TaxTMI Updates e-Newsletter
Mar 11,2022

Show-cause notice - vagueness and failure to state contravention - principles of natural justice - summary of show cause notice (Form GST DRC-01) - summary order (Form GST DRC-07) - quashing of proceedings and liberty to initiate fresh proceedings - maintainability of writ despite availability of statutory remedy - blocking of electronic credit ledger - Rule 86A(3) of JGST Rules, 2017

Show-cause notice - vagueness and failure to state contravention - The show-cause notice issued under section 73 of the JGST Act was invalid for failing to specify the contravention and for being in a format without striking off irrelevant particulars. - HELD THAT: - The Court examined the impugned notice (Annexure-5) and found it does not fulfil the ingredients of a proper show-cause notice under section 73, as it fails to indicate the specific contravention committed by the petitioner and is in a non-specific format with irrelevant particulars not struck off. Relying on this defect and the Court's earlier decisions quashing similar notices, the notice was held to be legally deficient for purposes of initiating adjudication under section 73. The defect was treated as a breach of the procedure mandated by law and of the principles of natural justice, rendering the notice non-est and liable to be quashed. [Paras 7]

Impugned show-cause notice dated 20.10.2020 (Annexure-5) quashed.

Summary of show cause notice (Form GST DRC-01) - summary order (Form GST DRC-07) - quashing of proceedings and liberty to initiate fresh proceedings - The summary of show-cause notice in Form GST DRC-01 and the summary order uploaded in Form GST DRC-07 could not substitute for a proper show-cause notice and were quashed along with the invalid notice. - HELD THAT: - The Court held that the Summary of Show Cause Notice issued in Form GST DRC-01 and the subsequent summary order in Form GST DRC-07 cannot stand when the foundational show-cause notice under section 73 is legally defective. As the defect related to non-observance of mandatory procedure and principles of natural justice, the summary documents dependent on that notice were set aside. The Court declined to go into the merits of the underlying demand and granted the respondents liberty to initiate fresh proceedings in accordance with law. [Paras 7, 8]

Summary of Show Cause Notice (Annexure-4) and summary order in Form GST DRC-07 (Annexure-7) quashed; respondents permitted to initiate fresh proceedings in accordance with law within four weeks.

Maintainability of writ despite availability of statutory remedy - principles of natural justice - Writ petition was held maintainable notwithstanding the existence of statutory remedies, because the proceedings exhibited violation of principles of natural justice and mandatory procedural requirements. - HELD THAT: - Applying the principles laid down by higher courts, the Court found that where there is a breach of natural justice or mandatory procedure in initiation of adjudicatory proceedings, interference by writ jurisdiction is justified even if alternative statutory remedies exist. The Court relied on precedent and its own prior orders quashing similar defective notices to conclude that the present petition met that threshold and could be entertained. [Paras 7]

Writ petition entertained and allowed on grounds of procedural infirmity and breach of natural justice.

Blocking of electronic credit ledger - Rule 86A(3) of JGST Rules, 2017 - quashing of proceedings and liberty to initiate fresh proceedings - The Court noted that the petitioner's electronic credit ledger remained blocked for more than one year but did not adjudicate the substantive correctness of blocking; respondents were permitted to initiate fresh proceedings afresh in accordance with law. - HELD THAT: - While the respondents did not dispute that the electronic credit ledger had been blocked for over a year, the Court did not decide on the propriety or relief regarding the blocking itself. Instead, because the show-cause notice and summary order were quashed for procedural defects, the Court allowed the department liberty to commence proceedings from the appropriate stage in accordance with law, thereby implicitly remanding consideration of any ledger-blocking consequences to fresh proceedings. [Paras 5, 7, 8]

No adjudication on merits of blocking; matter remitted for fresh consideration in accordance with law within the time directed.

Final Conclusion: Impugned show-cause notice dated 20.10.2020 (Annexure-5), the Summary of Show Cause Notice in Form GST DRC-01 (Annexure-4) and the summary order in Form GST DRC-07 (Annexure-7) are quashed for failure to comply with mandatory procedural requirements and principles of natural justice; the writ petition is allowed and the respondents may initiate fresh proceedings in accordance with law within four weeks.

Detention of goods for expired e-way bill - validity and extension of e-way bill - willful and deliberate violation - breakdown of vehicle as justification for delayed movement - refund of penalty and tax paid on protest

Detention of goods for expired e-way bill - willful and deliberate violation - breakdown of vehicle as justification for delayed movement - Validity of detention and confirmation of detention where the e-way bill had expired by a few hours and the petitioner attributed the delay to a vehicular breakdown, and whether such delay amounted to a willful attempt to evade tax. - HELD THAT: - The Court examined the factual matrix that the e-way bill's validity had expired in the midnight and the goods were detained the following morning, a period of a few hours less than a day. The petitioner asserted that the short delay was caused by a breakdown of the vehicle and was neither deliberate nor with intent to evade tax. The respondent failed to produce specific material to demonstrate that the violation was willful or that there was an intention to evade tax. The petitioner relied upon a higher court decision to support the contention that such inadvertent/short delay does not attract punitive consequence where willfulness is not established. In the absence of evidence of deliberate non-compliance or evasion, the detention and the consequent endorsement by the appellate authority could not be sustained.

Detention and its confirmation set aside for lack of proof of willful or deliberate violation; detention held not sustainable where delay of a few hours was attributable to vehicle breakdown and no intention to evade tax was shown.

Refund of penalty and tax paid on protest - Entitlement to refund of the penalty and tax paid on protest consequent to setting aside the detention orders. - HELD THAT: - Having set aside both the adjudicating authority's order and the appellate authority's confirmation, the Court directed that the petitioner is entitled to repayment of the amounts paid under protest. The entitlement is made subject to the petitioner completing the statutory and legal formalities required for such refund as per law.

Petitioner entitled to refund of penalty and tax paid on protest, subject to compliance with legal formalities.

Final Conclusion: Writ petition allowed; orders of adjudicating authority and appellate authority set aside. Petitioner to receive refund of penalty and tax paid on protest subject to completion of statutory formalities.

Refund of tax collected during search - voluntary payment under duress/coercion - prohibition on recovery at the time of search/inspection - show cause notice and opportunity of personal hearing - adjudication of tax liability on merits

Refund of tax collected during search - voluntary payment under duress/coercion - prohibition on recovery at the time of search/inspection - Whether the earlier direction to refund the amount collected during the search should stand or the matter should be remitted for fresh adjudication of tax liability and entitlement to refund. - HELD THAT: - The learned Judge had directed refund of the sums collected during the search relying on guidance in a Division Bench order from another High Court which restrained recovery during search/inspection. On appeal, having heard counsels and noting that both sides ultimately accepted that an enquiry to determine the actual tax liability was necessary, this Court modified the earlier direction and refrained from ordering an immediate refund on the record. Instead, the Court directed a fresh procedural adjudication: the appellants must issue a show cause notice calling upon the assessee to produce documents within four weeks; the assessee to file objections and documentary evidence within two weeks thereafter; the appellants to afford a personal hearing on a specified date; and thereafter to pass an order on merits determining the tax payable and the assessee's entitlement to refund of the sums already paid. The directions require the adjudicating authority to decide the matter on merits and in accordance with law within a further four weeks after hearing. These steps effectively remand the substantive question of liability and refund for fresh consideration while recognising the relevance of principles limiting recovery during search as a contextual factor. [Paras 9, 10, 11]

The writ court's direction for immediate refund is modified; the matter is remitted for fresh adjudication by issuance of a show cause notice, submission of evidence, personal hearing and passing of an order on merits determining tax liability and entitlement to refund within prescribed timelines.

Final Conclusion: The writ appeal is disposed modifying the earlier order for immediate refund; the appellants are directed to follow the prescribed show cause, hearing and adjudication process and thereafter determine the tax payable, if any, and the assessee's entitlement to refund of the sums paid, within the timelines specified by this Court.

Cancellation of GST registration - Validity of show cause notice - Vagueness and want of reasoned order - Quashing of administrative action for lack of due process - Suspension of registration pending adjudication

Validity of show cause notice - Cancellation of GST registration - Vagueness and want of reasoned order - Quashing of administrative action for lack of due process - The impugned show cause notice and the order cancelling the petitioner's GST registration are invalid for vagueness and are set aside. - HELD THAT: - The Court examined the show cause notice dated 08.01.2021 and the order of cancellation dated 20.01.2021 and found both documents to be impermissibly vague and lacking any intelligible explanation of the grounds for cancellation. The State's counsel conceded that the show cause notice and the cancellation order were unclear and did not convey any coherent case against the petitioner. The Court further noted that similar vague notices and orders have repeatedly been criticised by the High Court and observed that such defective communications lead to an upsurge of writ petitions. In light of the absence of a reasoned show cause notice and a discernible basis for cancelling registration, the impugned order was held to be unsustainable and liable to be quashed to protect the petitioner's right to due process and fair adjudication. [Paras 5, 6]

The order cancelling the petitioner's registration (Annexure A) is quashed and set aside.

Final Conclusion: The writ petition is disposed of by quashing and setting aside the order of cancellation of GST registration dated 20.01.2021 for being vague and devoid of proper reasoning; no remand was directed and the cancellation stands annulled.

Disallowance and appropriation of transitional credit under Section 73(1) - demand of interest for appropriated tax under Section 50(3) of the CGST Act - penalty under Section 122(2)(a) for wrongly availed or utilised Input Tax Credit - electronic credit ledger availability as equivalent to revenue possession/no prejudice to revenue

Demand of interest for appropriated tax under Section 50(3) of the CGST Act - electronic credit ledger availability as equivalent to revenue possession/no prejudice to revenue - Whether interest could be levied on the tax demand which was appropriated from the assessee's electronic input tax credit ledger - HELD THAT: - The Court found that the entire transitional credit remained in the assessee's electronic credit ledger throughout and the revenue appropriated the demand from that credit. Applying precedents cited in Maansarovar Motors Pvt. Ltd. and other decisions, the Court held that where the amount was available in the department's possession by way of credit in the electronic ledger and could have been adjusted at any time, imposition of interest to compensate alleged loss of capital is not justified. The reasoning rested on the view that no prejudice was caused to the revenue when the department held the credit balance and thereafter adjusted it; consequently interest under the statutory provision invoked could not be demanded in the facts of this case. [Paras 25, 26, 27, 30]

Demand of interest under Section 50(3) as made in the impugned order is unjustifiable and set aside.

Penalty under Section 122(2)(a) for wrongly availed or utilised Input Tax Credit - Whether penalty under Section 122(2)(a) could be imposed where the Input Tax Credit was not availed or utilised by the assessee - HELD THAT: - The Court examined the statutory language of Section 122(2)(a) which contemplates penalty where input tax credit has been wrongly availed or utilised. On the material before it, the Court recorded that the transitional credit was never availed or utilised by the assessee for discharging output tax liability but remained as a balance in the electronic credit ledger until appropriation. Because utilisation/availing is a pre-requisite for imposing the penalty under the provision relied upon, and that factual predicate was absent, the imposition of penalty could not be sustained. [Paras 28, 29, 30]

Penalty imposed under Section 122(2)(a) is not sustainable and is set aside.

Final Conclusion: Writ petition partly allowed: disallowance and appropriation of the transitional credit as recorded in the impugned order are upheld, but the clauses imposing interest and penalty are quashed; no order as to costs.

Validity of assessment passed despite pending reference to the Dispute Resolution Panel - Quashing of assessment order for non-consideration of DRP reference - Remand for fresh assessment to consider DRP observations

Validity of assessment passed despite pending reference to the Dispute Resolution Panel - Quashing of assessment order for non-consideration of DRP reference - Remand for fresh assessment to consider DRP observations - Assessment order dated 4th May 2021 passed notwithstanding the petitioner's reference to the Dispute Resolution Panel was quashed and respondents directed to pass a fresh assessment considering the DRP order dated 29th December 2021. - HELD THAT: - The petitioner received the draft assessment order on 31st March 2021 and lodged a reference to the DRP on 28th April 2021 within the thirty day period, informing the respondents by communication dated 29th April 2021. Although the respondents received that communication on 3rd May 2021, they proceeded to pass the final assessment order on 4th May 2021 without regard to the pending DRP reference. The Court found that an assessment passed notwithstanding a duly communicated and pending reference to the DRP could not stand. Consequently, the impugned order was quashed and set aside and the matter was remitted to the respondents to pass a fresh assessment order after considering the observations recorded by the DRP in its order dated 29th December 2021. The Court disposed of the petition by directing compliance with this course and accordingly rendered interim applications moot.

Impugned assessment order quashed; respondents directed to pass fresh assessment considering the DRP order dated 29th December 2021.

Final Conclusion: The High Court quashed the assessment order dated 4th May 2021, finding it was passed despite a pending and communicated reference to the DRP, and remitted the matter to the respondents to pass a fresh assessment order after taking into account the DRP's observations dated 29th December 2021.

Conditional interim stay - attachment of bank accounts - pre-deposit as condition for stay - exercise of discretion under Section 220(6) - consideration of stay applications on merits - consequences of non-compliance

Conditional interim stay - pre-deposit as condition for stay - attachment of bank accounts - Whether attachments on the petitioner's bank accounts should be lifted and a limited stay of recovery granted on payment of specified percentages of the demand. - HELD THAT: - The High Court accepted the petitioner's offer to make specified payments as a condition for temporary relief. Applying the discretionary framework available under the Act, the Court directed that the petitioner shall pay 20% of the demand for AYs 2015-16, 2016-17 and 2017-18 and 30% of the demand for AY 2012-13 within four weeks. On that condition the Court granted a stay for two months and directed that the attachments on the bank accounts may be lifted after such payment. The direction is a conditional interim arrangement to enable the petitioner to approach the appropriate appellate or adjudicatory forums. The Court made clear that the stay is not a blanket waiver of liability but a provisional measure contingent on compliance with the payment schedule. [Paras 15, 16, 20]

Petition disposed by granting a conditional interim stay and lift of bank-account attachments upon payment of specified percentages within four weeks.

Exercise of discretion under Section 220(6) - consideration of stay applications on merits - Obligations of the petitioner to seek stay from the appropriate forum and the manner in which such stay applications shall be considered. - HELD THAT: - The Court noted that appeals are pending before ITAT and CIT(A) for the relevant years and that the petitioner had in some years not filed stay applications before the appropriate fora. The Court directed that within the two-month stay period the petitioner must approach the ITAT, CIT(A) or the Assessing Authority, as applicable, and file stay applications. It further directed that any stay applications filed after complying with the Court's conditional payment order shall be considered objectively on merits by the concerned authorities, taking into account that the petitioner has complied with the conditional payment directed by this Court. The Court thereby required the appellate/adjudicatory authorities to take the conditional compliance into account while exercising their discretion. [Paras 15, 16, 20]

Petitioner must file stay applications before the appropriate forum within the stipulated period and those applications shall be considered on merits with regard to the petitioner's compliance with the Court's conditional payment order.

Consequences of non-compliance - Consequences if the petitioner fails to comply with the payment schedule or the directions to approach the concerned authorities. - HELD THAT: - The Court stipulated that failure to comply with the payment schedule will automatically vacate the conditional stay granted by this order without further reference to the Court. The Court expressly recorded that non-compliance in any respect - either in making the payments or in approaching the concerned authorities to seek stay - would entitle the Revenue to proceed as if the petitioner had become a defaulter in respect of the demands for the four Assessment Years. This establishes the automaticity of the consequence and places onus on the petitioner to meet both payment and procedural conditions. [Paras 20]

Non-compliance with the payment or filing directions will automatically vacate the stay and permit the Revenue to proceed as against a defaulting assessee.

Final Conclusion: Writ petition disposed by granting a conditional interim stay for two months and directing lifting of bank-account attachments upon specified pre-deposit (20% for AYs 2015-16, 2016-17, 2017-18; 30% for AY 2012-13) to be paid within four weeks; petitioner required to approach the appropriate forums within the stay period and any stay applications filed shall be considered on merits taking compliance into account; failure to comply will automatically vacate the stay and permit the Revenue to proceed.

Income from house property - business income - commercial asset versus house property - licence versus tenancy - appellate fact finding and interference

Income from house property - business income - commercial asset versus house property - licence versus tenancy - appellate fact finding and interference - The nature of receipts from letting out commercial premises together with amenities - whether assessable as business income or as income from house property. - HELD THAT: - The Tribunal found, on the facts and material placed before it, that the assessee had given the commercial premises on licence/for instantaneous user and had retained such control that the relationship of owner and tenant as envisaged by the head 'income from house property' under section 22 did not arise. Applying the principle that where a building is a commercial asset and is exploited as such the receipts may amount to business income, the Tribunal followed the jurisdictional High Court's decision in CIT v. VST Motors Pvt. Ltd. and distinguished decisions relied upon by the Revenue (which concerned pure rental arrangements). The High Court held that the Tribunal, being the fact finding authority, had considered the facts and circumstances and rendered a reasoned conclusion that the receipts were business income and not income from house property, a conclusion not warranting interference. [Paras 6, 8]

Tribunal's finding that the receipts are assessable as business income and not as income from house property is upheld.

Final Conclusion: Appeals dismissed; the substantial question answered in favour of the assessee - receipts from letting the commercial premises on the factual matrix before the Tribunal are to be taxed as business income rather than income from house property.

Deduction under Section 10A of the Income-tax Act - Stage of deduction - computation under Chapter IV (eligible undertaking) vs Chapter VI (total income) - Computation of deduction prior to set-off of brought forward losses and unabsorbed depreciation - Jurisdiction of the Commissioner under Section 263

Deduction under Section 10A of the Income-tax Act - Stage of deduction - computation under Chapter IV (eligible undertaking) vs Chapter VI (total income) - Computation of deduction prior to set-off of brought forward losses and unabsorbed depreciation - Deduction under Section 10A is to be computed while determining the gross total income of the eligible undertaking and not after setting off brought forward losses and unabsorbed depreciation at the stage of computing the assessee's total income under Chapter VI. - HELD THAT: - The court followed the decision of the Hon'ble Supreme Court in CIT v. Yokogawa India Ltd and held that, although Section 10A, as amended, provides for a deduction, the appropriate stage for working out that deduction is immediately after computing the profits and gains of the eligible undertaking under Chapter IV. The amended Section 10A contemplates deduction qua the eligible undertaking standing on its own; the legislative scheme and contemporaneous departmental guidance treat turnover and profits of the eligible unit as independent of the other business of the assessee. Consequently, application of provisions for set-off and carry forward (such as brought forward business losses and unabsorbed depreciation) under Chapter VI would be premature at that stage. The court therefore answered the substantial question of law in favour of the assessee, holding that the Section 10A deduction is to be applied prior to any set-off of earlier losses or depreciation.

Substantial question answered for the assessee: deduction under Section 10A must be computed at the stage of determining the eligible undertaking's gross total income, i.e., prior to set-off of brought forward losses and unabsorbed depreciation.

Jurisdiction of the Commissioner under Section 263 - Whether the Commissioner had jurisdiction under Section 263 to revise the assessment order was not decided and is left open for consideration. - HELD THAT: - Although the assessing sequence and the CIT's order under Section 263 were part of the controversy, the court declined to adjudicate the question of the CIT's jurisdiction to revise the assessment under Section 263 and expressly left that issue open. The Tribunal's conclusion regarding the absence of jurisdiction was not finally addressed by this court in the present order.

Issue of CIT's jurisdiction under Section 263 left open for determination.

Final Conclusion: The substantial question of law was answered in favour of the assessee: Section 10A deduction is to be computed while determining the eligible undertaking's gross total income (prior to set-off of brought forward losses and unabsorbed depreciation). The question of the Commissioner's jurisdiction under Section 263 was left open. The tax case appeal is disposed of.

Reopening of assessment under Section 147 - notice under Section 148 - reasons to believe - proceedings against deceased assessee - comparative verification of reasons for reopening - same reasons cannot be used to reopen assessment

Proceedings against deceased assessee - notice under Section 148 - Validity of issuance of notice under Section 148 in the name of the original assessee who is deceased - HELD THAT: - The Court examined whether issuance of the Section 148 notice in the name of the original assessee (who died on 15.07.2018) vitiates the proceedings. It accepted the Revenue's position that the assessing officer had no occasion to know of the death because the petitioner did not specifically state in earlier communications or in the return filed pursuant to the Section 148 notice that the original assessee was deceased. The Court therefore declined to treat the issuance in the deceased's name as fatal at this stage, observing that the assessing authority, once informed, may take appropriate steps in subsequent proceedings. The petitioner was, however, to be afforded an opportunity to be heard and to file supporting documents before the assessing authority proceeds further.

Issuance of the Section 148 notice in the name of the deceased original assessee is not held to be fatal; petitioner to be given hearing and allowed to place on record the position.

Reopening of assessment under Section 147 - reasons to believe - comparative verification of reasons for reopening - same reasons cannot be used to reopen assessment - Whether the reassessment under Section 147 can be sustained where the Revenue relies on reasons apparently identical to those on which an earlier reopening (culminating in assessment dated 27.06.2017) was made - HELD THAT: - The Court declined to decide on the merits whether the present reasons are identical to those relied upon in the earlier reopening because no documents were placed on record by the petitioner. Recognising the legal contention that the very same reason cannot ordinarily justify a second reopening, the Court directed the assessing authority to verify and compare the reasons recorded now (communication dated 14.09.2021) with the reasons recorded on the earlier occasion which ended in the assessment order dated 27.06.2017. If the assessing authority finds that the same reason was earlier given, the Court indicated that a further reopening on the same basis would not be permissible. If the reasons differ, the assessing authority must communicate the earlier reason to the petitioner in writing and may then proceed in accordance with law.

Matter remitted to the assessing authority to compare present and earlier reasons for reopening; if identical, reopening is impermissible; if different, petitioner to be informed in writing and proceedings may continue in accordance with law.

Final Conclusion: Writ petition disposed by remitting the matter to the assessing authority: petitioner to be granted personal hearing and file documents; assessing authority to verify whether the present reasons for reopening under Section 147 are the same as those relied upon earlier (assessment order dated 27.06.2017); if the reasons are identical, reopening cannot be sustained, otherwise the earlier reason must be disclosed in writing and the authority may proceed in accordance with law.

Deduction under section 54F - Admissibility of additional evidence at appellate stage - Verification by field inquiry and remand report as basis for appellate fact-finding - Irrelevance of disputed cost of improvement where exemption absorbs entire sale consideration

Admissibility of additional evidence at appellate stage - Verification by field inquiry and remand report as basis for appellate fact-finding - Whether the appellate authority could accept additional documents/evidence and rely on the Assessing Officer's field inquiry for decision. - HELD THAT: - The Tribunal noted that the assessee furnished the sale-deed and other documents before the first appellate authority, which were forwarded to the Assessing Officer for verification. The Assessing Officer deputed the Ward Inspector who conducted a physical enquiry and furnished a remand report confirming existence of a constructed residential house on the land at the time of purchase; relevant documentary indicia such as khasra/girdawari entries and property tax assessment records were also placed on file. The appellate fact-finding proceeded on the basis of those verified materials. Having regard to the verification and the remand report, the appellate authority's reliance upon and acceptance of the additional evidence was upheld as a proper basis for decision. [Paras 5]

Acceptance of the additional documents/evidence at the appellate stage, supported by the field inquiry and remand report, was valid.

Deduction under section 54F - Verification by field inquiry and remand report as basis for appellate fact-finding - Whether the assessee's claim of deduction under section 54F was allowable in respect of the purchase of the new asset. - HELD THAT: - On perusal of the materials and the remand report, it was found on physical inquiry that the new asset purchased by the assessee was a residential house. The Tribunal accepted the finding of existence of a constructed residential house at the time of purchase, supported by the sale-deed, khasra/girdawari entries and property tax records, and observed there was no infirmity in the Commissioner (Appeals)'s conclusion. Since the factual foundation for the claim under section 54F was thus established, the deduction under section 54F was correctly allowed by the first appellate authority. [Paras 5, 6]

Deduction under section 54F was rightly allowed as the new asset purchased was a residential house.

Irrelevance of disputed cost of improvement where exemption absorbs entire sale consideration - Whether adjudication was required on the claim for cost of improvement. - HELD THAT: - The Tribunal observed that the investment made by the assessee in the purchase of the new residential house subsumed the entire sale consideration. Consequently, the question of allowance or disallowance of the claimed cost of improvement became immaterial to the computation of taxable capital gain in the presence of the admitted exemption under section 54F. Therefore, separate adjudication of the cost of improvement was unnecessary for the outcome of the assessment. [Paras 7]

No adjudication on cost of improvement was necessary because the section 54F investment absorbed the entire sale consideration.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upheld the Commissioner (Appeals)'s allowance of deduction under section 54F based on verified evidence and the remand report, validated the acceptance of additional evidence at the appellate stage, and found separate adjudication of cost of improvement unnecessary.

Unexplained cash credits - presumptive taxation under section 44AF - gifts falling within section 56(2) - allowability of deduction for life insurance premium under section 80C - limitation/period of assessment

Unexplained cash credits - presumptive taxation under section 44AF - Whether cash bank deposits of Rs.10,12,500/- could be treated as unexplained credits and added to the assessee's income despite declaration under presumptive taxation scheme. - HELD THAT: - The assessee had declared income under the presumptive provisions of section 44AF and turnovers were accepted by the revenue authorities. The AO treated the cash deposits in the Andhra Bank account as unexplained credits because initial account details were not furnished and no adequate explanation or bills were produced to substantiate the source. The Tribunal, taking into account the assessee's contention that the deposits arose from retail sales, past savings, realization of receivables and inter-bank transfers, and recognising that the presumptive return and accepted turnovers limited inquiry into detailed books, concluded that the entire addition was excessive. In the exercise of appellate discretion and on the material on record, the Tribunal restricted the addition to 10% of the deposits, thereby reducing the addition imposed by the AO. [Paras 6]

Addition on account of bank deposits partly sustained but restricted to 10% of the deposits; ground partly allowed.

Gifts falling within section 56(2) - Whether amounts recorded as gifts from the assessee's brothers and added as unexplained credits could be sustained as income. - HELD THAT: - The assessee produced family partition and gift deed evidence before the Tribunal and the books showed corresponding entries of the gift and an inflated asset value. The AO rejected the explanation on grounds of identity and genuineness and because the gift deed was executed after the financial year end while the entry appeared earlier. The Tribunal observed that the assessee's books simply showed an inflated entry and there was no movement of cash or kind to justify an addition; the incorrect book entry alone did not warrant treating the amount as income. Applying the principle that mere mis-entries in books without material cash/kind transaction do not justify additions, the Tribunal deleted the addition. [Paras 7]

Addition on account of gifts deleted; ground allowed.

Allowability of deduction for life insurance premium under section 80C - Whether the assessee was entitled to deduction for LIC premium claimed but disallowed by the AO for lack of proof. - HELD THAT: - The AO disallowed the deduction because receipts were not on record, and the CIT(A) confirmed that finding. Before the Tribunal, the assessee produced the LIC premium receipts which were placed on record. On production of the requisite proof at the appellate stage, the Tribunal directed that the AO allow the deduction under section 80C. [Paras 8, 9]

LIC premium deduction allowed and AO directed to grant deduction; ground allowed.

Final Conclusion: The appeal is partly allowed: the addition for bank deposits is reduced and restricted to 10%, the addition on account of gifts is deleted, and the LIC premium deduction is restored; other non-pressed grounds dismissed.

Condonation of delay due to COVID-19 lockdown - Maintainability of Revenue appeal in view of CBDT policy limiting appeals where tax effect is below threshold - Liberty to seek recall/restoration where appeals are wrongly excluded or fall within exceptions to the CBDT policy

Condonation of delay due to COVID-19 lockdown - Delay of 346 days in filing the appeal by the revenue was condoned and the appeal was admitted for adjudication. - HELD THAT: - The Tribunal, after considering the condonation petition and submissions of both parties, found that the delay occurred due to the COVID-19 lockdown and consequent closure/limited functioning of Government offices and engagement of officials in implementation of the Vivad Se Vishwas Scheme. In these circumstances the Tribunal exercised its discretion to condone the delay and admit the appeal for adjudication. [Paras 3]

Delay condoned and appeal admitted.

Maintainability of Revenue appeal in view of CBDT policy limiting appeals where tax effect is below threshold - Liberty to seek recall/restoration where appeals are wrongly excluded or fall within exceptions to the CBDT policy - The appeal filed by the Revenue was non-maintainable and dismissed because the tax effect in dispute fell below the threshold set by the CBDT circular; however liberty was granted to the Revenue to point out cases wrongly dismissed or covered by exceptions for remedial steps. - HELD THAT: - The Tribunal applied CBDT Circular No.17/2019 (to be read with earlier Circular No.3/2018 and its amendments) which directs the Revenue not to file or press appeals before the Tribunal where the overall tax effect, excluding interest except when interest itself is in dispute, is 50,00,000 or less. Following the principles applied by the Supreme Court in the cited Keshav Power Ltd. decision, and after noting the circular's scope and applicability to pending appeals, the Tribunal held that the Revenue's appeal challenging the CIT(A)'s relief (below the monetary threshold) was not maintainable and dismissed it. The Tribunal also accepted the Departmental Representative's request to grant liberty to identify matters which may be exceptions or where tax effect was miscomputed, and undertook that appropriate remedial steps would be taken in such cases. [Paras 5, 6, 12, 13]

Appeal dismissed as non-maintainable under the CBDT policy; liberty given to Revenue to seek recall/restoration in respect of wrongly excluded or excepted cases.

Final Conclusion: The Tribunal condoned the delay in filing the Revenue appeal and admitted it for hearing, but on the merits of maintainability dismissed the appeal as barred by the CBDT policy (Circular No.17/2019) limiting appeals where the tax effect is below the specified threshold, while granting the Revenue liberty to seek recall or restoration if the appeal was wrongly excluded or falls within permitted exceptions.

Date of purchase for deduction under Section 54 - benefit under Section 54 on possession of an under-construction flat - relevance of source of funds for Section 54 - agreement for sale governed by Maharashtra Ownership Flats Act and its effect on date of purchase

Date of purchase for deduction under Section 54 - benefit under Section 54 on possession of an under-construction flat - agreement for sale governed by Maharashtra Ownership Flats Act and its effect on date of purchase - Whether the date of purchase for the purpose of claiming deduction under Section 54 is the date of registration of the agreement for sale or the date of actual possession/receipt of the completed flat. - HELD THAT: - The agreement executed and registered was an Agreement for Sale under the Maharashtra Ownership Flats Act, 1963 containing terms that possession would initially be as a licensee and title would pass only upon execution of conveyance; payments and obligation to pay were linked to construction and completion. Applying the substance-over-form approach and following precedent where date of payment of full consideration and handing over of possession was treated as date of purchase, the Tribunal held that the relevant date for purchase under Section 54 is the date on which the assessee took physical possession of the flat (02.04.2016). The Tribunal examined the agreement clauses showing purchaser would acquire only license rights until conveyance and noted the occupancy certificate and possession dates as determinative. As possession was within two years of the sale of the original asset, the statutory temporal requirement of Section 54 was satisfied. [Paras 6, 8, 10]

Date of purchase for Section 54 purposes is the date of actual possession (02.04.2016), not the date of registration of the agreement for sale.

Relevance of source of funds for Section 54 - Whether the assessee must demonstrate that sale proceeds of the original asset were the source of funds used to purchase the new residential house to claim deduction under Section 54. - HELD THAT: - The Tribunal observed that Section 54 requires purchase of a residential house within the prescribed period but does not mandate that the purchase be made specifically from the sale proceeds of the original asset. Citing precedent, the Tribunal held that source of funds is irrelevant to entitlement to deduction under Section 54 where the temporal and purchase conditions are fulfilled. The fact that sale proceeds were used to repay an existing loan did not defeat the claim when the purchase (possession) occurred within the statutory period. [Paras 10]

Source of funds is irrelevant; the assessee is entitled to deduction under Section 54 despite having used sale proceeds to repay an existing loan.

Final Conclusion: The appeal is allowed: the assessee is entitled to deduction under Section 54 as the date of purchase is the date of actual possession (02.04.2016), which falls within the statutory period, and the source of funds is immaterial.

Deduction under section 57(iii) - expenditure laid out or expended wholly and exclusively for the purpose of making or earning income - Purpose test under section 57(iii) - absence of actual income in the year does not preclude deduction - Nexus between interest-bearing borrowings and investment - diversion of borrowed funds and its effect on allowability of interest - Allowability of expenses incurred to maintain an investment portfolio - Apportionment of expenses relating to investment activities

Deduction under section 57(iii) - expenditure laid out or expended wholly and exclusively for the purpose of making or earning income - Nexus between interest-bearing borrowings and investment - diversion of borrowed funds and its effect on allowability of interest - Purpose test under section 57(iii) - absence of actual income in the year does not preclude deduction - Allowability of interest expense claimed by the assessee relating to borrowings used to make investments/advances to a sister concern. - HELD THAT: - The Tribunal found on facts that the assessee had proved the nexus between the secured loan taken from Bank of Baroda and the investment/advances made to Affem Rolling Pvt. Ltd., and observed that it was not disputed that interest expense had been incurred. The assessee had not derived business income from the investment as the investee was under development. Applying the purposive construction of section 57(iii), and following the decision of the Supreme Court in Rajendra Prasad Moody, the Tribunal held that the test under section 57(iii) is the purpose for which the expenditure was laid out - namely, to make or earn income - and it is not necessary that income must actually have been earned in the same assessment year. Consequently, interest incurred on borrowings used to make the investment/advances was allowable under section 57(iii) despite absence of return in that year. The Assessing Officer's approach of disallowing the interest on the ground that no income had been earned and treating the borrowed funds as diverted for non-business purpose was rejected on the stated facts. [Paras 10, 11, 12]

Interest expenses of Rs. 14,74,654 for AY 2012-13 and Rs. 13,96,831 for AY 2013-14 allowed under section 57(iii).

Allowability of expenses incurred to maintain an investment portfolio - Apportionment of expenses relating to investment activities - Allowability and extent of deduction of other expenses (accountant fees, audit fees, general expenses) incurred in relation to the investment in the sister concern. - HELD THAT: - The Tribunal accepted that certain expenses were incurred to manage and maintain the investment in Affem Rolling Pvt. Ltd. but were not expenses relating to the rented property from which the assessee derived rent income. On the facts and in exercise of judicial discretion, the Tribunal found it reasonable to allow a portion of such expenses relating to the investment activity and, applying an apportionment, allowed 50% of the claimed other expenses for each assessment year. The Tribunal made clear that this finding rested on the peculiar facts of the case and should not be treated as a precedent. [Paras 13]

50% of the other expenses disallowed by the authorities is allowed for each of the assessment years (50% of Rs. 9,02,504 for 2012-13 and 50% of Rs. 10,75,377 for 2013-14).

Final Conclusion: The appeals are allowed in part: interest expenses arising from borrowings used to make investments/advances to the sister concern are allowable under section 57(iii) for AY 2012-13 and 2013-14, and 50% of the other expenses relating to maintaining the investment portfolio are allowed for each year; the Tribunal's factual apportionment is confined to the peculiar facts of these years.

Condonation of delay - non-service of appellate order - reasonable cause for delay - recovery proceedings and attachment of bank accounts - natural justice - opportunity of being heard - exemption under 54F - admissibility of evidence - remand for fresh adjudication

Condonation of delay - non-service of appellate order - reasonable cause for delay - recovery proceedings and attachment of bank accounts - Delay in filing the appeal before the Tribunal and condonation of that delay. - HELD THAT: - The Tribunal examined the assessee's uncontested evidence of repeated attempts to obtain the CIT(A)'s order and the fact that the assessee remained unaware of the adverse decision until recovery proceedings were initiated and bank accounts were frozen. The material before the Tribunal established genuine efforts by the assessee to obtain the appellate order and absence of deliberate delay. On these facts the Tribunal found a reasonable cause for the delay and no mala fide conduct attributable to the assessee, and therefore condoned the delay and admitted the appeal for adjudication on merits. [Paras 5, 7]

Delay condoned and appeal admitted for adjudication on merits.

Natural justice - opportunity of being heard - non-service of appellate order - recovery proceedings and attachment of bank accounts - Effect of non-service of the CIT(A)'s order and related procedural lapses on the assessee's rights and on the justification for relief. - HELD THAT: - The Tribunal accepted the assessee's account that the CIT(A)'s order was not served on him and that he only became aware of the order when recovery action, including freezing of bank accounts, was initiated. The Tribunal found that these procedural circumstances supported the assessee's claim of not receiving an opportunity to learn of the outcome earlier, and that the evidences of attempts to obtain the order weighed in favour of granting relief by way of condonation. The Tribunal did not, however, decide the substantive merits of the assessments arising from those procedural defects. [Paras 5, 7]

Found non-service and recovery action to be material; relied upon them as reasonable cause to condone delay.

Exemption under 54F - admissibility of evidence - remand for fresh adjudication - natural justice - opportunity to produce evidence - Whether the assessee's claim of exemption under section 54F was finally determinable on the material before the Tribunal. - HELD THAT: - The AO disallowed the exemption under section 54F on account of absence of evidence before him. The CIT(A) verified documents produced before him but rejected them on the ground that they should have been produced earlier before the AO and on a presumptive basis concluded that the assessee had not made the investment. The Tribunal found the CIT(A)'s rejection to be a disposal without proper consideration of the merits of the evidence and noted the assessee's explanation regarding the consultant's role. In the interest of justice the Tribunal set aside the CIT(A)'s order and restored the matter to the file of the AO for fresh decision after admitting the evidences the assessee may place on record and after allowing sufficient opportunity to the assessee. The Tribunal expressly refrained from expressing any view on the substantive merit of the exemption claim. [Paras 12, 13]

Order of the CIT(A) set aside; matter remanded to the AO for fresh decision after admitting and considering the assessee's evidences and giving opportunity to be heard.

Final Conclusion: The Tribunal condoned the delay in filing the appeal in view of non-service of the CIT(A)'s order and initiation of recovery proceedings, admitted the appeal, set aside the CIT(A)'s order on the section 54F claim for lack of proper consideration, and restored the matter to the AO for fresh adjudication after admitting the assessee's evidences and affording opportunity to be heard.

Initiation of reassessment under section 148 - "reason to believe" v. "reason to suspect" - Accommodation entries / bogus loans and advances as sham transactions - Applicability of explanation under section 68 and burden of proof on the assessee - Principles of natural justice - non supply of statements and requirement of prejudice

Initiation of reassessment under section 148 - "reason to believe" v. "reason to suspect" - Validity of issuance of notice under section 148 of the Income tax Act. - HELD THAT: - The Tribunal upheld the initiation of reassessment. The Assessing Officer acted upon cogent material - a report from DGIT(Inv.) listing beneficiaries of accommodation entries which specifically named the assessee, the alleged lender and the date and amount of the loan as appearing in the assessee's books. At the initiation stage the AO is required only to have a prima facie reason to believe that income has escaped assessment; he need not establish the escapement conclusively. Citing Supreme Court and High Court precedents, the Tribunal found that the material before the AO furnished a legitimate basis for forming the requisite belief and distinguished authorities relied upon by the assessee on their facts. The ground challenging jurisdiction to reopen therefore failed. [Paras 5, 6, 7, 8, 11]

Reassessment was validly initiated and the notice under section 148 was sustained.

Accommodation entries / bogus loans and advances as sham transactions - Applicability of explanation under section 68 and burden of proof on the assessee - Whether the alleged loan of Rs. 25 lakh from M/s. Mohit International was a genuine transaction or an accommodation entry liable to be treated as bogus. - HELD THAT: - On merits the Tribunal affirmed the addition. The findings of adverse statements recorded under sections 131 and 132(4) established that M/s. Mohit International was part of a network providing accommodation entries, and its proprietor/accountant was shown to be under the control of the accommodation entry operator. The annual accounts, bank statements and other papers produced by the assessee were examined and found to be inconsistent and incomplete (missing schedules, implausible turnover with negligible fixed assets and no stock details, bank transactions running into crores inconsistent with the proprietor's claimed profile), undermining the genuineness of the loan. Applying the tests of surrounding circumstances and human probabilities and the statutory regime where unexplained credits must satisfy the AO, the Tribunal concluded that the transaction was a sham and upheld the addition. [Paras 15, 16, 17, 20, 21]

The addition treating the loan as an accommodation entry was sustained and the genuineness of the loan was rejected.

Principles of natural justice - non supply of statements and requirement of prejudice - Whether failure to supply statements of third parties (Mr. Nilesh Parmar and Mr. Praveen Kumar Jain) or to allow their cross examination vitiated the assessment for breach of natural justice. - HELD THAT: - The Tribunal rejected the contention that natural justice was violated. The reasons recorded and the AO's decision made the assessee aware of the case against it; the assessee raised objections, was afforded disposal of those objections, and supplied documents in support of its case. The Tribunal observed that where the assessee is aware of the case and does not demonstrate actual prejudice or seek cross examination at an appropriate stage, mere non supply of third party statements will not nullify the assessment. Reliance was placed on higher court principles that breach of audi alteram partem must cause prejudice to invalidate proceedings and that courts will not order remand if facts admit only one conclusion. The assessee neither obtained any fresh evidence nor showed specific prejudice from non supply or non examination of those witnesses. [Paras 24, 25, 26, 27, 32]

No violation of principles of natural justice was established; the assessment stood.

Final Conclusion: The appeal was dismissed: the reopening under section 148 was upheld as valid, the addition treating the Rs.25 lakh receipt as an accommodation entry was sustained on merits, and no prejudice from alleged non supply of third party statements was found to vitiate the assessment.

Mandatory notice under section 143(2) for scrutiny assessment - invalidity of reassessment framed without issuance of notice under section 143(2) - treatment of original return filed under section 139 as compliance to notice under section 147/148 - best judgment assessment under section 144 where assessee fails to file return in response to notice - proviso to section 143(2) barring issuance of notice after six months from end of financial year of filing

Mandatory notice under section 143(2) for scrutiny assessment - invalidity of reassessment framed without issuance of notice under section 143(2) - treatment of original return filed under section 139 as compliance to notice under section 147/148 - proviso to section 143(2) barring issuance of notice after six months from end of financial year of filing - Reassessment framed u/s.144/147 without issuing notice u/s.143(2) after the assessee asked the AO to treat the original return filed u/s.139 as the return in response to the notice u/s.147/148 is without jurisdiction and bad in law. - HELD THAT: - The Tribunal accepted the factual position that the assessee, in response to the notice dated 22.03.2018 under section 147/148, had by letter dated 28.03.2018 requested the AO to treat the original return filed on 30.09.2011 under section 139 as the return filed pursuant to the notice. Section 143(2) mandates service of a notice where the AO proposes to scrutinise a return; the proviso bars issuance of such notice after the expiry of six months from the end of the financial year in which the return is furnished. Applying that principle, the AO was obliged to issue the section 143(2) notice before 30.09.2018. No section 143(2) notice was issued prior to the reassessment order dated 26.12.2018. Reliance was placed on the reasoning of the Supreme Court in Hotel Blue Moon to the effect that issuance of notice under section 143(2) is mandatory for scrutiny assessments, and on relevant High Court authorities holding the same position in reassessment contexts (C. Palaniapan ; Iqbal Singh Atwal ; Pr. CIT v. Jai Shiv Shankar Traders Pvt. Ltd. ). The Tribunal rejected the Revenue's contention that a mere letter could not be treated as a return for limitation purposes, holding that the assessee's request to treat the original return as the return in response to the section 147/148 notice was effective for the purpose of attracting the time bar in the proviso to section 143(2). Consequently, framing of assessment under section 144/147 without issuance of the mandatory section 143(2) notice was held to be without jurisdiction and void; all subsequent action based on that assessment order was declared null. [Paras 5]

Reassessment order dated 26.12.2018 passed under sections 144/147 quashed for failure to issue the mandatory notice under section 143(2); appeal allowed.

Final Conclusion: The reassessment order dated 26.12.2018 framed under sections 144/147 was quashed for lack of jurisdiction because no notice under section 143(2) was issued before the time barred date; the assessee's appeal is allowed and other grounds are rendered academic.

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interest of Revenue - Verification of genuineness and reasonableness of commission payments to associate concern - Application of mind by Assessing Officer - Precedential weight of coordinate bench decisions

Revisional jurisdiction under section 263 - Verification of genuineness and reasonableness of commission payments to associate concern - Application of mind by Assessing Officer - Erroneous and prejudicial to the interest of Revenue - Whether the Principal Commissioner of Income Tax was justified in invoking revisional jurisdiction under section 263 to quash the assessment for alleged failure of the Assessing Officer to verify genuineness and reasonableness of commission paid to an associate concern. - HELD THAT: - The Tribunal found that during assessment proceedings the Assessing Officer issued a specific notice under section 142(1) seeking details of commission paid and the assessee furnished the requested documents and explanations. Although the assessment order did not contain an explicit discussion on the commission claim, the Assessing Officer examined the material and accepted the payment. The Tribunal placed weight on consistent treatment in earlier years and on coordinate-bench decisions in the assessee's own case (Assessment Years 2012-13 and 2015-16) which had examined and upheld the commission claims. On the facts the Tribunal concluded that the twin mandatory conditions for exercise of revisional jurisdiction under section 263 - that the assessment order is erroneous and prejudicial to the interest of the Revenue - were not concurrently satisfied. Reliance on prior acceptance of similar payments and the material on record showed that enquiries were made and that the Assessing Officer had applied his mind; accordingly the PCIT erred in assuming jurisdiction under section 263. [Paras 4, 5]

The order passed by the PCIT under section 263 was quashed and the assessee's appeal was allowed.

Final Conclusion: The Tribunal quashed the revisional order passed by the Principal Commissioner under section 263 for Assessment Year 2016-17, holding that the Assessing Officer had applied his mind to the commission payments and the mandatory conditions for invoking section 263 were not satisfied; appeal of the assessee is allowed.

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - principle of consistency - corpus of a trust - permissible investments under section 11(5) - proviso to section 13(1)(d) - quashing of revision order

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - permissible investments under section 11(5) - proviso to section 13(1)(d) - corpus of a trust - principle of consistency - Whether the Commissioner (Exemptions) was justified in invoking revisional jurisdiction under section 263 on the ground that the Assessing Officer failed to examine the nature of the assessee's investments in shares, rendering the assessment order erroneous and prejudicial to the revenue - HELD THAT: - The Tribunal held that the CIT(E)'s reasons for invoking section 263 in AY 2016-17 were identical to those in AYs 2014-15 and 2015-16 and that the coordinate Bench had already quashed revision orders on the same factual matrix. The Assessing Officer had recorded and relied upon detailed material showing the shareholdings as originating on or before 1 June 1973 and subsequent accretions by way of bonus, and there was a long-standing acceptance of those holdings as part of the trust corpus (including governmental acceptance evidenced by earlier notifications). In these circumstances, and in the absence of any change in law or material facts in the year under consideration, it was not unreasonable for the AO not to reopen the long-settled corpus characterisation. Further, even if the investments were contrary to section 11(5), the practical tax consequence would be limited (dividend income would be non-exempt or subject to alternate exemption under section 10(34) for the relevant year), so that the requisite twin conditions for exercise of section 263 - that the order is both erroneous and prejudicial to the interests of the revenue - were not satisfied. The Tribunal applied the principle of consistency and precedent that, where facts and law remain the same, a different view in a subsequent year is not warranted, and therefore disapproved the CIT(E)'s exercise of revisional powers and quashed the revision order. [Paras 6, 7]

The revision order passed by the Commissioner (Exemptions) for AY 2016-17 under section 263 is quashed as erroneous exercise of revisional jurisdiction; the AO's assessment is not shown to be both erroneous and prejudicial to the revenue on the facts before the Tribunal.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2016-17 and quashed the CIT(E)'s order under section 263, holding that the revisional jurisdiction was not properly invoked where the AO had acted reasonably in the context of longstanding acceptance of the investments as corpus and where no prejudice to the revenue was shown.

Anti-dumping duty - Validity of notification extending anti-dumping duty - second proviso to Section 9A(5) - power to extend anti-dumping notification - binding effect of Supreme Court decision in Union of India vs. Kumho Petrochemicals Company Limited - competence to issue retrospective extension after lapse of a temporary notification

Anti-dumping duty - Validity of notification extending anti-dumping duty - second proviso to Section 9A(5) - power to extend anti-dumping notification - binding effect of Supreme Court decision in Union of India vs. Kumho Petrochemicals Company Limited - Whether the Central Government had power to issue the notification dated 05.01.2015 extending the earlier notification after its validity expired on 07.12.2014, and whether demands of ADD for the post-expiry periods were sustainable. - HELD THAT: - The Court held that the question is no longer open in view of the Supreme Court's decision in Union of India vs. Kumho Petrochemicals Company Limited , which accepted the view that once a temporary notification extending anti-dumping duty expires, the Government cannot validly issue a further notification after that expiry to extend the earlier notification. The Supreme Court construed the second proviso to Section 9A(5) as permitting extension only before the earlier notification's expiry; once the five-year period lapsed there was no subsisting notification whose period could be extended. Applying that binding precedent, the High Court was correct in holding that the show cause notice insofar as it sought ADD for periods after 07.12.2014 was without jurisdiction and unsustainable. The remaining matters in the show cause notice were left open for adjudication, but the specific demand of ADD for the post-expiry periods had to be set aside in view of the Supreme Court's authoritative interpretation. [Paras 11, 12]

The impugned demand of ADD for the periods after the lapse of the earlier notification (including 01.09.2015 to 07.12.2015 and 08.12.2014 to 26.04.2016) is without jurisdiction and the writ court's order setting aside those demands is affirmed.

Final Conclusion: The intra court appeal is dismissed; the High Court's order setting aside the show cause notice insofar as it sought ADD for the post expiry periods is upheld in view of the binding Supreme Court precedent; other aspects of the adjudication were left to proceed before the adjudicating authority.

Interpretation of exemption notification in light of a beneficial trade treaty obligation - Scope and effect of explanatory proviso limiting 'digital still image video cameras' - Doctrine of merger and effect of a superior court's non-speaking or limited-order on earlier reasoning - Meaning and legal status of firmware in classification and assessment at import - Construction of conditional phrases - "in a single sequence" and "using the maximum storage (including expanded) capacity"

Doctrine of merger and effect of a superior court's non-speaking or limited-order on earlier reasoning - Applicability of earlier Tribunal reasoning after partial setting aside by the Supreme Court - Whether the earlier decision of the Tribunal dated 19.12.2017 is obliterated by the Supreme Court's order in Canon India or whether its reasoning can still be relied upon for merits. - HELD THAT: - The Tribunal examined the scope of merger and the limited effect of the Supreme Court's order in Canon India. The Supreme Court in Canon India set aside the Tribunal's order only on the ground that DRI officers lacked jurisdiction; it did not adjudicate the Tribunal's merits reasoning. Reliance is placed on the Supreme Court's exposition in S. Shanmugavel Nadar (and subsequent authorities) that where a superior court dismisses or sets aside on procedural grounds without considering merits, the operative part may merge but the subordinate forum's reasons on merits do not automatically stand obliterated as a declaration of law under Article 141. Accordingly, the fact that four of the five appeals were allowed in Canon India for lack of jurisdiction does not nullify the Tribunal's earlier reasoning on the merits, which therefore remains available for consideration in subsequent proceedings unless and until a court of competent authority decides otherwise on merits. [Paras 24, 28]

The contention that the Tribunal's reasons have been wiped out by Canon India is rejected; the Tribunal's merits reasoning is not automatically obliterated by the Supreme Court's order setting aside proceedings on jurisdictional grounds.

Scope and effect of explanatory proviso limiting 'digital still image video cameras' - Interpretation of exemption notification in light of a beneficial trade treaty obligation - Meaning and legal status of firmware in classification and assessment at import - Construction of conditional phrases - "in a single sequence" and "using the maximum storage (including expanded) capacity" - Whether the imported cameras are covered by the BCD exemption under notification dated 01.03.2005 as amended by notification dated 17.03.2012. - HELD THAT: - The Explanation added by the 17.03.2012 amendment excludes from exemption only those cameras that cumulatively satisfy three criteria: (i) video capability of at least 800 x 600 pixels, (ii) at least 23 frames per second, and (iii) capacity to record at least 30 minutes in a single sequence using maximum storage (including expanded) capacity. The Explanation was borrowed from EU Explanatory Notes and is to be read conjunctively; if any one condition is not met, the camera remains a "digital still image video camera" for exemption purposes. The firmware-implemented 29 minutes 59 seconds clip-length limit, being embedded non-volatile proprietary code intrinsic to the device and not alterable by a user in the normal course, cannot be treated as an artificial or irrelevant restriction for classification at import. Goods must be assessed in the state and condition in which they are imported. The phrase "using the maximum storage (including expanded) capacity" is an anti-abuse safeguard and does not import an additional requirement that the memory be actually exhausted at the end of the recorded clip; nor does it render the phrase "in a single sequence" redundant. Taking into account the beneficial purpose of the exemption (India's ITA obligations), any ambiguity is to be resolved so as to effectuate the intended liberal import treatment. On these grounds the cameras before the Tribunal, which record only up to 29 minutes 59 seconds in a single sequence as imported, do not cumulatively satisfy the three conditions and therefore qualify for BCD exemption under the 2012-amended entry. [Paras 54, 56, 58, 59, 63]

The imported cameras, as imported with firmware limitation to 29 minutes 59 seconds in a single sequence, do not satisfy the Explanation's cumulative three-fold test and are entitled to BCD exemption under the notification as amended on 17.03.2012.

Scope and effect of explanatory proviso limiting 'digital still image video cameras' - Whether a larger Bench reference is required to resolve conflicting Tribunal view - Whether the contrary view taken by a Division Bench of the Tribunal on 19.12.2017 requires reference to a larger Bench for authoritative determination. - HELD THAT: - The Bench recognises that its conclusion on entitlement is contrary to the earlier Division Bench decision dated 19.12.2017. Given the conflict in views within the Tribunal on the proper interpretation and scope of the Explanation inserted on 17.03.2012, and since the present conclusion departs from that Division Bench reading, the matter raises a substantial question of law suitable for consideration by a larger Bench. Consequently, while the present Bench has articulated its reasons and reached a conclusion in favour of the appellant, it directs that the question be placed before the President of the Tribunal for constitution of a larger Bench to decide (i) the entitlement of the imported cameras under the 2012-amended notification and (ii) whether the Tribunal's 19.12.2017 decision correctly interpreted the Explanation. [Paras 64, 65]

The matter is referred to the President of the Tribunal for constituting a larger Bench to decide the two specified issues of interpretation and the correctness of the earlier Tribunal view.

Final Conclusion: The Tribunal rejected the appellant's contention that the Supreme Court's partial setting-aside in Canon India erased the Tribunal's earlier reasoning; on the merits this Bench concluded that the imported cameras, as imported with firmware limiting a single-sequence video to 29 minutes 59 seconds, do not cumulatively meet the three-fold exclusion test in the 17.03.2012 Explanation and are therefore entitled to BCD exemption for the assessed period (February 2015 to March 2015). Because this conclusion departs from an earlier Division Bench decision, the questions of entitlement and the correctness of the Tribunal's prior interpretation are referred to the President for constitution of a larger Bench.

Confiscation of imported goods - restriction on import of drugs and cosmetics through specified entry ports - No Objection Certificate under the Drugs and Cosmetics Act - jurisdictional attribution of an ICD to a notified Customs commissionerate - redeemable confiscation and imposition of penalty under the Customs law - absence of deliberate or mala fide breach

Confiscation of imported goods - restriction on import of drugs and cosmetics through specified entry ports - jurisdictional attribution of an ICD to a notified Customs commissionerate - Validity of confiscation of the consignment imported through ICD Garhi Harsaru on ground of import via a non-notified port/ICD. - HELD THAT: - The Tribunal found that the imported goods were examined and samples taken, and the Drugs Controlling Authority issued a No Objection Certificate for the consignment after inspection. It was also noted that the import originated through a notified seaport (Nhava Sheva) and that ICD Garhi Harsaru falls under the jurisdiction of the Commissioner of Customs, ICD Patparganj. In these circumstances the Tribunal concluded there was no deliberate breach of the port-restriction rule warranting confiscation. The adjudicating authority's finding of violation of the Drugs and Cosmetics Rules by virtue of landing at a non-notified ICD was negatived on the facts: the regulatory authority had cleared the consignment and the ICD was within the commissionerate jurisdiction of the notified ICD, so adverse action in the form of confiscation was not justified. [Paras 9, 10]

Confiscation set aside and impugned order quashed insofar as it ordered confiscation.

No Objection Certificate under the Drugs and Cosmetics Act - redeemable confiscation and imposition of penalty under the Customs law - absence of deliberate or mala fide breach - Whether penalty and redemption option imposed under the Customs Act were sustainable in view of registration of the importer and issuance of NOC by the Drugs Authority. - HELD THAT: - The Tribunal observed that the importer was registered under the Drugs and Cosmetics Act and that the competent Drugs Authority issued an NOC for release of the goods both on hard copy and online, indicating regulatory compliance as to safety and permissibility. On the factual finding that there was no mala fide intent or deliberate contravention of Customs or regulatory provisions, the Tribunal held that the imposition of a penalty and the order for redemption were not warranted. Consequently, the punitive measures under the Customs law were set aside as a result of the absence of culpability and in light of the regulatory clearance. [Paras 9, 10]

Penalty and redemption direction set aside; appeal allowed with consequential benefits.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudicating order of confiscation, redemption and penalty in view of the importer's registration, issuance of a No Objection Certificate by the Drugs Authority, the absence of deliberate breach, and the ICD's attribution to the notified commissionerate; the appeal is allowed with consequential benefits.

Pre-deposit of 7.5% of penalty under the Customs Act, 1962 - confiscation and penalty for smuggling of gold - remand for fresh adjudication on merits after personal hearing

Pre-deposit of 7.5% of penalty under the Customs Act, 1962 - amount deposited treated as statutory pre-deposit - The amounts already deposited by the appellant qualify as the statutory pre-deposit of 7.5% required for entertaining the appeal against imposition of penalty. - HELD THAT: - The original adjudicating authority imposed a penalty but did not make any demand of duty. The Tribunal examined whether the sums of Rs. 75,000 and Rs. 40,000 already lodged by the appellant satisfy the requirement of depositing 7.5% of the penalty under the Customs Act, 1962. The Tribunal held that the aggregate of the amounts deposited exceeds the statutory 7.5% threshold applicable to the penalty imposed and therefore ought to have been treated as the pre-deposit required for prosecuting the appeal. The Commissioner (Appeals) erred in refusing to treat those deposits as constituting the mandatory pre-deposit, leading to dismissal of the appeal on a technical ground. [Paras 5]

Deposits already made by the appellant are to be treated as the statutory pre-deposit of 7.5% and the order of Commissioner (Appeals) rejecting the appeal on that technical ground is set aside.

Remand for fresh adjudication on merits after personal hearing - confiscation and penalty for smuggling of gold - Whether the appeal should be decided on merits by the Commissioner (Appeals) after treating the deposits as pre-deposit. - HELD THAT: - Having held that the requisite pre-deposit requirement has been met, the Tribunal found it inappropriate to adjudicate on the merits at this stage in view of the procedural defect in the appellate disposal. The Tribunal directed that the Commissioner (Appeals) shall afford the appellant a proper opportunity of personal hearing and decide the appeal on its merits within three months from receipt of the Tribunal's order, with a compliance report to be filed before the Tribunal. The Tribunal therefore remanded the matter for fresh consideration on merits rather than pronouncing on confiscation or penalty substantively. [Paras 5, 6]

Matter remanded to Commissioner (Appeals) for fresh decision on merits after personal hearing, within three months, with compliance report to the Tribunal.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order that rejected the appeal on the ground of non-compliance with the pre-deposit requirement, held that the amounts already deposited satisfy the 7.5% pre-deposit obligation, and remanded the matter to the Commissioner (Appeals) for fresh adjudication on merits after affording personal hearing within three months.

Limitation and acknowledgment under Section 18 of the Limitation Act - time-barred Section 9 insolvency application - operational debt acknowledgment / confirmation of accounts - revival of application and remand for admission

Limitation and acknowledgment under Section 18 of the Limitation Act - operational debt acknowledgment / confirmation of accounts - Application under Section 9 was not barred by limitation because acknowledgments by the Corporate Debtor extended the limitation period. - HELD THAT: - The Adjudicating Authority held the Section 9 application time barred by reference to the original invoices and an apparent date of default. The Appellate Tribunal examined the application record and noted that confirmations of account / acknowledgments by the Corporate Debtor, culminating in a letter dated 31.05.2016, were on the record. Applying Section 18 of the Limitation Act, 1963, the Tribunal held that such acknowledgments operate to extend the limitation period, and that the Section 9 petition filed within three years of the last acknowledgment was therefore within time. The Tribunal found that the Adjudicating Authority erred in rejecting the application without referring to or taking into account those acknowledgments. [Paras 6]

Adjudicating Authority's conclusion that the application was barred by time was incorrect; the application is timely in view of the acknowledgments.

Revival of application and remand for admission - time-barred Section 9 insolvency application - The impugned order was set aside and the Section 9 application was revived and remitted to the Adjudicating Authority for further proceedings. - HELD THAT: - Having held that the limitation period was extended by acknowledgments and that the Section 9 petition was filed within the extended period, the Tribunal set aside the Adjudicating Authority's order dismissing the petition as time barred. The Tribunal revived C.P.(IB) No. 319/9/NCLT/AHM/2018 and directed the Adjudicating Authority to issue notice to the appellant and to pass an order for admission of the application within six weeks from production of the copy of the Tribunal's order, while permitting the parties to explore settlement in the interim. [Paras 6]

Impugned order set aside; Section 9 application revived and remitted to the Adjudicating Authority with directions to proceed within six weeks.

Final Conclusion: The appeal is allowed: the Tribunal held that account confirmations/acknowledgments by the Corporate Debtor extended the limitation under Section 18 of the Limitation Act, set aside the Adjudicating Authority's dismissal as time barred, revived the Section 9 petition and directed the Adjudicating Authority to issue notice and pass orders on admission within six weeks.

Stay of Section 7 proceedings - liberty to file proceedings under Section 17 of the SARFAESI Act - plenary jurisdiction of the Adjudicating Authority to determine existence of financial debt and default under Section 7 - effect of an approved resolution plan on enforceability of debt

Stay of Section 7 proceedings - plenary jurisdiction of the Adjudicating Authority to determine existence of financial debt and default under Section 7 - Whether the Adjudicating Authority erred in rejecting the appellant's application to stay the Section 7 proceedings. - HELD THAT: - The Appellate Tribunal upheld the Adjudicating Authority's rejection of IA No.139/CB/2021 seeking a stay of the Section 7 proceeding. The Tribunal observed that the Supreme Court's grant of liberty to the appellant to file proceedings under Section 17 of the SARFAESI Act did not operate to stay or impliedly bar the Respondent's statutory right to proceed under Section 7 of the Code. The Adjudicating Authority has plenary jurisdiction to decide whether a financial debt and default exist; that jurisdiction is not ousted by pendency of remedies under the SARFAESI Act. Issues raised by the appellant regarding existence or non-existence of debt were held to be matters for determination by the Adjudicating Authority in the Section 7 proceedings and not grounds for keeping those proceedings in abeyance. [Paras 11, 13, 14]

The rejection of the application to stay the Section 7 proceedings was affirmed; the Section 7 proceeding may continue and the parties may raise all contentions before the Adjudicating Authority.

Liberty to file proceedings under Section 17 of the SARFAESI Act - effect of an approved resolution plan on enforceability of debt - Whether the Supreme Court's order of 26th November, 2021 barred or interdicted the Section 7 proceedings. - HELD THAT: - The Tribunal examined the Supreme Court judgment and held that the Supreme Court merely dismissed the appeal and granted the appellant liberty to initiate proceedings under Section 17 of the SARFAESI Act; it expressly did not decide merits on whether any debt remained enforceable against the appellant. The Supreme Court made no observation that would impliedly or expressly prevent the Respondent from pursuing its statutory remedy under Section 7 of the Code. Therefore the Supreme Court's order cannot be read as taking away the Respondent's right to proceed under Section 7. [Paras 8, 9, 10, 11]

The Supreme Court judgment did not bar or stay the Section 7 proceedings; no such interdiction arises from that order.

Effect of an approved resolution plan on enforceability of debt - plenary jurisdiction of the Adjudicating Authority to determine existence of financial debt and default under Section 7 - Whether the question of extinguishment or discharge of the alleged debt by the approved resolution plan was finally adjudicated by the Tribunal. - HELD THAT: - The Tribunal noted that the appellant has pleaded before the Adjudicating Authority that the debt stood discharged by the approved resolution plan and that the assignment was therefore void. The Tribunal did not decide the merits of that contention. Instead it held that those contentions have been raised in the appellant's reply to the Section 7 application and are to be adjudicated by the Adjudicating Authority in the Section 7 proceedings. The Tribunal therefore left determination of whether any legally enforceable debt exists and whether the assignment was void to the Adjudicating Authority (and where appropriate the DRT under Section 17) for decision on merits. [Paras 12, 13]

The question of extinguishment or discharge of the debt under the resolution plan is to be determined by the Adjudicating Authority/DRT on the merits; it was not decided and remains for adjudication.

Final Conclusion: The appeal is dismissed. The NCLT's order rejecting the application to stay the Section 7 proceedings is upheld; the parties remain at liberty to press all factual and legal contentions regarding existence or extinguishment of the debt before the Adjudicating Authority (and the DRT where permissible). No order as to costs.

Maintainability of application under Section 9 of the IBC - authorization and corporate board resolution for instituting insolvency proceedings - arbitration clause and pre-existing dispute as a bar to adjudication under the Code - requirement of service of demand notice under Section 8 of the IBC

Authorization and corporate board resolution for instituting insolvency proceedings - maintainability of application under Section 9 of the IBC - Whether the Adjudicating Authority was justified in dismissing the Section 9 application for lack of proper authorization / supporting board resolution. - HELD THAT: - The Tribunal recorded that the Adjudicating Authority dismissed the petition principally on the ground that the demand notice under Section 8 and the subsequent Section 9 application were not supported by authorization in the form of a valid board resolution. The Appellants' subsequently produced board resolution post-dated the filing of the petition and demand notice. The Tribunal noted the admitted chronology in the record and found no illegality in the Adjudicating Authority treating absence of prior authorization as a defect warranting dismissal. The Appellant's contention that the defect ought to have been permitted to be cured under the proviso to Section 9 was considered but the factual matrix showed the purported authorization came into existence after institution of proceedings; the Adjudicating Authority's conclusion was therefore not shown to be perverse or illegal. [Paras 14, 15]

The dismissal of the Section 9 application for want of authorization / supporting board resolution is affirmed.

Arbitration clause and pre-existing dispute as a bar to adjudication under the Code - requirement of service of demand notice under Section 8 of the IBC - Whether clause 32 of the agreement (arbitration) and the respondent's disputed factual contentions precluded the Section 9 proceedings. - HELD THAT: - The Tribunal recorded that the agreement contained clause 32 providing for arbitration where disputes were not amicably settled within 90 days. The Respondent had contested the asserted financial position, alleged receipt of payments, and pointed to stock lying with the Operational Creditor, asserting pre-existing disputes and deficiencies in the demand notice. Those contentions were on record and formed part of the Adjudicating Authority's consideration. While the Tribunal noted the existence of the arbitration clause and the respondent's disputed factual contentions, the impugned order had dismissed the Section 9 petition primarily on the ground of lack of authorization. The Tribunal found no error in the Adjudicating Authority's approach or in recording that disputes and the arbitration clause existed; those facts supported the Adjudicating Authority's conclusion that proceedings under the Code were not maintainable in the circumstances. [Paras 14]

The presence of an arbitration clause and the respondent's asserted pre-existing disputes, as recorded, supported the conclusion that the Section 9 petition was not maintainable; no interference is warranted.

Final Conclusion: The impugned order of the Adjudicating Authority dismissing the Section 9 application is affirmed; the appeal is dismissed.

Approval of fees by Committee of Creditors - liability of Committee of Creditors to bear IRP's expenses - Regulation 33 of the Resolution Professional Regulations - patent illegality/material irregularity standard of review

Approval of fees by Committee of Creditors - liability of Committee of Creditors to bear IRP's expenses - Regulation 33 of the Resolution Professional Regulations - Whether the Adjudicating Authority rightly held that the Committee of Creditors had not approved the Interim Resolution Professional's fees and legal expenses and whether the claim could be considered at that stage. - HELD THAT: - The Tribunal noted that the Appellant failed to produce any written communication demonstrating approval by the Committee of Creditors for the claimed fees and legal expenses and that no approval document was placed on record. The Adjudicating Authority had examined the material (including its findings at paras 4-7 of the impugned order) and observed absence of COC approval and reliance upon the IIIPI order which recorded that the COC had rejected the proposed fee. In that factual matrix the Adjudicating Authority concluded that the claim could not be entertained at that stage and dismissed the application. The Tribunal applied the governing principle that fee and expense claims of the IRP require COC approval in accordance with the regulatory framework (including the criteria reflected in Regulation 33 of the Resolution Professional Regulations), and that in absence of COC approval the Adjudicating Authority's refusal to allow the claim did not suffer from patent illegality or material irregularity. The Tribunal also considered earlier appellate observations on whether the COC is liable to bear IRP expenses but affirmed that where the COC has not approved the fee, the claim cannot be allowed without requisite approval.

The Adjudicating Authority correctly held that the claim for balance remuneration and legal expenses was not approved by the Committee of Creditors and could not be allowed at that stage; the impugned order does not suffer from material irregularity or patent illegality.

Final Conclusion: The Company Appeal is dismissed for lack of merits; the NCLT order upholding non-approval by the Committee of Creditors and rejecting the claim of the Interim Resolution Professional is affirmed. No costs.

Binding effect of an approved resolution plan - implementation of alternate structures contained in a resolution plan - re-classification of promoter to public shareholder and its non countability for minimum public shareholding - prohibition on modification of an approved resolution plan - applicability of SEBI regulations to implementation of a resolution plan

Binding effect of an approved resolution plan - prohibition on modification of an approved resolution plan - Whether the Adjudicating Authority rightly directed the erstwhile promoters to transfer their shares at the price and in the manner provided in the approved Resolution Plan. - HELD THAT: - The Tribunal held that once the Resolution Plan was approved under Section 31, its terms (including Annexure 5 para 3) became binding on the corporate debtor and its members. The Plan itself contemplated, as an alternative structure, that where the SEBI prohibition operated the Existing Promoter Group would be bound to sell their shares on the Closing Date for the specified consideration. Permitting the Appellants to retain their shares or to insist on a market price would amount to altering the approved Plan, which is impermissible. The Tribunal endorsed the Adjudicating Authority's reasoning that the Appellants had no vested right to retain the stake contrary to the mechanics provided in the approved Plan and that enforcing the sale at the specified price did not amount to unlawful modification of the Plan but to its implementation as approved. [Paras 12, 21, 26, 28, 31]

The direction to the erstwhile promoters to transfer their shares at the price and as provided in the approved Resolution Plan was lawful and rightly issued.

Implementation of alternate structures contained in a resolution plan - applicability of SEBI regulations to implementation of a resolution plan - re-classification of promoter to public shareholder and its non countability for minimum public shareholding - Whether the Resolution Applicant was entitled to adopt the second structure in para 3 of Annexure 5 on 18.05.2018 and require purchase of the promoters' shares in view of Regulation 31A(7)(b) and the later SEBI reclassification. - HELD THAT: - The Tribunal examined para 3 of Annexure 5 which provided two alternative shareholding structures and noted that Regulation 31A(7)(b) (then in force) precluded counting reclassified promoter shareholding towards the statutory minimum public shareholding. The Adjudicating Authority had refused the dispensation sought under the Plan and thus the statutory prohibition operated on the date of approval/closing. Consequently the Resolution Applicant legitimately adopted Structure two on 18.05.2018, subscribed the reduced number of shares and sought compulsory transfer of the Existing Promoter Group shares for the stipulated consideration so as to achieve the required 75% shareholding structure. The subsequent SEBI reclassification communications dated 25.06.2018 reflected an amendment made effective from 01.06.2018 and did not render the action taken on 18.05.2018 impermissible. [Paras 12, 13, 15, 16, 18]

Adoption of Structure two on 18.05.2018 and the consequent requirement for the promoters to sell their shares as per the Plan was permissible in view of the SEBI regulation operative at the relevant time and the rejection of the requested dispensation.

Applicability of SEBI regulations to implementation of a resolution plan - implementation of alternate structures contained in a resolution plan - Whether the Closing Date for implementation had to be deferred until the stock exchanges' reclassification on 25.06.2018 or whether the Plan could be implemented with 18.05.2018 as the Closing Date. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's conclusion that the Closing Date was the date on which the Plan was implemented and necessary steps completed (18.05.2018), not a later date when reclassification by stock exchanges occurred. The Resolution Plan itself provided for a contingency structure to be adopted if SEBI did not permit counting the erstwhile promoter shareholding towards minimum public shareholding; having not secured dispensation and with the statutory prohibition in force on 18.05.2018, the Resolution Applicant was not obliged to await the outcome of the reclassification application before implementing the Plan. [Paras 20, 21, 28]

The Closing Date for purposes of the Plan was 18.05.2018 and the Resolution Applicant was not required to await stock exchange reclassification before implementing the alternative structure provided in the Plan.

Final Conclusion: The appeal is without merit. The Tribunal upheld the Adjudicating Authority's order directing the erstwhile promoters to transfer their shares at the price and in the manner provided in the approved Resolution Plan; the Resolution Applicant was entitled to implement the alternative structure on 18.05.2018 in view of the SEBI regulation then in force and the Adjudicating Authority's decision refusing the requested dispensation. The appeal is dismissed.

Voluntary liquidation - dissolution under section 59 of the Code - Declaration of Solvency - compliance with IBBI Regulations - public announcement and submission of claims by stakeholders - final report of the voluntary liquidator - preservation of records and books of account

Voluntary liquidation - Declaration of Solvency - final report of the voluntary liquidator - compliance with IBBI Regulations - Application for dissolution of the company under section 59 of the Code after completion of voluntary liquidation - HELD THAT: - The Tribunal examined the steps taken under the Code and the IBBI Regulations including: execution and filing of the Declaration of Solvency; Board resolution and members' special resolution appointing the voluntary liquidator; publication of public announcements for submission of claims; submission of preliminary and final reports by the voluntary liquidator; and statutory filings made with the Registrar of Companies. The Registrar of Companies' status report confirming filing of annual returns, board and special resolutions, Declaration of Solvency and final report, and absence of outstanding inquiries or legal proceedings was taken into account. On the material placed before it and the satisfaction expressed by the voluntary liquidator, the Tribunal found no legal impediment to the dissolution of the company under section 59 of the Code and allowed the dissolution. [Paras 5]

Application allowed and the company is dissolved with effect from the date of the order.

Preservation of records and books of account - compliance with IBBI Regulations - Obligation of the liquidator to preserve liquidation records after dissolution - HELD THAT: - Having allowed dissolution, the Tribunal directed the liquidator to preserve either physical or electronic copies of reports, registers and books of account referred to in the IBBI Regulations for a period of at least eight years after dissolution. The preservation may be with the liquidator or with an information utility, ensuring compliance with regulatory record-keeping requirements post-dissolution. [Paras 5]

Liquidator directed to preserve the specified records for at least eight years after dissolution.

Filing with Registrar of Companies - statutory compliance - Requirement to file a copy of the dissolution order with the Registrar of Companies - HELD THAT: - The Tribunal ordered that a copy of the dissolution order be filed with the Registrar of Companies within the statutory period as per applicable provisions, thereby completing the statutory formalities consequent to dissolution and ensuring entry of the dissolution in official records. [Paras 6]

Copy of the order to be filed with the Registrar of Companies within the statutory period.

Final Conclusion: The Tribunal allowed the voluntary liquidator's application and dissolved the company under section 59 of the Code; it directed preservation of liquidation records for eight years and ordered filing of the dissolution order with the Registrar of Companies.

Operational creditor - operational debt - Joint Development Agreement - revenue sharing - reciprocal rights and obligations - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - arbitration clause - escrow account

Operational creditor - operational debt - Joint Development Agreement - revenue sharing - reciprocal rights and obligations - Whether the claim under the Joint Development Agreements amounts to an operational debt permitting admission of an application under Section 9 of the IBC by treating the petitioner as an operational creditor. - HELD THAT: - The Tribunal examined the terms of the Joint Development Agreement (JDA) and associated JVAs/MoUs and found that the agreements envisage joint development with proportionate participation and pre agreed sharing of sales realisations and other revenues. The JDA allocates defined shares of sales proceeds, specifies roles and cost liabilities of the landowner and developer, provides for operation of an escrow account, and contains an arbitration clause. The Tribunal held that the contractual matrix establishes reciprocal rights and obligations between the parties and a revenue sharing arrangement rather than a unilateral provision of services giving rise to an operational debt. The existence of statement(s) of accounts and admitted payments between the parties were treated as ongoing business liabilities between joint development partners and not as admission of a debt independent of the JV arrangement. Reliance was placed on authority of the NCLAT holding that JDA based reciprocal contracts between joint development partners do not give rise to a maintainable Section 7 application for a financial creditor; by parity, the Tribunal concluded Section 9 is not maintainable where the claim springs from the revenue sharing JV. Applying this reasoning, the petition seeking initiation under Section 9 was found to lack merit and was dismissed. [Paras 15, 17, 21]

The Section 9 petition was dismissed on the ground that the dispute arises out of a joint development/revenue sharing agreement and does not constitute an operational debt owed to an operational creditor.

Injunctive relief - books of account - deposit of proceeds - Whether the interlocutory application seeking restraint on further sales and for production/deposit of sale proceeds should be granted. - HELD THAT: - An interlocutory application (IA 4804/2020) sought restraint on sale of units, production of detailed books of accounts and deposit of proceeds from specified projects. The Tribunal noted that, given the dismissal of the Section 9 petition as not maintainable, the ancillary reliefs sought in the IA become infructuous. No separate adjudication on the merits of the injunction or account production claims was undertaken because the principal petition was dismissed.

The interlocutory application was dismissed as infructuous.

Final Conclusion: The Section 9 petition filed by M/s. Samyak Projects Pvt. Ltd. was dismissed because the claims arise from joint development/revenue sharing agreements constituting reciprocal obligations and not an operational debt; the ancillary interlocutory application for injunctive relief and account/proceeds deposit was dismissed as infructuous.

Replacement of Resolution Professional under section 60(5) of the Code - duty of Resolution Professional to conduct forensic audit and further enquiries pursuant to forensic report - compliance with Tribunal directions and time-bound implementation - liberty to revive or file fresh application under section 66 of the Code - protective immunity of insolvency professionals for actions taken in good faith

Duty of Resolution Professional to conduct forensic audit and further enquiries pursuant to forensic report - compliance with Tribunal directions and time-bound implementation - liberty to revive or file fresh application under section 66 of the Code - Whether the Resolution Professional must comply with the directions in the Tribunal's order dated 10.03.2021 by conducting further enquiries and take appropriate steps, and within what time-frame. - HELD THAT: - The Applicant pressed only the prayers seeking (c) a report of enquiries/investigation carried out after the Tribunal's order dated 10.03.2021 in IA No.133 of 2020 and (d) directions to conduct enquiries/investigation and submit a final report. The Tribunal noted that its earlier order of 10.03.2021 had disposed IA No.133 of 2020 as premature while granting liberty to the Resolution Professional to carry out further enquiries, seek responses from suspended directors/promoters and to revive or file a fresh application under section 66 after such enquiry. The RP admitted that he had not filed a fresh application or revived IA No.133 but explained practical difficulties, including cooperation issues and delays caused by the pandemic. The Tribunal held that the RP cannot postpone implementation of its directions beyond a reasonable period and, while accepting the RP's statement that steps are in progress, found that no further orders (such as replacement of the RP) were required. Instead, the Tribunal directed that the RP comply with the order dated 10.03.2021 by carrying out the further enquiries and taking appropriate steps as required by that order, to be completed as early as possible and in any event within 30 days. The Tribunal thus disposed of IA No.248 of 2021 on the limited terms of ensuring time-bound compliance with its earlier directions, without finally adjudicating other contested contentions such as locus, res judicata or alleged mala fides. [Paras 6, 7, 8, 9, 10]

IA No.248 of 2021 is disposed of; the Resolution Professional shall comply with the Tribunal's order dated 10.03.2021 by conducting the required enquiries and taking appropriate steps, within 30 days.

Final Conclusion: The application for replacement of the Resolution Professional is not acceded to; the Tribunal disposed IA No.248 of 2021 by directing the Resolution Professional to carry out the further enquiries and take appropriate steps in terms of the Tribunal's order dated 10.03.2021 within 30 days.

Composite resolution plan - transfer of development rights - sub-lease agreement - prior approval of lessor - violation of lease/sub-lease and consequences - application under Section 60 of the Insolvency and Bankruptcy Code, 2016

Composite resolution plan - transfer of development rights - sub-lease agreement - prior approval of lessor - violation of lease/sub-lease and consequences - Whether the Corporate Debtor could be permitted to have a composite resolution plan that relies on transfer of development rights to a third party without prior approval of the lessor, and whether the Applicant's challenge under Section 60 IBC succeeds. - HELD THAT: - The Tribunal found that the Corporate Debtor had created rights in favour of a third party (by way of a collaboration agreement/sub-transfer of development rights) without obtaining the prior permission of the lessor as required by the Lease/Sub-Lease. The stipulations in the Lease/Sub-Lease that required prior written approval of the lessor for transfer or creation of interests in the plot were not complied with. On that basis the Tribunal held that the transaction complained of was in violation of the lease/sub-lease terms and that the Applicant's objection to consideration of a composite resolution plan which depends on such transfer was well-founded. The Tribunal noted the chronology of documents (collaboration agreement predating insolvency) but concluded that non-obtainment of the required approval rendered the transfer impermissible vis-a -vis the lessor's rights. Having reached that conclusion, the Tribunal allowed the application to the extent indicated, restraining acceptance of the composite scheme that depended on the unauthorized transfer. [Paras 11, 12, 13]

Application under Section 60 IBC is allowed to the extent that the Corporate Debtor's transfer/creation of rights to a third party without prior approval of the lessor is held to violate the Lease/Sub-Lease and the composite resolution plan dependent on that transfer cannot be accepted.

Final Conclusion: The Tribunal allowed the Applicant's challenge: the Corporate Debtor violated the Lease/Sub Lease by creating rights in favour of a third party without the lessor's prior approval, and the application under Section 60 IBC is allowed to the extent indicated, restraining acceptance of a composite resolution plan premised on that unauthorized transfer.

Admission of CIRP under Section 9 of IBC, 2016 - Establishment of operational debt and default - Effect of issuance and dishonour of cheque as admission of debt - Appointment of Interim Resolution Professional - Security/Deposit for IRP's expenses - Moratorium under Section 14 of IBC, 2016 - Obligation to communicate order and update ROC/IBBI records

Establishment of operational debt and default - Effect of issuance and dishonour of cheque as admission of debt - The operational creditor established a debt due from the corporate debtor and proved default by the corporate debtor. - HELD THAT: - The Tribunal found on the material placed that the operational creditor supplied goods to the corporate debtor, issued invoices for the period April 2013 to August 2014, received an on-account payment on 02.05.2019 and that no payment was made thereafter. The corporate debtor had issued a cheque towards outstanding dues which was dishonoured; the Tribunal treated the issuance and dishonour of the cheque as indicative of admission of debt and held that default had occurred. On that basis the application under Section 9 was found to be maintainable and the claim was held to be due and payable by the corporate debtor. [Paras 1, 3, 4]

Application under Section 9 is payable and admission of the petition is justified on the finding of operational debt and default.

Admission of CIRP under Section 9 of IBC, 2016 - The petition under Section 9 of the IBC, 2016 is admitted by the Tribunal. - HELD THAT: - Having concluded that the operational creditor had established a debt and default, the Tribunal admitted the Section 9 application. The admission followed consideration of the pleaded invoices, payments, dishonoured cheque and the lack of contest by the respondent (the respondent proceeded ex parte after opportunities to file reply). The Tribunal therefore formally admitted the petition and passed consequential directions. [Paras 2, 4]

Section 9 petition admitted and proceeds to the insolvency process.

Appointment of Interim Resolution Professional - An Interim Resolution Professional (IRP) is appointed for the corporate debtor. - HELD THAT: - The applicant had not proposed the name of an IRP; accordingly the Bench appointed Mr. Hans Raj Bhogra as Interim Resolution Professional subject to there being no pending disciplinary proceedings and subject to his filing the required consent and disclosures under the relevant IBBI rules and regulations. The appointment is therefore made conditional upon statutory compliances by the IRP. [Paras 5]

Mr. Hans Raj Bhogra appointed as IRP, subject to consent and disclosure requirements.

Security/Deposit for IRP's expenses - The operational creditor is directed to deposit an amount to meet IRP's initial expenses. - HELD THAT: - The Tribunal directed the applicant to deposit a specified sum with the Interim Resolution Professional to meet expenses of performing the functions of the IRP in accordance with the IBBI Regulations, to be deposited within one week and to be subject to adjustment by the Committee of Creditors and accounting by the IRP. The direction is interlocutory and procedural to enable the IRP to commence his functions. [Paras 6]

Applicant to deposit the directed sum with the IRP within the stipulated time; amount liable to adjustment by the Committee of Creditors.

Moratorium under Section 14 of IBC, 2016 - The moratorium under Section 14(1) of the IBC, 2016 is declared consequent to admission of the application. - HELD THAT: - Upon admission of the Section 9 application, the Tribunal directed that the moratorium provisions under Section 14(1) shall follow in relation to the corporate debtor, invoking the statutory prohibitions as per the Code and noting that Sections 14(2) to 14(4) shall apply during the moratorium period. This is a direct legal consequence of admitting the insolvency application. [Paras 7]

Moratorium under Section 14(1) triggered; Sections 14(2)-14(4) to apply during the moratorium.

Obligation to communicate order and update ROC/IBBI records - Directions issued for communication of the order and updating of statutory records with ROC and IBBI. - HELD THAT: - The Tribunal directed that copies of the order be communicated to the applicant, the corporate debtor and the IRP, and be forwarded to the IBBI for records. The applicant was directed to provide the complete paper book to the IRP. The order was also directed to be sent to the Registrar of Companies for updating the Master Data, with ROC to send a compliance report to the NCLT Registrar. These are administrative directions consequent to admission. [Paras 8]

Registry to communicate the order and notify IBBI and ROC; applicant to supply paper book to the IRP.

Final Conclusion: The Tribunal admitted the Section 9 petition on the finding that the operational creditor established debt and default (including reliance on a dishonoured cheque as admission of debt), appointed an IRP subject to statutory consent and disclosures, directed the applicant to deposit funds to meet the IRP's initial expenses, declared the moratorium under Section 14 of the IBC consequent to admission, and directed communication of the order to the parties, IBBI and ROC for updating records.

Twin conditions under Sec.45(1) of the PML Act - reasonable grounds for believing the accused is not guilty - not likely to commit an offence while on bail - foundational facts and money trail by bank entries as prima facie proof - prima facie requirement for establishing proceeds of crime, placement, layering and integration - reverse burden under Sec.24 of the PML Act requires initial discharge by prosecution - medical grounds for grant of bail

Twin conditions under Sec.45(1) of the PML Act - foundational facts and money trail by bank entries as prima facie proof - prima facie requirement for establishing proceeds of crime, placement, layering and integration - reverse burden under Sec.24 of the PML Act requires initial discharge by prosecution - Applicability of the twin conditions under Sec.45(1) of the PML Act to the applicant and whether ED has prima facially established foundational facts to attract those rigours. - HELD THAT: - The Court held that the twin conditions under Sec.45(1) apply but that ED must prima facie establish foundational facts before the rigours operate. ED's case alleges Rs.410 crores as proceeds of crime and that about Rs.80 crores reached the applicant through a series of transfers. The Special Court examined the complaint, PAO and the bank statements produced by the parties and found that ED has not produced the requisite bank entry trail showing transfer of funds from the YES Bank account (A/c No.1000180200001099) into ORDPL's other bank accounts and thence into the applicant's accounts. The flow charts in the complaint are not supported by detailed corresponding bank entries; many entries relied upon pre date the first disbursement (03.08.2016) which ED itself alleges to be the inception of the proceeds of crime. Statements recorded under Sec.50 of the PML Act (and the PAO) lack corroboration from bank statements and thus do not discharge ED's initial burden to show placement, layering and integration involving the applicant. The Court therefore concluded on a short prima facie survey that the foundational link establishing that the applicant knowingly dealt with proceeds of crime is absent; in that factual backdrop the presumption/reverse burden under Sec.24 is not attracted at the bail stage and the twin conditions cannot be applied to deny bail. [Paras 4, 34, 35]

ED failed to prima facie establish the required foundational facts and money trail to attract the rigours of Sec.45(1); therefore the twin conditions do not bar grant of bail to the applicant.

Not likely to commit an offence while on bail - medical grounds for grant of bail - Whether, notwithstanding the above, the applicant should be released on bail and on what conditions. - HELD THAT: - The Court noted that medical grounds for bail were rejected by the Hon'ble Supreme Court and therefore did not merit grant of bail on that basis. Having found that ED had not made out the foundational case to invoke the twin conditions, the Court nonetheless considered the risk of flight or re offending and the applicant's background, assets and business ties. Concluding that there were reasonable grounds to believe the applicant was not guilty and would not abscond or commit an offence while on bail if appropriate conditions were imposed, the Court allowed the bail application subject to specified conditions including bond/surety, surrender of passport, non departure from India, cooperation with ED, disclosure of residence and contact details, prohibition on tampering with evidence or contacting witnesses, and a prohibition on engaging in activities relating to proceeds of crime; ED was granted liberty to move for cancellation on breach. [Paras 37]

Bail granted to the applicant subject to execution of PR bond and sureties and the conditions imposed by the Court; ED may move for cancellation on breach.

Final Conclusion: Bail application allowed: the Special Court found ED had not prima facie established the money trail or other foundational facts necessary to attract the twin conditions under Sec.45(1) of the PML Act, and released the applicant on bail on specified conditions (bond/surety, surrender of passport, non departure from India, cooperation with ED, and prohibitions on tampering/contacting witnesses and involvement with proceeds of crime).

Stay/suspension of bail order - entitlement to bail on merit - power to stay own order of grant of bail - rigours of twin conditions under Sec.45(1)(i) and (ii) of the PML Act

Stay/suspension of bail order - entitlement to bail on merit - Application by the prosecution to suspend/stay the order granting bail to accused No.5 Sachin Joshi for three weeks was rejected. - HELD THAT: - The Special Court had heard and decided the bail application on merits after exhaustive consideration of contentions from both sides and concluded that the accused was entitled to bail, applying the rigours of twin conditions under Sec.45(1)(i) and (ii) of the PML Act. Having reached a merits-based conclusion in favour of the accused, the Court held that suspending the operative bail order for three weeks would effectively frustrate the liberty granted and cause hardship to the accused. The Court also noted that stringent bail conditions had already been imposed and that the prosecution remained free to prefer an appeal; if such appeal succeeds, custody can be restored. On these bases the application to stay the bail order was refused as inappropriate and unnecessary to meet the ends of justice.

Application to suspend/stay the bail order (Exh.82) for three weeks is rejected.

Power to stay own order of grant of bail - The Special Court accepted the view in the cited High Court decision that a Judge does not have jurisdiction to stay his own order granting bail by taking recourse to ordinary criminal provisions, and proceeded on that understanding in refusing to suspend the bail. - HELD THAT: - The Court relied on recent observations of the High Court which held that the Code of Criminal Procedure does not empower a Sessions Judge to stay the operation of his own bail order and that the nearest provision (Section 439(2) Cr.P.C.) only permits recalling a person on bail to custody; accordingly, staying a grant of bail is not an available exercise of jurisdiction by the trial Judge. Applying that principle, and having already adjudicated the bail application on merits, the Special Court declined to assume jurisdiction to suspend its own grant of bail in order to facilitate the prosecution's challenge.

Court proceeded on the principle that a Judge should not suspend his own bail order and therefore refused the stay application.

Final Conclusion: The application to suspend/stay the order granting bail to accused No.5 is dismissed; the bail order granted on merits remains operative while the prosecution is at liberty to pursue appellate remedies, which, if successful, will entail restoration of custody.

Option to pay service tax on receipt basis - SSI threshold exemption - application of Rule 6(1) of Service Tax Rules (third proviso) - entitlement to consequential relief upon successful challenge

Option to pay service tax on receipt basis - application of Rule 6(1) of Service Tax Rules (third proviso) - SSI threshold exemption - Whether the appellant was entitled to pay service tax on receipt basis for the financial year 2012-13 and thereby claim SSI threshold exemption. - HELD THAT: - The Tribunal accepted the appellant's evidence that the actual receipts in respect of taxable services in financial year 2012-13 amounted to Rs. 58,451/-, as reflected in the bank statement and not disputed by the lower authority. Applying the third proviso to Rule 6(1) of the Service Tax Rules, individuals or partnership firms whose aggregate value of taxable services in the previous financial year did not exceed the prescribed limit have the option to pay tax on receipt basis in the subsequent year. The Tribunal found that the appellant fell within that class and thereby was entitled to avail the threshold (SSI) exemption for the financial year 2012-13, which negated the departmental quantification based on third party information. The adjudicating authority's confirmation of demand and imposition of penalty was set aside because the determinative factual foundation for liability (taxable receipts on accrual basis) was displaced by the receipt based evidence admissible under Rule 6(1). [Paras 5]

The appellant is entitled to pay service tax on receipt basis for financial year 2012-13 and accordingly entitled to SSI threshold exemption; the demand and penalty confirmed by the adjudicating authority are set aside.

Final Conclusion: Appeal allowed; impugned order set aside and appellant granted consequential benefits in law for financial year 2012-13 on the basis that they were entitled to pay tax on receipt basis and to SSI threshold exemption.

Cleaning activity - non-commercial buildings and premises - horticulture - input service/Cenvat credit distinction - penalty under Section 78 - penalty under Section 77

Cleaning activity - non-commercial buildings and premises - input service/Cenvat credit distinction - Whether the services for upkeep of the residential colony (contract dated 19.09.2003) fall within the definition of cleaning activity and are liable to service tax - HELD THAT: - The Tribunal examined the scope of "cleaning activity" as defined in Section 65(24b) of the Finance Act, 1994 and found that the term "premises" in that definition is confined to premises of a "commercial or industrial building" or of a "factory, plant or machinery, tank or reservoir" of such buildings. The Tribunal rejected Revenue's reliance on Cenvat-credit decisions because the definition of input services for Cenvat purposes is differently worded and broader (e.g., uses "in or in relation to") and therefore decisions on eligibility of input service credit cannot be read across to determine levy of service tax on cleaning activity. The CBEC clarification that cleaning services in respect of non-commercial buildings and premises are excluded was noted. Applying these principles to the detailed scope of work for the residential colony, the Tribunal concluded that the residential colony is not covered by the term "premises" for the purpose of the cleaning activity levy and consequently set aside the service-tax demand in respect of that contract. [Paras 5, 8]

Demand of service tax in respect of the contract for upkeep of the residential colony is set aside.

Cleaning activity - horticulture - Whether the activities of cutting grass, bushes and removal of unwanted vegetation (contract dated 15.06.2005) amount to horticulture and are therefore excluded from cleaning activity or are taxable as cleaning activity - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that horticulture involves study and practice of growing/cultivating plants and is distinct from cutting/removal of unwanted grass, bushes, weeds, uprooting wild growth and removal of debris. The factual description of work-cutting and removal of unwanted vegetation and clearing debris in the commercial/industrial premises of ONGC-falls within the defined "cleaning activity." The Tribunal found no bona fide doubt as to taxability for this contract and upheld the demand for service tax on that ground. [Paras 6, 7, 8]

Demand of service tax in respect of the contract for cutting and removal of unwanted vegetation is upheld.

Penalty under Section 78 - penalty under Section 77 - Whether penalties imposed under Section 78 and Section 77 are justified and, if so, to what extent - HELD THAT: - The Tribunal noted that the appellants were not registered and had not filed returns at the material time. While acknowledging that the appellants promptly paid service tax on two of the four work-orders when the demand was raised, the Tribunal found that the imposition of penalty under Section 78 at double the duty confirmed was excessive. On reconsideration the penalty under Section 78 was reduced to an amount equivalent to the duty confirmed. The penalty under Section 77 was upheld because the appellant had failed to take registration and to file ST-3 returns. [Paras 7, 9]

Penalty under Section 78 reduced to an amount equivalent to the duty confirmed; penalty under Section 77 upheld.

Final Conclusion: The appeal is partly allowed: the service-tax demand relating to upkeep of the residential colony is set aside; demands relating to cutting/removal of unwanted vegetation and the other two contracts are upheld; penalty under Section 78 is reduced to the duty confirmed and penalty under Section 77 is sustained.

Manufacture under Section 2(f) of the Central Excise Act - proviso to Section 11A - invocation of extended period of limitation for fraud, collusion, willful mis-statement or suppression of facts - burden on department to establish ingredients for invoking extended limitation - remand for de-novo adjudication

Proviso to Section 11A - invocation of extended period of limitation for fraud, collusion, willful mis-statement or suppression of facts - burden on department to establish ingredients for invoking extended limitation - Validity of invoking the extended period of limitation under the proviso to Section 11A for confirmation of duty demand. - HELD THAT: - The Tribunal found that invocation of the proviso to Section 11A is an exception and requires clear proof of fraud, collusion, willful mis-statement or suppression of facts with intent to evade revenue. Where adjudicating authorities have divergent views on whether an activity amounts to manufacture, such divergence does not, without more, constitute the necessary ingredients to invoke the extended period. The appellants had made repeated disclosures and correspondences with the department explaining the conversion process; there was no sufficient substantiation by the department to show concealment or intent to defraud. Consequently, confirmation of duty beyond the normal one-year period was held to be time-barred and the impugned order insofar as it confirmed demands beyond the normal period was set aside; the department may proceed within the normal period but no penalty under the extended-period clause is justified. [Paras 5]

Invocation of the extended period under the proviso to Section 11A was not justified; the demand confirmed beyond the normal one-year period is barred by limitation and is set aside, with liberty to re-adjudicate within the normal period without imposing penalty under the proviso.

Manufacture under Section 2(f) of the Central Excise Act - remand for de-novo adjudication - Whether conversion of crude sulphur lumps/granules into sulphur powder amounts to 'manufacture' within the meaning of Section 2(f). - HELD THAT: - The Tribunal found that the lower authorities had not adequately considered the legal precedents and the adjudication orders (including decisions in similar cases) relied upon by the appellants. Given the conflicting views recorded by equal-ranking adjudicating authorities and the significance of factual and legal analysis on whether pulverization effects a change falling within Section 2(f), the Tribunal declined to finally decide the question on the record before it. Instead, it remanded the issue to the learned Commissioner of Central Excise having jurisdiction over the appellants' factory for fresh, de-novo adjudication, directing that the appellants be afforded an opportunity of personal hearing. [Paras 6, 7]

Issue of whether the conversion process amounts to manufacture is remanded for fresh adjudication by the competent Commissioner of Central Excise with an opportunity for personal hearing.

Final Conclusion: The Tribunal set aside the impugned adjudication insofar as duty was confirmed beyond the normal one-year limitation, holding the extended-period proviso inapplicable on the facts, and remanded the substantive question of whether conversion of crude sulphur into powder constitutes 'manufacture' for de-novo consideration by the competent Commissioner with opportunity of personal hearing.

Abatement of duty - temporary cessation of work - pro rata duty calculation - interpretation of notification clauses 3 and 8 - per incuriam and precedential weight of Single Member Bench

Temporary cessation of work - interpretation of notification clauses 3 and 8 - pro rata duty calculation - Whether Notification No. 17/2007 permits abatement of duty where the factory temporarily ceases to work and the manner of computing duty for such month. - HELD THAT: - The Tribunal construed Clause 8 read with Clause 3 of Notification No. 17/2007 and held that Clause 8 deals with situations where a manufacturer who had availed the procedure ceases to work or reverts to normal procedure, without requiring the cessation to be permanent. The explanation to Clause 8 excludes only partial cessation (one or two shifts) from being treated as cessation, thereby not precluding temporary but bona fide cessation. Clause 3 provides for calculation of duty on a pro rata basis for the month in which the application is granted, and Clause 8 prescribes that duty for the month during which the manufacturer has availed the procedure shall be calculated in the manner prescribed in Clause 6 and adjusted against the amount paid under Clause 3. Applying these provisions, a temporary cessation undertaken after following due procedure entitles the manufacturer to have the duty for that month recalculated on a pro rata basis and any excess adjusted or refunded, or any deficiency recovered, as prescribed under the notification. [Paras 5, 6]

Clause 8 of Notification No. 17/2007 does not require permanent cessation; temporary cessation, after following the prescribed procedure, permits pro rata computation and adjustment of duty for the month.

Abatement of duty - per incuriam and precedential weight of Single Member Bench - Whether the Tribunal decisions relied upon by Revenue preclude relief in the present facts. - HELD THAT: - The Tribunal examined the precedents relied upon by Revenue. The decision in S. S. Strips Pvt. Ltd. was held distinguishable because it concerned cases where only some machines were operational and did not qualify as cessation under Clause 8. The Single Member Bench decision in Sethi Metal Industries, though factually similar, was found to have failed to consider Clause 8 read with Clause 3 and thus to be per incuriam; additionally, as a Single Member Bench decision it does not have binding effect on the Division Bench. Consequently, those authorities did not prevent relief to the appellant on the present facts. [Paras 5]

The decisions relied upon by Revenue are either distinguishable on facts or, in the case of the Single Member Bench, per incuriam and not binding on the Division Bench; they do not preclude grant of relief here.

Final Conclusion: The impugned order confirming duty and interest is set aside; a temporary cessation of work in July 2011, after following the prescribed procedure, entitled the appellant to pro rata duty adjustment under Notification No. 17/2007 and the appeal is allowed.

Distinction between Concrete Mix and Ready Mix Concrete (RMC) for exemption - extended period of limitation under the proviso to Section 11A (willful mis-statement or suppression) - burden on Revenue to prove wilful suppression or intent to evade duty - exemption claim examined qua the goods and not qua the site - prospective effect of an overruling judgment on earlier favourable decisions

Distinction between Concrete Mix and Ready Mix Concrete (RMC) for exemption - prospective effect of an overruling judgment on earlier favourable decisions - Eligibility of exemption under Notification No.12/2012-CE (Sr. No.144) for Ready Mix Concrete for the period April, 2014 to September, 2015. - HELD THAT: - The Tribunal held that the Supreme Court's decision in Larsen & Toubro established that Ready Mix Concrete (RMC) is not the same as 'Concrete Mix' and that the exemption available to Concrete Mix does not extend to RMC. Applying that authoritative conclusion, the Tribunal found RMC not eligible for exemption under Notification No.12/2012-CE (Sr. No.144) for the period in question. However, the Tribunal further examined the question of limitation and whether extended period could be invoked: having regard to the contemporaneous judicial views (including earlier decisions favourable to exemption), the assessee's declarations in ER-1 returns and invoices explicitly described the product as "Concrete Mix/Ready Mix Concrete" and claimed the notification; circulars cited earlier had been overtaken by judicial decisions; and there was no evidence of wilful mis-statement or suppression with intent to evade duty. Thus, although on law RMC is not covered by the notification post-Larsen, the Tribunal recognised that prior divergent authority and the assessee's disclosures rebut invocation of the extended period for the earlier part of the period. The legal consequence drawn was that the demand insofar as raised for April 2014 to September 2015 is time-barred. [Paras 4]

RMC is not covered by Notification No.12/2012-CE (Sr. No.144) as held by the Apex Court, but the demand for April, 2014 to September, 2015 is barred by limitation because there was no proved wilful suppression or intent to evade duty in the facts of this case.

Extended period of limitation under the proviso to Section 11A (willful mis-statement or suppression) - burden on Revenue to prove wilful suppression or intent to evade duty - Whether the adjudicating authority rightly invoked the extended (larger) period of limitation under the proviso to Section 11A for the demands. - HELD THAT: - The Tribunal applied settled precedent that the proviso to Section 11A requires proof of wilful mis-statement, suppression, fraud or collusion to invoke the extended period. It examined the factual matrix: the assessee had declared the product and claimed the exemption in ER-1 returns and invoices; the department had access to those returns and could have verified particulars within the normal period; prior judicial decisions created bona fide doubt about the correctness of departmental circulars; and periodic departmental audits had not earlier taken objection. On these facts the Tribunal concluded there was no suppression or wilful mis-statement with intent to evade duty and therefore the extended period could not be invoked; the demands falling in the extended period (including April, 2014 to September, 2015 and April, 2016 to June, 2017 as raised in the show cause) are time-barred. [Paras 4]

Invocation of the extended period under the proviso to Section 11A was not sustainable on the facts; the demands raised for the extended period are time-barred.

Exemption claim examined qua the goods and not qua the site - interpretation of amended exemption entry including RMC in Notification No.12/2016-CE - Eligibility for exemption under Notification No.12/2016-CE (Entry No.144 as amended) for Ready Mix Concrete manufactured and used at site for the period April, 2016 to June, 2017. - HELD THAT: - The Tribunal considered the amended Entry No.144 of Notification No.12/2016-CE which expressly included 'Ready Mix Concrete' manufactured at the site of construction for use in construction work at such site, with an explanation defining 'site' and requiring that goods manufactured at such premises are solely used in the said construction work. The Tribunal construed the notification as applying exemption qua those goods that are actually used at the site; it rejected the Revenue's contention that the exemption required that the entire production at the site must be exclusively used at the site (i.e., that any clearance outside would negate exemption for the site). The Tribunal observed that the assessee had paid duty on quantities cleared outside and claimed exemption only for quantities used in-site; therefore the adjudicating authority was correct to drop the demand for April, 2016 to June, 2017 on merits. [Paras 4]

The assessee is entitled to exemption under Notification No.12/2016-CE for quantities of RMC actually used in construction at the site for April, 2016 to June, 2017; the departmental demand for that period was rightly dropped on merits.

Final Conclusion: The Tribunal modified the impugned order: the assessee's appeal is allowed with consequential relief and the Revenue's appeal is dismissed. The demands raised within the extended period were held time-barred on the facts; on merits the exemption under Notification No.12/2016-CE was held applicable to quantities of RMC used at site for April, 2016 to June, 2017.

Inter-connected undertakings - related persons under Section 4(3)(b) - transaction value - Rule 10(b) of Valuation Rules - Rule 4 of Valuation Rules - amendments to valuation rules w.e.f. 2013 - demand under Section 11A - interest under Sections 11AB and 11AA - penalty under Section 11AC

Inter-connected undertakings - related persons under Section 4(3)(b) - Whether the assessee and the buyer M/s Ashutosh are inter-connected undertakings - HELD THAT: - The Tribunal found on the admitted facts that two directors of the assessee (Shri Virender Kumar Agarwal and Shri Basant Kumar Agarwal) are also two of the four directors of the holding company of the buyer, and that the assessee itself disclosed the relationship in related party disclosures in its balance sheet. Those facts establish that the assessee and M/s Ashutosh are controlled by the same persons and are therefore inter connected undertakings within the meaning of the Explanation to Section 4(3)(b). The Tribunal thus upholds that the parties are inter connected undertakings. [Paras 19, 20, 34]

The assessee and M/s Ashutosh are inter connected undertakings.

Related persons under Section 4(3)(b) - definition of "relative" in Companies Act - Whether the assessee and the buyer are related persons under clauses (ii), (iii) or (iv) of Section 4(3)(b) - HELD THAT: - The Tribunal examined clause (ii) (relative), clause (iii) (buyer a relative and distributor/sub distributor) and clause (iv) (mutual interest) of Section 4(3)(b). It held that the Companies Act definition of "relative" refers to individuals and not bodies corporate, and thus two companies (or a company and a proprietorship owned by a company) cannot be 'relatives' under clause (ii). There was no allegation or evidence of distributor/sub distributor relationship under clause (iii). As to clause (iv), while the assessee had an indirect interest in the buyer's business (through common directors), there was no evidence that the buyer had an interest in the assessee's business; the mutuality required by clause (iv) was not established. Consequently the parties are not related under clauses (ii), (iii) or (iv). [Paras 22, 23, 24, 25, 34]

They are not related persons under clauses (ii), (iii) or (iv) of Section 4(3)(b).

Rule 10(b) of Valuation Rules - Rule 4 of Valuation Rules - amendments to valuation rules w.e.f. 2013 - transaction value - Which Valuation Rule applies for the periods before and after the 2013 amendments - HELD THAT: - The Tribunal analysed the Valuation Rules and the changes made in 2013. Rule 4 applies where goods are sold but not at the time of removal; Rule 10(b) deals with sales to inter connected undertakings who are not related under clauses (ii)-(iv). Since the goods were sold at the time of removal and the parties are inter connected but not related under clauses (ii)-(iv), Rule 10(b) is the appropriate provision both prior to and after the 2013 amendments. Therefore transaction value must be accepted for valuation under Rule 10(b) for both periods. [Paras 26, 29, 31, 32, 34]

Rule 10(b) governs valuation for both April 2010-30 Nov 2013 and 1 Dec 2013-31 Mar 2014; transaction value is to be accepted.

Demand under Section 11A - interest under Sections 11AB and 11AA - penalty under Section 11AC - Whether the differential duty demand, interest and penalties as confirmed in the impugned order are sustainable - HELD THAT: - Because valuation must be made under Rule 10(b) and transaction value accepted, the Tribunal held that the demand of differential duty alleged by Revenue (for both normal and extended periods) cannot be sustained. Consequentially, interest claimed under the relevant provisions and the penalties imposed in the impugned order also cannot be sustained. [Paras 33, 34, 35]

The demand, interest and penalties cannot be sustained and are set aside.

Final Conclusion: The Tribunal held that the assessee and M/s Ashutosh are inter connected undertakings but not related under clauses (ii)-(iv) of Section 4(3)(b); valuation for both contested periods must be under Rule 10(b) accepting transaction value; accordingly the differential duty demand, interest and penalties confirmed in the impugned order are unsustainable - Revenue's appeal rejected and the assessee's appeal allowed with consequential relief.

Ultra vires - executive instruction cannot add or alter statutory conditions - issuance of C and F Forms under the Central Sales Tax regime governed by statutory conditions - statutory forms are to be issued where prescribed conditions are fulfilled - precondition of furnishing an undertaking incompatible with delegated legislation

Ultra vires - issuance of C and F Forms under the Central Sales Tax regime governed by statutory conditions - executive instruction cannot add or alter statutory conditions - Validity of the Office Memorandum dated 21.04.2021 and the appended undertaking as a precondition for issuance of C and F Forms - HELD THAT: - The Court examined the scheme of the CST Act, the Central Rules and the Goa Rules and found that those statutes and rules prescribe the authorities competent to issue C and F Forms and the conditions subject to which such forms are to be issued. The State did not point to any provision in the CST Act, the CST Rules or the Goa Rules authorising it to require the impugned undertaking as a precondition. An executive memorandum or instruction cannot, by itself, amend or supplement statutory conditions or introduce additional preconditions for issuance of statutory forms. Reliance on precedents (including decisions rejecting executive or circular devices that impose conditions outside the statute) supports that C and F Forms must be issued when the statutory conditions are met and that withholding such forms on extraneous grounds is impermissible. The State's concern about future GST liability does not furnish a statutory basis to compel an undertaking; perceived lacunae in central legislation cannot be remedied by the State through executive instructions. The insistence on the impugned undertaking therefore amounts to introducing an additional condition foreign to the statutory scheme and causes prejudice to the petitioners. [Paras 37, 38, 54, 56, 67]

The impugned direction and the impugned undertaking are declared ultra vires and the respondents are restrained from enforcing them; respondents must consider applications for C and F Forms in accordance with law without insisting on the undertaking and dispose of them within six weeks.

Final Conclusion: The Office Memorandum dated 21.04.2021 and the appended undertaking are ultra vires insofar as they impose an additional precondition for issuance of statutory C and F Forms; respondents are restrained from enforcing them and directed to consider and decide the petitioners' applications for C and F Forms in accordance with the CST statutory scheme, without insisting on the undertaking, within six weeks.

Pre-deposit condition for entertaining appellate proceedings - pre-deposit for filing second appeal - remand for fresh adjudication to first appellate authority - stay of coercive recovery pending disposal of appeal - concessional rate under Section 8(1) of the Central Sales Tax Act

Pre-deposit condition for entertaining appellate proceedings - pre-deposit for filing second appeal - The Tribunal erred in directing the writ applicant to deposit the entire assessed amount as pre-deposit for entertaining the Second Appeal. - HELD THAT: - The Court noted that the assessment for the year 1999-2000 had earlier been quashed by the Tribunal and remitted to the Assessing Officer, following which a fresh assessment was made and a First Appeal was entertained earlier without insistence on pre-deposit. The writ applicant had, in the earlier round, deposited a pre-deposit of Rs. 25 lakh. Having regard to the long pendency of the matter and the prior course of litigation (including the Tribunal's own earlier order quashing the assessment), it was disproportionate for the Tribunal at this stage to require a full pre-deposit of the entire assessed amount merely to admit the Second Appeal. The Tribunal failed to take these circumstances into account and was not justified in insisting on the full pre-deposit as a condition precedent to entertainment of the appeal. [Paras 8, 9]

The matter is remitted to the first appellate authority for hearing on merits without insisting on any further pre-deposit.

Remand for fresh adjudication to first appellate authority - stay of coercive recovery pending disposal of appeal - Relief against coercive recovery and timetable for disposal of the remitted appeal. - HELD THAT: - In order to secure an effective adjudication on merits, the Court directed that the First Appeal be heard on its own merits and disposed of expeditiously. The Court observed that, in the circumstances, coercive recovery of the disputed tax should be restrained until the First Appeal is decided. The Court further directed that the appellate proceedings be concluded within two months from the date of receipt of the writ of this order, thereby providing a firm timeline for the remand and protecting the assessee from immediate enforcement measures while protecting the interest of the revenue. [Paras 9, 10, 11]

First Appeal to be heard on merits and disposed of within two months; till such decision, no coercive recovery shall be made.

Final Conclusion: Writ petition disposed by remitting the appeal to the first appellate authority for fresh hearing on merits without requiring further pre-deposit; the First Appeal to be decided within two months and coercive recovery restrained until its disposal.

Extinguishment of pre-resolution claims - binding effect of approved resolution plan - prohibition on recovery of statutory dues not part of resolution plan - non-filing of claim before the resolution professional - prevailing effect of the Insolvency and Bankruptcy Code over inconsistent laws

Extinguishment of pre-resolution claims - binding effect of approved resolution plan - prohibition on recovery of statutory dues not part of resolution plan - non-filing of claim before the resolution professional - Validity of demand notices for VAT and CST for Assessment Period 2014-15 where the State did not lodge a claim before the resolution professional and a resolution plan had been approved under the I&B Code. - HELD THAT: - The Court applied the binding precedent of the Supreme Court (paras 95 and 141-149 of the reported judgment) which holds that once a resolution plan is duly approved under Section 31 of the I&B Code the claims provided in the resolution plan stand frozen and are binding on the corporate debtor and its creditors, including the State; claims not part of the approved plan stand extinguished and cannot be the subject of recovery proceedings. The respondents undisputedly did not lodge any claim in respect of the VAT and CST for Assessment Period 2014-15 before the resolution professional and the resolution plan was approved by the Adjudicating Authority on 17.04.2018. Applying the principle that statutory dues not included in the approved resolution plan are extinguished, the impugned demand notices issued for recovery of those pre-resolution period tax dues could not be enforced against the petitioner. [Paras 3, 6, 7, 9]

The demand notices for VAT and CST relating to Assessment Period 2014-15 cannot be realized against the petitioner as the State did not file a claim before the resolution professional and such pre-approval claims stand extinguished.

Final Conclusion: Writ petitions allowed; impugned demand notices dated 28.11.2019 for VAT and CST (Assessment Period 2014-15) quashed and respondents restrained from realizing those amounts, in view of the extinguishment of pre-resolution claims under the approved resolution plan.