TaxTMI Updates e-Newsletter
Feb 24,2023

Violation of principles of natural justice - non-speaking and cryptic show-cause notice and final order - requirement of recording cogent reasons in quasi-judicial orders - revocation of cancellation of registration procedure under GST rules - obligation to provide opportunity of hearing before passing penal or pecuniary orders - issue of fresh detailed show-cause notice and remand for fresh adjudication - physical service of notices where portal/technical glitches impede meaningful communication

Violation of principles of natural justice - non-speaking and cryptic show-cause notice and final order - requirement of recording cogent reasons in quasi-judicial orders - Impugned cancellation of GST registration and the rejection of revocation were vitiated for want of adequate reasons and failure to afford meaningful opportunity of hearing. - HELD THAT: - The Court found that the show-cause notice and consequential order were cryptic and did not disclose the material particulars or jurisdictional facts upon which cancellation and rejection were sought to be founded. Relying on settled jurisprudence that reasons are the heart and soul of an order and form part of the duty to observe principles of natural justice, the Court held that non-communication of cogent reasons and absence of adequate particulars resulted in denial of a reasonable opportunity to the petitioner to meet the allegations. The Court observed that where an order entails civil or penal consequences, the authority must furnish particulars of the material relied upon so that the affected person can effectively respond; mere reproduction of statutory grounds without supporting particulars is inadequate. In view of these defects, the Court treated the impugned steps as legally unsustainable. [Paras 5, 6]

The impugned cancellation and rejection, being non-speaking and violative of natural justice, cannot be sustained.

Revocation of cancellation of registration procedure under GST rules - obligation to provide opportunity of hearing before passing penal or pecuniary orders - issue of fresh detailed show-cause notice and remand for fresh adjudication - Whether the matter should be reopened by issuing a fresh detailed show-cause notice and given fresh opportunity for adjudication. - HELD THAT: - The Court directed that the authority is at liberty to initiate proceedings afresh by issuing a detailed show-cause notice containing all material particulars and reasons and to provide a reasonable opportunity of hearing before passing a speaking order on merits. The Court emphasised adherence to the procedural scheme for revocation under the GST rules and the necessity that the Proper Officer record reasons in writing if revocation is refused, or decide revocation within prescribed timelines when satisfied. Given the procedural infirmities found, the competent authority was required to re-examine the application for revocation after serving particulars and affording opportunity. [Paras 5, 7]

The respondent is permitted to issue a fresh detailed show-cause notice and to decide the matter afresh after providing reasonable opportunity of hearing.

Physical service of notices where portal/technical glitches impede meaningful communication - issue of fresh detailed show-cause notice and remand for fresh adjudication - Whether technical glitches in the GST portal excuse issuance of vague notices and whether alternative modes of physical service should be employed. - HELD THAT: - The Court noted precedents and observations that technical glitches in the portal cannot justify issuance of vague, non-particularised notices or orders. Where the portal does not permit insertion of necessary particulars, the department must resort to physical service (e.g., RPAD) of show-cause notices and final orders containing all material particulars until the technical defects are remedied. The Court underlined the duty of the authority to communicate evidentiary material it intends to rely upon so that the dealer may respond effectively. [Paras 5, 6]

Portal-related technical difficulties do not absolve the authority of the duty to issue detailed notices; physical service of detailed notices/orders is mandated until glitches are rectified.

Final Conclusion: Writ petition allowed to the extent that the impugned cancellation and rejection were found to be legally defective for want of reasons and violation of natural justice; the authority is permitted to issue a fresh detailed show-cause notice containing particulars and to decide the revocation afresh after affording a reasonable opportunity of hearing, and may initiate such action within two weeks.

Cancellation of GST registration - non-speaking order - lack of opportunity of hearing - judicial review under Article 14 - remand for fresh consideration

Cancellation of GST registration - non-speaking order - lack of opportunity of hearing - judicial review under Article 14 - Validity of the order dated 02.06.2021 cancelling the petitioner's GST registration - HELD THAT: - The Court found that the impugned cancellation order did not record reasons and was passed without affording the petitioner an opportunity to be heard. Applying the principle in the earlier decision cited by the Court (Technosum India Pvt. Ltd. [Writ Tax No.145 of 2022] and Chandrasen), an order of cancellation which is non-speaking and prima facie passed without application of mind does not satisfy the standards of judicial review under Article 14. For these reasons the cancellation order was held to be invalid and liable to be set aside.

The order dated 02.06.2021 cancelling the petitioner's GST registration is set aside.

Remand for fresh consideration - opportunity to file reply - Validity of the appellate order dated 04.01.2023 dismissing the appeal and the appropriate consequential remedy - HELD THAT: - The appellate order, having dismissed the petitioner's appeal on the ground of delay without addressing the merits and in the factual backdrop that the petitioner did not receive or could not file a reply to the show cause notice, was set aside. The Court granted the petitioner a limited opportunity to appear before the respondent with a reply to the show cause notice and certified copies of this order and the earlier judgment relied upon, within three weeks. The matter is remitted to the respondents to consider the petitioner's reply and to pass a fresh order in accordance with law, thereby directing a fresh adjudication rather than deciding the controversy on the basis of the earlier non-speaking order.

The appellate order dated 04.01.2023 is set aside and the matter is remitted for fresh consideration after the petitioner files a reply within the time directed.

Final Conclusion: Writ petition allowed; cancellation order and appellate dismissal set aside. Petitioner granted three weeks to file reply and certified orders; respondents directed to pass a fresh order in accordance with law after considering the reply.

Opportunity of hearing - mandatory personal hearing under Section 75(4) of the U.P. GST Act, 2017 - principle of natural justice - ticking 'No' to personal hearing does not oust statutory duty - remand for fresh hearing

Opportunity of hearing - mandatory personal hearing under Section 75(4) of the U.P. GST Act, 2017 - ticking 'No' to personal hearing does not oust statutory duty - principle of natural justice - Whether an assessing authority is obliged to grant an opportunity of personal hearing before passing an adverse assessment order even where the assessee has indicated 'No' to personal hearing in an online reply. - HELD THAT: - The Court examined Section 75(4) of the U.P. GST Act, 2017 and applied the principle laid down by a coordinate bench in Bharat Mint & Allied Chemicals, holding that an opportunity of personal hearing is not dependent upon a written request by the assessee and is mandatory where an adverse decision is contemplated. The fact that the assessee ticked 'No' in the column indicating choice to avail personal hearing does not relieve the authority of its statutory duty to afford a hearing. In cases involving substantial civil liability, providing a real and minimal opportunity of hearing is integral to observance of the principles of natural justice and enables the authority to pass an appropriate, reasoned order and facilitates proper appellate review. The impugned order was passed without such hearing although the reply had been entertained earlier; consequently the order was set aside and the matter remitted for fresh notice and hearing to be issued and concluded expeditiously. [Paras 7, 8, 9, 10, 11]

Impugned assessment order set aside; matter remitted to the Assistant Commissioner to issue fresh notice and afford personal hearing, proceedings to be concluded expeditiously.

Final Conclusion: Writ petition allowed; assessment order dated 21.10.2022 set aside and remitted for fresh notice and personal hearing to be afforded to the petitioner within two weeks, with directions to conclude proceedings expeditiously.

Furnishing certified copy as procedural requirement under Rule 108(3) of the Tamil Nadu Goods and Service Tax Rules, 2017 - Statutory appeal under Section 107 of the Tamil Nadu Goods and Services Tax Act, 2017 - Technical defect and condonation under Article 226 of the Constitution - Application of Section 5 of the Limitation Act, 1963 to procedural timelines

Furnishing certified copy as procedural requirement under Rule 108(3) of the Tamil Nadu Goods and Service Tax Rules, 2017 - Statutory appeal under Section 107 of the Tamil Nadu Goods and Services Tax Act, 2017 - Technical defect and condonation under Article 226 of the Constitution - Whether an appeal filed electronically under Section 107 can be entertained despite non submission of the certified copy of the impugned order within seven days as prescribed by Rule 108(3). - HELD THAT: - The Court held that the requirement to furnish the certified copy within seven days is a procedural requirement and, in the circumstances, a mere technical defect. Relying on the reasoning of the Division Bench of the Orissa High Court, the judgment notes Rule 108(3) does not itself provide for condonation of delay nor expressly exclude application of Section 5 of the Limitation Act, 1963 to the supply of the certified copy; therefore failure to comply with the seven day proviso should not result in forfeiture of the right to have the appeal decided on merits. Exercising the jurisdiction under Article 226, the Court concluded that the respondents ought to accept the certified copy when produced belatedly and proceed to process and decide the statutory appeal on merits if otherwise in order. The Court directed compliance steps (submission of certified copy within one week and final adjudication within three months) so that the appeal may be adjudicated on merits rather than defeated by a procedural lapse. [Paras 4, 5, 6, 7, 8]

The writ petitions are allowed; the petitioner shall submit the certified copy within one week and the first respondent shall accept the same, process the electronically filed appeal under Section 107 if otherwise in order, and decide it on merits within three months.

Final Conclusion: Writ petitions allowed. The respondents are directed to accept the belated certified copy within one week, process the appeal filed under Section 107 and decide the same on merits within three months; petitions disposed of with no costs.

Cancellation of registration - restoration of registration - application of mind - system-generated order - delay and limitation in filing appeal - equitable relief conditioned on payment of tax with interest

Cancellation of registration - application of mind - system-generated order - delay and limitation in filing appeal - Validity of the order cancelling the appellant's registration in view of the authority's recording that no reply was submitted and whether the cancellation should be set aside despite delay in preferring an appeal. - HELD THAT: - The Court found that the cancellation order recorded that no reply to the show cause notice had been submitted whereas the appellant had in fact filed a reply dated 3rd November, 2021; the recording of non-submission was attributed to the order being system generated. The Court held that whether an order is physically signed or auto-generated, the authority must apply its mind before cancelling registration. Noting the lack of proper application of mind in the impugned cancellation and the appellant's admission of inability earlier to remit tax but present willingness to pay the tax with interest, the Court exercised its discretion to grant relief despite the appellant's delay in instituting the statutory appeal. On these findings the cancellation dated 24th October, 2021 was set aside subject to the appellant paying the entire tax due together with interest and other charges within the time directed, whereupon the assessing authority was directed to restore the registration in accordance with law. [Paras 2, 3, 5]

The order of cancellation dated 24th October, 2021 is set aside; the appellant is granted 10 days from receipt of the certified copy of the judgment to pay the tax with interest and other charges, and upon compliance the assessing authority shall restore the registration.

Final Conclusion: The intra-Court appeal succeeds; the cancellation of registration is quashed for want of application of mind and is ordered to be restored upon the appellant's payment of the tax due with interest and other charges within the time directed; no order as to costs.

Validity of composition levy - Withdrawal from composition scheme - Retrospective cancellation of composition registration - Liability on breach of composition conditions - Intimation in FORM GST CMP-04 - Portal/software limitation not to obstruct statutory rights

Validity of composition levy - Retrospective cancellation of composition registration - Liability on breach of composition conditions - Portal/software limitation not to obstruct statutory rights - Whether the petitioner was entitled to cancellation of composition permission with retrospective effect from the date he breached the conditions of composition by exporting goods (16th March, 2022) notwithstanding the GST portal's inability to permit retrospective withdrawal. - HELD THAT: - The Court held that the option to pay tax under the composition scheme remains valid only so long as the taxpayer satisfies the conditions of Section 10, and that upon ceasing to satisfy those conditions the person is liable to pay tax as a regular taxpayer from the day of breach and must file an intimation for withdrawal in FORM GST CMP-04 within seven days as contemplated by Rule 6. The petitioner's export on 16th March, 2022 constituted a breach of the conditions for composition levy; accordingly the composition permission ceased from that date and ought to be treated as cancelled with effect from 16th March, 2022. The Court recognised that the GST portal/software lacked functionality to record retrospective cancellation, but held that such technical limitation cannot defeat the statutory effect of cessation under Rule 6(2). The respondents were directed to implement cancellation with retrospective effect and to determine the petitioner's tax liability in accordance with law, with the authority to compute and decide the tax consequences within two weeks of receipt of the order. The Court also observed that systemic/software constraints should be remedied by the higher authorities so that statutory rights are not frustrated by portal limitations. [Paras 16, 17]

Petition allowed to the extent that composition permission is to be treated as cancelled with effect from 16th March, 2022; respondents to determine tax liability in accordance with law within two weeks and to address software limitations.

Final Conclusion: The petition succeeds insofar as the Court directs retrospective cancellation of the petitioner's composition permission from the date of breach (16th March, 2022), and directs the revenue to compute and decide the resulting tax liability within two weeks while addressing the portal limitations that prevented recording such retrospective withdrawal.

Sale of land not being a supply under entry 5 of Schedule III - taxability of advances received towards sale of land before completion of development - development of land as a service to purchaser - applicability of CBIC Circular No.177/09/2022 para 14.3 - taxability of services procured by owner from third parties

Taxability of advances received towards sale of land before completion of development - sale of land not being a supply under entry 5 of Schedule III - applicability of CBIC Circular No.177/09/2022 para 14.3 - Advances or consideration received by the land owner/developer from prospective buyers, whether received during development or after completion, are not subject to GST. - HELD THAT: - The Appellate Authority examined whether amounts received by the respondent before completion of development works amount to a taxable supply (works contract/construction service). It found that entry 5 of Schedule III declares sale of land neither a supply of goods nor services and that CBIC Circular No.177/09/2022 para 14.3 clarifies that sale of developed land is covered by that entry. In the factual matrix of plotted development under the Karnataka Town & Country Planning Act, development works are mandated by law and the infrastructure so created is relinquished to public authorities; title to plots is released only after completion certificates and final layout are issued. The dominant intention of transactions with buyers is sale of land, not a service; therefore advances are advances for sale of land and not consideration for a service. Circulars are binding on the Department and its clarifications were followed. Accordingly, the claim that advances received during development attract GST as works contract was rejected. [Paras 14, 21, 24]

Advances and consideration received from buyers are not taxable under GST in terms of entry 5 of Schedule III; the Department's contention that such advances are taxable as works contract is rejected.

Sale of land not being a supply under entry 5 of Schedule III - applicability of CBIC Circular No.177/09/2022 para 14.3 - Sale of plots/sites after completion of development works (and after release of sites by the Planning Authority) does not attract GST. - HELD THAT: - On a conjoint reading of the KTCPA provisions governing release of sites and the entry in Schedule III, the Authority held that sale of developed plots is within the scope of 'sale of land' and therefore excluded from GST. The layout/process requires completion certificates and relinquishment of infrastructure to authorities before title transfer; sale after such completion is a sale of land. The Board's circular confirming that sale of developed land is covered by Schedule III was treated as binding and followed. [Paras 21, 25]

Sale of plots after completion of mandated development works is not leviable to GST.

Development of land as a service to purchaser - taxability of services procured by owner from third parties - Development works undertaken by the owner pursuant to statutory requirements are not a service rendered to buyers; however services procured by the owner from third parties for development are taxable, and any development over and above statutory requirements rendered to buyers will be taxable. - HELD THAT: - The Authority distinguished construction-of-flat cases where construction is at buyer's behest. Here the owner develops land because law mandates it for release of sites; the infrastructure is handed over to public authorities and not transferred to buyers, so the developer has not rendered a service to purchasers-the transaction remains sale of land. Conversely, contracts between the owner and third-party contractors for carrying out development are supplies of services and taxable. The bench cautioned that if the owner provides development works beyond what is mandated by law to buyers, such excess would constitute a taxable service. [Paras 17, 19, 24]

Development mandated by law is incidental to sale and not a taxable service to buyers; services procured by the owner from third parties are taxable; any development over and above statutory mandate rendered to buyers will attract GST.

Final Conclusion: The appeal is rejected and the Advance Ruling KAR/ADRG 31/2022 dated 8th September 2022 is upheld: consideration (including advances) received for sale of plots developed as mandated by law is not subject to GST; supplies of services by third parties to the owner are taxable and any development over and above statutory requirements rendered to buyers will attract GST.

Composite supply - value of supply including non-monetary consideration - determination of value where consideration not wholly in money under Rule 27(b) - exemption for composite supply to Government/Public Distribution where goods component does not exceed 25% - public distribution as a function entrusted under Article 243G

Composite supply - principal supply - Whether the applicant's activities (milling, fortification and packing) constitute a composite supply with milling as the principal supply. - HELD THAT: - The agreement requires the applicant to crush wheat, premix micro-nutrients (fortification) and pack the resulting atta in labeled poly-pouches for delivery to nominated distributors. These coordinated activities form a supply in which the service of milling is the principal element. Applying the definition of composite supply in clause (30) of section 2, the combined activities of milling, fortification and packing qualify as a composite supply with milling as the principal supply.

Activities constitute a composite supply with milling as the principal supply.

Public distribution as a function entrusted under Article 243G - exemption for composite supply to Government/Public Distribution where goods component does not exceed 25% - Whether the composite supply is made in relation to a function entrusted to a Panchayat/Municipality so as to attract the exemption entry. - HELD THAT: - The supply is made to the State Government for distribution through the Public Distribution System. The empanelment and supply arise under government orders and the PDS activity is identified as part of functions listed in the Eleventh Schedule; circulars and the empanelment notification link PDS to entry 28 of the Eleventh Schedule and therefore to Article 243G. Hence the composite supply is made in relation to a function entrusted to a Panchayat/Municipality and falls within the scope of the exemption entry applicable to such supplies to governmental authorities.

The composite supply is in relation to a function entrusted under Article 243G and thus falls within the class of supplies covered by the exemption entry.

Value of supply including non-monetary consideration - determination of value where consideration not wholly in money under Rule 27(b) - exemption for composite supply to Government/Public Distribution where goods component does not exceed 25% - Whether the value of goods in the composite supply exceeds 25% of the total value when value is computed including non-cash consideration as per Rule 27(b). - HELD THAT: - Price was not the sole consideration; the contract provided for cash consideration and specified retention by the miller of gunny bags and by-products (bran and refraction). Rule 27(b) applies where consideration is not wholly in money and prescribes inclusion of the known monetary equivalent of non-cash consideration. The Department's memo establishes notional values for the retained gunny bags and by-products (taken as known at the time of supply). Adding the cash consideration (Rs.136.48 per 100 kg) and the known non-cash consideration (Rs.124) yields the agreed total value of supply. The value attributable to goods (packing and fortification components) is Rs.60 out of the total value of supply, amounting to 23.03%, which does not exceed 25%. Accordingly, the composite supply qualifies for exemption under the relevant entry.

Value of supply includes non-cash consideration under Rule 27(b); the goods component is 23.03% of total value and therefore does not exceed 25%, entitling the supply to the exemption.

Final Conclusion: The milling, fortification and packing arrangement is a composite supply (milling being principal), made in relation to a function entrusted under Article 243G, and-having computed value inclusive of known non-monetary consideration under Rule 27(b)-the goods component is below 25%; accordingly the composite supply to the Food & Supplies Department for PDS is exempt under the cited notification entry.

Jurisdictional pre-conditions for reopening under section 147 - reopening assessment beyond four years - reason to believe - failure to disclose fully and truly all material facts - mere change of opinion - Explanation I to section 147 (embedded material)

Reason to believe - failure to disclose fully and truly all material facts - reopening assessment beyond four years - mere change of opinion - jurisdictional pre-conditions for reopening under section 147 - Whether the Assessing Officer satisfied the jurisdictional pre-conditions for reopening the assessment for AY 2015-16 under section 147, read with the first proviso (reopening beyond four years), or whether the notice amounted to a mere change of opinion and was therefore invalid. - HELD THAT: - The Court considered that reopening beyond four years required satisfaction of both limbs: a 'reason to believe' that income has escaped assessment and that such escape was by reason of the assessee's failure to disclose fully and truly all material facts. The adjudicatory exercise must be tested solely by the reasons recorded and those reasons cannot be supplemented later. The Assessing Officer's reasons amounted to a bald assertion that material facts were 'embedded' in documents and therefore not discoverable despite the assessee having filed audited accounts, balance-sheet and P&L and having asserted the deduction under section 35(2AB) during original scrutiny. No fresh material, information or change of law was brought on record between the original assessment and the impugned reopening. Applying the settled principle that an attempt to rework the same material without any new information results in a 'mere change of opinion', the Court held that the AO had not established the requisite failure to disclose fully and truly any material fact and had relied only on material already on record. Consequently the jurisdictional prerequisites for invoking section 147 for reopening beyond four years were not satisfied and the reopening was impermissible as a change of opinion. [Paras 7, 8, 9, 10, 11]

The AO failed to satisfy the jurisdictional conditions under section 147 for reopening AY 2015-16; the notice and the order rejecting objections were vitiated as a mere change of opinion and are unsustainable.

Final Conclusion: The petition is allowed; the notice dated 30th March 2021 under section 148 and the order dated 21st February 2022 rejecting objections are set aside.

Interest on compensation awarded under the Motor Vehicles Act - deduction of tax at source - Section 194A - tax deduction at source on interest - interest pendente lite not being income - taxability of interest after High Court judgment as income from other sources

Interest on compensation awarded under the Motor Vehicles Act - interest pendente lite not being income - deduction of tax at source - Section 194A - tax deduction at source on interest - Deductibility of TDS on the interest component of compensation awarded by the Claims Tribunal up to the date of the High Court judgment. - HELD THAT: - The Court applied the principle, as articulated by the Division Bench in Rupesh Rashmikant Shah, that interest awarded from the date of the claim petition until the passing of the Tribunal's award (and, in case of appeal, until the High Court's judgment) is not exigible to tax because such interest is not income of the recipient. Section 194A is a machinery provision for deduction of tax at source and is not a charging provision; it cannot convert a non-taxable receipt into taxable income. Consequently, TDS deducted by the payer on that interest component prior to the High Court judgment is unlawful. The Court therefore directed repayment of the TDS so deducted along with interest at 9%.

TDS deducted on the interest component up to the date of the High Court judgment was not permissible; Insurance Company must repay the TDS so deducted with 9% interest.

Taxability of interest after High Court judgment as income from other sources - deduction of tax at source - Section 194A - tax deduction at source on interest - Whether TDS may be deducted on interest accruing after the date of the High Court judgment. - HELD THAT: - The Court held that interest accruing after the High Court judgment constitutes income chargeable as 'income from other sources' and is therefore subject to tax. In respect of such post-judgment interest, the payer is entitled and obliged to deduct TDS under Section 194A in accordance with the statutory scheme. The decision distinguishes between non-taxable pre-judgment interest (not liable for TDS) and taxable post-judgment interest (liable for TDS).

Interest accruing after the High Court judgment is taxable as income from other sources and TDS may be deducted on that component.

Final Conclusion: The petition is allowed: TDS wrongly deducted on the interest component up to the High Court judgment must be refunded by the Insurance Company with 9% interest; interest accruing after the High Court judgment is taxable and subject to TDS under Section 194A.

Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 (hearing ex parte and setting aside ex parte orders) - rectification of mistake apparent from record under section 254(2) of the Income-tax Act - six months period and non availability of condonation - tribunal's power to recall or set aside an ex parte disposal where sufficient cause for non appearance is shown

Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 (hearing ex parte and setting aside ex parte orders) - rectification of mistake apparent from record under section 254(2) of the Income-tax Act - six months period and non availability of condonation - Whether the Tribunal was justified in treating the petitioner's application for recall of an ex parte dismissal as an application under section 254(2) and rejecting it as time barred instead of considering it under Rule 24 of the ITAT Rules. - HELD THAT: - The Court found that the application moved by the petitioner sought recall of an ex parte order passed for non prosecution and was not an application to rectify a mistake apparent from the record under section 254(2). Rule 24 expressly contemplates that where an appeal is disposed of in the absence of the appellant the Tribunal, on the appellant later showing sufficient cause for non appearance, shall set aside the ex parte order and restore the appeal. Reading Rule 24 with its proviso obliges the Tribunal to set aside an ex parte disposal if satisfied about sufficient cause. The Tribunal had, however, applied the time bar in section 254(2) and stated that condonation of delay for filing miscellenous applications under that provision is not permissible. That was a misapplication of the statutory provision because the matter before the Tribunal was governed by Rule 24 and not by section 254(2). For these reasons the Tribunal erred in rejecting the application on the ground that it was filed beyond six months under section 254(2). [Paras 8, 10, 13]

Tribunal's reliance on section 254(2) was misplaced; the application for recall fell to be considered under Rule 24 and the Tribunal's order rejecting the miscellaneous application is set aside on this ground.

Tribunal's power to recall or set aside an ex parte disposal where sufficient cause for non appearance is shown - Whether the matter should be remitted for adjudication on merits following the setting aside of the dismissal for non prosecution. - HELD THAT: - The petitioner had been denied depreciation for AY 2011 2012 by the CIT(A), a denial which concerned depreciation on block assets previously allowed in other assessment years. The petitioner furnished explanations for its non appearance (misplacement of notice, delayed knowledge of the dismissal order, staff transfers and retirements) which the Court considered sufficient to warrant a merit hearing. In view of the misapplication of section 254(2) instead of Rule 24 and the existence of arguable grounds on the merits (denial of depreciation sustained in other years), the Court concluded that the appeal merits adjudication on its merits and ordered the matter remitted to the Tribunal for disposal of the statutory appeal on merits. [Paras 11, 12, 13]

Impugned order dated 07.09.2022 is set aside and the matter is remitted to the Tribunal for disposal of the petitioner's appeal on merits (AY 2011 2012).

Final Conclusion: The High Court held that the Tribunal erred in treating the petitioner's recall application as a section 254(2) rectification and rejecting it as time barred; the correct forum was Rule 24 of the ITAT Rules, and therefore the ex parte dismissal is set aside and the appeal remitted to the Tribunal for fresh disposal on merits in respect of AY 2011 2012.

Retention of tax collected without a valid assessment - Right to refund where assessment is time-barred - Statutory bar under Section 153(1)(a)(iii) of the Income-tax Act - Article 265-prohibition on taxation without authority of law - Entitlement to statutory interest on refunded tax

Retention of tax collected without a valid assessment - Right to refund where assessment is time-barred - Entitlement to statutory interest on refunded tax - Whether respondent authorities are entitled to retain the amount deposited by the petitioner after the time limit for passing a fresh assessment expired, and the consequent relief. - HELD THAT: - The Court found that the time limit for making a fresh assessment pursuant to the ITAT remand expired on 31.03.2017, so that no assessment could thereafter be lawfully made. Applying the principle that until the quantum of tax is determined in accordance with the procedure laid down by law the revenue has no right to collect or retain tax, the Court relied on the view expressed in Deep Chand Jain and followed by this Court in Bharti Engineering Corporation to hold that retention of amounts collected where no valid assessment exists is without authority and contrary to Article 265. Because the petitioner had complied with the ITAT condition by depositing the amount, but no assessable liability was later determined within the statutory period, the excess deposited must be refunded. The admitted concession by the petitioner qua the disallowance of depreciation (an agreed tax liability) is to be deducted from the deposited amount. The petitioner is also entitled to statutory interest on the refunded sum for the period from 01.04.2017 until actual payment. [Paras 7, 8, 9, 10]

The respondents are directed to refund the excess amount deposited by the petitioner after deducting tax liability qua the admitted depreciation disallowance, and to pay statutory interest thereon from 01.04.2017 until the date of payment, the refund to be made within 30 days of receipt of certified copy of the order.

Final Conclusion: Writ petition allowed; deposit made pursuant to ITAT stay must be refunded (less admitted depreciation liability) with statutory interest, as fresh assessment could not be lawfully completed after the statutory bar.

Capital receipt - revenue receipt - hardship compensation - income from other sources - reassessment under section 147 - reopening of assessment - deletion of addition

Hardship compensation - capital receipt - revenue receipt - income from other sources - deletion of addition - Whether the amount received by the assessee as hardship allowance/consideration on redevelopment is a capital receipt or taxable as income from other sources, and whether the addition made on that account is liable to be deleted. - HELD THAT: - The Tribunal found that the assessee, a member of the housing society, received a larger flat and a monetary consideration from the developer pursuant to a redevelopment agreement; the consideration was paid to the society (owner) and distributed to members according to the size of their old flats. Relying on coordinate-bench precedents dealing with identical hardship/rehabilitation compensation, the Tribunal held that such monetary consideration given to flat owners on redevelopment is a capital receipt simpliciter and falls outside the ambit of income under the charging provisions; the impugned amount reduces the cost of acquisition of the asset and is to be accounted for in computing capital gains when occasion arises. Applying that reasoning to the facts, the Tribunal set aside the addition made by the Assessing Officer (and upheld by the CIT(A)) treating the amount as income from other sources, and ordered deletion of the addition. [Paras 6, 7]

Addition of Rs.25,21,508 treated as income from other sources set aside and deleted; ground allowed.

Final Conclusion: The appeal is allowed: the hardship compensation/consideration received on redevelopment is held to be a capital receipt and the addition made by the Assessing Officer (and upheld by the CIT(A)) as income from other sources is deleted.

Reopening of assessment - reason to believe - speaking through recorded reasons - corrigendum to reasons - cure by section 292B - jurisdictional defect versus mere irregularity - nullity of notice under section 148

Reopening of assessment - reason to believe - speaking through recorded reasons - corrigendum to reasons - nullity of notice under section 148 - Validity of the notice under Section 148 and the recorded reasons for reopening assessment. - HELD THAT: - The Tribunal held that the 'reason to believe' recorded by the Assessing Officer is the foundational material for assuming jurisdiction to reopen an assessment. Reasons must disclose the material on which belief is founded and the officer must 'speak through' those recorded reasons. The Assessing Officer issued a corrigendum after issuance of notice which substituted the broker's name and materially altered the quantum relied upon; those changes went to the very fulcrum of the belief originally recorded. Such substantive alteration of the basis for reopening, effected after jurisdiction was assumed, showed non-application of mind or reliance on materially different facts than those disclosed in the original reasons. Precedents require that reasons as recorded cannot be supplemented or materially modified to support jurisdiction. On that basis the Tribunal concluded that the notice under Section 148 was vitiated by a fundamental defect and was null and void, rendering the consequent reassessment without jurisdiction. [Paras 7, 8]

Notice under Section 148 and reassessment under Section 147 held invalid; assessment set aside.

Cure by section 292B - jurisdictional defect versus mere irregularity - Whether Section 292B can cure the substantive defects in the reasons for reopening. - HELD THAT: - The Tribunal distinguished between curable procedural irregularities and fundamental defects affecting jurisdiction. Section 292B permits curing certain mistakes, omissions or defects, but cannot validate a want of basic jurisdiction or substitute for absence of the material facts that gave rise to 'reason to believe'. Where the original reasons relied upon a non-existent factual basis (for example, transactions through a different broker), that infirmity was substantive, not merely technical. Consequently, reliance on Section 292B to validate the corrigendum that materially altered the basis for reopening was held impermissible and insufficient to cure the jurisdictional defect. [Paras 7, 8]

Section 292B could not cure the fundamental defect in the reasons; corrigendum held unsustainable.

Final Conclusion: The Tribunal allowed the appeal, held the notice under Section 148 and the reassessment under Section 147 to be void for want of valid reasons and jurisdiction, set aside the assessment, and refrained from adjudicating the remaining grounds as academic.

Interpretation of the term "royalty" under a Double Taxation Avoidance Agreement - effect of the Finance Act, 2012 on Article 12 of the DTAA - income from data transmission services - taxability of receipts from use of satellite transponders as "royalty" - control over satellite/transponder and severability of transponder services

Effect of the Finance Act, 2012 on Article 12 of the DTAA - interpretation of the term "royalty" under a Double Taxation Avoidance Agreement - Whether the Finance Act, 2012 alters the interpretation of "royalty" under Article 12 of the DTAA so as to include income from data transmission services for the purposes of assessment years falling before any joint amendment of the DTAA. - HELD THAT: - The Tribunal accepted the pronouncement of the Hon'ble Delhi High Court in Director of Income Tax v. New Skies Satellite B.V., which held that the Finance Act, 2012 does not affect Article 12 of existing DTAAs absent a joint amendment by the contracting states. The High Court concluded that the earlier judicial interpretation of "royalty" (in Asia Satellite and similar decisions) remains applicable to assessment years preceding any DTAA amendment, and that only a joint amendment to the DTAA can alter whether income from data transmission services is characterized as royalty under that agreement. The Tribunal found no contrary material or authority before it to displace that conclusion and therefore upheld the position that the Finance Act, 2012 does not, by itself, change the Article 12 interpretation in the DTAA context for the years in question. [Paras 4]

Held that the Finance Act, 2012 does not affect the interpretation of "royalty" under Article 12 of the DTAA for the cases before the Tribunal; any change requires a joint amendment of the DTAA.

Income from data transmission services - taxability of receipts from use of satellite transponders as "royalty" - control over satellite/transponder and severability of transponder services - Whether the assessee's receipts from providing digital broadcasting/data transmission services through satellite transponders to Indian customers constitute "royalty" taxable in India under the relevant DTAA. - HELD THAT: - Relying on the Delhi High Court's reasoning, the Tribunal recorded that the customer's entitlement under the agreement is merely access to bandwidth on the transponder; the assessee retains control over the satellite and its parts, and does not cede control to customers. Because a transponder is inseparable from the satellite and cannot be independently controlled without control of the satellite, the functions performed by transponders do not amount to a "process" whose use would fall within the concept of royalty. Applying that legal analysis, the Tribunal agreed with the First Appellate Authority that the receipts from providing transponder-based digital broadcasting/data transmission services do not fall within the term "royalty" under the DTAA and hence are not taxable as such in India. [Paras 4, 5]

Held that the receipts from transponder-based digital broadcasting/data transmission services are not "royalty" under the DTAA and therefore are not taxable in India as royalty; the CIT(A)'s order was upheld.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s finding that (i) the Finance Act, 2012 does not alter the DTAA interpretation of "royalty" absent joint amendment, and (ii) the assessee's transponder-based data transmission/broadcasting receipts do not constitute "royalty" taxable in India.

Appeal fee under Section 253(6) of the Income-tax Act, 1961 - Computation of total income as computed by the Assessing Officer - Appeal arising from rectification under Section 154 - Application of residuary clause to Section 253(6)

Appeal fee under Section 253(6) of the Income-tax Act, 1961 - Computation of total income as computed by the Assessing Officer - Appeal arising from rectification under Section 154 - Leviability of appeal fee for second appeal to the Tribunal where the appeal arises from rejection of an application under Section 154 and the assessing officer has computed total income at Rs.50,73,010/-, and the assessee paid Rs.500/- instead of the higher fee claimed by the Department. - HELD THAT: - The Tribunal examined whether the instant appeal falls within the residuary clause (d) of Section 253(6) (fee Rs.500) or within clauses (a)-(c) which fix fee by reference to the total income as computed by the Assessing Officer. The reassessment dated 31.03.2016 computed total income at Rs.50,73,010/-. The rectification application under Section 154 sought to exclude long term capital gains from that computation and thus directly related to the computation of total income made by the AO. Acceptance of the assessee's contentions in the rectification or on appeal would reduce the assessed total income and therefore has a direct bearing on the assessment against which the appeal lies. Consequently the appeal cannot be treated as a matter falling outside clauses (a)-(c) merely because the rectification was dismissed; the determinative test is nexus with the AO's computed total income. Since the AO's computed total income exceeded the threshold for clause (c), the appeal fee is governed by Section 253(6)(c) (one per cent of assessed income subject to a maximum of Rs.10,000), and the maximum of Rs.10,000 is attracted. The assessee had deposited Rs.500; the Tribunal therefore directed deposit of the differential fee of Rs.9,500 by the specified date and warned that failure to comply would result in dismissal of the appeal. [Paras 4]

Appeal fee payable is Rs.10,000 under Section 253(6)(c); assessee directed to deposit the differential fee of Rs.9,500 by the dates specified, failing which the appeal shall stand dismissed.

Final Conclusion: Tribunal held that the second appeal arises out of a rectification application that directly impinges on the AO's computation of total income; hence fee under Section 253(6)(c) (maximum Rs.10,000) is payable and the assessee was directed to deposit the shortfall within the specified time failing which the appeal would be dismissed.

Classification of income under heads - Profits and gains of business or profession - Income from other sources - allowance of depreciation under section 32 - rectification under section 154 - mistake apparent from record - remand for verification of eligibility and computation

Profits and gains of business or profession - Income from other sources - Assessee's receipts from running the school were incorrectly offered under the head 'Income from Other Sources' and should be computed under the head 'Profits and gains of business or profession'. - HELD THAT: - The Tribunal examined the nature of the assessee's activities and the income-expenditure account and found that the sole purpose and activity of the assessee is running a school for educational purposes. Under the heads of income provided by the Act, such receipts do not fall under 'Income from Other Sources' but within 'Profits and gains of business or profession'. The Tribunal relied on the classification scheme in section 14 (heads of income) and concluded that income must be computed in the manner provided for Chapter IV D (Profits and gains of business or profession). [Paras 9, 10, 13]

Income to be treated and computed under 'Profits and gains of business or profession' and not under 'Income from Other Sources'.

Rectification under section 154 - mistake apparent from record - The failure to allow depreciation in the intimation under section 143(1) was a mistake apparent from the record capable of rectification under section 154; the CIT(A) erred in treating the matter as merely debatable and refusing rectification. - HELD THAT: - The Tribunal followed the coordinate bench authorities which recognised that where tax has been levied on an amount not legally imposable, rectification under section 154 against an intimation under section 143(1) may be appropriate in the interest of substantial justice. The Tribunal noted the CPC intimation itself invites rectification requests under section 154 and concluded that non-grant of depreciation in the 143(1) intimation constituted a mistake apparent from the record which could have been corrected by the authorities below; the CIT(A)'s characterization of the issue as debatable was incorrect. [Paras 11, 12, 13]

CIT(A) erred in refusing rectification; the lapse in not granting depreciation was a mistake apparent from record and amenable to rectification.

Allowance of depreciation under section 32 - remand for verification of eligibility and computation - The Tribunal did not decide the substantive allowability or quantum of depreciation on merits but remitted the matter to the Assessing Officer for fresh consideration of eligibility and computation as per law. - HELD THAT: - Having held that the income requires classification under Profits and gains of business or profession and having found that the lower authorities did not examine the preliminary requirements and computation under section 32, the Tribunal directed a remand. The AO was directed to verify whether the assessee satisfies the statutory conditions for depreciation, to compute depreciation in accordance with law and to call for necessary documents from the assessee to substantiate the claim. The Tribunal therefore left the substantive determination of allowance and computation to the AO on fresh consideration. [Paras 13]

Issue of allowance and computation of depreciation remitted to the Assessing Officer for decision as per law; assessee to produce supporting documents.

Final Conclusion: The Tribunal held that the receipts from running the school are to be classified under 'Profits and gains of business or profession', found that non-grant of depreciation in the 143(1) intimation was a mistake apparent from record capable of rectification, and remitted the question of eligibility and computation of depreciation to the Assessing Officer for fresh adjudication.

Deduction under section 80P(2)(d) of the Income tax Act - scope of "co-operative society" for section 80P(2)(d) - effect of amendment excluding co operative banks from section 80P - business deduction for ceremonial expenses being "wholly and exclusively" for business - followed binding tribunal precedent

Deduction under section 80P(2)(d) of the Income tax Act - scope of "co operative society" for section 80P(2)(d) - effect of amendment excluding co operative banks from section 80P - followed binding tribunal precedent - Claim for deduction under section 80P(2)(d) in respect of interest income received by a co operative society from deposits/investments with co operative banks. - HELD THAT: - The Tribunal applied the reasoning of an earlier co ordinate Bench decision on identical facts which held that section 80P(2)(d) permits deduction of interest income derived by a co operative society from investments with any other co operative society. While the Finance Act 2006 inserted subsection (4) to section 80P excluding co operative banks from claiming deduction under section 80P, a co operative bank nonetheless remains a "co operative society" as defined in section 2(19). Therefore, where it is established that the interest income was derived by the assessee co operative society from investments made with a co operative bank, the deduction under section 80P(2)(d) is available. The Assessing Officer/Revenue did not furnish material to distinguish the present facts from the binding co ordinate Tribunal decision relied upon by the assessee; consequently the CIT(A)'s allowance of the deduction was sustained. [Paras 3, 4, 5]

Relief granted to the assessee: deduction under section 80P(2)(d) upheld and Revenue's Ground No.1 dismissed.

Business deduction for ceremonial expenses being "wholly and exclusively" for business - Allowability as business expenditure of ceremonial/festival expenses disallowed by the Assessing Officer. - HELD THAT: - The CIT(A) found, and the Tribunal agreed, that the ceremonial expenses were intrinsically linked to the assessee's business operations in the sugar industry, customary across sugar factories, and contributed to worker harmony and morale which in turn affects business functioning. Such expenses, borne by the assessee and not collected from employees, were held to take on the character of business expenditure and thus allowable. The Tribunal found no error in the appellate authority's conclusion and sustained the deletion of the addition made by the Assessing Officer. [Paras 6]

Relief granted to the assessee: ceremonial expenses treated as business expenditure and Revenue's Ground No.2 dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for Assessment Year 2017 18, upholding the CIT(A)'s allowance of the section 80P(2)(d) deduction on interest from co operative banks and the deletion of disallowance of ceremonial expenses; general grounds were unsuccessful.

Power of revision under section 263 - erroneous and prejudicial to the interests of revenue - deduction under section 80P(2)(a)(i) and exemption under section 80P(2)(d) - plausible or debatable view of the Assessing Officer - Explanation 2 to section 263

Power of revision under section 263 - erroneous and prejudicial to the interests of revenue - deduction under section 80P(2)(a)(i) and exemption under section 80P(2)(d) - plausible or debatable view of the Assessing Officer - Validity of the Commissioner's assumption of jurisdiction under section 263 in setting aside the assessment for alleged failure to examine taxability of interest from investments with cooperative banks and disallowance of deduction under section 80P. - HELD THAT: - The Tribunal applied the settled test that the Commissioner's power of revision under section 263 can be invoked only where the assessment order is both erroneous and prejudicial to the revenue and where the error is not a debatable or plausible view. The Assessing Officer had considered and allowed the claim for exemption/deduction under section 80P. Co ordinate Bench and High Court authorities were shown holding that interest earned by a cooperative society on deposits with cooperative banks qualifies for deduction/exemption under the relevant clauses of section 80P. Given those judicial precedents and that the Assessing Officer adopted a plausible view after examination, the order under section 263 could not be sustained. Where the issue is covered in favour of the assessee by judicial decisions and the AO's view is a tenable one, the condition of an non debatable error necessary to invoke section 263 is not satisfied.

Order of revision passed by the Principal Commissioner of Income Tax under section 263 set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the revision under section 263 could not be sustained because the Assessing Officer's allowance of deduction/exemption under section 80P was a plausible view supported by judicial precedents; the order of the PCIT under section 263 was therefore set aside.

Rectification under section 154 - limitation under section 154(7) - time-bar of rectification proceedings - mistake apparent from record - deduction under section 80-IA - sub-section 12A of section 80IA

Rectification under section 154 - limitation under section 154(7) - time-bar of rectification proceedings - The order dated 27/03/2018 passed under section 154 is barred by limitation as a rectification disturbing the grant of deduction under section 80-IA relates back to the original assessment dated 26/03/2013. - HELD THAT: - The Tribunal held that the rectification order of 10/03/2014, which granted additional TDS credit and corrected interest, related back to and merely modified the original assessment of 26/03/2013 and did not stand as an independent proceeding for reckoning limitation for subsequently altering a separate substantive allowance. The denial of deduction under section 80-IA by the impugned 154 order dated 27/03/2018 dealt with a subject-matter (allowability of 80-IA deduction) that was not the subject of the first rectification and therefore the limitation for making such a rectification had to be computed from the original assessment date. Reliance was placed on precedents holding that a second rectification affecting a matter not dealt with in the earlier rectification cannot extend the limitation period, and the facts were distinguished from authorities where the subject-matter of successive rectifications was the same. [Paras 4]

The Tribunal quashed the impugned section 154 order dated 27/03/2018 as time-barred.

Deduction under section 80-IA - sub-section 12A of section 80IA - mistake apparent from record - On the merits the denial of deduction under section 80-IA by invoking section 80IA(12A) was not sustained and the assessee is entitled to the deduction in the facts of the case. - HELD THAT: - The Tribunal observed that, even apart from the limitation point, the assessee was entitled to the deduction under section 80-IA in respect of the transferred thermal power plants. The Tribunal noted that a detailed earlier order of the Tribunal in related appeals (on successor company) had considered section 80IA(12A) and granted the deduction; those conclusions favour the assessee on merits. Consequently, the impugned withdrawal of the 80-IA claim was not upheld on substantive grounds. [Paras 4]

The Tribunal held that on merits the assessee is entitled to the deduction under section 80-IA and allowed the grounds raising that contention.

Rectification under section 154 - mistake apparent from record - The claim for TDS/TCS credit raised by the assessee requires factual verification and is remitted to the assessing officer for decision in accordance with law. - HELD THAT: - The Tribunal found that the assessee's plea for TDS/TCS credit could not be resolved on the record before it and that the matter involved factual determination of credit on the basis of certificates produced. Therefore the issue was not finally decided on merits by the Tribunal and was directed to be examined afresh by the assessing officer in accordance with law. [Paras 5]

The matter of TDS/TCS credit is remanded to the assessing officer for factual verification and decision.

Final Conclusion: The appeal is allowed: the impugned section 154 order dated 27/03/2018 denying the section 80-IA deduction is quashed as time-barred; alternatively, the assessee is held entitled to the 80-IA deduction on merits; the claim for TDS/TCS credit is remitted to the assessing officer for factual verification.

Long term capital gains accrual - meaning of "transfer" under Section 2(47) - part performance, agreement and delivery of possession as determinative of transfer - exemption under Section 54F and Section 54B

Long term capital gains accrual - meaning of "transfer" under Section 2(47) - part performance, agreement and delivery of possession as determinative of transfer - exemption under Section 54F and Section 54B - Whether the long term capital gain arising from sale of the assessee's share in urban agricultural land accrued in A.Y. 2011-12 (when agreement and possession/part performance occurred) or in A.Y. 2012-13 (when the sale deed was registered), and whether the exemptions claimed under Sections 54F and 54B were rightly denied. - HELD THAT: - The Tribunal found that the assessee, an individual, executed the sale agreement and parted with possession in the relevant financial year and offered the long term capital gain in the return for A.Y. 2011-12. The Assessing Officer treated the gain as accruing in A.Y. 2012-13 solely because the registered sale deed was dated 27.04.2011. The Tribunal accepted the contention that the definition of "transfer" in Section 2(47) (which begins with "includes") requires recognition of transfers effected by agreement and part performance where possession is delivered; registration occurring subsequently does not automatically shift the year of accrual where the material acts constituting transfer took place earlier. The Tribunal noted that the income was offered and assessed in A.Y. 2011-12 and that relevant documents were placed on record and not disbelieved by the Assessing Officer in that year. Given these facts and the distinction drawn on the immediate precedents relied upon by the Department (including where factual matrices differed), the Tribunal concluded that the long term capital gain accrued in A.Y. 2011-12 and that the Assessing Officer and the CIT(A) had erred in treating it as accruing to A.Y. 2012-13 and in denying the claimed exemptions under Sections 54F and 54B on that basis.

Appeal allowed: the long term capital gain is held to have accrued in A.Y. 2011-12 (agreement and possession/part performance occurred in that year) and the denial of exemptions under Sections 54F and 54B on the ground of registration in A.Y. 2012-13 is set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that the long term capital gain accrued in A.Y. 2011-12 on account of agreement and delivery of possession/part performance in that year, and that the Assessing Officer's treatment of the gain as taxable in A.Y. 2012-13 (and consequent denial of exemptions under Sections 54F and 54B) was erroneous.

Deemed gift under section 56(2)(vii)(b) - effect of antecedent gift/WILL/GPA executed prior to effective date on subsequent registered transfer - characterisation of transaction as gift versus consideration transfer - addition as unexplained investment under section 69 - recognition of pre-existing instruments in light of Suraj Lamp principle

Deemed gift under section 56(2)(vii)(b) - recognition of pre-existing instruments in light of Suraj Lamp principle - characterisation of transaction as gift versus consideration transfer - Whether the transfer of immovable property to the assessee is a deemed gift under section 56(2)(vii)(b) because the registered transfer deed was executed on 23.10.2010. - HELD THAT: - The Tribunal found that the earliest operative document evidencing voluntary transfer was a gift deed dated 15.04.2009, supported by a will, registered agreement to sell (dated 13.05.2009) and a registered GPA executed in May 2009. These antecedent instruments showed the transaction to be of the nature of a gift completed before 01.10.2009. Reliance was placed on the principle in Suraj Lamp (as invoked by the assessee) that documents like gift, WILL and GPA executed prior to the specified cut-off must be treated as part of the transaction. The subsequent registered transfer deed dated 23.10.2010 was held to be a document executed to create legal title and not the determinative date of transfer for taxing the transaction as a deemed gift. Consequently, the retrospective application of the amendment (effective from 01.10.2009) embodied in section 56(2)(vii)(b) was held inapplicable to this transaction because the gift had been completed prior to that date. [Paras 9, 11]

The transfer is to be treated as a gift completed prior to 01.10.2009; section 56(2)(vii)(b) was wrongly applied and therefore does not operate to treat the transaction as a deemed gift for AY 2010-11.

Addition as unexplained investment under section 69 - characterisation of transaction as gift versus consideration transfer - Whether the addition of the amount treated as unexplained investment (Rs.1,00,000 as part of Rs.4,00,000 shown as consideration) was sustainable once the transaction was held to be a gift. - HELD THAT: - Having concluded that the primary instrument of transfer was a gift executed in 2009 and that other documents showing consideration were executed on advice or as precaution, the Tribunal held there was no real consideration passing for the transaction. The recital of consideration in ancillary documents was regarded as the result of erroneous advice and did not alter the true nature of the transaction as a gift. On that basis the addition made as unexplained investment under the impugned assessment was not sustainable. [Paras 12, 13]

The addition made as unexplained investment is not justified; once the transaction is held to be a gift, there is no ground to sustain the addition.

Final Conclusion: The appeal is allowed: the Tribunal held that the transfer was a gift completed before 01.10.2009 (so section 56(2)(vii)(b) does not apply) and directed that additions made as unexplained investment be deleted accordingly.

Disallowance of interest expenditure - availability of interest-free funds - use of working capital (trade payables and timings of receipts and payments) - burden of proof and reliance on audited financial statements

Disallowance of interest expenditure - availability of interest-free funds - use of working capital (trade payables and timings of receipts and payments) - Disallowance of interest expense of Rs.11,74,989/- upheld by lower authorities but challenged on basis that interest-free funds were available to give interest-free advances. - HELD THAT: - The Tribunal examined the audited financial statements and details placed on record showing significant interest-free funds at the year end, largely in the form of trade payables. The assessee explained that sale proceeds had been realised but payments to sundry creditors were not yet made, leaving a temporal surplus which was applied in giving interest-free advances. Those particulars from the audited accounts remained uncontroverted. The Tribunal accepted that the timing gap between receipt from sales and payment to creditors can legitimately create interest-free funds available for other business purposes. On this basis the Tribunal found that the Assessing Officer and the Commissioner (Appeals) were not justified in disallowing the interest expenditure, and reversed the disallowance. [Paras 7, 8]

Disallowance of interest of Rs.11,74,989/- set aside and interest expense allowed.

Final Conclusion: Appeal allowed; the Tribunal held that, on the uncontroverted audited financials showing sufficient interest-free funds (notably trade payables and timing of receipts), the disallowance of interest expenditure was unwarranted and is therefore reversed.

Prospective operation of administrative notifications and circulars - retrospective application of trade policy amendments - applicability of import policy as on date of licence issuance - transferability of DFIA licences and rights of transferee - revalidation of expired/unused DFIA licences - arbitrariness and non-application of mind in administrative orders

Prospective operation of administrative notifications and circulars - applicability of import policy as on date of licence issuance - retrospective application of trade policy amendments - Public Notice No.84/2009-14 dated 23.07.2010 and Policy Circular No.13 dated 31.01.2011 do not affect DFIA licences issued prior to their issuance and the import policy prevailing on the date of issuance governs licences issued earlier. - HELD THAT: - The Court held that the DFIA licences which came into effect on 12.03.2010 and 15.04.2010 attract the import policy and clarifications in force on the date of issuance and are not divested of those benefits by subsequent Public Notices and Circulars. The judgment of the learned Single Judge in Howitzer Organic Chemical Co. having applied the Supreme Court precedents that the import policy prevailing at the time of licence issuance governs subsequent imports was treated as final and persuasive. The Court agreed with the view in Pushpanjali Floriculture Pvt. Ltd. that, absent clear power to make retrospective amendments, later notifications or instructions cannot deprive licence-holders or transferees of rights conferred at the date of issue. Consequently, the subsequent Public Notice dated 23.07.2010, the clarification dated 23.09.2010 and Policy Circular No.13 dated 31.01.2011 were held to have no consequence in respect of licences already issued. [Paras 6, 10, 11]

The Court decided that the subsequent Public Notice and Policy Circular cannot be applied retrospectively to affect the DFIA licences issued on the dates specified.

Transferability of DFIA licences and rights of transferee - revalidation of expired/unused DFIA licences - arbitrariness and non-application of mind in administrative orders - The rejection of the petitioner's applications for revalidation of the purchased/transferable DFIA licences on the grounds that only an actual user could seek revalidation and that the petitioner failed to explain delay was arbitrary and unsustainable; the licences must be revalidated for the unused period. - HELD THAT: - The Court examined the impugned order rejecting revalidation and found that the respondents erred by treating the petitioner's transferred, freely transferable DFIA licences as ineligible for revalidation and by holding that the petitioner failed to justify delay. The petitioner had explained delay by reference to ongoing challenges to the Circulars and Public Notices (including earlier proceedings in this Court) and had filed multiple representations seeking revalidation. Relying on the finality of the Howitzer Organic Chemical Co. decision and the persuasive Division Bench view in Pushpanjali Floriculture, the Court concluded that the respondents acted arbitrarily and without proper application of mind in refusing revalidation. Accordingly, the impugned order was quashed and a direction issued to revalidate the three specified DFIA licences for the unused period within four weeks. [Paras 12, 13, 14]

The respondents' order rejecting revalidation is quashed as arbitrary; the respondents are directed to revalidate the three DFIA licences for the unused period within four weeks.

Final Conclusion: The writ petition is allowed: the Court held that the later Public Notice and Policy Circular do not adversely affect DFIA licences issued on 12.03.2010 and 15.04.2010, the respondents' rejection of revalidation was arbitrary, and the respondents are directed to revalidate the three specified DFIA licences for the unused period within four weeks.

Time bar under Section 28 of the Customs Act, 1962 - interest on duty for warehoused goods beyond three years under Section 61 - waiver of interest for 100% EOU under Board Circular No.10/2006 - effect of undertaking or departmental consideration on limitation

Time bar under Section 28 of the Customs Act, 1962 - limitation for demand of interest - Validity of the show cause notice dated 13.10.2008 as being within the limitation prescribed by Section 28. - HELD THAT: - The Tribunal held that the relevant date for computing limitation was the date of de-bonding / payment of duty (31.03.2007). Section 28 prescribes a six months limitation in cases other than specified categories and contains no provision for extension by an undertaking or by pendency of a departmental waiver request. The SCN dated 13.10.2008 was thus issued well beyond six months from the relevant date and is time barred. The Board circular relied on by the appellant, while providing guidelines for waiver of interest for certain categories (including 100% EOUs), does not operate to extend the statutory limitation under Section 28 or validate a belated SCN. The Tribunal therefore held the demand unsustainable on limitation grounds. [Paras 14, 16]

The SCN dated 13.10.2008 is time barred and therefore invalid.

Interest on duty for warehoused goods beyond three years under Section 61 - waiver of interest for 100% EOU under Board Circular No.10/2006 - Whether the appellant was liable to pay interest on duty paid in respect of raw materials warehoused beyond three years. - HELD THAT: - Although the Department contended that interest under Section 61(2)(i) was leviable on imported raw materials warehoused beyond three years and the Chief Commissioner had rejected the appellant's request for waiver, the Tribunal did not adjudicate the substantive question on the merits because the procedural infirmity (time-bar) in issuance of the SCN rendered the demand unsustainable. The circular provides a basis for departmental waiver in appropriate cases, but the Tribunal found no effect on limitation or on the validity of a belated notice. [Paras 12, 16]

Demand of interest cannot be sustained in view of the SCN being time barred; substantive liability was not upheld on merits.

Final Conclusion: The impugned order confirming interest and imposing penalty is set aside; the appeal is allowed and the demand for interest is quashed as the show cause notice was time barred.

Insolvency resolution process costs - Duty of interim resolution professional - Responsibility of applicant to bear IRP expenses under Regulation 33 - Disclosure of item-wise insolvency resolution process costs under Regulation 34A - Reasonableness and transparency of IRP fees - Right to raise complaint under Section 217

Duty of interim resolution professional - Reasonableness and transparency of IRP fees - Whether the IRP discharged duties with due diligence and was entitled to claim fees and expenses incurred during CIRP. - HELD THAT: - The Tribunal examined the IRP's conduct from appointment, communications seeking books and records, issuance of public announcement and attempts to obtain information and claims. Although CIRP progress was stymied by lack of cooperation, absence of books of accounts and non-filing of claims, the IRP nevertheless took steps contemplated by the Code including public announcement and efforts to obtain records. The Operational Creditor did not file any complaint under Section 217 alleging dereliction of duty. On these facts the Tribunal held that the IRP had not been derelict and was entitled to be compensated for professional services and expenses incurred in furtherance of CIRP, subject to reasonableness scrutiny. [Paras 13, 14, 15, 16, 17]

IRP entitled to claim fees and expenses incurred in the CIRP; no proven dereliction of duty by IRP.

Responsibility of applicant to bear IRP expenses under Regulation 33 - Insolvency resolution process costs - Who is liable to bear the IRP's fees and expenses where CoC could not be constituted. - HELD THAT: - Regulation 33(1)-(3) and its Explanation provide that the applicant shall fix and bear the expenses to be incurred by or on the IRP and such expenses are to be reimbursed by the committee to the extent ratified. Where no CoC can be constituted (as in the present case because no claims were received), the statutory responsibility to bear the IRP's expenses rests with the applicant who initiated the CIRP. The Tribunal held that the Operational Creditor, having triggered the CIRP and having not engaged thereafter, is liable to reimburse the IRP's reasonable expenses. [Paras 11, 18]

Operational Creditor (applicant) liable to bear IRP expenses where CoC could not ratify costs.

Reasonableness and transparency of IRP fees - Disclosure of item-wise insolvency resolution process costs under Regulation 34A - Insolvency resolution process costs - Whether the quantum of fees and expenses allowed by the Adjudicating Authority was reasonable and what amount should be permitted. - HELD THAT: - The Tribunal applied statutory provisions, the Code of Conduct and the IBBI circular emphasising that fees must be a reasonable reflection of work necessarily and properly undertaken and disclosed in a transparent manner. Having regard to the limited progress of CIRP (preliminary phase, pandemic-related lockdown, absence of claims, inability to prepare information memorandum or constitute CoC) the Tribunal found the Adjudicating Authority erred in simply endorsing the claimed amount. The Tribunal examined the claimed break-up (fixed IRP fee, public announcement, legal, company secretary and out of pocket expenses) and, while allowing full reimbursement of the public announcement cost, reduced the fixed fee and professional/miscellaneous heads on proportionality grounds. It concluded that a consolidated reduced amount would suffice and directed payment of that amount plus applicable GST within a specified time. [Paras 21, 22, 23, 24]

The allowed quantum of IRP fees/expenses is modified downward and fixed at a consolidated amount of Rs.2,87,000/- plus GST to be reimbursed by the Operational Creditor.

Final Conclusion: The appeal is dismissed insofar as it sought to deny the IRP reimbursement; the Tribunal held the IRP entitled to fees/expenses and the Operational Creditor liable to reimburse them, but modified the Adjudicating Authority's awarded quantum to a consolidated sum of Rs.2,87,000/- plus GST payable within one week of upload of this order.

Classification of claim as financial debt or operational debt - ingredient of Section 5(8) of the I&B Code - assets excluded from insolvency as third party trust under Section 18(1)(f) - admission of new plea on appeal

Classification of claim as financial debt or operational debt - ingredient of Section 5(8) of the I&B Code - Claim of the appellant that the amount paid to the corporate debtor constituted a financial debt - HELD THAT: - The agreement between the consortium members shows the appellant paid Rs.50 lakhs as its share towards the consortium's bid bond bank guarantee and not as a disbursement for the time value of money. The Adjudicating Authority concluded, and this Tribunal agrees, that the disbursement did not satisfy the ingredient of Section 5(8) of the I&B Code necessary to characterise the claim as a financial debt. The contractual arrangement indicates the payment was the appellant's share for the bid bond rather than a loan or financial accommodation to the corporate debtor, and no error is found in treating the claim as not being a financial debt. [Paras 6, 13]

The claim is not a financial debt and was correctly not admitted as a financial creditor claim.

Assets excluded from insolvency as third party trust under Section 18(1)(f) - admission of new plea on appeal - Whether the amount paid by the appellant was held by the corporate debtor on trust and hence excluded from the corporate debtor's assets under the Explanation to Section 18(1)(f) - HELD THAT: - Although the Explanation to Section 18(1)(f) provides that assets owned by a third party and held under trust are not assets of the corporate debtor, the written agreement between the parties does not establish that the payment was made to the corporate debtor to be held on trust. The agreement records the payment as the appellant's share towards the bid bond to be arranged by the consortium leader, with conditions for repayment upon specified events; it does not create a trust relationship or indicate that the funds were to be kept separate as trust property. The Tribunal also notes that the trust contention was not pleaded before the Adjudicating Authority, although the appeal advanced it; on examination, the factual and contractual record does not support treating the amount as trust property excluded from the corporate debtor's assets. [Paras 8, 12, 13]

The payment was not held in trust for the appellant and therefore is not excluded from the corporate debtor's assets under the Explanation to Section 18(1)(f). The trust plea is unfounded.

Approval of resolution plan - Challenge to the Adjudicating Authority's approval of the resolution plan - HELD THAT: - No substantive ground was urged before this Tribunal that would justify interference with the Adjudicating Authority's order approving the resolution plan. The court found no merit in submissions that would warrant setting aside or modifying the approval. [Paras 14]

The order approving the resolution plan is not interfered with and the challenge is dismissed.

Final Conclusion: The Tribunal finds no merit in the appeals: the appellant's claim is not a financial debt, the payment was not held on trust and is not excluded under the Explanation to Section 18(1)(f), and there is no ground to interfere with the approval of the resolution plan; the appeals are dismissed.

Requirement of notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - transfer of pending winding up proceedings to the Tribunal and dealing with them from the stage before transfer under Section 434 of the Companies Act, 2013 - submission of information for admission of transferred petitions under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016 - maintainability of an application under Section 9 of the Code upon transfer of a winding up petition

Requirement of notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - maintainability of an application under Section 9 of the Code upon transfer of a winding up petition - submission of information for admission of transferred petitions under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016 - Notice under Section 8 of the Code is not mandatory where a winding up petition transferred to the Tribunal, filed on ground of inability to pay debts, is treated as an application under Section 9. - HELD THAT: - The Court examined the statutory scheme: Section 8 requires an Operational Creditor to deliver a demand notice and Rule 5 prescribes information to be submitted when winding up petitions are transferred. The proviso to Rule 5 does not contemplate issuance of a fresh Section 8 notice where a statutory demand or notice antecedent to filing of the winding up petition under the Companies Act, 1956 (transferred under Section 434) has already been given. Section 434(c) permits the Tribunal to deal with transferred proceedings from the stage before transfer; where the statutory notice stage has been completed prior to transfer, repeating a fresh Section 8 notice is not required. Accordingly, a petition transferred from winding up proceedings on the ground of inability to pay can be treated as an application under Section 9 and be maintainable without service of a fresh notice under Section 8 of the Code. [Paras 11, 12, 14, 15]

After transfer of winding up proceedings as per the Rules and Section 434, a fresh notice under Section 8 of the Code is not necessary for maintenance of an application under Section 9.

Requirement of notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - precedential value of Tribunal decisions on transferred winding up petitions - Earlier Tribunal decisions holding that a fresh Section 8 notice is mandatory on transfer of winding up petitions are incorrect and are overruled. - HELD THAT: - The Court considered the Tribunal decisions in Sabari Inn Pvt. Ltd., Mosmetro Story (FZE) and Shailendra Sharma which held that transferred winding up petitions could not be treated as Section 9 applications absent a fresh Section 8 notice. Having concluded that a fresh Section 8 notice is not required where statutory notice antecedent to the winding up petition was already served and the Tribunal is to deal with the proceedings from the stage before transfer, the Court held those earlier decisions to be not good law and overruled them. [Paras 16, 19]

The decisions in Sabari Inn, Mosmetro Story and Shailendra Sharma are overruled to the extent they require a fresh Section 8 notice for transferred winding up petitions to be treated as Section 9 applications.

Final Conclusion: The appeal is dismissed on merits. A winding up petition transferred to the Tribunal that was filed on the ground of inability to pay debts may be treated as an application under Section 9 of the Code without service of a fresh notice under Section 8; earlier Tribunal decisions to the contrary are overruled.

Suppression of facts with intent to evade - proviso to Section 73(1) of the Finance Act, 1994 - extended limitation for recovery in cases of evasion - payment of service tax with interest before issue of show cause notice and effect of CBEC Circular F. No. 137/167/2006-CX dated 03.10.2007 - penalty for suppression or evasion - duty to deposit tax collected from recipients into Government exchequer - appellate restraint vis-a -vis original authority's factual satisfaction

Duty to deposit tax collected from recipients into Government exchequer - suppression of facts with intent to evade - penalty for suppression or evasion - Validity of confirmation of service tax demand, interest and imposition of penalty where assessee collected service tax but did not deposit it and failed to file ST-3 returns for the relevant period. - HELD THAT: - The Tribunal found that the appellant did not dispute collection of service tax from recipients but failed to deposit the same and omitted to file ST-3 returns for the period in question. The original authority inferred that withholding of tax and failure to file returns indicated conduct consistent with suppression with intent to evade payment. The appellant's plea of financial hardship was unsupported by material; no persuasive reason was shown to displace the original authority's subjective satisfaction. In these circumstances the confirmation of demand, levy of interest and imposition of penalty were held to be justified and not perverse or unreasonable. [Paras 6]

Confirmation of demand, interest and penalty upheld.

Proviso to Section 73(1) of the Finance Act, 1994 - extended limitation for recovery in cases of evasion - payment of service tax with interest before issue of show cause notice and effect of CBEC Circular F. No. 137/167/2006-CX dated 03.10.2007 - penalty for suppression or evasion - Whether payment of service tax with interest before issue of show cause notice, in light of the CBEC circular, absolves the assessee from initiation or continuation of adjudication proceedings in a case alleging suppression. - HELD THAT: - The Tribunal explained that the effect of the Board's circular and related provisions depends on the facts and statutory conditions. Section 73(1A) and the circular contemplate conclusion of proceedings where the taxpayer pays tax, interest and the specifically stipulated reduced penalty within the time provided. In the present case the appellant had not complied with that statutory mechanism (reduced penalty payment as required) and moreover did not file returns for the relevant period on time. The original authority nevertheless extended the facility available; hence the appellant cannot claim automatic termination of proceedings based on the circular. Prior judicial decisions cited by the appellant were distinguished on their facts. [Paras 7]

CBEC circular does not automatically preclude proceedings; its benefit was not available to the appellant on the facts and statutory requirement not satisfied.

Appellate restraint vis-a -vis original authority's factual satisfaction - Scope for interference by appellate authority with the original authority's factual satisfaction regarding intent to evade or suppression. - HELD THAT: - The Tribunal reiterated that appellate bodies should be cautious in substituting their view for the original authority's first hand assessment of facts and credibility unless the impugned order is irrational, unreasonable or procedurally improper. No such perversity or procedural defect was shown in the present case to warrant interference with the original findings of the authority. [Paras 7]

No interference with the original authority's factual satisfaction; appellate restraint applies.

Final Conclusion: The appeal is dismissed; the impugned Order in Original confirming demand, interest and penalty is upheld.

Foreclosure charges / prepayment charges - banking and other financial services - service tax liability on charges for premature termination of loans - definition of banking and other financial services under Section 65(12) of the Finance Act, 1994 - distinction between damages and consideration for service

Foreclosure charges / prepayment charges - banking and other financial services - service tax liability on charges for premature termination of loans - definition of banking and other financial services under Section 65(12) of the Finance Act, 1994 - distinction between damages and consideration for service - Foreclosure charges collected by the appellant on premature termination of loans are leviable to service tax under banking and other financial services. - HELD THAT: - The Tribunal (following the Larger Bench decision in Commissioner of Service Tax, Chennai Vs REPCO Home Finance Ltd.) considered whether preclosure/foreclosure charges levied by banks and non-banking financial companies amount to a taxable service within the meaning of banking and other financial services as defined in Section 65(12) of the Finance Act, 1994. The Larger Bench examined prior decisions and the amended definition (post 10-9-2004) and rejected the view that foreclosure charges are consideration for a service. It held that such charges are stipulated in contracts as damages for breach on premature termination and do not represent a service rendered by the lender to the borrower. The addition of the term "lending" to the definition was held not to be determinative of levy on foreclosure charges. The Tribunal therefore held that the reasoning in Hudco could not be accepted and that foreclosure/prepayment charges are not leviable to service tax under banking and other financial services. Applying that binding conclusion, the confirmed demands, interest and penalties in the impugned orders could not be sustained and were set aside.

Demand of service tax, interest and penalties on foreclosure/prepayment charges is not sustainable; impugned orders are set aside and the appeals are allowed.

Final Conclusion: Following the Larger Bench decision in REPCO Home Finance Ltd., foreclosure or prepayment charges collected by banks and non-banking financial companies on premature termination of loans are not leviable to service tax under the definition of banking and other financial services; the confirmed demands and penalties were set aside for the periods July 2001 to March 2010 and April 2010 to March 2011.

Movable property versus immovable property - permanency test - functional utility test - inputs under Rule 2(k) of the CENVAT Credit Rules, 2004 - capital goods under Rule 2(a) of the CENVAT Credit Rules, 2004 - entitlement to CENVAT credit for provision of Business Support Services

Movable property versus immovable property - permanency test - Towers and shelters used in the appellant's passive infrastructure are not immovable property and are movable goods for purposes of excise/CENVAT law. - HELD THAT: - Applying the permanency test as explained by the Supreme Court, the Tribunal held that the towers and shelters, supplied in CKD condition and bolted to foundation stubs merely to provide stability and wobble-free operation, are not assimilated into the earth nor intended to be permanently annexed for beneficial enjoyment of the land. The Court applied established precedents distinguishing machines or plants permanently integrated with earth-embedded structures from items fastened only for operational stability; where fastening (nuts and bolts) permits unbolting, removal and reassembly, the movable character survives. Reliance was placed on prior Supreme Court authority and on the Delhi High Court decision in Vodafone Mobile Services, and the factual finding that towers/shelters are fabricated off-site, portable and re-locatable led to the conclusion that they are movable goods and not immovable property. [Paras 15, 16, 17, 18, 20]

The towers and shelters are movable goods and not immovable property; therefore they are not excluded from excise/CENVAT as immovable property.

Functional utility test - inputs under Rule 2(k) of the CENVAT Credit Rules, 2004 - Towers and prefabricated shelters qualify as 'inputs' under Rule 2(k) of the Credit Rules when used for providing output services, including Business Support Services. - HELD THAT: - The Tribunal followed the functional utility test: goods satisfy the test if they are required for providing the output service on a commercial scale. The Delhi High Court's reasoning in Vodafone Mobile Services was adopted, holding that towers and shelters, used in conjunction with BTS and antennae and forming essential parts of the integrated BTS system, perform actual use (including passive use) in supplying the service and thus fall within the wide expression 'all goods' in Rule 2(k). The Tribunal found a sufficient nexus between these goods and the output service to treat them as inputs. [Paras 21]

Towers and shelters used in the provision of the appellant's services qualify as 'inputs' under Rule 2(k) and are eligible for CENVAT credit.

Capital goods under Rule 2(a) of the CENVAT Credit Rules, 2004 - entitlement to CENVAT credit for provision of Business Support Services - Towers and shelters also qualify as 'capital goods' (or accessories/parts thereof) under Rule 2(a) and thus attract CENVAT credit when used for providing output services. - HELD THAT: - Adopting the Delhi High Court's interpretation, the Tribunal held that for an item to be 'capital goods' it must fall under the relevant tariff entries (notably Chapter 85 and its components) and be used for providing the output service. Towers and shelters function as essential components or accessories to BTS and antennae-supporting, enabling and enhancing transmission-thereby satisfying the tests for being capital goods or accessories thereto. Consequently, CENVAT credit taken as capital goods was held to be allowable. [Paras 22, 23, 24]

Towers and shelters qualify as capital goods or accessories thereof under Rule 2(a); CENVAT credit on them was correctly availed.

Final Conclusion: The Commissioner's order denying CENVAT credit on towers, shelters and parts is set aside; the appeals are allowed and the appellant is entitled to the CENVAT credit claimed for the periods 2011-12 to 2014-15.

Export of service under Rule 3(3) of Export of Services Rules, 2005 - Business Auxiliary Service as export when recipient located outside India - taxability of overriding commission - retention in Indian rupees treated as saving of foreign exchange akin to receipt in convertible foreign exchange - eligibility for Cenvat credit on input services under Cenvat Credit Rules, 2004 - definition of 'input service' includes activities in relation to business

Export of service under Rule 3(3) of Export of Services Rules, 2005 - Business Auxiliary Service as export when recipient located outside India - taxability of overriding commission - retention in Indian rupees treated as saving of foreign exchange akin to receipt in convertible foreign exchange - Overriding commission received by the appellant as General Sales Agent is export of service and not liable to service tax. - HELD THAT: - The Tribunal applied the conditionalities of Rule 3(3) of the Export of Services Rules, 2005, holding that Business Auxiliary Services qualify as export where they are provided in relation to commerce or industry and the recipient is located outside India. The appellants, acting as General Sales Agent, rendered services (soliciting, promoting and selling passenger air transportation) that benefited the foreign principal abroad; the Tribunal accepted that the foreign company is the service recipient and that the benefit accrues outside India. Reliance was placed on the Tribunal's earlier decision in Arafaath Travels Pvt. Ltd., which held that retention of commission in Indian rupees amounts to a saving of foreign exchange and is to be treated akin to receipt in convertible foreign exchange; that reasoning was followed here to conclude that the overriding commission is an export and exempt from service tax. Consequently, the demand for service tax on overriding commission was set aside. [Paras 3]

Demand for service tax on overriding commission set aside as the commission amounts to export of Business Auxiliary Service.

Eligibility for Cenvat credit on input services under Cenvat Credit Rules, 2004 - definition of 'input service' includes activities in relation to business - Cenvat credit admissible for services integrally connected with provision of output service - Cenvat credit on input services such as car hire charges, insurance charges, travelling expenses and staff welfare expenses is admissible. - HELD THAT: - The Tribunal examined the inclusive and wide scope of the definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004 and the entitlement to credit under Rule 3. It observed that the inclusive part of the definition (services 'used in relation to' business) covers services integrally connected with the business of providing output services. Following the reasoning in Ultratech Cement Ltd. and other authorities cited, the Tribunal held that the impugned expenses fall within the sweep of 'input service' and bear a connection to the provision of output services (Air Travel Agent Service and Business Auxiliary Service), and therefore denial of credit was not legally sustainable. The appeals were allowed insofar as Cenvat credit was denied. [Paras 7]

Denial of Cenvat credit on the specified input services set aside; credit held admissible.

Final Conclusion: All three appeals are allowed: the demand for service tax on overriding commission is set aside as the commission qualifies as export of Business Auxiliary Service, and the denial of Cenvat credit on specified input services is held unsustainable; consequential relief, if any, shall follow.

Quashing of show cause notice - inordinate delay in adjudication / revival after long lull - transfer to call book and requirement of prior approval / periodic review - Section 11A(11) of the Central Excise Act, 1944 - "if it is possible to do so" and time for determination - principles of natural justice and prejudice by delay - revival of adjudication proceedings

Quashing of show cause notice - transfer to call book and requirement of prior approval / periodic review - inordinate delay in adjudication / revival after long lull - Section 11A(11) of the Central Excise Act, 1944 - "if it is possible to do so" and time for determination - principles of natural justice and prejudice by delay - Impugned show cause notice dated 9th December 1993 (period June 1993 to November 1993) and subsequent notices of personal hearing were quashed. - HELD THAT: - The Court found that the impugned show cause notice and ten related SCNs had been kept in the departmental "call book" but the respondents failed to establish satisfaction of any of the conditions in the CBIC guidelines that justify transfer to the call book. No material was produced to show prior approval of the jurisdictional Commissioner, any periodic review as required by relevant circulars, or any stay/ injunction continuing in respect of the 9.12.1993 SCN after the Apex Court judgment of 5.5.2004. Section 11A(11) mandates that, "where it is possible to do so", the Central Excise Officer determine the amount within prescribed time frames (six months for cases under sub section (1)), and the statutory expression cannot be stretched to validate adjudication after an inordinate lapse of 29 years. The Court applied the principle that unreasonable and unexplained delay in reviving and adjudicating a show cause notice causes prejudice to the noticee and offends procedural fairness and natural justice; prior decisions of High Courts were noted to the same effect. In the factual matrix - long inaction after 2004, absence of any recorded basis for keeping the matter in call book, and non compliance with CBIC directions - revival and adjudication after 29 years was held to be arbitrary and vitiated the proceedings. For these reasons the impugned SCN and the personal hearing notices were set aside. [Paras 18, 19, 22]

Impugned show cause notice dated 9th December 1993 and the personal hearing notices dated 30th November 2022 and 23rd December 2022 are quashed as adjudication after 29 years is unreasonable, CBIC call book conditions and periodic review/communication requirements were not shown to have been complied with, and revival would violate Section 11A(11) and principles of natural justice.

Final Conclusion: Writ petition allowed: the show cause notice dated 9.12.1993 (June 1993 to Nov.1993) and the personal hearing notices impugned are quashed; petitioner relieved from further adjudication on those notices in the present proceedings.

Interest on delayed refunds - Entitlement to refund of unutilised Cenvat credit - Section 11BB of the Central Excise Act, 1944 - Rule 5 of the Cenvat Credit Rules, 2004 - Preclusive effect of Larger Bench/High Court decisions and judicial discipline

Interest on delayed refunds - Section 11BB of the Central Excise Act, 1944 - Entitlement to refund of unutilised Cenvat credit - Rule 5 of the Cenvat Credit Rules, 2004 - Whether the appellant is entitled to interest under Section 11BB on delayed refund of unutilised Cenvat credit in the facts of the case. - HELD THAT: - The Tribunal held that entitlement to interest under Section 11BB is contingent upon a legally cognisable right to refund. The Larger Bench decision of the Bombay High Court in Gauri Plasticulture determined that refund of unutilised Cenvat credit is not permissible under the statutory scheme (and Rule 5) because there is no express provision authorising such refunds except in limited export-related circumstances. The appellant's refund in this case succeeded only by virtue of a Rajasthan High Court order; that order did not grant interest. Given the Larger Bench ruling and the absence of a statutory right to the refund in ordinary circumstances, the Tribunal concluded that there was no legal entitlement to interest here. Consequently, the claim for interest is unsustainable on merits and need not be examined on limitation grounds. [Paras 12, 13, 14, 18, 19]

Claim for interest under Section 11BB on the delayed refund of unutilised Cenvat credit is rejected; no interest is allowable.

Final Conclusion: The appeal is dismissed. The order rejecting the claim for interest under Section 11BB is upheld because, on the merits and in view of binding judicial pronouncements, the appellant had no statutory entitlement to the refund that would give rise to interest; limitation need not be considered.

Clandestine manufacture and clearance of excisable goods - admissions under Section 14 of the Central Excise Act - evidentiary significance of records and recovered challans - extended period of limitation for willful suppression - penalty under section 11AC - personal penalty under Rule 26(1) of the Central Excise Rules, 2002 - compliance with principles of natural justice in adjudication

Clandestine manufacture and clearance of excisable goods - evidentiary significance of records and recovered challans - Appellant clandestinely manufactured and cleared excisable goods without payment of central excise duty. - HELD THAT: - The Tribunal accepted the departmental investigation showing recovery of challans and parallel outward registers, and the absence of invoices for goods cleared under those challans. The Director's voluntary statements corroborated that goods were removed without invoices and duty was leviable. In view of these records and admissions, the Department was not required to lead further proof to establish that finished goods were clandestinely cleared under the guise of job work. [Paras 5, 12, 13]

Findings of clandestine manufacture and duty-evading clearance are upheld.

Admissions under Section 14 of the Central Excise Act - evidentiary significance of records and recovered challans - Admissions recorded from the Director under Section 14 constituted conclusive evidence requiring no further proof by the Department. - HELD THAT: - The Director admitted that challans were used for clearance without invoices, that entries and statutory records were not maintained and that corrections were made to job-work challans. The Tribunal reiterated the settled principle that matters admitted by a party need not be proved and relied on these admissions, together with the recovered documents, to sustain the demand. [Paras 4, 13]

Admissions by the Director are decisive and support the confirmed demand.

Extended period of limitation for willful suppression - The extended period of limitation was correctly invoked because the appellant willfully and intentionally suppressed material facts to evade duty. - HELD THAT: - The Tribunal found that concealment (non-issuance of invoices, failure to maintain statutory records, and clandestine clearances) amounted to willful suppression. Consequently, invocation of the proviso to the then section 11A(1) (now section 11A(4)) to extend the limitation period was held proper and the demand fell within the extended five-year period. [Paras 14]

Extended limitation rightly applied; demand is within time.

Penalty under section 11AC - Penalty under section 11AC was justified and confirmed against the assessee. - HELD THAT: - Given the Tribunal's concurrence with the finding of clandestine clearances and suppression of material facts constituting contraventions of the Central Excise law and rules, imposition of penalty under section 11AC was sustained as a consequence of those violations. [Paras 5, 15]

Penalty under section 11AC confirmed.

Personal penalty under Rule 26(1) of the Central Excise Rules, 2002 - Personal penalty under Rule 26(1) was correctly imposed on the Director, Sh. Amit Rajput. - HELD THAT: - The Tribunal held that the Director was responsible for the clandestine manufacture and removal of goods, as evidenced by documents recovered and his own admissions. His position and active involvement in day to day affairs rendered him liable for a personal penalty under Rule 26(1), which the Tribunal upheld. [Paras 16]

Personal penalty on the Director under Rule 26(1) upheld.

Compliance with principles of natural justice in adjudication - Adjudicating authority complied with principles of natural justice despite ex parte conduct by the appellant. - HELD THAT: - The adjudicating authority afforded opportunities for hearing, noted the appellant's failure to respond to the show cause notice and to appear despite warnings, and relied on precedent to conclude that natural justice requirements were satisfied. The Tribunal found no infirmity in proceeding on the material available and confirming the demand. [Paras 9]

Proceedings held to be in conformity with natural justice.

Final Conclusion: The Tribunal confirmed the adjudicating authority's findings that the assessee clandestinely manufactured and cleared excisable goods without payment of duty, sustained the extended limitation, upheld penalty under section 11AC and the personal penalty under Rule 26(1) against the Director, and found the adjudication procedurally fair; the appeals are dismissed.

Tax deduction at source from payment to works contractor - Levy of penalty under Section 8(D)(6) of the U.P. Trade Tax Act, 1948 - Discretionary nature of penalty and requirement for absence of mala fide or deliberate default - Effect of assessment of the contractor on liability of the payer - Avoidance of litigation and public interest in not pursuing futile proceedings against Government institutions

Levy of penalty under Section 8(D)(6) of the U.P. Trade Tax Act, 1948 - Discretionary nature of penalty and requirement for absence of mala fide or deliberate default - Whether imposition of penalty under Section 8(D)(6) on the university was justified - HELD THAT: - The Court held that the penalty under Section 8(D)(6) is discretionary and should not be imposed mechanically. The revisionist, an educational institution, established that its officers were not aware of the deduction requirement and that there was no malafide intention; the reasons offered were plausible. In the circumstances, and having regard to the discretionary character of the penalty provision, imposition of the penalty was not justified. [Paras 8, 9, 17]

Penalty under Section 8(D)(6) was not leviable on the university and the penalty order was set aside.

Effect of assessment of the contractor on liability of the payer - Tax deduction at source from payment to works contractor - Avoidance of litigation and public interest in not pursuing futile proceedings against Government institutions - Whether continuation of penalty proceedings against the university was justified once the Government agency contractor (U.P. Rajkiya Nirman Nigam Ltd.) had been assessed and tax liability created - HELD THAT: - The Court observed that the primary object of the deduction provision is to secure revenue by ensuring the contractor is assessed. Once U.P. Rajkiya Nirman Nigam had been assessed for the relevant period and a tax liability created, further penalty proceedings against the payer (the university) were futile and caused unnecessary expenditure and litigation. Given that the contractor's assessment achieved the fiscal purpose, initiation and continuation of penalty proceedings against the Government-funded university were contrary to public interest and the effective functioning of the fiscal scheme. [Paras 13, 15, 16]

Penalty proceedings were unnecessary and the penalty order was set aside in view of the contractor's assessment and the public interest in avoiding futile litigation.

Final Conclusion: Revision allowed; the order imposing penalty under Section 8(D)(6) and the Tribunal's order are set aside. The questions of law were answered in favour of the assessee and against the revenue.

Penalty under Section 40(2) of the JVAT Act - penalty under Section 30(4)(d) of the JVAT Act - revised return - directory nature of time-limit for revision of returns - mens rea in taxing statutes - acceptance of turnover in regular assessment - refund of amount realized under recovery proceedings

Penalty under Section 40(2) of the JVAT Act - revised return - directory nature of time-limit for revision of returns - mens rea in taxing statutes - acceptance of turnover in regular assessment - Sustainability of penalty under Section 40(2) of the JVAT Act where revised quarterly return disclosing the purchases was subsequently filed and accepted in regular assessment. - HELD THAT: - The Court found that the petitioner had in fact utilized Form SUGAM G for inter state purchases and thereafter filed a revised quarterly return which was accepted in the regular assessment proceedings. The statutory time for revision of returns is directory and revision can be allowed after the prescribed period; the statutory scheme also contemplates a lesser, specified penalty for return defaults under Section 30(4)(d). In the absence of any allegation or proof of mens rea to evade tax, the language and object of Section 40(2) - a provision imposing a heavy penal consequence for deliberate concealment - are not attracted. Given the acceptance of the revised return and turnover in the assessment, and the specific, alternative penal regime in Section 30(4)(d) for return defaults, imposition of penalty under Section 40(2) was not sustainable in the facts of this case. [Paras 11, 12, 13]

Penalty imposed under Section 40(2) set aside; in the facts the appropriate provision for return default would have been Section 30(4)(d).

Refund of amount realized under recovery proceedings - penalty under Section 30(4)(d) of the JVAT Act - Entitlement to refund of amounts realized under recovery proceedings consequent to quashing of the penalty order, and quantum of permissible penalty under Section 30(4)(d). - HELD THAT: - Having held that the Section 40(2) penalty was unsustainable, the Court directed restitution of amounts realized by the revenue under the impugned recovery proceedings. The Court further observed that Section 30(4)(d) prescribes a maximum penalty for return defaults and accordingly ordered that the realized amount be refunded after deducting the maximum permissible penalty under Section 30(4)(d). The court thereby balanced the finding that a return default existed (belonging to the Section 30 regime) with the absence of concealment warranting the heavier sanction under Section 40(2). [Paras 13, 14]

Amount realized (penalty) to be refunded to the petitioner after deduction of Rs.25,000/ being the maximum under Section 30(4)(d); writ allowed.

Final Conclusion: The Tribunal's orders dismissing the petition against imposition of penalty were quashed and set aside; the penalty under Section 40(2) was held not sustainable in the circumstances, the payment realised under recovery is to be refunded after deduction of the maximum permissible penalty under Section 30(4)(d), and the writ petition is allowed.

Error apparent on the face of the record - power to rectify under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - rectification not a substitute for statutory appeal - requirement of personal hearing where rectification results in enhancement of assessment or penalty - delay and laches in filing rectification petitions - validity of auction notice for recovery of tax and penalty

Power to rectify under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - error apparent on the face of the record - Whether the Rectification Petitions under Section 84(1) could be entertained and whether the first respondent was justified in rejecting them. - HELD THAT: - Section 84 permits rectification only where there is an error apparent on the face of the record. The authority examined the petitions filed in 2018 against assessment orders of 2013 and concluded that no case for rectification was made out. The Court, having regard to the undisputed facts showing that the petitioner had not pursued statutory appeal and filed rectification only after a delay, found no infirmity in the first respondent's conclusion that the petitions did not disclose an error apparent on the face of the record and were rightly rejected. [Paras 11, 12, 13, 17]

The rejection of the Rectification Petitions was justified and is upheld.

Requirement of personal hearing where rectification results in enhancement of assessment or penalty - Whether the petitioner was entitled to a personal hearing before rejection of the Section 84 petitions. - HELD THAT: - The proviso to Section 84 requires an opportunity of hearing only where rectification has the effect of enhancing assessment or penalty. The authority did not effect any revision or enhancement while deciding the petitions and therefore was not obliged to grant personal hearing. The petitioner did not specifically request a personal hearing. The Court held that the discretion to grant personal hearing rests with the authority and observed no requirement to grant one in the circumstances of this case. [Paras 13, 14, 15]

No personal hearing was required and absence of one did not vitiate the rejection order.

Rectification not a substitute for statutory appeal - delay and laches in filing rectification petitions - Whether the petitioner's failure to file the statutory appeal and the delay in seeking rectification precluded entertain ment of the rectification petitions. - HELD THAT: - The record showed that no statutory appeal was filed against the assessment orders dated 28.01.2013 and 15.10.2013 and that rectification petitions were filed only in 2018, five years after the assessments. The Court noted prior proceedings in which the petitioner was granted liberty to file statutory appeal within a specified period and did not do so. Given the petitioner's inaction and the long delay, the Court found the rectification route inappropriate as a means to avoid the statutory appellate remedy and upheld the authority's view that the rectification petitions could not be entertained. [Paras 10, 16, 17]

Petitioner's failure to pursue statutory appeal and the inordinate delay disentitle him to relief by way of rectification.

Validity of auction notice for recovery of tax and penalty - Whether the Auction Notice dated 07.02.2023 impugned in the writ petition deserved interference. - HELD THAT: - The impugned Auction Notice was issued pursuant to the order rejecting rectification petitions. Since the Court found no merit in the challenge to the rejection of rectification petitions, and having regard to the petitioner's failure to comply with earlier conditional directions and statutory remedies, the Court concluded that the Auction Notice did not warrant interference. [Paras 17, 18]

The Auction Notice stands; the writ petition challenging it is dismissed.

Final Conclusion: The writ petition is dismissed. The order rejecting the rectification petitions under Section 84(1) and the consequential Auction Notice dated 07.02.2023 are upheld; no interference is warranted.

Recovery of tax during pendency of statutory appeal - effect of statutory pre-deposit - stay of coercive action - lifting of bank attachment - direction to appellate authority to decide pending appeal within time

Recovery of tax during pendency of statutory appeal - effect of statutory pre-deposit - lifting of bank attachment - penalty recovery - Permissibility of further recovery from the petitioner's bank account after filing of a statutory appeal with payment of statutory pre-deposit and after partial recovery by the department - HELD THAT: - The Court found that the petitioner had filed a statutory appeal against the assessment order and had made the required statutory pre-deposit, and that the first respondent had thereafter recovered a portion of the assessed tax from the petitioner's bank account. In these circumstances the Court held that no further coercive recovery could be lawfully taken from the petitioner while the statutory appeal remained pending and the pre-deposit had been made. The Court noted the petitioner's apprehension that the penalty component might also be recovered and, to prevent prejudice during the pendency of the appeal, restrained any further recovery pursuant to the impugned communication. Consequently, the attachment effected on the petitioner's bank account was directed to be lifted and the petitioner permitted to operate the account. [Paras 7, 8, 9, 11]

Further recovery from the petitioner pursuant to the impugned proceedings is stayed; the bank attachment is to be lifted and the petitioner permitted to operate the bank account until final disposal of the statutory appeal.

Direction to appellate authority to decide pending appeal within time - stay of coercive action - Obligation of the statutory appellate authority to decide the pending statutory appeal within a specified timeframe and interim consequences - HELD THAT: - The Court suo motu impleaded the statutory appellate authority as a necessary party and directed it to decide the petitioner's statutory appeal, which was already pending and for which the pre-deposit had been made, on merits and in accordance with law within twelve weeks from receipt of the order. The Court linked that direction to the interim protection granted, making the stay of coercive recovery conditional on disposal of the appeal within the prescribed period. The Court observed that no prejudice would be caused to the respondents by this timeline and directed that no coercive steps pursuant to the impugned communication shall be taken till the appellate authority passes final orders. [Paras 8, 9, 11]

The appellate authority is directed to decide the statutory appeal within twelve weeks; until final orders are passed no coercive steps shall be taken pursuant to the impugned proceedings.

Final Conclusion: Writ petition disposed by staying further recovery under the impugned proceedings and directing lifting of the bank attachment and operation of the account; the statutory appellate authority is impleaded and directed to decide the pending appeal within twelve weeks, and no coercive action shall be taken until the appeal is finally disposed of.

Limited scope of sanction under Rule 36 read with Section 43 to quantification of refund - prohibition on higher authority exercising review, appeal or revision in refund proceedings - refund to follow the order of the Assessing Authority irrespective of merits - binding effect of Division Bench precedent affirmed by the Supreme Court

Limited scope of sanction under Rule 36 read with Section 43 to quantification of refund - prohibition on higher authority exercising review, appeal or revision in refund proceedings - Whether the Commissioner had jurisdiction under Rule 36 of the Haryana General Sales Tax Rules read with Section 43 of the Haryana General Sales Tax Act to refuse the refund or to re-open/assess the merits of the assessment made by the Assessing Authority. - HELD THAT: - Following a Division Bench decision of this Court in Raghbar Dass Hukam Chand which was subsequently affirmed by the Supreme Court on SLP, the Court held that the statutory power to sanction refunds under Rule 36 read with Section 43 is confined to determining and quantifying the amount of refund already allowed by the Assessing Authority. An officer exercising sanctioning power cannot review, re-appreciate or set aside the assessment order; such higher authority must respect the assessment and limit itself to quantification of refund. The Commissioner's refusal to approve the refund on grounds going to merits (including invocation of the principle of unjust enrichment and re-examination of whether turnover should include the rental) amounted to an impermissible exercise of review/appeal/revision powers in refund proceedings. The Tribunal's endorsement of the Commissioner's view was therefore unsustainable in law. Applying that precedent to the facts, the Court held that the appellant is entitled to the refund as determined by the Assessing Authority for the assessment year 1998-99.

The Commissioner had no jurisdiction to re-open or refuse the refund on merits; the refund as determined by the Assessing Authority must be allowed for AY 1998-99.

Final Conclusion: The appeal is allowed; the impugned order of the Haryana Tax Tribunal is set aside and the refund, as calculated in the assessment order dated 11.02.2003 for assessment year 1998-99, is to be granted in accordance with law.

Rectification of assessment - decision on applications under Section 84 of the Tamil Nadu Value Added Tax Act 2006 - bank attachment notice - stay of recovery pending decision

Rectification of assessment - decision on applications under Section 84 of the Tamil Nadu Value Added Tax Act 2006 - Petitioner's applications dated 26.10.2022 and 05.12.2022 for rectification of the assessment order dated 01.02.2022 are to be considered and finally disposed of on merits and in accordance with law within a stipulated period. - HELD THAT: - The Court recorded that the petitioner filed specific applications under Section 84 seeking rectification of the assessment order dated 01.02.2022 on stated grounds including alleged misuse of the registration certificate and cessation of business. Observing that disposal of those applications would cause no prejudice to the respondents, the Court directed that the first respondent shall consider the applications on merits and in accordance with law and pass final orders within eight weeks from receipt of the copy of this order. The direction is procedural and mandates fresh consideration of the pending rectification requests within the prescribed timeframe. [Paras 6, 7]

The first respondent is directed to pass final orders on the petitioner's rectification applications within eight weeks.

Bank attachment notice - stay of recovery pending decision - Whether recovery proceedings in enforcement of the assessment order, including action pursuant to the Bank Attachment Notice dated 14.10.2022, should be restrained until the first respondent disposes of the rectification applications. - HELD THAT: - The Court noted that the petition challenges the Bank Attachment Notice issued to the petitioner's bank account and that the rectification applications remain pending. In the exercise of its discretion and to prevent prejudice pending adjudication of the rectification pleas, the Court restrained initiation of recovery proceedings for enforcement of the assessment order dated 01.02.2022 until final orders are passed on the applications. The restraint is interim and co-extensive with the period given to the first respondent to decide the rectification applications. [Paras 5, 7]

Until the first respondent passes final orders on the rectification applications, no recovery proceedings shall be initiated against the petitioner for enforcement of the assessment order dated 01.02.2022.

Final Conclusion: Writ petition disposed by directing the first respondent to decide the petitioner's rectification applications dated 26.10.2022 and 05.12.2022 within eight weeks and by restraining recovery proceedings, including enforcement pursuant to the Bank Attachment Notice dated 14.10.2022, until such decision is rendered.

Transfer of criminal proceedings under Section 406 Cr.P.C. - territorial jurisdiction under Section 142(2) of the Negotiable Instruments Act, 1881 - non obstante clause in Section 142(1) of the Negotiable Instruments Act, 1881 - jurisdiction where the cheque is dishonoured / drawee bank is located

Territorial jurisdiction under Section 142(2) of the Negotiable Instruments Act, 1881 - jurisdiction where the cheque is dishonoured / drawee bank is located - Scope and situs of territorial jurisdiction for prosecution under Section 138 after insertion of Section 142(2). - HELD THAT: - The Court construed Section 142(2) in the context of Dashrath Rupsingh Rathod and the Statement of Objects and Reasons to hold that the amendment was intended to restrict territorial jurisdiction for inquiry and trial to the Court within whose local jurisdiction the branch of the bank is situated where the cheque was delivered for collection through the payee's account. The Court noted that Section 142(2)(a) vests jurisdiction in the Court where the cheque was delivered for collection (i.e., the branch of the drawee bank where presentation and dishonour occurred) and that subsequent decisions, including Bridgestone India Pvt. Ltd., affirmed this position. The institution of the two complaints before the Nagpur Courts therefore accords with the amended statutory scheme. [Paras 9, 11, 12]

Jurisdiction to try an offence under Section 138, post-amendment, vests in the Court within whose local jurisdiction the relevant bank branch (where the cheque was delivered for collection and dishonoured) is situated.

Non obstante clause in Section 142(1) of the Negotiable Instruments Act, 1881 - transfer of criminal proceedings under Section 406 Cr.P.C. - Whether the non obstante clause in Section 142(1) ousts the power of this Court to transfer criminal proceedings under Section 406 Cr.P.C. in relation to offences under Section 138. - HELD THAT: - The Court held that the non obstante clause in Section 142(1) must be read in context - it prescribes the manner of taking cognizance and the special procedural regime applicable to Section 138 offences, but does not expressly or impliedly exclude the constitutional and statutory power of this Court under Section 406 Cr.P.C. to transfer pending criminal proceedings. The Court observed precedent where transfer under Section 406 Cr.P.C. was exercised in Section 138 matters prior to the 2015 amendments (A.E. Premanand v. Escorts Finance Ltd.), and concluded that the power to transfer remains intact and available where expedient in the interests of justice. [Paras 11, 13]

The non obstante clause in Section 142(1) does not abrogate the power of this Court to transfer criminal cases under Section 406 Cr.P.C. in relation to offences under Section 138; transfers remain permissible for the ends of justice.

Transfer of criminal proceedings under Section 406 Cr.P.C. - territorial jurisdiction under Section 142(2) of the Negotiable Instruments Act, 1881 - Whether transfer of the two Nagpur complaints to the Dwarka Courts for common trial with four other complaints is appropriate. - HELD THAT: - Applying the principles that jurisdiction under Section 142(2) vests where the cheque was delivered for collection but that the Court's transfer power under Section 406 Cr.P.C. remains available, the Supreme Court assessed the convenience and risk of divergent findings if separate trials proceeded. Noting that all six complaints arise from the same transaction and that four are already pending in Dwarka while two are in Nagpur, the Court found it advisable, in the interests of justice and convenience of parties and witnesses, to transfer the two Nagpur matters to the South West District Courts, Dwarka, New Delhi, for trial along with the other four complaints. [Paras 14, 15]

The two complaint cases pending at Nagpur are to be transferred to the South West District Courts, Dwarka, New Delhi, to be tried along with the four complaint cases already pending there.

Final Conclusion: Transfer petitions allowed; SCC Nos.25668/2019 and 26875/2019 (Atlanta Limited v. M/s Shakti Buildcon & Anr.) are transferred from the Nagpur Courts to the South West District Courts, Dwarka, New Delhi, to be tried along with Complaint Case Nos. 42489/2019, 1464/2020, 7596/2020 and 4094/2020.