TaxTMI Updates e-Newsletter
Mar 10,2022

Regular bail - non-bailable offences where input tax credit wrongly availed or utilised exceeds five hundred lakh rupees - compounding of offences under the CGST Act - necessity of arrest in offences punishable with imprisonment up to five years (Arnesh Kumar principle) - delay in concluding trial as factor favouring grant of bail - risk of tampering with evidence and influencing witnesses - prosecutorial burden to prove mastermind role in fraudulent ITC scheme

Regular bail - non-bailable offences where input tax credit wrongly availed or utilised exceeds five hundred lakh rupees - delay in concluding trial as factor favouring grant of bail - compounding of offences under the CGST Act - risk of tampering with evidence and influencing witnesses - prosecutorial burden to prove mastermind role in fraudulent ITC scheme - Whether the applicant should be released on regular bail in the offences under the Central and Gujarat GST Acts and section 120B IPC - HELD THAT: - The court examined the material collected by the Directorate General of GST Intelligence which alleges that the applicant operated proprietary concerns implicated in passing inadmissible input tax credit through a chain of non existent firms and that investigation and pre charge evidence disclose manipulations and alleged transfers showing the applicant as the mastermind. The offences invoked include the non bailable category where wrongly availed or utilised input tax credit exceeds five hundred lakh rupees, but the Court observed that trial and further investigation will take considerable time. The Court applied the principle that delay in concluding trial is a relevant factor in bail adjudication and noted statutory provisions enabling recovery and compounding of offences under the CGST Act which permit abatement of criminal proceedings upon payment of tax, interest and penalty. Balancing the prosecutorial case and the risk factors, the Court found no sufficient basis to refuse bail in the exercise of discretion: although the prosecution must prove the allegation of mastermindship at trial and there are apprehensions of tampering, the availability of recovery/compounding remedies and the prospective long duration of proceedings justified conditional release. The Court therefore exercised discretion in favour of bail subject to stringent conditions intended to mitigate risk of tampering or flight, including bond, surety, surrender of passport and restrictions on travel and residence. [Paras 5, 6, 7]

Application allowed; applicant directed to be released on regular bail on executing bond and surety and subject to specified conditions (including surrender of passport, not leaving India without permission, furnishing residence address and other protective conditions)

Final Conclusion: Bail granted on conditions. The Court exercised discretionary power to enlarge the applicant on regular bail taking into account the prosecution material, the likely duration of trial, and statutory recovery/compounding provisions, imposing conditions to guard against tampering, flight or misuse of liberty.

Infructuousness of statutory notice upon satisfaction of demand and withdrawal - Withdrawal of statutory notice - Constitutional challenge to Section 16(2)(c) of the CGST Act and Rule 86A of the CGST Rules - Abstention where identical constitutional issue is pending before other High Courts - Disposition of petition as no cause survives

Infructuousness of statutory notice upon satisfaction of demand and withdrawal - Withdrawal of statutory notice - The challenge to the notice dated 12.3.2020 (Annexure P/3) became infructuous following payment of the tax demand and withdrawal of the notice by the revenue. - HELD THAT: - The Court recorded the statement of respondents that the tax demand raised by the impugned notice had been satisfied by respondent No.5 and that respondent No.3 had withdrawn the notice. On that factual basis the petition insofar as it attacked Annexure P/3 was rendered devoid of any live controversy. The Court therefore declined to proceed with adjudication of the validity of that notice and treated the challenge as no longer maintainable.

Petition disposed insofar as it relates to the challenge to Annexure P/3 as infructuous.

Constitutional challenge to Section 16(2)(c) of the CGST Act and Rule 86A of the CGST Rules - Abstention where identical constitutional issue is pending before other High Courts - Disposition of petition as no cause survives - The constitutional validity of Section 16(2)(c) of the Central Goods and Service Tax Act, 2017 and Rule 86A of the Central Goods and Service Tax Rules, 2017 was not adjudicated and was left undetermined by this Court. - HELD THAT: - The Court noted that the challenge to the constitutional validity of the cited provisions was already pending before other High Courts. Given the factual resolution of the specific notice dispute (rendering that part infructuous) and the existence of identical challenges elsewhere, the Court declined to decide the constitutional question and disposed of the petition without adjudicating the validity of Section 16(2)(c) and Rule 86A.

The petition does not decide the constitutional validity of Section 16(2)(c) of the CGST Act or Rule 86A of the CGST Rules; those challenges remain pending elsewhere and the petition is disposed accordingly.

Final Conclusion: The petition is disposed: the challenge to the impugned notice (Annexure P/3) is rendered infructuous following payment of the demand and withdrawal of the notice; the Court did not adjudicate the constitutional validity of Section 16(2)(c) of the CGST Act or Rule 86A of the CGST Rules, those issues remaining pending before other High Courts.

Concessional rate of GST for works contract services supplied to a Government entity - definition of Government entity for concessional rate - exception where civil structure is meant predominantly for use for commerce, industry or any other business or profession - classification and applicable GST rate for construction of IT towers

Definition of Government entity for concessional rate - concessional rate of GST for works contract services supplied to a Government entity - Whether the services rendered by the applicant to TSIIC qualify for the concessional GST rate applicable to works contract services supplied to a Government entity. - HELD THAT: - The Authority examined whether TSIIC falls within the notification definition of a Government entity. The Memorandum of Association shows that TSIIC is owned by the State Government and pursues objectives to implement government schemes and further state and central policies for industrial development. On this basis TSIIC qualifies as a Government entity. However, the concessional entry for works contract services applies only where the civil structure is not meant predominantly for commerce, industry or any other business or profession. The works executed were construction of IT towers which, by their nature, are meant for commerce/industry. Consequently, even though the recipient is a Government entity, the subject work falls within the exception to the concessional entry and does not attract the reduced rate provided at the cited entry. [Paras 7, 8]

No; the supply does not qualify for the concessional rate despite the recipient being a Government entity because the civil structure is meant for commerce/industry.

Classification and applicable GST rate for construction of IT towers - exception where civil structure is meant predominantly for use for commerce, industry or any other business or profession - The appropriate classification and rate of GST payable on the works contract for construction of IT towers executed for TSIIC. - HELD THAT: - Having found that the constructed IT towers are civil structures meant for commerce/industry and thus fall within the exception to the concessional entry, the Authority applied the standard rate provision for such works contract services. The ruling specifies that the correct tax treatment is to charge GST at the applicable rates for works contract services not covered by the concessional entry. [Paras 7, 8]

Taxable at 9% under CGST and 9% under SGST (i.e., 9% CGST & 9% SGST).

Final Conclusion: TSIIC qualifies as a Government entity, but the works contracted (construction of IT towers) are civil structures meant for commerce/industry and therefore do not attract the concessional rate; the works contract services are taxable at 9% under CGST and 9% under SGST.

Scope of advance ruling - Jurisdictional competence of the Authority for Advance Ruling - Advance ruling in relation to supply undertaken by the applicant - Advance ruling not permissible for supply received by the applicant - Rejection under sub-section (2) of section 98 of the GST Act

Scope of advance ruling - Advance ruling in relation to supply undertaken by the applicant - Advance ruling not permissible for supply received by the applicant - Jurisdictional competence of the Authority for Advance Ruling - Whether the Authority for Advance Ruling can decide questions that relate to a supply being received by the applicant rather than supplies undertaken or proposed to be undertaken by the applicant - HELD THAT: - The Authority examined the statutory definition of an advance ruling under clause (a) of section 95 read with section 97 and found that an advance ruling is available only in relation to matters concerning supplies of goods or services or both being undertaken or proposed to be undertaken by the applicant. The questions posed by the applicant concerned the legal character of a proposed transaction insofar as the applicant would be the recipient of the supply, not the supplier or a person undertaking the supply. Since the subject-matter of the applicant's questions falls outside the class of matters enumerated for advance rulings, the Authority lacks jurisdiction to determine those questions. The authorized advocates for the applicant were informed of this limitation and conceded the point. [Paras 1]

The application is beyond the scope of matters on which an advance ruling can be given and is therefore rejected under sub-section (2) of section 98 of the GST Act.

Final Conclusion: The Authority held that it has no jurisdiction to entertain an application seeking an advance ruling on supplies received by the applicant (as opposed to supplies undertaken or proposed to be undertaken by the applicant) and consequently rejected the application under the statutory provision permitting rejection.

Grant of bail - Parity in grant of bail - Completion of investigation / custodial necessity - Statement recorded under section 70 of the GST Act - Conditions to prevent tampering with evidence and influencing witnesses - Application of higher court precedents on bail

Grant of bail - Completion of investigation / custodial necessity - Statement recorded under section 70 of the GST Act - Parity in grant of bail - Conditions to prevent tampering with evidence and influencing witnesses - Application for bail by accused Mukesh Gupta was allowed subject to conditions. - HELD THAT: - The court found that the accused's role was not shown to be directly connected with the firms allegedly availing fraudulent ITC and that the primary evidence against him consisted of WhatsApp chats and his statement recorded under section 70 of the GST Act. The accused had been in custody since 09.02.2022, his statement under section 70 had been recorded and the investigation qua him was not pending further; several co-accused with more direct involvement had already been enlarged on bail or granted anticipatory/interim bail. Having regard to these facts and the principles governing grant of bail as applied by higher courts, continued custody was not considered necessary. The court therefore admitted the accused to bail on furnishing personal bond and surety, while imposing specified conditions to ensure attendance, to prevent tampering with evidence and influencing witnesses, and to restrain departure from the country without permission.

Accused admitted to bail on furnishing personal bond and surety subject to conditions including joining investigation when required, not influencing witnesses or tampering with evidence, depositing passport and not leaving the country without prior permission.

Final Conclusion: Bail application allowed: accused Mukesh Gupta admitted to bail on furnishing personal bond and one surety with conditions to secure investigation and prevent interference; application disposed of.

Mark-to-market loss - ascertained business loss - valuation of derivative contracts as on balance-sheet date - stock-in-trade excluded from investments for Rule 8D/Section 14A purpose - disallowance of interest under Rule 8D - comparison of interest income and interest expenditure - precedent application in revenue matters

Mark-to-market loss - ascertained business loss - valuation of derivative contracts as on balance-sheet date - Mark-to-market loss on open equity stock-future contracts and interest-rate swaps treated as ascertained business loss and allowed by the Tribunal. - HELD THAT: - The Court noted that where transactions are not speculative and forward/derivative contracts are entered into in the regular course of business, losses on such forward contracts as determined by mark-to-market valuation have been held to be allowable as business losses. A Division Bench decision of this Court was relied upon to that effect. Having examined the ITAT's approach, the Court found no perversity or incorrect principle in treating the mark-to-market loss as an ascertained business loss and held that the questions raised did not involve any substantial question of law warranting interference. [Paras 2, 6]

Tribunal's allowance of mark-to-market losses as business/ascertained losses upheld; no substantial question of law made out.

Stock-in-trade excluded from investments for Rule 8D/Section 14A purpose - precedent application in revenue matters - Investment in shares held as stock-in-trade is not to be treated as 'investments' for the purposes of Section 14A read with Rule 8D; consequently the Rule does not apply to such holdings. - HELD THAT: - The Tribunal followed a previous decision of this Court holding that the provisions governing disallowance under Section 14A and the computation mechanism under Rule 8D do not apply to shares and securities that are held as stock-in-trade. The Bench observed that nothing was placed before it to demonstrate that the cited Bombay High Court decision was inapplicable to the facts of the present case, and therefore there was no reason to disturb the Tribunal's conclusion. [Paras 3, 6]

Tribunal's conclusion that Rule 8D/Section 14A does not apply to shares held as stock-in-trade accepted.

Mark-to-market loss - ascertained business loss - Whether mark-to-market losses should be excluded from additions to book profits under the corporate tax provision invoked (question derived from valuation issues) was not a substantial question of law. - HELD THAT: - This contention derived from the earlier questions on valuation of mark-to-market losses. The Court recorded that, since it was not persuaded that the primary valuation questions (A-C) raised any substantial question of law, the derivative contention that such losses should or should not be added back to book profits similarly did not present a substantial question for consideration. Accordingly, no interference was warranted. [Paras 4, 6]

Derivative question on addition to book profits rejected as not raising any substantial question of law.

Disallowance of interest under Rule 8D - comparison of interest income and interest expenditure - precedent application in revenue matters - No disallowance of interest under Rule 8D(2)(ii) where the assessee demonstrated that interest income (and/or interest-bearing funds) exceeds interest expenditure or investments, and the Tribunal so held. - HELD THAT: - On the facts the ITAT accepted the assessee's demonstration that interest income during the relevant years exceeded interest expenditure and relied on an earlier Division Bench decision of this Court which set aside disallowance where the assessee's interest-bearing funds exceeded investments in tax-free securities. The High Court found nothing to indicate that that precedent was inapplicable and held that the Tribunal did not misapply principles or act perversely in reaching its conclusion. [Paras 5, 6]

Tribunal's finding that no interest disallowance was warranted under Rule 8D(2)(ii) upheld.

Final Conclusion: The appeal is dismissed for lack of merit; the Tribunal's decisions on valuation of mark-to-market losses, treatment of shares held as stock-in-trade for Rule 8D/Section 14A purposes, and non-disallowance of interest under Rule 8D(2)(ii) are upheld.

Deduction under Section 43B - actually paid - no-lien/escrow account - wholly and exclusively for the business - burden of substantiation

Deduction under Section 43B - actually paid - no-lien/escrow account - Whether deposit of disputed electricity duty in a court-ordered no-lien/escrow account amounts to 'actual payment' for claiming deduction under Section 43B. - HELD THAT: - Section 43B permits deduction only in the previous year in which the relevant sum is 'actually paid'. The interim orders of the High Court and the Supreme Court directed the assessee to deposit the disputed portion of electricity duty in a no-lien/escrow account to prevent the State Government from having access to the amount during litigation. Although the assessee had parted with the funds into that account, the payment was conditional and the State Government did not receive the amount; the assessee retained a potential recourse to the funds depending on the litigation's outcome. Emphasis must be placed on the word 'actually': a payment implies both payer and payee, and where the payee has no access to the amount and the payer has not wholly lost control, the requirement of 'actual payment' is not satisfied. The placement of funds in a no-lien/escrow account under judicial directions is therefore analogous to furnishing a bank guarantee or other device to avoid immediate transfer to the recipient, which previous decisions have held does not constitute 'actual payment' for Section 43B purposes. For these reasons the deposit in the escrow account did not meet the 'actually paid' requirement and the deduction claimed was rightly disallowed. [Paras 16, 17, 20, 21]

Deposit in the no-lien/escrow account does not constitute 'actual payment' under Section 43B; deduction disallowed.

Wholly and exclusively for the business - burden of substantiation - Whether the assessee discharged the burden to substantiate that foreign travel expenses of Directors were wholly and exclusively for business so as to allow the full claim as export promotion expenses. - HELD THAT: - The assessee claimed foreign travel expenses of certain Directors as export promotion expenses and supplied names of the Directors, destination cities and aggregate amounts spent on each. The tax authorities required further particulars-such as break-up of travel, stay and entertainment expenses or other details demonstrating that the trips were exclusively for business. Where a claim is that expenditure is 'wholly and exclusively' for business, the assessee bears the burden of substantiation. The assessing officer's conclusion that the particulars furnished were insufficient was not unreasonable; in the absence of better particulars to establish that the trips were entirely for business purposes, a partial disallowance was justified. Accordingly, withholding 20% of the claimed amount was legally permissible. [Paras 22, 23, 24]

Assessee failed to satisfactorily substantiate that the foreign travel expenses were wholly and exclusively for business; 20% disallowance upheld.

Final Conclusion: Appeal dismissed; the Tribunal's confirmation of the disallowance of the disputed electricity duty deposited in a no-lien/escrow account (not qualifying as 'actually paid' under Section 43B) and the partial disallowance of foreign travel expenses for lack of adequate substantiation is upheld.

Developer versus contractor - eligibility for deduction under Section 80IB(10) - ownership of land as condition precedent for claiming deduction - interpretation of the proviso/Explanation to Section 80IB(10)

Developer versus contractor - eligibility for deduction under Section 80IB(10) - ownership of land as condition precedent for claiming deduction - Whether the assessee is a developer (and thus eligible for deduction under Section 80IB(10)) notwithstanding that the land had been conveyed to the SRA and whether ownership of the land is a condition precedent for claiming the deduction. - HELD THAT: - The court affirmed the factual conclusion of the Tribunal and the CIT(A) that the agreement between the assessee and the SRA must be read as a whole and, on its terms, the assessee had undertaken the entire responsibility to construct tenements and infrastructural facilities and to hand over the constructed building to the SRA. On that basis the assessee could not be reduced to the status of a mere contractor. The court agreed with the approach of treating the nature of the assessee's role by reference to the substance of the contract rather than the formal transfer of land. The court further relied on the reasoning of the Gujarat High Court in Commissioner of Income Tax vs. Radhe Developers that Section 80IB(10) does not require that ownership of the land must vest in the developer to qualify for the deduction and that the term "developer" has a wide connotation. Applying that principle, the High Court held that the questions raised did not disclose any substantial question of law against the finding that the assessee was a developer entitled to the deduction under Section 80IB(10). [Paras 5, 6]

The assessee was properly treated as a developer for the purposes of Section 80IB(10) despite conveyance of the land to the SRA; ownership of the land is not a condition precedent for claiming the deduction.

Final Conclusion: The appeals are without merit and are dismissed with no order as to costs.

No deduction of tax certificate under section 197 of the Income-tax Act, 1961 - Lower/ Nil deduction certificate and administrative approval - TRACES Portal technical delay affecting issuance of certificate - Writ remedy for directing issuance of tax deduction certificate

No deduction of tax certificate under section 197 of the Income-tax Act, 1961 - Lower/ Nil deduction certificate and administrative approval - Whether the writ petition seeking quashing of the ex-parte rejection and direction to issue a No Deduction / Lower Deduction Certificate should be entertained in view of the respondents' stated willingness to grant the certificate and to upload approval on the TRACES Portal - HELD THAT: - The respondents, by affidavit and instructions on record, have informed the Court that administrative approval for issuance of a Lower/ Nil Deduction Certificate under section 197 has been accorded and that approval would be uploaded on the TRACES Portal; the Deputy Commissioner's comments record that after set-off of losses and considering TDS already withheld, a Nil deduction certificate may be issued if deemed fit. In view of this categorical stand and the specific undertaking to upload the approval (subject to technical delay on TRACES), the grievance which formed the subject-matter of the writ petition stands satisfied. Given the respondents' concession and active steps to grant the relief sought, exercise of writ jurisdiction to compel issuance was rendered unnecessary. [Paras 3, 5]

Writ petition disposed of as the respondents have undertaken to issue the Lower/ Nil Deduction Certificate and to upload the approval on the TRACES Portal, thereby satisfying the petitioner's grievance.

Final Conclusion: The petition was disposed of by the High Court after the Income Tax authorities represented that administrative approval for a Lower/ Nil Deduction Certificate under section 197 has been granted and would be uploaded on the TRACES Portal, rendering further relief by writ unnecessary.

Recording of reasons - lack of application of mind / non-speaking order - opportunity of hearing - remand for fresh decision - stay of demand under Section 220(6) of the Income Tax Act - attachment of bank accounts under Section 226(3) of the Income Tax Act

Recording of reasons - lack of application of mind / non-speaking order - opportunity of hearing - remand for fresh decision - Impugned order dated 16.12.2021 refusing stay except on payment of 20% was set aside for want of reasons and without affording hearing, and the matter remanded for fresh decision. - HELD THAT: - The High Court found that the order dated 16.12.2021 does not disclose any application of mind and failed to indicate reasons for the decision to conditionally grant stay. The petitioner was entitled to be heard and the authority was required to deal with the prayer by recording reasons. For these defects the order could not stand and the matter was remitted to respondent No.1 for a fresh decision in accordance with law after affording an opportunity of hearing to the petitioner within the stipulated time. [Paras 13, 14, 15]

Order dated 16.12.2021 set aside; matter remanded to respondent No.1 to decide afresh within thirty days after affording hearing.

Attachment of bank accounts under Section 226(3) of the Income Tax Act - Attachments of the petitioner's bank accounts and APT Online account were ordered to be withdrawn forthwith. - HELD THAT: - Having set aside the impugned order, the Court directed immediate withdrawal of the attachments imposed on the petitioner's bank accounts and the APT Online account. The direction was incidental to setting aside the non-speaking order and was given without expressing any view on the merits of the underlying assessment or the petitioner's entitlement to stay. [Paras 16]

Respondent Nos.5 and 6 directed to withdraw the attachments forthwith.

Final Conclusion: Impugned order of respondent No.1 dated 16.12.2021 set aside for want of reasons and lack of hearing; matter remanded for fresh decision within thirty days with opportunity of hearing; attachments on the petitioner's bank and APT Online accounts ordered withdrawn immediately; no opinion expressed on merits.

Pre-deposit for entertaining appeal under Section 246A - stay of demand under Section 220(6) - assessing authority's discretion to impose conditions for grant of stay - maintainability of writ under Article 226 against assessment order where statutory remedy exists

Pre-deposit for entertaining appeal under Section 246A - Appeal under Section 246A is not contingent upon making a pre-deposit of 20% of the demand for the purpose of entertaining the appeal. - HELD THAT: - The Court accepted that Section 246A does not contemplate a condition of pre-deposit for entertaining an appeal and noted that the petitioner's appeal before the Commissioner of Income Tax (Appeals) has in fact been entertained without requiring such a pre-deposit. Reliance on an earlier decision to the same effect was held to be correctly applied by the petitioner insofar as the appeal's entertainability is concerned, and there was no dispute that the appeal was admitted. [Paras 8, 9, 10]

The appeal under Section 246A shall be entertained without insisting on a pre-deposit as a condition for admission.

Stay of demand under Section 220(6) - assessing authority's discretion to impose conditions for grant of stay - Assessing authority may, in the exercise of its discretion under Section 220(6), require conditions (including payment of a portion of the demand) as a precondition for staying the remaining demand. - HELD THAT: - The Court held that while entertainability of an appeal under Section 246A does not require pre-deposit, during pendency of the appeal the assessing authority may make a demand and the assessee seeking stay of that demand must proceed under Section 220(6). The communication by the assessing authority directing payment of 20% and requiring an application for stay of the remaining 80% was characterised as an exercise consistent with Section 220(6). The Court emphasised that such grant of stay is discretionary and the authority may impose conditions after considering the facts and circumstances, including the financial condition of the assessee. [Paras 11, 12, 13, 15]

The direction to pay 20% of the demand as a condition related to seeking stay under Section 220(6) is permissible as an exercise of the assessing authority's discretion.

Maintainability of writ under Article 226 against assessment order where statutory remedy exists - Extraordinary writ jurisdiction under Article 226 is not available to bypass the statutory remedy of applying to the assessing authority under Section 220(6) for stay of demand. - HELD THAT: - The Court rejected the petitioner's attempt to impugn the assessment order before the High Court on the ground that the petitioner had an alternative remedy: to apply under Section 220(6) for stay of the demand. Since the assessing authority had issued a communication directing payment of 20% and inviting an application for stay of the balance, the petitioner could not seek to overturn that approach by invoking writ jurisdiction. The Court therefore dismissed the writ petition while expressly permitting the petitioner to make an application under Section 220(6), which the assessing authority must decide at its discretion taking into account relevant factors. [Paras 13, 14, 15, 16]

The writ petition is dismissed; the petitioner must seek stay under Section 220(6) and may not bypass that remedy by invoking Article 226.

Final Conclusion: Writ petition dismissed: appeal under Section 246A may be entertained without a pre-deposit, but the assessing authority validly directed payment of 20% as a condition related to stay under Section 220(6); the petitioner must seek stay from the assessing authority under Section 220(6), which shall be considered in the authority's discretion.

Validity of notice under Section 148 after insertion of Section 148A - Commencement of amendments by the Finance Act, 2021 and prospective applicability - Delegated power under the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 to extend time limits - Validity of Ministry of Finance notifications extending time limits and saving pre amendment provisions - Doctrine of conditional legislation and permissible administrative delegation

Validity of notice under Section 148 after insertion of Section 148A - Commencement of amendments by the Finance Act, 2021 and prospective applicability - Validity of the notice issued under Section 148 on 31.03.2021 in view of insertion of Section 148A with effect from 01.04.2021. - HELD THAT: - The court considered whether the insertion of Section 148A of the Income tax Act by the Finance Act, 2021 (which was to come into force on 1 April 2021) rendered the notice issued under Section 148 on 31 March 2021 invalid for want of the procedural safeguards introduced by Section 148A. The court accepted that Section 148A prescribes prior enquiry, opportunity of hearing and prior approval before issuance of a notice under Section 148 once the amendment is in force. However, the determinative question was whether the amended regime had, in law, become operative on 1 April 2021 so as to displace the pre existing procedure applicable to notices issued up to 31 March 2021. Having examined the enactment and the related notifications, the court held that the notice dated 31.03.2021 fell within the temporal scope of the pre amendment regime and therefore was not rendered invalid simply because Section 148A was to commence the following day.

The notice dated 31.03.2021 issued under Section 148 is not vitiated by the subsequent insertion of Section 148A and is valid.

Delegated power under the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 to extend time limits - Validity of Ministry of Finance notifications extending time limits and saving pre amendment provisions - Doctrine of conditional legislation and permissible administrative delegation - Lawfulness and effect of notifications issued by the Central Government under the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 that extended the time limit for issuance of notices under Section 148 and saved the pre amendment provisions up to specified dates. - HELD THAT: - The court analysed the statutory delegate power conferred by the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 to permit the Central Government to extend time limits falling in the pandemic period. The Ministry of Finance notifications dated 31.03.2021 and 27.04.2021 were held to validly specify end dates and to extend the time for completion of actions (including issuance of notices under Section 148) first to 30.04.2021 and subsequently to 30.06.2021. The notifications expressly clarified that, for purposes of issuance of notices under Section 148 during the extended period, the provisions of Section 148 (and related provisions) as they stood on 31.03.2021 would continue to apply. The court treated this exercise of delegated power as a permissible instance of conditional legislation and administrative delegation made necessary by the pandemic, not as an impermissible abdication of legislative power.

The Ministry of Finance notifications extending the operation of pre amendment Section 148 and saving its application up to the notified dates are lawful and operate to preserve notices issued on or before those dates.

Final Conclusion: The petition challenging the notice dated 31.03.2021 is dismissed: the notice issued under Section 148 for Assessment Year 2014 2015 is valid, the delegated notifications lawfully extended and saved the pre amendment regime pending activation of Section 148A, and no interference with the notice is warranted.

Disallowance under section 40A(2)(b) as excessive and unreasonable payment to a specified person - requirement of determining fair market rate before invoking section 40A(2) - restriction on interest charged to a firm in which assessee is partner under section 40(b)(iv)

Disallowance under section 40A(2)(b) as excessive and unreasonable payment to a specified person - requirement of determining fair market rate before invoking section 40A(2) - restriction on interest charged to a firm in which assessee is partner under section 40(b)(iv) - Whether the disallowance made under section 40A(2)(b) in respect of excess interest paid to related parties can be sustained. - HELD THAT: - The Tribunal held that before making a disallowance under section 40A(2)(b) the Assessing Officer must objectively form an opinion on the basis of material demonstrating that the payment was excessive or unreasonable having regard to the fair market rate. The AO in the present case accepted that loans were given to a partnership firm in which the assessee is a partner and that interest receivable was at a lower rate (limited by the principle in section 40(b)(iv)), but failed to determine the fair market rate or bring any comparable instances to establish that the interest paid to specified persons at a higher rate was excessive. In absence of any market comparison or material to show unreasonableness, the mere fact of higher interest paid to related parties, juxtaposed with lower interest charged to the firm where the assessee is a partner, did not suffice to attract section 40A(2)(b). Applying these principles and relying on the approach adopted by co-ordinate benches, the Tribunal concluded that the AO had not discharged the precondition of ascertaining fair market value/price and therefore could not sustain the disallowance.

The addition under section 40A(2)(b) is deleted and the ground of appeal is allowed.

Final Conclusion: The appeal is allowed and the disallowance made under section 40A(2)(b) for AY 2014-15 is deleted.

Cessation of liability - application of section 41(1) of the Act - addition on account of undisclosed income - mutual recognition of liability in books and confirmations - remand verification of bank encashment and post-dated cheques

Cessation of liability - application of section 41(1) of the Act - mutual recognition of liability in books and confirmations - remand verification of bank encashment and post-dated cheques - addition on account of undisclosed income - Deletion of addition made under section 41(1) of the Act of Rs. 2,51,24,000/- on account of alleged cessation of liability (and alternative finding of payment from undisclosed income). - HELD THAT: - The Tribunal accepted the CIT(A)'s findings that both parties (assessee and seller) recognised the outstanding sum in their books and that the seller confirmed the amount as receivable. The seller's affidavit and a Memorandum of Understanding recorded an agreed mode of settlement by transfer of specified land, which remained pending. The remand verification by the Assessing Officer showed that only Rs. 10 lakhs was encashed and the remaining cheques mentioned in the sale deed were not encashed, corroborating that the balance consideration remained unpaid. In these circumstances there was no cessation of liability in the hands of the assessee; the liability remained live and contingent on the agreed land transfer. The Assessing Officer's alternative conclusion that the amount had been paid out of undisclosed income was not supported by evidence. The Tribunal therefore found no infirmity in the CIT(A)'s deletion of the addition under section 41(1). [Paras 10, 11, 12]

The addition under section 41(1) was correctly deleted; the appeal filed by the Assessing Officer is dismissed.

Final Conclusion: The Tribunal upheld the deletion of the addition of Rs. 2,51,24,000/- made under section 41(1) and dismissed the Revenue's appeal, holding that the liability remained in the assessee's books and there was no evidence of payment from undisclosed income.

Deductibility of employees' contribution to PF and ESI where payment made before the due date for filing return under section 139(1) - prospective effect of Finance Act, 2021 amendment to section 36(1)(va) and section 43B - amendment not clarificatory or retrospective where it alters existing law - binding effect of jurisdictional High Court decision

Deductibility of employees' contribution to PF and ESI where payment made before the due date for filing return under section 139(1) - binding effect of jurisdictional High Court decision - Employees' contribution to ESI/PF paid after the statutory due date under the respective statutes but before the due date for filing return under section 139(1) is allowable as a deduction for AY 2018-19. - HELD THAT: - The Tribunal followed the binding decision of the jurisdictional High Court in Essae Teraoka Pvt. Ltd. v. DCIT and the co-ordinate decision of the Bangalore Bench in M/s. Shakuntala Agarbathi Company v. DCIT, holding that where the assessee remitted employees' contribution to ESI/PF prior to the due date for furnishing the return under section 139(1), the amount is deductible. The Tribunal observed that the Finance Act, 2021 amendments to sections 36(1)(va) and 43B alter the law as it previously stood and therefore cannot be treated as clarificatory or retrospective to affect the assessment year in question. Applying that reasoning to AY 2018-19, the amended provisions do not apply and the deduction must be allowed where payment was made before the section 139(1) filing deadline. [Paras 7]

Disallowance deleted and deduction allowed in respect of employees' contribution to ESI/PF for AY 2018-19 where payment was made before the due date for filing the return under section 139(1).

Prospective effect of Finance Act, 2021 amendment to section 36(1)(va) and section 43B - amendment not clarificatory or retrospective where it alters existing law - The Finance Act, 2021 amendment to sections 36(1)(va) and 43B is prospective and does not apply to the assessment year under consideration. - HELD THAT: - Relying on the Supreme Court's principle that a provision alleged to be 'for removal of doubts' cannot be read as retrospective if it changes existing law, the Tribunal held that the 2021 amendment changes the position of law and is not clarificatory. The amendment is effective from 01.04.2021 and applies from AY 2021-22 onwards; consequently it does not govern AY 2018-19 and cannot defeat the deduction which was allowable under the earlier law. [Paras 7]

Amendments made by Finance Act, 2021 to sections 36(1)(va) and 43B do not apply to AY 2018-19 and are prospective in effect.

Final Conclusion: The Tribunal allowed the appeal, deleting the disallowance and directing that employees' contributions to ESI/PF remitted before the due date for filing the return under section 139(1) be allowed as a deduction for AY 2018-19; the Finance Act, 2021 amendments to sections 36(1)(va) and 43B were held prospective and inapplicable to the year under consideration, with liberty to the Revenue to seek rectification subject to statutory limits if the Supreme Court later rules otherwise.

Double taxation - long term capital gain - income from other sources - consenting party - ownership and chargeability of capital gains - taxation only by authority of law (Article 265)

Double taxation - long term capital gain - consenting party - ownership and chargeability of capital gains - taxation only by authority of law (Article 265) - Whether the receipt of Rs. 10 lakhs by the assessee as a consenting party in the sale of land (and the long term capital gain offered by him) could be taxed in his hands when the entire sale consideration was held taxable in full in the hands of his mother as the sole owner. - HELD THAT: - The assessee signed the sale deed as a consenting party and received Rs. 10 lakhs; he suo motu offered Rs. 5.39 lakhs as long term capital gain and the AO treated the receipt as "income from other sources" by making an addition of Rs. 4.61 lakhs. The CIT(A) had held in the appeal of the assessee's mother that she was the sole owner and that the entire capital gain on the sale was taxable in her hands. Given that the full sale consideration has been taxed in the hands of the mother as sole owner, imposing tax again on the portion received by the assessee would result in double taxation. It is well established that income cannot be taxed merely because it was wrongly offered in a return; taxation must be by authority of law (Art. 265). Applying these principles, the Tribunal held that neither the long term capital gain offered by the assessee nor the addition made by the AO could stand, and the entire amount of Rs. 10 lakhs must be excluded from the assessee's computation of total income. [Paras 4, 5]

The addition and the declared long term capital gain attributable to the Rs. 10 lakhs are deleted; the full Rs. 10 lakhs is removed from the assessee's income and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that no part of the Rs. 10 lakhs received by the assessee as a consenting party was taxable in his hands since the entire sale consideration had been taxed in full in the hands of his mother as sole owner; the contested amounts were deleted from the assessee's income.

Power of revision under section 263: erroneous and prejudicial to the interests of revenue - Mandatory reference to DVO under section 50C when stamp duty value is disputed - Application of section 56(2)(vii)(b) to valuation differential on acquisition of property - Finality of issues in assessment proceedings and inadmissibility of new pleas in revision proceedings

Power of revision under section 263: erroneous and prejudicial to the interests of revenue - Mandatory reference to DVO under section 50C when stamp duty value is disputed - Application of section 56(2)(vii)(b) to valuation differential on acquisition of property - Whether the Principal Commissioner was justified in exercising revisionary jurisdiction under section 263 by setting aside the assessment on the ground that the Assessing Officer accepted the assessee's valuer's report without referring the matter to the DVO under section 50C, rendering the assessment erroneous and prejudicial to the revenue. - HELD THAT: - The Tribunal examined whether the Assessing Officer had applied his mind and followed the statutory procedure when the assessee disputed the stamp duty valuation. The Court noted that although the Assessing Officer considered the valuation report submitted by the assessee and made an addition under section 56(2)(vii)(b), he accepted the valuer's figure without referring the matter to the DVO as mandated when the stamp duty value is objected to. The Tribunal relied on the principle that revision under section 263 requires an error that is not a debatable or plausible view and that mandatory statutory procedure must be followed; non-compliance with the requirement to obtain DVO reference where the stamp duty valuation is disputed renders the assessment order erroneous. In these circumstances the Principal Commissioner was correct in holding the assessment to be erroneous and prejudicial and in setting it aside for re-assessment after following the prescribed procedure and affording the assessee an opportunity of being heard. [Paras 9]

The revision under section 263 was validly exercised because the Assessing Officer failed to follow the mandatory step of referring the disputed stamp duty valuation to the DVO, rendering the assessment erroneous and prejudicial to the revenue.

Finality of issues in assessment proceedings and inadmissibility of new pleas in revision proceedings - Application of section 56(2)(vii)(b) to valuation differential on acquisition of property - Whether the contention that the lands were agricultural (and therefore outside the scope of section 56(2)(vii)(b)) could be entertained before the Tribunal while deciding validity of the revision order. - HELD THAT: - The Tribunal held that the plea that the lands were agricultural and hence not taxable under section 56(2)(vii)(b) was not raised before the Assessing Officer or during the section 263 proceedings. The assessee had, in earlier proceedings, relied upon and accepted applicability of section 56(2)(vii)(b) by submitting a valuation report; thus the contention was not part of the record at the time of the Principal Commissioner's examination. The Tribunal emphasized that revision proceedings are adversarial and an issue concluded against the assessee in original assessment cannot be permitted to be agitated in revision. Consequently the Tribunal declined to examine afresh whether agricultural land falls within the scope of section 56(2)(vii)(b). [Paras 9, 10]

The agricultural-land plea could not be entertained in revision or before the Tribunal because it was not pleaded earlier and the assessee had treated the issue as within the scope of section 56(2)(vii)(b) during assessment; therefore the plea was rejected for being belated and not part of the record.

Final Conclusion: The Tribunal dismissed the appeal, holding that the Principal Commissioner was justified in invoking section 263 to set aside the assessment because the Assessing Officer erred in accepting the assessee's valuer report without referring the disputed stamp duty valuation to the DVO as required, and that the assessee's late plea regarding agricultural character of the land could not be entertained.

Charitable purpose - advancement of any other object of general public utility (proviso to section 2(15)) - exemption under section 11 of the Income-tax Act, 1961 - registration under section 12AA

Charitable purpose - advancement of any other object of general public utility (proviso to section 2(15)) - exemption under section 11 of the Income-tax Act, 1961 - Whether the assessee was entitled to exemption under section 11 for A.Y. 2010-11 despite earning rental and other receipts from letting out halls and buildings, having regard to the proviso to section 2(15). - HELD THAT: - The Tribunal analysed the scope of charitable purpose and observed that the proviso to section 2(15) applies only to activities pursuing the advancement of any other object of general public utility (category (d)) and not to relief of the poor, education or medical relief (categories (a)-(c)). Examination of the trust-deed showed some objects falling in category (d) but several objects and powers (such as acquisition and letting of property) were identified as modes of financing rather than substantive charitable objects. The assessee produced detailed documentary evidence showing that during the year it actually pursued education (scholarships paid directly to students after application, verification and interview), medical relief (payments to hospitals/patients on documented applications or recommendations) and relief to the poor (distribution of consumables with recipient signatures). The Income & Expenditure account for the year was scrutinised and the Tribunal found that expenditures on Medical help, Education and Relief to the poor together formed the bulk of outgoings, and identifiable costs connected with letting the halls were largely matched by corresponding recoveries; after accounting for these, little remained for any activities advancing objects of general public utility. Since the assessee in the year under consideration was genuinely carrying out activities under categories (a)-(c) and did not in fact pursue the category (d) objects that would attract the proviso, the disability in the proviso to section 2(15) did not get attracted and the assessee remained entitled to exemption under section 11. The Assessing Officer's denial of exemption on the ground of the proviso was therefore set aside. [Paras 10, 11, 12, 13, 14]

Exemption under section 11 for A.Y. 2010-11 allowed; the proviso to section 2(15) did not apply as the assessee actually pursued education, medical relief and relief to the poor during the year.

Final Conclusion: The Tribunal allowed the appeal, held that the proviso to section 2(15) was not attracted for A.Y. 2010-11 because the assessee actually pursued relief to the poor, education and medical relief, and directed that exemption under section 11 be granted.

Maintainability of appeal under section 246(1) - order giving effect to Tribunal's directions under section 143(3) - interest under section 244A - interest on interest / compensation for belated payment

Maintainability of appeal under section 246(1) - order giving effect to Tribunal's directions under section 143(3) - Appeal filed by the assessee before the CIT(A) against the assessing officer's order giving effect to the Tribunal's directions is maintainable. - HELD THAT: - The Tribunal held that an order passed under section 143(3) giving effect to the Tribunal's directions is an order appealable under section 246(1) before the CIT(A). The order giving effect to the Tribunal's directions in this case was in the nature of an order under section 143(3), and therefore the appeal filed by the assessee before the CIT(A) was held to be maintainable. The assessee's reliance on precedent supporting the proposition that such orders are appealable was accepted. [Paras 8]

The appeal filed before the CIT(A) is maintainable.

Interest under section 244A - interest on interest / compensation for belated payment - Assessee is not entitled to interest on the interest amount previously granted (i.e., interest on interest) or any compensation for belated payment where the Tribunal's direction did not order payment of such additional compensation. - HELD THAT: - The Tribunal found that it had earlier directed the AO to grant interest under section 244A for the period 01/04/2003 to 24/03/2006, and that direction attained finality as neither party challenged it. The AO complied by granting interest amounting to the specified sum on 04/05/2018. The earlier Tribunal order did not direct computation or payment of interest on that interest or any compensation for delay in payment of the interest itself. A subsequent Tribunal order in the assessee's different appeals (ITA Nos. 5221 & 5222/Del/2016) had expressly directed computation of interest on late payment of interest, but that was delivered on different facts and cannot be applied to the instant case. Since the AO faithfully implemented the Tribunal's direction and there was no operative direction to pay interest on interest, the assessee cannot seek additional compensation now. [Paras 13, 14, 17, 18]

Claim for interest on interest/compensation on belated payment of the interest is rejected; no interference with the AO's compliance with the Tribunal's direction.

Final Conclusion: The Tribunal held the appeal to the CIT(A) maintainable, but dismissed the substantive plea for interest on the interest/compensation because the original Tribunal direction only required payment of interest under section 244A (which the AO complied with) and did not direct payment of interest on that interest; the assessee's reliance on a later, factually different Tribunal order was found inapplicable.

Reversal of Bad and Doubtful Debts Reserve and its taxability - Netting of BDDR in profit and loss account and its effect on computation of total income - Deduction not claimed at time of creation-effect on subsequent year reversal - Distinction between book provision under RBI norms and tax deduction under section 36(1)(viia) / interaction with section 80P

Reversal of Bad and Doubtful Debts Reserve and its taxability - Netting of BDDR in profit and loss account and its effect on computation of total income - Deduction not claimed at time of creation-effect on subsequent year reversal - Whether the reversal of earlier years' Bad and Doubtful Debts Reserve (BDDR) amounting to Rs. 8,54,42,557/- for A.Y. 2014-15 is taxable when no deduction had been claimed earlier at the time of creation of the provision and the net reversal is reflected in the profit and loss account and the computation of total income. - HELD THAT: - The Tribunal found on comparison of the profit and loss account and the computation of total income that the assessee's net profit figure for the year (as per books) already embraced the net effect of the BDDR written back of Rs. 8,54,42,557/-, and that in the computation of total income there was no separate claim of deduction for the BDDR in earlier years nor any separate offer of income on account of the write-back in the year under consideration. The authorities' own material showed that the assessee had been creating BDDR in earlier years and simultaneously adding back those provisions in the computations of total income for those years, resulting in no tax deduction having been availed at the time of creation. Given that no deduction was claimed earlier, the Tribunal held that taxing the reversal in a subsequent year would be incorrect. The Tribunal relied on a coordinate-bench decision in the assessee's own case for A.Y. 2013-14 which analysed identical facts and concluded that reversal could not be taxed where the provision had been added back in the year of creation and hence no deduction was taken. Applying the same reasoning, the Tribunal concluded that the CIT(A) was not justified in confirming the addition and deleted the addition made by the AO. [Paras 4, 5, 6]

Addition of Rs. 8,54,42,557/- on account of BDDR written back for A.Y. 2014-15 is deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for assessment year 2014-15 and deleted the addition of Rs. 8,54,42,557/- made by the AO/CIT(A) on account of reversal of Bad and Doubtful Debts Reserve, holding that where no deduction was claimed at the time of creation and the net reversal is reflected in the books and computation of income, the reversal is not taxable.

Interpretation of Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - detention and demurrage waiver for seized or detained goods - detention/demurrage certificate to secure waiver from service providers - provisional release on furnishing bond and bank guarantee

Interpretation of Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - detention and demurrage waiver for seized or detained goods - detention/demurrage certificate to secure waiver from service providers - Whether the petitioner was entitled to a detention and demurrage certificate for the period during which the imported goods were under seizure. - HELD THAT: - Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 provides that no rent or demurrage shall be charged on goods seized or detained by customs authorities. The goods in question were seized on 26.06.2020 and a provisional release order was issued on 17.07.2020; they were cleared subsequently after compliance with conditions. Applying Regulation 6(1)(l), demurrage or detention charges could not be levied for the period when the goods were under seizure. The court therefore directed issuance of an appropriate detention and demurrage certificate covering the seizure period to enable the petitioner to secure waiver from the container freight station and liner. [Paras 8, 10, 11]

Respondents to issue detention and demurrage certificate in respect of the period 26.06.2020 to 17.07.2020 within thirty days.

Final Conclusion: Writ petition partly allowed; respondents directed to issue detention and demurrage certificate for the period when the goods were under seizure (26.06.2020 to 17.07.2020) within thirty days; no costs.

Bar on civil court jurisdiction in matters of customs levy - exclusive appellate remedy under the Customs Act - Section 155 of the Customs Act - protection from suit - territorial non jurisdiction where act done outside forum - return of plaint with liberty to pursue statutory appeal - exclusion of time spent in civil proceedings for limitation - direction for expeditious disposal by Appellate Authority

Bar on civil court jurisdiction in matters of customs levy - Section 155 of the Customs Act - protection from suit - exclusive appellate remedy under the Customs Act - territorial non jurisdiction where act done outside forum - Civil Court has no jurisdiction to entertain a suit challenging the levy of customs duty; the remedy lies under the Customs Act. - HELD THAT: - The Court held that the Customs Act is a self contained code and suits challenging levy of customs duty cannot be entertained by civil courts. Section 155 (as reproduced in the judgment) bars suits, prosecutions or other legal proceedings against the Government or its officers for acts done in good faith in pursuance of the Act, and accordingly the plaintiff ought to have availed the appellate remedy provided under the statute. The Court further noted territorial considerations: the levy and official action occurred at New Delhi and the defendants perform duties outside the territorial jurisdiction of the trial Court, reinforcing the bar on maintainability. In view of these principles the trial Court's order dismissing the petition under Order 7 Rule 11 was set aside and the plaint was directed to be returned so that the plaintiff may approach the statutory appellate authority.

Plains not maintainable before civil court; plaint returned with liberty to pursue statutory appeal under the Customs Act.

Return of plaint with liberty to pursue statutory appeal - exclusion of time spent in civil proceedings for limitation - direction for expeditious disposal by Appellate Authority - Consequential directions regarding limitation and conduct of appeal following return of plaint. - HELD THAT: - The Court directed that the plaint be returned to the plaintiff with liberty to file an appeal before the Appellate Authority under the Customs Act. The time consumed by the plaintiff in pursuing the civil suit before the trial Court is to be excluded for computation of limitation for filing the statutory appeal. Given the delay already occasioned, the Court expected the Appellate Authority to dispose of any appeal filed within three months. Liberty was also left to the respondents to approach this Court if aggrieved by the order.

Plaint returned; plaintiff granted liberty to file statutory appeal with exclusion of time already spent in civil proceedings; Appellate Authority directed to decide any appeal within three months.

Final Conclusion: The revision petition is allowed; the impugned order is set aside, the plaint is returned with liberty to approach the Appellate Authority under the Customs Act, time spent in the civil suit is excluded for limitation, and the Appellate Authority is requested to dispose of any appeal within three months.

Penalty under section 114 of the Customs Act, 1962 - penalty under section 114AA of the Customs Act, 1962 - Customs Brokers Licensing Regulations, 2013 contraventions - abetment and mens rea for imposition of penal liability - remand for reconsideration of penalties by Commissioner (Appeals)

Penalty under section 114 of the Customs Act, 1962 - penalty under section 114AA of the Customs Act, 1962 - Customs Brokers Licensing Regulations, 2013 contraventions - abetment and mens rea for imposition of penal liability - Whether penalties under sections 114 and 114AA of the Customs Act, 1962 could be imposed on the customs broker when the adjudicating authority found no active participation in, or facilitation of, the attempted smuggling and the contraventions alleged were of the Customs Brokers Licensing Regulations, 2013. - HELD THAT: - The Tribunal accepted the adjudicating authority's finding that the appellant (customs broker) had merely processed and filed the shipping bill based on documents received from a third party and that there was no evidence of active collusion, overt acts, or intentional omission that facilitated the attempted smuggling. The alleged failures were regulatory contraventions under the Customs Brokers Licensing Regulations, 2013 (failure to verify exporter, obtain direct authorization), and the Show Cause Notice framed the charge as such. Imposition of penalty under section 114 requires establishment of abetment involving mens rea (intentional aid or omission). No evidence was produced to show that the broker intentionally aided the offence or had knowledge of forged documents or the smuggling attempt. In these circumstances, the Tribunal held that the matter falls within regulatory breaches governed by the CBLR and that penalties under sections 114 and 114AA of the Customs Act could not be sustained absent proof of abetment or mens rea; the adjudicating authority's exoneratory findings on involvement were upheld. [Paras 12, 15, 16]

Appellant not liable to penalties under sections 114 or 114AA of the Customs Act, 1962; alleged contraventions were regulatory under the Customs Brokers Licensing Regulations, 2013 and did not establish abetment or mens rea.

Remand for reconsideration of penalties by Commissioner (Appeals) - appellate interference with remand orders - Whether the Commissioner (Appeals) was justified in remanding the matter to the adjudicating authority to reconsider imposition of penalties on the appellant despite the adjudicating authority's explicit findings exonerating the broker from involvement. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) did not correctly appreciate the factual findings recorded by the adjudicating authority, which had categorically held that the broker had not engaged in any act making the goods liable for confiscation and that there was no evidence of facilitation. The Commissioner (Appeals) remanded the issue for reconsideration on the basis that the shipping bill was filed by the broker and thereby facilitated smuggling; the Tribunal held that such conclusion was premised on assumptions and lacked factual or legal basis given the adjudicating authority's findings. Consequently, the remand order was erroneous and unsustainable. [Paras 4, 17]

Impugned remand order of the Commissioner (Appeals) set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, upheld the adjudicating authority's findings that the customs broker had not actively facilitated the attempted smuggling and that the contraventions were regulatory under the CBLR, ruled that penalties under sections 114 and 114AA could not be imposed in the absence of abetment/mens rea, and set aside the Commissioner (Appeals)'s remand order.

Demurrage charges not includible in assessable value - post-importation charges - classification of imported LPG under Customs Tariff Heading 2711 1300 versus 2711 1900 - entitlement to benefit of exemption Notification No. 82/2004-Cus. and Notification No. 37/2005-Cus. conditional on timely classification/protest - estoppel by classification in provisional Bill of Entry

Demurrage charges not includible in assessable value - post-importation charges - Demurrage charges paid on account of hold up of vessels at port are not includible in the assessable value of imported goods. - HELD THAT: - The Tribunal applied the principle established by the Hon'ble Supreme Court in Mangalore Refinery & Petroleum Chemicals Limited that demurrage charges are essentially post importation charges incurred after the goods have reached Indian ports and therefore are not to be included in the assessable value. On that basis the Tribunal held that demands based on inclusion of demurrage in assessable value must be set aside.

Demurrage charges are not includible in assessable value; demands on that basis are set aside.

Classification of imported LPG under Customs Tariff Heading 2711 1300 versus 2711 1900 - entitlement to benefit of exemption Notification No. 82/2004-Cus. and Notification No. 37/2005-Cus. conditional on timely classification/protest - estoppel by classification in provisional Bill of Entry - Appellants are not entitled to the benefit of the cited exemption Notifications because they declared and filed provisional Bills of Entry under CTH 2711 1300 and did not raise classification or protest at the time of filing. - HELD THAT: - The Tribunal found on the record that the appellants, when filing provisional Bills of Entry for the imports in question, classified the goods under CTH 2711 1300 and did not contest that classification or lodge a protest at that stage. The claim to reduced duty under the subsequent Notifications was sought only after finalisation of assessments. Having accepted and recorded the provisional classification and not having preserved the issue by timely protest or classification challenge, the appellants could not, at this stage, invoke the benefit of the Notifications. The Tribunal noted consistent precedent of other benches taking the same view and accordingly rejected the claim for exemption.

Benefit of Notification No. 82/2004-Cus. and Notification No. 37/2005-Cus. denied because appellants had declared under CTH 2711 1300 in their provisional Bills of Entry and did not raise or protest classification at the relevant time.

Final Conclusion: Appeals disposed: demands based on inclusion of demurrage charges in assessable value set aside; claim to benefit of the cited exemption Notifications rejected due to appellants' admitted classification under CTH 2711 1300 in provisional Bills of Entry and failure to raise the classification issue or protest at the time of filing.

Confiscation of seized goods as smuggled goods - presumption under Section 123 of the Customs Act - penalty under Section 112 of the Customs Act - reliability and evidentiary value of statement recorded under Section 108 - admissibility of electronic evidence under Section 138C - town seizure principle - requirement of corroboration for statement of co-accused - option of redemption of confiscated goods

Requirement of corroboration for statement of co-accused - admissibility of electronic evidence under Section 138C - penalty under Section 112 of the Customs Act - town seizure principle - Whether the penalties and confiscation sustained against Mr. Ashok Soni, Mr. Abhishek Soni and Mr. Sandeep Gupta are supportable on the material on record - HELD THAT: - The Tribunal found that, apart from the incriminating statement of the carrier Mr. Sanjay Soni, there is no independent or cogent evidence implicating these three appellants. Call detail records and mere acquaintance in the same trade did not establish their involvement, and the WhatsApp message retrieved from Mr. Sanjay Soni's phone was held unreliable for non-compliance with the statutory safeguards for electronic evidence. The Tribunal applied the settled principle that a statement of a co-accused cannot sustain penal consequences against others without corroboration, and that mere non-appearance or casual communications, without more, do not constitute violations attracting penalty under Section 112. On these bases the imposition of penalty and confiscation as against these appellants was found unsustainable and was set aside. [Paras 28, 32]

Penalty and confiscation sustained against Mr. Ashok Soni, Mr. Abhishek Soni and Mr. Sandeep Gupta set aside; their appeals allowed with consequential relief.

Confiscation of seized goods as smuggled goods - presumption under Section 123 of the Customs Act - reliability and evidentiary value of statement recorded under Section 108 - town seizure principle - option of redemption of confiscated goods - penalty under Section 112 of the Customs Act - Extent of liability of Mr. Sanjay Soni - which seized items are liable for confiscation, applicability of the presumption under Section 123, and quantum of penalty - HELD THAT: - The Tribunal treated the matter as a town seizure. It held that Section 123's presumption of foreign origin applied only to the single gold bar bearing the foreign marking ('rand refinery') because that specific piece could not be satisfactorily explained by Mr. Sanjay Soni; accordingly that piece was rightly confiscable. The remaining four 1-kg bars and the cut piece, lacking foreign markings and given the town-seizure context, were not found to attract Section 123 and were ordered released to Mr. Sanjay Soni. The Tribunal further observed that the Revenue had relied principally on the statement recorded under Section 108, but had failed to examine the declarant during adjudication, diminishing the statement's evidentiary value; on the facts the penalty originally imposed on Mr. Sanjay Soni was therefore reduced. [Paras 29, 30, 31, 32]

One marked gold bar upheld as absolutely confiscated; other four bars and cut piece released to Mr. Sanjay Soni; penalty reduced (as indicated in the order) and Revenue's appeal allowed in part.

Final Conclusion: The Tribunal allowed the appeals of Mr. Ashok Soni, Mr. Abhishek Soni and Mr. Sandeep Gupta, setting aside penalties and confiscation as against them. Revenue's appeal against Mr. Sanjay Soni was allowed in part: one foreign-marked gold bar was upheld as absolutely confiscated, the remaining seized gold was ordered released to Mr. Sanjay Soni and his penalty reduced; the impugned orders were modified accordingly.

Inherent power under Section 482 Cr.P.C. to quash criminal proceedings - scope of interference with police investigation and trial - prima facie evidence - abuse of the process of the Court - prevention of oppression and mismanagement

Inherent power under Section 482 Cr.P.C. to quash criminal proceedings - scope of interference with police investigation and trial - prima facie evidence - abuse of the process of the Court - Whether the petition under Section 482 Cr.P.C. to quash the criminal proceedings should be allowed. - HELD THAT: - The High Court reiterated that the inherent power under Section 482 Cr.P.C. must be exercised sparingly and only in rare cases to prevent abuse of process or where it is beyond doubt that no offence is made out or prosecution is barred by law. The Court observed that the charge sheet records statutory documents from the Registrar of Companies showing induction of A1 and A2 as directors processed through Form-32 using the complainant's digital signature, and an e-mail admission by A3 that he acted on A1's instructions; A3's admission during interrogation and witness statements were also noted. On that material the investigating officer had collected prima facie evidence to support offences under Sections 406 and 420 IPC, and other offences were prima facie indicated by the witness statements. The Court emphasised that the veracity and sufficiency of this evidence are matters for full trial and that the High Court should not ordinarily assess reliability of evidence at the stage of a Section 482 petition. Applying these principles, the Court concluded that it was not satisfied beyond doubt that the prosecution was illegitimate or an abuse of process and therefore it was not fit to quash the proceedings. [Paras 9, 10]

The petition under Section 482 Cr.P.C. seeking quashing of the criminal proceedings is dismissed.

Prevention of oppression and mismanagement - abuse of the process of the Court - Whether the amendments to the Companies Act, 2013 (Sections 241-246) and the availability of alternative remedies before company authorities barred the complainant from filing the criminal complaint. - HELD THAT: - The Court noted that the alleged offence occurred on 31-10-2012, prior to the Companies Act, 2013 amendments. It further observed that the provisions in Sections 241-246 of the Companies Act, 2013 relate to prevention of oppression and mismanagement and apply to management conduct likely to cause serious injury to company affairs or public interest, not to offences such as forging and filing of documents to appoint directors. Given the temporal occurrence of the acts and the distinct subject-matter of the statutory provisions, the Court found no merit in the contention that the complainant was barred from approaching the criminal court and held that those statutory remedies did not oust the criminal jurisdiction in the present facts. [Paras 7]

The plea that the Companies Act, 2013 provisions and alternative remedies before company authorities barred the criminal complaint is rejected.

Final Conclusion: The High Court dismissed the petition under Section 482 Cr.P.C.; the court declined to quash the criminal proceedings, finding prima facie evidence recorded by the investigating officer and that the Companies Act, 2013 provisions did not bar the complaint in the facts of this case.

Composite scheme of arrangement involving amalgamation and reduction of share capital - dispensing with meetings of members and creditors in an arrangement between a company and its shareholders - appointment of Appointed Date for a scheme of arrangement - reduction of share capital as part of a scheme of arrangement - requirement to procure consent affidavits of creditors prior to sanction - direction to serve statutory authorities with notice and deeming of no-objection on silence - appointment of a professional to assist the Official Liquidator in scrutiny of accounts - obligation to file affidavits of service evidencing compliance with directions

Appointment of Appointed Date for a scheme of arrangement - The Appointed Date for the Composite Scheme of Arrangement is fixed as 1st October 2021. - HELD THAT: - The Tribunal records that the Board of Directors of both applicant companies approved the proposed Scheme and that the Appointed Date as provided in the Scheme is 1st October 2021. The Tribunal accordingly fixes and records the Appointed Date for the Scheme as that date. [Paras 5, 6]

Appointed Date fixed as 1st October 2021.

Dispensing with meetings of members and creditors in an arrangement between a company and its shareholders - Meetings of the Equity Shareholders of the First Applicant Company and the Equity and Preference Shareholders of the Second Applicant Company are dispensed with on account of written consents filed by all such shareholders. - HELD THAT: - The Tribunal notes that all equity shareholders of the First Applicant Company and all equity and preference shareholders of the Second Applicant Company have provided consent affidavits in respect of the proposed Scheme. In view of these consent affidavits, the Tribunal dispenses with calling meetings of those shareholder classes for the purpose of considering and, if thought fit, approving the Scheme. [Paras 10, 11]

Meetings of the specified shareholders are dispensed with.

Dispensing with meetings of members and creditors in an arrangement between a company and its shareholders - requirement to procure consent affidavits of creditors prior to sanction - Meetings of the Secured and Unsecured Creditors of the Second Applicant Company are dispensed with, subject to specified safeguards including procuring requisite consents and serving notices. - HELD THAT: - The Tribunal accepts the applicants' submission that the Scheme is an arrangement between the companies and their shareholders (under the provision analogous to an arrangement pursuant to shareholders) and that no creditor sacrifice is involved. Accordingly, meetings of secured and unsecured creditors of the Second Applicant Company are dispensed with. The Tribunal, however, imposes safeguards: the Second Applicant Company shall procure a consent affidavit from not less than 90% in value of the secured creditors prior to sanction and shall serve notice of the application on all secured and unsecured creditors as on the specified record date. Auditor's certificates verifying creditor lists are on record. [Paras 12, 13, 14, 15]

Meetings of the Second Applicant Company's secured and unsecured creditors dispensed with, subject to procurement of 90% secured creditors' consent and service of notices.

Direction to serve statutory authorities with notice and deeming of no-objection on silence - The Applicant Companies are directed to serve notice of the Scheme application on specified statutory authorities, with the Tribunal deeming no-objection if no response is received within 30 days. - HELD THAT: - The Tribunal directs each applicant company to serve notice upon the Central Government (through Regional Director), the Registrar of Companies, the Income Tax Authority within whose jurisdiction each company is assessed, the Official Liquidator (for the First Applicant Company), and the relevant GST Authority, pursuant to the statutory scheme and rules governing compromise, arrangement and amalgamation. The Tribunal further provides that if no response is received from those authorities within 30 days of receipt of the notice, it will be presumed they have no objection to the proposed Scheme. [Paras 16, 18]

Notices to statutory authorities directed; presumption of no-objection after 30 days of receipt.

Appointment of a professional to assist the Official Liquidator in scrutiny of accounts - The Tribunal appoints a chartered accountant to assist the Official Liquidator to scrutinize the Transferor Company's books for the last five years and fixes the professional fee. - HELD THAT: - The Tribunal appoints M/s. Sandeep Rathi & Associates, Chartered Accountants, to assist the Official Liquidator in scrutinising the Transferor Company's accounts for the previous five years, and fixes the fee payable by the Transferor Company. The Official Liquidator may make representations within thirty days of receipt of the notice, which must also be served on the Transferor Company. [Paras 17]

Chartered Accountant appointed to assist the Official Liquidator; fee fixed; OL may submit representations within 30 days.

Obligation to file affidavits of service evidencing compliance with directions - The Applicant Companies are directed to file affidavits of service proving dispatch of notices to creditors and regulatory authorities and to report compliance to the Tribunal. - HELD THAT: - To ensure compliance with the directions given for service of notices to creditors and statutory authorities, the Tribunal mandates that the applicant companies file affidavits of service with the Registry evidencing dispatch of those notices and to report that the directions have been complied with. [Paras 19]

Affidavits of service to be filed and compliance to be reported to the Tribunal.

Final Conclusion: The Tribunal records the Appointed Date as 1 October 2021, dispenses with the convening of specified shareholder and creditor meetings subject to safeguards (including procurement of requisite secured creditors' consents and service of notices), directs service of notices on statutory authorities with a 30-day deeming provision, appoints a chartered accountant to assist the Official Liquidator in scrutinising the Transferor Company's accounts, and requires filing of affidavits of service to evidence compliance.

Time barred petitions under Article 137 of the Limitation Act - applicability of the Limitation Act to proceedings under Section 7 of the IBC - effect of decree or recovery certificate in giving rise to a fresh cause of action - acknowledgement and One Time Settlement offers under Section 18 of the Limitation Act - effect of dismissal/withdrawal of an appeal on limitation - duty of the Adjudicating Authority to decide limitation objections

Applicability of the Limitation Act to proceedings under Section 7 of the IBC - time barred petitions under Article 137 of the Limitation Act - Section 7 petition filed by the Financial Creditor against the Corporate Debtor was barred by limitation. - HELD THAT: - The Tribunal applied settled law that a Section 7 petition is governed by Article 137 of the Limitation Act and the right to sue accrues on default. The DRT decree dated 06.05.2011 (and related recovery certificates) gave rise to a fresh cause of action which, under the law, produced a three year limitation period for filing a Section 7 petition. The petition filed on 10.07.2018 was beyond the period that expired in 2014 and therefore was time barred. The Adjudicating Authority erred in admitting the petition without properly dealing with the limitation objection. [Paras 11, 17]

The Section 7 petition against the Corporate Debtor is dismissed as barred by limitation.

Duty of the Adjudicating Authority to decide limitation objections - Adjudicating Authority was obliged to consider and record a reasoned finding on the limitation objection before admitting the petition. - HELD THAT: - Section 3 of the Limitation Act mandates dismissal of suits or applications instituted after the prescribed period. When the Corporate Debtor raised the limitation defence, the Adjudicating Authority was bound to examine and decide that objection. The Impugned Order did not advert to or record findings on the limitation plea but accepted submissions of the Financial Creditor that a longer limitation (twelve years) applied; this omission constituted legal error requiring setting aside of the admission order. [Paras 16, 18]

The admission order is set aside for failure to address the limitation defence.

Acknowledgement and One Time Settlement offers under Section 18 of the Limitation Act - The Tribunal declined to entertain the Financial Creditor's contention that One Time Settlement offers by the principal borrower extended limitation insofar as the petition against the principal borrower has been finally dismissed as barred by limitation. - HELD THAT: - Although acknowledgements or One Time Settlement offers may, under Section 18, give rise to a fresh limitation period, the Tribunal observed that the Section 7 petition against the principal borrower was dismissed by this Tribunal and the Supreme Court declined to interfere. In view of that final dismissal, there was no need to consider whether the One Time Settlement offers of the principal borrower could extend limitation for the guarantor's liability; the Court therefore did not rely on those offers to validate the Section 7 petition against the Corporate Debtor. [Paras 22]

The contention based on One Time Settlement by the principal borrower was not accepted as a basis to validate the petition against the guarantor.

Effect of dismissal/withdrawal of an appeal on limitation - effect of decree or recovery certificate in giving rise to a fresh cause of action - Dismissal of the appeal by the DRAT on 14.02.2017 (on the corporate debtor's application to withdraw) did not revive or create a fresh cause of action resetting the limitation period for the Financial Creditor. - HELD THAT: - The Tribunal examined the DRAT order of 14.02.2017 and found that the corporate debtor itself sought dismissal/withdrawal of its appeal; the order did not operate to create a new decree that would restart the limitation clock. The fresh cause of action arose from the DRT decree/ recovery certificates in 2011 (or certificates issued in December 2011), and the three year limitation from those events expired in 2014. Consequently, the DRAT dismissal in 2017 could not be relied upon to extend limitation to support the petition filed in 2018. [Paras 24]

The DRAT order dated 14.02.2017 does not revive the Financial Creditor's limitation period; petition remains time barred.

Final Conclusion: The admission order dated 08.05.2019 in CP(IB) No. 2527/MB/2018 is set aside and the Section 7 petition against the Corporate Debtor is dismissed as barred by limitation; the Adjudicating Authority failed to adjudicate the limitation objection and the attempts to rely on One Time Settlement offers or the DRAT order do not validate the belated petition. Parties to bear their own costs.

Maintainability of section 7 application - real estate allottee as financial creditor - third proviso to section 7(1) of the IBC - modification requirement and joint filing by 100 allottees or 10% - conversion of booking advance into loan - temporary transfer for compliance - temporary transfer of deposit to loan account does not convert its substantive character - remand for fresh adjudication on maintainability and related objections

Conversion of booking advance into loan - temporary transfer for compliance - temporary transfer of deposit to loan account does not convert its substantive character - Characterisation of the amount of Rs. 3.50 crores paid by the applicant - deposit against booking of flats or a loan - HELD THAT: - The Tribunal found that the applicant initially paid the amount as an advance for booking flats and the corporate debtor, on account of lack of statutory approvals, transferred the advance on a temporary basis into a loan account to comply with regulatory and accounting requirements. The letter dated 31.3.2015 expressly stated that the transfer was temporary, that the investor's right to permanent allotment would not be relinquished, and that the arrangement was to avoid sale prior to approvals. The absence of interest entries in the corporate debtor's account statements and contemporaneous records supported the conclusion that the amount remained substantively a deposit against booking and was not a conventional loan carrying a pre decided interest obligation; the temporary accounting treatment did not change the nature of the transaction. The Tribunal therefore held that the amount was a deposit transferred temporarily to a loan account and was not a loan in the ordinary sense. [Paras 19]

The Rs. 3.50 crore was a deposit against booking of flats, temporarily transferred to a loan account for regulatory/accounting reasons, and not a loan earning pre decided interest.

Maintainability of section 7 application - real estate allottee as financial creditor - third proviso to section 7(1) of the IBC - modification requirement and joint filing by 100 allottees or 10% - remand for fresh adjudication on maintainability and related objections - Whether the section 7 application filed by a single real estate allottee complied with the amendment obligations under the third proviso to section 7(1) of the IBC and was therefore maintainable - HELD THAT: - The Tribunal examined the third proviso to section 7(1), which requires applications filed by real estate allottees (that were pending but not admitted before the Amendment Act of 28.12.2019) to be modified within 30 days to comply with the first or second provisos - the latter requiring joint filing by not less than 100 allottees or not less than 10% of total allottees, whichever is less. The Tribunal observed that the Adjudicating Authority had noted submissions on this ground but had not adequately dealt with the maintainability objection under the third proviso. While the Tribunal regarded non compliance with the third proviso as a fundamental infirmity affecting maintainability, it did not itself finally adjudicate admission or rejection on that ground; instead it set aside the Impugned Order and remanded the matter to the Adjudicating Authority to consider the objection about maintainability and any other objections/ issues raised by the parties and to pass a speaking order. Parties remain free to settle. [Paras 24, 25]

Non compliance with the third proviso to section 7(1) is a basic infirmity affecting maintainability; the matter is remitted to the Adjudicating Authority to decide the maintainability objection and other raised issues afresh and to pass a speaking order.

Final Conclusion: The Tribunal held that the Rs. 3.50 crore was a deposit for booking of flats temporarily placed in a loan account and not a substantive loan; it further concluded that non compliance with the third proviso to section 7(1) is a fundamental maintainability defect and accordingly set aside the Impugned Order and remitted the matter to the Adjudicating Authority for fresh consideration of the maintainability objection and any other objections, with liberty to the parties to settle.

Operational Debt - Provision of Services - Debt in default - License to use immovable property - Provision of services through lease/ licence - Interpretation of Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - Applicability of Mobilox Innovations (P) Ltd. (principle on operational v. financial creditors)

Operational Debt - Provision of Services - License to use immovable property - Debt in default - Claim for unpaid licence fee arising from a licence agreement for use of immovable premises for commercial purposes is an operational debt and the claim constituted a debt in default. - HELD THAT: - The licence agreement granted the corporate debtor the right to use demised premises for commercial activity (running an educational institute) in consideration of a monthly licence fee. The transaction of permitting use of immovable property for commercial purposes falls within the expression "provision of services" contemplated by the Code. A "debt" under Section 3(11) includes operational debt; the unpaid licence fees, together with dishonoured cheques and admitted defaults, therefore constituted a debt which was in default. The Tribunal relied on the Bankruptcy Law Reforms Committee's example (quoted with approval in Mobilox) treating a lessor to whom rent is owed as an operational creditor and on decisions recognising lease/licence of land or premises as supply of services, to conclude that the Appellant's claim is an operational debt recoverable under Section 9. [Paras 10, 11, 12, 13]

The Appellant's claim arising out of non-payment of licence fee for use of immovable premises is an operational debt and the liability was in default.

Conflict of Tribunal precedents - Need for Larger Bench - Reference to a Larger Bench was directed to resolve inconsistent precedents of this Tribunal on whether claims for licence/lease/ rent for immovable premises constitute operational debt. - HELD THAT: - The Tribunal observed divergent decisions of this bench on the question whether lease/licence rentals qualify as operational debt - noting in particular the conflict with the decision in Company Appeal (AT) (Ins.) No. 331 of 2019 which held otherwise. Given the importance and recurring nature of the issue and the Tribunal's own doubts about the contrary view, the matter was referred administratively for constitution of a Larger Bench to authoritatively decide the legal questions identified. [Paras 16, 17, 18, 19]

Matter to be placed before the Chairperson for constitution of a Larger Bench to decide the identified questions.

Question framed for Larger Bench - Scope of authoritative pronouncement - Two specific questions were framed for the Larger Bench: (i) whether the Tribunal decision in Company Appeal (AT) (Ins.) No. 331 of 2019 lays down correct law; and (ii) whether a licensor's claim for licence fee for use and occupation of immovable premises for commercial purposes is an operational debt under Section 5(21). - HELD THAT: - The Tribunal formulated the precise issues requiring authoritative determination and directed administrative placement before the Chairperson for constitution of a Larger Bench to decide those questions. The framing recognises that the second question bears directly on the present appeal and similar future cases, necessitating resolution of the conflicting views. [Paras 18, 19]

The two questions are referred to a Larger Bench for authoritative determination.

Final Conclusion: The Tribunal held that unpaid licence fees for use of immovable premises for commercial purposes qualify as an operational debt and were in default, but observed conflicting precedents and accordingly referred two formulated questions to the Chairperson for constitution of a Larger Bench for authoritative determination.

Supply of documents under Section 207 Cr.P.C. - Access to unrelied / unexhibited documents - Right to a fair trial under Article 21 - Duty of the investigating agency and the court to ensure disclosure - Particularity requirement for seeking inspection of seized material

Supply of documents under Section 207 Cr.P.C. - Particularity requirement for seeking inspection of seized material - Whether the order dismissing the petition under Section 482 Cr.P.C. seeking supply of all documents and statements collected during investigation was liable to be quashed - HELD THAT: - The Court examined the record and the applications filed in the trial court and found that the petitioner sought a blanket direction for supply of all documents and statements collected by the respondent without specifying which documents were alleged to be unrelied or withheld. The trial court had noted that all documents relied upon by the Enforcement Directorate were furnished to the accused as contemplated under Section 207 Cr.P.C., that no search had been conducted by the Enforcement Directorate (searches having been conducted by the predicate agency), and that the petition appeared to be an attempt to protract proceedings. Applying the principle that an accused seeking access to unmarked/unexhibited material must identify with particularity the documents claimed to be in the court's custody or in the possession of the prosecution, the High Court held that a vague, non-specific prayer for "all documents" was rightly rejected as devoid of merit and an abuse of process. The court therefore found no illegality or perversity in the dismissal of the petition and declined to interfere. [Paras 6, 13, 15, 16]

Petition dismissed; impugned order upholding rejection of the vague, non specific application was sustainable and not liable to be quashed.

Access to unrelied / unexhibited documents - Duty of the investigating agency and the court to ensure disclosure - Right to a fair trial under Article 21 - Legal principle governing entitlement of an accused to unrelied or unexhibited documents and the manner of seeking them - HELD THAT: - The Court reiterated the settled law in V.K. Sasikala and related pronouncements and the Suo Moto guidelines, that where documents seized in investigation have been forwarded to the court but not relied upon by the prosecution, an accused has a right to access those documents or at least to inspect them if he can demonstrate a reasonable basis for prejudice. The Court recorded that these principles require the accused to specify the documents sought (correlated, where possible, with seizure lists or particulars) so that the court may determine whether inspection or disclosure is warranted. The High Court also noted the distinction that where material was seized by a predicate agency (here CBI) and retained with that agency, the accused may have to approach that agency in accordance with applicable procedure, and that procedural provisions under the PML Act (such as retention/return of records) differ from general police investigation provisions. Applying these principles, the Court held that the entitlement to unrelied documents exists in law but is subject to the requirement of particularity and appropriate procedure for inspection or production. [Paras 10, 11, 12, 14]

Accused are entitled in principle to access unrelied/unexhibited materials forwarded to the court, but such relief must be sought with specific particulars; blanket or vague requests will be rejected.

Final Conclusion: The Criminal Petition under Section 482 Cr.P.C. is dismissed; the trial court's rejection of a vague, non specific application for all documents collected during investigation was held sustainable, and remedies for accessing particular unrelied materials remain available subject to specification and appropriate procedure.

Date of completion of service as determining tax liability - taxability cut-off date of 16.06.2005 - reliance on R.A. bills for determining time of provision of services - measurement sheets and contractor affidavit as evidence of service dates - liability under the proviso to Section 73(1) of the Finance Act, 1994 - Principles of Natural Justice - remand for fresh consideration

Date of completion of service as determining tax liability - taxability cut-off date of 16.06.2005 - reliance on R.A. bills for determining time of provision of services - measurement sheets and contractor affidavit as evidence of service dates - Principles of Natural Justice - Whether the question of when the services of site formation, excavation and related works were provided (i.e. before or after 16.06.2005) required fresh adjudication and reconsideration by the Adjudicating Authority. - HELD THAT: - The Appellate Tribunal observed that the Adjudicating Authority reached its conclusion principally by treating the dates on R.A. bills-particularly those issued by the subcontractor-as the dates of completion, and thereby held the services to have been provided after 16.06.2005. The Tribunal noted that the appellant produced measurement sheets and an affidavit (filed after the Order-in-Original) which purportedly show completion periods prior to the cut-off date, but those materials were not considered by the Adjudicating Authority because they were not before it at the time. Given that the factual determination of the date of provision of service turns on the evidence of when work was executed, and that relevant documentary evidence (measurement sheets and affidavit) was not examined by the Adjudicating Authority, the Tribunal found that the matter required re-examination. The Tribunal therefore set aside the impugned order and remanded the matter to the Adjudicating Authority to decide afresh on the date of completion of services after affording the parties an opportunity in accordance with the Principles of Natural Justice. The Tribunal's remand contemplates that the Adjudicating Authority should consider the measurement records and affidavit (and any other relevant evidence) in determining whether the services fell within the pre-16.06.2005 period and hence outside the taxability introduced from that date, and then pass a fresh reasoned order addressing the evidence and applicability of the proviso to Section 73(1) of the Finance Act, 1994 where relevant. [Paras 5, 6]

Impugned order set aside and matter remanded to the Adjudicating Authority for fresh adjudication on the date of provision of services after observing Principles of Natural Justice.

Final Conclusion: The appeal is allowed by way of remand: the impugned order is set aside and the Adjudicating Authority is directed to reconsider and decide afresh, after giving the parties opportunity in accordance with natural justice, whether the services were provided before 16.06.2005 and consequently whether service tax liability under the proviso to Section 73(1) arises.

Applicability of Rule 3(5A)(a) of the CENVAT Credit Rules, 2004 to removal of used capital goods - transaction value as basis for duty on clearance of capital goods - transfer between related/sister units treated as sale - proviso to Rule 3(5A)(a) - duty leviable on transaction value where computed amount is less - extended period of limitation invoked for suppression/misleading conduct - penalty for suppression/misleading behaviour in credit reversal

Applicability of Rule 3(5A)(a) of the CENVAT Credit Rules, 2004 to removal of used capital goods - proviso to Rule 3(5A)(a) - duty leviable on transaction value where computed amount is less - Rule 3(5A)(a) including its proviso applies to the transfer of the used generator set from the appellant's Jaipur unit to its Hapur unit and the value declared in the invoice must be considered for calculating the amount payable. - HELD THAT: - The Tribunal examined Rule 3(5A)(a) which requires payment equal to CENVAT credit taken reduced by prescribed percentage points for quarters of use, and provides that if the amount so calculated is less than the duty leviable on transaction value, the duty on transaction value is to be paid. The facts show the capital good was removed after use and an invoice declared a value of Rs. 6,14,322/-. The proviso therefore becomes applicable where the depreciated reversal computed under the rule is less than the duty leviable on that declared transaction value. The adjudicating findings that the proviso applied and that the invoice value must be used for calculating reversal were accepted as correct. [Paras 5, 6, 11]

Rule 3(5A)(a) and its proviso apply to the impugned transfer and the declared invoice value is to be used for calculating the amount payable.

Transaction value as basis for duty on clearance of capital goods - transfer between related/sister units treated as sale - The transfer of the generator set between the appellant's units, effected with a declared price in the invoice, constitutes a transaction attracting transaction value for the purposes of the proviso to Rule 3(5A)(a). - HELD THAT: - The Tribunal relied on the definition of "transaction value" and the statutory definition of "sale" which includes transfer of possession of goods for cash or other valuable consideration. The valuation rules recognising clearances to related units as sale and account adjustments between units being consideration were noted. Consequently, even a transfer between sister units, when effected with a declared price and accounting consideration, is to be treated as a sale/transaction and the invoiced value becomes the transaction value for computing duty under the proviso. [Paras 8, 9, 10, 11]

The inter-unit transfer with a declared invoice value is to be treated as a sale/transaction and that value is the transaction value for levy under the proviso.

Extended period of limitation invoked for suppression/misleading conduct - Invocation of the extended period of limitation by the Department was valid on the finding that the appellant misled authorities by treating the transfer as a stock transfer and thereby evaded liability. - HELD THAT: - Although the Commissioner (Appeals) did not separately address limitation, the Tribunal concluded from the facts that the appellant's characterization of the transfer as a stock transfer was misleading and resulted in evasion of duty. The Tribunal held that the appellant's conduct could not be treated as a mere interpretational error and that the plain statutory language governed. Relying on precedent, the Tribunal found no infirmity in the Department invoking the extended period of limitation. [Paras 12]

Extended period of limitation was rightly invoked by the Department.

Penalty for suppression/misleading behaviour in credit reversal - The penalty imposed on the appellant was justified and rightly sustained. - HELD THAT: - Having found that the appellant misrepresented the nature of the transfer and thereby evaded duty equal to the transaction value, the Tribunal held that the imposition of penalty was warranted. The appellant's contention that the matter was an interpretational error was rejected because the statutory language is plain and the appellant's conduct amounted to suppression/misleading action, attracting penalty. [Paras 12]

Penalty imposed on the appellant was correctly sustained.

Final Conclusion: The Tribunal upheld the adjudicating order, dismissed the appeal and sustained the demand (including invocation of extended limitation) and penalty, holding Rule 3(5A)(a) and its proviso applicable and the invoiced transaction value chargeable for duty.

Proportionate reversal of cenvat credit for by-products - applicability of Rule 6 of Cenvat Credit Rules, 2004 - time limit for availing cenvat credit for invoices issued prior to 01/09/2014 - six-month limitation under Notification No. 21/2014-CE (NT)

Proportionate reversal of cenvat credit for by-products - applicability of Rule 6 of Cenvat Credit Rules, 2004 - Appellant not required to reverse proportionate cenvat credit attributable to inputs and input services consumed in by-products cleared without payment of duty. - HELD THAT: - The Tribunal held that the question whether proportionate reversal under Rule 6 applied was settled by earlier decisions, notably Anil Products Ltd. and Rajaram Maize Products, and that the provisions of Rule 6 are not applicable to the appellants in these cases. The Tribunal observed that, as previously decided, the facts fall outside the scope of Rule 6 (including Explanation 1 introduced later) for the relevant periods, and accordingly the demand for proportionate reversal was unsustainable. Reliance was placed on the Tribunal's precedent and the affirmation by the Gujarat High Court of the Anil Products decision; where earlier proceedings had dealt with post-introduction aspects of Rule 6, matters were remanded in the cited case, but for the present appellants the Tribunal concluded Rule 6 does not apply and set aside the demand. [Paras 6]

Demand for reversal of proportionate cenvat credit on account of by-products is set aside; appellants need not reverse such credit.

Time limit for availing cenvat credit for invoices issued prior to 01/09/2014 - six-month limitation under Notification No. 21/2014-CE (NT) - Appellant entitled to take cenvat credit on invoices issued prior to 01/09/2014 though credit was taken on 18/09/2014. - HELD THAT: - The Tribunal applied its prior decision in Bharat Aluminium Company Limited and a series of tribunal and High Court decisions holding that the six-month limitation introduced with effect from 01/09/2014 does not operate retrospectively to deny credit for invoices issued prior to that date. The Tribunal noted the issue is no longer res integra and concluded that the appellants validly availed credit on 18/09/2014 for invoices dated before 01/09/2014, subject to verification by the original adjudicating authority of the invoices' dates and genuineness as directed in the cited precedents. [Paras 6]

Cenvat credit taken on 18/09/2014 for invoices issued prior to 01/09/2014 is upheld; original authority to verify invoice dates as necessary.

Final Conclusion: Both appeals allowed: the demand for proportionate reversal of cenvat credit on account of by-products is set aside and the cenvat credit taken on invoices issued prior to 01/09/2014 (though availed on 18/09/2014) is upheld, with consequential relief and verification of invoice particulars by the adjudicating authority where required.

Refund of unutilised cenvat credit - limitation / time bar for refund claims - return of application to wrong forum and effect on limitation - duty to transfer refund application to the competent authority - remand for adjudication on merits

Limitation / time bar for refund claims - return of application to wrong forum and effect on limitation - Refund claim filed by the appellant for the period April 2012 to June 2012 is not barred by limitation. - HELD THAT: - The appellant originally filed the refund claim before the Assistant Commissioner of Service Tax on 04/02/2013, within the prescribed time. The Service Tax authority returned the claim on 03/04/2013 after the last date for filing refunds had expired. The Tribunal accepted the principle that where a bona fide refund application is filed in time before a wrong forum and the application is returned instead of being transferred to the competent authority, the period during which the matter remained pending before the wrong forum cannot be allowed to render the claim time barred. The Tribunal relied on its earlier decision in Anurag Enterprises and on the decision of the Gujarat High Court in AIA Engineering Ltd. to hold that the initial filing in time, followed by return by the wrong forum, precludes the claim being treated as barred by limitation. [Paras 6]

The refund claim is held to have been filed within time and is not time barred.

Remand for adjudication on merits - duty to transfer refund application to the competent authority - Whether the claim should be adjudicated on merits by the proper authority. - HELD THAT: - Both adjudicating authorities had not examined the substantive merits of the refund claim. Given the conclusion that the claim is not time barred and that the Service Tax authority ought to have transferred the application to the appropriate Central Excise authority, the Tribunal set aside the impugned order rejecting the refund as time barred and remitted the matter to the adjudicating authority for consideration of the claim on merits. [Paras 7]

Impugned order set aside and matter remanded to the adjudicating authority to entertain and decide the refund claim on merits.

Final Conclusion: The appeal is allowed by way of remand: the refund claim for April 2012 to June 2012 is not time barred, the impugned order is set aside, and the matter is remitted to the adjudicating authority to decide the claim on merits.

Power under Section 34(8A) to initiate assessment only during pending proceedings - Limitation on reopening where prior scrutiny assessment under Section 34(2) has attained finality - Prohibition on change of opinion to reopen completed assessment - Requirement of identification of "proceedings" to invoke Section 34(8A)

Power under Section 34(8A) to initiate assessment only during pending proceedings - Requirement of identification of "proceedings" to invoke Section 34(8A) - Limitation on reopening where prior scrutiny assessment under Section 34(2) has attained finality - Prohibition on change of opinion to reopen completed assessment - Validity of the notice dated 26.07.2019 under Section 34(8A) for reopening assessment of F.Y. 2009-10 where no proceedings were pending and a scrutiny assessment under Section 34(2) had been completed. - HELD THAT: - The Court held that sub section (8A) of Section 34 can be invoked only "during the course of any proceedings" under the Act; consequently some proceedings must be pending for the authority to initiate an assessment under Section 34(8A). The power is not a vehicle to correct or review an audit assessment already concluded under Section 34(2) or to permit the Assessing Officer to sit in appeal over his own final order. Where an assessment for the relevant period has been subjected to scrutiny under Section 34(2) and concluded with a conscious decision of no demand, initiating an issue based assessment under Section 34(8A) solely on the basis of an AG Audit, without specifying any pending proceedings in which such audit came to notice, is without jurisdiction. Applying these principles to the present case, the Commercial Tax Officer did not identify any proceedings in which the AG Audit was noticed and attempted to reopen F.Y. 2009 10 despite the earlier scrutiny assessment having attained finality; therefore the impugned notice was unlawful.

The impugned notice dated 26.07.2019 under Section 34(8A) insofar as it seeks to reopen assessment for F.Y. 2009-10 is without jurisdiction and is quashed; all consequential proceedings pursuant to the notice are terminated.

Final Conclusion: Writ allowed; the show cause/assessment notice dated 26.07.2019 issued under Section 34(8A) for F.Y. 2009 10 is quashed as impermissible where no proceedings were pending and a scrutiny assessment under Section 34(2) had been completed, and all consequential proceedings stand terminated.

Principles of natural justice - opportunity of personal hearing - remand for fresh consideration - compounding fee under Section 72 of the TNVAT Act - service of adjudication order

Principles of natural justice - service of adjudication order - compounding fee under Section 72 of the TNVAT Act - Whether the adjudication order dated 04.09.2015 could stand where the petitioner had filed a reply to the second adjudication notice and the order was not served, resulting in an alleged breach of natural justice in fixation of composition fee. - HELD THAT: - The Court recorded that after an earlier order which required payment of disputed tax (complied with by the petitioner) a second adjudication notice was issued on 19.07.2015 and the petitioner replied on 29.08.2015, the reply having been received by the revenue. The impugned order dated 04.09.2015 makes reference to the notice but does not record consideration of the petitioner's reply nor was a copy of that order served on the petitioner. In these circumstances the Court held that the petitioner's reply was not considered in proper perspective and that non-consideration together with non-service engaged principles of natural justice. Given these infirmities, the Court declined to adjudicate the merits of the composition fee and instead set aside the impugned order and remitted the matter for fresh consideration. The respondents were directed to afford the petitioner a personal hearing at the earliest by issuing proper notice; on the fixed date the petitioner must appear and produce supporting documents and reply; the authority is to consider those inputs and pass a final order. The Court clarified that the grant of personal hearing was on the peculiar facts and not to be treated as precedent. [Paras 12, 13, 14]

Impugned order of 04.09.2015 set aside and matter remitted to respondents for reconsideration with direction to grant personal hearing, accept the petitioner's reply and supporting documents, and thereafter pass a fresh final order.

Final Conclusion: Writ petition allowed to the extent of setting aside the adjudication order dated 04.09.2015; the matter is remitted for fresh consideration with a direction to afford the petitioner a personal hearing and to pass a fresh final order after considering the petitioner's reply and supporting documents; no costs.

Input Tax Credit - rectification under Section 84 of the TNVAT Act - deemed assessment under Section 22(2) of the TNVAT Act - assessment under Section 27 of the TNVAT Act - opportunity of personal hearing - non-application of mind - quash and remand

Rectification under Section 84 of the TNVAT Act - Input Tax Credit - opportunity of personal hearing - non-application of mind - quash and remand - Validity of the communication dated 12.01.2022 disposing the petitioner's application under Section 84 for rectification and the requirement to afford personal hearing and consider production of the original invoice - HELD THAT: - The Court found that the respondent's communication dated 12.01.2022 did not address the petitioner's claim that the original invoice had subsequently been traced and was available for production, but instead proceeded on an erroneous premise that the petitioner had already produced the invoice. The impugned order was therefore held to be cryptic and a product of non-application of mind. The Court observed that an application under Section 84 can be filed at any stage and requires consideration on merits as to whether rectification is permissible, including giving the assessee an opportunity of personal hearing and permitting production of supporting documents such as the original invoice before passing a reasoned order. [Paras 11, 12, 13]

Impugned communication dated 12.01.2022 quashed; matter remitted to the respondent to decide the Section 84 application on merits after affording personal hearing and permitting production of the original invoice.

Deemed assessment under Section 22(2) of the TNVAT Act - assessment under Section 27 of the TNVAT Act - Fate of the original assessment order dated 27.08.2021 challenged in the second writ petition pending outcome of the Section 84 rectification proceeding - HELD THAT: - The Court refrained from adjudicating the correctness of the assessment order dated 27.08.2021 on merits because the validity and effect of that order may be altered depending on the outcome of the remanded rectification proceedings under Section 84. In view of the direction to decide the Section 84 application afresh, the Court considered it appropriate to keep the assessment order in abeyance until the revenue disposes of the rectification application. [Paras 14]

Writ challenging the assessment order dated 27.08.2021 kept in abeyance pending disposal of the Section 84 application; further orders to follow based on that decision.

Final Conclusion: The notice dated 12.01.2022 is quashed and the matter is remanded for fresh consideration of the petitioner's Section 84 application after affording personal hearing and permitting production of the original invoice; the assessment order dated 27.08.2021 is kept in abeyance pending the outcome of those proceedings.

Error apparent on the face of the record - rectification under Section 84 of the TNVAT Act - rectification application pending precludes revenue demand - suomotu rectification versus rectification on application

Rectification application pending precludes revenue demand - rectification under Section 84 of the TNVAT Act - Whether the demand dated 27.02.2019 could be sustained while the petitioner's application under Section 84 remained pending consideration. - HELD THAT: - Section 84 permits a dealer to apply for rectification of an error apparent on the face of the record within six years of the order. Where such an application is filed, the authority before whom it is made must consider and decide whether to allow or reject the rectification on merits. In the present case an application under Section 84 was filed on 08.10.2018 in respect of five assessment years. Although the Revenue passed an order dated 04.02.2019 dealing with assessment year 2010-11, there is no express order accepting or rejecting the claims made in the Section 84 application for the remaining years. While the rectification application as to those years remained undecided, the Revenue proceeded to issue the demand dated 27.02.2019 based on the original assessments. The Court held that the Revenue cannot proceed to make demand on the original assessments without first deciding the rectification application made under Section 84, and therefore the demand was infirm and liable to be set aside. [Paras 12, 13, 14, 16, 17]

Demand dated 27.02.2019 set aside as illegal insofar as it was issued while the Section 84 application remained undecided.

Error apparent on the face of the record - suomotu rectification versus rectification on application - Whether the order dated 04.02.2019 constituted a decision on the Section 84 application filed on 08.10.2018 for all five assessment years or only for 2010-11, and the consequential relief. - HELD THAT: - The Revenue's order dated 04.02.2019 expressly records rectification only in respect of assessment year 2010-11 and makes no reference to the other assessment years covered by the Section 84 application. The Court found that insofar as the other years are concerned there is no whisper in that order accepting or rejecting the claims made by the petitioner; the 04.02.2019 order appears to deal suomotu with 2010-11 rather than on the basis of the petitioner's application dated 08.10.2018. Consequently the claims in the Section 84 application for the years 2009-10, 2011-12, 2012-13 and 2013-14 remain undecided and require fresh consideration. The Court thus remitted the matter to the respondent to consider and decide the Section 84 application on merits and in accordance with law, permitting further input from the dealer and fixing a six-week time frame for final orders from receipt of the Court's order. [Paras 9, 13, 14, 15, 18]

Matter remitted to respondent to consider and decide the Section 84 application dated 08.10.2018 for assessment years 2009-10 to 2013-14 on merits and in accordance with law, allowing the dealer to furnish any further input and directing final orders within six weeks of receipt of this order.

Final Conclusion: The impugned demand dated 27.02.2019 is set aside and the matter is remitted for fresh consideration of the petitioner's Section 84 application dated 08.10.2018 in respect of assessment years 2009-10 to 2013-14; the respondent shall decide the application on merits in accordance with law within six weeks of receipt of this order after receiving any further input from the dealer.

Gross delay and laches - Mandamus to decide representation - Creation of fresh cause of action to overcome limitation - Pre-existing administrative decision communicated to affected party

Gross delay and laches - Mandamus to decide representation - Creation of fresh cause of action to overcome limitation - Petition dismissed on account of gross delay and laches; no direction issued to respondents to decide the representation. - HELD THAT: - The petitioner's shop was demolished in 1975 and a policy for allotment to similarly affected persons was framed in 1977. The respondents communicated to the petitioner on 02.06.2010 that his representation had been considered by the competent authority and could not be acceded to. Despite that communication and the long passage of time, the petitioner did not approach a court to enforce any alleged rights and only filed the present petition after an inordinate delay of over four decades. The court found that the present prayer seeking a direction to respondents to decide the representation was an attempt to create a fresh cause of action to circumvent delay and laches. In these circumstances the court exercised its discretion to refuse the relief of mandamus and dismissed the petition for want of merit. [Paras 8, 9, 10, 11]

Petition dismissed for gross delay and laches; no direction to respondents to decide the representation.

Final Conclusion: The petition was dismissed as barred by gross delay and laches, and no order was made directing the respondents to decide the petitioner's representation.