TaxTMI Updates e-Newsletter
Mar 09,2022

Pre-show-cause consultation - directory and discretionary nature of administrative circular - requirement of reasoned exercise of discretion; prohibition on arbitrary or discriminatory exercise - prospective application and non-retrospectivity of executive circulars - interim stay of action on show-cause notice

Pre-show-cause consultation - directory and discretionary nature of administrative circular - Whether the subsequent Board Circular dated 11th November, 2021 removed the mandatory requirement of issuing a pre-show-cause consultation notice and the legal character of that change. - HELD THAT: - The Court examined the effect of the later Circular dated 11th November, 2021 upon the earlier Circular dated 19th November, 2020 which made pre-show-cause consultation mandatory for high-pitched assessments. It held that the later Circular does not make issuance of pre-show-cause consultation compulsory; rather it renders such consultation directory and places the matter within the discretion of the authority. The Court also emphasised that where discretion is conferred, it must be exercised judiciously and reasonably and not in a discriminatory or arbitrary manner. The Circular does not wholly exclude the possibility of issuing a pre-show-cause consultation notice; authorities retain the option to issue it but must give due reasons when choosing not to do so.

The Circular dated 11th November, 2021 does not render pre-show-cause consultation mandatory; it is directory and discretionary, and any discretion must be exercised reasonably and non-arbitrarily.

Prospective application and non-retrospectivity of executive circulars - interim stay of action on show-cause notice - Whether the benefit of earlier Circular could be withdrawn retrospectively and the immediate consequence for the impugned show-cause notice dated 23rd April, 2021. - HELD THAT: - The Court noted that the subsequent Circular of 11th November, 2021 does not state any retrospective operation. Applying the settled principle that benefits conferred by a statute or executive communication cannot be withdrawn retrospectively unless expressly provided, the Court found that the petitioner has a prima facie case requiring protection. In view of the legal questions and the absence of retrospective effect in the later Circular, the Court granted an interim injunction restraining the respondents from proceeding with the impugned show-cause notice dated 23rd April, 2021 until the writ petition is disposed of, while directing filing of affidavits and fixing a timetable for final hearing.

The later Circular is not retrospective; petitioner showed a prima facie case and the respondents are restrained from proceeding with the impugned show-cause notice until disposal of the writ petition.

Final Conclusion: The Court held that the Board's Circular of 11th November, 2021 makes pre-show-cause consultation directory and discretionary (not mandatory), that such discretion must be exercised reasonably and not retrospectively to divest existing benefits, and granted an interim stay restraining action on the show-cause notice dated 23rd April, 2021 until final disposal with directions for affidavits and a timetable for hearing.

Release of seized goods pending assessment - security by deposit or bank guarantee - furnishing bond for full value of goods - assessment after release - preservation of right of appeal - detention for absence of valid transit documents - consideration of perishable nature of goods

Release of seized goods pending assessment - security by deposit or bank guarantee - furnishing bond for full value of goods - assessment after release - consideration of perishable nature of goods - Whether the seized vehicle and perishable goods should be released pending assessment and on what conditions - HELD THAT: - The Court directed that, subject to full assessment by the GST authorities, the vehicle and the goods ought to be released because the goods are perishable and continued detention serves no useful purpose so long as the tax demand and penal consequences are secured. The respondents possess statutory power to carry out assessment and impose tax and penalty; the Court fashioned interim relief by requiring the petitioner to either deposit under protest or furnish a bank guarantee for the aggregate security computed to cover the estimated tax and maximum imposable penalty, and to furnish a bond for the full value of the goods. Upon fulfilment of these conditions the vehicle and goods must be released forthwith. The authorities may thereafter proceed with assessment after issuing notice and determine liability, subject to the petitioner's statutory right of appeal.

The vehicle and goods are directed to be released on the petitioner depositing under protest or furnishing a bank guarantee of Rs. 3.75 lacs and executing a bond for the full value of the goods; assessment to be carried out thereafter and liabilities to be adjudicated with right of appeal preserved.

Final Conclusion: The petition is disposed of by directing immediate release of the vehicle and goods on the specified security and bond, with the respondents permitted to proceed with assessment and the petitioner retaining the right of appeal.

Regular bail under Section 439 of the Code of Criminal Procedure, 1973 - triability by Judicial Magistrate First Class - prejudice from prolonged custody and trial delay due to COVID-19 restrictions - GST/Input Tax Credit fraud and loss to public exchequer - conditional bail subject to prohibition against committing similar offences

Regular bail under Section 439 of the Code of Criminal Procedure, 1973 - triability by Judicial Magistrate First Class - prejudice from prolonged custody and trial delay due to COVID-19 restrictions - GST/Input Tax Credit fraud and loss to public exchequer - conditional bail subject to prohibition against committing similar offences - Grant of regular bail to the petitioner arrested in FIR No.259 of 2019 for offences relating to alleged issuance of bogus invoices and wrongful claim of input tax credit. - HELD THAT: - The Court weighed the nature of accusation and the evidence placed on record against the petitioner, including the State's claim of large-scale alleged GST/Input Tax Credit fraud and investigative steps taken. It noted the petitioner was not named in the original FIR, contends to have been falsely implicated on statements of co-accused, is not the proprietor or beneficiary of the firm, and had been in custody for over two years. The offences are triable by a Judicial Magistrate First Class and the trial is likely to be protracted, particularly in view of delays caused by COVID-19 restrictions. Without expressing any view on merits, the Court found that these circumstances justified release on regular bail. The Court imposed a bail condition prohibiting the petitioner from committing any similar offence after release and directed that breach of that condition would render the bail liable for cancellation on prosecution's application. The petitioner was directed to furnish bail bonds to the satisfaction of the Trial Court/Chief Judicial Magistrate/Duty Magistrate concerned.

Petition allowed; petitioner granted regular bail on furnishing bail bonds to the satisfaction of the Trial Court/Chief Judicial Magistrate/Duty Magistrate, subject to the condition that he shall not commit any similar offence and that commission of any similar offence will render his bail liable to cancellation.

Final Conclusion: The petition for regular bail is allowed; the petitioner is released on bail on specified bonds and subject to the condition prohibiting commission of similar offences, without any adjudication on the merits of the allegations.

Faceless assessment - principles of natural justice - personal hearing through video conferencing - mandatory procedure under Section 144B(7)(vii) and (ix) - setting aside assessment and remand for fresh hearing

Faceless assessment - personal hearing through video conferencing - principles of natural justice - mandatory procedure under Section 144B(7)(vii) and (ix) - Validity of the assessment order dated 29.09.2021 passed without granting the requested personal hearing through video conferencing under the faceless assessment scheme - HELD THAT: - The Court held that where, under the faceless assessment scheme, a draft or final draft assessment order proposes a variation and a show-cause notice is served, an assessee who requests a personal hearing under the scheme is entitled to have that request considered and, if approved, to be heard exclusively by video conferencing in accordance with the prescribed procedure. The 2nd respondent admitted that the petitioner's request for personal hearing through video conferencing was not granted and did not demonstrate that hearing was conducted in the manner mandated by Section 144B(7)(vii) and (ix). The Court reiterated the settled principle that audi alteram partem is integral to quasi-judicial decision-making and that failure to afford a requested personal hearing where the statutory scheme provides for it amounts to a violation of natural justice and of the mandatory procedure in the Faceless Assessment Scheme. The Court relied on earlier decisions addressing the obligation to follow the procedural safeguards in Section 144B and the necessity of giving an assessee a reasonable opportunity of personal hearing, including the reasoning in Bharat Aluminium Company Ltd. v. Union of India , Sanjay Aggarwal v. National Faceless Assessment Centre (2021 (6) TMI 336), Piramal Enterprises Limited v. Additional/Joint/Deputy Assistant Commissioner of Income-Tax & others , and Swadeshi Cotton Mills v. Union of India , to emphasize that the word 'may' in the faceless assessment provisions must be read in context so as to ensure that a personal hearing, when properly requested and approved, is afforded. Applying these principles to the present case, the Court found the impugned assessment order to be non-sustainable because the petitioner was not given the statutorily envisaged video-conferencing hearing before finalising the assessment.

Impugned assessment order dated 29.09.2021 set aside; matter remitted to the Assessing Officer for fresh assessment after affording the petitioner a reasonable opportunity of hearing by video conferencing, and for passing appropriate orders in accordance with law.

Final Conclusion: Writ petition allowed; assessment order dated 29.09.2021 is quashed and the matter is remitted for de novo assessment after granting the petitioner a statutorily mandated personal hearing by video conferencing, to be completed as expeditiously as possible.

Limitation under Section 153 and time bar of reassessment - entitlement to refund where assessment is set aside and no fresh order is passed within time - duty to give opportunity of hearing by Dispute Resolution Panel and requirement of speaking order

Entitlement to refund where assessment is set aside and no fresh order is passed within time - limitation under Section 153 and time bar of reassessment - Whether, after the ITAT set aside the DRP and assessment orders and restored the matter, the proceedings are time barred and the assessee is entitled to refund of taxes paid with interest. - HELD THAT: - The Court recorded that the ITAT had set aside the DRP order and the assessment order and restored the matter to the file of the Assessing Officer for fresh assessment in accordance with law. The writ applicant submitted that no action has been taken by the DRP/AO within the time prescribed under the statute and therefore the proceedings have become time barred, giving rise to a claim for refund with interest. The Court referred to binding and persuasive High Court authority on the legal principle that proceedings before the DRP and consequent fresh assessments are circumscribed by the time limits under Section 153 of the Act and that where the time limit for passing the requisite order has expired the assessing authority acts without jurisdiction. Noting the factual position that no decision has been taken despite representations, the Court did not adjudicate the substantive entitlement itself but required the respondent to consider and decide the question in accordance with law (including the time bar principle) and communicate the decision to the assessee.

The question of time bar and refund is to be considered and decided by respondent No.1 in accordance with law; the writ court did not decide entitlement on merits but required fresh decision.

Duty to give opportunity of hearing by Dispute Resolution Panel and requirement of speaking order - Whether the respondent has a duty to act on the ITAT direction and to pass an appropriate written order within a specified time frame. - HELD THAT: - The Court found that despite the ITAT's directions and multiple representations by the assessee, the respondent had not taken steps to discharge the statutory duty to pass a fresh assessment order or to obtain fresh directions from the DRP. Having regard to the delay and the authorities cited on the legal consequences of inaction, the Court exercised its supervisory jurisdiction under Article 226 to direct respondent No.1 to take up the matter for consideration and pass an appropriate written order in accordance with law within four weeks from receipt of the writ of this order, and to communicate that decision to the writ applicant.

Respondent No.1 directed to consider the matter and pass a reasoned written order in accordance with law within four weeks and communicate it to the writ applicant.

Final Conclusion: Writ petition disposed by directing respondent No.1 to take up the restored assessment, decide the time bar and refund issues in accordance with law (including the time limits discussed), and pass a reasoned written order within four weeks from receipt of this order, with communication of the decision to the assessee.

Resale Price Method (RPM) as Most Appropriate Method - Transactional Net Margin Method (TNMM) - Arm's Length Price (ALP) - comparability and functional similarity in transfer pricing - book profit under section 115JB - ascertainable versus unascertained liabilities - provision for bonus as ascertained liability - provision for long service award as ascertained liability

Resale Price Method (RPM) as Most Appropriate Method - Transactional Net Margin Method (TNMM) - comparability and functional similarity in transfer pricing - Arm's Length Price (ALP) - Resale Price Method is the most appropriate method for determining ALP of distribution transactions where the assessee imports goods from an Associated Enterprise and resells them without value addition; TNMM is not the appropriate method in the facts of this case. - HELD THAT: - The assessee undisputedly performs sales, marketing and distribution and does not add value to the imported material handling equipment. Established guidelines and precedents indicate that RPM best measures compensation where goods purchased from an AE are resold without substantial processing, because RPM tests gross margin and is less sensitive to differences in operating cost structures that affect net margins. The TPO's rejection of RPM on the ground of lack of public information for comparables is unsound, as the TPO/AO has powers to obtain necessary data and the same comparables were accepted for TNMM; no material functional dissimilarity was shown by the Revenue. Having regard to the facts and binding coordinate decisions cited, RPM provides a more reliable measure of ALP in the present distribution context. The order of the CIT(A) upholding application of TNMM is set aside and the AO/TPO is directed to adopt RPM and determine ALP after affording the assessee an opportunity of being heard. [Paras 6]

AO/TPO directed to adopt Resale Price Method as the most appropriate method and redetermine ALP accordingly.

Book profit under section 115JB - ascertainable versus unascertained liabilities - provision for bonus as ascertained liability - provision for long service award as ascertained liability - Provisions for bonus and for long service award are ascertainable liabilities and therefore shall not be added back while computing book profits under section 115JB. - HELD THAT: - For the purposes of section 115JB, book profit starts from net profit per the profit and loss account prepared under the Companies Act, with specified add-backs. The provisions in question were determined on a definite basis: bonus provision is computed in accordance with the Payment of Bonus Act, 1965 and supported by a Chartered Accountant's certificate; long service award provision is determined on actuarial valuation. Such calculations render these liabilities capable of reasonable estimation and hence ascertained, not unascertained. Reliance on consistent judicial precedents supports treating these provisions as ascertainable and not to be added back in computing book profits under section 115JB. Accordingly, the additions made by the AO (sustained by the CIT(A)) are reversed in respect of these provisions. [Paras 13]

Provision for bonus and provision for long service award are ascertainable liabilities and shall not be added back to arrive at book profit under section 115JB; appeal allowed on these grounds.

Final Conclusion: Partly allowed: the Tribunal sets aside the CIT(A)'s confirmation of TNMM and directs AO/TPO to apply RPM to determine ALP for AY 2009-10 after hearing the assessee; the additions of provisions for bonus and long service award under section 115JB are deleted as these are held to be ascertainable liabilities.

Rejection of books of account under section 145(3) - application of gross profit rate for estimation of income - fall in gross profit not a sole ground for rejecting books - onus on Revenue to prove books incorrect or incomplete - consistency of accounting treatment and acceptance in subsequent assessment years

Rejection of books of account under section 145(3) - application of gross profit rate for estimation of income - fall in gross profit not a sole ground for rejecting books - onus on Revenue to prove books incorrect or incomplete - consistency of accounting treatment and acceptance in subsequent assessment years - Whether the Assessing Officer was justified in rejecting the assessee's books of account under section 145(3) and making an addition by applying an average gross profit rate to the entire turnover. - HELD THAT: - The Tribunal upheld the conclusion of the CIT(A) that the AO was not justified in rejecting the books of account. The AO's action was founded on the observation of a fall in gross profit rate and perceived mismatch between purchases and production expenses, followed by application of an average gross profit rate of earlier years to compute income. The Court observed that mere decline in gross profit rate, without specific defects or discrepancies in the accounts, is not a valid ground for invoking section 145(3). The assessee produced audited books, vouchers and stream-wise turnover data showing three distinct streams (retail sale of garments, trading of fabric and wholesale trading), and gave an explanation for higher production expenses and lower gross profit in the retail stream (closure of many retail outlets, market recession and consequent discounted sales). The AO, after remand, did not point out any substantive discrepancy in the data and accepted that similar losses and acceptance of books occurred in subsequent assessment years (AY 2012-13 and AY 2013-14). Relying on authoritative precedents, the Tribunal reiterated that the onus lies on the Revenue to show that books are incorrect or incomplete and that gross profit fluctuations alone do not warrant rejection or best judgment assessment; accordingly the addition made by applying an averaged gross profit rate was deleted. [Paras 10, 11, 12, 14, 15]

Deletion of the addition made by applying an average gross profit rate; rejection of books under section 145(3) was not justified and the CIT(A)'s order deleting the addition is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) deleting the addition and upholding the assessee's books of account for Assessment Year 2011-12 is sustained.

Penalty under section 271(1)(c) - Notice under section 274 read with section 271(1)(c) - Omnibus/standard pro-forma notice and failure to strike off irrelevant limb - Non-application of mind in issuing penalty notice - Vagueness in statutory notice and prejudice - Quashing of penalty order

Notice under section 274 read with section 271(1)(c) - Omnibus/standard pro-forma notice and failure to strike off irrelevant limb - Non-application of mind in issuing penalty notice - Vagueness in statutory notice and prejudice - Penalty under section 271(1)(c) - Validity of penalty proceedings under section 271(1)(c) where the statutory notice under section 274 did not strike off inapplicable limb and was omnibus in form. - HELD THAT: - The Tribunal found that the notice issued under section 274 read with section 271(1)(c) was stereotyped/omnibus and did not specify or strike off the inapplicable limb (i.e., whether penalty was proposed for concealment of particulars of income or for furnishing inaccurate particulars). Relying on the reasoning of the Hon'ble Bombay High Court (Full Bench at Goa) in Mr. Mohd. Farhan A. Shaikh v. ACIT, and noting the Supreme Court's disapproval of routine omnibus notices in Dilip N. Shroff, the Tribunal held that penalty proceedings must stand on their own and the statutory notice is the means by which the assessee is informed of the grounds for penalty. An omnibus notice that fails to delete irrelevant portions is vitiated by vagueness and betrays non-application of mind; given the mandatory nature and serious consequences of section 271(1)(c), such procedural infraction implies prejudice and cannot be cured by earlier assessment proceedings. Applying that principle to the facts, the Tribunal concluded that the notice failed to intimate the specific charge and therefore the penalty order could not be sustained. [Paras 6, 7, 8, 9]

Penalty order under section 271(1)(c) quashed for AY 2003-04 as the statutory notice was omnibus and did not specify or strike off the irrelevant limb.

Final Conclusion: The Tribunal allowed the appeal and quashed the penalty imposed under section 271(1)(c) for AY 2003-04 on the ground that the section 274 notice was an omnibus notice that failed to specify the applicable limb, betraying non-application of mind and rendering the penalty proceedings bad in law.

Processing of TDS statements under section 200A - levy of fee under section 234E - prospective operation of tax amendment - conflicting precedents and benefit to the assessee

Processing of TDS statements under section 200A - levy of fee under section 234E - prospective operation of tax amendment - conflicting precedents and benefit to the assessee - Whether fee under section 234E could be levied by invoking section 200A for TDS statements relating to periods prior to 01.06.2015. - HELD THAT: - The Tribunal examined applicability of the fee introduced w.e.f. 01.06.2015 in the absence of machinery provisions to charge the late fee under section 200A. It noted conflicting High Court decisions: the Karnataka High Court held the amendments prospective and notices for periods prior to 01.06.2015 not maintainable, whereas the Gujarat High Court took an opposite view. Applying the principle in Vegetable Products Ltd. that where judicial decisions conflict the view favourable to the assessee should be followed, the Tribunal concluded that the levy of fee under section 234E for defaults occurring prior to 01.06.2015 could not be sustained. Consequently, the impugned orders confirming the late fee for periods before 01.06.2015 were held not sustainable and the fee under section 234E was ordered to be deleted. [Paras 5, 6, 7, 8, 9]

The late fee levied under section 234E for TDS statements pertaining to periods prior to 01.06.2015 is deleted and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that the fee under section 234E could not be levied for defaults in filing TDS statements occurring prior to 01.06.2015 and directed deletion of the fee.

Dumb documents - statement recorded under section 132(4) - corroboration requirement for seized loose papers - rebuttable presumption - undisclosed income disclosed during search

Dumb documents - statement recorded under section 132(4) - corroboration requirement for seized loose papers - rebuttable presumption - Sustainability of additions made on the basis of uncorroborated jottings/loose sheets seized during search and admissions in the statement recorded under section 132(4). - HELD THAT: - The Tribunal held that loose sheets containing undecipherable jottings and rough notings recovered during search are 'dumb documents' and, without independent corroborative evidence, cannot be the sole basis for making additions. Although admissions in a statement recorded under section 132(4) are material, they are not conclusive and the presumption in favour of the Revenue is rebuttable. Where the declarant is deceased and the legal heir denies the transactions, and where the creator of the seized papers has himself described them as tentative, trial-and-error workings, the Assessing Officer was obliged to undertake independent enquiries (for example, to contact alleged payers/recipients or other parties, or to produce tangible corroboration) before treating the notings as completed transactions. In the absence of such corroboration, the Assessing Officer's interpretation of the jottings as actual receipts, payments or investments is speculative and the additions founded solely on such material are unsustainable. The Tribunal relied on authorities holding that undated, unsigned, and contextless loose sheets require corroboration and that mere presence of such sheets at the assessee's premises does not, by itself, establish that transactions materialized. [Paras 16]

Additions based solely on uncorroborated loose jottings and conditional admissions in the 132(4) statement are unsustainable and liable to be deleted.

Undisclosed income disclosed during search - dumb documents - corroboration requirement for seized loose papers - Deletion of specific additions made for each assessment year which were founded on the seized jottings and the 132(4) disclosure. - HELD THAT: - Applying the general principle that uncorroborated loose sheets cannot sustain additions, the Tribunal considered each contested addition and found no independent evidence linking the jottings to actual transactions or to the assessee in his individual capacity. For A.Y. 2007-08 the addition relating to negative peak and alleged unaccounted receipt from sale of Bhoslewadi (and the household cash expenses item) were deleted. For A.Y. 2008-09 the addition relating to Bhoslewadi receipts was deleted. For A.Y. 2011-12 the addition for negative peak was deleted; the large alleged cash-interest additions (including the amount attributed via seized pages at the broker's premises and the Shivalik-related entry) were also deleted after noting that the broker admitted the pages were tentative workings and lenders did not corroborate receipt of cash interest. For A.Y. 2012-13 the addition relating to Ladiwala Chawl was deleted. The Tribunal therefore gave effect to its dispositive finding by directing deletion of the impugned additions for the respective years. [Paras 19, 23, 24, 25, 37]

Impugned additions for A.Ys. 2007-08, 2008-09, 2011-12 and 2012-13 founded on the uncorroborated seized jottings and conditional 132(4) disclosure are deleted.

Final Conclusion: All appeals are allowed; the additions made by the Assessing Officer and confirmed by the CIT(A) for the assessment years 2007-08, 2008-09, 2011-12 and 2012-13 that were founded on uncorroborated seized loose papers and conditional statements under section 132(4) are deleted.

Use of documents seized from third-party premises - Search and seizure under section 132 - Assessment under section 153A versus section 153C - Retraction of statement recorded during search and its relevance - Burden on Revenue to corroborate electronic third party data - Estimation of unexplained cash receipts as brokerage/commission

Use of documents seized from third-party premises - Assessment under section 153A versus section 153C - Retraction of statement recorded during search and its relevance - Whether additions could be made in assessment framed under section 153A relying on data and statements seized from third party premises or whether the department was required to proceed under section 153C - HELD THAT: - The Tribunal found that the assessee was not merely a third party to the search but was directly connected with the transactions and the collection of funds for M/s Nish Developers Pvt. Ltd.; he was covered in the search proceedings. The recorded statement of the third person (Praveen Mishra) and the fact that the assessee was confronted with the seized information during proceedings rendered the material usable for assessment under section 153A. The assessee's subsequent retraction of his earlier statement two years later did not vitiate the relevance of the contemporaneous statement recorded during search. Accordingly, the additional ground that reliance on third party material required action under section 153C was dismissed and the material was held admissible for making assessment under section 153A. [Paras 19]

Additional ground dismissed; material seized from third party premises could be used in assessment under section 153A as the assessee was a party to, and directly connected with, the transactions recorded in the seized data.

Burden on Revenue to corroborate electronic third party data - Estimation of unexplained cash receipts as brokerage/commission - Whether the addition based on pendrive entries recorded against the assessee could be sustained as unexplained investment or whether it should be reduced by treating the receipts as amounts collected on behalf of purchasers and estimating brokerage - HELD THAT: - The Tribunal examined the factual matrix: pendrive entries showing multiple dated receipts against the assessee, the assessee's admission that he introduced clients and collected cash (despite later retraction), and the unrealistic consequence if the pendrive amounts were treated as the assessee's own payments for his flats (which would produce an anomalous per sq.ft. price). The CIT(A) had found on the material that the assessee solicited clients and likely received quid pro quo benefits (flats at concessional rates) and therefore reasonably estimated taxable benefit as brokerage at 2% of the cash recorded against the assessee for the year. The Tribunal found no reason to interfere with the appellate authority's considered estimation and upheld the restriction of disallowance to 2% of the recorded cash for the year; the Tribunal also noted that the same finding applies to the other assessment years on identical facts. [Paras 11, 21, 27]

Addition sustained only to the extent of brokerage estimated at 2% of the cash recorded against the assessee for the year; balance deleted. Same conclusion applied to other identical assessment years.

Final Conclusion: Appeals of both the assessee and the Revenue dismissed: seized third party data and statements were usable in assessment proceedings under section 153A as the assessee was a party to the transactions; on facts the Tribunal upheld the CIT(A)'s approach of deleting the large addition and restricting the taxable addition to an estimated brokerage of 2% of the cash recorded against the assessee, with that conclusion applied to the identical other assessment years.

Arm's length price - international transaction - benchmarking of corporate guarantee - transfer pricing adjustments - allocation of research and development expenditure - deduction under section 80-IC - computation of book profit under section 115JB - disallowance under section 14A - weighted deduction under section 35(2AB) - depreciation on computer software - treatment of capital subsidy for written down value - prohibition by law - Explanation to section 37(1) - retrospective amendment

International transaction - arm's length price - benchmarking of corporate guarantee - Validity of transfer pricing adjustments in respect of corporate guarantees given to associated enterprises and the appropriate arm's length commission. - HELD THAT: - The Tribunal held that corporate guarantees fall within the scope of an international transaction once the Explanation to section 92B (Finance Act, 2012, retrospective to 01-04-2002) is applied, and therefore guarantees must be benchmarked at arm's length. Having considered the authorities and various approaches adopted by benches, the Tribunal fixed a reasonable benchmarking rate of 0.5% of the value of corporate guarantees as the arm's length commission in the assessee's circumstances, allowing part relief to the assessee. The Tribunal noted conflicting decisions but applied the retrospective amendment and relevant precedents to reach the rate of 0.5% as equitable in the facts of these years.

Benchmarking of corporate guarantee upheld as an international transaction; commission accepted at 0.50% of guarantee value (partial allowance to assessee).

Transfer pricing adjustments - arm's length price - Allowability of upward TP adjustments in respect of interest on loans made to associated enterprises and liaison/service fees. - HELD THAT: - The Tribunal followed its coordinate-bench reasoning in the assessee's own earlier years: (a) adjustment for credit/risk premium on foreign currency loans was held not sustainable in the facts of these cases and the TPO's addition on that account was not upheld in full; (b) a small margin (0.50%) over LIBOR was acceptable in specific contexts and some TP interest adjustments were therefore partly allowed or restricted; and (c) adjustments in respect of liaison/liaison-type service fees were re-examined and where the assessee demonstrated commercial substance and prior acceptance, the Tribunal set aside the TPO/AO additions. The Tribunal therefore partly allowed the assessee's appeals on loan-interest benchmarking and deleted certain liaison-fee adjustments following principles applied in earlier years of the assessee.

TP interest adjustments and liaison-fee additions were partly disallowed or restricted; certain TPO additions deleted following coordinate-bench precedent (partial allowance to assessee).

Allocation of research and development expenditure - deduction under section 80-IC - Whether discovery R&D expenditure and certain R&D capital costs must be allocated to the eligible Baddi unit for computing deduction under section 80-IC. - HELD THAT: - Applying the Tribunal's prior decisions in the assessee's own case and the Gujarat High Court's ruling in the assessee's case, the Tribunal held that expenditure on discovery research and certain R&D capital costs need not be allocated to an eligible industrial unit that did not directly benefit from such research. The principles of consistency and the statutory requirement that profit of the eligible business be computed as if it were the only source of income supported non-allocation where the R&D centre's work was not directly linked to the unit. Consequently, additions disallowing such expenditure allocation were deleted.

R&D discovery and related capital expenditure need not be allocated to the Baddi unit; deletion of the impugned additions (allowance to assessee).

Allocation of administrative expenses - deduction under section 80-IC - Proper basis for allocation of common administrative expenses between Baddi and Indrad units (number of employees v. turnover). - HELD THAT: - The Tribunal followed its coordinate bench precedent: administrative expenses that are not attributable to a specific undertaking should not be allocated on the basis of turnover (which is volatile) but on a manpower/employee basis, since head office/admin costs are manpower driven and relatively stable. Applying that principle to the facts, the Tribunal set aside AO/AO's turnover based reallocation and deleted the additional allocation made to the eligible unit.

Administrative expenses to be allocated by number of employees; turnover based reallocation deleted (allowance to assessee).

Deduction under section 80-IC - gross total income - retrospective amendment - Whether the deduction under section 80-IC is to be restricted to 'income from business and profession' or may be set off against gross total income. - HELD THAT: - Relying on the Supreme Court's interpretation in respect of analogous provisions (section 80 IA), the Tribunal held that the subsection dealing with computation of the eligible business' profit (treating it as the only source) is antecedent to allowance of the deduction and cannot be pressed to read a limitation that the deduction be confined only to 'business income'. Therefore, deduction under section 80 IC is to be allowed against gross total income (subject to statutory ceilings), and the Revenue's restriction to business income only was set aside.

Deduction under section 80 IC is not restricted to business income alone and may be applied against gross total income (allowance to assessee).

Prohibition by law - Explanation to section 37(1) - Whether expenses claimed for 'doctor sponsorship' and freebies are inadmissible under Explanation to section 37(1) by reason of MCI regulations and CBDT Circular No.5/2012. - HELD THAT: - The Tribunal examined the MCI regulations and CBDT circular. It held that MCI regulations are addressed to medical practitioners and do not, by themselves, bind or criminalise pharmaceutical companies; therefore MCI regulations do not automatically render the assessee's expenditures 'prohibited by law' for the years prior to the CBDT circular (and the CBDT circular itself applies prospectively from AY 2013 14). On the facts, certain expenditures (notably unspecified academic grants, gift cards and travel) were found to be in breach of the applicable standards and disallowed, but other promotion and business advancement expenses were held allowable where substantiated and not falling within the prohibition for the year in issue.

CBDT circular not applicable retrospectively to the years in issue; MCI regulations do not by themselves render pharma expenditure prohibited by law. Certain doctor related items disallowed, others allowed on facts (mixed result; partly allowed to assessee).

Weighted deduction under section 35(2AB) - Allowability of weighted deduction under section 35(2AB) for R&D expenditure where DSIR approval and the nature/place of expenditure were in dispute. - HELD THAT: - The Tribunal followed the assessee's own earlier coordinate bench and Gujarat High Court decisions holding that eligible R&D expenditure (including some costs incurred outside the in house facility such as clinical trials and registration) qualifies for weighted deduction if the expenditure relates to approved in house research activity; procedural formalities (Form 3CL) were treated in the context of the factual approval process. The Tribunal accordingly directed allowance of weighted deduction in respect of R&D expenditure in line with the authoritative precedent and DSIR/tribunal conclusions, except where specific items lacked requisite connection or approval on the facts.

Weighted deduction under section 35(2AB) allowed in accordance with DSIR approval and applicable precedents; many AO disallowances deleted (allowance to assessee).

Depreciation on computer software - Whether computer software is to be treated as part of 'computers including computer software' attracting the higher depreciation rate. - HELD THAT: - Examining the depreciation schedule and Note 7, and following judicial authority, the Tribunal held that computer software falls within the specific entry 'computers including computer software' and is therefore entitled to depreciation at the rate applicable to computers. The classification in accounting standards does not override the statutory schedule; application/embedded software used as part of computer functions falls within the statutory term.

Depreciation at the higher rate applicable to 'computers including computer software' upheld (allowance to assessee).

Treatment of capital subsidy for written down value - Whether a capital investment subsidy must be reduced from the actual cost / WDV of block of assets for depreciation purposes. - HELD THAT: - The Tribunal held that a capital incentive of the nature in these facts (capital investment subsidy under a scheme for setting up industry) does not reduce the 'actual cost' or WDV under sections 43(1) and 43(6). The subsidy is an incentive and does not partake the character of meeting 'actual cost' of assets; Supreme Court authority supports not reducing WDV by such subsidy. Accordingly, AO's reduction of WDV and consequent excess depreciation disallowance was set aside.

Capital investment subsidy need not be reduced from actual cost/WDV for depreciation; AO's disallowance deleted (allowance to assessee).

MODVAT/CENVAT credit - Whether unutilized MODVAT/CENVAT credit forming part of exclusive/net accounting method amounts to taxable income requiring addition under section 145A. - HELD THAT: - The Tribunal accepted the assessee's net (exclusive) method of accounting and followed Supreme Court authority (Indo Nippon) that irreversible CENVAT/MODVAT credit does not constitute taxable income. Given consistent prior practice and accounting method, the AO's addition of unutilized credit to closing stock was deleted.

Unutilized MODVAT/CENVAT credit not taxable when assessee follows net method; AO addition deleted (allowance to assessee).

Computation of book profit under section 115JB - disallowance under section 14A - Whether disallowance under section 14A (and Rule 8D computations) can be directly imported into book profit computation under section 115JB. - HELD THAT: - Having regard to Special Bench and High Court jurisprudence, the Tribunal held that the mechanism under section 14A r.w. Rule 8D is not to be mechanically applied while computing book profit under section 115JB; clause (f) of Explanation 1 to section 115JB is a separate code. The Tribunal directed an ad hoc approach (1% of exempt income) for making a clause (f) adjustment in the circumstances of this case to avoid multiplicity and inconsistent outcomes, while deleting the AO's direct 14A/8D addition as such.

14A/Rule 8D computations are not to be directly imported into section 115JB book profit adjustments; AO's 14A addition deleted and a clause (f) adjustment directed on an ad hoc basis (partial allowance to assessee with limited adjustment).

Treatment of loan/advance to associated enterprise - Whether a working capital loan to a wholly owned subsidiary (ZAO) written off in the assessee's books is an allowable business loss or is capital in nature and not deductible. - HELD THAT: - On the facts the Tribunal found the advances were working capital in nature to a subsidiary engaged in the same trade, losses had been incurred by that subsidiary, and regulatory constraints (including RBI/host country issues) affected recovery; applying precedents where investments or losses in 100% subsidiaries engaged in the same business were treated as business losses, the Tribunal allowed the write off as an allowable deduction and set aside the AO/CIT(A) disallowance which had treated the loan as capital in nature.

Loan written off to wholly owned subsidiary in same trade allowed as business loss (deletion of AO's addition; allowance to assessee).

Final Conclusion: The Tribunal delivered a consolidated set of decisions across AYs 2009 10 to 2012 13. Material rulings in favour of the assessee include: (i) corporate guarantees are international transactions but a 0.50% ALP commission was accepted; (ii) several TP additions (interest/liaison) were restricted/deleted following coordinate bench precedents; (iii) discovery R&D and certain R&D capital costs need not be allocated to the eligible Baddi unit and corresponding additions were deleted; (iv) administrative expenses should be allocated on employee strength (not turnover) and reallocation by AO was set aside; (v) deduction under section 80 IC may be applied against gross total income (not confined to business income); (vi) many doctor related promotion disallowances were examined on facts and the CBDT circular held not retroactively applicable; (vii) weighted deduction under section 35(2AB) was largely allowed in line with DSIR/precedent; (viii) computer software attracts depreciation at the rate for 'computers including computer software'; (ix) capital investment subsidy need not reduce WDV; (x) unutilized MODVAT/CENVAT credit not taxable when net accounting is followed; (xi) section 14A/Rule 8D computations are not to be directly transposed into book profit (section 115JB) computations and the Tribunal directed a limited clause (f) approach. Overall the appeals were largely allowed or partly allowed for the assessee and most departmental grounds were dismissed as set out in the order.

Seized documents and evidentiary value - Rejection of books of account under section 145(3) - Application of presumption under section 292C - Extrapolation of profits from seized material - Rule of consistency in assessments

Seized documents and evidentiary value - Extrapolation of profits from seized material - Application of presumption under section 292C - Validity of making additions by relying on printouts from a hard disk/pen drive (treated as 'forecast') seized during search and extrapolating profit therefrom - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s finding that the printouts on the seized device were described as 'forecast' and that the Assessing Officer had not carried out requisite verification to treat those notings as a true reflection of the assessee's actual transactions. The Assessing Officer did not enquire with the person from whose premises the material was seized (Sh. Bharat Mehta), nor were corroborative documents, bogus purchase bills, unexplained assets or investments found during search to support the seized figures. Although some sales figures matched, the mismatch in cost items and absence of supporting evidence made the seized document inadequate to displace the audited books. The Tribunal also relied on the principle that seized material cannot be applied as conclusive proof against the assessee without verification and corroboration and that extrapolation of profit on that basis was therefore unjustified. The Tribunal further observed that identical printouts had not given rise to additions in earlier assessment years and applied the rule of consistency in favour of the assessee. The Tribunal found no infirmity in the Commissioner (Appeals)'s deletion of the addition. [Paras 9, 10, 11]

Addition based on the seized printouts and extrapolation of profits is not sustainable and is deleted.

Rejection of books of account under section 145(3) - Seized documents and evidentiary value - Lawfulness of rejection of the assessee's books of account under section 145(3) of the Income-tax Act in the absence of pointed out discrepancies or corroborative evidence - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that the Assessing Officer invoked section 145(3) without pointing out specific discrepancies or defects in the books of account and without examining the books and vouchers up to the date of search. The Assessing Officer relied on the seized material as corroborative evidence but failed to produce independent evidence (such as bogus purchase bills, incriminating vouchers or resulting unaccounted assets) that would justify rejection of the audited accounts. In these circumstances, the rejection of books was held to be unlawful. The Tribunal noted the Assessing Officer had not satisfactorily accounted for items such as depreciation, foreign exchange differences, and other claimed expenses when estimating income, further undermining the basis for rejection. [Paras 14]

Rejection of the books of account under section 145(3) was unlawful and cannot be sustained.

Final Conclusion: The appeal filed by the Revenue is dismissed; the deletion of the addition and the finding that the books of account were wrongly rejected are upheld for assessment year 2010-11.

Selection of comparables - functional comparability - application of Transactional Net Margin Method - adequacy of segmental disclosures - demerger as extraordinary event affecting comparability - remand for verification of comparables - related party transactions affecting comparability - deductibility of Education Cess under Section 40(a)(ii) of the Income-tax Act

Selection of comparables - functional comparability - adequacy of segmental disclosures - demerger as extraordinary event affecting comparability - Exclusion of Infobeans Systems Private Limited from the final set of comparable companies - HELD THAT: - The Tribunal examined the financial statements and notes of Infobeans and found absence of segmental details and that the software business of a demerged entity had been included in revised accounts, indicating a demerger which is an extraordinary event. In the absence of sufficient information to test functional comparability and given the demerger, proper comparability could not be established. The Tribunal followed its coordinate-bench finding in the assessee's own earlier year (A.Y. 2012-13) which had held Infobeans not comparable, and the Revenue did not place any contrary material before this Bench. On these grounds the Tribunal directed exclusion of Infobeans from the final set of comparables. [Paras 10]

Infobeans Systems Private Limited is to be excluded from the final set of comparable companies and the AO/TPO directed accordingly.

Remand for verification of comparables - functional comparability - segmental analysis - Remand of the question of comparability of Thirdware Solutions Limited to the AO/TPO for detailed factual verification - HELD THAT: - The assessee raised for the first time before the Tribunal that Thirdware Solutions Limited may not be comparable due to trading activities and absence of segmental data. The Tribunal recalled its earlier direction in the assessee's A.Y. 2012-13 to the AO/TPO to undertake detailed factual verification based on annual report and other records to ascertain nature and scope of functions. The Revenue accepted remand. Given the factual character of the inquiry, the Tribunal remitted the issue to the AO/TPO for fresh verification in terms of the earlier directions. [Paras 12]

The issue of comparability of Thirdware Solutions Limited is remanded to the AO/TPO for detailed verification as directed by the Tribunal.

Inclusion of comparables - annual report as basis for functional comparability - Inclusion of M/s. Lucid Software Limited and Evoke Technologies Private Limited in the final list of comparables - HELD THAT: - The CIT(A) examined the annual reports and was satisfied that both Lucid Software Limited and Evoke Technologies Private Limited are functionally comparable to the assessee, with evidence of significant revenues from software services. The TPO had not placed specific contrary grounds on record and these companies had been accepted as comparables in the assessee's own earlier-year proceedings. The Revenue did not produce material to rebut the CIT(A)'s satisfaction. The Tribunal therefore upheld the CIT(A)'s direction to include these companies in the final comparable set. [Paras 19, 20]

AO/TPO is directed to include M/s. Lucid Software Limited and Evoke Technologies Private Limited in the final list of comparable companies.

Related party transactions affecting comparability - comparability filters - Treatment of M/s. Harbinger Software Limited and Saven Technologies Limited in the comparable set - HELD THAT: - Harbinger Software Limited was treated as comparable (the assessee's challenge was inadvertent and thus treated as infructuous). Saven Technologies Limited, though initially included by the assessee and accepted by the TPO, was excluded by the CIT(A) because its revenues comprised 100% related-party transactions, failing the comparability filter. The assessee supported the exclusion and the Revenue did not place contrary material before the Tribunal. [Paras 22, 23]

Harbinger Software Limited remains a comparable company; Saven Technologies Limited is excluded from the final set of comparables.

Deductibility of Education Cess under Section 40(a)(ii) of the Income-tax Act - Allowance of deduction for Education Cess while computing taxable income - HELD THAT: - Relying on the decision of the Bombay High Court in Sesa Goa Ltd. and consistent Tribunal precedents, the Tribunal accepted that 'cess' is not covered by the disallowance in Section 40(a)(ii) and therefore amounts paid as Education Cess are deductible in computing profits and gains of business or profession. The Education Cess paid by the assessee did not require further factual examination and is allowable. [Paras 15]

The AO is directed to allow deduction in respect of the Education Cess paid by the assessee.

Final Conclusion: For A.Y. 2013-14, the Tribunal directed exclusion of Infobeans Systems Private Limited from the comparable set, remanded the question of Thirdware Solutions Limited for factual verification by the AO/TPO, upheld inclusion of Lucid Software Limited and Evoke Technologies Private Limited, affirmed exclusion of Saven Technologies Limited and acceptance of Harbinger Software Limited as comparable, and directed allowance of Education Cess as a deductible expenditure; the assessee's appeal is partly allowed (statistical) and the Revenue's appeal is dismissed.

Bogus purchases - addition under section 69C - adverse inference from third party statement recorded under section 131 - requirement to confront enquiries and afford opportunity to explain - reliance on bank hypothecation / stock statement vis a vis books of account valuation - valuation of closing stock in accordance with section 145A - inadmissibility of ad hoc disallowance without rejection of books of account

Bogus purchases - addition under section 69C - adverse inference from third party statement recorded under section 131 - requirement to confront enquiries and afford opportunity to explain - inadmissibility of ad hoc disallowance without rejection of books of account - Deletion of additions made by the Assessing Officer treating purchases of rice husk as bogus and consequent disallowance of 5% ad hoc of remaining purchases. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusions deleting the addition of Rs. 2,49,01,874/-. The Assessing Officer primarily relied on a statement of a third party recorded under section 131 and on limited inquiries from selected suppliers to treat several purchases as bogus. The assessee produced sworn affidavits of suppliers, purchase invoices, sales tax records, income tax returns of suppliers and evidence of payment through banking channels; the books were not rejected and consumption of rice husk was not doubted. The Tribunal accepted the CIT(A)'s finding that the AO had not brought material to conclusively establish routing back of payments or non existence of suppliers, and had failed to confront the assessee with results of enquiries or make further inquiries where suspicion arose. The Tribunal also found that ad hoc disallowance (5%) on remaining purchases was unjustified where books were accepted and no specific defects in accounts were pointed out. In that factual matrix the additions were held to be based on surmise and conjecture and rightly deleted by the CIT(A). [Paras 13, 14, 15, 16]

The deletions of the additions on account of alleged bogus purchases (including the specific disallowances and the 5% ad hoc disallowance) are sustained and the Assessing Officer's additions are not interfered with.

Reliance on bank hypothecation / stock statement vis a vis books of account valuation - valuation of closing stock in accordance with section 145A - requirement to confront enquiries and afford opportunity to explain - inadmissibility of ad hoc disallowance without rejection of books of account - Deletion of addition of Rs. 52,12,000/ made on account of alleged under valuation of closing stock as compared to stock statement furnished to bank. - HELD THAT: - The Tribunal agreed with the CIT(A) that the difference related to valuation and not to quantity: quantities in the stock statement furnished to the bank matched the books, and the assessee explained that the bank statement used estimated values while books applied valuation in accordance with section 145A (raw materials/consumables at cost; semi finished/finished at cost of production). The AO did not impugn the books, did not show any departure from the method of valuation in earlier years, and did not identify any defect in the assessee's valuation method. The Tribunal relied on the principle that hypothecation statements (often on estimate basis) cannot be preferred over bona fide books of account and that no addition can be made on such a discrepancy where books are accepted and valuation follows law; accordingly the CIT(A)'s deletion was upheld. [Paras 23]

The addition made on account of difference between hypothecation stock statement and books of account is deleted.

Final Conclusion: The Department's appeal is dismissed: the Tribunal affirms the CIT(A)'s deletions of the additions made by the Assessing Officer both in respect of alleged bogus purchases of rice husk and the disputed under valuation of closing stock for A.Y. 2011 12 (financial year 2010 11).

Principles of natural justice - right to cross-examine witnesses - right of access to material relied upon - reliance on witness statements in adjudication - order vitiated for denial of cross-examination

Principles of natural justice - right to cross-examine witnesses - reliance on witness statements in adjudication - order vitiated for denial of cross-examination - Adjudication order that relied on witness statements without affording the petitioner an opportunity to cross-examine was in violation of principles of natural justice and liable to be set aside. - HELD THAT: - The Court found on the record, including the impugned adjudication order dated December 7, 2021, that the adjudicating authority relied upon the statements of certain witnesses but did not permit the petitioner to cross-examine them. Applying the principle articulated by the Supreme Court in Andaman Timber Industries (paras. quoted in the judgment), denial of an opportunity to cross-examine witnesses whose statements form the basis of an adverse order constitutes a serious flaw and renders the order nullity for violation of principles of natural justice. The respondent did not dispute these factual findings from the record. In consequence, the portion of the impugned order based on those untested statements cannot stand.

Portion of the adjudication order that relied on witness statements without affording cross-examination set aside.

Right of access to material relied upon - right to cross-examine witnesses - Whether the adjudicating authority must afford the petitioner an opportunity to cross-examine witnesses if it intends to rely on their statements on rehearing. - HELD THAT: - The Court directed that on fresh consideration the adjudicating authority, if it proposes to rely on the statements of the same witnesses, must afford the petitioner an opportunity to cross-examine those witnesses and shall provide access to the material upon which it intends to rely. The writ petition was disposed by setting aside the impugned order to the extent indicated and remanding the matter for fresh adjudication in accordance with law, consistent with the requirement that reliance on witness statements entails the right to test them by cross-examination.

Matter remitted to the adjudicating authority to pass a fresh order and, if it relies on the witness statements, to permit cross-examination and access to the relied material.

Final Conclusion: Writ petition allowed in part: impugned adjudication order dated December 7, 2021 set aside insofar as it relied on witness statements without permitting cross-examination; matter remitted for fresh adjudication, and if the authority relies on those statements it must afford the petitioner an opportunity to cross-examine and access the material relied upon.

Refund of duty paid under protest - lodging of protest - claim of exemption during pendency of appeal - payment of duty deemed to be under protest - maintainability of appeal where assessment not challenged before first appellate authority

Lodging of protest - refund of duty paid under protest - Whether refund claims for imports made during December 2005 to April 2009 are admissible in absence of evidence of protest at the time of payment. - HELD THAT: - The Tribunal found no evidence on record that the appellant had lodged any protest in respect of the Bills of Entry for which refund was claimed. An affidavit produced on behalf of the appellant was vague, failing to specify the date or the authority before whom any protest was lodged, and therefore could not be treated as supportive evidence. Although the appellant lodged a protest during the pendency of the present Tribunal appeal, there was no protest prior to the impugned imports. On these facts the authorities were correct in rejecting refund claims for want of proof of prior protest. [Paras 7, 9]

Refund claims were rightly rejected for lack of evidence that a protest had been lodged for the relevant Bills of Entry.

Payment of duty deemed to be under protest - claim of exemption during pendency of appeal - Whether the decision in Electro Steel Castings Ltd. rendered the appellant's payments during pendency of an earlier appeal automatically 'under protest' and therefore actionable for refund. - HELD THAT: - The Tribunal distinguished the decision relied upon by the appellant, noting that in Electro Steel the assessee had filed a protest before the authorities prior to the period for which refund was claimed. The facts of that case therefore did not apply. Since no contemporaneous protest was established in the present case, the Elec tro Steel decision was held inapplicable to confer an automatic status of 'payment under protest' for the impugned Bills of Entry. [Paras 6]

Electro Steel Castings Ltd. is not applicable to the facts of this case; payments were not deemed to be under protest in the absence of a prior protest.

Maintainability of appeal where assessment not challenged before first appellate authority - Whether the present appeal is maintainable when the appellant did not challenge the assessment of the Bills of Entry before the Commissioner (Appeals). - HELD THAT: - The Tribunal observed that the appellant did not prefer appeals against the assessments of the Bills of Entry to the Commissioner (Appeals). In that circumstance, reliance was placed on the principle in ITC Limited v. CCE, Kolkata that an appeal is not maintainable where the statutory first appeal has not been availed. On this ground the appeal was held not maintainable in addition to the merits-based rejection of refund claims. [Paras 8]

The appeal is not maintainable because the assessments in question were not challenged before the Commissioner (Appeals).

Final Conclusion: The Tribunal dismissed the appeal and upheld the impugned order rejecting refund claims for imports during December 2005 to April 2009: there was no proof of prior protest for the relevant Bills of Entry, the Madras High Court decision relied upon was inapplicable on the facts, and the appeal was also held not maintainable for failure to challenge assessments before the Commissioner (Appeals).

Jurisdiction of officer issuing show cause notice under Section 28 - proper officer for reassessment and recovery under Section 28 - effect of retrospective validation provision on designation of proper officer - inseparability of duty demand from proposals for confiscation and penalty

Jurisdiction of officer issuing show cause notice under Section 28 - proper officer for reassessment and recovery under Section 28 - effect of retrospective validation provision on designation of proper officer - The Additional Director General, DRI did not have jurisdiction to issue the show cause notices demanding duty under Section 28 and the proceedings initiated by those notices are without authority of law. - HELD THAT: - The Tribunal applied and followed the reasoning of the Supreme Court in M/s. Canon India Pvt. Ltd. and its subsequent treatment in Agarwal Metals and Alloys, holding that the power to reopen assessment and recover duties under Section 28 is a power of administrative review vested in "the proper officer" who had originally assessed and cleared the goods (i.e., the Appraising/assessing officer) or his successor assigned assessment functions. An officer of DRI who had not performed the original assessment cannot be treated as "the proper officer" for issuance of a Section 28 notice; consequently notices issued by the Additional Director General, DRI were held to be without jurisdiction. The Tribunal considered but rejected the Department's contention based on Section 28(11) (purporting retrospective deeming/validation) and related circulars, observing that even if officers of DRI are statutorily recognised as "proper officers" for some purposes, the Canon India ratio requires that reassessment proceed by the officer who did the original assessment (or his successor who performed assessment functions); none of the impugned matters involved original assessment by DRI officers. The Tribunal also held that it was bound to follow the Supreme Court's decision notwithstanding any pending review petition. The impugned orders founded on the Section 28 show cause notices were therefore set aside. [Paras 5, 6, 10, 11, 15]

The show cause notices dated May 04, 2015, April 18, 2010 and March 8, 2019 issued by the Additional Director General, DRI were without jurisdiction; the proceedings and impugned orders based thereon are set aside.

Inseparability of duty demand from proposals for confiscation and penalty - consequences of invalid duty demand on confiscation/penalty proposals - Proposals for confiscation and imposition of penalties that are predicated on a reassessment/duty demand under Section 28 cannot survive where the foundational Section 28 demand is invalid. - HELD THAT: - Relying on Tribunal and judicial precedents (including Bakeman's Home Products and coordinate-bench decisions), the Tribunal held that when the demand of differential duty under Section 28 fails for want of jurisdiction, the related proposals for confiscation and penalties - which are based on the same factual matrix of reassessment/misdeclaration - cannot be segregated and must also fall. The Tribunal agreed with coordinate decisions that even where separate statutory notices (e.g., under Section 124) are issued for confiscation/penalty, if the reassessment basis collapses, the consequential confiscation and penalty proceedings cannot be sustained. Applying that principle, the Tribunal set aside the confiscation/penalty aspects of the impugned orders which flowed from the invalid Section 28 proceedings. [Paras 13, 15]

The proposals for confiscation and the penalties imposed insofar as they were founded on the reassessment/duty demand under Section 28 cannot survive and are set aside along with the impugned orders.

Final Conclusion: All five appeals are allowed; the show cause notices issued by the Additional Director General, DRI and all proceedings and impugned orders founded thereon (including demands, confiscation proposals and penalties premised on those demands) are set aside, with consequential relief to the appellants.

Transfer of proceedings under Section 434 of the Companies Act, 2013 - Application of Section 231(3) of the Companies Act, 2013 to schemes sanctioned by High Courts - Continuing application of the Companies Act, 1956 and the Companies (Court) Rules, 1959 to matters retained by High Courts - Res judicata effect of earlier High Court order - Scope of the Companies (Transfer of Pending Proceedings) Rules, 2016 and cut off for transfer

Continuing application of the Companies Act, 1956 and the Companies (Court) Rules, 1959 to matters retained by High Courts - Section 465(1) of the Companies Act, 2013 - Whether the repeal of the Companies Act, 1956 divests the High Court of jurisdiction over matters retained by it. - HELD THAT: - The Court held that Section 465(1) of the Companies Act, 2013 must be read with Section 434 and the Transfer Rules and that the 2013 Act expressly preserves the continued application of the Companies Act, 1956 and the Companies (Court) Rules, 1959 to matters validly retained by the High Court. The second proviso to Section 465(1) contemplates that until transfer is notified by the Central Government, retained matters continue to be governed 'as if the Companies Act, 1956 has not been repealed'. Consequently, repeal of CA 1956 did not, by itself, divest the High Court of jurisdiction over proceedings which lawfully remain with it under Section 434 and the Transfer Rules. [Paras 8, 9]

The repeal of CA 1956 did not oust this Court's jurisdiction in respect of matters lawfully retained by the High Court; CA 1956 and the Companies (Court) Rules continue to apply to retained matters.

Transfer of proceedings under Section 434 of the Companies Act, 2013 - Scope of the Companies (Transfer of Pending Proceedings) Rules, 2016 and cut off for transfer - Proceedings relating to schemes of arrangement and the second proviso to Section 434(1)(c) - Whether the pending applications and proceedings relating to the scheme sanctioned on 30.04.2014 were liable to be transferred to the NCLT under Section 434(1)(c) and the Transfer Rules. - HELD THAT: - The Court analysed Section 434(1)(c) together with the Transfer Rules and concluded that those provisions address transfer of 'proceedings' and not every individual application in isolation. For schemes of arrangement the statutory cut off is the stage at which orders are reserved in the proceedings; where a scheme has been sanctioned and consequential supervisory applications under the earlier Act are pending, those post sanction applications constitute supervisory/power consequential steps exercisable by the court that sanctioned the scheme. Transferring individual applications while retaining the sanctioning petition would frustrate the object of transfer and produce anomalous results. Given that the scheme here was sanctioned on 30.04.2014 and consequential administration and supervisory action followed (including appointment of an Administrator and multiple reports), the proceedings were not liable to be transferred to the NCLT as sought. [Paras 13, 14, 15, 16]

The applications and proceedings related to the post sanction supervision of the scheme are not liable to be transferred to the NCLT; they shall be retained by this Court.

Res judicata effect of earlier High Court order - Application of Section 231(3) of the Companies Act, 2013 - Whether the Court's earlier order dated 05.01.2017 operates as res judicata and whether that order precludes the present transfer applications or is erroneous. - HELD THAT: - The Court examined its order of 05.01.2017 which had declined transfer on the basis that the High Court had sanctioned the scheme and appointed an Administrator to supervise its implementation. Having considered the subsequent submissions invoking Section 231(3) of CA 2013 and authorities on transfer, the Court found that Section 231(3) does not divest the High Court of jurisdiction over schemes it sanctioned and is an enabling provision permitting the Tribunal to apply supervisory powers where appropriate. The earlier order was held not to be erroneous and to have res judicata effect insofar as the matter of transfer was concerned. Accordingly, fresh requests for transfer premised on the same ground were held to be misconceived. [Paras 10, 11, 17]

The earlier order dated 05.01.2017 is not erroneous and operates as res judicata; the present transfer applications are misconceived and cannot be allowed.

Final Conclusion: Company Applications seeking transfer are dismissed and the pending applications relating to the scheme sanctioned by this Court are retained for adjudication here; each set of applicants is directed to pay costs to the State Legal Services Authority and other pending applications shall be listed before this Court for further directions.

Publication of public announcement - publication of Form G (Expression of Interest) - Regulation 6 of the CIRP Regulations - physical newspaper evidence versus e paper - maintainability of fresh objections during reserved hearing

Maintainability of fresh objections during reserved hearing - Whether the applicant could file an interim application raising fresh allegations of non publication and fraud at the stage when the application for approval of the resolution plan was reserved for orders - HELD THAT: - The Tribunal examined the propriety of entertaining an application that raised serious allegations about the conduct of the resolution professional at a stage when the interim application for approval of the resolution plan was reserved. The Bench noted that the applicant had already filed objections to approval of the resolution plan and had later sought to file multiple additional applications raising the publication issue. Having considered the course of events and the materials placed before it, the Tribunal concluded that filing several applications objecting to approval of the resolution plan at this stage was not permissible and that the fresh application could not be entertained. [Paras 17, 19, 20]

The application making fresh allegations during the reserved hearing is not maintainable and cannot be entertained; IA 83 of 2022 is dismissed on this ground.

Publication of public announcement - publication of Form G (Expression of Interest) - Regulation 6 of the CIRP Regulations - physical newspaper evidence versus e paper - Whether the resolution professional complied with the publication requirements under Regulation 6 and for Form G, and whether the applicant's allegations of non publication and submission of bogus newspaper cuttings were sustainable - HELD THAT: - The Tribunal reviewed the record, including original newspapers filed by the resolution professional and additional documents in IA No. 1850 of 2021. The Bench examined physical copies of the Prathakal (Udaipur edition) dated 23.04.2021 containing the public announcement and Prathakal dated 30.05.2021 containing Form G, and noted that publications in Mumbai (The Free Press Journal and Navshakti) were made on 22.04.2021. The Tribunal accepted the distinction between electronic e paper availability and physical newspaper publication and observed that there is no English newspaper published locally in Udaipur. On these materials, the Bench held that the applicant's allegations of non publication and submission of bogus copies were untenable. [Paras 11, 18]

The Tribunal finds that the required publications were made as evidenced by original newspaper copies and that the allegations of non publication are untenable.

Final Conclusion: The Tribunal dismissed IA 83 of 2022, holding the fresh application alleging non publication and fraud to be untenable and not maintainable at the stage when the resolution plan approval was reserved, after finding that required publications were evidenced by original newspaper copies.

Offence of money laundering as a continuing offence - power to arrest under section 19 of the PMLA - custodial interrogation for investigation under PMLA - possession, acquisition or projecting proceeds as untainted property

Offence of money laundering as a continuing offence - possession, acquisition or projecting proceeds as untainted property - Prima facie satisfaction that the accused has committed an offence under section 3 of the PMLA - HELD THAT: - The Court noted witness statements alleging that the accused had taken control of disputed property belonging to Munira Plumber and her mother and that the accused was in possession of the property. Applying the statutory explanation that money laundering is a continuing activity until a person is enjoying proceeds of crime by concealment, possession, acquisition, use or projecting them as untainted property, the Court found prima facie material on record to indicate involvement of the accused in processes covered by section 3. On this basis and having regard to the merged investigations and the statements relied upon, the Court was not inclined to accept defence contention that no offence under section 3 is made out. [Paras 16, 18, 19, 20]

There is prima facie material to indicate that the accused has committed an offence under section 3 of the PMLA.

Power to arrest under section 19 of the PMLA - Legality of the arrest of the accused under section 19 of the PMLA - HELD THAT: - The Court examined the arrest record and observed that an Assistant Director, on the basis of material in his possession, recorded reasons to believe that the accused had committed an offence under the PMLA. The arrest order communicated grounds to the accused and, on the material before the Court, there was substantial compliance with the requirements of section 19. The Court therefore rejected the submission that the arrest was illegal or in contravention of statutory requirements. [Paras 11, 19]

The arrest under section 19 of the PMLA is found to be in substantial compliance with statutory requirements and not illegal.

Custodial interrogation for investigation under PMLA - Necessity for custodial remand of the accused to Enforcement Directorate custody - HELD THAT: - The Court observed that the investigation was at a nascent stage, the accused had not cooperated on crucial aspects, and custodial interrogation was necessary to confront him with recorded statements, to collect seized and recovered documents, and to explore the ramifications of transactions alleged to have traversed over two decades. In view of the seriousness of allegations and the material on record, the Court considered custodial detention for further investigation to be necessary. [Paras 20]

Accused is remanded to the custody of the Enforcement Directorate for investigative custodial interrogation.

Final Conclusion: On the material before the Court the accused was prima facie found to be involved in a continuing money laundering offence, his arrest under section 19 of the PMLA was held to be in substantial compliance with statutory requirements, and custodial remand to the Enforcement Directorate was directed until 03.03.2022.

Adjustment of pre-deposit against confirmed demand - effect of appellate set-aside order - time-barred show-cause notice - duty of subordinate authority to seek rectification or challenge a tribunal judgment - refund under Section 11B of Central Excise Act, 1944

Effect of appellate set-aside order - refund under Section 11B of Central Excise Act, 1944 - Whether the Deputy Commissioner was entitled to adjust the assessee's pre-deposit/refund after the CESTAT had set aside the adjudicating authority's order. - HELD THAT: - The Tribunal's order set aside the original adjudication. Once the appellate forum allowed the appeal and set aside the order in original, the subordinate authority could not unilaterally give the appellate judgment a restricted effect by adjusting the pre-deposit against the original demand. The Court held that where the superior Tribunal has set aside the adjudication, the Deputy Commissioner was not competent to interpret the appellate order to limit its effect and thereupon adjust the pre-deposit; instead the impugned adjustments made by the Deputy Commissioner were illegal. The Court therefore quashed the adjustment orders and directed refund of the pre-deposit sum, subject to the department's right to appeal against the Tribunal's judgment.

Adjustment of pre-deposit by the Deputy Commissioner after the CESTAT set aside the original order was quashed and the department directed to refund the amount within four months.

Finality of unchallenged parts of adjudication - duty of subordinate authority to seek rectification or challenge a tribunal judgment - Whether the Deputy Commissioner could treat parts of the original demand-allegedly unopposed before the Tribunal-as final and adjust the pre-deposit accordingly without seeking rectification or challenging the Tribunal's order. - HELD THAT: - Although certain heads of demand were not opposed in the reply to the show-cause notice and the appeal memo concentrated on the principal demand, the Court held it was not open to the subordinate authority to reinterpret the CESTAT's omnibus order as limited to only some heads. Where the scope or effect of a Tribunal's order is in doubt, the proper course for the revenue was to seek rectification from the Tribunal or to challenge the Tribunal's order before the High Court. The Deputy Commissioner erred in adjusting the pre-deposit on the basis of his own interpretation of the appellate order without availing these remedies.

The Deputy Commissioner should have sought rectification or challenged the Tribunal's order; his unilateral adjustment treating parts of the demand as final was impermissible.

Time-barred show-cause notice - Consequences of the Tribunal's finding that the show-cause notice was time-barred and the impact of that finding on penalty and demand. - HELD THAT: - The Tribunal found that when no taxability is involved the question of evasion does not arise and the extended period of limitation could not be invoked; consequently, the show-cause notice was held to be time-barred and the penalty imposed by the adjudicating authority was set aside. The High Court accepted that the Tribunal set aside the order in original and treated the appellate outcome as operative for purposes of determining entitlement to refund of pre-deposit.

The Tribunal's conclusion that the show-cause notice was time-barred led to setting aside the original order, with the High Court enforcing the refund of pre-deposit subject to the department's appellate rights.

Final Conclusion: The impugned orders adjusting the petitioner's pre-deposit were quashed; the department is directed to refund the pre-deposit within four months, without prejudice to the department's right to challenge the Tribunal's judgment by appropriate proceedings.

Declared service - service portion in an activity wherein goods, being food or any other article of human consumption or any drink is supplied as part of the activity - take-away/packed food constitutes sale and not provision of service - scope of restaurant service limited to services provided by specified (air conditioned) restaurants - Circular clarifying that mere sale by way of pick up or home delivery is not service - Rule 2C - prescription of service portion for restaurant and outdoor catering

Take-away/packed food constitutes sale and not provision of service - declared service - service portion in an activity wherein goods, being food or any other article of human consumption or any drink is supplied as part of the activity - Liability to service tax on food cooked and supplied in packed form (take-away/home delivery) by the appellant. - HELD THAT: - The tribunal found as an undisputed fact that the appellant sold food in packed form either over the counter or through delivery to customers and did not serve it within the restaurant. While Section 66E declares a service portion where food or drink is supplied as part of an activity, the admissibility of service tax depends on the nature of the transaction. Following the reasoning in the decision of the Hon'ble Madras High Court (paras. 21-29 reproduced in the record) and the Board's clarifications in Circular 173/8/2013, the levy is confined to situations where specified services (ambience, seating, waiter service, etc.) in air conditioned restaurants are actually provided and predominate; mere sale of food by way of take away or home delivery lacks those attributes and therefore amounts to sale of goods rather than a taxable service. The tribunal expressly applied that ratio to the identical facts of the present case and held that the activity is a sale and not a service; hence service tax does not apply. The tribunal noted Rule 2C and the concept of a service portion in value determination, but held that those provisions do not convert a take away sale into a service when the characteristics of restaurant service are absent. [Paras 4]

The activity of cooking and supplying packed food as take away/home delivery by the appellant is sale of goods and not a service liable to service tax.

Final Conclusion: The appeal is allowed; the impugned order confirming service tax, interest and penalties in respect of packed/take away food for the period 2013-14 to 2017-18 (upto June 2017) is set aside, with consequential relief.

Sovereign function of State police - Security Agency Service - Levy of service tax on charges collected for statutory duties deposited into government treasury - CBEC Circular No.89/7/2006-ST three condition test for exemption

Sovereign function of State police - Security Agency Service - CBEC Circular No.89/7/2006-ST three condition test for exemption - Whether the supply of armed police personnel by the State Police Department to various departments, undertakings and persons attracts Security Agency Service and service tax - HELD THAT: - The Tribunal found that the appellant is a State Police Department discharging statutory duties under the Kerala State Police Act and that amounts charged for supplying police personnel are collected under authority of law and deposited into the Government treasury. Applying the CBEC Circular No.89/7/2006 ST, exemption from service tax is warranted where (a) the authority performs statutory and mandatory duties under law, (b) charges are levied as per the relevant law, and (c) amounts collected are deposited into the government treasury. Having regard to these criteria and earlier decisions of the Tribunal and other Benches which held that police departments acting in agency of the State are performing sovereign/statutory functions and are not persons running security business, the Tribunal held the issue to be no longer res integra and concluded that the activity does not fall within the definition of Security Agency Service liable to service tax. [Paras 6, 7]

The supply of armed police personnel by the State Police Department is a sovereign/statutory function and does not attract service tax as Security Agency Service; the demands are unsustainable.

Final Conclusion: Impugned orders imposing service tax, interest and penalties on the appellant are set aside; appeals allowed with consequential relief as per law.

Remand for fresh adjudication - fresh evidence after adjudication - verification report by field officers - compliance with tribunal directions

Remand for fresh adjudication - verification report by field officers - fresh evidence after adjudication - compliance with tribunal directions - Whether the Commissioner (Appeals) rightly remanded the matter to the adjudicating authority to consider the verification report dated 05.03.2018 which was received after the adjudication order but prepared pursuant to the Tribunal's earlier remand. - HELD THAT: - The Tribunal had earlier remanded the matter to the adjudicating authority to verify the facts concerning payment of Service Tax. In compliance with that direction the adjudicating authority sought and obtained a verification report from the field officers, but the report was received after the adjudication order had been passed. The Commissioner (Appeals) entertained the Revenue's appeal on the basis of that verification report and remanded the matter for fresh adjudication so that the adjudicating authority could consider the report made in compliance with the Tribunal's directions. The Court found that the verification report, though received post-decision, was generated pursuant to the earlier remand and related to existing records; consequently it was appropriate for the Commissioner (Appeals) to remit the matter for reconsideration. The assessee was afforded the opportunity to rebut the observations in the verification report on the basis of records and documents.

The Commissioner (Appeals) correctly remanded the matter to the adjudicating authority to consider the verification report dated 05.03.2018; no infirmity in the impugned order.

Final Conclusion: The impugned order remanding the matter to the adjudicating authority is upheld; the appeal is dismissed and the assessee has liberty to rebut the verification report on record.

Interest on pre-deposit - refund of pre-deposit - Section 35FF of the Central Excise Act - pre-deposit made during investigation/search - interest from date of deposit till date of refund - rate of interest 12% per annum - following Apex Court in Sandvik Asia Ltd.

Interest on pre-deposit - Section 35FF of the Central Excise Act - pre-deposit made during investigation/search - rate of interest 12% per annum - Claim for interest on amount deposited during search (pre-deposit) under Section 35FF was allowable and payable from the date of deposit until the date of refund. - HELD THAT: - The Tribunal held that interest on pre-deposit made during investigation/search is payable under Section 35FF. Relying on its precedent in Parle Agro (P) Ltd. and following the Supreme Court's ruling in Sandvik Asia Ltd., the Tribunal enhanced the rate of interest to 12% per annum. The adjudicating authority was directed to grant interest from the date of deposit (23.06.2016) until the date of refund and to disburse the same within two months from service of this order. The Tribunal rejected the Revenue's reliance on the impugned order and divergent authority, concluding that the appellant was entitled to interest on the pre-deposit.

Appeal allowed; adjudicating authority directed to grant interest @12% p.a. from date of deposit till refund and pay the same within two months.

Final Conclusion: The appeal was allowed and the adjudicating authority was directed to grant interest at 12% per annum on the pre-deposit from the date of deposit until the date of refund, to be paid within two months of service of this order.

Refund of Cenvat credit on sale of capital goods - interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 - retrospective operation of statutory amendment - application of Section 11A of the Central Excise Act, 1944 - remand to adjudicating authority for fresh consideration - right to personal hearing in adjudication

Remand to adjudicating authority for fresh consideration - right to personal hearing in adjudication - Tribunal's order set aside and matter remitted for fresh adjudication with directions. - HELD THAT: - The High Court found that the Tribunal's decision upholding the Department's entitlement to recover the amount (extracted after an alleged erroneous refund) required reconsideration, particularly because the Tribunal did not address the assessee's pivotal contention concerning the effect of its excise exemption on the obligation to refund Cenvat credit. The Department accepted that fresh consideration was appropriate. The Court therefore set aside the Tribunal's order dated January 16, 2020 and the adjudicating authority's order, remitting the entire matter to the adjudicating authority for de novo consideration in accordance with law. The Court directed that the adjudicating authority decide the matter within four months of receipt of this order and afford the assessee or its representative a personal hearing; parties remain free to challenge the fresh adjudication before the Tribunal in accordance with law. [Paras 18, 19, 20]

Tribunal's order and the adjudicating authority's order set aside; matter remanded to adjudicating authority for fresh consideration with directions to decide within four months and to afford personal hearing.

Refund of Cenvat credit on sale of capital goods - interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 - retrospective operation of statutory amendment - application of Section 11A of the Central Excise Act, 1944 - Substantive legal controversies (including applicability of unamended Section 11A, interpretation of original and amended Rule 3(5), and the question whether exemption negates obligation to refund) were not finally adjudicated and are remanded for fresh consideration. - HELD THAT: - The Court reviewed competing contentions: (a) that unamended Section 11A applied and the Department could not invoke Section 11A as if the Assistant Commissioner had not applied his mind; (b) that amendment to Rule 3(5) in 2007 introduced a depreciation-based rebate and questions arose as to retrospective effect; and (c) the core contention that the assessee's entitlement to refund of excise duty by reason of its location made any refund obligation for adjusted Cenvat credit revenue-neutral and should preclude disgorgement. The Court observed that the Tribunal did not address the critical third contention and that earlier authorities had differing views on retrospective operation of the 2007 amendment. Given these unresolved and determinative legal questions and the Department's concession as to the need for reconsideration, the Court did not decide these matters on merits but remitted them for fresh consideration by the adjudicating authority. [Paras 14, 15, 16, 17, 18]

The substantive legal issues concerning the applicability of Section 11A, interpretation and retrospective effect of Rule 3(5) (2007 amendment), and the effect of the assessee's excise exemption on the obligation to refund Cenvat credit are remanded to the adjudicating authority for fresh adjudication; no final decision on these points is recorded.

Final Conclusion: The Tribunal's order and the adjudicating authority's order are set aside; the matter is remitted to the adjudicating authority for de novo consideration of the full gamut of issues (including the effect of the assessee's exemption and the applicability/interpretation of Rule 3(5) and Section 11A) with a direction to decide within four months and to afford a personal hearing.

Promissory estoppel - legitimate expectation - tax exemption / tax holiday entitlement - effect of amendment of notifications under Central Excise law (Section 38A) - protection of accrued rights upon supersession of subordinate legislation

Promissory estoppel - legitimate expectation - tax exemption / tax holiday entitlement - Whether the respondents could, by the 2005 notification, exclude three of the four Khasra numbers earlier included in Annexure II and thereby deny the petitioner the exemption/tax-holiday benefits - HELD THAT: - The Court found that the petitioner's Khasra Nos. 148D, 176B, 173B and 176A were included in Annexure II to Notification No.50/2003 and that the petitioner had relied upon that inclusion in expanding capacity and claiming exemptions. No rationale or assertion of superior public interest was advanced by the respondents to justify later exclusion of three Khasra numbers by the 2005 notification. Applying the principles embodied in promissory estoppel and legitimate expectation, and having regard to precedents cited by the petitioner that protect accrued rights to exemption where conditions are fulfilled, the Court held that the State cannot withdraw the benefit in the absence of a shown overriding public interest. The coordinate decision relied on by the respondents was distinguished on facts because in the present case the Khasra numbers had been expressly included in Annexure II and the petitioner had received contemporaneous communication recognising entitlement. The Court therefore concluded that the respondents were estopped from taking away the exemption granted earlier. [Paras 6, 7, 8, 9, 10]

The exclusion of three Khasra numbers by the subsequent notification could not deprive the petitioner of the exemption; promissory estoppel and legitimate expectation applied to protect the petitioner's entitlement.

Effect of amendment of notifications under Central Excise law (Section 38A) - protection of accrued rights upon supersession of subordinate legislation - Whether the subsequent notification which superseded the earlier notification could, by operation of law, affect rights, privileges or liabilities already accrued to the petitioner - HELD THAT: - The Court relied upon Section 38A of the Central Excise Act, 1944, which provides that an amendment, repeal or supersession of a rule, notification or order shall not, unless a different intention appears, affect any right, privilege, obligation or liability acquired or accrued under the earlier instrument. Applying that statutory provision to the present facts, the Court held that the later notification which removed three Khasra numbers could not impair the rights and privileges already accrued to the petitioner under the earlier notification. No contrary intention was demonstrated by the respondents and no superior public interest was shown to justify such impairment. [Paras 11, 12]

By virtue of Section 38A, the subsequent notification could not deprive the petitioner of rights and privileges already accrued under the earlier notification; the accrued exemption/tax-holiday remains protected.

Tax exemption / tax holiday entitlement - Relief to be granted in view of findings on entitlement and statutory protection - HELD THAT: - Having held that the petitioner's entitlement could not be withdrawn by the later notification and that accrued rights are protected, the Court addressed the appropriate relief. Noting objection as to the exact form of prayer, the Court exercised remedial discretion to modulate relief so as to give practical effect to its conclusions. It directed that the benefits granted to the petitioner under Annexure II to Notification No.50/2003 shall continue to be available to the petitioner for past, present and future transactions, thereby restoring and preserving the petitioner's exemption/tax-holiday entitlement. [Paras 13]

The petitioner is entitled to continue receiving the benefits under Annexure II of Notification No.50/2003 for past, present and future transactions; the writ petition is allowed.

Final Conclusion: Writ petition allowed. The Court held that the petitioner's inclusion in Annexure II gave rise to a legitimate expectation and promissory estoppel, and that Section 38A of the Central Excise Act prevents a subsequent notification from affecting accrued rights; accordingly the benefits under Annexure II of Notification No.50/2003 shall continue to be available to the petitioner for past, present and future transactions.

Central Excise exemption under industrial policy - eligibility of new industrial units in non-industrial areas - interpretation of Notification No.50/2003 - effect of Nodal Agency's clarification on statutory notification - precedential effect of a Full Bench decision

Interpretation of Notification No.50/2003 - eligibility of new industrial units in non-industrial areas - effect of Nodal Agency's clarification on statutory notification - precedential effect of a Full Bench decision - Whether a new industrial unit located in an area categorised as 'Industrial Activity in Non-Industrial Area' but whose Khasra number is specified in the Central Government notification granting exemption is entitled to claim Central Excise exemption under Notification No.50/2003 despite a contrary clarification from the State Nodal Agency. - HELD THAT: - The Court accepted and applied the Full Bench decision in M/s Om Ispat (supra), holding that Annexure-II to Notification No.50/2003 plainly entitles new industrial units commencing commercial production on or after 07.01.2003 to the exemption if located in the areas and Khasra numbers specified therein. The Court rejected the respondents' reliance on the Managing Director, SIDCUL's clarification to the effect that the category 'Industrial Activity in Non-Industrial Area' was intended only for existing units undertaking substantial expansion. The Full Bench had examined the categories in Annexure-II and found no basis for reading them as limiting the benefit to existing units; the words "to be notified alongwith extension" were treated as a typographical error and did not require any separate notification under the Central Excise Act to make the exemption operative. Consistently, the Court held that an administrative opinion of the Nodal Agency cannot override the plain scope of the statutory notification, and that the object of the industrial policy-encouraging industrial growth-supports extending the exemption to new units whose Khasra numbers are specified in the notification. On these grounds the impugned order and the opinion relying on the Nodal Agency clarification were quashed. [Paras 15, 16, 17, 18, 20]

Writ petition allowed; order dated 16.03.2005 and the opinion of the respondent rejecting exemption on the basis of the Nodal Agency's clarification are quashed and the petitioner is held entitled to exemption under Notification No.50/2003.

Final Conclusion: The challenge succeeds: the Court, following the Full Bench in M/s Om Ispat, held that Notification No.50/2003 entitles a new unit specified by Khasra number in the notification to Central Excise exemption even if situated in an area described as 'Industrial Activity in Non-Industrial Area', and quashed the impugned order and the opinion based on the Nodal Agency's contrary clarification.

Pre-deposit adjustment - rectification under Section 127 - non-application of mind - purposive interpretation of statutory scheme - violation of Article 14 - judicial review under Article 226 - functus officio - Form SVLDRS 3

Pre-deposit adjustment - Form SVLDRS 3 - rectification under Section 127 - non-application of mind - Whether the Designated Committee erred in failing to reckon the pre-deposit while issuing Form SVLDRS 3 and whether the Form SVLDRS 3 should be set aside. - HELD THAT: - The Court found that the appellant had, before the close of the scheme, filed Form SVLDRS-1 declaring the pre-deposit and thereafter pointed out the error by invoking the remedy under Section 127 and Rule 6, including filing written submissions and producing challans and Tribunal order. Despite this, the Designated Committee issued Form SVLDRS 3 reflecting the pre-deposit as "0" without recording reasons or exercising its corrective power. The department's own circulars and FAQs indicate that pre-deposits made pursuant to appellate orders are to be adjusted and that apparent clerical/arithmetic errors may be rectified. In these circumstances the Court concluded that the decision recorded in Form SVLDRS 3 manifested total non-application of mind and was devoid of reasons, warranting quashing. The Court therefore set aside the impugned Form SVLDRS 3 and directed the Designated Committee to reckon the pre-deposit and issue a fresh Form SVLDRS 3. [Paras 9, 13, 14, 15, 16]

Form SVLDRS 3 set aside; Designated Committee directed to reckon the pre-deposit and issue a fresh Form SVLDRS 3.

Purposive interpretation of statutory scheme - violation of Article 14 - judicial review under Article 226 - Whether the Court could intervene under Article 226 where the Designated Committee's action was arbitrary, without reasons and contrary to the object of the scheme. - HELD THAT: - The Court applied a purposive construction of the SVLDRS scheme, noting its object of settlement and the requirement that the Designated Committee consider materials placed before it. Where administrative action is arbitrary, unreasonable or devoid of reasons and thereby violates Article 14, judicial review under Article 226 is available. The Court held that the Designated Committee's failure to consider the appellant's submissions and to give reasons amounted to such arbitrariness, justifying interference and remedial directions. [Paras 9, 11, 12, 15]

Writ jurisdiction under Article 226 properly invoked; interference warranted due to arbitrariness and lack of reasons.

Functus officio - rectification under Section 127 - Whether the Designated Committee had become functus officio after the scheme's closing date and therefore was barred from rectifying or deciding the appellant's pending representation. - HELD THAT: - The Court rejected the revenue's contention that the Designated Committee became functus officio upon the scheme's closure on 30th June, 2020. It reasoned that the cut-off date governed filing of declarations and payments, but the adjudicatory function of the Designated Committee to decide declared cases commences upon receipt of applications and may be exercised thereafter. Since the appellant's representation and application under Section 127 were made well before the scheme closed and were not decided, the Committee could and should have acted; consequently it was not functus officio and must now reconsider by issuing a fresh Form SVLDRS 3 in conformity with the directions given. [Paras 2, 8, 17, 18]

Designated Committee not functus officio; directed to reconsider and issue fresh Form SVLDRS 3.

Rectification under Section 127 - Remand for fresh decision to the Designated Committee with specific direction to reckon the pre-deposit and issue fresh Form SVLDRS 3 within a stipulated time. - HELD THAT: - The Court, while setting aside the earlier Form SVLDRS 3, directed the Designated Committee to give effect to the pre-deposit made by the appellant and to issue a fresh Form SVLDRS 3. The Committee was ordered to act within six weeks from receipt of the judgment's server copy. The remand is therefore for fresh decision implementing the Court's direction that the pre-deposit be reckoned; the Court also observed that reasonable time shall be afforded to the appellant to make any payment that may become due after issuance of the fresh form. [Paras 16, 18, 19]

Matter remitted to the Designated Committee to issue fresh Form SVLDRS 3 within six weeks, reckoning the pre-deposit; reasonable time to be allowed for any payment.

Final Conclusion: The appeal is allowed, the writ petition is allowed, the impugned Form SVLDRS 3 and demand are set aside for want of reasons and non-application of mind; the Designated Committee is directed to reckon the appellant's pre-deposit and issue a fresh Form SVLDRS 3 within six weeks, the Committee not being functus officio despite the scheme's closure.

Service of order on authorized agent - Limitation and condonation under Section 85 of the Finance Act, 1994 - Application of Section 37C(1)(a) of the Central Excise Act, 1944 - Commencement of limitation upon communication of order - Remand for fresh adjudication on merits with opportunity of hearing - Principle that rules of limitation are not intended to destroy rights

Service of order on authorized agent - Application of Section 37C(1)(a) of the Central Excise Act, 1944 - Validity of service of the adjudicating authority's order on Manoj Kumar Shrivastava as service upon the petitioner via an authorized agent. - HELD THAT: - The Court examined the endorsement that the impugned order was received by Manoj Kumar Shrivastava and the respondent's reliance on registration/formalities to treat him as the petitioner's legal representative. Applying the language of Section 37C(1)(a) (made applicable by Section 83 of the Finance Act, 1994), the Court held that valid service on an authorized agent requires documentary proof of authorization. The respondent produced no authority letter or equivalent evidence showing Manoj Kumar Shrivastava was appointed or authorized to accept service on behalf of the petitioner; the mere presence of an e-mail description in a registration form did not suffice to establish agency or authorization. In view of the absence of material proving authorized agency, the Court concluded there was no proper service of the order upon the petitioner. [Paras 16, 17, 18]

Service on Manoj Kumar Shrivastava was not established as valid service on the petitioner; the order was not properly served.

Limitation and condonation under Section 85 of the Finance Act, 1994 - Commencement of limitation upon communication of order - Principle that rules of limitation are not intended to destroy rights - Whether the appeals were barred by limitation and whether the impugned appellate orders dismissing them on limitation were sustainable. - HELD THAT: - The Court construed Sub section (3A) of Section 85 to confirm the statutory limitation framework: appeals made on or after the Finance Bill, 2012 must be presented within two months of receipt of the order, with a discretionary extension of one further month (total three months). The Court noted Section 85 does not itself state when limitation commences other than from the date of 'receipt' of the decision or order. Having found that service (and thus 'receipt') upon the petitioner was not established, the Court observed the appellate authorities' dismissal on limitation could not stand. The Court also recalled the guiding principle from higher authority that rules of limitation should not operate to destroy rights and that discretion to condone delay must be exercised having regard to bona fides and absence of mala fides. Applying these principles, the Court held the orders of the Commissioner (Appeals) and the Tribunal dismissing the appeals as time barred were unsustainable. [Paras 11, 12, 19, 20]

The appeals could not be held time barred in the absence of proved service; the orders dismissing the appeals on limitation were quashed.

Remand for fresh adjudication on merits with opportunity of hearing - Relief following findings on service and limitation-whether matter should be remitted for fresh decision on merits. - HELD THAT: - Having found that service was not proved and that the appellate orders dismissing the appeals on limitation were unsustainable, the Court did not express any view on the merits of the underlying demand. Instead, the Court quashed the impugned appellate orders and remitted the matter to the Commissioner (Appeals), CGST, Customs & Central Excise, Bhopal, for fresh adjudication on merits in accordance with law, directing that the petitioners be afforded a proper opportunity of hearing. [Paras 20]

Impugned orders quashed; matter remitted to Commissioner (Appeals) for fresh adjudication on merits with opportunity of hearing.

Final Conclusion: The writ petitions are allowed to the extent that the appellate orders dismissing the appeals as time barred are quashed; service on the alleged legal representative was not proved, and the matter is remitted to the Commissioner (Appeals) to decide the appeals on merits after affording the petitioners a proper hearing. No opinion is expressed on the merits.

Fixation of special rate of value addition - exemption of excise duty by way of refund - consideration of applications under industrial policy notifications - limitation for filing applications - stay on passing final orders in response to show cause notices

Fixation of special rate of value addition - consideration of applications under industrial policy notifications - limitation for filing applications - Respondent authority directed to consider and decide the petitioner's applications for fixation of a special rate of value addition under the notifications, without insisting on the time of filing in view of the Gauhati High Court judgment. - HELD THAT: - The petition sought directions for adjudication of applications submitted on 18.05.2020 for fixation of a special rate of value addition under the industrial policy notifications which provide exemption/refund of excise duty. The court noted that respondents had been rejecting such applications on the ground of limitation and that a decision of the Gauhati High Court held that rejection for non-submission within the prescribed date may not be tenable. In these circumstances the court directed the Commissioner, Central Excise & GST, Jammu to consider and decide the petitioner's applications in accordance with law and expeditiously, without insisting on the time of filing of the applications, applying the ratio of the Gauhati High Court decision where appropriate. The directive requires fresh consideration and adjudication of the applications by the authority rather than deciding the matter on the limitation ground at this stage. [Paras 8]

Respondent No.2 to consider and decide the petitioner's applications for fixation of special rate of value addition in accordance with law, expeditiously and without insisting on the time of filing, applying the Gauhati High Court view.

Stay on passing final orders in response to show cause notices - No final orders shall be passed pursuant to the show cause notices for a limited period pending decision on the applications for special rate fixation. - HELD THAT: - The court, while directing fresh consideration of the fixation applications, further protected the petitioner from immediate final action by ordering that no final order shall be passed in response to the two show cause notices dated 29.10.2021 and 01.12.2021 for one month or until the applications are decided as directed. This interim protection ensures that the authority's proceedings on the show cause notices do not culminate in final adverse orders before the applications for fixation of special rate are determined. [Paras 9]

Proceedings on the two show cause notices are restrained from resulting in any final order for one month or until the directed decision on the applications is rendered.

Final Conclusion: The petition is disposed of by directing the Commissioner, Central Excise & GST, Jammu to consider and decide the petitioner's applications for fixation of a special rate of value addition in accordance with law and without insisting on the time of filing (applying the Gauhati High Court view) expeditiously, and by restraining final orders on the two show cause notices for one month or until those applications are decided.

Admissibility of CENVAT credit on payment under Reverse Charge Mechanism - interpretation and applicability of Rule 9(1)(bb) of Cenvat Credit Rules - interpretation and applicability of Rule 9(1)(e) of Cenvat Credit Rules - effect of payment under Voluntary Compliance Encouragement Scheme (VCES) on credit - demand for reversal of CENVAT credit and penalty under section 78 of the Finance Act

Admissibility of CENVAT credit on payment under Reverse Charge Mechanism - interpretation and applicability of Rule 9(1)(bb) of Cenvat Credit Rules - interpretation and applicability of Rule 9(1)(e) of Cenvat Credit Rules - Whether Rule 9(1)(bb) applies to service tax paid by the recipient under the Reverse Charge Mechanism and whether credit is admissible under Rule 9(1)(e). - HELD THAT: - The Tribunal held that Rule 9(1)(bb) refers expressly to a supplementary invoice, bill or challan issued by a "provider of output service" and therefore does not apply where tax is paid by the recipient under the Reverse Charge Mechanism. In the present case the appellant undisputedly paid service tax as the recipient of service; accordingly the correct statutory provision for availing CENVAT credit is Rule 9(1)(e), which permits credit on the basis of a challan evidencing payment by the service recipient. The Tribunal relied on earlier decisions applying the same distinction and concluded that a Rule 9(1)(bb)-based denial could not be sustained where Rule 9(1)(e) is applicable to RCM payments. [Paras 5]

Rule 9(1)(bb) is not applicable to service tax paid by the recipient under RCM; credit is correctly claimable under Rule 9(1)(e).

Effect of payment under Voluntary Compliance Encouragement Scheme (VCES) on credit - demand for reversal of CENVAT credit and penalty under section 78 of the Finance Act - Whether the demand for reversal of CENVAT credit, interest and penalty premised on Rule 9(1)(bb) and Section 78 could be sustained in the facts of this case. - HELD THAT: - The Tribunal found that the Revenue's case was founded on the inapplicable provision Rule 9(1)(bb). Since the payment of service tax under VCES was made by the appellant in its capacity as recipient and credit was availed in terms of Rule 9(1)(e), the demand for reversal and consequential interest and penalty could not be upheld on the basis invoked by the adjudicating authority. The Tribunal therefore set aside the demand and the penalty imposed. [Paras 6]

The demand of reversal of CENVAT credit, interest and penalty set up on the basis of Rule 9(1)(bb) is not sustainable and is set aside.

Final Conclusion: Appeal allowed; impugned order set aside as the credit taken on payment of service tax under Reverse Charge Mechanism was admissible under Rule 9(1)(e) and Rule 9(1)(bb) could not be invoked to sustain the demand, interest and penalty.

Relevancy of statements under Section 9D - Admissibility of statements recorded before a Gazetted Central Excise Officer - Mandatory procedure for admitting investigative statements in adjudication proceedings - Right to cross-examination where statement is sought to be admitted under Section 9D

Relevancy of statements under Section 9D - Admissibility of statements recorded before a Gazetted Central Excise Officer - Statements recorded during inquiry before a Gazetted Central Excise Officer cannot be relied upon to prove the truth of their contents in adjudication proceedings unless the procedure prescribed by Section 9D is complied with. - HELD THAT: - The Tribunal applied the statutory scheme of Section 9D and the precedents construing it to hold that the evidentiary value of statements recorded before a Gazetted Central Excise Officer is contingent on compliance with the conditions in Section 9D. Where none of the clause (a) handicaps exist, clause (b) mandates that the person who made the statement be examined as witness before the adjudicating authority and that the authority record reasons forming the opinion that the statement should be admitted in the interests of justice. Absent compliance with these mandatory steps, reliance on such statements for the truth of their contents amounts to reliance on irrelevant material and is impermissible. [Paras 3]

The Tribunal held that the statements relied upon in the impugned order lacked the requisite procedural foundation under Section 9D and therefore could not be treated as evidence of the truth of their contents.

Mandatory procedure for admitting investigative statements in adjudication proceedings - Right to cross-examination where statement is sought to be admitted under Section 9D - The matter is remanded to the original adjudicating authority to follow the procedure under Section 9D in respect of all relied-upon statements, to examine relevant persons as witnesses, afford opportunity for cross-examination, and pass a reasoned order in accordance with principles of natural justice. - HELD THAT: - Both parties conceded that Section 9D procedure had not been followed for the statements on which the adjudicating authority relied. The Tribunal therefore did not express any view on the merits but required the Commissioner to determine, after summoning and examining makers of the statements as witnesses and, where appropriate, permitting cross-examination, which statements (if any) should be admitted under Section 9D and to record reasons for admitting or excluding them. The Tribunal emphasised that the adjudicating authority must pass a reasoned order applying Section 9D and observe principles of natural justice before acting on such statements. [Paras 4, 5, 6]

Appeals allowed by way of remand; impugned order set aside and matter remitted to the original authority to proceed in accordance with Section 9D and natural justice, with all issues left open for fresh adjudication.

Final Conclusion: The appeals are allowed by remand: the impugned order is set aside and the matter is remitted to the original adjudicating authority to comply with the mandatory procedure of Section 9D (including examination of statement-makers and providing opportunity for cross-examination), record reasons for admission or exclusion of statements and thereafter pass a reasoned order observing principles of natural justice.

Maintainability of writ for specific performance - delay and laches - representation does not extend period of limitation - relegation to representation where petition is barred by delay - fresh cause of action on rejection of belated representation

Delay and laches - relegation to representation where petition is barred by delay - Whether the High Court should have dismissed the writ petition at the threshold as barred by delay and latches instead of directing NOIDA to decide a belated representation - HELD THAT: - The Court held that the petitioner first sought enforcement of Clause 12 by making a representation only after ten years and had earlier filed a writ after eleven years from the deed. When a writ petition is found to be belated and barred by delay and latches, the High Court ought to dismiss the petition at the threshold rather than rejuvenate time barred claims by relegating the litigant to make a fresh representation or by directing the authority to decide it. Permitting such a course gives the belated litigant an opportunity to claim a fresh cause of action upon any subsequent rejection and thereby undermines limitation and laches principles. High Courts must examine delay and latches before directing remedial administrative action in order to avoid creating artificial fresh causes of action. [Paras 4, 5]

The High Court erred in permitting the matter to proceed by directing decision of a belated representation; where a writ petition is barred by delay and latches it should have been dismissed at the threshold.

Representation does not extend period of limitation - Whether making a representation extends the period of limitation or cures prior delay in seeking judicial relief - HELD THAT: - The Court reiterated the settled proposition that a mere representation does not extend the period of limitation and an aggrieved person must approach the court expeditiously and within a reasonable time. Acceptance of belated representations or directions to decide them cannot be allowed to function as an extension of limitation; if the petitioner is guilty of delay and laches, the writ should be dismissed rather than converted into fresh litigation by subsequent administrative action. [Paras 5]

A belated representation does not extend limitation; the petitioner remained time barred and the High Court should have disposed of the petition accordingly.

Maintainability of writ for specific performance - Whether a writ under Article 226 is maintainable to seek specific performance of a contractual clause after the limitation period for a suit would have expired - HELD THAT: - On merits the Court agreed with the High Court that relief in the nature of specific performance is not maintainable under Article 226 in the facts of this case, particularly where the claim is brought after a period (ten/eleven years) by which a suit for specific performance would have been barred by limitation. The High Court correctly refused relief in the form of specific performance of Clause 12 of the sale deed. [Paras 6]

Writ relief for specific performance, raised after the period by which a suit would be time barred, is not maintainable and the High Court correctly refused such relief.

Final Conclusion: The special leave petition is dismissed; the High Court's approach in refusing specific performance and its failure to dismiss a belated writ at the threshold is addressed-High Courts must scrutinise delay and latches and not allow belated representations to be used to create fresh causes of action.

Quashing of FIR under Section 174-A of the Indian Penal Code - setting aside declaration as proclaimed person in proceedings under Section 138 of the Negotiable Instruments Act - abuse of the process of court - compromise in proceedings under Section 138 of the Negotiable Instruments Act - regularisation of non-appearance by subsequent appearance

Setting aside declaration as proclaimed person in proceedings under Section 138 of the Negotiable Instruments Act - compromise in proceedings under Section 138 of the Negotiable Instruments Act - regularisation of non-appearance by subsequent appearance - Validity of the order dated 20.12.2019 declaring the petitioner as a proclaimed person in the proceedings under Section 138 of the Negotiable Instruments Act, 1881. - HELD THAT: - The Court found that the order declaring the petitioner as a proclaimed person was passed without due service; zimni orders and the record show the petitioner was not served and the declaration followed non-service. Subsequently the petitioner joined the trial, obtained bail and the main complaint under Section 138 was compromised and withdrawn by the complainant on receipt of the cheque amount. In these circumstances the default which led to the proclamation stood regularised by the petitioner's subsequent appearance and by the parties' compromise. The Court applied the principle that continuation of proceedings predicated on non-appearance, where the main complaint has been regularised or withdrawn by compromise, amounts to an abuse of the process of court and therefore the impugned proclamation was unsustainable.

Order dated 20.12.2019 declaring the petitioner as a proclaimed person is set aside.

Quashing of FIR under Section 174-A of the Indian Penal Code - abuse of the process of court - compromise in proceedings under Section 138 of the Negotiable Instruments Act - Validity of FIR No.483 dated 17.02.2020 registered under Section 174-A IPC consequent to the proclaimed person order in the Section 138 proceedings. - HELD THAT: - The FIR under Section 174-A was registered solely because the petitioner had been declared a proclaimed person in the Section 138 proceedings. Given that the proclamation was issued without due service, the petitioner subsequently appeared and the main complaint was compromised and withdrawn, continuation of the criminal proceedings under Section 174-A would be an abuse of process. The Court relied on consistent decisions of co-ordinate Benches holding that where the main complaint is withdrawn or the default is regularised, FIRs registered solely on that basis must be quashed to prevent misuse of criminal process.

FIR No.483 dated 17.02.2020 registered under Section 174-A IPC and all consequential proceedings are quashed.

Final Conclusion: The petition is allowed: the order declaring the petitioner as a proclaimed person and FIR No.483 dated 17.02.2020 under Section 174-A IPC, together with all subsequent proceedings, are quashed on the grounds of non-service, subsequent regularisation/compromise of the main complaint and abuse of the process of court.

Dismissal of complaint for want of prosecution amounts to acquittal - appeal against order of acquittal in complaints lies to the High Court under Section 378(4) Cr.P.C. - Sessions Court lacks jurisdiction to entertain revision against acquittal in summons trial - triability of offence under Section 138 of the Negotiable Instruments Act by a Judicial Magistrate First Class

Dismissal of complaint for want of prosecution amounts to acquittal - appeal against order of acquittal in complaints lies to the High Court under Section 378(4) Cr.P.C. - Sessions Court lacks jurisdiction to entertain revision against acquittal in summons trial - Validity of the Sessions Judge's order restoring a complaint dismissed for want of prosecution in a Section 138 N.I. Act summons trial - HELD THAT: - The Court held that dismissal of a complaint for non-appearance of the complainant operates as an acquittal of the accused. Where an acquittal has been recorded in a case instituted upon complaint, the statutory remedy for the complainant is to seek leave to appeal to the High Court under Section 378(4) Cr.P.C.; the Sessions Court does not have jurisdiction to entertain a revision/appeal in such circumstances. The judgment relies on the established principle that offences triable by a Judicial Magistrate First Class (including those under Section 138 of the Negotiable Instruments Act) if resulting in acquittal give the complainant a right of appeal to the High Court under Section 378(4), and that appellate or revision proceedings before the Sessions Court are limited to cases specified under Section 378(1). Applying these authorities and statutory scheme, the Court concluded that the Sessions Judge exceeded jurisdiction in setting aside the dismissal and restoring the complaint, rendering the impugned order void.

Impugned order of the Sessions Judge restoring the complaint dismissed for want of prosecution is set aside as not maintainable; the complainant's remedy was by leave to appeal to the High Court under Section 378(4) Cr.P.C.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed and the order dated 18.01.2022 of the Sessions Judge restoring the complaint dismissed for want of prosecution is set aside on the ground that the remedy to the complainant was to seek leave to appeal to the High Court under Section 378(4) Cr.P.C.

Vicarious liability of directors under the Negotiable Instruments Act - requirement of specific averments to fasten liability on a director - effect of resignation from directorship on criminal liability for offences committed thereafter - strict construction of penal provisions creating vicarious liability - exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash criminal proceedings

Effect of resignation from directorship on criminal liability for offences committed thereafter - vicarious liability of directors under the Negotiable Instruments Act - Whether the complaint under Sections 138/141 read with Section 142 of the Negotiable Instruments Act against the petitioners can be quashed because they had tendered resignation before issuance of the cheques and were not signatories to the cheques. - HELD THAT: - The court found as an admitted fact that the petitioners tendered their resignations on 01.02.2018 and 03.01.2018 respectively, before the cheques were issued on 27.03.2018, and that they were not signatories to the dishonoured cheques. The resignation forms (DIR-11 and DIR-12) were filed with the Registrar and available on the Registrar's website, a fact not disputed by the complainant. The complaint contained only an omnibus averment that all accused directors were responsible for day-to-day affairs of the company and would be vicariously liable. Relying on the settled principle that Section 141 NI Act creates penal vicarious liability which must be strictly construed, and on the requirement that a complaint must specify how and in what manner a director was responsible for conduct of the company's business, the court held that the bald omnibus allegation was insufficient. Given the uncontroverted resignation prior to issuance of the cheques and absence of any specific role pleaded against the petitioners, continuation of proceedings against them would be an abuse of process. The court considered contrary authority relied upon by the complainant and concluded that the facts here-resignation before issuance and lack of specific averments-distinguish the matter and do not justify sending the petitioners to trial. [Paras 12, 13, 14, 16, 17]

Proceedings against the petitioners were quashed because they had resigned before commission of the alleged offence and the complaint lacked specific averments to fasten vicarious liability upon them.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed; the criminal complaint under Sections 138/141 read with Section 142 NI Act against the petitioners is quashed on the ground that they had resigned before issuance of the cheques and the complaint contains only bald omnibus averments insufficient to fasten vicarious liability.

Joinder of charges - Separate trial as the general rule - Enabling nature of Sections 219 and 220 Cr.P.C. - Distinct offences under Section 138 of the Negotiable Instruments Act - Single transaction test under Section 220 Cr.P.C.

Joinder of charges - Enabling nature of Sections 219 and 220 Cr.P.C. - Distinct offences under Section 138 of the Negotiable Instruments Act - Single transaction test under Section 220 Cr.P.C. - Application under Sections 219 and 220 Cr.P.C. for charging with and trying two complaints under Section 138 NI Act together was rightly dismissed. - HELD THAT: - Section 218 Cr.P.C. establishes separate charges and separate trials as the normal rule; Sections 219 and 220 are exceptions and use permissive language ('may'), making them enabling provisions rather than mandatory directives to join trials. The provisions in Part B dealing with joinder must be read harmoniously, but their permissive character permits a court to refuse joint trial without committing illegality. Under Section 138 NI Act, each dishonoured cheque gives rise to a distinct cause of action only after the prescribed notice period; separate cheques issued on different dates and dishonoured on presentation on different dates, followed by separate notices, constitute separate offences. Where the payee has chosen to institute two separate complaints (three cheques in one complaint and two in another) and the underlying liabilities are of different natures (individual loan repayment versus payment for goods to a sole proprietorship), the facts do not satisfy the 'one series of acts so connected as to form the same transaction' test in Section 220. Accordingly, there was no illegality, perversity or irregularity in the trial Court's exercise of discretion to refuse to charge and try both complaints together.

Application for joinder under Sections 219 and 220 Cr.P.C. dismissed and impugned order upheld.

Final Conclusion: The High Court dismissed the petition; the trial court's refusal to charge and try the two complaints under Sections 219/220 Cr.P.C. together was held to be within judicial discretion and not liable to interference, as the dishonour of separate cheques on different dates giving rise to distinct offences under Section 138 NI Act did not constitute a single transaction attracting joint trial.

Compounding of offence under Section 138 of the Negotiable Instruments Act - withdrawal of criminal complaint on satisfaction of compromise - quashing of conviction and sentence consequent to compounding - release of amounts deposited in court to the complainant upon compounding - reduction/exemption of compounding fee in appropriate cases

Compounding of offence under Section 138 of the Negotiable Instruments Act - withdrawal of criminal complaint on satisfaction of compromise - quashing of conviction and sentence consequent to compounding - Whether the complaint and the convictions recorded by the courts below could be treated as compounded and quashed upon the respondent's acceptance of the compensation paid by the petitioner and consequent withdrawal of the complaint. - HELD THAT: - The Court recorded that the respondent/complainant, of his own free will and without coercion, stated that he had received the compensation (subject to completion of a small shortfall which was later paid) and agreed to withdraw the complaint and compound the matter. Counsel for the petitioner confirmed receipt of instructions that the petitioner had paid the balance amount. In view of the respondent's unconditional statement of withdrawal and the payment of the compensation, the High Court held the matter to be compounded. Consequent to the compounding, the Court quashed and set aside the convictions and sentences recorded by the courts below and acquitted the petitioner of the accusation.

Complaint permitted to be withdrawn; offence treated as compounded; convictions and sentences quashed and petitioner acquitted.

Release of amounts deposited in court to the complainant upon compounding - Whether the amounts deposited by the petitioner in the trial court should be released to the respondent following compounding. - HELD THAT: - The Registry's report and counsels' statements established sums deposited in the trial court and that the outstanding shortfall had been paid prior to recording final compromise. The High Court directed the Registry and the trial Court to release the amounts deposited by the petitioner, together with up-to-date interest, in favour of the respondent by remitting the same to the respondent's bank account as instructed by him.

Registry and trial Court directed to remit deposited amounts with accrued interest to the respondent's bank account.

Reduction/exemption of compounding fee in appropriate cases - Whether the compounding fee fixed at the statutory percentage should be reduced in the petitioner's case. - HELD THAT: - Relying on the principle that courts may reduce compounding fees in appropriate cases, and having regard to the financial condition of the petitioner as presented, the Court exercised its discretion to impose a lesser compounding fee. Considering the facts and circumstances, the Court directed payment of a reduced compounding fee instead of the statutory percentage.

Petitioner directed to deposit a reduced compounding fee of Rs. 5,000 with the State Legal Services Authority within six weeks.

Final Conclusion: The High Court allowed the revision petition by permitting the complainant to withdraw the complaint on settlement, treated the offence as compounded, quashed the convictions and sentences, directed release of court-deposited amounts with accrued interest to the complainant, and ordered a reduced compounding fee to be paid to the State Legal Services Authority.

Delay and laches - cause of action - repeated representations do not extend limitation - condonation of delay - limitation in writ jurisdiction

Delay and laches - cause of action - repeated representations do not extend limitation - Whether the writ petition seeking direction to consider representations is maintainable despite a delay of several decades and earlier communication rejecting the claim - HELD THAT: - The Court accepted the finding that the shop was demolished in 1975 and the writ petition was filed in 2021, a delay of over 46 years, without any satisfactory explanation for waiting nearly five decades to approach the Court. The Court relied on the letter dated 02.06.2010 in which Respondent No.1 informed the appellant that there was no scope for new entrants and that the request for an alternative site could not be acceded to; this communication defeated the appellant's plea that representations had been pending without response. The Court held that, at the latest, a cause of action arose in 2010 when the representation was rejected, yet the appellant waited another 11 years before filing the writ petition and failed to explain the inordinate delay. The Court further held that the subsequent representation dated 11.10.2019 and the prayer for disposal of that representation could not be used to create a fresh cause of action or to circumvent the bar of delay and laches, applying the settled principle that repeated representations do not extend limitation nor revive an extinguished cause of action. Consequently, the writ petition was properly held to be barred by delay and laches and not amenable to condonation on the material before the Court. [Paras 5, 6, 7]

Writ petition barred by delay and laches; earlier communication of rejection (02.06.2010) fixed the cause of action and subsequent representations could not revive it.

Final Conclusion: The Letters Patent Appeal is dismissed; the High Court concurs with the Single Judge that the writ petition was barred by delay and laches and that the appeal lacks merit.