of deposits - Additions in the hands of the firm vis-a -vis partner - Principles of natural justice - notice before making additions - Deletion of addition of Rs. 20,50,000/- credited to partner Smt. Swaran Kanta's capital account - HELD THAT: - Tribunal upheld the CIT(A)'s finding that the firm had satisfactorily explained the source of the capital credited to the partner. Documentary evidence showed transfers from the partner's NRE-backed bank account (funds received from her son, an NRI) into her savings account and thereafter into the firm's capital account. The bench held that where the partner's source is satisfactorily explained and evidenced through banking channels, any addition, if at all warranted, should be made in the hands of the partner and not the firm. The tribunal also noted that the assessee placed evidence of the source of source (remittances from abroad) which was not shown to be adverse by the Assessing Officer, and relied on precedent supporting that once the contributor's capacity to invest is established the firm's liability to explain ceases. [Paras 6, 10]

Addition of Rs. 20,50,000/- deleted

Creditworthiness and genuineness of depositors - Unexplained credits / unexplained cash credits - Additions in the hands of the firm vis-a -vis partner - Deletion of addition of Rs. 40,50,000/- treated as unexplained credit from Shri Ankush Gupta - HELD THAT: - Tribunal concurred with the CIT(A) that the assessee had produced bank statements and supporting documents demonstrating the identity and creditworthiness of Shri Ankush Gupta and the source of source (amounts received by him from his NRI brother and from a cousin and sale proceeds). The receipts were through banking channels and the assessee furnished bank records of the depositor(s). On perusal the bench was satisfied that the amounts given to the firm were out of explained sources; consequently the addition in the firm's hands was not justified and, if required, should have been made in the hands of the depositor. [Paras 7, 19]

Addition of Rs. 40,50,000/- deleted

Acceptance of source in reassessment of the creditor - Unexplained credits / unexplained cash credits - Principles of natural justice - notice before making additions - Deletion of addition of Rs. 3,88,82,000/- claimed to be received from M/s Shree Radha Commodity Services - HELD THAT: - Tribunal relied on an earlier order in the assessee's own case for A.Y. 2008-09 (reproduced in the record) where identical transactions involving M/s Shree Radha Commodity Services were examined and the cash deposits in that entity's account were accepted as explained in reassessment proceedings. Since the creditor's bank deposits had been accepted as genuine by the Department when framing assessment/reassessment of the creditor, amounts subsequently received by the firm through banking channels could not be treated as unexplained in the hands of the firm. Following that reasoning, the tribunal found no ground to interfere with the CIT(A)'s deletion of the addition. [Paras 11, 24]

Addition of Rs. 3,88,82,000/- deleted

Final Conclusion: The Department's appeal is dismissed; the Tribunal upholds the CIT(A)'s deletion of the impugned additions after finding that sources were satisfactorily explained, depositors' creditworthiness was established and amounts received through banking channels could not be treated as unexplained in the hands of the firm.

Treatment of cash deposits as unexplained and addition under section 68 of the Income tax Act - onus on the assessee to substantiate bank deposits with contemporaneous documentary evidence - peak bank balance method for restricting additions relating to unexplained credits - exclusion of opening and closing bank balances from unexplained deposits

Treatment of cash deposits as unexplained and addition under section 68 of the Income tax Act - onus on the assessee to substantiate bank deposits with contemporaneous documentary evidence - peak bank balance method for restricting additions relating to unexplained credits - exclusion of opening and closing bank balances from unexplained deposits - Whether the cash deposits shown in the assessee's bank accounts which were treated as unexplained and added to income should be sustained, deleted or restricted. - HELD THAT: - The Tribunal upheld the Assessing Officer's and CIT(A)'s conclusion that the bulk of the bank deposits could not be accepted as explained. The assessee failed to furnish contemporaneous documentary evidence verifying the claimed sources (business receipts of wife and mother) and did not provide particulars such as their PANs, assessment details or bank account particulars; the Assessing Officer and CIT(A) therefore rightly treated the deposits as unexplained in the absence of proof. However, having examined the assessee's bank statements, the Tribunal observed unrebutted evidence of corresponding withdrawals and an admixture of credits and debits, and applied the principle of restricting the addition to the peak bank balance. The Tribunal also directed exclusion of amounts constituting closing balance as on 31.03.2011 and opening balance as on 01.04.2012 from the addition, following the principle that only transactions within the relevant previous year are to be considered. The Tribunal accordingly confirmed the addition in principle but remitted the matter to the Assessing Officer for recomputation limited to the peak amount and excluding the specified opening/closing balances. [Paras 4, 5]

Addition of cash deposits upheld in principle for being unexplained, but reduced and recomputed by the Assessing Officer by applying the peak bank balance method and excluding the stated opening and closing balances; appeal partly allowed.

Final Conclusion: The Tribunal sustained the finding that the deposits were unexplained due to lack of documentary proof, but directed that the addition be restricted to the peak bank balance and that opening/closing balances be excluded; the appeal is partly allowed for statistical purposes and the Assessing Officer is directed to recompute accordingly.

Transfer pricing adjustment for interest on delayed receivables - working capital adjustment in transfer pricing - recharacterisation of receivables as loans - international transaction including receivables under Section 92B - treatment where assessee is a debt-free company

Transfer pricing adjustment for interest on delayed receivables - working capital adjustment in transfer pricing - recharacterisation of receivables as loans - international transaction including receivables under Section 92B - treatment where assessee is a debt-free company - Validity of the upward transfer pricing adjustment treating delayed inter-company receivables as unsecured loans and charging notional interest - HELD THAT: - The Tribunal examined whether the TPO/AO/DRP were justified in characterising outstanding inter company receivables (beyond contractual credit period) as unsecured loans and making an upward TP adjustment by imputing interest. It accepted the assessee's position that its transfer pricing study had already made working capital adjustments for differences between the assessee and comparables, thereby factoring the impact of receivables into pricing. Relying on the reasoning of the Delhi High Court in PCIT v. Kusum Healthcare Pvt. Ltd. (as applied and explained with reference to CIT v. EKL Appliances Ltd. ), the Tribunal held that where the impact of receivables is reflected in a working capital adjustment, a separate adjustment purely on the basis of outstanding receivables would distort comparability and amount to impermissible recharacterisation of the underlying transaction. The Tribunal further noted the assessee was a debt free company (as per audited financial statements) and applied the principle in PCIT v. Bechtel India Pvt. Ltd. that imputing interest is not warranted in such circumstances. The Tribunal distinguished the decision relied upon by Revenue (Cotton Natural ) on facts and issue, observing it concerned a different question (loan interest and choice of benchmark rate) and was not applicable. No contrary binding decision was shown by Revenue. On these grounds the Tribunal set aside the TP addition of Rs. 51,15,652 made by AO/TPO and upheld by DRP.

The transfer pricing adjustment treating delayed receivables as unsecured loans and imputing interest is not sustainable; the addition is set aside and the assessee's ground is allowed.

Final Conclusion: Appeal allowed; the TP addition of Rs. 51,15,652 made on account of notional interest on delayed inter company receivables is set aside because the working capital adjustment in the assessee's TP study already accounted for the impact of receivables, recharacterisation as a loan was impermissible, and the assessee was debt free.

Deduction under Section 80-IA - ascertained liability versus contingent liability - provision for tariff adjustments as ascertained liability - disallowance under Section 14A read with Rule 8D - computation of book profits under Section 115JB - allowability of amortisation/depreciation of leasehold/unclassified land in computing book profit - precedent value of coordinate-bench and High Court decisions

Deduction under Section 80-IA - precedent value of coordinate-bench and High Court decisions - Allowability of amounts shown as 'Other Income' for deduction under Section 80-IA. - HELD THAT: - The Tribunal held that the disallowance of other income aggregating to the amounts claimed for the specified power projects was not sustainable. The Bench followed earlier coordinate-bench decisions in assessee's own case (including decisions for earlier assessment years) and authoritative decisions cited therein which establish that items shown as 'other income' may be included in profits 'derived from' the eligible business for the purpose of Section 80-IA where the factual matrix is identical and no contrary binding decision has been placed on record. In view of identical facts and absence of any contrary higher court ruling, the AO's exclusion of the said other income from computation of deduction under Section 80-IA was set aside and the AO was directed to recompute the deduction without excluding those items. [Paras 14, 15]

Disallowance of other income for purpose of deduction under Section 80-IA set aside; deduction to be recomputed including the disputed items.

Ascertained liability versus contingent liability - provision for tariff adjustments as ascertained liability - computation of book profits under Section 115JB - Whether the provision of Rs. 14.34 crores for interest to beneficiary states (on account of tariff reduction) is an ascertained liability allowable as expenditure and not to be added back for normal income and book profits under Section 115JB. - HELD THAT: - The Tribunal, following the decision of the Hon'ble Punjab & Haryana High Court in the assessee's own case and relevant Supreme Court and High Court authorities, held that the provision represented a liability which had crystallised (incurred) in the relevant accounting period despite quantification occurring later upon CERC determination. Applying mercantile accounting principles and precedents that a liability accrued in the accounting period is deductible if reasonably ascertainable, the Bench concluded that the provision was not a contingent liability and therefore was allowable for computing taxable income and should not be added back while computing book profits under Section 115JB. The AO was directed to treat the amount as an ascertained liability for both normal tax and MAT computations. [Paras 20, 21]

Provision of Rs. 14.34 crores held to be an ascertained liability; allowed as expenditure for normal income and not to be added back for computation under Section 115JB.

Disallowance under Section 14A read with Rule 8D - precedent value of coordinate-bench decisions - Sustainability of addition under Section 14A read with Rule 8D for expenditure attributable to exempt income. - HELD THAT: - The Tribunal upheld the deletion of the disallowance under Section 14A r.w. Rule 8D. The Bench observed that the AO proceeded under Rule 8D without recording any dissatisfaction with the assessee's account or explaining why the assessee's contention (that investments were made out of own or interest-free government-provided funds and that no expenditure was incurred to earn exempt income) was unacceptable. Relying on earlier co-ordinate-bench orders in the assessee's own case and relevant High Court decisions, the Tribunal found no reason to interfere and affirmed deletion of the addition under Section 14A/Rule 8D. [Paras 29, 30]

Deletion of disallowance under Section 14A r.w. Rule 8D upheld; Revenue's ground dismissed.

Allowability of amortisation/depreciation of leasehold/unclassified land in computing book profit - computation of book profits under Section 115JB - precedent value of coordinate-bench and High Court decisions - Whether depreciation/amortisation claimed on unclassified/leasehold land debited to profit and loss account must be added back while computing book profits under Section 115JB. - HELD THAT: - The Tribunal followed its preceding orders in assessee's own case and the decision of the Hon'ble Punjab & Haryana High Court holding that amortisation of leasehold/unclassified land, made in accordance with accounting standards and Companies Act requirements, is permissible for the purpose of computing book profit under Section 115JB. In absence of any distinguishing facts or any contrary higher court ruling, the CIT(A)'s deletion of the addition was sustained and the AO's attempt to add back the amount was held unsustainable. [Paras 36, 37]

Deletion of add-back of depreciation/amortisation on land for computing book profit under Section 115JB upheld; Revenue's ground dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal for A.Y. 2013-14: (i) other income items were held eligible for deduction under Section 80-IA and directed recomputation; (ii) the provision for tariff-related interest (Rs.14.34 crores) was held an ascertained liability allowable for normal tax and not to be added for MAT; (iii) deletion of disallowance under Section 14A r.w. Rule 8D was upheld; and (iv) add-back of depreciation/amortisation on land for computation of book profit under Section 115JB was disallowed.

Double deduction - allowability of deductions under Chapter VIA vis-a -vis each other - restriction on aggregate deductions under Section 80IA(9) of Chapter VIA - binding effect of Supreme Court precedent under Article 141 of the Constitution - remand for consequential computation and factual verification

Double deduction - allowability of deductions under Chapter VIA vis-a -vis each other - restriction on aggregate deductions under Section 80IA(9) of Chapter VIA - binding effect of Supreme Court precedent under Article 141 of the Constitution - Whether claims of deduction under Section 80IA and Section 80HHC in respect of profits of eligible industrial undertakings constitute impermissible double deduction or are allowable subject to the overall ceiling prescribed by law. - HELD THAT: - The Tribunal accepted the assessee's contention in principle and held that the earlier remand direction to follow the Tribunal's Special Bench (Hindustan Mint & Agro) could not prevail in the face of later and binding judicial developments. The Revenue's SLP in the apex court was dismissed and thus the judicial position favourable to the assessee attained finality. Applying the doctrine of supremacy of the Supreme Court (Article 141), the Tribunal concluded that the twin claims under Section 80IA and Section 80HHC do not amount to an impermissible double deduction so long as the aggregate deductions are restricted to the profits of the undertaking in accordance with legislative intent and binding judicial precedent. Consequently the assessee's substantive grievance was accepted in principle and the Assessing Officer was directed to give effect to the settled legal position. [Paras 5, 6]

The Tribunal allowed the substantive claim that deductions under Section 80IA and Section 80HHC are not to be treated as prohibited double deductions where the aggregate does not exceed the profits of the undertaking, adopting the binding view of the Supreme Court.

Remand for consequential computation and factual verification - Whether and to what extent consequential computation and factual verification should be remitted to the Assessing Officer after acceptance in principle of the assessee's claim. - HELD THAT: - While accepting the assessee's legal position, the Tribunal left quantification and factual determination to the Assessing Officer. The Tribunal noted that the assessee had filed calculation sheets but directed the AO to finalise consequential computations "as per law" after verifying required records and arriving at final figures. The order thus restores the matter to the AO for determination of entitlement and computation consistent with the legal conclusion recorded by the Tribunal. [Paras 6, 7]

The matter of consequential computation and factual verification was remitted to the Assessing Officer to be finalised in accordance with law after verification of records.

Final Conclusion: The four appeals are allowed in principle: the tribunal held that deductions under Section 80IA and Section 80HHC are not to be disallowed as double deductions so long as their aggregate does not exceed the profits of the eligible undertaking, and remitted the matter to the Assessing Officer for consequential computation and factual verification in accordance with law.

Validity of proceedings under section 153C - Meaning of "belongs" in section 153C(1) (pre-2015) - Presumption under section 292C - Assessment quashed for lack of jurisdiction under section 153C - On money additions and requirement of evidentiary nexus for source of funds - Penalty under section 271(1)(c) and absence of deliberate concealment - Applicability of amended section 153C w.e.f. 01.06.2015

Validity of proceedings under section 153C - Meaning of "belongs" in section 153C(1) (pre-2015) - Presumption under section 292C - Proceedings and assessments framed under section 153C for A.Y. 2011-12 are void for want of jurisdiction. - HELD THAT: - The Tribunal examined the satisfaction recorded and the seized sale deed found at the premises of the searched person (buyer). Applying the law as it stood prior to the 01.06.2015 amendment, jurisdiction under section 153C(1) arose only if the seized document "belongs" to a person other than the person searched. Reliance was placed on the Delhi High Court decision in Pepsico India Holdings (and subsequent consistent decisions) which distinguishes "belongs to" from "pertains to" or "relates to"; a sale deed found in the purchaser's premises cannot be said to "belong to" the seller/attorney merely because the seller's or attorney's name appears in it. The presumption under section 292C that a document found in the possession of the searched person belongs to that person was not rebutted on the facts. Applying these principles to the seized sale deed, the Tribunal held that the required jurisdictional satisfaction under the pre 2015 section 153C(1) did not exist and therefore the assessments under section 153C r.w. s.143(3) were quashed. [Paras 14, 15]

Assessment proceedings under section 153C for A.Y. 2011-12 quashed for want of jurisdiction.

On money additions and requirement of evidentiary nexus for source of funds - Requirement of evidentiary nexus for additions - Addition made in respect of undisclosed 'on money' for A.Y. 2012-13 partly sustained to the extent of the amount for which source could not be established. - HELD THAT: - The Tribunal reviewed the sale agreement, statements recorded in post-search enquiries, bank deposit entries of the sellers and admissions made by the assessees. Although much of the consideration and its timing could be linked to the amounts received from the buyer (M/s Agrawal Buildcon), the Tribunal found that a specific cash amount (aggregate cash deposits of Rs. 24,70,000 in April 2011) lacked satisfactory evidentiary nexus to the buyer's payments. On the facts and evidence, the Tribunal held that only that portion for which source was not satisfactorily established should be sustained as income of the assessees. Accordingly an amount corresponding to the assessee's 40% share, i.e., Rs. 9,88,000, was confirmed for A.Y. 2012-13 and the remaining addition was deleted. [Paras 22, 29, 30]

Addition in respect of on money for A.Y. 2012-13 partly confirmed to the extent of Rs. 9,88,000; balance deleted.

Penalty under section 271(1)(c) and absence of deliberate concealment - Mere disallowance of deduction not sufficient for penalty - Penalty under section 271(1)(c) for A.Y. 2006-07 to A.Y. 2010-11 deleted. - HELD THAT: - Penalty was imposed consequent to disallowance of deduction under section 80IB(10). The Tribunal held that the disallowance arose from non fulfilment of a technical/ documentary condition (delay in obtaining completion certificate) and there was no material to show that the assessee furnished inaccurate particulars or acted with deliberate concealment of income. Relying on the perspective of the jurisdictional High Court, the Tribunal concluded that mere disallowance of a claimed deduction does not establish the mens rea required for penalty under section 271(1)(c). [Paras 41, 42]

Penalty under section 271(1)(c) for A.Y. 2006-07 to A.Y. 2010-11 deleted.

Penalty under section 271(1)(c) and linkage to sustained additions - Penalty for A.Y. 2011-12 quashed; penalty for A.Y. 2012-13 sustained only to the extent of the addition confirmed (Rs. 9,88,000). - HELD THAT: - Because the assessments for A.Y. 2011-12 were quashed for lack of jurisdiction under section 153C, the related penalty orders could not be sustained and were quashed. For A.Y. 2012-13 the Tribunal limited the penalty to the quantum of income it upheld (the portion of on money addition of Rs. 9,88,000), directing penalty to be levied only on that sustained amount. [Paras 43, 45, 48]

Penalty for A.Y. 2011-12 quashed; penalty for A.Y. 2012-13 partly sustained and to be levied only on the confirmed addition of Rs. 9,88,000.

Final Conclusion: The Tribunal quashed assessments framed under section 153C r.w. s.143(3) for A.Y. 2011-12 (both assessees) for want of jurisdiction as the seized sale deed did not "belong" to them under the pre 2015 law; for A.Y. 2012-13 the on money addition was partly sustained (Rs. 9,88,000) and the balance deleted; consequentially penalties under section 271(1)(c) for A.Y. 2006-07 to A.Y. 2010-11 were deleted, penalties for A.Y. 2011-12 quashed, and penalties for A.Y. 2012-13 limited to the sustained addition.

Deductibility of business expenditure - inventory write off due to expiry / best before date - normal shrinkage/shortage in trading business - burden of proof to establish risk and reward of stock - reliance on coordinate-bench appellate order

Inventory write off due to expiry / best before date - deductibility of business expenditure - burden of proof to establish risk and reward of stock - reliance on coordinate-bench appellate order - Whether the claimed inventory loss on account of pulling back goods from market due to expiry (best before date) is allowable as business expenditure for Assessment Year 2006-07 - HELD THAT: - The Assessing Officer disallowed the claim because the assessee had changed its explanation, failed to produce agreement with distributors showing risk lay with the assessee, and did not furnish evidence that stocks were actually called back; accordingly an addition was made. The Commissioner (Appeals) restricted the allowance to 70% by following a coordinate-bench decision in the assessee's own case for AY 2008-09 which accepted that some inventory loss is inevitable in the business and allowed 70% of the claim in the absence of fuller breakup or evidence. The Tribunal examined the nature of the loss and the material on record and observed that the loss arises from passing of the expiry date of finished products whose market value becomes nil and no revenue was shown to have been derived from such goods. The Tribunal noted no adverse evidence was placed on record by the revenue, the assessee's BDD policy and turnover context made inventory loss plausible, and distributors would not realistically bear such expiry risk. In these circumstances the Tribunal found no justification for an ad hoc restriction and concluded the entire claimed write off for expiry-related pull backs should be allowed. [Paras 6]

The disallowance in respect of the claimed inventory loss on account of expiry/pulled back stock for Assessment Year 2006-07 is deleted and the claim is allowed.

Final Conclusion: The Tribunal reversed the Commissioner (Appeals)'s partial restriction and directed deletion of the disallowance relating to the expiry related inventory write off for Assessment Year 2006-07, allowing the claimed deduction in full.

Reopening of assessment - reason to believe - change of opinion - assessment under section 143(3) - reassessment proceedings - AIR information - legal representatives / impleadment of heirs - capital gains on transfer of immovable property

Legal representatives / impleadment of heirs - Impleadment of legal heirs of the deceased assessee and their acceptance as parties before the Tribunal - HELD THAT: - The Tribunal recorded the death of the assessee and the filing of an application by Shri Mehul Baldevbhai Patel identifying three family members as legal heirs and seeking to be treated as legal representative. The Tribunal impleaded the named individuals as legal heirs of the deceased and directed that this fact be verified by the Assessing Officer, with any dispute to be raised before the AO. The Tribunal proceeded to decide the appeal on merits after impleadment. [Paras 2]

The named persons were impleaded as legal heirs and taken on record as legal representatives subject to verification by the Assessing Officer.

Reopening of assessment - reason to believe - change of opinion - assessment under section 143(3) - AIR information - capital gains on transfer of immovable property - Validity of reopening assessment under section 147/148 in respect of alleged undisclosed capital gain on sale of land - HELD THAT: - The Tribunal examined the reasons recorded for reopening and the material before the original Assessing Officer who framed the assessment under section 143(3). The original assessment recorded that details called for in relation to the AIR information were furnished by the assessee and tallied. The reasons for reopening relied on the same AIR information and alleged non-disclosure of capital gain. The Tribunal found factual inaccuracies in the reasons (typographical error in sale date) and, more importantly, no indication that primary facts were not disclosed or that new tangible material existed which would justify reopening. The Tribunal held that the reassessment amounted to a change of opinion by the current Assessing Officer on the same set of facts accepted earlier and that the assessee had disclosed material facts fully and truly at the time of original assessment. For these reasons invoking section 147 was held to be not valid and the reassessment order was quashed. [Paras 10]

Reopening of assessment was invalid; reassessment order quashed and appeal allowed.

Final Conclusion: The Tribunal impleaded the legal heirs of the deceased assessee for the purposes of the appeal and, on the merits, quashed the reassessment initiated under section 147/148 for Asstt.Year 2008-09 as resulting from a change of opinion and lacking new tangible material to justify reopening.

Penalty under section 271(1)(c) - Burden of proof on the assessee to substantiate purchases - Disallowance of purchases versus levy of penalty - Secondary evidence versus primary evidence - Reopening of assessment under section 147

Penalty under section 271(1)(c) - Burden of proof on the assessee to substantiate purchases - Disallowance of purchases versus levy of penalty - Secondary evidence versus primary evidence - Whether penalty under section 271(1)(c) could be sustained where purchases were disallowed for want of primary evidence but books were not rejected and the explanation of the assessee was unproved but not positively disproved. - HELD THAT: - The Tribunal found on the record that the assessee had claimed purchases from a supplier which the Assessing Officer could not verify because notices to the supplier remained unserved, the supplier could not be produced, and primary documentary evidence linking the purchases to production was not furnished. The A.O. therefore disallowed the purchases as bogus. However, the A.O. did not reject the assessee's books of account and accepted the assessee's sales. The Tribunal held that failure to substantiate a claim (resulting in an addition/disallowance) does not ipso facto establish concealment or furnishing of inaccurate particulars for the purpose of imposing penalty under section 271(1)(c). If an assessee's explanation is unproved but not affirmatively disproved so as to permit a reasonable and positive inference of falsity, levy of penalty is not justified. The Tribunal applied this principle and relied on the precedent cited in the impugned order, CIT Vs. Upendra Vs. Mithani , to conclude that on the facts - where only secondary evidence was produced and the books were not rejected - the circumstances did not warrant drawing a positive inference of concealment necessary to sustain penalty. Accordingly the penalty imposed was vacated. [Paras 9]

Penalty under section 271(1)(c) set aside; appeal allowed.

Final Conclusion: The Tribunal vacated the penalty imposed under section 271(1)(c) because the assessee's explanation, though not proved to the satisfaction of the Assessing Officer leading to disallowance of purchases, was not positively disproved and the books of account were not rejected; appeal allowed.

Interest under Section 28 of the Land Acquisition Act forms part of enhanced compensation - interest on enhanced compensation taxable on receipt basis - interest on enhanced compensation is compensation and not income from other sources - compensation exempt under section 10(37) of the Income tax Act

Interest under Section 28 of the Land Acquisition Act forms part of enhanced compensation - interest on enhanced compensation is compensation and not income from other sources - compensation exempt under section 10(37) of the Income tax Act - interest on enhanced compensation taxable on receipt basis - Whether interest awarded under Section 28 on enhanced compensation for compulsory acquisition is in the nature of compensation (and thus exempt under section 10(37)) and not taxable as income from other sources under section 56, and the year of its taxability. - HELD THAT: - The Tribunal upheld the view in Commissioner of Income Tax v. Ghanshyam (HUF) and subsequent Supreme Court decisions that interest awarded under Section 28 is an accretion to the value and forms part of the enhanced compensation/consideration, distinguishing it from interest under Section 34. As such, the interest is to be treated as compensation and, where the compensation is exempt under section 10(37), the interest is not taxable separately under the head 'income from other sources' under section 56. The Court further followed the ratio that the taxability of such interest is determined on a receipt basis, i.e., it is taxable (if at all) in the year of receipt. The Tribunal relied on decisions of coordinate Benches which applied the Ghanshyam ratio and concluded that the Assessing Officer's addition treating the amount as interest taxable under section 56 was unsustainable.

The interest received under Section 28 on enhanced compensation is in the nature of compensation, taxable (if at all) on receipt basis, and where the compensation is exempt under section 10(37) it is not chargeable as income from other sources under section 56; the CIT(A)'s order deleting the addition is upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upheld the CIT(A)'s decision following the Supreme Court's ratio in Ghanshyam (HUF) and coordinate Bench decisions, and held that the interest under Section 28 is part of enhanced compensation and not taxable as income from other sources where exempt under section 10(37).

Seizure of imported goods - Classification under Customs Tariff - Bill of Entry and Second Check System - Seizure under Customs Act, 1962 - Opportunity of hearing and speaking order

Seizure of imported goods - Classification under Customs Tariff - Bill of Entry and Second Check System - Opportunity of hearing and speaking order - Representation against the Seizure Memo dated 12.01.2021 to be considered and decided by the Additional Commissioner of Customs after hearing the petitioner. - HELD THAT: - Petitioner sought quashing of the Seizure Memo dated 12.01.2021 issued in relation to imported consignments alleged to be misclassified under the Customs Tariff. The Bill of Entry filed under the Second Check System was examined and customs officers formed an opinion of misclassification, leading to seizure and alleged duty shortfall. The High Court did not adjudicate the merits of classification or validity of the seizure. Instead, the Court directed respondent No.3 to examine the petitioner's representation and reminder (dated 25.01.2021 and 01.02.2021), to afford the petitioner an opportunity of hearing and to pass a reasoned (speaking) order in accordance with law within one week of receipt of certified copy of the order. No substantive determination was made on the correctness of tariff classification, duty liability or propriety of seizure; those matters remain for administrative determination following the mandated hearing and speaking order.

Respondent No.3 directed to consider the petitioner's representation and reminder, afford an opportunity of hearing, and pass a speaking order in accordance with law within one week of receipt of certified copy of this order.

Final Conclusion: Writ petition disposed by directing the Additional Commissioner of Customs to decide the pending representation/reminder by a reasoned order after hearing the petitioner within one week; the merits of classification and seizure were not finally determined by the Court.

Power to permit denaturing or mutilation of imported goods - petitioner's right to request mutilation under the Customs Act - provisional release of goods on execution of bond and security - inclusion of cost of mutilation in FOB

Power to permit denaturing or mutilation of imported goods - petitioner's right to request mutilation under the Customs Act - provisional release of goods on execution of bond and security - inclusion of cost of mutilation in FOB - Validity of the impugned order directing provisional release when the petitioner asserts entitlement to have the imported goods mutilated and cleared thereafter - HELD THAT: - The court found that Section 24 of the Customs Act contemplates permitting denaturing or mutilation of imported goods at the request of the owner so as to render them unfit for one or more purposes, and observed that tribunals and some High Courts have applied this principle in favour of importers where the revenue considered goods serviceable. Although the petitioner had not invoked provisional release under the statutory provision for provisional release, the third respondent's order directing provisional release on execution of bond, production of security towards redemption fine and penalty, and payment of duty was set aside because the authority could not pass that impugned order in circumstances where the petitioner was entitled to call upon the customs authority to mutilate the goods and clear them thereafter. The court directed that the respondents permit the petitioner to have the goods mutilated under the supervision of the customs authority at the petitioner's cost, and accepted the respondents' position that the cost of mutilation will be included in FOB, while requiring the exercise to be completed within three weeks and other formalities to be complied with. [Paras 3, 4, 5, 8]

Impugned order of provisional release quashed; respondents directed to permit mutilation of the imported goods under their supervision at the petitioner's cost, with cost of mutilation included in FOB and the exercise completed within three weeks.

Final Conclusion: Writ petition allowed; the provisional release order is quashed and respondents are directed to allow supervised mutilation of the imported goods at the petitioner's cost (to be included in FOB) within three weeks, subject to compliance with other formalities.

Violation of principles of natural justice - Failure to furnish documents relied upon in show cause notice - Quashing of adjudication order for non supply of relied documents - Maintainability of writ under Article 226 where alternative remedy exists - Remand for fresh adjudication after supply of relied documents

Failure to furnish documents relied upon in show cause notice - Violation of principles of natural justice - Quashing of adjudication order for non supply of relied documents - Remand for fresh adjudication after supply of relied documents - The petitioner was not supplied with copies of the documents relied upon in the show cause notice; the adjudication suffered from breach of natural justice and the impugned order is quashed insofar as the petitioner with directions to supply documents and decide afresh. - HELD THAT: - The petitioner specifically requested supply of all documents referred to in the show cause notice in his reply. The respondent maintained that the relied documents were enclosed with the show cause notice but did not record any controverting finding or furnish proof of service in the impugned order. The Court noted the absence of a positive averment or evidence in the adjudication to rebut the petitioner's claim and found the circumstance that the postal weight and stamp value were inconsistent with dispatch of the annexed documents to be supportive of the petitioner's case. In the absence of proof that the relied documents were supplied, the adjudicatory process deprived the petitioner of an opportunity to meet the case against him, constituting a breach of the principles of natural justice. On this basis the Court quashed the impugned order insofar as it relates to the petitioner, directed supply of all relied documents, granted two weeks for filing a fresh reply and directed the authority to pass a fresh order in accordance with law. The Court expressly declined to go into the merits of the underlying penalty order. [Paras 6, 7, 8, 9]

Impugned order quashed in respect of the petitioner for non supply of relied documents; respondent to furnish the relied documents, petitioner to file reply within two weeks of receipt, and respondent to adjudicate afresh.

Final Conclusion: Writ petition allowed. The adjudication order is quashed as to the petitioner for breach of natural justice for non supply of the documents relied upon; matter remitted to the respondent to supply the documents, receive the petitioner's fresh reply and pass fresh orders in accordance with law; merits not decided.

Writ petition under Article 226 - direction to consider representation and decide in accordance with law within a time bound period - remand for administrative decision - no expression on merits

Direction to consider representation and decide in accordance with law within a time bound period - remand for administrative decision - Joint Director General, DGGI, Zonal Unit Ahmedabad directed to consider the representation dated 26th September 2020 and take an appropriate decision in accordance with law within four weeks. - HELD THAT: - The High Court, while not expressing any opinion on the merits, required the Joint Director General, DGGI, Zonal Unit Ahmedabad to immediately examine the representation dated 26th September 2020 (Annexure J) and to pass an appropriate decision in accordance with law within a period of four weeks from receipt of the order. The order confines the court's intervention to securing timely administrative disposal and directs the authority to act in accordance with applicable legal standards when deciding the representation. [Paras 4]

The authority at Ahmedabad must consider and decide the representation dated 26th September 2020 in accordance with law within four weeks.

Direction to consider representation and decide in accordance with law within a time bound period - remand for administrative decision - Joint Director General of Foreign Trade, Surat directed to consider the representation dated 5th November 2020 and take an appropriate decision in accordance with law within four weeks. - HELD THAT: - The High Court directed the Joint Director General of Foreign Trade, Surat to look into the representation dated 5th November 2020 (Annexure Q) and to decide the matter in accordance with law within four weeks from receipt of the order. The court's direction is limited to requiring prompt and lawful administrative action; it neither adjudicates the substantive merits nor prescribes the outcome. [Paras 4]

The authority at Surat must consider and decide the representation dated 5th November 2020 in accordance with law within four weeks.

No expression on merits - Court clarifies that it has not expressed any opinion on the merits of the petition. - HELD THAT: - The High Court expressly recorded that its disposal of the writ application is limited to issuing directions for consideration of the representations and that it has not considered or decided the substantive claims made in the petition. This clarification preserves the authorities' competence to decide on merits and preserves the parties' rights on substantive issues. [Paras 5]

The court has not expressed any opinion on merits; disposal limited to directions for administrative decision.

Final Conclusion: Writ petition disposed by directing the specified authorities at Ahmedabad and Surat to consider and decide the respective representations in accordance with law within four weeks; the Court refrained from expressing any opinion on the merits.

Release of seized goods - security by P.D. Bond and bank guarantee - conditional release pending appellate outcome - challenge to demand for differential duty

Release of seized goods - security by P.D. Bond and bank guarantee - conditional release pending appellate outcome - Petitioner entitled to lift the seized goods subject to conditions already complied with and subject to the final outcome of any appeal. - HELD THAT: - The petition sought quashing of the order insofar as it imposed a redemption fine as condition for release of the seized natural river sand and prayed for release of the goods. The Court noted that the petitioner had executed a P.D. Bond covering the commercial value of the seized goods and had furnished a bank guarantee for 10% of the claimed differential duty, with the bank guarantee remaining valid. On this factual foundation the Court declined further adjudication of the confiscation/redemption issue and directed the respondent to permit the petitioner to lift the goods seized, while expressly making such release subject to the final outcome of the appeal which the petitioner intends to pursue. The direction preserves the rights of the respondent in the appellate process and conditions the release on the securities already furnished by the petitioner. [Paras 7, 8]

Respondent directed to permit petitioner to lift the goods under seizure, subject to the final outcome of the appeal and the securities already furnished.

Challenge to demand for differential duty - The question of levy of the differential duty was not adjudicated and remains open for challenge before the appellate authority. - HELD THAT: - The Court recorded that the ground for levy of the claimed differential duty was being contested by the petitioner and is being pursued before the Appellate Authority. The petition did not require further adjudication on that question; the Court kept all contentions open and did not decide on the correctness of the demand, leaving the matter to be determined in the appellate proceedings initiated by the petitioner. [Paras 7, 9]

No adjudication on the levy of differential duty; the contention is left open to be prosecuted before the appellate authority.

Final Conclusion: Writ petition disposed by permitting release of the seized goods on the basis of the P.D. Bond and bank guarantee already furnished, subject to the final outcome of the appeal; substantive challenge to the differential duty remains undetermined and is left to the appellate process.

Sale of unclaimed imported goods after notice to the importer under Section 48 - notice requirement to the importer (not consignor) - custodian's power to open, examine, value and auction imported goods in custody - amendment of Import General Manifest (IGM) and bills of entry - competent officer's power to allow or refuse extension of time for clearance - compliance with Disposal Manual-2019 and CBIC Circular No.49/2018 for disposal of imported goods - protection of revenue as a determinative administrative objective

Sale of unclaimed imported goods after notice to the importer under Section 48 - custodian's power to open, examine, value and auction imported goods in custody - compliance with Disposal Manual-2019 and CBIC Circular No.49/2018 for disposal of imported goods - Validity of the auction of the imported goods contained in 113 containers and compliance with statutory/procedural requirements. - HELD THAT: - The Court found that the respondents followed the statutory procedure for goods not cleared within the prescribed period under Section 48: notices were issued to the importers, seals were opened with permission, containers were examined and valued, and a no-objection for auctioning was granted before online auction through MSTC. The Disposal Manual-2019 and CBIC Circular No.49/2018 guidelines for disposal were applied. The auction conducted on 05.11.2020 therefore conformed to the statutory scheme and prescribed norms, and cannot be impugned as contrary to law. The Court recorded that these facts demonstrate compliance with the requirements for sale of such goods and that no interference under writ jurisdiction was warranted. [Paras 6, 8, 11, 13, 14]

Auction of the 113 containers was valid and conducted in accordance with law and applicable disposal norms; no interference warranted.

Notice requirement to the importer (not consignor) - amendment of Import General Manifest (IGM) and bills of entry - competent officer's power to allow or refuse extension of time for clearance - consignor's lack of statutory right to notice or to obstruct sale under Section 48 - Whether the consignor (petitioner) was entitled to further time or to block the auction by seeking amendment of IGM and extension up to 31.01.2021, and whether the respondents acted unreasonably by refusing that extension. - HELD THAT: - The Court held that Section 48 envisages notice to the importer and does not confer a statutory right on the consignor to prevent sale. The record showed that multiple notices were sent to importers, and the petitioner only sought intervention after the auction process had commenced; moreover the competent authority granted extensions twice and afforded ample opportunity (including time until 15.01.2021) to submit documents for amendment of IGMs. Given the petitioner's failure to supply requisite documents despite repeated opportunities, and the statutory role of the proper officer to allow or refuse further time, the respondents' refusal to extend time to 31.01.2021 was not unreasonable or arbitrary. [Paras 11, 12, 13]

Petitioner was not entitled to further extension or to block the auction; respondents acted within their statutory discretion and the petitioner's relief is refused.

Final Conclusion: The writ petition is dismissed. The auction of the imported goods contained in 113 containers was carried out in accordance with the Customs Act and applicable disposal guidelines, and the petitioner (consignor) is not entitled to further time or to set aside the sale; respondents acted lawfully and protected revenue.

Delay in finalisation of provisional assessment - quashing of show cause notices for belated adjudication - application of time-guidelines under Section 11A(11) of the Central Excise Act - provisional assessment under Section 18 of the Customs Act - invalidity of 'call book' delay and administrative stalling

Delay in finalisation of provisional assessment - quashing of show cause notices for belated adjudication - application of time-guidelines under Section 11A(11) of the Central Excise Act - Finalisation of provisional assessments after an unexplained delay of 8-9 years is impermissible and impugned notices issued for framing final assessment after such delay are liable to be quashed. - HELD THAT: - The Court held that when adjudicatory proceedings pursuant to show cause notices remain pending for years without plausible explanation, revival and finalisation after such a long gap is unlawful and arbitrary. While Section 11A(11) uses the expression 'where it is possible to do so', the legislative time-guidelines - six months in ordinary cases and one year in cases involving fraud/collusion - indicate that determination ought to be completed within the prescribed frame as far as possible; that expression does not permit extension to decades. Administrative practices of consigning matters to a call book or awaiting other decisions do not constitute a valid explanation for prolonged inaction. The petitions were held to be squarely covered by this Court's earlier decisions (M/s GPI Textiles Limited and Gupta Smelter Pvt. Ltd.) and, applying those principles, the notices issued after 8-9 years were quashed.

Impugned notices for finalisation of provisional assessments after long unexplained delay quashed.

Provisional assessment under Section 18 of the Customs Act - invalidity of 'call book' delay and administrative stalling - The Department's reliance on the absence of a statutory limitation in Section 18 of the Customs Act or on pendency of other appeals does not justify prolonged non-adjudication; absence of a stay or judicial restraint precludes withholding finalisation for years. - HELD THAT: - The Court rejected the respondents' contention that Section 18 prescribes no limitation and that matters could be kept pending pending other proceedings. The absence of any stay or judicial restraint was noted; therefore, administrative non-finalisation for years (including transfer to call book) cannot be treated as a legitimate ground to delay adjudication. The Court reiterated that departmental appeals or pending proceedings in other fora do not validate indefinite postponement of adjudicatory action in the face of statutory time-guidelines and prior judicial precedent.

Departmental reliance on Section 18 or pending appeals does not justify delay; notices quashed for prolonged non-adjudication.

Final Conclusion: Writ petitions allowed. Impugned notices for framing final assessments of provisional assessments, issued after an unexplained delay of 8-9 years in respect of imports during 2012-2013, are quashed in view of statutory time-guidelines and this Court's precedents; administrative stalling by transferring matters to call book or awaiting other decisions does not validate such delay.

Issue of notice - service of notice - mandatory versus directory time limit - limitation for issuance of notice - distinction between 'issue' and 'service' in statutory text

Issue of notice - service of notice - distinction between 'issue' and 'service' in statutory text - The expression 'issue' in regulation 17(1) of the Customs Brokers Licensing Regulations, 2018 does not mean 'serve'. - HELD THAT: - Regulation 17(1) requires that the Commissioner "shall issue a notice in writing" within ninety days of receipt of an offence report. The regulation elsewhere uses different expressions such as "submit the report within a period of ninety days from the date of issue of a notice" and "from the date of submission of the report", indicating that different words were deliberately chosen and must bear different meanings. The Customs Act itself distinguishes between "issue" and modes of "service" (section 153 as amended), and earlier Supreme Court and High Court decisions (notably R.K. Upadhyaya, M.M. Rubber, and the Full Bench of the Punjab & Haryana High Court) establish that where a statute distinguishes between issuance and service, issuance is satisfied when the notice is actually issued within the prescribed period and service is a separate act that affects commencement of certain procedural timelines. The Tribunal's earlier decision in R.P. Cargo Handling, which treated "issue" as meaning "serve", did not consider these later or clarifying authorities; therefore the correct construction is that "issue" means the act of issuing the notice (e.g., signing/tendering for dispatch) and does not require actual service on the addressee within the ninety days. [Paras 52]

'Issue' in regulation 17(1) means issuance of the notice and does not include actual service of the notice.

Mandatory versus directory time limit - limitation for issuance of notice - The ninety-day time limit prescribed in regulation 17(1) of the 2018 Regulations (corresponding to regulation 20(1) of the 2013 Regulations) is mandatory. - HELD THAT: - Regulation 17(1) prescribes time-limits at various stages (issuance within ninety days, reply within thirty days, inquiry report within ninety days of issuance, representation within not less than thirty days, and final order within ninety days of report submission). Precedent from the Delhi High Court and Madras High Court has consistently held that the ninety-day limit for issuance of the show cause notice is mandatory and non-compliance renders subsequent proceedings and revocation invalid. Although there are conflicting High Court decisions (Bombay and Calcutta) treating the timeline as directory, the Tribunal's Larger Bench precedent requires following the view of the jurisdictional High Court; where the jurisdictional High Court has taken a clear view, that decision must be followed. Given the Delhi High Court authorities favouring mandatory character of the limit, the Tribunal holds that non-issuance within ninety days results in revival of the licence. [Paras 71, 72]

The ninety-day limit in regulation 17(1) is mandatory; failure to issue the notice within that period invalidates the proceedings and results in revival of the licence.

Final Conclusion: The Division Bench reference is answered: (i) 'issue' in regulation 17(1) does not include 'serve'; and (ii) the ninety-day time limit for issuance prescribed by regulation 17(1) is mandatory.

Forum shopping - abuse of process of law - public interest litigation maintainability - criminal contempt for repeated filings - doctrine of res judicata - imposition of punitive costs

Public interest litigation maintainability - forum shopping - doctrine of res judicata - criminal contempt for repeated filings - Maintainability of the writ petition filed after unconditional withdrawal of an earlier PIL and multiple subsequent writ petitions raising substantially the same cause of action. - HELD THAT: - The Court held that the present writ petition, though styled independently, arises from the same core cause of action and complaints earlier raised before other fora and before this Court in a PIL which was withdrawn. The petitioner had earlier filed a PIL seeking broadly similar reliefs against the same authorities and thereafter instituted multiple separate writ petitions against various statutory authorities; the complaint dated March 14, 2017 was common to earlier proceedings including a petition in the Delhi High Court which resulted in a detailed examination and an order by the Ministry of Corporate Affairs. The Court applied the principle in Sarguja Transport Service and treated repeated refiling and approaching different fora for substantially the same relief as impermissible forum shopping. Having regard to prior dismissals of other writ petitions and the identical subject-matter addressed by earlier orders, the petition was found to be an abuse of process and liable to be dismissed; the conduct was held to fall within the category of repeated filings which the authorities in Udyami and Cipla characterize as amounting to contempt and impermissible forum shopping. [Paras 5, 13, 16, 26, 27]

Writ petition dismissed as not maintainable and an abuse of process on account of forum shopping and repetition of the same cause of action.

Imposition of punitive costs - abuse of process of law - Whether punitive costs should be imposed for instituting frivolous and repetitive litigation that wastes judicial time. - HELD THAT: - The Court found that despite being forewarned and notwithstanding availability of prior orders dismissing similar petitions, the petitioner persisted in prosecuting the petition as a stand-alone matter and advanced repeated and elaborate arguments on substantially the same subject-matter. The conduct was held to amount to an abuse of process warranting deterrent measures. In view of the misuse of the court's time and resources, the Court concluded that imposition of punitive costs was necessary to mark disapproval and deter repetition. [Paras 28, 29]

Punitive costs of Rs. 10,00,000/- imposed on the petitioner, payable to the Registrar General, High Court of Karnataka within four weeks; interlocutory application disposed of as consequential.

Final Conclusion: The writ petition was dismissed as an abuse of process and impermissible forum shopping arising from repetition of the same cause of action across multiple proceedings; punitive costs were imposed on the petitioner to deter future repetition.

Civil contempt - wilful disobedience - willful breach of court order - contempt under Section 425 of the Companies Act, 2013 - reinstatement of director - status quo in board composition - DIR-12 filing with Registrar of Companies

Civil contempt - wilful disobedience - contempt under Section 425 of the Companies Act, 2013 - Whether the respondents are guilty of civil contempt for non compliance with the Tribunal's interim orders dated 27.09.2019 and 31.12.2019 by failing to reinstate the applicant as Director and by taking other board composition steps. - HELD THAT: - The Tribunal applied the definition of civil contempt under the Contempt of Courts Act, 1971 and the settled principle that mere non compliance is not sufficient; the disobedience must be proved to be wilful. Reliance was placed on authorities explaining that 'wilful' denotes a deliberate act or omission with the specific intent to disobey. On the materials before it, including annexures and counter statements, the petitioner failed to establish that the respondents intentionally and deliberately disobeyed the Tribunal's directions. The Tribunal noted compliance steps taken in respect of the 2nd respondent and the respondent companies' assertion that requisite filings were made with the Registrar of Companies and that notices were served and attended. Absent proof of deliberate or intentional breach, the jurisdiction to punish for contempt could not be exercised. [Paras 12, 13, 14, 16, 17]

Contempt petition dismissed as wilful disobedience was not established; notice of contempt discharged.

Status quo in board composition - reinstatement of director - DIR-12 filing with Registrar of Companies - wilful disobedience - Whether the appointment of Mr. Saji Chacko as Director of the 2nd respondent company at the AGM on 30.09.2019 amounted to a wilful breach of the Tribunal's order of 27.09.2019 prohibiting changes to board composition. - HELD THAT: - The Tribunal examined the factual contention that Mr. Saji Chacko was inducted by filing DIR 12 after the interim order. The respondents' defence was that he was already an Additional Director and that the AGM merely altered designation without effecting an addition or removal contrary to the interim direction preserving status quo in board composition. Considering the evidence and submissions, the Tribunal found that the petitioner did not prove that the appointment was effected with the requisite deliberate intent to disobey the order. The element of voluntariness and specific intent to contravene the order, which is essential to establish wilful disobedience, was not shown. [Paras 8, 15, 16]

No contempt established in respect of the appointment of Mr. Saji Chacko; petitioner failed to prove wilful breach.

Final Conclusion: The Contempt Petition under Section 425 of the Companies Act, 2013 is dismissed for failure to prove wilful disobedience of the Tribunal's interim orders; the notice of contempt is discharged.

Interim relief under Section 242(4) of the Companies Act, 2013 - formation of opinion under Section 241(2) of the Companies Act, 2013 - public interest - prima facie case for regulating the conduct of company's affairs - suspension of management and appointment of an Administrator - regulating the conduct of the company's affairs - mismanagement and misuse of State largesse by a Section 8 company - scope of appellate review of interim orders - objects and obligations of a Section 8/Section 26 company

Formation of opinion under Section 241(2) of the Companies Act, 2013 - scope of judicial review of executive opinion - Validity of the Central Government's formation of opinion that the Club's affairs were being conducted in a manner prejudicial to public interest - HELD THAT: - The Tribunal and this Appellate Tribunal examined the genesis and materials leading to the Central Government's action: the inspection order (16.03.2016), the Inspectors' report (31.07.2019) and the supplementary inspection report (03.03.2020), together with the directions culminating in the letter dated 18.03.2020. On the material placed before it, the Appellate Tribunal held that the Competent Authority had perused the inspection material and applied its mind before directing filing of a petition under Sections 241/242. Judicial review of the Government's opinion is limited to verifying the existence of factual material; sufficiency of reasons or re-appraisal of the material is not within the Tribunal's province absent malafides. Accordingly, the formation of opinion by the Central Government was held to be present and not vitiated by non-application of mind.

The Central Government had formed a valid opinion on the basis of material; the petition under Section 241(2) was not barred for want of formation of opinion.

Public interest - prima facie case for regulating the conduct of company's affairs - mismanagement and misuse of State largesse by a Section 8 company - objects and obligations of a Section 8/Section 26 company - Whether a prima facie case existed that the Club's affairs were being conducted in a manner prejudicial to public interest - HELD THAT: - The Tribunal's interim findings were reviewed on the material placed before it, including the inspection reports which alleged financial irregularities, dubious membership practices, misuse of funds collected from applicants, deviation from MOA/AOA and extensive recreational use of government-leased land intended principally for sports. The Appellate Tribunal applied the established principle that public interest may be engaged as to a section or class of citizens and need not affect the entire populace. Considering the inspection material and allegations-waiting lists, alleged hereditary or preferential admissions, utilization of applicants' funds/interest for benefits of existing users, and disproportionate expenditure on recreational activities-the Court concluded that fair questions requiring probe were raised and a prima facie case was made out to justify interlocutory regulation of the Club's affairs.

The finding of a prima facie case that the Club's affairs were being conducted in a manner prejudicial to public interest is upheld.

Interim relief under Section 242(4) of the Companies Act, 2013 - suspension of management and appointment of an Administrator - scope of appellate review of interim orders - regulating the conduct of the company's affairs - Adequacy and effectiveness of the interim relief granted by the Tribunal and the appropriate interim measures - HELD THAT: - The Appellate Tribunal analysed whether the interim measures framed by the Tribunal would be effective to prevent further prejudice during pendency of the petition. It held that mere nomination of two Government nominees to the General Committee, in view of their minority position, would be ineffective. Given the prima facie findings and the preventive object of interim relief under Section 242(4), the Tribunal exercised appellate powers to modify the interim order so as to ensure effective regulation. The modification was confined to interim measures and expressly without prejudice to the final merits. The Court directed meaningful interim control by suspending the existing General Committee and directing appointment of an Administrator by the Central Government, and stayed acceptance of new memberships, fees or any enhancement thereof until disposal of waitlist applications and the Company Petition.

The interim relief as originally granted was modified: the General Committee is to be suspended and an Administrator nominated by the Union of India appointed; acceptance/enhancement of new membership fees stayed until further orders.

Final Conclusion: On review of the inspection material and supplementary reports, the Appellate Tribunal held that the Central Government had validly formed an opinion that the Club's affairs were being conducted in a manner prejudicial to public interest, that a prima facie case existed warranting interim regulation, and that the original interim order was inadequate; accordingly the Tribunal's finding on prima facie case was upheld, the appeal by the Club dismissed, and the interim relief was modified to suspend the General Committee and appoint an Administrator nominated by the Union of India, with certain prohibitions on new memberships and fees during the pendency of the petition.

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - appointed date - vesting of undertakings and transfer of assets and liabilities - continuation of contracts and legal proceedings - treatment of employees on amalgamation - issue and allotment of shares on merger - compliance with Section 232(3)(i) of the Companies Act, 2013 - filing of order with Registrar of Companies and stamp authorities - Form CAA 7 and filing of schedule of properties

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - appointed date - Sanction of the Scheme of Amalgamation and fixation of the Appointed Date. - HELD THAT: - Having considered the Scheme placed before it, the report of the Registrar of Companies and the Regional Director (who raised no objection subject to compliance with Section 232(3)(i)), and the absence of any objections following paper publication, the Tribunal sanctioned the Scheme of Amalgamation between the two Transferor Companies and the Transferee Company. The Appointed Date for the Scheme was fixed as the opening hours of 31st March, 2019. The sanction is recorded after due appreciation of the facts, reports and statutory conditions required under Sections 230 to 232 and the Companies (Compromise, Arrangements and Amalgamation) Rules, 2016. [Paras 26, 29, 30]

The Scheme is sanctioned and the Appointed Date is fixed as opening hours of 31st March, 2019.

Vesting of undertakings and transfer of assets and liabilities - encumbrances - continuation of contracts and legal proceedings - Legal effect of the amalgamation on assets, liabilities, encumbrances, contracts and pending proceedings. - HELD THAT: - The Tribunal gave effect to the Scheme's provisions that, from the Appointed Date and upon coming into effect, the entire undertakings of the Transferor Companies shall stand transferred to and vested in the Transferee Company as a going concern without further act. All assets (including those acquired after the Appointed Date but before the Effective Date), liabilities (secured and unsecured), existing encumbrances relating to the undertakings, and subsisting contracts shall be transferred and be enforceable by or against the Transferee Company. Inter se transactions between the Transferor Companies and the Transferee Company from the Appointed Date are to be treated as intra-group. Pending or instituted suits, appeals or proceedings shall not abate and may be continued by or against the Transferee Company. [Paras 6, 7, 8, 10, 11]

All assets, liabilities, encumbrances, contracts and pending legal proceedings of the Transferor Companies shall stand transferred to and be enforceable by or against the Transferee Company as provided in the Scheme.

Treatment of employees on amalgamation - accounting treatment - Treatment of employees and accounting on amalgamation. - HELD THAT: - The Tribunal sanctioned the Scheme's provisions that all employees of the Transferor Companies on the Effective Date shall become employees of the Transferee Company without break and on the existing terms; their prior service shall be counted for retirement and statutory benefits. Provident Fund, Gratuity and other special funds shall have the Transferee Company substituted for the Transferor Companies. For accounting, the Transferee Company is to record assets, liabilities and reserves of the Transferor Companies at existing carrying amounts in its books, following Accounting Standard(s) and Section 133 of the Companies Act, 2013, and the investment made by the Transferee Company in the share capital of the Transferor Companies shall stand cancelled. [Paras 14, 18]

Employees' service and benefits are preserved and the Transferee Company shall adopt specified accounting treatment upon effectiveness of the Scheme.

Issue and allotment of shares on merger - compliance with Sections 42 and 62 - Mechanics and compliance for issue and allotment of Transferee Company shares to Transferor Company shareholders. - HELD THAT: - The Tribunal sanctioned the Scheme clause providing that on the Scheme becoming effective, equity shares of the Transferor Companies shall be extinguished and the shareholders of the Transferor Companies shall be allotted equity shares of the Transferee Company in the proportion provided in the Scheme. Fractional entitlements will not result in fractional certificates; fractions will be consolidated and sold with proceeds distributed to entitled shareholders. Approval of the Scheme by the Transferee Company's shareholders is to be treated as compliance with the provisions relating to issue/allotment (as stated in the Scheme) including Sections 42 and 62 to the extent indicated. [Paras 16]

Shares of Transferor Companies are extinguished and Transferee Company shall allot shares to Transferor shareholders as provided in the Scheme; shareholder approval is treated as compliance with relevant allotment provisions.

Compliance with Section 232(3)(i) of the Companies Act, 2013 - filing of order with Registrar of Companies and stamp authorities - Form CAA 7 and filing of schedule of properties - Post-sanction compliance and directions to be followed by the parties and authorities. - HELD THAT: - The Tribunal directed specific post-sanction compliances: furnishing certified copy of the order and the Scheme to concerned regulatory authorities; filing a copy of the order and Scheme with the Registrar of Companies electronically in Form INC-28 and physically within thirty days; the Transferee Company to comply with Section 232(3)(i) including payment of balance fee with the Registrar of Companies; lodging certified copy of the order with the Superintendent of Stamps for adjudication within sixty days; filing amended Memorandum and Articles of Association with the Registrar of Companies; and the Registrar of the Tribunal to draw up the necessary order in Form CAA 7 with the Transferor Company to furnish the schedule of properties within four weeks. Concerned authorities and interested persons were kept at liberty to approach the Tribunal for further directions. [Paras 26, 27, 29]

The Petitioner Companies and the Transferee Company are directed to comply with the post-sanction filings, fee payment, stamp adjudication and Form CAA 7 formalities as set out in the order; authorities and persons are at liberty to seek further directions.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Commodity Online (India) Limited and Celebrus Capital Limited with Acumen Capital Market (India) Limited, fixed the Appointed Date as 31st March, 2019, and issued specific directions for post-sanction compliance including filings with the Registrar of Companies, stamp authorities, adherence to Section 232(3)(i), accounting and employee-related adjustments; the petition is disposed of accordingly.

Registration requirement under Section 12(1) of the Securities and Exchange Board of India Act, 1992 - entitlement to act as Debenture Trustee under Regulation 7 of SEBI (Debenture Trustees) Regulations, 1993 - statutory recognition and duties of a Debenture Trustee - jurisdiction of SEBI over securities transactions of an NBFC - judicial restraint at the show cause notice stage

Jurisdiction of SEBI over securities transactions of an NBFC - statutory recognition and duties of a Debenture Trustee - Whether SEBI is without jurisdiction to issue the show cause notice in respect of debentures issued by an NBFC and in respect of its debenture trustees. - HELD THAT: - The Court held that even though the 4th respondent is registered as an NBFC under the RBI Act, regulation of issuance of debentures and protection of investors in securities falls within the Board's ambit unless NBFCs are specifically excluded from the SEBI Act. The statutory status and independent duties of a Debenture Trustee, together with the regulatory scheme under the SEBI Act and the Debenture Trustees Regulations, support SEBI's competence to examine compliance relating to debenture issues. The Court observed that the Company (the NBFC) itself has not challenged SEBI's competency before this Court, and therefore there is no basis to quash the show cause notice on the ground of lack of SEBI jurisdiction at this interlocutory stage. [Paras 12]

SEBI has jurisdiction to issue the show cause notice in relation to issuance of debentures by the NBFC and in relation to matters involving Debenture Trustees.

Registration requirement under Section 12(1) of the Securities and Exchange Board of India Act, 1992 - entitlement to act as Debenture Trustee under Regulation 7 of SEBI (Debenture Trustees) Regulations, 1993 - Whether the petitioners, acting as Debenture Trustees, are required to hold SEBI registration and whether there is a prima facie violation. - HELD THAT: - Section 12(1) mandates that intermediaries associated with the securities market, including trustees of trust deeds, shall deal in securities only under and in accordance with a certificate of registration obtained from the Board in accordance with regulations. Regulation 7 of the Debenture Trustees Regulations prescribes who may act as a Debenture Trustee. The petitioners, being members of the Institute of Chartered Accountants and having not shown any registration to act as Debenture Trustees, are prima facie in breach of the statutory registration requirement, warranting issuance of the show cause notice for explanation. [Paras 10, 11]

On the record before the Court there is a prima facie violation by the petitioners of the SEBI registration requirements for acting as Debenture Trustees.

Judicial restraint at the show cause notice stage - Whether the High Court should interfere with SEBI proceedings at the stage of issuance of a show cause notice. - HELD THAT: - Relying on established principle that courts should not pre-emptively interfere with quasi judicial proceedings merely at the show cause stage, the Court noted that the petitioners have opportunity to raise jurisdictional and other objections before SEBI. The role of the court is to ensure lawful exercise of power but not to appropriate the statutory adjudicatory function entrusted to the authority. Given that SEBI's proceedings are at the show cause stage and the petitioners can agitate all objections before the Board, the Court declined to interfere with Ext.P2. [Paras 5, 6, 13]

The writ petitions seeking quashing of the show cause notice are dismissed; the Court will not interfere at the show cause stage and the petitioners may contest the matter before SEBI.

Final Conclusion: Writ petitions dismissed. SEBI's show cause proceedings may continue; the petitioners are left to raise all objections, including jurisdictional and limitation pleas, before SEBI.

Interim injunction in suit for money decree - Inherent jurisdiction under Section 151, Civil Procedure Code to grant temporary injunctions - Attachment before judgment abandoned - Triable issues and quantification of liability - Restraint on creation of third-party rights pending adjudication

Interim injunction in suit for money decree - Restraint on creation of third-party rights pending adjudication - An interim injunction restraining the defendant from creating any third-party rights over the specified flats was granted until the liability is quantified or the Court otherwise orders. - HELD THAT: - The Court found that although triable issues exist between the parties as to termination and deductions claimed by the defendant, the material facts establish that the defendant is liable to the plaintiff while the quantum remains to be determined. Given that the subject-matter of the contract relates to specific units (12W, 13W and 14W on the 12th, 13th and 14th floors), the court considered it appropriate to protect the plaintiff's interest by restraining the defendant from creating third-party rights in respect of those units until the liability is quantified or the court orders otherwise. The order is a provisional protective measure directed at preserving the subject-matter pending final determination of quantum. [Paras 10, 11, 12]

Grant of interim injunction restraining the defendant from creating any third-party rights over units Nos. 12W, 13W and 14W without leave of the Court, until quantification of liability or further order.

Attachment before judgment abandoned - The plaintiff abandoned the prayer for attachment before judgment and the Court did not consider or decide the propriety of an attachment before judgment. - HELD THAT: - Counsel for the plaintiff expressly limited the application to injunction relief and did not press for attachment before judgment. Having been so limited, the Court observed that the principles in Raman Tech. & Process Engg. Co. & Anr. (concerning attachment before judgment) need not be examined in the present proceedings. [Paras 2, 7]

No order for attachment before judgment was sought or passed; the question of attachment before judgment was not adjudicated.

Final Conclusion: The application for interim relief was disposed of by granting an injunction restraining the defendant from creating third-party rights over the specified flats until the plaintiff's liability claim is quantified or until further order; the plaintiff had abandoned the prayer for attachment before judgment, which was therefore not considered.

Financial debt - time value of money - default (non-payment of debt) - claim including disputed claims - deposit as borrowing and its characterization vis-a -vis financial debt - inconsistency and overriding effect of the Insolvency & Bankruptcy Code over other statutes and regulatory provisions - Companies (Acceptance of Deposits) Rules, 2014 and its interplay with the IBC

Financial debt - time value of money - deposit as borrowing and its characterization vis-a -vis financial debt - claim including disputed claims - The investments/deposits made by the investors under the Corporate Debtor's schemes constitute a financial debt and the claimants are financial creditors for the purposes of the Insolvency & Bankruptcy Code. - HELD THAT: - The Tribunal held that a sine qua non of a financial debt is an existing obligation to pay money and that the essential feature of such debt is the time value of money - compensation for the period for which money was disbursed. Where monies were disbursed under the Corporate Debtor's schemes with an assured return or repayment on maturity, those receipts fall within the statutory concept of a claim and, being obligations to pay with an element of time value, qualify as financial debt. The Tribunal rejected the Adjudicating Authority's conclusion that such amounts could not be debt merely because they were characterized as deposits and that the remedy lay exclusively under Chapter V of the Companies Act. The Tribunal emphasised that the Code's definitions (including those of claim, debt and default) encompass rights to payment even if disputed or unmatured and that where the Corporate Debtor failed to pay on maturity there was a subsisting debt and therefore a default for the purpose of Section 7. The Tribunal accordingly held that the appellants are financial creditors entitled to invoke the insolvency process. [Paras 28, 29, 34]

The deposits/investments are financial debt and there was default; the appellants are financial creditors under the IBC.

Default (non-payment of debt) - Companies (Acceptance of Deposits) Rules, 2014 and its interplay with the IBC - inconsistency and overriding effect of the Insolvency & Bankruptcy Code over other statutes and regulatory provisions - The Adjudicating Authority erred in rejecting the Section 7 petition on the ground that the remedy lay only under Chapter V of the Companies Act and in concluding there was no default; the impugned order is set aside and the petition must be restored and admitted under the IBC. - HELD THAT: - The Tribunal found the Adjudicating Authority's reasoning - that amounts deposited could only be recovered under the Companies Act and therefore did not amount to debt under the IBC - to be incorrect. Given the IBC's comprehensive code and its definitions, overlapping statutory or regulatory provisions (including the Companies (Acceptance of Deposits) Rules, 2014) do not preclude the invocation of the insolvency remedy where the statutory tests under the IBC are met. Because the Tribunal concluded that there was a subsisting debt and a default, the Adjudicating Authority's dismissal of the Section 7 application and its direction that the claimants seek relief under Chapter V were set aside. The Tribunal directed the Adjudicating Authority to restore the company petition and admit it for further proceedings under the Code. [Paras 31, 33, 34, 36]

The impugned order dismissing the Section 7 application is set aside; the petition is to be restored and admitted under the IBC.

Final Conclusion: The appeal is allowed. The National Company Law Tribunal's order dismissing the Section 7 petition is set aside; the company petition is to be restored to file, admitted and proceeded with under the Insolvency & Bankruptcy Code. No order as to costs.

Service of notice - publication in newspaper as substituted service - ex-parte admission of CIRP - setting aside ex-parte hearing under Rule 49(2) of NCLT Rules, 2016 - scope of NCLT's power to revisit orders decided on merits - initiation of CIRP under section 9 of the Insolvency and Bankruptcy Code, 2016

Service of notice - publication in newspaper as substituted service - ex-parte admission of CIRP - initiation of CIRP under section 9 of the Insolvency and Bankruptcy Code, 2016 - Validity of service and substituted service and consequence for ex-parte admission of CIRP. - HELD THAT: - The Tribunal found that notices were repeatedly sent to the corporate debtor but were refused, and the Adjudicating Authority directed publication in two newspapers as substituted service. The applicant filed the affidavit and proof of publication before the Authority and an Interim Resolution Professional has been appointed and CIRP is underway. On these facts the Tribunal concluded that the averment of non-receipt by the corporate debtor is not sustainable and that proper measures to effect service, including paper publication, were taken before admitting the petition under section 9. Accordingly the admission, though ex-parte, was founded on service steps and publication which justified proceeding with CIRP. [Paras 3, 4, 5, 7]

Application to set aside the ex-parte order on ground of non-service is dismissed; service and substituted publication were held sufficient and the ex-parte admission of CIRP stands.

Setting aside ex-parte hearing under Rule 49(2) of NCLT Rules, 2016 - scope of NCLT's power to revisit orders decided on merits - Applicability of Rule 49(2) to set aside an ex-parte order that was decided on merits and the availability of remedy before NCLT versus appeal to NCLAT. - HELD THAT: - The Tribunal explained that Rule 49(2) is intended to set aside ex-parte hearings where a party was not duly served or was prevented by sufficient cause from appearing, commonly in summary disposals for want of prosecution. However, where a matter has been decided on merits, even if ex-parte, Rule 49(2) cannot be invoked to re-open the merits. The proper remedy against an order decided on merits is an appeal to the National Company Law Appellate Tribunal. Further, the Tribunal observed that NCLT does not possess power to review its orders on merits and is limited to correcting typographical mistakes in its orders. Consequently, the present application under Rule 49(2) and Rule 11 was not maintainable to disturb an order decided on merits. [Paras 8]

Rule 49(2) cannot be used to reopen an adjudication decided on merits; remedy lies by way of appeal to NCLAT and the application under Rule 49(2) is therefore dismissed.

Final Conclusion: The application under Rules 11 and 49(2) to set aside the ex-parte admission of CIRP was dismissed: substituted service by newspaper publication and prior service attempts were held sufficient and Rule 49(2) cannot be invoked to reopen an order decided on merits; the aggrieved party's remedy is to appeal to the NCLAT.

Setting aside ex-parte order - ex parte admission under CIRP - non-service of notice and paper publication - duty of vigilance and responsibility of the corporate debtor - timely disposal under the Insolvency & Bankruptcy Code, 2016 - Section 60(5) of the Insolvency & Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016

Setting aside ex-parte order - non-service of notice and paper publication - duty of vigilance and responsibility of the corporate debtor - timely disposal under the Insolvency & Bankruptcy Code, 2016 - Application under Section 60(5) IBC r.w. Rule 11 NCLT Rules seeking setting aside of the ex parte order admitting the corporate debtor into CIRP was not maintainable and liable to be dismissed. - HELD THAT: - The Tribunal found that the Financial Creditor had served advance copy of the petition, had effected service of notice of hearings including by publication in the newspaper, and that the Corporate Debtor remained absent and did not participate at any hearing before the Adjudicating Authority. Although the NCLAT permitted withdrawal of an earlier appeal with liberty to raise the question of non service, the Applicant produced no material to substantiate non service when this Authority re examined the matter. The application was filed after the NCLAT order and the Applicant failed to demonstrate any substantive case on merits that would justify setting aside an order passed after hearing the Financial Creditor. The Tribunal observed that setting aside the ex parte order in these circumstances would only prolong litigation and defeat the object of timely resolution under the Code, and noted the Applicant's lack of vigilance and responsibility in prosecuting its case. In view of these findings the Tribunal concluded that no case was made out to reopen the ex parte admission into CIRP.

Application dismissed and IA No.185 of 2020 in CP(IB) No.580 of 2019 stands dismissed; no order as to costs.

Final Conclusion: The application under Section 60(5) IBC read with Rule 11 NCLT Rules to set aside the ex parte order admitting the Corporate Debtor into CIRP is dismissed for failure to establish non service or any merits warranting reopening, and to protect timely disposal under the Code.

CIRP is a proceeding in rem - relevant date for withdrawal of CIRP is the date of application - withdrawal of CIRP after constitution of Committee of Creditors requires compliance with Section 12A of the IBC and Regulation 30A(1)(b) of the CIRP Regulations - Interim Resolution Professional's duties under Regulation 30A and timelines for Form FA

Withdrawal of CIRP after constitution of Committee of Creditors requires compliance with Section 12A of the IBC and Regulation 30A(1)(b) of the CIRP Regulations - Effect of constitution of the Committee of Creditors on the right to withdraw CIRP and the mode of seeking withdrawal by an assignee of the financial creditor - HELD THAT: - The Bench found that, as the Committee of Creditors had already been constituted in the present case, any application for withdrawal of the Corporate Insolvency Resolution Process must comply with the statutory regime applicable post-constitution. In that situation Regulation 30A(1)(b) read with Section 12A of the IBC governs the procedure for withdrawal and the application must be placed and considered in accordance with those provisions. The interlocutory application filed by the assignee (seeking direction on the IRP to file an application for withdrawal) did not meet the statutory framework applicable after constitution of the CoC and accordingly could not be entertained. [Paras 10]

IA filed by the assignee is dismissed as any withdrawal must comply with Section 12A and Regulation 30A(1)(b) once the CoC is constituted.

Relevant date for withdrawal of CIRP is the date of application - CIRP is a proceeding in rem - Which event is crucial for considering an application for withdrawal of CIRP - HELD THAT: - Relying on the principle that CIRP is a proceeding in rem and on the decision referred to in K.C. Sanjeev v. Easwara Pillai Kesavan Nair, the Bench observed that the material date for considering withdrawal is the date on which the application for withdrawal is made. The Tribunal noted that in the present matter no application for withdrawal was ever filed by the IRP before the Adjudicating Authority; the present interlocutory application was filed by the assignee and, with the CoC already constituted, the legal regime applicable to withdrawal post-constitution governs the matter. [Paras 10]

The relevant date for considering withdrawal is the date of the application, and absent an application filed in accordance with the post CoC regime, withdrawal cannot be permitted.

Interim Resolution Professional's duties under Regulation 30A and timelines for Form FA - Whether the Interim Resolution Professional acted improperly in constituting the CoC after receipt of Form FA from the assignee - HELD THAT: - After reviewing documents and hearing parties, the Bench recorded that the Interim Resolution Professional acted fairly and in accordance with the requirements of the Code. The Tribunal accepted the IRP's account of communications and timing, including the constitution and certification of the CoC, and found no impropriety in the IRP's conduct or in convening the CoC in the manner and within the timelines reflected in the record. [Paras 10]

The IRP acted fairly and judiciously; no relief against the IRP's constitution of the CoC is warranted.

Final Conclusion: The application filed by the assignee seeking direction to the IRP and challenging non filing of an application for withdrawal is dismissed; any withdrawal of CIRP where the CoC is constituted must comply with Section 12A of the IBC and Regulation 30A(1)(b) of the CIRP Regulations, and the interim stay on the functioning of the CoC is vacated.

Principles of natural justice - rights of creditors under Regulation 10 to be heard - verification of claims by the Resolution Professional - best estimate of claim where amount is not precise under Regulation 14 - limited, non adjudicatory role of the Resolution Professional - obligation to reconsider claims before finalisation of the resolution plan

Principles of natural justice - rights of creditors under Regulation 10 to be heard - Whether the applicant was denied an opportunity of hearing in contravention of principles of natural justice and Regulation 10. - HELD THAT: - The Tribunal examined the applicant's contention that his claim was rejected without any opportunity to substantiate it. The record shows that the Resolution Professional had communicated specific queries and requested bank statements and other documents (letter dated 02.11.2020) and invited the applicant to submit documentary evidence. The Tribunal recorded that the RP had set out the reasons for recomputation and had sought further material from the applicant before finalisation of the claims. Rather than finding a complete failure to afford opportunity, the Tribunal directed the applicant to supply the documents called for within two weeks and directed the RP to reconsider the claim after due verification and before finalisation of the Resolution Plan. The Tribunal therefore did not set aside the RP's action as a summary denial of natural justice but required an opportunity for the applicant to be heard by tendering the requested evidence. [Paras 14, 15]

Applicant must submit the documents requested by the RP within two weeks; RP to reconsider the claim after hearing/verifying before finalisation of the Resolution Plan.

Verification of claims by the Resolution Professional - best estimate of claim where amount is not precise under Regulation 14 - limited, non adjudicatory role of the Resolution Professional - Whether the RP's recomputation of the applicant's claim on the basis of the books and ledger entries was permissible and whether the RP's role required adjudication of competing factual contentions between parties. - HELD THAT: - On verification, the RP relied upon the corporate debtor's ledger and internal information which showed lack of salary due entries for the periods claimed, records of advances, and an asserted retrospective revision of salary. The RP recomputed the eligible claim and consequentially disclosed a net amount receivable from the claimant. The Tribunal noted that Regulation 14 permits the RP to make the best estimate where amounts are imprecise and emphasised the RP's limited, verification focused role rather than that of an adjudicatory forum resolving disputed factual issues between parties. While the RP's recomputation on the basis of books was upheld as a permissible verification exercise, the Tribunal allowed reconsideration if the applicant furnishes the documentary evidence called for so the RP can verify and, if warranted, revise the computation before the Resolution Plan is finalised. [Paras 8, 9, 14, 15]

RP's recomputation based on books is permissible as a verification exercise under the Regulations, subject to reconsideration if the applicant produces the documentary evidence sought; RP not required to adjudicate rival factual claims but must verify before finalisation of the Plan.

Final Conclusion: The application is disposed of by directing the applicant to supply the documents called for by the Resolution Professional within two weeks; upon receipt the RP shall verify and explore settlement of the claim and give a reply before the Committee of Creditors finalises the Resolution Plan.

Related party within the meaning of Section 5(24) and 5(24A) of the Insolvency and Bankruptcy Code, 2016 - temporal point for determination of related party status (date when creditor steps into the shoes of creditor / date of commencement of CIRP) - Committee of Creditors membership and voting rights of a Financial Creditor - effect of resignation from directorship prior to insolvency commencement date on disqualification - right of a Financial Creditor to participate and vote notwithstanding prior association with the corporate debtor

Temporal point for determination of related party status (date when creditor steps into the shoes of creditor / date of commencement of CIRP) - insolvency commencement date - Whether related party status is to be determined with reference to the date of initiation of CIRP or the date on which the person becomes a Financial Creditor / the commencement date of CIRP. - HELD THAT: - The Tribunal held that the correct matrix is to examine the status of the person as on the date when he steps into the shoes of a creditor or as on the date he becomes a member of the Committee of Creditors. It rejected the contention that related party status must be frozen as at the date of initiation of the CIRP application. The Tribunal noted that the insolvency commencement date is the date of admission and that resignation from directorship during the pendency of an application cannot be disregarded simply because the application had been filed earlier; a person who, at the time of becoming a creditor/CoC member, is a Financial Creditor is entitled to be treated as such for purposes of participation and voting. [Paras 14, 16, 18]

Related party status is to be determined with reference to the position when the person becomes a Financial Creditor / member of the CoC (i.e., on stepping into the shoes of the creditor or as on commencement), not with reference to the earlier date of initiation of CIRP.

Related party within the meaning of Section 5(24) and 5(24A) of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors membership and voting rights of a Financial Creditor - effect of resignation from directorship prior to insolvency commencement date on disqualification - Whether Respondent Nos.2 to 5 are 'related parties' such that they are disqualified from representation, participation and voting in the Committee of Creditors. - HELD THAT: - Applying the statutory definition of 'related party' and the temporal principle adopted above, the Tribunal found that as on the date Respondent No.2 stepped into the position of Financial Creditor and as on the date of commencement, he was a Financial Creditor who had resigned from directorship. His family members (Respondent Nos.3 to 5) being his wife and children could not be treated as related parties for the purpose of disqualification in the circumstances narrated. The Tribunal emphasized that a person cannot be excluded from the CoC merely because he had been associated with the corporate debtor prior to becoming a creditor; secured loans advanced and creation of security interest do not, by themselves, render a creditor disqualified under the related party provisions relied upon by the applicant. On these findings the Tribunal concluded there was no illegality in constituting the CoC with Respondent Nos.2 to 5 as members and in them exercising voting rights according to their shares. [Paras 16, 18, 19]

Respondent Nos.2 to 5 are not disqualified as 'related parties' and are entitled to participate and vote as members of the Committee of Creditors; the CoC constitution is valid.

Final Conclusion: The application challenging admission and voting rights of Respondent Nos.2 to 5 as related parties is dismissed; the Tribunal held that related party status is to be assessed with reference to the date the person becomes a Financial Creditor / member of the CoC (commencement), and on the facts found Respondent Nos.2 to 5 are not disqualified from CoC membership or voting.

Liquidation under section 33(2) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the committee of creditors - appointment of resolution professional as liquidator - liquidation costs and contribution under CIRP (Liquidation Process) Regulations - sale as a going concern - liquidator's duties - public announcement and reporting obligations

Liquidation under section 33(2) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the committee of creditors - Order for liquidation of the corporate debtor was to be passed pursuant to the resolution of the committee of creditors and intimation by the resolution professional under section 33(2) of the Code. - HELD THAT: - The Tribunal considered the application filed by the Resolution Professional under section 33(2) after the Committee of Creditors, with the requisite voting share, resolved that revival was not possible because the plant and machinery were in irreparable condition and liquidation would reduce the creditors' burden. The adjudicating authority noted the proviso in section 33(2) and the NCLAT observation that a COC decision to recommend liquidation, after proper evaluation and in absence of a resolution plan, is a business decision reflecting the COC's commercial wisdom and not ordinarily open to judicial review. Having perused records and the compliance affidavit including photographs of machinery condition, the Tribunal was satisfied that conditions under section 33(2) were met and directed liquidation in accordance with Chapter III of the Code. [Paras 6, 7, 15]

Application under section 33(2) allowed and corporate debtor ordered to be liquidated in accordance with Chapter III of the Code.

Appointment of resolution professional as liquidator - consent of proposed liquidator - Whether the Resolution Professional should be appointed as Liquidator. - HELD THAT: - The COC resolved in its fourth meeting to appoint the incumbent Resolution Professional as Liquidator with the requisite voting share. The proposed Liquidator filed written consent in Form AA and the Tribunal's verification of credentials disclosed no adverse material. In view of section 34(1) which contemplates that the RP shall act as Liquidator subject to written consent, the Tribunal appointed Mr. Amarnath as Liquidator. [Paras 9]

Mr. Amarnath, the Resolution Professional, appointed as Liquidator following submission of written consent and verification of credentials.

Liquidation costs and contribution under CIRP (Liquidation Process) Regulations - sale as a going concern - liquidator's duties - public announcement and reporting obligations - fees of the liquidator - Directions regarding compliance with CIRP (Liquidation Process) Regulations including meeting of liquidation costs, consideration of sale as a going concern, liquidator's remuneration, and statutory publication and reporting obligations. - HELD THAT: - The Tribunal recorded that the COC had not complied with Regulation 39B concerning meeting liquidation costs and therefore directed the Liquidator to take steps under Regulation 2A of the CIRP (Liquidation Process) Regulations regarding contributions to liquidation costs. As the COC had not recommended sale as a going concern, the Liquidator was directed to take action under Regulation 32A. The Tribunal noted the COC's resolution on liquidation fee and recorded the obligation on the Liquidator to publish the public announcement in Form B within five days of receipt of the order, call for claims with a 30 day bar from the liquidation commencement date, file a preliminary report within 75 days and fortnightly progress reports thereafter in accordance with Regulations 12, 13 and 15 of the CIRP (Liquidation Process) Regulations. These directions implement the statutory liquidation regime and ensure compliance with the applicable regulations. [Paras 11, 12, 13, 15]

Liquidator directed to secure contributions for liquidation costs, consider sale as a going concern under the Regulations, accept the remuneration resolution of the COC, and comply with publication and reporting obligations under the CIRP (Liquidation Process) Regulations.

Final Conclusion: The Tribunal allowed the application under section 33(2) and ordered liquidation of Karan Processors Private Limited; Mr. Amarnath is appointed as Liquidator and directed to carry out liquidation in conformity with the Code and applicable CIRP (Liquidation Process) Regulations, with specified directions on costs, sale as a going concern, remuneration, public announcement and reporting.

Withdrawal of appeal - liberty to file application under Section 7 of the Insolvency & Bankruptcy Code, 2016 - characterisation of debt as operational creditor or financial creditor - equity, fair play and good conscience - principles of natural justice

Withdrawal of appeal - liberty to file application under Section 7 of the Insolvency & Bankruptcy Code, 2016 - Whether the order dated 18-2-2020 dismissing the appeal as withdrawn granted liberty to the appellant to file an application under Section 7 of the IBC. - HELD THAT: - The Tribunal examined the order dated 18-2-2020 and found that while the appellant was permitted to withdraw Company Appeal (AT)(Ins.) No. 746 of 2019 and the appeal was dismissed as withdrawn, the order did not grant the specific liberty to approach the Adjudicating Authority under Section 7 of the IBC. The Tribunal therefore clarified that the earlier order did not confer the pleaded permission to institute proceedings under Section 7, and recorded this interpretation to remove any ambiguity arising from the memo of withdrawal and prior hearings. [Paras 8]

The Tribunal held that the order dated 18-2-2020 did not grant liberty to the appellant to file an application under Section 7 of the IBC.

Equity, fair play and good conscience - principles of natural justice - liberty to file application under Section 7 of the Insolvency & Bankruptcy Code, 2016 - Whether the appellant is precluded from approaching the Adjudicating Authority to seek relief under the IBC following dismissal of the appeal as withdrawn, and, if not, the manner in which such approach should be treated. - HELD THAT: - Acting on considerations of equity, fair play and good conscience and in the interest of justice, the Tribunal directed that the dismissal of the appeal as withdrawn shall not operate to preclude the appellant from approaching the Competent/Adjudicating Authority to seek redress by filing the necessary application in accordance with law. The Tribunal emphasised that any such application shall be decided by the Adjudicating Authority on merits after affording the parties opportunity to be heard and applying the principles of natural justice. The clarification was given to remove any impediment or limitation-based prejudice that might be asserted from the withdrawal, while leaving all factual and legal contentions open for adjudication by the proper forum. [Paras 8, 9]

The Tribunal clarified that the withdrawal dismissal will not preclude the appellant from filing an appropriate application before the Adjudicating/Competent Authority, which shall determine the matter on merits after following principles of natural justice.

Final Conclusion: The interlocutory application is disposed of by clarifying that the earlier order dated 18-2-2020 did not grant liberty to file a Section 7 application; however, on equitable grounds the Tribunal declared that the dismissal as withdrawn will not bar the appellant from approaching the Adjudicating/Competent Authority in accordance with law, and any such application shall be decided on merits after affording parties a hearing.

Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Existence of a plausible dispute - Pre-existing dispute - Adjudicating authority's duty at admission stage to reject application if a dispute exists - Dispute not to be spurious, hypothetical or illusory - Requirement of notice of dispute or record in the information utility

Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Existence of a plausible dispute - Adjudicating authority's duty at admission stage to reject application if a dispute exists - Dispute not to be spurious, hypothetical or illusory - Whether the Section 9 application is maintainable or must be rejected because a pre-existing plausible dispute, supported by evidence, exists between the parties. - HELD THAT: - The Tribunal examined the documentary record and correspondence exchanged between the parties and found credible material evidencing a pre-existing dispute about quality, completion and scope of work raised prior to the demand notice. Emails dated 07.09.2019 and subsequent communications, the minutes of meeting of 21.11.2019 and further emails alleging non-adherence to that schedule, together with the Voltas inspection report and communications regarding defective supplies, were held to constitute evidence that a dispute existed before the operational creditor filed the Section 9 application. Applying the legal test articulated in Mobilox (para 40) the adjudicating authority is required at the admission stage to determine only whether a plausible contention of dispute exists that is not a patently feeble, hypothetical or illusory defence; it need not determine the merits. The Tribunal found the Corporate Debtor's contentions were supported by corroborative evidence and were not mere bluster. Consequently the statutory precondition for admission under Section 9 was absent and the application could not be proceeded with under the Insolvency Code. The Tribunal also noted that the applicant remains at liberty to pursue its claim under other laws without prejudice to observations made in the order. [Paras 28, 29, 30, 31, 32]

The Section 9 application is dismissed because a pre-existing plausible dispute, supported by evidence, exists between the parties and therefore the Adjudicating Authority cannot admit the application to commence CIRP.

Final Conclusion: On the facts and materials before it the Tribunal found a real, substantiated dispute regarding quality, completion and payments existing prior to the demand notice; applying the Mobilox test the Section 9 petition was dismissed and the applicant may pursue its rights under other remedies if so advised.

Requirement of valid Authorisation for Assignment (AFA) - operation and scope of Regulation 7A of the IP Regulations - professional misconduct for undertaking assignment without AFA - obligation to abide by bye-laws of the Insolvency Professional Agency and Code of Conduct - separate legal character of CIRP and Liquidation requiring fresh consent

Requirement of valid Authorisation for Assignment (AFA) - operation and scope of Regulation 7A of the IP Regulations - separate legal character of CIRP and Liquidation requiring fresh consent - professional misconduct for undertaking assignment without AFA - Accepting appointment as Liquidator after 31st December, 2019 without holding a valid AFA constituted contravention of Regulation 7A and amounted to professional misconduct. - HELD THAT: - The Disciplinary Committee found that Regulation 7A precludes an insolvency professional from accepting or undertaking any assignment after 31st December, 2019 unless he holds a valid AFA on the date of acceptance or commencement of the assignment. The Regulation expressly exempts assignments already being undertaken as on 31st December, 2019, but the Committee held that CIRP and liquidation are distinct processes requiring separate appointments and consents; an RP continuing as liquidator is not a continuation of the same assignment. The IP had not obtained a valid AFA despite the amendments being notified on 23rd July, 2019 and coming into effect from 1st January, 2020. Consequently, his acceptance of the liquidator appointment on 29th May, 2020 without a valid AFA contravened the conditions of registration and the Code of Conduct under the Code and Regulations and amounted to professional misconduct. [Paras 4, 5]

The Committee concluded that the respondent contravened Regulation 7A and committed professional misconduct by accepting the liquidator assignment without a valid AFA.

Obligation to abide by bye-laws of the Insolvency Professional Agency and Code of Conduct - disciplinary action by the insolvency professional agency - No further action by IBBI was warranted as the IPA's Disciplinary Committee had already adjudicated the misconduct and imposed a penalty. - HELD THAT: - The record established that the Disciplinary Committee of the Indian Institute of Insolvency Professionals of ICAI had found the IP guilty of professional misconduct for accepting the liquidator assignment without a valid AFA and had imposed a penalty. Exercising powers under Regulation 11, the IBBI's Committee noted the IPA's order and, in view of that concurrent disciplinary finding and penalty, disposed of the show cause notice without issuing any directions. [Paras 5, 6]

The show cause notice was disposed of by the IBBI without further direction because the IPA's Disciplinary Committee had already determined guilt and imposed a penalty.

Final Conclusion: The Disciplinary Committee held that Regulation 7A requires a valid AFA for any assignment accepted after 31st December, 2019; the respondent accepted the liquidator appointment without such AFA and thereby committed professional misconduct. As the insolvency professional agency's Disciplinary Committee had already found misconduct and imposed a penalty, the IBBI disposed of the show cause notice without further directions.

Requirement of valid Authorisation for Assignment (AFA) for undertaking assignments after 31st December, 2019 - Interpretation and applicability of Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016 - Obligation to abide by the Code of Conduct and bye laws of the insolvency professional agency - Disciplinary jurisdiction and exercise of discretion by the Board where the Insolvency Professional Agency has already taken disciplinary action

Requirement of valid Authorisation for Assignment (AFA) for undertaking assignments after 31st December, 2019 - Interpretation and applicability of Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016 - Obligation to abide by the Code of Conduct and bye laws of the insolvency professional agency - Whether an insolvency professional is required to hold a valid AFA to accept or undertake an assignment after 31st December, 2019 and the consequences of non compliance with that requirement in the facts of this case. - HELD THAT: - The Disciplinary Committee held that Regulation 7A plainly requires an insolvency professional to hold a valid authorisation for assignment on the date of acceptance or commencement of any assignment undertaken after 31st December, 2019. The bye laws of the IPA define AFA and prescribe the procedure for grant. Section 208(2) of the Code and regulation 7(2)(a) and (h) make observance of the Code of Conduct and the bye laws a condition of registration. The Committee noted that regulation 7A was inserted well before the cut off date and that adequate time was available to obtain AFA. On the material, the IP had given consent in Form 2 on 5 4 2019 but the CIRP commenced on 27 1 2020; accordingly, the requirement of having a valid AFA at the commencement of the CIRP applied. The Committee recorded these findings while also noting the IP's explanations of inadvertence, health issues, and subsequent application for AFA. [Paras 4]

Regulation 7A requires a valid AFA for assignments commenced after 31 12 2019; the Committee found the requirement applicable to the CIRP which commenced on 27 1 2020 and recorded the IP's explanations.

Disciplinary jurisdiction and exercise of discretion by the Board where the Insolvency Professional Agency has already taken disciplinary action - Whether further action by the Board was warranted after the IPA's disciplinary committee had considered the same conduct and passed an order. - HELD THAT: - The Disciplinary Committee observed that the Indian Institute of Insolvency Professionals of ICAI had already taken disciplinary action and its Disciplinary Committee had passed an order on 1 12 2020 deciding that the IP was not guilty of professional misconduct in the matter. Exercising the powers under regulation 11, and having regard to the prior adjudication by the IPA's Disciplinary Committee, the IBBI Committee exercised its discretion to dispose of the show cause notice without any direction against the IP. The Committee therefore did not issue any further directions despite having recorded findings on the applicability of Regulation 7A. [Paras 4, 5]

The show cause notice was disposed of by the Board's Disciplinary Committee without any direction because the IPA had already dealt with the matter and found the IP not guilty of professional misconduct.

Final Conclusion: The IBBI Disciplinary Committee concluded that Regulation 7A requires a valid AFA for assignments commenced after 31 12 2019 and recorded that the CIRP in question commenced on 27 1 2020; however, since the IPA's Disciplinary Committee had already adjudicated the matter and found the insolvency professional not guilty, the IBBI disposed of the show cause notice without imposing any further direction and forwarded copies of the order to the IPA and the NCLT Registrar.

Authorisation for Assignment - Obligation to obtain AFA before undertaking assignment after 31st December, 2019 - Regulation 7A of the IP Regulations - Code of Conduct for insolvency professionals - Obligation to abide by bye laws and code of conduct under Section 208(2) - Disciplinary action by the insolvency professional agency as a relevant consideration for IBBI action

Authorisation for Assignment - Obligation to obtain AFA before undertaking assignment after 31st December, 2019 - Regulation 7A of the IP Regulations - Whether the insolvency professional undertook the liquidation assignment without holding a valid Authorisation for Assignment in contravention of Regulation 7A. - HELD THAT: - The Disciplinary Committee found that Regulation 7A unambiguously requires an insolvency professional to hold a valid AFA on the date of acceptance or commencement of any assignment after 31st December, 2019. The committee noted that the decision of the Committee of Creditors to liquidate was on 19th December, 2019, but the IP's consent to act as liquidator was given on 2nd January, 2020 and the liquidation order was passed on 17th January, 2020. The IP did not hold a valid AFA on either 2nd January, 2020 or 17th January, 2020 and therefore undertook the assignment in breach of Regulation 7A. [Paras 4]

Found to have accepted the liquidation assignment without a valid AFA in breach of Regulation 7A.

Code of Conduct for insolvency professionals - Obligation to abide by bye laws and code of conduct under Section 208(2) - Whether the IP's plea of bona fide technical error and belief of having submitted the AFA excuses non compliance with the prescribed AFA process and the duties of care under Section 208(2). - HELD THAT: - The Committee observed that the bye laws and the Step by Step Guide prescribed a complete 10 step process for submission of AFA. While the IP contended he followed steps 1 to 6 and was under a bona fide belief that the AFA had been submitted, the Committee held that following only part of the mandated process and leaving the submission incomplete demonstrates negligence. The obligation to take reasonable care and diligence and to comply with bye laws and the Code of Conduct under Section 208(2) requires completion of the prescribed process; the explanation of technical misunderstanding was found untenable. [Paras 4]

The plea of bona fide technical error was rejected and the conduct was held to reflect negligence in complying with the AFA requirement and attendant duties.

Disciplinary action by the insolvency professional agency as a relevant consideration for IBBI action - Disposal of SCN where IPA has already imposed penalty - What action IBBI should take in respect of the show cause notice in view of disciplinary action already taken by the insolvency professional agency (IPA). - HELD THAT: - The Committee noted that the IPA (ICSI Institute of Insolvency Professionals) had issued an SCN and imposed a disciplinary order and penalty against the IP in respect of the same contravention. Having regard to that disciplinary action, and exercising powers under Regulation 11 of the IP Regulations, the Committee disposed of the IBBI SCN without further directions against the IP. The order records that copies will be forwarded to the IPA and the NCLT Registrar for information. [Paras 4, 5]

SCN disposed of without any direction against the IP in view of disciplinary action already taken by the IP's IPA.

Final Conclusion: The Disciplinary Committee held that the insolvency professional undertook the liquidation assignment after 31st December, 2019 without a valid Authorisation for Assignment and that his defence of a technical or bona fide error was untenable, reflecting negligence in breach of the Code and Section 208(2); however, since the insolvency professional agency had already taken disciplinary action and imposed a penalty, the IBBI disposed of the show cause notice without further direction.

Pre-execution challenge to preventive detention - inordinate and unexplained delay in passing a detention order - live-link between prejudicial activity and object of detention - reasonableness of explanation for delay (forensic examination, non-cooperation, COVID-19 lockdown) - scope of judicial interference in preventive detention at pre-execution stage

Pre-execution challenge to preventive detention - scope of judicial interference in preventive detention at pre-execution stage - A detention order under COFEPOSA can be assailed at the pre-execution stage, but only on limited and exceptional grounds and with caution. - HELD THAT: - The Court accepted the settled position that a detention order may be challenged before execution on limited grounds recognized by higher courts and reiterated that such jurisdiction is 'suspicious' and to be exercised sparingly. The Court observed that interference at the pre-execution stage is exceptional and the writ court must be mindful of precedents which confine relief prior to arrest to specified circumstances. Accordingly, the petition was amenable to hearing on delay-based grounds but subject to the restricted standards applicable to pre-execution challenges. [Paras 24, 25, 27]

Pre-execution challenge is maintainable on limited grounds, but interference is exceptional and must be exercised with caution.

Inordinate and unexplained delay in passing a detention order - live-link between prejudicial activity and object of detention - reasonableness of explanation for delay (forensic examination, non-cooperation, COVID-19 lockdown) - The delay of approximately 16 months in passing the Detention Order was not fatal because the respondents furnished a satisfactory and tenable explanation which preserved the live-link between the prejudicial activity and the purpose of detention. - HELD THAT: - The Court examined the timeline and accepted the respondents' explanation that the initial proposal in February 2019 did not suffice and additional evidence (principally forensic extraction from the petitioner's mobile phone) was necessary to justify detention. The forensic examination could only be conducted in January 2020 after repeated notices, the petitioner's non-cooperation and changes of address impeded earlier efforts, and the unlocking facility was at a separate DRI laboratory. After recovery of incriminating material from the phone, a fresh proposal was forwarded in March 2020; consideration by CSC and the Detaining Authority was affected by the COVID-19 lockdown but proceeded in May-June 2020. Applying the settled principle that delay is not automatically fatal, the Court held that where delay is satisfactorily explained and a rational nexus remains between the prejudicial activity and the detention, the detention order is not vitiated. The Court also rejected reliance on authorities where delay remained unexplained, distinguishing them on facts. [Paras 32, 33, 34, 35, 36]

Delay in passing the Detention Order did not break the live-link; the explanation for the delay was satisfactory and the Detention Order stands.

Final Conclusion: The writ petition challenging the Detention Order was dismissed: the Court held that (i) limited pre-execution scrutiny is permissible but to be exercised cautiously, and (ii) on the facts the purportedly inordinate delay was satisfactorily explained (forensic examination impeded by the petitioner's non-cooperation and operational constraints, and consideration affected by lockdown), so the live-link to the object of detention was not snapped and the Detention Order was not liable to be quashed.

Jurisdiction to issue show cause notice - prohibition of speculative foreign exchange transactions under Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 - remand for documentary verification and adjudication - video-conference oral submissions - denial by non-invitation of affidavits

Jurisdiction to issue show cause notice - prohibition of speculative foreign exchange transactions under Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 - remand for documentary verification and adjudication - Validity of the show cause notice dated 17th June, 2020 and whether it should be quashed in light of regulatory amendments - HELD THAT: - The Court refrained from adjudicating the merits of whether the transactions complied with the Foreign Exchange Derivative Contracts Regulations, 2000 or whether the transactions were speculative, observing that the question can be resolved only after the authorities have had the opportunity to examine the relevant documents. The petition seeking quashing of the show cause notice was therefore not acceded to on merits. The Court directed that the petitioners be allowed to place their records before the authorities within eight weeks, that oral submissions of the petitioners be recorded by video-conference, and that the exercise of documentary verification and recording of submissions be completed within four months, with the authorities endeavouring to conclude the entire proceeding within six months. The Court also recorded that, since no affidavits were invited, the allegations in the writ petition are deemed denied by the respondents. [Paras 4, 5, 6, 8]

Show cause notice not quashed; matter remanded to the authorities for consideration on merits after documentary production and hearing in terms of the Court's directions.

Final Conclusion: Writ petition disposed without quashing the show cause notice; authorities directed to permit submission of records, record oral submissions by video-conference and decide the matter within the timelines prescribed by the Court; no order as to costs.

Exemption under mega Notification No. 25/2012-ST - construction services relating to canals, roads and railways - services provided to the Government through a sub-contractor - remand for fresh adjudication - pre-deposit refund waiver

Exemption under mega Notification No. 25/2012-ST - construction services relating to canals, roads and railways - Serial Number 12(d) - Serial Number 13(a) - Serial Number 14(a) - Entitlement of the appellant to exemption under entries at Serial Number 12(d), 13(a) and 14(a) of Notification No. 25/2012-ST dated 20 June, 2012. - HELD THAT: - The Tribunal found from the show-cause notice and original order that several contracts undertaken by the appellant appear to relate to roads, canals and railways and therefore may fall within the exemptions at Serial Number 12, 13 and 14 of the Notification, subject to fulfilment of other conditions. The original adjudicating authority did not examine the applicability of Serial Number 13(a) and 14(a) because those entries were not pointed out before it, owing to inadequate representation. In the interest of justice and because the matter was not previously considered, the Tribunal set aside the impugned order and remanded the question for fresh adjudication so that the Commissioner may examine entitlement under the cited entries on merits. [Paras 6, 8]

Remanded to the Commissioner for fresh adjudication to examine entitlement to exemptions under Serial Number 12(d), 13(a) and 14(a) of Notification No. 25/2012-ST, keeping all issues open.

Services provided to the Government through a sub-contractor - reliance on Tribunal decision in M/s Saritha Infra & Geo Structures - remand for fresh adjudication - Whether services rendered to Government through a sub-contractor qualify for exemption/relief and require re-examination in light of Tribunal precedent cited by the appellant. - HELD THAT: - The appellant relied on the Tribunal's decision in M/s Saritha Infra & Geo Structures to contend that services not provided directly to the Government but through a sub-contractor merit consideration. That decision was not placed before the original adjudicating authority. Given that the precedent bears upon the question and was not earlier considered, the Tribunal held that the issue requires fresh examination by the Commissioner and remitted the matter for adjudication afresh, keeping the issue open. [Paras 3, 7, 8]

Remanded to the Commissioner for fresh consideration of the applicability of relief where services to Government were provided through a sub-contractor, in light of the cited Tribunal authority.

Pre-deposit refund waiver - Acceptance of the appellant's undertaking not to claim refund of the pre-deposit made before the Tribunal. - HELD THAT: - The appellant gave an express undertaking that it would not claim refund of the pre-deposit made at the time of filing the appeal. The Tribunal recorded this undertaking and treated it as a condition in disposing of the appeal to the extent indicated. [Paras 4, 9]

Appellant's undertaking not to seek refund of the pre-deposit is accepted; the appeal is allowed to the extent indicated and the impugned order is set aside and remanded.

Final Conclusion: Impugned order set aside and the matter remitted to the Commissioner for fresh adjudication on the applicability of exemptions under Serial Numbers 12(d), 13(a) and 14(a) of Notification No. 25/2012 ST and on the question of services to Government provided through sub-contractors; appellant's undertaking not to seek refund of the pre-deposit is accepted and the appeal is allowed to the extent indicated.

Committee on Disputes clearance - dismissal for non-production of clearance certificate - entitlement to proceed without COD permission after ECIL - remand for hearing on merits

Committee on Disputes clearance - dismissal for non-production of clearance certificate - entitlement to proceed without COD permission after ECIL - Whether the CESTAT was justified in dismissing the appeal for non-production of a Committee on Disputes (COD) clearance certificate and non-appearance - HELD THAT: - The High Court held that the learned Tribunal dismissed the appeal principally because the petitioner had not produced a COD clearance certificate. The court applied the law laid down by the Constitution Bench in Electronics Corporation of India Limited and the subsequent clarification in Northern Coalfields Limited, together with the Government office memorandum deleting para-13 requiring COD clearance, to conclude that absence of COD permission is not a fatal legal bar to institution or continuance of proceedings. Earlier decisions in the ONGC line merely restrained further progress until COD permission was obtained, but the Constitution Bench removed that impediment and the subsequent developments abrogated the practical requirement. Consequently, the Tribunal's sole reasoning for dismissal based on non-production of COD clearance was erroneous. The High Court therefore set aside the impugned order and directed that the appeal be heard on merits by the CESTAT; liberty previously granted to seek restoration was rendered academic by the change in law and practice. [Paras 7, 8]

Impugned order of dismissal dated 17.02.2011 set aside and the matter remitted to CESTAT for fresh hearing on merits.

Final Conclusion: Writ petition allowed; CESTAT order dismissing the appeal for non-production of COD clearance set aside and the appeal remitted for adjudication on merits.

Revival of adjudicatory proceedings after prolonged inaction - consignment of matters to call book without informing the party - breach of principles of natural justice by delayed adjudication - prejudice from loss of evidence due to long delay and change of circumstances - limitations on administrative instructions to consign cases to call book - interpretation of statutory mandate to decide duty within a reasonable time

Revival of adjudicatory proceedings after prolonged inaction - consignment of matters to call book without informing the party - breach of principles of natural justice by delayed adjudication - Validity of initiating adjudication in 2020 on a show cause notice dated 16.04.2004 after remand in 2005, when the matter had been consigned to the call book and the petitioner was not informed of such consignment. - HELD THAT: - The Court held that revival of proceedings after a long interregnum without any plausible explanation and without informing the affected party is unlawful and in breach of the principles of natural justice. Relying on the consistent approach of earlier High Court precedents cited in the judgment, the Court observed that consigning matters to the call book is not authorised by the statutory scheme and cannot operate as a legitimate reason for long delays in adjudication. Where the adjudicating authority keeps a matter in abeyance for years on extraneous grounds and fails to communicate that status to the noticee, the noticee may reasonably believe the proceedings are dropped and consequentially lose the ability to defend the matter. In such circumstances, revival of proceedings causes prejudice and vitiates the adjudicatory process, warranting quashment of the show cause notice and related communication. [Paras 19, 20, 21]

Communication dated 20.11.2020 and the Show Cause Notice F.No. V(Ch.54)03-10/Dem/2004 dated 16.04.2004 were quashed and set aside on the ground that initiation of proceedings in 2020 after prolonged consigning to the call book without informing the petitioner amounted to a breach of natural justice.

Prejudice from loss of evidence due to long delay and change of circumstances - interpretation of statutory mandate to decide duty within a reasonable time - Effect of the petitioner having closed the factory, surrendered registration and sold the factory during the interregnum on the viability of continuing adjudication after long delay. - HELD THAT: - The Court found that the petitioner's changed circumstances-closure and sale of the factory and surrender of registration-rendered it virtually impossible to marshal the evidence necessary to defend the show cause notice after a 15-year delay. The Court emphasised that prolonged delay results in loss or misplacement of documents and unavailability of witnesses, which are serious prejudicial consequences that engage procedural fairness. The Court also noted the legislative intent, as reflected in time-prescriptive provisions discussed in the judgment, that adjudication should be completed within a reasonable timeframe 'where possible', and that administrative practices (such as indefinite consigning to call book) cannot override that requirement. [Paras 21, 22]

Given the prejudice arising from the lapse of time and the petitioner's changed circumstances, continuation of adjudication would be unfair; this factor supported quashing the communication and the show cause notice.

Final Conclusion: The petition was allowed: the communication dated 20.11.2020 and Show Cause Notice F.No. V(Ch.54)03-10/Dem/2004 dated 16.04.2004 were quashed and set aside because revival of long dormant proceedings without informing the petitioner and after the petitioner's circumstances had materially changed amounted to a breach of natural justice and caused overwhelming prejudice.

Eligibility for Cenvat credit of service tax paid on Business Support Services - interpretation of "input service" under the Cenvat Credit Rules - nexus between input service and manufacture (direct or indirect) - acceptance of service tax by the service provider/department and its effect on credit denial to the recipient - distinction between "input" and "input service" for credit eligibility - imposition of penalty where credit availed under bonafide belief

Interpretation of "input service" under the Cenvat Credit Rules - nexus between input service and manufacture (direct or indirect) - eligibility for Cenvat credit of service tax paid on Business Support Services - Services provided by ABMCPL to the appellant qualify as "input service" and the appellant was entitled to avail Cenvat credit of service tax paid on such Business Support Services. - HELD THAT: - The expression "input service" under rule 2(l) of the Cenvat Credit Rules was interpreted purposively and expansively: it embraces any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance up to the place of removal. The conjunctive use of "directly or indirectly" and "in or in relation to" indicates a wide scope. The Memorandum of Association of ABMCPL shows that the company provides Business Support Services (consultancy, HR, legal, management, logistics, etc.) intended to optimise specialization and economies of scale for member companies; such services fall within BSS and are directly or indirectly related to the appellant's business/manufacturing activities. The adjudicating authority's approach requiring physical records or a direct one-to-one consumption nexus was rejected as inapposite to services which, unlike physical inputs, have no physical receipt and consumption records. On this basis the demand for irregular availment of Cenvat credit in respect of the impugned services was found unjustified and credit was held allowable. [Paras 7, 8, 9, 11, 12]

Credit of service tax paid on services provided by ABMCPL held to be allowable as input service; demand on this ground set aside.

Acceptance of service tax by the service provider/department and its effect on credit denial to the recipient - Where the department has accepted and collected service tax from the service provider for Business Support Services, the department cannot subsequently deny Cenvat credit to the recipient on the ground that no services were rendered. - HELD THAT: - The record showed that ABMCPL was registered and had paid service tax under Business Support Service for the disputed period and the department had accepted that tax. The appellate authority relied on prevailing practice and prior tribunal decisions to hold that once the department has accepted tax from the provider, it is not open to deny credit at the recipient's end by alleging non-rendering of services. There was no evidence of absence of intention to provide service; amounts recovered by ABMCPL from members were for services and cost compensation and were taxable as BSS. Accordingly, denial of credit on the basis that services were not actually rendered was not sustainabl . [Paras 8, 10, 12]

Denial of credit based on alleged non-rendering of services overruled where department accepted tax from service provider; related demand set aside.

Distinction between "input" and "input service" - imposition of penalty where credit availed under bonafide belief - The adjudicating authority's reliance on decisions concerning physical "inputs" to deny credit for services was inappropriate, and consequentially the penalty and confirmed demands were not to be sustained where the appellant's claim of entitlement was bona fide. - HELD THAT: - The order distinguished earlier precedent relied upon by the respondent that pertained to "inputs" (physical goods) and their record-keeping, noting that "input services" lack physical existence and hence the same standards cannot be mechanically applied. The appellant's contention of acting under a bona fide belief that credit was admissible was accepted by the appellate authority in context of the foregoing legal conclusions. In view of the acceptance that the services constituted input services and that tax had been paid by the provider and accepted by the department, the penalty and demand confirmed by the original order could not be sustained. [Paras 9, 12]

Adjudicating authority's application of "input" jurisprudence to deny service credit rejected; penalty and demand set aside as consequential relief.

Final Conclusion: Appeals allowed; impugned original orders set aside. Cenvat credit of service tax paid on Business Support Services provided by ABMCPL held admissible to the appellant for the periods January 2015 to October 2015 and November 2015 to March 2017; related demands and penalties set aside with consequential relief.

Power to rectify any error apparent on the face of the record - powers under Section 55(3-A) to rectify despite appeal or revision - abdication of statutory jurisdiction by decline to exercise power - remittal for fresh exercise of discretion and opportunity of hearing

Powers under Section 55(3-A) to rectify despite appeal or revision - power to rectify any error apparent on the face of the record - Assessing authority retains power to rectify an apparent error in an original order even though that original order has been the subject-matter of appeal or revision. - HELD THAT: - The Court examined Section 55 read as a whole and, in particular, Section 55(3-A), which expressly permits an assessing authority to exercise rectification powers notwithstanding that the original order has been appealed or revised. The fact that the petitioner's appeals and subsequent proceedings were adverse does not oust the statutory power of the original assessing authority to rectify an error apparent on the face of the record. The statutory competence to rectify is therefore not defeated by prior appellate or revisional adverse orders and must be exercised where appropriate. [Paras 7, 8]

Section 55(3-A) enables the assessing authority to entertain rectification despite the original order having been the subject of appeal or revision; such power remains exercisable.

Abdication of statutory jurisdiction by decline to exercise power - remittal for fresh exercise of discretion and opportunity of hearing - Assessing authority's refusal to exercise statutory rectification power by citing earlier adverse orders amounts to abdication of jurisdiction, warranting setting aside and remittal for fresh consideration with an opportunity to the dealer to be heard. - HELD THAT: - The Court found that the assessing authority declined to exercise the rectification jurisdiction on the ground of earlier adverse orders, which the Court regarded as an abdication of the statutory function conferred by Section 55. Where an authority improperly refuses to exercise a conferred power, the appropriate remedy is to set aside that refusal and remit the matter for fresh consideration. The Court directed that on remand the assessing authority must afford the petitioner a hearing and permit the petitioner to point out the apparent errors sought to be rectified, and then pass orders in accordance with law. [Paras 9]

Impugned order declining to exercise rectification jurisdiction set aside; matter remitted to the assessing authority to decide afresh after hearing the petitioner.

Final Conclusion: Writ petition allowed; impugned order set aside and matter remitted to the assessing authority for fresh exercise of rectification jurisdiction under Section 55 after affording the petitioner an opportunity to be heard.

Termination for conviction - effect of subsequent acquittal on termination - reinstatement with continuity of service - entitlement to back wages - compounded offence and its relevance to reinstatement - initiating departmental action on conviction - service regulations permitting summary dismissal

Termination for conviction - effect of subsequent acquittal on termination - service regulations permitting summary dismissal - compounded offence and its relevance to reinstatement - Validity of termination effected on the ground of criminal conviction and the legal consequence of the subsequent acquittal. - HELD THAT: - The Court observed that the employee was terminated following conviction by the criminal court, and that the Regulations (Rule 81) relied upon by the employer permit termination on conviction. However, the subsequent setting aside of the conviction by the High Court brought into question the continuing justification for termination. The petitioner did not place on record the High Court judgment to show the acquittal was by way of compounding, nor did it produce the Regulations to demonstrate any rule-based distinction treating acquittal after compounding as excluding reinstatement. Authorities cited by the petitioner were inapposite because they either depended on specific statutory rules providing exceptions (as in the Punjab Police Rule) or did not establish a general prohibition on reinstatement after acquittal. The Court therefore held that in the absence of any statutory provision or rule preventing reinstatement where conviction is set aside (even if on compounding, which was not proved), the termination could not stand once the sole ground for dismissal ceased to exist. The Court also noted that initiation of departmental action upon conviction is permissible in the first instance, but that does not preclude reinstatement if conviction is subsequently annulled. [Paras 7, 8, 9]

The direction of the Labour Court for reinstatement with continuity of service is maintained.

Entitlement to back wages - effect of acquittal on entitlement to salary for the intervening period - initiating departmental action on conviction - Extent of back wages payable where termination was on the ground of conviction subsequently set aside. - HELD THAT: - The Court examined competing precedents and observed that an acquittal does not automatically entitle an employee to full salary for the entire period of removal, and earlier decisions have declined blanket grants of back wages. Having regard to the fact that the respondent was terminated solely because of the conviction and that the petitioner was put on notice of the acquittal in March 2011 but did not reinstate the respondent, the Court held that full back wages from the date of acquittal until the date of superannuation are legally recoverable. The Labour Court's award of 50% back wages for the earlier period was held to be unsustainable in law, but the respondent is entitled to full wages for the period from the date the conviction was set aside until retirement. The Court directed payment within a specified period subject to adjustment for amounts already received. [Paras 9]

The Labour Court's direction to pay 50% back wages is set aside; the petitioner is directed to pay full back wages from 22/2/2011 (date of acquittal) to the date of superannuation, to be paid within three months subject to adjustments.

Final Conclusion: Writ petition partly allowed: reinstatement with continuity of service upheld; award of 50% back wages set aside; petitioner directed to pay full back wages from the date of acquittal to date of superannuation within three months, subject to adjustment; no order as to costs.