TaxTMI Updates e-Newsletter
Mar 24,2022

Anticipatory bail - interim protection - joining of investigation - restraint on coercive steps pending hearing - cancellation of interim protection for non-compliance - GST enforcement proceedings under Section 132

Anticipatory bail - interim protection - joining of investigation - restraint on coercive steps pending hearing - cancellation of interim protection for non-compliance - Interim protection was granted to the applicants in anticipatory bail applications on conditions including specified dates for joining the investigation and abstention from coercive action by the respondent until the next date of hearing. - HELD THAT: - The High Court allowed the interlocutory applications and granted interim protection to the applicants in the anticipatory bail proceedings, subject to specified conditions. The applicants were directed to join the investigation on the dates fixed and thereafter to comply with summons as and when issued by the department; the respondents were restrained from taking any coercive steps against the applicants until the next date of hearing provided the applicants join the investigation as directed. The Court also recorded that failure to join the investigation on the fixed dates would entitle the department to move for cancellation of the interim protection before the concerned court. The Court further directed filing of a status report/reply and listed the matters for further hearing. [Paras 1, 9, 10, 11]

Interim protection granted on conditions of joining the investigation on specified dates, restraint on coercive action until the next hearing, and liberty to the department to seek cancellation of protection for non-compliance; status report to be filed and matter listed for hearing.

Final Conclusion: The Court granted conditional interim protection in the anticipatory bail applications: applicants to join investigation on stated dates and comply with summons; no coercive steps to be taken by the department until the next hearing provided these conditions are met, with liberty to the department to move for cancellation of protection in case of non-compliance.

Anticipatory bail under Section 438 Cr.P.C. - maintainability of anticipatory bail for bailable offences - requirement of accusation of a non-bailable offence and reasonable apprehension of arrest - classification of offences under Section 132 of the Central Goods and Services Tax Act as cognizable/non-cognizable and bailable/non-bailable

Anticipatory bail under Section 438 Cr.P.C. - maintainability of anticipatory bail for bailable offences - requirement of accusation of a non-bailable offence and reasonable apprehension of arrest - Application under Section 438 Cr.P.C. is not maintainable in respect of offences which are bailable. - HELD THAT: - The court examined the scheme of Section 438 Cr.P.C. and held that two concomitant conditions must exist to invoke its jurisdiction: an accusation of the applicant having committed a non-bailable offence, and a reasonable apprehension of arrest arising from that accusation. On the plain language of Section 438, anticipatory bail is conceived for persons fearing arrest for non-bailable offences; petitions under Section 438 in relation to bailable offences are misconceived. The judgment relied upon earlier decisions cited in the order - Onkar Nath Agrawal , Joginder @ Jindi and R. K. Krishna Kumar - to reinforce that anticipatory bail cannot be entertained where the offence is bailable. Applying this principle to the facts, and having regard to the statutory classification in Section 132 of the CGST Act which makes most offences non-cognizable and bailable except specified high-value offences, the court found it undisputed that the offences in the present case are bailable. Consequently, the prerequisite for exercising jurisdiction under Section 438 Cr.P.C. was absent and the anticipatory bail application could not be maintained. [Paras 15, 16, 18, 19, 20]

Anticipatory bail application rejected as the offences are bailable and Section 438 Cr.P.C. applies only where there is an accusation of a non-bailable offence coupled with reasonable apprehension of arrest.

Final Conclusion: The anticipatory bail application under Section 438 Cr.P.C. is rejected because the offences in dispute are bailable; anticipatory bail is available only where there is an accusation of a non-bailable offence and a reasonable apprehension of arrest. Interim order vacated.

Prima facie case - absence of ingredients of cheating - disobedience to order promulgated by public servant - offence under Section 63 of the Copyright Act - malicious first information report and abuse of power - police authority to check tax/goods invoices - interim protection from arrest - exemplary costs against public servant

Prima facie case - absence of ingredients of cheating - disobedience to order promulgated by public servant - offence under Section 63 of the Copyright Act - Impugned first information report does not prima facie disclose offences under Sections 420 and 188 IPC or under Section 63 of the Copyright Act. - HELD THAT: - On bare reading of the impugned first information report the essential ingredients of cheating are not made out; there is no allegation that the petitioner, by deception, induced delivery or retention of property or caused damage as required by the definition of cheating. The presence of multiple persons as required for the offence is also not reflected. Section 188 relates to disobedience of an order promulgated by a public servant; the FIR contains no allegation that the petitioner disobeyed any such order. Likewise, mere failure to produce invoices at the point of interception and absence of ingredients constituting an offence under Section 63 of the Copyright Act means that, prima facie, that offence is not made out from the FIR. The court therefore finds that on the face of the FIR no case is established under the said penal provisions.

No prima facie case is made out under Sections 420/188 IPC or Section 63 of the Copyright Act from the impugned FIR; the FIR is therefore prima facie defective in law.

Police authority to check tax/goods invoices - malicious first information report and abuse of power - Police lack jurisdiction to examine or adjudicate alleged defects in tax invoices; such matters fall within the remit of the GST authorities. - HELD THAT: - If goods are not accompanied by proper documents, the statutory remedies and enforcement including seizure are vested in the tax authorities under the relevant GST enactments and rules. The police do not possess authority to check invoices and determine tax irregularities during transportation; invocation of penal provisions on that basis thus appears to be an improper exercise of police power. The FIR, on its face, indicates malafide conduct by the informant Sub Inspector and an obstruction to legitimate trade and commerce.

The police action as founded on alleged invoice defects is prima facie improper; determination of invoice irregularities is for GST authorities, and the FIR reflects prima facie malice and abuse of power by the informant.

Exemplary costs against public servant - malicious first information report and abuse of power - remand for verification - Respondents directed to file a counter affidavit and to show cause whether the FIR was malicious and whether exemplary costs should be imposed; Superintendent of Police authorised to take appropriate action before filing affidavit. - HELD THAT: - The court has ordered a personal affidavit by the Superintendent of Police, Jalaun, as counter affidavit within three days and has required the respondents to explain why, if the FIR is found malicious or an abuse of power by the Sub Inspector, exemplary costs should not be imposed recoverable from his personal assets. The Superintendent is permitted, if he finds wrongdoing by the Sub Inspector, to take appropriate departmental or legal action prior to filing the affidavit. Thus the factual and disciplinary aspects regarding malice and costs are left for fresh consideration by the respondents and the court on the subsequent date.

Proceedings remitted to respondents for verification and explanation; show-cause on exemplary costs to be answered and the SP may take action before filing the counter affidavit.

Interim protection from arrest - Interim protection from arrest granted to the petitioner until the next date of hearing. - HELD THAT: - Considering the prima facie absence of offences in the FIR and the allegations of malice and abuse of power by the informant, the court, as an interim measure, stayed arrest of the petitioner pursuant to the impugned FIR until the next date fixed.

Petitioner shall not be arrested pursuant to the impugned FIR until the next date of hearing.

Final Conclusion: On a prima facie reading the FIR does not disclose offences under Sections 420/188 IPC or Section 63 of the Copyright Act and appears to be malicious and an abuse of power by the informant; respondents are directed to file a personal counter affidavit and show cause on exemplary costs, the Superintendent of Police may take appropriate action before filing, and interim protection from arrest is granted to the petitioner until the next date.

Alternative efficacious remedy - exercise of writ jurisdiction under Article 226 - exercise of discretionary jurisdiction where alternative remedy exists - condonation of delay and leave to file application - deferment of recovery pending invocation of appellate remedy

Alternative efficacious remedy - exercise of writ jurisdiction under Article 226 - Maintainability of the writ petition in view of the availability of a statutory second appeal. - HELD THAT: - The Court found that the petitioner seeks to challenge Ext.P3 on merits and that a statutory remedy by way of Second Appeal is available and efficacious. Where an alternative, effective statutory remedy exists, it is not appropriate for the High Court to exercise its discretionary writ jurisdiction under Article 226 to entertain a challenge which is essentially factual and merits-based. The petitioner's concession that the Second Appeal remedy exists reinforces that the present petition is not maintainable. Consequently, the Court declined to exercise writ jurisdiction and directed the petitioner to invoke the appellate remedy. [Paras 5]

Writ petition dismissed for want of maintainability; petitioner directed to pursue second appeal.

Condonation of delay and leave to file application - deferment of recovery pending invocation of appellate remedy - Reliefs and directions to facilitate invocation of the alternative remedy. - HELD THAT: - The Court granted liberty to the petitioner to file any necessary application for condonation of delay before the Appellate Authority and directed that such application shall be considered in accordance with law. To enable the petitioner to pursue the appellate remedy without immediate prejudice, the Court ordered that all recovery based on Ext.P1 assessment be deferred for a period of one month from the date of receipt of a copy of the judgment. These directions are procedural and limited to ensuring that the petitioner can invoke the statutory remedy without imminent enforcement action. [Paras 6, 7]

Liberty granted to file condonation application; Appellate Authority to consider it in terms of law; recovery under Ext.P1 deferred for one month from receipt of the judgment.

Final Conclusion: The writ petition is dismissed as not maintainable in view of the available and efficacious statutory second appeal; petitioner granted liberty to file application for condonation of delay before the Appellate Authority which must be considered in law, and recovery under the assessment is deferred for one month from receipt of this judgment.

Classification under Tariff Heading 2008.19.40 - Residue entry versus specific heading (residuary heading 2106 vs specific heading 2008) - Application of General Rules for the Interpretation of the First Schedule (Rule 1, Rule 2(a), Rule 3(a)) - Common parlance test for classification - Classification under Tariff Heading 2106.90.99 (sweetmeats / namkeens) - GST rate consequence of tariff classification (12% under Schedule II v. 5% under Schedule I)

Classification under Tariff Heading 2008.19.40 - Application of General Rules for the Interpretation of the First Schedule (Rule 1, Rule 2(a), Rule 3(a)) - Residue entry versus specific heading (residuary heading 2106 vs specific heading 2008) - Jackfruit Chips and Banana Chips (including salted/masala variants) are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12% (6% CGST + 6% SGST). - HELD THAT: - The Authority applied the rules for interpretation of the First Schedule to the Customs Tariff Act as incorporated into the GST rate notification. Chapter 21 (heading 2106) is a residuary heading for food preparations not elsewhere specified, while Chapter 20 (heading 2008) specifically covers preparations of fruits and other edible parts of plants. Rule 2(a) permits treating articles presented in processed form as articles of the stated material if they retain the essential character; Rule 3(a) gives preference to the most specific heading. The chips at issue, though fried/salted/masala treated, retain the essential character of the underlying fruit/vegetable and fall within the specific descriptions in heading 2008. Therefore the specific heading 2008.19.40 prevails over the residuary heading 2106.90 and the products are taxable at the rate specified for Sl. No. 40 of Schedule II (12%). The appellant's reliance on common parlance characterisation and Supplementary Note 6 to place these items in 2106 was rejected because a specific tariff entry applies. [Paras 6]

Jackfruit Chips and Banana Chips are classifiable under 2008.19.40 and liable to GST at 12%.

Classification under Tariff Heading 2008.19.40 - Classification under Tariff Heading 2106.90.99 (sweetmeats) - Residue entry versus specific heading (residuary heading 2106 vs specific heading 2008) - Sharkaraivaratty is classifiable under Tariff Heading 2008.19.40 and liable to GST at 12%; Halwa is classifiable under Tariff Heading 2106.90.99 and liable to GST at 5% (2.5% CGST + 2.5% SGST). - HELD THAT: - The Authority examined the nature and essential character of each product. Sharkaraivaratty, though sweetened, was held to retain the character of the fruit preparation falling within heading 2008.19.40 and thus attract the rate under Sl. No. 40 of Schedule II. Halwa, by contrast, falls within the descriptive scope of heading 2106.90.99 as a sweetmeat and is therefore taxable under the Schedule I entry at the lower rate. The decision applies the same interpretive framework-preferring specific headings and treating 2106 as residuary-while assessing the essential character of the individual products. [Paras 6]

Sharkaraivaratty is classifiable under 2008.19.40 (12% GST); Halwa is classifiable under 2106.90.99 (5% GST).

Classification under Tariff Heading 2008.19.10 and 2008.19.20 - Residue entry versus specific heading (residuary heading 2106 vs specific heading 2008) - Application of General Rules for the Interpretation of the First Schedule (Rule 1, Rule 3(a)) - Roasted/salted/roasted-and-salted preparations of cashew nuts, groundnuts and other nuts are classifiable under specific Tariff Headings 2008.19.10 and 2008.19.20 respectively and liable to GST at 12%. - HELD THAT: - The Authority held that these nut preparations fall squarely within the specific descriptions in Chapter 20 and Sl. No. 40 of Schedule II, so the residuary heading 2106 cannot be invoked. The interpretive rules oblige preference for the most specific applicable heading; accordingly roasted/salted nut products are classifiable under specific 2008 subheadings and attract the rate prescribed for heading 2008. [Paras 6]

Roasted/salted cashew nuts and other roasted/salted nuts/seeds are classifiable under 2008.19.10 / 2008.19.20 and liable to GST at 12%.

Classification under Tariff Heading 2008.19.40 - Common parlance test for classification - Application of General Rules for the Interpretation of the First Schedule (Rule 2(a), Rule 3(a)) - Salted and masala chips of potato and tapioca are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12%, and the appellant's plea to characterise them as 'namkeens' under 2106.90.99 was rejected. - HELD THAT: - The Authority found that potato and tapioca chips retain the essential character of the underlying vegetable/tuber after frying and seasoning; Rule 2(a) and Rule 3(a) therefore point to classification under the specific Chapter 20 heading rather than the residuary 2106. The appellant's argument based on common parlance and Supplementary Note 6 was not accepted where a specific tariff description applies. [Paras 6]

Salted and masala potato and tapioca chips are classifiable under 2008.19.40 and liable to GST at 12%.

Final Conclusion: The appeal is dismissed. The Advance Ruling (KER/105/2021 dated 25-05-2021) is upheld with the modifications recorded: the impugned chips and specified nut products are classifiable under the respective subheadings of Chapter 20 (heading 2008) and taxable at 12% (Sl. No. 40, Schedule II), while Halwa is classifiable under heading 2106.90.99 and taxable at 5% (Schedule I).

Reopening of assessment - change of opinion - proviso to Section 147 - failure to disclose truly and fully material facts - notice under Section 148 - consideration of queries during original assessment proceedings

Proviso to Section 147 - failure to disclose truly and fully material facts - notice under Section 148 - reopening of assessment - Validity of the notice dated 31st March 2021 under Section 148 (proviso to Section 147) in respect of A.Y. 2015-2016. - HELD THAT: - The proviso to Section 147 bars reopening beyond four years unless there is a failure by the assessee to truly and fully disclose material facts; the respondents bear the onus to demonstrate such failure. The reasons recorded for reopening contain only a bald allegation of non disclosure and do not identify any material fact that was concealed. Where primary facts necessary for assessment were fully disclosed and considered, reopening the assessment merely because the Assessing Officer wishes to take a different view amounts to impermissible change of opinion. Applying these principles, the court found the proposed reopening to be based on change of opinion and therefore legally impermissible. [Paras 2, 3, 6, 7]

Notice dated 31st March 2021 under Section 148 quashed as impermissible reopening based on change of opinion.

Consideration of queries during original assessment proceedings - subsidy treated as capital receipt - provision for expenses and disallowance - Whether the issues of subsidy (Rs. 61,50,969) and provision for expenses (Rs. 59,04,000) were subject matter of consideration in the original assessment. - HELD THAT: - Record shows that the Assessing Officer raised specific queries during the Section 143(3) assessment proceedings and the assessee replied by letter dated 28th December 2017 explaining the nature of the subsidy (claimed as a capital receipt) and justifying the provision for expenses. The Assessing Officer accepted the subsidy as a capital receipt and made a considered disallowance in respect of provision for doubtful debts after verification. A query raised and replied to in the assessment proceedings constitutes a matter considered by the Assessing Officer even if the assessment order does not recite the discussion. Thus both issues were previously considered, and reopening on the same material is a change of opinion not warranting reassessment. [Paras 4, 5, 9]

Both subsidy and provision-for-expenses issues were considered during the original assessment; reopening on those issues is barred as change of opinion.

Adequacy of order disposing objections - faceless assessing officer - reasons on objections - Adequacy of the order disposing the assessee's objections to the reopening notice. - HELD THAT: - The court observed that the order disposing objections, despite its length, failed to address the assessee's substantive submissions or demonstrate how the relied authorities applied to the facts. The Faceless Assessing Officer listed numerous decisions but did not explain their application or deal with the fact that the issues were previously considered. The order therefore did not sustain the reopening and amounted to an unsustainable disposal of objections. [Paras 10]

Order disposing objections is unsatisfactory for failing to address the assessee's substantive submissions and is unsupported.

Final Conclusion: Writ petition allowed; the notice under Section 148 dated 31/3/2021 (A.Y. 2015-2016), the impugned order dated 8/2/2022 disposing objections, and the notice under Section 142(1) dated 2/3/2022 were quashed, the reopening having been found to be based on impermissible change of opinion and the objections order being unsustainable.

Deduction under section 36(1)(va) - employees' contribution deposited before filing of return under section 139(1) - application of section 43B in relation to employees' contribution - effect of Explanation 2 inserted by Finance Act, 2021 on timing of deduction

Deduction under section 36(1)(va) - employees' contribution deposited before filing of return under section 139(1) - application of section 43B in relation to employees' contribution - Whether the employees' share of EPF and ESIC, deducted by the assessee but deposited after the due date under the respective Acts yet before filing of the return under section 139(1), is allowable as deduction under section 36(1)(va) for AY 2017-18. - HELD THAT: - The Tribunal noted that it was an admitted fact that the employees' share had been deducted at source and deposited after the statutory due date under the respective labour statutes but before the due date for filing the return under section 139(1). Reliance was placed on consistent high court decisions permitting deduction where such deposits are made before filing of the return, including the decision in CIT v. Nipso Polyfabriks Ltd., which treated employees' and employer's contributions alike for the purpose of deduction. The Tribunal observed that Explanation 2 to section 36(1)(va) introduced by the Finance Act, 2021 (with effect from 01.04.2021) excludes the application of section 43B for determining the due date under section 36(1)(va), and that amendment applies from AY 2021-22 onwards. Since the assessment year before the Tribunal is 2017-18, the post-2021 amendment is not applicable; therefore the pre-amendment position allowing deduction where payment was made before filing under section 139(1) governs the matter. On that basis the disallowance sustained by the authorities was not warranted. [Paras 6, 7]

The disallowance under section 36(1)(va) read with section 43B is deleted for AY 2017-18 as the employees' contributions were paid before the due date for filing the return under section 139(1).

Final Conclusion: Appeal allowed; addition/disallowance confirmed by lower authorities deleted for assessment year 2017-18.

Moratorium under Insolvency and Bankruptcy Code, 2016 - prohibition on institution or continuation of proceedings during moratorium - overriding effect of the Insolvency and Bankruptcy Code - binding nature of an approved resolution plan - authority of Interim/Resolution Professional to represent the corporate debtor - requirement of prior permission of the Adjudicating Authority for prosecution of suits/appeals by a corporate debtor

Moratorium under Insolvency and Bankruptcy Code, 2016 - prohibition on institution or continuation of proceedings during moratorium - overriding effect of the Insolvency and Bankruptcy Code - binding nature of an approved resolution plan - Whether the Revenue's appeal could be continued or entertained during the moratorium declared under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal noted that CIRP had been initiated against the corporate debtor and an Interim Resolution Professional appointed, and that section 14 of the Code imposes a moratorium prohibiting institution or continuation of suits or proceedings against the corporate debtor during the moratorium period. Reliance was placed on authority holding that proceedings, including arbitration, cannot be initiated or continued after imposition of the moratorium. The Tribunal observed that the Code has overriding effect and that an approved resolution plan is binding on stakeholders, preventing tax or regulatory authorities from proceeding in breach of the moratorium. In consequence, the Revenue's appeal, being an institution of proceedings against the corporate debtor during the moratorium, could not be entertained and was dismissed, while liberty was granted to file afresh after completion of the moratorium or as may be appropriate post-approval of a resolution plan or upon appointment of a liquidator. [Paras 4, 5, 6, 7, 8]

Revenue's appeal dismissed as barred by the moratorium with liberty to institute proceedings afresh after moratorium expiry or as permitted upon revival or liquidation.

Authority of Interim/Resolution Professional to represent the corporate debtor - requirement of prior permission of the Adjudicating Authority for prosecution of suits/appeals by a corporate debtor - binding nature of an approved resolution plan - Whether the assessee's cross-appeal was maintainable in the absence of NCLT permission and express authority from the Interim Resolution Professional or Committee of Creditors. - HELD THAT: - The Tribunal observed that no permission from the Adjudicating Authority (NCLT) had been filed nor any letter of authority from the Interim Resolution Professional authorising the authorised signatory to prosecute the appeals on behalf of the corporate debtor. In view of authorities and the scheme of the Code, the Tribunal held that the appeal by the corporate debtor could not be sustained without the requisite NCLT permission or an authorised representation by the Interim/Resolution Professional, or without showing that the Interim Resolution Professional was authorised by the Committee of Creditors. The assessee's appeal was therefore dismissed, with liberty to file afresh by the Interim/Resolution Professional (or substitute) with prior NCLT permission or after completion of the moratorium as applicable. [Paras 9, 10]

Assessee's appeal dismissed for want of NCLT permission/authority of the Interim/Resolution Professional, with liberty to file afresh by an authorised representative or after moratorium.

Final Conclusion: Both cross-appeals are dismissed: the Revenue's appeal as barred by the IBC moratorium (liberty to file after moratorium or as permitted post-resolution/liquidation), and the assessee's appeal for lack of NCLT permission or authorised representation (liberty to file afresh by the Interim/Resolution Professional or after moratorium).

Allowability of employees' contribution to provident fund and employees' state insurance as deduction under section 36(1)(va) - timing of payment - payments made after statutory due date under PF/ESI statutes but before due date for furnishing return under section 139(1) - effect of amendment by Finance Act, 2021 to provisions governing deduction and deduction-linked payments - prospective or retrospective operation

Allowability of employees' contribution to provident fund and employees' state insurance as deduction under section 36(1)(va) - timing of payment - payments made after statutory due date under PF/ESI statutes but before due date for furnishing return under section 139(1) - effect of amendment by Finance Act, 2021 to provisions governing deduction and deduction-linked payments - prospective or retrospective operation - Employees' contribution to PF and ESI paid by the assessee before the due date for furnishing the return under section 139(1) is allowable as deduction for AY 2019-20 despite being in some instances remitted after the statutory due date under the respective welfare laws; the Finance Act, 2021 amendment does not apply to AY 2019-20. - HELD THAT: - The Tribunal examined the Tax Audit report showing remittance of employees' contributions before the due date for filing the return under section 139(1) for AY 2019-20 and followed the jurisdictional High Court decision in Essae Teraoka Pvt. Ltd. v. DCIT, which held that an employer is entitled to deduction of employees' contribution to PF/ESI if the payment is made on or before the due date for furnishing the return under section 139(1). The Tribunal relied on its earlier coordinate decision in M/s. Shakuntala Agarbathi Company v. DCIT which applied Essae Teraoka and further held that the Finance Act, 2021 amendments to the provisions governing such deductions were not clarificatory but altered the law and were therefore prospective, with effect from 01.04.2021 (applicable from AY 2021-22 onwards). Consequently, the amended provisions do not apply to AY 2019-20 and cannot defeat the assessee's entitlement to deduction where payment was made before the section 139(1) due date. The Tribunal also recorded that the Revenue may seek rectification if the Supreme Court later upholds the contrary view of the Gujarat High Court, subject to statutory limitations. [Paras 4, 5, 6, 7, 8]

Disallowance deleted and deduction in respect of employees' contribution to PF and ESI allowed for AY 2019-20.

Final Conclusion: The appeal is allowed: employees' contribution to PF and ESI remitted before the due date for filing the return under section 139(1) is deductible for Assessment Year 2019-20; the Finance Act, 2021 amendment does not apply to that assessment year. Revenue granted liberty to seek rectification subject to statutory limits if higher court rulings so require.

Deduction under section 80IB(10) - Treatment of 'on-money' / unaccounted receipt as business receipt - Doctrine of approbate and reprobate - Vivad se Vishwas Scheme opt-in and its effect on appeals - Remand for fresh consideration

Deduction under section 80IB(10) - Treatment of 'on-money' / unaccounted receipt as business receipt - Doctrine of approbate and reprobate - Claim for deduction under section 80IB(10) allowed on the unaccounted 'on-money' receipt of Rs. 33,54,000/- attributable to the Pimpri housing project. - HELD THAT: - During survey the assessee disclosed an unaccounted receipt of Rs. 33,54,000/- relating to the Pimpri (Manish Garden) project and claimed deduction under section 80IB(10). The AO had earlier denied 80IB relief (in the original assessment) on completion-timing grounds, but a coordinate bench of the Tribunal in ITA No. 2955/Mum/2012 applying the Bombay High Court decision in CIT v. Vandana Properties held the assessee entitled to deduction for the project. The Tribunal noted that the seized documents demonstrate that the impugned amount pertained to the housing project, and the AO produced no material to displace the assessee's claim that the amount was receipt as 'on-money' from flat bookings. Reliance was placed on the Tribunal, Pune decision in M/s Surana Mutha Bhasali Developers v. ACIT, which held that amounts received as on-money qualify for deduction under section 80IB(10), and applied the doctrine of approbate and reprobate to prevent the Revenue from accepting inclusion of the amount in income while denying the corresponding deduction. In view of the above and absence of contrary proof by the AO, the Tribunal directed allowance of deduction under section 80IB(10) on the Rs. 33,54,000/-. [Paras 5, 9]

Deduction under section 80IB(10) to be allowed on Rs. 33,54,000/- as the amount is an on-money receipt attributable to the housing project; appeal allowed on this ground.

Vivad se Vishwas Scheme opt-in and its effect on appeals - Remand for fresh consideration - Whether the appeal against penalty under section 271(1)(c) was barred by the assessee's purported opt-in to the Vivad se Vishwas Scheme; matter restored to the CIT(A) for fresh decision. - HELD THAT: - The AO imposed a penalty under section 271(1)(c). The CIT(A) dismissed the appeal on the view that the assessee had opted for the Vivad se Vishwas Scheme by an application dated 21.01.2021. The assessee contested that it had not opted for the Scheme in respect of the penalty and placed on record Forms No.1 and 5 and submissions before the CIT(A). The Departmental Representative did not controvert this contention. Having regard to the assessee's specific denial of having availed the Scheme with respect to the penalty and the material produced, the Tribunal found it appropriate to restore the issue to the CIT(A) for fresh adjudication on merits after taking into account the assessee's submissions regarding non-availment of the Scheme for the impugned penalty. The matter was therefore remanded rather than finally decided on merits. [Paras 8, 9]

Issue relating to penalty under section 271(1)(c) restored to the CIT(A) for fresh decision on the question whether the assessee had validly opted for the Vivad se Vishwas Scheme; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeal insofar as it directed allowance of deduction under section 80IB(10) on the Rs. 33,54,000/- on-money receipt attributable to the Pimpri housing project (A.Y. 2007-08), and restored the appeal against the penalty under section 271(1)(c) to the CIT(A) for fresh consideration of the question whether the assessee had opted for the Vivad se Vishwas Scheme.

Business expenditure - interest on borrowings as business expense - deduction under section 80P(2)(a)(i) - ex-parte assessment under section 144 - cooperative society carrying on business of banking/credit to members - source of funds irrelevant for deduction under section 80P(2)(a)(i)

Interest on borrowings as business expense - business expenditure - cooperative society carrying on business of banking/credit to members - precedent of coordinate bench - Whether interest paid on bank loans/overdrafts amounting to Rs. 49,42,618/- is an allowable business expenditure and not income of the cooperative society - HELD THAT: - The Tribunal found that the assessee is a cooperative society engaged in accepting deposits and advancing credit to its members and that it had borrowed funds against its own fixed deposits to advance to members. Following the reasoning of the coordinate bench in ACIT v. M/s Sangwari Primary Agr. Co-op. Society Ltd., the Tribunal held that the source of funds (deposits or borrowings) used to provide credit to members does not convert interest paid on borrowings into the assessee's income. The interest paid to the bank for loans/overdrafts was therefore in the nature of expenditure incurred in carrying on the society's business of providing credit to members and not income. Applying that principle, the Tribunal concluded that the addition of the bank interest to the assessee's income was not justified and the addition confirmed by the CIT(A) required deletion. [Paras 5, 6]

The addition of Rs. 49,42,618 made by the Assessing Officer and confirmed by the CIT(A) by treating interest on bank borrowings as income is deleted and the ground of appeal is allowed.

Final Conclusion: The appeal is partly allowed: the addition of interest on bank loans/overdrafts treated as income is deleted; consequential claim under section 80P(2)(a)(i) need not be adjudicated.

Unexplained cash credits under section 68 - presumptive taxation under section 44AD - attribution of joint account deposits between joint account holders - relevance of cash withdrawals and cheque payments in determining redeposited cash - materiality of unexplained deposits

Unexplained cash credits under section 68 - attribution of joint account deposits between joint account holders - presumptive taxation under section 44AD - relevance of cash withdrawals and cheque payments in determining redeposited cash - materiality of unexplained deposits - Whether the addition of cash deposits held to be unexplained and confirmed partly by the CIT(A) should be sustained or deleted. - HELD THAT: - The Tribunal examined the admitted facts that the bank account was a joint account of the assessee and his father, both contractors who had returned income on presumptive basis under section 44AD and whose declared contract receipts were accepted in scrutiny assessments. The Tribunal held that the Revenue had not given any reason to attribute the entire cash deposits exclusively to the assessee. Applying a reasonable apportionment in proportion to the admitted turnovers (ratio of 1:2.5), the cash deposits attributable to the assessee at most came to Rs. 9,16,500/-. The Tribunal further found that the CIT(A)'s approach of restricting relief by presuming 60% of withdrawals were utilized for business and personal expenses was incomplete because it failed to take into account cheque payments from the same account which reduced the cash outflow available for redeposit. Having considered the assessee's cash-flow summary (including account-payee cheques) the Tribunal accepted a conservative estimate of available cash for redeposit and concluded that the unexplained balance reduced to approximately three lakhs (about 10% of total cash deposits), which was immaterial. On these grounds the Tribunal determined there was no case for making the addition confirmed by the CIT(A) and deleted it. [Paras 7, 8, 9, 10]

The addition of Rs. 12,83,200/- on account of unexplained cash deposits is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal deleted the addition of unexplained cash deposits confirmed by the CIT(A), holding that the deposits should be apportioned between the joint account holders in proportion to admitted turnovers, that cheque payments must be considered when assessing cash available for redeposit, and that the residual unexplained amount was immaterial; the assessee's appeal was allowed.

Disallowance under section 14A read with Rule 8D - treatment of corpus funds as outstanding liability not taxable income - treatment of amounts written back previously offered to tax - deduction under section 80G - remand for verification of prior assessment inclusion

Disallowance under section 14A read with Rule 8D - exempt income - No disallowance under section 14A read with Rule 8D where there is no exempt income in the year. - HELD THAT: - The Tribunal held that the scope of disallowance under section 14A read with Rule 8D is confined to expenses attributable to earning exempt income. The Assessing Officer's view that disallowance could be made even in a year when no exempt income was earned was rejected. Following the principle that disallowance must be limited to the quantum of exempt income, the AO was directed to restrict any disallowance to expenses attributable to exempt income; if no exempt income exists, no disallowance should be made. [Paras 5]

Disallowance under section 14A/Rule 8D set aside for the year under appeal to the extent no exempt income exists; AO to disallow only to the extent of exempt income, if any.

Treatment of amounts written back previously offered to tax - remand for verification - Whether the amount written back (unutilised BWSSB/KEB deposits) was already offered to tax in AY 2012-13 and therefore not taxable in AY 2014-15 was remitted to the Assessing Officer for verification. - HELD THAT: - The Tribunal observed that the assessee contends the unutilised deposits were offered to tax in AY 2012-13 and noted the presence of a disclosure in the notes to accounts. The question whether the sum was included in the AY 2012-13 assessment requires factual verification by the AO. Rather than decide on the materials before it, the Tribunal directed fresh consideration by the AO to ascertain if the amount was actually assessed earlier; if so, it cannot be taxed again in AY 2014-15. [Paras 6, 7]

Issue remitted to the AO for verification and fresh consideration whether the unutilised deposits were included and taxed in AY 2012-13; outcome to determine taxability in AY 2014-15.

Deduction under section 80G - admission of documentary evidence and remand - Claim for deduction under section 80G based on donation receipts remitted to the Assessing Officer for fresh consideration. - HELD THAT: - The assessee produced donation receipts which, according to the Tribunal, formed part of the books of account and had been before the AO but were not properly examined. Although the Department objected to admission as fresh evidence, the Tribunal considered it in the interests of justice and directed the AO to take note of the donation receipts and decide the claim in accordance with law. [Paras 8, 9]

Deduction u/s 80G remitted to the AO for fresh consideration in light of the donation receipts placed on record.

Treatment of corpus funds as outstanding liability not taxable income - application of section 28 - Amounts collected as maintenance corpus funds held for handover to site owners' association are not taxable as income where liability subsists; deletion of addition under section 28 confirmed. - HELD THAT: - The Tribunal found that corpus funds collected were shown as outstanding liability in the books and there was no cessation of liability or conversion into perquisites of the assessee. Absent evidence that the liability had ceased or that the amounts were applied as income of the assessee, the addition treating the corpus as income under section 28 was unsustainable. The CIT(A)'s deletion of the addition was upheld. [Paras 11, 14]

Deletion of addition treating corpus funds as income upheld; revenue's appeal dismissed.

Final Conclusion: Assessee's appeal partly allowed: disallowance under section 14A/Rule 8D set aside where no exempt income; issues regarding written-back BWSSB deposits and claim under section 80G remitted to the Assessing Officer for fresh consideration. Revenue's appeal dismissed: corpus fund receipts treated as outstanding liability and not taxable income.

Disallowance under section 40(a)(i) - tax deduction at source under section 195 - royalty and fees for technical services - application of Supreme Court ratio in Engineering Analysis Centre of Excellence - remand for fresh examination and verification of Master Services Agreement

Disallowance under section 40(a)(i) - tax deduction at source under section 195 - royalty and fees for technical services - application of Supreme Court ratio in Engineering Analysis Centre of Excellence - remand for fresh examination and verification of Master Services Agreement - Whether the impugned payments for online advertisement should be treated as royalty/FTS attracting withholding liability and consequent disallowance, and whether the matter should be remitted for fresh consideration applying the Supreme Court ratio in Engineering Analysis Centre of Excellence P. Ltd. - HELD THAT: - The Tribunal observed that the question whether payments to non-resident vendors for online advertising constitute royalty or fees for technical services requires re-examination in the light of the Supreme Court's decision in Engineering Analysis Centre of Excellence P. Ltd. The Tribunal noted that earlier decisions relied upon by the lower authorities (including the Karnataka High Court decision in Samsung Electronics) have been reversed by the Supreme Court and similar appeals before the Tribunal have been remitted for fresh consideration. Consequently, the Tribunal set aside the orders of the CIT(A) and directed that the issue be restored to the file of the Assessing Officer for fresh examination applying the ratio of the Supreme Court decision. The AO is to call for the Master Services Agreement to ascertain the nature of services and the assessee is directed to cooperate and furnish relevant information; the appeal has been allowed for statistical purposes. [Paras 11, 12]

Orders of the CIT(A) set aside and the matter remitted to the file of the Assessing Officer for fresh examination/appreciation applying the ratio of Engineering Analysis Centre of Excellence P. Ltd.; parties to furnish documentation including the Master Services Agreement; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s order on the issue of taxability/withholding of payments for online advertisement and remitted the matter to the Assessing Officer for fresh consideration in light of the Supreme Court's decision in Engineering Analysis Centre of Excellence P. Ltd.; appeal allowed for statistical purposes.

Long Term Capital Gains - full value of consideration - valuation of constructed area / cost of construction - expenses of transfer - cost of acquisition / cost of improvement - remand for fresh consideration - principle in V.S.M.R. Jagadishchandran (Decd.) vs. CIT

Long Term Capital Gains - full value of consideration - valuation of constructed area / cost of construction - remand for fresh consideration - Recomputation of Long Term Capital Gains by determining correct full value of consideration received on transfer pursuant to the joint development agreement. - HELD THAT: - The Tribunal held that neither party's approach could be accepted without further enquiry: the Assessing Officer's method of treating the compensation paid by the assessee as reflecting fair market value was incorrect because that amount included the builder's profit element, while the assessee's adopted cost-of-construction rate was unsupported by documentary evidence or builder confirmation. Given the lack of clear supporting material for either valuation method, the issue of determining the correct value of consideration must be returned to the Assessing Officer for fresh determination in accordance with law. [Paras 9, 12]

Referred back to the file of the Assessing Officer for fresh determination of full value of consideration and recomputation of Long Term Capital Gains.

Expenses of transfer - Long Term Capital Gains - Claim for deduction of amount paid to the builder as compensation for shortfall in allotted constructed area. - HELD THAT: - The Tribunal found that the Assessing Officer did not dispute the fact that the assessee paid compensation to the builder for the lesser share of constructed area allotted; the payment is characterisable as an expense of transfer. Although the claim was not in the original return, it was made in a revised statement filed before completion of assessment. Therefore the Assessing Officer ought to have entertained and allowed the claim as a deduction while recomputing the capital gains. [Paras 10, 12]

Directed the Assessing Officer to allow the claim as an expense of transfer when recomputing Long Term Capital Gains.

Cost of acquisition / cost of improvement - principle in V.S.M.R. Jagadishchandran (Decd.) vs. CIT - remand for fresh consideration - Deduction claimed for amounts paid to discharge encumbrance (mortgage) on the property. - HELD THAT: - The Tribunal noted conflicting facts: the assessee contended that encumbrance was discharged by him, whereas the authorities recorded that the encumbrance had been created by the present owner (assessee's parents) and not by a previous owner. Under the cited Supreme Court principle, if a previous owner created the encumbrance and a subsequent owner discharges it, the expenditure can form part of cost of acquisition/improvement. Because the factual matrix is contradictory, the Tribunal directed that the matter be examined afresh by the Assessing Officer in the light of the said authority to ascertain who created the encumbrance and whether the expenditure qualifies as cost of acquisition/improvement. [Paras 11, 12]

Issue remitted to the Assessing Officer for factual verification and decision on whether the encumbrance-discharge expenditure qualifies as cost of acquisition / improvement.

Final Conclusion: Appeal allowed for statistical purposes; the computation of Long Term Capital Gains is set aside and remitted to the Assessing Officer for fresh determination of full value of consideration and reconsideration of the claims for deduction (compensation to builder to be allowed; encumbrance-discharge claim to be examined afresh) in accordance with law.

Disallowance under section 43B for provision versus actual payment - MAT credit entitlement consequential to computation under section 115JB - adjustment under section 143(1)(a)(iv) on basis of tax audit report - deductibility of club subscription as business expenditure

Disallowance under section 43B for provision versus actual payment - Deductibility of gratuity expense claimed on actual payment basis and its disallowance under the provisions invoked by the Assessing Officer. - HELD THAT: - The Tribunal found on the materials placed before it that the assessee had actually paid gratuity to employees by cheque and debited the same to the gratuity expenses account. The additions made by the AO in processing the return treated the claimed amount as a provision and disallowed it under the head invoked, and the CIT(A) sustained that addition. The Tribunal concluded that the claimed amount was not a mere provision but an actual payment; therefore the disallowance under the provision relied upon was not warranted. The Tribunal directed deletion of the additions made towards gratuity expenses. [Paras 4]

Addition for gratuity disallowance deleted; deduction upheld as being on actual payment basis.

MAT credit entitlement consequential to computation under section 115JB - Entitlement to MAT credit for tax paid under section 115JB for AY 2017-18 and verification of such credit in light of consequential adjustments. - HELD THAT: - The assessee had paid tax under section 115JB and claimed credit because total income under normal provisions was NIL in the return. The AO had denied MAT credit after making certain additions which rendered the normal income positive; however, the Tribunal observed that deletions (notably in respect of employees' contributions to PF & ESI and gratuity) affect the computation relevant to MAT credit. As the MAT credit entitlement is consequential on the correct computation of income under both section 115JB and the normal provisions, the Tribunal directed the AO to verify and allow MAT credit, if any, after recomputing income in accordance with the provisions of section 115JB and normal provisions. [Paras 5]

Matter remitted to AO to verify and allow MAT credit, if any, after correct computation under section 115JB and normal provisions.

Adjustment under section 143(1)(a)(iv) on basis of tax audit report - deductibility of club subscription as business expenditure - Validity of the AO's adjustment in processing the return disallowing club membership subscription as per the Tax Audit Report and whether the subscription qualifies as a business expense. - HELD THAT: - The AO made the adjustment under clause (iv) of section 143(1)(a) based on the Tax Auditor's report in Form No. 3CD which quantified certain expenditures as personal in nature and not taken into account in the return. The Tribunal accepted the AO's power to make such an adjustment under section 143(1)(a)(iv) where the audit report indicates disallowance. On the substantive claim that the subscription was incurred wholly and exclusively for business purpose, the Tribunal noted that the assessee failed to produce relevant evidence showing how the club subscription enhanced the business or aided overall business development. In absence of such proof, the expenditure was rightly treated as personal in nature and disallowed. [Paras 7, 8, 9]

Adjustment disallowing club membership subscription upheld; claim that the subscription was a business expense rejected.

Final Conclusion: The appeal for AY 2017-18 (ITA No. 781/Chny/2020) is allowed for statistical purposes directing deletion of gratuity addition and remand to verify MAT credit entitlement; the appeal for AY 2018-19 (ITA No. 782/Chny/2020) is dismissed upholding disallowance of club subscription.

Entertainment of fresh claim by appellate authority - revised return and revised statement of income - Goetze (India) Ltd. principle on appellate powers - characterisation of surplus sale consideration as part of sale consideration - exemption under section 54 - source of income not disputed

Entertainment of fresh claim by appellate authority - revised return and revised statement of income - Goetze (India) Ltd. principle on appellate powers - Whether the appellate authority could entertain the assessee's revised computation of sale consideration though the AO had declined to accept it for lack of a revised return. - HELD THAT: - The Tribunal noted that the Hon'ble Supreme Court in Goetze (India) Ltd. establishes that the restriction on the Assessing Officer to entertain fresh claims not made by way of revised return does not apply to appellate authorities. The authorities below did not dispute that the assessee received the higher consideration as per the sale agreement. Having filed a revised statement of total income reflecting the sale consideration per the agreement, the assessee's fresh claim ought to have been entertained at the appellate stage. Accordingly the Tribunal directed the AO to consider the revised statement and recompute long-term capital gains on the basis of the sale agreement. [Paras 7]

The appellate authority must entertain the revised computation and the AO is directed to consider the revised statement of total income reflecting the higher sale consideration.

Characterisation of surplus sale consideration as part of sale consideration - exemption under section 54 - source of income not disputed - Whether the difference between consideration stated in the sale agreement and the registered sale deed (the surplus) is exigible as income from other sources or must be treated as part of the sale consideration eligible for exemption under section 54. - HELD THAT: - The Tribunal observed that the source of the additional amount was not disputed by the Revenue and that additions by the AO were made on the basis of the discrepancy between the sale deed and the sale agreement. Where the source of money is undisputed and the additional amount arises from the same transaction of sale, that surplus partakes the character of income from that source and should be included in the sale consideration for computing capital gains. On the facts, the assessee's investment in acquiring a new residential property exceeded the recomputed long-term capital gains based on the sale agreement, entitling him to the benefit of exemption under section 54 as per the revised computation. [Paras 7]

The surplus consideration is to be treated as part of the sale consideration; the AO is directed to recompute long-term capital gains accordingly and allow exemption under section 54 as per the revised computation.

Final Conclusion: Appeal allowed; matter remitted to the AO to recompute long-term capital gains on the basis of the sale agreement and to grant exemption under section 54 in accordance with the revised computation, since the appellate authority may entertain the revised claim and the surplus consideration forms part of the sale proceeds where the source is not disputed.

Deductibility of employees' contribution to PF and ESI - Determination of 'due date' for deduction under Section 36(1)(va) - Applicability of Section 43B in determining due date - Prospective operation of Finance Act, 2021 amendment (Explanation 2 to Section 36(1)(va))

Deductibility of employees' contribution to PF and ESI - Determination of 'due date' for deduction under Section 36(1)(va) - Prospective operation of Finance Act, 2021 amendment (Explanation 2 to Section 36(1)(va)) - Assessee entitled to deduction of employees' contribution to PF and ESI paid before the due date of filing the return for the years under appeal. - HELD THAT: - The Tribunal examined that the assessee had remitted employees' contributions to PF and ESI accounts within the due date for filing the return. It applied the binding view of the Jurisdictional Calcutta High Court (as followed by the Coordinate Bench in Lumino Industries Ltd.) that payments made before the due date of filing under section 139(1) are allowable as a deduction. The Tribunal considered the amendment by Finance Act, 2021 inserting Explanation 2 to Section 36(1)(va) which clarifies that Section 43B shall not apply for determining the 'due date'. Applying the legislative intent as reflected in the Notes on Clauses and the express provision that the amendment takes effect from 1 April 2021, the Tribunal held the amendment to be prospective in operation and therefore irrelevant to assessment years prior to A.Y. 2021-22. Consequently, for A.Y. 2018-19 and A.Y. 2019-20 the pre-amendment position governed and the payments made before the due date of filing were to be allowed as deductions, and the disallowances were deleted.

Allow deduction of employees' contribution to PF and ESI paid before the due date of filing the return; disallowances deleted for the years in question.

Final Conclusion: Both appeals are allowed: the Tribunal directs that the claim for deduction of employees' contribution to PF and ESI, remitted before the due date of filing the return for A.Y. 2018-19 and A.Y. 2019-20, be allowed and the disallowances deleted.

Deduction under section 80IA - mandatory filing of return on or before due date under section 80AC - revised return / rectification during assessment proceedings under section 139(4) and 139(5) - entertainment of belated claim during assessment proceedings - electronic filing of audit report in Form No.10CCB - verification of genuineness by Assessing Officer

Deduction under section 80IA - mandatory filing of return on or before due date under section 80AC - revised return / rectification during assessment proceedings under section 139(4) and 139(5) - entertainment of belated claim during assessment proceedings - Entitlement to claim deduction under section 80IA where the original return was filed within the due date but the specific deduction was claimed subsequently during assessment proceedings - HELD THAT: - The Tribunal held that Section 80AC requires that a return of income be furnished on or before the due date specified under section 139(1) to be eligible for deduction under section 80IA, but the provision does not stipulate that the deduction must be asserted in the original return and not thereafter. Where the original return was filed within the due date, subsequent submissions or revised return(s) filed before completion of assessment proceedings are to be considered, since the Act permits filing of revised/rectified returns for removal of omissions or defects. Applying these principles and following coordinate decisions on analogous facts, the Tribunal found no dispute on the merits of the deduction and affirmed the view that the claim made during assessment ought to be entertained and decided after due verification. [Paras 8, 9]

The Commissioner (Appeals) was right to direct that the Assessing Officer entertain the deduction claim made during assessment proceedings; that order is affirmed and the Revenue's appeal is dismissed.

Electronic filing of audit report in Form No.10CCB - verification of genuineness by Assessing Officer - Whether non-electronic filing of Form No.10CCB, as noted by the Assessing Officer, was fatal to the claim or required fresh consideration - HELD THAT: - The Assessing Officer noted non-compliance with the requirement to furnish the audit report electronically and treated that as a ground for disallowance. The Tribunal did not accept a summary disallowance on that basis where the claim was made during assessment and there was no dispute on the substantive eligibility. Instead, the Tribunal affirmed the appellate direction that the Assessing Officer must entertain the claim and carry out due verification of the genuineness and compliance (including scrutiny of the Form No.10CCB filing requirements) before adjudicating the claim. Thus the question of electronic filing compliance was left for the Assessing Officer's verification and decision in the assessment proceedings. [Paras 9]

The matter of compliance with electronic filing of Form No.10CCB and related verification is remanded to the Assessing Officer for examination of genuineness and due adjudication.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, affirmed the Commissioner (Appeals)'s direction that the deduction under section 80IA claimed during assessment (after filing the original return within the due date) be entertained, and remanded the question of verification and compliance (including Form No.10CCB filing requirements) to the Assessing Officer for due examination and decision.

Revision under section 263 - Deduction under section 80IA - Section 80AC requirement of furnishing return by the due date - Binding precedent of the jurisdictional ITAT - Highly debatable question as bar to exercise of revisionary jurisdiction

Revision under section 263 - Deduction under section 80IA - Section 80AC requirement of furnishing return by the due date - Binding precedent of the jurisdictional ITAT - Highly debatable question as bar to exercise of revisionary jurisdiction - Validity of the Principal Commissioner of Income Tax's revision under section 263 which set aside the assessment allowing deduction under section 80IA on the ground of non-compliance with section 80AC's return-filing requirement - HELD THAT: - The Assessing Officer had granted deduction under section 80IA after considering the assessee's submissions and relying on a coordinate ITAT decision. The PCIT invoked section 263 on the ground that the return and audit report were filed beyond the due dates and, relying on a different coordinate Bench decision of the jurisdictional ITAT, treated the assessment as erroneous and prejudicial to the revenue. The Tribunal noted that the matter admits differing views and is "highly debatable." The Court applied the principle that where the question involved is debatable and different views are reasonably possible, exercise of revisionary jurisdiction under section 263 is not warranted. On that basis the Tribunal found the revision order unsustainable and quashed it, restoring the original assessment which had allowed the deduction after examination of the issue. [Paras 4, 5]

The revision order passed by the Principal Commissioner under section 263 is quashed and the appeal of the assessee is allowed.

Final Conclusion: The Tribunal quashed the PCIT's revision order under section 263 as the issue concerning eligibility for deduction under section 80IA was a debatable question (with conflicting coordinate Bench decisions) and thereby allowed the assessee's appeal, restoring the assessment that had allowed the deduction.

Stay of operation pending appeal - powers under Rule 41 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 - interim stay and withdrawal of stay application - abuse of process and securing the ends of justice - injunction on recovery pending disposal of appeal - expeditious disposal of pending appeal

Stay of operation pending appeal - interim stay and withdrawal of stay application - powers under Rule 41 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 - Whether the Tribunal erred in refusing to restore the appellant's application for interim stay and permitting recovery despite the pending appeal. - HELD THAT: - The appellant had originally sought interim stay and a date for final hearing; upon the Tribunal fixing 11.03.2020 for final hearing, the appellant withdrew the stay application. Owing to lack of hearing on that date because of coram and the COVID-19 pandemic, the appellant sought restoration of the withdrawn stay application when the department sought to implement the confirmed adjudication. The Tribunal dismissed the restoration application. The High Court noted that the appeal has been pending for a considerable time and that the appellant had withdrawn the stay application in the expectation that the appeal would be heard on the date fixed. In view of the delay occasioned by circumstances beyond the appellant's control and the department's attempt to effect recovery while the appeal remained undetermined, the Court exercised its supervisory jurisdiction to restrain recovery pending final disposal of the appeal. The Court left the substantive questions of law open for adjudication by the Tribunal, but granted interim relief to protect the appellant from implementation measures during the pendency of the appeal. [Paras 9, 10]

Respondent restrained from making any recovery from the appellant until the appeal pending before the Tribunal is disposed of; substantive legal questions left open.

Expeditious disposal of pending appeal - injunction on recovery pending disposal of appeal - Whether the pending appeal should be directed for prompt disposal and any procedural directions required. - HELD THAT: - Recognising the prolonged pendency of the appeal concerning collection of extra duty deposit for the period stated in the record, the Court directed the Customs, Excise & Service Tax Appellate Tribunal at Chennai to dispose of the appeal within four months from receipt of the copy of this judgment. The Court confined its order to procedural directions for expeditious adjudication and did not decide the merits of the questions of law raised by the parties, expressly leaving those questions to be adjudicated in the appeal. [Paras 10]

Tribunal directed to dispose of the appeal within four months; questions of law reserved for adjudication in the appeal.

Final Conclusion: The High Court restrained recovery of the impugned demand until the Tribunal disposes of the pending appeal, left the substantive legal questions open for decision by the Tribunal, and directed the Tribunal to finally dispose of the appeal within four months from receipt of the judgment.

Provisional release under Section 110A of the Customs Act, 1962 - Bank guarantee as condition for provisional release of seized goods - Security by payment and PD bond to protect revenue interest - Judicial modification of provisional release conditions - Court not entering into merits while granting interim relief

Bank guarantee as condition for provisional release of seized goods - Judicial modification of provisional release conditions - Condition requiring an onerous bank guarantee (condition No.3) for provisional release was excessive and was struck down. - HELD THAT: - The court examined the provisional release order passed under Section 110A and, having noted that investigation was ongoing, observed that condition No.3 - a requirement of an outright bank guarantee of the full contested amount with stringent renewal and automatic debit clauses - was harsh and unnecessary for protecting the Revenue's interest. The court concluded that the protection afforded by payment of duty (or security for it) together with a PD bond was sufficient. The Additional Solicitor General accepted the court's prima facie view and the petitioner did not oppose modification. On these grounds the court modified the provisional release order by striking off condition No.3. [Paras 7, 10]

Condition No.3 struck off; the bank guarantee requirement as framed in the provisional release order set aside.

Provisional release under Section 110A of the Customs Act, 1962 - Security by payment and PD bond to protect revenue interest - The court modified the payment/security regime (condition No.1) for provisional release by permitting 50% of the duty to be deposited in cash and the remaining 50% to be secured by a bank guarantee. - HELD THAT: - While upholding the principle that the Revenue's interest must be protected before provisional release, the court accepted the parties' agreed arrangement that full cash payment need not be insisted upon. Instead, it directed that half of the duty demanded be deposited by cash or demand draft and the balance secured by a bank guarantee from a nationalised bank, to be completed within two weeks of receipt of the order, after which the seized vehicle would be provisionally released. The court expressly refrained from adjudicating the merits of the underlying customs proceedings, keeping all contentions open. [Paras 8, 9, 10, 11]

Condition No.1 modified: 50% of duty to be paid in cash/demand draft and remaining 50% to be secured by bank guarantee; vehicle to be provisionally released thereafter; merits kept open.

Final Conclusion: The High Court modified the provisional release order dated 29.11.2021 by striking down the onerous bank guarantee condition and permitting release on deposit of 50% of the demanded duty in cash and securing the remaining 50% by a bank guarantee; the court did not decide merits of the underlying proceedings and kept all contentions open.

Redemption option under Section 125 - confiscation under Section 111(d) - penalty under Section 112 - minimum import price and port restriction applicability - transitional application of Foreign Trade Policy - date of import determined by bill of lading versus bill of entry

Date of import determined by bill of lading versus bill of entry - transitional application of Foreign Trade Policy - minimum import price and port restriction applicability - Findings that the minimum import price and port restriction were not applicable to the import and that the date of shipment on the Bill of Lading (15/11/2019) governed the transitional position. - HELD THAT: - The adjudicating authority held, and this Tribunal observed (with no challenge by Revenue), that the Bill of Lading date ante-dated the DGFT amendment effective 18/12/2019 and therefore the changed policy fixing a minimum import price and port restriction did not apply to the consignment. The Tribunal noted that these findings have attained finality because Revenue did not contest the adjudicating authority's conclusions and the adjudicating authority itself granted the redemption option instead of ordering absolute confiscation.

The impugned findings that minimum import price and port restriction were not applicable, based on the Bill of Lading date and transitional FTP provisions, are affirmed as final.

Confiscation under Section 111(d) - redemption option under Section 125 - Validity and quantum of the redemption fine imposed under the option to redeem goods that were held liable for confiscation for breach of quantitative restriction. - HELD THAT: - The adjudicating authority found confiscation was warranted only because of breach of a quantitative restriction under the then-prevailing Trade Notice, but exercised the statutory power to offer redemption under Section 125. The Tribunal held that where only the quantity restriction was the shortcoming, the redemption fine must be commensurate with the excess quantity and not excessive. On that basis the redemption fine imposed in the impugned order was reduced as being on the higher side.

Redemption fine under Section 125 is reduced from the amount imposed in the impugned order to the modified sum directed by the Tribunal.

Penalty under Section 112 - Appropriateness and quantum of penalty imposed under Section 112 for the contravention found. - HELD THAT: - The Tribunal examined the penalty levied for the breach that related only to the quantitative restriction and concluded that the penalty imposed by the adjudicating authority was excessive in the facts of the case. Applying the principle that punitive consequences should be proportionate to the nature and extent of default, the Tribunal reduced the monetary penalty to a lower amount deemed commensurate with the contravention.

Penalty under Section 112 as imposed in the impugned order is reduced to the modified sum directed by the Tribunal.

Final Conclusion: Appeal partly allowed: the Tribunal affirms that the DGFT amendment fixing minimum import price and port restriction did not apply to the consignment (Bill of Lading antecedent), but reduces the redemption fine under Section 125 and the penalty under Section 112 to lower amounts as proportionate to the breach of quantitative restriction.

Rejection of transaction value - customs valuation by market enquiry - confiscation under Section 111(d) for prohibited/unauthorised goods - confiscation under Section 111(m) for mis-declared goods - relinquishment/abandonment of imported goods - penalty under Section 112(a) for mis-declaration

Rejection of transaction value - customs valuation by market enquiry - Validity of rejection of declared transaction value and subsequent revaluation by market enquiry. - HELD THAT: - The Tribunal found that the authority below rejected the transaction value without observing the statutory pre-conditions and proceeded to re-determine value by market enquiry without following the sequential procedure mandated by the Valuation Rules read with Section 14. The Tribunal held that the revaluation was resorted to without following the due process of law and therefore set aside the rejection of the declared transaction value and the revaluation, accepting the declared value as per the Bill of Entry. [Paras 20]

Rejection of declared transaction value and revaluation by market enquiry set aside; declared value accepted.

Relinquishment/abandonment of imported goods - confiscation under Section 111(d) for prohibited/unauthorised goods - Whether confiscation of the six cosmetic items (requiring ADC NOC) could be sustained where the importer relinquished title and lacked required registration/clearance. - HELD THAT: - The Tribunal recorded that the importer was not registered with the drug authority and was unable to produce the requisite NOC for the cosmetics. The importer had relinquished title to those six items. In view of the relinquishment and lack of requisite regulatory clearance, the Tribunal confirmed the absolute confiscation of the six items under the provision concerning unauthorised/prohibited goods. [Paras 21]

Absolute confiscation of the six cosmetic items confirmed.

Confiscation under Section 111(m) for mis-declared goods - rejection of transaction value - Sustainability of confiscation and redemption fine imposed on the remaining goods (serial Nos. 7-48) which were alleged to be mis-declared. - HELD THAT: - The Tribunal accepted the importer's explanation, corroborated by the shipper's e-mail admitting packing error and offering to take back undeclared goods. Finding no deliberate mis-declaration and having set aside the revaluation, the Tribunal concluded that confiscation under the mis-declaration provision and the redemption fine could not be sustained and accordingly set aside both the confiscation and the redemption fine in respect of the remaining goods. [Paras 19, 22]

Confiscation and redemption fine in respect of goods at serial Nos. 7-48 set aside.

Penalty under Section 112(a) for mis-declaration - rejection of transaction value - Validity of penalty imposed on the proprietor under Section 112(a) for alleged mis-declaration and undervaluation. - HELD THAT: - Having found that there was no deliberate mis-declaration and having set aside the rejection of transaction value and the revaluation, the Tribunal held that the foundational findings necessary to sustain penalty under Section 112(a) did not survive. Consequently, the Tribunal set aside the penalty imposed on the proprietor. [Paras 23]

Penalty under Section 112(a) set aside.

Final Conclusion: The appeal is allowed: the declared transaction value is accepted and the revaluation by market enquiry is set aside; absolute confiscation of six cosmetics (relinquished by the importer) is confirmed; confiscation, redemption fine and penalty related to the remaining goods are set aside; appellant entitled to consequential benefits in accordance with law.

Provisional release of seized goods - principles of natural justice - discretion under Section 110A of the Customs Act - definition of prohibited goods under Section 2(33) - guidelines for provisional release in Board Circular No.35/2017 - reasonableness and relevance in exercise of administrative discretion - remand for fresh consideration by adjudicating authority

Provisional release of seized goods - principles of natural justice - guidelines for provisional release in Board Circular No.35/2017 - reasonableness and relevance in exercise of administrative discretion - definition of prohibited goods under Section 2(33) - Whether the ADG's communication dated 12.11.2021 denying provisional release complied with requirements of natural justice and constituted a lawful exercise of discretion under Section 110A read with relevant guidelines. - HELD THAT: - The Tribunal found that the ADG, while rejecting the appellant's request for provisional release, treated the imported CRGO sheets as falling within the definition of "prohibited goods" and relied upon Board Circular No.35/2017 and Steel Ministry orders to deny release. The communication was issued without affording the appellants an opportunity of hearing, which prima facie violated the principles of natural justice. Further, the ADG's conclusion that the goods warranted absolute confiscation was reached without a reasoned, speaking exercise of discretion tested against relevance and reasonableness. The Tribunal referred to the guidance in Malabar Diamond Gallery and Mala Petrochemicals (as incorporated in the Circular) and to the Supreme Court's exposition in Raj Grow Impex LLP on the need for discretion to be exercised according to law, guided by relevant considerations and in a balanced manner. Given these defects, the ADG's order could not be sustained. The Tribunal therefore set aside the communication and remanded the matter to the original authority to reconsider the request for provisional release after allowing the appellant a reasonable opportunity to present submissions, to examine the test reports and policy provisions, and to pass a reasoned speaking order within the directed time-frame. [Paras 2, 5, 7, 8, 9]

The communication dated 12.11.2021 is set aside and the matter is remanded for fresh consideration of the request for provisional release after providing an opportunity of hearing and passing a speaking order within one month.

Final Conclusion: The appeal is allowed: the ADG's communication denying provisional release is quashed for failure to comply with natural justice and for an unreasonable exercise of discretion; the matter is remanded to the original authority to decide afresh on the provisional release application after hearing the appellant and on the basis of a reasoned speaking order within one month.

Restoration of stay application - stay of valuation and collection of duty - effect of not pressing a stay application / waiver - early hearing (EH) as substitute for stay

Restoration of stay application - stay of valuation and collection of duty - effect of not pressing a stay application / waiver - Application to restore the stay application and for grant of stay of valuation and collection of duty pending appeal - HELD THAT: - The application for restoration of the previously dismissed stay application was considered in the context that on 30.01.2020 the appellant had applied for early hearing (EH) and for stay, and expressly did not press the stay application when EH was allowed. The Tribunal treated that disposition as relinquishment of the stay prayer in favour of obtaining an early hearing. The present application sought to revive a stay not pressed earlier and sought, in effect, an interlocutory order staying the valuation and collection of duty so as to facilitate clearance of imported goods. The Tribunal held that a prayer to stay valuation and collection of duty, made after the appellant had earlier declined to press the stay application in favour of EH relief, could not be allowed. The EH remedy remains available to secure earliest disposal of the appeal, and the Tribunal found no grounds to grant the belated stay of valuation or recovery. Consequently the restoration application was dismissed. [Paras 13]

Application to restore the stay application and for stay of valuation/collection is dismissed; no stay granted and EH remains the available remedy for early disposal of the appeal.

Final Conclusion: The Tribunal dismissed the application to restore the previously withdrawn stay application and refused to grant a stay of valuation or recovery of duty; the appellant remains entitled to pursue early hearing of the appeal but cannot revive the earlier stay prayer.

Time-bound completion of CIRP - admission of claims by Resolution Professional - right of operational creditors to receive a copy of the resolution plan - prejudice to resolution applicants and Committee of Creditors by belated claims - compliance with Regulation 7(1) and Regulation 12(2) of the CIRP Regulations - Arcelor Mittal principle on strict timeline under Section 12

Admission of claims by Resolution Professional - prejudice to resolution applicants and Committee of Creditors by belated claims - time-bound completion of CIRP - compliance with Regulation 7(1) and Regulation 12(2) of the CIRP Regulations - Arcelor Mittal principle on strict timeline under Section 12 - Whether a claim submitted after the expiry of the claim submission period and after the resolution plan has been received by the Resolution Professional can be admitted and attendant reliefs granted (copy of the resolution plan, admission of claim, rejection of plan and resubmission of a revised plan). - HELD THAT: - The Tribunal found that the applicant submitted its claim in the prescribed Form only on 18.11.2020, whereas the last date for submission of claims as per the public announcement and applicable regulations had expired earlier. The resolution plan had already been received by the Resolution Professional on 17.11.2020 and the Information Memorandum had been issued to prospective resolution applicants. Allowing a belated claim at this stage would require material alterations to the Information Memorandum, stakeholder list and the resolution plans submitted by prospective resolution applicants, thereby prejudicing those applicants and risking withdrawal or failure of plans. Such intervention would delay the CIRP and could push the process beyond the outer statutory limits, defeating the Code's object of a time-bound resolution. The Tribunal relied on the principle in Arcelor Mittal that the timeline under Section 12 is mandatory and must be adhered to, and held that the acceptance of a belated claim at this stage is inimical to the statutory scheme and the interests of maximising value through timely resolution. Although operational creditors have certain rights to participate and receive copies of plans, those rights cannot be exercised in a manner that undermines the time-bound CIRP process and prejudices other stakeholders where the claim is received after the plan submission.

Reliefs sought - copy of the resolution plan, admission of the claim and direction to reject the resolution plan and resubmit a revised plan incorporating the claim - were refused; the application has no merit.

Final Conclusion: IA No.17/2021 dismissed as the claim was filed after the claim submission period and after the resolution plan had been received, and allowing it would prejudice resolution applicants and frustrate the time-bound CIRP process.

Pre-existing dispute - Section 9 application under the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 - operational creditor and corporate debtor relationship - running account - invoices taken together as operational debt - Mobilox plausibility test - plausible contention requiring further investigation

Pre-existing dispute - demand notice under Section 8 - Mobilox plausibility test - plausible contention requiring further investigation - Pre-existing dispute between the operational creditor and the corporate debtor existed prior to issuance of the demand notice, thereby justifying rejection of the Section 9 application. - HELD THAT: - The Adjudicating Authority considered the email correspondence between the parties (spanning 28.02.2018 to 26.09.2018) and found communications, meetings and debit notes evidencing a dispute over delayed supply, loss of production and debit notes raised by the corporate debtor. The emails of 03.07.2018, 04.07.2018 and 25.10.2018, and the minutes of meeting, show that the corporate debtor raised debit notes and sought adjustment which the operational creditor denied, demonstrating a real dispute existing before the demand notice dated 18.06.2019. Applying the test in Mobilox, the Tribunal held that a plausible, non illusory dispute existed and thus the adjudicating authority correctly rejected the Section 9 petition without undertaking merits beyond the limited inquiry required at admission stage. [Paras 6, 8, 16, 19, 21]

There was a real pre-existing dispute prior to the demand notice, and the Section 9 application was correctly rejected on that ground.

Invoices taken together as operational debt - running account - Section 9 application under the Insolvency and Bankruptcy Code, 2016 - The operational debt could not be bifurcated invoice wise where the parties treated accounts as a running account and multiple invoices and adjustments were interlinked. - HELD THAT: - The record showed nine invoices were aggregated in Part IV of the Section 9 application and payments (including issuance of cheques and post dated cheques) were made and attempted in the context of a running account rather than strict invoice by invoice settlement. The Tribunal endorsed the Adjudicating Authority's view that the operational debt related to all invoiced items collectively and could not be selectively bifurcated to treat some invoices as undisputed when the overall account, debit notes and payment communications indicated interlinked disputes and adjustments. [Paras 17]

The invoices forming the operational debt were to be considered collectively; they could not be bifurcated to admit the Section 9 petition.

Final Conclusion: The appeal is dismissed. The National Company Law Tribunal's order rejecting the Section 9 petition on the ground of a pre existing dispute and treating the invoiced claims as part of an interlinked running account is upheld; no interference is warranted.

Rectification of order under Rule 154 of NCLT Rules - condonation of delay in filing claim - admission of claims under Regulation 12(1) and 12(2) of the CIRP Regulations - opportunity of hearing to the Resolution Professional - advanced stage of CIRP and finality of resolution plan - primacy of timely completion of CIRP under the IBC

Rectification of order under Rule 154 of NCLT Rules - Whether the application for rectification under Rule 154 seeking recall of an order for want of notice to the Resolution Professional was maintainable as correction of a clerical or arithmetical mistake. - HELD THAT: - Rule 154 permits correction of clerical or arithmetical mistakes or errors arising from accidental slip or omission. The Resolution Professional's application sought to set aside the impugned order on the ground that he had not been given notice and therefore could not place before the Adjudicating Authority facts relevant to the decision. That grievance did not amount to a clerical or arithmetical mistake or an accidental slip or omission amenable to rectification under Rule 154. The Adjudicating Authority therefore correctly rejected the rectification application as not falling within the scope of Rule 154. [Paras 8, 9, 10]

Application under Rule 154 was not a plea for correction of a clerical/arithmetic error and was rightly dismissed.

Condonation of delay in filing claim - admission of claims under Regulation 12(1) and 12(2) of the CIRP Regulations - opportunity of hearing to the Resolution Professional - advanced stage of CIRP and finality of resolution plan - primacy of timely completion of CIRP under the IBC - Whether the Adjudicating Authority's ex parte order condoning delay and directing the Resolution Professional to admit the long-delayed claim should be sustained. - HELD THAT: - The Court examined the timeline: the 90-day period under Regulation 12(2) expired on 17.12.2019, whereas the Respondent's initial claim was submitted on 26.10.2020 (and later revised). By the time the claim was first received, the Committee of Creditors had shortlisted and begun considering resolution plans (opening on 17.10.2020, shortlisting on 22.10.2020) and approved a plan on 07.11.2020; the approved plan was filed before the Adjudicating Authority on 25.11.2020. Admission of a claim after such an advanced stage would have required reopening the resolution process and could jeopardize the objective of timely resolution under the IBC. Furthermore, in proceedings considering rejection of a claim the Resolution Professional who refused the claim ought to be heard so that the Adjudicating Authority can make a judicious and transparent decision; no such hearing occurred and the order was passed ex parte. For these reasons the Adjudicating Authority's order condoning the delay and directing admission of the claim was erroneous. [Paras 13, 14, 15, 16, 17]

Impugned order condoning delay and directing admission of the claim is quashed and set aside; the delayed claim should not be included in the CIRP given its inordinate delay and the advanced stage of the process.

Final Conclusion: The rectification application under Rule 154 was not maintainable as a request to correct a clerical error and was rightly dismissed. The Adjudicating Authority's ex parte order condoning the long delay and directing admission of the claim is quashed: the claim submitted well after the Regulation 12(2) period and at an advanced stage of CIRP should not be admitted as that would prejudice the timely completion and finality of the resolution process. Parties to bear their own costs.

Pre-existing dispute - record of dispute under Section 9 - suppression of material facts - blacklisting for breach of tender conditions and supply of non-standard drugs - failure to establish undisputed operational debt - costs for abuse of process

Pre-existing dispute - record of dispute under Section 9 - failure to establish undisputed operational debt - Existence of a pre existing dispute and its effect on maintainability of the Section 9 application. - HELD THAT: - The Tribunal examined the reply to the demand notice, the pendency of writ proceedings before the High Court of Kerala and the materials showing allegations of defective supplies, penal deductions and blacklisting. It held that litigation between the parties concerning calculation of dues and challenge to penalties/blacklisting constitutes a pre existing dispute. Having regard to the respondent's contemporaneous reply to the demand notice and the pending High Court proceeding, the Adjudicating Authority was not satisfied that the debt was an undisputed operational debt which would warrant initiation of CIRP under Section 9. The presence of substantial contested questions of fact and law about quality of supplies, deductions and the arithmetic of dues led to rejecting the claim of an undisputed debt. [Paras 17, 18, 19]

The Section 9 application was not maintainable because a pre existing dispute existed, and the claim was not shown to be an undisputed operational debt.

Suppression of material facts - blacklisting for breach of tender conditions and supply of non-standard drugs - Whether the applicant suppressed material facts in the Section 9 application. - HELD THAT: - The Tribunal found that the applicant had omitted to disclose relevant litigation and the respondent's reply to the demand notice including the pendency of writ petitions and detailed allegations of violations of tender conditions. The Tribunal observed that the applicant itself had produced a reply from the Corporate Debtor contradicting its averment that no dispute or reply existed. The non disclosure of the pendency of the High Court proceedings and other material facts was held to be a deliberate suppression amounting to abuse of process, which vitiated the application. [Paras 19, 20]

The application was dismissed on account of suppression of material facts and abuse of process.

Costs for abuse of process - Imposition of costs for filing a vexatious or suppressed application. - HELD THAT: - Having concluded that the applicant suppressed material facts and that the Section 9 petition lacked merit, the Tribunal exercised its discretion to impose costs. The Tribunal fixed costs payable to the Ministry of Corporate Affairs, finding such an order appropriate to penalise the misuse of the insolvency process and deter similar conduct. [Paras 20]

Costs of Rs. 25,000 were imposed on the applicant payable to the Ministry of Corporate Affairs within two weeks.

Final Conclusion: The Section 9 petition filed by the operational creditor was dismissed for want of merit because a pre existing dispute and ongoing High Court litigation regarding quality, penalties and calculation of dues rendered the claim not an undisputed operational debt; the applicant was found to have suppressed material facts and was ordered to pay costs.

Liquidation process - lien on bank account - defreezing of bank accounts - directions to revenue authorities to release seized assets - completion of liquidation in an expeditious manner

Liquidation process - lien on bank account - defreezing of bank accounts - directions to revenue authorities to release seized assets - Whether the Income Tax Department must remove its lien on the corporate debtor's bank accounts and the bank must defreeze the accounts to enable completion of the liquidation process. - HELD THAT: - The Liquidator sought directions for release of lien on two Kotak Mahindra Bank accounts held in the name of the corporate debtor on the ground that the company is under liquidation and the accounts are required for completion of the liquidation process. The Adjudicating Authority relied on the order passed in CA(IB)1149/KB/2019, where, in a similar factual matrix involving seizure by a revenue department, the Authority directed release of seized accounts to facilitate expeditious completion of liquidation and directed the bank to defreeze the account. Applying the same analogy to the present facts, the Authority held that the Income Tax Department's lien obstructs the liquidation process and therefore directed the Income Tax Department to immediately remove its lien and directed Kotak Mahindra Bank to defreeze the specified accounts on the basis of this order so as to enable completion of the liquidation. [Paras 6, 7, 8]

Income Tax Department directed to remove lien on the corporate debtor's bank accounts and Kotak Mahindra Bank directed to defreeze the accounts to permit completion of liquidation.

Final Conclusion: Application allowed; Income Tax Department directed to remove lien on the specified bank accounts of the corporate debtor and Kotak Mahindra Bank directed to defreeze those accounts to facilitate completion of liquidation; IA(IB) No.1033/KB/2021 disposed of.

Scheme of Arrangement/Compromise under Section 230 of the Companies Act, 2013 - Liquidator's power to accept or reject a scheme during liquidation - Timelines for submission of scheme (90 days from date of liquidation) - Stakeholders Consultation Committee decision and objections by a major stakeholder - Objective of the Insolvency and Bankruptcy Code to revive the corporate debtor

Scheme of Arrangement/Compromise under Section 230 of the Companies Act, 2013 - Liquidator's power to accept or reject a scheme during liquidation - Timelines for submission of scheme (90 days from date of liquidation) - Stakeholders Consultation Committee decision and objections by a major stakeholder - Objective of the Insolvency and Bankruptcy Code to revive the corporate debtor - Validity of the liquidator's refusal to accept the Scheme of Arrangement/Compromise presented after liquidation and consequent dismissal of the application under Section 60(5) of the IBC. - HELD THAT: - The Applicant had sought to place a Scheme of Arrangement/Compromise before the Liquidator after the corporate debtor was ordered for liquidation. The record establishes that a major stakeholder (Maximus ARC Limited) considered the proposed scheme and raised specific objections, citing the dilapidated condition of plant and machinery, absence of provision for workmen dues and statutory liabilities, unrealistic revenue projections, lack of available non-core assets to fund instalments, absence of demonstrable financial resources of the proponents, and lack of industry experience. The Stakeholders Consultation Committee meeting held on 17.11.2020-at which the Applicant participated-had resolved that the liquidator may proceed with the sale by e-auction and need not await further schemes as doing so would delay completion of liquidation. The Applicant did not inform the SCC of an intention to submit a scheme within that forum, and the Applicant attributed delay in submitting the scheme to late knowledge of liquidation and the pandemic. In these circumstances the Tribunal found that the liquidator was justified in refusing to place the scheme before stakeholders and in proceeding towards auction, because the scheme had been rejected on substantive grounds by a major stakeholder and the SCC had directed the liquidator not to await further proposals.

Application CP/2/2021 dismissed; liquidator's rejection of the proposed scheme upheld.

Final Conclusion: The Tribunal upheld the Liquidator's refusal to accept the proposed Scheme and dismissed CP/2/2021; the stakeholders' objections and the SCC's decision to proceed to e-auction justified the Liquidator's course of action. No costs.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice and deemed service - existence of operational debt and default - limitation and applicability of Section 10A (COVID 19) defence - appointment of Interim Resolution Professional and duties of IRP

Service of demand notice and deemed service - Service of the demand notice on the Corporate Debtor was valid and treated as complete, permitting the Tribunal to proceed ex parte. - HELD THAT: - The Tribunal found that despite physical return endorsements at the registered and branch addresses, the Operational Creditor's attempts at service, supplemented by substituted service by publication and delivery to directors as directed, satisfied the requirements for service in the circumstances. The Tribunal relied upon the reasoning in the cited NCLAT decisions to treat electronic/official address service and compliance with substituted service directions as sufficient, and therefore proceeded in the absence of any representation from the Corporate Debtor. [Paras 17]

Service is complete and the matter proceeds ex parte.

Existence of operational debt and default - There existed an operational debt and the Corporate Debtor had committed default in repayment of that debt. - HELD THAT: - The Tribunal noted that the Corporate Debtor had acknowledged an outstanding sum by an Audit Confirmation Letter and had not raised any dispute regarding the amounts claimed by the Operational Creditor. Documentary records and absence of any contested claim were held to establish the existence of operational debt and default for the purposes of admitting the Section 9 application. [Paras 18]

Operational debt and default established.

Limitation and applicability of Section 10A (COVID 19) defence - The Section 9 application was within the period of limitation and the default pre dated the COVID 19 period; Section 10A did not apply. - HELD THAT: - On examination of invoices and payment history, the Tribunal observed that supplies and invoicing occurred in April-May 2016 and the last payment was in June 2018, while the Section 9 petition was filed on 16.12.2020. The Tribunal therefore concluded the proceeding was within limitation and that the default had occurred prior to 25.03.2020, so the Corporate Debtor could not invoke Section 10A relief. [Paras 19]

Application is within limitation and Section 10A is not applicable.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and duties of IRP - The Section 9 petition is admitted; CIRP is ordered, moratorium is imposed, and an Interim Resolution Professional is appointed with directions to perform statutory duties. - HELD THAT: - Having found service valid, operational debt and default established, and the petition within limitation, the Tribunal admitted the application under Section 9(5). Consequentially, the moratorium envisaged under Section 14(1) was directed to operate. Because the Operational Creditor had not proposed an IRP, the Tribunal appointed an Interim Resolution Professional from the IBBI list subject to disclosures and the absence of disciplinary proceedings, and directed the IRP to take charge, make the public announcement, call for claims, perform functions under relevant Code provisions and Regulations, submit reports and comply with timelines prescribed for CIRP. [Paras 23, 29]

Application admitted; CIRP initiated, moratorium imposed, and IRP appointed with statutory directions.

Final Conclusion: The Tribunal admitted the Section 9 petition filed by the Operational Creditor, held that service and demand notice requirements were satisfied, found operational debt and default and that the petition was within limitation (Section 10A not available), directed initiation of CIRP with imposition of moratorium, and appointed an Interim Resolution Professional with directions to carry out statutory duties.

Obligation to cooperate with Resolution Professional - duties of personnel of the corporate debtor under Section 19(1) of the Insolvency and Bankruptcy Code, 2016 - power of the Adjudicating Authority to direct cooperation under Section 19(3) of the Insolvency and Bankruptcy Code, 2016 - time bound nature of the Corporate Insolvency Resolution Process (CIRP) - interim resolution professional's entitlement to information and books of account

Obligation to cooperate with Resolution Professional - duties of personnel of the corporate debtor under Section 19(1) of the Insolvency and Bankruptcy Code, 2016 - power of the Adjudicating Authority to direct cooperation under Section 19(3) of the Insolvency and Bankruptcy Code, 2016 - time bound nature of the Corporate Insolvency Resolution Process (CIRP) - Direction issued to the respondents (suspended directors and other persons associated with management) to cooperate with the Resolution Professional and furnish information/documents until completion of the CIRP. - HELD THAT: - The Tribunal found that the Resolution Professional had been validly appointed and had commenced the CIRP, which is a time bound process. There was demonstrable non cooperation by the respondents in providing signed provisional financial statements and other requisite information, which impeded preparation of the Information Memorandum and the valuation exercise. The reasons urged in the counter affidavit, including alleged transition of management and relocation of registered office, were held insufficient to justify non cooperation. Relying on the statutory duty imposed by Section 19(1) (personnel of the corporate debtor to extend assistance) and the adjudicating authority's power under Section 19(3) to direct compliance and cooperation, the Tribunal concluded that the CIRP could not be frustrated by non cooperation and that a direction to furnish information and books of account was warranted for smooth conduct of the CIRP. [Paras 4, 5, 6]

Application partly allowed; respondents directed to cooperate with the Resolution Professional and provide all information, documents, clarifications and books of account as and when required until completion of the CIRP.

Final Conclusion: The Tribunal granted a direction under the IBC requiring the suspended board and others associated with the corporate debtor to cooperate with the Resolution Professional and produce necessary information and books of account to enable timely completion of the CIRP; the respondents' objections were rejected as insufficient.

Contempt for wilful disobedience - compliance with tribunal order - direction to take steps in accordance with law including institution of criminal prosecution under Section 69 & 74 of IBC - admission of claims by resolution professional - time-barred claims - interest on time-barred claims - precedential effect of coordinate bench and NCLAT orders

Contempt for wilful disobedience - compliance with tribunal order - direction to take steps in accordance with law including institution of criminal prosecution under Section 69 & 74 of IBC - Whether contempt proceedings should be initiated for alleged non-compliance with the Tribunal order dated 21.10.2021 and what remedial step is appropriate. - HELD THAT: - The petition alleged that the Respondents (suspended directors) did not comply with the Tribunal order dated 21.10.2021 directing payment. On examination of the same order, the Tribunal noted that the order had also directed the RP/Applicant that if the amount was not paid within two weeks, the RP/Applicant was to take steps in accordance with law, including institution of criminal prosecution/complaint under the insolvency provisions referred to. The Tribunal found that the RP/Applicant had not complied with that part of the order. In view of this non-compliance by the RP/Applicant with the procedural direction in the earlier order, the Tribunal declined to initiate contempt proceedings against the suspended directors and instead directed the RP/Applicant to act in accordance with the directions contained in the order dated 21.10.2021. [Paras 2, 3]

Contempt petition disposed; RP/Applicant directed to act as per order dated 21.10.2021 and contempt proceedings were not initiated against the respondents.

Admission of claims by resolution professional - time-barred claims - interest on time-barred claims - precedential effect of coordinate bench and NCLAT orders - Whether the Resolution Professional erred in rejecting part of the applicant's claim as time-barred and in refusing interest on the rejected portion. - HELD THAT: - The RP admitted only a part claim and rejected the remainder as time-barred. The Tribunal considered prior decisions of a Coordinate Bench in IA No. 2295/2020 and the affirming order of the NCLAT in Company Appeal (Insolvency) 927/2020, which had rejected time-barred claims. Applying the same principle, the Tribunal held that the RP was justified in rejecting the time-barred portion and in refusing interest on that portion. There was no illegality in the RP's order dated 21.08.2021. Consequently, the application seeking condonation and fresh filing or direction to admit the claim was found devoid of merit. [Paras 5, 6, 7, 8]

IA dismissed; RP's rejection of the time-barred claims and refusal to grant interest upheld.

Final Conclusion: The contempt petition was disposed with a direction to the RP/Applicant to comply with the procedural directions of the earlier order dated 21.10.2021; the application challenging the RP's rejection of time-barred claims was dismissed, the RP's decision to admit only the non-time-barred portion and refuse interest being upheld.

Seizure under Section 37A of the Foreign Exchange Management Act, 1999 - competent authority under Section 37A(2) - continuation of confirmed seizure until disposal of adjudication proceedings - remedy of appeal under Section 37A(5) - provisional release of seized funds during pendency of confirmed seizure - scope of writ jurisdiction where statutory remedy exists

Seizure under Section 37A of the Foreign Exchange Management Act, 1999 - competent authority under Section 37A(2) - provisional release of seized funds during pendency of confirmed seizure - scope of writ jurisdiction where statutory remedy exists - Validity of the Single Judge's order releasing a portion of seized funds when the seizure orders remained in force and had been affirmed by the Competent Authority under Section 37A. - HELD THAT: - The Court observed that Section 37A provides for seizure of equivalent assets and mandates that the order of seizure be placed before the Competent Authority who shall confirm or set aside the order. Once the Competent Authority has affirmed the seizure by an order under Section 37A(2), the confirmed seizure continues until disposal of adjudication proceedings. In the present case the Single Judge permitted release of a specified sum while disposing of the writ petition, although the seizure orders were not set aside and no statutory provision authorising such a provisional release upon disposal of the writ was brought to the court's notice. The Court held that in these circumstances the Single Judge could not have ordered provisional release by disposing of the writ petition itself. Consequently, the release order was set aside. The Court expressly refrained from expressing any opinion on the merits of the underlying seizure and left all rights and contentions open to the parties.

Order of the Single Judge directing release of funds was set aside because the seizure orders remained affirmed by the Competent Authority under Section 37A and no statutory basis justified such provisional release.

Remedy of appeal under Section 37A(5) - scope of writ jurisdiction where statutory remedy exists - Availability of statutory remedies following confirmation of seizure by the Competent Authority. - HELD THAT: - The Court noted that Section 37A(5) provides a remedy of appeal to the Appellate Tribunal against orders of the Competent Authority. Given the existence of this statutory remedy and the Competent Authority's order dated 04.02.2022 affirming the seizure, the writ petitioner was held to be free to prefer an appeal or to pursue other remedies available under law. The High Court therefore set aside the Single Judge's order without addressing the merits, leaving the statutory avenues open to the aggrieved party.

Respondent is free to avail the statutory remedy of appeal under Section 37A(5) or other remedies; the High Court left merits open.

Final Conclusion: Writ appeal allowed; the Single Judge's order directing release of funds was set aside because the seizure orders stood affirmed by the Competent Authority under Section 37A, and the aggrieved party remains free to pursue the statutory appeal or other remedies; no opinion expressed on merits.

Maintainability of writ petition under Article 226 - Alternate efficacious remedy / self imposed restraint - Power of trial court to rescind Look Out Circular (LOC) - LOC akin to Non Bailable Warrants (NBW) - Right to travel and its curtailment by administrative measures

Maintainability of writ petition under Article 226 - Alternate efficacious remedy / self imposed restraint - Whether the writ petition challenging issuance of a Look Out Circular is maintainable before the High Court after cognizance of a prosecution complaint has been taken by the Special Court - HELD THAT: - The Court accepted the respondents' objection that, in view of a supplementary prosecution complaint having been filed and cognizance taken by the Special Court, the High Court should exercise its self imposed restraint and not continue the writ petition. The Court applied the principle that Article 226 jurisdiction is subject to the rule of restraint where an alternate efficacious remedy is available, and found that once the Special Court has cognizance and has issued summons, the appropriate forum to seek cancellation of an LOC is the trial court seized of the case. The Court relied on the precedent in Sumer Singh Salkan and subsequent High Court decisions which treat cancellation of LOCs as falling within the competence of the trial court, analogous to cancellation of NBWs, and noted that the complaint was filed during the pendency of the writ petition such that earlier orders did not negate the present change in circumstance. The petition was therefore closed for want of maintainability and the petitioner relegated to the Special Court for appropriate relief. [Paras 28, 30, 31, 35, 36]

Writ petition dismissed as not maintainable in view of the filing of the prosecution complaint and cognizance by the Special Court; petitioner must approach the Special Court for relief.

Power of trial court to rescind Look Out Circular (LOC) - LOC akin to Non Bailable Warrants (NBW) - Right to travel and its curtailment by administrative measures - Whether the Special Court before which the prosecution complaint is pending can consider and decide an application for withdrawal/cancellation of the LOC and for permission to travel - HELD THAT: - The Court held that the trial court before which the complaint is pending is competent to consider applications for withdrawal of an LOC and for directions permitting travel, observing that issuance of LOCs is akin to issuance of NBWs and that the criminal court's jurisdiction to cancel or affirm LOCs is commensurate with its jurisdiction to cancel NBWs. The High Court declined to examine in the writ petition the validity of the policy OMs under which LOCs are issued because no relief for quashing those OMs had been prayed for. The petitioner was afforded liberty to urge all grounds, including mala fide, before the Special Court and to appear before that Court even prior to the scheduled date of summons. [Paras 31, 34, 36]

Liberty granted to the petitioner to move the Special Court with appropriate application(s) for withdrawal of the LOC and for permission to travel; the Special Court to consider such applications in accordance with law.

Final Conclusion: The writ petition and connected applications are dismissed on maintainability grounds in view of the prosecution complaint and cognizance by the Special Court; the petitioner is granted liberty to approach the Special Court for withdrawal of the LOC and for permission to travel, which the Special Court shall decide in accordance with law.

Offence of money laundering as a stand-alone offence - PMLA proceedings independent of scheduled offence - ECIR not equivalent to FIR - Summons and compulsion powers under Section 50 of PMLA - Burden of proof under Section 24 of PMLA - Overriding effect of PMLA provisions - Quashing jurisdiction under Section 482 Cr.P.C. - abuse of process/miscarriage of justice test

Offence of money laundering as a stand-alone offence - PMLA proceedings independent of scheduled offence - Burden of proof under Section 24 of PMLA - Overriding effect of PMLA provisions - Registration of ECIR/05/HYZO/2014, dated 25.02.2014, by the Enforcement Directorate is legally sustainable. - HELD THAT: - The Court held that the offence under Section 3 of the PMLA is an independent, stand-alone offence and PMLA contains a self-contained code distinct from proceedings in respect of scheduled offences. The definition of "proceeds of crime" is wide and Section 3 criminalises concealment, possession, acquisition, use or projection as untainted property of such proceeds; the offence is a continuing activity. The Court noted the different burdens of proof under Section 24 of PMLA and observed that PMLA provisions have overriding effect. Registration of an ECIR based on predicate agency material is an appropriate step for the Enforcement Directorate to investigate whether the ingredients of Section 3 exist; ECIR and the investigation under PMLA need not await conclusion or charging in the scheduled-offence proceedings. For these reasons the ECIR was held to be legally sustainable and proper for investigation. [Paras 13, 14, 16, 17, 27]

ECIR/05/HYZO/2014 is legally sustainable and its registration by the Enforcement Directorate is not unsupportable in law.

ECIR not equivalent to FIR - Summons and compulsion powers under Section 50 of PMLA - Quashing jurisdiction under Section 482 Cr.P.C. - abuse of process/miscarriage of justice test - The subject ECIR and the ongoing investigation are not liable to be quashed under the inherent jurisdiction of the High Court (Section 482 Cr.P.C.). - HELD THAT: - Applying the established test for exercise of Section 482 jurisdiction, the Court confined itself to whether the uncontroverted allegations prima facie disclose an offence and cautioned against converting itself into a trial court. The Court observed that mere issuance of ECIR or summons under Section 50(3) does not make the person an accused in a PMLA prosecution and that ECIR is not equivalent to an FIR; nevertheless, the existence of detailed allegations, the mode of operation pleaded, the predicate CBI registration and the prima facie material satisfy the threshold required to permit investigation to continue. Given the seriousness and alleged scale of economic fraud affecting a public sector enterprise and the settled position that courts should not stifle PMLA investigations at the initial stage, continuation of the ECIR investigation would not amount to abuse of process and quashing was refused. The interim stay previously granted was vacated and the petition dismissed. [Paras 19, 21, 29, 30, 31]

The Criminal Petition to quash the ECIR and investigation is dismissed; continuation of investigation does not constitute abuse of process and quashing is refused.

Final Conclusion: The High Court refused to quash ECIR/05/HYZO/2014 and dismissed the criminal petition: the Court held that PMLA proceedings are independent and stand-alone, the ECIR registration was legally sustainable, issuance of summons under Section 50 is lawful and not equivalent to an FIR, and continuation of investigation does not amount to abuse of process; the interim relief previously granted was vacated.

Summons issued by Enforcement Directorate - Writ of Mandamus - infructuous disposal of appeal - no interim order - appearance in compliance with summons - liberty to file fresh writ petition - issues left open for adjudication

Summons issued by Enforcement Directorate - appearance in compliance with summons - infructuous disposal of appeal - Whether the writ appeals should be proceeded with after the persons summoned had appeared before the Enforcement Directorate in response to the impugned summons. - HELD THAT: - The Court noted that summons dated 19.11.2014 (in W.P. No. 36838 of 2014 / W.A. No.198 of 2016) and the summons impugned in W.P. No. 31143 of 2015 / W.A. No.199 of 2016 had been complied with by the respective petitioners appearing before the Enforcement Directorate. The Division Bench had expressly declined to grant any interim order at the time of notice and required appearance before the Enforcement Directorate. Given that the principal relief sought in the writ petitions concerned setting aside those summonses, and the petitioners have since appeared as directed, the Court concluded there was no effective relief remaining to be granted in the pending writ appeals and accordingly treated the appeals as infructuous.

W.A. No.198 of 2016 and W.A. No.199 of 2016 disposed of as infructuous.

Issues left open for adjudication - liberty to file fresh writ petition - no interim order - Whether the substantive legal questions raised in the writ petitions were finally adjudicated by this Court. - HELD THAT: - The Court made clear that it has not decided the substantive legal issues raised in the writ petitions and has not passed any adverse order against the appellants. All legal questions were left open for adjudication by the appropriate forum. Consequently, the Court granted liberty to the appellants to file a fresh writ petition if they remain aggrieved, preserving their right to seek relief and ensuring that non-decision on merits does not bar future proceedings.

Substantive issues left open; appellants granted liberty to file a fresh writ petition.

Final Conclusion: Both appeals disposed of as infructuous because the persons summoned had appeared before the Enforcement Directorate; no substantive adjudication was made and appellants are granted liberty to initiate fresh proceedings if aggrieved; miscellaneous applications closed and no order as to costs.

Limitation - condonation of delay - statutory bar on extension of limitation beyond prescribed period - exclusion of period for computation of limitation due to COVID-19 - binding effect of Supreme Court orders under Article 141 - remand for adjudication on merits

Limitation - condonation of delay - statutory bar on extension of limitation beyond prescribed period - Whether the Commissioner (Appeals) was justified in rejecting the appeal as barred by limitation. - HELD THAT: - The Tribunal examined the statutory scheme under which the Commissioner (Appeals) has power to condone delay only up to thirty days beyond the normal two month period and noted the binding precedent relied upon by the Commissioner (Appeals) that excludes the applicability of Section 5 of the Limitation Act for further condonation. Applying those principles, the Tribunal observed that, on the face of the statutory mandate and precedent, the Commissioner (Appeals) correctly applied the legal position relating to the maximum permissible condonation period. However, the Tribunal proceeded to consider intervening sovereign measures and judicial directions issued in consequence of the COVID 19 pandemic which affected computation of limitation periods. [Paras 7, 8]

While the statutory position limits condonation to thirty days beyond two months, the Tribunal held that subsequent executive and judicial orders excluding specified pandemic periods from limitation computation altered the operative limitation dates in this case.

Exclusion of period for computation of limitation due to COVID-19 - binding effect of Supreme Court orders under Article 141 - remand for adjudication on merits - Whether the appeal filed on 25.09.2020 was within time after applying the COVID 19 related exclusions and, if so, the appropriate course of action. - HELD THAT: - The Tribunal accepted that the Tax Department's Ordinance extending due dates and the Supreme Court's order excluding the period from 15.3.2020 to 28.2.2022 from computation of limitation apply to proceedings before quasi judicial authorities. Applying those exclusions to the dates relevant to the present appeal, the Tribunal found that the appeal filed on 25.09.2020 fell within the extended/ excluded period and therefore was not time barred. In view of that conclusion the Tribunal held that the Commissioner (Appeals) erred in rejecting the appeal solely on limitation grounds and directed that the appeal be remanded for fresh adjudication on merits without entertaining the plea of limitation. [Paras 8, 9]

The appeal was held to be within time after applying the COVID 19 exclusions and is remanded to the Commissioner (Appeals) for decision on merits, excluding limitation as a ground.

Final Conclusion: The impugned order rejecting the appeal as barred by limitation is set aside; the appeal is allowed by way of remand to the Commissioner (Appeals) for adjudication on merits (limitation not to be considered), with the matter directed to be decided preferably within four months.

Jurisdiction of Appellate Tribunal - refund/rebate on exportation of goods - rebatability under Notification No. 41/2012-ST - appeal bar under the first proviso to Section 35B - revision under Section 35EE of the Central Excise Act, 1944 - appeal jurisdiction under Section 86 of the Finance Act, 1994

Jurisdiction of Appellate Tribunal - refund/rebate on exportation of goods - appeal bar under the first proviso to Section 35B - revision under Section 35EE of the Central Excise Act, 1944 - Whether the Appellate Tribunal has jurisdiction to entertain appeals against Commissioner (Appeals) orders rejecting refund/rebate claims of SBC and KKC in respect of ATF exported as goods. - HELD THAT: - The Tribunal held that the refund/rebate claims arose from exportation of goods (ATF) under Notification No.41/2012 ST and thus fall within the appeal regime applicable to exportation of goods. The first proviso to Section 35B excludes jurisdiction of the Appellate Tribunal in cases of rebate of duty of excise on exportation of goods, so appeals to the Tribunal are barred. Consequently, the statutory remedy is by way of revision under Section 35EE before the Central Government (as made applicable), and not by appeal to the Tribunal under Section 86. The Commissioner (Appeals) had also directed the appellants to seek remedy before the Joint Secretary under Section 35EE. On these grounds the preliminary objection as to lack of jurisdiction was upheld and the appeals were found not maintainable before the Tribunal.

The Tribunal lacks jurisdiction to hear the appeals; the appeals are dismissed as not maintainable and the appellants may pursue revision under Section 35EE.

Final Conclusion: Appeals dismissed for want of jurisdiction of the Appellate Tribunal in respect of rebate/refund claims arising from exportation of goods; appellants are at liberty to pursue the statutory revision remedy under Section 35EE.

Validity of show cause notice - Rule 24A - return of seized records and time-limit for return - Natural justice - right to peruse seized documents and to take copies - Section 11A - invocation of extended period of limitation (mixed question of law and fact) - Adjudication procedure - timelines for perusal, reply and completion of adjudication

Validity of show cause notice - Challenge to the show cause notice was rejected and the writ court's dismissal affirmed. - HELD THAT: - The High Court held that the challenge to the show cause notice was rightly rejected by the learned Writ Court and therefore that part of the impugned order is affirmed. The Court observed that the appellants, having approached the Court on multiple occasions and having secured directions for a speaking order, cannot at this stage successfully assail the issuance of the show cause notice. The Court therefore found no ground to quash or interfere with the show cause notice itself. [Paras 6, 10]

The order rejecting the challenge to the show cause notice is affirmed.

Rule 24A - return of seized records and time-limit for return - Appellants cannot now invoke the 30 day return period under Rule 24A as a ground for relief; return of documents was not ordered at this stage. - HELD THAT: - The Court held that it was too late for the appellants to rely on the 30 day time-limit in Rule 24A because the appellants themselves had repeatedly approached the Court and had obtained directions, including directions resulting in the speaking order dated 28th January, 2022. In view of those proceedings and the fact that adjudication has not yet commenced, the Court declined to order return of the seized documents at this stage. The proviso to Rule 24A requiring an order of the Principal Commissioner/Commissioner to retain documents was noted but the Court refrained from directing outright return given the procedural posture. [Paras 7, 11]

The contention based on the 30 day return period under Rule 24A is rejected and the relief for return of documents is not granted at this stage.

Natural justice - right to peruse seized documents and to take copies - Adjudication procedure - timelines for perusal, reply and completion of adjudication - Appellants shall be permitted to peruse the documents relied upon in the show cause notice and to take photostat copies at their cost; specific timelines for perusal, filing reply and completion of adjudication were directed. - HELD THAT: - While refusing to order return of documents, the Court held that principles of natural justice require that the appellants be given effective opportunity to inspect the documents relied upon in the show cause notice and the impugned order. The Court directed that the authorised representative be allowed to peruse all documents referred to in the show cause notice and the order dated 28th January, 2022, with permission to take photostat copies at appellants' cost. The Court prescribed procedural timelines: 10 clear days' time for perusal in the respondent's office during working hours; 15 days thereafter to file reply to the show cause notice; and completion of adjudication within 45 days from receipt of the reply, after affording personal hearing to the authorised representative. [Paras 9, 11, 12]

Authorised representative to peruse documents and take copies at appellants' cost; 10 days for perusal, 15 days to file reply thereafter, and adjudication to be completed within 45 days of receipt of reply after personal hearing.

Section 11A - invocation of extended period of limitation (mixed question of law and fact) - Applicability of the extended period under Section 11A is a mixed question of law and fact left to be agitated and decided during the adjudication; not decided on merits by this Court. - HELD THAT: - The Court observed that whether the department is entitled to invoke the extended period under Section 11A is not a pure question of law but a mixed question of law and fact. Consequently, the Court declined to decide the applicability of Section 11A at this stage and held that the appellants must raise and contest that issue while submitting their reply to the show cause notice and during the adjudication process. The matter was therefore left open for determination by the adjudicating authority after considering factual materials and submissions. [Paras 8]

Question of applicability of Section 11A not adjudicated; appellants may agitate it while replying to the show cause notice and it is to be decided in the adjudication.

Final Conclusion: Appeal partly allowed in procedural respects: the writ court's rejection of the challenge to the show cause notice is affirmed; return of seized documents is not ordered, but the authorised representative is permitted to peruse and take photostat copies of documents relied upon in the show cause notice (10 days for perusal; 15 days to file reply thereafter) and the adjudicating authority shall complete adjudication within 45 days of receipt of the reply after affording personal hearing. The question of applicability of Section 11A is left open for adjudication.

Penalty under Rule 26 of Central Excise Rules, 2002 - Validity of penalty for issuing false or fabricated invoices - Reliance on third party evidence and requirement of corroboration - Admissibility of transporter evidence and lorry receipts as proof - Effect of admission by the purchaser on proof of fraudulent availment of CENVAT credit

Validity of penalty for issuing false or fabricated invoices - Admissibility of transporter evidence and lorry receipts as proof - Effect of admission by the purchaser on proof of fraudulent availment of CENVAT credit - Penalty imposed on M/s. Jain Ispat is sustainable and is upheld. - HELD THAT: - The adjudicating authority's finding that lorry receipts recovered from M/s. Jain Ispat were fabricated was sustained by contemporaneous evidence, including denial by the named transporter that it had conveyed the goods shown in those receipts. The tribunal noted that M/s. ASL's director had given admissions on record regarding stock shortages and purchases, and those admissions were neither withdrawn nor retracted; admissions therefore required no further proof. The adjudicating authority considered the recovered documents, the falsity of the lorry receipt details, and the scheme by which such documents assisted M/s. ASL in availing CENVAT credit. The appellants failed to produce witnesses for cross examination or other evidence to rebut the transporter's denial and the objective link between the fabricated receipts and fraudulent availment of credit was found established. On this basis the imposition of penalty on M/s. Jain Ispat was held to be justified. [Paras 7, 8]

Penalty of Rs. 10,00,000 imposed on M/s. Jain Ispat is upheld; appeal dismissed.

Penalty under Rule 26 of Central Excise Rules, 2002 - Reliance on third party evidence and requirement of corroboration - Penalty imposed on M/s. K G Ispat is unsustainable and is set aside. - HELD THAT: - No search or recovery was made from M/s. K G Ispat's premises and the material relied upon consisted essentially of documents recovered from M/s. ASL and third party statements. The tribunal observed that third party evidence alone, without corroborative material from the supplier's records or technical/chemical verification where relevant, is insufficient to fasten penal liability. Specific factual assertions by the director of M/s. K G Ispat about the nature of supplied ingots were not falsified by any chemical report or technical analysis. In the absence of direct evidence or corroborative recoveries from M/s. K G Ispat, the penalty could not be sustained. [Paras 9, 10, 11]

Penalty of Rs. 10,00,000 imposed on M/s. K G Ispat is set aside; appeal allowed.

Final Conclusion: The tribunal affirmed the penalty on M/s. Jain Ispat based on fabricated lorry receipts, transporter denial and unwithdrawn admissions by M/s. ASL, and set aside the penalty on M/s. K G Ispat for lack of corroborative evidence and reliance only on third party material.

Statements recorded under Section 14 admissible only if witness is produced and cross-examined under Section 9D - Principles of natural justice - right to cross-examination - Vitiation of adjudication for failure to allow cross-examination on remand - Evidence from third-party records requires identification of author and independent corroboration - Stock verification requires contemporaneous weighment or documentary corroboration and cannot rest on unsupported oral estimation

Statements recorded under Section 14 admissible only if witness is produced and cross-examined under Section 9D - Principles of natural justice - right to cross-examination - Vitiation of adjudication for failure to allow cross-examination on remand - Whether statements and third party records relied upon by Revenue in remand proceedings could be acted upon when cross examination of the authors/witnesses was not allowed as directed by Commissioner (Appeals). - HELD THAT: - The Tribunal found that Commissioner (Appeals) had remanded the matter with direction to provide documents and permit cross examination. On remand the adjudicating authority refused to allow cross examination of investigating officers, panchas and other witnesses. In view of settled law, including the Supreme Court decision relied upon, statements recorded under Section 14 become admissible evidence for the purpose of fastening duty only if the person is examined and cross examined under Section 9D. The adjudicating authority's refusal to permit cross examination, without acceptable reasons and contrary to remand directions, amounted to violation of the principles of natural justice and judicial discipline. Consequently the statements and attendant third party records used to sustain the duty demand could not be relied upon and the remand proceedings were vitiated in the facts of this case. [Paras 4]

Statements and third party records relied upon in remand, in absence of cross examination as mandated, are inadmissible and their use vitiates the duty demand.

Stock verification requires contemporaneous weighment or documentary corroboration and cannot rest on unsupported oral estimation - Evidence of third-party documents requires identification and independent corroboration - Whether the duty demand arising from alleged shortage of finished goods found at time of search (3.275 MT) was sustainable. - HELD THAT: - The Tribunal examined the panchnama and weighbridge documentation and found that the alleged weighment records were not contemporaneous with the search and did not corroborate the stock figure relied upon. The shortage figure was based on an oral statement of an employee which was not supported by proper weighment slips or counting slips and the employee was not made available for cross examination. Judicial authority requires stock taking to be supported by material evidence; mere eye estimation or unsupported representative statements are insufficient. On this basis the demand founded on the alleged shortage could not be sustained. [Paras 4]

Demand on account of alleged shortage of finished goods is not sustainable for want of proper contemporaneous weighment or documentary corroboration.

Final Conclusion: The Tribunal set aside the total excise duty demand of Rs. 13,53,968/-, and the consequential interest and penalties, holding that the remand adjudication was vitiated by denial of cross examination and that the shortage based demand lacked requisite corroboration; the appeals are allowed with consequential reliefs in accordance with law.

Manufacture - excisable goods / non-excisable goods - process of manufacture - by-product / waste - CENVAT credit - Rule 6 of CENVAT Credit Rules, 2004 - marketability not sufficient for exigibility - remand for fresh adjudication

Manufacture - excisable goods / non-excisable goods - process of manufacture - marketability not sufficient for exigibility - Whether the various categories of scrap sold by the appellant are excisable goods liable to Central Excise duty. - HELD THAT: - The Tribunal examined the nature of the listed scrap and held that these items are not produced by deliberate treatment, labour or manipulation in the appellant's manufacturing process and are largely leftovers of packing material, worn-out furniture or consumables of the premises. Excise is leviable on manufacture and not merely on sale; manufacture requires a process effecting transformation into a new and distinct article. Therefore goods must satisfy the conjoint tests of being within the tariff and being manufactured in the terms of the charging provisions. Applying these principles to the scrap described, the Tribunal concluded they are non-manufactured and hence non-excisable. Reliance on their marketability alone does not render them exigible to excise duty. [Paras 7, 8, 9, 10, 12]

The scrap items in question are non-excisable (non-manufactured) and not liable to Central Excise duty.

Rule 6 of CENVAT Credit Rules, 2004 - by-product / waste - CENVAT credit - Whether Rule 6 CCR, 2004 or departmental circulars require reversal or make the scrap exigible where the scrap is non-manufactured/waste. - HELD THAT: - The Tribunal referred to the statutory scheme and relevant decisions and held that Rule 6 and its Explanation do not deem non-manufactured goods as excisable goods. The Tribunal also relied on precedents and departmental circulars clarifying that wastes and by-products which are non-excisable cleared for consideration should be treated like exempted goods for the purpose of credit reversal. Given the nature of the scrap as non-manufactured waste, the provisions cited do not support imposition of duty. [Paras 10, 11, 12]

Rule 6 CCR, 2004 and the departmental circulars do not make the non-manufactured scrap exigible nor justify demand for duty or reversal in the circumstances.

Remand for fresh adjudication - reliance on invoices - Whether the matter should be remanded to the Commissioner (Appeals) for production/verification of invoices and fresh adjudication regarding the differential duty claimed on certain scrap. - HELD THAT: - The Department had relied on absence of invoices to sustain the demand and sought remand. The Tribunal found that the excisability question depends on the nature of the scrap and not on production of invoices; having determined the scrap to be non-excisable, remand for invoices was unnecessary. The Tribunal therefore rejected the Department's request for remand and held that reliance on invoices was neither proper nor required to decide excisability. [Paras 5, 12]

Request for remand is refused; reliance on invoices is not necessary and the demand cannot be sustained.

Final Conclusion: The appeal is allowed: the confirmed duty demand in respect of the specified scrap is set aside as the scrap are non-manufactured and non-excisable; Rule 6 CCR and departmental circulars do not render them exigible; remand to ascertain invoices is refused and the impugned order is quashed.

Cenvat credit admissibility and verification of supporting documents - Reliance on Range Superintendent's verification report - Remand for verification of documents - Service Tax reverse charge - liability where payment not made and invoice not issued in assessee's favour - Penalty under Rule 26 of the Central Excise Rules, 2002 - imposition on director for non production of documents - Departmental appeal against reduction/drop of demand

Cenvat credit admissibility and verification of supporting documents - Remand for verification of documents - Whether the confirmed demand of Cenvat credit of Rs. 2,36,08,399/- required fresh verification and whether the matter should be remitted to the adjudicating authority for verification of documents in possession of the Appellant. - HELD THAT: - The Tribunal found that the central controversy related to production and verification of original documents/invoices for claimed Cenvat credit. The Appellant produced certified input credit registers and sample invoices before the Tribunal and the Range Superintendent had earlier conducted an independent verification and filed a report. Given that documents which the Appellant says are in its possession were not considered transparently in the adjudication, the Tribunal directed remand limited to verification of documents insofar as they relate to the confirmed demand of Rs. 2,36,08,399/-. Sufficient time and opportunity were to be afforded to the Appellant and the exercise was directed to be completed within 90 days from receipt of the order. [Paras 17]

Remanded to the adjudicating authority for verification of documents in respect of the confirmed Cenvat credit demand of Rs. 2,36,08,399/- with direction to complete the exercise within 90 days.

Service Tax reverse charge - liability where payment not made and invoice not issued in assessee's favour - Whether the Service Tax demand under reverse charge on legal fees could be sustained where the Appellant did not make payment to the advocate and the invoice was not issued in the Appellant's favour. - HELD THAT: - On examination of the appeal record, the Tribunal noted that the bank had debited charges but the Appellant had not made payment to the advocate and the advocate's invoice was not issued in the Appellant's name. In these circumstances the reverse charge demand could not be sustained, since the invoice and payment evidence did not establish the asserted liability under reverse charge. [Paras 17]

Demand of Service Tax on the legal charges is not sustainable and is set aside.

Penalty under Rule 26 of the Central Excise Rules, 2002 - imposition on director for non production of documents - Whether imposition of penalty on the Director under Rule 26 of the Central Excise Rules, 2002 was justified for non production of documents. - HELD THAT: - The Tribunal held that the case concerned non production of documents by the assessee before the Department and did not involve an allegation of availment of Cenvat credit without receipt of goods or services. Since the essential ingredients for imposing penalty under Rule 26 - as applied by the adjudicating authority - were not established, imposition of the penalty on the Director was unjustified. Consequently the penalty was set aside with consequential relief as per law. [Paras 18]

Penalty imposed on the Director under Rule 26 is set aside.

Reliance on Range Superintendent's verification report - Departmental appeal against reduction/drop of demand - Whether the Department's appeal against the adjudicating authority's decision to drop a portion of the Cenvat credit demand (Rs. 33,41,12,047/-) on the basis of the Range Superintendent's verification report merited interference. - HELD THAT: - The Tribunal examined the challenge that the adjudicating authority had merely relied on the Range Superintendent's report without independent verification. The record showed the Superintendent had examined over 17,000 pages, taken photocopies, and reported verification of invoices and accompanying transport documents. The Show Cause Notice had not disputed receipt of goods/services and the assessee had been regularly paying excise duty. The Tribunal found the Department's objection to be speculative and devoid of corroborative evidence; accordingly the departmental appeal lacked merit and was dismissed. [Paras 15, 19]

Departmental appeal challenging the dropping of part of the Cenvat credit demand is dismissed.

Final Conclusion: The Tribunal remanded the adjudication limited to verification of documents for the reduced confirmed Cenvat credit demand, set aside the Service Tax reverse charge demand and the penalty on the Director, and dismissed the Department's appeal against the dropping of the larger portion of the Cenvat credit demand.

Manner of distribution of credit by input service distributor - Input service distributor - Restriction on distribution: credit not exceeding service tax paid and not attributable to services used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services - Refund claim under Section 11B - limitation exception for amounts paid under protest - Unjust enrichment in refund claims - Rule 14 as the remedy for expunging CENVAT credit from books of account

Manner of distribution of credit by input service distributor - Input service distributor - Restriction on distribution: credit not exceeding service tax paid and not attributable to services used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services - Validity of denying CENVAT credit to a unit on the ground that the input service was used in another unit when credit was distributed by the input service distributor under the rules prevailing prior to 2012. - HELD THAT: - The Tribunal applied the rule as it existed at the material time and the decision in ECOF Industries (affirmed by the Karnataka High Court) to hold that Rule 7 then imposed only two limitations on distribution: (i) the credit distributed should not exceed the service tax paid on the document; and (ii) credit attributable to services used in a unit exclusively engaged in manufacture of exempted goods or providing exempted services shall not be distributed. There was no rule-based prohibition on distributing credit accrued in respect of services used at one unit to another unit of the same input service distributor. Consequently, denial of credit to the appellant on the ground that the underlying services pertained to another unit was not sustainable. The Tribunal noted that even after the 2012 amendment the total distributable credit remained the same and, if credit is to be disallowed at one unit, the input service distributor should have been directed to redistribute the credit to the unit(s) legitimately entitled to it. The proper mode to expunge credit from books is under Rule 14 of the Cenvat Credit Rules, not by ad hoc denial under the pre-2012 Rule 7 interpretation.

Credit distributed by an input service distributor prior to 2012 could not be denied to the appellant merely because the underlying service was used in another unit; the impugned denial was set aside and appeal allowed.

Refund claim under Section 11B - limitation exception for amounts paid under protest - Unjust enrichment in refund claims - Whether the appellant's refund claim filed after debiting the disputed credit under protest was liable to be rejected on grounds of limitation or unjust enrichment. - HELD THAT: - The Tribunal held that the Revenue's grounds of limitation and unjust enrichment could not sustain rejection because those grounds were not raised by the original authority. More importantly, Section 11B expressly provides that the one year limitation does not apply where duty (or equivalent) has been paid under protest; therefore the refund claim could not be denied on limitation. Regarding unjust enrichment, the Tribunal observed that the distributed credit, if not admissible to one unit, might be admissible to another unit of the same distributor and that the correctness of distribution between sister units did not render the claim liable to be rejected for unjust enrichment without appropriate proceedings; hence the Revenue's contention on unjust enrichment did not carry the case forward.

Refund claim could not be rejected on the grounds of limitation or unjust enrichment; such grounds did not justify denial of the refund.

Rule 14 as the remedy for expunging CENVAT credit from books of account - Whether a debit entry made under protest and communication by audit could be treated as an appealable order or justify expunging credit without following prescribed procedure. - HELD THAT: - The Tribunal held that the debit made under protest and audit communication could not be equated to an appealable order and that credit cannot be expunged from books except by following the procedure provided in Rule 14 of the Cenvat Credit Rules. The appellant had reversed the credit under protest and pursued a refund claim; that course did not convert the debit or audit communication into an order permitting summary denial of the refund.

The contention that the debit under protest or audit communication amounts to an appealable order or permits summary expungement of credit was rejected.

Final Conclusion: The impugned order rejecting the refund claim was set aside. The Tribunal allowed the appeal, holding that under the law prevailing prior to 2012 the distribution of input service credit by an input service distributor was not restricted by the location of use of the service among its units (subject only to the two limits in Rule 7), that the refund could not be denied on limitation or unjust enrichment grounds where payment was made under protest, and that the proper procedure (including Rule 14) must be followed to expunge CENVAT credit from books.

Eligibility of Cenvat credit for input services (loading services) - Requirement of physical receipt of goods in factory for claiming input service credit - Input Service Distributor (ISD) invoices - Refund of input service under Rule 5 of the CENVAT Credit Rules, 2004 - Limitation and extended period; fraud or suppression exception

Eligibility of Cenvat credit for input services (loading services) - Requirement of physical receipt of goods in factory for claiming input service credit - Input Service Distributor (ISD) invoices - Credit of service tax paid on loading services availed through ISD invoices was correctly claimable even though the goods in respect of which the loading services were rendered were not physically received in the assessee's factory. - HELD THAT: - The Tribunal found that denial of Cenvat credit was premised solely on the ground that the goods for which loading services were taken did not reach the factory. The Credit Rules do not prescribe physical receipt of goods in the factory as a condition for availing credit of input services. The authorities below therefore took an erroneous view in treating non-receipt of goods as barring the credit. Although the alternative course of claiming refund under Rule 5 was available where services related to exported goods, the assessee had availed credit under the Credit Rules for meeting output excise liability on clearances from the factory. On these facts, there was no reason to deny the credit claimed. [Paras 5]

Denial of Cenvat credit for loading services on the ground that the goods were not received in the factory was reversed and credit was allowed.

Limitation and extended period; fraud or suppression exception - The demand raised by invoking the extended period of limitation was unsustainable in the absence of evidence of fraud or suppression; therefore the demand is barred by limitation. - HELD THAT: - The Show Cause Notice invoking the extended period was issued in August 2016. Apart from a general assertion, the authorities did not demonstrate any fraud or suppression by which the extended period could be sustained. In view of the lack of such evidence, the impugned demand based on extended limitation was held to be time-barred. [Paras 6]

The demand founded on invocation of the extended period of limitation was held barred and not sustainable.

Final Conclusion: The appeal is allowed: Cenvat credit of service tax paid on loading services availed through ISD invoices is permitted despite the goods not being physically received in the factory, and the demand raised invoking extended limitation is barred in the absence of proof of fraud or suppression; consequential relief, if any, follows.

Judicial review of administrative decision on retention of seized documents - discretion of investigating authority in determining relied and non-relied documents - return of non-relied documents under Rule 24A - constructive res judicata - Order 2 Rule 2 CPC - plea preclusion

Judicial review of administrative decision on retention of seized documents - return of non-relied documents under Rule 24A - Whether the impugned order dated 28th January, 2022 releasing non-relied documents requires interference by this Court. - HELD THAT: - The Court considered the history of two earlier writ petitions which had directed return of documents not relied upon and observed that the respondent acted in compliance of the direction by issuing the order dated 28th January, 2022 and returning the non-relied documents referred to therein. The Court held that it is not the function of the writ jurisdiction to determine which seized documents must be treated as relied or non-relied in the course of investigation; that classification and retention of documents for investigation is within the discretion of the investigating authority. Having regard to compliance with the earlier direction and the admitted return of the non-relied documents, the Court found no ground to interfere with the impugned order.

The impugned order dated 28th January, 2022 does not require interference and the petition is dismissed insofar as it challenges that order.

Constructive res judicata - Order 2 Rule 2 CPC - plea preclusion - Whether the petitioner may raise in the third writ petition grievances based on facts or allegations that existed at the time of the earlier petitions. - HELD THAT: - The Court noted that grievances or causes of action which were in existence at the time of the first and second writ petitions cannot be re-agitated in the subsequent petition. Applying the principles of Order 2 Rule 2 CPC and constructive res judicata, the Court held that the petitioner is precluded from raising those earlier facts or allegations in the present writ petition. Consequently, the Court declined to entertain such revived or repeated challenges.

Claims based on facts existing at the time of earlier petitions are barred by constructive res judicata and Order 2 Rule 2 CPC and cannot be entertained in the present petition.

Final Conclusion: Writ petition dismissed; impugned order of 28th January, 2022 upheld as not requiring interference, subject to the petitioner being free to pursue any alternative remedy available under law.

Classification of goods for sales tax - Deduction for trade discount - Enhancement of turnover for purchase suppression/fraud - proportionality of multiplier - Adjustment of tax paid at check-post against admitted tax - requirement of goods to be specified in Registration Certificate

Classification of goods for sales tax - Whether 'huggies' (diapers) are classifiable as 'Hosiery goods and Readymade garments' and exigible to 4% sales tax. - HELD THAT: - The Court examined the nature and commercial understanding of the product 'huggies' and rejected the submission that they are 'readymade garments' even if worn as under garments. Noting the Tribunal's concurrence with the Assistant Commissioner and the comparison drawn with sanitary napkins treated under the residual entry at higher rate, the Court held that diapers cannot properly be classified as 'Hosiery goods and Readymade garments'. Accordingly, the Tribunal was justified in upholding the ACST's classification attracting the higher rate. [Paras 5]

Answered in favour of the Department and against the Assessee; Tribunal justified in upholding the ACST's classification.

Deduction for trade discount - Whether deduction for trade discount claimed by the Assessee should have been allowed. - HELD THAT: - The Tribunal accepted the Assessee's plea on the claim for deduction of trade discount but in its operative portion upheld the STO's denial, an internally inconsistent outcome. Reliance was placed by the Assessee on a Supreme Court decision supporting allowance of such deduction. Given the Tribunal's acceptance of the plea but contradictory operative finding, the Court found the Tribunal was not justified in upholding the denial of the trade discount and answered the question in favour of the Assessee. [Paras 6, 7]

Answered in favour of the Assessee and against the Department; deduction for trade discount should not have been denied.

Enhancement of turnover for purchase suppression/fraud - proportionality of multiplier - Whether enhancement of turnover by ten times on account of alleged purchase suppression (fraud) was justified. - HELD THAT: - The Court considered that explanation for one container among 45 branch-transfer consignments was not furnished despite opportunities. While the Assessing Officer treated the matter as 'fraud' and enhanced turnover tenfold, the Court found that a tenfold enhancement may be disproportionate. Exercising supervisory jurisdiction, the Court modified the enhancement multiplier from ten times to five times as a proportionate measure. [Paras 8]

Enhancement reduced from ten times to five times; question answered accordingly.

Adjustment of tax paid at check-post against admitted tax - requirement of goods to be specified in Registration Certificate - Whether tax paid at the check-post on tricycle, freezer, pushcart and stabilizer could be adjusted against admitted tax payable by the dealer where those items were not specified in the Registration Certificate. - HELD THAT: - The Assessee relied on the proviso to Rule 36 permitting adjustment of tax paid at check-posts. The Department relied on the statutory requirement that the goods dealt with must be incorporated in the Registration Certificate. The Court observed that the RC did not specifically incorporate the four items, and unless such items are specified in the RC the proviso will not be attracted. Consequently, the Court upheld the findings of the AO, ACST and Tribunal refusing the adjustment. [Paras 10]

Answered against the Assessee and in favour of the Department; adjustment rightly refused as items were not specified in the RC.

Final Conclusion: The revision petition is disposed of: classification of 'huggies' upheld in favour of the Department; trade discount deduction allowed in favour of the Assessee; turnover enhancement reduced from ten times to five times; adjustment of check-post tax refused as the items were not specified in the Registration Certificate.

Error apparent on the face of the record - power of rectification - rectification under section 66 of the Kerala Value Added Tax Act, 2003 - principles of natural justice - opportunity of hearing - scope of judicial review under Article 226

Error apparent on the face of the record - power of rectification - rectification under section 66 of the Kerala Value Added Tax Act, 2003 - Whether the assessing officer's rejection of the rectification petition was vitiated because the alleged errors were 'apparent on the face of the record' within the scope of section 66. - HELD THAT: - The Court considered the statutory ambit of section 66 and the authoritative dicta that an 'error apparent on the face of the record' is one which is apparent on a mere looking at the record and not one that requires long-drawn reasoning or contentious factual inquiry. Reliance was placed on established principles that rectification power does not extend to correcting errors which can be shown only after elaborate argument, investigation or where reasonable differences of opinion exist. Applying that test, the High Court observed that the assessing officer had addressed the specific contentions raised in the rectification application and that the correctness of his conclusions involved debatable questions and factual/appreciative exercise properly amenable to statutory remedies. Where the view taken by the assessing officer is plausible, it does not amount to an error amenable to rectification under section 66, and such conclusions cannot be disturbed under Article 226 in the absence of perversity. [Paras 12, 13, 14, 15, 16]

The rejection of the rectification petition did not constitute an error apparent on the face of the record and was not liable to be set aside under Article 226.

Principles of natural justice - opportunity of hearing - rectification under section 66 of the Kerala Value Added Tax Act, 2003 - Whether the impugned rectification order offended principles of natural justice by not affording a hearing to the petitioner. - HELD THAT: - The Court noted the proviso to section 66 which mandates notice and a reasonable opportunity of hearing only where rectification would have the effect of enhancing an assessment or penalty. The petitioner had not sought a personal hearing in the rectification application, and the application itself sought relief favorable to the petitioner rather than enhancement. In these circumstances there was no statutory obligation to grant a hearing, and the non-grant did not amount to a breach of natural justice. The Court observed that the position might have differed had the petitioner expressly sought a hearing. [Paras 5, 17, 19]

No violation of principles of natural justice occurred in the impugned order as no hearing was requested and the statutory requirement for hearing was not triggered.

Final Conclusion: The writ petition is dismissed: the High Court held that the assessing officer's refusal to rectify the assessment did not involve an error apparent on the face of the record and that there was no breach of natural justice since no hearing was requested and no enhancement was contemplated; the petitioner retains statutory remedies against the impugned order.

Principles of natural justice - opportunity of hearing in assessment under section 25(1) - assessment to the best of judgement - fresh assessment after opportunity of hearing

Principles of natural justice - opportunity of hearing in assessment under section 25(1) - Assessment order passed without affording a further opportunity of personal hearing after the assessee filed objections was in breach of the principles of natural justice and liable to be set aside. - HELD THAT: - The assessing officer's order records that an opportunity to file written objections and for personal hearing was fixed for 03.03.2021 and adjourned to 10.03.2021, on which date the assessee filed its reply and also sought personal hearing. Thereafter no further opportunity of hearing was granted and the assessing officer proceeded to decide the matter on merits. This Court relied on earlier observations that after receipt and consideration of the assessee's reply, if the assessing officer is not satisfied with the explanation, a reasonable opportunity of being heard must be afforded before making an assessment under section 25(1). Applying that principle to the facts, the Court found that the request for personal hearing was not considered and the failure to grant an opportunity amounted to infringement of natural justice, requiring interference. [Paras 5, 7, 9, 10]

Impugned assessment order set aside for breach of natural justice.

Fresh assessment after opportunity of hearing - assessment to the best of judgement - Matter remitted to the Assessing Officer to pass fresh assessment orders after granting an opportunity of hearing to the petitioner within a specified time frame. - HELD THAT: - While the assessment was set aside for want of a hearing, the Court directed that in the interest of justice the assessing officer should reconsider and pass fresh orders of assessment. The reassessment is to be carried out in a time-bound manner after affording the petitioner the opportunity of hearing which was earlier denied, thereby enabling the officer to proceed to determine tax to the best of his judgment with the parties heard. [Paras 10, 11]

Assessing Officer directed to pass fresh assessment after granting an opportunity of hearing to the petitioner within three months from receipt of copy of the judgment.

Final Conclusion: Writ petition allowed: the impugned assessment order is set aside for breach of natural justice and the assessing officer is directed to pass fresh assessment orders after affording the petitioner an opportunity of hearing within three months.

Maintainability of writ petition challenging assessment order - remedy by statutory appeal - exercise of discretion to refuse writ where alternative remedy exists - opportunity of personal hearing - failure to seek adjournment and non-appearance - jurisdictional challenge to show cause notice

Maintainability of writ petition challenging assessment order - remedy by statutory appeal - exercise of discretion to refuse writ where alternative remedy exists - Whether the learned Single Judge was correct in dismissing the writ petition and directing the appellant to avail the statutory appellate remedy instead of entertaining the writ on merits. - HELD THAT: - The Court found that the dispute related to computation and determination of tax and that alternative statutory remedy in the form of an appeal was available. The appellant had been issued a second show cause notice and a date for personal hearing; they did not appear nor seek an adjournment. In these circumstances the learned Single Judge rightly declined to adjudicate the contested tax assessment on merits and directed the appellant to challenge the assessment before the Appellate Commissioner. The Court declined to interfere with that exercise of discretion. [Paras 8]

The dismissal of the writ petition and direction to agitate the grievance by way of statutory appeal was upheld.

Opportunity of personal hearing - failure to seek adjournment and non-appearance - jurisdictional challenge to show cause notice - Whether the appellant's contention that the assessment was passed without enquiry or consideration of earlier replies and that the issuing authority acted without jurisdiction required interference by this Court. - HELD THAT: - The Court examined the record and noted that a personal hearing was fixed and that the appellant did not avail the hearing or seek an adjournment; therefore the assessing authority proceeded to pass the assessment. Although the appellant raised jurisdictional objections and alleged that earlier replies were ignored and that there was inordinate delay, the Court recorded that these factual and evidentiary contentions were matters appropriately examinable by the appellate authority in the statutory appeal rather than by writ jurisdiction in the present circumstances. [Paras 8]

The jurisdictional and factual complaints were not entertained in this writ appeal and were left to be canvassed before the appellate authority.

Remedy by statutory appeal - exercise of discretion to refuse writ where alternative remedy exists - Whether the appellant should be granted additional time to file the statutory appeal and whether the appellate authority should be directed to decide the appeal within a stipulated period. - HELD THAT: - Although the writ appeal was dismissed, the Court exercised its supervisory power to grant the appellant an extension of time to file the statutory appeal. The Court directed that if the appeal is filed within the extended period it shall be considered on merits and in accordance with law, and directed the Appellate Authority to dispose of the appeal within three months thereafter. [Paras 8]

Four weeks' time granted to file the statutory appeal; appellate authority directed to decide the appeal on merits within three months.

Final Conclusion: Writ appeal dismissed; the appellant is granted four weeks to file the statutory appeal before the Appellate Authority, which is directed to decide the appeal on merits and in accordance with law within three months.

Willful defaulter - show-cause notice - RBI Master Circular dated July 1, 2014 - Wilful Defaulter Committee - prima facie examination - representation before committee - Transaction Audit Report - prematurity of challenge at show-cause stage

Prematurity of challenge at show-cause stage - willful defaulter - Wilful Defaulter Committee - representation before committee - Maintainability of writ challenge to issuance of a show-cause notice alleging willful default at the stage prior to adjudication by the Wilful Defaulter Committee. - HELD THAT: - The court held that a writ petition impugning the mere issuance of a show-cause notice under Clause 3(b) of the RBI Master Circular is premature. The Master Circular envisages a process in which the First (Wilful Defaulter) Committee examines evidence to form a prima facie view and the person so served is entitled to make a representation to that Committee; thereafter a Review Committee exists for further consideration. Given these available internal remedies and the opportunity to file a full written representation on facts and law before the First Committee and, if necessary, before the Review Committee, it would be inappropriate for the writ court to pre-emptively adjudicate the merits at the show-cause stage. The court therefore dismissed the petition at this nascent stage while preserving the petitioner's right to make representations and to pursue subsequent review avenues. [Paras 17, 18, 20, 21, 27]

Challenge to the show-cause notice at the stage of issuance is premature; writ petition dismissed with liberty to represent before the Wilful Defaulter Committee within the time directed.

Show-cause notice - RBI Master Circular dated July 1, 2014 - Transaction Audit Report - prima facie examination - representation before committee - Whether the show-cause notice was legally deficient because it reproduced portions of a Transaction Audit Report (TAR) and relevant documents were not annexed to the notice. - HELD THAT: - The court examined the content and context of the show-cause notice and the role of the TAR. It noted that the TAR contained disclaimers about its limited scope and reliance on information provided by the Resolution Professional and that portions of the TAR were quoted in the notice. However, Clause 3(a) of the Master Circular requires the First Committee only to examine evidence to reach a prima facie conclusion for issuing a show-cause notice; it does not mandate that the Committee disclose every document relied upon at the time of issuance. The TAR can constitute one component of the circumstantial evidence forming the basis for a prima facie view. Further, since the respondents have placed the relevant documents on record in the writ proceedings, the petitioner is not precluded from making a complete representation on all facets of the allegations before the First Committee. On this basis the court found the show-cause notice sufficient to meet the requirements of the Master Circular at the prima facie stage. [Paras 23, 24, 25, 26, 28]

The show-cause notice was adequate for the purpose of a prima facie determination under the Master Circular; the TAR may be one component of the evidence and does not, by itself, vitiate the notice.

Final Conclusion: Writ petition dismissed as premature; petitioner granted liberty to file a representation before the Wilful Defaulter (First) Committee within fifteen days, and thereafter to pursue review remedies if aggrieved; no order as to costs.

Quashing of criminal proceedings under Section 482 Cr.P.C. - Prima facie satisfaction for issuance of process - Vicarious liability under Section 141 of the Negotiable Instruments Act - Notice requirement under Section 138 of the Negotiable Instruments Act - Liability of partners and effect of retirement under Partnership Act - Abuse of the process of court and securing ends of justice - Bhajan Lal guidelines for exercise of inherent powers

Prima facie satisfaction for issuance of process - Quashing of criminal proceedings under Section 482 Cr.P.C. - Abuse of the process of court and securing ends of justice - Prima facie case against Smti. Sarita Harish Kanchan to sustain criminal process - HELD THAT: - The complaint allegations as to the role of Smti. Sarita Harish Kanchan were general and not specific; the partnership deed annexed to the complaint does not show her as partner, agent, manager or employee of the firm. Applying the principle that liability under Section 141 N.I. Act requires clear averments spelling out that the person was "in charge of and responsible" for the conduct of business at the relevant time, the Court found no prima facie material to proceed against the petitioner. Evaluation of the record for limited prima facie satisfaction (without appreciating evidence) shows the Magistrate proceeded on bald averments; such exercise amounted to an abuse of process in the facts of this case warranting exercise of inherent powers under Section 482 Cr.P.C. and quashing of proceedings as against this petitioner. [Paras 46, 52, 53]

Proceedings against Smti. Sarita Harish Kanchan quashed for want of prima facie case; summons recalled as to her.

Liability of partners and effect of retirement under Partnership Act - Vicarious liability under Section 141 of the Negotiable Instruments Act - Quashing of criminal proceedings under Section 482 Cr.P.C. - Prima facie case against Mr. Mark Alexander Davidson who claimed retirement before the alleged offence - HELD THAT: - Although the partnership deed shows the petitioner as a partner, he produced a deed of retirement dated 01.04.2018 asserting he had ceased to be a partner before the issuance of the cheques in 2019. The respondent relied on non-compliance with the public notice requirement under Section 72 of the Partnership Act to contend continued liability. The Court observed that even assuming absence of compliance with Section 72, the complaint failed to make specific averments about the petitioner's role in the firm's affairs at the relevant time. Liability under Section 141 depends on the role played at the relevant time and cannot rest merely on designation; therefore the complaint's bald averment that he was "in charge of and responsible" was insufficient to constitute a prima facie case. On limited evaluation of documents (without appreciating evidence), the Court found the material wanting and, in the circumstances, concluded that proceeding further would amount to abuse of process, justifying quashing under Section 482 Cr.P.C. [Paras 47, 49, 50, 53]

Proceedings against Mr. Mark Alexander Davidson quashed for want of prima facie case; summons recalled as to him.

Bhajan Lal guidelines for exercise of inherent powers - Quashing of criminal proceedings under Section 482 Cr.P.C. - Notice requirement under Section 138 of the Negotiable Instruments Act - Scope for exercise of inherent jurisdiction under Section 482 Cr.P.C. and applicability of Bhajan Lal principles to private complaints under Chapter XV Cr.P.C. - HELD THAT: - The Court examined Section 482 Cr.P.C. and held that the inherent powers may be invoked to prevent abuse of process and to secure ends of justice. The Bhajan Lal guidelines were not confined to police complaints under Chapter XIV but may inform the exercise of inherent jurisdiction generally. While notice under Section 138 need be given to the drawer of the cheque only, the central question remained whether the complaint made out prima facie materials against the individuals sought to be proceeded against. Having found the complaint deficient in particulars required to fasten vicarious liability under Section 141, the Court concluded that exercise of inherent powers was appropriate to quash proceedings as to the petitioners. [Paras 26, 38, 40, 53]

High Court may exercise inherent jurisdiction under Section 482 Cr.P.C. informed by Bhajan Lal principles; on facts, such power was exercised to quash proceedings as to the petitioners.

Quashing of criminal proceedings under Section 482 Cr.P.C. - Prima facie satisfaction for issuance of process - Final relief - extent of quashing and recall of summons - HELD THAT: - After evaluating the complaint and annexed documents for limited prima facie satisfaction, the Court concluded that the related complaint proceedings, insofar as they concerned the petitioners before the Court, lacked requisite specific averments and prima facie material. The inherent powers were exercised to prevent abuse of process and to secure ends of justice. Consequently, the Court quashed the listed criminal complaint cases and recalled summons only insofar as the petitioners are concerned. [Paras 53, 54]

The listed criminal complaint proceedings are quashed and summons recalled insofar as the petitioners are concerned.

Final Conclusion: The High Court, exercising its inherent jurisdiction under Section 482 Cr.P.C. and applying the requirement of prima facie averments to attract vicarious liability under Section 141 N.I. Act, found that the complaint against the petitioners (Smti. Sarita Harish Kanchan and Mr. Mark Alexander Davidson) lacked specific material to proceed; accordingly the Court quashed the related criminal complaint proceedings and recalled summons as to the petitioners.

Power to summon documents under Section 91 CrPC - Power to recall and re-examine witnesses under Section 311 CrPC - Discretion of the trial court and scope of High Court interference - Bankers' Books Evidence Act - proof of bank records and non compulsion of bank officer - Section 138 Negotiable Instruments Act - materiality of non affixation of bank seal

Power to summon documents under Section 91 CrPC - Power to recall and re-examine witnesses under Section 311 CrPC - Bankers' Books Evidence Act - proof of bank records and non compulsion of bank officer - Section 138 Negotiable Instruments Act - materiality of non affixation of bank seal - Discretion of the trial court and scope of High Court interference - Application under Sections 91 and 311 CrPC for production of bank passbook/statement to prove dishonour of cheque was rightly rejected by the trial Court and does not warrant interference by the High Court. - HELD THAT: - The trial Court's exercise of discretion under Sections 91 and 311 CrPC is plenary and interference by the High Court is justified only for good reason or manifest error. The principles in Rajaram Prasad Yadav (and related authorities) require that Section 311 be invoked only where additional evidence is essential to a just decision and not to fill mere lacunae, subject to safeguards of fairness and absence of prejudice. Section 91 can be employed to compel production of documents, but the decision to summon is within trial Court's discretion. Further, in the context of bank records, the Bankers' Books Evidence Act contemplates proof of bank documents without compelling the bank officer's attendance and creates a presumption as to their origin; consequently, non affixation of a bank seal on return memos was held not to be materially fatal to proof of dishonour under Section 138 NI Act. Applying these principles, the High Court found no manifest illegality or miscarriage of justice in the trial Court's order rejecting the prayer for calling the bank officer, passbook or statement, and therefore declined to exercise inherent powers to interfere. [Paras 9, 10, 11, 12]

Petitions dismissed; no interference with the trial Court's rejection of the applications under Sections 91 and 311 CrPC.

Final Conclusion: The High Court declined to interfere with the trial Court's rejection of applications under Sections 91 and 311 CrPC for production of bank records to prove cheque dishonour, holding that the trial Court did not commit a manifest error of law, that bank documents can be proved under the Bankers' Books Evidence Act notwithstanding absence of a seal on the memo, and that the petitions are devoid of merit and are dismissed.

Quashing of criminal proceedings under Section 482 Cr.P.C. - Offence under Section 138 of the Negotiable Instruments Act - Section 141 of the Negotiable Instruments Act - vicarious liability of partners - No vicarious criminal liability absent statutory mandate - Scope and limits of inherent power under Section 482 Cr.P.C.

Quashing of criminal proceedings under Section 482 Cr.P.C. - Offence under Section 138 of the Negotiable Instruments Act - Section 141 of the Negotiable Instruments Act - vicarious liability of partners - Scope and limits of inherent power under Section 482 Cr.P.C. - Whether the proceedings in C.C.No.118 of 2014 against the petitioners (partners of the firm) ought to be quashed under Section 482 Cr.P.C. in view of the allegations of dishonour of cheques and the partnership arrangement. - HELD THAT: - The petitioners, who are undisputedly partners in the firm, challenged the cognizance taken in the complaint under Section 138 N.I. Act on the ground that they did not sign or issue the alleged cheques and therefore cannot be held liable. The Court noted the statutory scheme in Section 141 which renders persons who were "in charge of, and responsible to the company for the conduct of the business" liable unless they prove lack of knowledge or that due diligence was exercised. The partnership deed filed shows the existence of a reconstituted partnership, designation of roles and a clause regarding operation of bank accounts by the partner designated to operate the account. The Court held that whether the petitioners were performing managerial duties or were in charge of the firm's business during the relevant period is a matter that cannot be decided on a petition under Section 482 on the present record. The inherent power under Section 482 Cr.P.C. is narrow and is to be exercised sparingly to prevent abuse of process or to secure ends of justice; the petitioners had not established such exceptional circumstances to warrant quashment. Having regard to the pleadings and the partnership instrument, the Court found no ground to exercise the extraordinary jurisdiction to quash the proceedings and declined to interfere. [Paras 14, 15, 16, 17, 18]

Petition dismissed; proceedings in C.C.No.118 of 2014 to continue and interim stay vacated.

Final Conclusion: The criminal petition seeking quashment of the proceedings in C.C.No.118 of 2014 was dismissed: the court declined to exercise the limited power under Section 482 Cr.P.C. because the petitioners, as partners of the firm, had not shown exceptional grounds to displace the complaint alleging dishonour of cheques under Section 138 read with Section 141 of the N.I. Act; the interim stay was vacated and the matter will proceed before the trial court.