TaxTMI Updates e-Newsletter
Feb 24,2024

Quashing of assessment order - remand for fresh consideration - reversal of Input Tax Credit based on auto-populated GSTR-2A - bank attachment and appropriation subject to outcome of remand - opportunity to submit reply and personal hearing before fresh assessment

Reversal of Input Tax Credit based on auto-populated GSTR-2A - quashing of assessment order - remand for fresh consideration - opportunity to submit reply and personal hearing before fresh assessment - bank attachment and appropriation subject to outcome of remand - Validity of reversal of Input Tax Credit and consequent assessment where ITC was denied on the basis of auto-populated portal data and the assessee contests supplies from a named supplier - HELD THAT: - The court found that the reversal of ITC was effected on the basis of auto-populated GSTR-2A data from the portal, and the petitioner contended that no supplies were received from the supplier whose credit notes were said to have been issued. The court noted that the entire assessed demand had been satisfied by bank remittance, thereby protecting revenue interest. However, because the petitioner asserts absence of supplies from the named supplier and would have replied had he been aware of the proceedings, the assessment requires re-examination. In the exercise of writ jurisdiction the impugned assessment order was quashed and the matter remanded for reconsideration. The petitioner was permitted to file a reply to the show cause notice within two weeks of receipt of this order; the assessing authority was directed to afford a reasonable opportunity including a personal hearing and to pass a fresh assessment order within two months thereafter. It was clarified that amounts appropriated pursuant to the assessment shall remain retained by the revenue pending the outcome of the remanded proceedings. [Paras 4, 5]

Impugned assessment order quashed; matter remanded for fresh consideration with liberty to the petitioner to file a reply and to be afforded a personal hearing; appropriated amounts to be retained subject to remand outcome.

Final Conclusion: Writ petition allowed in part: assessment order dated 11.08.2023 quashed and remitted for fresh decision in accordance with the directions; petitioner permitted to reply and to be heard; bank appropriation to remain subject to the result of the remanded proceedings.

Penalty under Section 129(3) of the Uttar Pradesh Goods and Services Act, 2017 for detention of goods - absence of invoice and E Way Bill raises a presumption of intention to evade tax - burden shifts to the owner/transporter to rebut presumption of evasion - production of documents after interception does not absolve liability for penalty - penalty as a deterrent against evasion of tax

Absence of invoice and E Way Bill raises a presumption of intention to evade tax - burden shifts to the owner/transporter to rebut presumption of evasion - production of documents after interception does not absolve liability for penalty - Whether the penalty imposed under Section 129(3) is sustainable where invoice and E Way Bill were not accompanying the goods at the time of interception but were produced subsequently - HELD THAT: - The Court found the facts undisputed that neither invoice nor E Way Bill accompanied the goods at the time of interception (paras. 3, 6). It held that such non accompaniment is not a mere technical lapse and permits a presumption of intention to evade tax; consequently the evidential burden shifts to the owner/transporter to rebut that presumption (paras. 6-7). The Court observed that production of the documents after interception does not itself absolve the petitioner from penalty because the statutory scheme and the purpose of penalty-serving as a deterrent against tax evasion-require that the documents accompany the goods at the relevant time; had the goods not been intercepted, the revenue would have suffered (para. 8). Applying these principles to the undisputed facts, the petitioner failed to rebut the presumption of evasion and therefore remained liable to the penalty imposed under Section 129(3) (paras. 6-8). [Paras 6, 7, 8]

Penalty under Section 129(3) sustained; production of invoice and E Way Bill after interception did not negate liability as petitioner failed to rebut presumption of evasion.

Final Conclusion: Writ petition dismissed; impugned orders imposing penalty under Section 129(3) upheld for failure to rebut the presumption of intention to evade tax where goods were not accompanied by invoice and E Way Bill at the time of interception.

Input Tax Credit - transition of VAT credit to GST regime - reliance on portal upload as basis for reversal of credit - right to fair opportunity and personal hearing - quash and remand for reconsideration

Input Tax Credit - reliance on portal upload as basis for reversal of credit - Whether the assessing officer was justified in reversing the credit solely because refund orders were not uploaded on the portal. - HELD THAT: - The court found that the assessing officer reversed the credit on the basis that copies of refund orders were not available or uploaded in the portal. The petitioner had, however, furnished a communication dated 01.12.2020 (received 02.12.2020) stating that three refund orders were enclosed and specifying order numbers and amounts. The High Court did not decide the substantive correctness of the claimed credit on merits; instead it held that, in the factual matrix where the petitioner had produced a contemporaneous reply asserting enclosure of the refund orders, the impugned order cannot stand when the assessing officer failed to consider those documents. For this reason the court quashed the order insofar as it proceeded solely on the ground of non-upload and remanded the matter for fresh consideration. [Paras 6, 7]

Impugned order quashed and the question of reversal on the ground of non-upload remitted for fresh consideration.

Right to fair opportunity and personal hearing - quash and remand for reconsideration - The remedial directions to be given on remand and procedural opportunities to the petitioner. - HELD THAT: - The court directed that the petitioner be permitted to submit all relevant documents to the assessing officer within two weeks of receipt of the order. Upon receipt, the assessing officer must afford the petitioner a reasonable opportunity, including a personal hearing, and thereafter pass a fresh order after considering the documents. The fresh decision is to be rendered within two months from receipt of the documents. These directions were issued to secure a fair adjudicatory process where the assessing officer will re-examine the claim in light of the documents now to be produced. [Paras 7, 8]

Petitioner to submit documents within two weeks; assessing officer to grant opportunity including personal hearing and decide afresh within two months.

Final Conclusion: The impugned order dated 29.12.2023 is quashed and the matter is remanded for reconsideration after the petitioner furnishes the asserted refund orders; the assessing officer shall grant a reasonable opportunity including personal hearing and pass a fresh order within the specified timelines.

Rejection of Input Tax Credit solely for non-claim in GSTR-3B - Duty of assessing officer to examine ITC claim and call for supporting documents - Quashment of assessment orders and remand for fresh consideration - Penalty under Section 74 of the CGST Act, 2017

Rejection of Input Tax Credit solely for non-claim in GSTR-3B - Duty of assessing officer to examine ITC claim and call for supporting documents - The rejection of the petitioner's ITC claim solely because the ITC was not reflected in GSTR-3B returns was impermissible and required reconsideration. - HELD THAT: - The Court recorded that the impugned orders rejected the petitioner's asserted entitlement to Input Tax Credit on the sole ground that the petitioner had not claimed the ITC in the GSTR-3B returns. The Court held that when a registered person asserts entitlement to ITC by reference to GSTR-2A and GSTR-9, the assessing officer is obliged to examine the validity of that claim by considering relevant documents and, if necessary, by calling upon the registered person to produce supporting material. A mechanical rejection merely because the GSTR-3B did not reflect the claim fails to discharge the assessing officer's duty to examine the claim on its merits and therefore warranted interference with the impugned orders. [Paras 5, 6]

The Court quashed the portions of the assessment orders that rejected the ITC claim solely for non-claim in GSTR-3B and directed reconsideration after proper examination of supporting documents.

Quashment of assessment orders and remand for fresh consideration - Procedural direction for production of documents and opportunity of personal hearing - The assessment orders were set aside and the matters were remanded to the assessing officer with directions for document submission, hearing and fresh assessment within specified timelines. - HELD THAT: - The Court quashed the impugned orders and remanded the matters for fresh consideration. The petitioner was permitted to place all documents in support of the ITC claims before the assessing officer within two weeks of receipt of the order. Upon receipt, the assessing officer was directed to afford a reasonable opportunity to the petitioner, including a personal hearing, and to pass fresh assessment orders within two months from receipt of the documents. The Court thereby provided a limited and specific procedure for reconsideration rather than deciding entitlement on the merits. [Paras 7]

Orders quashed and cases remanded with directions permitting the petitioner to tender documents within two weeks and directing fresh assessment after a hearing within two months.

Final Conclusion: Impugned assessment orders for AYs 2017-2018, 2018-2019 and 2019-2020 quashed to the extent they rejected ITC solely because it was not claimed in GSTR-3B; matters remanded for reconsideration after production of documents and a personal hearing, with fresh assessment orders to be passed within the timelines directed by the Court.

Anticipatory bail - Interim bail - Conditions under Section 438(2) Cr.P.C. - Obligation to join investigation - Non-tampering with evidence and witness influence - No departure from India without prior permission of the Court - Adjudication of GST liability pending

Anticipatory bail - Interim bail - Conditions under Section 438(2) Cr.P.C. - Obligation to join investigation - Non-tampering with evidence and witness influence - No departure from India without prior permission of the Court - Confirmation of interim anticipatory bail granted earlier and the conditions to be imposed - HELD THAT: - The Court noted that the petitioner had joined the investigation in compliance with earlier orders and that the State advised the petitioner is neither required for further investigation nor for custodial interrogation. In view of these facts and the petitioner's undertaking to abide by legal processes concerning the pending GST liability, the interim bail previously granted was confirmed. The confirmation is subject to the conditions envisaged under Section 438(2) Cr.P.C., including the petitioner joining investigation as and when required by written notice from the Investigating Officer, refraining from tampering with evidence or influencing witnesses, and not leaving the country without prior permission of the Court. The Court clarified that this order does not express any opinion on the merits of the criminal or revenue claims against the petitioner. [Paras 8, 9]

Interim anticipatory bail granted earlier is confirmed subject to conditions under Section 438(2) Cr.P.C.; petitioner to join investigation on notice, not tamper with evidence or influence witnesses, and not leave the country without prior permission.

Final Conclusion: The petition under Section 438 Cr.P.C. is allowed: the interim bail previously granted is confirmed on the stated conditions; nothing in the order decides the merits of the criminal or revenue disputes.

Personal hearing under Section 75(4) of the Tamil Nadu State Goods and Services Tax Act, 2017 - opportunity to produce documents and be heard before confirming an adverse assessment - reconsideration of assessment on production of documents - remand for fresh assessment

Personal hearing under Section 75(4) of the Tamil Nadu State Goods and Services Tax Act, 2017 - opportunity to produce documents and be heard before confirming an adverse assessment - reconsideration of assessment on production of documents - Whether the impugned assessment order could stand where a personal hearing was requested by the petitioner but not granted and adverse findings were recorded for non-production of documents. - HELD THAT: - By reply dated 24.10.2023 the petitioner expressly requested a personal hearing. Section 75(4) mandates that a personal hearing be given if requested or where an order adverse to the assessee is proposed. The assessment dated 29.12.2023 was issued without providing the requested personal hearing. The impugned order records several findings that supporting documents were not produced; notably, the demand relating to trade payables (defect No.8) was confirmed on the basis that payment details were not produced despite the petitioner having enclosed a trade payables ageing report indicating no payments beyond 180 days. Given that the failure to provide a personal hearing deprived the petitioner of an opportunity to place supporting documents and to be heard on adverse proposals, the assessment cannot be sustained without reconsideration. The matter requires fresh consideration with the opportunity to produce documents and a personal hearing before any final adverse conclusion is recorded. [Paras 5, 6]

Impugned order quashed; matter remanded to the assessing officer to grant a reasonable opportunity including a personal hearing, take into account documents produced by the petitioner and thereafter pass a fresh assessment order within two months of receipt of this order.

Final Conclusion: The writ petition is allowed to the extent that the assessment order dated 29.12.2023 is quashed and the matter is remanded for fresh consideration after affording the petitioner a personal hearing and opportunity to produce documents; the assessing officer shall complete the exercise within two months.

Cancellation of GST registration - Retrospective cancellation - Validity of show cause notice - Requirement of reasons and objective satisfaction for cancellation - Opportunity to be heard against retrospective action - Consequences of retrospective cancellation on input tax credit

Validity of show cause notice - Cancellation of GST registration - Opportunity to be heard against retrospective action - Impugned show cause notice dated 20.07.2023 and cancellation order dated 02.08.2023 were invalid for want of specification of reasons, particulars of the authority, and failure to put the petitioner on notice of retrospective cancellation. - HELD THAT: - The show cause notice merely stated "Others" and required the petitioner to appear before the undersigned without naming the officer, place or time; the consequential order likewise referred only to the show cause notice and gave no reasons, merely fixing a retrospective effective date. Those defects meant the petitioner was not informed of the grounds for cancellation or that cancellation would be retrospective, depriving it of an opportunity to object. For these reasons the impugned notice and order could not be sustained and did not qualify as a valid order of cancellation. [Paras 5, 6, 7, 12, 16]

Show cause notice dated 20.07.2023 and order dated 02.08.2023 set aside; registration restored and petitioner directed to comply with Rule 23 of the CGST Rules, 2017.

Retrospective cancellation - Requirement of reasons and objective satisfaction for cancellation - Consequences of retrospective cancellation on input tax credit - Retrospective cancellation under Section 29(2) of the CGST Act must be founded on objective satisfaction and cogent reasons; it cannot be mechanically applied and the proper officer must consider consequences of retrospective effect. - HELD THAT: - Section 29(2) permits cancellation from such retrospective date as the proper officer deems fit, but that satisfaction must be objective and based on criteria, not subjective or mechanical action. Mere non-filing of returns for some period does not automatically justify cancelling registration retrospectively for periods when the taxpayer was compliant. The court noted that retrospective cancellation carries consequences, including denial of input tax credit to recipients, and the proper officer is required to consider such consequences when deciding to impose retrospective effect. The impugned order contained no reasoning explaining why retrospective cancellation was warranted. [Paras 13, 14, 15]

Retrospective cancellation must be supported by objective reasons and consideration of consequences; absence of such reasoning renders retrospective cancellation unsustainable in the present case.

Final Conclusion: Petition allowed; impugned show cause notice dated 20.07.2023 and cancellation order dated 02.08.2023 set aside, GST registration restored; respondents free to proceed in accordance with law, including recovery of any due tax, penalty or interest.

Retrospective cancellation of GST registration - adequacy of show cause notice - objective satisfaction for cancellation under Section 29(2) - restoration of GST registration subject to compliance - consequences for denial of input tax credit

Adequacy of show cause notice - retrospective cancellation of GST registration - Impugned show cause notice dated 11.02.2021 and order dated 19.04.2021 cancelling GST registration (with retrospective effect) are invalid for want of reasons and cannot be sustained. - HELD THAT: - The show cause notice merely stated non-filing of returns for a continuous period of six months without specifying cogent reasons for cancellation, and the cancellation order is internally inconsistent and devoid of reasoning for retrospective effect. The order both records a reply and yet states no reply was submitted, and the cancellation column shows nil demand, demonstrating the absence of a reasoned conclusion. A cancellation order must set out adequate reasons; mechanical or conclusory statements are insufficient. For these deficiencies the Court set aside the show cause notice and the cancellation order and restored the registration. [Paras 4, 5, 6, 12, 15]

Show cause notice dated 11.02.2021 and order dated 19.04.2021 are set aside; GST registration restored.

Objective satisfaction for cancellation under Section 29(2) - retrospective cancellation of GST registration - consequences for denial of input tax credit - Retrospective cancellation under Section 29(2) cannot be exercised mechanically; it requires objective satisfaction and reasons, particularly because retrospective effect has consequences such as denial of input tax credit to recipients. - HELD THAT: - Section 29(2) permits cancellation from such date as the proper officer may deem fit, including retrospectively, but such power cannot be exercised subjectively or mechanically. The officer's satisfaction must be based on objective criteria and articulated in the order; retrospective cancellation that covers periods when the taxpayer was compliant is not permissible merely because returns for some subsequent period were not filed. While the Court did not undertake an exhaustive examination of consequences, it emphasised that retrospective cancellation should be reserved for cases where such consequences are warranted and intended and must be supported by reasons. [Paras 13, 14, 15]

Cancellation with retrospective effect is impermissible in the absence of objective, recorded satisfaction and reasoning; the impugned retrospective cancellation is invalid.

Restoration of GST registration subject to compliance - recovery of tax, penalty or interest in accordance with law - Registration is restored subject to petitioner filing requisite returns and payment of any tax; respondents remain entitled to recover any tax, penalty or interest in accordance with law. - HELD THAT: - Having set aside the show cause notice and cancellation order, the Court directed restoration of the petitioner's GST registration. The petitioner was directed to comply with Rule 23 of the CGST Rules, to file all requisite returns and to pay tax, if any, within 30 days. The respondents were not precluded from initiating steps for recovery of any tax, penalty or interest due under law. These directions effectuate restoration while preserving the respondents' statutory remedies for collection. [Paras 16, 17]

GST registration restored; petitioner to file returns and pay tax within 30 days; respondents may recover any tax, penalty or interest in accordance with law.

Final Conclusion: The Court set aside the show cause notice dated 11.02.2021 and the cancellation order dated 19.04.2021 (which had retrospective effect from 01.07.2017) for want of adequate reasons and objective satisfaction, restored the petitioner's GST registration, directed filing of requisite returns and payment of any tax within 30 days, and permitted respondents to pursue recovery of any tax, penalty or interest in accordance with law.

Export of services - zero-rated supply - input tax credit - refund under Section 54 - payment received in convertible foreign exchange - receipt through intermediary/agent constitutes receipt by supplier - manner of receipt under FEMA Regulation 3

Export of services - payment received in convertible foreign exchange - receipt through intermediary/agent constitutes receipt by supplier - manner of receipt under FEMA Regulation 3 - Whether payments routed through an intermediary (PayPal), received by the intermediary in convertible foreign exchange and credited in Indian rupees to the supplier's account, satisfy the requirement of payment having been received in convertible foreign exchange for export of services. - HELD THAT: - The Court held that the petitioner provided services to foreign clients and that the payments were received by the intermediary (PayPal) in freely convertible foreign exchange before being credited in Indian rupees to the petitioner. Applying Regulation 3 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 and the permissibility for receipts through a third party/authorised dealer, the Court concluded that receipt by an authorised intermediary for and on behalf of the supplier qualifies as receipt in convertible foreign exchange by the supplier. The Court rejected the opposite conclusion that mere credit in INR to the supplier's bank account ipso facto negates export receipt, observing that routing through an authorised intermediary in accordance with FEMA Regulation 3 does not defeat the requirement in Section 2(6)(iv) of the IGST Act. The Appellate Authority's reliance on Board Circular No.88/07/2019-GST to assert non-realisation in foreign exchange was held to be misplaced in the facts of this case. [Paras 36, 40, 41, 42, 43]

Payments collected by PayPal in freely convertible foreign exchange and credited to the petitioner in INR through authorised banking arrangements satisfy the requirement of payment received in convertible foreign exchange; therefore the petitioner's supplies qualify as export of services.

Zero-rated supply - input tax credit - refund under Section 54 - export of services - Whether the petitioner is entitled to refund of unutilised input tax credit and tax paid on exported services in view of the Appellate Authority's rejection (inter alia) for non-production of export invoices and FIRC/BRC. - HELD THAT: - The Court noted that there was no dispute about the petitioner providing services to foreign recipients via its online portal and that payments were received through an authorised intermediary in convertible foreign exchange. Relying on the definitions of "zero-rated supply" and the refund scheme under Section 16 of the IGST Act and Section 54 of the CGST Act, the Court held that both refund of unutilised input tax credit and refund of tax paid on exports are available where there is a zero-rated supply. The absence of tax invoices or of formal FIRC/BRC did not, on the facts, defeat the petitioner's entitlement where the receipt in convertible foreign exchange was established through the authorised intermediary and the FEMA regulations permitted such third-party receipts. Consequently, the appellate findings rejecting refund claims on the grounds indicated were held unsustainable. [Paras 20, 21, 31, 40, 44]

The petitioner is entitled to refund of unutilised input tax credit and tax paid on export of services; the impugned orders rejecting the refund claims are set aside.

Final Conclusion: Writ petition allowed: impugned appellate order upholding rejection of refund claims set aside; petitioner entitled to refund of tax paid on exports and unutilised input tax credit pursuant to its supplies qualifying as export of services.

Provisional attachment - show cause notice - attachment of bank accounts - adjudication of tax liability - attempt to evade payment of tax - operation of bank accounts and carrying on business

Provisional attachment - attachment of bank accounts - show cause notice - attempt to evade payment of tax - adjudication of tax liability - operation of bank accounts and carrying on business - Validity of multiple provisional attachment orders attaching all bank accounts issued under FORM GST DRC 22 pending adjudication of the show cause notice - HELD THAT: - The court held that issuance of thirteen provisional attachment orders attaching all the appellant's bank accounts while the show cause notice remained pending was unduly harsh in the absence of any material indicating an attempt by the appellant to evade payment of tax. Since tax and interest were yet to be adjudicated, the provisional attachment orders could not be sustained at the interlocutory stage. The court therefore set aside all provisional attachment orders, permitted the appellant to operate its bank accounts and carry on business subject to simultaneous payment of requisite taxes, and directed the respondent authority to commence and complete adjudication of the show cause notice within three weeks from receipt of the server copy of the order. The court expressly did not consider the merits of the underlying claim and left it to the adjudicating authority to examine the facts and legal position afresh and proceed in accordance with law. [Paras 4, 5, 6]

All provisional attachment orders issued in FORM GST DRC 22 were set aside; the appellant was allowed to operate bank accounts and carry on business; the authority directed to adjudicate the show cause notice within three weeks, merits reserved to the adjudicating authority.

Final Conclusion: The intra court appeal was allowed: provisional attachment orders attaching all bank accounts were quashed for being unsustainable pending adjudication in the absence of material of tax evasion; the appellant may operate its accounts and the adjudicating authority must decide the show cause notice within three weeks, merits to be decided on fresh consideration.

Business expenditure incidental to and wholly and exclusively for the purposes of business - commercial expediency and direct and intimate connection test for deduction - expenditure in the nature of loans or advances to subsidiaries treated as business expenditure - allowability of compensation paid to subsidiaries as revenue expenditure - delay in filing the special leave petition - HC [2022 (11) TMI 782 - ORISSA HIGH COURT] Dismissed revenue appeal

HELD THAT: - There is a gross delay of 340 days in filing the special leave petition. We are not satisfied with the explanation offered for condonation of delay.

Hence, the application seeking condonation of delay is dismissed.

Consequently, the special leave petition is also dismissed keeping open the question of law, if any.

Grossing up - income payable net of tax - tax deduction at source (TDS) - Double Taxation Avoidance Agreement (DTAA) - Article 13 - computation of income for TDS under Section 195A - applicability of DTAA rates under Section 90 - inclusive definition of income under Section 2(24) - exemption under Section 10(6A) and its effect on grossing up -

As per HC [2018 (9) TMI 81 - MADRAS HIGH COURT] substantial question was answered against the assessee: grossing up under Section 195A applies and the tax borne by the payer forms part of the non resident's income for TDS computation; the additional ground based on a subsequent retrospective amendment was not admitted. The appeals are dismissed

HELD THAT:- Special Leave Petitions are dismissed as withdrawn, However, the question of law is kept open.

Pending application(s), if any, shall stand disposed of.

Reopening of assessment - bonafide belief that income chargeable to tax has escaped assessment - tangible subsequent material - sham or bogus transactions - change of opinion - scope of judicial scrutiny of reasons for reopening

High Court [2017 (6) TMI 605 - GUJARAT HIGH COURT] upheld the validity of reopening the scrutiny assessment for AY 2009-2010 on the basis of subsequent specific material indicating sham transactions and affirmed that courts should not engage in minute scrutiny of the Ao's formed bonafide belief.

HELD THAT:- As petitioner submits that the present petition has become infructuous in view of the assessment order having been passed during the pendency of the Special Leave Petition.

In view of the statement made, the Special Leave Petition is dismissed as having become infructuous.

Applicability of the Vivad se Vishwas scheme to proceedings where limitation for challenge had not expired on the specified date - scope of CBDT clarifications regarding pending appeals and revisions as on the specified date - effect of extension of limitation by ordinance and judicial orders on eligibility under a beneficial/remedial scheme - prohibition of arbitrary distinction between appeal and revision under Article 14 - beneficial/remedial construction of the Vivad se Vishwas scheme

Applicability of the Vivad se Vishwas scheme to proceedings where limitation for challenge had not expired on the specified date - scope of CBDT clarifications regarding pending appeals and revisions as on the specified date - effect of extension of limitation by ordinance and judicial orders on eligibility under a beneficial/remedial scheme - prohibition of arbitrary distinction between appeal and revision under Article 14 - beneficial/remedial construction of the Vivad se Vishwas scheme - Filing of a revision after the specified date but within the extended period of limitation does not render the petitioner ineligible for relief under the Vivad se Vishwas Act. - HELD THAT: - The CBDT circular clarified that the Scheme covers appeals pending as on 31 January 2020 and also those cases where an order had been passed but the time limit for filing an appeal had not expired on the specified date; the same principle applies to revision proceedings. The period of limitation for filing the petitioner's revision extended beyond 31 January 2020 by virtue of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 and orders excluding the limitation period (Suo Motu Writ Petition (Civil) No. 3/2020). Given the Board's directive to include matters where limitation had not expired, there is no logical or lawful basis to distinguish between an appeal and a revision for purposes of the Scheme. Such a distinction would be arbitrary and violative of Article 14. The Scheme is a beneficial/remedial enactment whose object is to widen settlement of disputes; ambiguities in its scope should be resolved to effectuate that legislative policy. Applying these principles, the respondents' rejection of the petitioner's Forms 1 and 2 on the ground that the revision was instituted after the specified date but within the extended limitation was unsustainable. Consequently, the Form 5 issued during the pendency of proceedings is to be given finality since the petitioner deposited the stipulated amount under the Scheme.

The impugned rejections are quashed; the petitioner is eligible under the Vivad se Vishwas Act despite filing the revision after 31 January 2020 so long as it was within the extended period of limitation, and the Form 5 issued is accorded finality.

Final Conclusion: Writ petition allowed; rejections set aside and Form 5 issued during the proceedings granted finality, since a revision filed after the specified date but within the extended limitation falls within the coverage of the Vivad se Vishwas Scheme.

Rule 11 of the Second Schedule - Rule 11(4)-(6) inquiry into possession and its capacity - Remedy under Rule 11(6) - suit in civil court - Section 281 of the Income Tax Act - transfers void as against revenue - Effect of amendment to Section 281 (deletion of 'intention to defraud' and proviso) - Power of Tax Recovery Officer to release attachment vs. power to declare transfer void

Rule 11 of the Second Schedule - Rule 11(4)-(6) inquiry into possession and its capacity - Power of Tax Recovery Officer to release attachment vs. power to declare transfer void - Validity of the Tax Recovery Officer's order declaring the sale deed/document forged and directing cancellation of registration and restoration of title - HELD THAT: - The Court held that the Tax Recovery Officer's jurisdiction under Rule 11 is to investigate claims or objections as to whether the property was in the possession of the defaulter and, if so, in what capacity. If the TRO is satisfied that the claimant was in possession in his own right, attachment can be maintained; if possession is not in the defaulter's own right, the TRO may release the property. The TRO does not, in ordinary course, possess the power to declare a transfer void in the sense of pronouncing a transaction null and void as against third parties; where the Department seeks a declaration that a transfer is void, the proper remedy is to institute a suit under Rule 11(6). The Court examined the impugned order and the surrounding facts and concluded that the challenge to the TRO's order is unsustainable on the grounds raised by the petitioner. [Paras 31, 32, 33, 34, 35]

The challenge to the TRO's order was dismissed; the TRO's investigative role under Rule 11 does not extend to exercising the civil jurisdiction of declaring transfers void in lieu of a civil suit.

Section 281 of the Income Tax Act - transfers void as against revenue - Effect of amendment to Section 281 (deletion of 'intention to defraud') - Remedy under Rule 11(6) - suit in civil court - Whether the decision in Tax Recovery Officer II v. Ranade precluded the TRO from treating the sale as void and whether the petitioner must pursue civil proceedings under Rule 11(6) - HELD THAT: - The Court analysed the legislative changes to Section 281 and observed that the earlier ratio in Ranade arose in a materially different statutory context (when Section 281 contained an 'intention to defraud' limb). Subsequent amendments altered the statutory contours. Notwithstanding that distinction, the Court reaffirmed that where a party seeks a declaration that a transfer is void, the remedy is by instituting a civil suit under Rule 11(6). The petitioner was therefore given liberty to institute a suit to establish title; the TRO's order is not to be treated as superseding the civil forum for such a declaration. [Paras 26, 27, 34, 35, 36]

Ranade's ratio does not apply identically on the facts; petitioner must pursue the civil remedy under Rule 11(6); writ petition dismissed with liberty to file suit.

Final Conclusion: Writ petition dismissed. The Tax Recovery Officer's role under Rule 11 is confined to investigating possession and its character; declarations that a transfer is void for the purposes of title must be sought in a civil court under Rule 11(6). Liberty granted to the petitioner to file suit strictly in accordance with law. No costs.

Client's money held in fiduciary capacity not taxable as assessee's trading receipt - solicitor as agent - lien on clients' balances does not convert clients' money into trading receipts or income - application of Section 145(3) of the Income-tax Act regarding treatment of receipts and out of pocket expenses - Section 88 of the Indian Trusts Act - fiduciary gains to be held for the beneficiary

Client's money held in fiduciary capacity not taxable as assessee's trading receipt - solicitor as agent - lien on clients' balances does not convert clients' money into trading receipts or income - application of Section 145(3) of the Income-tax Act regarding treatment of receipts and out of pocket expenses - Whether amounts received by the solicitor firm from clients (and expended as out of pocket expenses on clients' behalf) constituted the assessee's receipts taxable as business income where such amounts were not routed through profit and loss account. - HELD THAT: - The Tribunal and the Commissioner (Appeals) found, on facts accepted by the Assessing Officer, that sums received were advances from clients and substantial part was spent by the solicitor firm as agent on counsel fees, stamp paper, court fees and similar items for the clients. The Court examined earlier authority in Sandersons & Morgans and subsequent approvals by the Supreme Court, and applied the English and Indian principles that a solicitor ordinarily receives clients' money in a fiduciary/agency capacity. A lien retained by the solicitor for costs does not convert the character of the clients' money into the solicitor's trading receipt. If the receipts and the corresponding payments are brought into account, they neutralise each other; where receipts are clients' money received and applied for clients' purposes, they do not possess a profit making character when received and remain liable to account to the clients. The appellant's reliance on Section 145 was considered and rejected on facts because sub section (3) conditions were not shown to be engaged in the assessment order. The factual findings that the payments were made on behalf of clients and were not disputed were affirmed and treated as determinative of the tax character of the amounts. [Paras 12, 13, 22, 23, 24]

Amounts of Rs.3,74,85,859/ received as advances and expended as out of pocket expenses on behalf of clients were clients' money held in a fiduciary capacity and were not assessable as the assessee's trading receipts; reliance on Section 145(3) was not warranted on the facts.

Final Conclusion: The substantial question of law is answered in favour of the assessee; the departmental appeal is dismissed and the addition of the clients' advances as the assessee's income is deleted.

Principles of natural justice - opportunity of being heard - ex-parte assessment - remand for fresh hearing - completion of assessment under section 143(3) - limited scrutiny under CASS

Principles of natural justice - opportunity of being heard - ex-parte assessment - remand for fresh hearing - Remand to the Commissioner (Appeals) for affording the assessee another opportunity of hearing in view of alleged non-receipt of notices and prior ex-parte orders. - HELD THAT: - The Tribunal found it to be an undisputed fact that the appeal had been dismissed ex-parte before the revenue authorities and that neither the assessee nor his authorised representative had received notices for hearing to prosecute the case. Applying the principles of natural justice, the Tribunal held that the matter should not be finally adjudicated without affording the assessee an opportunity to be heard and to place on record bank statements, cash flow details and other material relied upon. The Tribunal therefore did not decide the merits of the assessment or the question whether the cash deposits were explained; instead it directed that the Ld. CIT(A) afford one more opportunity of hearing and that the assessee cooperate with and adhere to notices issued by the Department. [Paras 7, 8]

Matter remitted to the file of the Ld. CIT(A) with a direction to afford the assessee one more opportunity of being heard; appeal allowed for statistical purpose.

Final Conclusion: The Tribunal remitted the appeal to the Commissioner (Appeals) for fresh consideration limited to affording the assessee an opportunity of hearing in accordance with the principles of natural justice; no adjudication was made on the merits of the assessment.

Fees for Included Services - Fees for technical services - India-USA Double Taxation Avoidance Agreement - Article 12 "make available" condition - Rule of consistency - Section 9(1)(vii) - source of income and taxation in India

Fees for Included Services - Fees for technical services - India-USA Double Taxation Avoidance Agreement - Article 12 "make available" condition - Rule of consistency - Section 9(1)(vii) - source of income and taxation in India - Taxability in India of receipts from an Indian customer characterised as fees for technical services where identical issue was decided in earlier assessment years in assessee's favour - HELD THAT: - The Tribunal noted that the Dispute Resolution Panel accepted that identical issues were decided by the ITAT in favour of the assessee for A.Y. 2017-18, 2018-19 and 2019-20 (paragraphs 5 and 5.1). The ITAT's earlier decision for A.Y. 2017-18 held that even if section 9(1)(vii) could be held to apply, Article 12(4)(b) of the India-USA DTAA requires that services "make available" technical knowledge to the recipient before taxation under the treaty; there was no material to satisfy that condition (paragraph 6). Applying the rule of consistency and noting that the facts for the year under appeal are the same as in the earlier years, the Tribunal held that the assessee is entitled to the benefit of the India-USA DTAA because the "make available" condition is not satisfied and, therefore, the services are not taxable in India (paragraph 7). [Paras 5, 6, 7]

Assessee's appeal allowed; receipts not taxable in India as fees for technical services and DTAA benefit applied.

Final Conclusion: Applying the prior ITAT decisions on identical facts and the Article 12 "make available" test under the India-USA DTAA, the Tribunal allowed the assessee's appeal and held the receipts from the Indian customer not taxable in India.

Non prosecution dismissal of appeals for failure to appear - Penalty under section 271(1)(c) for concealment of income - Voluntary disclosure after search does not preclude penalty (Explanation 5A) - Admission in statement recorded under section 132(4)

Non prosecution dismissal of appeals for failure to appear - Appeals dismissed for non prosecution for failure to comply with repeated hearing notices. - HELD THAT: - The Tribunal accepted the first appellate authority's finding that the assessee, despite being granted multiple opportunities (six and eight hearings before the CIT(A) respectively and further opportunities before the Tribunal), neither responded nor filed submissions or appeared. Mere filing of an appeal was held insufficient; the appellant must prosecute the appeal. The assessee's continued non appearance and failure to prosecute justified dismissal of both appeals for non prosecution. [Paras 3]

Both appeals dismissed on the ground of non prosecution.

Penalty under section 271(1)(c) for concealment of income - Voluntary disclosure after search does not preclude penalty (Explanation 5A) - Admission in statement recorded under section 132(4) - Levy of penalty under section 271(1)(c) upheld on the merits for concealment of receipts discovered on search. - HELD THAT: - On merits, the Tribunal found that the assessee had suppressed receipts which were disclosed by reason of search and which the assessee admitted in the statement recorded under section 132(4). Although the suppressed receipts were subsequently shown in the return filed under section 153A, the Tribunal held that, but for the search, the amounts would have escaped detection and taxation, constituting concealment of income. Reliance was placed on the principle in Prasanna Dugar that a voluntary post search disclosure does not preclude imposition of penalty under section 271(1)(c) read with Explanation 5A. In view of these facts and authorities, no infirmity was found in the CIT(A)'s order upholding the penalty. [Paras 4, 5]

Penalty under section 271(1)(c) sustained.

Final Conclusion: Both appeals dismissed: dismissal for non prosecution upheld and, on the merits, the penalty under section 271(1)(c) for concealment of income discovered on search is sustained.

Addition as unexplained cash - cash-in-hand as source of deposit - burden of proof for existence of cash in hand - eligibility for presumptive taxation under section 44AD

Addition as unexplained cash - cash-in-hand as source of deposit - burden of proof for existence of cash in hand - eligibility for presumptive taxation under section 44AD - Deletion of the addition of Rs. 5,71,276/- treated as unexplained money in assessment year 2016-17. - HELD THAT: - The Tribunal examined the orders of the Assessing Officer and the Commissioner (Appeals). The Assessing Officer made the addition treating the claimed cash-in-hand as unexplained because the assessee did not prove its existence despite opportunities. The Commissioner (Appeals) sustained that addition but did so without giving reasons addressing the assessee's assertion of business cash-in-hand or properly considering the question of eligibility under the presumptive taxation provision relied upon in the return. The Tribunal found that the lower authorities did not advert to the assessee's claim with adequate reasoning and failed to take action in accordance with law on the contention regarding section 44AD eligibility. In view of that omission and the absence of a clear finding rejecting the existence of the cash-in-hand, the Tribunal concluded that the impugned addition could not be sustained and therefore deleted the addition. [Paras 5, 6]

The addition of Rs. 5,71,276/- as unexplained money is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal deleted the addition of Rs. 5,71,276/- treated as unexplained cash for assessment year 2016-17, holding that the lower authorities failed to give adequate reasons addressing the assessee's claim and therefore the addition could not be sustained; the appeal is allowed.

Agricultural income exemption - 7/12 extract as evidence - verification and field visit on agricultural claim - exemption under section 54F - agreement to sell versus completion by sale deed - admission of additional evidence and remand for de novo adjudication - dismissed as not pressed - penalty premature

Agricultural income exemption - 7/12 extract as evidence - verification and field visit on agricultural claim - admission of additional evidence and remand for de novo adjudication - Addition of alleged agricultural income of Rs. 22,70,575 remitted for fresh adjudication by the Assessing Officer after admission of additional evidence. - HELD THAT: - The assessee claimed agricultural income which was disallowed by the AO and confirmed by the CIT(A) on the ground that the primary documents on record did not relate to the year under consideration and the supporting statement was undocumented. The assessee produced a surveyor's report as additional evidence describing land use and plantation. As the surveyor's report was not considered by the lower authorities, the Tribunal directed restoration of the issue to the AO for de novo adjudication after consideration of the additional document. The AO is directed to undertake thorough verification including calling persons from whom produce was purchased and conducting a field visit, and shall afford the assessee a reasonable opportunity of being heard; the AO may summon evidence and demand further information and documentation from the assessee. [Paras 7]

Issue remanded to the jurisdictional AO for de novo adjudication after consideration and verification of additional evidence; impugned order set aside on this issue; ground no. 1 allowed for statistical purposes.

Exemption under section 54F - agreement to sell versus completion by sale deed - admission of additional evidence and remand for de novo adjudication - Claim of exemption under section 54F in respect of investment in a residential house remitted for fresh adjudication after admission of additional evidence. - HELD THAT: - The AO had rejected the claim on the basis that only part consideration was paid and the agreement to sell had not been converted into a sale deed within the statutory period, and therefore vacant and peaceful possession had not been handed over. The assessee filed additional documents including a share certificate transfer and ledger entries, which were not considered by the lower authorities. In the interest of justice the Tribunal set aside the impugned order and restored the matter to the AO for de novo adjudication after considering the material furnished by the assessee, directing that no order be passed without affording the assessee a reasonable opportunity to be heard and to supply any information sought by the AO. [Paras 13]

Issue remanded to the jurisdictional AO for de novo adjudication after consideration of additional material; impugned order set aside on this issue; ground no. 2 allowed for statistical purposes.

Dismissed as not pressed - Ground no. 3 (disallowance of expenses) was not pressed by the assessee and is therefore dismissed as not pressed. - HELD THAT: - The assessee did not press ground no. 3 during hearing; accordingly the Tribunal declined to adjudicate the matter on merits and dismissed it as not pressed. [Paras 14]

Ground no. 3 dismissed as not pressed.

Penalty premature - Ground no. 4 relating to initiation/levy of penalty under section 271(1)(c) dismissed as premature. - HELD THAT: - The Tribunal found the challenge to penalty to be premature and therefore did not adjudicate the penalty claim on merits, dismissing the ground accordingly. [Paras 15]

Ground no. 4 dismissed as premature.

Final Conclusion: The appeal is partly allowed for statistical purposes: grounds 1 and 2 are remitted to the Assessing Officer for de novo adjudication after consideration and verification of additional evidence; ground 3 is dismissed as not pressed; ground 4 (penalty) is dismissed as premature.

Claim of deduction under Chapter VIA (section 80IA) and requirement of filing Form 10CCB - directory versus mandatory nature of filing audited report before completion of assessment - distinction between Chapter III exemptions and Chapter VIA deductions - double disallowance in computation-verification of belated statutory remittance

Claim of deduction under Chapter VIA (section 80IA) and requirement of filing Form 10CCB - directory versus mandatory nature of filing audited report before completion of assessment - distinction between Chapter III exemptions and Chapter VIA deductions - Assessee entitled to deduction under section 80IA for AY 2017-18 despite initial non e-filing of Form 10CCB, since the Form was filed electronically before completion of assessment. - HELD THAT: - The Tribunal held that the filing of the audit report in Form 10CCB is not a condition which, if complied with any time before completion of assessment, can be treated as fatal to the claim. The decision in CIT v. G.M. Knitting Industries P. Ltd., following the view in CIT v. AKS Alloys P. Ltd. and other High Court decisions, establishes that filing the audit report before assessment is completed satisfies the requirement and the filing is directory rather than mandatory in a manner that defeats the claim. The Tribunal noted the distinction drawn by the Supreme Court in PCIT v. Wipro Ltd. between Chapter III exemptions and Chapter VIA deductions, and applied the consistent precedents holding that once the audit report (Form 10CCB) was filed before processing/framing of assessment, the assessee is entitled to the deduction. On this basis the Tribunal directed the Assessing Officer to allow the deduction claimed under section 80IA. [Paras 4, 5]

Impugned deduction under section 80IA is to be allowed; corresponding grounds allowed.

Double disallowance in computation-verification of belated statutory remittance - Whether the disallowance under section 36(1)(va) for belated remittance of employee's provident fund is a double disallowance. - HELD THAT: - The Tribunal observed that the disallowance appearing in the intimation appears to duplicate an amount already disallowed by the assessee in the computation of income. The matter was not finally adjudicated on merits by the Tribunal; instead the Assessing Officer was directed to verify the submissions of the assessee regarding the prior disallowance in the computation and, if found correct, delete the disallowance recorded in the intimation. This constitutes a limited remand for verification and correction rather than a substantive adjudication on the merits of the PF disallowance. [Paras 6]

AO to verify the claim of prior disallowance and delete the disallowance in the intimation if the assessee's submissions are found correct; corresponding grounds allowed for statistical purpose (remanded for verification).

Final Conclusion: Appeal partly allowed: deduction under section 80IA for AY 2017-18 directed to be allowed by the Assessing Officer; disallowance under section 36(1)(va) remanded to the Assessing Officer for verification and deletion if the assessee had already disallowed the amount in the computation.

Mandatory recording of satisfaction in assessment order for initiation of penalty proceedings under section 271D/271E - validity of initiation of penalty proceedings where proposal is made by AO to Addl./Joint Commissioner - advisory force of CBDT circular advising reference to Range Head during assessment proceedings - presumption under section 132(4A) as to ownership and its rebuttable character when incriminating material is found in third party premises

Mandatory recording of satisfaction in assessment order for initiation of penalty proceedings under section 271D/271E - Recording of satisfaction in the assessment order is a mandatory prerequisite for valid initiation of penalty proceedings under section 271D/271E where the assessment arises from search/seizure material. - HELD THAT: - The Tribunal held that the ratio of CIT vs. Jai Laxmi Rice Mills, which requires recording of satisfaction for initiation of penalty proceedings, applies to the present facts. The assessment framed under section 153C did not record any satisfaction regarding violation of section 269SS; penalty proceedings were initiated subsequently by proposal to the Addl. CIT. The Tribunal agreed with the first appellate authority that absence of recording of satisfaction in the assessment order vitiates the initiation of penalty proceedings and renders the penalty orders bad in law. This legal requirement was treated as mandatory and determinative of the validity of penalty initiation under section 271D. [Paras 5, 8]

Penalty levied under section 271D/271E was not validly initiated due to absence of satisfaction recorded in the assessment order; deletion of penalty sustained.

Advisory force of CBDT circular advising reference to Range Head during assessment proceedings - Failure to make the reference to the appropriate authority during the course of assessment proceedings as advised in CBDT Circular No. 09/DV/2016 vitiates the initiation of penalty proceedings. - HELD THAT: - The AO moved a proposal to the appropriate authority nearly eight months after completion of assessment, contrary to the advisory in CBDT Circular dated 26.04.2016 which advises that a reference be made during assessment proceedings. The Tribunal accepted the CIT(A)'s conclusion that such delayed reference was in gross violation of the departmental circular. Relying on the view that the CBDT circulars have regulatory effect as recognised by the Supreme Court, the Tribunal treated the non compliance as additional ground for holding the penalty initiation invalid. [Paras 4, 7]

Reference to Addl. CIT made after completion of assessment was in violation of the CBDT circular; this infirmity supports deletion of the penalty.

Presumption under section 132(4A) as to ownership and its rebuttable character when incriminating material is found in third party premises - Presumption under section 132(4A) operates primarily against the person in whose possession incriminating material is found and is rebuttable; it cannot be mechanically applied to a third party without corroborative enquiry. - HELD THAT: - The Tribunal noted that the alleged cash loan was based on one sided entries found in premises of a third party (Vels Group). Section 132(4A) presumption is rebuttable and applies to the person in whose premises the material is found. The assessee, being a third party, denied receipt of such loan and produced a confirmation from the other party; no further corroborative enquiry was made by the AO. On these facts, the Tribunal held that the penalty could not be sustained on the basis of uncorroborated, one sided seized entries. [Paras 6]

Presumption under section 132(4A) could not be invoked against the assessee as a third party without further corroboration; penalty unsustainable on merits.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the penalty orders: the initiation of penalty proceedings was invalid for want of recorded satisfaction in the assessment order, was vitiated by delayed reference contrary to the CBDT circular, and the allegation based on seized third party entries could not sustain penalty; all appeals by the revenue dismissed.

Jurisdiction of Assessing Officer - Notice under Section 143(2) - Assessment framed under Section 143(3) - Section 124(3) - bar on questioning jurisdiction - Section 292BB - deemed service to cure defects in service

Jurisdiction of Assessing Officer - Notice under Section 143(2) - Assessment framed under Section 143(3) - Validity of the assessment where the notice under Section 143(2) and the final assessment under Section 143(3) were issued/framed by an Assessing Officer who did not have territorial jurisdiction over the assessee. - HELD THAT: - The Tribunal examined the statutory scheme under Sections 120 and 124 and the CBDT directions vesting jurisdiction in Assessing Officers. The assessment record showed the assessee's address and jurisdiction lay in Uttar Pradesh whereas the notice and final assessment were issued/framed by the AO at Deoghar, Jharkhand, who thus lacked territorial jurisdiction. Reliance was placed on coordinate Tribunal decisions holding that issuance of notice under Section 143(2) by a non jurisdictional AO, and framing of assessment by such AO, renders the assessment proceedings a nullity. The Tribunal distinguished the Revenue's reliance on precedents where the assessee had participated and failed to object within the statutory time; on the facts before it the AO that framed the assessment had no jurisdiction as mandated by the Board's directions and thus acted beyond jurisdiction. Consequently the assessment founded on such notice and order was held to be without jurisdiction and void.

Assessment order under Section 143(3) framed by a non jurisdictional AO is quashed as void for want of territorial jurisdiction.

Section 292BB - deemed service to cure defects in service - Section 124(3) - bar on questioning jurisdiction - Whether Section 292BB or Section 124(3) cures the defect of absence of notice or precludes the assessee from challenging jurisdiction in the circumstances of the case. - HELD THAT: - The Tribunal considered Section 292BB and observed that it cures infirmities in service where a notice has in fact emanated from the Department and the assessee has participated; it does not cure the complete absence of a notice originating from the department. Section 124(3) was examined and the Tribunal found it inapplicable to validate action taken by an AO who had no jurisdiction to issue the notice or frame the assessment. The facts did not show that the jurisdictional AO had issued the requisite notice or that the assessee had lost the right to object under Section 124(3). Therefore the statutory provisions relied upon by the Revenue could not sustain the assessment framed by a non jurisdictional AO.

Section 292BB does not cure complete absence of notice from the department; Section 124(3) does not validate an assessment framed by an AO who lacked jurisdiction in the facts of this case.

Final Conclusion: The assessee's appeal is allowed and the assessment for AY 2016-17 framed by the AO at Deoghar is quashed as void for want of territorial jurisdiction; the revenue's cross-appeal is dismissed as infructuous.

Disallowance of interest to related parties under section 40A(2)(b) - excessive or unreasonable expenditure under section 40A(2)(a) - notional interest on idle bank balances - TDS compliance for transport payments and section 194C(6) - restoration/remand for de novo adjudication

Disallowance of interest to related parties under section 40A(2)(b) - excessive or unreasonable expenditure under section 40A(2)(a) - restoration/remand for de novo adjudication - Part disallowance of interest paid to related parties treated as excessive and unreasonable under section 40A(2)(b) for A.Y. 2014-15 was considered. - HELD THAT: - The Tribunal found that the Assessing Officer treated interest paid @18% to related parties as excessive by benchmarking against an unspecified bank rate of 12% but failed to place material on record to substantiate that comparison. The assessee relied on contemporaneous private-party transactions showing receipt of interest at 18% as indicia of prevailing market rate, which lower authorities did not examine. Reliance by the CIT(A) on provisions applicable to partners was inapt because payments were to related persons and not partners. As the fair market rate for unsecured loans was not determined on evidence, the Tribunal restored the issue to the file of the AO for fresh adjudication de novo and permitted the assessee an opportunity to produce supporting material to justify the 18% rate. [Paras 12]

Restored to the AO for de novo adjudication; ground allowed for statistical purposes.

Notional interest on idle bank balances - Addition of notional interest on alleged idle bank balances (computation of notional interest and its addition to income) for A.Y. 2014-15 was considered. - HELD THAT: - The Tribunal examined bank statements and summaries showing that large balances were maintained only prior to scheduled payments to airlines and that balances fell (even to negative) after remittances, demonstrating that funds were held for working capital needs of the freight-agent business. The Tribunal distinguished a coordinate-bench decision relied upon by the AO on its facts. Further, the addition was made without invocation of any statutory provision and therefore lacked legal authority. On these bases the Tribunal set aside the impugned addition. [Paras 15, 16]

Addition set aside; ground allowed.

TDS compliance for transport payments and section 194C(6) - restoration/remand for de novo adjudication - Disallowance of transportation charges for non-deduction of TDS where payments exceeded the threshold and PAN documentation was not on record for A.Y. 2014-15 was considered. - HELD THAT: - The Tribunal observed that section 194C(6) exempts TDS where the transporter furnishes PAN to the payer. The assessee asserted PAN had been furnished during assessment but documentary proof was not on record before the Tribunal. In the interest of justice the Tribunal granted the assessee an opportunity to produce the transporter's PAN and restored the issue to the AO for verification and de novo adjudication of compliance with TDS requirements. [Paras 20]

Issue restored to the AO for verification and de novo adjudication; ground allowed for statistical purposes.

Disallowance of interest to related parties under section 40A(2)(b) - restoration/remand for de novo adjudication - Part disallowance of interest to related parties for A.Y. 2015-16 was considered. - HELD THAT: - The Tribunal applied the reasoning and directions recorded in the A.Y. 2014-15 disposal to the identical issue in A.Y. 2015-16 and restored the matter to the AO for de novo adjudication on the same terms. [Paras 23]

Restored to the AO for de novo adjudication; ground allowed for statistical purposes.

Notional interest on idle bank balances - Addition of notional interest on idle bank balances and related contention that assessee had no need to borrow for A.Y. 2015-16 was considered. - HELD THAT: - The Tribunal held that the conclusions reached for A.Y. 2014-15-namely that funds were required for working capital and the addition lacked statutory basis-apply mutatis mutandis to A.Y. 2015-16 and therefore the impugned additions are to be set aside. [Paras 24]

Grounds allowed following the conclusions in A.Y. 2014-15.

TDS compliance for transport payments and section 194C(6) - Contention in A.Y. 2015-16 that assessee had sufficient own funds and thus borrowing from related parties was unnecessary (as linked to idle balances and transport/TDS issues) was considered. - HELD THAT: - The Tribunal applied its findings from A.Y. 2014-15 regarding working capital needs, the factual distinction from precedents relied upon by the AO, and the requirement of documentary proof for TDS/PAN compliance, and allowed the corresponding grounds for A.Y. 2015-16 accordingly. [Paras 24]

Grounds allowed following the conclusions in A.Y. 2014-15.

Final Conclusion: Both appeals for A.Y. 2014-15 and A.Y. 2015-16 are allowed for statistical purposes: notional interest additions on idle balances were set aside; issues concerning excess interest paid to related parties and transport-TDS compliance were restored to the Assessing Officer for de novo adjudication with directions to verify and afford the assessee opportunity to produce supporting material.

Validity period of duty credit certificate - exclusion of IGST and GST compensation cess from adjustment under duty credit scrips - equitable extension of fiscal concession - power of the Director General of Foreign Trade to prescribe procedural conditions in the Handbook of Procedures

Validity period of duty credit certificate - delegated legislation - power of DGFT under paragraph 2.4 - Validity of the 24 months period prescribed in paragraph 3.2.5(VII) of the Handbook of Procedures for utilisation of Target Plus Scheme duty credit certificates - HELD THAT: - The Court held that the Handbook of Procedures was published pursuant to paragraph 2.4 of the Foreign Trade Policy and that the DGFT acts in the dual capacity of DGFT and Ex Officio Additional Secretary to the Government of India; the procedural provisions in the Handbook, including the validity period for certificates, are authorised by the FTP and were published by the Ministry. The court noted precedent that procedural or delegated rules cannot override the parent legislation, but found Agricas LLP dispositive on the authority of DGFT/Ministry to publish such procedural rules. The 24 month validity was prescribed contemporaneously with introduction of the TPS and was not challenged in earlier litigation; the petitioner having availed benefits under the scheme with that condition cannot belatedly challenge it. On these bases the Court concluded there is no illegality or want of jurisdiction in paragraph 3.2.5(VII). [Paras 6]

Paragraph 3.2.5(VII) prescribing 24 months validity is legal and intra vires the FTP and DGFT's delegated procedural power.

Exclusion of IGST and GST compensation cess from adjustment under duty credit scrips - interpretation of Section 3 of the Customs Tariff Act, 1975 - Legality of Entry 56 of Notification No.26/2017 Cus. (29.06.2017) which limits exemption to duties under sub sections (1), (3) and (5) of Section 3, thereby excluding IGST and GST compensation cess from adjustment by TPS scrips - HELD THAT: - The Court examined the amendments to Section 3 effected with the introduction of GST and observed that the legislature did not describe the newly inserted levies as 'additional duty' in the same terms as earlier sub sections. The impugned Entry 56 clarifies that exemption applies to duties under sub sections (1), (3) and (5) only; the Court held this clarification did not take away any vested right previously conferred under the original exemption notification. The Trade Notice's reference to collection mechanism does not convert IGST or compensation cess into 'additional duty' for the purposes of the TPS exemption. Consequently, Entry 56 was held not to be ultravires or to have deprived the petitioner of vested rights. [Paras 7]

Entry 56 is a permissible clarification of the scope of exemption and does not unlawfully deprive the petitioner of vested rights; exclusion of IGST and GST compensation cess from TPS adjustment is not illegal.

Equitable extension of fiscal concession - scope of judicial relief in fiscal policy - Whether the petitioner is entitled to judicially grant an extension (15 years) to utilise the Duty Credit Certificate on account of delay in issuance of scrips by authorities - HELD THAT: - The Court acknowledged the delay in issuance of scrips but emphasised that the 24 month validity runs from the date of issue of the scrip. It reiterated that courts cannot expand or reconstruct fiscal schemes or create new exemptions by judicial fiat; equitable relief to extend the temporal scope of a fiscal concession would amount to rewriting the scheme. Accordingly, the petitioner cannot claim an extension of fifteen years by way of writ relief. The Court, however, noted that the petitioner may pursue administrative relief and observed that the Policy Relaxation Committee under Clause 2.5 may consider extension or other relief on merits independently of the writ petitions. [Paras 8, 9]

No judicial extension of the duty credit validity is granted; relief to extend validity is refused, subject to consideration by the Policy Relaxation Committee on merits.

Final Conclusion: Writ petitions challenging (i) the 24 month validity prescribed in the Handbook of Procedures and (ii) Entry 56 excluding IGST and GST compensation cess were dismissed; prayer for a 15 year extension and for permitting adjustment against IGST and cess was refused, with liberty to seek administrative relief before the Policy Relaxation Committee.

Admissibility of statement under Section 108 of the Customs Act as substantive evidence - use of confession of a co-accused against a co-accused - requirement of corroboration for inculpatory statements implicating a co-noticee - verification of verifiable facts alleged in co-accused's statement - perversity and misapplication of law by a fact-finding appellate authority

Admissibility of statement under Section 108 of the Customs Act as substantive evidence - use of confession of a co-accused against a co-accused - requirement of corroboration for inculpatory statements implicating a co-noticee - Whether the CESTAT rightly sustained the penalty on the basis of the inculpatory statements of co-accused John Alexander without independent corroboration or verification of verifiable facts - HELD THAT: - The Court reviewed the settled law on statements recorded under Section 108 of the Customs Act and the use of confessions or inculpatory statements of co-accused. While such statements are admissible and may be used against the maker and, in appropriate circumstances, against co-noticees, long-standing authorities require caution: a retracted confession must be shown to be voluntary and, as regards portions implicating a co-accused, prudence requires examination for corroboration or circumstances rendering the incriminatory material probable. The tribunal below applied the principle of preponderance of probability but failed to verify facts in the co-accused's statement that were readily verifiable (for example, alleged payments and transit particulars) and treated admissions about being a licensed dealer and acquaintance as sufficient corroboration. The CESTAT also misread the appellant's statements and relied on temporal inferences (refusal to sign) without establishing the sequence and possibility of contemporaneous confrontation with the co-accused's statement. On these grounds the impugned order was found to be perverse, a misapplication of the legal principles governing the use of Section 108 statements and the requirement of corroboration in material particulars when a co-accused's statement implicates another. Consequently, the tribunal's conclusion sustaining the penalty could not be sustained. [Paras 28, 29, 30, 31]

The CESTAT's order upholding the penalty based primarily on the uncorroborated inculpatory statement of the co-accused is set aside as perverse and contrary to law

Final Conclusion: Civil Miscellaneous Appeal allowed; the order of the CESTAT confirming imposition of penalty on the appellant is set aside as perverse and contrary to law; no order as to costs.

Maintainability of writ petition where final adjudication has been passed and statutory appeal lies - availability of alternative remedy by way of appeal - provisional release of imported goods subject to furnishing of bond - expeditious disposal of interim applications by the Appellate Authority - claim of exemption under Notification No. 52/2003-Cus for re-imported goods

Maintainability of writ petition where final adjudication has been passed and statutory appeal lies - availability of alternative remedy by way of appeal - claim of exemption under Notification No. 52/2003-Cus for re-imported goods - Writ petition challenging the assessment order dated 25.01.2024 declining exemption under Sl. No.14 of Annexure-I to Notification No.52/2003-Cus is not maintainable before this Court as a final order has been passed and an appeal remedy is available under the Customs Act, 1962. - HELD THAT: - The Court recorded that the original assessment order dated 25.01.2024 rejects the petitioner's claim of exemption for the re-imported Coarse Ground Chilli. Once a final adjudication has been rendered, the appropriate remedy is to invoke the statutory appellate process. In those circumstances the writ jurisdiction is not to be exercised to supplant the remedy of appeal where the statute provides for an appeal against the impugned order. Consequently the petition seeking to challenge the assessment order by way of writ jurisdiction was not entertained. [Paras 4, 5]

Writ petition not entertained; petitioner to pursue remedy by filing appeal against the order dated 25.01.2024.

Provisional release of imported goods subject to furnishing of bond - expeditious disposal of interim applications by the Appellate Authority - Application for interim relief seeking provisional release of the re-imported goods was not granted by this Court in the writ proceedings; the Appellate Authority is directed to decide the petitioner's interim application filed before it within two weeks and the appeal preferably within three months. - HELD THAT: - Because the writ petition was not entertained, no interim relief could be granted by this Court in that forum. Recognising the risk of deterioration of the goods during the pendency of appellate proceedings, the Court exercised its supervisory role to secure an expeditious remedy by directing the Appellate Authority to consider and decide the petitioner's interim application for provisional release (subject to law and bond) within two weeks of its filing. The Court further directed that the appeal itself be disposed of expeditiously, preferably within three months, and mandated that the Appellate Authority consider all facts and pass orders in accordance with law when adjudicating the interim application. [Paras 6]

No interim relief granted by this Court in the writ; Appellate Authority directed to decide interim application within two weeks and to dispose of the appeal preferably within three months.

Final Conclusion: The petition challenging the assessment order of 25.01.2024 is not entertained by this Court; the petitioner is directed to pursue the statutory appeal, and the Appellate Authority is directed to decide the petitioner's interim application for provisional release within two weeks of filing and to dispose of the appeal expeditiously, preferably within three months.

Confiscation without seizure - seizure requirement for confiscation - liberal approach for EOUs - Import of Goods at Concessional Rate of Duty Rules, 2017 - Rule 5(1)(a)

Confiscation without seizure - seizure requirement for confiscation - Whether the Order-in-Original directing confiscation of imported goods is sustainable where the goods were not seized. - HELD THAT: - The Court held that confiscation cannot be ordered unless the goods have been seized. The adjudicating authority's direction of confiscation was therefore unsustainable in the factual matrix where it is undisputed that Customs did not seize the goods. The reasoning notes that the Commissioner's order recorded confiscation despite absence of seizure, a precondition for such a measure. The Court accepted the respondent's submission and prior authority relied upon that a confiscation order cannot stand where there is no seizure. [Paras 10, 11]

Confiscation ordered in the Order-in-Original is unsustainable in the absence of seizure; that part of the order cannot be sustained.

Liberal approach for EOUs - Import of Goods at Concessional Rate of Duty Rules, 2017 - Rule 5(1)(a) - Whether, having regard to the respondent's status as a 100% EOU and CESTAT's directions, the matter should be remitted to permit application under the IGCR Rules and release subject to compliance. - HELD THAT: - The Court noted that EOUs are to be dealt with liberally under the import policy and that importations for processing in a SEZ/EOU are revenue-neutral unless it is shown the goods were not re-exported or sold domestically. The CESTAT's directions permitting the importer to apply afresh under Rule 5(1)(a) of the IGCR Rules, 2017 and, failing production of revised permission, for Customs to draw samples and proceed on test reports, were held to be appropriate. Given the liberty reserved to the importer and the revenue-neutral character of the transaction unless contrary proof is adduced, the Revenue had no sustained grievance against CESTAT's approach. [Paras 5, 7, 11]

CESTAT's directions to permit fresh application under Rule 5(1)(a) and to proceed by sampling/testing if revised permission is not produced are appropriate; the matter is to be dealt with in that manner and Revenue's challenge fails.

Final Conclusion: The appeal fails. The High Court upheld CESTAT's permissive direction allowing the importer to seek revised permission under Rule 5(1)(a) of the IGCR Rules, 2017 and held that confiscation could not be sustained in the absence of seizure; substantial questions of law were answered in favour of the assessee and against the Revenue.

Conversion of shipping bill from drawback scheme to advance authorisation scheme - amendment of document under Section 149 of the Customs Act, 1962 - requirement of documentary evidence existing at the time of export - time limit in Board's Circular No.36/2010 for amendment of shipping bills - remand for de novo adjudication

Time limit in Board's Circular No.36/2010 for amendment of shipping bills - conversion of shipping bill from drawback scheme to advance authorisation scheme - Impugned rejection of appellant's request to convert shipping bills from drawback to advance authorisation solely on the ground of non compliance with the time limit prescribed in Board's Circular No.36/2010 is unsustainable. - HELD THAT: - The Tribunal found no allegation of fraud, misdeclaration or that the export documents did not prove the fact of export or coverage under the relevant drawback schedule. Recognising that Circular No.36/2010's prescribed time limit has been held unsustainable in earlier decisions of superior courts, the adjudicating authority erred in denying the request merely because the application was filed belatedly under the Circular. The Tribunal emphasised that amendment under Section 149 is discretionary but must be exercised by examining whether documentary evidence existing at the time of export supports the amendment; a mechanical reliance on the impugned Circular's time bar, particularly where courts have questioned its validity, was inappropriate. In these circumstances the order rejecting conversion on the basis of the Circular was set aside. [Paras 9, 10, 11, 13]

Impugned order rejecting conversion on the sole ground of Circular No.36/2010 set aside; matter remanded for consideration on merits.

Amendment of document under Section 149 of the Customs Act, 1962 - requirement of documentary evidence existing at the time of export - remand for de novo adjudication - Whether the documents produced by the appellant satisfy the conditions for amendment under Section 149 must be examined afresh by the adjudicating authority. - HELD THAT: - The Tribunal observed that the adjudicating authority did not apply the statutory test under Section 149 to the documentary evidence produced by the appellant (including advance authorisations, shipping bills, invoices and CA/GST certificates). The Tribunal noted the appellant's undertaking to repay drawback where applicable and that omissions in records had been rectified when pointed out. Consequently, the Tribunal directed a de novo adjudication to determine, after giving the appellant reasonable opportunity of personal hearing, whether the existing documentary evidence suffices to permit conversion of the shipping bills to the advance authorisation scheme. The remand is for substantive verification of documents and factual entitlement, not for a fresh time bar exclusion under the Circular. [Paras 10, 11, 12, 13]

Issue remanded for de novo adjudication; adjudicating authority to consider the documents on record, afford hearing, and decide entitlement under Section 149.

Final Conclusion: The appeal is allowed by way of remand: the order refusing conversion of shipping bills to the advance authorisation scheme on the basis of Circular No.36/2010 is set aside and the matter is remitted for de novo adjudication to determine, after giving the appellant an opportunity of hearing, whether documentary evidence existing at the time of export permits amendment under Section 149 of the Customs Act, 1962.

Classification of imported goods as coffee husk versus coffee beans - Eligibility for concessional import under Notification No.52/2003 - Confiscation for mis-declaration and reclassification - Validity and temporal effect of amended Development Commissioner authorization - Remand for verification, sampling and obtaining expert opinion

Classification of imported goods as coffee husk versus coffee beans - Eligibility for concessional import under Notification No.52/2003 - Confiscation for mis-declaration and reclassification - Imported consignment was adjudicated as coffee husk/bits and not Indonesia Robusta coffee beans, and consequently the concessional benefit under Notification No.52/2003 could not be allowed. - HELD THAT: - The Tribunal upheld the factual and legal conclusion that laboratory examination established the consignment contained predominantly coffee husk (about 71%) with rejected/defective beans, rather than Robusta coffee beans. The tariff distinguishes coffee (Chapter Heading 0901 11) from coffee husks and skins (Chapter Heading 0901 9010), and the Commissioner correctly reclassified the goods as coffee husk. Procurement certification and the import documentation describing the goods as Robusta coffee beans did not override the examination findings. Since the procurement certificate under the concessional import rules authorises import of Robusta coffee beans, importation of coffee husk/bits does not satisfy the essential condition for availing Notification No.52/2003; accordingly, the benefit was rightly denied and reclassification/confiscation followed from the mis description. [Paras 4, 5]

Findings of coffee husk/bits sustained; benefit under Notification No.52/2003 cannot be extended to the goods as imported; reclassification/confiscation held legally supportable.

Validity and temporal effect of amended Development Commissioner authorization - Remand for verification, sampling and obtaining expert opinion - Whether the Development Commissioner's amended permission dated 23.12.2022 covers coffee husk/bits for the purposes of concessional import was not finally adjudicated and was remanded for fresh examination. - HELD THAT: - The Tribunal noted that the appellant produced a subsequent letter from the Development Commissioner allegedly broad banding items to include coffee bean with husk and without husk, but the amendment post dated shipment. Given prior inconsistent outcomes in related proceedings and the relevance of the amended authorization to entitlement, the Tribunal did not decide the legal effect of that amendment on the instant import. Instead, the matter was remanded to the Commissioner to examine whether the amended letter authorises import of coffee husk/bits as raw material for manufacture of instant coffee and to verify temporal and procedural validity of the amendment in relation to the consignment. [Paras 6, 7, 8]

Issue remanded to the Commissioner for de novo adjudication to examine the scope and temporal effect of the Development Commissioner's amended authorization.

Remand for verification, sampling and obtaining expert opinion - Eligibility for concessional import under Notification No.52/2003 - Whether coffee husk can be used as a raw material for manufacture of the export product (instant coffee) was remanded for obtaining an expert opinion from the Coffee Board and for further verification. - HELD THAT: - Although the Tribunal recorded that coffee husk is ordinarily a waste used as animal feed or manure and not a raw material for instant coffee manufacture, it did not preclude factual verification of the appellant's claim that husk with infected beans is used in their manufacturing process. Consequently, the Tribunal directed the Commissioner to obtain a formal letter from the Coffee Board on whether coffee husk can serve as raw material for the manufacture of the appellant's export product, and to carry out such further examination or sampling as necessary before concluding entitlement to the Notification. [Paras 7]

Directed remand to obtain Coffee Board opinion and to verify the suitability of coffee husk as raw material, with adjudication to follow thereafter.

Final Conclusion: Impugned order set aside and the matter remanded to the Commissioner for de novo adjudication in accordance with the Tribunal's directions to examine the scope and temporal effect of the Development Commissioner's amended authorization, to obtain a Coffee Board opinion on use of coffee husk as raw material, and to carry out necessary verification and sampling before deciding entitlement to Notification No.52/2003.

Transaction value - related-party transactions and influence on price - close approximation to substitute values (transaction value of identical/similar goods, deductive value, computed value) - Rule 12 inquiry into truth or accuracy of declared value - sequential application of Customs Valuation Rules and residuary valuation under Rule 9 - addition of royalty to assessable value under Rule 10(1)(c)

Transaction value - related-party transactions and influence on price - close approximation to substitute values (transaction value of identical/similar goods, deductive value, computed value) - Rule 12 inquiry into truth or accuracy of declared value - sequential application of Customs Valuation Rules and residuary valuation under Rule 9 - Whether the declared invoice transaction value of the imported goods could be rejected and replaced by an enhanced value under Rule 9 where the importer and supplier are related parties. - HELD THAT: - The Tribunal found that mere relatedness between importer and supplier does not by itself justify rejection of the transaction value; the proper officer must demonstrate that the relationship influenced the price or that there is flow back or abnormal discounts. The appellant produced extensive evidence showing worldwide uniform pricing between affiliates, cost certifications, transfer pricing documentation and comparisons demonstrating only about 2% variation, which the Tribunal held did not amount to abnormal discounts or proof of price manipulation. Rule 12 requires cogent reasons and evidence for doubting declared value; the Department failed to adduce such evidence. Further, having proceeded through the sequence of valuation methods and reached enhancement under Rule 9, the Tribunal observed that the Commissioner (Appeals) could not remand for redetermination by another method after Rule 9 had been finally applied without contest on that method; the remand for re-determination was therefore unsustainable. Applying the statutory tests in Rule 3(3)(b) the declared value closely approximated substitute values and the rejection was unjustified. [Paras 4]

Declared transaction value accepted; original enhancement by 100% under Rule 9 unsustainable and remand for redetermination set aside.

Addition of royalty to assessable value under Rule 10(1)(c) - consideration clause and nature of royalty - Whether payment of royalty under the licence/agreement had to be added to the assessable value of imported finished goods under Rule 10(1)(c). - HELD THAT: - The Tribunal applied settled principles that royalties are to be added to assessable value only where the royalty is paid for use of intellectual property in the manufacture of the imported goods or where the royalty forms part of the conditions of sale of the imported goods. Here the royalty was payable for use of technology to produce goods in India and was not a condition of sale of the finished goods imported for trading or mere repacking. In the absence of any showing that the royalty adjusted the price of the imported goods or that the consideration clause effected a price substitution, the royalty could not be added to the transaction value. [Paras 4]

Addition of royalty to the assessable value of the imported finished goods under Rule 10(1)(c) was not warranted.

Final Conclusion: Appeal allowed; impugned order rejecting the declared transaction value and enhancing value (and remanding for re-determination) set aside, and addition of royalty to the value of imported finished goods disallowed, with consequential relief as per law.

Power of High Court under section 463(2) of the Companies Act, 2013 to grant relief - Apprehension of prosecution by an officer of a company - Requirement of a reasoned order after show-cause/reply before initiating prosecution - Limitation of criminal complaints under section 468(2) of the Code of Criminal Procedure, 1973 - Effect of internal departmental circulars and requirement of sanction where limitation is affected under section 470(3) Cr.P.C.

Power of High Court under section 463(2) of the Companies Act, 2013 to grant relief - Apprehension of prosecution by an officer of a company - High Court's jurisdiction under section 463(2) to grant relief to officers who apprehend proceedings, including where related criminal proceedings have been initiated. - HELD THAT: - Section 463(2) confers on the High Court the power to relieve an officer who has reason to apprehend that proceedings may be brought against him for negligence, default, breach of duty, misfeasance or breach of trust, and the Court has the same powers as it would have under section 463(1). The Court held that this jurisdiction is available notwithstanding that complaints or criminal proceedings may have been filed, particularly where the petitioner had reasonable apprehension and sought relief while the consequences of the preliminary findings were pending. The Court rejected the respondent's contention that initiation of proceedings before a Special/Criminal Court ousts the High Court's power under section 463(2), observing that the High Court's power is additional and may be exercised in appropriate cases. [Paras 15, 16, 17, 20, 21]

The High Court has jurisdiction under section 463(2) to grant relief to the petitioners despite institution of related criminal proceedings.

Apprehension of prosecution by an officer of a company - Requirement of a reasoned order after show-cause/reply before initiating prosecution - Whether the petitioners had reasonable apprehension of prosecution and acted honestly and diligently, and whether the respondent complied with due process before instituting prosecution. - HELD THAT: - The Court found that the petitioners had reason to apprehend proceedings because the ROC had issued preliminary findings to a group company on the same date and subsequently instituted criminal proceedings against that group company. The record showed multiple inquiry and inspection notices and detailed replies by the Company, including a comprehensive reply dated 17.11.2020 to the preliminary findings. The Court held that the respondent did not pass any reasoned order taking into account the Company's replies before initiating prosecution; this lack of a reasoned adjudication after the reply undermines the procedural fairness expected before prosecutorial steps are taken. Given the repeated replies and documentary disclosures, the petitioners were found to have acted honestly, reasonably and with diligence. [Paras 10, 11, 14, 18, 19]

The petitioners had reasonable apprehension and acted honestly and with diligence, and the respondent failed to pass a reasoned order after considering the Company's replies before initiating prosecution.

Limitation of criminal complaints under section 468(2) of the Code of Criminal Procedure, 1973 - Whether the offences alleged in the impugned notice are barred by limitation under section 468(2) Cr.P.C. - HELD THAT: - The Court examined the period to which the alleged offences related (2014-2019) and the dates of the ROC's inquiry/inspection communications (including the first inquiry notice and the preliminary findings letter). Applying the limitation periods in section 468(2) Cr.P.C. (six months for offences punishable with fine and one year for offences punishable with imprisonment not exceeding one year), the Court concluded that the alleged offences were time-barred irrespective of whether limitation is reckoned from the date of the first inquiry notice, the inspection notice, or the preliminary findings letter. The Court noted earlier precedents of this Court and co-ordinate benches that took a similar view on limitation in Registrar of Companies prosecutions. [Paras 22, 23]

The offences alleged in the impugned notice are barred by limitation and cannot be taken cognizance of.

Effect of internal departmental circulars and requirement of sanction where limitation is affected under section 470(3) Cr.P.C. - Whether the Departmental Circular dated 20.6.2016 or requirement of sanction precludes the High Court from granting relief or affects the institution of prosecution in the present case. - HELD THAT: - The Court treated the departmental circular as an internal document and observed that its contents were not determinative. It further held that consent or sanction under section 470(3) Cr.P.C. becomes relevant only where the prosecution would otherwise be time-barred and sanction is a statutory requirement that may extend limitation; absent such circumstances, the circular does not preclude exercise of the High Court's jurisdiction under section 463(2). The Court referred to authority indicating that sanction requirements apply only where they affect limitation. [Paras 5, 24]

The departmental circular does not bar the exercise of the High Court's powers; sanction under section 470(3) Cr.P.C. is relevant only where it affects limitation, which is not shown to save the prosecution here.

Final Conclusion: Writ petition allowed. Petitioners excused of any criminal liability in respect of the alleged defaults in the notice dated 6.10.2020; respondent restrained from instituting or proceeding with criminal proceedings in respect of that notice; connected applications disposed of accordingly.

Interference with appellate tribunal order - Dismissal of civil appeal

Interference with appellate tribunal order - Whether the Supreme Court should interfere with the impugned order of the National Company Law Appellate Tribunal, New Delhi. - HELD THAT: - The Bench recorded its conclusion that it was not inclined to interfere with the impugned order of the National Company Law Appellate Tribunal, New Delhi. No further reasons or elaboration are supplied in the operative order; the appellate exercise resulted in the dismissal of the civil appeal.

The appeal was dismissed and the Court declined to interfere with the NCLAT order.

Final Conclusion: The Civil Appeal was dismissed; the Supreme Court declined to interfere with the impugned order of the National Company Law Appellate Tribunal, New Delhi.

Extension of corporate insolvency resolution process - exclusion of period of pendency of judicial proceedings from CIRP computation - retrospective calculation of extension - time taken in legal proceedings as an exceptional circumstance - actus curiae neminem gravabit

Exclusion of period of pendency of judicial proceedings from CIRP computation - time taken in legal proceedings as an exceptional circumstance - actus curiae neminem gravabit - Whether the period from 09.05.2023 to 27.07.2023 spent in pursuing IA (IBC)/1235(CHE)/2023 in CP (IB)/9(CHE)/2022 and the pendency of the present appeal should be excluded when computing the CIRP period. - HELD THAT: - The Tribunal held that the period during which the application for extension was pending before the Adjudicating Authority (09.05.2023 to 27.07.2023) is an exceptional circumstance and must be excluded from calculation of the CIRP period. Relying on the principle that no act of the judicial forum should prejudice a litigant (actus curiae neminem gravabit) and considering that the extension application sought exclusion and extension from date of disposal, the Tribunal found it was an error for the Adjudicating Authority to make the 90 day extension run retrospectively from the last date of CIRP. The Tribunal observed that exclusion of pendency would enable proper evaluation of resolution plans and serve substantial justice, and accordingly granted exclusion of the IA pendency period and also ordered exclusion of the period of pendency of the instant appeal. [Paras 28]

The period from 09.05.2023 to 27.07.2023 and the pendency of the instant appeal are excluded when computing the CIRP period.

Extension of corporate insolvency resolution process - retrospective calculation of extension - Whether the 90 day extension under Section 12(2) of the I&B Code should run retrospectively from 10.05.2023 or should be granted from the date of disposal of the appeal. - HELD THAT: - The Tribunal concluded that when an Adjudicating Authority grants an extension for 90 days, that period is to be counted from the date on which the order granting extension is passed. Having found that the Adjudicating Authority erred in directing that the extension run retrospectively from 10.05.2023 without excluding the period of pendency, and having excluded the pendency period, the Tribunal exercised its power to grant the 90 day extension under Section 12(2) of the I&B Code to run from the date of disposal of the instant appeal. This approach was applied to avoid injustice and to permit completion of actions necessary for revival of the corporate debtor. [Paras 27, 28]

The impugned direction that the 90 day extension run retrospectively from 10.05.2023 is set aside; a 90 day extension is granted to run from the date of disposal of the appeal.

Final Conclusion: The appeal is allowed: the adjudicating authority's retrospective running of the 90 day CIRP extension from 10.05.2023 is set aside; the period 09.05.2023 to 27.07.2023 (and the pendency of this appeal) is excluded from the CIRP computation; and a 90 day extension under Section 12(2) is granted to run from the date of disposal of the appeal. No costs.

Imposition of costs - observation of concealment or fraud on court - allocation of CIRP costs and legitimate expenses - liberty to file application for determination of cost sharing - closure of contempt proceedings

Observation of concealment or fraud on court - imposition of costs - Deletion of the observation that the order admitting CIRP was obtained by concealment of material fact or by playing fraud on the Court. - HELD THAT: - The Tribunal accepted the Appellant's submission that, in view of the dismissal of the Section 65 application, there was no occasion to make the adverse observation recorded in the last line of Paragraph 13 of the Adjudicating Authority's order. Consequently that specific observation is deleted as unnecessary. [Paras 5]

Observation in the last line of Paragraph 13 is deleted.

Imposition of costs - Maintenance of the direction imposing a cost of Rs.50,000 to be paid to the Prime Minister's Relief Fund. - HELD THAT: - The Tribunal noted that the Appellant has already deposited the directed amount and therefore maintained the first limb of Paragraph 16 of the Adjudicating Authority's order which imposed that cost. [Paras 7]

Direction for payment of Rs.50,000 is maintained.

Allocation of CIRP costs and legitimate expenses - liberty to file application for determination of cost sharing - Modification of the direction that the entire CIRP cost and legitimate expenses of the IRP/RP shall be borne by the Applicant; liberty granted to the Resolution Professional to apply to the Adjudicating Authority for decision on payment and sharing of the balance costs. - HELD THAT: - The Tribunal observed that, given the events including the interim appellate order and the continued showing of NBFC status on the RBI portal, the Committee of Creditors and the Resolution Professional should have been cautious in incurring costs. Rather than directing that the Applicant alone bear the entire balance cost, the Tribunal granted liberty to the Resolution Professional to file an application before the Adjudicating Authority seeking directions on whether the balance cost is fully payable and whether it should be borne entirely by the Applicant or shared among CoC members and/or the Resolution Professional. The Adjudicating Authority is to pass orders on that application taking into account the sequence of events and facts in the CIRP. [Paras 9, 10, 11]

Direction in Paragraph 16(b) is modified to permit the Resolution Professional to move the Adjudicating Authority for determination of liability for the balance costs; the Adjudicating Authority to decide whether costs are payable in full by the Applicant or to be shared.

Closure of contempt proceedings - Closure of the contempt application filed by the Resolution Professional. - HELD THAT: - In light of the deletion of the adverse observation against the Appellant, the Tribunal held that the contempt application filed by the Resolution Professional cannot proceed and therefore stands closed. [Paras 12, 13]

Contempt application by the Resolution Professional stands closed.

Final Conclusion: The appeal is disposed of: the adverse observation in Paragraph 13 is deleted; the Rs.50,000 cost direction is maintained (already deposited); the direction that the Applicant bear the entire CIRP costs is modified by granting the Resolution Professional liberty to apply to the Adjudicating Authority for determination of payment and sharing of the balance costs; and the contempt application is closed.

Claims filed after approval of resolution plan - condonation of delay in filing claims during CIRP - finality of claims upon Committee of Creditors' approval of resolution plan - duty of the resolution professional to collate claims reflected in the corporate debtor's books - time bound nature of the Insolvency and Bankruptcy Code and protection of the resolution applicant

Claims filed after approval of resolution plan - condonation of delay in filing claims during CIRP - time bound nature of the Insolvency and Bankruptcy Code and protection of the resolution applicant - Applications for condonation of delay and admission of claims filed after the CoC had approved the resolution plan were not maintainable and were correctly dismissed. - HELD THAT: - The Tribunal held that the Appellants filed their claims in Form CA on 29.03.2023, long after the CoC approved the Resolution Plan on 13.08.2021 and after orders on the application for approval of the plan had been reserved on 22.02.2023. Relying on the reasoning in Mukul Kumar (accepted by the Supreme Court in RPS Infrastructure Ltd. v. Mukul Kumar), the Court emphasised that allowing belated claims after CoC approval would jeopardise the time bound CIRP, create uncertainty for the resolution applicant and defeat the statutory object of the Code. The Tribunal found no ground to direct the Resolution Professional to admit claims filed at that belated stage and agreed with the Adjudicating Authority's conclusion that the applications for condonation of delay could not be allowed. The Tribunal thus affirmed the Adjudicating Authority's dismissal of the Applications on this ground. [Paras 7, 8, 11, 12]

Applications for condonation of delay and admission of the claims filed after CoC approval were rightly rejected; Appeals dismissed on this ground.

Duty of the resolution professional to collate claims reflected in the corporate debtor's books - claims reflected in the corporate debtor's accounts - The Appellants could not rely on the K V Developers decision because they did not show that their claims were reflected in the corporate debtor's books. - HELD THAT: - The Tribunal distinguished the Appellants' reliance on the K V Developers judgment, which requires that claims be reflected in the corporate debtor's records for the RP to collate and include them. In the present case the Appellants failed to place on record any material demonstrating that their claims appeared in the Corporate Debtor's accounts or records. In absence of such evidence, the protective principle in K V Developers was held inapplicable and did not assist the Appellants. [Paras 10, 11]

K V Developers inapplicable because there is no material showing the claims were reflected in the corporate debtor's records; reliance on that decision rejected.

Final Conclusion: The Tribunal found no error in the Adjudicating Authority's dismissal of the applications for condonation of delay and admission of the claims filed after the CoC had approved the resolution plan, and dismissed both Appeals; no order as to costs.

Quashing of FIR and consequential quashing of proceedings - predicate offence as basis for PMLA/ECIR - locus/maintainability of appellate remedy for an affected agency - availability of independent remedial measures including initiation of proceedings under Section 156(3) Cr.P.C. and seeking review before the High Court - independence of subsequent forums from observations in earlier quashing orders

Locus/maintainability of appellate remedy for an affected agency - Whether the appellant-Directorate of Enforcement's locus to institute these appeals requires adjudication by this Court - HELD THAT: - The Court considered rival submissions on whether the ED, not being a party to the proceedings before the Bombay High Court, was entitled to challenge the quashing of the predicate FIR which led to annulment of the ECIR. The Bench declined to decide the question of maintainability or locus. It observed that it was unnecessary to delve into that question because the ED had efficacious alternative remedies available in law which it could pursue, making determination of maintainability unnecessary for disposal of these appeals. The Court therefore did not adjudicate the maintainability issue on merits. [Paras 14, 15]

Maintainability/locus left undecided; Court declined to adjudicate the issue.

Availability of independent remedial measures including initiation of proceedings under Section 156(3) Cr.P.C. and seeking review before the High Court - independence of subsequent forums from observations in earlier quashing orders - Remedial avenues available to the ED after quashing of the predicate FIR and consequential striking down of the ECIR - HELD THAT: - The Court directed that the ED has efficacious alternative remedies notwithstanding the High Courts' impugned orders. It specifically indicated two independent courses the ED may adopt: (i) approach the Judicial Magistrate under Section 156(3) Cr.P.C. to seek registration of a complaint and investigation; and (ii) file a review petition before the Bombay High Court seeking clarification that the impugned judgment shall have no effect on the rights of the ED. The Court emphasised that any Appropriate Forum approached by the ED must determine issues independently and must not be influenced by observations made in the Bombay and Delhi High Courts' orders. The Court expressly refrained from expressing any opinion on the merits of the underlying allegations or counter-allegations. [Paras 15, 16, 17, 18]

ED permitted and directed to pursue independent remedies (Section 156(3) Cr.P.C. or review before Bombay High Court); forums to decide independently unaffected by earlier observations.

Final Conclusion: Permission to file SLPs granted, delay condoned and leave granted; the Court declined to decide the maintainability/locus issue and instead disposed the appeals by recording that the ED may pursue independent remedies (including approaching the Judicial Magistrate under Section 156(3) Cr.P.C. or seeking review in the Bombay High Court), with the proviso that the Appropriate Forum shall determine matters on merits uninfluenced by earlier High Court observations; no opinion expressed on merits.

Anticipatory bail - section 45 of the Prevention of Money Laundering Act (offences cognizable and non bailable; conditions for grant of bail) - reasonable grounds to believe not guilty and not likely to commit offence while on bail - proceeds of crime - extraordinary power under section 438 Cr.P.C. - privilege of pre arrest bail to be granted sparingly - economic offences as heinous offences

Anticipatory bail - section 45 of the Prevention of Money Laundering Act (offences cognizable and non bailable; conditions for grant of bail) - reasonable grounds to believe not guilty and not likely to commit offence while on bail - proceeds of crime - Anticipatory bail application under section 438 Cr.P.C. in a PMLA prosecution was not maintainable in the facts of this case and must be rejected. - HELD THAT: - The court held that offences under the PMLA are cognizable and non bailable under section 45 and that bail can be granted only if the court is satisfied, upon opportunity to the Public Prosecutor, that there are reasonable grounds to believe the accused is not guilty and is not likely to commit an offence while on bail. The jurisdictional presumption attendant on section 45 displaces the ordinary 'bail, not jail' norm; accordingly, the extraordinary power under section 438 Cr.P.C. must be exercised sparingly in PMLA matters. Applying these principles, the court accepted the prosecution case that the applicant participated in sale of fake Remdesivir injections and that the money trail shows the alleged proceeds of crime amounting to Rs. 2,89,00,000/-. In view of the rigor of section 45 and the material produced by the prosecution demonstrating the applicant's involvement and the claimed proceeds, the court was not satisfied that there were reasonable grounds to believe the applicant was not guilty or would not reoffend if released; hence anticipatory bail was refused. [Paras 7, 8, 11, 12, 13]

Application for anticipatory bail dismissed; applicant not entitled to anticipatory bail under the PMLA on the material on record.

Final Conclusion: Anticipatory bail under section 438 Cr.P.C. refused in view of section 45 PMLA and the prosecution material; trial court to proceed in accordance with law if the applicant appears.

Offence under the Prevention of Money Laundering Act, 2002 - proceeds of crime - predicate offence - prima facie satisfaction for bail under Section 45(1) of the PMLA - reverse burden under Section 24 of the PMLA - bail under Section 439 Cr.P.C.

Offence under the Prevention of Money Laundering Act, 2002 - proceeds of crime - predicate offence - reverse burden under Section 24 of the PMLA - Prima facie case under Section 3 of the PMLA is made out against the accused and bail under Section 439 Cr.P.C. is not warranted. - HELD THAT: - The court examined whether there is prima facie evidence that the accused procured and laundered proceeds derived from predicate offences listed in the schedule. The accused was charge-sheeted under Sections 420 and 120-B of the IPC and under provisions of the Rajasthan Public Examination (Prevention of Unfair Means) Act; while the latter is not a scheduled offence, Sections 420 and 120-B fall within the schedule. Investigations and recoveries indicate that Rs. 1.06 Crores alleged to be proceeds of crime were traced to eight persons on information linked to the accused, which the court regarded as sufficient at the bail stage to infer use/concealment of proceeds by the accused. The Court noted the statutory scheme including the reverse burden under Section 24 and the requirement in Section 45(1) that the court be satisfied there are reasonable grounds to believe the accused is not guilty before granting bail. Given the material on record, the court concluded it cannot be said at this stage that the accused is not guilty and therefore bail cannot be granted. [Paras 12, 14, 15, 16, 17]

Bail dismissed as prima facie case under the PMLA is made out and the accused has not discharged the reverse burden such as would justify bail.

Prima facie satisfaction for bail under Section 45(1) of the PMLA - proceeds of crime - Proviso to Section 45(1) of the PMLA (bail where laundering amount is less than one crore) is not attracted. - HELD THAT: - The proviso to Section 45(1) permits bail where the alleged laundering amount is below Rs. 1 crore. The court considered the amounts recovered and held that the recoveries attributable to the accused total Rs. 1.06 Crores, i.e., in excess of the threshold in the proviso. Accordingly, the proviso does not apply to afford bail to the petitioner. [Paras 3, 18]

Proviso to Section 45(1) not attracted as alleged proceeds exceed Rs. 1 crore; bail not permissible on that ground.

Final Conclusion: The criminal miscellaneous bail application under Section 439 Cr.P.C. is dismissed: the Court finds prima facie material that the accused procured and laundered proceeds of scheduled predicate offences and that the proviso to Section 45(1) of the PMLA is inapplicable because the alleged proceeds exceed Rs. 1 crore.

Anticipatory bail under Section 438 CrPC - Economic offences as a class apart - Prima facie case in anticipatory bail - Custodial interrogation as one relevant factor - Conditions under sub section (2) of Section 438 CrPC - Exercise of discretion to grant anticipatory bail sparingly

Anticipatory bail under Section 438 CrPC - Economic offences as a class apart - Prima facie case in anticipatory bail - Custodial interrogation as one relevant factor - Conditions under sub section (2) of Section 438 CrPC - Grant of anticipatory bail to the applicant apprehending arrest in a PMLA prosecution. - HELD THAT: - The Court exercised its discretionary power under Section 438 CrPC and granted anticipatory bail to the applicant subject to specified conditions. In reaching this conclusion the Court considered that the applicant had earlier been made accused and granted bail in related FIRs and that the ECIR had been filed, statements recorded and no arrest had been earlier demanded; investigation was said to be complete and only a bailable warrant had been issued by the Special Judge. The Court noted the settled principles that anticipatory bail is an extraordinary power to be exercised sparingly and that economic offences are serious and may constitute a class apart; it also acknowledged authorities emphasizing the need to consider the prima facie case and that custodial interrogation is only one of several relevant factors. Applying these principles to the material before it, the Court was satisfied to permit release on anticipatory bail while imposing the conditions in sub section (2) of Section 438 CrPC and requiring cooperation with the investigation. [Paras 6, 7, 8, 9, 10]

In the event of arrest the applicant shall be released on furnishing personal bond with one surety and subject to the conditions of Section 438(2) CrPC and cooperation with investigation.

Final Conclusion: Application under Section 438 CrPC allowed; anticipatory bail granted to the applicant on furnishing the prescribed bond and surety and subject to the statutory conditions and cooperation with the investigation.

Person for tax statutes - firm as an assessee - Service of notice and rebuttal of presumption raised by postal delivery manifest - Recovery of sums due to Government under Section 142 of the Customs Act - Appropriate procedure for recovery of service tax dues under the CGST enactment - Right to pursue statutory appeal where assessment order not in possession of assessee

Person for tax statutes - firm as an assessee - Whether a partnership firm is an entitled party to challenge tax recovery measures as the 'person' or assessee under service-tax law. - HELD THAT: - The Court examined statutory definitions of 'person' in tax statutes and noted that for purposes of service-tax law the term includes a firm. Reliance on non-tax decisions that treat a firm differently in non-tax contexts does not alter the statutory scheme which treats a firm as a distinct taxable person. The objections based on absence of joinder of all partners therefore do not preclude the partnership firm from being the aggrieved person entitled to invoke writ jurisdiction against tax recovery measures in this matter. [Paras 10]

Preliminary objection that the partnership firm cannot file the writ petition is overruled; the firm is the person/assessee for tax purposes and is entitled to challenge the attachment.

Recovery of sums due to Government under Section 142 of the Customs Act - Appropriate procedure for recovery of service tax dues under the CGST enactment - Validity of the attachment order issued under Section 142 of the Customs Act for recovery of service-tax dues which arise under the repealed Finance Act and are governed by the CGST Act. - HELD THAT: - Section 142 of the Customs Act authorises recovery of sums payable under that Act. The attachment impugned was issued under Section 142 of the Customs Act at a time when service tax provisions under the Finance Act had been repealed and recovery of such dues falls to be proceeded with in accordance with the CGST Act and its saving provisions. Because Section 142 of the Customs Act applies only to sums payable under the Customs Act, invoking that provision for recovery of service-tax dues was impermissible. Consequently, the impugned attachment could not be sustained and was quashed, subject to the respondents being at liberty to initiate recovery under the CGST Act. [Paras 11]

Impugned attachment order under the Customs Act quashed; respondents may initiate appropriate recovery proceedings under the CGST Act.

Service of notice and rebuttal of presumption raised by postal delivery manifest - Right to pursue statutory appeal where assessment order not in possession of assessee - Whether the petitioner, having not received a certified copy of the assessment order, should be permitted to prosecute a statutory appeal and whether the appellate authority should entertain such an appeal notwithstanding limitation. - HELD THAT: - The Court noted factual material that the petitioner had sent communications informing the department of a changed registered office and had repeatedly requested a certified copy of the assessment order, which was not provided. The petitioner also made a pre-deposit. Given that the challenge to the assessment order would involve disputed questions of fact and that the petitioner did not possess a copy of the assessment order when the writ petition was filed, the Court considered it appropriate to allow the petitioner to invoke the statutory appellate remedy. The Court directed that if the statutory appeal is filed within two weeks of receiving this order, the appellate authority shall receive and decide it on merits without going into limitation, provided the requisite pre-deposit has been remitted. As a protective measure, the Court restrained alienation or encumbrance of the immovable asset subject to attachment without leave of the appellate authority. [Paras 12, 13, 14]

Petitioner permitted to present a statutory appeal within two weeks of receipt of this order; appellate authority to admit and decide the appeal on merits without raising limitation if pre-deposit is made; petitioner restrained from alienating or encumbering the attached immovable asset without leave.

Final Conclusion: The writ petition is disposed by overruling the preliminary objection on locus, quashing the attachment issued under the Customs Act as impermissible for recovery of service-tax dues (leaving respondents free to proceed under the CGST Act), and permitting the petitioner to file a statutory appeal within a limited period to be decided on merits by the appellate authority subject to pre-deposit; protective restraint on alienation of the attached immovable asset; no order as to costs.

Liability to pay service tax - juridical person - trust as a pass-through - doctrine of mutuality - statutory construction of definition clauses

Juridical person - statutory construction of definition clauses - Whether the assessee-trust is a juridical person for the purpose of levy of service tax under the Finance Act - HELD THAT: - The Court held that recognition of an entity as a 'person' must be determined with reference to the relevant statute under which liability is asserted. Although other statutes (for example SEBI) may treat a trust as a juridical person, that treatment cannot be imported into the Finance Act. The CESTAT's reliance on SEBI recognition to treat the trust as a juridical person for taxation was held to be untenable; for levy of service tax the definition under the Finance Act governs. [Paras 16, 17]

Assessee is not to be treated as a juridical person for the purpose of service tax liability under the Finance Act; this question is answered in favour of the assessee.

Trust as a pass-through - liability to pay service tax - Whether the assessee-trust can be treated as a pass-through and therefore not liable to service tax on fund operations - HELD THAT: - On the facts pleaded and exemplified before the Court, the trust functions as a conduit where contributors' funds are consolidated and invested pursuant to the investment manager's advice, and any residual funds are distributable to unit-holders such that the trust itself does not retain profit. The Court accepted that in substance the trust acts as a pass-through and does not perform activities amounting to a service attracting service tax, and accordingly the imposition of service tax was unsustainable. [Paras 21, 22]

Assessee acts as a pass-through trust and is not liable to service tax on the fund operations; this question is answered in favour of the assessee.

Doctrine of mutuality - liability to pay service tax - Whether the doctrine of mutuality applies so as to negate any service provided by the trust to contributors - HELD THAT: - The Court found that where commonality exists between contributors and participators and the trust merely holds and invests contributors' monies on their behalf, the contributors and the trust cannot be dissected into separate persons for the purpose of imposing service tax. Because the fund holds contributors' investments and acts in accordance with the investment manager's directions, in substance the fund does not render a service to itself or to contributors and the doctrine of mutuality applies. [Paras 23, 24]

Doctrine of mutuality applies and negates imposition of service tax; this question is answered in favour of the assessee.

Final Conclusion: Appeals allowed; CESTAT order dated July 07, 2021 in Final Order No. 20372-20402/2021 set aside and the three legal questions answered in favour of the assessee.

Service tax exemption - pre-conciliation / show cause proceedings - opportunity of personal hearing - exhaustion of alternative statutory remedy / appeal under the Finance Act - exclusion of time spent in litigating writ petition for computation of limitation

Service tax exemption - pre-conciliation / show cause proceedings - opportunity of personal hearing - exhaustion of alternative statutory remedy / appeal under the Finance Act - Challenge to the order imposing service tax and penalty dismissed; merits of exemption claim left for appellate adjudication and petition held not maintainable for not exhausting statutory appeal. - HELD THAT: - The court recorded that the petitioner was issued pre-conciliation and show-cause notices and, although he replied to the show-cause notice asserting that the services were exempt under the notification, he did not produce any documents to substantiate the claim and failed to avail several opportunities of personal hearing afforded by the authority (paras 8-9). The impugned order is an assessment under section 73 of the Finance Act and an appeal remedy is provided under the Act; consequently the High Court declined to adjudicate the disputed question of whether the services are exempted and held that that dispute is for the appellate authority to consider (para 10). In view of the availability of an efficacious alternative statutory remedy and the absence of the necessary evidentiary material before the adjudicating authority, the writ petition was dismissed while leaving open the petitioner's remedy to prefer an appeal under the Finance Act (para 11). [Paras 3, 8, 9, 10, 11]

Petition dismissed; petitioner permitted to file appeal under the Finance Act and time spent in prosecuting the petition excluded for computing limitation.

Final Conclusion: Writ petition challenging the order of assessment for service tax dismissed as not maintainable in view of the availability of a statutory appeal; the question of exemption is left to the appellate authority, petitioner granted liberty to prefer the appeal and the time consumed in the petition is excluded for limitation purposes.

Time-bar of show-cause notice - service tax liability where consideration is received inclusive of tax - onus on revenue to investigate filing of nil/late returns - surrender of registration and departmental verification - setting aside demand on limitation and prior departmental clearance

Time-bar of show-cause notice - surrender of registration and departmental verification - setting aside demand on limitation and prior departmental clearance - Whether the show-cause notice dated 18.02.2009 and the consequent demand for service tax for April, 2004 to June, 2005 were time-barred and liable to be set aside in view of prior departmental verification dated 20.08.2008 and the conduct of the revenue in not investigating nil/late returns. - HELD THAT: - The Tribunal found that the appellant had initially paid service tax when the consideration was inclusive of tax, but subsequently filed ST-3 returns without payment. When the appellant surrendered its registration in 2008 an internal departmental verification was carried out and, by letter dated 20.08.2008, the department recorded that nothing was pending against the appellant. Having accepted that internal verification, the subsequent issuance of the show-cause notice on 18.02.2009 was held to be highly time-barred. The Tribunal further observed that where an assessee files nil or late returns after earlier payments, the onus is on the revenue to investigate the discrepancy; no such investigative steps were shown to have been taken before issuing the show-cause notice. For these reasons the demand confirmed in the adjudicating order was set aside. [Paras 6, 7]

Impugned demand set aside and appeal allowed in view of departmental verification dated 20.08.2008 and the time-barred issuance of the show-cause notice.

Final Conclusion: Appeal allowed; demand of service tax for April, 2004 to June, 2005 set aside as the show-cause notice was time-barred in light of prior departmental verification and absence of departmental investigation into the filing of nil/late returns.

Management Consultancy Service - Service tax on reimbursable expenses - Liability of sub-contractor for service tax - Exemption for software development services - Extended period of limitation - Issue already decided in earlier proceedings

Management Consultancy Service - Demand of service tax on amounts classified as consulting fees (other than management consulting) was not sustainable. - HELD THAT: - The Tribunal examined whether the activities undertaken by the appellant fall within the definition of management consultancy. It noted that the appellant's activities - data collection and analysis, manpower mobilization, liaison, training supervision - did not satisfy the criteria for levy as management consultancy, and the adjudicating authority had not explained how the criteria were met. Applying the definitional scope of management consultancy, the Tribunal concluded that the demand confirmed on this account lacked basis and must be set aside.

Demand on consulting fees classified as management consultancy is set aside.

Service tax on reimbursable expenses - Amounts received as reimbursements during execution of jobs are outside the ambit of service tax and the demand thereon is unsustainable in absence of evidence that reimbursements represented taxable services. - HELD THAT: - The Tribunal observed that the adjudicating authority produced no evidence to show that the reimbursements were consideration for taxable services. In the absence of such evidence, the receipts characterised as reimbursements could not be brought within the taxable net and the impugned demand in respect of reimbursable expenses could not be sustained.

Demand in respect of reimbursable expenses is set aside.

Liability of sub-contractor for service tax - Services rendered by the appellant as a sub-contractor to main contractors were not liable to service tax for the material period and the demand in respect of such subcontracted services is liable to be set aside. - HELD THAT: - Relying on the earlier considered reasoning in the appellant's own case, the Tribunal held that for the relevant period the tax net did not uniformly tax services provided by a sub-contractor to the main contractor; the statutory and policy position then prevailing, circulars and authorities indicated that the main contractor's liability (where it existed) could prevent double taxation. The Tribunal found that the services rendered to main contractors were not taxable in the hands of the appellant for the material period and therefore the demand on this count could not be sustained.

Demand in respect of services rendered as sub-contractor is set aside.

Exemption for software development services - Amounts received for software development were exempt from service tax for the relevant period and no tax was payable on such receipts. - HELD THAT: - The Tribunal noted that software development services provided by the appellant fell within the exemption available under the Notification applicable at the time (Notification No. 16/2004-ST dated 10-9-2004). Consequently, the receipts on account of software development were not taxable and the demand in respect of such receipts could not be sustained.

No service tax payable on software development receipts; demand set aside.

Extended period of limitation - Issue already decided in earlier proceedings - Invocation of the extended period of limitation was not sustainable and the entire demand is barred by limitation. - HELD THAT: - The Tribunal observed that the appellant's activity and the relevant receipts were known to the Revenue and that the show-cause notices impugned were issued invoking the extended period. Having already dealt with the identical issues in the appellant's earlier proceedings and having found the substantive demands unsustainable on merits, the Tribunal furthermore held that the invocation of the extended period was not justified in the facts of the case. On that basis the Tribunal concluded that the whole of the demand was barred by limitation.

Invocation of extended period rejected; whole demand held barred by limitation.

Final Conclusion: The impugned orders are set aside; the demands confirmed by the adjudicating authority are quashed on merits (consulting fees, reimbursements, sub contract services, and software development) and, in any event, the entire demand is barred by limitation. The appeal is allowed with consequential relief, if any.

Security Agency - Security Services - statutory function - sovereign/public authority - business - deposit into Government treasury - C.B.E. & C. Circular No. 89/7/2006-S.T.

Security Agency - Security Services - business - sovereign/public authority - statutory function - deposit into Government treasury - C.B.E. & C. Circular No. 89/7/2006-S.T. - Whether the appellant (State-raised battalions deployed to PSUs) is liable to service tax as a provider of security services under the definition of Security Agency - HELD THAT: - The Tribunal applied its earlier decision in Mumbai Police v. Commissioner of Service Tax, CESTAT Mumbai, which held that State police or agencies acting as instruments of the State are not "persons" engaged in the business of providing security services for the purposes of service tax. The court accepted that the term "person" as understood prior to the 2012 amendments does not include the State, and that deployment of State police or analogous State-raised battalions to maintain public security is a statutory and sovereign function. Reliance was placed on C.B.E. & C. Circular No. 89/7/2006-S.T., which exempts charges collected by sovereign/public authorities for statutory duties where (i) the duty is statutory/mandatory, (ii) the fee is levied under law, and (iii) the amounts are deposited into the Government treasury. The Tribunal found these conditions satisfied: the deployment falls within statutory powers to maintain public security; user charges were prescribed by statute/notification; and amounts recovered were credited to Government treasury. The activity was characterised as cost recovery for discharge of a statutory/souvereign duty rather than a commercial "business" undertaken to earn profit. In view of the precedent and the Circular, the appellant's activities were held to fall outside the definition of Security Agency and hence beyond the levy of service tax.

The appellant is not liable to pay service tax as a provider of security services; the impugned demand is set aside.

Final Conclusion: Appeals allowed; impugned orders demanding service tax set aside and consequential relief, if any, granted.

Works Contract Service - Erection, Commissioning and Installation Service - bifurcation of composite works contracts - valuation of service element at 33% of contract value - application of Larsen & Toubro ratio - no demand sustainable where tax paid exceeds liability

Works Contract Service - Erection, Commissioning and Installation Service - bifurcation of composite works contracts - valuation of service element at 33% of contract value - Classification of the appellant's activities and sustainability of the service-tax demand under 'Erection, Commissioning and Installation Service' for the period May, 2006 to March, 2008. - HELD THAT: - The Tribunal accepted that the appellant undertook fabrication together with erection, commissioning and installation at project sites and noted that the Revenue did not press any demand under 'Works Contract Service'. Relying on the principle in Larsen & Toubro, the Tribunal observed that composite or works contracts require bifurcation of service and non-service elements and that the service element where applicable is to be assessed under the works-contract approach. Applying that approach, the Tribunal held that if the activity is treated as liable under 'Works Contract Service', the taxable service element is 33% of the contract value and that the appellant had already discharged service tax exceeding that liability. Consequently, the demand confirmed under 'Erection, Commissioning and Installation Service' could not be sustained. [Paras 7, 8, 9]

The impugned order confirming demand under 'Erection, Commissioning and Installation Service' is set aside as no demand is sustainable in view of the classification as works contract and the appellant having paid service tax exceeding the 33% service-element liability.

Final Conclusion: The appeal is allowed, the impugned demand is set aside and consequential relief, if any, is granted.

Saving clause under Section 174(2)(e) of the CGST Act, 2017 - Liability for non-filing of statutory returns - Extended period of limitation for imposition of penalty - Penalty under Rule 27 of the Central Excise Rules, 2002 - Burden of proving intent to evade tax

Saving clause under Section 174(2)(e) of the CGST Act, 2017 - Liability for non-filing of statutory returns - Whether proceedings for non-filing of returns for the period February 2012 to March 2016 could be continued after introduction of GST under the saving provision of Section 174(2)(e). - HELD THAT: - The Tribunal examined Section 174(2)(e) and held that the saving clause permits continuation of only those proceedings which arise out of investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication or other legal proceedings. The Tribunal found that violation consisting of non-filing of returns is not a matter saved by the provision in the present context. Because the show cause notice was issued after the GST regime came into force, continuation under the saving clause was considered permissible only where the proceedings originated from the kinds of actions specifically enumerated in Section 174(2)(e). The Tribunal found no basis in the record to treat the non-filing violation as falling within the saved categories, and therefore the saving provision did not sustain the impugned proceedings in this case. [Paras 6, 7]

Proceedings for non-filing of returns for the period in question could not be continued under Section 174(2)(e) of the CGST Act, 2017.

Extended period of limitation for imposition of penalty - Penalty under Rule 27 of the Central Excise Rules, 2002 - Burden of proving intent to evade tax - Whether the imposition of penalties for non-filing of returns for February 2012 to March 2016 (by show cause notice dated 23.04.2018) was sustainable in view of limitation, absence of invocation of extended period, and absence of findings of intent to evade tax. - HELD THAT: - The Tribunal observed that the show cause notice was issued beyond the period of limitation for the stated period. The adjudicating authorities did not discuss or record the grounds necessary for invoking the extended period of limitation under the applicable law, nor did they find that the appellant had not filed returns with intent to evade payment of duty. The Tribunal noted that invocation of an extended limitation requires satisfaction and recording of specific facts justifying it; such satisfaction is absent in the notice and impugned order. In addition, while Rule 27 prescribes a maximum penalty for contraventions, the record does not show appropriate application of limitation or requisite mens rea to justify the penalties imposed. On these bases the Tribunal concluded that the penalties were unsustainable. [Paras 7, 8]

Penalties imposed by the adjudicating authority are not sustainable as the extended period of limitation was not properly invoked or recorded and there was no finding of intent to evade tax; the penalties are set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming penalties for non-filing of returns for February 2012 to March 2016 is set aside because the proceedings could not be sustained under the saving clause of Section 174(2)(e) and the extended period of limitation was not properly invoked or supported by findings of intent to evade tax.

CENVAT credit admissibility where process does not amount to manufacture - Reversal of CENVAT credit by payment of duty on clearance of inputs/final products - Precedential effect of Tribunal/High Court/Supreme Court decisions on admissibility of credit in non-manufacture cases

CENVAT credit admissibility where process does not amount to manufacture - Reversal of CENVAT credit by payment of duty on clearance of inputs/final products - Precedential effect of Tribunal/High Court/Supreme Court decisions on admissibility of credit in non-manufacture cases - Whether CENVAT credit availed by the appellant is admissible though the process did not amount to manufacture, by reason of duty having been paid on clearance of inputs/final products equal to or exceeding the credit availed - HELD THAT: - The Tribunal examined earlier authoritative decisions of the Tribunal, High Courts and the Supreme Court holding that where the activity undertaken does not amount to manufacture, CENVAT credit is nevertheless admissible if the inputs (or final products) are cleared on payment of duty in an amount equal to or higher than the credit taken, such payment operating as reversal of the credit. The appellant produced evidence that duty was accepted on clearance and relied upon consistent Tribunal and High Court rulings affirming that acceptance of duty on the final product/relevant clearance amount precludes denial of CENVAT credit even if the process is not manufacture. Applying these precedents, the Tribunal concluded that the Commissioner's disallowance of credit (and consequential interest and penalty) was not sustainable where duty paid on clearance effected the reversal of credit; accordingly the impugned order was set aside and the appeal allowed with consequential relief as per law. [Paras 7]

Impugned order disallowing CENVAT credit is set aside; appeal allowed on the ground that payment of duty on clearance equal to or exceeding the credit availed operates as reversal and sustains admissibility of the CENVAT credit.

Final Conclusion: Following consistent Tribunal, High Court and Supreme Court precedents, the appeal is allowed and the Commissioner's order disallowing CENVAT credit (with interest and penalty) is set aside because duty accepted on clearance amounted to reversal of the credit; consequential relief to the appellant to follow as per law.

Secondary packing and its includibility in assessable value - marketability at the factory gate as test for includibility - forwarding/freight charges for onward movement beyond factory gate - exclusion of charges paid at buyer's instance from assessable value - finalization of provisional assessments and confirmation of demand

Secondary packing and its includibility in assessable value - marketability at the factory gate as test for includibility - exclusion of charges paid at buyer's instance from assessable value - Cost of secondary packing is not includible in the assessable value for the period 01.04.1980 to 30.06.2000 where such packing was provided at the instance of the buyers and goods were marketable without it. - HELD THAT: - The Commissioner (Appeals) found on the evidence that a substantial proportion of sales during the material period were effected at the factory gate without secondary packing, demonstrating that the goods were marketable without such packing. The Commissioner further recorded that secondary packing was provided at the behest of purchasers and charged extra, and that, applying the civil standard of preponderance of probabilities, the invoices and purchase orders produced (and admitted practice) establish that secondary packing was not ordinarily necessary for marketability. The appellate authority applied the Supreme Court test that only that degree of packing necessary to put the goods in the condition in which they are ordinarily sold at the factory gate is includible in value; special secondary packing supplied at a buyer's instance must be excluded. On these findings and in view of the cited precedents, the inclusion of secondary packing in assessable value was unsustainable and was set aside. [Paras 18, 19, 20, 21, 24]

Secondary packing costs shall be excluded from the assessable value for 01.04.1980 to 30.06.2000.

Forwarding/freight charges for onward movement beyond factory gate - exclusion of charges paid at buyer's instance from assessable value - Charges described as forwarding or freight for transporting goods from the factory gate to railway booking and for storage are not includible in the assessable value for the period 01.04.1982 to 30.06.2000 where they represent services rendered beyond the factory gate and were separately collected. - HELD THAT: - The Commissioner (Appeals) noted the assessee's consistent position that forwarding charges represented transportation and godown charges for services performed beyond the factory gate, supported by contemporaneous documents, credit notes, and affidavits showing pass-through payment to service providers. The authority found that the uniform sale price at the factory gate and separate recovery of forwarding charges established that these were not part of the price of the goods. Applying the principle that services rendered beyond the point of sale at factory gate cannot be added to assessable value, the inclusion of forwarding charges by the lower authority was held to be erroneous and was set aside. [Paras 22, 23, 24]

Forwarding/freight charges for onward movement beyond the factory gate shall be excluded from the assessable value for 01.04.1982 to 30.06.2000.

Finalization of provisional assessments and confirmation of demand - Finalization of provisional assessments confirming the demand is legally unsustainable and the demand (and interest thereon) is set aside for the period 01.04.1980 to 30.06.2000. - HELD THAT: - The Commissioner (Appeals) examined the manner and evidence on which provisional assessments were finalized after long delays and concluded that the departmental insistence, after 7 to 27 years, on production of invoices in each case overlooked the demonstrable practice and documentary material now produced in appeal. Having held that secondary packing and forwarding charges were not includible, the Commissioner directed re-finalization of assessments excluding those costs and set aside the demand and interest. The Tribunal found these conclusions and the legal principles applied to be sound and declined to interfere. [Paras 19, 24]

Provisional assessments are to be finalized excluding secondary packing and forwarding charges and the confirmed demand (with interest) is set aside for 01.04.1980 to 30.06.2000.

Final Conclusion: Revenue's appeals are dismissed. The Commissioner (Appeals)'s orders are upheld directing re-finalization of assessments for the stated periods excluding secondary packing and forwarding charges, and the confirmed demand and interest are set aside.

Interest on delayed refunds - Commencement of liability under Section 11BB - Deeming provision in the Explanation to Section 11BB - Limitation in refund claims where duty paid under protest - Finality of Tribunal's recorded facts

Finality of Tribunal's recorded facts - Interest on delayed refunds - Whether the refund application dated 07.04.1997 was established by the Tribunal's final order and whether interest was correctly allowed from three months after that date. - HELD THAT: - The Tribunal's final order expressly recorded that the appellant submitted an application for refund on 07.04.1997 and directed payment of refund with interest. The Appellate Tribunal's findings on the date of filing and entitlement were not challenged by Revenue under Section 35C(2) or by appeal to a higher forum; having not availed those remedies, the factual recording in the Tribunal's order stands. In view of the Tribunal's direction and the unchallenged finding that the refund application was filed on 07.04.1997, the Commissioner (Appeals) correctly allowed interest from three months after that date in accordance with the statutory scheme governing interest on belated refunds. [Paras 4]

The Tribunal's finding that the refund application was filed on 07.04.1997 is final for these proceedings and interest was correctly allowed from three months after that date.

Commencement of liability under Section 11BB - Deeming provision in the Explanation to Section 11BB - Limitation in refund claims where duty paid under protest - Whether Section 11BB's interest provisions apply and from which date interest becomes payable, including in the context of claims relating to periods prior to insertion of Section 11BB. - HELD THAT: - The Tribunal and the Appellate Tribunal relied on authoritative decisions (including Ranbaxy and subsequent Supreme Court pronouncements) and Board circulars which interpret Section 11BB to make interest payable where refund is not sanctioned within three months from the date of receipt of the refund application. The Explanation to Section 11BB creates a deeming fiction for orders of appellate authorities but does not alter the commencement point for interest, which is the expiry of three months from receipt of the application. The fact that the refund claim related to an earlier period does not negate the applicability of Section 11BB where the claim was filed and remained unpaid beyond three months; the Tribunal found limitation inapplicable because duty was paid under protest, and directed refund with interest accordingly. Having adopted these precedents and the statutory interpretation, the appellate forum correctly applied Section 11BB. [Paras 4, 5]

Section 11BB applies to interest on delayed refunds from the date immediately after expiry of three months from receipt of the refund application; the Tribunal's application of that principle to the present refund claim was correct.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal's and Commissioner (Appeals)'s orders recording the refund application dated 07.04.1997 and directing payment of refund with interest (computed from three months after filing) are sustained.

Deemed assessment under Section 27 - self-assessment and deemed assessment arising from annual return - reason to believe for reassessment - requirement of cogent material and recorded reasons before reopening assessment - power of higher authority to grant permission for reassessment on satisfaction - limitation to reassess and extended period under Section 29 - rectification under Section 31 and setting aside under Section 32 - quashing of assessment for lapse of limitation

Deemed assessment under Section 27 - self-assessment and deemed assessment arising from annual return - Legal effect of Section 27 and whether the annual return filed by the assessee constituted a deemed assessment for A.Y. 2012-2013. - HELD THAT: - The Court held that Section 27 creates a deeming fiction: an annual return filed in the prescribed time constitutes a deemed assessment order and the facts and figures disclosed therein form part of that assessment. Although a subsequent conscious assessment order will replace the deeming fiction while it subsists, recall of such conscious assessment restores the deemed assessment. In the present facts the petitioner filed the annual return within the extended filing date and, after the specific assessment dated 04.01.2016 was recalled on 01.02.2016, the deemed assessment revived and became absolute on expiry of the period for making a fresh assessment (30.09.2016). Consequently, the assessing authority could not treat the case as one of 'no assessment' after that date. [Paras 35, 36, 37, 38, 39]

The annual return filed for A.Y. 2012-2013 constituted a deemed assessment under Section 27 and, upon lapse of the period to make a regular assessment, that deemed assessment became conclusive.

Reason to believe for reassessment - requirement of cogent material and recorded reasons before reopening assessment - power of higher authority to grant permission for reassessment on satisfaction - limitation to reassess and extended period under Section 29 - Whether the assessing authority and the Additional Commissioner validly assumed jurisdiction to reopen/reassess the petitioner for A.Y. 2012-2013 in the extended period of limitation. - HELD THAT: - The Court reiterated that jurisdiction to reassess under the Act depends on a valid 'reason to believe' supported by cogent, objective material and that such reason must be recorded. The higher authority (Additional Commissioner) may grant permission to reopen only upon being satisfied (on the basis of the assessing authority's recorded reasons or its own reasons), and those reasons must be disclosed to the dealer. In the present case the assessing authority did not point to any material showing falsity, suppression or incorrectness in the annual return, nor did it record any reason to believe that turnover had escaped assessment. The Additional Commissioner granted permission mechanically without proper consideration of recorded reasons or material. As a result, jurisdiction to reassess never arose and the reassessment proceedings were without jurisdiction. [Paras 49, 50, 51, 52, 53]

Reassessment in the extended period was invalid: no cogent material or recorded reasons were produced to form a 'reason to believe', and the Additional Commissioner's permission was granted without the requisite satisfaction.

Rectification under Section 31 and setting aside under Section 32 - quashing of assessment for lapse of limitation - Effect of the coordinate bench's order that quashed the assessment for A.Y. 2012-2013 and whether that order permitted reassessment. - HELD THAT: - The Court examined the coordinate bench's order dated 28.08.2019 which quashed the assessment order for A.Y. 2012-2013 (while taking a different view for A.Y. 2013-2014). The coordinate bench's quashing meant nothing survived for reconsideration in respect of A.Y. 2012-2013. Although a technical distinction exists between regular assessment and reassessment proceedings, that distinction did not validate initiation of reassessment here because the jurisdictional fact (recorded reasons and material to form a reason to believe) was absent. Further, the assessing authority's subsequent rectification did not cure the lack of jurisdiction to initiate reassessment in the extended period. [Paras 54, 55, 56, 57, 58]

The coordinate bench's quashing of the A.Y. 2012-2013 assessment did not sustain a lawful reassessment in absence of jurisdictional material; accordingly the permission and reassessment were nullities.

Final Conclusion: The order dated 30.01.2021 as modified on 08.02.2021 granting permission to reassess and the reassessment order dated 17.03.2021 for A.Y. 2012-2013 (U.P. and Central) are quashed; the writ petition is allowed and the reassessment proceedings are declared without jurisdiction.

Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - notice requirement under the proviso to Section 138 - authorization of company representative by board resolution / constituted attorney - revisional jurisdiction and interference with concurrent findings of fact - framing of points for determination in criminal judgment

Notice requirement under the proviso to Section 138 - receipt of summons as substitute opportunity to make payment - Validity and sufficiency of the demand notice for prosecuting an offence under Section 138 of the N.I. Act - HELD THAT: - The Court held that the statutory purpose of the notice is to give the drawer an opportunity to make payment and that the requirement is to give notice (not necessarily that the payee alone must sign it). The notice was on the company's letterhead and hand-delivered; a consultant who signed it and personally served it (PW-2) was accepted as an officer/agent for that purpose. Even if technical defects in issuance or non-receipt were assumed, the drawer had the subsequent opportunity upon receipt of summons to make payment within 15 days and could not thereafter rely on lack of notice. The Courts below evaluated the handwriting expert and the service evidence and found no perversity in those findings; technical irregularities that were capable of cure do not vitiate the complaint when not utilized by the drawer on receiving summons. The Court declined to upset the concurrent factual findings on notice and service in absence of perversity. [Paras 53, 54, 55, 56, 58]

The notice was sufficient for purposes of Section 138; defects were technical or curable and did not invalidate the complaint.

Authorization of company representative by board resolution / constituted attorney - Section 142 cognizance requirement - Maintainability of the complaint filed by a company through a person described as its constituted attorney when no PoA was produced with the complaint but a board resolution was produced during trial - HELD THAT: - The Court applied settled principles that a company must act through a natural person and that prima facie authorisation and knowledge by the person prosecuting the complaint is sufficient for the Magistrate to take cognizance. The absence of a power of attorney at filing is not fatal where authorization can be and was furnished at trial; procedural defects of this nature are curable. PW-1 was a director and produced a certified copy of the board resolution (dated prior to the complaint) during re-examination, which the Courts below accepted. Allegations of fabrication of the resolution were matters of fact considered by the courts below and not shown to be perverse, and therefore not amenable to interference in revision. [Paras 77, 78, 79, 80, 81]

The complaint was maintainable; subsequent production of the board resolution cured the initial absence of PoA and was rightly accepted by the courts below.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal on preponderance of probabilities - Whether the accused successfully rebutted the statutory presumption under Section 139 of the N.I. Act - HELD THAT: - The Court reiterated that admission of the accused's signature on the cheques invokes the legal presumption under Section 139, shifting the onus to the accused to raise a probable defence on preponderance of probabilities. The material shows the accused ultimately admitted issuance of the cheques and receipt of the advance; his plea that the cheques were given as 'security' or that the transaction was unconnected failed to produce independent material to overthrow the presumption. The Courts below also relied on expert evidence and documentary material; none of those concurrent findings were shown to be perverse. Consequently, the accused did not successfully rebut the presumption. [Paras 87, 88, 92, 93, 94]

The presumption under Section 139 was not rebutted; the accused failed to discharge the onus and the conviction on merits stands.

Revisional jurisdiction and interference with concurrent findings of fact - standard for upsetting concurrent factual findings - Whether the Revisional Court should disturb the concurrent findings of the trial and appellate courts in absence of perversity - HELD THAT: - The Court reiterated that a revisional court will not re-appreciate evidence or disturb concurrent findings of fact unless there is perversity or a jurisdictional error. The judgments below were examined in light of this principle and the relevant authorities; no jurisdictional error or perversity was demonstrated that would justify interference. Although the trial courts could have framed points for determination with greater precision, incorrect framing alone without perversity in the findings does not warrant upsetting the concurrent conclusion on guilt. [Paras 41, 42, 43, 56, 68]

No interference in revisional jurisdiction; concurrent findings upheld in absence of perversity or jurisdictional error.

Final Conclusion: Revision dismissed; concurrent conviction and sentence under Section 138 of the Negotiable Instruments Act upheld. Applicant granted four weeks to surrender; respondent permitted to withdraw amounts deposited in court.