TaxTMI Updates e-Newsletter
Mar 18,2023

Cancellation of GST registration - limitation for filing appeal under Section 107 and one month extension - remand for fresh consideration to primary authority - opportunity of hearing before passing fresh order - absence of constituted GST Appellate Tribunal leaving writ remedy

Cancellation of GST registration - limitation for filing appeal under Section 107 and one month extension - remand for fresh consideration to primary authority - opportunity of hearing before passing fresh order - Orders cancelling the petitioner's GST registration and dismissing the appeal as time-barred were set aside and the matter remanded to the primary authority for fresh consideration with opportunity of hearing. - HELD THAT: - Following the Court's earlier reasoning in M/s. Chenna Krishnama Charyulu Karampudi v. Additional Commissioner (Appeal-1) and subsequent decisions, the High Court held that where the primary authority has suo motu cancelled GST registration and the appellate tribunal under Section 109 is not constituted, strict insistence on limitation beyond the permitted extended period may leave the assessee without effective remedy. In these circumstances the appropriate course is to set aside both the cancellation order and the appellate authority's order declining to admit the appeal, and to remand the matter to the primary authority to reconsider the grievance after affording a reasonable opportunity of hearing. The Court emphasised that on remand the petitioner may submit all GST returns as required by statute. No opinion was expressed on the merits of the cancellation itself. [Paras 7, 8, 9]

Order dated 11.12.2019 cancelling GST registration and order dated 19.04.2022 dismissing the appeal are set aside; matter remanded to respondent No.2 for fresh decision after affording hearing and permitting submission of returns; no opinion on merits.

Final Conclusion: Writ petition allowed to the extent that the cancellation order and the appellate order are set aside and the matter is remitted to the primary authority for fresh adjudication after giving the petitioner a reasonable opportunity of hearing; petitioner may file the returns in the remand proceedings; no observations on merit.

Availability of alternative remedy - writ of certiorari - detention under Section 129(3) of the CGST Act, 2017 - release of detained goods - perishable goods - interim relief - statutory appeal before the First Appellate Authority - restricted order - no precedential value

Availability of alternative remedy - writ of certiorari - statutory appeal before the First Appellate Authority - Whether writ relief should be granted in view of the existence of an equally efficacious alternative remedy by statutory appeal - HELD THAT: - The Court declined to entertain the petition on merits because an equally efficacious and alternative remedy existed by way of appeal to the First Appellate Authority. Without expressing any opinion on the rival contentions, the petition was disposed of while reserving liberty to the petitioner to challenge the impugned Annexures before the statutory first appellate forum. The Court directed that if a statutory appeal is preferred, the First Appellate Authority shall consider it on merits and in accordance with law uninfluenced by this order. The disposal is therefore administrative and not an adjudication on substantive rights raised in the petition. [Paras 3]

Petition disposed of without adjudication on merits in view of availability of alternative statutory remedy; liberty reserved to prefer appeal before the First Appellate Authority.

Release of detained goods - perishable goods - interim relief - detention under Section 129(3) of the CGST Act, 2017 - Interim release of the detained conveyances and goods on account of their perishable nature - HELD THAT: - On the peculiar and special facts of the case and having regard to the perishable nature of the goods, the Court directed the respondents to release the two conveyances along with the goods in favour of the petitioner within 48 hours of receipt of the order. The direction was granted as an interim measure and the Court explicitly limited the order to the special facts of the case, refraining from expressing any opinion on the legality of the detention under the statutory provision invoked by respondents. [Paras 4, 5]

Interim direction issued for release of the conveyances and goods within 48 hours; order confined to the special facts and not to be treated as precedent.

Final Conclusion: The petition was disposed of without deciding the merits because an alternative statutory appeal remedy exists; however, on the special facts and due to the perishable nature of the goods, the Court granted interim relief by directing release of the detained conveyances and goods within 48 hours, reserving all contentions and emphasising that the order has no precedential value.

Delay in disposal of appeal - judicial interference in administrative delay - direction to dispose pending appeal within a fixed time

Delay in disposal of appeal - direction to dispose pending appeal within a fixed time - Whether the appellate authority should be directed to pass a final order on a pending appeal which had been heard but remained undecided for an extended period. - HELD THAT: - The petition was filed complaining that an appeal filed on 27th March, 2019 remained undecided despite the hearing having been concluded on 18th January, 2021, and that subsequent representations seeking disposal dated 28th July, 2021 and 3rd March, 2022 had gone unheeded. Having considered the representations and submissions of the parties, the Court recorded the continued non-disposal as a grievance warranting judicial intervention and directed the appellate authority to pass a final order on the appeal. The Court fixed a definite timeframe for compliance, thereby balancing the need to protect the petitioner's right to timely adjudication with deference to the authority's adjudicatory role. [Paras 2, 3, 4]

The appellate authority is directed to pass a final order on the appeal within eight weeks from the date of communication of the order; the writ petition is disposed of.

Final Conclusion: Writ petition disposed by directing the appellate authority to decide the pending appeal (heard on 18th January, 2021) by issuing a final order within eight weeks from communication of this order.

Condition of interim bail deposit - Setting aside an onerous bail condition - Application of precedent by follow-on order

Condition of interim bail deposit - Setting aside an onerous bail condition - Application of precedent by follow-on order - Validity of the condition directing the appellant to deposit a sum of Rs.2 crores as part of bail conditions - HELD THAT: - The Court, noting that the facts of the present case are identical to those in Criminal Appeal No.186 of 2023 and applying the reasoning and conclusions recorded in the judgment and order dated 20.01.2023 in that matter, held that the condition directing deposit of Rs.2 crores is not liable to be sustained. For consistency with the precedent relied upon, the specific deposit condition is set aside while the remainder of the bail conditions in the impugned order are left intact. The Court therefore modified the impugned order only to the extent of striking down the deposit requirement and otherwise maintained the existing conditions. [Paras 4, 5]

The deposit condition of Rs.2 crores is set aside; the rest of the conditions in the impugned order are sustained.

Final Conclusion: Appeal allowed insofar as the Rs.2 crores deposit condition is set aside; otherwise the impugned order and its conditions remain in force. Pending applications, if any, are disposed of.

Long-term capital gains vs business income - investment portfolio vs trading portfolio - mixed funds and appropriation presumption - principle of consistency in tax treatment - retrospective application of beneficial CBDT circulars - onus of proof for claiming tax exemption

Long-term capital gains vs business income - investment portfolio vs trading portfolio - The profit of Rs. 4,32,09,144 arising from sale of shares in six companies is to be treated as long term capital gains and not business income. - HELD THAT: - The Tribunal separately examined the transactions in respect of the long term shares (distinguishing them from short term dealings) and found that the shares in question were purchased in earlier years and largely held as investments; there was no material to show that those transactions formed part of a systematic trading activity. The High Court accepted the Tribunal's factual findings that the long term shares had been acquired in preceding years, the investment amounts were small relative to the assessee's capital and profits, and the revenue did not establish that the transactions constituted an organised business of trading in those scrips. On this basis the Tribunal's conclusion that the identified sum should be taxed as long term capital gains was upheld. [Paras 20, 21, 23, 26, 33]

Held for the assessee: the Rs. 4,32,09,144 is long term capital gains.

Mixed funds and appropriation presumption - onus of proof for claiming tax exemption - The fact that transactions were routed through a cash credit (mixed) account did not, without further material, justify a conclusion that borrowed funds were used for the investments. - HELD THAT: - CIT(A) had inferred use of borrowed funds from the flow through a cash credit account; the Tribunal found the account to be mixed/composite and noted absence of evidence that borrowings specifically funded the investments. Given the undisputed facts that the investments were small relative to the assessee's capital/reserves and annual profits, the High Court held that the revenue had not discharged the burden of proving that borrowed funds were used, and a presumption of borrowings cannot be drawn solely from the account being a cash credit account. [Paras 21, 23]

Held that no automatic presumption of borrowed funds use arises from routing through a cash credit account; Tribunal's finding in favour of the assessee is justified.

Investment portfolio vs trading portfolio - long-term capital gains vs business income - The CIT(A)'s adverse inferences based on alleged thin trading, lack of dividends and phenomenal appreciation were not sufficient to convert the long term share disposals into business income where genuineness of transactions was not doubted. - HELD THAT: - CIT(A) treated certain scrips as penny/illiquid stocks and drew inferences that the motive was trading rather than investment. The Tribunal and the High Court noted that neither the Assessing Officer nor CIT(A) doubted the genuineness of the transactions and that adverse inferences on thin trading or absence of dividends, without more, could not displace the finding that the disposals were of investment assets held over from earlier years. Accordingly, the Court declined to sustain CIT(A)'s characterization on those grounds. [Paras 24]

CIT(A)'s findings on penny stocks/dividend absence were not a proper basis to recharacterise the long term disposals as business income; reversed.

Principle of consistency in tax treatment - long-term capital gains vs business income - The revenue cannot depart from the department's earlier consistent acceptance of the transactions as investments and capital gains in absence of fresh material warranting a different view. - HELD THAT: - The assessee had treated the relevant shares as investments in earlier assessment years and those treatments were accepted by the department. The Court emphasised that while departure from a prior consistent view is permissible if fresh material exists, no fresh material was placed before the authorities to justify reversing the earlier consistent treatment. The Tribunal's reliance on consistency of prior assessments, taken together with absence of new evidence, supported upholding the characterization of the long term disposals as capital gains. [Paras 25, 26, 27]

Held that absent fresh material, the department's departure from earlier consistent treatment was not justified; consistency favours assessee.

Retrospective application of beneficial CBDT circulars - investment portfolio vs trading portfolio - Beneficial CBDT circulars clarifying treatment of listed and unlisted shares can be relied upon by the assessee and, insofar as they are favourable, may be given retrospective effect. - HELD THAT: - The Court reviewed CBDT Circulars (2007 and 2016) which acknowledge that an assessee may maintain separate investment and trading portfolios and instruct that where listed shares held over 12 months are treated by the assessee as capital assets the assessing officer should not dispute that stand; further guidance was given for unlisted shares. The High Court held that such clarificatory directions, being at least partially beneficial to taxpayers, can be applied retrospectively and may be invoked by the assessee, and that the circulars reinforce the acceptability of treating the long term disposals here as capital gains. [Paras 28, 29, 31, 32]

Held that the CBDT circulars may be relied upon by the assessee and the beneficial instructions can have retrospective application; they support the assessee's position.

Final Conclusion: The appeal is dismissed. The High Court upholds the Tribunal's classification of the specified Rs. 4,32,09,144 as long term capital gains for Assessment Year 2005 06, finds no basis to treat those receipts as business income, accepts the Tribunal's conclusions on mixed account/funds and consistency, and holds that beneficial CBDT circulars may be invoked by the assessee.

Reopening of assessment - Notice under section 148 of the Income Tax Act - Order under section 148A(d) of the Income Tax Act - Limitation for reopening assessments - Writ jurisdiction under Article 226 of the Constitution

Reopening of assessment - Notice under section 148 of the Income Tax Act - Order under section 148A(d) of the Income Tax Act - Limitation for reopening assessments - Validity of the notice dated 27.07.2022 under section 148 and the order dated 27.07.2022 under section 148A(d) insofar as they seek reopening of assessment for assessment year 2013-14. - HELD THAT: - The Court considered the challenge to the notice and the 148A(d) order on limitation grounds and applied the reasoning adopted in Keenara Industries Private Limited v. The Income Tax Officer (Special Civil Application No.17321 of 2022 and allied matters). Relying on that precedent, the Court found that the reopening instrument and the consequential order suffered from the same legal defect of being time-barred or otherwise beyond permissible jurisdictional scope for reassessment of the specified year. No separate additional reasoning was provided; the petition was allowed on the basis that the issue is covered by the cited decision of this Court.

Notice dated 27.07.2022 under section 148 and order dated 27.07.2022 under section 148A(d) insofar as they seek reopening for assessment year 2013-14 are quashed and set aside.

Final Conclusion: The petition under Article 226 is allowed; the notice under section 148 and the order under section 148A(d) dated 27.07.2022 relating to assessment year 2013-14 are quashed and set aside, with service by e-mode also permitted.

Assessment in name of non-existent entity - scheme of amalgamation/effect of appointed date - jurisdictional validity of notice - doctrine of merger - curability under Section 292B

Assessment in name of non-existent entity - scheme of amalgamation/effect of appointed date - jurisdictional validity of notice - curability under Section 292B - doctrine of merger - Validity of assessment proceedings and notices framed in the name of Inox Renewables Limited after it ceased to exist pursuant to a sanction of a composite scheme of arrangement - HELD THAT: - The Court found that the composite scheme sanctioned by the NCLT became effective on 09.02.2021 with appointed date(s) operating retrospectively (including 01.04.2020 for Part II), and that Inox Renewables Limited had ceased to exist with effect from the appointed date. Notices, show-cause and draft/final assessment proceedings continued to be issued and completed in the name of Inox Renewables Limited notwithstanding repeated communications and production of the certified NCLT order informing the department of the scheme. Applying settled precedent (including Khurana Engineering and Maruti Suzuki) and the doctrine of merger, the Court held that where an entity has ceased to exist pursuant to a sanctioned scheme of amalgamation/demerger, assessment proceedings and jurisdictional notices addressed to that non-existent entity are void; such defect is substantive and not a mere procedural irregularity curable under Section 292B. Participation by the successor/transferee in the proceedings did not operate as an estoppel against law where jurisdiction itself was invoked against a non-existing entity. Given these facts and authorities, the assessment framed in the name of the non-existent transferor was held to be without jurisdiction and liable to be quashed. The Court observed that quashment of the invalid assessment does not preclude the Revenue from initiating proceedings, if permissible in law, against the amalgamated/transferee entity. [Paras 21, 22, 23, 24, 25]

Impugned assessment order dated 29.09.2021 and the related notice and penalty notices issued in the name of Inox Renewables Limited are quashed and set aside; authorities remain free to take action, if permissible by law, against the amalgamated/amalgamating successor entity.

Final Conclusion: Writ petition allowed; assessment and notices issued in the name of the non-existent Inox Renewables Limited are quashed for want of jurisdiction, with liberty to the Revenue to proceed, if legally permissible, against the successor/amalgamated company.

Corpus donation - exemption under section 11(1)(d) of the Income Tax Act - genuineness of donations and source of funds - bogus companies and siphoning of funds - admission of additional evidence under rule 46A - remand for fresh consideration and remand compliance

Corpus donation - exemption under section 11(1)(d) of the Income Tax Act - genuineness of donations and source of funds - Whether the corpus donation of Rs.2,94,00,000 claimed by the assessee is exempt under section 11(1)(d) or is taxable as income. - HELD THAT: - The Tribunal recorded that on remand the Assessing Officer afforded the assessee an opportunity to be heard but no fresh material or evidence was produced. The AO in his remand report rehearsed the earlier findings that the donors' claims were not substantiated by identification papers or books of account, that receipt by cheque alone did not establish genuineness, and that post-search investigations had identified the donor companies in the list of entities floated by the Usha group for siphoning funds. The CIT(A) after considering the AO's remand report and the absence of new material reiterated the earlier conclusion that the receipts were not proved to be genuine corpus donations. The Tribunal, noting absence of any new evidence before the AO, CIT(A) or itself, found no infirmity in the concurrent findings of the lower authorities and upheld the addition treating the amount as taxable income. [Paras 7, 8]

Addition of Rs.2,94,00,000 as taxable income upheld; claim of exemption under section 11(1)(d) rejected.

Admission of additional evidence under rule 46A - affidavits filed during appellate proceedings - Whether affidavits and statements filed on behalf of donor representatives constituted admissible additional evidence. - HELD THAT: - The CIT(A) and the AO noted that affidavits filed during appellate proceedings contained statements inconsistent with earlier depositions recorded under summons u/s 131 and that the persons who appeared at earlier proceedings had not produced identification or books of account. The appellate authority applied the tests for admission of additional evidence and found that none of the conditions for admitting such evidence (including compliance with rule 46A) were satisfied; accordingly the affidavits were not admitted and could not bolster the assessee's claim. The Tribunal accepted that no fresh material complying with admissibility conditions was produced on remand. [Paras 7, 8]

Affidavits/additional evidence not admitted; cannot be relied upon to establish the genuineness of the donations.

Bogus companies and siphoning of funds - remand for fresh consideration and remand compliance - Whether the remand to the Assessing Officer was complied with and whether findings regarding the donors being bogus entities could sustain the addition. - HELD THAT: - The Tribunal noted that the matter had earlier been remanded by the ITAT to the AO for fresh examination. On remand the AO submitted a report after hearing the assessee and reiterated findings from investigations that linked the donor companies to the Usha group and to entities identified as bogus for purposes of siphoning funds. The CIT(A) considered the remand report and the rejoinder, found no new evidence from the assessee, and upheld the AO's view. The Tribunal recorded that the remand directions had been complied with, that the AO and CIT(A) had considered the material on record, and that in absence of fresh admissible evidence there was no reason to interfere with the conclusion drawn on the basis of the investigation and remand report. [Paras 4, 7, 8]

Remand complied with; findings regarding linkage of donor companies to bogus entities sustained and relied upon to uphold the addition.

Final Conclusion: The Tribunal, after hearing the Revenue and noting absence of any fresh admissible evidence from the assessee on remand, upheld the addition of Rs.2,94,00,000 as taxable income; the claim of exemption under section 11(1)(d) and the affidavits filed as additional evidence were rejected, and the appeal is dismissed.

Unexplained investment under section 69/69C - penalty for concealment under section 271(1)(c) - burden of proof on Revenue to establish payment and source - acceptance of co-owner's explanation and source of funds

Unexplained investment under section 69/69C - burden of proof on Revenue to establish payment and source - acceptance of co-owner's explanation and source of funds - Deletion of addition of Rs. 42,84,150/- made as unexplained investment under Section 69/69C. - HELD THAT: - The Tribunal found as an undisputed factual matrix that the assessee and his cousin purchased jointly a plot and that the assessee had, from bank evidence and submissions, paid only a part of the consideration (Rs. 21,68,000/-) while the balance was paid by the co-owner. The co-owner furnished an affidavit and bank/compensation details showing borrowing and receipt of funds from a third party as source of the payment. The Assessing Officer and the CIT(A) overlooked these materials and proceeded on a presumption that the assessee had paid his full 50% share. The Tribunal held that the Revenue failed to discharge the burden of proof to show that the assessee himself had made the impugned payment and that the co-owner's explanation and source of funds were neither contradicted nor discredited by the AO. On this basis the addition under Section 69/69C could not be sustained and was deleted. [Paras 7]

Addition of Rs. 42,84,150/- as unexplained investment under Section 69/69C is deleted.

Penalty for concealment under section 271(1)(c) - burden of proof on Revenue to establish payment and source - Deletion of penalty of Rs. 10,95,120/- imposed under Section 271(1)(c). - HELD THAT: - The Tribunal observed that penalty for concealment could not be justified where the assessee had furnished a plausible explanation and evidentiary material showing he had not made the full payment and that the co-owner had financed the balance from identified sources. Since the Assessing Officer's invocation of Section 271(1)(c) rested on the same erroneous presumption that the assessee had paid the entire share, and the Revenue did not establish concealment or disprove the explanation, the penalty did not survive. [Paras 11]

Penalty under Section 271(1)(c) is deleted.

Final Conclusion: Both appeals are allowed: the addition under Section 69/69C is deleted and the penalty under Section 271(1)(c) is set aside for A.Y. 2012-13.

Denial of reasonable opportunity / violation of principles of natural justice - technical glitch in electronic submission as ground for setting aside ex parte order - registration under section 12AB/12A and registration under section 80G(5)(ii) - de novo consideration and remand with direction to afford hearing

Denial of reasonable opportunity / violation of principles of natural justice - technical glitch in electronic submission as ground for setting aside ex parte order - Whether the ex parte rejection of the applications for registration was vitiated by denial of reasonable opportunity due to alleged non-receipt of notices and technical glitches in electronic filing - HELD THAT: - The Tribunal found on the material before it that the assessee had attempted to respond and had sought adjournment, and that technical difficulties prevented timely electronic submission. The income-tax authority had proceeded ex parte by rejecting the registration applications without considering the assessee's belated but proximate submission. In these circumstances the assessee was deprived of a reasonable opportunity of hearing and the principles of natural justice were breached. The Tribunal therefore concluded that the impugned ex parte orders could not stand.

Impugned ex parte rejections set aside as vitiated by denial of reasonable opportunity; matter remanded for fresh consideration.

Registration under section 12AB/12A and registration under section 80G(5)(ii) - de novo consideration and remand with direction to afford hearing - What relief should follow upon finding breach of natural justice in respect of the registration applications under 12AB/12A and 80G - HELD THAT: - On finding that the applications under section 12A(1)(ac)(iii)/12AB(1) and under the second proviso to sub-section (5) of section 80G were not properly considered because the assessee was denied a fair opportunity, the Tribunal directed the Commissioner (Exemptions) to reconsider the applications de novo. The reassessment must be conducted in accordance with law and after affording the assessee a reasonable opportunity of hearing; the Tribunal observed that the applications should be granted or refused on merits in the reconsideration, following applicable legal standards.

Directed de novo consideration of the registration applications by the CIT(E) with a reasonable opportunity of hearing and in accordance with law; appeals allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the ex parte cancellations of the registration applications as resulting from denial of reasonable opportunity (including due to alleged technical glitches), and directed the Commissioner (Exemptions) to reconsider the applications under section 12A/12AB and section 80G(5)(ii) de novo after affording the assessee a reasonable hearing; appeals allowed for statistical purposes.

Foreign tax credit - Grant of relief under Section 90 read with DTAA Article 24 - Filing of Form 67 under Rule 128 - Directory versus mandatory nature of procedural requirements - Rectification under Section 154

Foreign tax credit - Filing of Form 67 under Rule 128 - Directory versus mandatory nature of procedural requirements - Grant of relief under Section 90 read with DTAA Article 24 - Rectification under Section 154 - Assessee entitled to foreign tax credit for tax paid in Italy despite belated filing of Form 67. - HELD THAT: - The Tribunal held that the entitlement to foreign tax credit under Section 90 read with Article 24(3)(a) of the India Italy DTAA is not automatically defeated by delayed compliance with the procedural requirement of filing Form 67 under Rule 128. The DTAA and Section 90 confer the substantive right to credit foreign tax against Indian tax; rules prescribing the manner of claiming that right are machinery provisions. Applying the principle that treaty provisions and the Act govern substantive relief and that subordinate rules cannot nullify that right, the Tribunal followed coordinate bench decisions which treated Rule 128's Form 67 requirement as directory where substantial compliance is shown and relief on merits is clearly available. In view of those precedents and the assessee's subsequent filing of Form 67 and rectification proceedings under Section 154, the denial of FTC solely on account of belated filing was held to be unjustified. The matter was remediable by taking cognisance of the belatedly filed Form 67 and granting credit in accordance with law.

Set aside the CIT(A)'s order; directed the Assessing Officer to take cognisance of the filed Form 67 and grant foreign tax credit as entitled in law.

Final Conclusion: Appeal allowed: FTC claim upheld notwithstanding belated filing of Form 67; AO directed to grant credit in accordance with law for AY 2019-20.

Deduction under section 80P(2)(d) of the Income-tax Act - Eligibility of income from deposits/investments with a co-operative bank - Co-operative society registered under the Co-operative Societies Act - Effect of insertion of section 80P(4) on deduction under section 80P(2)(d) - Precedential value of Division Bench decision of the Tribunal

Deduction under section 80P(2)(d) of the Income-tax Act - Eligibility of income from deposits/investments with a co-operative bank - Co-operative society registered under the Co-operative Societies Act - Deduction under section 80P(2)(d) allowed in respect of interest and dividend income received from Pune District Central Co-operative Bank for Assessment Year 2018-19. - HELD THAT: - The Tribunal examined whether interest and dividend earned by the assessee (a co-operative society) from deposits/investments with Pune District Central Co-operative Bank qualify for deduction under section 80P(2)(d). It was observed that Pune District Central Co-operative Bank is a registered co-operative society within the meaning of the definition of co-operative society, and therefore income arising from deposits/investments with such a bank falls within the scope of section 80P(2)(d). The Tribunal followed the Division Bench decision of the Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. v. Pr.CIT , which held that the insertion of section 80P(4) (w.e.f. 1-4-2007) excluding certain co-operative banks from specified deductions does not negate the independent eligibility under section 80P(2)(d) of a co-operative society to claim deduction in respect of interest income on investments/deposits parked with a co-operative bank that is a registered co-operative society. Applying that precedent, the Tribunal found the Assessing Officer and the CIT(A) erred in denying the deduction and directed grant of deduction under section 80P(2)(d) on the interest and dividend income received from the Pune District Central Co-operative Bank.

Impugned order set aside; deduction under section 80P(2)(d) granted in respect of interest and dividend income from Pune District Central Co-operative Bank for AY 2018-19.

Final Conclusion: The appeal is allowed and the deduction under section 80P(2)(d) is directed to be granted in respect of interest and dividend income earned from Pune District Central Co-operative Bank for Assessment Year 2018-19.

Treatment of difference between agreement to sell and registered sale price as unexplained investment - cancellation of prior agreement and renegotiation as explanation for lower registered consideration - reliance on seized documents found during search - acceptability of affidavits and subsequent transactions to rebut seized documents

Treatment of difference between agreement to sell and registered sale price as unexplained investment - cancellation of prior agreement and renegotiation as explanation for lower registered consideration - reliance on seized documents found during search - acceptability of affidavits and subsequent transactions to rebut seized documents - Whether the addition made as unexplained investment by treating the higher seized agreement price as the real consideration was justified when the assessee produced evidence of cancellation of the prior agreement and subsequent renegotiation resulting in lower registered consideration. - HELD THAT: - The Assessing Officer made an addition treating the difference between prices in seized agreements and the registered sale deeds as unexplained investment. The assessee, however, produced the cancelled agreements, affidavits from the sellers confirming cancellation and refund/adjustment of advances, the registered sale deeds at lower prices and corresponding entries in the assessee's accounts/ITR. The CIT(A) examined these materials, noted that the seized agreements had been cancelled because requisite permissions were not obtained and that amounts were refunded/adjusted, and found the assessee's explanation credible. The Tribunal accepted that the AO did not satisfactorily contradict the cancellation and the subsequent renegotiation and registration at lower prices, and that the evidentiary material produced by the assessee (affidavits, registration documents and accounting records) provided a reasonable explanation for the reduction in consideration. On that basis the addition under the impugned provision was held to be unwarranted and was deleted. [Paras 5, 6, 7]

Addition treated as unexplained investment was deleted as the assessee satisfactorily established cancellation of the earlier agreements and renegotiation/registration at lower prices; the revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition made by the AO under the relevant provision for A.Y. 2007-08, finding the assessee's evidence of cancellation of the prior agreements and subsequent valid registration at lower consideration to be a reasonable and uncontradicted explanation; the revenue's appeal was dismissed.

Revision under section 263 of the Income Tax Act - Jurisdiction to issue notice and pass revision order after death of the assessee - Service of notice on legal representative versus all legal heirs - Assessment erroneous and prejudicial to the interests of Revenue - Assessing Officer's duty to enquire into declared sale consideration and receipt of advances

Revision under section 263 of the Income Tax Act - Jurisdiction to issue notice and pass revision order after death of the assessee - Validity of the show-cause notice issued under section 263 and of the revision order where the assessee died after issuance of the notice but before passing of the revision order - HELD THAT: - The Tribunal found that the Principal Commissioner issued the show-cause notice while the assessee was alive and, after the assessee's death, took steps to obtain the death and legal heir certificates and issued a hearing notice to the legal heir before passing the revision order. The Court held that the procedure adopted - issuing notice when the assessee was alive, seeking and accepting legal heir documentation, and addressing the revision order to the legal heir - satisfies the requirements for exercising jurisdiction under section 263. The argument that an order passed after the assessee's death is invalid was rejected as contrary to the procedural steps taken by the Commissioner and the record showing notice and opportunity to the legal heir. [Paras 7, 8]

Notice and revision order under section 263 were validly issued and sustained despite the assessee's death occurring after issuance of the notice; additional grounds on this point are dismissed.

Service of notice on legal representative versus all legal heirs - Jurisdiction to issue notice and pass revision order after death of the assessee - Whether the Commissioner was required to serve the section 263 notice and hearing notice on all legal heirs rather than on the principal legal heir - HELD THAT: - The Tribunal held that it was sufficient for the Commissioner to serve the notice on the legitimate legal heir (the wife), who was brought on record after production of the legal heir certificate and death certificate, and that there was no requirement to bring every married legal heir on record before passing the revision order. The contention that notice to only one legal heir rendered the revision void was held to be an afterthought and not tenable in law. [Paras 8]

Service of notice on the principal legal heir was sufficient; there was no legal infirmity in issuing the revision order without serving every legal heir.

Assessment erroneous and prejudicial to the interests of Revenue - Assessing Officer's duty to enquire into declared sale consideration and receipt of advances - Whether the assessment order was erroneous and prejudicial to the interests of Revenue because the Assessing Officer failed to examine (a) discrepancy between sale consideration offered for long-term capital gains and market value reflected in the sale deed, and (b) unexamined advances received from a third party - HELD THAT: - On review of the assessment order, the Tribunal observed that the Assessing Officer, though issuing notices under sections 143(2) and 142(1), did not address or seek information specifically regarding the alleged short computation of sale consideration vis-a -vis market value and did not investigate the balance amount shown as advance received from the third party. There was no record of enquiry or questionnaire on these specific defects. The Tribunal agreed with the Principal Commissioner that these omissions rendered the assessment erroneous and prejudicial to revenue, thereby justifying exercise of revisionary power under section 263 and directing reassessment after giving the assessee an opportunity. [Paras 9, 10]

The assessment was held to be erroneous and prejudicial to the interests of Revenue for lack of inquiry into the sale consideration discrepancy and the advances; the section 263 revision directing re-assessment was sustained.

Final Conclusion: The Tribunal dismissed the appeal, holding the section 263 show-cause notice and revision order validly issued and the impugned assessment to be erroneous and prejudicial to revenue; the revision order directing the Assessing Officer to redo the assessment after affording opportunity to the legal heir is sustained.

Revisionary jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interests of Revenue - scope of limited scrutiny/CASS and adequacy of AO's enquiries - determination of fair market value for the purposes of section 56(2)(viib) - Net Assets method as per Explanation (a)(ii) to section 56(2)(viib) - Rule 11UA valuation formula and its relevance

Revisionary jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interests of Revenue - scope of limited scrutiny/CASS and adequacy of AO's enquiries - Whether the revision under section 263 was justified on the ground that the assessment order was erroneous and prejudicial to the interests of Revenue - HELD THAT: - The Tribunal found that the Assessing Officer had specifically selected the case for limited scrutiny to examine the applicability of section 56(2)(viib) and had issued detailed queries (including specific questions on shares issued, premium received and investments) and called for valuation certificates and supporting documents. The assessee filed comprehensive responses and valuation reports, and the Assessing Officer, after examining these materials, took a conscious decision in the assessment order dated 31.10.2017 not to make any addition under section 56(2)(viib). Applying the settled test that both elements-error and prejudice to revenue-must coexist for exercise of power under section 263, and relying on authority that mere cryptic characterization by the Commissioner without demonstrating why enquiries were insufficient is inadequate, the Tribunal held that the order under section 143(3) could not be characterized as erroneous or prejudicial and that exercise of revisional power was unjustified. [Paras 7, 8, 10]

Revisionary order under section 263 quashed as the assessment order was not shown to be erroneous and prejudicial to Revenue.

Determination of fair market value for the purposes of section 56(2)(viib) - Net Assets method as per Explanation (a)(ii) to section 56(2)(viib) - Rule 11UA valuation formula and its relevance - Whether the assessee's determination of fair market value at Rs.33 per share by the Net Assets method was valid and whether any addition under section 56(2)(viib) was warranted - HELD THAT: - The Tribunal accepted that the assessee chose the Net Assets method in terms of Explanation (a)(ii) to section 56(2)(viib) and filed a valuation certificate by a Chartered Accountant substantiating the Rs.33 per share valuation. The Commissioner did not dispute the method adopted by the assessee; instead, the Commissioner relied on a Rule 11UA computation giving a different figure under the alternative method in Explanation (a)(i). The Tribunal held that Rule 11UA valuation (and the figure arrived thereby) is irrelevant where the assessee has legitimately adopted the Net Assets method under Explanation (a)(ii) and supported it with a valuation certificate. Accordingly, since the issue price equalled the fair market value as determined by the adopted method, no consideration exceeding fair market value arose and no addition under section 56(2)(viib) was warranted. [Paras 11]

Assessee's valuation by Net Assets method accepted; no addition under section 56(2)(viib) arises.

Final Conclusion: The appeal is allowed: the revisional order under section 263 is quashed because the assessment was neither erroneous nor prejudicial to Revenue, and on merits the assessee's Net Assets valuation at Rs.33 per share is sustained so that no addition under section 56(2)(viib) is called for.

Arm's length price - transfer pricing adjustment - comparability and quality adjustment - burden of proof on assessee - depreciation on capitalised share issue expenses - mercantile system of accounting - taxation on accrual - condonation of delay for COVID period

Arm's length price - transfer pricing adjustment - comparability and quality adjustment - burden of proof on assessee - Deletion of downward purchase price adjustment of Rs.2,05,23,752/- made by TPO for purchases of MS ingots from the associated enterprise for January 2014. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the TPO's downward adjustment because the assessee produced contemporaneous and substantive evidence showing a qualitative difference between MS ingots purchased by the assessee and those sold by the AE to unrelated parties. The evidence accepted by the authorities included third party confirmations attributing price variation to higher carbon content and random sizes, chemical analysis and factory test reports, and consultant certificates describing sub standard ingots sold at discounts. The TPO had accepted the assessee's quality contention for December 2013, February 2014 and March 2014 and made adjustment only for January 2014 on the sole ground of higher third party sales that month; no material was placed on record to show transactions of January 2014 were different in nature from other months. In these circumstances the Tribunal found no reason to disturb the CIT(A)'s finding that the downward adjustment was unsustainable, since the assessees bore the evidentiary burden and had produced credible, uncontroverted material supporting non comparability of the third party purchases. The Tribunal therefore dismissed the Department's appeal on this ground. [Paras 6, 7, 8, 9, 10]

Dismissal of the Department's appeal against deletion of the transfer pricing downward adjustment; the addition is deleted.

Depreciation on capitalised share issue expenses - Whether depreciation is allowable on expenditure incurred for increase in authorised capital which the assessee had capitalised. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that while the AO could not compel the assessee to treat the expenditure as revenue, depreciation on capitalised expenses incurred in connection with increase in authorised capital is not allowable. The Tribunal relied on established judicial precedents to the effect that such capitalised share issue or authorised capital related expenses do not qualify for depreciation and fall within the non allowable category. Consequently, the CIT(A)'s direction to disallow depreciation claimed on the capitalised amount was upheld. [Paras 11, 12, 13, 14]

Assessee's ground dismissed; depreciation on the capitalised authorised capital expenses disallowed.

Mercantile system of accounting - taxation on accrual - Whether interest income reflected in Form 26AS but taxed in the subsequent year can be excluded from income of assessment year 2014 15 to avoid double taxation. - HELD THAT: - The Tribunal agreed with the CIT(A) that, under the mercantile system of accounting followed by the assessee, interest income accrues and is taxable in the year of accrual; therefore offering the same amount to tax in the subsequent year does not by itself justify exclusion in the earlier year. The assessee had accepted the addition before the AO; however, the Tribunal noted that if the amount is ultimately taxed in the subsequent year, Revenue may grant consequential relief after carrying out necessary verifications. Accordingly the assessee's appeal was partly allowed limited to permitting the Revenue to provide relief in the subsequent year upon appropriate verification. [Paras 15, 16, 17]

Addition on account of interest upheld for AY 2014 15; partly allowed insofar as consequential relief may be given in AY 2015 16 after verification.

Final Conclusion: The Department's appeal is dismissed in respect of the transfer pricing downward adjustment; the assessee's cross objection is partly allowed - depreciation claimed on capitalised authorised capital expenses is disallowed, and the interest addition is sustained for AY 2014 15 subject to possible consequential relief in AY 2015 16 after verification. A 21 day delay in filing the revenue appeal was condoned on account of the COVID period.

Tonnage tax scheme - core shipping activity - prior period adjustments - incidental income in excess of 0.25% of turnover - reimbursement of expenses / recovery of costs - write back of provisions - capital gains and turnover - interest income as business income - remand for de novo adjudication - interest under section 234D

Prior period adjustments - core shipping activity - Classification of prior period adjustments as income from core shipping activity or taxable under normal provisions - HELD THAT: - The Tribunal examined items credited as prior period adjustments and applied precedents in the assessee's own case. Small amounts not pressed were dismissed as not pressed. Interest on housing loans to employees was held to be income from core shipping activity following the coordinate bench's decision. Insurance and P&I claims received in respect of qualifying ships were held to relate directly to core shipping activity and therefore covered by the tonnage tax provisions. Recoveries of container-related costs were treated as reimbursements of expenditure and not as income, following precedent. Terminal handling charges and commission on disbursement were held to be part of core shipping activities. The Assessing Officer's categorisation of most of the prior period receipts as taxable under normal provisions was therefore reversed in part and upheld in part as per the findings. [Paras 12, 15, 16, 17, 18]

Prior period adjustments were held to be from core shipping activity in respect of interest on housing loans, insurance and P&I claims, container-cost recoveries and terminal handling/commission items; certain small items not pressed were dismissed as not pressed; overall the assessee's ground is partly allowed.

Sundry receipts - incidental income in excess of 0.25% of turnover - reimbursement of expenses / recovery of costs - remand for de novo adjudication - Taxability of sundry receipts and treatment under Chapter XII G (tonnage tax), including admission of additional evidence and remand of part of the issue - HELD THAT: - The Tribunal considered each category of sundry receipts. Receipts arising from employee accommodation recoveries, rent on furniture, company bus services, contributions for employee schemes, penal charges, refund of directors' fees, commission on disbursements, insurance and P&I claims, liquidated damages (dry docks), and profit on bar/shop sales were held to relate to core shipping activity or incidental activity within Chapter XII G and not taxable under normal provisions. The assessee's application to admit additional evidence regarding sundry receipts (volume incentives, container charges, documentation charges, etc.) was allowed; because those details were not before the lower authorities the Tribunal remanded the specific item of sundry receipts of Rs.1,44,81,883 to the Assessing Officer for de novo adjudication after examination of the newly admitted evidence. The Tribunal clarified that where receipts are not treated as core shipping income, corresponding deductible expenditure should be allowed. [Paras 26, 27, 28, 29, 31]

Sundry receipts largely treated as arising from core or incidental shipping activities and not taxable under normal provisions; additional evidence admitted and the specific sundry receipts of Rs.1,44,81,883 remanded to the Assessing Officer for de novo adjudication.

Capital gains and turnover - tonnage tax scheme - Whether profit on sale of assets forms part of turnover for computing incidental income under Chapter XII G - HELD THAT: - Relying on the coordinate bench's decision in the assessee's own case, the Tribunal held that profit on sale of assets is taxable as capital gains and does not constitute turnover for purposes of Chapter XII G. Accordingly, profit on sale of assets is excluded from turnover when calculating the 0.25% threshold and incidental income under the tonnage tax scheme. Receipts treated as core activities will be included in turnover as applicable. [Paras 32, 33, 34]

Reduction of profit on sale of assets from turnover upheld; adjustments to turnover to follow the classification of sundry receipts.

Interest income as business income - tonnage tax scheme - Whether interest (and dividend) income constitutes income from core shipping activity eligible for presumptive taxation under Chapter XII G - HELD THAT: - The Tribunal admitted an additional ground by the assessee. The assessee did not press the claim for dividend income. For interest income, the Tribunal accepted the assessee's case that interest earned on short term deposits of funds held for business purposes (including amounts in the Tonnage Tax Reserve) is in the nature of business income. The Tribunal relied on authority holding that interest earned on unutilised borrowed funds for business purposes is business income. Consequently, interest income was held to relate to the core shipping activity and taxed accordingly under the tonnage tax framework. [Paras 35, 36, 37, 38]

Interest income held to be business income relating to core shipping activity and thus treated within the tonnage tax scheme; dividend claim not pressed.

Interest under section 234D - remand for de novo adjudication - Levy of interest under section 234D where refund intimation was issued but refund not released - HELD THAT: - The assessee contended that an intimation under section 143(1) showed a refund which was not paid and had filed a rectification application. The Tribunal remanded this issue to the Assessing Officer for verification of whether the refund was granted; if the claim is found correct the Assessing Officer is directed to delete the interest under section 234D. No final finding on the levy was recorded by the Tribunal itself. [Paras 39, 40]

Issue remanded to the Assessing Officer for verification and de novo adjudication; interest under section 234D to be deleted if refund was not granted.

Write back of provisions - tonnage tax scheme - Whether write back of sundry creditors and excess provisions are to be treated as income from core activity and covered by Chapter XII G - HELD THAT: - The Tribunal followed the coordinate bench's reasoning that write back of provisions and sundry credit balance write backs form part of income from core activity of a tonnage tax company. The scheme under Chapter XII G provides the mode of computation for qualifying ships and displaces sections 28 to 43C; therefore items under section 41(1) cannot be separately added under normal provisions where the company has no other business. The learned CIT(A)'s deletion of additions on these grounds was affirmed. [Paras 41, 42, 43, 44, 45]

Revenue's appeals challenging allowance of tonnage tax treatment to write backs and deletion of additions on excess provisions are dismissed.

Reimbursement of expenses / recovery of costs - turnover for incidental income - Taxability of reimbursement of overheads for managed vessels and its inclusion in turnover for computing incidental income - HELD THAT: - Receipts that are reimbursements of overheads for managed vessels pertain to managed vessels and were held to arise from the core activity of shipping. Such receipts therefore form part of turnover for the purpose of working out incidental income in excess of 0.25% of core activity turnover. [Paras 46]

Revenue's ground on reimbursement of overheads dismissed; such receipts are part of turnover for computing incidental income under Chapter XII G.

Final Conclusion: The assessee's appeal is partly allowed (certain prior period items and sundry receipts treated as core/incidental shipping income; interest income held as business income; specific sundry receipts remanded for de novo adjudication; section 234D issue remanded), and the Revenue's appeal is dismissed.

Admission of additional legal ground - reopening of assessment - reason to believe - non-application of mind - tangible material - notice under section 148 - reassessment under section 147

Admission of additional legal ground - Application to admit additional ground No.7.2 challenging validity of notice under section 148 was allowed for adjudication before the Tribunal. - HELD THAT: - The Tribunal applied the principle that purely legal objections which go to the root of the matter may be entertained for the first time before the Tribunal. The assessee sought admission of a legal ground challenging the initiation of reassessment on the basis that the AO did not conduct an independent inquiry before forming a reason to believe. The Revenue did not dispute that the ground was purely legal. On this basis the Tribunal allowed the application and admitted ground No.7.2 for adjudication. As the assessee withdrew its request to admit ground No.7.1, that part was not pressed. [Paras 5]

Application to admit additional ground No.7.2 allowed; application for No.7.1 not pressed.

Reopening of assessment - reason to believe - non-application of mind - tangible material - notice under section 148 - reassessment under section 147 - Reopening of assessment and issuance of notice under section 148 and consequent reassessment under section 147 were quashed for want of jurisdiction due to non-application of mind and absence of link between tangible material and reason to believe. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the material on record and concluded that the AO proceeded on an erroneous premise that no return had been filed for AY 2009 - 10 despite the assessee having filed a return. The Tribunal held that the AO failed to apply his mind to available relevant material and did not create any link between the information received from the Investigation/AIR and the formation of a reason to believe that income had escaped assessment. Relying on the jurisprudence of the jurisdictional High Court (as discussed in RMG Polyvinyl (I) Ltd. reproduced in the order) the Tribunal found that information from the Investigation Wing is not tangible material per se unless followed by further inquiry or linkage by the AO. In the absence of such application of mind and verification, the assumption of jurisdiction to reopen assessment was held to be invalid and the notice under section 148 and consequent proceedings under section 147 were quashed. As the legal ground was allowed, the Tribunal did not adjudicate merit grounds which became academic. [Paras 8, 9, 11]

Initiation of reassessment under section 147, issuance of notice under section 148 and consequent proceedings/quasi-orders quashed for non-application of mind and lack of tangible link.

Final Conclusion: The Tribunal admitted the additional legal ground No.7.2 and, on its merits, allowed that ground by quashing the notice under section 148 and all consequential reassessment proceedings under section 147 for non-application of mind and absence of a link between the Investigation/AIR information and a reason to believe; consequential merit grounds were left academic and the appeal was allowed.

Fixed place Permanent Establishment - Dependent agent Permanent Establishment - Service Permanent Establishment - Attribution of profits to Permanent Establishment - Business connection under section 9 - Taxability of IPLC/link charges as royalty - Precedential effect of coordinate-bench Tribunal orders in assessee's own case

Fixed place Permanent Establishment - Precedential effect of coordinate-bench Tribunal orders in assessee's own case - Whether the assessee had a fixed place Permanent Establishment in India for the relevant year and whether earlier coordinate-bench findings in the assessee's own case are binding. - HELD THAT: - The Tribunal followed earlier coordinate-bench decisions in the assessee's own case (concluding a fixed place PE existed for earlier assessment years) and applied judicial discipline to hold that those findings bind the Bench in the present proceeding. On that basis the Tribunal affirmed the finding of a fixed place PE in India and decided the related grounds against the assessee. [Paras 9]

Finding of fixed place PE in India affirmed; grounds challenging fixed place PE dismissed against the assessee.

Attribution of profits to Permanent Establishment - Methodology and quantum of profits attributable to the PE arising from assets/use of project-specific assets. - HELD THAT: - While the existence of a fixed place PE was affirmed by following earlier coordinate-bench methodology, the Tribunal did not decide the final quantification on the merits. Instead, it restored the issue to the file of the Assessing Officer/TPO with directions to adopt the methodology laid down by the coordinate Bench for earlier assessment years, and to recompute attribution after giving the assessee opportunity to submit calculations. [Paras 10]

Issue remanded to AO/TPO for recomputation of profits attributable to the PE following the Tribunal's earlier prescribed methodology.

Service Permanent Establishment - Dependent agent Permanent Establishment - Whether the assessee had a Service PE or a Dependent Agent PE in India for the year under consideration. - HELD THAT: - The Tribunal noted that earlier orders in the assessee's own case had held there was no service PE and no dependent agent PE, and that the Revenue had failed to point out distinguishing facts for the year under appeal. The Tribunal therefore accepted the earlier findings and sustained the conclusion that neither a Service PE nor a Dependent Agent PE existed in India in the year under consideration. [Paras 11]

Findings that there is no Service PE and no Dependent Agent PE upheld; related grounds raised by the Revenue dismissed.

Taxability of IPLC/link charges as royalty - Whether amounts received by the assessee towards IPLC/link charges are taxable in India as royalty. - HELD THAT: - Following the Tribunal's earlier reasoning in the assessee's own case, the Bench held that the IPLC/link charges did not amount to transfer of right to use nor constituted royalty under Article 12 of the India-US DTAA. The payments were treated as procurement/reimbursement for services and not as equipment or process royalty; accordingly the CIT(A)'s allowance of the ground in favour of the assessee was sustained. [Paras 5, 12]

Receipt of IPLC/link charges held not taxable as royalty in India; ground allowed for the assessee.

Final Conclusion: The revenue appeal is dismissed. The assessee's appeal is partly allowed: the Tribunal upheld that a fixed place PE exists (following coordinate-bench precedent), sustained findings that there is no Service PE or Dependent Agent PE, held IPLC/link charges are not taxable as royalty, and remanded the profit-attribution computation to the Assessing Officer/TPO to be carried out in accordance with the Tribunal's established methodology.

Burden of proof in smuggling - definition of "smuggled goods" as indicating foreign origin/recent importation - evidentiary value of statements recorded under Section 108 of the Customs Act - right to cross-examination and consequences of denial - retraction of statements and its effect on adjudication - release of perishable seized goods by way of value claim

Burden of proof in smuggling - definition of "smuggled goods" as indicating foreign origin/recent importation - The department bears the burden of proving that the seized betel nuts were smuggled goods of foreign origin. - HELD THAT: - The Tribunal and this Court held that betel nuts are not goods notified under the regulation that gives rise to an adverse presumption, and therefore the presumption of foreign origin does not arise. On the facts, the department failed to produce evidence establishing recent importation or foreign origin; findings suggesting a possibility of smuggling in the adjudication order were treated as presumptive and unsupported. The Tribunal examined local market receipts, absence of foreign markings, lack of forensic testing proving foreign origin, and the fact that betel nuts are commonly sold in adjoining domestic areas, concluding that the revenue did not discharge the burden to prove smuggling.

Tribunal rightly held that burden lay on the department and, on the facts, the department failed to prove that the goods were smuggled.

Evidentiary value of statements recorded under Section 108 of the Customs Act - retraction of statements and its effect on adjudication - Statements initially recorded under Section 108 which were subsequently retracted on oath could not sustain the adjudication in the absence of independent corroborative evidence. - HELD THAT: - The Tribunal found that the initial statements were identical and appeared unreliable given the semi-literate status of the declarants and that the same were retracted before the Magistrate at the earliest opportunity. In the absence of independent incriminating material or corroboration obtained in raids or interrogations, the Tribunal correctly disbelieved those statements and concluded they could not form the basis for confiscation or penalty.

Retraction of the statements and lack of independent evidence justified setting aside the adjudication based on those statements.

Right to cross-examination and consequences of denial - Denial of opportunity to cross-examine witnesses who implicated respondents vitiated the proceedings and undermined the department's case. - HELD THAT: - Relying on authority that denial of cross-examination goes to the root of the matter, the Tribunal held that the department's refusal to produce dealers/witnesses for cross-examination (despite a specific request) and its reliance on untested statements under Section 108 fatally weakened its evidentiary case. On that factual and legal basis, the Tribunal concluded the department failed to establish smuggling.

Rejection of the request for cross-examination vitiated the proceedings and contributed to the setting aside of the adjudication.

Release of perishable seized goods by way of value claim - Although the Tribunal's order directing return of seized perishable goods cannot be executed after lapse of time, the respondent may seek payment of the value of the goods by making an application to the concerned authority within a specified period. - HELD THAT: - This Court agreed with the Tribunal's factual conclusion that the goods were perishable and seized long prior; directing physical return would be against public interest as the goods would be unfit for consumption. Consequently, the Court modified the Tribunal's order to permit the respondent to apply for payment of the value of the goods; if such application is filed within thirty days from service of this order, it is to be processed according to law.

Order modified: physical return not directed; respondent allowed to apply for value of goods within thirty days for processing in accordance with law.

Final Conclusion: The appeals by the revenue are dismissed. The Tribunal was correct in placing the burden on the department to prove foreign origin, in rejecting reliance on retracted statements and in faulting denial of cross-examination; the adjudication was set aside on those grounds. The Tribunal's direction for return of perishable goods is modified so that the respondent may, within thirty days of service, apply for payment of the value which shall be processed in accordance with law.

Classification of goods under Customs Tariff - Exemption under Notification No. 12/2012-Cus - Principle of natural justice-opportunity of personal hearing - Remand for fresh adjudication

Principle of natural justice-opportunity of personal hearing - Remand for fresh adjudication - Impugned orders set aside and matter remanded to the Adjudicating Authority for fresh decision after affording opportunity of personal hearing, in view of affidavit filed before the Tribunal but not considered earlier. - HELD THAT: - The Tribunal found that the appellants had declared the goods as 'Pulses Grinding (Atta of pulses)-Powder' which prima facie suggested a product in the form of atta/powder. The appellants, however, placed on record a detailed affidavit by their Director explaining that the goods are bhusi/bhuki/tukdi arising in usual course of pulse processing and that no milling industry processes were undertaken. That affidavit had not been considered by the Adjudicating Authority. In the interest of fair hearing and natural justice the Tribunal held that the Adjudicating Authority must re consider the classification and the claim for exemption in the light of the affidavit and after affording the appellants a sufficient opportunity of personal hearing. Consequently the impugned orders were set aside and the matter remanded for fresh adjudication.

Impugned orders set aside; appeals allowed by way of remand directing the Adjudicating Authority to reconsider classification and exemption claim after giving personal hearing and having regard to the affidavit filed before the Tribunal.

Final Conclusion: The appeals are allowed by way of remand: the impugned orders are set aside and the Adjudicating Authority is directed to decide afresh the classification of the goods and entitlement to the stated exemption after affording the appellants a sufficient opportunity of personal hearing and considering the affidavit placed on record.

Provisional release of goods - re-export of imported goods - power to allow provisional release under Section 110 of the Customs Act - freely importable goods - mis-declaration of description, classification and quantity - samples drawn and testing by Textile Committee - safeguarding the revenue by bond or bank guarantee

Provisional release of goods - re-export of imported goods - freely importable goods - samples drawn and testing by Textile Committee - safeguarding the revenue by bond or bank guarantee - Refusal to provisionally release the seized imported fabrics for the limited purpose of re-export was unlawful and the matter must be reconsidered by the adjudicating authority. - HELD THAT: - The Tribunal found that samples had been drawn and tested by the Textile Committee and that the goods are freely importable, although there was mis-declaration as to description, classification and quantity. The appellant undertook not to contest classification, identity or quantity and had deposited an amount with the department. Applying the reasoning in Rajkamal Industrial Pvt. Ltd. and the jurisdictional High Court in Kausalya Impex, the Tribunal held that where goods are not prohibited and the investigating agency does not require retention of the goods for adjudication (samples already drawn), the discretion under Section 110 to permit provisional release must be exercised lawfully with suitable safeguards for revenue. The Tribunal concluded that refusal solely because adjudication was pending was not justified and that provisional release for re-export could be allowed subject to reasonable conditions (such as bond or bank guarantee) to protect revenue interests. The Tribunal therefore set aside the impugned refusal and directed the adjudicating authority to reconsider the request within one month from receipt of the order, imposing reasonable conditions if necessary. [Paras 15, 18, 19]

Impugned letter refusing provisional release for re-export set aside; adjudicating authority directed to consider the importer's request for provisional release for re-export within one month, subject to reasonable conditions to safeguard the revenue.

Final Conclusion: The appeal is allowed: the refusal to provisionally release the freely importable goods for re-export was set aside and the adjudicating authority is directed to reconsider the request within one month, permitting provisional release for re-export subject to reasonable safeguards for the revenue.

Maintainability of appeal before the Appellate Tribunal - appeal before Commissioner (Appeals) under Section 128A of the Customs Act, 1962 - condonation of delay

Maintainability of appeal before the Appellate Tribunal - appeal before Commissioner (Appeals) under Section 128A of the Customs Act, 1962 - condonation of delay - Whether the appeal filed before the Appellate Tribunal was maintainable or ought to have been filed before the Commissioner (Appeals), and the relief to be granted in the interest of justice. - HELD THAT: - The Tribunal accepted the Revenue's contention that the order for provisional release dated 29/08/2022 was passed by the Additional Commissioner of Customs and, accordingly, the appropriate forum for challenge is the Commissioner (Appeals) in terms of Section 128A of the Customs Act, 1962. The Tribunal held that the appellant ought to have approached the Commissioner (Appeals) instead of the Tribunal. However, exercising its discretion in the interest of justice, the Tribunal directed that the appellant may file the appeal before the Commissioner (Appeals) and that the Commissioner (Appeals) should consider condoning the period consumed before the Tribunal when deciding any application for condonation, provided the appeal is filed within a reasonable period. The Tribunal accordingly disposed of the miscellaneous application and the appeal without deciding the merits of classification or provisional release conditions.

Appeal was not maintainable before the Tribunal and the appellant is directed to file the appeal before the Commissioner (Appeals); the Commissioner (Appeals) is to consider condoning the delay caused by proceedings before this Tribunal if the appeal is filed within a reasonable period; miscellaneous application and appeal disposed.

Final Conclusion: The Tribunal held the appeal to be not maintainable before itself and directed the appellant to approach the Commissioner (Appeals) with liberty to seek condonation of delay for the time spent before the Tribunal; miscellaneous application and appeal disposed of.

Right of development as an intangible asset - inclusion of assets in the Information Memorandum - duties of Interim Resolution Professional under Section 18 - duties of Resolution Professional under Section 25 - Explanation under Section 18 and its limited application - distinction between possession and ownership - bundle of rights doctrine in development agreements

Right of development as an intangible asset - inclusion of assets in the Information Memorandum - bundle of rights doctrine in development agreements - Whether the Corporate Debtor's rights over the land constitute assets/property that the Resolution Professional must include in the Information Memorandum and may take custody and control of under Sections 18 and 25 of the IBC. - HELD THAT: - The Court examined the contractual chain - MoU (24.01.2008), Shareholders Agreement (24.01.2008), Sale Certificate (29.01.2008), Development Agreement (16.06.2008), Memoranda Recording Possession (02.03.2010 and 24.06.2010) and the Leave and License Agreement (19.08.2011) - and found that a bundle of rights and interests, including exclusive development rights and actual handing over of possession to the Corporate Debtor, were created for valuable consideration. Relying on the inclusive definition of "property" in Section 3(27) of the IBC (which covers present, future, vested or contingent interests arising out of or incidental to property) and the settled principle that development rights can be incidents of ownership (as explained in Sushil Kumar Agarwal), the Court held that those development rights amount to "property" and, in common parlance, constitute "assets" within the scope of Sections 18(f) and 25(2)(a). Consequently, such rights are capable of being included in the Information Memorandum and are within the duties of the Resolution Professional to take custody and control of for the purposes of CIRP. [Paras 33, 34, 35, 36, 37]

The development rights and the bundle of rights and interests of the Corporate Debtor over the land constitute "property"/"assets" includible in the Information Memorandum and are subject to custody and control under Sections 18 and 25 of the IBC.

Duties of Interim Resolution Professional under Section 18 - duties of Resolution Professional under Section 25 - Explanation under Section 18 and its limited application - distinction between possession and ownership - Whether NCLT and NCLAT exceeded their jurisdiction by issuing directions to protect or recover possession for the Corporate Debtor and by directing assistance under Regulation 30. - HELD THAT: - The Court observed that the Explanation to Section 18 (excluding third party owned assets in the possession of the corporate debtor for purposes of that section) is expressly confined to Section 18 and does not extend to Section 25. Given that the Corporate Debtor had been conferred development rights and exclusive possession by the sequence of agreements and memoranda, those rights were not excluded from the duties of the Resolution Professional. The Court also noted that Victory's pleadings and documentary record did not establish occupation beyond the 10,000 sq.ft. licensed area; Victory was a licensee (not a lessee) and a licence does not create proprietary rights in immovable property. Balancing these facts, NCLT and NCLAT confined protection to the licensed area while preserving the Corporate Debtor's development rights over the remaining land and directed appropriate disclosure in the Information Memorandum. The Court distinguished precedents relied upon by the appellants (Embassy, Gujarat Urja, Tata Consultancy) as inapposite to the factual matrix where development rights were created for consideration and, where applicable, held that Rajendra K. Bhutta supports treating such rights as assets. [Paras 46, 47, 48, 49, 50]

NCLT and NCLAT did not exceed jurisdiction in protecting the Corporate Debtor's possession and directing assistance under Regulation 30; their orders balancing the licensee's limited rights and the Corporate Debtor's development rights were justified.

Final Conclusion: Both appeals are dismissed and the impugned orders of NCLT and NCLAT are upheld; the Resolution Professional may include and protect the Corporate Debtor's development rights in the Information Memorandum while the licensee's rights under the Leave and License Agreement over the specified 10,000 sq.ft. remain protected.

Maximisation of value of the corporate debtor - private sale of corporate debtor as going concern - stakeholders' consultation committee approval - liquidator's duty to identify and group assets under Regulation 32A(3) - time bound nature of insolvency and liquidation process - discretion of adjudicating authority in approving sale proposals - confidentiality of asset memorandum - failed e auctions and absence of EMD

Stakeholders' consultation committee approval - private sale of corporate debtor as going concern - discretion of adjudicating authority in approving sale proposals - Validity of the Adjudicating Authority's approval of the proposal of Respondent No.2 given stakeholders' consent and affidavits of financial creditors - HELD THAT: - The Tribunal upheld the Adjudicating Authority's approval of the sale proposal submitted by Respondent No.2. The Liquidator received a proposal after the fifth failed e auction and placed it before the Stakeholders' Consultation Committee which, by majority, authorised the Liquidator to seek approval. On the Adjudicating Authority's direction, the two financial creditors (ARCIL and Pegasus) filed affidavits confirming their acceptance of the proposal. Having recorded stakeholders' consent and the affidavits, the Adjudicating Authority lawfully approved the private sale; the appellate court found no illegality in that exercise of discretion and no ground to interfere with the approval. [Paras 11, 19, 20]

The Adjudicating Authority rightly approved Respondent No.2's proposal; approval sustained.

Maximisation of value of the corporate debtor - time bound nature of insolvency and liquidation process - discretion of adjudicating authority in approving sale proposals - Whether a belated higher offer by the appellant required the Adjudicating Authority to set aside the approved proposal or order a limited e auction - HELD THAT: - While maximisation of value is an objective of the Code, it must be achieved within statutory timelines. The Tribunal distinguished the cited precedent on its facts: in that case the Adjudicating Authority exercised discretion to direct a limited e auction after requiring a deposit to demonstrate bonafide. In the present facts the stakeholders had considered and accepted the earlier participant's proposal, and the financial creditors had sworn affidavits accepting it. A belated offer filed after stakeholders' approval and months after the proposed sale does not automatically entitle the appellant to unsettle the approved process. The appellate court found no basis to direct a limited auction here and affirmed the Adjudicating Authority's discretionary decision. [Paras 12, 14, 19]

A belated higher offer did not oblige the Adjudicating Authority to set aside or re open the approved sale; no interference warranted.

Liquidator's duty to identify and group assets under Regulation 32A(3) - private sale of corporate debtor as going concern - Whether the Liquidator failed to comply with Regulation 32A(3) by not identifying assets and liabilities to be sold as a going concern - HELD THAT: - The Tribunal accepted that the Liquidator prepared an Asset Memorandum containing details of immovable and movable assets and that five e auction notices were issued on that basis without objection from participants. The Liquidator's note explained reliance on corporate debtor and secured creditors' records and attempts to obtain certified records from RIICO. The appellate court held that the Asset Memorandum constituted identification of assets under Regulation 32A(3), and that the appellant could not raise this ground belatedly before the Adjudicating Authority when it was not pressed earlier. [Paras 16, 18]

There was no non compliance with Regulation 32A(3); the identification requirement was met by the Asset Memorandum.

Confidentiality of asset memorandum - failed e auctions and absence of EMD - Whether the appellant could rely on confidential documents (Asset Memorandum) allegedly received from the promoter to challenge the sale - HELD THAT: - The Tribunal held that the Asset Memorandum is a confidential document not accessible to outsiders during the liquidation process. The appellant produced documents it did not explain the source of; the court accepted the respondent's submission that those documents likely originated from the promoter. Given the confidential nature of the Asset Memorandum and absence of any pleading of procedural irregularity before the Adjudicating Authority, the appellant could not rely on such material to unsettle the approved sale. [Paras 17, 18]

Appellant could not rely on confidential Asset Memorandum material obtained from the promoter to challenge the process; such reliance rejected.

Final Conclusion: The Tribunal found no illegality in the Adjudicating Authority's approval of the private sale to Respondent No.2, rejected the appellant's belated higher offer and challenges based on asset identification or confidential documents, and dismissed the appeal.

Interpretation and application of e-auction Process Information Document - preference for sale as a going concern where competing bids are equal - duty of the liquidator to apply tender conditions and protect corporate debtor's revival value - bid incremental value and automated platform rejection does not supplant contractual preference - judicial review of liquidator's declaration where tender terms are not given effect - deference to author of tender document subject to absence of mala fide or perversity

Preference for sale as a going concern where competing bids are equal - interpretation and application of e-auction Process Information Document - Whether the Adjudicating Authority was correct in declaring Respondent No.1 as successful bidder insofar as the Process Document mandated that, where highest bids under Option 1 and Option 2 are equal, the bidder offering sale as a going concern (Option 1) must be preferred. - HELD THAT: - The Tribunal examined the bidding records and the E-auction Process Information Document which expressly provided that if the highest bids under Options 1 and 2 are equal, the bidder offering to purchase the Corporate Debtor as a going concern (Option 1) shall be declared successful. The auditorium bidding platform records show that the Appellant's and Respondent No.1's final offers were for the same amount, but the platform rejected Respondent No.1's matching entries for failing to meet the incremental value criterion applied by the system. The liquidator declared the Appellant successful by mechanically following the auction platform's acceptance status without applying the contractual preference contained in Clause 10. The Adjudicating Authority rightly held that, on a proper application of the Process Document, Respondent No.1-who had bid under Option 1 for sale as a going concern and had matched the amount offered by the Appellant-was entitled to be declared the successful bidder. The Tribunal accepted that the tender author (liquidator) ordinarily merits deference in interpreting tender terms, but found that here the liquidator failed to give effect to an express contractual provision favoring sale as a going concern and the Adjudicating Authority correctly remedied that omission. [Paras 11, 12, 13, 14, 18]

The Adjudicating Authority correctly declared Respondent No.1 as successful bidder by applying the Process Document preference for Option 1 where competing bids were equal; the liquidator erred in mechanically following the auction platform without applying the contractual provision.

Duty of the liquidator to apply tender conditions and protect corporate debtor's revival value - judicial review of liquidator's declaration where tender terms are not given effect - Whether the Adjudicating Authority was justified in intervening to correct the liquidator's declaration on the ground that the liquidator acted mechanically and failed to protect the corporate debtor's interest as envisaged under the Code. - HELD THAT: - The Tribunal noted the object of the Insolvency and Bankruptcy Code to maximise asset value and, where possible, to preserve the corporate debtor as a going concern. The liquidator's declaration of the highest bidder should be made after applying the terms of the Process Document. Where the liquidator failed to apply an explicit, pre conditioned preference in the tender document-thereby risking the corporate debtor's revival prospects-the Adjudicating Authority was entitled to examine the record and set aside the declaration in favour of the Appellant. The Adjudicating Authority evaluated the evidence of matching bids and the tender clause and concluded that intervention was warranted to give effect to the tender terms and the statutory object; the Tribunal found no error in that approach and declined to reopen the e auction or order fresh bidding. [Paras 11, 12, 13, 14, 21]

Intervention by the Adjudicating Authority was justified because the liquidator acted mechanically in declaring the successful bidder without applying the contractual preference and the statutory objectives; the Adjudicating Authority's order correcting the declaration was proper.

Bid incremental value and automated platform rejection does not supplant contractual preference - Whether the auction platform's rejection of Respondent No.1's bids for not complying with the incremental bid rule could defeat the contractual clause preferring Option 1 bidders where bids are equal. - HELD THAT: - The Tribunal recorded that the platform rejected certain entries of Respondent No.1 for not meeting the minimum incremental amount; however, the Process Document separately provided the tie breaking rule favoring Option 1. The liquidator could not rely on the platform's mechanical rejection to circumvent an express provision of the tender document. The Adjudicating Authority correctly treated the platform's operational rejections as not determinative where the contractual preference required a different result, and therefore directed declaration in favour of the Option 1 bidder who had matched the highest price. [Paras 13]

The platform's rejection for incremental non compliance did not override the express contractual tie breaker favoring the Option 1 bidder; the Adjudicating Authority correctly applied the Process Document over the platform outcome.

Refund of deposit with interest - Whether the Adjudicating Authority's direction to refund the amount deposited by the Appellant with accrued interest was appropriate. - HELD THAT: - The Adjudicating Authority directed that if Respondent No.1 complied with the deposit direction, the liquidator should refund the amount deposited by the declared successful bidder (Appellant) with accrued interest. The Tribunal observed that this protective direction preserves substantive justice to the Appellant while giving effect to the corrective declaration. No error was found in this protective remedy. [Paras 21]

The Adjudicating Authority's direction to refund the Appellant's deposit with accrued interest was appropriate as a protective measure while enforcing the corrected declaration.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's order declaring Respondent No.1 the successful bidder (on the ground that the Process Document mandates preference for sale as a going concern where bids are equal), held that the liquidator erred by mechanically following the auction platform without applying the tender terms, and endorsed the refund of the Appellant's deposit with accrued interest as directed by the Adjudicating Authority.

Justiciability of academic controversy - public interest litigation - Foreign Direct Investment policy - settlement / abandonment by petitioner - sealing and custody of confidential status reports

Justiciability of academic controversy - public interest litigation - The writ petition challenging the FIPB approval was rendered academic and was disposed of on the petitioner's statement of no longer wishing to pursue the petition. - HELD THAT: - The Court noted that the shareholding structure of the company subject to the impugned approval had undergone material changes over time and that there was no foreign investment as of the date of the order. In these circumstances, and in view of the petitioner's explicit statement in person that he was no longer interested in pursuing the petition, the Court treated the controversy as academic and disposed of the writ petition. The Court therefore did not proceed to adjudicate the merits of the challenge to the impugned approval under the Foreign Direct Investment policy. [Paras 11, 12]

Writ petition disposed as academic on petitioner's statement of abandonment.

Sealing and custody of confidential status reports - Sealed status reports filed by investigating agencies were re-sealed and handed over to their counsel. - HELD THAT: - The Court perused the sealed-status reports submitted by the CBI and the Enforcement Directorate. Having considered the filings, the Court re-sealed those reports and directed that the sealed covers be handed over to the learned counsel for the CBI and the ED, thereby preserving their confidentiality and custody with the respective agencies' counsel. [Paras 10, 13]

Sealed reports re-sealed and delivered to counsel for CBI and ED.

Final Conclusion: The petition challenging the Government's approval was disposed of as academic following material changes in shareholding and the petitioner's withdrawal; sealed status reports from investigating agencies were re-sealed and returned to their counsel.

Writ jurisdiction under Article 226 - Availability of alternate statutory remedy by way of appeal to the Customs, Excise and Service Tax Appellate Tribunal - Entertainability versus maintainability of writ petitions - Service tax under reverse charge and the definition of "service" in the negative list regime - Extended period of limitation for recovery of service tax (proviso to the limitation provision) - Jurisdictional facts and patent lack of jurisdiction - Principles of natural justice - Final appellate route to the Supreme Court on questions of taxability

Writ jurisdiction under Article 226 - Availability of alternate statutory remedy by way of appeal to the Customs, Excise and Service Tax Appellate Tribunal - Entertainability versus maintainability of writ petitions - Final appellate route to the Supreme Court on questions of taxability - Whether the writ petition under Article 226 should be entertained despite the availability of an alternate statutory remedy of appeal to the Appellate Tribunal (and ultimately to the Supreme Court). - HELD THAT: - The Court applied the established principle that availability of an alternate statutory remedy does not oust writ jurisdiction but observed that judicial restraint ordinarily requires relegation to the statutory appeal unless exceptional circumstances justify interference. Considering precedent cited by the parties, including the Supreme Court's decisions distinguishing entertainability and maintainability, the Court found no breach of natural justice, no patent lack of jurisdiction, and no exceptional circumstance warranting exercise of writ jurisdiction at the interlocutory stage. The factual and legal controversies raised-particularly classification and taxability-necessitate factual inquiry and detailed adjudication which the appellate machinery is equipped to undertake. The possibility that the final appeal on questions of taxability may lie to the Supreme Court further militates against interlocutory writ interference. On these foundations the petition was held not to be entertainable in writ jurisdiction and the petitioner was directed to pursue the statutory appeal. [Paras 19, 30, 31, 32, 33]

Writ petition not entertained; petition dismissed and petitioner relegated to statutory appeal to the Appellate Tribunal (with further appellate route preserved).

Service tax under reverse charge and the definition of "service" in the negative list regime - Jurisdictional facts and patent lack of jurisdiction - Entertainability versus maintainability of writ petitions - Whether the payments described as "irrigation restoration charges" payable to the State amount to a taxable service under the reverse charge mechanism and whether this question can be decided in writ jurisdiction without remitting the matter to the appellate process. - HELD THAT: - The Court examined the Agreement, the State circulars and the legal framework under the negative list regime, noting that the adjudicating authority had framed the taxability question and reached findings after analysing documents. The Court observed that the characterisation of the charges-whether a recovery of construction cost or a charge for a service supporting the petitioner's business-raises mixed questions of law and fact that require factual enquiry (including consideration of the Agreement, computation of restoration cost, and whether any expenditure was actually incurred). Because the question of taxability is fact intensive and was addressed by the adjudicating authority, the appropriate forum for resolution is the statutory appeal where evidence and detailed adjudication can be undertaken. The Court expressly refrained from deciding the merits and left factual and legal determinations to the appellate process. [Paras 21, 22, 24, 26, 32]

Question of taxability requires factual adjudication and is not amenable to final determination in writ jurisdiction; it is to be adjudicated in the statutory appeal.

Extended period of limitation for recovery of service tax (proviso to the limitation provision) - Service tax under reverse charge and the definition of "service" in the negative list regime - Whether the extended period of limitation for recovery can be invoked against the petitioner. - HELD THAT: - The Court held that the contention on extended limitation is interlinked with the primary question of tax liability. The adjudicating authority's invocation of the extended period was premised on findings of deliberate suppression and concealment, which themselves depend on whether a service tax liability existed. Resolution of whether the extended period applies therefore requires factual and legal determination of liability and intent-matters appropriate for the statutory appellate forum rather than by way of writ. The Court therefore declined to adjudicate the extended limitation issue on merits in writ jurisdiction. [Paras 28, 32]

Invocation of the extended period left to adjudication in the statutory appeal; not decided in the writ petition.

Final Conclusion: Writ petition dismissed on the ground that the dispute-primarily taxability of the irrigation restoration charges and the invocation of the extended limitation-requires factual adjudication by the statutory appellate mechanism; petitioner allowed four weeks to file the appeal, the Tribunal to consider pendency of the writ if delay arises.

Support services of business or commerce - reverse charge mechanism - extended period of limitation - normal period of limitation - penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - appropriation and relief under Section 80 of the Finance Act, 1994

Reverse charge mechanism - extended period of limitation - normal period of limitation - Whether the demand could be sustained for the extended period or was restricted to the normal period, having regard to payment and credit under reverse charge. - HELD THAT: - The Tribunal found that the tax demand arose under the reverse charge mechanism and that where tax is payable under reverse charge and credit is availed by the recipient, the position is revenue-neutral, leaving no scope to infer fraud or suppression to justify invoking the extended period of limitation. Consequently the revenue could not invoke the extended period and the demand was restricted to the normal period. The Show Cause Notice having been issued on 08.05.2014, the demand proposed and confirmed for the period prior to October 2009 is barred by limitation. [Paras 5]

Extended period of limitation cannot be invoked; demand for periods prior to October 2009 is time-barred and only the normal period is admissible.

Support services of business or commerce - The demand qua translation services received from overseas was upheld only to the extent of the normal (time barred excluded) period and the matter was remanded for computation for that normal period. - HELD THAT: - Although the question whether translation services constitute 'support services of business or commerce' was in issue, the Tribunal, after holding that extended limitation could not be invoked, upheld the demand for the normal period and remitted the matter to the Adjudicating Authority for working out the demand limited to the normal period. The remand is for computation/verification of the demand within the admissible period and not for relitigation of the limitation finding. [Paras 4, 6]

Demand sustained to the extent of the normal period; matter remanded to Adjudicating Authority to compute the demand for the normal period.

Penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - appropriation and relief under Section 80 of the Finance Act, 1994 - Whether penalties under Section 78 and Section 77 were correctly imposed and whether appropriation ordered by the Adjudicating Authority was justified. - HELD THAT: - The Tribunal found that Revenue did not establish fraud, suppression or other circumstances warranting extended penalties; accordingly the reduced penalty confirmed under Section 78 was set aside. As to penalty under Section 77, the Tribunal observed absence of any allegation or material showing failure to register, or failure to maintain or retain books as envisaged by Section 77 and held that the penalty appeared to have been imposed mechanically. In addition, since the Adjudicating Authority had ordered appropriation of amounts paid and there was no allegation of non registration, the Tribunal held that the appellant was entitled to invoke the relief under Section 80 as then constituted; accordingly the impugned order was set aside to the extent of levying penalties under Sections 78 and 77 and the related appropriation. [Paras 6]

Penalties under Sections 78 and 77 and the order of appropriation set aside; appellant's grounds on penalties allowed and relief under Section 80 recognised.

Final Conclusion: The appeal is partly allowed: the Tribunal holds that the extended period of limitation cannot be invoked where tax was payable under reverse charge and creditable, time bars demands prior to October 2009, upholds the demand only for the normal period and remands computation for that period to the Adjudicating Authority, and sets aside the penalties under Sections 78 and 77 and the related appropriation, allowing the appellant's grounds to that extent.

Utilisation of CENVAT credit to discharge Service Tax payable on reverse charge basis - validity of payment of Service Tax on import of services by reverse charge mechanism - pre-deposit requirement under Section 35F - remand for fresh adjudication to consider merits - imposition of penalty under Sections 76, 77 and 78

Utilisation of CENVAT credit to discharge Service Tax payable on reverse charge basis - validity of payment of Service Tax on import of services by reverse charge mechanism - Payment of Service Tax on services received from service providers located outside India could be discharged by utilisation of CENVAT credit. - HELD THAT: - The Tribunal followed the reasoning in Mccan Erickson (India) Ltd., where Rule 3(4) of the Cenvat Credit Rules permits utilisation of Cenvat credit for payment of Service Tax on output services; the recipient of imported services is treated as the person liable to pay Service Tax and, by statutory definitions, as the provider of taxable service for the purpose of the Cenvat Credit Rules. In light of statutory scheme and judicial pronouncements cited, the payment of Service Tax on reverse charge basis by utilising Cenvat credit is a valid mode of discharge of the tax liability. The impugned order failed to consider this legal position on merits.

Held that payment of Service Tax on reverse charge basis by utilising Cenvat credit is valid; the impugned order could not be sustained on this point.

Pre-deposit requirement under Section 35F - remand for fresh adjudication to consider merits - imposition of penalty under Sections 76, 77 and 78 - Whether the appeal could be dismissed for non-compliance of the pre-deposit requirement without adjudication on merits and related penalties. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) dismissed the appellant's appeal for failure to comply with Section 35F without addressing the substantive defence that the tax liability had been discharged by utilisation of Cenvat credit. Because the Commissioner (Appeals) did not consider the appellant's core defence on merits and also dealt with revenue's claim for imposition of penalties, the matter requires reconsideration. Consequently the impugned order was set aside and the matter remanded to the Commissioner (Appeals) for fresh adjudication on the merits, including consideration of the demand and any penalties.

Impugned order set aside; matter remanded to the Commissioner (Appeals) for fresh adjudication on merits, including consideration of demand and penalties.

Final Conclusion: The Tribunal held that utilisation of Cenvat credit to discharge Service Tax on reverse charge basis is a valid mode of payment, set aside the impugned order which did not deal with the appellant's defence on merits, and remanded the matter to the Commissioner (Appeals) for fresh adjudication including consideration of the demand and penalties.

Taxability of amounts retained by clinical establishments as consideration for health care services - exemption of health care services provided by clinical establishments under the negative list/Notification No.25/2012 - characterisation of hospital-doctor contractual arrangements as joint-benefit revenue-sharing agreements - non-application of business auxiliary / business support service levy where no service is provided by hospital to doctors

Taxability of amounts retained by clinical establishments as consideration for health care services - exemption of health care services provided by clinical establishments under the negative list/Notification No.25/2012 - characterisation of hospital-doctor contractual arrangements as joint-benefit revenue-sharing agreements - non-application of business auxiliary / business support service levy where no service is provided by hospital to doctors - Demand of service tax under the head 'business auxiliary/business support service' for the period April 2009 to March 2013 confirmed by the Commissioner is not sustainable. - HELD THAT: - The agreements between the hospital and the consultants demonstrate a revenue-sharing model with shared obligations, responsibilities and benefits rather than a unilateral provision of infrastructural or administrative services by the hospital to the doctors. The hospital provided healthcare services to patients by engaging consultants; the consultants rendered professional services and the hospital managed patient care from admission to discharge. The Tribunal's earlier decisions (notably in Sir Ganga Ram Hospital) established that such contractual arrangements are for the joint benefit of both parties and do not disclose a separate business support service rendered by the hospital to doctors. Further, under the negative list regime and Notification No.25/2012 clinical establishments providing health care services are exempt from service tax, and treating the hospital's retained share as taxable business support service would undermine that exemption. On these grounds and in view of consistent Tribunal decisions, the Commissioner's confirmation of demand under business support/auxiliary services is legally untenable.

Impugned order confirming service tax demand under 'business auxiliary/business support service' is set aside and the appeal is allowed.

Final Conclusion: The Commissioner's order dated March 20, 2017 confirming service tax demand under 'business auxiliary/business support service' for April 2009 to March 2013 is quashed; the appeal is allowed.

Voluntary Disclosure and One Time Settlement (SVLDR) Scheme eligibility - Commencement of enquiry or investigation for eligibility test - Effect of summons not served on declarant for eligibility - Mis-declaration and consequences under the SVLDR Scheme

Voluntary Disclosure and One Time Settlement (SVLDR) Scheme eligibility - Commencement of enquiry or investigation for eligibility test - Effect of summons not served on declarant for eligibility - Eligibility of the appellant to avail the SVLDR Scheme despite issuance of summons by DGGSTI, GRU, Ghaziabad and the timing of any enquiry or investigation for the purpose of Section 125(1)(e). - HELD THAT: - The Tribunal found that no enquiry or investigation was pending against the appellant as on the date of filing the declaration in Form-SVLDRS-I and that the summons issued were never served upon the appellant at his residential address. Relying on the interpretation adopted by the Hon'ble Bombay High Court in M/s. New India Civil Erectors Pvt. Ltd. (supra), the date 30.06.2019 is material for determining eligibility: an enquiry or investigation must have been initiated on or before that date and be such that the amount of duty involved was quantified by that date to render a declarant ineligible under clause (e). Applying that reasoning, the Tribunal held that an inquiry or investigation post 30.06.2019 does not bar filing under the voluntary disclosure category and that mere issuance of summons (which were not served) did not establish that an enquiry was pending against the appellant for the purpose of the Scheme. Consequently, the appellant was eligible to make the voluntary declaration and avail the benefits of the SVLDR Scheme. [Paras 8]

The rejection of the appellant's declaration as ineligible under the SVLDR Scheme was set aside and the original order restoring the declaration under the Scheme was restored.

Mis-declaration and consequences under the SVLDR Scheme - Presumption of falsity and Section 129(2)(c) implications - Whether any false statement or mis-declaration was made by the appellant in the declaration under the SVLDR Scheme that would disentitle him to the Scheme or permit reopening under the statutory provision invoked by Revenue. - HELD THAT: - The Tribunal observed that no mis-declaration or false material particulars were found in the declaration filed by the appellant under the Scheme. The Revenue's contention invoking the presumption in Section 129(2)(c) (that a declaration found false within one year would be treated as never made) had no application in the absence of any finding of falsity or suppression of material facts. The Tribunal therefore concluded that there was no basis to treat the declaration as void on the ground of mis-declaration or to deny the settlement benefits on that account. [Paras 8]

No mis-declaration was found; therefore the declaration stood valid and the benefits under the SVLDR Scheme were upheld.

Final Conclusion: The appeal is allowed; the impugned Commissioner(A) order rejecting the appellant's SVLDR declaration is set aside, the original order under the Scheme is restored, and the appellant's declaration for the period April, 2014 to June, 2017 is held valid as made in accordance with the Scheme.

Eligibility for exemption under Notification No. 06/2006-C.E. - application of Condition No. 29 of Customs Notification No. 21/2002 to domestic suppliers - requirement of supply under International Competitive Bidding - refund of excise duty on supplies subsequently covered by exemption

Eligibility for exemption under Notification No. 06/2006-C.E. - application of Condition No. 29 of Customs Notification No. 21/2002 to domestic suppliers - requirement of supply under International Competitive Bidding - refund of excise duty on supplies subsequently covered by exemption - Whether supplies of shutdown valves to M/s. ONGC qualify for Nil rate exemption under Sl. No. 91 of Notification No. 06/2006-C.E., permitting refund of excise duty paid, and whether Condition No. 29 of Customs Notification No. 21/2002 is a pre-condition for domestic suppliers. - HELD THAT: - The Tribunal examined Notification No. 06/2006-C.E. (Sl. No. 91 with condition No.19) and Customs Notification No. 21/2002 (List 12 and condition No.29). Condition No.29 of the Customs Notification contains stipulations directed at importers. Applying the reasoning in the CESTAT Mumbai decision in M/s. Kent Introl Pvt. Ltd., upheld by the Bombay High Court, the Tribunal held that domestic suppliers are not required to satisfy importer-specific stipulations in Condition No.29. For a domestic manufacturer/supplier the determinative condition is that the supply be made against contracts awarded under International Competitive Bidding and that the goods claimed for exemption are those listed (List 12) in the Customs Notification; both conditions were satisfied on the record. The Tribunal also took into account documentary evidence of grant/renewal of lease, the Project Authority Certificate and ONGC's communication that it had not reimbursed excise duty and had no objection to refund. On these bases, the Tribunal concluded that the respondent was eligible for the exemption and that the Original Authority rightly sanctioned the refund. [Paras 11, 12, 13, 14, 15]

Refund sanctioned by the Original Authority upheld; appeal by the Revenue rejected.

Final Conclusion: The Tribunal affirmed that the domestic supplier satisfied the sole relevant conditions for exemption under Notification No. 06/2006-C.E. (supply under International Competitive Bidding and goods falling under the Customs list) and that importer-specific Condition No. 29 of Customs Notification No. 21/2002 does not apply to domestic suppliers; the sanction of refund was therefore upheld and the Revenue's appeal dismissed.

Principles of natural justice - Relevancy of statements under Section 9D of the Central Excise Act - Right to cross-examination of witnesses whose statements are relied upon - Remand for de novo consideration to secure compliance with mandatory procedure - Validity of administrative decision of Committee of Commissioners despite separate signatures

Validity of administrative decision of Committee of Commissioners despite separate signatures - Maintainability of appeal - Objection to maintainability of appeal on the ground that the review order was signed separately by members of the Committee of Commissioners was rejected. - HELD THAT: - The Tribunal applied the view of the Larger Bench of the Delhi High Court that formation of opinion on the administrative side by a Committee of Commissioners does not require a joint meeting or consultation so long as each member has the requisite material before him. The appellate forum has no jurisdiction to strike down an administrative decision merely because members signed separately; the sole requirement is that a decision of the Committee exists to institute the appeal. The preliminary objection raised by the respondent was therefore held unsustainable. [Paras 19]

Preliminary objection on maintainability founded on separate signatures of Committee members is rejected.

Relevancy of statements under Section 9D of the Central Excise Act - Right to cross-examination of witnesses whose statements are relied upon - Principles of natural justice - Remand for de novo consideration to secure compliance with mandatory procedure - Matter remanded to the adjudicating authority to grant the assessee opportunity to cross-examine witnesses relied upon by Revenue in terms of Section 9D and in the interests of natural justice. - HELD THAT: - The Tribunal found that the Revenue's case substantially relied on statements recorded during investigation and that the adjudicating authority did not permit cross-examination of those deponents. Citing Section 9D and consistent judicial authority, the Tribunal held that statements relied upon in adjudication require strict compliance with the procedure and that denial of opportunity to cross-examine amounts to a violation of natural justice. In view of settled precedents and the absence of cross-examination, it was appropriate in the interests of justice to remand the matter for the original authority to permit cross-examination and reconsider the case de novo without expressing any opinion on the merits. [Paras 20, 21, 25, 28]

The impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh consideration after affording opportunity of cross-examination in accordance with Section 9D and principles of natural justice.

Miscellaneous application rendered infructuous - Application for supply of the opinion formed under Section 35B(2) and for complete paper book was dismissed as infructuous. - HELD THAT: - The appellant abandoned its challenge to the Review Order under Section 35B(2), and consequently the application seeking a copy of the opinion formed under that provision and the complete paper book had no subsisting purpose. The Tribunal therefore dismissed the miscellaneous application. [Paras 27]

Miscellaneous Application No. 50675 of 2022 is dismissed as infructuous.

Final Conclusion: The Tribunal rejected the maintainability objection as to separate signatures of Committee members, set aside the impugned order and remanded the matter to the original adjudicating authority for de novo consideration after affording the assessee the opportunity to cross-examine witnesses in accordance with Section 9D and principles of natural justice; the unrelated miscellaneous application was dismissed as infructuous.

Restriction on utilization of Cenvat Credit during period of default - Rule 8(3A) declared ultra vires - Utilization of Cenvat Credit to discharge duty - Binding effect of High Court decisions on Revenue - Parity to assessees where a provision is struck down

Restriction on utilization of Cenvat Credit during period of default - Rule 8(3A) declared ultra vires - Utilization of Cenvat Credit to discharge duty - Binding effect of High Court decisions on Revenue - Whether demand under Rule 8(3A) for alleged improper utilization of Cenvat credit during periods of default is sustainable where courts have declared the provision ultra vires, and whether the assessee is entitled to parity for discharging duty by utilizing Cenvat credit. - HELD THAT: - The Tribunal applied the principle that Rule 8(3A), insofar as it restricted utilization of Cenvat credit during a period of default, has been declared ultra vires by High Court decisions relied upon by the parties, notably the Calcutta High Court in Goyal MG Gases Pvt. Ltd. and the Gujarat High Court in Indsur Global Ltd., and those declarations have not been stayed by the Supreme Court. Given that the provision impugned was held invalid, the Revenue cannot adopt a contrary stance to deny relief to an assessee who discharged duty by using Cenvat credit. The appellant had in fact utilized Cenvat credit to meet the duty liability for the relevant periods. In view of the binding effect of the High Court rulings and the absence of any stay, the impugned demand founded on the invalidated restriction cannot be sustained and must be set aside. [Paras 5, 6, 7, 8]

Demand under Rule 8(3A) dismissed; impugned order set aside and appeal allowed with consequential reliefs.

Final Conclusion: The appeal is allowed: the demand premised on the invalidated restriction on utilization of Cenvat credit (Rule 8(3A)) is unsustainable in view of the High Court decisions relied upon, and the impugned order is set aside with consequential reliefs.

Service of statutory orders - mode of service under Rule 64 of Telangana VAT Rules - validity of attachment under the Revenue Recovery Act - first charge/priority of tax dues over bank dues - estoppel by conduct and waiver of objection to service

Service of statutory orders - mode of service under Rule 64 of Telangana VAT Rules - first charge/priority of tax dues over bank dues - Whether the assessment orders for AY 2005-06 to 2008-09 were validly served and had attained finality so as to support recovery and priority over bank's claim. - HELD THAT: - The Court accepted the High Court's finding that service for the assessment proceedings culminating in the order dated 31.03.2011 (relating to AY 2005-06 to 2008-09) was shown to have been effected on the assessee through its director, and that service must conform to the modes prescribed by Rule 64 for a company. Having regard to the material before the High Court, the assessments for 2005-06 to 2008-09 could not be impugned for want of service and had attained finality. The Court recognised that tax arrears under the VAT enactment enjoy a first charge/priority over bank dues and that the revenue was entitled to enforce that claim where the assessments are final and service established. [Paras 9, 15]

The assessment orders for AY 2005-06 to 2008-09 were validly served and had attained finality; the revenue may proceed in respect of those arrears.

Service of statutory orders - validity of attachment under the Revenue Recovery Act - estoppel by conduct and waiver of objection to service - Whether the attachment notice dated 20.02.2018 (invoking the RR Act) attaching the assessee's property could be sustained notwithstanding the High Court's finding that assessment orders for AY 2009-10 and 2010-11 were not shown to have been served. - HELD THAT: - The Court acknowledged the legal requirement that adverse statutory orders must be served in the modes prescribed by Rule 64 and that non-service can invalidate recovery steps. However, having examined the sequence of events and the assessee's conduct, the Court held that the assessee, being impleaded and served in the revenue's earlier writ proceedings in which the revenue's case about crystallised liabilities was pleaded, did not deny service or raise non-service at that stage. That conduct, together with the assessee's failure to pursue available remedies when given opportunity, operated to estop the assessee from belatedly challenging service. On that basis the High Court's reliance on absence of traceable records to invalidate the attachment was reversed; the attachment notice dated 20.02.2018 was therefore revived and the revenue was permitted to recover the dues reflected therein. [Paras 12, 16, 18, 19, 20]

The High Court's setting aside of the attachment dated 20.02.2018 insofar as it relied on alleged non-service for AY 2009-10 and 2010-11 was set aside; the attachment notice is revived and the revenue may recover the dues as per that notice.

Final Conclusion: The High Court judgment is set aside. The Supreme Court held that assessments for 2005-06 to 2008-09 were validly served and final; having regard to the assessee's conduct and prior proceedings the Court rejected the challenge to the attachment dated 20.02.2018 and revived that attachment, leaving the revenue free to recover the dues shown therein. No order as to costs.

Review on discovery of new and important facts - Stock transfer vs. sale in course of export - Levy of purchase tax under Section 7-A(1)(c) of the TNGST Act - Deeming provision of Section 5(3) of the CST Act - Requirement of agreement or export order and Form H for exemption

Review on discovery of new and important facts - Whether the Tribunal's review under Section 36(6)(a) of the TNGST Act was maintainable. - HELD THAT: - The Tribunal, on verification of the dealer's CST files, discovered that the dealer had made inconsistent disclosures between returns under the State Act and the Central Act and had earlier disclosed a branch transfer figure which differed from the exemption claimed. This disclosure-viz., the dealer's CST return and assessment position revealing a different declared turnover and exemption claimed-constituted a new and important fact which was not before the Tribunal when it passed the original order. In these circumstances the Review Application was not an impermissible rehearing in disguise but was founded on newly discovered material within the scope of Section 36(6)(a). The Court therefore held the Tribunal's exercise of review jurisdiction to be maintainable. [Paras 13, 14, 15, 16]

Review under Section 36(6)(a) was maintainable because verification of CST files disclosed new and important facts not before the Tribunal.

Stock transfer vs. sale in course of export - Levy of purchase tax under Section 7-A(1)(c) of the TNGST Act - Deeming provision of Section 5(3) of the CST Act - Requirement of agreement or export order and Form H for exemption - Whether the turnover of Rs.2,24,00,783/- was rightly excluded as stock transfer and exempt from tax, or was liable to purchase tax under Section 7-A(1)(c) of the TNGST Act. - HELD THAT: - The Tribunal found, and this Court agreed, that the factual matrix did not establish an uninterrupted transaction constituted solely for export. The dealer purchased raw coffee seeds in Tamil Nadu from unregistered sellers, raised purchase bills, and transported goods to the Karnataka unit under delivery notes; the stock was not shown to have been exported in entirety and portions were sold within India. Crucially, the dealer failed to produce an agreement or export order or Form H evidencing that the last sale/purchase was for the purpose of complying with an export order as contemplated by Section 5(3) of the CST Act. In absence of such documentary proof and given the inconsistent disclosures in CST returns and assessment, the transaction could not be treated as a sale in the course of export and the exemption could not be allowed. Consequently the levy of purchase tax under Section 7-A(1)(c) of the TNGST Act and the reversal of the Appellate Authority's exemption were upheld. [Paras 11, 12, 17, 18, 19]

The turnover was not entitled to exemption as a sale in the course of export; tax under Section 7-A(1)(c) of the TNGST Act was correctly attracted in absence of export agreement/order and Form H.

Final Conclusion: The Tribunal's Review was maintainable on the ground of discovery of new and important facts revealed by verification of CST files; on the merits the exemption as stock transfer was not sustainable because the dealer failed to establish that the purchases were the last sale/purchase for export (no export agreement/order or Form H and inconsistent disclosures), and the levy under Section 7 A(1)(c) of the TNGST Act was upheld. The tax case is dismissed.

Section 138 of the Negotiable Instruments Act, 1881 - Vicarious liability under Section 141 of the Negotiable Instruments Act, 1881 - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Resolution plan binding effect under Section 31 of the Insolvency and Bankruptcy Code, 2016 - Section 32A of the Insolvency and Bankruptcy Code, 2016 - extinguishment of corporate liability and preservation of personal liability - Doctrine of harmonious construction between IBC and NI Act - Distinction between penal proceedings and civil/recovery proceedings

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Section 138 of the Negotiable Instruments Act, 1881 - Distinction between penal proceedings and civil/recovery proceedings - Whether proceedings under Section 138 NI Act can continue during the pendency of insolvency proceedings and moratorium under Section 14 IBC. - HELD THAT: - The Court held that Section 14 IBC does not contemplate staying criminal proceedings of a penal character such as those under Section 138 NI Act. Section 138 proceedings are penal (not mere recovery or civil suit) and may attract imprisonment or fine; they are not amenable to characterization as civil recovery proceedings which Section 14 seeks to stay. Thus proceedings under Section 138 do not automatically get abated by the moratorium and can continue against persons covered by Section 141 even while insolvency proceedings are pending. The court rejected the appellant's submission that Section 138 should be treated as civil/recovery for the purposes of moratorium, emphasizing the penal character and criminal jurisdictional regime governing Section 138 prosecutions. [Paras 15, 16, 17, 18, 19]

Proceedings under Section 138 NI Act can continue during the pendency of CIRP; Section 14 IBC's moratorium does not bar criminal prosecution under Section 138 which is penal in character, particularly against natural persons under Section 141.

Resolution plan binding effect under Section 31 of the Insolvency and Bankruptcy Code, 2016 - Section 32A of the Insolvency and Bankruptcy Code, 2016 - extinguishment of corporate liability and preservation of personal liability - Vicarious liability under Section 141 of the Negotiable Instruments Act, 1881 - Compounding of offences and limits of resolution plan clauses - Effect of approval of a resolution plan under Section 31 IBC (and related provisions, including Section 32A) on criminal liability under Section 138/141 NI Act for the corporate debtor and for signatories/directors. - HELD THAT: - The Court held that an approved resolution plan (Section 31) and Section 32A operate to extinguish criminal liability of the corporate debtor insofar as the plan effects a change in management in favour of an eligible new management, thereby enabling the corporate entity to have a 'clean slate'. However, Section 32A's second proviso (and settled precedents) preserve criminal liability of persons who were in charge of, responsible to, or associated with the corporate debtor and who were directly or indirectly involved in the offence (including officers in default, designated partners, promoters or directors). The signatory/director cannot claim discharge merely because the corporate debtor's liability is extinguished by a resolution plan; such a discharge would defeat legislative intent and the purpose of Section 32A. Clauses in a resolution plan purporting to extinguish criminal liability of natural persons or to compound offences cannot override statutory provisions; the resolution plan must comply with existing law and cannot abrogate the criminal court's jurisdiction or statutory liability preserved by Section 32A. The Court drew analogy to guarantor law (Lalit Kumar Jain) to reject an argument that involuntary discharge of the corporate debtor absolves personal penal liability of directors/signatories. [Paras 86, 87]

Approval of a resolution plan extinguishes the corporate debtor's criminal liability where Section 32A conditions are met, but criminal proceedings under Section 138/141 continue against signatories/directors/officers covered by the proviso to Section 32A; resolution-plan terms cannot nullify such personal liability.

Final Conclusion: The appeals are dismissed. The Court affirms that (i) moratorium under Section 14 IBC does not bar continuation of penal proceedings under Section 138 NI Act against natural persons; and (ii) while an approved resolution plan and Section 32A may extinguish criminal liability of the corporate debtor (subject to its conditions), they do not absolve signatories, directors or officers who remain prosecutable under Section 141 and the second proviso to Section 32A; resolution-plan clauses cannot override statutory criminal liability.

Compounding of offences under the Negotiable Instruments Act - Section 147 of the Negotiable Instruments Act and its non-obstante clause - Compounding after conviction - Interaction of Section 147 NI Act with Section 320 CrPC - Payment of compensation and compromise as basis for compounding

Compounding of offences under the Negotiable Instruments Act - Compounding after conviction - Payment of compensation and compromise as basis for compounding - Whether the offence under Section 138 of the Negotiable Instruments Act could be compounded after conviction in view of a compromise and payment of the claimed amount by the accused. - HELD THAT: - The High Court accepted the parties' compromise and recorded that the entire amount of compensation had been paid to the complainant. Relying on the statutory scheme of Section 147 of the Negotiable Instruments Act and the guidance of the Apex Court in Damodar S. Prabhu v. Sayed Babalal H. and K. Subramanian v. R. Rajathi, the Court held that compounding under Section 147 is permissible even after conviction. The Court noted that Section 147, by virtue of its non-obstante clause, enables compounding of offences under the Act and operates notwithstanding the scheme of Section 320 CrPC; accordingly, a compromise supported by payment of the claimed amount can form the basis for compounding. Having recorded the complainant's statement that he had received the amount and did not wish to pursue the complaint, the Court found no impediment to accepting the prayer for compounding and exercising its powers to quash the conviction and set aside the sentence.

Compounding permitted; conviction and sentence quashed and set aside and the accused acquitted of the offence under Section 138 of the Act.

Final Conclusion: In view of the compromise and payment of the claimed amount by the petitioner and the complainant's statement of no objection, the High Court permitted compounding under Section 147 of the Negotiable Instruments Act, quashed the conviction and sentence, and acquitted the petitioner of the offence under Section 138.