TaxTMI Updates e-Newsletter
Mar 23,2023

Provisional attachment of bank accounts under the CGST Act - refund sanction under the CGST Act read with the CGST Rules - exercise of supervisory review powers under the CGST Act - summons under the CGST Act - furnishing of security by way of fixed deposit in lieu of bank attachment - cooperation with investigation to avoid coercive measures - CBIC guidelines on provisional attachment as a measure of last resort

Provisional attachment of bank accounts under the CGST Act - CBIC guidelines on provisional attachment as a measure of last resort - Whether the provisional attachment of the petitioner's bank accounts should be continued or withdrawn pending investigation and appeal - HELD THAT: - The Court, without adjudicating the merits of the rival contentions, directed withdrawal of the provisional attachments effected on 08.03.2023. The direction to withdraw was made subject to specified conditions imposed on the petitioners and in the context of the CBIC guidance that attachment of accounts is a drastic measure and should be a last resort. The Court balanced the need to protect revenue interests against the risk of economic prejudice to an ongoing concern and thereby ordered temporary relief by lifting attachments on compliance with conditions set out in the order.

Provisional attachments of the petitioner's bank accounts are to be withdrawn forthwith, subject to compliance by the petitioners with the Court's conditions.

Refund sanction under the CGST Act read with the CGST Rules - furnishing of security by way of fixed deposit in lieu of bank attachment - Whether the petitioners should be required to furnish security and the form and timeline for such security in respect of the refund sanctioned to them - HELD THAT: - Noting that a refund sanction for July 2020 had been issued in favour of the petitioner, the Court required the petitioners to deposit an amount approximating the sanctioned refund by way of a fixed deposit in a nationalised bank and to produce the fixed deposit receipt (FDR) to respondent No.3. The Court specified the quantum to be deposited, the deadline for deposit, and the timeline for furnishing the FDR to the authority. The direction operates as a protective measure in substitution for the provisional attachment that was ordered to be withdrawn on compliance.

Petitioners to deposit the specified sum by way of fixed deposit in a nationalised bank by the date directed and furnish the FDR to the authority within the time stipulated.

Summons under the CGST Act - cooperation with investigation to avoid coercive measures - Whether the petitioners are obliged to cooperate with summons and ongoing investigation and consequences of non-cooperation - HELD THAT: - The Court directed that petitioners must cooperate with any summons issued in connection with the proceedings under the CGST Act. It recorded that earlier summons had not been complied with and linked continued non-cooperation to the potential resumption of coercive measures. The Court conditioned the protection from coercive action on the petitioners' cooperation with investigation and on furnishing the FDR, thereby making cooperation a term for continued relief from coercion.

Petitioners shall cooperate with summonses and investigations; failure to do so may permit respondents to take appropriate action in accordance with law.

Coercive measures and conditional forbearance - exercise of supervisory review powers under the CGST Act - Whether respondents are restrained from taking coercive measures once the petitioners comply with the Court's conditions - HELD THAT: - The Court ordered that, upon production of the FDR and the petitioners' cooperation with the investigation, respondents shall not take any coercive measures against the petitioners. This restraint is conditional and temporary; the Court expressly preserved respondents' rights to resume appropriate action in accordance with law if the petitioners fail to comply with the conditions imposed.

On furnishing the FDR and cooperating with the investigation, respondents shall refrain from coercive measures; non-compliance will permit respondents to act as permissible by law.

Final Conclusion: The writ petition is disposed by directing the petitioners to furnish a fixed deposit and to cooperate with summons and investigation; on compliance respondents must withdraw provisional attachments and refrain from coercive action, while preserving respondents' rights to lawfully act in case of non-compliance.

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - claim for refund of GST paid on leasehold premium - person entitled to claim refund - time bound decision by tax authorities

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - person entitled to claim refund - Petitioners may apply to the tax authorities under Section 54 of the Act for refund of GST paid on leasehold premium; the court does not adjudicate entitlement on merits but requires administrative decision on any such application. - HELD THAT: - The petitioners, being co operative housing societies, contend that GST charged and paid to CIDCO on leasehold premium was not payable by them and that CIDCO should have applied for refund. The court observed that Section 54 refers to any person claiming refund and that petitioners can therefore make an application to the tax authorities under Section 54. The court did not decide the legal entitlement to refund on merits or rule on CIDCO's obligations; instead it directed that if the petitioners file applications invoking Section 54 within the prescribed period, the concerned tax authorities shall consider and decide those applications as per law within a time bound period. The matter is therefore remitted to the tax authorities for fresh consideration and decision in accordance with law. [Paras 3, 4, 5]

Petitions disposed with direction that petitioners may apply under Section 54 within four weeks and the tax authorities shall decide the applications as per law within six weeks (subject to earlier time bound commitments).

Final Conclusion: Writ petitions disposed of by directing petitioners to invoke Section 54 of the CGST Act within four weeks and requiring the concerned tax authorities to decide the refund applications within six weeks; no adjudication on the merits of entitlement to refund was made by the court.

Reduction of pre-deposit for stay of adjudication order - pre-deposit as condition precedent for entertaining appeal - appropriation/set-off of refundable CENVAT credit against pre-deposit - adequacy of remedy of appeal and doctrine of rendering remedy illusory

Reduction of pre-deposit for stay of adjudication order - pre-deposit as condition precedent for entertaining appeal - adequacy of remedy of appeal and doctrine of rendering remedy illusory - Whether the pre-deposit required to maintain an appeal against the order-in-original dated 26.11.2021 ought to be reduced so that the petitioner is not deprived of its remedy of appeal. - HELD THAT: - The Court found that while it could not permit appropriation of the petitioner's refundable CENVAT credit against the pre-deposit, the petitioner's inability to make the full statutory pre-deposit would render the remedy of appeal illusory. Having regard to the petitioner's stated inability to make the prescribed pre-deposit and its submission to deposit a lesser amount, the Court exercised its discretion to moderate the pre-deposit condition. The petitioner undertook to deposit an amount equivalent to 2.5% of the liability in lieu of the 7.5% pre-deposit. On that undertaking, the Court directed that the appeal would not be rejected solely for want of the requisite pre-deposit, thereby preserving the petitioner's right to pursue appellate remedy without adjudicating the merits of the underlying demand. [Paras 7, 8, 9]

If the petitioner deposits an amount equivalent to 2.5% of the liability, the appeal against the order-in-original dated 26.11.2021 shall not be rejected solely for want of the requisite pre-deposit.

Appropriation/set-off of refundable CENVAT credit against pre-deposit - Whether the petitioner could appropriate its claim for refund of CENVAT credit to discharge the obligation of making the pre-deposit. - HELD THAT: - The Court rejected the contention that the petitioner could set off or appropriate its claim for refund of CENVAT credit against the obligation to make the statutory pre-deposit required to maintain the appeal. The Court held that the petitioner cannot meet its pre-deposit requirement by unilateral appropriation of its claimed refundable credit, and declined that form of relief. [Paras 7]

The petitioner cannot set off its obligation to make the pre-deposit against its claim for refund of CENVAT credit.

Final Conclusion: Petition disposed of by directing that on deposition of 2.5% of the liability the petitioner's appeal will not be rejected solely for want of pre-deposit; no observation on merits; request to appropriate refundable CENVAT credit against the pre-deposit declined.

Violation of principles of natural justice - ex parte order and non-speaking order - quashing and remand for fresh adjudication on merits - deposit as condition for hearing - stay on coercive action and de-freezing of bank accounts

Violation of principles of natural justice - ex parte order and non-speaking order - Impugned appellate order dated 19.10.2022 and assessment order dated 01.02.2021 were legally infirm and liable to be set aside. - HELD THAT: - The Court found that the orders under challenge were passed ex parte and without affording sufficient opportunity of hearing to the petitioner, thereby breaching the principles of natural justice. The appellate order did not furnish sufficient reasons or demonstrate how the amount claimed was determined, and the authorities failed to adjudicate the matter on the attending facts and circumstances. In view of these defects the orders were held bad in law and were quashed and set aside.

The impugned orders dated 19.10.2022 and 01.02.2021 are quashed and set aside on the ground of violation of natural justice and being non speaking.

Quashing and remand for fresh adjudication on merits - deposit as condition for hearing - Matter remitted to the Assessing Authority for fresh decision on merits subject to prescribed deposits and procedural safeguards. - HELD THAT: - The Court remanded the matter for de novo adjudication on merits, directing that the Assessing Authority decide the case after complying with the principles of natural justice and after affording opportunity to place all relevant documents. The petitioner stated that ten per cent of the amount had already been deposited as a precondition for hearing; the petitioner was directed to additionally deposit ten per cent of the demand within four weeks if not already paid. The deposit was ordered to be without prejudice to parties' rights, and any excess found to have been deposited was to be refunded within two months of the final order. The Court expressly declined to express any opinion on merits and left all issues open for fresh adjudication.

The matter is remitted for fresh, expeditious and speaking adjudication on merits after observance of natural justice; prescribed deposits to be made by the petitioner as directed.

Stay on coercive action and de-freezing of bank accounts - Interim protection from coercive steps and de-freezing of bank accounts was granted during pendency of proceedings. - HELD THAT: - The Court accepted the Revenue's undertaking that limitation would not be permitted to bar consideration and ordered that during the pendency of the remanded proceedings no coercive action shall be taken against the petitioner. Any bank accounts attached in relation to the subject proceedings were directed to be de frozen / de attached immediately. The petitioner was directed to appear before the Assessing Authority on the specified date and to cooperate in the proceedings.

No coercive steps to be taken during pendency; attached bank accounts to be de frozen immediately.

Final Conclusion: Impugned appellate and assessment orders were quashed for breach of natural justice and non speaking reasons; the matter is remitted for fresh adjudication on merits after observance of natural justice and subject to the petitioner making the directed deposits, with interim protection from coercive measures and de freezing of bank accounts; the Court expressed no opinion on merits.

Validity of e-Way bill during transit - Renewal/extension of e-Way bill and practical impossibility after entry into another State - Seizure and release of consignment on deposit and bond - Levy of tax and penalty for expired e-Way bill - Entitlement to refund of amounts paid upon quashing of impugned order

Validity of e-Way bill during transit - Renewal/extension of e-Way bill and practical impossibility after entry into another State - Levy of tax and penalty for expired e-Way bill - Entitlement to refund of amounts paid upon quashing of impugned order - Whether the appellate order upholding levy of duty and penalty for movement with an expired e Way bill could be sustained where the vehicles reached the State after expiry and renewal/extension could not practically be sought from the competent authority, and whether the petitioner is entitled to consequential relief including refund. - HELD THAT: - The Court examined the facts that the e Way bills generated were valid only until 15.02.2020 while the vehicles reached the State of Tripura on 17.02.2020. The petitioner could not seek renewal or extension of the e Way bills once the vehicle had entered the territory of Tripura, making renewal practically impossible. Having considered the parties' submissions and the record, the Court concluded that the Appellate Authority's order upholding the levy of duty and penalty was not just or proper in these circumstances. On that basis the impugned order dated 16.04.2021 was set aside and the petitioner was held entitled to consequential benefits flowing from that decision, including refund. [Paras 6, 7]

Impugned appellate order set aside; petitioner entitled to consequential benefits including refund.

Final Conclusion: Writ petition allowed; the appellate order dated 16.04.2021 is set aside for being unjust where the e Way bills had expired in transit and renewal could not be practically obtained; petitioner granted consequential relief including refund.

Suspension of registration under GST pending show-cause for cancellation - time-limit for suspension under Rule 22(3) of the Central Goods and Services Tax Rules, 2017 - adjudication of liability of interest after issuance of a proper show-cause notice - principles of natural justice in show-cause proceedings

Suspension of registration under GST pending show-cause for cancellation - time-limit for suspension under Rule 22(3) of the Central Goods and Services Tax Rules, 2017 - Adjudicatory authority directed to decide the show-cause notice dated 07.07.2022 regarding cancellation of registration and associated suspension. - HELD THAT: - The Court recorded that although a show-cause notice dated 07.07.2022 for cancellation of registration was issued, no adjudication order has been passed and the petitioner's registration remains suspended. In the circumstances the Court disposed of the petition by directing that the petitioner shall appear before the Superintendent, CGST, Phulwarisharif Range, Patna on 03.01.2023 at 10:30 A.M. and that the authority shall take a decision pursuant to the show-cause notice and in terms thereof, positively and not later than one week thereafter. The Court expressly refrained from expressing any opinion on the merits and left issues open for the adjudicatory authority to decide in accordance with law.

Petitioner to appear on 03.01.2023 and the Superintendent to decide the show-cause dated 07.07.2022 within one week thereafter; merits left open.

Adjudication of liability of interest after issuance of a proper show-cause notice - principles of natural justice in show-cause proceedings - Court declined to adjudicate on merits including the demand for interest and preserved the petitioner's right to pursue other legal remedies. - HELD THAT: - The Court noted contested contentions regarding payment or deposit of a portion of the alleged interest demand and rival judicial precedents cited by parties, but did not decide those contentions. Instead, the Court reserved all substantive issues, declined to express any view on merits, and granted liberty to the petitioner to pursue such other remedies as available in law. The disposal was limited to directing expeditious adjudication by the concerned authority and did not endorse or reject the legal positions advanced.

No adjudication on merits; liberty granted to petitioner to pursue other remedies; all issues left open.

Final Conclusion: Petition disposed by directing personal appearance on 03.01.2023 and requiring the adjudicating authority to decide the show-cause dated 07.07.2022 within one week thereafter; the Court expressed no opinion on merits and left the petitioner free to pursue other legal remedies.

Validity of notices issued to a dissolved entity - Notice under Section 148A(b) and order under Section 148A(d) - Notice under Section 148 - Legal representative substituted for deceased partner - Remand for fresh issuance of notice and opportunity of hearing - Limitation not to bar fresh proceedings in peculiar circumstances

Validity of notices issued to a dissolved entity - Notice under Section 148A(b) and order under Section 148A(d) - Notice under Section 148 - Impugned notices and order issued to Lotus Law Partners LLP after its dissolution were liable to be set aside. - HELD THAT: - The Court noted that the petitioner LLP stood dissolved prior to issuance of the impugned notice under Section 148A(b) and the consequential notice under Section 148. Proceedings directed against an entity which had ceased to exist could not be permitted to continue. Although the writ was filed in the name of the dissolved LLP (a de minimis procedural error given that the petition was supported by the affidavit of the legal representative), the central legal consequence was that notices and the order issued to the defunct entity were invalid. In light of these conclusions the impugned notices and the order were set aside. [Paras 5, 6, 9, 10]

Impugned notices and order issued to the dissolved LLP set aside.

Legal representative substituted for deceased partner - Remand for fresh issuance of notice and opportunity of hearing - Limitation not to bar fresh proceedings in peculiar circumstances - AO granted liberty to issue fresh notice to the legal representative of the deceased managing partner and to proceed afresh with opportunity to reply and personal hearing; limitation would not bar fresh action in the circumstances. - HELD THAT: - Rather than foreclosing proceedings on merits, the Court afforded the Assessing Officer a structured opportunity to proceed correctly by directing issuance of a fresh notice under Section 148A(b) to the legal representative (Ms Ragini Mohan) within a stipulated time after receipt of the order. The legal representative was to be given two weeks to reply, and the AO was directed to afford personal hearing to her or her authorized representative before taking further steps in law. The Court expressly clarified that limitation would not obstruct the revenue from proceeding, given the peculiar facts of the case. These directions amount to remand for fresh consideration and compliance with procedural safeguards. [Paras 8, 11, 12]

Liberty granted to AO to issue fresh notice to the legal representative within prescribed timelines, with an opportunity to reply and personal hearing; limitation will not bar fresh proceedings.

Final Conclusion: The notices and order issued to the dissolved Lotus Law Partners LLP (relating to AY 2018-19) were set aside; the Assessing Officer is permitted to issue a fresh Section 148A(b) notice to the legal representative of the deceased managing partner within two weeks, allow two weeks for reply, afford personal hearing, and thereafter proceed in accordance with law, limitation being held not to impede fresh action in the circumstances.

Opportunity of being heard before rejecting application under Section 270AA(4) - time-bound disposal of application under Section 270AA(4) - remand for fresh consideration of application under Section 270AA

Opportunity of being heard before rejecting application under Section 270AA(4) - Whether the impugned order rejecting the application under Section 270AA was passed without affording the petitioner an opportunity of being heard as required by the proviso to sub section (4). - HELD THAT: - The proviso to sub section (4) of Section 270AA mandates that no order rejecting an application shall be passed unless the assessee has been given an opportunity of being heard. The Court found as a fact that the petitioner was not afforded such opportunity. For that reason the impugned order, having rejected the application without following the statutory requirement, cannot stand and has been set aside. The Court did not decide the merits of the application but confined its decision to the procedural defect of denial of hearing. [Paras 12, 13, 14]

Impugned order set aside because the petitioner was not given the opportunity of being heard as required by Section 270AA(4) proviso.

Remand for fresh consideration of application under Section 270AA - power to condone delay in filing application under Section 270AA - Whether the matter should be remanded for fresh consideration and to afford the petitioner an opportunity to be heard and to make submissions (including on delay and condonation). - HELD THAT: - Rather than adjudicating on the merits or on the question of condoning the 48 day delay, the Court refrained from expressing any view on those substantive aspects and directed that the concerned officer consider the petitioner's submissions afresh. The petitioner was ordered to appear before the officer at a specified date and time to avail the statutory opportunity of being heard, and the officer was directed to pass a fresh order in accordance with law, thereby remitting the matter for adjudication on merits and any question of condonation. [Paras 15, 16, 17]

Matter remanded to Respondent No.2 for fresh consideration and adjudication after affording the petitioner the opportunity of being heard; no observation made by the Court on condonation of delay.

Final Conclusion: The rejection order under Section 270AA(4) is set aside for failure to afford the statutory hearing; the matter is remanded to the assessing authority to hear the petitioner, consider his submissions (including any explanation for delay), and pass a fresh order in accordance with law, with a hearing directed on the date specified by the Court.

Sufficiency of averments in complaint for issuance of process - criminal liability of persons in charge and responsible for company affairs under Section 278B - sanction and prima facie application of mind for prosecution under the Income Tax Act - distinction between prosecution under Income Tax Act and complaints under Section 138 of the Negotiable Instruments Act - prima facie inquiry limited to adequacy of pleadings; factual disputes (including residence) to be decided at trial

Sufficiency of averments in complaint for issuance of process - sanction and prima facie application of mind for prosecution under the Income Tax Act - criminal liability of persons in charge and responsible for company affairs under Section 278B - Averments in the complaint together with the sanction order and the Commissioner's order are sufficient at the prima facie stage to issue process for alleged offence under Section 276B read with Section 278B. - HELD THAT: - The Court examined the complaint (paragraphs 6 and 8) alongside the sanction order and the Commissioner's order (paragraphs reproduced at paras 3 and 9 of the record) and held that taken together they satisfy the threshold required to allege that the petitioner was a director "in charge of and responsible for" the company's affairs for the relevant year and that a default under Section 200/Rule 30 attracting prosecution under Section 276B r/w Section 278B is prima facie disclosed. The Court applied the requirement of prior application of mind by the sanctioning authorities - distinguishing prosecutions under the Income Tax Act from routine complaints under Section 138 of the Negotiable Instruments Act - and concluded that the material before the Magistrate demonstrates such application of mind and contains the necessary pleadings to proceed. On that basis no interference with issuance of process was warranted. [Paras 8, 9, 10, 11, 13]

Proceedings against the petitioner may be issued; the averments together with sanction and Commissioner's order suffice at the prima facie stage.

Prima facie inquiry limited to adequacy of pleadings; factual disputes (including residence) to be decided at trial - Whether the petitioner's asserted foreign residence for six years defeats issuance of process is not to be decided at this stage and must be determined at trial or an appropriate stage. - HELD THAT: - The Court noted that the sanction order records an address in Navi Mumbai and that the petitioner's assertion of residence in the Netherlands for six years raises factual questions which cannot be resolved in the writ petition confined to a prima facie scrutiny of pleadings and sanction. The proper forum to adjudicate the factual contention regarding residence is the trial or an appropriate stage of the criminal proceedings; therefore the contention does not justify quashing issuance of process at this preliminary stage. [Paras 12]

The question of the petitioner's residence is left open for trial; it does not preclude issuance of process at the prima facie stage.

Final Conclusion: Writ petition dismissed; issuance of process under Section 276B r/w Section 278B is upheld on prima facie material and the petitioner's claim of foreign residence is left to be determined at trial or an appropriate stage.

Jurisdictional challenge to assessment under Section 144 - Limitation under the proviso to Section 153(1) - Violation of principles of natural justice - Writ jurisdiction under Article 226 and availability of alternative statutory remedy - Direction to pursue statutory appeal and mandatory disposal within fixed time

Jurisdictional challenge to assessment under Section 144 - Writ jurisdiction under Article 226 and availability of alternative statutory remedy - Whether the High Court in writ jurisdiction under Article 226 should adjudicate the factual and jurisdictional complaints against the order of assessment passed under Section 144, or require exhaustion of the statutory appellate remedy. - HELD THAT: - The Division Bench held that the challenge to the assessment order raises questions of fact and that there is no specific finding on jurisdiction in the assessment order (noting the state of the record). The court declined to enter into an inquiry requiring factual investigation under Article 226, observing that such an exercise is beyond the scope of writ jurisdiction where an effective statutory remedy exists. The court relied on the settled principle that High Courts ordinarily should not entertain writ petitions under Article 226 when an effective alternative remedy is available and should require the aggrieved party to exhaust that remedy; this reasoning is applied to the facts of the present case as the appropriate course rather than factual adjudication in writ proceedings. Reference is made to earlier Supreme Court authority [Authorized Officer, State Bank of Travancore and Another vs Mathew K.C] and the principles stated therein (including discussion of United Bank of India v. Satyawati Tondon) as guiding the exercise of discretion to refuse writ relief in favour of statutory remedies. [Paras 6, 7]

The court refused to adjudicate the factual and jurisdictional complaints in writ jurisdiction and directed the appellant to resort to the statutory appellate remedy.

Direction to pursue statutory appeal and mandatory disposal within fixed time - Whether the appellant should be permitted to pursue the statutory appeal and how the appellate authority should proceed. - HELD THAT: - Instead of deciding the merits, the court granted relief in the form of permitting the appellant to file the statutory appeal within a limited time and imposed a timetable for disposal. The appellant was allowed four weeks from receipt of the order to file the appeal, and any such appeal so filed was directed to be disposed of by the Appellate Authority within six weeks of filing. This constitutes a judicial direction to avail and promptly process the prescribed statutory remedy rather than a substantive adjudication on the assessment's merits, limitation, or alleged violation of natural justice. [Paras 8]

The appellant was permitted to file the statutory appeal within four weeks and the Appellate Authority was directed to dispose of any such appeal within six weeks.

Final Conclusion: The writ appeal is disposed of by declining to examine the factual and jurisdictional challenges to the assessment in writ jurisdiction where an effective statutory remedy is available; the appellant is permitted to file the statutory appeal within four weeks and any appeal so filed shall be disposed of by the Appellate Authority within six weeks. No costs.

Bad debt - trading loss - irrecoverable advances - objective satisfaction for bad debt - question of fact - concurrent findings of fact - appellate court not to reappreciate evidence - Section 28(i) of the Income Tax Act, 1961

Bad debt - trading loss - irrecoverable advances - objective satisfaction for bad debt - concurrent findings of fact - Claim that advances written off as irrecoverable could be allowed either as bad debts or alternatively as trading loss under Section 28(i) was not maintainable - HELD THAT: - The Tribunal and the CIT(A) found the assessee's explanations regarding the advances vague and general in five entries and lacking clarity as to the nature of transactions in the remaining entries. There was no material showing the conditions necessary to treat the amounts as bad debts or that they represented trading losses for the relevant accounting period. The determination whether a debt has become bad is a question of fact and requires an objective opinion formed after considering all relevant circumstances. Where there is evidence to justify the factual conclusion, a court in appeal will not reappreciate the evidence. The High Court relied on the settled propositions that the point when a debt becomes bad is a factual determination and that concurrent findings of fact recorded by revenue authorities are not to be disturbed in the absence of a substantial question of law. Applying these principles to the material on record, the concurrent factual findings that the advances could not be allowed as bad debts or as trading loss were not shown to be illegal or perverse. [Paras 7, 8, 9, 10]

Concurrent findings rejecting the claim of bad debts and the alternative claim of trading loss in respect of the irrecoverable advances were upheld and not interfered with.

Final Conclusion: The tax case appeal is dismissed; the concurrent findings of the Tribunal and the CIT(A) that the advances written off could not be allowed as bad debts or as trading loss under Section 28(i) of the Income Tax Act, 1961, are affirmed.

Genuineness of share transactions - exemption under Section 10(38) - addition as unexplained credit under Section 68 - reliance on suspicion, surmise and conjecture - evidentiary value of contract notes, demat statements and bank statements - burden of proof on assessee to explain entries - appellate interference where dispute is essentially one of fact

Genuineness of share transactions - exemption under Section 10(38) - addition as unexplained credit under Section 68 - evidentiary value of contract notes, demat statements and bank statements - reliance on suspicion, surmise and conjecture - Validity of addition of sale consideration as unexplained income and denial of exemption claimed on long term capital gain - HELD THAT: - The Tribunal found that the assessee produced contemporaneous and verifiable documents - contract notes, share transfer forms, share certificates, demat account entries and bank statements showing account payee cheques and BSE settlement numbers - which established the receipt and source of sale consideration. The Tribunal recorded that there was no material to show recycling of cash, no nexus of the assessee with alleged entry operators, and no evidence that the broker or company directors implicated the assessee. The Tribunal held that the Assessing Officer and the CIT(A) had proceeded on suspicion, surmise and conjecture and that such suspicion cannot substitute for legal evidence. On these findings the Tribunal deleted the addition made under the head of unexplained credit and consequentially deleted the related disallowance. The High Court declined to interfere with these concurrent factual findings of the Tribunal. [Paras 7]

Addition under Section 68 and denial of exemption were deleted by the Tribunal; High Court upheld the Tribunal's factual findings and refused to interfere.

Appellate interference where dispute is essentially one of fact - burden of proof on assessee to explain entries - Whether the questions of law framed by the revenue raised substantial questions of law warranting interference with the Tribunal's order - HELD THAT: - The High Court examined the revenue's formulated questions and concluded that they were essentially factual in character - challenging the weight and appreciation of evidence adduced before the Tribunal rather than raising any point of law of general importance. The Court observed that the Tribunal's conclusion rested on its assessment of documents and evidentiary material and that there was no substantial question of law arising from the record which would justify interference. Consequently, the revenue's appeals were dismissed. [Paras 8, 9]

Revenue's questions were factual and not substantial questions of law; appeals dismissed.

Final Conclusion: The Tribunal's deletion of the addition made under Section 68 (and consequential disallowance) was upheld on appraisal of evidentiary material; the revenue's appeals raising factual challenges did not disclose a substantial question of law and are dismissed.

Maintainability of writ petitions in presence of alternative statutory remedy - Scope of writ jurisdiction under Article 226 in fiscal matters - Application of Section 153C vis-a -vis Section 153A - Transfer of proceedings under Section 127 - Service of statutory notices

Maintainability of writ petitions in presence of alternative statutory remedy - Scope of writ jurisdiction under Article 226 in fiscal matters - Alternate remedy rule in fiscal statutes - Whether the writ petitions are maintainable when an efficacious alternative statutory remedy exists under the Income Tax Act - HELD THAT: - The High Court applied the settled principle that the availability of an effective alternative remedy is a relevant discretionary bar to exercise of writ jurisdiction in fiscal matters. Having regard to the facts that (i) disputed assessments arise from search/seizure material and (ii) statutory appellate remedy under the Act exists, the Court held that resolution of the core disputes would entail contested questions of fact; such factual controversies are not appropriate for adjudication in writ jurisdiction under Article 226 when an alternative remedy is available. The Court observed that the rule of alternative remedy is a discretionary restraint which must be applied with rigour in fiscal statutes and, on that basis, declined to entertain the petitions and dismissed them. The Court further clarified that its observations on merits were only for the limited purpose of deciding maintainability and that any appellate authority must proceed uninfluenced by those observations; time spent in the writ proceedings is excluded for limitation reckoning.

Writ petitions dismissed for want of maintainability in view of available alternative statutory remedy; merits to be agitated before the appropriate appellate forum.

Application of Section 153C vis-a -vis Section 153A - Transfer of proceedings under Section 127 - Service of statutory notices - Substantive questions regarding whether assessments were rightly made under Section 153C instead of Section 153A, compliance with Section 127, and validity of service of notices - HELD THAT: - The Court did not decide these substantive questions on merits. It recorded that whether notices should have been issued under Section 153A or Section 153C depends on the factual matrix-specifically whether incriminating material relied upon was seized pursuant to a search in the petitioner's premises or in premises of other entities of the group-and that the applicability of Section 127 is fact-sensitive. Similarly, objections as to the manner of service raised factual contentions relating to corporate representation and family disputes that cannot be resolved in writ proceedings. For these reasons the Court refrained from adjudicating these controversies and left them to be considered through the available statutory remedy by the appropriate appellate/administrative authority.

Substantive factual and legal issues concerning applicability of Section 153C/153A, compliance with Section 127, and service of notices are not adjudicated and are to be agitated and decided through the statutory appellate forum.

Final Conclusion: The writ petitions are dismissed on maintainability grounds because an effective alternative statutory remedy exists; substantive disputes on applicability of Sections 153A/153C, compliance with Section 127 and validity of service were not decided and are to be pursued before the appropriate appellate authority, which shall proceed uninfluenced by the Court's preliminary observations.

Power of reassessment - reasons to believe - change of opinion - assumption of jurisdiction - integrated code of Sections 147 to 153 - full and true disclosure

Assumption of jurisdiction - change of opinion - reasons to believe - Whether the learned Single Judge erred in treating issuance of notice under Section 148 as independent of the substantive limitations on reassessment under Section 147 and in relegating the question of jurisdiction to the assessment proceedings without adjudicating whether the reopening was based on mere change of opinion. - HELD THAT: - The High Court held that Sections 147 to 153 constitute an integrated code governing reassessment and must be read harmoniously; the substantive power to assess escaped income is traceable to Section 147 while Section 148 prescribes the procedural step to initiate reassessment, with Section 149 prescribing time-limits. The learned Single Judge's view that a notice under Section 148 is a freestanding act unhindered by the restrictions in Section 147 was characterised as a misconception that distorts the reassessment scheme. The Court emphasised that the Supreme Court's mandate requiring furnishance of reasons for reopening when sought is not a mere formality but a substantive protection enabling the assessee to test the jurisdictional basis of reassessment. Where the reasons disclosed indicate only a change of opinion, reassessment is impermissible; jurisdiction cannot be sustained by an assessing authority clutching at a non-existent jurisdictional fact. The Court found that the Single Judge should have entertained the challenge to the assumption of jurisdiction on the ground that it may be founded on mere change of opinion rather than relegating that question to the reassessment process itself. [Paras 11]

The Single Judge's approach treating Section 148 as independent of the restrictions in Section 147 was erroneous and misplaced; the protections and substantive limits in Section 147 must be given effect.

Assumption of jurisdiction - full and true disclosure - Whether the question of legality of the assumption of jurisdiction to reopen assessment (including whether the reopening was occasioned by mere change of opinion or by absence of full and true disclosure) should be adjudicated by the High Court or left to the assessing authority in the reassessment proceedings. - HELD THAT: - The Court observed that if the reopening is shown to be vitiated by mere change of opinion, the proceedings are without jurisdiction and therefore a nullity; judicial review is available to examine such jurisdictional challenge. It noted that the reasons supplied for reassessment did not allege lack of full and true disclosure, and that the Single Judge erred in treating the question of full and true disclosure as open for determination later. Given the centrality of the jurisdictional question, the High Court directed that the matter be remitted to the learned Single Judge to examine whether the assumption of jurisdiction to make reassessment was bad for want of jurisdiction, including whether the reasons for reopening disclose only a change of opinion. [Paras 11, 12]

Matter remitted to the learned Single Judge to determine whether the assumption of jurisdiction for reassessment is vitiated for want of jurisdiction (including whether reopening rests on mere change of opinion) and to proceed thereafter in accordance with law.

Final Conclusion: Writ appeal allowed in part; the Single Judge's order is set aside to the extent indicated and the matter is remitted to the learned Single Judge to examine whether the assumption of jurisdiction to reopen the assessment for A.Y.2012-13 is bad for want of jurisdiction; no costs.

Bogus purchases/expenses - reliance on non-receipt of information under notices issued u/s 133(6) - rejection of books of account under section 145(3) - bank evidence and ledger confirmations as proof of genuineness of transactions - remand report under Rule 46A of the Income Tax Rules, 1962 - acceptance of declared sales and comparative gross profit as indicia of genuineness of purchases

Bogus purchases/expenses - reliance on non-receipt of information under notices issued u/s 133(6) - bank evidence and ledger confirmations as proof of genuineness of transactions - rejection of books of account under section 145(3) - remand report under Rule 46A of the Income Tax Rules, 1962 - acceptance of declared sales and comparative gross profit as indicia of genuineness of purchases - Deletion of addition of Rs. 9,54,37,240/- made by the AO on account of alleged bogus purchases and freight/forwarding expenses was sustained. - HELD THAT: - The AO made the addition solely because three counterparties did not respond to notices issued under section 133(6), and therefore treated the purchases and freight/forwarding expenses as bogus. On appeal the assessee produced ledger copies, bank statements showing payments, confirmed account copies of suppliers, quantitative stock details in audited accounts and tax-audit report, and invoice-wise freight evidence showing payment through banking channels. The CIT(A) called for a remand report under Rule 46A; the AO's remand report did not produce material adverse to the assessee or justify rejecting the additional evidence. The AO had not rejected the books of account under section 145(3), and the declared sales and gross profit for the year were not disputed, with the gross profit being better than the preceding year. Relying on these facts and precedents where additions were not sustained in similar circumstances, the CIT(A) concluded that an addition based merely on non-receipt of confirmations under section 133(6) was not sustainable. The Tribunal found no infirmity in the CIT(A)'s reasoning or remand process and concurred with the deletion. [Paras 5, 7, 8]

Tribunal upheld deletion of the addition; Revenue's appeal dismissed.

Final Conclusion: The Tribunal concurs with the CIT(A) that the addition made by the AO on the sole ground of non-receipt of confirmations under section 133(6) is unsustainable in view of the bank evidence, ledger confirmations, audited accounts, lack of rejection of books under section 145(3), and the remand report; Revenue's appeal is dismissed.

Defective return under section 139(9) read with Explanation (c)(i) - interest under section 234A(1)(a) - rectification under section 154 for mistake apparent from record - non-payment of self-assessment tax and consequences under section 140A

Defective return under section 139(9) read with Explanation (c)(i) - interest under section 234A(1)(a) - rectification under section 154 for mistake apparent from record - Whether the Assessing Officer could, by way of an order under section 154, levy interest under section 234A by treating the assessee's earlier return dated 08.02.2013 as defective and therefore 'not filed'. - HELD THAT: - The Tribunal held that section 139(9) together with its Explanation (c)(i) treats a return as defective only where the return claims payment of tax (at source, in advance, or on self-assessment) but proof of such payment is not attached and the defect is not remedied within the prescribed time. Where no payment is claimed, omission to pay does not render the return defective. The assessee had filed the earlier return without claiming any payment of self-assessment tax; no intimation under section 139(9) was issued making the return defective. The Assessing Officer's attempt in the section 154 rectification order to treat the earlier return as null and void and to compute interest under section 234A from the original due date was therefore misplaced. Section 140A and other provisions addressing consequences of non-payment do not change the specific test in section 139(9) for declaring a return defective. Because the prerequisite for treating the 08.02.2013 filing as a defective/invalid return was absent, the rectification under section 154 to levy additional interest under section 234A was not sustainable and is to be reversed. [Paras 8, 9]

The Assessing Officer's section 154 rectification to levy interest under section 234A by treating the earlier return as defective is set aside; the appeal is allowed.

Final Conclusion: The Tribunal reversed the orders under which the earlier return was treated as defective for the purpose of levying interest under section 234A by way of section 154 rectification, and allowed the assessee's appeal for assessment year 2011-12.

Section 154 rectification jurisdiction - apparent mistake - detailed enquiry - mismatch in 26AS data - scrutiny assessment - assessment of service tax component

Section 154 rectification jurisdiction - apparent mistake - mismatch in 26AS data - scrutiny assessment - assessment of service tax component - Validity of invoking section 154 to assess alleged mismatched contract receipts and confirming the addition made on that basis. - HELD THAT: - The Tribunal examined whether the Assessing Officer validly invoked section 154 to rectify the assessment by assessing the assessee's disputed receipts at a flat rate. The Court applied the settled principle that section 154 is attracted only in respect of an apparent mistake and not for matters requiring a detailed enquiry, relying on the authority cited in the judgment, T.S. Balram, ITO vs. Volkart Bros. . The assessee's consistent plea, as recorded, was that the impugned sum related to a service tax component already subjected to scrutiny in the assessment framed after detailed investigation into ITS data and 26AS. The National Faceless Appeal Centre confined its reasoning to the exercise of rectification power without rebutting the assessee's averments that the matter had been the subject of prior scrutiny assessment. On these findings the Tribunal concluded that the exercise of section 154 rectification to assess the receipts at the flat rate exceeded the scope of section 154 and could not be sustained. [Paras 4, 5]

The section 154 rectification employed to assess the mismatched receipts at the flat rate is beyond the scope of section 154 and is set aside; the appeal is allowed.

Final Conclusion: The Tribunal reversed the impugned section 154 rectification which had assessed the disputed contract receipts at a flat rate, holding that such an exercise went beyond section 154 since the matter required or had undergone detailed enquiry; the appeal is allowed.

Definition of "education" under section 2(15) - general public utility - first and second proviso to section 2(15) regarding commercial activity disqualifying GPU - AUDA guidelines for determining commerciality of GPU activities - treatment of project-specific grants as capital receipts - prospective operation of New Noble limited to interpretation of "solely" in section 10(23C)(vi)

Definition of "education" under section 2(15) - Activities of the assessee qualify as "education" under section 2(15) of the Act. - HELD THAT: - The Tribunal, applying the Supreme Court's decision in New Noble Educational Society and earlier precedent in LokaShikshana Trust and T.M.A. Pai, held that the term "education" in section 2(15) is to be given a narrow meaning - imparting formal scholastic learning by systematic instruction. The assessee's activities, primarily operating as a science museum and related experiential exhibits, do not fall within this restricted meaning of "education" and therefore cannot be treated as charitable under the head of education in section 2(15). The learned CIT(A)'s contrary conclusion was set aside. [Paras 31, 32, 33]

Assessee's activities are not charitable as "education" under section 2(15); the CIT(A)'s finding to the contrary is set aside.

General public utility - first and second proviso to section 2(15) regarding commercial activity disqualifying GPU - AUDA guidelines for determining commerciality of GPU activities - Whether the assessee's general public utility activities are commercial in nature so as to be disqualified from charitable status under the provisos to section 2(15). - HELD THAT: - The Tribunal held that the activities fall within the limb of "general public utility" under section 2(15). However, the question whether those GPU activities are carried on in the nature of trade, commerce or business (and thus disqualified by the first/second proviso) was not finally decided on the merits. Noting that the Assessing Officer had not applied the Supreme Court's AUDA guidelines (which address connection to objects, quantitative limits and whether charges are cost/nominal or markedly above cost), the Tribunal restored the matter to the AO for fresh determination strictly in accordance with those AUDA guidelines and applicable statutory provisions, directing the AO to determine commerciality and compute taxable income thereafter. [Paras 34, 35, 36, 39]

Issue remanded to the Assessing Officer to determine, following AUDA guidelines, whether the GPU activities are commercial and thereby disqualified under the provisos to section 2(15); AO to recompute income as required.

Treatment of project-specific grants as capital receipts - Whether project-specific grants received from Government are to be treated as capital receipts for computing application/accumulation under section 11. - HELD THAT: - The Tribunal noted that the learned CIT(A) had found project-specific grants to be capital receipts and directed the AO to verify and treat such grants as capital receipts, excluding them from the income/expenditure account for purposes of computing application and accumulation under section 11. The Revenue did not challenge this specific finding before the Tribunal, and therefore the CIT(A)'s conclusion stands and is binding for the purposes of these appeals. [Paras 4, 38]

Project-specific government grants are to be treated as capital receipts as held by the CIT(A); this finding stands and is not reopened.

Final Conclusion: For Asst. Years 2013-14, 2014-15 and 2015-16 the Tribunal holds that the assessee's activities are not "education" under section 2(15); they fall within "general public utility" but the question of commerciality under the provisos to section 2(15) is remanded to the Assessing Officer to be decided afresh in accordance with the AUDA guidelines; the CIT(A)'s finding that project-specific grants are capital receipts is accepted. Appeals are restored to the AO and allowed for statistical purposes.

Cost of acquisition for the purpose of Section 48 - agreement to sell and its effect on cost of acquisition - part performance under section 53A of the Transfer of Property Act - revisionary jurisdiction under section 263 of the Income-tax Act - re-opening under section 147 of the Income-tax Act

Cost of acquisition for the purpose of Section 48 - agreement to sell and its effect on cost of acquisition - part performance under section 53A of the Transfer of Property Act - Whether the Assessing Officer was justified in treating the consideration agreed between the original allottee and the assessee (under an agreement to sell) as part of the cost of acquisition for computing capital gains, and whether the Pr. CIT was justified in setting aside that view under section 263. - HELD THAT: - The Tribunal held that the term 'cost of acquisition' under Section 48 is wider than the value recorded in the sale deed or the stamp duty valuation and can include amounts paid under a preceding enforceable arrangement where the intermediary (original allottee) had an enforceable and transferable interest in the property. The factual matrix showed payments of Rs. 62,40,000 by banking channels to the original allottee and documentary material (builder's certificate and receipts) establishing her prior payments to the builder and her interest as allottee. The Pr. CIT's conclusion rested on selectively treating the sale deed recital and on applying section 53A/formal registration concerns without appreciating the three party transaction as a whole. The Tribunal observed that the Assessing Officer had made relevant inquiries and taken a possible view by recognizing the agreement to sell as forming part of the cost of acquisition; hence the exercise of revisionary power under section 263 was not sustainable. [Paras 8, 10, 11, 13]

The Assessing Officer's view to consider the agreement to sell and the payments to the original allottee as part of the cost of acquisition for Section 48 was sustainable; the Pr. CIT's order under section 263 setting aside the assessment is unjustified and is set aside.

Revisionary jurisdiction under section 263 of the Income-tax Act - re-opening under section 147 of the Income-tax Act - Whether the assessment order was 'erroneous and prejudicial to the interest of revenue' due to alleged failure of the Assessing Officer to make inquiries, thereby validating the Pr. CIT's invocation of section 263. - HELD THAT: - The Tribunal reviewed the record and found documentary evidence on file including bank payments to the original allottee, the builder's no dues certificate and receipts demonstrating the transaction chain. On these facts the Assessing Officer had conducted inquiries and accepted one of the possible views. The Pr. CIT's order was based on selective appreciation and expanded the scope of inquiry (including questioning the wife's source) beyond the reason recorded for re opening. Where the Assessing Officer takes a possible view after enquiry, the condition for exercising power under section 263 - that the assessment is erroneous and prejudicial to revenue - is not fulfilled. Accordingly, the Tribunal concluded that the AO had applied his mind and the section 263 order could not be sustained. [Paras 8, 11, 13]

The Pr. CIT's exercise of revisionary jurisdiction under section 263 was not justified; the assessment order does not suffer from the kind of error warranting interference and the section 263 order is set aside.

Final Conclusion: The Tribunal allowed the appeal of the assessee, set aside the Pr. CIT's order passed under section 263, and held that the Assessing Officer was justified in treating the payments agreed with the original allottee (agreement to sell) as part of the cost of acquisition for computing capital gains for AY 2012-13.

Reopening of assessment under Section 147/148 - reasons to believe - independent application of mind - borrowed satisfaction - tangible material - information from Investigation Wing - nexus between material and formation of belief

Reopening of assessment under Section 147/148 - reasons to believe - independent application of mind - information from Investigation Wing - nexus between material and formation of belief - Validity of the notice issued under section 148 and the consequent reassessment proceedings under section 147 for A.Y. 2013-14. - HELD THAT: - The Tribunal held that the Assessing Officer's reasons for reopening merely reproduced conclusions and the report of the Investigation Wing, without any independent inquiry or verification connecting the material with the formation of a belief that income had escaped assessment. Following precedents of the Coordinate Benches and higher courts, the Tribunal emphasised that reasons to believe must be supported by tangible material and must disclose the link between that material and the belief formed; mere information from the Investigation Wing, or repetition of its conclusions, amounts to a 'borrowed satisfaction' and is insufficient. The reasons recorded in the present case were found to be identical in character to those struck down in the cited authorities: they did not state what evidence was relied upon, how the Investigation Wing's report applied to the assessee specifically, or any independent application of mind by the AO. Consequently, the jurisdictional precondition for reopening under section 147 was not satisfied and the notice under section 148 and the reassessment were vitiated. [Paras 7, 8, 10]

The notice under section 148 and the reassessment proceedings under section 147 for A.Y. 2013-14 are set aside as lacking jurisdictional foundation.

Merits of additions - Adjudication of the merits of additions made under sections 68 and 69C. - HELD THAT: - Having invalidated the reopening for lack of jurisdiction, the Tribunal observed that the substantive grounds of addition became academic. No party advanced substantive arguments before the Tribunal on the merits, and therefore those grounds were not adjudicated on merits. [Paras 9, 10]

Merits of the additions were not adjudicated as they became academic; those grounds are dismissed as infructuous.

Final Conclusion: The appeal is allowed: the reassessment initiated by notice under section 148 and consequential proceedings under section 147 for A.Y. 2013-14 are quashed for want of jurisdiction due to lack of independent reasons to believe; the substantive additions were not decided as they became academic.

Condonation of delay - sufficient cause under Section 5 of the Limitation Act, 1963 - treatment of gift from a relative - proof of source of gift and burden of inquiry - relevance of donor's non-filing of income-tax return

Condonation of delay - sufficient cause under Section 5 of the Limitation Act, 1963 - Application for condonation of delay of 780 days in filing the appeal before the Tribunal was allowed. - HELD THAT: - The assessee filed an affidavit and documentary evidence showing a family dispute and criminal litigation (FIR) involving the assessee's family which, it was held, sufficiently disrupted normal functioning and justified the delay. The affidavit was not controverted by the Revenue. The Tribunal observed that matrimonial and family criminal disputes can paralyse normal working of the family and, in the facts of the case, constituted a plausible and sufficient cause within the meaning of Section 5 of the Limitation Act, 1963. Reliance placed by the Revenue on authorities condemning unexplained delay was not accepted on the particular facts because the assessee had furnished contemporaneous material and an uncontested affidavit explaining the delay. The application for condonation was therefore allowed and the appeal admitted for adjudication. [Paras 5, 6]

Delay condoned and appeal admitted for hearing.

Treatment of gift from a relative - proof of source of gift and burden of inquiry - relevance of donor's non-filing of income-tax return - Addition of Rs.2,00,000 made on account of alleged unexplained gift from the assessee's father was deleted. - HELD THAT: - The assessee maintained that the gift of Rs.2,00,000 was from his father, who earned small income from puja and astrology and had agricultural income from ownership of about 6.5 acres. The Tribunal found no finding in the assessment or first appellate order disputing ownership of the agricultural land, and held that the CIT(A)'s conclusion-that the gift could not be accepted because the father had not filed income-tax returns-was not a reasonable basis to reject the explanation. The Tribunal accepted that ownership of agricultural land yielding produce and the father's stated sources could plausibly explain the gift and that non-filing of returns by the donor, when his income may be below taxable limits or agricultural and exempt, cannot by itself impeach the transaction of gift. On this reasoning the Tribunal held the basis for the addition unsustainable and directed deletion of the addition. [Paras 9]

Sole effective ground allowed; addition deleted and AO directed to delete the addition.

Final Conclusion: The application for condonation of 780 days' delay was allowed and the appeal admitted; on merits the Tribunal allowed the sole effective ground and deleted the addition of Rs.2,00,000 treated as gift, resulting in the appeal being partly allowed.

Post-decisional hearing - principles of natural justice - bias or apprehension of bias - appointment of an independent officer for adjudication - dual charge/additional charge and decision making capacity

Post-decisional hearing - appointment of an independent officer for adjudication - principles of natural justice - bias or apprehension of bias - Direction in the writ petition that another officer of the same rank be appointed to hear the post decisional hearing on suspension of the customs broker's licence - HELD THAT: - The Single Judge directed that the Chief Principal Chief Commissioner of Customs appoint another officer to adjudicate the post decisional hearing because the same authority who issued the post decisional hearing notice had also drawn the offence report which formed the basis for suspension. The Division Bench observed two possible views: (a) that identity of the officers may give an impression of a person judging his own cause, and (b) that an officer acting in different capacities may still be distinct in role. The court did not resolve the theoretical controversy but emphasised that post decisional hearing must be effective and comply with the principles of natural justice, avoiding any iota of bias or prejudice; on that practical ground the Single Judge's direction to appoint another officer was affirmed. The Court confined its conclusion to the requirement of an effective, unbiased hearing and declined to treat the writ order as laying down a legal principle applicable generally. [Paras 1, 2, 3, 4]

Affirmed the Single Judge's direction that another officer be appointed to adjudicate the post decisional hearing and dismissed the Revenue's intra Court appeal; extended time for compliance by 30 days.

Dual charge/additional charge and decision making capacity - appointment of an independent officer for adjudication - principles of natural justice - Whether matters raised by the Department concerning investigation/adjudication by an officer holding dual charges were to be finally decided in the appeal - HELD THAT: - The Court recorded that the specific grounds advanced by the Department-relating to investigation under supervision of one Commissioner, segregation of investigatory and adjudicatory functions, and legality of orders passed by an officer holding two charges-had not been adjudicated in the writ proceeding. Consequently, the Division Bench declined to decide those legal questions on merits in the intra Court appeal. The court expressly left those questions of law open for consideration in appropriate proceedings, and held that the writ order should not be treated as precedent on those points. [Paras 3, 6]

Left the legal issues raised by the Department open for adjudication; the writ order shall not be treated as a precedent.

Final Conclusion: The Revenue's intra Court appeal is dismissed; the Single Judge's direction to appoint another officer to conduct the post decisional hearing is affirmed and time for compliance is extended by 30 days; questions of law raised by the Department regarding dual charge and adjudicatory competence are left open and the writ order is not to be treated as a precedent.

Classification of goods - Yeast versus medicament - Chapter 21 exclusion for yeast put up as a medicament - Interpreting Explanatory Notes to Chapter 21 - Rule preferring the most specific tariff heading

Classification of goods - Yeast versus medicament - Chapter 21 exclusion for yeast put up as a medicament - Interpreting Explanatory Notes to Chapter 21 - Rule preferring the most specific tariff heading - Imported 'Lyophilized Saccharomyces Boulardii' is classifiable under CTH 21021090 (Chapter 21) and not under Chapter 29 or Chapter 30. - HELD THAT: - The Tribunal accepted the factual findings in the analysis and safety data sheets that the imported material is described as "ovoid yeasts to the exclusion of all other micro-organisms" and that lactose is added as an auxiliary for lyophilization (stabilization) rather than as an ingredient that converts the product into a medicament. The appellant's medical literature showing therapeutic uses of Saccharomyces boulardii did not establish that the imported material is known in the market in ordinary parlance as a medicament or put up as such; there was no evidence that the goods were sold as medicaments or put up in measured doses or retail packings to attract headings 3003/3004. Chapter 29 was inapplicable because the goods are not separate chemically defined organic compounds. The Tribunal applied the Explanatory Notes to Chapter 21 (which expressly cover yeasts active or inactive) and invoked the interpretative rule that the heading providing the most specific description is preferred. Reliance on earlier Tribunal precedents (Kasturi Foods & Products Ltd. and M/s. Zymonutrients Pvt. Ltd.) was held appropriate on the facts, supporting classification under Chapter 21. Consequently, the department's re-determination to CTH 21021090 and the related demand were sustained. [Paras 19, 21, 22, 24, 25]

The appeal is dismissed; the impugned order classifying the goods under CTH 21021090 is sustained.

Final Conclusion: On the facts and documentary evidence, including the supplier's analysis and safety data sheet, the product is yeast (lyophilized Saccharomyces boulardii) with lactose as a stabilizing auxiliary and not a medicament put up as such; classification under Chapter 21 (CTH 21021090) is upheld and the appeal is dismissed.

Entitlement to exemption for "Microlens and Splitter" under the exemption notification - reliance on expert test reports of technical institutions - confiscation for mis-declaration under Section 111(m) of the Customs Act, 1962 - penalty under Sections 112 and 114AA of the Customs Act, 1962 - provisional release on execution of a pre deposit/PD Bond under Section 18 of the Customs Act, 1962

Entitlement to exemption for "Microlens and Splitter" under the exemption notification - reliance on expert test reports of technical institutions - Whether the imported "PLC Splitter Module" qualified for duty exemption as "Microlens and Splitter" under the notification and which expert report should be accepted. - HELD THAT: - The Tribunal found that the notification confers exemption only on goods that satisfy the specification of "Microlens and Splitter." The departmental sample drawn from the imported consignment was tested at IIT Delhi, whose expert report found no microlens in the sample. The appellant produced a contrary report from another technical institute, but the authenticity of the sample in that report was doubtful and it was not established that it related to the same consignment. Given the settled legal principle that competent expert opinion of recognised technical institutions merits due weight, the IIT Delhi report could not be disregarded. Although the Tribunal observed that, when two contradictory expert opinions are on record, the proper course would have been to obtain a third, decisive test report, the appellate forum could not remedy that procedural omission at this stage. On the available evidence the product did not fall within the notified description and therefore was not entitled to the exemption.

Exemption claim rejected; the goods did not qualify as "Microlens and Splitter" and the departmental/IIT Delhi expert report was accepted.

Confiscation for mis-declaration under Section 111(m) of the Customs Act, 1962 - penalty under Sections 112 and 114AA of the Customs Act, 1962 - provisional release on execution of a pre deposit/PD Bond under Section 18 of the Customs Act, 1962 - Whether the goods should be confiscated and whether penalties and redemption fine should be imposed in the facts of the case. - HELD THAT: - The Tribunal held that although the appellant's claim for exemption was not accepted, there was no evidence of improper importation or mis-declaration warranting confiscation under Section 111(m). The goods had been examined and found to accord with the invoice and bill of entry and were provisionally released on payment of regular duty and upon execution of a PD bond. In the circumstances, imposing confiscation, redemption fine or sustaining the penalties under Sections 112 and 114AA was not justified. The Tribunal, applying the principle of proportionality and referring to precedent where differing expert opinions led to relief in the interest of justice, found that striking down the penalties and redemption fine was appropriate while maintaining the duty demand.

Confiscation and redemption fine set aside; penalties under Sections 112 and 114AA set aside; differential duty demand upheld and goods not confiscated.

Final Conclusion: The appeal is disposed of by upholding the demand for differential duty while setting aside confiscation, the redemption fine and the penalties; the exemption claim was rejected on the accepted expert evidence and no case for confiscation or penalties was made out.

Proviso to Section 137(3) of the Customs Act - prohibited items in the ITC (HS) Classification of Export and Import Items - definition of "prohibited goods" in Section 2(33) of the Customs Act - distinction between "prohibited" and "restricted" goods - maintainability of compounding application before issuance of show cause notice

Proviso to Section 137(3) of the Customs Act - prohibited items in the ITC (HS) Classification of Export and Import Items - definition of "prohibited goods" in Section 2(33) of the Customs Act - Whether the Chief Commissioner was justified in rejecting the compounding application by applying the definition of "prohibited goods" under Section 2(33) instead of the term "prohibited items" used in proviso to Section 137(3)(c)(ii). - HELD THAT: - The proviso to Section 137(3)(c)(ii) expressly excludes from compounding offences involving goods specified as "prohibited items for import and export in the ITC (HS) Classification". The learned Chief Commissioner declined to entertain the compounding application by treating the seized gold as "prohibited goods" under the broader definition in Section 2(33). The Tribunal held that Section 137(3)(c)(ii) must be read with the specific phrase "prohibited items" as used in the ITC (HS) list and not conflated with the statutory definition of "prohibited goods" in Section 2(33). The list of prohibited items in the ITC (HS) does not include gold bars and gold is freely importable; therefore the mere fact of illegal importation without prior permission does not convert freely importable goods into "prohibited items" under the ITC (HS). The definition in Section 2(33) cannot be imported into Section 137(3)(c)(ii) where the statute uses a different expression and Section 2 itself qualifies words by the phrase "unless the context otherwise requires." The learned Chief Commissioner thus misdirected himself by relying on Section 2(33) to reject the compounding application as not maintainable. [Paras 8, 9]

The rejection of the compounding application on the ground that the goods became "prohibited" under Section 2(33) was incorrect; the proviso to Section 137(3)(c)(ii) refers only to "prohibited items" in the ITC (HS) and that test was not satisfied.

Maintainability of compounding application before issuance of show cause notice - compounding under Section 137(3) - Whether there is any bar on filing or considering an application for compounding under Section 137(3) before issuance of a show cause notice or adjudication. - HELD THAT: - The Tribunal noted authority holding there is no bar on filing an application for compounding prior to issuance of a show cause notice or adjudication. The Chief Commissioner could not decline to entertain the application merely because adjudication had not commenced. The impugned order's reliance on prematurity for rejecting the application was incorrect. The Tribunal expressly refrained from adjudicating the merits of compounding and limited its intervention to correcting the legal error on maintainability. [Paras 10]

There is no bar on filing or considering a compounding application before issuance of a show cause notice; prematurity was not a valid ground for rejection in the present case.

Compounding under Section 137(3) - adjudication on merits after opportunity of hearing - Disposition of the compounding application after finding error in the rejection. - HELD THAT: - Having found that the authority erred in rejecting the compounding application as not maintainable, the Tribunal set aside the impugned order and restored the application to the file of the Chief Commissioner. The matter was remitted for fresh adjudication on merits in accordance with law, with directions to afford adequate opportunity of hearing and permit the appellant to file supporting documents. The Tribunal did not decide the merits of the compounding application and left those issues to the competent authority. [Paras 11]

The impugned order is set aside and the compounding application is remitted to the Chief Commissioner for fresh adjudication on merits after hearing both parties.

Final Conclusion: The Tribunal allowed the appeal, holding that the Chief Commissioner erred in treating the seized gold as "prohibited goods" under Section 2(33) for the purpose of proviso to Section 137(3)(c)(ii), that there is no bar to filing a compounding application before issuance of a show cause notice, and remitted the application to the Chief Commissioner for adjudication on merits after giving opportunity of hearing.

Relinquishment of title to warehoused goods - liability for customs duty on goods improperly removed from warehouse - treatment of warehoused goods as improperly removed on expiry of the warehousing period - power to demand duty under Section 72(1)(b) of the Act - penalty under Section 112 and penalty under Section 117 of the Act - contributory negligence of Revenue

Relinquishment of title to warehoused goods - liability for customs duty on goods improperly removed from warehouse - treatment of warehoused goods as improperly removed on expiry of the warehousing period - power to demand duty under Section 72(1)(b) of the Act - Whether the appellant was liable to pay customs duty and interest on wine warehoused beyond the permissible period notwithstanding their purported relinquishment of title. - HELD THAT: - The Tribunal found that the appellant had validly exercised the statutory right of relinquishment under Section 68 (as amended) prior to any departmental order clearing the goods for home consumption. The Tribunal recorded that Revenue had not demanded duty or taken timely action after expiry of the warehousing periods and observed contributory negligence on the part of the Customs authorities, who were under an obligation to consider shorter warehousing periods where goods were likely to deteriorate. In these circumstances the Tribunal held that duty and interest could not be demanded from the appellant because no demand had been made prior to relinquishment and the Department had slept over the matter; accordingly the appellant was not liable to pay the customs duty and interest that had been adjudged earlier. [Paras 9]

Appellant not liable to pay the customs duty and interest on the warehoused goods in view of valid relinquishment and Revenue's delay.

Penalty under Section 112 and penalty under Section 117 of the Act - contributory negligence of Revenue - Whether penalty was rightly imposed and the appropriate provision for imposing penalty in the circumstances of this case. - HELD THAT: - Although the Tribunal absolved the appellant from duty and interest, it found that the appellant had allowed the goods to deteriorate and did not relinquish title within a reasonable time. Having regard to the appellant's conduct and the delay in taking steps to relinquish the goods, the Tribunal held that some penal consequence was warranted. The Tribunal therefore substituted a penalty under Section 117 for the penalty originally imposed under Section 112 and confirmed a reduced penalty amount as adjudicated. The decision reflects a balancing of Revenue's contributory negligence and the appellant's delay in acting. [Paras 10]

Penalty under Section 117 imposed in lieu of Section 112; reduced penalty of Rs.1 Lakh confirmed.

Final Conclusion: Appeal allowed in part: demand of customs duty and interest set aside in view of valid relinquishment and Revenue's inaction; penalty sustained but re-characterised and reduced, with a penalty of Rs.1 Lakh confirmed.

Moratorium under the Insolvency and Bankruptcy Code - personal guarantor / independent contract of guarantee - binding effect of an approved resolution plan - liability of directors where personal guarantee exists - overriding effect of the Insolvency and Bankruptcy Code

Moratorium under the Insolvency and Bankruptcy Code - personal guarantor / independent contract of guarantee - Moratorium under Section 14 of the IBC does not extend to personal guarantors and does not protect directors who have given personal guarantees from proceedings for recovery of corporate debt. - HELD THAT: - The Court applied the reasoning of the Supreme Court to hold that Section 14 prohibitions are directed to the corporate debtor alone and are not applicable to personal guarantors. The scheme of the Code, the Amendment bringing personal guarantors within the Code for limited purposes, and the decisions cited establish that a personal guarantor (often a director) remains independently liable under the contract of guarantee and is not saved by the moratorium imposed on the corporate debtor. Consequently, enforcement action against a guarantor's assets is not barred merely because CIRP/insolvency proceedings are pending or a resolution plan has been approved in respect of the corporate debtor. [Paras 35, 36, 37, 38, 39]

Moratorium under Section 14 does not operate in favour of personal guarantors; directors who are guarantors can be proceeded against despite CIRP.

Binding effect of an approved resolution plan - personal guarantor / independent contract of guarantee - Approval of a resolution plan under Section 31 of the IBC does not ipso facto discharge a personal guarantor of liabilities under an independent contract of guarantee. - HELD THAT: - Relying on and following authoritative precedents, the Court held that although a resolution plan is binding on the corporate debtor and stakeholders, its sanction does not automatically extinguish the separate contractual liability of a guarantor. The extent of the guarantor's liability depends on the terms of the guarantee and the contract; statutory finality of the resolution plan as to claims against the corporate debtor does not per se relieve guarantors of their independent obligations. [Paras 41, 42, 43, 44, 45]

An approved resolution plan does not automatically absolve a personal guarantor (including a director) of independent liability under a guarantee.

Liability of directors where personal guarantee exists - overriding effect of the Insolvency and Bankruptcy Code - The writ challenge to the demand notice issued jointly against the directors on the ground that insolvency/resolution plan extinguished their personal liability is unsustainable; question whether a specific director gave a personal guarantee is left open for appropriate proceedings. - HELD THAT: - Applying the above principles, the Court rejected the petitioner's contention that approval of the resolution plan and liquidation of the corporate debtor's assets automatically extinguished liability of the directors named in the demand notice. The Court observed that one director (not before the Court) had allegedly given an affidavit/undertaking at the time of application for supply of electricity and that whether that affidavit constitutes a personal guarantee was not adjudicated and remains open for appropriate forum. As no substantive arguments were advanced to challenge the Supply Code provision invoked by respondents, and given that guarantor liability survives IBC moratorium and resolution, the petition seeking quashing of the demand notice on insolvency grounds was dismissed. [Paras 31, 32, 46, 48, 49]

Challenge to the demand notice on the sole ground of insolvency/resolution-plan discharge of the corporate debtor is dismissed; liability of directors who are alleged guarantors remains enforceable and issues as to the nature and extent of any specific guarantee are reserved.

Final Conclusion: The writ petition challenging the demand notice issued jointly against the directors of the corporate consumer was dismissed: the moratorium and approval of a resolution plan under the IBC do not, by themselves, protect or discharge personal guarantors (including directors) from independent liability under guarantees, and the question of any specific guarantee remains open for adjudication in appropriate proceedings.

Modification/alteration of approved resolution plan - perpetual exclusive right to use trademarks versus ownership of trademarks - jurisdictional limits of the adjudicating authority under the Insolvency and Bankruptcy Code - binding nature of a resolution plan approved by the Committee of Creditors - extinguishment of rights claimed after approval of the resolution plan

Perpetual exclusive right to use trademarks versus ownership of trademarks - modification/alteration of approved resolution plan - jurisdictional limits of the adjudicating authority under the Insolvency and Bankruptcy Code - Whether the adjudicating authority's declaration that the trademarks belong to the corporate debtor amounted to an impermissible modification of the resolution plan approved by the Committee of Creditors and transgressed the authority's jurisdiction. - HELD THAT: - The Court examined Clause 11.12 of the Resolution Plan which granted the corporate debtor a perpetual exclusive right to use the listed brands for carrying on its business, and noted that the CoC approved the Plan with 81.39% voting in compliance with Sections 30(2) and 30(4) of the IBC. The adjudicating authority's conditional approval of the Plan was subject to the outcome of I.A. No.155/2018. When the NCLT, on disposing of I.A. No.155/2018, went beyond upholding the exclusive right to use and further declared that the trademarks "Deccan Chronicle" and "Andhra Bhoomi" belong to the corporate debtor, the Court held that such a declaration was not reconcilable with the terms approved by the CoC. The NCLAT correctly concluded that declaring ownership post-approval would amount to modification/alteration of the approved Resolution Plan - a course impermissible under the Code - and that the adjudicating authority thereby transgressed its jurisdictional limits. The Court relied on the principle, as explained in Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited & Another , that residual powers of the adjudicating authority cannot be used to effect substantive outcomes that alter an approved resolution plan or enable post-approval negotiations or withdrawals which the statute does not provide for. Applying that principle, the Court held that the NCLT's additional declaration of ownership extinguished or altered the settled allocation of rights approved by the CoC and therefore the NCLAT's setting aside of that part of the NCLT order was justified. The Court dismissed the appeal, affirming that the Resolution Plan granted exclusive use (not ownership) and that ownership could not be judicially declared in a manner that modified the approved Plan. [Paras 21, 24, 26]

The declaration by the adjudicating authority that the trademarks belong to the corporate debtor amounted to an impermissible modification of the approved Resolution Plan; the NCLAT's order setting aside that declaration is upheld and the appeal is dismissed.

Binding nature of a resolution plan approved by the Committee of Creditors - extinguishment of rights claimed after approval of the resolution plan - Whether the connected appeals challenging the approved Resolution Plan or its consequences should be entertained or are rendered infructuous/nonsuited. - HELD THAT: - The Court observed that the Resolution Plan had been approved by the CoC and the adjudicating authority and that one connected appeal was rendered infructuous in light of the principal judgment dismissing the challenge to the NCLAT order. Another connected appeal by a financial creditor who had not challenged the approved Resolution Plan before the appellate authority was nonsuited because the Plan had been validly approved by the requisite CoC majority and the adjudicating authority. On these bases the Court dismissed the connected appeals as infructuous or without merit. [Paras 31, 36]

The connected appeals are dismissed - one as having become infructuous and the other as rightly nonsuited for failure to challenge the approved Resolution Plan.

Final Conclusion: The appeal is dismissed: the NCLAT was correct in holding that the NCLT's declaration of ownership over the trademarks modified the Resolution Plan and exceeded its jurisdiction; the approved Plan conferred only a perpetual exclusive right to use the brands (not ownership), and connected appeals are dismissed as infructuous or nonsuited.

Exemption from transfer charges under approved resolution plan - binding effect of an approved resolution plan and the clean slate principle - refund of amounts paid under protest in consequence of an unsustainable demand - entitlement to interest on unlawfully retained or wrongfully demanded sums

Exemption from transfer charges under approved resolution plan - binding effect of an approved resolution plan and the clean slate principle - Whether respondent No.1 was entitled to recover transfer fee notwithstanding the exemption contained in the resolution plan approved by the NCLT. - HELD THAT: - The approved resolution plan expressly granted the company and the resolution applicant exemption from all taxes, levies, fees, transfer charges, transfer premiums and surcharges arising from or relating to implementation of the resolution plan. On approval, the resolution plan became binding on the corporate debtor and other stakeholders and is intended to freeze claims so that the resolution applicant commences on a clean slate. Applying the principle in Ghanshyam Mishra and Sons (as referred to in the judgment) and the clause of the sanctioned plan, the demand for transfer charges by respondent No.1 was unsustainable. Consequently the learned Single Judge's direction to refund the amount recovered towards transfer fee was upheld and the challenge by respondent No.1 was dismissed. [Paras 5, 6, 7, 8]

FMA 152 of 2022 dismissed; respondent No.1 was not entitled to recover the transfer fee and the refund direction was sustained.

Refund of amounts paid under protest in consequence of an unsustainable demand - entitlement to interest on unlawfully retained or wrongfully demanded sums - Whether the writ petitioner was entitled to interest on the amount deposited under protest pursuant to the unsustainable demand for transfer fee, and if so at what rate and from which date. - HELD THAT: - The record shows the writ petitioner deposited the demanded sum under protest because urgent NOC/loan requirements compelled payment pending resolution of the dispute. The court accepted that the demand was unsustainable in view of the approved resolution plan. Applying the principle that a party wrongfully deprived of its money is entitled to reimbursement with interest (as recognised in the cited authority dealing with refunds), the Court held that the writ petitioner suffered loss by reason of unlawful retention and therefore is entitled to interest. Considering prevailing rates, the Court awarded interest at 8% per annum on the deposited amount from the date of deposit until the date of refund and directed that the amount together with interest be refunded within six weeks. [Paras 10, 11, 13, 14, 15]

FMA 1262 of 2022 disposed of subject to modification: writ petitioner entitled to interest at 8% from date of deposit until refund; refund with interest to be made within six weeks.

Final Conclusion: The challenge by respondent No.1 to the Single Judge's refund direction is dismissed; refund direction sustained. The writ petitioner's appeal is allowed insofar as interest is concerned-interest at 8% per annum awarded from date of deposit until refund and the amount with interest to be refunded within six weeks.

Application for dissolution under section 54 of the Insolvency and Bankruptcy Code, 2016 - power of Interim Resolution Professional to seek dissolution - liquidation under section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - commencement of liquidation and fresh moratorium under section 33(5) of the Insolvency and Bankruptcy Code, 2016 - appointment of liquidator and duties of liquidator in liquidation process

Application for dissolution under section 54 of the Insolvency and Bankruptcy Code, 2016 - power of Interim Resolution Professional to seek dissolution - Validity of the Interim Resolution Professional's application seeking early dissolution of the Corporate Debtor under Section 54 of the IBC. - HELD THAT: - The Tribunal examined Section 54 and observed that the statutory text contemplates an application for dissolution to be filed by a liquidator. The present application was filed by the Interim Resolution Professional. In view of the statutory allocation of the power to seek dissolution to a liquidator, the Tribunal declined to order dissolution at this stage on the basis of the IRP's application. [Paras 10]

The application for early dissolution filed by the Interim Resolution Professional is not maintainable under Section 54 and dissolution is not ordered on that application.

Liquidation under section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - commencement of liquidation and fresh moratorium under section 33(5) of the Insolvency and Bankruptcy Code, 2016 - Whether the Corporate Debtor should be ordered to be liquidated under Section 33(1)(a) of the IBC on account of expiry of the insolvency resolution process period without receipt or approval of a resolution plan. - HELD THAT: - The Tribunal noted that the CIRP commenced on 30.09.2021, that no resolution plan had been received or approved, and that no application for extension or exclusion of the CIRP period was pending. Taking resort to Section 33(1)(a), the Tribunal found that the maximum period under Section 12 had expired and that the statutory precondition for liquidation - non-receipt of a resolution plan within the prescribed period - was satisfied. Consequently, the Tribunal was compelled to pass an order of liquidation. The order also provides that the moratorium under Section 14 shall cease and a fresh moratorium under Section 33(5) shall commence. [Paras 11, 12, 13, 14]

The Corporate Debtor is ordered to be liquidated under Section 33(1)(a) of the IBC and a fresh moratorium under Section 33(5) shall commence.

Appointment of liquidator and duties of liquidator in liquidation process - Appointment of the liquidator and the directions governing the liquidation process. - HELD THAT: - As the Committee of Creditors had approved a liquidator, the Tribunal appointed the person whose consent and valid AFA were on record to act as liquidator. The Tribunal directed the liquidator to act in accordance with the IBC, Rules and Regulations, issue the public announcement of liquidation, treat the order as notice of discharge to officers and employees (in view of Section 33(7)), investigate the financial affairs including preferential and undervalued transactions and file applications as required, intimate statutory authorities including the Registrar of Companies and Income Tax authorities, and submit the preliminary report within the time prescribed by the Liquidation Regulations. [Paras 15, 16]

E. Santhanalakshmi is appointed as Liquidator and is directed to carry out the liquidation in accordance with the Code, rules and regulations and the terms set out by the Tribunal.

Final Conclusion: The Tribunal declined the IRP's prayer for dissolution under Section 54 since only a liquidator may file such an application; having regard to expiry of the CIRP period without a resolution plan and absence of an extension, the Tribunal ordered liquidation under Section 33(1)(a), appointed the approved liquidator and issued directions governing the liquidation process.

Anticipatory bail / regular bail in event of arrest - conditioning of bail under Section 438(2) Cr.P.C. - coordinates of surrender, bail bond and sureties - non-tampering and cooperation conditions as grounds for cancellation

Anticipatory bail / regular bail in event of arrest - conditioning of bail under Section 438(2) Cr.P.C. - coordinates of surrender, bail bond and sureties - non-tampering and cooperation conditions as grounds for cancellation - Grant of bail to the petitioner (Ashok Kumar Goenka) in the PMLA prosecution on conditions - HELD THAT: - Having considered the factual matrix, the orders passed in respect of co-accused (one of whom was enlarged on bail and another who obtained relief from the Supreme Court), the Court found it appropriate to extend similar relief to the petitioner. The petition was allowed to the extent that, in the event of arrest or surrender within four weeks, the petitioner would be released on bail on furnishing a bail bond and two sureties to the satisfaction of the learned Sessions Judge/Special Judge, Patna. The Court imposed conditions consistent with the statutory framework under Section 438(2) Cr.P.C., and tailored directions to secure attendance and preserve the integrity of the trial: (i) one bailor to be a family member who shall produce official documentary proof of bona fides; (ii) cooperation with authorities and availability as required; (iii) appearance on every trial date with express provision that absence on two consecutive dates without plausible cause would invite cancellation; (iv) prohibition on inducing, threatening or tampering with witnesses or evidence, breach of which would permit the State to seek cancellation; and (v) prohibition on committing further offences, breach of which would permit cancellation. The Court exercised its discretion in the light of parity with co-accused and the interest of ensuring attendance and non-interference with the prosecution, while leaving the quantification and satisfaction of bond and sureties to the trial court.

Petition allowed to the extent of directing release on bail on surrender/arrest within four weeks on furnishing bond and sureties and subject to specified conditions; failure to comply or breach of conditions may invite cancellation of bail.

Final Conclusion: The High Court allowed the petition and directed that the petitioner be released on bail upon arrest or surrender within four weeks on furnishing the specified bail bond and two sureties to the satisfaction of the trial court, subject to conditions including a family-member bailor, cooperation and attendance, and prohibitions against witness tampering and further offences, breach of which may lead to cancellation of bail.

Violation of principles of natural justice - right to personal hearing - vitiation of adjudication for non-service of notice - treatment of an order as a show cause notice and remand for fresh adjudication

Violation of principles of natural justice - right to personal hearing - vitiation of adjudication for non-service of notice - Impugned order is vitiated for failure to afford opportunity of personal hearing to the petitioner in accordance with principles of natural justice. - HELD THAT: - The court found that the petitioner did not receive the notice for personal hearing and that the adjudicating authority proceeded without affording personal hearing. The authority's reliance on service by registered post when the show cause notice had been sent by e-mail did not justify proceeding without ensuring effective service or providing a hearing. For this failure to provide an opportunity of personal hearing, the impugned order was held vitiated and therefore set aside. [Paras 6, 7, 8]

Order-in-original dated 02.11.2022 set aside for breach of natural justice.

Treatment of an order as a show cause notice and remand for fresh adjudication - Impugned order to be construed as a show cause notice and matter remitted for fresh consideration after grant of opportunity to the petitioner to file reply and be heard. - HELD THAT: - Although the impugned order was set aside for want of personal hearing, the court directed that the order shall be treated as the show cause notice so that the petitioner, now aware of the allegations, may file a reply within four weeks. Thereafter the adjudicating authority was directed to proceed afresh, give due opportunity of hearing and pass a fresh order in accordance with law within eight weeks from receipt of the reply. The court preserved the authority's power to pass an appropriate order if the petitioner defaults in filing a reply. [Paras 8, 9]

Impugned order to be treated as show cause notice; petitioner to file reply within four weeks; respondent to decide afresh after hearing within eight weeks; default by petitioner permits respondent to act appropriately.

Final Conclusion: Impugned adjudication under Section 73(2) of the Finance Act, 1994 is quashed for failure to afford personal hearing; the order is treated as a show cause notice and the matter is remitted for fresh adjudication after the petitioner files a reply and is given an opportunity of hearing within the time frames directed by the High Court.

Appropriation of deposits - pre-deposit in appellate proceedings - Sabka Vishwas (Legacy Dispute Resolution) Scheme - treasury accounting of departmental receipts - Designated Committee's power to reckon amounts on deposit

Pre-deposit in appellate proceedings - Designated Committee's power to reckon amounts on deposit - Sabka Vishwas (Legacy Dispute Resolution) Scheme - Whether the Designated Committee was confined to considering only the specific pre-deposit made at the time of filing the appeal, and could not take into account other amounts already deposited with the Revenue. - HELD THAT: - The court noted that the Designated Committee relied upon the sums already lying with the Revenue treasury in determining whether the condition under the scheme (deposit of 50% of the disputed demand) was satisfied. The Revenue's contention that only the pre-deposit of Rs.27,66,646/- made while filing the appeal was relevant was rejected: payments made to the Department, whether as a pre-deposit in appeal or under other heads, are receipts of the Central Government and stand accounted in the Treasury. Consequently, amounts already in deposit with the Department could be taken into account by the Committee when assessing whether the threshold under the SVLDR scheme was met. [Paras 10]

Designated Committee was not restricted to the narrow pre-deposit figure and could reckon amounts already deposited with the Treasury in determining eligibility under the scheme.

Appropriation of deposits - treasury accounting of departmental receipts - Whether, on the admitted facts that the assessee had deposits with the Revenue exceeding the required 50% of the disputed demand, the writ petition directing issuance of discharge certificate was rightly allowed. - HELD THAT: - The court recorded the undisputed facts: the disputed demand was Rs.1,77,06,985/- and 50% of that demand amounted to Rs.88,53,492/-. The records and audit showed that the assessee had an aggregate deposit with the Revenue which, after accounting adjustments noted in the proceedings, amounted to an admitted figure in excess of the 50% threshold (assessed by the court on the record as Rs.92,00,000/-). Given that the requisite amount was already in the Treasury, the Single Judge's direction to issue an appropriate discharge certificate was based on these admitted facts and the proper accounting of departmental receipts, and did not warrant interference. [Paras 9, 11]

Because the admitted deposits with the Revenue exceeded the 50% requirement, the High Court correctly directed issuance of a discharge certificate; the Revenue's appeal fails.

Final Conclusion: Appeal dismissed. The High Court's order directing issuance of a discharge certificate was upheld because admitted sums already deposited with the Government Treasury exceeded the 50% threshold required under the SVLDR scheme, and the Designated Committee was entitled to reckon such deposited amounts.

Limitation for filing appeal under Section 85(3A) of the Finance Act, 1994 - condonation of delay limited to one month by proviso to Section 85(3A) - power of appellate authorities and Tribunal to condone delay beyond statutory period - inapplicability of Section 5 of the Limitation Act where statute prescribes outer limit - binding precedent of the Supreme Court

Limitation for filing appeal under Section 85(3A) of the Finance Act, 1994 - condonation of delay limited to one month by proviso to Section 85(3A) - binding precedent of the Supreme Court - The first appellate authority was justified in dismissing the appeal as barred by limitation under Section 85(3A) of the Finance Act, 1994. - HELD THAT: - Section 85(3A) prescribes a two month period for filing an appeal to the Commissioner (Appeals) and the proviso permits the Commissioner (Appeals), if satisfied that the appellant was prevented by sufficient cause, to allow presentation within a further period of one month, thereby fixing a total outer limit of three months. The Tribunal relied on the Supreme Court decision in Singh Enterprises which construed a pari materia provision to hold that the appellate authority cannot condone delay beyond the statutory extended period. The Tribunal held that the Commissioner (Appeals) correctly dismissed the appeal filed after the extended period and that Article 141 requires adherence to the Supreme Court's law on the permissible extent of condonation. Decisions of High Courts exercising writ jurisdiction were distinguished as not conferring similar remedial power on the Tribunal or first appellate authority. Applying these principles to the facts, the Commissioner (Appeals) did not err in dismissing the appeal as time barred. [Paras 6, 9]

Dismissal of the appeal by the Commissioner (Appeals) on the ground of limitation under Section 85(3A) is upheld.

Power of appellate authorities and Tribunal to condone delay beyond statutory period - inapplicability of Section 5 of the Limitation Act where statute prescribes outer limit - power of Tribunal to extend statutory limitation - The Tribunal has no power to condone delay in filing an appeal beyond the outer statutory period prescribed by Section 85(3A). - HELD THAT: - The Supreme Court's decision in Chhattisgarh State Electricity Board establishes that Section 5 of the Limitation Act cannot be invoked where the statute prescribes a specific outer limit for condonation, because permitting Section 5 would nullify the legislative intent. Consistent with that principle and the Supreme Court's ruling in Singh Enterprises, the Tribunal concluded it cannot entertain or condone an appeal filed beyond the period allowed by the statute. The Tribunal also noted decisions where High Courts exercised writ jurisdiction to grant relief but distinguished those as not available to the Tribunal; consequently, the Tribunal must operate within the statutory four corners and cannot extend the condonable period. [Paras 7, 8, 9]

The appeal cannot be entertained or condoned by the Tribunal beyond the period prescribed by Section 85(3A).

Final Conclusion: The order of the Commissioner (Appeals) dated 26.11.2019 dismissing the appeal as barred by limitation under Section 85(3A) of the Finance Act, 1994 is affirmed; the Tribunal has no power to condone delay beyond the statutory outer limit and the appeal is dismissed.

Unjust-enrichment - refund of service tax - credit note - passing on of tax incidence - refund to Consumer Welfare Fund - verification of who ultimately bore the burden

Unjust-enrichment - credit note - passing on of tax incidence - refund to Consumer Welfare Fund - Whether the appellant's refund claim is barred by the mischief of unjust-enrichment where service tax was initially charged to customers but later reversed by issuance of credit notes. - HELD THAT: - The Tribunal examined whether issuance of post invoice credit notes reversing service tax charged to customers results in unjust enrichment barring refund. The Tribunal accepted the appellant's position that although service tax was initially charged, it was subsequently returned by issuing credit notes and therefore the incidence of tax was not ultimately borne by any other person. The Tribunal relied upon the ratio of the Supreme Court in Addison & Co. Ltd., and subsequent decisions of this Tribunal and other fora which hold that where the assessee has returned the amount to buyers (evidenced by credit notes or certificates), the incidence is not treated as passed on and refund is not hit by unjust enrichment. Applying those authorities to the facts, the Tribunal found the present facts identical and concluded there was no unjust enrichment. On that basis the impugned order directing credit to the Consumer Welfare Fund was set aside and the refund allowed. [Paras 4, 5]

The appellant's refund claim is not hit by unjust enrichment because the service tax initially charged was subsequently reversed by credit notes; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Following authoritative precedents, the Tribunal held that where service tax initially collected was subsequently returned to customers by credit notes, the incidence was not passed on and the refund is not liable to be credited to the Consumer Welfare Fund; the impugned order was set aside and the refund claim allowed.

Penalty under Section 78 of the Act - penalty under Section 77 of the Act - reasonable cause for non-deposit of tax - interpretational error / venial breach - suppression / deliberate default - appropriation of tax and interest deposited

Penalty under Section 78 of the Act - penalty under Section 77 of the Act - reasonable cause for non-deposit of tax - interpretational error / venial breach - suppression / deliberate default - Whether penalties under Section 78 and Section 77 were rightly imposed for the short payment/non-payment of service tax. - HELD THAT: - The Tribunal found that the shortfall in tax arose from an interpretational issue concerning the basis and timing of payment (annual invoicing for certain tenants vis-a -vis the requirement to discharge tax month-to-month). The appellant had maintained records, was regularly paying service tax, and, upon audit objection, deposited the tax and interest. There was no finding of deliberate default, suppression or fraud; the breach was characterised as technical or venial and attributable to bona fide belief and advice of consultants. On these facts the Tribunal held that a reasonable cause existed for not depositing tax on an accrual (monthly) basis and that imposition of penalties was not justified. The Court therefore set aside the penalties under Section 77 and Section 78. [Paras 9]

Penalties under Section 77 and Section 78 set aside as there was reasonable cause and no deliberate default; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the short payment resulted from an interpretational/venial breach for which reasonable cause existed and that no suppression or deliberate default was made out; penalties under Sections 77 and 78 were set aside.

Refund of education cess and higher education cess - recovery under Section 11A of the Central Excise Act - effect of a subsequent binding decision of the Supreme Court and doctrine of per incuriam - review under Section 114 read with Order XLVII Rule 1 of the CPC - request for adjournment/sine die stay pending decision on modification application before the Supreme Court

Review under Section 114 read with Order XLVII Rule 1 of the CPC - request for adjournment/sine die stay pending decision on modification application before the Supreme Court - effect of a subsequent binding decision of the Supreme Court and doctrine of per incuriam - Whether the review petition seeking adjournment of the High Court's judgment sine die until the Supreme Court decides a modification application (seeking to align earlier precedent with a subsequent larger Bench decision) should be allowed. - HELD THAT: - The review petition was filed under Section 114 read with Order XLVII Rule 1 CPC seeking review of this Court's order setting aside the show cause notice. The Union sought adjournment of the matter sine die on the ground that the Supreme Court is seized of a modification application in proceedings where earlier precedent relied upon by the petitioner may be held to be per incuriam by a larger Bench. Reliance was placed on the principle that a review may be maintainable on discovery of new and important matter or evidence (reference to Kamlesh Verma). The Court examined the request to stay or adjourn the proceedings pending the outcome of the modification application before the Supreme Court and found that the ground advanced by the review petitioner was not satisfactory to justify exercise of review jurisdiction or an adjournment sine die. The Court therefore declined to await the outcome of the Supreme Court modification proceedings and refused to reopen or modify its earlier order on that basis.

Prayer for review to adjourn the matter sine die pending decision of the modification application before the Supreme Court is rejected and the review petition is dismissed.

Final Conclusion: The review petition seeking reconsideration of this Court's order and, in particular, an adjournment sine die pending the outcome of a modification application before the Supreme Court was rejected; the review petition is dismissed.

Admissibility of CENVAT credit on capital goods and their components/accessories - Cenvat credit for inputs used outside factory premises but in relation to manufacture - invocation of extended period of limitation where credit is declared in statutory returns - reversal of credit and effect on limitation

Invocation of extended period of limitation where credit is declared in statutory returns - reversal of credit and effect on limitation - Whether the department could invoke the extended period of limitation and levy penalty for recovery of Cenvat credit when the alleged irregularity was detected in March 2014 but the show cause notice was issued only on 29.4.2016 and the credits had been declared in statutory returns. - HELD THAT: - The Tribunal found no justification in the record for the delay in issuance of the show cause notice; although the irregularity was noticed and statements recorded in March 2014, the SCN was issued after a long delay on 29.4.2016 without reasons. Precedents of the Tribunal require initiation within one year from knowledge of the alleged irregularity. Further, the appellants had declared the availment of Cenvat credit in their books, Cenvat registers and ER-1 returns, negating any case of suppression. Consequently, invocation of the extended period and imposition of penalty on the ground of suppression was held impermissible and the demand was found to be barred by limitation. The Tribunal therefore set aside the demand on limitation grounds in addition to merits. [Paras 4, 6]

Extended period could not be invoked and the demand was barred by limitation; penalty on suppression could not be imposed.

Admissibility of CENVAT credit on capital goods and their components/accessories - Cenvat credit for inputs used outside factory premises but in relation to manufacture - Whether Cenvat credit availed on MS angles, MS beams, MS channels and poles used for erection of transmission poles outside the factory and for supporting structures of machinery is admissible as capital goods or components/accessories thereof. - HELD THAT: - On the merits the Tribunal accepted the appellants' case that the structural items and poles, though located outside the factory premises, were used directly in relation to the manufacture of sugar and its by-product by enabling supply of electricity essential for running the machinery. The Tribunal emphasised that location is subordinate to purpose: goods used 'in or in relation to manufacture' are eligible. Further, structural steel used as supports or as components/accessories of machinery fall within the definition of capital goods (components/parts/accessories) under the relevant Rule and are therefore eligible for Cenvat credit. The Tribunal noted that nothing contrary had been placed on record to displace the appellants' claim. It accordingly held the credits in question admissible. [Paras 5, 6]

Cenvat credit on the structural steel items and poles was admissible as capital goods or their components/accessories despite being situated outside the factory premises.

Final Conclusion: The appeal is allowed: the demand and penalty set aside both on limitation grounds (extended period not invocable where credit was declared and SCN belatedly issued) and on merits (the structural steel and poles qualify as capital goods or components/accessories used in or in relation to manufacture); consequential relief to follow as per law.

Clandestine removal - reliance on third party records and broker's diaries - requirement of corroborative evidence - cross examination under Section 9D - penalty under Rule 26(1) of the Central Excise Rules, 2002 - onus of proof on the Revenue

Clandestine removal - reliance on third party records and broker's diaries - requirement of corroborative evidence - penalty under Rule 26(1) of the Central Excise Rules, 2002 - onus of proof on the Revenue - Whether penalties imposed under Rule 26(1) based on broker diaries and other third party records are sustainable where those third party witnesses were not produced for cross examination and no corroborative evidence links the alleged removals to the appellants' premises. - HELD THAT: - The Tribunal found that the present matters arose from a common investigation in which identical evidence - primarily broker diaries and records recovered from third parties - was relied upon across multiple cases. The Tribunal reiterated established principle that duty demands or penalties for clandestine removal cannot rest solely on uncorroborated third party documents and statements. Where brokers, transporters or other third party witnesses whose statements underpin the case were not produced for cross examination, those statements cannot be relied upon. In the absence of cross examination and without independent corroboration (for example, linking removal from the appellants' premises, corroborative input/raw material records, higher consumption of inputs or other tangible evidence), the onus of proof which lies on the Revenue was not discharged. The Tribunal therefore followed its prior orders in identical matters and held that penalties founded on such evidence are not sustainable. [Paras 4, 5]

Penalties imposed under Rule 26(1) on the basis of broker diaries and uncorroborated third party records are set aside.

Cross examination under Section 9D - reliance on weighment slips lacking direct linkage to manufacturer - requirement of corroborative evidence - Whether weighment slips recovered from the residence of a third person, which do not mention the manufacturer's name and are supported only by statements that were not put through examination under Section 9D, can sustain imposition of penalty. - HELD THAT: - The Tribunal examined the weighment slips seized from the residence of a third person and observed there was no direct mention of the manufacturer's name, hence no direct correlation with the noticee. The only purported link was through statements of persons who were not subjected to examination under Section 9D. Given the absence of proper examination/cross examination and lack of independent corroboration, those slips in isolation lacked evidentiary value for imposing penalty. [Paras 4]

Penalties predicated on the said weighment slips are unsustainable and are set aside.

Final Conclusion: The Tribunal allowed the appeals and set aside the penalties imposed under Rule 26(1) of the Central Excise Rules, 2002, holding that demands based on broker diaries, third party records and uncorroborated weighment slips - without cross examination or other corroborative evidence linking the alleged removals to the appellants - could not be sustained.

Cenvat credit on capital goods - intermediate exempted goods - exclusive use for manufacture of exempted goods - Rule 6(4) of the Cenvat Credit Rules, 2004 - used in relation to the manufacture

Cenvat credit on capital goods - intermediate exempted goods - Rule 6(4) of the Cenvat Credit Rules, 2004 - exclusive use for manufacture of exempted goods - Entitlement to cenvat credit on capital goods used to manufacture an intermediate product (briquettes) which is subsequently used in the manufacture of the final dutiable product (soda ash). - HELD THAT: - The Tribunal found no dispute that the plant and machinery for manufacture of briquettes were part of the overall manufacturing process of soda ash, the final product cleared on payment of duty. Rule 6(4) of the Cenvat Credit Rules, 2004 disqualifies credit only where capital goods are exclusively used in the manufacture of a final product which is cleared under exemption. Where the intermediate product (briquettes) is used in the factory process as an input for a final excisable product and the final product is cleared on payment of duty, the capital goods cannot be treated as being exclusively used for exempted goods. The Tribunal applied this principle and followed precedents holding that credit is allowable where the capital goods form part of the process leading to a dutiable final product, and where potential or actual use in the manufacture of the final product is established. Consequently, the denial of credit under Rule 6(4) was not sustainable on the facts of the case.

Cenvat credit on the capital goods used in manufacture of briquettes, which are intermediates used in making dutiable soda ash, is admissible; the impugned orders denying credit under Rule 6(4) are set aside.

Final Conclusion: Appeals allowed; cenvat credit on the capital goods in issue is held admissible because the goods formed part of the process of manufacture of the final excisable product (soda ash), and Rule 6(4) does not apply where the capital goods are not exclusively used for an exempted final product.

Zero Rate Sale - Input Tax Credit - Refund - Exemption - Special Economic Zone (SEZ) - Works contract / deemed sale - Disjunctive construction of "or" - Delegated legislation cannot curtail plenary statutory benefit

Zero Rate Sale - Input Tax Credit - Special Economic Zone (SEZ) - Disjunctive construction of "or" - Whether sale to a registered dealer located in a SEZ in the State qualifies as a "Zero Rate Sale" under Section 18(1)(ii) of the TNVAT Act without requiring export by the purchasing dealer. - HELD THAT: - The Court held that Section 18(1) identifies three independent categories of zero rate sale and that Section 2(44) defines zero rate sale as one on which no tax is payable but input tax credit is admissible. The word "or" between entitlement to input tax credit and refund in Section 18(1) is disjunctive, demonstrating the independence of the two benefits. Importing the export condition of Section 18(2) into clause (ii) of Section 18(1) would rewrite the statute and render clause (ii) redundant. Consequently, sales to a registered dealer in a SEZ that fall within Section 18(1)(ii) qualify as zero rate sales (i.e., no tax payable but input tax credit admissible) without the purchasing dealer having to export the goods. [Paras 11, 13, 14, 15, 16]

Sale to a registered dealer in a SEZ qualifies as a Zero Rate Sale under Section 18(1)(ii) without export being a prerequisite; input tax credit is admissible for such sales.

Refund - Zero Rate Sale - Special Economic Zone (SEZ) - Whether export by the purchasing dealer is a pre-condition for claiming refund under Section 18(2) of the TNVAT Act. - HELD THAT: - The Court explained that Section 18(2) is directed to an additional and distinct benefit of refund. A dealer who effects a zero rate sale may claim refund of input tax paid only if the goods are exported as such or consumed/used in manufacture of goods that are exported, subject to prescribed restrictions and conditions. Thus export is essential for claiming the refund benefit under Section 18(2), but not for entitlement to zero rating itself. [Paras 11, 13, 15, 16]

Export of goods by the purchasing dealer is a necessary condition to claim refund under Section 18(2), but not to claim the zero rate/Input Tax Credit benefit under Section 18(1)(ii).

Exemption - Zero Rate Sale - Input Tax Credit - Delegated legislation cannot curtail plenary statutory benefit - Whether sales to SEZ treated as exempt (by notification) attract the embargo on input tax credit under Section 19(5) and whether a subordinate notification can curtail the benefit of Section 18. - HELD THAT: - The Court held that zero rating under Section 18 is distinct from exemption under the notification issued under Section 30. Section 19(5) (which bars input tax credit for exempted sales) does not apply to zero rated sales. The plenary statutory benefit in Section 18 cannot be curtailed by a subordinate notification; where two provisions/notifications afford benefits, an assessee may claim the larger benefit. Accordingly, a notification under Section 30 cannot restrict the statutory scope of Section 18. [Paras 11, 13, 16]

Zero Rate is distinct from exemption; Section 19(5) embargo on input tax credit for exempt sales does not apply to zero-rated sales, and notifications cannot curtail the statutory benefit of Section 18.

Works contract / deemed sale - Zero Rate Sale - Whether works contracts fall within the meaning of "sale" in Section 18 so as to be eligible for zero rating. - HELD THAT: - The Court observed that the statutory definition of "sale" (which includes transfer of property in execution of works contract) must be given full effect. The legislative fiction expanding "sale" to include mutant sales must be carried to its logical end; therefore works contracts are covered by the expression "sale" in Section 18 and can qualify for zero rate treatment if they meet the statutory criteria. [Paras 14, 16]

Works contracts (deemed sales) fall within the expression "sale" in Section 18 and are eligible for zero rating where the statutory conditions are met.

Circular No.9/2013 - Delegated legislation cannot curtail plenary statutory benefit - Validity of Circular No.9/2013 insofar as it required export by SEZ purchasers to treat a sale as zero rated. - HELD THAT: - The Court set aside the impugned circular to the extent it was contrary to the law declared. A circular or subordinate instruction cannot impose a condition inconsistent with the statutory scheme in Section 18 which independently confers zero rating. Accordingly the Circular's requirement (that goods sold to a SEZ dealer be exported/used in exported goods to qualify as zero rate) insofar as it curtailed Section 18(1)(ii) was quashed. [Paras 3, 16]

Impugned Circular No.9/2013 is set aside insofar as it imposes an export precondition inconsistent with Section 18(1)(ii).

Remand for fresh assessment - Disposition of pending assessments, appeals and show-cause proceedings in light of the declared law. - HELD THAT: - The Court did not decide merits of individual cases. Instead, it set aside the Single Judge's contrary conclusion and remanded matters to the Assessing/ Appellate Authorities for fresh consideration in conformity with the legal conclusions reached on Section 18. Assessing Authorities are directed to reopen or re-do assessments and to accept objections in show-cause matters, granting personal hearings and completing exercise within specified time (12 weeks) pursuant to this judgment. [Paras 17, 18]

Matters remanded to Assessing/ Appellate Authorities for fresh consideration in accordance with this judgment; assessing authorities to complete exercise within the time directed.

Final Conclusion: The Single Judge's view that export by the SEZ purchaser is a pre-condition for a sale to qualify as a zero rate sale under Section 18(1)(ii) is set aside. Section 18(1)(ii) confers zero rating (no tax payable but input tax credit admissible) on sales to registered dealers in SEZ without requiring export; refund under Section 18(2) however requires export. The impugned circular is quashed to the extent inconsistent with this construction. Individual assessments and appeals are remanded for fresh adjudication in accordance with this legal position.

Violation of principles of natural justice - assessment order exceeding the proposals contained in show cause notices - failure to disclose best-judgment assessment figures in pre-assessment notices - absence of recorded personal hearing - remand for fresh consideration in accordance with law

Assessment order exceeding the proposals contained in show cause notices - failure to disclose best-judgment assessment figures in pre-assessment notices - violation of principles of natural justice - Impugned assessment orders assess turnover and tax in excess of the amounts proposed in the pre-assessment notices and thereby violate principles of natural justice. - HELD THAT: - The Court found that the proposal notices issued on various dates proposed tax calculated on specific taxable turnovers (at the rate of 5%), whereas the final assessment orders determine a substantially higher taxable turnover and apply higher tax rates. The notices did not disclose the actual figures or the basis of the best-judgment assessment that culminated in the enhanced tax liability; without disclosure of the proposed assessed figures the petitioner could not be placed in a position to meet the case against it. The Court relied upon the principle that an assessment should not go beyond the show-cause notice and on the administrative guidance that orders should not assess turnover different from that proposed in the notice. For these reasons the Court concluded there was non-application of mind and a breach of natural justice in passing the impugned orders. [Paras 7, 8, 11, 12, 13]

The impugned assessment orders are quashed insofar as they assess turnover and tax beyond the proposals in the notices and are remitted for fresh consideration.

Absence of recorded personal hearing - violation of principles of natural justice - remand for fresh consideration in accordance with law - There is no record in the impugned orders of any personal hearing afforded to the petitioner, and the petitioner's allegation of denial of hearing is accepted. - HELD THAT: - Although the respondents asserted that a personal hearing was granted, the impugned assessment orders do not reflect that any such hearing took place. The Court held that in absence of any indication in the orders that personal hearing was afforded, the petitioner's statement that no hearing was given must be accepted. Accordingly, the matter is remanded to the respondents to conduct fresh consideration on merits after complying with principles of natural justice, including granting the petitioner the right of personal hearing. [Paras 9, 10, 15]

Respondents are directed to reconsider and pass final orders after granting personal hearing and observing principles of natural justice.

Final Conclusion: Impugned assessment orders dated 9.12.2019 and 11.12.2019 are quashed and the matters are remanded to the respondents for fresh consideration on merits and in accordance with law; respondents shall grant the petitioner personal hearing and pass final orders within twelve weeks from receipt of this order.

Criminal liability for tax default - assessee status under tax law - effect of undertaking or guarantee - civil remedy for recovery - quashing of criminal proceedings to prevent abuse of process

Criminal liability for tax default - assessee status under tax law - effect of undertaking or guarantee - civil remedy for recovery - Liability of the second accused (petitioner/A2) to be prosecuted criminally for the first accused's tax defaults in view of the undertaking executed by A2. - HELD THAT: - The Court found that the prosecution against A2 was founded solely on an undertaking executed by him to pay tax arrears of the first accused. The second accused is not the assessee in respect of the business of the first accused, and mere failure by the first accused to file correct returns or to pay tax cannot, by itself, convert a guarantor's or surety's contractual undertaking into a basis for criminal prosecution under the tax enactment. While the undertaking may render A2 civilly liable to pay the arrears and thus expose him to recovery proceedings, it does not, in the absence of his being an assessee under the statute, attract criminal culpability for the default committed by the first accused. Proceeding criminally against A2 on the sole ground of that undertaking would amount to an abuse of process. Applying these principles, the Court held there was no sustainable basis for the criminal complaint against A2 and that the appropriate course, if any, was civil recovery and not criminal prosecution.

Proceedings in CC.No.7 of 2019 as against the petitioner/A2 are quashed.

Final Conclusion: The petition is allowed and the criminal proceedings against A2 are quashed; the undertaking creates contractual/civil liability but does not, by itself, justify criminal prosecution of a person who is not the assessee under the tax law.

Anticipatory bail - custodial interrogation - summons as distinct from warrant - remand to custody by the Trial Court - presence for trial versus custodial requirement for investigation - documentary evidence as primary focus

Custodial interrogation - presence for trial versus custodial requirement for investigation - Whether appellants are entitled to protection by anticipatory bail when the investigating agency did not require custodial interrogation and the investigation was completed. - HELD THAT: - The Court noted that the CBI did not take the appellants into custody during the investigation (29.06.2019 to 31.12.2021) and that the investigation proceeded with the accused cooperating; the final report was filed. Where custodial interrogation was not required during investigation, and the prosecution itself has taken the stance that the accused's presence is required for trial (not for investigation), opposing anticipatory bail on the basis of an asserted need for custody at that stage is difficult to accept. The Court treated the distinction between requirement of custody for investigation and requirement of presence for trial as material to the grant of protective bail. [Paras 5, 6, 9]

Appellants are entitled to protection by anticipatory bail insofar as custodial custody is not shown to be necessary by the investigating agency.

Summons as distinct from warrant - remand to custody by the Trial Court - Whether apprehension of arrest is adequately met by anticipatory bail when the investigating agency has only issued summons and is not seeking custody, but the appellants fear remand to custody by the Trial Court on their appearance. - HELD THAT: - The Court observed that the CBI had represented that only summons (and not warrants) had been issued and that it was not seeking custody; nevertheless, appellants apprehended arrest by reason of a practice in some Courts to remand accused to custody upon appearance. The Court recognised that such remand practice, if it results in custody notwithstanding the investigating agency's position, justifies consideration of protective bail. The possibility of remand by the Trial Court, distinct from an investigating agency's custody requirement, was treated as a relevant factor in granting protective relief. [Paras 6, 10]

Protective bail was granted to meet the appellants' apprehension of remand to custody by the Trial Court when they appear pursuant to summons.

Documentary evidence as primary focus - anticipatory bail - Whether the documentary nature and historical timing of transactions weigh in favour of anticipatory bail. - HELD THAT: - The Court noted that the transactions underlying the complaint occurred during 2009-10 to 2012-13 and that the case primarily rests on documentary records. When the prosecution's case is documentary and historical, the justification for current custodial detention becomes weak; this factor contributed to the Court's conclusion that custodial arrest at the trial stage was not necessary and that anticipatory protection was appropriate. [Paras 9]

The documentary and historical character of the evidence favours grant of protective bail rather than custodial arrest.

Anticipatory bail - Relief to be granted and conditions for release in the event of arrest pursuant to summons. - HELD THAT: - Balancing the seriousness of allegations against the absence of custodial requirement by the investigating agency, the Court directed that appellants be released on bail if remanded to custody when they appear in response to summons. The Court left the precise terms and conditions to the Special Court, permitting imposition of usual conditions including surrender of passport. The grant was preventive: it activates upon arrest/remand and is subject to conditions the trial court may impose. [Paras 12]

Appeals allowed; appellants to be released on bail if arrested, subject to such terms as the Special Court may impose, including surrender of passport.

Anticipatory bail - Whether prior and other pending cases against the prime accused preclude grant of protective bail in the present matter. - HELD THAT: - The Court examined the tabulation of other matters said to be pending against the prime accused and observed that several were complaints under the Negotiable Instruments Act and other matters were inter-partes or related to TDS, with only a subset being CBI cases. This assessment undercut the submission that multiple pending matters rendered the accused a candidate for custodial detention in the present case. [Paras 11]

The existence of other proceedings did not furnish a sufficient ground to refuse protective bail in the facts of this case.

Final Conclusion: The appeals are allowed; in the event the appellants are arrested or remanded to custody when appearing in response to summons, they shall be released on bail subject to such conditions as the Special Court may impose, including surrender of passport, and pending applications stand disposed of accordingly.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttal of presumption - onus to prove delivery of goods in cheque dishonour proceedings - probative value of notice-reply and banker evidence - no legally recoverable debt as a defence to prosecution under Section 138 NI Act - distinction between compensation and fine under Section 357 Cr.P.C.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttal of presumption - probative value of notice-reply and banker evidence - Evidence given by the Respondent-Accused in rebuttal of the statutory presumption was adequate - HELD THAT: - The Court examined whether the accused rebutted the statutory presumption attached to the cheques. The accused pleaded non-receipt of goods in the statutory notice-reply and produced evidence through two bank witnesses that stop-payment instructions were issued and that the cheque-books had been issued earlier. The complainant failed to prove delivery of plywood: invoices filed were not proved in evidence and there was no acknowledgement of delivery. Given the difficulty of proving a negative fact, the Court held that the materials produced by the accused constituted a probable and sufficient defence to rebut the presumption, and that it was incumbent on the complainant to prove delivery. On that basis the trial court's finding that the offence was proved was reversed and the appellate court's acceptance of the rebuttal was upheld. [Paras 17, 18, 19, 20, 21]

The accused succeeded in rebutting the presumption; the defence raised (non-receipt of goods and stop-payment instructions) was held to be proved to the requisite degree.

Onus to prove delivery of goods in cheque dishonour proceedings - no legally recoverable debt as a defence to prosecution under Section 138 NI Act - acquittal upheld by appellate court - Correctness of the First Appellate Court's findings in setting aside conviction and acquitting the Respondent-Accused - HELD THAT: - The High Court evaluated the appellate court's reversal of the trial court. Noting that when an accused places the onus on the complainant by raising a plausible defence and adducing corroborative banker evidence and notice-reply, an appellate court may properly acquit if the prosecution fails to establish delivery and thus a legally recoverable debt. The High Court found the appellate court's reasoning sound, that there was no legally recoverable liability proved against the accused, and that the appellate court correctly concluded that the presumption was rebutted. The High Court, therefore, refused to interfere with the acquittal. [Paras 5, 16, 21]

The First Appellate Court's acquittal was correct and is affirmed; no interference is warranted.

Final Conclusion: Appeal dismissed; the High Court affirms the First Appellate Court's acquittal of the Respondent-Accused on the ground that the presumption under the NI Act was rebutted and no legally recoverable debt was established. The ancillary observations on compensation and default sentence were noted but the determinative decision rests on the successful rebuttal and correctness of the appellate court's findings.