TaxTMI Updates e-Newsletter
Mar 12,2021

Advance ruling - Admissibility of application - Supply of goods or services - Applicant as recipient not supplier - Exemption for pure services to a governmental authority - Binding effect of advance ruling

Advance ruling - Supply of goods or services - Applicant as recipient not supplier - Admissibility of application - Application for advance ruling was not admissible because the applicant sought a ruling in respect of services received as a recipient and not in relation to any supply undertaken or proposed to be undertaken by the applicant. - HELD THAT: - Section 95(a) defines 'advance ruling' as a decision in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. The Advance Ruling Authority examined the application and the submissions and found that the applicant sought a determination on the eligibility for exemption under Notification No.12/2017 in respect of services received by it, i.e., in the capacity of a recipient rather than as a supplier. As advance rulings are confined to questions pertaining to the applicant's own supplies, the application did not satisfy the statutory requirement of being in relation to supplies undertaken or proposed to be undertaken by the applicant. The Authority therefore declined to admit the application and did not proceed to decide the merits. The ruling will be binding only in the manner and to the extent provided by Section 103(1) where an admissible ruling is given to an applicant; that statutory framework reinforces the limitation on admissibility adopted by the Authority. [Paras 4, 5]

Application rejected as not admissible under Section 98(2) read with Section 95(a) because the applicant sought a ruling as recipient of services and not as supplier.

Final Conclusion: The Advance Ruling Authority refused to admit the application and rejected it for lack of pertinence to the applicant's supplies; the Authority did not decide the merits of whether the cited services qualify as exempt 'pure services' under the notification.

Advance ruling - applicability to supplies undertaken or proposed to be undertaken by the applicant - Admissibility of application by recipient of supply - Authority to reject application under Section 98(2) read with Section 95(a) - Binding effect of advance ruling on the applicant and the concerned officers

Advance ruling - applicability to supplies undertaken or proposed to be undertaken by the applicant - Admissibility of application by recipient of supply - Application for advance ruling filed by Chennai Metropolitan Water Supply and Sewerage Board as recipient of supply of water was not admissible. - HELD THAT: - The Authority examined the application against the statutory definition of "advance ruling" in Section 95(a), which confines an advance ruling to matters "in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant." The applicant sought a ruling on the taxability of water received by it from Chennai Water Desalination Plant Limited; the applicant is the recipient and not the supplier of that supply. Further, Section 103(1) was noted to show that a ruling is binding only on the applicant and the concerned officer. Because the question raised relates to liability on the supply made to the applicant rather than by the applicant, the application did not fall within the scope of matters on which an advance ruling can be sought. Consequently the Authority declined to admit the application and did not proceed to adjudicate the merits.

Application not admitted under Section 98(2) read with Section 95(a) of the CGST/TNGST Act, 2017.

Final Conclusion: The Authority rejected the application for admission because the applicant, being the recipient of the supply, could not seek an advance ruling on the taxability of that supply; the application was therefore not admitted under the provisions cited.

Supply - Business - Consideration excludes government subsidy - Exemption under Notification No. 12/2017 (Rate) - Sl. No. 69 and Sl. No. 70 - Interpretation of exemption entries - Registration under GST Act

Exemption under Notification No. 12/2017 (Rate) - Sl. No. 69 and Sl. No. 70 - Interpretation of exemption entries - Whether the applicant's activities are exempt under Sl. No. 69 and Sl. No. 70 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017. - HELD THAT: - The entries at Sl. No. 69 and Sl. No. 70 exempt only services that satisfy a conjunctive set of conditions: the service must be classifiable under specified headings and must be provided by specific classes of persons (e.g., the National Skill Development Corporation set up by the Government of India, an SSC approved by NSDC, assessment agencies or training partners approved by NSDC/SSC) in relation to specified programmes implemented by NSDC or, in the case of Sl. No. 70, by assessing bodies empanelled centrally by MSDE. The Authority examined the applicant's constitution and activities and found that TNSDC is a State Skill Development Corporation established by the Government of Tamil Nadu and is not an entity within the specific classes listed in the entries (it is not NSDC, an NSDC-approved SSC, an NSDC/SSC-approved assessment agency or training partner, nor an MSDE-empanelled assessing body). The words of the notification are clear and unambiguous and must be read within their terms; pari materia notifications issued by another State in respect of a specific body do not alter the applicability of the Central notification. Accordingly, the conditions for exemption under Sl. No. 69 and Sl. No. 70 are not met in this case and the exemptions do not apply to the applicant. [Paras 7]

The applicant is not entitled to exemption under Sl. No. 69 or Sl. No. 70 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.

Supply - Business - Consideration excludes government subsidy - Registration under GST Act - Whether the activities of the applicant constitute a 'supply' and, consequently, whether the applicant is required to obtain registration under the GST Act. - HELD THAT: - Section 7(1) defines 'supply' to include all forms of supply of goods or services for a consideration in the course or furtherance of business. The definition of 'business' under Section 2(17) includes activities undertaken irrespective of pecuniary motive. 'Consideration' excludes only subsidy given by the Central or State Government. The Authority found that the applicant's activities fall within the scope of 'supply' under Section 7(1) and are not excluded by Section 7(2) or by any notified Schedule entry. The absence of profit motive does not negate the characterization of the activity as business for GST purposes, and government grants directed to third parties or to meeting costs do not convert the supplies into non-taxable transactions unless expressly excluded. Therefore, the applicant's supplies are taxable subject to turnover thresholds, and the applicant is required to obtain registration if the monetary turnover so requires. [Paras 8, 9, 10]

The applicant's activities constitute 'supply' liable to GST and, as such, the applicant is required to obtain registration under the CGST/TNGST Act, 2017, subject to applicable turnover limits.

Final Conclusion: The Authority rules that Tamil Nadu Skill Development Corporation is not covered by the exemptions at Sl. No. 69 or Sl. No. 70 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017; its activities are supplies under the GST law and, accordingly, it is required to be registered under the CGST/TNGST Act, 2017 (subject to turnover thresholds).

Classification of goods under competing tariff headings - Parts and accessories of motor vehicles - principal use test - Specific heading preferred to residual heading (Rule 3(a) of General Rules for Interpretation) - HSN Explanatory Notes and Section/Chapter Notes as interpretative aids - Essential character and functional utility in classification - Exclusion under Note 2 to Section XVII (articles of vulcanised rubber) - Application of First Schedule rules to GST Notification No.1/2017 (use of Customs Tariff interpretation)

Classification of goods under competing tariff headings - Essential character and functional utility in classification - Specific heading preferred to residual heading (Rule 3(a) of General Rules for Interpretation) - Exclusion under Note 2 to Section XVII (articles of vulcanised rubber) - Parts and accessories of motor vehicles - principal use test - Air Springs manufactured and supplied by the applicant are classifiable under CTH 8708 (more specifically CTH 8708 8000) and not under CTH 4016 9990/4016 9990/40169990. - HELD THAT: - The Authority examined composition, functionality, use and relevant Section/Chapter Notes and HSN explanatory notes and applied the rules for interpretation of the First Schedule as made applicable to GST Notification No.1/2017. Although the bellows are of fabric-reinforced vulcanised soft rubber (supported by technical reports) and rubber forms a part of the product, the product as a whole comprises metal, rubber and other components which together provide the suspension/shock-absorbing functional utility when fitted to motor vehicles. The product is designed and manufactured solely or principally for use in motor vehicles of headings 8701-8705. Section Note 2 to Section XVII excludes articles of vulcanised rubber from Section XVII only if the goods are articles of vulcanised rubber falling under heading 4016; mere use of vulcanised rubber does not convert a composite part into an article of vulcanised rubber. Applying the principal-use test in the explanatory notes to Section XVII and the preference for specific over residual entries (Rule 3(a)), the suspension-specific entry 8708 80 00 (suspension systems and parts thereof, including shock absorbers) is a more specific and appropriate classification than the residual 4016 99 90. External authority (US HTS ruling) was distinguished because the Customs Tariff adopted for GST lacks the specific HTSUS sub-entry relied upon by the applicant. Thus, on a holistic view of composition, predominant use and interpretative rules, the goods fall under CTH 8708 8000 rather than CTH 40169990. [Paras 8, 10, 11]

Air Springs are classifiable under CTH 8708 and more specifically under CTH 8708 8000.

Final Conclusion: The Advance Ruling is that the applicant's 'Air Springs' are rightly classifiable under CTH 8708 (specifically CTH 8708 8000) and not under CTH 40169990; classification follows the principal-use/prioritisation of specific tariff entries and the applicable Chapter/Section Notes and HSN explanatory notes.

Bail jurisprudence and the principle 'bail not jail' - application of section 167(2)(a)(ii) of the Code of Criminal Procedure, 1973 - custodial detention and right to personal liberty under Article 21 - offences under the MGST Act attracting cognizable and non-bailable provisions - remand application not constituting a first information or complaint - payment towards disputed tax/dues as a relevant mitigating factor in bail - delegation of power to record reasons to believe under section 69 of the MGST Act

Bail jurisprudence and the principle 'bail not jail' - application of section 167(2)(a)(ii) of the Code of Criminal Procedure, 1973 - custodial detention and right to personal liberty under Article 21 - offences under the MGST Act attracting cognizable and non-bailable provisions - payment towards disputed tax/dues as a relevant mitigating factor in bail - remand application not constituting a first information or complaint - Petitioner entitled to bail subject to conditions. - HELD THAT: - Petitioner was arrested on 15.01.2021 for alleged offences under the MGST Act punishable up to five years. Since the maximum sentence on conviction falls below the threshold in section 167(2)(a)(ii) Cr.P.C., the magistrate's power to authorize detention beyond twenty-four hours is subject to the sixty-day limit, after which release on bail becomes obligatory if no charge-sheet is filed. As on the hearing date the petitioner had been in custody for 54 days and no charge-sheet had been produced, and having regard to the absence of a formal accusation prior to arrest, the Court applied established bail jurisprudence favouring liberty (bail not jail). The Court also took into account that the petitioner had paid a substantial amount to the revenue (including payments made after arrest and under protest), treating that fact as a relevant mitigating circumstance. Balancing the rights of the accused and the needs of investigation, the Court concluded that continued detention was not justified and ordered release on bail on specified conditions, including cash surety, cooperation with investigation, non-tampering with evidence or witnesses, and deposit of passport. [Paras 7, 8, 9, 11]

Grant bail on furnishing cash surety and subject to conditions of cooperation, non-tampering, and deposit of passport; directed further furnishing of solvent surety within two weeks.

Delegation of power to record reasons to believe under section 69 of the MGST Act - Question of validity and extent of delegation regarding recording of reasons to believe under section 69 of the MGST Act deferred for deeper consideration. - HELD THAT: - The petitioner's contention that the Assistant Commissioner could not independently record reasons to believe and effect arrest raised a substantial question concerning delegation of the Commissioner's powers under section 69. The Court observed that the contention requires detailed analysis of the impugned delegation and the record, and therefore deferred adjudication of that controversy to a subsequent hearing so as not to impede determination of the immediate bail application. [Paras 10]

Defer examination of the delegation issue for subsequent hearing; remand the matter for deeper analysis.

Final Conclusion: Petitioner released on bail on furnishing specified cash surety and subject to conditions; the separate question regarding delegation of power under section 69 of the MGST Act is deferred for fuller consideration at a subsequent hearing.

Collection of tax without issuance of a show cause notice or order of assessment - duty to disclose legal authority for tax collection - interim protection from coercive steps - continuation of investigation despite interim protection

Collection of tax without issuance of a show cause notice or order of assessment - duty to disclose legal authority for tax collection - Whether the respondents collected amounts from the petitioner-company without issuance of a show cause notice or an order of assessment and under what legal authority such amounts were received - HELD THAT: - The Court recorded the petitioner's contention that substantial amounts were collected and the respondents' assertion that the petitioner voluntarily deposited the sums. Since the respondents' counsel was unable to identify or explain the legal authority under which amounts were collected in the absence of a show cause notice or an assessment order, the Court directed the respondents to file an affidavit of the concerned officer detailing the statutory or legal basis for the collection. The direction requires the respondents to disclose the authority for the impugned collection so that the factual and legal position can be examined on the next date. A rejoinder, if any, is permitted before the next hearing. [Paras 2]

Respondents directed to file an affidavit within one week stating the authority under which the amounts were collected without issuance of a show cause notice or an order of assessment; rejoinder permitted before the next hearing.

Interim protection from coercive steps - continuation of investigation despite interim protection - Whether coercive action may be taken against the petitioner-company pending compliance with the Court's direction and further hearing - HELD THAT: - The Court granted interim protection by prohibiting any coercive steps against the petitioner-company in the intervening period. This protection is procedural and provisional, and the Court expressly clarified that the respondents remain at liberty to continue with investigatory steps that do not amount to coercion. The order preserves the status quo and prevents enforcement measures until the respondents file the required affidavit and the matter is next listed. [Paras 4]

No coercive steps shall be taken against the petitioner-company meanwhile; respondents may continue the investigation.

Final Conclusion: The Court directed the respondents to file, within one week, an affidavit by the concerned officer stating the legal authority for the collection of amounts allegedly made without a show cause notice or assessment order, permitted rejoinder, and granted interim protection restraining coercive action against the petitioner-company while allowing the respondents to continue investigations; listed the matter for further hearing on 07.04.2021.

E-way bill - detention of goods - proceedings under Section 129 of the GST Act, 2017 - requirement of necessary documents for transportation under Rule 138 of the GST Rules - renewal of e-way bill - judicial interference in ongoing detention proceedings

E-way bill - detention of goods - proceedings under Section 129 of the GST Act, 2017 - judicial interference in ongoing detention proceedings - Validity of interference by writ court with detention of vehicle where no valid e-way bill was produced at interception and proceedings under Section 129 GST are pending - HELD THAT: - The Court noted that it was not in dispute that at the time of interception the vehicle did not have a valid e-way bill. In consequence the vehicle was detained and notice proceedings under Section 129 of the GST Act, 2017 were initiated and served on the petitioner. The petitioner's explanation that a breakdown delayed the journey and that the journey was resumed within statutory time was not accepted as a ground for quashing the detention in these proceedings. Having regard to the statutory requirement for carrying necessary documents for transportation and the ongoing statutory proceedings, the Court held that it would not intervene by writ at this stage and that the petitioner must appear before the authorities and present his stand in the notice proceedings. [Paras 5]

Writ petition dismissed; petitioner directed to appear and represent his case before the authorities in the pending Section 129 proceedings.

Final Conclusion: The High Court refused to exercise writ jurisdiction to release the detained vehicle where no valid e-way bill was produced at interception and statutory detention proceedings under Section 129 GST were pending; the petitioner was directed to appear before the authorities and the petition was dismissed.

Treatment of proceeds from sale of carbon/Certified Emission Reduction credits as capital receipt and not taxable business income - deduction under Section 80IA of the Act contingent on profits and gains derived by the eligible industrial undertaking - judicial declaration of law and retrospective applicability of High Court/Tribunal decisions

Treatment of proceeds from sale of carbon/Certified Emission Reduction credits as capital receipt and not taxable business income - deduction under Section 80IA of the Act contingent on profits and gains derived by the eligible industrial undertaking - Proceeds realized by the assessee on sale of Certified Emission Reduction (carbon) credits are capital receipts and not taxable as business income, and therefore do not form part of profits eligible for deduction under Section 80IA. - HELD THAT: - The High Court held that the question in the present appeal is covered by earlier Division Bench authority which concluded that receipts from sale of carbon credits are capital in nature. The court relied on precedents including the Supreme Court decisions distinguishing capital and revenue receipts/expenditure (Maheshwari Devi Jute Mills Ltd. and Empire Jute Co. Ltd.), and the Andhra Pradesh High Court decision in My Home Power Ltd., which treated carbon credits as an offshoot of environmental concerns, not directly generated by the commercial activity of power generation. Applying these principles, the Court observed that no asset is generated in the course of the assessee's business by earning carbon credits and that sale of excess carbon credits results in a capital receipt. Because deduction under Section 80IA is available only in respect of profits and gains derived by the undertaking, capital nature of the receipt precludes its inclusion as eligible profits for Section 80IA. As the issue was squarely governed by the cited Division Bench decision, no substantial question of law remained for fresh adjudication and the appeal was dismissed in favour of the assessee. [Paras 4]

Answered in favour of the assessee: the proceeds from sale of carbon/CER credits are capital receipts and not taxable as business income; consequently they do not qualify as profits for deduction under Section 80IA.

Final Conclusion: The High Court dismissed the Revenue's appeal and held that sale proceeds of Certified Emission Reduction (carbon) credits are capital receipts, not taxable business income, and therefore are not includible as profits for the purpose of claiming deduction under Section 80IA for Assessment Year 2009-10.

Exercise of suo motu revisional jurisdiction under Section 263 of the Income Tax Act - show-cause notice as a preliminary step - use of post-assessment material in revision - opportunity of hearing in revision proceedings - judicial restraint from interfering with pending revision show-cause

Show-cause notice as a preliminary step - judicial restraint from interfering with pending revision show-cause - Validity of the show-cause notice issued by the Principal Commissioner proposing suo motu revision of the assessment order and whether the High Court should interfere at the notice stage. - HELD THAT: - The Court held that the impugned communication is a show-cause notice and thus a preliminary step in revision proceedings. Since the notice invites objections and proposes to grant an opportunity of hearing to the assessee, the authority has not passed any final revisional order. In these circumstances, judicial interference at the stage of a show-cause notice is unwarranted. Absent material demonstrating bias or that the revisional authority is predetermined to decide adversely, the High Court will not halt the revision process; administrative acts undertaken in accordance with law are to be allowed to proceed so that the assessee may be heard before any final order is passed. [Paras 4, 5]

Petition to quash the show-cause notice dismissed; Court declines to interfere with the pending suo motu revision at the notice stage.

Exercise of suo motu revisional jurisdiction under Section 263 of the Income Tax Act - use of post-assessment material in revision - opportunity of hearing in revision proceedings - Whether the Principal Commissioner may rely on a valuation communication received after the assessment order for initiating suo motu revision. - HELD THAT: - The Court observed that although the valuation communication post-dated the assessment order, the revisional authority may legitimately rely on such material in deciding whether to initiate suo motu revision. The fact that the document was not before the assessing officer does not preclude the Principal Commissioner from considering it when forming the view that the assessment order may be erroneous or prejudicial to revenue. However, because the matter is at the show-cause stage, the assessee must be given the opportunity to contest reliance on that material before any final revisional order is passed. [Paras 4, 5]

Revisional authority may use the post-assessment valuation communication as a basis for proposing revision, subject to giving the assessee a full opportunity to be heard.

Final Conclusion: Writ petition dismissed; the High Court refrains from interfering with the Principal Commissioner's suo motu revision process at the show-cause stage and expects the revisional authority to determine the matter in accordance with law after affording the assessee an opportunity of hearing.

Mistake apparent from the record - rectification under Section 254(2) of the Income Tax Act, 1963 - power of rectification is not appellate or review power - subsequent decision of the Tribunal cannot be treated as a mistake apparent on the record of an earlier order - non-consideration of a binding decision of a superior court may constitute a mistake apparent - explanation to Section 271(1) inapplicable to penalty under Section 271(1)(a)

Mistake apparent from the record - rectification under Section 254(2) of the Income Tax Act, 1963 - subsequent decision of the Tribunal cannot be treated as a mistake apparent on the record of an earlier order - power of rectification is not appellate or review power - explanation to Section 271(1) inapplicable to penalty under Section 271(1)(a) - Whether the Appellate Tribunal was justified in allowing the Department's rectification petition under Section 254(2) by treating a subsequently rendered contrary decision in a sister case as a mistake apparent from the record. - HELD THAT: - The Court held that rectification under Section 254(2) can be exercised only where there is a mistake that is patent and visible on the record before the Tribunal at the time the order was rendered; the power is not a substitute for appeal or review and does not extend to errors discernible only after argument or by subsequent change of opinion. A later decision of the same Tribunal, rendered after the impugned order, does not form part of the earlier case record and cannot be invoked as a ground for rectification; at best it represents a change of view or subsequent wisdom which may be challenged by appeal but does not render the earlier order a mistake apparent on the face of the record. The Court observed that rectification may be permissible where the Tribunal had failed to follow a binding decision of the High Court or Supreme Court, but no such circumstance existed here. The Tribunal's sole basis - a contradiction with a decision delivered two days later in a sister case and absence of a rectification petition by the assessee in that subsequent case - did not establish a mistake apparent from the record. The revenue's contention that omission to consider the explanation to Section 271(1) warranted rectification was rejected on the ground that the explanation applies to cases under Section 271(1)(i)(b) and not to penalty levied under Section 271(1)(i)(a), so the explanation was inapplicable to the facts before the Tribunal. Applying these principles to AY 1982-83, the Court concluded the Tribunal erred in allowing rectification. [Paras 14, 15, 16, 18, 19]

The Tribunal erred in allowing the Department's rectification petition; the rectification under Section 254(2) was not justified and the order of rectification is set aside.

Final Conclusion: Reference answered in favour of the assessee: the Appellate Tribunal wrongly permitted rectification based on a subsequently rendered contrary decision in a sister case; the rectification is not sustainable and the other two referred questions need not be answered.

Deductibility of provision for loss on foreign exchange forward contracts - Application of Accounting Standard 11 to forward exchange contracts - Treatment of mark-to-market/unrealised foreign exchange loss as business loss and not a contingent liability - Speculative transaction exclusion under Section 43(5) and provisos - Applicability of Section 14A and Rule 8D where no exempt income is earned - Retrospective operation of CBDT instructions and circulars

Deductibility of provision for loss on foreign exchange forward contracts - Application of Accounting Standard 11 to forward exchange contracts - Treatment of mark-to-market/unrealised foreign exchange loss as business loss and not a contingent liability - Retrospective operation of CBDT instructions and circulars - Whether the market-to-market provision for loss on forward foreign exchange contracts entered to hedge export consideration is allowable as a business deduction for AY 2009-10 - HELD THAT: - The court accepted the Tribunal's factual findings that the assessee entered binding forward contracts to hedge export consideration, that the contracts related to revenue items, and that the liability arising on valuation date was determinable with reasonable certainty. Accounting treatment was in accordance with Accounting Standard 11 and ICAI guidelines. The Tribunal and this Court applied the principles in Woodward Governor India Pvt. Ltd. to hold that an unrealised/mark-to-market loss on such hedging contracts, determined in accordance with AS 11, is a deductible business loss and not a mere contingent liability. Instruction No.3/2010 (issued 23.03.2010) was held not applicable to the assessment year in question and the Court noted that circulars which are operative retrospectively only when beneficial cannot be applied so as to override settled legal principles to the detriment of the taxpayer. The findings on genuineness, reasonableness and reasonable basis of estimation were not shown to be perverse. [Paras 11, 12, 13]

Provision for mark-to-market loss on forward exchange contracts entered as hedges was allowable as a business deduction for AY 2009-10; substantial questions 1 and 3 answered in favour of the assessee.

Applicability of Section 14A and Rule 8D where no exempt income is earned - MAXOPP decision on disallowance under Section 14A - Whether disallowance under Section 14A read with Rule 8D can be made for AY 2009-10 when the assessee did not earn any exempt income in that year - HELD THAT: - The Court examined the Supreme Court's reasoning in Maxopp and related precedent and concluded that Section 14A is directed to expenditure incurred in relation to income which is in fact earned and exempt. The Court held that where no exempt income has accrued in the year, Section 14A does not apply to disallow expenses proportionate to exempt income. Earlier contrary observations in this Court were clarified as misreadings of Maxopp. Circular No.5/2014 (dated 11.02.2014) was held inapplicable to the assessment year under consideration and has no retrospective operation. [Paras 14, 15]

Disallowance under Section 14A read with Rule 8D does not arise for AY 2009-10 where no exempt income was earned; the substantial question No.2 answered in favour of the assessee.

Final Conclusion: The revenue's appeal is dismissed. The Tribunal's deletion of the disallowance of the provision for loss on forward exchange contracts and its rejection of the Section 14A disallowance are affirmed for Assessment Year 2009-10.

Revision under section 264 of the Income Tax Act, 1961 - business expenditure - interest on borrowed capital - maintainability of revision as substitute for statutory appeal - timeliness of statutory appeal - scope of revision under section 264

Business expenditure - interest on borrowed capital - Whether the interest paid on amounts advanced to Mrs. Thillaikarasi is allowable as a business expenditure of the petitioner - HELD THAT: - The Court accepted the finding that the petitioner had borrowed capital from a bank and advanced amounts to Mrs. Thillaikarasi in a manner contrary to the petitioner's memorandum and articles of association. Those payments were not connected with the petitioner's business of developing a software technology park. Accordingly the amount advanced was not a business expenditure of the petitioner and the proportionate interest borne on that amount cannot be allowed as a business deduction. The respondent authority's disallowance of the interest in the assessment was therefore sustained on the merits. [Paras 7, 9]

The interest paid on the amounts advanced to Mrs. Thillaikarasi is not allowable as a business expenditure and the disallowance in the assessment is upheld.

Revision under section 264 of the Income Tax Act, 1961 - scope of revision under section 264 - maintainability of revision as substitute for statutory appeal - timeliness of statutory appeal - Whether the application under section 264 was maintainable where the petitioner had not filed a statutory appeal in time - HELD THAT: - The Court observed that the petitioner had an opportunity to file a statutory appeal before the Commissioner of Income Tax (Appeals) and had missed the time limit. The scope of revision under section 264 is limited and cannot be used as a device to circumvent the appellate remedy under the statute. The Principal Commissioner therefore rightly refused to exercise revisionary jurisdiction to set aside the assessment which the petitioner could have challenged by way of appeal. [Paras 3, 8, 10]

The application under section 264 was rightly rejected as revision cannot be invoked as a substitute for a timely statutory appeal; the impugned order refusing revision is sustained.

Final Conclusion: The writ petition is dismissed. The impugned order dated 22.03.2018 refusing revision under section 264 is upheld and there shall be no costs.

Deduction under section 80IA(4) - development of infrastructure facility - Explanation to section 80IA(13) excluding works contract - developer vis-a -vis works contractor - entrepreneurial and investment risk - turnkey/overall responsibility principle - definition of "infrastructure facility" (including a rail system)

Deduction under section 80IA(4) - development of infrastructure facility - Explanation to section 80IA(13) excluding works contract - developer vis-a -vis works contractor - entrepreneurial and investment risk - definition of "infrastructure facility" (including a rail system) - Whether the assessee was entitled to deduction under section 80IA(4) for AY 2016-17 in respect of profits from infrastructure projects (including project No. 3004 with RVNL) - HELD THAT: - The Tribunal examined the agreements between the assessee and RVNL and found the assessee had assumed comprehensive responsibilities (procurement, plant and machinery, labour, temporary works, site clearance, testing, health and safety, etc.) and attendant commercial risks including liability for defects, security deposits and indemnities. Such obligations and risks demonstrate that the assessee undertook entrepreneurial and investment risk beyond a mere works-contractor role. The contract concerned a rail system falling within the Explanation's definition of "infrastructure facility." Reliance was placed on the Supreme Court's reasoning in Commissioner of Income-tax-VI v. VRM (India) Ltd. regarding turnkey/overall responsibility as indicia of development activity. The Tribunal also noted consistent earlier tribunal decisions in the assessee's own cases and instances where the AO had, after examining contracts, allowed the deduction in prior years. On these combined factual and legal findings the Explanation to section 80IA(13) excluding works contracts was held not applicable to the assessee's projects, and the assessee was held to be a developer entitled to deduction under section 80IA(4). [Paras 7, 9, 11, 15]

Deduction claimed under section 80IA(4) for AY 2016-17 allowed; assessee is a developer of infrastructure facility and not a mere works contractor, so Explanation to section 80IA(13) does not bar the claim.

Final Conclusion: Revenue's appeal is dismissed and the deduction under section 80IA(4) for Assessment year 2016-17 is sustained.

Penalty under section 271D - reasonable cause defence under section 273B - prohibition on receipt of cash under section 269SS - requirement of recording satisfaction for initiation of penalty proceedings

Penalty under section 271D - reasonable cause defence under section 273B - requirement of recording satisfaction for initiation of penalty proceedings - Whether penalty under section 271D could be levied where assessee received cash from neighbours for obtaining demand drafts and the Assessing Officer had not recorded satisfaction for initiation of penalty proceedings. - HELD THAT: - The Tribunal accepted the assessee's explanation that cash was received from two neighbours who had no bank accounts and required demand drafts for payment to HUDA; the assessee deposited the amounts in her bank account and procured drafts in their names, with receipts from HUDA and corresponding bank statements placed on record. Section 273B exempts penalty where a reasonable cause is proved. The Assessing Officer, while making additions, did not disbelieve this explanation in the assessment order nor recorded any satisfaction for initiating penalty proceedings under section 271D. Relying on the principle that a penalty based on an earlier assessment order cannot survive where the satisfaction for initiation of penalty proceedings is absent in the fresh assessment, the Tribunal held that the assessee had shown reasonable cause and that penalty could not be sustained in the absence of recorded satisfaction by the AO. [Paras 7, 8, 9]

Penalty under section 271D cancelled as assessee established reasonable cause and no satisfaction to initiate penalty proceedings was recorded by the Assessing Officer.

Final Conclusion: The appeal is allowed and the penalty under section 271D of the Income-tax Act is set aside and cancelled.

Taxation of unexplained cash credits - Burden of proof under Section 68 - Deeming fiction arising from unexplained credits under Section 68 - Invocation of Section 115BBE in relation to income charged under Section 68 - Right to opportunity of being heard / principles of natural justice in appellate proceedings

Taxation of unexplained cash credits - Burden of proof under Section 68 - Deeming fiction arising from unexplained credits under Section 68 - Validity of additions made u/s 68 to the assessee's income by treating cash deposits credited in the names of two sundry creditors as unexplained cash credits - HELD THAT: - The Tribunal upheld the findings of the Assessing Officer and the CIT(A) that fresh cash deposits totalling the impugned amount appeared in the assessee's bank accounts and were credited in the assessee's books in the names of two persons. The assessee failed to discharge the primary onus cast by Section 68: no confirmations or ITRs of the two persons were placed on record, the assessee did not produce the parties for examination, and when one person (Anuj Sonkar) was summoned he denied any transactions with the assessee. The AO recorded cash deposit details from the assessee's bank accounts, the assessee did not seek cross-examination of the witness, and no satisfactory explanation about nature, source or purpose of the credits was offered. Applying the settled principle that where a sum is credited and the explanation is not, in the AO's opinion, satisfactory, the amount may be treated as the assessee's income, the Tribunal found the authorities rightly characterised the credits as unexplained cash credits and charged them to tax under Section 68. The Tribunal relied on the reasoning in Sumati Dayal and Durga Prasad More to the extent relevant and concluded that the primary onus on the assessee was not discharged, permitting the invocation of Section 68. [Paras 3, 6]

Additions made under Section 68 treating the cash deposits as unexplained cash credits were upheld and the orders of the lower authorities confirmed.

Invocation of Section 115BBE in relation to income charged under Section 68 - Set off of current year loss against income characterised under Section 68 - Applicability of Section 115BBE for denying set off of the assessee's claimed current year loss against income charged under Section 68 - HELD THAT: - The AO invoked Section 115BBE read with Section 68 and denied the set off of the claimed current year loss. The CIT(A) did not adjudicate this issue in his appellate order. In the interest of justice the Tribunal held that this specific question requires fresh consideration and a speaking, reasoned order by the CIT(A). The matter is remitted for de novo adjudication on the applicability of Section 115BBE (and resultant consequences for set off of loss), with directions that the CIT(A) grant adequate opportunity of being heard and admit evidence tendered by the assessee for adjudication on merits in accordance with law. [Paras 6]

Issue of applicability of Section 115BBE and denial of set off of current year loss is restored to the file of the CIT(A) for fresh adjudication after giving the assessee proper opportunity.

Final Conclusion: The Tribunal upheld the additions made under Section 68 treating the alleged cash receipts as unexplained cash credits and confirmed the orders of the lower authorities; however, the question whether Section 115BBE applies so as to deny the set off of the claimed current year loss was remitted to the CIT(A) for fresh, reasoned adjudication after affording the assessee a proper opportunity to be heard. The appeal is partly allowed for statistical purposes.

Condonation of delay - substantial justice over technicalities - fee for default in furnishing statements - processing of statements of tax deducted at source - remand for fresh decision on merits

Condonation of delay - substantial justice over technicalities - Delay in filing appeals is condoned. - HELD THAT: - The Tribunal found that the assessee's appeals, though filed belatedly, raised a substantial legal controversy regarding levy of fee under section 234E for TDS statements filed prior to 1.6.2015 and that clarity emerged only after the Karnataka High Court decision of 26.8.2016. Relying on the principle that substantial justice should prevail over technicalities (as explained in Collector of Land Acquisition v. Mst. Katiji & others), and on precedents where delay was condoned where no legal remedy was available earlier, the Tribunal held that the delay was not due to negligence and merited condonation. The Tribunal therefore exercised discretion in favour of condoning the delay so that the appeals could be heard on merits. [Paras 10, 11]

Delay in filing the appeals is condoned.

Fee for default in furnishing statements - processing of statements of tax deducted at source - remand for fresh decision on merits - The CIT(A)'s order is set aside and the matter is remanded for fresh adjudication on the merits of the levy of fee under section 234E. - HELD THAT: - The Tribunal observed that the CIT(A) had not decided the substantive question whether fee under section 234E could be levied while processing TDS statements filed prior to the amendment effective 1.6.2015. Given that the appeals relate to TDS returns for the listed assessment years and that the CIT(A)'s order dismissed the appeals on procedural grounds without deciding the merits, the Tribunal set aside that order and remanded the appeals to the CIT(A) with a direction to decide them on merits in accordance with law, affording the assessee a due opportunity of hearing. [Paras 11]

Order of the CIT(A) is set aside and the appeals are remanded to the CIT(A) for decision on merits in accordance with law with due opportunity to the assessee.

Final Conclusion: The Tribunal condoned the delay in filing the appeals and set aside the CIT(A)'s order, remanding the matters to the CIT(A) to decide the legality of the levy of fee under section 234E in respect of the TDS statements for assessment years 2013-14 to 2016-17 on merits and in accordance with law.

Deemed dividend under section 2(22)(e) - trade advances versus loans - substantial interest / related-party transactions - precedent of coordinate bench in assessee's own case - distinction from Gopal & Sons (HUF)

Deemed dividend under section 2(22)(e) - trade advances versus loans - substantial interest / related-party transactions - precedent of coordinate bench in assessee's own case - distinction from Gopal & Sons (HUF) - Addition made under section 2(22)(e) deleted by the Commissioner (Appeals) is upheld. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) deleted the addition under section 2(22)(e) and that identical issues in the assessee's own case for preceding assessment years had been allowed by a co ordinate Bench of the Tribunal. Applying those precedents, and on a review of the material on record, the Tribunal found no infirmity in the appellate order. The Tribunal further observed that the facts of the Supreme Court decision in Gopal & Sons (HUF) relied upon by the Revenue are distinguishable on the facts of the present case and therefore inapplicable. The absence of any authorised representative for the assessee at hearing and lack of any fresh material did not persuade the Tribunal to interfere with the appellate finding that the advances did not attract deemed dividend treatment under section 2(22)(e). Consequently the Tribunal declined to reverse the deletion made by the Commissioner (Appeals). [Paras 6, 9, 10]

Order of the Commissioner (Appeals) deleting the addition under section 2(22)(e) is sustained and the Revenue's grounds are dismissed.

Final Conclusion: Revenue's appeal is dismissed; the deletion of the addition under section 2(22)(e) in assessment year 2010-11 is upheld by the Tribunal relying on co ordinate bench precedent and finding the Supreme Court authority cited by Revenue distinguishable.

Arm's Length Price - Transfer Pricing - Transaction Net Margin Method - Profit Level Indicator - Turnover filter - Comparability analysis - Associated enterprises - Remand for recomputation

Turnover filter - Comparability analysis - Arm's Length Price - Exclusion of five comparable companies from the comparability set on account of their significantly higher turnovers compared to the assessee. - HELD THAT: - The Tribunal considered whether companies with substantially larger turnovers than the assessee should be excluded from the comparable set. Having reviewed relevant precedents and the applicability of turnover as a relevant criterion, the Tribunal followed earlier decisions which treat high turnover as a valid basis for exclusion. Applying that principle to the facts - where the assessee's turnover was materially lower than the five challenged comparables - the Tribunal held that those five companies are not comparable and must be excluded from the TPO's list. The Tribunal therefore set aside the inclusion of those companies and directed their exclusion for the purpose of determining the ALP. [Paras 11, 12]

Five specified comparables are excluded from the comparable set on the basis of turnover; the DRP/AO/TPO direction to exclude them is upheld.

Remand for recomputation - Arm's Length Price - Transaction Net Margin Method - Direction to the Assessing Officer/Transfer Pricing Officer to recompute the Arm's Length Price after excluding the specified comparables and to afford the assessee an opportunity of hearing. - HELD THAT: - Having excluded the five comparables, the Tribunal did not decide the final ALP on merits. Instead the Tribunal directed the AO/TPO to recompute the ALP in accordance with the Tribunal's directions (i.e., after excluding the specified comparables) and to afford the assessee a hearing during such recomputation. This constitutes a remand for fresh computation and opportunity to be heard rather than a final quantification by the Tribunal. [Paras 13]

Matter remanded to the AO/TPO to compute ALP consistent with this order and after affording the assessee an opportunity of hearing.

Final Conclusion: The appeal is partly allowed: five comparables are excluded on the ground of disproportionate turnover and the matter is remanded to the AO/TPO to recompute the Arm's Length Price in light of that exclusion, with an opportunity to the assessee to be heard.

Deduction under section 10A/10AA - profits of the business of the undertaking - income from other sources - reimbursement of expenses - provision for leave encashment - exclusion of specified expenses from export turnover and total turnover - book profit under section 115JB - ascertained liability - rate of depreciation on computers and computer peripherals

Deduction under section 10A/10AA - profits of the business of the undertaking - income from other sources - Interest on short-term fixed deposits is not includible in the qualifying amount for deduction under sections 10A/10AA. - HELD THAT: - Sections 10A and 10AA allow deduction only in respect of the proportion of the "profits of the business of the undertaking" attributable to exports. Interest earned on short-term bank fixed deposits arising from temporary investment of unutilized funds is alien to the business profits of the undertaking and does not partake the character of "profits of the business of the undertaking." The assessee's contention that fixed deposits were for managing working capital was rejected because the funds were not deployed to assist working capital (for example, by keeping them in cash credit or overdraft), but were instead used to earn interest. Reliance on the jurisdictional High Court precedent led to exclusion of such interest from the qualifying amount. [Paras 5, 6, 7]

Interest on short-term fixed deposits is not part of the qualifying amount for deductions under sections 10A/10AA and is correctly excluded.

Deduction under section 10A/10AA - reimbursement of expenses - profits of the business of the undertaking - Recovery/reimbursement of expenses from group companies is includible in the qualifying amount for deduction under sections 10A/10AA. - HELD THAT: - The assessee had incurred expenses on behalf of group companies which were included in its profit and loss account and thereby reduced the profits of the business. Subsequent reimbursement credited to the Profit and Loss account is a correlative item to those expenses and therefore forms part of the 'profits of the business of the undertaking' for the purpose of computing the qualifying amount under sections 10A/10AA. The Tribunal overturned the appellate authority on this point and allowed deduction accordingly. [Paras 8, 9]

Recovery/reimbursement of expenses from group companies must be included in the qualifying amount and deduction under sections 10A/10AA is allowed on this component.

Deduction under section 10A/10AA - Gain on sale of fixed assets was not included by the assessee in the qualifying amount and therefore no reduction was required. - HELD THAT: - The assessee stated that it did not claim deduction in respect of gain on sale of fixed assets and the Revenue did not controvert this factual position. Since the amount was not included in the qualifying amount claimed by the assessee, no exclusion or reduction was necessary. [Paras 10]

No adjustment required; the assessee succeeds on this point.

Deduction under section 10A/10AA - profits of the business of the undertaking - Receipts from sale of scrap arising from normal working operations form part of the qualifying amount for deduction under sections 10A/10AA. - HELD THAT: - Scrap generated from the assessee's normal operations had its cost debited to the Profit and Loss account. The sale proceeds of such scrap, being correlative to those costs that were included in computing the qualifying profit, constitute part of the 'profits of the business of the undertaking' and therefore must be included in the qualifying amount. [Paras 11, 12]

Sale of scrap is includible in the qualifying amount and deduction under sections 10A/10AA is allowed on this component.

Deduction under section 10A/10AA - The unexplained item of 'Other income' cannot be treated as part of the qualifying amount for deduction under sections 10A/10AA. - HELD THAT: - The assessee failed to explain the nature of the small 'Other income' receipt or demonstrate any nexus with the profits of the business of the undertaking. Absent such explanation or linkage, the amount cannot be treated as qualifying business profit for purposes of sections 10A/10AA. [Paras 13]

The 'Other income' is not includible in the qualifying amount and deduction under sections 10A/10AA is not allowed on it.

Deduction under section 10A/10AA - provision for leave encashment - The Assessing Officer erred in reducing the qualifying amount by an amount that the assessee had already adjusted in its computation; the provision for leave encashment was correctly accounted for by the assessee. - HELD THAT: - The assessee's computation of income showed an addition of the provision for leave encashment and a corresponding reduction representing payment against the pending provision, such that the net effect was already reflected before claiming deduction under sections 10A/10AA. The AO overlooked this netting in the computation and made an unwarranted reduction of the qualifying amount. The Tribunal examined the computation and found the assessee had adjusted the amount, thereby allowing the ground. [Paras 14, 15]

The reduction made by the AO is set aside; the provision for leave encashment is correctly reflected and no further adjustment is required.

Deduction under section 10A/10AA - exclusion of specified expenses from export turnover and total turnover - Amounts spent on foreign travel and communication/connectivity charges must be excluded from both export turnover and total turnover when computing deduction under sections 10A/10AA; the AO's exclusion from export turnover alone was incorrect. - HELD THAT: - The AO reduced the specified expenses from the export turnover but did not correspondingly reduce the total turnover while applying the proportionate formula under sections 10A/10AA. Circular guidance from the CBDT and High Court precedent require exclusion of such expenses (freight, telecommunication, insurance etc.) from both export turnover and total turnover. Accordingly, the Tribunal directed that these amounts be excluded from total turnover as well and remitted computation to the AO to give effect to this correction. [Paras 16, 17, 18]

Exclude the specified expenses from both export turnover and total turnover and recompute deduction under sections 10A/10AA; matter restored to the file of the AO for computation in line with these directions.

Book profit under section 115JB - ascertained liability - Provisions for performance bonus and for expenses are to be treated as provisions for ascertained liabilities and therefore are not to be added back while computing book profit under section 115JB. - HELD THAT: - Explanation to section 115JB requires addition back of amounts set aside to provisions for meeting liabilities other than ascertained liabilities. The Tribunal examined records showing that the provision for performance bonus was largely discharged in the succeeding year and that the provision for expenses related to identifiable business expenses (salary, incentives, repairs, utilities, travel, etc.) for which bills were not received by year end. Given the supporting details and subsequent payments, these provisions were held to represent ascertained liabilities and hence not exigible to addition while computing book profit under section 115JB. [Paras 19, 20, 21, 22, 23]

Both the provision for performance bonus and provision for expenses are held to be for ascertained liabilities and no addition to book profit under section 115JB is required.

Rate of depreciation on computers and computer peripherals - Computers and eligible computer peripherals are entitled to depreciation at the higher rate claimed by the assessee (60%). - HELD THAT: - The assessee claimed depreciation at the higher rate for computers and related peripherals acquired for rendering IT-enabled services. The Tribunal accepted the assessee's entitlement to higher depreciation on computers. Precedents treating routers and switches as part of 'computers' for higher depreciation were noted. On the facts and the nature of assets used for IT services, the higher rate of depreciation is allowable. [Paras 24, 25, 26]

Depreciation on computers and eligible computer peripherals is allowable at 60%; the AO's restriction to 15% is set aside.

Final Conclusion: The appeal is partly allowed: several specific items excluded by the AO from deductions under sections 10A/10AA are restored (reimbursement of expenses and sale of scrap; exclusion of certain adjustments by the AO is corrected), interest on short-term fixed deposits and unexplained 'other income' are excluded from qualifying amount, specified expenses must be excluded from both export and total turnover and recomputation ordered, provisions in issue are treated as ascertained for section 115JB purposes (no addition), and higher rate depreciation on computers and qualifying peripherals is allowed; matter remitted to AO for recomputation in accordance with these directions.

Allowability of expenditure under section 37(1) - Explanation 1 to section 37(1) - penalty versus deductible expenditure - diversion of income by overriding title - guarantee payment for implementation of R&R plan deducted as condition for resuming mining - application of income versus appropriation of profits

Allowability of expenditure under section 37(1) - Explanation 1 to section 37(1) - penalty versus deductible expenditure - diversion of income by overriding title - guarantee payment for implementation of R&R plan deducted as condition for resuming mining - Whether the 15% of sale proceeds retained and contributed to the SPV pursuant to Supreme Court directions is allowable as a business expenditure for the assessment year 2013-14 or is a penalty/expenditure not deductible under Explanation 1 to section 37(1). - HELD THAT: - The Tribunal applied the test articulated by the Supreme Court in CIT v. Sitaldas Tirathdas that distinguishes payments which never reach the assessee (diverted by overriding title and deductible) from obligations to part with income after it has accrued (mere appropriation of profits and not deductible). The Tribunal found that the 15% contribution to the SPV was a guarantee payment required by the Supreme Court as a precondition to resume mining in Category 'B' leases and was therefore tied to the right to carry on the business activity. The payment was made pursuant to the judicial directive and for implementing the R&R plan (including reclamation and rehabilitation) and, subject to refund by the CEC upon completion, was not penal in nature. The Tribunal distinguished decisions treating similar payments as penalties on their facts and relied on coordinate-bench decisions (Veerabhadrappa Sangappa & Co. and Ramgad Minerals & Mining Ltd.) which held that such contributions are application of income necessary to carry on the mining business and accordingly allowable. For these reasons the Tribunal rejected the Revenue's contention that the sum represented a penalty or an appropriation of profits not incurred wholly and exclusively for business, and held the contribution deductible as business expenditure. [Paras 14, 16, 17, 18, 20]

The 15% contribution to the SPV retained by the monitoring committee on behalf of the assessee is to be treated as a business expenditure and is allowable for the year under consideration.

Final Conclusion: Appeal allowed; the Tribunal held that the 15% contribution to the SPV, retained pursuant to Supreme Court directions as a guarantee for implementation of the R&R plan, is deductible as business expenditure for AY 2013-14.

Weighted deduction - section 35(2AB) - recognition/approval by the prescribed authority (Secretary, DSIR) - existence of recognition versus date of approval - Form 3CK and Form 3CM

Weighted deduction - section 35(2AB) - recognition/approval by the prescribed authority (Secretary, DSIR) - existence of recognition versus date of approval - Form 3CK and Form 3CM - Allowability of weighted deduction under section 35(2AB) for AY 2011-12 - HELD THAT: - The Tribunal reconducted limited proceedings after noticing the correct date of recognition. The assessee's in house R&D unit was recognised by the prescribed authority on 19.01.2011. The statutory scheme requires that the facility be an in house R&D facility and be approved by the prescribed authority (Secretary, DSIR). The date of application for issuance of Form No.3CM is not determinative of eligibility; Form 3CK is the application for approval and Form 3CM quantifies expenditure. Reliance on the decisions in Claris Lifesciences, Sandan Vikas and Banco Products establishes that the relevant factor is the existence of recognition/approval and not the cut off date printed on the certificate. Applying these principles to the admitted fact of recognition dated 19.01.2011, the Tribunal held that the assessee was entitled to claim weighted deduction under section 35(2AB) for AY 2011-12 and allowed the grounds accordingly. [Paras 11, 12]

Claim for weighted deduction under section 35(2AB) is allowed for AY 2011-12.

Weighted deduction - section 35(2AB) - existence of recognition versus date of approval - Allowability of weighted deduction under section 35(2AB) for AY 2010-11 - HELD THAT: - The Tribunal considered factual chronology and earlier authorities holding that existence of recognition is the determinative factor. On the facts, however, the assessee had not applied for approval during the relevant previous year for AY 2010-11 and the prescribed authority's approval was effective from 01.04.2011. Applying the legal principles to these facts, the Tribunal found no merit in the assessee's grounds in respect of AY 2010-11 and dismissed them. [Paras 3, 10]

Claim for weighted deduction under section 35(2AB) is not allowable for AY 2010-11; grounds dismissed.

Final Conclusion: The Tribunal allowed the assessee's claim for weighted deduction under section 35(2AB) for AY 2011-12 on the basis that the R&D facility was recognised by the prescribed authority on 19.01.2011; the claim for AY 2010-11 was dismissed for lack of merit.

Deduction under section 54F - Reinvestment nexus between sale consideration and new asset - Investment out of own funds versus borrowed or third party funds - Remand for fresh consideration of reinvestment

Deduction under section 54F - Reinvestment nexus between sale consideration and new asset - Validity of Revenue's contention that assessee was not eligible for deduction under section 54F because no monetary consideration was received on transfer and no reinvestment of capital gains was made. - HELD THAT: - The Tribunal found the Revenue's stance self-contradictory: it argued that the assessee received no monetary consideration because she got built-up commercial area in lieu of the original asset, yet simultaneously treated a specified sum as taxable long term capital gain. The Tribunal held that such mutually inconsistent positions could not be accepted in principle and therefore found no merit in the Revenue's objection to the assessee's entitlement to claim exemption under section 54F on that basis. The finding rejects the Revenue's denial of the claim insofar as it rests on the asserted absence of consideration or capital gain. [Paras 4]

Revenue's contradictory reasoning that no monetary consideration was received but a capital gain was assessable is untenable and is not accepted.

Investment out of own funds versus borrowed or third party funds - Remand for fresh consideration of reinvestment - Whether the assessee's claimed reinvestment in the residential property at Magadha Village was made out of the relevant capital gains and is sufficiently proved to entitle her to exemption under section 54F. - HELD THAT: - On the question of actual reinvestment, the Tribunal noted material placed by the assessee regarding ownership, sanctioned plan and completion of the Magadha Village house, and observed that detailed factual examination by the Assessing Officer is warranted. Rather than decide the factual question on the papers, the Tribunal directed a fresh inquiry by the Assessing Officer to examine the entire issue of reinvestment, permitting opportunity for the assessee to produce evidence and be heard. The remand is ordered so that the AO may verify nexus between the claimed reinvestment and the capital gains, including examination of documents concerning the new asset and sources of funds. [Paras 5]

Matter remanded to the Assessing Officer for fresh examination of the reinvestment claim and verification of nexus and proof of investment in the Magadha Village property.

Final Conclusion: Appeal allowed for statistical purposes; Revenue's contradictory objection to the 54F claim is rejected in principle and the question of actual reinvestment is remanded to the Assessing Officer for fresh consideration with opportunity to the assessee to produce evidence and be heard.

Ultra vires - Service Exports from India Scheme (SEIS) eligibility - definition of "service provider" under the Foreign Trade Policy - power to amend the Foreign Trade Policy vested in the Central Government under section 5 of the Foreign Trade (Development & Regulation) Act, 1992 - clarification versus amendment by administrative circulars - treatment of INR receipts as deemed foreign exchange under RBI guidelines - net foreign exchange versus gross foreign exchange for SEIS entitlement

Ultra vires - clarification versus amendment by administrative circulars - power to amend the Foreign Trade Policy vested in the Central Government under section 5 of the Foreign Trade (Development & Regulation) Act, 1992 - Validity of Policy Circular Nos. 06/2018 dated 22.05.2018 and 08/2018 dated 21.06.2018 - HELD THAT: - The court considered whether the two impugned circulars operate as permissible clarifications of the FTP or impermissible amendments effectuated by administrative fiat. Section 5 of the FT (D & R) Act vests the power to formulate and amend the Foreign Trade Policy exclusively in the Central Government by notification. The circulars introduced conditions and procedures (including a certificate mechanism and limitations on when INR receipts could be treated as deemed foreign exchange) that effectively altered the eligibility framework in para 3.08 of the FTP and overrode the role of the Reserve Bank of India in deeming INR receipts as foreign exchange. Such modifications go beyond mere interpretation or procedural clarification and amount to introducing new substantive conditions which, by statute, require amendment of the FTP by the Central Government. Consequently, the circulars are an exercise in usurpation of the amendment power and are ultra vires the FTP to the extent they add or amend eligibility conditions. [Paras 16, 18, 19, 24]

Circular Nos. 06/2018 and 08/2018 are ultra vires the Foreign Trade Policy 2015-20 insofar as they add or amend eligibility conditions and procedural requirements beyond the FTP.

Service Exports from India Scheme (SEIS) eligibility - definition of "service provider" under the Foreign Trade Policy - net foreign exchange versus gross foreign exchange for SEIS entitlement - Whether the petitioner qualifies as a 'service provider' eligible for SEIS benefits - HELD THAT: - Applying paras 3.07, 3.08 and the definitional provisions in Chapter 9 (paras 9.50 and 9.51) of the FTP, the court examined the nature of the petitioner's activities, its ANF3B registration and statutory filings (including ST-3 returns) and the agency/service contract with the foreign principal. The FTP defines a 'service provider' by modes of supply (cross-border, consumption abroad, commercial presence, presence of natural persons). On the facts found and the statutory definitions, the petitioner's activities fall within the FTP's conception of a service provider and satisfy the eligibility conditions in para 3.08 (including the foreign exchange earning criterion). The court rejected the respondent's contention that entitlement must be restricted by treating receipts merely as routed funds for actual local service providers, and relied on the policy text and precedent distinguishing net/gross treatment to hold that this would amount to altering the policy. Accordingly, the petitioner is a service provider eligible for SEIS benefits under the FTP as it stood. [Paras 21, 22, 23, 24]

The petitioner qualifies as a 'service provider' under the FTP and is eligible for SEIS benefits in accordance with the policy's eligibility criteria.

Clarification versus amendment by administrative circulars - treatment of INR receipts as deemed foreign exchange under RBI guidelines - ultra vires - Validity of the order of refusal dated 25.10.2018 and show cause notices dated 10.05.2019 and 30.05.2019 issued consequential to the impugned circulars - HELD THAT: - Because the impugned circulars were held to be ultra vires insofar as they sought to impose new eligibility constraints and procedural requirements, the departmental actions taken pursuant to those circulars were examined. The refusal order and the show cause notices relied upon the circulars' altered criteria to deny or demand recovery of SEIS benefits. Having held that the circulars could not lawfully amend the FTP, the court found that the consequential administrative orders and notices premised on those circulars could not stand. The refusals and demands therefore lacked lawful foundation. [Paras 15, 18, 24]

The order of refusal dated 25.10.2018 and the show cause notices dated 10.05.2019 and 30.05.2019 are quashed and set aside.

Final Conclusion: Writ petition allowed: the two policy circulars (Nos. 06/2018 and 08/2018) are ultra vires to the extent they add or amend FTP eligibility conditions; the petitioner is held to be an eligible service provider under the FTP and SEIS; consequential departmental order of refusal and the show cause notices are quashed; no order as to costs.

Detention cum demurrage waiver certificate - Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018 - authorised carrier responsibilities under the 2018 Regulations - conflict between subordinate legislation and private contract - customs control over goods in a customs area - status-quo and illegality of levying charges during it - officer's non-application of mind in quasi judicial order - binding nature of regulatory directions issued under the 2018 Regulations

Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018 - authorised carrier responsibilities under the 2018 Regulations - conflict between subordinate legislation and private contract - binding nature of regulatory directions issued under the 2018 Regulations - Whether the detention cum demurrage waiver certificate dated 16.11.2020 issued by customs under Regulation 10(1)(l) of the 2018 Regulations is legally binding on the shipping line despite contractual terms between the importer and carrier. - HELD THAT: - The court held that the 2018 Regulations are subordinate legislation made under section 157 read with other provisions of the Customs Act and therefore carry statutory force. Regulation 10(1)(l) expressly prohibits an authorised carrier from demanding container detention charges for containers laden with goods detained by customs for verification where entries are found correct, and Regulation 10(1)(m) requires an authorised carrier to abide by the Customs Act and rules, regulations and orders thereunder. Unlike the 2009 Regulations (which are expressly subject to other law), Regulation 10(1)(l) contains no proviso making it subject to other law. Precedents establish that contractual terms inconsistent with statutory/regulatory obligations must yield to the law. Consequently, a private contractual right to levy detention charges cannot prevail over a valid regulatory direction issued under the 2018 Regulations in respect of the same subject matter; the shipping line's plea of contractual liability therefore fails and the certificate dated 16.11.2020 is binding on it. The court further noted that respondent No.4 did not mount an independent legal challenge to the certificate and only collaterally disputed its efficacy.

Detention cum demurrage waiver certificate dated 16.11.2020 is valid and binding on the shipping line; contractual entitlement to detention charges yields to the applicable regulatory mandate for the period covered by the certificate.

Detention cum demurrage waiver certificate - status-quo and illegality of levying charges during it - customs control over goods in a customs area - officer's non-application of mind in quasi judicial order - Whether customs and supervisory authorities have taken appropriate steps and what directions should be issued to secure compliance, release the goods and conclude the internal enquiry. - HELD THAT: - The court found that the first order in original was set aside due to the adjudicating officer's non application of mind; a fresh adjudication accepted the importer's invoice value and required the jurisdictional Commissioner to consider waiver of demurrage. The court observed that status quo was directed by the High Court pending fresh adjudication, and it is inequitable and unlawful to levy detention/demurrage charges while that status quo subsisted. Official respondents had issued detention cum demurrage waiver certificates and granted out of charge; the container freight station agreed to comply, but the shipping line did not. The court required supervisory action: respondent No.2 was directed to ensure implementation of the 16.11.2020 certificate by all concerned (including the shipping line and CFS) and to effect release within a specified time, and to complete the investigation into alleged official misconduct within a fixed period and furnish the report to the petitioner.

Respondent No.2 to ensure implementation of the detention cum demurrage waiver certificate dated 16.11.2020 and secure release of the goods within the prescribed time; investigation into customs officials to be completed and report furnished to the petitioner.

Final Conclusion: Writ petition allowed in part: the High Court held the detention cum demurrage waiver certificate dated 16.11.2020 issued under Regulation 10(1)(l) of the 2018 Regulations to be valid and binding on the shipping line, directed respondent No.2 to ensure implementation and release of the imported goods within a stipulated period, and directed completion of the internal investigation into officials' conduct within three months; no costs awarded against the customs authorities.

Natural justice - right to cross examination in adjudication - penalty under Section 112(a) and 114AA of the Customs Act, 1962 - statutory alternate remedy - statements under Section 108 of the Customs Act - mala fide allegation

Statutory alternate remedy - natural justice - Whether the writ petitions should be dismissed for non exhaustion of the alternate statutory remedy or decided on merits. - HELD THAT: - Although the learned Single Bench dismissed the writ petitions for failure to pursue the appellate remedy, the High Court observed that a writ entertained and pending since 2013 should not be summarily relegated to the alternate remedy after seven years. The Court accepted the appellant's contention that the plea on denial of cross examination required adjudication and therefore exercised its discretion to decide the matter on merits rather than insist on exhaustion of the statutory appeal. The Court nevertheless noted the settled principle that bypassing the alternate remedy requires good and sufficient reason and indicated that this exception was engaged on the facts because pleadings were complete and the Department had responded in the writ proceedings. [Paras 20, 21]

The Court declined to dismiss the petitions for non exhaustion of the alternate remedy and proceeded to decide the merits.

Right to cross examination in adjudication - natural justice - statements under Section 108 of the Customs Act - Whether denial of the appellant's request for cross examination vitiated the adjudication and violated principles of natural justice. - HELD THAT: - The Court examined the adjudicating authority's detailed review of the factual matrix and replies (noting the authority's consideration at identified paragraphs of the Order in Original). The authority had supplied relied upon documents, considered the appellant's conduct during investigation (non appearance, absconding, unsuccessful anticipatory bail), and found that co noticees' statements under Section 108 remained un retracted. The Adjudicating Authority concluded that the request for cross examination was a dilatory ploy and lacked bonafides. The High Court agreed that the appellant's replies were bare denials without independent evidence to justify cross examination, and that the reasons assigned for denial were founded on the material on record. Prior decisions cited by the appellant were distinguished on their facts. Having applied these considerations, the Court held that the denial did not cause prejudice nor vitiate the adjudication. [Paras 26, 30, 31, 34, 37]

The request for cross examination was rightly denied and such denial did not violate natural justice or vitiate the adjudication.

Mala fide allegation - Whether the impugned proceedings were vitiated by mala fide on the part of the investigating officers. - HELD THAT: - The Court observed that the appellant alleged mala fide because he had earlier lodged a complaint to CBI, but held that mala fide must be pleaded and supported with specific allegations against identified officers. No such officers were made parties nor were specific allegations advanced in the writ; accordingly the contention of mala fide failed. The Court thus rejected the plea of bias without specific averments or parties impleaded. [Paras 32]

The plea of mala fide was rejected for want of specific allegations and parties.

Penalty under Section 112(a) and 114AA of the Customs Act, 1962 - Whether the Adjudicating Authority's imposition of penalty under the cited provisions suffered from error of law. - HELD THAT: - After considering the investigative findings (including impersonation, use of dummy accounts, supply of bankers' cheques, and un retracted statements under Section 108), and having found that the appellant's denials did not dislodge the material facts, the High Court concluded that the Adjudicating Authority had properly considered the evidence and reasons for imposing penalty. The Court found no legal error in the adjudication and distinguished authorities relied upon by the appellant as factually inapposite. [Paras 22, 23, 28, 29, 38]

The penalties imposed were sustained; the Order in Original did not suffer from any error of law.

Final Conclusion: The High Court dismissed the writ appeals, confirmed the orders of the Adjudicating Authority imposing penalties under Section 112(a) read with Section 114AA of the Customs Act, 1962, and held that (i) it would decide the matter on merits despite earlier non exhaustion of the alternate remedy, (ii) the denial of cross examination did not vitiate the adjudication, (iii) the mala fide plea was unsubstantiated, and (iv) no error of law was made out.

Applicability of the Tribunal, Appellate Tribunal and Other Authorities (Qualifications, Experience and other Conditions of Members) Rules, 2017 - protective proviso to section 183 of the Finance Act, 2017 - section 129(7) of the Customs Act, 1962 - principle of equal pay for equal work vis-a -vis a statutory mandate - per incuriam

Section 129(7) of the Customs Act, 1962 - applicability of the 1987 Rules to pre-2017 appointees - Whether Members of the Appellate Tribunal appointed before commencement of Part XIV of Chapter VI of the Finance Act, 2017 could be held entitled to salaries and other terms under the 2017 Rules. - HELD THAT: - The Court found that Section 129(7) of the Customs Act expressly provides that President, Vice-President and Members appointed before commencement of Part XIV of Chapter VI of the Finance Act, 2017 shall continue to be governed by the provisions of that Act and the rules made thereunder, as if section 184 of the Finance Act had not come into force. In consequence, pre-2017 appointees remain governed by the pre-existing (1987) rules and cannot be held to be entitled, as of right, to the terms and emoluments provided by the 2017 Rules which govern subsequent appointees. The CAT order did not notice or apply Section 129(7) and therefore failed to consider a determinative statutory provision bearing directly on the question of entitlement; that omission renders the impugned order per incuriam to that extent and unsustainable. [Paras 9, 12]

The impugned order insofar as it granted to pre-2017 appointees the benefits of the 2017 Rules is set aside because Section 129(7) preserves the applicability of the 1987 Rules to such appointees.

Principle of equal pay for equal work vis-a -vis a statutory mandate - comparative assessment of terms and conditions - Whether the principle of equal pay for equal work could be applied to grant respondents the enhanced emoluments under the 2017 Rules despite the statutory preservation in Section 129(7). - HELD THAT: - The Court accepted that the doctrine of equal pay for equal work may prima facie justify parity of emoluments, but held that it cannot be applied in a manner that contravenes an unchallenged statutory provision. In addition, the Court observed that application of the equal-pay principle would require a comparative study of the entirety of terms and conditions of appointment (including tenure and other consequential differences) before any parity in emoluments could be awarded. The CAT did not undertake such a comparative exercise; consequently, its application of equal-pay reasoning in the face of Section 129(7) was legally unsustainable. [Paras 10]

Equal-pay reasoning cannot override the statutory mandate in Section 129(7), and any claim based on parity requires a full comparative assessment of terms which the CAT did not undertake.

Protective proviso to section 183 of the Finance Act, 2017 - effect of non-challenge to statutory provisions - Whether the proviso to Section 183 operates merely as a protective clause for pre-existing members and whether CAT's contrary observation requires interference. - HELD THAT: - The Court recorded doubts about the correctness of CAT's observation that the proviso to Section 183 is merely protective of rights of pre-existing members, but declined to decide that question in view of subsequent developments and other determinative statutory provisions (notably Section 129(7)). The Court emphasised that where a statutory provision has not been challenged or struck down, tribunals cannot disregard it when deciding entitlement to service conditions. [Paras 11]

The Court did not sustain CAT's conclusion on the proviso to Section 183 and declined to uphold the impugned order in the absence of a challenge to the statutory provisions.

Final Conclusion: The petition is allowed; the Central Administrative Tribunal's order of 26th September 2019 is set aside insofar as it directed payment to pre-2017 appointees of salaries and allowances under the 2017 Rules. Pre-2017 members remain governed by the earlier statutory regime and any claim to parity of emoluments requires proper statutory and comparative consideration in accordance with law.

Late filing penalty - authority to levy late fees subject to non-satisfaction of cause - charging late fee from the importer only - bona fide / sufficient cause for delay - IGM amendment and change of consignee after arrival - post-import developments and perishable goods justification

Late filing penalty - authority to levy late fees subject to non-satisfaction of cause - bona fide / sufficient cause for delay - IGM amendment and change of consignee after arrival - Whether the adjudicating authority and Commissioner (Appeals) were justified in imposing/confirming late fee for delayed filing of Bill of Entry against the appellant in the facts of the case. - HELD THAT: - The Tribunal examined the factual matrix where the original consignee failed to clear the consignment and the shipper identified a new buyer; the appellant accepted the offer after arrival of the vessel and initiated IGM amendment and filing of Bill of Entry. The bench relied on its earlier decisions in identical circumstances which held that Section 46 empowers levy of late fees only where the proper officer is not satisfied with the cause shown, and that the liability to charge late fee is to be considered with reference to the importer status and bona fides. In the present case there was no finding of mala fides and the Revenue had permitted IGM amendment and collected requisite fees; these post-import developments, prompted by the perishable nature of goods, supported the appellant's explanation. Applying the principle that late fees can be levied only when the authority is not satisfied with the cause shown, and noting absence of dissatisfaction or adverse finding against the appellant, the Tribunal found the impugned order sustaining the late fee to be unsustainable and set it aside.

Impugned order confirming levy of late fee set aside; appeal allowed and consequential reliefs granted.

Final Conclusion: The Tribunal allowed the appeal, setting aside the order confirming late fee-finding no dissatisfaction with the appellant's explanation for delay and no mala fide, and directing consequential reliefs as per law.

Redemption fine as option in lieu of confiscation under Section 125 of the Customs Act, 1962 - confiscation of imported goods under Section 111 of the Customs Act, 1962 - penalty for improper importation under Section 112(a) of the Customs Act, 1962 - liability to confiscation as the trigger for penalty under Section 112(a)

Redemption fine as option in lieu of confiscation under Section 125 of the Customs Act, 1962 - confiscation of imported goods under Section 111 of the Customs Act, 1962 - Validity of the redemption fine where the order of confiscation remains unchallenged - HELD THAT: - The Tribunal held that the redemption fine is an option available only in lieu of confiscation; both cannot co-exist. Where the order of confiscation remains unchallenged and the importer has not exercised any option to redeem the goods, there is no subsisting option to levy a redemption fine. The Tribunal applied its earlier decision in M/s. O.M.S. Sivajothi Mills and similar precedents to conclude that the redemption fine charged under Section 125 is unsustainable and must be deleted. (Findings and application recorded at paras 6.1-6.2.) [Paras 6]

Redemption fine set aside.

Penalty for improper importation under Section 112(a) of the Customs Act, 1962 - liability to confiscation as the trigger for penalty under Section 112(a) - Whether penalty under Section 112(a) is attracted for improper importation that renders goods liable to confiscation and scope of abetment requirement - HELD THAT: - The Tribunal interpreted Clause (a) of Section 112 to have two limbs: (i) improper importation which renders goods liable to confiscation, and (ii) abetment of such importation. It held that abetment is not a prerequisite where the importation itself renders the goods liable to confiscation; therefore Section 112(a) is attracted by such improper importation. The Tribunal relied on the decision in Sankar Pandi Vs. Union of India (as noted in the order and upheld by the Apex Court) in support of this interpretation. Having found the provision attracted on facts, the Tribunal exercised its discretion to moderate the penalty in view of the appellant's bona fides and reduced the penalty to a specified lower amount. (Reasoning and modification recorded at paras 7.1-7.3.) [Paras 7]

Penalty under Section 112(a) sustained in principle but reduced in amount.

Final Conclusion: The appeal is partly allowed: the redemption fine imposed under Section 125 is set aside, and the penalty under Section 112(a) is held to be attracted but reduced in exercise of discretion.

Right to challenge enhanced valuation despite consent given for customs clearance - Validity of speaking order passed without evidentiary disclosure - Violation of principles of natural justice by non-supply of documents and denial of personal hearing - Remand for de novo speaking order with opportunity for personal hearing

Right to challenge enhanced valuation despite consent given for customs clearance - Consent given at the time of clearance does not preclude the appellant from challenging enhancement of customs valuation by seeking a speaking order and preferring an appeal. - HELD THAT: - The Tribunal found that although the appellant had given consent for enhancement of value at the time of clearance, the appellant contemporaneously protested the enhancement by requesting a speaking order and a reminder. The assessing authority subsequently passed a speaking order. On these facts the appellate right to challenge the speaking order survived the initial consent given for clearance; therefore consent for clearance could not be treated as an absolute bar to adjudicatory review of the enhanced valuation.

Consent for clearance did not oust the appellant's right to challenge the enhancement; the appeal on that ground is maintainable.

Validity of speaking order passed without evidentiary disclosure - Violation of principles of natural justice by non-supply of documents and denial of personal hearing - Remand for de novo speaking order with opportunity for personal hearing - The speaking order was passed in violation of principles of natural justice because the Adjudicating/Assessing Authority neither supplied documentary evidence relied upon for enhancement nor granted personal hearing; the orders are set aside and the matter remanded for de novo adjudication. - HELD THAT: - The Tribunal observed that the assessing authority did not furnish the documents relied upon to justify the enhanced value to the appellant, nor did it afford personal hearing before passing the speaking order. Such failure amounted to a clear breach of natural justice, rendering the speaking order unsustainable. Consequently, both the speaking order and the orders of the lower authorities were set aside and remitted to the Adjudicating Authority for fresh consideration. The Tribunal directed that all necessary documents supporting the enhancement be provided to the appellant and that a sufficient opportunity for personal hearing be granted before a de novo speaking order is passed. The Tribunal also directed expedition of the de novo adjudication within three months from the date of the order.

Speaking order quashed for violation of natural justice; matter remanded for de novo speaking order after disclosure of documents and grant of personal hearing, to be completed within three months.

Final Conclusion: Appeal allowed by way of remand: the orders below are set aside and the matter is remitted to the Adjudicating Authority to pass a de novo speaking order after supplying all documents relied upon for enhancement and affording the appellant personal hearing, to be completed within three months.

Countervailing duty - excess remission principle - verification mechanism for duty remission - termination of investigation on de minimis subsidy - countervailability of duty exemption on inputs used exclusively for export - reliance on facts available where information not provided

Excess remission principle - verification mechanism for duty remission - countervailability of duty exemption on inputs used exclusively for export - termination of investigation on de minimis subsidy - Whether the exemption from import duty on raw materials availed by the appellant under the Malaysian approval letter constituted a countervailable subsidy and, if excluded, whether the subsidy for the appellant falls below the de minimis threshold requiring termination of investigation. - HELD THAT: - The Tribunal accepted that under the SCM Agreement and the 1995 Rules only an "excess" remission of import duties can constitute the financial contribution amount of a subsidy. The Designated Authority had categorized the exemption availed by the appellant as an "other program" in the final findings whereas the disclosure statement had referred to a different program; this change in categorization caused prejudice because the disclosure statement must set out the essential facts on which the authority proposes to rely. The MIDA approval letter and its Appendices set out a detailed, step-by-step procedure (including pledge on customs forms, storage requirements, export declarations, quarterly returns and audits) and an express 1:1 input-output ratio, evidencing a verification mechanism to prevent excess remission. The appellant had furnished documentary records (authorization, import forms, returns and reconciliation of imports and exports) during verification. The Designated Authority neither pointed to any instance of excess remission nor sought further clarification from the Government of Malaysia or the exporter pursuant to Part 2 of Annexure III where a further examination would be necessary. Reliance on the WTO Appellate Body reasoning in the PET (Pakistan) dispute was treated as persuasive: duty drawback schemes are countervailable only to the extent of excess remission and where lack of an adequate verification system exists an investigating authority must request a further examination or otherwise may rely on facts available. In the present case the record demonstrates a verification system and documentary compliance by the appellant; consequently the exemption could not be treated as a countervailable subsidy. Excluding the subsidy attributable to the "other program" reduces the appellant's subsidy margin below the de minimis threshold, mandating termination of the measure under rule 16 of the 1995 Rules. [Paras 24, 26, 49, 57, 66]

The imposition of 2.47% CVD on the appellant is set aside because the exemption on imported inputs was not shown to produce any excess remission and, on excluding the "other program", the appellant's subsidy margin falls below the de minimis threshold requiring termination of the measure.

Final Conclusion: The Tribunal allowed the appeals and set aside the imposition of 2.47% countervailing duty on Continuous Cast Copper Wire produced by the appellant, concluding that the import duty exemption at issue was not shown to produce an excess remission and that, with that program excluded, the subsidy margin fell below the de minimis level.

Disqualification for appointment of Director - Automatic disqualification by operation of law under Section 164(2) - Prospective operation of statute / rule against retrospectivity - Validity of publication of list of directors under Section 248 - Deactivation/cancellation of Director Identification Number and limits of Rule 11 - Condonation of delay scheme and its non-retrospective operation

Disqualification for appointment of Director - Prospective operation of statute / rule against retrospectivity - Whether disqualification under Section 164(2) of the Companies Act, 2013 applies retrospectively to defaults prior to 1.4.2014 or is to be given prospective effect. - HELD THAT: - The Court adopted the reasoning of the Gujarat High Court that Sub section (2) of Section 164, which prescribes ineligibility where a company has not filed financial statements or annual returns for three continuous financial years, was enacted as part of the Act of 2013 and came into force w.e.f. 1.4.2014. Prior law (Companies Act, 1956) did not attach the same disqualification to directors of private companies for such defaults. Applying the presumption against retrospectivity, the provision must be construed prospectively unless a contrary legislative intent is clear. Accordingly, the three financial years for operation of Section 164(2)(a) must be counted from 2014-15 onwards (i.e., 2014-15, 2015-16 and 2016-17) and any disqualification under that provision would arise only after the relevant filing periods following those years had expired. The Court held that giving retrospective effect would impair rights accrued under the prior statute and could not be justified.

Section 164(2) is to be applied prospectively; disqualification could accrue only in respect of defaults from financial year 2014-15 onwards.

Validity of publication of list of directors under Section 248 - Automatic disqualification by operation of law under Section 164(2) - Whether the respondent could publish a list (dated 12.9.2017) showing the petitioner as disqualified for the period alleged and whether that publication was legally tenable. - HELD THAT: - Relying on the prospective operation of Section 164(2) and the calculation of the relevant financial years and filing windows, the Court found the impugned list dated 12.9.2017 - which showed the petitioners as disqualified for a five year period beginning 1.11.2016 - to be premature and not in conformity with Section 164(2). The Court observed that disqualification under Section 164(2) occurs by operation of law upon occurrence of the statutory default but that the publication and dated characterization in the impugned list did not accord with the statutory timeline and therefore was not justified.

The impugned published list showing the petitioners as disqualified on the stated dates is quashed and set aside.

Deactivation/cancellation of Director Identification Number and limits of Rule 11 - Condonation of delay scheme and its non-retrospective operation - Whether the respondents were legally entitled to deactivate the petitioner's Director Identification Number (DIN) on the basis of the impugned list or otherwise under the Rules governing DIN cancellation/deactivation. - HELD THAT: - The Court reproduced the Rule framework: DIN is allotted for life and Rule 11 prescribes specific grounds and a verification procedure for cancellation, surrender or deactivation. Rule 11 does not confer suo motu power on authorities to cancel or deactivate DIN merely because a company in which the person was director is struck off or because the director becomes ineligible under Section 164. Given that the impugned list was itself unjustified, the consequent deactivation of the petitioner's DIN was also held not to be legally tenable. The Court further noted that a subsequent condonation scheme introduced by the Ministry could not retrospectively validate the prior publication or the deactivation, and that deactivation had prevented the petitioner from availing any remedial scheme.

Deactivation of the petitioner's DIN on the stated grounds was unlawful; the DIN must be reactivated for use in other companies subject to respondents' liberty to pursue appropriate legal action in accordance with law.

Final Conclusion: The writ petition is allowed: the impugned list published on 12.9.2017 is quashed and the deactivation of the petitioner's DIN is held unlawful; the respondents are directed to reactivate the DIN for use in other companies, while remaining at liberty to initiate lawful proceedings for any statutory defaults in accordance with the Act and Rules.

Deposit versus loan characterization - Repayment of deposits accepted before commencement of the Act - Applicability of the Companies (Acceptance of Deposits) Rules, 2014 to earlier receipts - Penal rate of interest for overdue deposits - Treatment of share application money as deemed deposit and entitlement to 12% interest - Directors' liability for unauthorised acceptance of money without Board resolution - Tribunal's discretionary power under Section 74(2) to allow further time for repayment

Deposit versus loan characterization - Applicability of the Companies (Acceptance of Deposits) Rules, 2014 to earlier receipts - Directors' liability for unauthorised acceptance of money without Board resolution - The sums paid by the petitioner constituted deposits within the scope of the Companies Act and the company defaulted in repayment, attracting the obligations under Section 74; the Board/Directors are liable where receipts were collected without requisite Board authorisation or requisite compliance. - HELD THAT: - The Tribunal held that the new Act's definition of 'deposit' is wide and that Chapter V (Sections 73-76) and the Rules must be read to protect depositors. The company produced no board resolution authorising the collection and there was a receipt recording the amount as 'deposit/loan'. The company also failed to file the statement of deposits and arrangements for repayment as required for amounts accepted before commencement of the Act. Article provisions limiting the Managing Director's unilateral borrowing and Clause 51 for securing repayment were not complied with; where collection is regularised only by entries in financial statements, the members of the Board are equally liable. The Tribunal therefore found the receipts to fall within the regime governing deposits and concluded that Section 74(1)(b) obligations and related protective provisions were attracted. [Paras 12, 18, 23]

The Tribunal found that the amounts received were deposits and that the company had defaulted in repayment obligations, with the Board/officers liable for unauthorised acceptance without requisite resolutions or statutory compliance.

Treatment of share application money as deemed deposit and entitlement to 12% interest - Penal rate of interest for overdue deposits - Tribunal's discretionary power under Section 74(2) to allow further time for repayment - Appropriate interest to be awarded for delayed repayment: the Tribunal directed repayment with interest at 12% per annum for the delayed period and invoked its remedial powers under Section 74 rather than applying only the penal rate provision. - HELD THAT: - The Tribunal noted Rule 17 prescribing an 18% penal rate for overdue matured deposits but examined statutory context including Section 42(6) (which treats unallotted share application money as yielding 12% interest) and the protective object of Chapter V. Applying this context and the analogy with share application money treated as deposit when used by the company, the Tribunal concluded it was judicially correct to order interest at 12% per annum for the delayed period. The Tribunal exercised its remedial discretion to direct repayment with 12% interest and to require compliance steps to be filed; it also directed the Registrar of Companies to initiate prosecution under the relevant penal provisions in case of non-compliance. [Paras 20, 22, 24]

The company was directed to repay the amounts due with interest at 12% per annum for the delayed period and to file an unconditional affidavit of compliance; failure to comply would invite prosecution of the company and officers.

Final Conclusion: The Tribunal held that the sums received from the petitioner were deposits within the statutory scheme and that the company defaulted in repayment; it directed repayment of the amounts due with 12% per annum interest, required filing of an affidavit of compliance by the company, and instructed the Registrar of Companies to initiate prosecution of the company and responsible officers in case of non-compliance.

Scheme of Arrangement - sanction under Section 230 to 232 of the Companies Act, 2013 - dispensation of meeting - convening of meetings of shareholders and creditors - appointment of Chairperson for the meeting - service of notice on regulatory authorities under Section 230(5) - publication of advertisement under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Dispensation of meeting - convening of meetings of shareholders and creditors - Whether meetings of the equity shareholders and creditors required under the Scheme should be convened or dispensed with. - HELD THAT: - The Tribunal recorded that, pursuant to consents filed in affidavit by all equity shareholders of the Resulting Company, the requirement to convene separate meetings of the Resulting Company's equity shareholders is dispensed with. The Tribunal directed that separate meetings of the equity shareholders, secured creditors and unsecured creditors of the Demerged Company be convened at the specified venue and times. The Tribunal also accepted that, as verified by the auditor's certificates, the Resulting Company has no secured or unsecured creditors, and therefore separate meetings of such classes for the Resulting Company do not arise. These directions implement the procedural requirements for consideration of the Scheme while permitting waiver where unanimous consent exists and creditor classes are non-existent. [Paras 3]

Meetings of the Demerged Company's specified classes shall be convened as directed; meetings of the Resulting Company's equity shareholders and creditors are dispensed with where consent or nil creditors have been established.

Appointment of Chairperson for the meeting - Appointment of a Chairperson for supervision of the meetings and post-meeting reporting obligations. - HELD THAT: - The Tribunal appointed Mr. Viktor Chatterjee as Chairperson of the meetings convened for consideration of the Scheme and fixed his remuneration. The Tribunal required the appointed Chairperson to submit his report within four weeks of the conclusion of the meeting. The record shows that the meeting was convened under the Tribunal-appointed Chairperson and that his report was filed and delivered to the Tribunal on 21-07-2020, fulfilling the reporting requirement. [Paras 3, 4]

Chairperson appointed with specified remuneration and directed to submit report; the Chairperson's report has been filed.

Service of notice on regulatory authorities under Section 230(5) - publication of advertisement under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Requirements for service of notice on statutory/regulatory authorities and publication of advertisement in newspapers prior to final hearing. - HELD THAT: - The Tribunal directed service of notice on specified regulatory authorities (including Regional Director, Registrar of Companies, Official Liquidator, Competition Commission and Income Tax authorities) in accordance with Rule 8 and Section 230(5), with suitable changes where meetings were waived. The Tribunal further ordered publication of the convening advertisement in the specified English and Bengali newspapers and required the petitioners to file an affidavit evidencing service and publication. The notice must inform that representations be filed within 30 days of receipt and that failure to file representations will be taken as no objection. [Paras 5, 8, 9, 10, 11]

Petitioners directed to serve notices on listed authorities, publish the statutory advertisement and file affidavits proving service and publication; representations to be filed within 30 days of receipt of notice.

Scheme of Arrangement - sanction under Section 230 to 232 of the Companies Act, 2013 - Fixing the date for further hearing and procedural status of the petition seeking final sanction of the Scheme. - HELD THAT: - After recording compliance steps and receipt of the Chairperson's report, the Tribunal admitted the petition for further consideration and directed that notice be issued and requisite publication and service be completed. The petition bearing CP (CAA) No. 1000/KB/2020 (connected with C.A. (CAA) 126/KB/2020) was listed for hearing on 10-12-2020. The Tribunal also authorised issuance of certified copies of the order upon compliance with formalities. [Paras 6, 12, 13]

Petition admitted for final consideration; hearing fixed for 10-12-2020 and certified copies to be issued on compliance.

Final Conclusion: The Tribunal recorded compliance with the procedural steps for the proposed Scheme of Arrangement, directed convening or dispensation of meetings as appropriate, appointed and accepted the report of the Tribunal Chairperson, ordered service on statutory authorities and publication of notice, required filing of affidavits proving service and publication, and listed the petition for further hearing on 10-12-2020; the Scheme itself is not finally sanctioned in this order.

Scheme of Amalgamation - dispensation of meeting of shareholders and creditors - meeting of secured creditors not required where none exist - service under Section 230(5) of the Companies Act, 2013 - affidavit of compliance and proof of service - electronic service of notice - consequences of false affidavits and fraud under the Companies Act

Dispensation of meeting of shareholders and creditors - meeting of secured creditors not required where none exist - Whether convening of separate meetings of equity shareholders, secured creditors and unsecured creditors of the Transferor and Transferee companies is required for the proposed Scheme of Amalgamation. - HELD THAT: - The Tribunal examined the affidavits of consent filed by all equity shareholders of both companies and the auditor-certified lists showing the numbers and statuses of creditors as on the relevant date. In view of unanimous written consents by all equity shareholders, the Tribunal dispensed with the requirement to convene separate meetings of equity shareholders. Where auditors' certificates established that a company had no secured creditors, the Tribunal held that the requirement to convene a meeting of secured creditors did not arise. Where all unsecured creditors had given written consent by affidavit, the Tribunal dispensed with convening separate meetings of unsecured creditors. The dispensation was made conditional on the veracity of the affidavits and auditors' certificates filed in support of the application.

Separate meetings of equity shareholders and unsecured creditors are dispensed with; meetings of secured creditors not required where auditors certify none exist.

Service under Section 230(5) of the Companies Act, 2013 - electronic service of notice - The manner and timeline for service of statutory notice to governmental and regulatory authorities under Section 230(5). - HELD THAT: - The Tribunal directed that notices, together with the application, scheme and statement disclosing necessary details, be served on the Central Government through the Regional Director (Eastern Region), Registrar of Companies, Official Liquidator, Competition Commission of India, Income Tax authorities (with PAN numbers of the applicant companies) and other sectoral regulators likely to be affected. Service was ordered to be effected by hand-delivery through special messenger or by registered post/Speed Post within seven days of the order, and by e-mail, with the recipients given 30 days from date of receipt to file representations. The Tribunal specified that lack of representation within the stipulated period would be treated as absence of objection.

Notice to prescribed authorities to be served physically and by e-mail within seven days; authorities to file representations within 30 days of receipt.

Affidavit of compliance and proof of service - Filing of affidavits evidencing service and compliance with conditions directed by the Tribunal. - HELD THAT: - The Tribunal required the applicants to file an affidavit within seven days confirming service of the notices and to file copies of e-mail transmissions along with an affidavit. It further directed a joint affidavit of compliance and production of original proof of service to be filed by the Transferee and Transferor companies. The requirement for an affirmation by affidavit that no investigation or proceedings under the Companies Act (1956 or 2013) are instituted or pending against the companies was also imposed.

Applicants to file affidavits confirming service and compliance, including originals of proof of service and e-mail records; to affirm no investigations or proceedings are pending.

Consequences of false affidavits and fraud under the Companies Act - Consequences if the consent affidavits or letters of members and unsecured creditors are found to be false or dubious. - HELD THAT: - The Tribunal warned that if consent affidavits or letters annexed to the application are found to be false or dubious at any stage, necessary action for committing fraud under the Companies Act, 2013 would be initiated against the companies and their directors. The Tribunal identified the statutory provisions which would be invoked for such fraudulent conduct and indicated that criminal or penal consequences under the Act would follow, thereby making the dispensation and other directions contingent upon the genuineness of the documents filed.

If consent affidavits/letters are found false or dubious, action under the Companies Act, 2013 (including provisions relating to fraud and punishment) shall be initiated against the companies and their directors.

Scheme of Amalgamation - application disposal - Final disposition of the Company Application for sanction of the Scheme of Amalgamation subject to compliance with directions. - HELD THAT: - After hearing the applicants and perusing records, the Tribunal made the procedural directions set out above, including dispensation of certain meetings, service and filing requirements, and compliance affidavits. The Tribunal recorded liberty to file a joint application under the applicable rules and required compliance before further action. The Tribunal then disposed of the Company Application by order, subject to fulfilment of the conditions it imposed.

The Company Application (C.A.(CAA) No. 638/KB/2020) is disposed of subject to the conditions and directions contained in the order; no order as to costs.

Final Conclusion: The Tribunal disposed of the application for sanction of the Scheme of Amalgamation, having dispensed with convening certain meetings based on unanimous consents and auditors' certificates, directed service of statutory notices (including by e-mail) and filing of compliance affidavits within specified timelines, warned of action for false affidavits under the Companies Act, 2013, granted liberty to file a joint application under the Rules, and ordered the application disposed with no costs.

Dispensation of meetings of equity shareholders and certain classes of creditors - convening of creditors' meetings via Video Conferencing/Other Audio Visual Means - quorum and adjournment rules for creditors' meetings - service of notices and publication under section 230(5) read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - statutory auditors' certification of accounting treatment and creditors' lists - appointment of chairperson and scrutinizer for creditors' meetings and their remuneration - affidavit of compliance, filing with regulatory authorities and presumption on non-response - requirement to affirm absence of pending investigation or proceedings under the Companies Act - consequences for false or dubious consent affidavits (fraud proceedings)

Dispensation of meetings of equity shareholders and certain classes of creditors - Dispensation of convening separate meetings of equity shareholders and specified classes of creditors of the Transferee and Transferor Companies - HELD THAT: - The Tribunal, having regard to the affidavits of consent filed by all equity shareholders of the Transferee Company and each Transferor Company, dispensed with the requirement to convene and hold separate meetings of equity shareholders. Certificates from statutory auditors showing NIL secured and/or unsecured creditors for Transferor Company Nos. 1, 2 and 3 justified non-convening of meetings for those classes. For Transferor Company No. 4, affidavits of consent by unsecured creditors representing 99.79% of that class warranted dispensation of a separate meeting of unsecured creditors. These findings are recorded as grounds for dispensing with the respective meetings. [Paras 25]

Requirement of holding separate meetings of specified equity shareholders and creditors dispensed with as recorded.

Convening of creditors' meetings via Video Conferencing/Other Audio Visual Means - quorum and adjournment rules for creditors' meetings - Directions to convene meetings of Secured and Unsecured Creditors of the Transferee Company by Video Conferencing/Other Audio Visual Mode with specified quorum rules - HELD THAT: - The Tribunal directed that separate meetings of the Secured Creditors and of the Unsecured Creditors of the Transferee Company shall be convened via VC/OAVM on 12th December, 2020 at specified times. The quorum for each meeting shall follow the prescription of section 103 of the Companies Act, 2013; in the event no quorum is present within 30 minutes, the creditors present shall constitute the quorum. Notice periods and content requirements for such meetings were mandated to ensure compliance with statutory procedure. [Paras 25]

Meetings of Secured and Unsecured Creditors of the Transferee Company to be convened by VC/OAVM on the specified date with prescribed quorum and adjournment rule.

Service of notices and publication under section 230(5) read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - affidavit of compliance, filing with regulatory authorities and presumption on non-response - Procedural directions for service and publication of notices, and filing of affidavits of compliance with statutory authorities - HELD THAT: - The Tribunal required that at least 30 clear days before the meetings, notices together with copies of the Scheme and the statement under section 230 be sent to all secured and unsecured creditors, and published once each in specified newspapers. Where physical service is not possible, notices may be sent to registered email addresses. The applicant companies were directed to serve notices on prescribed authorities (Regional Director, ROC, Official Liquidator, CCI, Income Tax Authorities) and to file joint affidavits of compliance and original proofs of service; in the absence of any response within 30 days from those authorities, it would be presumed they have no objection in terms of Rule 8. [Paras 25]

Applicants to serve and publish notices as directed, serve specified authorities and file affidavits of compliance; non-response by authorities within 30 days shall be treated as no objection.

Appointment of chairperson and scrutinizer for creditors' meetings - Appointment of Chairperson and Scrutinizer for the Transferee Company's creditors' meetings and fixation of their remuneration - HELD THAT: - The Tribunal appointed Mr. Sunil Kumar Maheshwari as Chairperson and Mrs. Moumita Mukherjee Nag as Scrutinizer for the Secured and Unsecured Creditors' meetings of the Transferee Company, and fixed their respective remunerations. The Chairperson is required to submit his report within 30 days from the conclusion of the meetings, duly affirmed by affidavit. [Paras 25]

Chairperson and Scrutinizer appointed and remunerations fixed; Chairperson to file report within 30 days.

Statutory auditors' certification of accounting treatment and creditors' lists - Certification by statutory auditors regarding accounting treatment and creditors' lists accepted for purposes of convening/dispensing meetings - HELD THAT: - The Tribunal recorded that statutory auditors have certified that the proposed accounting treatment in Clause 24 of Part VI of the Scheme conforms with Accounting Standards under section 133 of the Companies Act, 2013. Auditor certificates showing the lists or absence of secured/unsecured creditors were relied upon to determine whether meetings needed to be convened for particular classes of creditors. [Paras 24, 25]

Statutory auditors' certifications accepted and relied upon for compliance and dispensation decisions.

Requirement to affirm absence of pending investigation or proceedings under the Companies Act - Mandate for applicant companies to affirm by affidavit that no investigation or proceedings under the Companies Act, 1956 or 2013 are instituted or pending - HELD THAT: - The Tribunal directed the Transferee and Transferor Companies to affirm by affidavit that no investigations or proceedings under the Companies Act, 1956 or Companies Act, 2013 have been instituted or are pending in relation to the amalgamating or amalgamated companies, as a condition precedent for further processing. [Paras 25]

Applicants to file affidavit affirming absence of investigations or proceedings under the Companies Act.

Consequences for false or dubious consent affidavits (fraud proceedings) - Direction to initiate proceedings for fraud in the event consent affidavits/letters are found to be false or dubious - HELD THAT: - The Tribunal warned that if any consent affidavits or letters of members and unsecured creditors annexed to the application are found to be false or dubious at any stage, appropriate action for committing fraud under the Companies Act (including provisions cited in the order) shall be initiated against the Transferee and Transferor Companies and their directors for punishment as provided under the Act. [Paras 25]

False or dubious consent affidavits/letters will attract proceedings for fraud against companies and their directors.

Liberty to file joint application under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Grant of liberty to file joint application within the statutory timeframe - HELD THAT: - The Tribunal granted liberty to the Transferee and Transferor Companies to file a joint application in accordance with Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 within a period of 30 days as mentioned in section 230(5) of the Companies Act, 2013. [Paras 25]

Liberty granted to file the joint application within the specified 30 day period.

Disposal of Company Application C.A. (CAA) No. 665/KB/2020 - Final disposal of the Company Application subject to compliance with the directions given - HELD THAT: - After hearing counsel and perusing documents, the Tribunal passed the procedural directions set out in the order and disposed of the Company Application C.A. (CAA) No. 665/KB/2020 accordingly. Urgent certified copies of the order were permitted to be supplied on compliance of requisite formalities. [Paras 26]

Company Application C.A. (CAA) No. 665/KB/2020 disposed of in accordance with the order.

Final Conclusion: The Tribunal, after considering affidavits, auditor certificates and documents, dispensed with certain meetings of shareholders and creditors where consent or absence of creditors was established; directed convening of Secured and Unsecured Creditors' meetings of the Transferee Company by VC/OAVM with specified notice, publication, quorum and compliance requirements; appointed meeting functionaries with fixed remuneration; required service on statutory authorities and filing of affidavits of compliance; warned of fraud proceedings for false affidavits; granted liberty to file a joint application and disposed of C.A. (CAA) No. 665/KB/2020 subject to the directions given.

Statutory authority - Article 226 writ jurisdiction - jurisdiction of the NCLT as Adjudicating Authority - Corporate Insolvency Resolution Process - control and custody of assets - assets subject to determination of ownership by a court or authority - operational debt - finalised claim fastening liability upon the corporate debtor - overriding effect of the IBC

Article 226 writ jurisdiction - jurisdiction of the NCLT as Adjudicating Authority - statutory authority - Maintainability of the writ petition under Article 226 despite availability of alternative remedy before the NCLT - HELD THAT: - The court applied the ratio in Embassy Property to distinguish lack of jurisdiction from wrongful exercise of jurisdiction. The petition challenged the absence of jurisdiction of the NCLT and the Resolution Professional to take control of an asset allegedly protected by the statutory powers of the Municipal Corporation; such a challenge falls within the exception permitting invocation of Article 226 despite an alternative remedy. Authorities establishing that writ relief may be granted where impugned proceedings or orders are wholly without jurisdiction were followed and synthesized with precedents that treat exhaustion of alternative remedies as discretionary. Consequently, the High Court found the writ petition maintainable because the challenge raised is to jurisdiction itself and not merely to the manner of exercise of jurisdiction. [Paras 35, 36, 37, 38, 39]

Writ petition under Article 226 is maintainable as the challenge is to absence of jurisdiction of the NCLT and Resolution Professional

Control and custody of assets - assets subject to determination of ownership by a court or authority - finalised claim fastening liability upon the corporate debtor - operational debt - Corporate Insolvency Resolution Process - jurisdiction of the NCLT as Adjudicating Authority - Whether property distrained and attached by the Municipal Corporation can be taken into custody by the Interim Resolution Professional / fall within the CIRP under the IBC - HELD THAT: - Following the Supreme Court's interpretation in Embassy Property, Section 18(1)(f)(vi) must be read as qualifying the power of an interim resolution professional where assets are 'subject to determination of ownership by a court or authority.' The court examined the KMC's procedure under Sections 217-220 of the 1980 Act and found that, once the statutory distraint and attachment procedure was completed and the claim remained unchallenged, the claim had crystallised and attained finality, thereby fastening liability on the corporate debtor. Such finalised claims fall within the definition of 'operational debt' under the IBC and become part of the insolvency/liquidation estate. Thus, the Resolution Professional and the NCLT have jurisdiction to take custody and deal with the asset in the CIRP/liquidation process. The court also held that crown/statutory debts do not enjoy primacy over other creditors under the IBC. [Paras 47, 48, 49, 50, 51]

The distrained and attached property, the claim of the Municipal Corporation having attained finality, can be subject-matter of the CIRP and taken into custody by the Resolution Professional; the petitioner's crown debt does not take precedence over other creditors under the IBC

Final Conclusion: The writ petition is maintainable on the ground of alleged absence of jurisdiction, but on the merits the finalized statutory claim and the attached property fall within the ambit of the IBC and may be dealt with in the CIRP/liquidation; WPA No. 977 of 2020 is dismissed.

Financial debt - consideration for the time value of money - debt under the Insolvency and Bankruptcy Code - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - assignment does not alter the intrinsic nature of a debt - default does not convert a simple debt into a financial debt

Financial debt - consideration for the time value of money - debt under the Insolvency and Bankruptcy Code - Whether the loan advanced to the corporate debtor constituted a "financial debt" under Section 5(8) of the IBC by reason of being interest-free and given to meet business development needs. - HELD THAT: - The Tribunal accepted the undisputed fact that funds were advanced but analysed the definition of "financial debt" which requires, inter alia, disbursement against consideration for the time value of money. The loan agreement recorded that the sum was advanced because the corporate debtor could not obtain unsecured financing elsewhere and the advance was interest-free and repayable on demand after two years. The Court held that the intended use of the money by the corporate debtor (for day-to-day activities or business development) cannot supply the creditor's consideration for the time value of money. An interest-free advance by a related party, lacking any evidence that the lender sought or received consideration for the time value of money, does not fall within the statutory definition of "financial debt." The Tribunal therefore upheld the Adjudicating Authority's finding that the transaction was not a financial debt. [Paras 4, 5, 7]

The advance is not a "financial debt" under Section 5(8) of the IBC because there is no consideration for the time value of money demonstrated.

Assignment does not alter the intrinsic nature of a debt - default does not convert a simple debt into a financial debt - Whether subsequent assignment of the debt to the appellant or mere lapse of time/default transformed the nature of the original interest-free advance into a financial debt admissible under Section 7. - HELD THAT: - The Tribunal rejected the contention that assignment to a non related assignee converts a simple interest free loan into a financial debt. It held that the basic character of the loan, as evidenced by the original loan agreement, remains unchanged upon assignment. Similarly, the Court rejected the submission that mere default or the passage of the contractual repayment period alters the legal nature of the obligation; default on a simple debt does not transmute it into a financial debt under the IBC. [Paras 9, 13]

Assignment of the debt and subsequent default do not change an interest free simple loan into a financial debt for the purposes of Section 7.

Final Conclusion: The Appellate Tribunal affirmed the Adjudicating Authority's refusal to admit the Section 7 petition: the advance was not a "financial debt" under the IBC (no consideration for time value of money shown), and neither assignment nor default altered that character; the appeal is dismissed.

Operational debt - pre-existing dispute - plausibility of dispute - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - admission in consolidated financial statements as evidence of liability - input tax credit as evidentiary circumstance - forged document allegation - initiation of Corporate Insolvency Resolution Process - moratorium under the Insolvency and Bankruptcy Code, 2016 - public announcement and claims submission under Section 15 of the Insolvency and Bankruptcy Code, 2016

Operational debt - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - admission in consolidated financial statements as evidence of liability - input tax credit as evidentiary circumstance - The existence and quantum of operational debt owed by the Corporate Debtor to the Operational Creditor and whether the Operational Creditor proved default. - HELD THAT: - The Tribunal found that the Operational Creditor established supplies supported by tax invoices and ledger entries showing aggregate supplies and part payments, leaving a balance of Rs. 1,70,82,059.04 which remained unpaid despite service of the demand notice. The Tribunal accepted the Operational Creditor's evidence that GST was paid and input tax credit was availed by the Corporate Debtor without any reversal, treating this as corroborative of receipt and consumption of supplies. The consolidated financial statements of the holding company admitting an amount payable to the Operational Creditor also weighed in favour of the claim. The Corporate Debtor failed to produce reliable proof of a valid debit note or any accepted set-off that would reduce the claimed amount. On the record the Operational Creditor discharged the short prima facie burden required at the admission stage and the Corporate Debtor did not overturn that showing. [Paras 15, 16, 24]

The Operational Creditor proved an outstanding operational debt of Rs. 1,70,82,059.04 which remained due and payable together with interest.

Pre-existing dispute - plausibility of dispute - forged document allegation - spurious defence - Whether a pre-existing dispute existed between the parties which would bar admission of the Section 9 application. - HELD THAT: - The Corporate Debtor relied on two letters and a purported debit note to show pre-existing dispute and reduction in invoiced value. The Tribunal examined the content and provenance of those letters, observed absence of contemporaneous signed minutes or corroborating communications, noted that goods were not returned and were consumed, and found the Operational Creditor's denial of receipt and allegations of forgery to be a probable explanation. The Tribunal applied the principle that a dispute must be real and supported by evidence rather than a mere assertion; the Corporate Debtor's version was held to be unsubstantiated and thus not a bona fide pre-existing dispute that could defeat the petition. [Paras 23]

No pre-existing dispute was established; the defence was held to be unsubstantiated and not sufficient to reject the Section 9 application.

Initiation of Corporate Insolvency Resolution Process - moratorium under the Insolvency and Bankruptcy Code, 2016 - public announcement and claims submission under Section 15 of the Insolvency and Bankruptcy Code, 2016 - Relief to be granted upon admission of the Section 9 petition. - HELD THAT: - Having held that default in payment had been established and that no valid pre-existing dispute barred the claim, the Tribunal admitted the Section 9 petition. Consequent reliefs were ordered in line with the Code: initiation of CIRP, declaration of moratorium, public announcement and call for claims, appointment of an Interim Resolution Professional and directions for convening the Committee of Creditors and related procedural steps. The Tribunal directed payment into an escrow for preliminary CIRP expenses and communication of the order to concerned parties. [Paras 24]

The petition under Section 9 is admitted; CIRP is initiated, moratorium is declared, and an Interim Resolution Professional is appointed with directions for public announcement and further steps.

Final Conclusion: The Tribunal admitted the Section 9 petition, holding that the Operational Creditor established an outstanding operational debt of Rs. 1,70,82,059.04 with interest, that the Corporate Debtor failed to prove a bona fide pre-existing dispute, and accordingly ordered initiation of the Corporate Insolvency Resolution Process with moratorium, public announcement, appointment of an Interim Resolution Professional and ancillary directions.

Admissibility of CENVAT credit on renting of immovable property services - Admissibility of CENVAT credit on general insurance services - Rule 5 of the CENVAT Credit Rules, 2004 - refund of unutilised credit for export of services - Computation of refundable amount by applying export/total turnover ratio on net CENVAT credit - Section 11BB of the Central Excise Act - interest on delayed refund - Remand for quantification and computation of refund and interest

Admissibility of CENVAT credit on renting of immovable property services - Credit for renting of immovable property services availed by the appellant is admissible. - HELD THAT: - On review of the lease agreement, sample invoice and a certificate from the landlord, the Tribunal found that the rented premises (South City Pinnacle) were occupied by the appellant and the invoice and landlord certificate support receipt of renting services by the appellant. The Revenue's objection that the premises were shared with another company was unsupported by evidence and therefore cannot justify denial of credit. In absence of contrary evidence, the finding of the lower authorities rejecting credit on this factual basis was reversed and the credit allowed. [Paras 6]

Credit on renting of immovable property services allowed.

Admissibility of CENVAT credit on general insurance services - Credit for general insurance services relating to the appellant's office premises is admissible. - HELD THAT: - Because the Department's assertion that insurance related to a shared premises was not substantiated by evidence, and the landlord's certificate and lease establish the appellant's exclusive occupation of the relevant premises, there is no basis to deny CENVAT credit on general insurance services. The Tribunal accordingly allowed the credit. [Paras 6]

Credit on general insurance services allowed.

Rule 5 of the CENVAT Credit Rules, 2004 - refund of unutilised credit for export of services - Computation of refundable amount by applying export/total turnover ratio on net CENVAT credit - Refund computation must apply the export-to-total turnover ratio on the net CENVAT credit amount without deducting credit utilised for payment of output service tax on domestic services under Rule 3(5C). - HELD THAT: - Rule 5 prescribes that the refund be determined by applying the ratio of export turnover to total turnover on the 'net CENVAT Credit amount'. The Tribunal held that the amount referred to in Rule 3(5C) (relevant to manufacturers under rules concerning remitted duty) is inapposite to a service provider and therefore no deduction for credit used to discharge output service tax on domestic services is prescribed. Applying the correct formula, the proportionate amount attributable to export of services on the net CENVAT credit is refundable. The Department's computation that made such deduction was thus a fundamental error and the appellant's claim on this ground was allowed. [Paras 7]

Refund computation corrected in favour of the appellant; departmental deduction for output service tax not warranted.

Section 11BB of the Central Excise Act - interest on delayed refund - Remand for quantification and computation of refund and interest - Appellant is entitled to interest for delay in sanctioning the refund under Section 11BB; matter remanded to original authority for quantification of refund and interest. - HELD THAT: - The Tribunal followed the ratio of the cited authority holding that refunds ordered under Rule 5 fall within the scope of sub-section (2) of Section 11B and, when not refunded within the statutory period, attract interest under Section 11BB. The original adjudicating authority had not addressed entitlement to interest and the Commissioner (Appeals) did not decide the point; accordingly the Tribunal upheld entitlement to interest for the delay. Given that the quantification of refund and computation of applicable interest had not been carried out by the original authority, the Tribunal remanded the matter to that authority to quantify and grant the refund arising from the allowed credits and corrected computation, and to compute and grant interest as per law. [Paras 8]

Entitlement to interest under Section 11BB recognised; case remanded to original authority for quantification of refund and interest.

Final Conclusion: The appeal is allowed by way of remand: credits on renting of immovable property and general insurance services are permitted; the correct method of computing refund under Rule 5 is to apply the export/total turnover ratio on the net CENVAT credit without the disputed deduction; the appellant is entitled to interest under Section 11BB for delayed refund; the matter is remanded to the original authority for quantification and grant of the refund and applicable interest in accordance with law.

Input Service - nexus with output service - refund under Notification No.27/2012 issued under Rule 5 of CENVAT Credit Rules, 2004 - definition of Input Service - repair, maintenance, modernization and renovation of office premises as Input Service

Input Service - nexus with output service - Whether Real Estate Agency Service availed to identify office premises is an Input Service having direct nexus with the exported output service and entitled to refund. - HELD THAT: - The Tribunal found that the authorities below applied a narrow interpretation of the term Input Service. The Real Estate Agency Service was availed to identify office premises from where the appellant exports software services; without such premises the appellant could not render the exported service. Applying the definition of Input Service in the CENVAT Credit Rules, 2004 and following precedents relied upon by the appellant, including 2007 (5) TMI 12 - CESTAT, NEW DELHI; 2008 (8) TMI 24 - CESTAT, AHMEDABAD; and 2009 (3) TMI 23 - CESTAT, NEW DELHI, the Tribunal held that the service bears a direct nexus with the output service and cannot be excluded from input credit/refund merely by a restrictive construction.

Real Estate Agency Service was held to be an Input Service having direct nexus with the exported output service; denial of refund on this ground was set aside.

Input Service - repair, maintenance, modernization and renovation of office premises as Input Service - nexus with output service - Whether Works Contract Service, availed for repair and maintenance of office premises, qualifies as an Input Service and supports the refund claim. - HELD THAT: - The Tribunal noted that the authorities below did not appreciate that the appellant had availed Works Contract Service for repair and maintenance of office premises, activities which are specifically encompassed within the definition of Input Service (modernization, renovation, repair and maintenance of office premises). Such services were held to be essential for provision of the exported software services and therefore have the requisite nexus with output service to qualify for refund under Notification No.27/2012 issued under Rule 5 of CENVAT Credit Rules, 2004. On this basis the Tribunal concluded that denial of refund on this ground was unsustainable.

Works Contract Service for repair and maintenance of office premises was held to be an Input Service with direct nexus to the exported service; denial of refund on this ground was set aside.

Final Conclusion: The appeal was allowed and the impugned order rejecting the refund claims in respect of Real Estate Agency Service and Works Contract Service was set aside; the appellant's refund claim for the period April to June 2017 was held to be maintainable in respect of those services.

Refund of unutilised CENVAT credit under Rule 5 - requirement of nexus between input service and exported output service - classification of services as input service - exclusion of Mandap Keeper and Restaurant services from input service - departmental challenge to eligibility of credit at refund stage - Tax Research Unit clarification dated 16.3.2012 on amended Rule 5

Refund of unutilised CENVAT credit under Rule 5 - requirement of nexus between input service and exported output service - Tax Research Unit clarification dated 16.3.2012 on amended Rule 5 - departmental challenge to eligibility of credit at refund stage - Whether refund of unutilised CENVAT credit under Rule 5 can be denied for lack of nexus between input services and exported output services, and whether the Department may re open eligibility of input credit at the refund stage. - HELD THAT: - The Tribunal found that the Commissioner(A) rejected the refund solely on the ground of lack of nexus between the input services and the exported output services. It noted the Tax Research Unit (TRU) clarification dated 16.3.2012 that the amended Rule 5 does not require correlation between the output service exported and the input services used in such export. The Tribunal further observed that the Department had not questioned the classification or eligibility of the input services at the time CENVAT credit was taken, and relied on the precedent that the Department is not permitted to re open the eligibility of credit when a refund is claimed. Applying these principles and following the cited decisions, the Tribunal held that lack of nexus by itself is not a ground to deny refund under Rule 5 and that the appellant was entitled to refund of the disputed credits (subject to specific exclusions noted separately). [Paras 12]

Refunds claimed under Rule 5 cannot be denied solely for lack of nexus between input services and exported output services in view of the TRU clarification and precedent; the appellant is entitled to refund on this ground.

Classification of services as input service - Business Auxiliary Service - Commercial Coaching or Training Services - Public Management Relations Service - Video Production Agency Service - Sponsorship Service - Whether the specified categories of services relied upon by the appellant qualify as input services for the purpose of claiming refund. - HELD THAT: - The Tribunal recorded that the services on which refund was rejected have been consistently held to be input services in various decisions relied upon by the appellant. Considering those precedents and the fact that the Department had not questioned these services when credit was taken, the Tribunal accepted that Business Auxiliary Service (including garden/indoor plant maintenance), Commercial Coaching/Training, Public Management Relations, Video Production Agency services and Sponsorship Service qualify as input services for refund purposes. The Tribunal applied the cited authorities and the TRU clarification to conclude that refunds on these categories should be allowed. [Paras 4, 6, 7, 8, 12]

The disputed categories (Business Auxiliary, Commercial Coaching/Training, Public Management Relations, Video Production Agency and Sponsorship) are to be treated as input services and the appellant is entitled to refund in respect of these services.

Exclusion of Mandap Keeper and Restaurant services from input service - Whether Mandap Keeper and Restaurant services qualify as input services and are refundable. - HELD THAT: - The appellant did not press the refund claim in relation to Mandap Keeper and Restaurant services after the departmental objection that these services are specifically excluded from the definition of "input service" under the CENVAT Credit Rules. The Tribunal noted that such services fall within the exclusion and accordingly did not allow refund in respect of Mandap Keeper and Restaurant services in the relevant appeal. [Paras 5, 12]

Refund in respect of Mandap Keeper and Restaurant services is not allowable as those services are excluded from the definition of input service.

Final Conclusion: Appeals allowed in part: refunds under Rule 5 granted in respect of the disputed input service categories held to be input services (Business Auxiliary, Commercial Coaching/Training, Public Management Relations, Video Production Agency and Sponsorship) in view of precedents and TRU clarification dated 16.3.2012; refund in respect of Mandap Keeper and Restaurant services denied. Appeals disposed accordingly.

Entitlement to avail service tax on input services - Tour operator services - Input tax credit for services used in business - Precedential effect of Tribunal decisions

Entitlement to avail service tax on input services - Tour operator services - Input tax credit for services used in business - Whether the appellant was entitled to avail the service tax paid on tour operator services utilised for arranging foreign trips of dealers. - HELD THAT: - The Tribunal noted that both parties conceded the issue was covered by existing Tribunal precedent and relied on the decision in M/s Savita Oil Technologies Ltd. Vs. Commissioner of Central Excise, Belapur 2018 (4) TMI 1385 - CESTAT MUMBAI. Applying that precedent, the Tribunal found the appellant entitled to avail the service tax paid on the tour operator services used for arranging foreign trips of its dealers. For that reason the impugned order denying such entitlement was set aside and the appeals were allowed with consequential relief. [Paras 2, 3]

Impugned order set aside; appeals allowed and the appellant held entitled to avail the service tax paid on the tour operator services for arranging foreign trips of dealers.

Final Conclusion: Appeals allowed by setting aside the impugned order; appellant permitted to avail service tax paid on tour operator services used for arranging dealers' foreign trips, following the Tribunal precedent cited.

Cenvat credit on inputs used in the manufacture of final product - treatment of by-product or manufacturing waste for excise liability - application of Rule 6 of the Cenvat Credit Rules, 2004 - precedential effect of earlier Tribunal and superior court decisions

Cenvat credit on inputs used in the manufacture of final product - treatment of by-product or manufacturing waste for excise liability - application of Rule 6 of the Cenvat Credit Rules, 2004 - Legitimacy of recovery under Rule 6 in respect of cenvat credit where boulder slag is generated as waste in the manufacture of pig iron and inputs were used for manufacture of pig iron. - HELD THAT: - The Tribunal found that the appellant used inputs for manufacturing pig iron and that boulder slag is only waste generated in that manufacturing process. The bench applied controlling precedents, including its own earlier order in the appellant's case (Final Order No.A/75699/KOL/2016 dated 29.07.2016 in Appeal No.E/70211/2013-SM) and the decision in Tata Metalliks Ltd. v. Commissioner of Central Excise, holding that a by-product or waste coming into existence in the course of manufacture (analogous to bagasse in sugar manufacture) cannot be treated as an excisable product for the purpose of invoking recovery under Rule 6 of the Cenvat Credit Rules, 2004. On that basis the impugned orders that sought recovery were held unsustainable and were set aside. [Paras 2, 3]

Impugned orders set aside and the appeal allowed; consequential relief, if any, to be granted.

Final Conclusion: The appeal is allowed: cenvat credit retained by the manufacturer is not liable to be recovered under Rule 6 in respect of boulder slag treated as waste generated during manufacture of pig iron; impugned orders are set aside with consequential relief.

Penalty under Section 11AC of the Central Excise Act, 1944 - mandatory nature of penalty vis-a -vis scope for discretion - mens rea / intention to evade duty as condition for application - penalty not sustainable in absence of fraud, suppression or collusion - clerical error and bona fide short payment - precedential interplay: Rajasthan Spinning & Weaving Mills vis-a -vis Dharamendra Textile

Penalty under Section 11AC of the Central Excise Act, 1944 - mens rea / intention to evade duty as condition for application - penalty not sustainable in absence of fraud, suppression or collusion - clerical error and bona fide short payment - mandatory nature of penalty vis-a -vis scope for discretion - Whether penalty under Section 11AC is imposable where short payment of duty occurred but there was no intention to evade duty, returns were filed and duty with interest was paid - HELD THAT: - The Tribunal applied the Supreme Court's exposition in Rajasthan Spinning & Weaving Mills, which clarified the scope of Dharamendra Textile: Section 11AC is mandatory in its quantification once its statutory conditions are satisfied, but its application depends on the existence of the conditions expressly stated in the section, particularly the element of intent to evade. The appellant had filed statutory returns, the transactions were known to the Department, the short payment arose from clerical error, and duty along with interest was admitted and paid when pointed out. There was no finding of fraud, suppression or collusion or mens rea to evade duty. On these facts the essential condition for invoking Section 11AC was absent and penalty could not be sustained. The Tribunal therefore set aside the penalty following the ratio of the Supreme Court decision. [Paras 6, 7, 8]

Penalty imposed under Section 11AC set aside on facts showing absence of intention to evade duty; appeal allowed.

Final Conclusion: The appeal is allowed; the penalty under Section 11AC is quashed on the finding that the short payment arose from clerical error and there was no intention to evade duty, with consequential relief if any.

Classification of goods as cosmetics or medicines for value added tax - Evidence and samples for chemical analysis in classification of products - Validity of assessment where original assessment was set aside and fresh assessment made - Tax rate differentiation under Schedule II for cosmetics and Schedule II(a) for ayurvedic medicines

Classification of goods as cosmetics or medicines for value added tax - Imported products listed by the petitioner are to be classified as cosmetics for the purposes of the Tripura Value Added Tax Act. - HELD THAT: - The Court accepted the assessing authority's conclusion that the products (moisturisers, fair skin solutions, shampoos, hair solutions and similarly described items) are cosmetic in nature. The conclusion was based on the product descriptions and trade source (Glamour World) and was reinforced by the petitioner's failure, despite opportunities, to provide samples or documentary evidence establishing that the items were medicines or ayurvedic drugs. The Court noted that while titles alone are an unsafe basis, the petitioner created the evidentiary lacuna by not producing samples which could be subjected to chemical/twin tests, and in those circumstances the assessing authority's classification as cosmetics was tenable. [Paras 2, 7]

Products imported by the petitioner were held to be cosmetics and taxable accordingly under the higher entry for cosmetics.

Validity of assessment where original assessment was set aside and fresh assessment made - Objection to the assessment on the ground that the Tax Audit Officer lacked authority was held not to survive because the Commissioner set aside the original assessment and a fresh assessment was made by the Assessing Officer. - HELD THAT: - The Court observed that the earlier assessment by the Tax Audit Officer had been set aside by the Commissioner and the matters were remanded for fresh assessment. Consequently, any challenge premised on the authority of the Tax Audit Officer did not survive the re-opening and re-assessment process undertaken by the proper authority; the petition could not rely on that ground to invalidate the fresh assessment. [Paras 5]

The plea that the Tax Audit Officer had no authority was rendered moot by the remand and fresh assessment and therefore did not survive.

Evidence and samples for chemical analysis in classification of products - The assessing authority was justified in proceeding without chemical analysis where the dealer failed to produce samples or documentary evidence despite being given opportunities. - HELD THAT: - The Revisional Authority had directed cooperation for conducting twin tests, and the assessing officer repeatedly sought samples for chemical analysis. The petitioner did not supply usable samples (only two expired samples were provided) and did not produce documentary proof to substantiate the claim that the items were medicines. Given the petitioner's non-production of evidence after specific requests and opportunities, the assessing authority's decision to proceed to classify the goods without the aid of chemical analysis was upheld by the Court. [Paras 2, 3, 4, 7]

Absence of samples and documentary evidence justified the assessing authority's proceeding without chemical analysis and supports the classification as cosmetics.

Final Conclusion: The petition was dismissed: the Court upheld the assessing authority's classification of the imported products as cosmetics for assessment years 2010-11 and 2011-12, held that the challenge to the Tax Audit Officer's authority did not survive the remand and fresh assessment, and found that the absence of samples/documentary evidence justified proceeding without chemical analysis.

Quashing of First Information Report - cognizable offence - criminal misconduct under Section 13(1)(d) of the Prevention of Corruption Act - bar of prosecution under a special statute - limitation for prosecution - second FIR doctrine - double jeopardy (Article 20(2) of the Constitution) - issue estoppel - protection under the Judges (Protection) Act, 1985

Quashing of First Information Report - cognizable offence - criminal misconduct under Section 13(1)(d) of the Prevention of Corruption Act - Ext.P1 FIR prima facie discloses commission of a cognizable offence under the Prevention of Corruption Act and is not liable to be quashed on factual grounds. - HELD THAT: - Ext.P1 FIR specifically alleges that the petitioner, a public servant, accepted a monetary gratification as reward for reducing the tax liability of a company; if accepted at face value this allegation prima facie constitutes an offence under Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act. The Court applied settled principles that an FIR need only disclose a cognizable offence to set investigation in motion and that truthfulness is a matter for investigation. The allegations were not found to be absurd or inherently improbable nor shown to be mala fide; accordingly the FIR cannot be quashed on factual merits at this stage. [Paras 13, 15, 16]

Ext.P1 FIR cannot be quashed on factual grounds because it prima facie discloses a cognizable offence under the Prevention of Corruption Act.

Bar of prosecution under a special statute - protection under the Judges (Protection) Act, 1985 - Protections under the KVAT Act and the Judges (Protection) Act, 1985 do not bar prosecution under the Prevention of Corruption Act for acceptance of bribe. - HELD THAT: - Section 79 of the KVAT Act affords protection only for acts done or purporting to be done under that Act and immunities under Section 79(2) are confined to bona fide official acts; accepting a bribe is not an act done under the statute or in good faith and therefore does not attract Section 79(1) or (2). Section 80 (limitation) of the KVAT Act similarly applies only to acts done under that statute and does not apply to acceptance of bribe. The Judges (Protection) Act protects persons acting in discharge of judicial or definitive adjudicatory functions; receiving a bribe is not an act done in the course of official judicial duty and therefore does not attract immunity under Section 3 of that Act. The Court relied on authority and principle that prosecution under the PC Act is governed by that Act and cannot be displaced by special/local law immunities for unrelated acts. [Paras 25, 26, 53, 56, 57]

The petitioner is not entitled to immunity under Section 79 or Section 80 of the KVAT Act, nor under the Judges (Protection) Act, 1985, for allegations of accepting a bribe; these statutory protections do not bar the criminal proceedings.

Second FIR doctrine - cognizable offence - Ext.P1 FIR is not vitiated as an impermissible second FIR on the record before the Court. - HELD THAT: - A second FIR in respect of the same incident is generally impermissible, but a distinct incident, different scope of investigation, or allegation of conspiracy may justify a subsequent FIR. The Court could not apply the precise 'test of sameness' because the petitioner did not produce the earlier FIR, but the final report of the earlier case showed that its scope related to cheating by the company and did not investigate the alleged incident of receiving illegal gratification on 09.02.2010 or any conspiracy. Therefore, on available materials the canvass and scope of Ext.P1 FIR are materially different from the earlier case and registration of Ext.P1 FIR for offences under the Prevention of Corruption Act was permissible. [Paras 36, 38, 39, 42, 43]

Ext.P1 FIR cannot be quashed as a second FIR because it relates to a distinct incident/subject-matter (alleged receipt of gratification and conspiracy) not covered by the earlier investigation.

Double jeopardy (Article 20(2) of the Constitution) - issue estoppel - Neither Article 20(2) (double jeopardy) nor the rule of issue estoppel precludes prosecution under Ext.P1 FIR. - HELD THAT: - Article 20(2) bars prosecution twice for the same offence; it requires identity of the ingredients of the offences prosecuted. The earlier proceedings culminated only in the petitioner's discharge and, in any event, the present prosecution charges distinct offences under the Prevention of Corruption Act whose ingredients differ from the earlier case. Hence double jeopardy does not apply. The doctrine of issue estoppel prevents re-litigation of factual findings recorded by a competent court; it operates to exclude evidence which would disturb a previously recorded finding. No such earlier adjudicative finding adverse to the prosecution on the relevant facts exists to trigger issue estoppel at this stage, so the doctrine does not bar the present prosecution. [Paras 45, 48, 50, 51, 52]

The petitioner's pleas based on double jeopardy and issue estoppel fail; they do not bar the criminal proceedings initiated by Ext.P1 FIR.

Final Conclusion: The writ petition seeking quashing of Ext.P1 FIR is dismissed; there is no sufficient ground to quash the FIR as it prima facie discloses an offence under the Prevention of Corruption Act and statutory or constitutional bars relied upon by the petitioner do not apply.

Limitation for application under Section 11 governed by Article 137 of the Limitation Act - Commencement of limitation upon failure to appoint arbitrator (post notice) - Confined pre reference examination to existence of an arbitration agreement under Section 11(6A) - Doctrine of kompetenz kompetenz - Distinction between jurisdiction and admissibility (statutory time bar as admissibility) - Power to refuse reference where claims are manifestly ex facie time barred or no subsisting dispute

Limitation for application under Section 11 governed by Article 137 of the Limitation Act - Commencement of limitation upon failure to appoint arbitrator (post notice) - Period of limitation applicable to an application under Section 11 of the Arbitration and Conciliation Act, 1996 and when it begins to run. - HELD THAT: - Section 11 does not prescribe a limitation period; Section 43 of the 1996 Act makes the Limitation Act applicable. In the absence of any specific Article in the Schedule, applications under Section 11 fall under the residual Article 137, prescribing three years. The limitation for filing a Section 11 application arises only after a notice invoking arbitration has been issued and there is failure to make the appointment of an arbitrator (for example, after the 30 day period for appointment expires). The Court observed that although Article 137 currently governs, a three year period for initiating Section 11 proceedings is unduly long relative to the Act's objective of expedition and Parliament may consider prescribing a more fitting period. [Paras 9, 10, 11, 17, 40]

An application under Section 11 is governed by Article 137 of the Limitation Act (three years) and the period begins to run from the date when there is failure to appoint the arbitrator following the notice invoking arbitration.

Confined pre reference examination to existence of an arbitration agreement under Section 11(6A) - Doctrine of kompetenz kompetenz - Distinction between jurisdiction and admissibility (statutory time bar as admissibility) - Power to refuse reference where claims are manifestly ex facie time barred or no subsisting dispute - Whether a court, when seized under Section 11, may refuse to make a reference to arbitration where the claims are ex facie time barred. - HELD THAT: - Post 2015 amendment (Section 11(6A)) the court's pre reference enquiry is confined to the existence of an arbitration agreement, leaving threshold and merits issues to the arbitral tribunal under the kompetenz kompetenz principle. Limitation generally concerns admissibility of the claim and is for the tribunal to decide. However, the court may perform a limited prima facie review to 'cut the deadwood' and refuse reference in rare and exceptional cases where it is manifest and ex facie certain that the claims are time barred or there is no subsisting dispute. If there is any plausible doubt or the matter is not plainly incapable of arbitration, the proper course is to refer the dispute to arbitration. [Paras 36, 37, 38, 39, 40]

The court may in rare and exceptional cases refuse to refer to arbitration where the claims are manifestly and ex facie time barred or there is no subsisting dispute; otherwise disputes should be referred to the arbitral tribunal.

Final Conclusion: The appeals are allowed; the High Court orders referring the disputes to arbitration are set aside and the Section 11 petition is dismissed on the ground that the notice invoking arbitration was ex facie time barred. The Court observed that Article 137 presently governs limitation for Section 11 applications and that courts retain a narrow power to refuse reference only in manifest, exceptional cases of deadwood or non arbitrability.

Section 138 of the Negotiable Instruments Act - vicarious liability of directors - summary trial under the Negotiable Instruments Act - powers under Section 482 Cr.P.C. - presumptions under Sections 118 and 139 of the Negotiable Instruments Act - recall of witnesses under Section 145(2) of the Negotiable Instruments Act

Powers under Section 482 Cr.P.C. - Section 138 of the Negotiable Instruments Act - Whether the High Court ought to quash the complaint under Section 138 of the N.I. Act by exercising inherent jurisdiction under Section 482 Cr.P.C. - HELD THAT: - The High Court held that it cannot usurp the function of the trial court by traversing disputed questions of fact at the threshold. Section 482 Cr.P.C. is a wide but cautiously to be exercised power; it is not to be used to try issues of fact which require evidence. Allegations in the complaint and the defence raised by the petitioner involve triable issues which must be adjudicated by the Trial Court after evidence is led. The court relied on the special and expeditious code for offences under the N.I. Act and the settled principle that 482 jurisdiction cannot be invoked where allegations require proof in a court of law. Consequently, no material of sterling quality was found to warrant quashing at this stage. [Paras 18, 22, 23, 24]

Petition under Section 482 Cr.P.C. to quash the complaint under Section 138 N.I. Act dismissed; matters of fact to be tried by the Trial Court.

Vicarious liability of directors - presumptions under Sections 118 and 139 of the Negotiable Instruments Act - Whether the petitioner, a director who did not sign the cheques, could be prosecuted under Section 138 of the N.I. Act. - HELD THAT: - The Court held that mere absence of the petitioner's signature on the cheques is not decisive to preclude prosecution. A person who, at the time of the offence, was in charge of and responsible for the conduct of the business of the company may be prosecuted vicariously. The complainant's averments that the petitioner was a director, a key managerial person, participated in negotiations and that transactions were family/familiar concerns are sufficient at the stage of summoning to require trial. Defences based on lack of knowledge, sleeping director status, or non-involvement are matters for the accused to raise and prove at trial; they cannot be adjudicated on a Section 482 petition. [Paras 15, 16, 17]

Prima facie case established for proceeding against the director; allegations of non-involvement to be tested at trial and not by quashing petition.

Summary trial under the Negotiable Instruments Act - recall of witnesses under Section 145(2) of the Negotiable Instruments Act - What is the procedural regime and obligations of parties in a Section 138 N.I. Act prosecution at the trial stage? - HELD THAT: - The Court summarised the statutory scheme for summary trials under the N.I. Act: Sections 142-147 constitute a special code designed to expedite trials. The accused, on appearance, must enter plea and may file defence evidence by affidavit; if the accused seeks to cross-examine complainant's witnesses, an application under Section 145(2) N.I. Act must disclose specific grounds for recall. The complainant's affidavit evidence is prima facie sufficient for issuance of process, and the burden of proving defences lies on the accused (with reference to the presumptions under Sections 118 and 139 of the N.I. Act and Section 27 of the General Clauses Act). These procedural aspects mean routine factual disputes should be resolved at trial under the prescribed summary procedure rather than by invoking inherent jurisdiction. [Paras 12, 13, 14, 20, 21]

Trial to proceed under the summary procedure of the N.I. Act; accused to follow statutory steps (enter plea, file defence evidence or apply under Section 145(2)) and prove defences at trial.

Final Conclusion: No infirmity found in the trial court's proceedings; the High Court declined to quash the complaint under Section 138 N.I. Act. Petition dismissed and the Trial Court directed to consider the petitioner's contentions in accordance with law during trial.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Drawer of cheque - Liability of signatory/Managing Director for cheque drawn on company account - Application of Section 141 of the Negotiable Instruments Act

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Drawer of cheque - Liability of signatory/Managing Director for cheque drawn on company account - Application of Section 141 of the Negotiable Instruments Act - Complaint under Section 138 against the person who signed a cheque on behalf of a company when the cheque is drawn on the company account and the alleged debt is asserted against the signatory personally - HELD THAT: - The Court applied the statutory test in Section 138, accepting the principle that only the drawer of the cheque-being the person who draws a cheque on an account maintained by him for payment to another for discharge of any debt or liability-can be deemed to have committed the offence. The cheque in the present case was drawn on and issued from the account of the company and was expressly printed/issued for and on behalf of the company; the signature on the cheque was that of the Managing Director signing for the company. Consequently the company alone is the drawer within the meaning of Section 138, and liability of the signatory personally cannot be fastened in the absence of the company being shown to owe the debt or being made a party. If the company is to be proceeded against, only upon finding the company liable would the provisions dealing with liability of company officers (Section 141) arise. The Court relied on the principle in Anil Gupta v. Star India (P) Ltd. and Mainuddin Abdul Sattar Shaikh v. Vijay D. Salvi to hold that where a cheque is issued from a company account and on its behalf, a complaint cannot be maintained against the signatory in his personal capacity unless the company is itself found to be the drawer liable for the debt or statutory provision permitting imputation of liability to the signatory is appropriately invoked after making the company a party.

Complaint under Section 138 against the Managing Director who signed a cheque on behalf of the company is not maintainable where the cheque is drawn on the company's account and the complainant has no case against the company; the company is the drawer and Section 141 consequences arise only if the company is proceeded against and found liable.

Final Conclusion: The appeal is dismissed; the High Court's order confirming the magistrate's finding that the cheque was drawn on the company's account and that the complaint could not be maintained against the signatory personally is affirmed.