TaxTMI Updates e-Newsletter
Mar 13,2021

Classification under Chapter 0802 - applicable GST rate under Notification No. 01/2017 - interpretation of tariff descriptions by reference to essential character - relevance of GST Council minutes and Fitment Committee recommendations - preferential application of specific tariff entry over residuary entry - binding effect of prior final classification

Classification under Chapter 0802 - binding effect of prior final classification - preferential application of specific tariff entry over residuary entry - Classification of the product 'Nizam Pakku' at the Chapter 0802 level and effect of earlier final classification at the 8 digit level. - HELD THAT: - The Appellate Authority found that classification of the product at the 4 digit level under CTH 0802 is accepted by both parties and that the 8 digit classification in favour of CTH 08028090 has already attained finality in the earlier litigation concerning the manufacturer. There being no change in the manufacturing process or in the description of the product, the prior final classification remains binding and there is no reason to re open classification. The Authority further observed that for GST purposes classification at the 4 digit level suffices for determining rate, but that the settled 8 digit classification (08028090) supports the conclusion on character of the goods. [Paras 7]

Classification up to Chapter 0802 is accepted and the prior final classification at CTH 08028090 is noted as having attained finality.

Applicable GST rate under Notification No. 01/2017 - interpretation of tariff descriptions by reference to essential character - relevance of GST Council minutes and Fitment Committee recommendations - Whether the product 'Nizam Pakku' is leviable to the 5% GST entry for 'Dried areca nuts' (Sl. No. 28 of Schedule I to Notification No. 01/2017) or to the 12%/6% entry for other dried nuts. - HELD THAT: - The Authority examined the language of Notification No. 01/2017 and the minutes and recommendations of the GST Council and Fitment Committee. It noted the legislative and fitment background whereby dried areca nuts were specifically placed at the lower rate following Council consideration that dried areca nuts (as ordinarily sold by farmers) should be taxed at 5%. The Authority found that the appellant's product retains the essential character of areca/betel nut after the permitted processes and that the terms 'areca nut' and 'betel nut' are used interchangeably in practice and in precedent. Given the clear wording of Sl. No. 28 - 'Dried areca nuts, whether or not shelled or peeled' - and the exclusion of dried areca nuts from the higher rate entry for 'other dried nuts', the product falls within the 5% entry. Reliance on Council minutes was used to interpret the intent behind the fitment, but the decisive factor remained the notification language read in context with the established character of the goods. [Paras 8, 9]

The product is covered by Sl. No. 28 of Schedule I to Notification No. 01/2017 and is leviable to GST at the 5% rate (2.5% CGST and 2.5% SGST).

Final Conclusion: The Appellate Authority modified the Original Advance Ruling and held that 'Nizam Pakku', classifiable under CTH 0802 (08028090 at 8 digit level), is leviable to GST at the rate specified for 'Dried areca nuts' in Sl. No. 28 of Schedule I to Notification No. 01/2017 (2.5% CGST and 2.5% SGST).

Composite supply - principal supply - contract for work or service - transfer of property incidentally - definition of 'goods' under Section 2(52) - supply of goods - supply of services - Circular No. 11/11/2017-GST dated 20.10.2017 - property in goods - printing as principal activity

Composite supply - principal supply - contract for work or service - transfer of property incidentally - printing as principal activity - Nature of the appellant's transactions - whether printing of customer provided content on appellant owned media and supply of the printed trade advertisement is a supply of goods or a composite supply with printing as the principal supply. - HELD THAT: - The Appellate Authority examined the purchase orders, invoices and the contractual scope and applied the conventional test distinguishing a contract of sale from a contract for work or service. Relying on the principle that in a contract for work or service the person rendering the work does not have property in the finished product as a whole (Anandam Viswanathan and authorities), it was found that the appellant never acquires proprietary rights in the customer's copyrighted content which remains with the recipient. The appellant merely owns the blank media which, upon printing the recipient's content, is transferred to the recipient. That transfer of property in the blanks is incidental to the printing contract. On the facts - where the contract is for printing the customer's copyrighted content on a specified medium and the printing activity is the raison d'e tre of the contract - the transaction is a contract for work or service. Consequently the supply is a composite supply under Section 8, and, having regard to the contractual purpose and the primacy of the printing activity in producing the deliverable, the principal supply is the printing service. The Authority considered and distinguished the appellant's reliance on decisions holding that certain printed products are goods or manufactured goods, noting that those authorities address manufacture/classification or marketability and do not alter the conclusion on the nature of the present contractual arrangement. The Authority also addressed the appellant's reliance on the Board Circular, observing that the factual matrix and contractual intention determine applicability. For these reasons the Authority affirmed the lower ruling that the transaction is a composite supply with printing being the principal supply. [Paras 6, 7, 8, 9]

The transaction is a composite supply and the printing service is the principal supply; the Advance Ruling Authority's order is upheld and the appeal is dismissed.

Final Conclusion: The Appellate Authority upholds the Authority for Advance Ruling: the appellant's contracts constitute contracts for work or service and therefore a composite supply in which the printing service is the principal supply. The appeal is dismissed.

Exemption for pure services to local authorities under Notification No.12/2017 - eligibility as a governmental authority for Notification No.12/2017 - exclusion from supply treatment under Notification No.14/2017 (public authority carve out) - treatment of supply of treated water as goods (Notification No.2/2017) versus service - classification of incidental charges (interest, cheque bouncing, connection/reconnection) as supply of service - taxability of sewage offtake and treatment as exempt service under Article 243W - self service / capitalised new connection works not liable as supply - reference to Appellate Authority where members differ (Section 98(5))

Exclusion from supply treatment under Notification No.14/2017 (public authority carve out) - Applicability of Notification No.14/2017-C.T.(Rate) to the applicant. - HELD THAT: - Notification No.14/2017 exempts activities undertaken by Central/State/Union territory or any local authority when acting as a public authority in functions under Article 243G/243W. The applicant is a public limited company incorporated under the Companies Act and not a person specified in the notification. The concession agreement is commercial in nature and the presence of government nominees on the board does not render the applicant a public authority covered by Notification No.14/2017. Accordingly the notification does not apply to the applicant. [Paras 10]

Applicant is not eligible for exemption under Notification No.14/2017.

Exemption for pure services to local authorities under Notification No.12/2017 - taxability of sewage offtake and treatment as exempt service under Article 243W - Whether sewage offtake and treatment services provided to Tirupur City Municipal Corporation are exempt under Sl. No.3 of Notification No.12/2017. - HELD THAT: - The concession agreement requires the applicant to offtake, treat and dispose sewage using facilities owned and operated by the applicant and to charge TCMC on metered sewage treated. That activity corresponds to an activity listed at Item 6 of the 12th Schedule (Article 243W) and is a pure service rendered to a local authority. Notification No.12/2017 at Sl. No.3 exempts pure services provided to a government/local authority in relation to functions entrusted under Article 243G/243W. Applying these criteria, the Authority holds that the sewage offtake and treatment service supplied to TCMC qualifies as an exempt pure service under Sl. No.3. [Paras 11]

Sewage offtake and treatment services provided to TCMC are exempt under Sl. No.3 of Notification No.12/2017.

Exemption for pure services to local authorities under Notification No.12/2017 - Whether consultancy (construction management and supervision) services rendered to TCMC are exempt under Sl. No.3 of Notification No.12/2017. - HELD THAT: - The consultancy contract (Construction Management and Supervision Consultant) requires project management, contract administration, construction supervision and related support for TCMC's water and sewerage projects. Those activities fall within functions entrusted to municipalities under Article 243W and amount to pure services provided to a local authority. Therefore the supplies of project management and consultancy services to TCMC are covered by Sl. No.3 of Notification No.12/2017 and are exempt. [Paras 11]

Consultancy (project management and supervision) services to TCMC are exempt under Sl. No.3 of Notification No.12/2017.

Classification of incidental charges (interest, cheque bouncing) as supply of service - treatment of incidental charges under value provisions - Taxability of interest on delayed payments and cheque bouncing charges levied by the applicant. - HELD THAT: - Delayed payment interest and cheque bouncing charges are not components of the core water or sewage charges as fixed under the agreements and are charged separately as miscellaneous charges. Delayed payment interest and cheque bouncing charges constitute consideration for agreeing to tolerate an act (SAC 999794) and are not activities entrusted to a municipality under Article 243W. They therefore do not qualify for exemption under Sl. No.3 of Notification No.12/2017. The Authority classifies these charges as taxable supplies attract ing 9% CGST and 9% SGST as per the relevant entries for such services. [Paras 13, 14]

Interest on delayed payments and cheque bouncing charges are taxable as SAC 999794 at 9% CGST and 9% SGST.

Self service / capitalised new connection works not liable as supply - Tax treatment of new connection works executed under the concession agreement and accounted as the applicant's assets. - HELD THAT: - Where new connection works are executed under the concession agreement and capitalised as the applicant's assets, the activity is treated as self service and does not give rise to a taxable supply at the time of execution. The applicant provided limited documentary evidence but the Authority accepts that capitalised new connection works executed as per the concession agreement and retained as assets in applicant's books are not taxable supplies. [Paras 13]

New connection works executed and capitalised as applicant's assets are not taxable being self service.

Classification of connection/reconnection/disconnection charges as water distribution services - Taxability of connection, reconnection, disconnection and permanent disconnection charges. - HELD THAT: - Connection, reconnection and disconnection charges collected from industrial customers arise from water distribution services performed by the applicant under service agreements. These charges are not part of the exempt pure services to TCMC and correspond to water distribution services classifiable under SAC 9969. Such services attract tax at 9% CGST and 9% SGST under the notifications specified for water distribution services. [Paras 13]

Connection, reconnection, disconnection and permanent disconnection charges are taxable as water distribution services (SAC 9969) at 9% CGST and 9% SGST.

Treatment of supply of treated water as goods (Notification No.2/2017) versus service - reference to Appellate Authority where members differ (Section 98(5)) - Whether supply of treated water by the applicant is to be characterised as exempt 'water' under Notification No.2/2017 (Sl. No.99) or as a taxable supply (members differed) - reference made under Section 98(5). - HELD THAT: - Members recorded divergent conclusions on the characterisation of treated water supplied by the applicant. One member concluded that the applicant's treatment results in 'purified' water (involving filtration, flocculation, chlorination etc.) and therefore does not fall within the exempted category at Sl. No.99 of Notification No.2/2017 (hence taxable under Schedule I/Notification No.1/2017). The other member concluded that the applicant supplies potable water for public purposes (not 'purified' in the narrow biological sense) and that supply to TCMC for public distribution could attract nil rate under Sl. No.99 read with the CBIC circular. Because the members differ on this determinative question of classification and rate, the point is referred to the Appellate Authority for Advance Rulings for hearing and decision in terms of Section 98(5). [Paras 12]

Question whether supply of treated water is exempt under Notification No.2/2017 or taxable is referred to the Appellate Authority for Advance Rulings under Section 98(5) due to differing views of the members.

Final Conclusion: The Authority ruled that the applicant is not eligible for Notification No.14/2017; sewage offtake and treatment services to TCMC and consultancy (project management/supervision) services to TCMC are exempt under Sl. No.3 of Notification No.12/2017; incidental charges of delayed payment interest and cheque bouncing charges are taxable as SAC 999794 at 9% CGST + 9% SGST; capitalised new connection works executed as self service are not taxable; and connection/reconnection/disconnection charges are taxable as water distribution services (SAC 9969) at 9% CGST + 9% SGST. The determinative question whether the applicant's supply of treated water is covered by the nil rated exemption in Notification No.2/2017 or is taxable was left to the Appellate Authority in view of a split between the members.

Provisional attachment of property under section 83 of the CGST Act - bank accounts belonging to the taxable person - provisional attachment of bank accounts of family members - sub rules (5) and (6) of Rule 159 - objection, hearing and release mechanism - temporary nature of provisional attachment and review by Commissioner - protection of government revenue vis a vis invasion of private domain

Provisional attachment of bank accounts of family members - bank accounts belonging to the taxable person - Validity of provisional attachment of bank accounts belonging to family members of the taxable person. - HELD THAT: - The Court examined the list of nine attached bank accounts and found that only three accounts belonged to the petitioner while the remaining accounts were in the names of his mother, wife and son. Relying on the principle that provisional attachment under section 83 can be directed only against property belonging to the taxable person and having regard to the provisional and protective character of attachment as governed by the rules, the Court held that attachment of accounts of family members who are not the taxable person was not justified. Consequently, those accounts were ordered to be released forthwith. The Court emphasised that provisional attachment is a drastic measure aimed at protecting revenue and cannot be used as a punitive or sweeping tool to affect non taxable family members. [Paras 6, 7, 8]

Bank accounts belonging to family members (Sr. Nos.1 and 5 to 9 in the statement) shall be released from provisional attachment forthwith.

Sub rules (5) and (6) of Rule 159 - objection, hearing and release mechanism - temporary nature of provisional attachment and review by Commissioner - Procedural course for the petitioner's own provisionally attached bank accounts and requirement of adjudication by the Commissioner. - HELD THAT: - The Court did not decide the merits of attachment of the petitioner's own accounts. Instead, invoking the procedural safeguards under the rules which permit filing of an objection and suo motu review by the Commissioner, the Court directed the petitioner to file an objection before the Commissioner within seven days. The Commissioner was directed to afford an opportunity of hearing and pass an appropriate order in accordance with law within three weeks from filing of the objection. This constituted a remand to the Commissioner for consideration of the attachment of the petitioner's accounts rather than a final adjudication on merits. [Paras 8]

Petitioner to file objection in seven days; Commissioner to hear and decide the objection within three weeks - merits kept open.

Final Conclusion: Writ petition disposed by ordering immediate release of specified family members' bank accounts; petitioner's own attached accounts remitted to the Commissioner for consideration on objection with opportunity of hearing and a three week decision timeline; merits of attachment left open.

Rectification of Form GSTR-3B - rectification/adjustment of input tax credit (ITC) for the tax period to which it relates - system-based reconciliation of ITC and auto-populated returns - subordinate legislation must conform to the statute - invalidity of circular to the extent it contravenes statutory scheme - duty to verify and give effect to rectified return within a stipulated time

Rectification of Form GSTR-3B - rectification/adjustment of input tax credit (ITC) for the tax period to which it relates - Petitioner entitled to rectify the entries in Form GSTR-3B for the month of May-2019. - HELD THAT: - Relying on the reasoning of the Delhi High Court in Bharti Airtel Ltd. (W.P.(C) No.6345/2018), the court accepted that the statutory scheme envisages system-based reconciliation and a right to correct returns so as to reflect ITC pertaining to the tax period to which the return relates. In the factual matrix the petitioner inadvertently uploaded another party's data for May-2019 and sought to amend the GSTR-3B prior to finalisation. Having regard to the scheme of verification and reconciliation contemplated by the CGST framework and the precedential conclusion that limited rectification in the period to which the error relates is permissible, the writ applicant must be permitted to rectify its GSTR-3B for May-2019. The court thus granted the substantive relief sought for rectification.

Rectification of Form GSTR-3B for May-2019 permitted and the respondents directed to act accordingly.

Invalidity of circular to the extent it contravenes statutory scheme - subordinate legislation must conform to the statute - Restriction in Circular No.26/26/2017-GST (para 4) limiting rectification to the month in which the error is noticed cannot be used to deny rectification for the period to which the error relates. - HELD THAT: - Following the Delhi High Court's analysis, the court observed that the impugned circular's constraint is contrary to the scheme of the CGST Act which contemplated reconciliation and correction to reflect correct ITC for the relevant tax period. The executive cannot, by way of a circular, place a fetter that defeats the statutory right of a registered person to rectify returns in respect of the period to which the error pertains. Consequently, the respondents cannot rely on that restriction to deny rectification when the failure to operationalize the statutory forms contributed to the error.

Para 4 of Circular No.26/26/2017-GST cannot operate so as to deny rectification for the relevant tax period and cannot be used to defeat the statutory right of rectification.

Duty to verify and give effect to rectified return within a stipulated time - Respondent required to verify the rectified Form GSTR-3B and give effect to the claim within two weeks; petitioner not to be saddled with late fees for the period in question. - HELD THAT: - The court directed that upon filing the rectified Form GSTR-3B the assessing authority shall, within two weeks, verify the claim and give effect to it once verified. Considering that the petitioner was brought to litigation by technicalities and system deficiencies, the court ordered that the petitioner shall not bear liability for late fees in respect of the return in question.

Respondent to verify and effect rectified return within two weeks; petitioner exempted from late fee liability for the relevant return.

Final Conclusion: Writ petition allowed: petitioner permitted to rectify Form GSTR-3B for May-2019; the respondents directed to verify and give effect to the rectified return within two weeks; restriction in Circular No.26/26/2017-GST cannot be used to deny rectification for the period to which the error relates; no late fees shall be charged to the petitioner for the return in question.

Extension of limitation due to COVID-19 - filing period for first appeal - condonation of delay - admission of belated appeal - re consideration on merits

Extension of limitation due to COVID-19 - filing period for first appeal - admission of belated appeal - Whether the time barred first appeal against cancellation of GST registration should be admitted and entertained notwithstanding limitation in view of Supreme Court orders extending limitation during the COVID-19 pandemic. - HELD THAT: - The court noted that the statutory 90 day period for filing the first appeal expired on 03.03.2020 and the additional 30 day period for condonation expired on 02.04.2020, both falling within the COVID 19 period. Having regard to the Supreme Court's orders extending limitation during the pandemic (including extension till 31.01.2021), the petitioner's belated appeal which was dismissed as barred by limitation is to be permitted to be re presented. The High Court directed that if the petitioner re presents the appeal within two weeks, the first appellate authority must take the appeal on file without reference to limitation and hear and dispose of the appeal in accordance with law, thereby requiring fresh consideration on merits by the appellate authority.

Petitioner permitted to re present the first appeal within two weeks; the appellate authority to admit the appeal without reference to limitation and decide it on merits.

Final Conclusion: Writ petitions disposed by directing the petitioner to re present the belated first appeal within two weeks and the first appellate authority to admit and decide the appeal without reference to limitation in accordance with law; no costs.

Cancellation of GST registration - Revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 - Requirement to furnish returns before filing revocation application - Show cause notice and non-submission of reply - Clarification by Circular No. 99/18/2019-GST - Infructuous appeal

Cancellation of GST registration - Revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 - Requirement to furnish returns before filing revocation application - Infructuous appeal - Appeal rendered infructuous and rejected because the registration has been reinstated and is shown as active. - HELD THAT: - The adjudicating authority initially cancelled the appellant's GST registration and rejected the revocation application on the ground of non-submission of reply to the show cause notice and non-payment/non-furnishing of returns. Rule 23 of the CGST Rules, 2017 prescribes the procedure for filing and disposal of applications for revocation of cancellation, including the proviso that where cancellation is on account of failure to furnish returns, such returns must be furnished and dues paid before filing revocation. The Board's Circular No. 99/18/2019-GST clarifies these requirements under Rule 23. The appellate authority examined the record, noted the procedural requirements and the adjudicating authority's subsequent action, and recorded that the jurisdictional authority has revoked the cancellation and the GSTIN is presently active. As the principal relief sought in the appeal (restoration of registration) has been achieved by the authority itself, the appeal has become infructuous and is rejected without further adjudication on the merits of the earlier cancellation or the initial rejection of revocation.

Appeal rejected as infructuous because the registration has been revoked by the jurisdictional authority and is active.

Final Conclusion: The appeal is dismissed as infructuous in view of the adjudicating authority's revocation of the cancellation and the GST registration being active; no further adjudication on the merits of the original cancellation or earlier rejection of revocation was undertaken.

Expenses excluded from export turnover to be excluded from total turnover - allowability of deduction under Section 10A - treatment of internet/telecommunication expenditure for computation of deduction - artificial bifurcation of technical services from software development

Expenses excluded from export turnover to be excluded from total turnover - allowability of deduction under Section 10A - treatment of internet/telecommunication expenditure for computation of deduction - Internet/telecommunication expenditure excluded from export turnover is also to be excluded from total turnover for computing deduction under Section 10A, and such exclusion is allowable for the assessee. - HELD THAT: - The Court examined whether internet and related telecommunication expenses which are excluded from export turnover must also be excluded from total turnover when computing the deduction under Section 10A. Relying on the reasoning in the cited decisions of the Supreme Court and this Court, the Court held that allowing those expenses to be excluded only from export turnover but not from total turnover would render the statutory formula unworkable and produce absurd results. The same principle applies to expenses incurred in foreign exchange for providing services outside India. The Court accepted the precedents that expenses integral to export operations (including internet/telecommunication) must be proportionately excluded from total turnover so as to give effect to the statutory deduction under Section 10A. The Court also noted authority rejecting artificial bifurcation of technical services from the software development contract where no material supported such a split, reinforcing that integral expenses cannot be separated to deny the deduction. Following those authorities, the substantial question of law was answered in favour of the assessee and against the Revenue.

The substantial question of law is answered against the Revenue; internet/telecommunication expenditure excluded from export turnover shall also be excluded from total turnover for computing deduction under Section 10A, and the appeals are dismissed.

Final Conclusion: Following binding precedents, the Court held that internet/telecommunication and analogous expenses excluded from export turnover must also be excluded from total turnover for the purpose of computing deduction under Section 10A; appeals dismissed in favour of the assessee for the assessment years 2005-06, 2006-07 and 2008-09.

Reassessment under Section 147 and notice under Section 148 - reason to believe - change of opinion - failure to make full and true disclosure - intangible asset: Customer/Vendor/Dealer list - amalgamation and transferor's liabilities vesting in amalgamated company

Amalgamation and transferor's liabilities vesting in amalgamated company - reassessment under Section 147 and notice under Section 148 - Validity of reopening/reassessment issued in the name of the transferor company which had been amalgamated into the petitioner - HELD THAT: - The Court found the facts distinguishable from the authority relied upon by the petitioner and held that the transferor company had filed a return for AY 2009-2010 and later merged with the petitioner. The petitioner did not inform the jurisdictional assessing officer of the merger nor seek rectification of the assessment order made in the transferor's name, and actively participated in assessment and reassessment proceedings. The sanctioned scheme of amalgamation contemplates that liabilities of the amalgamating company vest in the amalgamated company. In these circumstances the reopening in the name of the transferor company did not render the proceedings without jurisdiction and amalgamation could not be invoked to defeat assessment or reassessment proceedings. [Paras 28, 30, 31, 36, 38]

Reopening and reassessment proceedings issued in the name of the transferor company are valid and the preliminary objection on this ground is overruled.

Reason to believe - change of opinion - failure to make full and true disclosure - intangible asset: Customer/Vendor/Dealer list - Whether the reopening for AY 2009-2010 was invalid as a mere change of opinion or was supported by material indicating failure to disclose - HELD THAT: - The Court examined the reasons recorded for reopening and the material on record. The assessment originally disallowed only non compete fees, while other allocated intangible heads were accepted by the assessing officer at that stage. The reasons for reopening focussed on the Customers/Vendor/Dealer lists, noting absence of valuation by an approved valuer, that the lists were internally allocated without valuation, and that the return/reply did not supply documents substantiating the claimed depreciation on those lists. Because the reopening notice was issued on the last day under the proviso to Section 147, the respondents were required to have material to form a belief of failure to truly and fully disclose material facts. The Court found that no substantiation had been furnished during original proceedings and that the claim went to the root of assessment, so the reopening could not be set aside as mere change of opinion. [Paras 41, 43, 44, 45, 46]

Reopening is not vitiated as a change of opinion; the assessing authority had material to form reason to believe non disclosure regarding depreciation on Customer/Vendor/Dealer lists.

Reassessment under Section 147 and notice under Section 148 - intangible asset: Customer/Vendor/Dealer list - Scope and conduct of reassessment directed by the Court - HELD THAT: - The Court declined to quash the impugned order but limited the scope of reassessment. It directed the respondent to confine the reassessment to the issue relating to the claim for depreciation on the Customer/Dealer and Vendor lists. The Court required the petitioner to substantiate valuation of the lists within thirty days and ordered the assessing authority to complete reassessment in accordance with law uninfluenced by the Court's observations, within three months from receipt of the order. [Paras 47, 49, 50]

Reassessment to continue confined to the issue of depreciation on Customer/Dealer and Vendor lists; petitioner to produce valuation documents and respondent to conclude reassessment within three months.

Final Conclusion: The petition is dismissed on merits: the reopening under Section 148/147 for AY 2009-2010 is valid despite being in the name of the transferor company; reopening is not a mere change of opinion as there was non disclosure/absence of valuation concerning the Customer/Vendor/Dealer lists; reassessment is confined to that issue, petitioner to submit valuation within 30 days and the assessing authority to complete reassessment in three months.

Reopening of assessment - proceedings under Section 148 of the Income Tax Act - reason to believe - change of opinion - tangible material - escapement of income - scrutiny assessment - assessment under Section 143(3)

Reopening of assessment - reason to believe - change of opinion - tangible material - scrutiny assessment - assessment under Section 143(3) - Validity of the Notice dated 27.03.2019 under Section 148 for reopening the assessment for A.Y. 2014-15 on account of alleged non disclosure of VAT refund. - HELD THAT: - The court examined whether the Assessing Officer had jurisdiction to reopen the completed assessment where the VAT refund was considered during the original scrutiny assessment culminating in an order under Section 143(3). It applied the settled principle that mere change of opinion by the AO on the same set of facts cannot by itself furnish a 'reason to believe' under Section 147/148. Reliance on the law in CIT v. Kelvinator of India Ltd. establishes that reopening requires 'tangible material' linking to escapement of income and that reasons must have a live link to the belief formed. On the facts, the VAT refund of Rs. 79,78,941/- had been called for, considered and partly adjusted in the original assessment (with a specific addition made and later deleted by the Tribunal). The revenue did not show any subsequent tangible material discovered after the original assessment; the reasons recorded merely re asserted non disclosure despite the primary materials having been available and examined earlier. Accordingly, the recorded reasons amounted to a mere change of opinion and not a fresh lawful foundation for reopening. [Paras 13, 16, 17, 18]

The notice under Section 148 dated 27.03.2019 is without authority of law and is quashed.

Final Conclusion: Writ allowed; the reassessment notice dated 27.03.2019 issued to reopen the assessment for A.Y. 2014-15 is quashed because it rested on a mere change of opinion without any subsequent tangible material to justify reopening.

Disallowance under section 40(a)(ia) - tax deduction at source - applicability of section 194C - applicability of section 194I - finality of appellate findings / scope of remand

Applicability of section 194C - finality of appellate findings / scope of remand - Whether the Assessing Officer was entitled to re-open and re-examine applicability of section 194C to the impugned lorry hire payments when the first appellate authority had earlier held section 194C inapplicable and that finding was not challenged before the Tribunal. - HELD THAT: - The Tribunal and the authorities below recorded that in the first round of litigation the CIT(A) had given a categorical finding that section 194C did not apply to the lorry hire payments, a finding left unchallenged by the Revenue before the Tribunal. The ITAT remanded the matter to the AO only on the limited question of applicability of section 40(a)(ia) to amounts paid or payable and directed the AO to examine applicability of section 194I. The AO nevertheless reopened the issue under section 194C and treated the payments as subject to that provision. The Tribunal held, and we agree, that where an appellate authority's finding on a specific issue has attained finality because it was not challenged on further appeal, the AO cannot go beyond the scope of the remand by re considering that settled issue; doing so exceeds the AO's powers. Reconsideration of section 194C by the AO was therefore impermissible and his contrary finding cannot be accepted. [Paras 8]

AO erred in re examining applicability of section 194C; the earlier unchallenged finding of the CIT(A) that section 194C did not apply must be respected and the AO's contrary finding is not acceptable.

Applicability of section 194I - disallowance under section 40(a)(ia) - tax deduction at source - Whether the impugned lorry hire payments fall within section 194I and, consequently, whether disallowance under section 40(a)(ia) for failure to deduct TDS was justified. - HELD THAT: - The CIT(A) examined evidentiary material filed during reassessment and found as a fact that the assessee had merely paid hire charges to lorry owners/agents, that the owners bore running costs including driver salary and fuel, and that no running/maintenance expenses were claimed in the assessee's books. Those findings were uncontroverted and the Revenue produced no evidence to demonstrate that the payments were rent within section 194I. Given the absence of contrary evidence and the factual findings supporting that the arrangement was for hire (with owners bearing operational costs), the Tribunal found no error in the CIT(A)'s conclusion that section 194I did not apply and that the disallowance under section 40(a)(ia) could not be sustained. [Paras 9]

Findings of the CIT(A) that section 194I is not attracted to the impugned payments are upheld and the addition under section 40(a)(ia) for failure to deduct TDS is deleted.

Final Conclusion: The appeal filed by the Revenue is dismissed and the CIT(A)'s order deleting the addition under section 40(a)(ia) is confirmed; the assessee's cross objection is rendered infructuous and is dismissed as not maintainable.

Validity of penalty notice under section 271(1)(c) - Concealment of particulars of income - Furnishing inaccurate particulars of income - Vitiation of penalty proceedings due to defective notice - Right to raise legal point at any stage

Validity of penalty notice under section 271(1)(c) - Vitiation of penalty proceedings due to defective notice - Concealment of particulars of income - Furnishing inaccurate particulars of income - Whether the penalty notice and consequent penalty under section 271(1)(c) were invalid because the assessing officer invoked both limbs of the provision without specifying which limb was relied upon, thereby vitiating the proceedings. - HELD THAT: - The assessment order and the penalty notice both recorded that the assessee had "concealed his income and furnished inaccurate particulars of income" and invoked section 271(1)(c). The Tribunal applied binding precedents holding that a notice which does not specify which limb of section 271(1)(c) is the basis for initiating proceedings-whether concealment of particulars of income or furnishing inaccurate particulars-is bad in law. Since the defect in the notice goes to the initiation of penalty proceedings, the proceedings stood vitiated. The Tribunal further held that this was a pure legal issue arising from the assessment order and notice, and therefore the assessee was entitled to raise it at any stage of the proceedings. [Paras 7, 8, 9]

Penalty proceedings and the penalty imposed under section 271(1)(c) were set aside and the penalty cancelled as the notice was invalid.

Final Conclusion: The appeal is allowed; the penalty under section 271(1)(c) for AY 2003-04 is cancelled because the penalty notice, having invoked both limbs of the provision without specifying which limb was relied upon, vitiated the proceedings.

Revision under section 263 - inadequate enquiries / verification by Assessing Officer - minimum alternate tax under section 115JB - ascertained and unascertained liabilities - exceptional items as per Schedule III - remand for fresh examination

Revision under section 263 - inadequate enquiries / verification by Assessing Officer - minimum alternate tax under section 115JB - ascertained and unascertained liabilities - exceptional items as per Schedule III - remand for fresh examination - Validity of the Pr.CIT's exercise of revision under section 263 in respect of fuel surcharge adjustment and its impact for MAT purposes - HELD THAT: - The Tribunal examined whether the assessment order under section 143(3) was erroneous and prejudicial to the revenue for not verifying reduction of profit by the sum shown as fuel surcharge adjustment taken directly to the balance sheet. It noted that explanation (1) to clause (c) of section 115JB requires amounts set aside for provisions (other than ascertained liabilities) to be added back for MAT, and that the Assessing Officer had not verified whether the amount represented an ascertained liability or an unascertained provision nor applied his mind to the MAT implications despite the accounts and statements being filed. The Tribunal observed that mere placement of financial statements before the AO does not establish that specific enquiries were made. While recognising the assessee's contention that the amount was treated as an exceptional item under Schedule III and supported by agreements and later payments, the Tribunal concluded that the allowability and MAT treatment of the expenditure required factual and legal examination in light of the submissions and case law relied upon by the assessee. Consequently, instead of sustaining the Pr.CIT's cancellation of the assessment, the Tribunal set aside the Pr.CIT's order under section 263 and remitted the matter to the Assessing Officer for fresh examination on merits, permitting the assessee to make all submissions and directing that reasonable opportunity be provided before giving effect to any decision. [Paras 5]

Order passed by the Pr.CIT under section 263 is modified; matter remitted to the Assessing Officer to examine the allowability of the fuel surcharge adjustment and its treatment under section 115JB afresh, with opportunity to the assessee to make submissions.

Final Conclusion: The Tribunal modified the Pr.CIT's order under section 263 and remitted the issue of fuel surcharge adjustment and its MAT treatment to the Assessing Officer for fresh examination on merits; the assessee may file submissions and shall be given reasonable opportunity. Appeal allowed for statistical purposes.

Penalty under section 271(1)(c) for concealment/inaccurate particulars of income - addition on estimated/non-genuine purchases - imposition of penalty based on estimation alone - acceptance of assessment order and failure to appeal not tantamount to concealment - burden on revenue to establish deliberate concealment

Penalty under section 271(1)(c) for concealment/inaccurate particulars of income - addition on estimated/non-genuine purchases - acceptance of assessment order and failure to appeal not tantamount to concealment - Whether the penalty imposed under section 271(1)(c) is sustainable where the Assessing Officer made an ad hoc addition by estimating non genuine purchases and the assessee accepted the addition without filing an appeal. - HELD THAT: - The Tribunal held that an ad hoc or estimated disallowance of a percentage of claimed purchases does not ipso facto establish concealment of income, a necessary foundation for levying penalty under section 271(1)(c). The Assessing Officer, after noting alleged hawala billing by suppliers and issuing notices under section 133(6), made an addition of 17.5% of the purchases and imposed penalty when the assessee did not challenge the disallowance. The Tribunal found that the Assessing Officer failed to satisfy the conditions required to attract penalty: the assessee had furnished purchase details, returned its income, and recorded payments by cheque; mere non acceptance of claimed expenditure by Revenue or the assessee's decision not to litigate the addition for 'peace' does not convert the claim into deliberate concealment. Relying on the principle that estimation of income or expenditure, without material establishing deliberate misstatement or concealment, cannot sustain a penalty under section 271(1)(c), the Tribunal upheld deletion of the penalty by the Commissioner (Appeals).

Penalty under section 271(1)(c) was not sustainable; the Commissioner (Appeals) rightly deleted the penalty and the Tribunal dismissed Revenue's appeal.

Final Conclusion: The appeal is dismissed; the order deleting the penalty under section 271(1)(c) is upheld because an ad hoc/additional disallowance on account of estimated non genuine purchases, accepted by the assessee, did not establish the deliberate concealment necessary to sustain the penalty.

Interest on funds invested during construction - taxable as income from other sources unless inextricably linked to project - receipts inextricably linked with construction activities - capital receipt reducing project cost - distinction between surplus funds invested and funds deployed as part of construction financing (Tuticorin v. Bokaro ratio) - remand for de novo adjudication where factual parity with earlier years is not established - condonation of delay in filing appeal - substantial justice over technicality where bonafide delay shown

Interest on funds invested during construction - taxable as income from other sources unless inextricably linked to project - distinction between surplus funds invested and funds deployed as part of construction financing (Tuticorin v. Bokaro ratio) - Treatment of interest earned on bank deposits during the construction period for AY 2015-16 and AY 2016-17 remitted to CIT(A) for fresh consideration - HELD THAT: - The Tribunal observed that although earlier tribunal orders for prior years allowed similar claims on their peculiar facts, the CIT(A) had not made specific findings to show that the facts for the impugned years were pari materia to those earlier years. The Tribunal noted the competing Supreme Court decisions (Tuticorin and Bokaro) and the need to determine whether the interest arose from surplus funds or was inextricably linked to construction activities. In view of absence of clear year-specific findings by the CIT(A), the Tribunal set aside the appellate decision and remitted the issue for de novo adjudication by the CIT(A), directing that the CIT(A) examine the bank standing-instruction/material facts (including whether deposits were created by the bank or by assessee's instructions), give the assessee opportunity to be heard and decide the matter in accordance with law and authorities cited. [Paras 7, 8]

Issue remitted to the file of the CIT(A) for fresh adjudication on merits with direction to consider factual matrix and applicable precedents

Interest on advances to contractors - may be capital receipt if inextricably linked to construction - application of Bokaro principle where receipts are intrinsic to construction arrangements - Treatment of interest earned on advances to contractors for AY 2015-16 and AY 2016-17 remitted to CIT(A) for fresh consideration - HELD THAT: - The Tribunal directed a remand because the CIT(A) had not examined whether the advances and their contractual terms made the interest receipts an integral part of the construction process (in which case they would reduce project cost under the Bokaro line) or whether they represented earnings from surplus funds (in which case Tuticorin would render them taxable under section 56). The CIT(A) is to scrutinise contract terms and the factual matrix, admit evidence, and determine whether the interest is inextricably linked to the project or is income from surplus funds. [Paras 9]

Issue remitted to the file of the CIT(A) for de novo determination of whether such interest is capital in nature or taxable as income

Receipts inextricably linked with construction activities - capital receipt reducing project cost - Bokaro Steel principle applied to receipts from forfeiture of earnest money and similar recoveries - Forfeiture of earnest money (EMD) and miscellaneous recoveries held to be capital receipt reducing project cost for AY 2015-16 and AY 2016-17 - HELD THAT: - On the facts that the project was under implementation and commercial operations had not commenced, and that the EMD and recoveries arose from contractors engaged in construction, the Tribunal applied the reasoning in Bokaro Steel and related authorities to hold that such receipts are inextricably linked to the process of setting up the plant and therefore are capital receipts that reduce the cost of the project. Consequently the CIT(A)'s addition was reversed for this head. [Paras 10]

Forfeiture of EMD and similar recoveries treated as capital receipts and the assessee's appeal on this issue allowed

Condonation of delay in filing appeal - substantial justice over technicality - Condonation of 48 days' delay in filing the appeals granted - HELD THAT: - The Tribunal accepted the assessee's explanation that referral to head office and obtaining legal opinions caused the delay, found no mala fides, and held that as a public sector undertaking some delay in processing is reasonably foreseeable. Emphasising that technicalities should not bar access to justice where bona fide delay is shown, the Tribunal condoned the delay and admitted the appeals for adjudication on merits. [Paras 4]

Delay of 48 days condoned and appeals admitted for adjudication on merits

Final Conclusion: Both appeals for AY 2015-16 and AY 2016-17 are partly allowed: condonation of delay granted; the Tribunal remitted the issues of interest on bank deposits and interest on advances to contractors to the CIT(A) for fresh adjudication with directions to consider year specific facts and applicable precedents, while holding forfeiture of earnest money and related recoveries to be capital receipts reducing project cost in favour of the assessee.

Validity of assessment under Section 153A consequent to search under Section 132 - Allowability of business deduction under Section 37(1) - Onus of proof on assessee for genuineness of claimed business expenses and stock - Remand for de novo verification and reconciliation of seized material with audited accounts

Validity of assessment under Section 153A consequent to search under Section 132 - Legality of assessments framed under Section 153A for AY 2005-06 in absence of alleged incriminating material. - HELD THAT: - The Tribunal recorded that search and seizure under Section 132(1) was conducted and that several additions in the assessment order were based on documents seized during that search. Although the assessee in grounds challenged the framing of assessment on the basis that no incriminating material or undisclosed income was found, no such contention was pressed before the Tribunal. The assessment records show seized material relied upon by the Assessing Officer to make additions. On this basis the Tribunal dismissed the grounds contesting jurisdiction and validity of the Section 153A assessment. [Paras 3]

Grounds challenging validity of assessment under Section 153A for AY 2005-06 dismissed.

Allowability of business deduction under Section 37(1) - Onus of proof on assessee for genuineness of claimed business expenses and stock - Remand for de novo verification and reconciliation of seized material with audited accounts - Claimed provision for sales-promotion expenses for AY 2005-06 and whether addition disallowing the provision was sustainable on merits. - HELD THAT: - The assessee had made a provision in audited books for sales-promotion expenses, estimated at 6% of sales, but relevant seized trial balance did not reflect that entry. The AO treated the amount as not incurred, and the CIT(A) held the provision to be contingent and not properly justified under the scheme. The assessee did not produce full working, vouchers or the scheme before the AO (the scheme was produced first before the CIT(A) and not placed before the AO). The Tribunal recognised that bona fide business expenses are deductible under Section 37(1) but noted that the primary onus to establish genuineness and that the liability crystallised during the year rests on the assessee. Given lack of verification by the AO and absence of key supporting material before the AO, and in the interests of justice and fair play, the Tribunal directed a de novo consideration by the AO: the assessee to produce all relevant details and the AO to admit evidence, give opportunity of hearing and decide on merits in accordance with law. [Paras 4, 5, 6]

Matter remitted to the Assessing Officer for fresh adjudication on merits with direction to admit and verify evidence and determine allowability of the sales-promotion provision in accordance with law.

Allowability of business deduction under Section 37(1) - Onus of proof on assessee for genuineness of claimed business expenses and stock - Remand for de novo verification and reconciliation of seized material with audited accounts - Addition in AY 2009-10 based on differences between seized Tally extract (Kanpur branch) and consolidated audited financial statements (closing stock differential). - HELD THAT: - The AO adopted profit reflected in seized tally extract and made additions for differences in closing stock; the CIT(A) granted partial relief but confirmed a part of the addition. The assessee contended the seized extract related only to a branch and year-end accounting adjustments and consolidated entries could reconcile differences. The Tribunal observed that where consolidated audited accounts are prepared after taking into account various units/branches, it is impermissible to determine income solely on the basis of one branch's trial balance unless bogus entries or absence of other units' transactions are proved. The onus to prove genuineness of entries, stock records and reconciliation rests on the assessee; conversely the AO must prove mala fide or fabrication. As the assessee had not produced unit-wise records, stock registers or excise/VAT records before the AO for verification, the Tribunal directed remand for de novo consideration and directed the assessee to produce unit-wise and consolidated records and other supporting documents for verification by the AO. [Paras 7]

Addition for AY 2009-10 remitted to the Assessing Officer for de novo adjudication after verification of unit-wise accounts, consolidated reconciliation, stock records and allied documents.

Final Conclusion: Both appeals are disposed of in the assessee's favour for statistical purposes: the challenge to the validity of the Section 153A assessment (AY 2005-06) is dismissed, while the factual disputes on allowability of sales-promotion provision (AY 2005-06) and on differences in closing stock (AY 2009-10) are remitted to the Assessing Officer for fresh consideration on merits with directions to admit and verify evidence and to afford the assessee adequate opportunity of hearing.

Depreciation on goodwill - treatment of slump sale consideration and allocation to intangible assets - disallowance under section 14A read with Rule 8D - recording of satisfaction before invoking section 14A - treatment of notional income on corporate guarantees and arm's length consideration in international transactions - deductibility of cess in computing business income - levy of interest under sections 234A, 234B and 234C

Depreciation on goodwill - treatment of slump sale consideration and allocation to intangible assets - Allowability of depreciation claimed on goodwill arising from acquisition by slump sale in earlier year where initial year claim was not disturbed - HELD THAT: - The Tribunal examined the acquisition by slump sale and the accounting recognition of goodwill in earlier years and noted that the claim of depreciation on that goodwill had already been allowed in the initial year(s) by coordinate benches and the DRP/Tribunal decisions. Absent disturbance of the initial year claim, subsequent years cannot be reopened to deny depreciation. The Assessing Officer and CIT(A)'s disallowance relied on alleged absence/valuation defects and on transactions (transfer of certain customer relationship consideration to the parent) occurring in a later year; those facts did not justify disturbing an admitted earlier-year allowance. In view of precedent decisions in the assessee's own case and the fact that the amount treated as held for sale did not negate the existence of goodwill for which depreciation had been previously allowed, the disallowance was unsustainable. [Paras 16, 17, 18, 19, 20]

Disallowance of depreciation on goodwill deleted and the grievance allowed.

Disallowance under section 14A read with Rule 8D - recording of satisfaction before invoking section 14A - Sustenance of disallowance under section 14A r.w. Rule 8D in absence of recorded satisfaction after examination of books - HELD THAT: - The Assessing Officer made a mechanical disallowance under Rule 8D without recording satisfaction that examination of the assessee's books showed expenditures incurred in earning tax exempt income. The Tribunal followed coordinate-bench precedent and Supreme Court dicta requiring that AO must record satisfaction upon examination of accounts before invoking section 14A/Rule 8D. On the facts, the AO's statement that it was 'unbelievable' no expenditure was incurred did not amount to the mandatory recorded satisfaction; consequently the disallowance could not be sustained. The deletion in normal income computation necessitated deletion for book profit computation under section 115JB as well. [Paras 22, 23, 28, 29, 30]

Disallowance under section 14A r.w. Rule 8D deleted; corresponding adjustment in computation of book profit under section 115JB directed to be removed.

Levy of interest under sections 234A, 234B and 234C - Consequential levy of interest and limited direction regarding section 234C - HELD THAT: - The Tribunal observed that interest under sections 234A, 234B and 234C is mandatory as a consequence of the assessment outcome. However, in respect of section 234C the Tribunal directed the AO to levy interest on the returned income of the assessee (i.e., the AO should compute interest taking into account returned income), reflecting a limited procedural direction without altering the mandatory nature of such interest. [Paras 31, 32]

Interest under the cited sections remains consequential; AO directed to levy section 234C interest on returned income.

Deductibility of cess in computing business income - Allowability of education cess as deduction while computing business income - HELD THAT: - Relying on reasoning in a High Court decision and administrative circulars regarding treatment of 'cess', the Tribunal held that education cess paid before the due date for filing returns is deductible in computing business income. The Tribunal directed the AO to allow the claim of deductibility of cess for the relevant assessment years. [Paras 33, 34, 35, 36]

Claim of deductibility of education cess allowed and AO directed to permit the deduction.

Treatment of notional income on corporate guarantees and arm's length consideration in international transactions - Deletion of transfer pricing adjustment imputing notional commission income for corporate guarantee not issued by assessee - HELD THAT: - The Tribunal found the bank guarantee was issued by the bank on the basis of the assessee's fixed deposits and not as a corporate guarantee issued by the assessee for the benefit of its associated enterprise; the bank charged fees which the assessee recovered from the AE with mark up. The guarantee related to the AE's tax liability and, if any demand arose, liability would fall on the AE. On these factual findings the TPO/DRP erred in imputing notional income equivalent to bank commission in the hands of the assessee. Accordingly the transfer pricing addition was deleted. [Paras 38, 41, 42, 43, 44]

Transfer pricing addition imputed on account of corporate guarantee deleted.

Final Conclusion: All appeals filed by the assessee are allowed: disallowance of depreciation on goodwill deleted; disallowance under section 14A r.w. Rule 8D deleted (with corresponding deletion for book profit); AO directed to levy section 234C interest on returned income; deductibility of education cess allowed; and the transfer pricing addition relating to notional commission on guarantee deleted.

Retrospective amendment and liability to pay interest - interest under section 234B and 234C of the Act - book profit under section 115JB of the Act - advance tax liability and default for payment of advance tax - reassessment interest treatment under section 234B(3)

Retrospective amendment and liability to pay interest - interest under section 234B and 234C of the Act - book profit under section 115JB of the Act - advance tax liability and default for payment of advance tax - Levy of interest under sections 234B and 234C on additional book profit brought to tax by a retrospective amendment to section 115JB. - HELD THAT: - The Tribunal considered that the additional income under section 115JB arose only because of a retrospective amendment (Finance Act (No.2), 2009) which was not on the statute book during the relevant assessment year; consequently the assessee could not reasonably be expected to have paid advance tax on that additional book profit during the relevant financial year. Relying on and following decisions of coordinate and higher fora (including Calcutta and Bombay High Courts and various ITAT benches) the Tribunal applied the legal principle that interest under section 234B/234C is predicated on an existing liability to pay advance tax within the statutory dates, and where liability arises solely by a retrospective legislative change, there is no default in the sense required to attract those interest provisions. Applying that principle to the facts, the Tribunal held that interest under sections 234B and 234C cannot be levied on the tax attributable to the additional book profit which was brought to tax by the retrospective amendment. [Paras 13]

No interest under sections 234B and 234C shall be charged on the tax liability arising solely by reason of the retrospective amendment to section 115JB; the revenue's ground on this issue is dismissed.

Reassessment interest treatment under section 234B(3) - interest under section 234B and 234C of the Act - advance tax liability and default for payment of advance tax - Proper computation and applicability of interest in the order giving effect to the appellate decision where reassessment provisions operate (treatment under section 234B(3) for reassessment differential). - HELD THAT: - The Tribunal examined the provisions applicable to reassessment and noted that where a reassessment follows a regular assessment, interest under section 234B(3) (as it stood for the year) applies to the differential tax determined by reassessment for the period from the day following the regular assessment to the date of reassessment, in addition to interest already levied under section 234B(1) in the original assessment. The Tribunal directed that the interest amount already levied in the regular assessment must be adopted and that interest under section 234B(3) be computed on the excess tax determined by the reassessment for the intervening period. While directing this computation, the Tribunal expressly ordered that the tax attributable to the additional book profit arising from the retrospective amendment be disregarded for the purpose of computing interest (as held under the first issue). [Paras 5]

In the order giving effect, interest shall be computed in accordance with the reassessment regime (section 234B(3) for the differential tax) adopting the interest levied in the original assessment, and excluding the tax attributable to the retrospective amendment as directed above.

Final Conclusion: Following established judicial authority, the Tribunal held that interest under sections 234B and 234C cannot be levied on tax levied only by a retrospective amendment to section 115JB; accordingly the revenue's appeal is dismissed and the Assessing Officer is directed to recompute interest in the giving effect order in the manner indicated, excluding the retrospective addition.

Accommodation entries - reopening assessment under section 147 on the basis of third party information - addition based on third party statement without opportunity for cross examination - estimation of income by extrapolation using an assumed commission rate - requirement of independent verification of invoices and supplier transactions before making additions

Accommodation entries - addition based on third party statement without opportunity for cross examination - estimation of income by extrapolation using an assumed commission rate - requirement of independent verification of invoices and supplier transactions before making additions - Whether the Assessing Officer was justified in estimating inflated accommodation entries at Rs. 25,73,62,400 by treating a payment of Rs. 6,43,406 as commission (using a 0.25% rate) and disallowing 15% thereof. - HELD THAT: - The Tribunal accepted the finding of the CIT(A) that the AO's estimation was unsupported by independent evidence. The AO relied on the statement and affidavit of a third party (Shri Jaymesh R. Rami) but the material did not name the assessee except once as an entry of Rs. 6,43,406, and the affidavit did not establish that the payment in question to M/s Rami Brothers was a commission. The assessee produced an account payee cheque and an invoice showing labour charges for soil filling (purportedly for FY 2010 11) and a list of genuine suppliers which did not coincide with entities identified by the third party. The AO did not conduct independent enquiries from suppliers nor allow cross examination of the third party. The AO's computation extrapolating total accommodation entries from the alleged commission payment and applying a 15% disallowance was held to be based on hypothesis and conjecture and therefore unsustainable. The Tribunal therefore upheld the CIT(A)'s deletion of the ad hoc addition made by the AO and found no infirmity in restricting the disallowance to the amount the AO could properly treat as an accommodation entry for the assessee. [Paras 8]

The addition estimated by the AO at Rs. 3,86,04,360 (being 15% of the extrapolated accommodation entries) was deleted; the Revenue's appeal on this issue is dismissed.

Accommodation entries - reopening assessment under section 147 on the basis of third party information - requirement of independent verification of invoices and supplier transactions before making additions - Whether the disallowance of Rs. 7,91,406 upheld by the CIT(A) against the assessee should be sustained in full. - HELD THAT: - The Tribunal noted that the invoice relied on by the assessee for labour charges was dated 07/03/2011 and pertained to FY 2010 11, and thus the expenditure shown by that invoice was not claimed in the year under appeal. The AO had treated Rs. 6,43,406 as an accommodation entry for the year under consideration. Given the lack of reconciliation by the assessee between the payment considered by the AO and the invoice amount, the Tribunal held it appropriate to restrict the disallowance to the amount actually considered by the AO as pertaining to the assessment year. [Paras 11]

The assessee's appeal is partly allowed by reducing the disallowance to Rs. 6,43,406.

Final Conclusion: The Revenue's appeal is dismissed; the assessee's appeal is partly allowed by reducing the disallowance to Rs. 6,43,406, with the Tribunal upholding the CIT(A)'s finding that the AO's large extrapolated addition lacked independent verification and was based on hypothesis.

Disallowance under section 14A read with Rule 8D - Broken period interest - revenue nature where investments treated as stock-in-trade - Taxation of interest on securities - accrual basis versus due basis - Amortization of premium on securities held under Held to Maturity (HTM) category - Depreciation on Available for Sale (AFS) and Held for Trading (HFT) securities - netting of appreciation and depreciation

Disallowance under section 14A read with Rule 8D - Assessee's challenge to disallowance under section 14A r.w. Rule 8D. - HELD THAT: - The Tribunal held that the question of disallowance of interest under Rule 8D(2)(ii) is covered by the Tribunal's earlier decision in the assessee's own case where it was found that no disallowance in respect of interest is sustainable if the assessee's own non interest bearing funds exceed the investments. Accordingly, interest disallowance was held not sustainable subject to verification by the AO that own funds indeed exceed investments. As to administrative/indirect expenses under Rule 8D(2)(iii), the matter was restored to the file of the AO for computation in accordance with the prior reasoning and directions of the Tribunal, including exclusion of strategic investments that did not yield exempt income during the year and consideration of only investments yielding exempt income for computing average investment.

Assessee's ground allowed for statistical purposes as to interest disallowance; expense disallowance remanded to AO for recomputation in terms of earlier appellate directions.

Broken period interest - revenue nature where investments treated as stock-in-trade - Revenue's appeal against deletion of addition of broken period interest. - HELD THAT: - The Tribunal affirmed the CIT(A)'s deletion of the addition, following earlier Tribunal and High Court findings in the assessee's own precedent years. The Tribunal noted that the bank treated the securities as part of its banking business and as stock in trade for income tax purposes; broken period interest was accounted as revenue (interest expense/income) in the regular system of accounting consistently followed for many years. In view of the consistent accounting policy and binding precedents in the assessee's own case and supporting High Court orders, the disallowance was held to be without merit.

Revenue's ground dismissed; broken period interest treated as revenue and deletion of disallowance sustained.

Taxation of interest on securities - accrual basis versus due basis - Whether interest on government and other securities is taxable on accrual basis or on due basis. - HELD THAT: - Relying on the Tribunal's earlier decisions in the assessee's own case and other precedents, the Tribunal held that the right to receive interest on securities arises only on the due date and therefore such interest cannot be taxed in the accounting year merely because it is accounted on accrual basis in the books. The AO's addition under section 145(1) was reversed as no change of facts warranted departure from the prior decisions which treated such interest as taxable on due basis.

Revenue's ground dismissed; interest on securities to be taxed on due basis as per earlier appellate findings.

Amortization of premium on securities held under Held to Maturity (HTM) category - Allowability of amortization claimed on HTM securities. - HELD THAT: - The Tribunal followed its prior decisions in the assessee's own case and earlier appellate orders which recognised the allowance of amortization of premium on acquisition of HTM securities where the bank, following RBI guidance and accepted accounting practice, amortized premium over the holding period. The AO's contention that such amounts are not deductible until sale/maturity was rejected in view of consistent earlier findings and the relevant RBI/CBDT circulars relied upon by the assessee and earlier appellate authorities.

Revenue's ground dismissed; amortization of HTM premium allowed following prior appellate precedent.

Depreciation on Available for Sale (AFS) and Held for Trading (HFT) securities - netting of appreciation and depreciation - Allowability of depreciation on securities held under AFS/HFT by netting depreciation category wise instead of aggregating across scrips. - HELD THAT: - The Tribunal endorsed the approach taken in the assessee's prior appellate decisions and relevant High Court authority that each scrip requires independent valuation and that the assessee's method of netting depreciation within categories (and accounting consistent with its books) was acceptable. The Tribunal distinguished the AO's reliance on CBDT instruction and other authorities, noting factual differences and that taxing notional appreciation contradicts settled principles. Consequently, the CIT(A)'s deletion of the disallowance was sustained.

Revenue's ground dismissed; depreciation treatment and netting methodology as adopted by the assessee upheld.

Final Conclusion: The assessee's appeal is allowed for statistical purposes on the section 14A interest issue (subject to verification by the AO) and restored/remitted for limited computation on administrative expenses; the Revenue's cross appeal on the remaining additions (broken period interest, accrual vs due interest, HTM amortization, and AFS/HFT depreciation) is dismissed, following the Tribunal's and High Court's prior decisions in the assessee's own case.

Deemed sale consideration under section 50C - Valuation by Valuation Officer under section 50C(2) - Fair market value for computation of capital gains - Cost of acquisition as on 01.04.1981 - Disallowance of expenses against professional receipts

Deemed sale consideration under section 50C - Valuation by Valuation Officer under section 50C(2) - Fair market value for computation of capital gains - Whether the deemed sale consideration under section 50C should be adopted as per stamp valuation authority or reconsidered in view of the DVO's report and assessee's contentions regarding unauthorized occupation. - HELD THAT: - The Tribunal found that the AO adopted stamp duty valuations but had also referred the matter to the DVO under section 50C(2). The DVO's report did not deal with the assessee's specific contention of unauthorized occupancy and other evidences filed; the AO supplemented the DVO's report by estimating building value on his own. The CIT(A) failed to note that the assessee had submitted written comments to the DVO and had placed evidences before the DVO and the appellate authority. Given that valuation is a technical exercise and the assessee contested the DVO's valuation on multiple grounds with supporting documents, the Tribunal held that the matter required fresh technical consideration. The Tribunal therefore set aside the valuation findings and remitted the matter to the file of the AO to call for a fresh report from the DVO and decide the fair market value for computation of capital gains in accordance with law. [Paras 11]

Valuation under section 50C set aside and remitted to AO to obtain fresh DVO report and determine deemed sale consideration afresh.

Cost of acquisition as on 01.04.1981 - Fair market value for computation of capital gains - Whether the cost of acquisition (fair market value as on 01.04.1981) adopted by the AO/DVO should be accepted or re-examined. - HELD THAT: - The Tribunal noted that, in view of remitting the determination of fair market value as on date of transfer to the DVO for fresh consideration, the related issue of cost of acquisition as on 01.04.1981 (which depends on valuation of land and building) also required fresh technical examination. Consequently, the Tribunal directed that the AO call for a fresh report from the DVO seeking valuation of both land and building and decide the matter afresh in accordance with law. [Paras 15]

Cost of acquisition as on 01.04.1981 remitted to AO to obtain fresh DVO valuation of land and building and determine anew.

Disallowance of expenses against professional receipts - Validity of the disallowance of Rs. 11,500 claimed as expenses against professional receipts. - HELD THAT: - The Tribunal examined the orders of the lower authorities on the disallowance and found no infirmity in their reasoning or conclusions. The challenge to the disallowance was therefore rejected. [Paras 16]

Claimed expenses disallowance of Rs. 11,500 upheld by the authorities; ground dismissed.

Final Conclusion: The appeal is partly allowed for statistical purposes: valuation under section 50C and the question of cost of acquisition as on 01.04.1981 are set aside and remitted to the AO for fresh consideration with fresh DVO reports; the disallowance of claimed professional expenses is sustained and that ground is dismissed.

Admission of additional evidence under Rule 29 of the Income tax Appellate Tribunal Rules, 1963 - classification of agricultural land as capital asset under Section 2(14)(iii) - distance from municipal limits as determinant of agricultural status - remand for verification and fresh adjudication

Admission of additional evidence under Rule 29 of the Income tax Appellate Tribunal Rules, 1963 - distance from municipal limits as determinant of agricultural status - Additional evidence filed by the assessee was admitted by the Tribunal. - HELD THAT: - The assessee filed a certificate from the Sub Tehsildar and an affidavit asserting that the impugned agricultural land lay beyond 8 km of the local limits of Jaipur Municipality as on the date of the relevant notification. The Tribunal examined these documents and found the certificate and affidavit to be relevant to the core controversy regarding the land's status. In view of the material bearing directly on the determinative fact (road distance from municipal limits as of the notification date) and the contention that the omission to produce the certificate before the lower authority was beyond the assessee's control, the Tribunal exercised its discretion to admit the additional evidence under the Tribunal's rules and took the documents on record. [Paras 7]

Additional evidences (certificate and affidavit) admitted.

Classification of agricultural land as capital asset under Section 2(14)(iii) - remand for verification and fresh adjudication - The question whether the agricultural land sold by the assessee is a capital asset was not finally adjudicated and was remanded to the Assessing Officer for fresh decision after verification of the admitted documents. - HELD THAT: - Having admitted the additional evidence materially bearing on the factual threshold (the land's distance from municipal limits), the Tribunal did not decide the substantive controversy on the merits. Instead, it directed that the Assessing Officer reconsider the issue afresh, after verifying the documents now on record, so that the factual determination required for applying the legal test for classification under the Act can be made by the AO in the first instance. [Paras 7, 8]

Substantive issue remitted to the Assessing Officer for fresh consideration and verification of the admitted documents.

Final Conclusion: Admitted the additional evidence bearing on the land's distance from municipal limits; matter remitted to the Assessing Officer for fresh adjudication of whether the land sold is a capital asset, and the appeal is disposed of as allowed for statistical purposes.

Suspension of Customs Broker License - Post-decisional hearing - Interference by Tribunal in administrative suspension - CBLR, 2018 - Duty of party to appear and seek adjournment - Obligation to supply relevant documents before hearing - Direction to complete hearing within a time frame

Suspension of Customs Broker License - Post-decisional hearing - Interference by Tribunal in administrative suspension - Validity of the suspension order passed by the Principal Commissioner and whether the Tribunal should interfere with that suspension. - HELD THAT: - The Tribunal found that the Principal Commissioner exercised the authority conferred under CBLR, 2018 in suspending the Customs Broker license and granted a post-decisional hearing. The appellant did not attend the post-decisional hearing and did not seek adjournment before the Principal Commissioner; the plea of non-supply of documents was not placed on record before the Principal Commissioner. Given the availability of a post-decisional hearing and the appellant's non-appearance, the Tribunal held there was no valid reason to intervene with the suspension order at this stage. The Tribunal also noted the absence of any demonstrated prima facie illegality in the suspension order and recorded that non-appearance amounted to a serious lapse by the appellant. [Paras 6, 7, 8, 9]

Tribunal declined to interfere with the suspension order and refused to set it aside on the present record.

Obligation to supply relevant documents before hearing - Duty of party to appear and seek adjournment - Direction to complete hearing within a time frame - Whether the appellant should be afforded an opportunity to be heard and whether the Revenue must supply the requested documents, with directions for completion of the hearing. - HELD THAT: - Although the suspension was not set aside, the Tribunal directed that the appellant must cooperate by attending the personal hearing before the Principal Commissioner and place their arguments and defence. The appellant's counsel undertook to attend the hearing and requested supply of relevant documents. The Tribunal accordingly directed the Revenue to supply all relevant documents already requested or to be requested and to complete the hearing process as far as practicable within 10 days from communication of the order. This direction amounts to remanding the matter for the Principal Commissioner to carry out the post-decisional hearing with the documents furnished to the appellant. [Paras 9, 10]

Appellant directed to attend and participate in the post-decisional hearing; Revenue directed to supply all relevant documents and complete the hearing within 10 days.

Early hearing / out-of-turn hearing - Application for early hearing of the appeals. - HELD THAT: - Both parties consented to an early hearing in view of the urgency and narrow compass of the issue. The Tribunal allowed the miscellaneous applications for early hearing and proceeded to hear and dispose of the appeals forthwith. [Paras 2, 4, 5, 6]

Early hearing applications allowed and appeals taken up for hearing and disposal.

Final Conclusion: Early hearing applications were allowed; the Tribunal refused to interfere with the suspension order since a post-decisional hearing had been provided and the appellant failed to appear, but directed the appellant to attend the post-decisional hearing and directed the Revenue to supply all relevant documents and complete the hearing as far as practicable within 10 days, after which the appeals stand disposed of.

Contractual appointment - termination by notice or payment in lieu - maintainability of writ against private company - instrumentality of the State under Article 12 - judicial review of State action confined to public law domain - stigmatic dismissal and requirement of enquiry

Maintainability of writ against private company - instrumentality of the State under Article 12 - Whether a writ petition under Article 226 is maintainable against the 2nd respondent-Company. - HELD THAT: - The Court found that the answering respondent is a Private Limited Company incorporated under company law and that no material was produced to show it is a Government Company or an instrumentality of the State fitting within Article 12. Reliance on the test in Ramana Dayaram Shetty was invoked and, on the record, the company did not satisfy that description. In the absence of prima facie evidence that the company exercises state functions or is under State control so as to attract public law jurisdiction, extraordinary constitutional writ jurisdiction was not available to the petitioner.

Writ petition not maintainable against the Company on public law grounds.

Contractual appointment - termination by notice or payment in lieu - Whether the determination of the petitioner's services was actionable notwithstanding the contractual terms permitting termination on three months' notice or payment in lieu. - HELD THAT: - The appointment letter dated 30.08.2016 expressly made the engagement contractual and contained Condition Nos.8 and 9 reserving the Company's right to determine service by giving three months' notice or three months' gross emoluments in lieu, and requiring three months' notice from the appointee on resignation. The Court held that where termination is effected in accordance with contractual terms, the action remains within the private law domain and is not ordinarily amenable to extraordinary writ jurisdiction, subject to exceptions not shown on the facts. The admitted acceptance by the petitioner of gross emoluments for three months without protest further indicated that the contractual mode of termination was availed of.

Termination effected in terms of the contract does not give rise to a maintainable writ remedy in the circumstances shown.

Judicial review of State action confined to public law domain - stigmatic dismissal and requirement of enquiry - Whether the removal was 'stigmatic' requiring a prior enquiry and whether the Court should compel an enquiry in the circumstances. - HELD THAT: - The petitioner contended the removal was stigmatic and therefore required an enquiry. The Court observed that even if the respondent were an instrumentality of the State, different considerations might apply; however, since the appointment was contractual and there were no binding recruitment rules, actions pertaining to contractual engagements lie in the private law field. Citing the principle that courts examine State action principally when public law character is present and refrain from intruding into private commercial or contractual decisions, the Court found no basis to read into the contract a requirement of a prior enquiry. The Court also noted that allegations preceding termination do not automatically negate the contractual right to terminate and that separate causes of action, if any, remain open to the petitioner to pursue.

No requirement to direct an enquiry prior to termination in the circumstances; allegations do not preclude enforcement of contractual termination and petitioner may pursue other remedies if available.

Final Conclusion: The writ petition is dismissed as lacking merit: the Company is not shown to be an instrumentality of the State, the petitioner's engagement was contractual permitting termination by notice or payment in lieu, and no basis exists to treat the termination as attracting constitutional public law scrutiny or to direct a prior enquiry; other causes of action, if any, remain available to the petitioner.

Direction to produce bank account details for receipt of ticket sale proceeds - appointment of an inspector to identify and verify company assets at project site - interim reliefs pending adjudication of a Company Petition

Direction to produce bank account details for receipt of ticket sale proceeds - Respondents 2, 3, 4, 5 and 6 to disclose the bank account(s) into which sale proceeds of entry tickets issued on 13th, 14th and 15th October, 2020 were credited. - HELD THAT: - The Tribunal observed that a substantive Company Petition dealing with most of the reliefs is pending, but in the interest of justice it is appropriate to grant limited interim reliefs that do not pre-empt the main lis. For transparency and to enable verification of the alleged diversion of receipts, the Tribunal directed Respondents 2, 3, 4, 5 and 6 to submit details of the bank account(s) where the ticket sale proceeds for the specified dates were credited. The direction is limited in scope to those particular dates and is procedural in nature, aimed at preserving and disclosing information relevant to the ongoing dispute. [Paras 32]

Respondents 2, 3, 4, 5 and 6 are directed to submit details of the bank account(s) into which the sale proceeds of entry tickets issued on 13th, 14th and 15th October, 2020 were credited, within two weeks from receipt of the order.

Appointment of an inspector to identify and verify company assets at project site - Appointment process for an inspector to identify and list assets of Respondent No.1 at Jatayupara Project and compare the same with the assets shown in the latest audited financial statements. - HELD THAT: - The Tribunal considered the petitioners' request for inspection and verification of assets installed at the project site, noting the relevance of such an exercise to the allegations about asset ownership and diversion. Rather than unilaterally appointing an inspector, the Tribunal directed the petitioner to file a memo suggesting three reliable persons, to be proposed with mutual consent of the opposite side, from whom one may be appointed as Inspector. This procedure preserves party participation and limits the Tribunal's order to initiating a consensual selection process for the inspector, leaving the actual appointment to follow from the names so proposed. [Paras 33]

Petitioner to file, within two weeks, a memo suggesting three reliable persons (with mutual consent from the opposite side) from whom one may be appointed as Inspector to identify and list the assets of Respondent No.1 at the Jatayupara Project and report variances with the latest audited financial statements.

Final Conclusion: The Tribunal declined to grant the substantive reliefs sought in the application insofar as they overlap with a pending Company Petition, but granted limited interim reliefs: directed disclosure of bank account details for ticket proceeds on specified dates and initiated a consensual process for appointing an inspector to verify project assets; the application is disposed of subject to those directions.

Application of Section 14 principles to exclude time spent prosecuting bona fide proceedings before a court - limitation for appeals under Section 61(2) of the Insolvency and Bankruptcy Code - principle that the commercial wisdom of the Committee of Creditors is non justiciable except within the limited tests in Sections 30(2) and 31 - scope of judicial review by Adjudicating Authority and Appellate Tribunal under Sections 30, 31 and 61 - waiver and acquiescence - contractual/formal waiver clauses in prescribed process formats and their enforceability - unconscionability and unequal bargaining power affecting standard/form contract terms in the resolution process - remand for determination of pending appeal against approval order

Application of Section 14 principles to exclude time spent prosecuting bona fide proceedings before a court - limitation for appeals under Section 61(2) of the Insolvency and Bankruptcy Code - Whether the period during which KIAL prosecuted a writ petition before the Bombay High Court could be excluded for computing limitation for the appeals under Section 61(2) of the I&B Code. - HELD THAT: - The Court held that Section 61(2) of the I&B Code fixes the appeal period (30 days with a discretionary additional 15 days) and that the I&B Code is a special statute for limitation purposes. However, consistent with precedents, although Section 14 of the Limitation Act may not apply literally to proceedings before a quasi judicial tribunal, the equitable principle underlying Section 14 - exclusion of time spent prosecuting bona fide proceedings before a wrong forum with due diligence - can be applied to advance justice. KIAL had promptly and bona fide filed a writ before the Bombay High Court alleging breach of natural justice in NCLT proceedings; the High Court heard the matter and dismissed it after detailed consideration. Applying the principles underlying Section 14, the period during which KIAL diligently pursued the writ in good faith was excluded and, on that basis, KIAL's appeals to NCLAT were held to be within limitation. (See reasoning and findings in paras 36-45, 51-65.) [Paras 37, 44, 51, 64, 65]

Period spent by KIAL prosecuting the bona fide writ petition before the Bombay High Court was excluded in computing limitation; the appeals before NCLAT were within time.

Waiver and acquiescence - contractual/formal waiver clauses in prescribed process formats and their enforceability - unconscionability and unequal bargaining power affecting standard/form contract terms in the resolution process - Whether KIAL, by accepting and signing the prescribed covering letter and by submitting revised plans after late participation by another applicant, had waived or acquiesced to the consideration of belated resolution plans so as to be estopped from challenging Kalpraj's participation. - HELD THAT: - The Court examined the Process Memorandum clauses relied upon by other parties and the covering letter signed by KIAL. It reiterated that waiver/acquiescence must be shown by clear conduct or agreement - intentional relinquishment of a known right - and that mere silence or participation does not automatically amount to waiver. The covering letter clause was part of a prescribed format supplied by the process and, given the unequal bargaining context of resolution applicants and the RP/CoC, such unilateral and broadly worded surrender clauses cannot be mechanically enforced; they may be unconscionable where the applicant has no meaningful choice. On facts, KIAL objected immediately when Kalpraj submitted a belated plan, continued to press its objections, and submitted revised plans only under compulsion (clause 11.2) to avoid being ousted. There was no forfeiture of rights, nor material detrimental reliance by others established. Therefore KIAL was not held to have waived or acquiesced its rights to challenge the participation of Kalpraj. (See reasoning and findings in paras 86-101, 116-134.) [Paras 95, 101, 126, 132, 134]

KIAL had not waived or acquiesced its right to challenge Kalpraj's participation; waiver/acquiescence was not established.

Principle that the commercial wisdom of the Committee of Creditors is non justiciable except within the limited tests in Sections 30(2) and 31 - scope of judicial review by Adjudicating Authority and Appellate Tribunal under Sections 30, 31 and 61 - Whether NCLAT was justified in setting aside NCLT's approval of the resolution plan on grounds of breach of natural justice and material irregularity, and whether NCLAT could review CoC's commercial decision. - HELD THAT: - Relying on the Code and precedents, the Court emphasised that the I&B Code entrusts business decisions about resolution to the Committee of Creditors; judicial review by NCLT/NCLAT is limited to the statutory tests in Sections 30(2), 31 and the specific grounds of appeal in Section 61(3). The commercial wisdom of CoC (feasibility and viability assessed by voting financial creditors) is not open to re appraisal by the Adjudicating Authority or Appellate Tribunal unless the resolution plan fails the statutory requirements. On the record, the CoC had expressly approved late consideration and RP's actions were backed by CoC; the approval was by a large majority (84.36%). The Court found that NCLAT exceeded its jurisdiction in interfering with CoC's commercial decision and setting aside NCLT orders; having regard to the limited scope of judicial review and the factual posture (majority approval, steps taken in implementation), NCLAT's interference was unsustainable. (See reasoning and findings in paras 136-158.) [Paras 142, 146, 156, 157, 158]

NCLAT erred in interfering with CoC's commercial decision; NCLT's orders approving the resolution plan are restored.

Remand for determination of pending appeal against approval order - Disposition of the separate appeal by Fourth Dimension Solutions Ltd. that was pending before NCLAT. - HELD THAT: - The Court did not decide the merits of Fourth Dimension's appeal. Observing that its challenge before NCLAT remained pending, the Court directed NCLAT to decide that appeal in accordance with law expeditiously and in any event within two months. This direction is procedural and results in remand to the appellate forum for final adjudication. [Paras 160]

Fourth Dimension Solutions Ltd.'s appeal is remitted for decision by NCLAT within two months; merits left open.

Final Conclusion: The appeals by Kalpraj, the erstwhile Resolution Professional and Deutsche Bank are allowed; NCLAT's order dated 5.8.2020 is quashed and the NCLT orders dated 28.11.2019 approving the resolution plan are restored. The period KIAL spent prosecuting a bona fide writ before the Bombay High Court was excluded for limitation purposes; KIAL did not waive or acquiesce its right to challenge Kalpraj's participation. The appeal of Fourth Dimension Solutions Ltd. remains pending before NCLAT and is directed to be decided within two months.

Competency of authorised representative to file a Section 7 application - validity of loan documents and effect of common seal - existence of creditor debtor relationship and financial debt - default as antecedent for initiation of CIRP - admission of application under Section 7 and commencement of moratorium

Competency of authorised representative to file a Section 7 application - The person who verified, signed and presented the Section 7 application was competent to do so on behalf of the Financial Creditor. - HELD THAT: - The Tribunal examined the power of attorney and earlier interlocutory proceedings in which the same contention was raised and decided. It recorded that Smt. Maya C., Assistant Vice President/Branch Head, had proper authority to file the application; the earlier order of this Tribunal to that effect was affirmed by the NCLAT and, accordingly, the plea on competency was rejected as impermissible to re-agitate at this stage. [Paras 19, 20]

Objection to competency of the applicant's representative is rejected and the representative is held competent to present the application.

Validity of loan documents and effect of common seal - The documents produced by the Financial Creditor, including those said to bear the common seal, were verified and found to be in order for the purposes of the application. - HELD THAT: - On verification of original documents in compliance with Tribunal directions, the Bench observed that the documents alleged to bear the impressed common seal were verified on record. The Tribunal rejected the objection that absence or non-visibility of the common seal vitiated the documents, noting that the common seal had been affixed though it may not be visible on the copies furnished. [Paras 19]

The objection regarding non-affixation/ non-visibility of the common seal is negatived and the loan documents are treated as valid for the purposes of admission.

Existence of creditor debtor relationship and financial debt - default as antecedent for initiation of CIRP - admission of application under Section 7 and commencement of moratorium - There exists a creditor debtor relationship, a financial debt and a default, and the Section 7 application is complete and admitted, triggering moratorium and appointment of an Interim Resolution Professional. - HELD THAT: - The Tribunal found from the record and pleadings that the Corporate Debtor had received monies from the Financial Creditor and had not repaid them; the account was declared NPA and default was established. The Bench held that the application satisfied the statutory definitions of Financial Creditor, Financial Debt and Default and that the Section 7(4) application was complete. Consequently, admission was warranted, the CIRP was ordered to commence from the date of the order, moratorium under Section 14 was imposed, and the proposed interim resolution professional was appointed subject to statutory compliances. [Paras 19, 20, 21, 22, 23]

The Section 7 application is admitted; CIRP is initiated, moratorium is declared, and the suggested IRP is appointed.

Final Conclusion: The Tribunal admitted the Financial Creditor's Section 7 application against the Corporate Debtor, holding that the applicant's representative was competent, the loan documents were in order, a creditor debtor relationship and default existed, and accordingly directed commencement of CIRP with imposition of moratorium and appointment of an Interim Resolution Professional.

Permissibility of simultaneous CIRPs or claims against principal borrower and corporate guarantor - Interpretation of Section 60(2) and (3) of the Insolvency and Bankruptcy Code regarding proceedings against corporate guarantors - Effect of an admitted claim in one CIRP on an asserted claim in another CIRP - Binding effect of an approved resolution plan on guarantors under Section 31 - Avoidance proceedings under Section 66 and their separability from admission of claims

Permissibility of simultaneous CIRPs or claims against principal borrower and corporate guarantor - Interpretation of Section 60(2) and (3) of the Insolvency and Bankruptcy Code regarding proceedings against corporate guarantors - Effect of an admitted claim in one CIRP on an asserted claim in another CIRP - Binding effect of an approved resolution plan on guarantors under Section 31 - Creditor may initiate and maintain CIRP/claims simultaneously against the principal borrower and its corporate guarantor; admission in one CIRP does not automatically bar admission in the other. - HELD THAT: - The Tribunal held that the Insolvency and Bankruptcy Code, read with the substituted language of Section 60(2) and (3), does not prohibit concurrent proceedings or maintenance of claims against both the corporate debtor and its corporate guarantor. The earlier NCLAT decision in Piramal addressed only whether two guarantors could be proceeded against simultaneously and did not decide the distinct question whether proceedings can run against a principal borrower and a guarantor at the same time. The statutory scheme in Section 60(2)-(3), as amended with retrospective effect, contemplates insolvency proceedings against guarantors being before the same Adjudicating Authority and does not displace the creditor's contractual remedy against a guarantor. Reliance on the Supreme Court's reasoning in V. Ramakrishnan supports that guarantors are not entitled to a moratorium by virtue of a CIRP against the corporate debtor and that a resolution plan, once approved, binds guarantors under Section 31. Practical adjustments between proceeds recovered in parallel CIRPs can be made at the stage of distribution/realisation and by the IRP/RP, particularly where proceedings are before the same IRP/RP; regulatory guidance may assist in coordination. Consequently, a claim in the guarantor's CIRP cannot be rejected solely because a claim on the same debt has been admitted in the principal borrower's CIRP. [Paras 14, 16, 17, 18, 19]

The Appeal succeeds on this legal question: there is no bar to creditors initiating or maintaining CIRPs or claims concurrently against the principal borrower and its corporate guarantor; admission in one CIRP does not ipso facto preclude admission in the other.

Avoidance proceedings under Section 66 and their separability from admission of claims - The Adjudicating Authority must consider the Appellant's claim in the guarantor's CIRP; any separate Avoidance Application already filed may be decided independently on its merits. - HELD THAT: - The Tribunal quashed the Adjudicating Authority's dismissal of the Appellant's claim and remitted the matter for fresh consideration by the IRP/RP and the Adjudicating Authority, directing that the claim submitted by the Appellant be considered. At the same time, the Tribunal expressly left open the Avoidance Application said to have been filed under Section 66, noting that it may be decided separately on merits in accordance with law and that the Tribunal expressed no view on that controversy. [Paras 9]

Impugned order set aside; claim remitted to the Adjudicating Authority/IRP-RP for consideration; Avoidance Application to be decided separately on merits.

Final Conclusion: Appeal allowed. Impugned order quashed and set aside. The claim filed by the appellant in the corporate guarantor's CIRP must be considered by the IRP/RP and the Adjudicating Authority; concurrent proceedings against principal borrower and guarantor are permissible. The pending Avoidance Application is left open for independent adjudication. No costs.

Liquidation of the corporate debtor - appointment of liquidator - liquidation as a going concern under Regulation 39(C) of IBBI (Liquidation) Regulations, 2016 - vesting of powers in the liquidator - public notice and filing with ROC - cessation of moratorium

Liquidation of the corporate debtor - Corporate Debtor M/s. India Techs Limited ordered to be liquidated under Section 33(1) of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal was satisfied by the Committee of Creditors' unanimous recording that no resolution plan was approved during the CIRP period and by the resolutions passed in the 10th meeting. On that basis and having considered the case records and resolutions, the Adjudicating Authority invoked Section 33(1) and ordered liquidation of the corporate debtor with immediate effect. [Paras 5, 8, 9]

IA under Section 33(1) is allowed and the corporate debtor is put into liquidation with immediate effect.

Appointment of liquidator - The Resolution Professional, Mr. Sasitharan Ramaswamy, is appointed as the Liquidator under Section 34 of the Code. - HELD THAT: - The Resolution Professional submitted the requisite written consent (Form 2) to act as Liquidator and the Committee of Creditors recommended his appointment in the 10th meeting. The Tribunal, being satisfied with the consent and the committee's recommendation, appointed the Resolution Professional as Liquidator in accordance with the statutory scheme. [Paras 7, 8, 9]

The Resolution Professional is appointed as Liquidator of the corporate debtor.

Public notice and filing with ROC - vesting of powers in the liquidator - liquidation as a going concern under Regulation 39(C) of IBBI (Liquidation) Regulations, 2016 - cessation of moratorium - Directions issued for conduct of liquidation: public notice and ROC filing; vesting of management powers in the Liquidator; exploration of sale as a going concern; and that the moratorium declared earlier stands ceased. - HELD THAT: - The Tribunal directed that liquidation be carried out as provided in Chapter III, including issuance of public notice and informing the Registrar of Companies. It vested in the Liquidator the powers of the board and key managerial personnel and directed personnel to cooperate. The Tribunal noted the Committee's resolution to explore sale as a going concern under Regulation 39(C) and authorised the Liquidator to represent the corporate debtor before government authorities. The earlier moratorium declared on admission was held to have ceased consequent to the liquidation order. [Paras 9]

Liquidation to proceed in terms of Chapter III with public notice and ROC filing; powers vested in Liquidator; exploration of sale as a going concern authorised; moratorium ceases.

Final Conclusion: The Interlocutory Application is allowed: the corporate debtor is ordered into liquidation, the Resolution Professional is appointed as Liquidator, consequential directions for conducting liquidation (including public notice, ROC filing, vesting of powers and exploration of sale as a going concern) are issued, and the earlier moratorium is held to have ceased. IA (IBC)/18/2021 is disposed of.

Avoidance of preferential transactions - maintainability after approval of resolution plan - role of resolution professional - limitation of RP's authority - jurisdiction of NCLT post-approval - benefit to creditors - avoidance proceedings in liquidation

Avoidance of preferential transactions - maintainability after approval of resolution plan - benefit to creditors - Whether an application under Section 43 for avoidance of preferential transactions can be entertained after approval of the resolution plan. - HELD THAT: - The Tribunal held that avoidance applications under Section 43 are intended to secure benefits for the creditors of the corporate debtor during the CIRP and to be taken into account in the formulation or approval of a resolution plan. Once a resolution plan is approved and the new management takes over, the purpose of an avoidance application (to preserve or recover assets for distribution among creditors under the CIRP) is exhausted. Post-approval, the rights and management of the company vest in the successful resolution applicant and the NCLT has no jurisdiction to adjudicate fresh avoidance claims in relation to a corporate debtor now under new management, except as permitted in relation to the resolution plan under the statutory scheme. [Paras 21, 25, 30]

An application under Section 43 cannot be entertained after approval of the resolution plan; the avoidance application is not maintainable once the corporate debtor is under new management.

Role of resolution professional - limitation of RP's authority - Whether the Resolution Professional can file or pursue an avoidance application after the resolution plan is approved. - HELD THAT: - Relying on the statutory scheme (including Section 23) and authoritative precedent, the Tribunal held that the RP's mandate is limited to conducting and managing the CIRP until a resolution plan is approved (or a liquidator appointed). The RP's role is administrative during the CIRP and ceases insofar as acting on behalf of the corporate debtor after approval of the resolution plan; the RP cannot continue as a 'former RP' to prosecute avoidance proceedings once the plan is approved and control has passed to the resolution applicant. [Paras 26, 27]

The RP has no authority to pursue avoidance applications after approval of the resolution plan; the RP's mandate ends on approval.

Jurisdiction of NCLT post-approval - Whether the Adjudicating Authority (NCLT) has jurisdiction to entertain avoidance applications after approval of the resolution plan. - HELD THAT: - The Tribunal concluded that, in the resolution context, once a resolution plan is approved and the new management assumes control, the NCLT ordinarily has no jurisdiction to adjudicate avoidance applications in respect of the corporate debtor unless the final resolution plan itself makes provision for such actions. Permitting post-approval avoidance adjudication would amount to the NCLT stepping into the shoes of the new management and interfering with the prerogatives of the incoming management. [Paras 25, 30]

NCLT lacks jurisdiction to decide avoidance applications against a corporate debtor after approval of the resolution plan and transfer of management.

Avoidance proceedings in liquidation - Whether the Tribunal's conclusion about post-approval avoidance applications applies to liquidation proceedings. - HELD THAT: - The Tribunal distinguished liquidation from resolution: in liquidation, the liquidator may prosecute avoidance proceedings and benefits recovered can assist the liquidation estate. The limitation on post-approval avoidance adjudication articulated for resolution proceedings does not govern liquidation, where different considerations apply and the liquidator's role permits recovery actions for the benefit of creditors in winding up. [Paras 29]

The prohibition on entertaining avoidance applications post-resolution approval does not extend to liquidation proceedings, where avoidance actions may be maintainable by a liquidator.

Final Conclusion: The Tribunal dismissed the avoidance application (TMA/42/KOB/2019 in CP/689/IB/2017 (C.B)) on the ground that after approval of the resolution plan and transfer of management to the resolution applicant, neither the RP nor the NCLT has jurisdiction to pursue or decide Section 43 avoidance claims in the resolution context.

Liquidation under the Insolvency and Bankruptcy Code - liquidation on CoC resolution in terms of section 33(2) of the Code - appointment of liquidator and written consent of the resolution professional under section 34(1) of the Code - power of the Adjudicating Authority to replace or appoint liquidator under section 34(4)(c) of the Code - limitations on Committee of Creditors' role in appointment of liquidator

Liquidation on CoC resolution in terms of section 33(2) of the Code - Corporate debtor ordered to be liquidated pursuant to a CoC resolution approved by the requisite voting share under the Code. - HELD THAT: - The Adjudicating Authority found that the Committee of Creditors passed a resolution with 93.21% voting share in favour of liquidation. Section 33(2) of the Code requires the Adjudicating Authority to pass an order for liquidation where the resolution professional intimates a CoC decision to liquidate approved by not less than sixty-six percent of the voting share. On the material before the Tribunal, the statutory threshold was met and the corporate insolvency resolution process was ordered to be converted into liquidation. [Paras 18, 24]

IA No.1027/KB/2020 is allowed and the corporate debtor is ordered to be liquidated in terms of section 33(2) of the Code read with subsection (1) thereof.

Appointment of liquidator and written consent of the resolution professional under section 34(1) of the Code - power of the Adjudicating Authority to replace or appoint liquidator under section 34(4)(c) of the Code - limitations on Committee of Creditors' role in appointment of liquidator - Neither the CoC resolution purporting to appoint a professional nor the absence of written consent by the RP can validly determine the liquidator; the Adjudicating Authority appointed a liquidator under its section 34(4) power. - HELD THAT: - The Tribunal held that the Code does not confer on the Committee of Creditors the power to appoint the liquidator; section 34(1) contemplates appointment of the RP as liquidator subject to his written consent and section 34(4) permits the Adjudicating Authority to replace the RP. The CoC resolutions (including the resolution proposing Mr. Pratim Bayal) were misconceived because the CoC has no authority to appoint the liquidator. Further, a person who has not submitted the written consent under section 34(1) cannot be appointed. Consequently, neither the CoC's choice nor a person lacking written consent could be appointed. Exercising its statutory power under section 34(4)(c), the Adjudicating Authority appointed an independent liquidator to conduct the liquidation process. [Paras 20, 21, 22, 23, 24]

The purported appointment of a liquidator by the CoC is invalid; neither the proposed professional approved by the CoC nor a person who failed to tender written consent can be appointed; the Adjudicating Authority appointed Mr. Sunil Mohan Acharya as liquidator under section 34(4)(c).

Final Conclusion: The corporate insolvency resolution process of Amrit Feeds Limited is converted into liquidation in terms of the Code; the Adjudicating Authority, exercising its power under section 34(4)(c), has appointed Mr. Sunil Mohan Acharya as the liquidator and directed initiation of the liquidation process along with consequential statutory steps.

Avoidance of preferential transactions - timeframe under Regulation 35A of the CIRP Regulations - duty of the Resolution Professional to form an independent opinion under section 43(1) of the Code - reliance on forensic auditor's report - effect of approval of a resolution plan - Resolution Professional becomes functus officio - maintainability of an application under sections 43/44 after approval of the resolution plan

Timeframe under Regulation 35A of the CIRP Regulations - duty of the Resolution Professional to form an independent opinion under section 43(1) of the Code - reliance on forensic auditor's report - Whether the Resolution Professional complied with the timeframe and duty to form an independent determination before filing an application for avoidance of preferential transactions. - HELD THAT: - The Tribunal examined the timeline against Regulation 35A of the CIRP Regulations and found that the application under section 43 was filed on the 389th day of the CIRP, thereby not adhering to the prescribed timeframe. Further, Regulation 35A(3) contemplates that the RP must form a determination of preferential transactions; the RP in this case relied heavily on the forensic auditor's report and did not articulate any independent reasons or opinions reaching such a determination. The forensic auditor had disclaimed providing an audit opinion or assurance, and the RP's dependence on that report without independent evaluative findings was held insufficient. The Tribunal was also satisfied with the explanations offered by respondents regarding the impugned transactions. For these reasons the RP was found not to have complied with the temporal and substantive obligations required before invoking avoidance provisions. [Paras 21]

The application was filed beyond the timeframe required by Regulation 35A and lacked the RP's independent determination; the RP did not comply with the regulatory duty to form an opinion before filing.

Effect of approval of a resolution plan - Resolution Professional becomes functus officio - maintainability of an application under sections 43/44 after approval of the resolution plan - avoidance of preferential transactions - Whether the application for avoidance of preferential transactions could be pursued after the resolution plan was approved. - HELD THAT: - The Tribunal observed that the RP had filed the application for approval of the resolution plan prior to filing the section 43 application and that the resolution plan was subsequently approved. Once the resolution plan is approved and a new management takes over, the RP becomes functus officio and cannot continue litigation on behalf of the corporate debtor. The Tribunal relied on the principle that an application for avoidance of preferential transactions cannot be prosecuted by the RP after approval of the resolution plan and noted that the sequence of filings (application for plan approval followed by the avoidance application) militated against maintainability. The Tribunal also recorded a view that the timing and manner of filing suggested the RP's motive was to avoid regulatory scrutiny rather than to diligently pursue avoidance remedies. In light of these considerations, the Tribunal held that the IA could not be allowed to survive post-approval of the resolution plan. [Paras 22, 23, 24]

An application to avoid preferential transactions cannot be pursued by the RP after the resolution plan is approved because the RP becomes functus officio; accordingly the IA is not maintainable and must be dismissed.

Final Conclusion: The IA filed by the Resolution Professional was dismissed: the RP failed to comply with the timeframe and the obligation to form an independent determination under Regulation 35A and section 43(1), and, having filed for approval of the resolution plan before prosecuting the avoidance action, could not pursue the application after the plan's approval when the RP had become functus officio.

Disclosure of relationships by an insolvency professional - timely cost and fee disclosures by an interim resolution professional - requirement to appoint registered valuers for valuation in CIRP - raising invoices in the name of the insolvency professional and payment into the IP's bank account - public announcement obligation on appointment of an IRP - duty to take reasonable care and diligence and abide by the Code of Conduct

Disclosure of relationships by an insolvency professional - regulation 7(2)(h) of the IP Regulations - Circular No. IP/005/2018 - Delay in disclosure of relationship by the IRP to the Insolvency Professional Agency - HELD THAT: - The Disciplinary Committee found that the IRP was required to disclose relationships with the corporate debtor and professionals engaged within three days of such appointment or engagement. Ms. Jain was appointed on 27-3-2019 but made initial relationship disclosure only on 4-7-2019 and submitted disclosures relating to professionals appointed during April-May 2019 only on 11-1-2020 after inspection queries. Her explanations about uncertainty of removal and personal engagements of professionals were examined and rejected to the extent they justified the delay. The DC held that the professionals were engaged in matters related to the CIRP and required timely disclosure; therefore there was a breach of the disclosure obligation. [Paras 10]

There was a contravention in respect of delayed relationship disclosure; the IRP is warned to exercise extreme care and diligence and not to repeat such conduct.

Raising invoices in the name of the insolvency professional and payment into the IP's bank account - fees payable to an insolvency professional - IBBI Circular No. IP/004/2018 - Invoices were raised in the name of the IRP's partnership firm and larger invoices were submitted than the fees ratified by the CoC - HELD THAT: - The DC noted invoices dated April and July 2019 were addressed to the corporate debtor in the name of the partnership firm rather than the IRP and that a bill dated 29-7-2019 exceeded the fees ratified by the CoC. The IRP submitted that the firm-name invoices were typographical errors subsequently rectified and that the applicant and CoC had directed invoicing in the name of the corporate debtor. The DC observed there was non-compliance with the Circular's requirement that invoices be raised in the IP's name and paid to the IP's bank account; however, given the rectification after inspection and the factual circumstances about applicant/CoC interaction and subsequent ratification, the DC took a lenient view. [Paras 7]

The conduct breached the Circular's invoicing requirement, but in view of the facts and subsequent rectification a lenient view was taken and no punitive action was imposed.

Timely cost disclosure by an IRP - Form II disclosure of insolvency resolution process cost - IBBI/IP/013/2018 - Submission of cost disclosure by the IRP after demitting office - HELD THAT: - The DC examined that the Form II cost disclosure was filed on 30-10-2019, approximately three months after demitting office on 24-7-2019. The IRP explained delays due to unsettled fees, follow-ups with RP and CoC, pending approvals for valuers and related uncertainties. The DC considered the explanations and noted follow up communications and the fact that some expenses remained unpaid; on evaluation the submission was found satisfactory and no contravention was made out. [Paras 8]

No contravention is recorded in respect of the timing and manner of the cost disclosure.

Requirement to appoint registered valuers for valuation in CIRP - Regulation 27 of CIRP Regulations - IBBI/RV/019/2018 - Appointment of valuers who were not registered with the Board - HELD THAT: - The DC observed that valuers purportedly appointed on 12-7-2019 were not registered valuers as required by Regulation 27 and the IBBI circular effective 1-2-2019. The IRP contended the appointment letters were subsequently cancelled by the CoC and that she had issued letters prior to a later clarification, and that registered valuers were ultimately appointed by the RP. The DC noted the contravention of the regulation and circular but, given cancellation by CoC and subsequent compliance by RP, adopted a lenient view. [Paras 9]

The appointment contravened the registration requirement, but no further disciplinary action was taken in view of cancellation and subsequent compliance.

Public announcement obligation on appointment of an IRP - Regulation 6(1) of CIRP Regulations - Timeliness of public announcement made by the IRP - HELD THAT: - The DC reviewed evidence that the public announcement was uploaded on the IBBI website on 28-3-2019 and published in two newspapers on 1-4-2019, while the corporate debtor's website showed an upload on 2-5-2019. The IRP explained that an initial publication and newspaper publication occurred within three days and that the later change on the corporate group's website was a hyperlink re-arrangement. The DC observed that operational creditors had filed claims based on the published announcement and concluded there was no delay in the public announcement within the regulatory timeframe. [Paras 11]

No contravention in respect of the public announcement obligation was found.

Final Conclusion: The Disciplinary Committee disposed of the show cause notice and found a contravention only for delay in relationship disclosure by the IRP; having taken lenient views on other deficiencies (invoicing, valuer appointment) and found no contravention on cost disclosure and public announcement, the Committee issued a warning to Ms. Sonu Jain to exercise extreme care and diligence and forwarded copies of the order to her IPA and the NCLT Registrar.

Authorisation for assignment - Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016 - Code of Conduct for insolvency professionals - Obligation to comply with bye laws of insolvency professional agency - Professional misconduct - Certificate of registration - conditions - Exercise of powers under Regulation 11 of the IP Regulations

Authorisation for assignment - Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016 - Obligation to comply with bye laws of insolvency professional agency - Code of Conduct for insolvency professionals - Whether the insolvency professional undertook or was ratified to undertake the assignment as Resolution Professional after 31st December, 2019 without holding a valid authorisation for assignment (AFA). - HELD THAT: - The Disciplinary Committee observed that Regulation 7A requires an insolvency professional to hold a valid AFA before accepting or undertaking any assignment after 31st December, 2019, subject only to the limited provisos. The bye laws of the concerned insolvency professional agency define AFA and provide the mechanism for grant. Section 208 of the Code and the conditions of the certificate of registration require an IP to comply with the bye laws and the Code of Conduct, including taking reasonable care and not acting negligently. The record shows that the IP had given consent earlier but was ratified as Resolution Professional in the first CoC meeting held on 8th January, 2020, i.e., after the threshold date, without a valid AFA. The IP acknowledged he became aware of the AFA requirement only in early February 2020 and subsequently applied for AFA, which was not granted. The Disciplinary Committee of the IPA has found him guilty of professional misconduct for accepting the assignment after 31st December, 2019 without a valid AFA and imposed a penalty. [Paras 4, 5]

The Committee records that the IP was ratified after 31st December, 2019 without holding a valid AFA and that the IPA's Disciplinary Committee has held him guilty of professional misconduct and imposed a penalty.

Exercise of powers under Regulation 11 of the IP Regulations - Concurrent disciplinary action by insolvency professional agency - Whether the IBBI should issue any direction or further action in view of the IPA's disciplinary order in the matter. - HELD THAT: - The IBBI, exercising the power under Regulation 11, noted that the Disciplinary Committee of the Indian Institute of Insolvency Professionals of ICAI had already considered the matter and passed an order finding professional misconduct and imposing a penalty. In light of that prior adjudication by the IPA's Disciplinary Committee, the IBBI disposed of the show cause notice without issuing any directions. The IBBI directed that a copy of its order be forwarded to the IPA and to the Registrar of the Principal Bench of the NCLT for information. [Paras 4, 6, 7]

The show cause notice is disposed of without any direction, and the order is to be forwarded to the IPA and the NCLT Registrar for information.

Final Conclusion: The IBBI recorded that the IP was ratified as Resolution Professional after 31st December, 2019 without a valid Authorisation for Assignment, noted the IPA's Disciplinary Committee has found professional misconduct and imposed a penalty, and accordingly disposed of the show cause notice under Regulation 11 without issuing further directions, while sending copies of this order to the IPA and the NCLT Registrar.

Declaration of NPA as date of default - initiation of CIRP under Section 7 of the I&B Code - limitation under Article 137 of the Limitation Act, 1963 - acknowledgement of debt and extension under Section 18 of the Limitation Act, 1963

Declaration of NPA as date of default - limitation under Article 137 of the Limitation Act, 1963 - initiation of CIRP under Section 7 of the I&B Code - Whether the Section 7 application filed on 12th September 2018 was barred by limitation having regard to the date of default recorded as 30th April 2013. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the date of default is the date on which the account was declared NPA, namely 30th April 2013, as recorded in Form I (Part IV) and in accordance with the law laid down in B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates. Applying Article 137 of the Limitation Act, 1963, a three-year limitation period applies to the present cause of action; an application filed on 12th September 2018 therefore falls beyond that period. The Tribunal also relied on consistent earlier decisions of this Tribunal to the same effect. Having found the date of default to be 30th April 2013, the Tribunal agreed that the Section 7 petition filed on 12th September 2018 is time-barred. [Paras 11, 12, 13, 22]

Application under Section 7 is barred by limitation and the Adjudicating Authority's rejection on that ground is affirmed.

Acknowledgement of debt and extension under Section 18 of the Limitation Act, 1963 - Whether any written acknowledgement by the corporate debtor operated to extend the limitation period such that the Section 7 application would be timely. - HELD THAT: - The Appellant relied on alleged acknowledgements-provisions in the Master Restructuring Agreement (MRA) dated 26th September 2013 and an One Time Settlement (OTS) proposal dated 19th June 2015-to contend that Section 18 of the Limitation Act extended the limitation period. The Tribunal noted that the corporate debtor had exited the MRA on 31st January 2015 and that the MRA's general acknowledgement of indebtedness could not be invoked as a written acknowledgement operative to restart limitation. The OTS notation in the Joint Lenders Meeting paper (dated 19th June 2015) did not amount to a specific written acknowledgement by the corporate debtor admitting the debt so as to attract Section 18. The Tribunal examined precedents relied upon by the parties and distinguished those decisions where there was a clear written acknowledgement; on the facts before it there was no such operative written acknowledgement to revive limitation. [Paras 14, 16]

No valid written acknowledgement was proved that would extend or restart the limitation period; Section 18 does not save the time-barred petition.

Final Conclusion: The Appeal is dismissed. The Tribunal affirms the Adjudicating Authority's conclusion that the Section 7 petition filed on 12th September 2018 is barred by limitation (date of default recorded as 30th April 2013) and that no effective written acknowledgement extended the limitation period; no interference is called for.

Manpower supply agency service - secondment of employees - employees treated as employees of the Indian subsidiary during secondment - Reverse Charge Mechanism - service tax liability of recipient under RCM - extended period of limitation - penalty under Section 78

Manpower supply agency service - secondment of employees - Reverse Charge Mechanism - employees treated as employees of the Indian subsidiary during secondment - Whether deputation of staff and experts by the overseas parent, whose salaries are paid by the Indian subsidiary with statutory deductions, amounts to supply of manpower by the parent attracting service tax under the Reverse Charge Mechanism. - HELD THAT: - The Tribunal examined whether experts and staff sent on secondment by the overseas parent constitute a taxable supply of manpower by the parent to the Indian subsidiary. Relying on consistent decisions of this Tribunal and on subsequent appellate disposition the Tribunal treated the deputed personnel as working as employees of the Indian subsidiary during the period of secondment. Consequently the arrangement does not amount to the parent supplying manpower and therefore does not attract service tax leviable on the recipient under the Reverse Charge Mechanism. The Tribunal also noted that in the assessee's own later period the Commissioner (Appeals) reached the same conclusion and that order has not been challenged by the Revenue, lending finality to the position in the appellant's case. On these grounds the demand, which was founded on the premise of supply of manpower by the parent, could not be sustained. [Paras 8, 9]

Decree of service tax under RCM set aside; deputed employees treated as employees of the Indian subsidiary and no service tax payable on their salaries.

Extended period of limitation - penalty under Section 78 - Whether invocation of the extended period of limitation and the penalty imposed are sustainable in view of the primary finding that no taxable service was rendered. - HELD THAT: - The impugned demand, interest and penalty were predicated on the conclusion that the parent supplied manpower to the appellant. Having held that no such supply took place, the Tribunal found no basis to sustain the invocation of the extended period or the penalty. The Tribunal therefore set aside the demand, interest and the penalty imposed under the impugned order. The Tribunal did not rest its decision on an independent adjudication of the proviso to the limitation provision or on novel culpability facts for penalty, because the foundational finding of taxable service was negatived. [Paras 2, 9]

Invocation of extended limitation and penalty cannot be sustained; interest and penalty set aside along with the demand.

Final Conclusion: Appeal allowed. The impugned order confirming demand, interest and penalty is set aside on the ground that deputed employees on secondment are to be treated as employees of the Indian subsidiary and the parent company did not supply manpower; consequential relief, if any, granted.

Writ jurisdiction under Article 226 of the Constitution - alternative efficacious remedy - limitation for filing appeal under the Central Excise Act (statutory 30+30 days) - entertainment of writ petitions where statutory appeal remedy exists and delay is unexplained - application of precedent in barring writ relief where alternative remedy not availed within limitation

Alternative efficacious remedy - limitation for filing appeal under the Central Excise Act (statutory 30+30 days) - entertainment of writ petitions where statutory appeal remedy exists and delay is unexplained - Whether the writ petition filed under Article 226 is maintainable where the petitioner bypassed the statutory appeal remedy under the Central Excise Act and approached the High Court after expiry of the prescribed period without cogent explanation. - HELD THAT: - The Court held that the petitioner resorted to writ jurisdiction after bypassing the alternative and efficacious remedy of appeal available under the Central Excise Act and did not file any appeal within the statutory period (the maximum period of 30+30 days). Even assuming lack of knowledge of the Order-in-Original, the petitioner made no effort to prefer an appeal after receipt of the detention order and ultimately approached the High Court only after the limitation period had expired, without offering any cogent explanation for the delay. The Court applied the ratio of the Apex Court in the case of Assistant Commissioner (CT), Kakinada and others Versus Glaxo Smith Kline Consumer Health Care Limited in holding that a writ petition in such circumstances ought not to be entertained. Having found no material justifying departure from the rule that statutory appellate remedy must be availed within time, the High Court declined to exercise its writ jurisdiction to bypass the statutory appeal mechanism.

Writ petition dismissed for want of maintainability as the petitioner bypassed the statutory appeal remedy and failed to explain delay in approaching the appellate authority within the prescribed period.

Final Conclusion: The High Court dismissed the writ petition under Article 226 for non-entertainment where the petitioner bypassed the statutory appeal remedy under the Central Excise Act and approached the court after the expiry of the limitation period without a cogent explanation, applying the controlling precedent.

Classification of goods for fiscal levy - entitlement to concessional rate of tax to be strictly construed - reliance on commercial invoice not conclusive for classification - demonstration of nature of product to attract concessional entry - Entry 36(8)(h)(i) of Third Schedule of KVAT Act dealing with medicaments of Ayurvedic system - remand for fresh consideration where material aspects are not considered

Reliance on commercial invoice not conclusive for classification - classification of goods for fiscal levy - Whether the Tribunal could treat the product as an Ayurvedic medicament and allow concessional rate solely on the basis of manufacturer's invoice. - HELD THAT: - The Court held that the Tribunal committed jurisdictional error by accepting the manufacturer's invoice as conclusive proof that the product fell under the H.S.N. Code specified for Ayurvedic medicaments. The bench observed that classification for fiscal purposes requires examination of primary characteristics of the product and supporting circumstances; an invoice alone is not a finally determinative factor. Relying solely on the invoice led to an inadequately reasoned conclusion that the chewing gum qualified as an Ayurvedic medicament attracting a concessional rate. [Paras 4, 7]

Tribunal's sole reliance on the invoice was erroneous and cannot sustain the concessional classification.

Entitlement to concessional rate of tax to be strictly construed - demonstration of nature of product to attract concessional entry - Entry 36(8)(h)(i) of Third Schedule of KVAT Act dealing with medicaments of Ayurvedic system - Whether the respondent was entitled to the concessional rate under the relevant concessional entry for Ayurvedic medicaments without an affirmative finding on the nature of the product. - HELD THAT: - Applying the principle that fiscal concessions must be strictly construed, the Court emphasised that entitlement to a concessional rate under the KVAT Act must be established by demonstrating the true nature of the product. The comparative acceptance of classification under other statutes may be considered, but a finding that the product is an Ayurvedic medicament was absent here. Because the Tribunal did not address the crucial aspect-whether the chewing gum is a medicament of the Ayurvedic system under the relevant entry-the concessional treatment could not be sustained without fresh adjudication. [Paras 5, 7]

Concessional rate cannot be allowed in the absence of a specific finding that the product qualifies under the concessional entry; entitlement must be demonstrated.

Remand for fresh consideration - What relief should follow from the Tribunal's inadequate reasoning and absence of material consideration. - HELD THAT: - Given the Tribunal's brief reasoning and failure to consider relevant aspects bearing on classification and concessional entitlement, the High Court set aside the common order and remitted the appeals to the Tribunal for fresh disposal. The parties were permitted to place further material and the Tribunal was directed to afford reasonable opportunity and decide the matters in accordance with law within a stipulated period. [Paras 7, 8]

Common order set aside; matters restored and remitted to the Tribunal for fresh consideration in accordance with law within three months, with liberty to adduce further material.

Final Conclusion: The High Court set aside the Tribunal's common order that had allowed concessional classification based largely on a manufacturer's invoice, held that entitlement to concessional tax must be strictly demonstrated, and remitted the matters (assessment years 2006-07, 2007-08 and 2008-09) to the Tribunal for fresh adjudication with opportunity to the parties to place material.

Use of Cenvat Credit to discharge excise duty during default period - Validity of Rule 8(3A) of the Central Excise Rules, 2002 - Ultra vires - Follow the decision of the Jurisdictional High Court

Use of Cenvat Credit to discharge excise duty during default period - Validity of Rule 8(3A) of the Central Excise Rules, 2002 - Ultra vires - Whether the appellant was barred from using accumulated Cenvat credit to discharge Central Excise duty for the specified months by virtue of Rule 8(3A) of the Central Excise Rules, 2002 - HELD THAT: - The Tribunal noted that demands were raised on the basis of Rule 8(3A) seeking payment in cash of duties which had been debited from the Cenvat Credit account. The Tribunal examined the judicial precedents and observed that various High Courts have struck down the impugned portion of Rule 8(3A) as ultra vires. The Jurisdictional High Court at Calcutta (Goyal MG Gases Pvt. Ltd.) has followed the Gujarat decision and held the provision ultra vires. In view of these holdings, the Tribunal concluded there is no bar on utilization of accumulated Cenvat credit to make payment of Central Excise duty even during the default period. Relying on the binding effect of the Jurisdictional High Court's decision, the Tribunal set aside the adjudicating and appellate orders which had disallowed the use of Cenvat credit and confirmed demands made under Rule 8(3A).

The portion of Rule 8(3A) relied upon to deny use of Cenvat credit is treated as ultra vires by the Tribunal; the impugned orders are set aside and the appeal is allowed.

Final Conclusion: Following the decisions of various High Courts including the Jurisdictional High Court, the Tribunal held that there is no bar on using accumulated Cenvat credit to discharge Central Excise duty during the default period; the impugned orders are set aside and the appeal is allowed.

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - admissibility of Cenvat credit on outward transportation of final products - interpretation of the phrase 'from the place of removal' in relation to clearance of final products - effect of amendment substituting 'from the place of removal' with 'upto the place of removal' w.e.f. 1-4-2008 - Reverse Charge Mechanism for service tax on freight

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - admissibility of Cenvat credit on outward transportation of final products - interpretation of the phrase 'from the place of removal' in relation to clearance of final products - Whether Cenvat credit of service tax paid on outward transportation of finished goods, where goods were cleared direct from factory to buyers, is admissible for the periods covered by the show-cause notices - HELD THAT: - The Tribunal applied the binding ratio of the Hon'ble Supreme Court in Commissioner of Central Excise, Belgaum v. Vasavadatta Cements Ltd., which construed the unamended definition of 'input service' in Rule 2(l) of the Cenvat Credit Rules, 2004. The Court accepted the CESTAT Full Bench approach that the portion of the definition governed by the word 'means' must be construed restrictively but nonetheless includes services used by the manufacturer in or in relation to manufacture and clearance of final products 'from the place of removal'. 'From the place of removal' was interpreted to cover transportation of final products from the place of removal up to the first point of delivery (such as a depot or directly to the customer), and therefore tax paid on such transportation falls within 'input service' for the relevant earlier period. The Tribunal further noted that the rule was amended w.e.f. 1-4-2008 substituting 'from the place of removal' with 'upto the place of removal', thereby narrowing the scope from that date; however, for the unamended period (which includes the tax periods in dispute) the wider interpretation in favour of the assessee applies. On this basis the demands confirmed for the specified periods could not be sustained.

Impugned orders confirming demand, interest and penalty set aside; appeals allowed for the periods in question.

Final Conclusion: Following the Supreme Court's decision in Vasavadatta Cements (construing the unamended Rule 2(l)), Cenvat credit of service tax paid on outward transportation from the place of removal up to the first point of delivery is admissible for the disputed periods; therefore the impugned orders are set aside and the appeals are allowed.

Prospective operation of Government Order - Interest Free Sales Tax deferral scheme - benchmark/Base Production Volume and Base Sales Volume condition - eligibility certificate and its date of issuance - application of subsequent government order to prior grants - assessment for wrong availment and demand of interest

Prospective operation of Government Order - application of subsequent government order to prior grants - eligibility certificate and its date of issuance - G.O.Ms.No.119 dated 13.4.1994 introducing BPV/BSV benchmark cannot be applied to units which obtained eligibility under G.O.Ms.No.500 dated 14.5.1990 prior to 13.4.1994. - HELD THAT: - The Court applied the principle that a Government Order imposing new eligibility conditions has only prospective effect and cannot be read into earlier grants. The petitioner's eligibility certificate dated 17.6.1993 was issued before G.O.Ms.No.119 (13.4.1994) and therefore the benchmark (BPV/BSV) introduced by G.O.Ms.No.119 could not be imposed on the petitioner. Earlier Division Bench decisions dealing with identical factual and legal questions were relied upon to hold that the tax liability of an expansion unit must be determined without reference to the later Government Order when the eligibility pre-dates that Order. The rescheduling of deferral dates did not operate to import the substantive benchmark condition into the original eligibility dated 17.6.1993.

G.O.Ms.No.119 (13.4.1994) is prospective; the petitioner's entitlement is to be governed by G.O.Ms.No.500 (14.5.1990) as per the eligibility certificate dated 17.6.1993.

Interest Free Sales Tax deferral scheme - assessment for wrong availment and demand of interest - The Assessing Officer and the Tribunal erred in upholding a demand for alleged wrong availment of IFST without regard to the Inspecting Officer's findings recorded in the D3 proposal. - HELD THAT: - The Court noted that the D3 inspection report expressly recorded that there was no deviation or wrongful availment of the IFST deferral and that the deferral amount had been repaid in the relevant period. The Assessing Officer issued a show cause notice and confirmed a demand under Section 24(3) without stating the basis for alleging wrongful availment and without adequately considering the D3 findings. The Tribunal likewise failed to take note of the D3 proposal and related factual findings. Having found these failures, the Court concluded that the departmental orders and the Tribunal order could not stand.

Orders of the Assessing Officer and the Tribunal confirming the demand and interest are quashed for having disregarded the inspection findings and for lack of adequate basis.

Final Conclusion: Writ petitions allowed; the common impugned order of the Tribunal and the departmental orders confirming demand and interest are set aside and quashed; no costs.

Extension of limitation - exclusion of period from 15.03.2020 to 14.03.2021 in computing limitation - restoration/availability of balance period of limitation with effect from 15.03.2021 - fixed 90-day period from 15.03.2021 where limitation expired during excluded period - application to outer limits, condonation and termination provisions under arbitration, commercial courts and negotiable instruments law - regulated movement for time-bound legal purposes

Extension of limitation - exclusion of period from 15.03.2020 to 14.03.2021 in computing limitation - Continuation of the suo motu extension of limitation during the COVID-19 period is brought to an end and the period from 15.03.2020 to 14.03.2021 is excluded for computation of limitation. - HELD THAT: - The Court observed that the original order extending limitation from 15.03.2020 had served its purpose and, in view of improving circumstances and resumption of court functioning, the general extension should cease. It directed that for computing the period of limitation for any suit, appeal, application or proceeding the time-span from 15.03.2020 till 14.03.2021 shall stand excluded. This exclusion operates as a temporal carve-out in the computation of statutory limitation periods for all proceedings governed by general or special limitation laws. [Paras 1, 2]

The extension of limitation is terminated and the period 15.03.2020-14.03.2021 is excluded in computing limitation.

Restoration/availability of balance period of limitation with effect from 15.03.2021 - fixed 90-day period from 15.03.2021 where limitation expired during excluded period - Provision for restoration of the balance period of limitation from 15.03.2021 and the grant of a minimum 90-day period where limitation would have expired during the excluded span. - HELD THAT: - The Court provided that any balance period of limitation remaining as on 15.03.2020 shall become available from 15.03.2021. Further, where limitation would have expired during 15.03.2020-14.03.2021, all persons shall have a limitation period of 90 days from 15.03.2021; however, if the actual balance period as on 15.03.2021 exceeds 90 days, that longer period shall apply. Thus the order creates a floor of 90 days for actions whose limitation fell due in the excluded period while preserving any longer residual limitation. [Paras 2]

Balance limitation periods revive from 15.03.2021 and a minimum 90-day period from that date is allowed where limitation expired during the excluded period, subject to any longer actual balance period.

Application to outer limits, condonation and termination provisions under arbitration, commercial courts and negotiable instruments law - The exclusion of 15.03.2020-14.03.2021 is declared applicable to statutory provisions that prescribe periods for instituting proceedings, outer limits for condoning delay and termination of proceedings in arbitration, commercial courts and negotiable instruments law. - HELD THAT: - The Court expressly extended the exclusionary rule to computing periods under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015, provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and to any other laws which prescribe limitation periods, outer limits for condonation and termination. The effect is that prescribed outer limits and termination timelines in those provisions are to be computed with the excluded period omitted, consistent with the general computation rule laid down. [Paras 2]

The exclusion of 15.03.2020-14.03.2021 applies to the specified arbitration, commercial courts and negotiable instruments provisions and similarly situated statutory limitation/termination regimes.

Regulated movement for time-bound legal purposes - Direction to the Government of India to amend containment-zone guidelines to permit regulated movement for specified time-bound functions, including legal purposes. - HELD THAT: - Recognising that continued access to legal remedies is a necessary function, the Court directed amendment of containment-zone guidelines so that regulated movement is expressly allowed for medical emergencies, provision of essential goods and services and other necessary functions, specifically including time-bound applications for legal purposes and educational and job-related requirements. This is a public-order direction aimed at ensuring physical access where required despite containment measures. [Paras 2]

The Government is directed to amend containment guidelines to permit regulated movement for time bound legal and other necessary purposes.

Final Conclusion: The suo motu extension of limitation granted during the COVID-19 pandemic is brought to an end; the period 15.03.2020-14.03.2021 is excluded in computing limitation, balance periods revive from 15.03.2021 with a minimum 90 day window for matters whose limitation fell during the excluded span (subject to any longer residual period), the exclusion applies to specified arbitration, commercial courts and negotiable instruments timelines, and the Government is directed to permit regulated movement for time bound legal purposes.

Admissibility of affidavit of evidence in lieu of examination-in-chief in proceedings under Section 138 of the Negotiable Instruments Act - distinction between complainant's documentary evidence and accused's defence evidence - requirement of availability of witnesses for cross-examination - power of High Court under Article 227 to quash magistrate's order and remit for oral evidence

Admissibility of affidavit of evidence in lieu of examination-in-chief in proceedings under Section 138 of the Negotiable Instruments Act - distinction between complainant's documentary evidence and accused's defence evidence - Affidavit of evidence filed by the accused in lieu of oral examination-in-chief in a complaint under Section 138 of the Negotiable Instruments Act is not permissible and must be discarded. - HELD THAT: - The Court applied the binding pronouncement of the Supreme Court in Mandvi Co-op. Bank Ltd. which held that the legislature expressly conferred on the complainant the right to give evidence by affidavit but did not extend that right to the accused; the High Court cannot judicially legislate to permit the accused to give evidence on affidavit. The judgment emphasises the fundamental difference in nature between the complainant's largely documentary case and the defence evidence which may not be documentary and may be relied upon to rebut statutory presumptions. The Court rejected reliance on the concluding sentence of the directions in Indian Banks Association as expanding the accused's right to tender affidavit evidence, holding that such a reading would be contrary to the settled law in Mandvi Co-op. Bank Ltd. and to the statutory scheme applicable to trials under Section 138. [Paras 5, 8, 9, 10]

The accused's affidavit-of-evidence dated 5th March 2019 is inadmissible and is discarded from the record of C.C. No.4311/SS/2015.

Power of High Court under Article 227 to quash magistrate's order and remit for oral evidence - requirement of availability of witnesses for cross-examination - The magistrate's order permitting the accused to file affidavit-of-evidence was quashed and the trial court was directed to record the accused's oral evidence following the procedure prescribed by law. - HELD THAT: - Having found the filing of affidavit-of-evidence by the accused impermissible, the High Court exercised supervisory jurisdiction under Article 227 to set aside the impugned order of 1st April 2019. The Court allowed the petitioner's application seeking discarding of the affidavit and directed the Metropolitan Magistrate to record the accused's oral evidence in accordance with law, ensuring the accused and prosecution witnesses remain available for cross-examination as required by the procedural directions applicable to trials under Section 138. [Paras 4, 10, 11, 12]

Impugned order dated 1st April 2019 is quashed; the application of the petitioner is allowed, the affidavit is expunged and the trial court is directed to record oral evidence of the accused in accordance with law.

Final Conclusion: Petition allowed: the High Court quashed the Magistrate's order permitting the accused to tender affidavit evidence in lieu of oral examination-in-chief, discarded the affidavit from the record, and directed the trial court to record the accused's oral evidence in accordance with law.

Writ petition under Article 226 - maintainability of writ against private bank - definition of State under Article 12 - instrumentality or agency tests - exhaustion of alternative statutory remedies under the SARFAESI regime

Maintainability of writ against private bank - definition of State under Article 12 - instrumentality or agency tests - Writ petition under Article 226 is not maintainable against M/s. Citi Bank, a private financial institution, as it does not fall within the definition of 'State' under Article 12. - HELD THAT: - The High Court applied the tests and principles summarised in the Full Bench decision in K. V. Panduranga Rao (paras 12-22 reproduced) and related Supreme Court authorities to determine when an entity is an instrumentality or agency of the State for the purposes of Article 12. The court held that a private financial institution like M/s. Citi Bank does not, on the material before it, qualify as 'State' and that writ jurisdiction under Article 226 does not lie against a private person who is not discharging any public duty (reference to Radhey Sham v. Chhabi Nath). On that basis the petition could not be entertained against the bank.

Petition dismissed insofar as it is directed against M/s. Citi Bank; writ not maintainable against the private bank.

Exhaustion of alternative statutory remedies under the SARFAESI regime - writ petition under Article 226 - High Court will not ordinarily entertain a writ challenging measures under the SARFAESI Act where effective statutory remedies exist; the petitioner must avail remedies under the SARFAESI/DRT scheme. - HELD THAT: - Relying on the Apex Court decisions cited (including United Bank of India v. Satyawati Tondon, Authorized Officer, State Bank of Travancore v. K. C. Mathew and ICICI Bank Ltd. v. Umakanta Mohapatra), the court reiterated that where a special statutory scheme provides efficacious remedies (including applications, appeals and revisions under the SARFAESI framework), the High Court should ordinarily refuse to entertain a writ under Article 226. In view of that principle the petitioner had an alternative remedy under the SARFAESI Act and related forums, and the writ was not maintainable on that ground as well.

Petition dismissed for failure to exhaust statutory remedies; liberty reserved to approach the appropriate forum and time spent before this Court to be noted for condonation of delay, if required.

Final Conclusion: The writ petition is dismissed: it is not maintainable against the private bank and, in any event, the petitioner must avail the alternative statutory remedies under the SARFAESI/DRT scheme; liberty granted to approach the appropriate forum and time spent before this Court shall be taken into account for condonation of delay.