TaxTMI Updates e-Newsletter
Mar 04,2022

Maintainability of writ petition against Show Cause Notice where statutory remedy is available - Adjudication of disputed facts by the Proper Officer - Right to file reply to a Show Cause Notice and opportunity to be heard - Jurisdictional objections to be raised before the adjudicating authority - Instructions appended to GSTR-9 vis-a -vis statutory provisions

Maintainability of writ petition against Show Cause Notice where statutory remedy is available - Instructions appended to GSTR-9 vis-a -vis statutory provisions - Writ petition not entertained at the interlocutory stage where the petitioner has not filed a reply to the Show Cause Notice and statutory remedy before the adjudicating authority is available. - HELD THAT: - The Court held that the petitioner approached the High Court without having filed any reply to the Show Cause Notice and that the contentions raised were essentially disputed factual matters requiring adjudication on evidence and documents before the Proper Officer. The Court referred to the principle in Union of India v. Coastal Container Transporters Association that it is not proper to entertain writ petitions challenging Show Cause Notices where an alternative statutory remedy exists; respondents ought to place material before the issuing authority rather than seek immediate writ relief. The petitioner's contention that instructions to GSTR-9 override statutory provisions was a matter of substance for adjudication and not a ground for pre-emptive writ relief. [Paras 4, 5]

Writ petition not entertained at this stage; petitioner directed to pursue statutory remedy before the Proper Officer.

Adjudication of disputed facts by the Proper Officer - Right to file reply to a Show Cause Notice and opportunity to be heard - Jurisdictional objections to be raised before the adjudicating authority - Disputed factual and jurisdictional contentions remitted to the Proper Officer for adjudication; petitioner granted time to file reply and objections. - HELD THAT: - The Court observed that the impugned notice records determination of tax short paid, interest and penalty but affords an opportunity to rebut; since the petitioner had not filed any reply, the factual disputes and the question of jurisdiction require adjudication by the Proper Officer. The petitioner was permitted to file a reply/objection within 15 days from the date of the order and the Proper Officer was directed to consider each objection and pass a reasoned order. The Court thus remanded the matter for fresh consideration by the adjudicating authority without deciding the merits of the tax, interest or penalty claims. [Paras 3, 6, 7]

Petitioner permitted to file reply within 15 days; matter remitted to Proper Officer to adjudicate objections and pass a reasoned order.

Final Conclusion: Writ petition disposed of without entertaining substantive challenge; petitioner permitted to file reply/objections within 15 days and the Proper Officer directed to decide all objections and pass a reasoned order, the disputed factual and jurisdictional issues being remitted for adjudication.

Revocation of cancellation of registration - failure to furnish returns - condonation of delay - payment of tax, interest, penalty and late fee as condition for revocation - opportunity of being heard - proviso to Rule 23 of the OGST Rules

Condonation of delay - proviso to Rule 23 of the OGST Rules - Delay in filing application for revocation of cancellation of registration under Rule 23 was condoned. - HELD THAT: - The Court noted that the Show Cause Notice alleged non-furnishing of returns for a continuous period of six months and recorded that the petitioner had not responded to the statutory notices. Both parties conceded that delay in invoking the proviso to sub rule (1) of Rule 23 should be condoned. Applying the provisions governing revocation of cancellation and the conditions in Rule 23, the Court exercised its discretion to condone the delay subject to compliance with statutory requirements. The Court therefore directed that the petitioner be permitted to proceed despite the delay, but only on compliance with the conditions specified in the rules and the order. [Paras 3, 7]

Delay in filing the revocation application is condoned, subject to the petitioner complying with statutory requirements.

Revocation of cancellation of registration - failure to furnish returns - payment of tax, interest, penalty and late fee as condition for revocation - opportunity of being heard - Revocation of cancellation was not allowed automatically; the petitioner must comply with statutory conditions and upon such compliance the department will consider revocation afresh. - HELD THAT: - Having quoted Section 30 and the relevant provisos to Rule 23, the Court recorded that where registration is cancelled for failure to furnish returns the proviso requires that returns be furnished and amounts due (tax, interest, penalty and late fee) be paid before an application for revocation is entertained. The petitioner offered to discharge the liabilities and to file the returns. The Court directed the petitioner to deposit all taxes, interest, penalty and late fee and to comply with formalities; upon such compliance the petitioner's application for revocation shall be considered in accordance with law and the department will re open the portal to enable filing of returns. The Court thereby did not decide the merits of revocation but remitted consideration to the authority after mandated compliance and afforded the statutory opportunity of being heard. [Paras 5, 6, 7]

The petitioner must deposit tax, interest, penalty and late fee and furnish returns; on compliance the revocation application shall be considered by the department in accordance with law.

Final Conclusion: Writ petition disposed of by condoning the delay and directing that on the petitioner's payment of all statutory dues and filing of returns the department shall consider the application for revocation of cancellation of registration in accordance with law; portal access shall be opened for compliance.

Bail under Section 439 of the Code of Criminal Procedure - presumption of innocence - pre-trial incarceration and its limit as ground for bail - serious offences under the CGST/IGST regime involving issuance of fake/goods-less invoices and passing of inadmissible Input Tax Credit - recovery and seizure of documents including electronic records - risk of tampering with prosecution evidence and influence on witnesses - cooperation with investigation and conditions on bail - release on bail subject to conditions

Bail under Section 439 of the Code of Criminal Procedure - pre-trial incarceration and its limit as ground for bail - presumption of innocence - serious offences under the CGST/IGST regime involving issuance of fake/goods-less invoices and passing of inadmissible Input Tax Credit - recovery and seizure of documents including electronic records - cooperation with investigation - Petitioners entitled to bail in Complaint No.1/2021 registered by DGGI - HELD THAT: - The Court found that although serious allegations under the CGST and IGST statutes were levelled, conviction would require proof and was likely to take time. The petitioners had been in custody since 21.07.2021 and the investigation qua them had been completed with the complaint filed on 19.09.2021. Recoveries and seizures of documents, including electronic records, had already been effected and no assertion was made that further recoveries remained to be made. The petitioners had cooperated with the investigating agency and no previous criminal history was shown. The Court emphasised the constitutional and criminal law principle of presumption of innocence and that prolonged pretrial incarceration cannot be the norm. The respondent's apprehension that ongoing investigation against other persons might be hampered by release of the petitioners was held to be addressable by imposing appropriate bail conditions rather than by continued detention. On these considerations the petitions for bail were allowed. [Paras 7, 8, 9, 10]

Both petitions allowed and petitioners ordered to be released on bail.

Release on bail subject to conditions - risk of tampering with prosecution evidence and influence on witnesses - cooperation with investigation - Bail granted subject to specified conditions to safeguard investigation and trial - HELD THAT: - The Court imposed conditions to mitigate the risk of tampering with evidence or influencing witnesses and to ensure availability for investigation and trial. The conditions require furnishing personal bonds with sureties, making themselves available for investigation and appearing on every date fixed by the trial court (or seeking exemption for reasons beyond control), refraining from tampering with prosecution evidence or influencing witnesses, surrendering passports (if not already surrendered), and not leaving India without prior permission of the trial court. The Court observed that breach of any condition would entitle the respondent to seek cancellation of bail. [Paras 10]

Bail subject to furnishing bonds and the enumerated conditions; breach entitles respondent to move for cancellation.

Final Conclusion: Petitions allowed; petitioners to be released on bail in Complaint No.1/2021 on furnishing prescribed bonds and subject to enumerated conditions to secure their attendance and protect the integrity of the investigation and trial; observations in the order are confined to bail and shall not affect the merits of the case.

Reopening of assessment - reassessment under section 147 - notice under section 148 - reason to believe - failure to disclose fully and truly all material facts - duty to disclose primary facts - deduction under section 36(1)(viia) - deduction for rural branches - tangible material - change of opinion

Reassessment under section 147 - reason to believe - tangible material - change of opinion - Validity of reopening the assessment for assessment year 2006-07 under section 147/notice under section 148 - HELD THAT: - The Court held that the jurisdictional condition for reopening - a bona fide "reason to believe" that income had escaped assessment - must be founded on tangible material and not on mere suspicion, guess or a change of opinion on the same facts. The AO must record reasons which stand on their own and cannot be supplemented or improved upon by after the fact explanations. In the present case the reasons recorded relied upon the assessee's temporary withdrawal of a claim in later years and a speculative view that the assessee 'might' have misclassified branches; there was no contemporaneous recording that income had escaped due to nondisclosure of material facts nor any tangible material justifying such belief. The reassessment thus amounted to a guess rather than a reasoned belief and was therefore invalid. [Paras 25, 26, 27, 30, 31]

The notice of reopening and consequent proceedings for assessment year 2006-07 were invalid and unsustainable.

Deduction under section 36(1)(viia) - deduction for rural branches - duty to disclose primary facts - failure to disclose fully and truly all material facts - Whether the assessee failed to disclose fully and truly all material facts concerning its claim for deduction under section 36(1)(viia) - HELD THAT: - The Court concluded that the assessee had disclosed primary facts relevant to its claim: it furnished the list of rural branches, supporting documents and RBI licences during the original assessment proceedings, and the AO examined and allowed the deduction not once but twice. The duty of the assessee extends to disclosure of primary facts; drawing inferences (for example, as to whether a place's population exceeded the statutory threshold) is the AO's function. The record showed that census data and other material were available to the AO at the time of original and earlier reassessment, and there was no non disclosure of primary facts that could justify reopening. [Paras 14, 15, 22, 24, 30]

The assessee did not fail to disclose fully and truly all material facts; the reopening cannot be sustained on that ground.

Final Conclusion: The petition is allowed: the notice for reopening and the order rejecting objections are quashed and set aside, the reassessment for assessment year 2006-07 being invalid for want of a reasoned belief supported by tangible material and not amounting to a mere change of opinion.

Section 40A(3) of the Income Tax Act, 1961 - Remand to Assessing Officer for verification - Rule 6DD(j) of the Income Tax Rules, 1962 - Cash payment on bank holiday

Section 40A(3) of the Income Tax Act, 1961 - Remand to Assessing Officer for verification - Validity of the Tribunal's remand to the Assessing Officer to determine applicability of Section 40A(3) to cash payments made towards purchase of land. - HELD THAT: - The Tribunal remitted the matter to the Assessing Officer to enable the assessee to satisfy the AO as to why the cash payments were made and why Section 40A(3) would not apply, noting that the land was reflected as a non current investment and not as an expenditure in the profit and loss account. The High Court observed that the appellant had not placed sale agreements or the sale deeds on record and had not answered questions on existence of an agreement to sell. In these circumstances the Court held that the interest of the appellant remains protected by remand and that the Tribunal's course of directing further enquiry and verification by the AO was justified. The Court declined to interfere with the Tribunal's remand. [Paras 5, 7, 8, 9]

Tribunal's remand to the AO for fresh verification on applicability of Section 40A(3) is upheld; no interference with the Tribunal's order.

Rule 6DD(j) of the Income Tax Rules, 1962 - Cash payment on bank holiday - Whether the immediacy of payment on a Sunday (bank holiday) and reliance on Rule 6DD(j) justified payment in cash was properly established by the appellant. - HELD THAT: - The appellant asserted that cash payments were necessitated because the transaction required closure on a Sunday when banks were closed and sought support from Rule 6DD(j). The Court noted that the appellant failed to place sale deeds or show agreement evidencing the necessity of immediate cash payment. Given the lacunae in the record, the Tribunal directed the AO to consider and determine whether the payments were justified on the ground of bank holiday and whether Rule 6DD(j) (as relied upon) negates disallowance under Section 40A(3). The High Court left this factual and evaluative enquiry to the AO on remand. [Paras 5, 6, 7]

Issue remanded to the AO for determination whether payments in cash were necessitated by bank holiday/immediacy and whether Rule 6DD(j) applies.

Final Conclusion: The appeal is dismissed. The Tribunal's order remitting the question of applicability of Section 40A(3) and the justification for cash payments (including the bank holiday contention under Rule 6DD(j)) to the Assessing Officer is sustained; the AO is to re examine the matter on the points indicated.

Power under Section 144A to issue pre-assessment directions - Binding nature of directions issued under Section 144A - Requirement of opportunity before issuing directions prejudicial to assessee - Rebuttable presumption under Section 132(4A) and Section 292C - Application of preponderance of probability in seizure cases - Assessment under Section 153A and addition under Section 69A

Power under Section 144A to issue pre-assessment directions - Requirement of opportunity before issuing directions prejudicial to assessee - Binding nature of directions issued under Section 144A - Validity of the order passed by the Additional Commissioner under Section 144A and whether it suffered from non-application of mind or required issuance of the specific directions sought by the petitioner. - HELD THAT: - The court analysed Section 144A as empowering the Joint/Additional Commissioner to call for and examine pending assessment records and, if he considers it necessary or expedient having regard to the nature of the case or the amount involved, to issue binding directions to the Assessing Officer, subject to the proviso that no direction prejudicial to the assessee shall be issued without an opportunity to be heard. The power is discretionary and is to be exercised on the basis of objective material available to the officer, though the decision involves the officer's subjective satisfaction. On the facts, the Additional Commissioner reproduced the petition and the investigating officer's report and directed the Assessing Officer to proceed in accordance with law. The court found that the record and objective material (including seizure particulars, packet markings, trust/college papers found with the cash, and deficiencies in the claimant's explanation and documentary support) furnished a sufficient basis for the Additional Commissioner's subjective satisfaction. Disposal of the application under Section 144A does not mandate elaborate reasons; a decision based on the available objective material and resulting subjective satisfaction does not amount to abdication of function or non-application of mind. Consequently, there was no infirmity in rejecting the petitioner's request for the specific directions sought. [Paras 48, 49, 55, 56, 59]

The order dated 25.09.2021 passed under Section 144A does not suffer from non-application of mind and is not liable to be interfered with.

Rebuttable presumption under Section 132(4A) and Section 292C - Application of preponderance of probability in seizure cases - Assessment under Section 153A and addition under Section 69A - Validity of the consequential assessment dated 27.09.2021 under Section 153A making addition under Section 69A on the basis that the seized cash constituted undisclosed income of the assessee. - HELD THAT: - The court examined the material relied upon in the assessment: cash seized with markings tied to the Vellore Parliamentary Constituency, documents relating to the petitioner's trust found with the cash, statements including a claim of ownership by a third person (S. Srinivasan) but without corroborative documentary proof or demonstration of means, and bank conversion records indicating discrepancy between amounts converted and amounts found. The statutory presumption (Sections 132(4A) and 292C) is rebuttable but requires adequate evidence by the person claiming ownership. Applying the preponderance of probability standard, the court found the evidence overwhelmingly indicative that the cash belonged to the petitioner and that the claimant's sworn statement and subsequent Settlement Commission application did not satisfactorily rebut the presumption. The Assessing Officer's reasoning in the assessment, including the inference as to expended cash and non-disclosure in returns, was held to be supported by the material on record. The assessment order was accordingly sustained. [Paras 50, 53, 54, 58, 60]

The assessment order dated 27.09.2021 under Section 153A sustaining addition under Section 69A is supported by the material and does not warrant interference.

Final Conclusion: Both writ petitions challenging the order under Section 144A and the consequential assessment under Section 153A are dismissed; liberty granted to the petitioner to prefer the statutory appeal under Section 246A within 30 days and recovery is stayed for 60 days subject to conditions stated by the court.

Power to transfer cases under Section 127 of the Income Tax Act - requirement of reasonable opportunity of being heard (audi alteram partem) - agreement between transferring and transferee authorities for inter-jurisdictional transfer - recording of reasons for transfer - public interest justification for procedural variation

Power to transfer cases under Section 127 of the Income Tax Act - agreement between transferring and transferee authorities for inter-jurisdictional transfer - recording of reasons for transfer - requirement of reasonable opportunity of being heard (audi alteram partem) - Validity of the transfer order passed under Section 127 where the show cause notice gave a different stated reason and whether there was requisite agreement between authorities and adequate opportunity of being heard. - HELD THAT: - The Court examined Section 127(2)(a) and held that where AOs are not subordinate to the same superior, transfer requires agreement between the superior officers and compliance with the reasonable opportunity and reasons requirements. The record showed correspondence between Bhopal and Hyderabad authorities evidencing concurrence. Although the show cause notice referred to centralization of the PAN and did not reproduce the detailed reasons later recorded in the transfer order, the petitioner's reply (para 2) demonstrated awareness that searches were being conducted against the principal contractors and that consolidation of records was intended. Given that the petitioner knew the real nexus between the petitioner's firm and the principal contractors, the Court found that the requirement of informing the assessee of the grounds of transfer and affording a hearing was satisfied in substance. The Court therefore upheld the transfer as validly made under Section 127 after recording reasons and with inter authority agreement. [Paras 7, 8, 9, 12, 14]

Transfer order under Section 127 was validly made; agreement between authorities existed and the requirement of reasonable opportunity to be heard was satisfied in substance.

Public interest justification for procedural variation - requirement of reasonable opportunity of being heard (audi alteram partem) - Whether public interest (consolidation of records for effective search operations) can justify variance in reasons between show cause notice and final transfer order and dispense with strict compliance with audi alteram partem. - HELD THAT: - The Court reiterated that principles of natural justice are not applied mechanically and must yield to compelling circumstances. Here consolidation of the principal contractors' and subcontractor's records at one place to facilitate effective search operations and curb tax evasion was held to be a compelling public interest factor. In light of the petitioner's knowledge of the search and the nexus with principal contractors, the Court concluded that implied compliance with audi alteram partem was sufficient and public interest justified the transfer despite variance in the descriptive reasons between the notice and the final order. [Paras 9, 10, 11]

Public interest considerations justified the transfer and the audi alteram partem requirement was considered satisfied by implication.

Final Conclusion: Writ petition dismissed; the transfer of the petitioner's case under Section 127 was upheld as valid in view of concurrence between authorities, recorded reasons, petitioner's awareness of the real grounds, and the compelling public interest in consolidating records for effective search operations.

Cancellation of registration under Section 12AA(3) - principles of natural justice - evidentiary value of statements recorded under Section 133A - opportunity to cross-examine witnesses whose statements are relied upon - requirement of evidence to establish money laundering/accommodation entries - genuineness of charitable activities and conformity with trust objects - application of precedent where facts are identical

Cancellation of registration under Section 12AA(3) - principles of natural justice - opportunity to cross-examine witnesses whose statements are relied upon - evidentiary value of statements recorded under Section 133A - Validity of the cancellation of the assessee's registration under Section 12AA(3) in view of reliance on statements and procedural opportunity. - HELD THAT: - The Tribunal found that the Commissioner relied on statements obtained in the course of investigation and did not afford the assessee an opportunity to cross-examine the declarants whose statements were placed on record; cancellation of registration followed without such opportunity. The Tribunal applied the principle that, where adverse action is founded on witnesses' statements, denial of cross-examination is a violation of principles of natural justice and renders the order vitiated. It also noted the legal position that statements recorded under Section 133A do not, by themselves, have conclusive evidentiary value and cannot form the sole basis for additions or cancellation without corroborative material. On facts, no material was produced to show connection between the assessee and the alleged brokers or to establish money laundering by the trust. In these circumstances the Tribunal rightly quashed the cancellation of registration.

Cancellation of registration was quashed as vitiated by non-compliance with natural justice and inadequate evidentiary basis; Tribunal's order upholding relief was affirmed.

Genuineness of charitable activities and conformity with trust objects - requirement of evidence to establish money laundering/accommodation entries - application of precedent where facts are identical - Whether the Commissioner's finding that the trust's activities were non-genuine was sustainable on the record. - HELD THAT: - The Tribunal examined the material and noted that the Commissioner did not impugn the bulk of the trust's charitable activities and accepted that the trust was operating educational institutions and other stated activities. The Tribunal observed that only donations from two parties were questioned and that documentary material (donor list, etc.) and the nature of the trust's operations did not support a finding that activities were broadly non-genuine. The Tribunal also relied on an earlier decision involving identical facts (the Mayapur Dham matter) and relevant authority that non-production of evidence linking the assessee to brokers prevents a finding of money laundering. On this factual foundation, the Tribunal rejected the Commissioner's broad finding of non-genuineness.

The finding that the trust's activities were non-genuine was not sustained for want of evidence; Tribunal's conclusion in favour of the assessee was upheld.

Final Conclusion: The appeal by the revenue is dismissed; the Tribunal's quashing of the cancellation of registration and its acceptance of the assessee's genuineness findings are affirmed.

Custody of seized property pending parallel tax assessment - interplay between Criminal Procedure Code return orders and Income Tax assessment proceedings - power of Income Tax authorities to proceed under search and seizure provisions and to claim undisclosed cash - deposit of seized cash in court custody and its preservation in bank fixed deposit pending assessment

Custody of seized property pending parallel tax assessment - interplay between Criminal Procedure Code return orders and Income Tax assessment proceedings - Validity of the learned Judicial Magistrate's order returning seized cash to the complainant subject to execution of bond and deposit of title deeds when income-tax assessment proceedings under the Income Tax Act were pending against the complainant - HELD THAT: - The Court found that the Income Tax Authority had initiated proceedings under the search and seizure provisions of the Income Tax Act and had recorded the complainant's statement admitting the seized cash as undisclosed income. In that factual matrix, the Magistrate's order of 03.03.2021 directing interim return of the cash to the complainant on conditions was inappropriate because the Income Tax proceedings were subsisting and the Department had not yet completed assessment. The Court noted that the Income Tax department did not formally implead itself in the return petition but that omission did not negate the existence of pending tax proceedings which affect entitlement to custody of the cash. The earlier authority relied upon by the Revenue was distinguished on facts and did not mandate maintaining the Magistrate's return order in the present circumstances.

Order of the learned Judicial Magistrate dated 03.03.2021 returning the cash to the complainant was set aside and the complainant was held not entitled to interim custody of the seized cash while assessment proceedings were pending.

Deposit of seized cash in court custody and its preservation in bank fixed deposit pending assessment - power of Income Tax authorities to proceed under search and seizure provisions and to claim undisclosed cash - Proper disposition of the seized cash pending finalization of the Income Tax assessment and the procedure to secure the property - HELD THAT: - In light of the subsisting Income Tax proceedings and the complainant's admission that the seized amount represented unaccounted income, the Court directed that the cash shall remain in the custody of the learned Judicial Magistrate pending completion of assessment. As a protective measure, the Magistrate was directed to deposit the cash in a nationalized bank as a fixed deposit. The Court recorded that upon completion of the assessment, the Income Tax Authority would be at liberty to approach the Magistrate for release of the portion of the amount found due and recoverable under law.

Seized cash to remain in Magistrate's custody and be deposited in a Nationalized Bank as fixed deposit pending finalization of the Income Tax assessment; Income Tax Authority may seek release of the recoverable portion after assessment.

Final Conclusion: Both petitions disposed: the Magistrate's order directing interim return of the seized cash to the complainant was set aside; the cash shall remain in Magistrate's custody and be preserved as a fixed deposit in a nationalized bank pending completion of the Income Tax assessment, after which the Revenue may seek release of the recoverable portion.

Voidness of transfers during pendency of income tax proceedings under Section 281 - investigation and adjudication by Tax Recovery Officer under Schedule II Rule 11 - priority of secured creditors under Section 26E of the SARFAESI Act and Section 31B of the DRT Act vis a vis tax dues - doctrine of constitutional priority favouring State tax claims

Voidness of transfers during pendency of income tax proceedings under Section 281 - priority of secured creditors under Section 26E of the SARFAESI Act and Section 31B of the DRT Act vis a vis tax dues - doctrine of constitutional priority favouring State tax claims - Whether the mortgage/transfer in favour of the Bank is void or admits priority over Income Tax dues in view of Section 281 and competing priority provisions in special statutes. - HELD THAT: - The Court held that Section 281 of the Income Tax Act unequivocally declares transfers or charges created by an assessee during the pendency of proceedings under the Income Tax Act to be void as against claims in respect of tax. Where such proceedings are pending at the time a mortgage or other transfer is created, Section 281 operates to render that transaction void and, consequently, the question of asserting priority under the SARFAESI Act or DRT Act does not arise. The Court recognised that the SARFAESI Act (Section 26E) and the DRT Act (Section 31B) confer priority on secured creditors, but emphasised that conflicting statutory provisions must be examined in light of the constitutional recognition and public policy underlying tax priority. On the facts as pleaded and averred, the pendency of Income Tax proceedings is determinative; if the mortgage was created during such pendency it is void under Section 281 and cannot be validated by invoking priority provisions of other enactments. The High Court further observed that disputed factual questions about the timing of proceedings, attachment and creation/registration of mortgage cannot be resolved in writ proceedings without investigation and consideration of original documents. [Paras 15, 18, 50]

Section 281 will render transfers made during the pendency of Income Tax proceedings void; priority under SARFAESI/DRT cannot prevail where Section 281 applies and factual determination of pendency is essential.

Investigation and adjudication by Tax Recovery Officer under Schedule II Rule 11 - role of Tax Recovery Officer in adjudicating third party claims to attachments - Whether the Bank may seek adjudication of its claim to enforce the mortgage and, if so, the appropriate forum and procedure. - HELD THAT: - The Court declined to decide the disputed factual questions in the writ petition and directed that the Bank is at liberty to file an appropriate application under Schedule II, Rule 11 of the Income Tax Act. Rule 11 empowers the Tax Recovery Officer to investigate claims or objections to attachment or sale of property and to form an opinion after examining original documents and evidence. If the Tax Recovery Officer finds the charge valid as of the relevant date, he may withdraw the attachment; if he finds the attachment preceded the mortgage, he may confirm it. The High Court therefore remitted the factual adjudication to the Tax Recovery Officer for expeditious investigation and appropriate orders, making clear that the statutory investigatory process - not a writ adjudication on affidavits - is the proper forum for resolving traceability, pendency and priority questions. [Paras 16, 20, 21]

The petitioner Bank is permitted to file an application under Schedule II Rule 11; the Tax Recovery Officer is directed to investigate the claim on original documents and pass appropriate orders expeditiously.

Final Conclusion: Writ petition rejected. The State Bank of India is granted liberty to approach the Tax Recovery Officer under Schedule II Rule 11 of the Income Tax Act for investigation of its claim; the Tax Recovery Officer is directed to examine original documents and evidence and pass appropriate orders expeditiously. No costs.

Re-opening of assessment - Proviso to Section 147 - bar on re-opening after four years unless failure to truly and fully disclose material facts - Assessment completed under Section 143(3) - Failure to truly and fully disclose material facts - Escapement of income - Change of opinion doctrine - Validity of notice issued under Section 148

Proviso to Section 147 - bar on re-opening after four years unless failure to truly and fully disclose material facts - Assessment completed under Section 143(3) - Validity of notice issued under Section 148 - Validity of the notice dated 31st March, 2019 issued under Section 148 to reopen assessment for Assessment Year 2012-13 in view of the proviso to Section 147 where assessment under Section 143(3) had been completed and more than four years had elapsed. - HELD THAT: - The Court examined the material relied upon for re-opening and held that the proviso to Section 147, as then in force, barred re-opening after four years where a Section 143(3) assessment had been completed unless escapement of income resulted from the assessee's failure to truly and fully disclose material facts. The reasons recorded for re-opening were based on the same records and proceedings that were before the original Assessing Officer and had been considered in the original assessment. The jurisdictional Assessing Officer sought to re-open the assessment on a different view of the claim already allowed (largely) in the original assessment. The Court found no fresh material demonstrating non-disclosure of any material fact by the assessee during the original proceedings and concluded that the statutory bar in the proviso prevented valid re-opening under Section 148 in these circumstances.

Notice dated 31st March, 2019 issued under Section 148 to reopen assessment for Assessment Year 2012-13 is invalid and quashed.

Escapement of income - Failure to truly and fully disclose material facts - Change of opinion doctrine - Whether the alleged escapement of income arose from the assessee's failure to disclose material facts, or from a mere change of opinion by the revenue. - HELD THAT: - The Court noted that the contested claim (interest expenditure) had been made by the assessee and was expressly considered in the original assessment order, which allowed the claim except to a limited extent. The reassessment was premised on the jurisdictional Assessing Officer's view that a portion of the interest should have been disallowed - a position not taken in the original assessment. The Court reiterated the settled principle that re-opening based on a mere change of opinion is impermissible. As the record before the revenue contained the same material that was available to the original Assessing Officer and there was no demonstration of nondisclosure of material facts by the assessee, the re-opening amounted to a change of opinion and could not sustain reassessment.

The proposed re-opening was founded on a change of opinion and not on any failure by the assessee to truly and fully disclose material facts; such re-opening is impermissible.

Final Conclusion: Writ petition allowed; the Section 148 notice dated 31st March, 2019 and the order rejecting objections dated 18th October, 2019 in respect of Assessment Year 2012-13 are quashed on the ground that re-opening after four years was barred by the proviso to Section 147 as there was no failure by the assessee to truly and fully disclose material facts and the attempt to reassess represented a mere change of opinion.

Rectification application under Section 154 - statutory limitation under Section 154(8) - grant of TDS credit and deletion of incorrect demand - compliance with CBDT circulars and instructions on rectification timelines

Rectification application under Section 154 - statutory limitation under Section 154(8) - grant of TDS credit and deletion of incorrect demand - compliance with CBDT circulars and instructions on rectification timelines - Rectification application dated 14th May, 2020 for Assessment Year 2018-19 to be disposed of by Respondent within the timeframe accepted by Revenue. - HELD THAT: - The petitioner contended that the Assessing Officer failed to dispose of the rectification application within the limitation prescribed by Section 154(8), resulting in denial of TDS credit and an incorrect demand. Learned counsel for Revenue accepted notice and, on instructions, undertook to dispose of the rectification application within six weeks. The Court accepted the undertaking, noting the petitioner's grievance regarding non-grant of TDS credit and the applicable administrative instructions requiring adherence to prescribed timelines. In view of the undertaking given and accepted, the Court directed disposal in accordance with that undertaking and disposed of the writ petition. [Paras 2, 4, 5]

Respondent to dispose of the petitioner's rectification application in accordance with the undertaking given by Revenue within six weeks; writ petition disposed of.

Final Conclusion: Writ petition disposed of after Court accepted Revenue's undertaking to decide the rectification application dated 14th May, 2020 for AY 2018-19 within six weeks; compliance listed for 12th January, 2022.

Penalty under section 271D - Violation of section 269SS - Specified sum in relation to transfer of immovable property - Strict construction of penal provisions - Onus of proof for levy of penalty

Penalty under section 271D - Violation of section 269SS - Specified sum in relation to transfer of immovable property - Strict construction of penal provisions - Onus of proof for levy of penalty - Whether penalty under section 271D could be levied for alleged receipt of specified sums in cash in contravention of section 269SS. - HELD THAT: - The Tribunal examined whether the seized diary entries established that the assessee accepted specified sums in cash beyond the statutory limit so as to attract penalty under section 271D. The amended definition of "specified sum" in section 269SS (w.e.f. 01-06-2015) is wide enough to include sums receivable in relation to transfer of immovable property, including receipts characterised as income; hence the provision can apply to receipts from sale/bookings. However, penal provisions must be strictly construed and the conditions for levy (acceptance in cash, of specified sums, exceeding the threshold, from a person) must be clearly established. The authorities relied on extrapolating entries in hundreds to larger amounts by reference to a single entry marked "CHQ" which matched a bank deposit; that method may suffice for making an addition on a preponderance of probabilities, but it does not meet the exacting standard required to prove contravention of section 269SS for imposition of penalty. The diary entries lacked names identifying the payors, did not incontrovertibly prove that each entry represented cash receipts or that amounts against each person exceeded the statutory limit, and there was no corroborative material (assets or other documents) to establish the asserted cash receipts in lacs. Consequently, the Revenue failed to bring the assessee squarely within the letter of section 269SS so as to sustain penal liability under section 271D. [Paras 18, 20, 21]

Penalty under section 271D was deleted as the Revenue did not strictly establish violation of section 269SS.

Final Conclusion: Appeal allowed; penalty levied under section 271D for A.Y. 2016-17 deleted as the conditions for penal liability under section 269SS were not strictly established by the Revenue.

Classification of interest receipts as "income from other sources" vis-a -vis "income from business or profession" - dominant-object test for charitable/ non-commercial character of an entity - passive investment of surplus grants and deposit of funds not amounting to business - allowability of depreciation under section 57(ii) read with section 32

Classification of interest receipts as "income from other sources" vis-a -vis "income from business or profession" - dominant-object test for charitable/ non-commercial character of an entity - passive investment of surplus grants and deposit of funds not amounting to business - Interest income earned on deposits of surplus grant funds does not qualify as income from business or profession and is taxable as income from other sources. - HELD THAT: - The assessee is a society formed for promotion of sports and receives government grants. The Tribunal accepted the Assessing Officer's factual findings that none of the memorandum objectives indicate carrying on any business or ancillary commercial activity and that surplus grant funds were deposited with GSFC to earn interest. No material was placed to displace these findings. Rulings were considered which establish that where the dominant object is charitable and receipts or incidental activities (including passive receipt of interest on deposits) further that object, such receipts do not convert the entity's activities into trade, commerce or business. Applying that principle, the Tribunal held that earning interest on parked surplus grant funds is incidental/passive and does not amount to carrying on business; hence the receipts are assessable as "income from other sources." [Paras 6]

Appeal dismissed on this ground; interest income treated as income from other sources.

Allowability of depreciation under section 57(ii) read with section 32 - interaction between head-wise computation and deductions for depreciation - Depreciation claimed against the interest income (assessed under the head "income from other sources") is not allowable. - HELD THAT: - Section 57(ii) permits depreciation under section 32(1) or 32(2) in respect of income chargeable under the head "income from other sources" only where such income is from letting on hire of plant, machinery or furniture. Having held that the assessee's receipts are interest on investments (passive income) and not business income, the claim for depreciation cannot be sustained. The Tribunal distinguished the cited Rakesh Singh precedent as involving depreciation on assets used in a positive business/profession and not applicable where only interest income is assessable under "other sources." The Assessing Officer's and CIT(A)'s conclusions on this statutory point were upheld. [Paras 7]

Claim for depreciation disallowed; appeal dismissed on this ground.

Final Conclusion: The appeal is dismissed: the interest on surplus grant deposits is held to be taxable as income from other sources and the depreciation claimed against that interest is not allowable under section 57(ii) read with section 32.

Deduction under section 54/54F - revised return under section 139(4) - deposit in capital gains account scheme - sub section (4) of section 54/54F - applicability where sale consideration is not utilised - investment in new residential property within prescribed period (one year prior / three years after) - requirement of receipt of entire sale consideration as a pre condition for exemption

Deduction under section 54/54F - revised return under section 139(4) - deposit in capital gains account scheme - requirement of receipt of entire sale consideration as a pre condition for exemption - Whether the assessee was disentitled to claim deduction under section 54/54F for amounts reinvested after the due date of filing the original return but before filing a revised return, because the sale proceeds were not deposited in a capital gains account scheme by the due date. - HELD THAT: - The Tribunal examined the chronology: sale deed dated 02-12-2014, part sale proceeds received on 07-07-2015 and the balance on 12-10-2015, original return filed 31-08-2015 and a revised return under section 139(4) filed 05-11-2015 claiming the deduction. The authorities below disallowed a portion of the claim on the ground that the assessee had not deposited the entire sale proceeds in a capital gains account by the due date of filing the original return and therefore could not utilise amounts received after that date. The Tribunal rejected that approach, holding that where the assessee actually reinvested the sale proceeds in the new residential asset within the statutory periods, the proviso and sub section (4) operate only where the sale consideration is not utilised for purchase or construction. In the present facts significant reinvestment was made out of the amounts received before the original return and the balance was reinvested immediately on receipt (within the three year period applicable to construction/purchase), and therefore the absence of deposit in a capital gains account did not disentitle the assessee to the full deduction. The Tribunal followed precedents construing the statutory scheme to allow investment made within the periods prescribed by section 54/54F and held that receipt of the full sale consideration prior to filing a revised return is not a precondition to claim exemption where the funds are in fact applied to the new asset within the prescribed time. [Paras 12]

Disallowance of Rs. 48,00,572/- made by AO/CIT(A) for want of deposit in capital gains account is set aside and the entire claim of deduction under section 54/54F is allowed.

Sub section (4) of section 54/54F - applicability where sale consideration is not utilised - investment in new residential property within prescribed period (one year prior / three years after) - Whether sub section (4) of section 54/54F applies to cases where the assessee has invested sale consideration in purchase or construction of a residential house within the periods stipulated by the statute. - HELD THAT: - The Tribunal relied on precedents from Karnataka and Madras High Courts and concluded that sub section (4) is attracted only when the sale consideration is not utilised either for purchase or for construction of a residential house. The statutory scheme permits investments in purchase or construction made within one year prior to transfer or within three years thereafter to qualify for exemption; there is no legal requirement that the assessee must first deposit the proceeds in a capital gains account if the proceeds are actually applied to acquisition/construction within the prescribed period. Applying that principle to the facts - where reinvestment occurred within the statutory timeframes - the Tribunal held sub section (4) inapplicable. [Paras 12]

Sub section (4) does not apply where the sale proceeds are invested in the new residential asset within the statutory periods; accordingly the exemption under section 54/54F is not forfeited on that ground.

Final Conclusion: The Tribunal allowed the appeal, set aside the disallowance of Rs. 48,00,572/-, and directed deletion of the addition; the assessee's entire claim of deduction under section 54/54F for Asst.Year 2015-16 is accepted.

Assessment under section 153A - Second Proviso to section 153A / unabated assessments - incriminating material found during search - third party statement recorded under section 132(4) - estimation of undisclosed income based on third party statement - requirement of corroborative seized material - stock reconciliation and unexplained difference in inventory - remand for verification of brought forward depreciation

Assessment under section 153A - Second Proviso to section 153A / unabated assessments - third party statement recorded under section 132(4) - requirement of corroborative seized material - estimation of undisclosed income based on third party statement - Additions made for AYs 2009-10 to 2013-14 based on the statement of Amit Gupta and estimation of undisclosed sales/capital - HELD THAT: - The Tribunal found that assessments for AYs 2009-10 to 2013-14 were unabated on the date of search and therefore fell within the protection of the Second Proviso to section 153A. It reiterated the settled principle that additions in respect of years already finally assessed cannot be sustained under section 153A unless incriminating material relating to those years is found during the search. The impugned additions rested primarily on a statement of a third party (Amit Gupta) recorded during a search of M/s Hari Iron India Ltd., and not on any incriminating document or seized material found in the assessee's own search premises. The Tribunal held that a third party statement in a different search, absent corroborative seized material or any rejection of the assessee's books, does not constitute incriminating material sufficient to estimate and levy additions for the unabated years. Applying these principles, the Tribunal directed deletion of the additions made by the AO for AYs 2009-10 to 2013-14. [Paras 16, 17, 18]

Additions for AYs 2009-10 to 2013-14 based on the third party statement are deleted.

Third party statement recorded under section 132(4) - requirement of corroborative seized material - estimation of undisclosed income based on third party statement - Whether a third party statement recorded in a different search can, by itself, sustain additions in the hands of the assessee for years under assessment - HELD THAT: - The Tribunal examined the content of the third party statement and observed that it did not specifically implicate the assessee as having made unaccounted sales; it described the distributor's practice of selling some goods 'without bill' and receiving commission. The AO had not rejected the assessee's books, nor found any corroborative seized documents in the assessee's search linking the assessee to unrecorded sales. In these circumstances, relying solely on the third party statement to estimate sales and apply profit rates was held impermissible. The Tribunal therefore sustained the principle that third party statements recorded in a different search cannot substitute for incriminating material found in the assessee's search to support additions. [Paras 18]

A third party statement in another search, without corroborative incriminating material, cannot sustain additions against the assessee; such additions are to be deleted.

Stock reconciliation and unexplained difference in inventory - requirement of corroborative seized material - remand for verification of brought forward depreciation - Treatment of addition for difference in stock and suppressed sales in Rathi Bars Limited for AY 2015-16 (difference in stock and suppressed sales of Rs.17,67,071/-) and related inventory additions - HELD THAT: - The AO made additions for excess raw material stock and for income on suppressed sales based on inventory discrepancies recorded at survey/search. The CIT(A) deleted the component attributable to excess raw material (accepted by the Tribunal as deleted) but did not give a clear finding on the component of suppressed sales/income of Rs.17,67,071/-. The Tribunal found lack of clarity in the appellate conclusion on this component and observed that the assessee should be given an opportunity to substantiate its reconciliation and explanations before the appellate authority. Consequently, the Tribunal remanded the issue of Rs.17,67,071/- to the file of the ld. CIT(A) for fresh and clear adjudication after affording the assessee an opportunity of being heard and verifying the reconciliation submitted. [Paras 20, 21, 23]

The component of addition relating to excess raw material is deleted; the addition of Rs.17,67,071/- on account of suppressed sales/stock difference is remanded to the ld. CIT(A) for fresh adjudication and verification.

Assessment under section 153A - requirement of corroborative seized material - Addition of Rs.9,39,813/- in Rathi Special Steels Ltd. for AY 2012-13 based on information received from the Excise Department - HELD THAT: - The Tribunal noted that AY 2012-13 was an unabated assessment year and the addition in question was founded on information received from the Excise Department during assessment proceedings rather than on any incriminating material seized in the assessee's search. In line with the principle that additions for unabated years require incriminating material found during the search, the Tribunal held that such information, standing alone, cannot sustain an addition under section 153A. The addition was therefore directed to be deleted. [Paras 24, 25]

Addition of Rs.9,39,813/- for AY 2012-13 is deleted.

Remand for verification of brought forward depreciation - Claim of brought forward depreciation in Rathi Special Steels Ltd. for AY 2014-15 - HELD THAT: - The assessee claimed brought forward depreciation which the AO did not allow. The Tribunal directed the AO to verify the claim and allow brought forward depreciation in accordance with law after giving the assessee an opportunity to substantiate the figures. The matter was therefore left for verification and decision by the AO [Paras 26]

Claim of brought forward depreciation is remitted for verification and allowance in accordance with law after affording opportunity to the assessee.

Final Conclusion: The Tribunal deleted the additions based on a third party statement for the unabated years (AYs 2009-10 to 2013-14) and directed deletion of specified additions (including the Excise based addition for AY 2012-13). The inventory related component of Rs.17,67,071/- in AY 2015-16 is remanded to the ld. CIT(A) for fresh adjudication; the claim for brought forward depreciation for AY 2014-15 is remitted for verification and decision in accordance with law.

Disallowance under section 14A read with Rule 8D - inapplicability of section 14A read with Rule 8D in the absence of exempt income - appellate authority's power to entertain additional claims without a revised return - assessee liable to tax on true and correct income - capital versus revenue expenditure

Disallowance under section 14A read with Rule 8D - inapplicability of section 14A read with Rule 8D in the absence of exempt income - appellate authority's power to entertain additional claims without a revised return - assessee liable to tax on true and correct income - Whether the CIT(A) was correct in admitting an additional ground in appeal without a revised return and in restricting the disallowance under section 14A r.w. r.8D to Rs. 5,52,505/- where no exempt income was received. - HELD THAT: - The Tribunal upheld the CIT(A)'s admission of the additional ground in appellate proceedings and its decision on merits. It applied the settled principle that an assessee is taxable on true and correct income and that appellate authorities are not barred from entertaining a fresh claim in appeal even if no revised return was filed. On the substantive question, the Tribunal followed binding decisions holding that section 14A read with Rule 8D cannot be applied in the absence of exempt income; where the assessee had not received exempt (dividend) income, the extensive disallowance made by the assessing officer was contrary to law. The CIT(A) therefore rightly restricted the disallowance to the small amount representing demat account maintenance charges, disallowing the assessing officer's larger addition. Having considered the authorities relied upon and the facts, the Tribunal found no infirmity in the CIT(A)'s reasoned order and dismissed the revenue's grounds challenging admission and the substantive restriction of the disallowance. [Paras 7, 8, 9]

The CIT(A)'s admission of the additional ground and restriction of the section 14A r.w. r.8D disallowance to Rs. 5,52,505/- is upheld; revenue grounds 1 to 4 are dismissed.

Capital versus revenue expenditure - pre-bid studies and investment maintenance charges-revenue expenditure - Whether the assessing officer was justified in disallowing Rs. 49,10,545/- as capital in nature when the CIT(A) held the expenditure to be revenue in nature. - HELD THAT: - The Tribunal accepted the CIT(A)'s examination of the nature of the expenses, noting that a majority related to pre-bid studies for road projects undertaken in the course of the assessee's business and that investment maintenance charges had already been disallowed by the assessee in its own computation. The CIT(A)'s conclusion that the expenditures were revenue in nature was supported by the material and did not call for interference. [Paras 10, 11]

The disallowance of Rs. 49,10,545/- by the AO is not sustained; the CIT(A)'s finding that the expenditure was revenue in nature is upheld and the revenue's ground on this point is dismissed.

Final Conclusion: The appeals filed by the revenue are dismissed and the cross objections filed by the assessee are rendered infructuous and dismissed; the CIT(A)'s orders are upheld.

Capital receipt - revenue receipt - carbon credit under Clean Development Mechanism (CDM) - allowability of claim made during assessment proceedings - precedent and stare decisis

Capital receipt - carbon credit under Clean Development Mechanism (CDM) - allowability of claim made during assessment proceedings - precedent and stare decisis - Whether the amount received by the assessee towards carbon credits under CDM is a capital receipt (excludible from total income) despite the claim being raised during assessment proceedings and not in the return of income. - HELD THAT: - The Tribunal examined the assessee's claim that receipts from sale of carbon credits during the year, net of registration expenditure, were capital in nature and therefore not exigible to tax as business income. The Assessing Officer had treated the receipts as business income and the Commissioner (Appeals) confirmed that treatment. The Tribunal found the issue to be squarely covered in favour of the assessee by the decisions of the Hon'ble High Court of Madras and by a coordinate Bench of the Tribunal in the assessee's own case for the subsequent assessment year. Applying the principle of precedent, the Tribunal followed those authorities and accepted that the carbon credit receipt is of capital nature, thereby permitting exclusion from total income notwithstanding that the claim was first made during assessment proceedings. [Paras 3, 4, 5]

The Tribunal allowed the appeal and held that the amount received towards carbon credits under CDM is a capital receipt excludible from total income, following the cited precedents.

Final Conclusion: Appeal allowed; the Tribunal, following binding and persuasive precedents and its coordinate bench decision in the assessee's own case, held the carbon credit receipt to be capital in nature and excluded it from total income for A.Y. 2012-13.

Competence of Directorate of Revenue Intelligence to issue show cause notice under section 28 of the Customs Act - the proper officer for reopening assessment - entrustment of functions under section 6 of the Customs Act - invalidity of proceedings initiated by DRI for want of entrustment - validity of retrospective deeming provision in Section 28(11)

Competence of Directorate of Revenue Intelligence to issue show cause notice under section 28 of the Customs Act - the proper officer for reopening assessment - entrustment of functions under section 6 of the Customs Act - invalidity of proceedings initiated by DRI for want of entrustment - validity of retrospective deeming provision in Section 28(11) - Validity of the show cause notice issued by the Additional Director General, DRI, under section 28 and the legitimacy of consequent adjudication - HELD THAT: - The Tribunal held that Canon India establishes that officers of the DRI are not proper officers under section 2(34) to issue notices under section 28 unless functions under the Customs Act are entrusted to them by the Government under section 6. Although Parliament enacted section 28(11) to deem persons appointed as Customs officers under section 4(1) prior to 6 July 2011 to be proper officers for assessment under section 17 and for purposes of section 28, the Tribunal found that even where persons are so deemed, the statutory concept of 'the proper officer' for issuing a section 28 notice requires that the officer must be the one who made the original assessment (or his successor). In the present case the original assessment was carried out by the assessing officers at the Custom House; ADG DRI did not perform that assessment and therefore lacked jurisdiction to issue the section 28 notice. Separately, because the impugned show cause notice was the culmination of searches, recording of statements and other actions undertaken by DRI under the Customs Act, and there was no entrustment of Customs functions to DRI under section 6 in this matter, those investigatory functions and the SCN are vitiated for want of jurisdiction. While section 28(11) remains on the statute book and its validity has been considered in other courts, it does not confer on DRI officers in this case the status of 'the proper officer' competent to reopen an assessment they did not make; further, lack of entrustment under section 6 independently invalidates DRI's exercise of Customs functions here. [Paras 6, 7, 8, 10, 11]

SCN issued by ADG, DRI, and the adjudication based thereon are invalid; the impugned order is set aside and the appeals are allowed.

Final Conclusion: The impugned adjudication founded on the show cause notice issued by ADG, DRI is quashed because DRI officers were not competent to exercise the functions under the Customs Act in this case; consequential relief granted and appeals allowed.

Authority to issue Show Cause Notice under Section 28 - proper officer - entrustment of functions under Section 6 - operation and scope of Section 28(11) - use of the definite article 'the' in statutory interpretation

Authority to issue Show Cause Notice under Section 28 - proper officer - entrustment of functions under Section 6 - Validity of the Show Cause Notice issued by officers of the DRI demanding differential duty under Section 28. - HELD THAT: - The Tribunal held that the SCN issued by the DRI was without authority and the consequent adjudication could not be sustained. Canon India establishes that DRI is a distinct organisation and that, absent entrustment of functions by the Central Government under Section 6, DRI officers cannot exercise functions conferred on Customs officers under the Customs Act. Further, the power to recover duties under Section 28 is conferred on 'the proper officer' (meaning the officer who assessed and cleared the goods or his successor) and not on any officer of comparable rank from another department. The SCN in this case was not issued by the officer who had undertaken the original assessment or his successor and therefore was invalid; additionally, many actions by DRI in the investigation (which culminated in the SCN) are vitiated for lack of entrustment under Section 6. For these reasons the impugned order based on the DRI-issued SCN cannot be sustained. [Paras 21, 22, 24]

SCN issued by DRI under Section 28 was invalid; impugned adjudication cannot be sustained on that basis.

Operation and scope of Section 28(11) - proper officer - use of the definite article 'the' in statutory interpretation - Whether Section 28(11) validates issuance of the SCN by DRI officers or cures the jurisdictional defect. - HELD THAT: - The Tribunal examined Section 28(11) and related authorities and concluded that even if Section 28(11) designates certain Customs appointees as 'proper officers' for purposes of Section 28, this does not displace the statutory requirement that the demand under Section 28 be issued by 'the proper officer' - i.e., the officer who made the original assessment or his successor. Thus, multiple officers being 'proper officers' does not permit an officer who did not make the assessment (such as the DRI officer in this case) to issue a demand. The Tribunal further noted that Canon India and subsequent decisions require entrustment under Section 6 for DRI to exercise Customs functions; accordingly Section 28(11) does not assist Revenue in these facts and the SCN remains invalid. [Paras 12, 23, 28]

Section 28(11) does not validate the SCN issued by DRI in this case because the demand must be issued by 'the proper officer' who conducted the original assessment; Section 28(11) therefore does not cure the jurisdictional defect.

Final Conclusion: The appeal is allowed; the impugned order confirming demand and imposing penalty, which emanated from a Show Cause Notice issued by DRI under Section 28, is set aside because the SCN was not issued by the officer who had conducted the original assessment (or his successor) and DRI officers lacked entrustment of Customs functions under Section 6.

Jurisdiction of Directorate of Revenue Intelligence - entrustment under Section 6 of the Customs Act, 1962 - invalidity of proceedings initiated by DRI officers - show cause notice issued by Additional Director General, DRI

Jurisdiction of Directorate of Revenue Intelligence - entrustment under Section 6 of the Customs Act, 1962 - invalidity of proceedings initiated by DRI officers - show cause notice issued by Additional Director General, DRI - Proceedings initiated by the Additional Director General of the Directorate of Revenue Intelligence by issuing show cause notice under the Customs Act, 1962 are invalid in the absence of an entrustment under Section 6 of the Customs Act, 1962. - HELD THAT: - The Court applied the principle laid down by the three-Judge Bench in Canon India Private Limited (as cited) that, unless there is an entrustment under Section 6 of the Customs Act, 1962, officers of the Directorate of Revenue Intelligence do not have jurisdiction to exercise the statutory functions entrusted to Customs officers. The notice to show cause dated 30 October 2013 in the present case was issued by the Additional Director General, DRI (Zonal Unit, Ahmedabad). In view of the precedent, the proceedings initiated by that officer under the Customs Act were held to be invalid and incapable of sustaining the appeal brought by the Commissioner of Customs.

The appeal is dismissed because the proceedings initiated by the Additional Director General, DRI, were invalid for want of entrustment under Section 6 of the Customs Act, 1962.

Final Conclusion: The appeal is dismissed on the ground that proceedings commenced by the Additional Director General of the Directorate of Revenue Intelligence were invalid in the absence of an entrustment under Section 6 of the Customs Act, 1962; no opinion expressed on the merits of the tribunal's judgment.

Territorial jurisdiction - exclusive jurisdiction by agreement - jurisdiction of Civil Courts under Section 9 of the Code of Civil Procedure - NCLT jurisdiction for compromise, arrangement or winding up under the LLP Act - registered office and maintenance of books of account at the registered office - supervisory jurisdiction under Article 227 of the Constitution

Territorial jurisdiction - registered office and maintenance of books of account at the registered office - Whether the Courts in Delhi have territorial jurisdiction to try the suit filed by the partner against co-partners of the LLP. - HELD THAT: - The plaint challenges denial of access to the LLP's business accounts and does not aver that the books of account or the LLP's registered office are located in Delhi. The LLP agreement fixes the registered office in Hyderabad and provides that books of account are to be maintained there and not removed without unanimous consent. Given those pleaded facts and the absence of any specific denial that business is carried on in Delhi, the Court held that carrying on business in various places does not, by itself, vest jurisdiction in every forum where the LLP operates. On the pleaded material the cause of action does not arise within the territorial limits of the Delhi Courts and the Courts in Delhi therefore lack territorial jurisdiction to entertain the suit. [Paras 15, 16, 18, 19, 22]

The Delhi Courts lack territorial jurisdiction to try the present suit; jurisdiction lies with the Courts in Hyderabad.

Exclusive jurisdiction by agreement - territorial jurisdiction - Whether an agreement conferring exclusive jurisdiction on the Courts in Delhi can vest jurisdiction when those Courts otherwise lack territorial jurisdiction. - HELD THAT: - The Court applied the settled principle that parties cannot, by agreement, confer jurisdiction on a forum which inherently lacks it. Clause 23 of the LLP Agreement purports to confer exclusive jurisdiction on courts in Delhi, but because the pleaded facts establish the registered office and books at Hyderabad and no cause of action in Delhi, the parties cannot confer jurisdiction on Delhi courts that they do not otherwise possess. Reliance placed on the Supreme Court precedent in Patel Roadways was accepted on this point. [Paras 20, 21, 22]

The clause conferring exclusive jurisdiction on Delhi courts cannot operate to confer jurisdiction where the Courts in Delhi inherently lack territorial jurisdiction.

NCLT jurisdiction for compromise, arrangement or winding up under the LLP Act - jurisdiction of Civil Courts under Section 9 of the Code of Civil Procedure - Whether disputes inter se partners of an LLP such as denial of access to business accounts must be adjudicated exclusively by the NCLT. - HELD THAT: - The Court rejected the submission that NCLT is the exclusive forum for all inter se LLP disputes. Sections 60-63 of the LLP Act (dealing with compromise, arrangement, reconstruction and winding up) vest specific jurisdiction in the NCLT, but the present dispute does not fall within those provisions. There is no provision comparable to Section 430 of the Companies Act barring civil courts. In terms of Section 9 CPC, civil courts retain jurisdiction to try suits of a civil nature except where expressly or impliedly barred. Therefore, a partner aggrieved by denial of access to business accounts may seek a remedy by filing a commercial suit under the Commercial Courts Act. [Paras 23, 24]

The dispute is not exclusively within the jurisdiction of the NCLT; the Civil/Commercial Courts are competent to try the suit.

Supervisory jurisdiction under Article 227 of the Constitution - Whether the High Court should interfere with the Commercial Court's dismissal of the defendants' jurisdictional objection. - HELD THAT: - On review of the plaint and the Commercial Court's reasoning, the High Court found that the Commercial Court failed to appreciate that the plaint did not plead a cause of action within the territorial limits of Delhi and wrongly treated the jurisdictional averments as admitted. Exercising Article 227 supervisory jurisdiction, the High Court concluded that interference was warranted. [Paras 25, 26]

The impugned order is set aside and the plaint is returned for filing in the appropriate court.

Final Conclusion: The petition is allowed: the High Court set aside the Commercial Court's order dismissing the jurisdictional plea, held that Delhi Courts lack territorial jurisdiction over this inter se LLP dispute (which is to be tried by courts in Hyderabad), rejected the contention that NCLT has exclusive jurisdiction over the dispute, and directed return of the plaint to the plaintiff for filing in the appropriate forum.

Maintainability of appeal - person aggrieved - locus to appeal - power to direct Serious Fraud Investigation Office investigation - error apparent on the face of the record - rectification of mistake under Section 420(2)

Maintainability of appeal - person aggrieved - locus to appeal - Whether the Registrar of Companies, Kerala was a proper and competent person to prefer the Company Appeal against the Tribunal order directing investigation by SFIO. - HELD THAT: - The Appellate Tribunal held that Section 421(1) confers a right of appeal only on a person who has suffered a legal grievance and that, in the context of an order directing investigation by the Serious Fraud Investigation Office, the primary aggrieved party is the Central Government/Union of India (through SFIO). The Registrar of Companies, Kerala, though a party in interest, did not represent the statutory authority empowered to sanction or contest an SFIO investigation and therefore lacked the requisite locus to impugn the impugned order. The Tribunal noted prior authority and statutory scheme indicating that initiation or assignment of SFIO investigations is within the domain of the Central Government and that where the principal grievance concerns absence of notice to that authority, it is for that authority to challenge the order. Viewed accordingly, the appeal by the Registrar was held to be not maintainable and otiose. [Paras 18, 25, 26, 27]

The appeal by the Registrar of Companies, Kerala is not maintainable for want of locus and is dismissed.

Power to direct Serious Fraud Investigation Office investigation - error apparent on the face of the record - rectification of mistake under Section 420(2) - Whether the National Company Law Tribunal could be faulted for directing SFIO investigation without following the procedure involving the Central Government and whether any error apparent on the face of the record justified interference by this Appellate Tribunal. - HELD THAT: - The Tribunal observed the settled position that assignment of an SFIO investigation implicates the Central Government's sanction and procedure under the Companies Act and that an adjudicating authority cannot simply mandate an SFIO probe without regard to those provisions. However, since the Central Government/SFIO had not itself appealed, and the Registrar (appellant) lacked the necessary status as the aggrieved party in relation to an SFIO direction, this Appellate Tribunal refrained from adjudicating the correctness of the Tribunal's order on merits. The Court further recalled the concept of an 'error apparent on the face of the record' as a limited ground for remedy and indicated that rectification powers under Section 420(2) are confined to apparent mistakes, not to substitute for the appeal which the proper aggrieved authority must pursue. [Paras 18, 20, 21, 23, 24]

No interference with the impugned Tribunal order on merits; the question of propriety of directing SFIO investigation remains for the appropriate aggrieved authority (Central Government/SFIO) to challenge.

Final Conclusion: The Company Appeal filed by the Registrar of Companies, Kerala was dismissed as not maintainable for want of locus; the Central Government (Union of India through SFIO), being the appropriate aggrieved authority in relation to an SFIO investigation direction, may challenge the impugned order before the competent forum if it so chooses.

Limitation under the Limitation Act - Acknowledgement extending limitation under Section 18 - Effect of the notation "Without Prejudice" on admissions/acknowledgements - Judgment/decree as giving rise to a fresh cause of action extending limitation - Assignment of debt and status as a financial creditor - Maintainability of an application under Section 7 of the IBC

Limitation under the Limitation Act - Acknowledgement extending limitation under Section 18 - Effect of the notation "Without Prejudice" on admissions/acknowledgements - Judgment/decree as giving rise to a fresh cause of action extending limitation - Whether the Section 7 application filed by ARCIL was within limitation having regard to acknowledgements in the corporate debtor's balance sheets, communications marked "Without Prejudice", the DRT judgment and other acts relied upon to extend limitation. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's reasoning that multiple instruments and events operated to extend the period of limitation. The corporate debtor's balance sheet for FY 2011-12 (signed 3.9.2012) and for FY 2012-13 (signed 4.9.2013) were held to constitute acknowledgements sufficient under Section 18 of the Limitation Act to extend limitation from the date the account became NPA. The DRT's judgment dated 29.4.2016 was held to create a fresh cause of action for the financial creditor, thereby giving rise to a fresh three-year limitation period from that judgment. The Tribunal considered the two letters dated 3.7.2018 and 11.8.2018, despite bearing the notation "Without Prejudice", and followed the view that the mere use of those words did not negate the clear admission of liability where the content of the communications expressly acknowledged the debt and proposed payment; accordingly the letter of 11.8.2018 was found to further extend limitation to 10.8.2021. Applying these extensions cumulatively, the Section 7 application filed on 28.7.2021 fell within the extended limitation period. The Tribunal distinguished authorities relied upon by the appellant as not controlling on the facts where the communications did not merely record settlement negotiations but contained explicit acknowledgement and undertaking to pay, and thus the Adjudicating Authority's conclusion on limitation was upheld. [Paras 22, 23, 24, 25, 26]

The Section 7 application was within limitation by reason of acknowledgements in the balance sheets, the DRT judgment creating a fresh cause of action, and the communications (notwithstanding the words "Without Prejudice") acknowledging liability; the Adjudicating Authority correctly held the application to be time barred.

Assignment of debt and status as a financial creditor - Maintainability of an application under Section 7 of the IBC - Whether ARCIL, having taken a deed of assignment from Bank of Baroda, qualifies as a financial creditor entitled to file a Section 7 application under the IBC. - HELD THAT: - The Tribunal noted that by a valid deed of assignment dated 13.3.2013 the debt of the corporate debtor stood assigned by Bank of Baroda to ARCIL. Under the definition of "financial creditor" in the IBC a person to whom a financial debt has been legally assigned is included. On the admitted facts that Bank of Baroda was a financial creditor and validly assigned the debt, ARCIL was held to have stepped into the shoes of the bank and to be a financial creditor entitled to maintain a Section 7 application. [Paras 27]

ARCIL is a financial creditor by virtue of the valid deed of assignment and therefore entitled to file the Section 7 application.

Final Conclusion: The Adjudicating Authority's order admitting the Section 7 petition and initiating CIRP was correct on limitation and on maintainability; the appeal is dismissed and the impugned order is upheld.

Fraudulent or malicious initiation of proceedings - Section 65 - penalty and jurisdiction to inquire into collusive or fraudulent initiation - Corporate Insolvency Resolution Process (CIRP) - Admission under Section 7 - existence of debt and default and completeness of application - Objective of the Code to revive and protect the corporate debtor - Remand for fresh consideration

Fraudulent or malicious initiation of proceedings - Section 65 - penalty and jurisdiction to inquire into collusive or fraudulent initiation - Remand for fresh consideration - IA No. 300 of 2018 filed by the Corporate Debtor under Section 65 alleging fraud/collusion by BMW group was not finally adjudicated by the Adjudicating Authority and requires fresh consideration. - HELD THAT: - The Tribunal found that the Adjudicating Authority dismissed IA No. 300 of 2018 merely on the narrow ground that BMW India Pvt. Ltd. (R2) was not a party to the main petition, without examining the substantive allegations of collusion, territory infringement and related conduct relied upon to invoke Section 65. The Tribunal noted binding authority that the adjudicating forum has jurisdiction to inquire into allegations of fraudulent or collusive initiation of CIRP under Section 65 and that such enquiries may warrant refusal to admit or other appropriate orders where visible signs of fraud exist. Observing that the Adjudicating Authority did not go into the merits of the IA and given the seriousness of the allegations of group-company conduct which, if established, may fall within the mischief of Section 65, the Tribunal set aside the limited finding recorded in paragraph 18.2 of the impugned order and remanded IA No. 300 of 2018 to the Adjudicating Authority for detailed consideration after giving all parties a reasonable opportunity to be heard. The Tribunal expressly refrained from commenting on the merits of the allegations.

IA No. 300 of 2018 is remanded to the Adjudicating Authority for fresh consideration on merits under Section 65; paragraph 18.2 of the impugned order is set aside.

Admission under Section 7 - existence of debt and default and completeness of application - Corporate Insolvency Resolution Process (CIRP) - Objective of the Code to revive and protect the corporate debtor - Whether the Adjudicating Authority rightly admitted the Section 7 petition filed by the Financial Creditor and initiated CIRP. - HELD THAT: - The Tribunal recorded that the Adjudicating Authority had examined the material placed before it - including loan agreements, facility utilizations, statements of account and communications - and was satisfied about the existence of financial facilities, that the debt exceeded the statutory threshold, that default had occurred on specified dates and that the insolvency application was filed within limitation and was complete for the purposes of initiation under Section 7. The Tribunal observed the Financial Creditor had demonstrated default and compliance with mandatory requirements for admission, and that objections raised by the Corporate Debtor pertained largely to commercial disputes with other group companies rather than to the completeness of the Section 7 filing. The Tribunal declined to reopen the admission on merits and did not interfere with the Adjudicating Authority's finding of satisfaction of the Section 7 parameters.

The admission of the Section 7 petition and initiation of CIRP by the Adjudicating Authority is not interfered with by this Tribunal.

Final Conclusion: The appeal is disposed of by remanding IA No. 300 of 2018 to the Adjudicating Authority for fresh consideration of the allegations of fraudulent or collusive initiation under Section 65, while leaving intact the Adjudicating Authority's satisfaction and admission of the Section 7 petition initiating CIRP; no costs.

Financial Creditor - Operational Creditor - Admission of claim after public announcement and inclusion in CoC from date of admission - Time bound CIRP and preservation of value of assets - Effect of Resolution Applicant's undertaking on prejudice to creditor

Financial Creditor - Operational Creditor - Effect of Resolution Applicant's undertaking on prejudice to creditor - The question whether the Applicant is a Financial Creditor or an Operational Creditor did not require determination and the application was disposed of as infructuous because the claim had been considered and the Resolution Applicant gave an undertaking to pay the Applicant on par with other financial creditors under the Resolution Plan. - HELD THAT: - The Tribunal recorded that the Applicant's claim had been considered by the Resolution Applicant and that the Resolution Applicant furnished a letter dated 05.02.2021 undertaking to pay the Applicant as per the proportionate ratio applicable to other financial creditors under the Resolution Plan. On that footing the Tribunal held that the substantive controversy as to classification of the Applicant as a financial or operational creditor did not arise for adjudication at this stage and that no prejudice would be caused to the Applicant because payments to it would be made in terms of the undertaking and the contingencies fund referred to in the letter. In view of these developments the application seeking adjudication of the creditor classification and related reliefs was rendered infructuous and was dismissed accordingly. [Paras 13, 14]

Application dismissed as infructuous since the claim was considered and the Resolution Applicant undertook to pay the Applicant on the same proportionate basis as other financial creditors under the Resolution Plan.

Admission of claim after public announcement and inclusion in CoC from date of admission - Time bound CIRP and preservation of value of assets - The Tribunal noted, but did not grant the relief sought on the ground of delayed filing, that regulation permits late claim submission and that entertaining belated claims may jeopardize CIRP; nonetheless, in the present facts the application was disposed of as infructuous in view of the Resolution Applicant's undertaking. - HELD THAT: - The Tribunal recorded the Respondent's contention that the Applicant filed its proof of claim after the last date in the public announcement and that Regulation 12 contemplates submission of claims within the prescribed period and inclusion of financial creditors in the CoC from the date of admission. The Tribunal also noted the objection that belated claims, if entertained, could jeopardize the CIRP and referenced the need for time bound resolution to maximize asset value. However, because the Resolution Applicant had already factored the Applicant's claim into the Resolution Plan and had undertaken to make payments on the same basis as other financial creditors, the Tribunal did not proceed to decide or grant relief on the ground of delay and instead dismissed the application as infructuous. [Paras 9, 10, 12, 13, 14]

Although delay and the risk to CIRP from belated claims were noted, no adverse order was passed on that ground because the Resolution Applicant's consideration of the claim and its undertaking made adjudication unnecessary; application dismissed as infructuous.

Final Conclusion: The application was dismissed as infructuous because the Resolution Applicant had considered the Applicant's claim and furnished an undertaking to pay the Applicant on the same proportionate basis as other financial creditors under the Resolution Plan, thereby obviating the need to decide the contested classification of the Applicant as a financial or operational creditor.

Material irregularity in conduct of CIRP - compliance with Regulation 35 (fair value and liquidation value) and Rule 8 (Registered Valuers) - publication of Form G under Regulation 36A - commercial wisdom of the Committee of Creditors and its limited judicial review under Sections 30(2) and 61(3) of the IBC - requirement that a resolution plan as approved by CoC must be the plan placed before Adjudicating Authority under Section 31 - Section 88, Indian Trusts Act - advantage gained by fiduciary - effect of Related Party status on entitlement to payment under an approved resolution plan - disqualification of a person under Section 164(2)(b) of the Companies Act and its consequence under Section 29A(e) of the IBC

Compliance with Regulation 35 (fair value and liquidation value) and Rule 8 (Registered Valuers) - material irregularity in conduct of CIRP - Validity of the valuation exercise relied upon by the CoC and RP under Regulation 35 and Rule 8 - HELD THAT: - The Tribunal held that the valuation process was tainted by statutory non compliance: the two registered valuers did not physically verify assets as mandated by Regulation 35(1)(a), the non core assets were not valued by the two valuers as required, detailed valuation reports with disclosures under Rule 8 were not furnished to enable verification, and reliance upon 'naked values' without an adjunct report materially handicapped the CoC's exercise of commercial wisdom. The Adjudicating Authority's contrary view treating such requirements as directory was rejected: statutory requirements governing valuation and the contents of valuation reports are mandatory and their breach constitutes a material irregularity in the CIRP. [Paras 77, 81, 86, 176, 177]

Valuation process did not comply with Regulation 35 and Rule 8 and amounted to a material irregularity vitiating the CIRP process.

Publication of Form G under Regulation 36A - material irregularity in conduct of CIRP - Whether failure to publish Form G on the corporate debtor's and IBBI's website as required by Regulation 36A(2)(ii)-(iii) is a material irregularity - HELD THAT: - The Tribunal found that Form G was not published on the corporate debtor's website nor on the website designated by the Board and was limited to newspaper publication. Regulation 36A(2) mandates publication on specified platforms to attract prospective resolution applicants; non compliance, especially during the COVID 19 period, impeded adequate publicity and thereby affected maximisation of value. The Adjudicating Authority's dismissal of this non compliance as not grave enough was held to be erroneous. [Paras 90, 93, 179]

Non publication of Form G as prescribed by Regulation 36A constituted a material irregularity in the exercise of powers by the Resolution Professional.

Requirement that a resolution plan as approved by CoC must be the plan placed before Adjudicating Authority under Section 31 - commercial wisdom of the Committee of Creditors and its limited judicial review under Sections 30(2) and 61(3) of the IBC - Whether the revised resolution plan dated 25.01.2021 was approved by the CoC before being filed before the Adjudicating Authority and the legal consequence - HELD THAT: - The Tribunal examined the 9th CoC minutes and found that while a plan was discussed on 22.01.2021, the CoC directed the RA to revise the plan and did not finally approve the revised plan dated 25.01.2021. Filing the revised plan before the Adjudicating Authority without fresh approval of the CoC violated Sections 30(2), 30(4), 30(6) and 31. The Tribunal held that approval of a plan by the Adjudicating Authority presupposes that the CoC has approved that very plan; presenting a materially revised plan without CoC approval is a material irregularity going to the root of the process. [Paras 129, 130, 131, 181]

The revised resolution plan was not approved by the CoC before being placed before the Adjudicating Authority; that procedural failure vitiated the approval and rendered the plan void ab initio.

Section 88, Indian Trusts Act - advantage gained by fiduciary - disqualification of a person under Section 164(2)(b) of the Companies Act and its consequence under Section 29A(e) of the IBC - Legality of the second respondent acting as Resolution Applicant where he was founder/managing trustee of a trust declared ineligible and whether he was disqualified as a director under Companies Act such as to attract ineligibility under Section 29A(e) - HELD THAT: - The Tribunal held that facts showed that the second respondent was founder and managing trustee of a trust which appeared in the provisional list of prospective resolution applicants and was declared ineligible; suppression of that material fact and competing with the trust engages Section 88 of the Indian Trusts Act since a fiduciary advantage cannot be appropriated and must be held for the trust. Separately, on the evidence relating to 'share application money pending allotment' in an associated company, the Tribunal found that the second respondent could be disqualified under Section 164(2)(b) of the Companies Act and thus ineligible under Section 29A(e) of the IBC. The Resolution Professional's verification was found insufficient. [Paras 12, 114, 115, 126, 180]

Second respondent's conduct engaged Section 88 of the Trusts Act and the material indicated disqualification under Section 164(2)(b); consequently his eligibility as a Resolution Applicant under Section 29A was vitiated.

Effect of Related Party status on entitlement to payment under an approved resolution plan - commercial wisdom of the Committee of Creditors and its limited judicial review under Sections 30(2) and 61(3) of the IBC - Whether an admitted claim of a related party financial/operational creditor can be denied payment under the approved resolution plan solely because of related party status - HELD THAT: - The Tribunal analysed statutory scheme and precedent: while the Code treats related parties as a distinct category for limited purposes (exclusion from CoC, ineligibility as resolution applicants), it does not automatically relegate related party admitted claims to absolute exclusion from distribution under a resolution plan. The Tribunal held that related parties cannot be arbitrarily or solely excluded from payment; any classification must have an intelligible nexus with the object sought to be achieved and respect the waterfall/prioritisation under Section 53. On the facts, the CoC's decision to provide nil to related parties without recorded reasoning and balancing of stakeholders was impermissible. [Paras 151, 158, 162, 182, 184]

Related party financial/operational creditors cannot be denied payment under a resolution plan solely because of their related party status; the approved plan contravened Section 30(2) in this respect.

Final Conclusion: Appeals allowed. The Tribunal set aside the Adjudicating Authority's order approving the Resolution Plan dated 15.07.2021, holding that material irregularities (defective valuation process, non publication of Form G, filing of a revised plan without fresh CoC approval, and concealment/eligibility issues relating to the successful applicant) vitiated the CIRP and approval. The matter is remitted for fresh continuation of CIRP: the Resolution Professional is directed to re commence from publication of Form G, to place the promoters' settlement proposal before the CoC and act in accordance with the Code and Regulations; the Tribunal declared that related party creditors cannot be discriminated against solely on account of related party status. Time consumed in the appeal may be excluded for CIRP computation. No order as to costs.

Handover of possession to the Liquidator - Production and delivery of books of accounts including electronic Tally data - Identification of designated person under the Pharmacy Act/Drugs Rules to maintain going concern - Police assistance to the Liquidator to prevent obstruction - Enforcement measures for non-compliance and criminal action against obstructors - Performance of duties by the Liquidator under the Code

Handover of possession to the Liquidator - Ex Directors/respondents ordered to hand over possession of the corporate debtor's movable and immovable assets to the Liquidator. - HELD THAT: - The Tribunal found that earlier directions to hand over specified immovable properties, motor vehicles and plant & machinery had not been complied with and, in view of persistent obstruction by the suspended Board and others, directed immediate surrender of possession of the listed assets to the Liquidator so that the liquidation process may proceed. The assets to be handed over were enumerated in the order and the direction is final and coercive to secure compliance with the liquidation order. [Paras 8]

Respondents shall immediately hand over peaceful possession of the enumerated immovable properties, motor vehicles and plant & machinery to the Liquidator.

Production and delivery of books of accounts including electronic Tally data - Respondents directed to deliver all books of accounts, including Tally data, at the factory premises for the Liquidator's custody and use in liquidation. - HELD THAT: - The Tribunal recorded repeated non compliance with earlier directions to provide accounts and documents. To facilitate the liquidation, it ordered delivery, storage and availability of books of account (sales register, purchase register, journal, ledgers, cash book and Tally files) at the factory premises so that the Liquidator can verify and use them in the liquidation process. The order emphasises availability of electronic Tally data at the premises. [Paras 9]

All books of accounts, including Tally format data, shall be handed over, stored and made available at the factory premises to the Liquidator.

Identification of designated person under the Pharmacy Act/Drugs Rules to maintain going concern - A responsible person under the Pharmacy Act/Drugs Rules to be identified and directed to cooperate with the Liquidator to maintain the corporate debtor as a going concern. - HELD THAT: - Recognising the need to keep the pharmaceutical company operational during liquidation, the Tribunal required identification of the person designated under the Pharmacy Act, 1948 or the Drugs and Cosmetics Rules, 1945 (or any relevant Act) who is responsible for running the company, and directed that such person be directed to cooperate with the Liquidator to ensure continuing operations as a going concern. [Paras 10]

The designated responsible person under applicable pharmacy/drug regulations shall be identified and directed to cooperate with the Liquidator to maintain operations.

Police assistance to the Liquidator to prevent obstruction - Enforcement measures for non-compliance and criminal action against obstructors - Deputy Commissioner, Parnashree Police Station directed to provide police assistance to the Liquidator and to take appropriate legal action against persons causing obstruction, with the Liquidator authorised to lodge FIRs. - HELD THAT: - Given the reported obstruction to the Liquidator's lawful exercise of duties, the Tribunal directed local police to provide necessary assistance to the Liquidator (an officer of the court) under the statutory scheme, instructed that no hindrance be permitted, and authorised the Liquidator to lodge FIRs against miscreants. The Tribunal made clear that failure to comply with its directions will attract appropriate action by the Authority and that police shall take legal action under the Indian Penal Code where warranted. [Paras 11]

Police at Parnashree shall provide necessary assistance to the Liquidator, prevent obstruction, and take legal action on FIRs lodged by the Liquidator against obstructors.

Performance of duties by the Liquidator under the Code - The Liquidator directed to perform duties as per the Code; IA No. 604/KB/2021 disposed and the matter listed for progress report. - HELD THAT: - The Tribunal reiterated that the Liquidator is to discharge statutory duties under the Insolvency and Bankruptcy Code, required that a copy of the order be forwarded to police in advance to arrange assistance, disposed of the petition IA No. 604/KB/2021 with the stated directions, and listed the matter for filing of a progress report on the specified date to monitor compliance and progress of liquidation. [Paras 12, 13, 14]

Liquidator shall perform duties as per the Code; IA disposed with the directions given and the matter listed for progress report on the specified date.

Final Conclusion: The Tribunal found repeated non compliance by the suspended Board and therefore issued coercive and supervisory directions: immediate handover of specified assets and books (including Tally data) to the Liquidator, identification and cooperation of the regulatory responsible person to preserve the business as a going concern, police assistance to prevent obstruction and permit filing of FIRs against miscreants, directed the Liquidator to perform statutory duties, disposed of IA No. 604/KB/2021 in terms of these directions and listed the matter for a progress report.

Powers under Section 50 of the Prevention of Money Laundering Act - Article 20(3) right against self incrimination - proceedings under Section 50 deemed judicial proceeding for purposes of IPC Sections 193 and 228 - PMLA as a special complete code overriding general criminal law - entitlement to copy of investigative record prior to investigative summons (ECIR vis a vis FIR)

Powers under Section 50 of the Prevention of Money Laundering Act - proceedings under Section 50 deemed judicial proceeding for purposes of IPC Sections 193 and 228 - Validity and effect of summons issued under Section 50 PMLA and authority of Enforcement Directorate to summon persons and compel production of documents during investigation. - HELD THAT: - The Court held that Section 50 PMLA vests the Director and designated officers with express power to summon any person, enforce attendance, examine on oath, and compel production of records during the course of an investigation. Sub sections (2) to (4) make such proceedings subject to penal consequences by deeming them judicial proceedings within the meaning of Sections 193 and 228 IPC. Applying these provisions and relevant precedents, the Court found that the respondents acted within jurisdiction in issuing the impugned summons and that there is no material to infer that issuance of summons has caused prejudice to the petitioners or amounted to illegality or coercion beyond statutory authority. [Paras 8, 9, 19]

The summons issued under Section 50 PMLA are valid and were lawfully issued by the Enforcement Directorate; no illegality is made out in issuance or in compelling attendance and production of documents.

Article 20(3) right against self incrimination - entitlement to copy of investigative record prior to investigative summons (ECIR vis a vis FIR) - PMLA as a special complete code overriding general criminal law - Whether the petitioners were entitled, as of right, to be furnished a copy of the ECIR before complying with summons under Section 50, and whether absence of such supply violated Article 20(3) or principles of fair trial. - HELD THAT: - The Court examined the contention that ECIR is akin to an FIR and that supply of ECIR is prerequisite to protect Article 20(3) rights and for fair response. Noting that PMLA is a special code with its own investigative machinery and that Section 50 does not mandate prior supply of the ECIR, the Court relied on statutory text and authoritative decisions distinguishing investigatory summons from accused's trial rights. The Court observed that determination of a person's status as 'accused' for trial stage disclosure arises only after enquiry and decision to prosecute; therefore the stage for furnishing relied upon documents ordinarily arises after such decision. On these foundations the Court concluded that no legal right to pre summons supply of the ECIR was established and that mere issuance of summons under Section 50 does not, by itself, violate Article 20(3). [Paras 10, 16, 21, 22, 26]

Petitioners are not entitled, as of right, to a copy of the ECIR prior to appearing pursuant to a Section 50 summons; non supply of ECIR at that stage did not constitute a violation of Article 20(3) or render the summons illegal.

Final Conclusion: Writ petitions dismissed; summons under Section 50 PMLA upheld as valid and there is no legal requirement to furnish a copy of the ECIR prior to compliance with investigatory summons; petitions devoid of merit and dismissed with pending applications.

Abuse of process - prosecution under the Prevention of Money Laundering Act - proceeds of crime - attachment under the PMLA - no liability where company is a victim and account opened by fraudster without authority - mens rea in money laundering offences (knowledge and control over funds)

Prosecution under the Prevention of Money Laundering Act - no liability where company is a victim and account opened by fraudster without authority - mens rea in money laundering offences (knowledge and control over funds) - Quashment of prosecution of VMT Spinning Mills India Pvt. Ltd. under Sections 3 and 4 of the PML Act on the ground that it is an abuse of process - HELD THAT: - The complaint itself discloses that the bank account in which the sum alleged to be "proceeds of crime" was found had been opened by G. Srinivasan by submitting fabricated board resolutions and used by him to divert funds. The material and the parties' own Memorandum of Compromise record that the transactions and operation of the Bank of Baroda accounts during Srinivasan's management were not connected with the company's legitimate affairs and that the balance remaining in the account would not be claimed by the company. On these facts the company was a victim of the fraud and did not knowingly or deliberately receive or control the tainted funds. Applying the principle that mere appearance of a company's name on a bank account does not establish the requisite knowledge or control for a money laundering offence, the prosecution of the company under Sections 3 and 4 PMLA is an abuse of the process of law. The court therefore exercised its inherent power to quash the prosecution insofar as it pertains to VMT Spinning Mills India Pvt. Ltd. [Paras 10, 11, 12, 13]

The prosecution in C.C.No.56 of 2016 insofar as it relates to VMT Spinning Mills India Pvt. Ltd. is quashed as an abuse of process.

Proceeds of crime - attachment under the PMLA - Continuation of attachment order unaffected by quashment of prosecution against the company - HELD THAT: - The court clarified that quashing the prosecution against the company does not impinge upon the prior provisional attachment of the sum alleged to be proceeds of crime. The material prima facie indicates that the amount was projected by Srinivasan as untainted funds and therefore the order of attachment remains intact for enforcement purposes. The Enforcement Directorate retains the option to examine persons involved, and may apply to the trial court under Section 311 Cr.P.C. to include witnesses if necessary. [Paras 13]

The order of attachment of the sum alleged to be proceeds of crime remains unaffected; the Enforcement Directorate may take further steps including seeking witness production under Section 311 Cr.P.C.

Final Conclusion: The Criminal Original Petition is allowed: prosecution in C.C.No.56 of 2016 against VMT Spinning Mills India Pvt. Ltd. under Sections 3 and 4 of the PML Act is quashed as an abuse of process, while the prior attachment of the amount alleged to be proceeds of crime remains undisturbed and the Enforcement Directorate may pursue appropriate steps including production of witnesses.

Benefit of a scheme subject to its terms and conditions - Strict compliance with time-limits under a scheme - Court cannot extend scheme time-limits as that would amount to modifying the scheme - Prerogative of the Government to modify an executive scheme

Benefit of a scheme subject to its terms and conditions - Strict compliance with time-limits under a scheme - Court cannot extend scheme time-limits as that would amount to modifying the scheme - Relief for extension of time to make the deposit under the Scheme was refused where the petitioner failed to deposit within the 30-day period prescribed by the Scheme. - HELD THAT: - The Court recorded that the petitioner admitted non-compliance with the Scheme's time limit of 30 days for making the deposit. The High Court therefore correctly refused relief in the form of an extension of time. The judgment reiterates the settled principle that a person seeking the benefit of a scheme must scrupulously comply with its terms and conditions; judicially extending a time-limit not provided by the Scheme would effectively modify the Scheme, which is a matter for the Government and not for the Court.

Petition dismissed for failure to comply with the Scheme's prescribed time limit; extension not granted.

Final Conclusion: The Special Leave Petition is dismissed and pending applications, if any, are disposed of; the Court affirmed that courts should not grant extensions that would amount to modifying a scheme, which is the Government's prerogative.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-bound amnesty scheme - payment within prescribed period - no provision for extension - extension of scheme period by court - mandamus under Article 226/227

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-bound amnesty scheme - payment within prescribed period - no provision for extension - extension of scheme period by court - mandamus under Article 226/227 - Whether the Court can direct acceptance of payment and make the SVLDRS, 2019 operational beyond the period for which the scheme was formulated and thereby grant relief to a declarant who failed to pay within the prescribed time. - HELD THAT: - The petitioner filed a declaration under SVLDRS, 2019 and the Designated Committee issued Form SVLDRS-3 requiring payment within thirty days and ultimately by the extended cut-off of 30.06.2020. The petitioner did not pay within the stipulated period and made belated representations; recovery proceedings were initiated thereafter. The Court reviewed decisions from other High Courts and observed that the prevailing and overwhelming view is that SVLDRS, 2019 is a time-bound amnesty scheme with no statutory provision for extending the period for individual declarants once the scheme has closed. Orders in some cases that had granted extensions were either rendered on peculiar facts or subsequently recalled; Division Bench and other High Court precedents support the principle that the scheme cannot be made operational by the Court beyond its prescribed period or its conditions relaxed for one person when the committee no longer exists. Applying that principle to the facts - delay of over one year and three months after the last date for payment and absence of statutory power to extend - the Court held it could not direct acceptance of payment or grant the relief sought under Article 226/227.

Petition dismissed as the Court cannot make SVLDRS, 2019 operational or extend its time limits to permit belated payment by the petitioner.

Final Conclusion: The writ petition seeking a direction to accept belated payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 is dismissed; the Court declined to extend or relax the time-bound scheme for the petitioner and parties shall bear their own costs.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-limit for deposit under Section 127 of SVLDRS - non extendibility of statutory deposit period - mandamus for inclusion in further processing of SVLDRS and lifting of attachment

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-limit for deposit under Section 127 of SVLDRS - non extendibility of statutory deposit period - mandamus for inclusion in further processing of SVLDRS and lifting of attachment - Entitlement to be included in further processing of the SVLDRS after issuance of SVLDRS-3 and to have bank attachment lifted where the petitioner failed to deposit the amount within the statutory period. - HELD THAT: - The petitioner applied for SVLDRS on the last date for application. The Designated Committee issued SVLDRS-2 on 06.02.2020 requiring deposit and subsequently issued SVLDRS-3. The period to make the required deposit is governed by Section 127 of the SVLDRS and is 30 days. The petitioner did not make the deposit within the time granted. There is no provision within the Scheme to extend the statutory period for deposit. Because the petitioner failed to comply with the time limit prescribed by the Scheme, relief in the nature of mandamus to include the petitioner in further processing or to lift the bank attachment cannot be granted.

Petition dismissed as the petitioner did not deposit the required amount within the statutory period and no extension is permissible under the Scheme.

Final Conclusion: The writ petition seeking inclusion in further processing of the SVLDRS and lifting of bank attachment is dismissed for non compliance with the 30 day deposit period under Section 127 of the Scheme, which the Court found not extendible.

Condonation of delay - condonation of delay on payment of costs - service by affixation on notice board under Section 153 of the Customs Act - service by registered post returned undelivered - personal hearing and principles of natural justice - premature application for out of turn hearing

Premature application for out of turn hearing - condonation of delay - Application for out of turn (early) hearing dismissed as premature pending disposal of delay condonation applications. - HELD THAT: - The Tribunal declined to entertain the appellant's application for out of turn hearing because there was an admitted delay in filing the appeal and the question of condoning that delay was yet to be decided. Until the delay issue is resolved, the appeal cannot be heard out of turn; accordingly the application for early hearing was dismissed as premature. [Paras 2]

Application No. ST/EH/50232 of 2021 dismissed as premature.

Condonation of delay - service by affixation on notice board under Section 153 of the Customs Act - service by registered post returned undelivered - personal hearing and principles of natural justice - condonation of delay on payment of costs - Whether the impugned order dated 29.03.2014 was validly served and whether the delay in filing the appeal should be condoned. - HELD THAT: - The Tribunal examined the service evidence and factual attempts at communication. Postal records showed registered letters and notices were returned with remarks indicating the addressee had 'left' the address; a departmental sepoy's report corroborated that the premises were locked and the appellant had vacated the address. The Department thereafter affixed the order on the office notice board in terms of the service provision relied upon, and uploaded practice was noted. On these facts the Tribunal held that service had been effected by affixation under the provision invoked and there was no justification for a delay of four to five years in filing the appeal. Notwithstanding that conclusion, the Tribunal, in order to afford the appellant an opportunity of appeal, exercised its discretionary power to condone the delay subject to the appellant paying a cost to public fund as a condition for condonation. [Paras 3, 4, 5, 6, 7]

Delay not justified; delay condoned on payment of a cost of Rs. 1,00,000 to the PM CARE Fund within one month; Miscellaneous applications seeking condonation disposed of accordingly.

Final Conclusion: The Tribunal dismissed the application for out of turn hearing as premature and, after finding that the impugned order had been validly served by affixation following returned registered post, condoned the long delay in filing the appeal subject to payment of a specified cost to the PM CARE Fund within one month; the condonation applications were disposed of accordingly.

Refund under Section 11B - limitation and unjust enrichment - test for unjust enrichment in refund claims - calculation of limitation period from appellate order - Action on appeal for appellant's default under Rule 20 of CESTAT Procedure Rules, 1982

Refund under Section 11B - limitation and unjust enrichment - calculation of limitation period from appellate order - Whether the refund claim was time-barred or filed within limitation - HELD THAT: - The Tribunal noted the Commissioner (Appeals) examined Section 11B and held that the one-year period for filing refund runs from the date of the Appellate Tribunal's order (20.08.2015) and that the refund application filed on 28.06.2016 was within that period. The appellant did not advance any contrary finding on limitation before the Tribunal. Having considered the impugned order and submissions, the Tribunal accepted the appellate authority's conclusion on limitation and recorded that the rejection on the ground of limitation was set aside by Commissioner (Appeals). [Paras 4]

Refund claim is not time-barred; the rejection on limitation was set aside by Commissioner (Appeals).

Refund under Section 11B - limitation and unjust enrichment - test for unjust enrichment in refund claims - Whether the appellant overcame the bar of unjust enrichment and was therefore entitled to refund - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s finding that the appellant failed to discharge the statutory requirement to establish that the tax incidence had not been passed on. The appellate authority observed absence of the statutory auditor's certificate and noted that the refund amount was not shown as 'receivable' in the appellant's books but was treated as expenditure, indicating the incidence was likely passed on. Reliance was placed on established authorities concerning the burden on the claimant to prove non-passing of incidence. The appellant did not place material before the Tribunal to rebut these conclusions. [Paras 4]

Appellant failed to satisfy the test of unjust enrichment under Section 11B; refund claim rejected on this ground.

Final Conclusion: The appeal is dismissed. The Tribunal found the refund claim was filed within limitation but the appellant failed to prove absence of unjust enrichment under Section 11B; consequently the refund claim remains rejected.

Process amounting to manufacture - negative list of services - Manpower Supply Service - Reverse Charge Mechanism - job work - Packing/repacking rendering product marketable

Process amounting to manufacture - Manpower Supply Service - negative list of services - job work - Whether the activity performed by contractors in packaging biscuits is a supply of manpower service attracting service tax under reverse charge, or a process amounting to manufacture falling within the negative list and thus exempted. - HELD THAT: - On examination of the contracts, invoices and the nature of work performed it was found that contractors were engaged in packing biscuits into carton boxes, paid on the basis of quantity packed and required to observe specifications, hygiene and to use conversion tools. Section 2(f) of the Central Excise Act and the notes to Chapter 19 recognize packing/repacking and adoption of treatment to render products marketable as amounting to manufacture. The contracts and payment on per-quantity basis indicate job work/conversion rather than mere supply of manpower. CBIC Circular No.190/9/2015 explaining distinction between manpower supply and job work supports this conclusion. The Department produced no evidence to establish that the services were in the nature of supply of manpower. Prior decisions addressing packaging as part of manufacture were held to be squarely on point and supportive of the conclusion that such activity is manufacturing and therefore falls under the negative list of services. [Paras 9, 10, 11, 12, 13]

The packaging activity carried out by the contractors amounts to manufacture and is an exempted service under the negative list; the demand of service tax under Manpower Supply Service is rejected.

Final Conclusion: The departmental appeal is dismissed. The adjudicating authority's order dropping the demand of service tax in respect of the packaging activity is upheld.

Failure to record reasons - remand for fresh consideration - duty to explain applicability of precedent - scope of appellate review under Section 35G of the Central Excise Act, 1944 - reasoned order requirement - open remand leaves issues undecided

Failure to record reasons - reasoned order requirement - Impugned Tribunal order set aside for failure to record reasons showing how an earlier decision applied to the present case and for not addressing the grounds raised in the memorandum of appeal. - HELD THAT: - The Tribunal allowed the assessee's appeal by relying on a later decision of the Tribunal in respect of another unit without recording how that decision covered the present case. The revenue did not accept that the earlier decision applied; where a decision of a coordinating forum is relied upon after being rendered, the adjudicating body must record reasons explaining the applicability. Further, the Tribunal did not discuss the factual and legal grounds advanced in the lengthy memorandum of appeal, including material produced and submissions on limitation, which was required when the department maintained the original findings. For these omissions the impugned order was found to be devoid of reasons and liable to be set aside.

Impugned order quashed and set aside for lack of reasons and inadequate consideration of the appeal.

Remand for fresh consideration - open remand leaves issues undecided - Matter remanded to the Tribunal for fresh consideration on merits and in accordance with law, leaving substantial questions of law open. - HELD THAT: - Because the Tribunal's reasoning was deficient and it did not explain reliance on the subsequent decision, the High Court remitted the case to the Tribunal for fresh adjudication. The remand is open: all factual and legal issues are left for reconsideration and the parties remain free to advance their contentions. Any observations made by the High Court are confined to justifying the remand and do not decide the merits of those issues.

Case remanded to the Tribunal for fresh decision on merits; substantial questions of law left open.

Scope of appellate review under Section 35G of the Central Excise Act, 1944 - High Court declined to adjudicate merits because such scrutiny is beyond the limited scope of an appeal under Section 35G when the impugned order lacks reasoned justification. - HELD THAT: - The Court observed that if it were to examine the correctness of the original adjudication on merits (as would be necessary given the Tribunal's failure to reason), that would exceed the scope of the jurisdiction exercised under Section 35G. This reinforced the need to remit the matter for proper consideration by the Tribunal rather than dispose of the controversy on merits at the High Court stage.

Court refrained from deciding merits and remitted the matter to the Tribunal, noting the limits of Section 35G review.

Final Conclusion: The appeal is allowed; the Tribunal's order is set aside for want of reasons and inadequate consideration, and the matter is remanded to the Tribunal for fresh decision on merits and in accordance with law, with all substantial questions of law left open.

Condonation of delay - exercise of judicial discretion - national litigation policy - monetary limit for pursuing departmental appeals - threshold for pursuing appeals under administrative instructions - penalty imposed under Section 11A(1) of the Central Excise Act, 1944 - validity of Rule 8(3A) of the Central Excise Rules, 2002 - stay of proceedings by the Hon'ble Supreme Court

Condonation of delay - exercise of judicial discretion - Condonation of 950 days' delay in filing the appeal - HELD THAT: - The revenue sought condonation of an inordinate delay of 950 days relying on the Supreme Court's order in SMW(C) No. 3 of 2020. The Court found that the period of limitation had expired in April 2019 and that the affidavit in support of the condonation petition offered no explanation for the lengthy delay. Although the Court expressed dissatisfaction with the reasons advanced, it accepted the departmental submission that the case involved an issue touching upon the interpretation of Rule 8(3A) which is pending before the Supreme Court, and therefore exercised its discretionary power to condone the delay as an exceptional case.

Delay condoned and IA No. GA 1 of 2021 disposed of.

Monetary limit for pursuing departmental appeals - national litigation policy - threshold for pursuing appeals under administrative instructions - Maintainability of the revenue's appeal in view of the CBEC circular prescribing a monetary threshold under the national litigation policy - HELD THAT: - The penalty originally imposed was substantially below the threshold limit stipulated in the CBEC circular forming part of the national litigation policy. The Court accepted that, despite ancillary observations by the Commissioner (Appeals) touching upon the validity of Rule 8(3A), the subject matter of the departmental challenge before the authorities and the Tribunal related only to imposition of penalty. Given that the penalty amount falls below the prescribed threshold, the circular prevents the department from pursuing the appeal. The Court held that allowing the appeal to be pursued notwithstanding the low monetary effect was unnecessary because leaving open the legal question on Rule 8(3A) would protect the revenue's interest while dismissal on monetary grounds would safeguard the assessee's interest.

Revenue's appeal dismissed on the ground that the penalty imposed is below the threshold limit fixed by the CBEC circular; appeal not maintainable.

Penalty imposed under Section 11A(1) of the Central Excise Act, 1944 - validity of Rule 8(3A) of the Central Excise Rules, 2002 - stay of proceedings by the Hon'ble Supreme Court - Whether observations by the Commissioner (Appeals) on the validity of Rule 8(3A) should be adjudicated in the instant appeal - HELD THAT: - Although the Commissioner (Appeals) made observations regarding the validity of Rule 8(3A) and cited decisions of various High Courts, the Court declined to decide the validity of the rule in the present proceedings because the appeal was dismissed on monetary threshold grounds. The Court expressly left open the observations made by the appellate authority on Rule 8(3A), noting that the legal issue is pending consideration elsewhere (including a stay granted by the Supreme Court in related proceedings) and that leaving the question open would protect the revenue's interest without permitting an appeal in a matter below the monetary threshold.

Observations on the validity of Rule 8(3A) left open for adjudication elsewhere; no adjudication on merits in this appeal.

Stay of proceedings by the Hon'ble Supreme Court - Application for stay of the impugned order (IA No. GA 2 of 2021) - HELD THAT: - The revenue's application for stay sought to preserve its right to pursue the appeal pending higher adjudication. Having dismissed the appeal on the ground of the monetary threshold in the national litigation policy and left open the wider issue of Rule 8(3A), the Court found no basis to grant the stay application in the present proceedings.

IA No. GA 2 of 2021 for stay dismissed.

Final Conclusion: The Court condoned the delay in filing the appeal but dismissed the departmental appeal on the ground that the penalty is below the CBEC's monetary threshold under the national litigation policy; observations by the Commissioner (Appeals) on the validity of Rule 8(3A) were left open, and the application for stay was dismissed.

Interim order. Matter listed for hearing on March 3, 2022. The Court identified the sole question of whether the proviso (inserted in Rule 3(5) of the CENVAT Credit Rules, 2004 in 2007) should be given retrospective effect but made no final adjudication; the Court observed that if the department grants the assessee retrospective benefit under the proviso the dispute may be resolved, and allowed the parties to raise further grounds at the next listing.

Mandatoriness of show cause notice for recovery of duty - recovery of Cenvat credit under Rule 14 - statutory requirement under section 11A of the Central Excise Act (parimateria to section 73 of the Finance Act) - protection against on-the-spot collection without quantification or SCN - entitlement to interest on refund of wrongly recovered duty

Mandatoriness of show cause notice for recovery of duty - recovery of Cenvat credit under Rule 14 - protection against on-the-spot collection without quantification or SCN - Whether the amount deposited during the audit without issuance of a statutorily mandated show cause notice is liable to be treated as voluntary payment barring refund, or is refundable due to non-compliance with statutory SCN requirement. - HELD THAT: - The Tribunal held that issuance of a show cause notice in the prescribed format is a mandatory statutory requirement where duty is alleged to be short paid or wrongly taken. Recovery under Rule 14 must proceed in accordance with the provisions of section 11A of the Central Excise Act (parimateria to section 73 of the Finance Act), which mandates service of a notice specifying the amount and calling for objections. Correspondence, audit communications or letters do not substitute for the statutory SCN. Reliance was placed on CBEC Circular No.423/56/98-CX and judicial authority condemning on-the-spot collection without quantification or SCN. In the absence of the requisite SCN, the amount collected at the instance of the audit team cannot be treated as a payment against a lawful demand and is liable to be refunded, without adjudicating the merits of the underlying demand. [Paras 5, 6, 7]

The amount deposited during the audit is refundable because the statutory show cause notice required for recovery was not issued.

Entitlement to interest on refund of wrongly recovered duty - What rate of interest is to be awarded on the refunded amount. - HELD THAT: - The Tribunal observed that where refund is directed under the relevant provisions of the Excise Act, interest is payable and may vary within the statutory band. Relying on earlier Tribunal decisions, the appellate authority directed refund of the claimed amount alongwith interest at the rate of 12% per annum. [Paras 7]

Refund to be granted with interest at the rate of 12% per annum.

Final Conclusion: The impugned orders are set aside; the appeal is allowed. The amount deposited during the audit (pertaining to 2013-14 to 2017-18) shall be refunded to the appellant together with interest at 12% per annum; consequential reliefs follow.

Disallowance of CENVAT credit under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A/11AB - Interest and penalty consequent to disallowance under Section 11AB and Section 11AC - Confiscation of inputs/final products and fine in lieu of confiscation - Penalty under Rule 26 of the Central Excise Rules, 2002 - Mens rea requirement for imposition of penalty under Rule 26 - Liability of directors/employees for offences of the company

Disallowance of CENVAT credit under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A/11AB - Interest and penalty consequent to disallowance under Section 11AB and Section 11AC - Confiscation of inputs/final products and fine in lieu of confiscation - Whether the disallowance of Cenvat credit and consequential interest, penalty and fines in lieu of confiscation as upheld in the adjudication should be set aside in appeal by the assessee-company. - HELD THAT: - The Tribunal found that the company admitted non-receipt of the imported goods corresponding to the two bills of entry and reversed the Cenvat credit by making the specified debit entry. The assessee failed to produce independent evidence (weighment slips, gate registers, goods receipt notices, LRs, octroi or freight payment particulars) to establish receipt and use of the inputs in manufacture. Those factual findings and documentary gaps, together with the reversal of credit by the company, support the adjudicating authority's conclusion to disallow the Cenvat credit and to impose interest and consequential measures. Nothing material was produced on appeal to rebut the finding of non-receipt; accordingly the Tribunal declined to interfere with the adjudication as it related to the company. [Paras 4, 5]

Appeal of M/s Sangli Aluminium Extrusions Pvt. Ltd. dismissed; disallowance of the specified Cenvat credit and consequential orders upheld.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Mens rea requirement for imposition of penalty under Rule 26 - Liability of directors/employees for offences of the company - Whether the penalty imposed on the director under Rule 26 of the Central Excise Rules, 2002 is sustainable. - HELD THAT: - The Tribunal examined the impugned order and observed that the adjudicating authority did not adequately establish the requisite mens rea or direct involvement of the director for attracting Rule 26. Reliance was placed on authorities emphasising that Rule 26 requires knowledge or reason to believe that goods are liable to confiscation and hence mens rea is a necessary ingredient. The director was found to have been performing duties as an employee/executive and no independent evidence was shown to prove knowledge or involvement in diversion of goods; in these circumstances the penalty could not be sustained and was accordingly set aside. [Paras 4, 5]

Appeal of the director allowed; penalty imposed under Rule 26 quashed.

Final Conclusion: The Tribunal dismissed the company's appeal and upheld the disallowance of the contested Cenvat credit with consequent measures, but allowed the director's appeal and set aside the penalty imposed under Rule 26 for lack of established mens rea or direct involvement.

Cenvat credit entitlement of a bona fide recipient on duty paid invoices - Burden of proof on revenue to establish non receipt or alternative source of goods - Duty to verify antecedents of supplier under Rule 9(3) of the Cenvat Credit Rules - Adjudicatory authority confined to the scope of the Show Cause Notice - Extended period of limitation and fraud exception under Section 11A(1)

Cenvat credit entitlement of a bona fide recipient on duty paid invoices - Burden of proof on revenue to establish non receipt or alternative source of goods - Whether Cenvat credit could be denied to the appellant when the supplier had issued duty paid invoices but was later alleged to be non genuine - HELD THAT: - The Tribunal found that the evidence relied upon by the Department related to the supplier M/s. Saha Industries and not to any discrepancy in the appellant's records. The Commissioner had accepted in his order (para 7.13) that the appellant had received the capital goods and the Department did not show that the goods were received from any other source. Relying on settled precedent the Tribunal held that the burden to prove that the appellant did not receive the goods or received them from an alternative source lies on the revenue. The appellant had statutory and financial records, payments through banking channels, and the machines were shown to be installed and in use. The Department failed to produce contrary evidence and thus could not rebut the appellant's prima facie case of bona fide receipt of duty paid goods. [Paras 9]

Cenvat credit could not be denied to the appellant on the basis of allegations against the supplier where the appellant had received the goods under duty paid invoices and the revenue failed to prove non receipt or receipt from another source.

Adjudicatory authority confined to the scope of the Show Cause Notice - Whether the Commissioner could hold that the supplier was not an assessee/manufacturer and therefore incapable of issuing valid excise invoices when that allegation was not made in the Show Cause Notice - HELD THAT: - The Tribunal held that the Commissioner travelled beyond the scope of the Show Cause Notice by concluding that M/s. Saha Industries was not an assessee or manufacturer with power to issue central excise invoices. The Show Cause Notice itself acknowledged that M/s. Saha Industries held a Central Excise Registration number. The Tribunal applied authorities that an adjudicating authority cannot go beyond allegations in the notice and observed that there was no material on record impeaching the supplier's statutory and financial records or registration. [Paras 9]

The finding that the supplier was not an assessee/manufacturer and lacked power to issue excise invoices was beyond the scope of the Show Cause Notice and unsustainable.

Duty to verify antecedents of supplier under Rule 9(3) of the Cenvat Credit Rules - Reasonable steps standard in verification of supplier - Whether the appellant failed to take reasonable steps under the Rules to verify the antecedents of the supplier so as to disentitle it to credit - HELD THAT: - The Tribunal examined the record and held that the appellant had taken reasonable and practicable steps: payments were made by account payee cheques, statutory records and ER 1 returns were maintained, and the capital goods were recorded as installed and in use. The Department's enquiries and an engineering certificate about the supplier's capacity were either not part of relied upon documents or related solely to the supplier. Precedent requires only reasonable steps by the buyer; it is unrealistic to expect the buyer to verify the supplier's internal accounts or departmental records. Given the absence of evidence undermining the appellant's records or showing that the goods came from another source, the requisite standard of verification was satisfied. [Paras 9]

The appellant had taken reasonable steps to verify the supplier and was not disentitled to Cenvat credit on that ground.

Extended period of limitation and fraud exception under Section 11A(1) - Whether the demand was time barred and whether extended limitation could be invoked against the appellant - HELD THAT: - The show cause notice was issued under extended limitation for the period Sept Oct 2006 to Feb March 2007. The Tribunal relied on authority holding that where credit is availed on the basis of invoices issued by a supplier who was duly registered and who paid duty, the buyer, unless shown to be a party to fraud, cannot be proceeded against under the extended limitation meant for fraud. Since the Department did not establish that the appellant was a party to any fraud and the supplier had discharged excise duty on the invoices, extended period invocation was held improper. The Tribunal also noted that the Department's adverse findings against the supplier related only to a limited subsequent period and did not taint the period when the appellant received the goods. [Paras 9]

The demand could not be sustained under the extended period of limitation; the extended limitation was not invokable against the appellant in the absence of evidence of the appellant's participation in fraud.

Final Conclusion: The Tribunal set aside the impugned Order in Original both on merits and limitation: the appellant was entitled to the Cenvat credit on the duty paid invoices and the extended period of limitation could not be invoked in the circumstances; the demand and penalty were quashed and the appeal allowed with consequential reliefs in accordance with law.

Appealability of assessment order - availability of statutory appeal remedy - saving provisions for past assessment years - condensed time for filing appeal and expedition of appellate proceedings - interim protection pending statutory appeal

Appealability of assessment order - availability of statutory appeal remedy - Challenge to the assessment order before the High Court is not maintainable in lieu of the statutory appeal; the petitioner must pursue the statutory appeal remedy. - HELD THAT: - The Court held that the order impugned constitutes an assessment order and is appealable under the statutory appeal mechanism. The petitioner's contention that the appellate remedy would be illusory because the order was passed in compliance with directions of this Court was rejected. The earlier direction to the authority to proceed expeditiously did not oust the appellate forum, and the Court observed that the order passed by the authority would remain subject to appeals or revisions as provided by law. Accordingly, the remedy of challenge before the appellate authority was held to be available and adequate. [Paras 3, 5]

Petition dismissed insofar as it seeks to substitute the statutory appeal; petitioner directed to file appeal.

Condensed time for filing appeal and expedition of appellate proceedings - interim protection pending statutory appeal - Court imposed a condensed timeframe for filing the statutory appeal and directed expedition of its adjudication, with limited interim protection. - HELD THAT: - Recognising the statutory appeal period but seeking to afford an effective remedy, the Court required the petitioner to file the appeal within 30 days from the date of the order (in lieu of the statutory 60 days) and directed the Appellate Authority to hear and decide the appeal within three months from filing. The Court also continued the interim stay granted earlier for 15 days from the date of the order and left the Appellate Authority free to pass further interim orders in its discretion. The petitioner was permitted to press all grounds previously raised before the High Court before the Appellate Authority. [Paras 6]

Petitioner to file appeal within 30 days; Appellate Authority to decide within three months; interim stay continues for 15 days; Appellate Authority may pass further interim orders.

Final Conclusion: Writ petition dismissed in substance; petitioner directed to file statutory appeal within 30 days and the Appellate Authority directed to decide the appeal within three months, with the existing interim order extended for 15 days and liberty for the Appellate Authority to pass further interim orders.

Limitation and condonation of delay for filing statutory appeal - Appeal against cancellation of registration under TNGST Act - limitation under Section 107 - Inability of courts to extend a statutorily prescribed condonable period - Non retrospective application of extension of limitation granted by the Supreme Court suo motu - Writ jurisdiction to interfere with time barred statutory remedies

Limitation and condonation of delay for filing statutory appeal - Appeal against cancellation of registration under TNGST Act - limitation under Section 107 - Validity of rejection of the appellant's belated statutory appeal filed after the three months limitation and the 30 day condonable period. - HELD THAT: - The Court found that the statute prescribed a three months limitation for filing an appeal against cancellation of registration and expressly allowed a further condonable period of 30 days. Those periods expired on 21.11.2019 and 21.12.2019 respectively, whereas the appeal was filed only on 25.08.2021. The petitioner's reliance on subsequent extensions of limitation granted by the Supreme Court from 15.03.2020 onward was rejected because those orders cannot operate retrospectively to revive a limitation period already expired before 15.03.2020. In consequence, the appellate authority correctly treated the appeal as time barred and dismissed it on limitation grounds. [Paras 2, 3, 9, 10, 13]

The impugned order dismissing the appeal as barred by limitation and beyond the condonable period was upheld.

Inability of courts to extend a statutorily prescribed condonable period - Writ jurisdiction to interfere with time barred statutory remedies - Whether this Court could, in exercise of writ jurisdiction, extend the statutorily fixed condonable period or grant relief analogous to prior judicial orders that temporally preserved limitation. - HELD THAT: - The Court reiterated the settled principle that where a statute prescribes a limitation and also fixes the condonable period, a judicial order cannot extend that condonable period beyond what the statute permits. A prior decision relied upon by the petitioner was distinguished: in that case the learned Judge, after considering merits and the pendency of proceedings, granted a limited additional period to file an appeal; the facts and procedural posture differed materially from the present case where no proceedings were instituted within the statutory or condonable period before the Supreme Court's suo motu extensions commenced. Absent any statutory or exceptional basis to extend the condonable period retrospectively, the Court declined to exercise writ jurisdiction to enlarge the time. [Paras 5, 8, 11, 12]

Writ relief to extend the statutorily prescribed condonable period was refused and the petition distinguished from the earlier authority relied upon by the petitioner.

Final Conclusion: The writ petition challenging the appellate order dismissing the belated appeal was dismissed: the appeal was time barred beyond the statutory and condonable periods, the Supreme Court's extension of limitation from 15.03.2020 could not be given retrospective effect to revive an earlier expired period, and this Court could not extend the statutorily fixed condonable period.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption by unimpeachable documentary evidence - part-payment and endorsement on negotiable instruments - onus on accused to establish probable defence - exercise of inherent powers to quash criminal proceedings as abuse of process

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption by unimpeachable documentary evidence - part-payment and endorsement on negotiable instruments - onus on accused to establish probable defence - Whether the complaint under Section 138 of the Negotiable Instruments Act ought to be quashed on the ground that part-payments totalling Rs. 2,69,000/- made by the petitioner's nephew into the complainant's wife's account discharged the alleged debt and rendered the cheque for a larger amount non-actionable. - HELD THAT: - The Court noted that issuance of the cheque for Rs. 15,00,000/- attracts the statutory presumption under Section 139 that the cheque was issued for discharge, in whole or in part, of a debt or liability. Reliance was placed on authoritative precedents that the drawer remains liable unless he adduces cogent evidence to rebut the presumption and that the accused must establish a probable defence on the preponderance of probabilities. The alleged UPI transfers made by the petitioner's nephew into the complainant's wife's account, as set out in the petition, are factual matters which cannot be accepted at the threshold as 'unimpeachable in nature and sterling in quality' so as to demolish the complainant's case. Whether those transfers were made at the behest of the complainant, or in discharge of the petitioner's debt, are questions of fact requiring evidence to be led at trial. The Court reiterated that inherent powers to quash criminal proceedings should be exercised sparingly and only where continuation would amount to an abuse of process; such satisfaction cannot be reached on the basis of the documents presently before the Court. On the available material, the petitioner has not discharged the burden required to rebut the statutory presumptions or to demonstrate that continuation of proceedings would be an abuse of process. [Paras 8, 11, 12, 13, 14]

The petition for quashment is rejected and no case for exercising inherent powers to quash the complaint is made out.

Final Conclusion: The petition seeking quashment of Complaint Case No.1740/2021 under Section 138 NI Act is dismissed; the criminal proceedings shall continue and the petition is disposed of.

Regular bail - relevant considerations for grant of bail (nature of offence; character of evidence; flight risk; impact on witnesses/society; likelihood of tampering) - tampering with evidence - flight risk - professional status of accused - seizure of electronic records and voice samples - conditions of bail including surrender of passport and personal bond

Regular bail - relevant considerations for grant of bail (nature of offence; character of evidence; flight risk; impact on witnesses/society; likelihood of tampering) - Applicant granted regular bail during the pendency of trial subject to conditions. - HELD THAT: - The Court applied the settled factors for bail as reiterated from Anil Kumar Yadav, considering the nature and seriousness of the offence, the character of the evidence and circumstances peculiar to the accused, the likelihood of fleeing justice, impact on witnesses and society, and the likelihood of tampering. Having reviewed the material on record - including the facts of recovery during trap proceedings, the absence of any prior registration against the applicant, seizure of his mobile and laptop and his having given voice samples - and having regard to his roots in society and willingness to surrender his passport, the Court concluded that suitable bail conditions would secure his presence and protect the investigation. Consequently the applicant was directed to be released on regular bail on furnishing bonds and subject to enumerated conditions including operational contact details, prohibition on contacting prosecution witnesses, regular appearance, surrender of passport and cooperation with investigation. [Paras 9, 16, 17]

Bail granted on conditions (personal bond with one surety, operational contact, non-contact with prosecution witnesses, surrender of passport, regular appearance and cooperation).

Tampering with evidence - flight risk - professional status of accused - seizure of electronic records and voice samples - Professional status of the accused and the Trial Court's apprehension of tampering did not preclude grant of bail where documents/evidence are in custody and appropriate conditions can allay flight/tampering fears. - HELD THAT: - The Trial Court's observation that the applicant, being a Chartered Accountant, was likely to tamper with evidence was examined in light of the Supreme Court's authority that flight risk and tampering apprehensions can be addressed by directions such as surrender of passport, issuance of look-out notice and by recognising that relevant documents are in custody of the prosecuting agency or the Court. The record showed seizure of the applicant's mobile and laptop and that he had given voice samples; further, the prosecution conceded no other recorded calls or WhatsApp messages established awareness of the bribe beyond trap calls. On these facts the High Court held that apprehensions of abscondence or tampering could be mitigated through conditions and therefore did not justify denial of bail. [Paras 12, 14, 15, 16]

Apprehension of tampering or flight allayed by seized material, voice samples and imposition of conditions (including surrender of passport); such apprehensions do not bar bail in the circumstances.

Final Conclusion: The bail application is allowed: the applicant is released on regular bail on furnishing a personal bond with one surety and subject to conditions including cooperation with investigation, maintaining operational contact details, abstention from contacting prosecution witnesses or tampering with evidence, regular court appearance and surrender of passport; the order is without prejudice to merits of the case.