TaxTMI Updates e-Newsletter
Mar 25,2022

Interim stay - GST on royalty/mining lease - stay of demand-cum-show cause notice under Section 74(1) of the CGST/UPGST Act - having regard to interim orders passed by the Supreme Court and coordinate Benches

Interim stay - stay of demand-cum-show cause notice under Section 74(1) of the CGST/UPGST Act - GST on royalty/mining lease - having regard to interim orders passed by the Supreme Court and coordinate Benches - Grant of interim relief in the form of stay of the demand notices dated 07.01.2022 and 18.01.2022 issued under Section 74(1) of the CGST/UPGST Act for the period July 2017 to March 2018. - HELD THAT: - The Court, noting earlier interim orders of the Supreme Court and a coordinate Bench of this Court in similar matters concerning the nature of royalty and the chargeability of GST/service tax on royalty or grant of mining lease, concluded that the petitioner was entitled to interim relief. For that reason, and pending filing of counter-affidavit and further orders, the writ petition was entertained only to the extent of staying the impugned demand notices for the specified period. The Court directed respondents to file counter-affidavit within three weeks and permitted the petitioner a week to file rejoinder. The interim stay is limited to the notices and does not decide the substantive question of whether GST is chargeable on royalty/mining lease.

The demand notices dated 07.01.2022 and 18.01.2022 for July 2017 to March 2018 issued under Section 74(1) of the CGST/UPGST Act are stayed until further orders; respondents to file counter-affidavit within three weeks and petitioner to file rejoinder within a week.

Final Conclusion: Interim relief granted: the specified demand-cum-show cause notices issued under Section 74(1) are stayed for the period July 2017 to March 2018 pending further orders; the Court has not adjudicated the substantive question of GST liability on royalty/mining lease and has directed filing of affidavits for further consideration.

Interest on delayed payment of tax - Adjudication under sections 73 and 74 - Principles of natural justice - Form GST DRC-01A and Form GST DRC-07 procedure - Automatic liability versus quantification of interest - Maintainability of writ under Article 226 despite alternate statutory remedy

Form GST DRC-01A and Form GST DRC-07 procedure - Principles of natural justice - Maintainability of writ under Article 226 despite alternate statutory remedy - Validity of issuance of Summary of Order in Form GST DRC-07 without issuing a show-cause notice under section 73(1) and maintainability of the writ petition. - HELD THAT: - The court held that Rule 142(1A)/(2A) and the intimation in Form GST DRC-01A required the revenue to issue a show-cause notice under section 73(1) if the assessee did not comply. The petitioner submitted a reply to the DRC-01A intimation; notwithstanding this, no show-cause notice under section 73(1) was issued and a summary adjudication was recorded in Form GST DRC-07. That procedure denied the petitioner the opportunity contemplated by section 73(1) and violated the principles of natural justice. In these circumstances the existence of the alternate statutory appeal did not preclude exercise of writ jurisdiction under Article 226. Relying on settled principles, the High Court entertained the writ because there was a clear failure to follow the statutory adjudicatory procedure and natural justice before imposing liability by summary order. [Paras 12, 14, 15, 16]

The Summary of the Order in Form GST DRC-07 dated 26.02.2020 is quashed for failure to follow the procedure prescribed under section 73(1) and for breach of natural justice; the writ petition is maintainable and allowed on this ground.

Interest on delayed payment of tax - Adjudication under sections 73 and 74 - Automatic liability versus quantification of interest - Whether liability to pay interest under section 50 can be imposed without initiating adjudication under section 73/74 when the assessee disputes the liability or its quantification. - HELD THAT: - The court accepted the principle that while the liability to pay interest under section 50 arises automatically in law, quantification of that liability-particularly where the assessee disputes either the leviability or the arithmetic computation-requires an adjudicatory exercise under section 73 or 74 after affording opportunity to be heard. The court relied on its earlier reasoning that a disputed interest claim cannot be unilaterally fixed by revenue without adjudication; if the assessee raises objections following the DRC-01A intimation, the proper officer must initiate adjudication to determine the quantum before enforcing recovery. [Paras 13, 14, 16]

Where the assessee disputes the leviability or the quantum of interest, the revenue must initiate adjudication under section 73 or 74 for determination; summary recovery without such adjudication is impermissible.

Final Conclusion: Writ petitions allowed to the extent that the Form GST DRC-07 summary orders dated 26.02.2020 are quashed for failure to follow the procedure under section 73(1) and for breach of natural justice; respondents are permitted to issue proper show-cause notices under section 73(1) and to adjudicate the interest liability after affording the petitioner an opportunity to be heard, the court expressing no view on the merits of the tax/interest claim.

Anticipatory bail - summons under Section 70 of the Central Goods and Services Tax Act, 2017 - voluntary statements/confessions recorded under Section 70 - whistle blower protection and dismissal for concealment of material facts - transfer of investigation to CBI/CVC (change of investigating agency) - default bail under Section 167(2) Cr.P.C.

Anticipatory bail - summons under Section 70 of the Central Goods and Services Tax Act, 2017 - voluntary statements/confessions recorded under Section 70 - whistle blower protection and dismissal for concealment of material facts - Petitioners are not entitled to anticipatory bail in respect of summons issued under Section 70 of the CGST Act, 2017. - HELD THAT: - The court found that the petitioners had deliberately concealed material facts about their status as active partners of the main accused and the creation of firms used in the bogus billing scheme. The department's status reports and statements recorded under Section 70 indicate that both petitioners admitted connivance in issuance and receipt of bogus invoices and fraudulent availment/passing of Input Tax Credit. The petitioners' conduct of posing as whistle blowers while being implicated in the fraud amounted to concealment and mislead the authorities; reliance on the Whistle Blowers Protection Act, 2014 was noted to the extent that complaints may be dismissed where facts are concealed. In these circumstances the court held that the petitioners have not made out a case for protection from arrest and dismissed the anticipatory bail petitions.

Anticipatory bail petitions dismissed for lack of merit due to concealment of involvement in the bogus billing scheme and admissions recorded under Section 70.

Transfer of investigation to CBI/CVC (change of investigating agency) - whistle blower protection and dismissal for concealment of material facts - Prayer for transfer of the investigation to an agency like the CBI/CVC is rejected. - HELD THAT: - The court rejected the application for transfer because the petitioners had concealed their involvement in the alleged fraud and had attempted to portray themselves as whistle blowers to procure a transfer and protection. The status report outlined ongoing departmental investigation steps (summonses, arrests of other accused, bank and verification enquiries and recorded statements) and explained delays such as the complexity of collusive bogus billing networks and practical difficulties in completing investigation within statutory timelines. Given the petitioners' concealment and the department's continuing investigative efforts, there was no basis to transfer the probe to another agency.

Application for transfer of investigation to CBI/CVC dismissed; cost of Rs. One Lakh imposed to be deposited with the Advocates' Welfare Fund within four months.

Final Conclusion: The High Court dismissed the anticipatory bail petitions and the petition seeking transfer of the investigation to agencies like the CBI/CVC, finding that the petitioners had concealed their participation in the bogus billing scheme and that the departmental investigation was properly in progress; transfer was refused and costs were imposed.

Classification under Customs Tariff heading 2008 - residuary heading versus specific heading - Rule 2(a) of the General Rules for Interpretation - Rule 3(a) - preference to the most specific description - essential character test - not classifiable under HSN 2106 (residuary) where specific heading applies - GST rate 12% under Entry 40 of Schedule II

Classification under Customs Tariff heading 2008 - essential character test - Rule 2(a) of the General Rules for Interpretation - Rule 3(a) - preference to the most specific description - GST rate 12% under Entry 40 of Schedule II - Jackfruit chips and banana chips (salted and masala varieties), sold without brand name, are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12% (6% CGST + 6% SGST). - HELD THAT: - The authority applied the Customs Tariff interpretation rules (Rules 1-3). Chapter 21 (HSN 2106) is a residuary heading for miscellaneous edible preparations and expressly excludes preparations made from fruits or other edible plant parts where the essential character is that of the fruit/plant part. The chips are produced by slicing and frying but their essential character as fruit/vegetable remains unchanged. Rule 2(a) permits reference to goods consisting wholly or partly of the named material and Rule 3(a) requires preference to the most specific heading. Hence, the products fall within heading 2008 (fruit, nuts and other edible parts of plants otherwise prepared) and, being covered by heading 2008, attract the rate specified at Sl. No. 40 of Schedule II, i.e., 12%. The appellant's reliance on common parlance and Supplementary Note 6 to place these goods under 2106.90 is rejected because a specific heading (2008) applies. [Paras 6]

Jackfruit chips and banana chips are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12%.

Classification under Customs Tariff heading 2008 - residuary heading versus specific heading - essential character test - GST rate 12% under Entry 40 of Schedule II - Sharkara varatty (sold without brand name) is classifiable under Tariff Heading 2008.19.40 and liable to GST at 12% (6% CGST + 6% SGST). - HELD THAT: - Although the appellant argued that Sharkara varatty is a sweetmeat and falls within HSN 2106 by common parlance and Supplementary Note 6, the authority found that the product is a preparation of an edible part of a plant whose essential character remains that of the fruit and thus falls within heading 2008. Prior advance rulings treating similar items as within 2008 were followed. Consequently the residuary HSN 2106 does not apply where the specific heading 2008 governs, and the rate under Sl. No. 40 of Schedule II (12%) applies. [Paras 6]

Sharkara varatty is classifiable under Tariff Heading 2008.19.40 and liable to GST at 12%.

Classification under Customs Tariff heading 2008 - residuary heading versus specific heading - Rule 3(a) - preference to the most specific description - GST rate 12% under Entry 40 of Schedule II - Roasted/salted and roasted-and-salted preparations of ground nuts, cashew nuts and other seeds are classifiable under specific subheadings of Tariff Heading 2008 (2008.19.10; 2008.19.20) and liable to GST at 12% (6% CGST + 6% SGST). - HELD THAT: - The chapter and explanatory notes to heading 2008 expressly include dry-roasted, oil-roasted or fat-roasted nuts whether or not coated with oil, salt, flavours or spices. Specific tariff items in Chapter 20 cover roasted/salted nuts and seeds; where a specific heading exists it overrides the residuary entry in Chapter 21. Accordingly, the roasted/salted preparations fall within the specific subheadings of heading 2008 and attract the rate in Sl. No. 40 of Schedule II (12%). [Paras 6]

Roasted/salted ground nuts, cashew nuts and other roasted/salted nuts and seeds are classifiable under heading 2008 (specific subheadings) and liable to GST at 12%.

Classification under Customs Tariff heading 2008 - Rule 2(a) of the General Rules for Interpretation - essential character test - GST rate 12% under Entry 40 of Schedule II - Salted and masala chips of potato and tapioca (sold without brand name) are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12% (6% CGST + 6% SGST). - HELD THAT: - The products are prepared by slicing and frying with salt/masala but retain the essential character of the potato/tapioca. Application of Rules 1-3 leads to classification under heading 2008 rather than the residuary heading 2106. The authority therefore held that these chips fall within heading 2008 and attract the 12% GST rate specified at Sl. No. 40 of Schedule II. [Paras 6]

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

Final Conclusion: The Appellate Authority for Advance Ruling upholds the advance ruling (with the stated modifications) and rejects the appellant's contention that the products fall under HSN 2106; the impugned goods (jackfruit, banana, potato, tapioca chips; sharkara varatty; and roasted/salted nuts/seeds) are classifiable under various tariff items of Chapter 20 (heading 2008) and are liable to GST at 12% (6% CGST + 6% SGST); the appeal is dismissed.

Reason to believe - reopening of assessment under Section 148 - reasons must speak for themselves - no supplementation of reasons by affidavit or subsequent explanation - quashing reassessment notice for want of valid reasons - wrongful claim of exemption

Reason to believe - reopening of assessment under Section 148 - reasons must speak for themselves - no supplementation of reasons by affidavit or subsequent explanation - quashing reassessment notice for want of valid reasons - Validity of the reasons recorded by the Assessing Officer for reopening assessment and consequent maintenance of notices and order rejecting objections. - HELD THAT: - The Court examined the reasons communicated for issuance of the Section 148 notice and found that the AO's stated reason- that the assessee had purchased immovable property valued at the specified amount-was factually incorrect: the record showed a sale by the assessee (ancestral land) and not a purchase. The respondents conceded, in their pleadings, that the transaction was mistyped as a purchase due to typographical error/oversight. Applying the settled proposition that reasons must be read as recorded and cannot be supplemented, corrected or fortified by subsequent affidavit or explanation, the Court held that the recorded reasons did not genuinely disclose a valid "reason to believe". A defect of this nature in the reasons vitiates the initiation of reassessment, since the reassessment must be judged on the reasons as they stand and no additions or corrections are permissible to cure material defects in those reasons. [Paras 6, 7, 9]

The notices dated 30.03.2021 and 03.12.2021 and the order dated 10.02.2022 rejecting objections were quashed and set aside for lack of valid reasons to reopen the assessment.

Wrongful claim of exemption - reopening of assessment under Section 148 - Whether the revenue may initiate fresh proceedings for alleged wrongful claim of exemption despite quashing of the impugned proceedings. - HELD THAT: - While the impugned proceedings were quashed for the defective reasons recorded, the Court noted on record (sale deed Schedule A) that the nature of the land may be residential and not agricultural as claimed by the assessee, and that the assessee had conceded the possibility that the department could contend wrongful claim of exemption. The Court therefore restricted its relief to quashing the defective proceedings but clarified that the revenue is at liberty to initiate fresh reassessment or other proceedings in accordance with law if material exists to sustain such action. [Paras 8, 9]

Quash of present proceedings without prejudice to the revenue's right to initiate fresh proceedings for wrongful claim of exemption in accordance with law.

Final Conclusion: Writ petition allowed: the reassessment notices and the order rejecting objections were quashed for want of valid reasons to reopen; however the revenue remains free to initiate fresh proceedings in accordance with law for any wrongful claim of exemption.

Addition as unexplained expenditure under section 69C - genuineness of purchases - receipt of goods and payment through banking channels as evidentiary basis - onus on the assessee to establish that payments were for purchased goods - concurrent findings of fact

Addition as unexplained expenditure under section 69C - genuineness of purchases - receipt of goods and payment through banking channels as evidentiary basis - Deletion of the addition made by the Assessing Officer treating purchases as unexplained expenditure for Assessment Year 2011-12. - HELD THAT: - The court recorded that both the CIT(A) and the ITAT gave concurrent factual findings that the purchases were genuine, the goods had been received by the assessee and payments were made through banking channels. The CIT(A) found that the inability to trace suppliers at given addresses, in the face of delivery of goods and bank payments, did not justify treating the purchases as unexplained under section 69C, particularly where search proceedings did not disclose receipt of payments in cash or incriminating documents. The ITAT similarly observed that the Assessing Officer proceeded on assumptions despite acceptance that purchases were reflected in subsequent assessment year and that no incriminating material was found during search. On these factual findings, the addition under section 69C was held to be based on conjecture and surmise and therefore unsustainable. [Paras 4, 5, 6]

The deletion of the addition for AY 2011-12 was upheld and the appeal was dismissed.

Protective assessment - genuineness of purchases - concurrent findings of fact - Validity of deletion of the protective assessment and related deletion of additions for Assessment Year 2012-13. - HELD THAT: - The ITAT considered the purchases shown in AY 2012-13 and noted that quantification was based on documents on record. In light of the findings for AY 2011-12 - that purchases were genuine, goods were received and no evidence of cash receipt was found in search proceedings - the CIT(A)'s deletion of the protective assessment for AY 2012-13 was held to be correct. The decision emphasised that the purchases could not be held unexplained under section 69C given the evidentiary record and concurrent factual findings. [Paras 5, 6]

The deletion of the protective assessment for AY 2012-13 was upheld and the Revenue's appeal for that year was dismissed.

Final Conclusion: Concurrent factual findings by the CIT(A) and ITAT that purchases were genuine, goods were received and payments were made through banking channels rendered the Assessing Officer's additions under section 69C unsustainable; the appeals are dismissed and no substantial question of law arises.

Reopening of assessment - change of opinion - reasons to believe - consideration of queries during assessment proceedings - section 148 of the Income Tax Act, 1961

Consideration of queries during assessment proceedings - change of opinion - Whether the Assessing Officer had considered the year end provision for expenses during the original assessment proceedings and whether the impugned reopening is based on mere change of opinion. - HELD THAT: - The Court found on the material before it that the Assessing Officer had issued a notice under section 142(1) during assessment calling for details of provisions debited to Profit & Loss and whether the liability was ascertained or contingent, and that the assessee had replied with particulars including the year end identified provision. The assessment order dated 27.12.2019 recorded the assessments under normal provisions and under section 115JB and referred to the notice of 15.11.2019 and the assessee's responses. Applying the settled principle that a query raised and replied to during assessment is a subject of consideration even if the assessment order does not expressly discuss it, the Court concluded that the year end provision was considered in the original assessment. The Court therefore held that the grounds advanced for reopening disclosed only a change of opinion of the Assessing Officer rather than fresh reasons to believe that income had escaped assessment. [Paras 4, 5, 6, 8, 9]

The year end provision was considered during the original assessment and the impugned reopening proceeds from a mere change of opinion.

Reopening of assessment - reasons to believe - section 148 of the Income Tax Act, 1961 - Whether the notice dated 27.03.2021 issued under section 148 and the subsequent order dated 10.01.2022 are legally sustainable. - HELD THAT: - Because the Court concluded that the Assessing Officer had already considered the matter during the assessment proceedings and that the reassessment notice was founded on a change of opinion, the statutory requirement of having fresh reasons to believe that income chargeable to tax had escaped assessment was not satisfied. Change of opinion, without new material or grounds independent of the original assessment, does not constitute valid justification for reopening under section 148. Applying these principles to the impugned notice and the order, the Court found them invalid. [Paras 4, 9, 10]

The notice dated 27.03.2021 under section 148 and the impugned order dated 10.01.2022 are quashed as issued on the basis of change of opinion and not on valid reasons to believe.

Final Conclusion: Writ petition allowed; the reassessment notice dated 27.03.2021 under section 148 and the impugned order dated 10.01.2022 are quashed on the ground that reopening was instituted by way of change of opinion despite the issue having been considered in the original assessment for AY 2017-18; petition disposed of with no order as to costs.

Lease versus financial arrangement - depreciation on leased assets - burden of proof on assessee - admission of fresh evidence/remand to tribunal - right to be heard

Lease versus financial arrangement - burden of proof on assessee - right to be heard - Whether the Tribunal was justified in denying the claim of depreciation on the ground that lease agreements were not placed on record, thereby treating the transactions as financial arrangements and not leases. - HELD THAT: - The Court found that the controversy as to whether the transactions were leases or financial arrangements turns on the terms of the lease agreements and that the Tribunal could not finally decide the matter without considering those documents. While the Assessing Officer had extracted certain clauses in the assessment order, the appellants were required to place copies of the lease agreements before the Tribunal in the second round; their failure to do so led the Tribunal to rely on the Assessing Officer's finding. Having regard to the appellants' undertaking to furnish the lease agreements within four weeks, the High Court held that justice required setting aside the impugned Tribunal orders and restoring the matters to the Tribunal so that the lease agreements can be considered afresh, with opportunity of hearing, and a decision rendered in accordance with law. [Paras 8, 9, 10]

Impugned orders set aside; matters restored to the Tribunal to permit the assessee to place lease agreements and for the Tribunal to decide whether the transactions are leases or financial arrangements after hearing parties.

Admission of fresh evidence/remand to tribunal - right to be heard - Disposition of the remaining substantial questions of law raised by the assessee (including depreciation, alleged sham transactions, and interest on refund). - HELD THAT: - The Court expressly left all other substantial questions of law open for consideration by the Tribunal. On remand, the Tribunal is to consider the lease agreements and thereafter decide all issues, including those framed as substantial questions of law before this Court, after affording an opportunity of hearing and in an expedited manner. The remand is for fresh consideration and decision by the Tribunal and does not constitute an adjudication on the merits of those other questions by the High Court. [Paras 10]

Other substantial questions of law kept open and remitted to the Tribunal for fresh consideration after admission of the lease agreements and hearing; Tribunal to decide expeditiously.

Final Conclusion: The High Court allowed the appeals on the limited ground that the Tribunal erred in proceeding without considering the lease agreements; the impugned Tribunal orders are set aside and the matters are restored to the Tribunal to enable the assessee to file the lease agreements within four weeks, after which the Tribunal shall decide in accordance with law and after hearing the parties; other substantial questions are left open for consideration by the Tribunal.

Intimation under Section 245 - set off of refunds - statutory prior notice - opportunity to file response - stay of demand and conditions for stay

Intimation under Section 245 - set off of refunds - statutory prior notice - Adjustment of a refund against outstanding demand made without prior intimation under Section 245 is unauthorised and liable to be set aside. - HELD THAT: - The Court examined Section 245 which mandates that the officer may set off a refund only after giving an intimation in writing of the proposed action. On the admitted facts in both writ petitions, adjustments were made in respect of certain assessment years for which no intimation under Section 245 had been served upon the assessee. Reliance was placed on precedent of coordinate High Courts holding that the prior intimation is mandatory and adjustments made without complying with that requirement are illegal. The Court therefore confined its decision to the narrow legal point of absence of the statutory intimation and refrained from adjudicating the merits of the underlying demands. Having found non-compliance with the mandatory prior intimation requirement, the adjustments made were set aside. [Paras 15, 19]

Adjustments effected without issuing the prior intimation required by Section 245 are set aside; respondents may proceed only after issuing the statutory intimation and giving the assessee opportunity to respond.

Stay of demand and conditions for stay - opportunity to file response - Communications concerning stay of recovery that merely reserve a right to adjust refunds do not satisfy the statutory intimation requirement under Section 245. - HELD THAT: - The Court analysed departmental communications relied upon by respondents and found that letters or notices relating to stay of recovery (which reserve a right to adjust refunds) are not equivalent to the prior intimation required under Section 245. While some earlier communications were in the proper format, others (including letters on stay of recovery) were not; the department cannot comply with the statutory mandate through different formats or practices. The Court rejected the contention that such stay-related communications cured the absence of a Section 245 intimation. [Paras 17]

Letters or communications about stay of recovery that merely reserve the department's right to adjust refunds do not fulfil the statutory intimation requirement and cannot be treated as compliance with Section 245.

Final Conclusion: Writ petitions allowed: adjustments of refunds made without the prior written intimation mandated by Section 245 are set aside; respondents are at liberty to take action in accordance with law only after issuing the statutory intimation and affording the assessee the prescribed opportunity to respond.

Applicability of departmental monetary limit for filing appeals - Exception for reopening based on revenue audit objection - Validity and applicability of reassessment notice issued under Section 148 - Dismissal of departmental appeals under CBDT Circular No.03/2018

Applicability of departmental monetary limit for filing appeals - Dismissal of departmental appeals under CBDT Circular No.03/2018 - Whether the ITAT was justified in dismissing the Revenue's appeal on account of the monetary limit prescribed by the CBDT Circular No.03/2018. - HELD THAT: - The Court examined the ITAT's consolidated dismissal of departmental appeals under the monetary threshold fixed by the CBDT circular and the Revenue's subsequent application for recall. The impugned dismissal operated under the circular which limited filing of Departmental appeals below the specified monetary limit. Having considered the facts and the nature of the reassessment notice as recorded in the orders and annexures, the High Court found no error in the ITAT's application of the circular. The Court observed that the exception to the circular would apply only where the reopening and consequential appeal were within the scope of the circular's carve-outs; absent such a qualifying ground the departmental appeal fell within the monetary limit and dismissal was lawful. The Court concluded that the ITAT did not err in dismissing the Revenue's appeal under the CBDT circular.

ITAT's dismissal of the Revenue's appeal under the monetary limit prescribed by CBDT Circular No.03/2018 was upheld.

Exception for reopening based on revenue audit objection - Validity and applicability of reassessment notice issued under Section 148 - Whether the reassessment proceedings under Section 148 were initiated on the basis of a revenue audit objection so as to attract the exception to the CBDT circular. - HELD THAT: - The Court reviewed the show-cause notice, the annexed narrative of reasons and the chronology of proceedings. The annexure and the notice of reopening recited reasons attributing escapement of income to matters such as the assessee being an SPV and depreciation discrepancies, and explicitly recorded the departmental formation of reason to believe for reopening. The High Court found that the notice dated 03.03.2014 and the material on record did not establish that the reassessment was initiated on the basis of a revenue audit objection such that exception 10(c) of the circular would apply. On that basis the Court held that the case did not fall within the circular's exclusion and that the ITAT correctly declined recall of its consolidated dismissal.

Reopening under Section 148 was not shown to be based on a revenue audit objection and therefore did not attract the exception to the CBDT circular.

Final Conclusion: The High Court dismissed the appeal, holding that the ITAT correctly applied the CBDT monetary limit and that the reassessment was not shown to have been initiated on the basis of a revenue audit objection; no substantial question of law was made out.

Prosecution under Section 276B of the Income Tax Act - Liability of principal officer under Section 278B of the Income Tax Act - Deposit of TDS with interest under Section 201(1A) of the Income Tax Act - Sanction for prosecution and exercise of judicial mind - CBDT instruction on initiation of prosecution - Reasonable cause defence under Section 278(AA) of the Income Tax Act - Abuse of process by launching prosecution after deposit of disputed dues

Prosecution under Section 276B of the Income Tax Act - Deposit of TDS with interest under Section 201(1A) of the Income Tax Act - Reasonable cause defence under Section 278(AA) of the Income Tax Act - Maintainability of criminal prosecution under Sections 276(B) and 278(B) where the deducted TDS amount was deposited with interest before initiation/continuation of prosecution for financial year 2016- 2017. - HELD THAT: - The Court found as an admitted fact that the deducted TDS amounts for the relevant financial year were ultimately deposited along with interest as provided by Section 201(1A). The Court noted the statutory scheme distinguishing civil recovery/interest liability under Section 201(1A) from penal liability under Section 276(B), and observed that Section 278(AA) permits a defence of reasonable cause. Having regard to the admitted deposit with interest and the principle that prosecution should not ordinarily proceed where the defaulted amount has been restored to Government account, the Court held that continuation of criminal proceedings after receipt of the deducted amount with interest, without immediate institution when default first occurred, is unsustainable in the circumstances of these cases. The Court emphasised that where the prosecution is launched only after deposit and not immediately upon default, the continuation may be impermissible and capable of being quashed. [Paras 17, 18, 19]

Criminal proceedings under Sections 276(B) and 278(B) in the respective cases were quashed insofar as prosecution was instituted/continued after the deducted amounts were deposited with interest.

Sanction for prosecution and exercise of judicial mind - CBDT instruction on initiation of prosecution - Abuse of process by launching prosecution after deposit of disputed dues - Legitimacy of the sanctioning authority's action where the sanction was accorded without apparent consideration of departmental instructions advising restraint in prosecution when amounts are deposited and defaults are not substantial. - HELD THAT: - The Court observed that the sanctioning authority under Section 279(1) did not advert to the CBDT instruction (F. No. 255/339/79-IT (Inv.) dated 28.05.1980) which advises that prosecution under Section 276(B) should not normally be proposed where the amount involved and/or period of default is not substantial and the amount has subsequently been deposited. The Patna High Court's treatment of that instruction in Sonali Autos (P) Ltd. [2017 (8) TMI 196 - PATNA HIGH COURT] was noted. Given that most deducted amounts were small (save one or two cases) and had been deposited with interest, the Court held that sanction and subsequent institution/continuation of prosecution amounted to an abuse of process in the facts of these matters and warranted quashing of cognizance orders. [Paras 17, 18, 19]

Sanction-based prosecutions and cognizance orders were quashed because the sanctioning authority failed to consider the departmental instruction and prosecution launched/continued after deposit constituted abuse of process in these cases.

Final Conclusion: The High Court quashed the cognizance orders and criminal proceedings pending before the Special Judge, Economic Offences, Dhanbad in the listed matters (relating to financial year 2016- 2017), holding that prosecution under Sections 276(B) and 278(B) was not maintainable where the deducted TDS sums had been deposited with interest and the sanctioning authority had failed to consider applicable CBDT guidance, so that continuation of proceedings amounted to an abuse of process.

Income-tax Settlement Commission ceased to operate with effect from 01.02.2021 - Application for settlement time-bar and admissibility of applications filed after 01.02.2021 - Validity and scope of exercise of power under section 119(2)(b) of the Income-tax Act, 1961 - Interim Board for Settlement and treatment of "pending applications" - Discrimination challenge to executive relaxation under section 119(2)(b)

Income-tax Settlement Commission ceased to operate with effect from 01.02.2021 - Application for settlement time-bar and admissibility of applications filed after 01.02.2021 - Section 245C application filing date - Legal validity of the Settlement Commission's rejection of the application filed on 17th March, 2021 in view of the Commission having ceased to operate w.e.f. 1st February, 2021. - HELD THAT: - The Court held that the Settlement Commission had ceased to operate with effect from 01.02.2021 as a consequence of the Finance Act, 2021, and that no application for settlement could be filed on or after that date. The petitioner filed the application under Section 245C(1) on 17.03.2021, after cessation of the Commission's operation. The petitioner's contention that assessment proceedings commenced only upon issuance of notice under Section 153A on 02.02.2021 did not render him eligible to file on 31.01.2021, and it is admitted that the application was not filed on the same day as issuance of notice. The Court emphasised that it cannot extend or amend the statutory scheme or the Board's order beyond its terms and that the impugned rejection by the Settlement Commission was in accordance with law. Consequently the rejection was upheld as legal and valid.

Rejection of the application filed on 17.03.2021 was lawful and the Settlement Commission's order of 14.01.2022 is upheld.

Validity and scope of exercise of power under section 119(2)(b) of the Income-tax Act, 1961 - Interim Board for Settlement and treatment of "pending applications" - Discrimination challenge to executive relaxation under section 119(2)(b) - Legality and constitutional validity of the Central Board of Direct Taxes' order dated 28th September, 2021 issued under section 119(2)(b) and challenge of discrimination in its exercise of power. - HELD THAT: - The Court examined the Board's order which authorised admission of certain applications filed after 31.01.2021 and before 30.09.2021 by assessees who were eligible to file on 31.01.2021 and whose relevant assessment proceedings were pending on the date of filing. The Court found that the order was within the statutory power conferred by section 119(2)(b) and that the petitioner did not belong to the class of persons covered by that order. Because the petitioner was not similarly placed as those expressly benefited, there was no basis for a discrimination finding. The Board's targeted relaxation was therefore held to be constitutionally valid and intra vires.

The CBDT order dated 28.09.2021 is valid and not discriminatory; the challenge to its legality is dismissed.

Final Conclusion: Writ petition dismissed; the Settlement Commission's rejection of the 17.03.2021 application is lawful as the Commission ceased to operate on 01.02.2021, and the CBDT order of 28.09.2021 granting limited relaxation under section 119(2)(b) is intra vires and not discriminatory.

Revaluation of a capital asset - credit to partners' current account - capital gains arising from transfer under Section 45 - proviso to Section 47(xiii) of the Income tax Act - conditions for exemption on conversion - Section 47A(3) - withdrawal of exemption on discovery of violation - review jurisdiction under Order XLVII Rule 1 CPC

Revaluation of a capital asset - credit to partners' current account - capital gains arising from transfer under Section 45 - Enhanced value of land credited to the current account of partners attracts capital gains tax - HELD THAT: - The Court examined whether the act of revaluing the firm's capital asset and apportioning the enhanced value to partners' current accounts by itself constituted a transfer attracting capital gains under Section 45. The Court held that there is no automatic transfer arising merely from reflecting enhanced value in the partners' current accounts. The reflection in the books of account is a matter of accounting practice and the mere credit to current accounts, without other ingredients of transfer, does not amount to a taxable transfer giving rise to capital gains. The Division Bench's reasoning that such apportionment does not, by itself, attract capital gain tax was considered and upheld. [Paras 5]

The enhanced value credited to partners' current accounts does not attract capital gains tax.

Proviso to Section 47(xiii) of the Income tax Act - conditions for exemption on conversion - Section 47A(3) - withdrawal of exemption on discovery of violation - Requirement to reflect enhanced value in the capital account (as opposed to current account) and its effect on applicability of proviso to Section 47(xiii) - HELD THAT: - The Court rejected the submission that law mandates that enhanced value must be reflected in the capital account to preserve exemption on conversion. There is no legal requirement prescribing that enhanced value be shown in the capital account; the manner of reflection in accounting records is within the assessee's discretion. The Court noted that non compliance with the proviso to Section 47(xiii) can lead to tax consequences, but mere placement in current account, without other indicia of transfer, does not by itself constitute violation attracting immediate capital gains. The Court also observed the distinct operation of Section 47A(3) for withdrawal of exemption upon later discovery of violations, but emphasised that where assessing authority finds violation at assessment stage, assessment may be framed accordingly. [Paras 4, 5]

There is no statutory requirement to credit enhanced value to capital account; apportionment to current account does not automatically amount to violation of the proviso to Section 47(xiii) that would attract capital gains.

Review jurisdiction under Order XLVII Rule 1 CPC - Whether the grounds urged in the review petition disclose an error apparent on the face of the record warranting recall of the judgment - HELD THAT: - The Court considered if the review petitioner demonstrated an error apparent on the face of the record as required for exercise of review jurisdiction. The Court observed that the grounds relied upon would require re appreciation of the totality of circumstances and fresh consideration of matters already examined by the Division Bench - an exercise impermissible in review proceedings and proper only in appeal. The Standing Counsel's contentions, though detailed, sought to re open factual and legal conclusions reached earlier. The Court therefore found that the review grounds do not fall within Order XLVII Rule 1 CPC and that entertaining them would exceed review jurisdiction. [Paras 6]

The review petition does not disclose any error apparent on the face of the record; review is not maintainable and must be dismissed.

Final Conclusion: The review petition filed by the Revenue is dismissed. The Division Bench's conclusion that the enhanced value credited to partners' current accounts does not attract capital gains is upheld, there is no legal requirement to reflect such enhancement in the capital account, and the grounds advanced do not qualify for review under Order XLVII Rule 1 CPC.

Open remand under section 263 - jurisdiction to initiate penalty proceedings after section 263 remand - satisfaction required for initiation of penalty under section 271(1)(c) - powers of assessing officer on fresh assessment after revision u/s 263

Open remand under section 263 - powers of assessing officer on fresh assessment after revision u/s 263 - Ext.P2 was an open remand setting aside the entire assessment order and vesting the assessing officer with powers to pass a fresh assessment on all issues. - HELD THAT: - A reading of Ext.P2 shows the earlier assessment was set aside in its entirety because the assessing officer had passed a "very sketchy order" and failed to examine seized/impounded material. The order expressly directed that a fresh assessment be passed after affording a reasonable opportunity of being heard. These observations demonstrate that the remand was not limited to a single issue but was an open remand, thereby restoring to the assessing officer all powers of an original assessment to examine and decide all matters afresh. [Paras 6, 7, 8, 9]

Ext.P2 is an open remand conferring full powers on the assessing officer to pass a fresh assessment on all issues.

Jurisdiction to initiate penalty proceedings after section 263 remand - satisfaction required for initiation of penalty under section 271(1)(c) - An assessing officer, while passing a fresh assessment pursuant to an open remand under section 263, can record the requisite satisfaction and initiate penalty proceedings under section 271(1)(c). - HELD THAT: - The Court held that once Ext.P2 operated as an open remand, the assessing officer, in issuing Ext.P3 (the fresh assessment), lawfully recorded his satisfaction that penalty proceedings under section 271(1)(c) ought to be initiated. The power to impose penalty depends upon the assessing officer's satisfaction formed in the course of proceedings under the Act, and such satisfaction may properly be recorded in the fresh assessment proceedings after remand. Consequently, the fact that the original assessment order (pre-remand) did not record such satisfaction does not oust jurisdiction where the assessment has been validly set aside and remitted for reconsideration. [Paras 10, 11, 12, 13]

Recording of satisfaction for initiating penalty in the assessment order made after an open remand is within the assessing officer's jurisdiction and satisfies the requirements of section 271(1)(c).

Applicability of precedents where satisfaction recorded in section 263 proceedings - Decisions relied upon by the petitioner where satisfaction for penalty was recorded in or directed by revision proceedings under section 263 are distinguishable and do not apply to a case of open remand. - HELD THAT: - The Court distinguished authorities in which satisfaction for initiation of penalty was recorded in the revisional order or where the revisional authority directed initiation of penalty, noting those cases involved materially different facts where the original assessment had not recorded satisfaction and the revisional order itself attempted to record or direct such satisfaction. In the present case, no satisfaction for penalty was recorded by the revisional authority; instead the assessment was set aside as erroneous and remitted openly, permitting the assessing officer on fresh assessment to form his own satisfaction. Therefore the precedents cited by the petitioner are not applicable. [Paras 14, 15]

The cited decisions are distinguishable and do not invalidate initiation of penalty in the fresh assessment made after an open remand.

Final Conclusion: The writ petition is dismissed: Ext.P2 constituted an open remand restoring full assessment powers to the assessing officer, who lawfully recorded satisfaction in the fresh assessment and initiated penalty under section 271(1)(c); the precedents cited by the petitioner are distinguishable. Liberty to pursue statutory remedies against the penalty order is preserved.

Validity of notice under Section 148 - Failure to disclose fully and truly all material facts - Applicability of Section 14A and Rule 8D - Audit objection as information for reopening - Limitation under the first proviso to Section 147 - Annexure to notice under Section 142(1) as sufficient factual basis

Validity of notice under Section 148 - Annexure to notice under Section 142(1) as sufficient factual basis - The notice issued under Section 148 qua assessment year 2014-15 is valid and not liable to be quashed at the writ stage. - HELD THAT: - The Court examined the scanned annexure to the Section 142(1) notice dated 23.11.2021 and held that it supplies the requisite factual basis for the Assessing Officer's belief that income had escaped assessment. The annexure articulates facts concerning the assessee's treatment of certain items (including reference to disallowances under Section 14A and the methodology under Rule 8D) and thus turns the question squarely into one of fact. In these circumstances and given the detailed reasons in the annexure, interference in writ jurisdiction was not warranted. The Court treated the matter as fact-intensive and concluded that the reassessment notice is sustainable at this interlocutory stage. [Paras 11, 18]

Notice under Section 148 upheld as valid; writ petition dismissed.

Failure to disclose fully and truly all material facts - Limitation under the first proviso to Section 147 - The Assessing Officer's reliance on the exception of failure to disclose fully and truly all material facts (for action beyond four years under the first proviso to Section 147) was permissible on the facts shown in the annexure. - HELD THAT: - The first proviso to Section 147 contains an exception permitting reopening beyond four years when income escaped assessment due to failure to disclose fully and truly all material facts. The Court observed that the writ petitioner's challenge on limitation amounted to disputing the very factual basis (failure to disclose) relied upon in the annexure and therefore was premature. Because the annexure set out facts (including issues relating to exempt income and related expenditure) giving rise to a belief of non-disclosure, the limitation objection failed at the writ stage. [Paras 18]

Limitation objection rejected; exception under the first proviso held to be engaged on the material before the Assessing Officer.

Applicability of Section 14A and Rule 8D - Audit objection as information for reopening - The annexure legitimately invoked Section 14A read with Rule 8D and treated audit observations (including the assessee's own partial disallowance) as factual material warranting reassessment. - HELD THAT: - The annexure expressly noted that the assessee had made an internal disallowance under Section 14A but had not followed the Rule 8D methodology for computing the disallowance; it also identified claimed inadequacy in the quantum of disallowance. The Court characterised such matters as factual contentions capable of forming the basis for a belief that income had escaped assessment. The contention that audit objections cannot constitute valid information was dealt with by reference to the annexure which addressed those objections and supplied factual particulars. Given this factual matrix, the Court declined to interfere with the reopening at the writ stage. [Paras 18]

Invocation of Section 14A and Rule 8D in the annexure and reliance on audit observations upheld as sufficient factual material for reopening.

Interference in writ jurisdiction - Interference with the reassessment notice in writ jurisdiction was not warranted because the matter was fact-centric and the annexure provided reasons forming the basis for the Assessing Officer's belief. - HELD THAT: - The Court emphasised that where the Assessing Officer records reasons and furnishes factual material indicating failure to disclose or escapement of income, such issues are matters of fact and ordinarily inappropriate for summary adjudication by writ. The Court noted that the assessee being a bank and the impugned notice not causing undue hardship militated against granting writ relief. Precedents were considered but distinguished on facts where necessary. [Paras 18, 19]

Writ petition dismissed; reassessment proceedings may proceed.

Final Conclusion: On the material disclosed in the annexure to the Section 142(1) notice, the Court found sufficient factual basis for the Assessing Officer's belief that income had escaped assessment (including issues under Section 14A and Rule 8D) and, accordingly, declined to interfere with the notice under Section 148; the writ petition is dismissed and the reassessment may proceed.

Reopening of assessment and validity of notice under section 148 - judicial approval of reasons recorded for reassessment - service and timeliness of notice in reassessment proceedings - bogus/accommodation entries and addition as unexplained expenditure - computation of addition by aligning gross profit rates of suspect and genuine transactions

Reopening of assessment and validity of notice under section 148 - service and timeliness of notice in reassessment proceedings - judicial approval of reasons recorded for reassessment - Validity of reassessment initiated by issuance of notice under section 148 and of the approval recorded by the Principal Commissioner. - HELD THAT: - The Tribunal examined whether the notice dated 07.10.2016 was validly served within the period permissible for reopening and whether the approval to issue the notice was vitiated. The record showed reasons were recorded within time and approval was granted on 03.10.2016. Although the assessee asserted actual receipt only on 27.07.2017, the copy of the notice produced bore the assessee's signature dated 16/02/2017 and the Tribunal found the signature on the notice matched the assessee's signature on other correspondence. On the facts the notice was therefore treated as served on 16/02/2017, which is within the statutory period for AY 2010-11. The reasons recorded by the AO were not impugned as infirm and the Principal Commissioner's approval-though brief-manifested application of mind by referring to those reasons; no specific manner of recording approval is prescribed by law and a non-cryptic challenge was not established. For these reasons the reassessment and approval were upheld. [Paras 20, 21, 22, 23, 24]

Reopening under section 148 upheld and approval given by the Principal Commissioner sustained.

Bogus/accommodation entries and addition as unexplained expenditure - computation of addition by aligning gross profit rates - Quantum of addition on account of purchases alleged to be bogus/accommodation entries. - HELD THAT: - On merits the Tribunal accepted that the assessee was a trading concern with audited books, maintained quantitative details, and made corresponding sales of the identical quantities to a third party with bank payments reflected. Following the binding reasoning of the Bombay High Court in comparable fact situations, the Tribunal held that where purchases and corresponding sales are accepted and recorded, the appropriate method is to equalise the gross profit rate on suspect purchases with that of the regular trade rather than disallow the entire purchase. The Tribunal computed the gross profit shortfall and, applying that method, sustained only a limited addition of Rs. 906,090. The Tribunal rejected the revenue's contention for full addition or a larger percentage by distinguishing precedents where no corresponding sales or other factual elements justified higher additions. [Paras 25, 26, 31]

Addition reduced and sustained only to the extent of bringing gross profit of suspect purchases in line with regular trade, namely Rs. 906,090; higher additions deleted.

Final Conclusion: Reopening under section 148 for AY 2010-11 was valid and the approval sustained; on merits the addition for alleged bogus purchases was substantially reduced by applying gross profit alignment, resulting in a limited sustained addition of Rs. 906,090 and the balance additions deleted.

Permanent Establishment - Dependent agent permanent establishment - Authority to conclude contracts - Habitual exercise of authority - Arm's length remuneration and attribution of profits - Article 5(4)(i) India-Mauritius DTAA - Article 12 India-USA DTAA - definition of royalty - Section 40(a)(i) disallowance for non-deduction of TDS - Burden of proof on Revenue under DTAA

Permanent Establishment - Dependent agent permanent establishment - Authority to conclude contracts - Habitual exercise of authority - Article 5(4)(i) India-Mauritius DTAA - Burden of proof on Revenue under DTAA - Whether Taj India constituted a dependent agent permanent establishment of the assessee in India in respect of distribution revenue. - HELD THAT: - Article 5(4)(i) of the India-Mauritius DTAA requires both that the agent has authority to conclude contracts in the name of the enterprise and that the agent habitually exercises that authority. The Tribunal examined the distribution agreement and its addendum and found that, prior to the addendum, Taj India contracted in its own name and, although the addendum purportedly granted authority to contract on behalf of the assessee, the Revenue did not establish that Taj India had in fact habitually exercised such authority. The Revenue thus failed to discharge its burden to prove the twin conditions of Article 5(4)(i). Following precedents relied upon in the order, the Tribunal upheld the CIT(A)'s conclusion that Taj India does not constitute a dependent agent P.E. of the assessee for distribution revenue. [Paras 12, 13, 14]

Revenue's grounds on distribution revenue dismissed; Taj India held not to be a dependent agent P.E. of the assessee for distribution revenue.

Permanent Establishment - Arm's length remuneration and attribution of profits - Article 5(4)(i) India-Mauritius DTAA - Whether any further profit is attributable to an alleged P.E. in India in respect of advertisement revenue where the agent was remunerated at arm's length. - HELD THAT: - The Transfer Pricing Officer had accepted that Taj India was remunerated at arm's length for advertisement sales and the assessee's arm's length analysis in respect of advertisement revenue was accepted. The Tribunal followed its Co ordinate Bench decision in the assessee's own case holding that where the agent is remunerated at arm's length, no additional income/profit attributable to a P.E. should be taxed in India. The Tribunal therefore accepted the assessee's alternate plea and deleted the addition made by the Assessing Officer in respect of advertisement revenue, while leaving the question of existence of a P.E. in respect of advertisement revenue open. [Paras 15]

Assessee's appeal allowed on alternate plea; no further profit attributable to alleged P.E. in respect of advertisement revenue since agent remuneration was accepted as arm's length; existence of P.E. on advertisement revenue left open.

Article 12 India-USA DTAA - definition of royalty - Section 40(a)(i) disallowance for non-deduction of TDS - Whether transponder fees and uplinking charges paid to a U.S. resident constituted 'royalty' under Article 12 of the India-USA DTAA and were therefore taxable in India such that disallowance under section 40(a)(i) was warranted for non-deduction of tax. - HELD THAT: - The Tribunal followed its Co ordinate Bench precedents in the assessee's own case which interpreted Article 12 of the India-USA DTAA as not covering payments for transponder and uplinking services - the Article's definition of 'royalties' did not encompass the tested payments as 'consideration for the use of, or the right to use' copyright or as consideration for use of industrial, commercial or scientific equipment. The Tribunal further observed that the expanded domestic definition of 'royalty' introduced later could not be read into the DTAA. On that basis and having regard to prior decisions applying the treaty text, the Tribunal held that the payments were not 'royalty' under Article 12 and therefore the Assessing Officer's disallowance under section 40(a)(i) could not stand. [Paras 22, 24]

Revenue's appeal on transponder and uplinking charges dismissed; payments not held to be 'royalty' under the India-USA DTAA and disallowance under section 40(a)(i) deleted.

Final Conclusion: Assessee's appeal allowed (deletion of additions in respect of advertisement revenue and affirmation of deletion of disallowance for transponder/uplinking charges); Revenue's appeal dismissed to the extent challenged, and Revenue's grounds on distribution revenue were dismissed as set out above.

Interest under section 28 of the Land Acquisition Act treated as part of enhanced compensation - TDS liability under section 194A of the Income tax Act - income from other sources under section 56 of the Income tax Act - exemption of capital gains on compulsory acquisition under section 10(37) of the Income tax Act - compulsory acquisition as transfer under section 2(47)(iii) of the Income tax Act

Interest under section 28 of the Land Acquisition Act treated as part of enhanced compensation - income from other sources under section 56 of the Income tax Act - TDS liability under section 194A of the Income tax Act - Whether interest paid under section 28 of the Land Acquisition Act on enhanced compensation is taxable as income from other sources and thereby attracts TDS under section 194A. - HELD THAT: - The Tribunal accepted the distinction between interest under section 28 and interest under section 34 of the Land Acquisition Act, noting that interest under section 28 is an accretion to the value and forms part of the enhanced compensation awarded by a court. Applying the ratio of the Supreme Court in Ghanshyam (HUF) and the Punjab & Haryana High Court in Jagmal Singh, the Tribunal held that such interest does not constitute income from other sources under section 56. Because the receipt is not income in the hands of the landowners, the withholding obligation under section 194A did not arise for the deductor. The Tribunal therefore allowed the additional ground that the impugned payments were not liable to TDS and set aside the demands raised under sections 201(1) and 201(1A). [Paras 7, 8]

Interest under section 28 is part of enhanced compensation and not income from other sources; TDS under section 194A does not apply and the demands are deleted.

Exemption of capital gains on compulsory acquisition under section 10(37) of the Income tax Act - compulsory acquisition as transfer under section 2(47)(iii) of the Income tax Act - Whether interest forming part of enhanced compensation is covered by the exemption in section 10(37) and the treatment of compulsory acquisition as a transfer under section 2(47)(iii). - HELD THAT: - The Tribunal noted that agricultural land falling within the areas specified in section 2(14)(iii) is a capital asset and that compulsory acquisition constitutes a transfer under section 2(47)(iii). It followed that capital gains arising on compulsory acquisition fall for consideration under section 45 but that section 10(37) specifically exempts capital gains arising from compulsory acquisition of such agricultural land. Consequently, any element of capital gain embodied in the compensation, including the accretion represented by interest under section 28, is covered by the exemption in section 10(37). [Paras 7]

Interest that is part of enhanced compensation is encompassed within the capital gains exemption under section 10(37) where compulsory acquisition is involved.

Final Conclusion: The Tribunal allowed the three appeals, holding that interest awarded under section 28 of the Land Acquisition Act is an accretion to enhanced compensation (not income from other sources), does not attract TDS under section 194A, and the capital gain component is covered by the exemption in section 10(37).

Allowability of employees' contribution to PF/ESI where payment made before the due date for filing return u/s 139(1) - temporal operation of Finance Act, 2021 amendment to section 36(1)(va) and section 43B - prospective vs retrospective effect - interpretation and application of section 43B-timing of payment as condition for deduction - binding effect of jurisdictional High Court precedent

Allowability of employees' contribution to PF/ESI where payment made before the due date for filing return u/s 139(1) - interpretation and application of section 43B-timing of payment as condition for deduction - binding effect of jurisdictional High Court precedent - Employees' contribution to PF/ESI paid by the employer before the due date for filing the return under section 139(1) is allowable as a deduction for the assessment years in issue. - HELD THAT: - The Tribunal followed the binding view of the jurisdictional High Court in Essae Teraoka Pvt. Ltd v. DCIT (as applied by the Tribunal in M/s. Shakuntala Agarbathi Company) that the term 'contribution' in clause (b) of section 43B includes both employer's and employee's contributions, and that where the employee's contribution is remitted on or before the due date for filing the return under section 139(1), the employer is entitled to deduction. Applying that precedent to the facts, the assessee had remitted the employees' contribution to PF/ESI before the section 139(1) due date for the relevant assessment years; accordingly the disallowance made by the Assessing Officer was not sustainable and was deleted. [Paras 8, 9]

Disallowance in respect of employees' contribution to PF/ESI deleted; deduction allowed for payments made before the due date for filing return u/s 139(1).

Temporal operation of Finance Act, 2021 amendment to section 36(1)(va) and section 43B - prospective vs retrospective effect - retrospectivity of tax amendments for removal of doubt - The amendment effected by the Finance Act, 2021 to section 36(1)(va) and section 43B is not of retrospective operation and does not apply to the assessment years under consideration. - HELD THAT: - The Tribunal examined the nature and effect of the Finance Act, 2021 amendment and, having regard to the jurisdictional High Court precedent and Supreme Court guidance that a provision said to be 'for removal of doubts' cannot be treated as retrospective if it alters the legal position, concluded that the amendment changed the existing law in a manner adverse to the assessee. Moreover, the amendment was stated to be effective from 01.04.2021 and thereby applicable from AY 2021-22 onwards; accordingly the amendment did not apply to the assessment years 2017-2018, 2018-2019 and 2019-2020. [Paras 8]

Finance Act, 2021 amendment to section 36(1)(va) and section 43B held prospective and inapplicable to the relevant assessment years; therefore it does not defeat the assessee's entitlement to deduction for timely payments.

Final Conclusion: Appeals allowed; the disallowances in respect of employees' contribution to PF/ESI for AYs 2017-2018, 2018-2019 and 2019-2020 are deleted and deduction granted, the Finance Act, 2021 amendments to section 36(1)(va) and 43B being held not applicable to these years.

Condonation of delay - preliminary decree in partition suit - effect of amendment to Prohibition of Benami Property Transactions Act, 1988 on ownership - benami property - service of notice waived

Condonation of delay - Application for condonation of delay in presenting the memorandum of appeal - HELD THAT: - There was a delay of twenty days in filing the memorandum of appeal. The Court perused the application and was satisfied that sufficient cause had been shown for the delay. In consequence, the delay was condoned and the application for condonation was allowed.

Delay of twenty days in presenting the memorandum of appeal is condoned; CAN 1 of 2019 (old CAN 7690 of 2019) is allowed.

Preliminary decree in partition suit - effect of amendment to Prohibition of Benami Property Transactions Act, 1988 on ownership - benami property - Validity of the preliminary decree in the partition suit and the effect of the amended provisions of the Prohibition of Benami Property Transactions Act, 1988 on the ownership claim - HELD THAT: - The appeal challenged the trial court's preliminary decree which treated the plaintiff no.1 (the mother) as co-owner to the extent of an eight anas share in the 'kha' schedule property. Counsel for the appellants submitted that the learned Trial Judge had applied the unamended provisions of the Prohibition of Benami Property Transactions Act, 1988 and failed to appreciate that, by virtue of the amendment relied upon, the property purchased in the mother's name by her husband should be treated as the father's property and thereafter inherited equally on his death. The High Court noted that although the Trial Judge referred to the unamended provisions, the amended provision invoked by the appellants conclusively vests the right in favour of the mother in respect of her eight anas claim in the 'kha' schedule property. Having considered the submissions and the effect of the amendment, the Court upheld the order of the learned Trial Judge for the reasons recorded in the order and dismissed the appeal.

The decree of the learned Trial Judge is upheld; the appeal fails. No order as to costs.

Service of notice waived - Whether service of notice of appeal upon the respondents should be dispensed with - HELD THAT: - The respondents' counsel waived service of notice of appeal. The Court recorded the waiver and proceeded accordingly.

Service of notice of appeal upon the respondents is waived.

Final Conclusion: The Court condoned the delay of twenty days in filing the memorandum of appeal and, after considering the effect of the amendment to the Prohibition of Benami Property Transactions Act, 1988, affirmed the preliminary decree in the partition suit; the appeal is dismissed, there is no order as to costs, and service of notice upon the respondents is waived.

Benami transaction - Prohibition of Benami Property Transactions - prima facie case - appreciation of evidence - bona fide purchaser - concurrent findings

Appreciation of evidence - prima facie case - concurrent findings - Whether the Appellant proved ownership of the suit property and whether the Courts below failed to appreciate the evidence relied upon by him - HELD THAT: - The Court examined Exhibits P1-P206 and found no documentary trail connecting the Appellant's receipts of money from his lottery business to the purchase, investment and registration of the suit property in his name. Exhibit P194 (money receipt/Agreement of Sale) showed the Appellant as a witness to the transaction between Respondents, and Exhibit P8 did not establish acquisition of the land. The Learned Trial Court and the First Appellate Court therefore correctly held that the Appellant had failed to make out even a prima facie case of ownership or benami purchase. The concurrent findings of fact were supported by the evidence and did not warrant interference. [Paras 13, 15]

Appellant failed to prove ownership; the Courts below correctly appreciated the evidence and their concurrent findings are upheld.

Benami transaction - Prohibition of Benami Property Transactions - Whether the Appellant could succeed on a claim of benami transaction under the Prohibition of Benami Property Transactions Act, 1988 - HELD THAT: - The Court considered Section 2(9)(A)(b)(iii) and observed that the statutory provision is self-explanatory. On the material before it the Appellant did not establish payment of consideration from his known sources so as to attract the statutory exception relied upon. In consequence, the Appellant could not take shelter under the provision to displace title standing in the Respondent No.1. [Paras 14, 15]

Claim of benami transaction not established; the Appellant cannot rely on the cited provision to overturn title in the name of Respondent No.1.

Final Conclusion: The appeal is dismissed; the concurrent findings of the Trial Court and the First Appellate Court that the Appellant failed to prove ownership or a benami transaction are upheld and the impugned judgment and decree require no interference.

Order 7 Rule 11 CPC - plaint to be accepted as true for preliminary determination - mixed question of law and fact not to be decided on pleadings - benami transaction - exclusion in respect of joint family property - proviso to Section 34 Specific Relief Act - relief of possession and maintainability - valuation of suit and adequacy of court-fee - question of pleadings and later stage scrutiny

Order 7 Rule 11 CPC - plaint to be accepted as true for preliminary determination - mixed question of law and fact not to be decided on pleadings - Application under Order 7 Rule 11 of CPC dismissed by trial court and that dismissal is sustainable - HELD THAT: - The Court applied the principle that for adjudication of an application under Order 7 Rule 11 CPC the averments in the plaint alone are to be taken into consideration and the defendant's version cannot be looked into. Where the controversy raises pure legal issues the suit or parts thereof can be disposed of at the preliminary stage, but mixed questions of law and fact require evidence and cannot be decided on the pleadings. On this basis the High Court found no illegality in the trial court's order dismissing the defendants' application under Order 7 Rule 11. [Paras 12]

The trial court's dismissal of the application under Order 7 Rule 11 CPC is maintained.

Benami transaction - exclusion in respect of joint family property - Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988 to the suit property pleaded as joint family property - HELD THAT: - The Court accepted the plaintiff's pleaded case that the suit property is part of the joint Hindu family corpus and noted the legal position that Section 4 of the Benami Transactions (Prohibition) Act, 1988 does not apply to joint family property as pleaded. The judgments relied on by the defendants did not concern joint family property and therefore did not assist them. [Paras 13]

Objection under the Benami Transactions (Prohibition) Act, 1988 is not tenable on the pleaded case of joint family property.

Mixed question of law and fact not to be decided on pleadings - limitation - preliminary adjudication inappropriate where factual disputes exist - Whether the suit is barred by limitation and whether that can be decided at the Order 7 Rule 11 stage - HELD THAT: - The Court held that the question of limitation, as raised by the defendants, involves mixed questions of law and fact and supportive factual pleas cannot be considered at the initial stage under Order 7 Rule 11. Such issues require evidence and therefore the trial court did not err in refusing to dispose of the suit on the limitation plea at the pleading stage. [Paras 14]

Limitation plea cannot be decided preliminarily on the pleadings; the trial court's approach is correct.

Proviso to Section 34 Specific Relief Act - relief of possession and maintainability - Maintainability of the suit under the proviso to Section 34 of the Specific Relief Act where possession was not claimed - HELD THAT: - Although the defendants contended that absence of a prayer for possession renders the suit not maintainable under the proviso to Section 34 Specific Relief Act, the High Court noted that this ground was not raised before the trial court. Consequently the Court declined to entertain it in the revision but observed that the defendants may raise the objection in their written statement and the trial court shall deal with it in accordance with law. [Paras 15]

Objection under the proviso to Section 34 Specific Relief Act not considered in revision for want of prior raising; defendants may raise it in written statement.

Valuation of suit and adequacy of court-fee - question of pleadings and later stage scrutiny - Sufficiency of valuation and payment of court-fee on the face of the plaint - HELD THAT: - The trial court had examined the plaint and concluded that valuation was made properly and adequate court-fee paid; the High Court found no fault with that conclusion at the present interlocutory stage and noted that the trial court had left the issue open for later consideration if required. [Paras 16]

Finding of the trial court on valuation and court-fee is sustainable at this stage.

Framing of issues and preliminary adjudication of pure legal issues after pleadings - Directions regarding further conduct of trial and adjudication of any pure legal issues without evidence - HELD THAT: - The High Court directed that the defendants file written statement on the next date fixed, permitted them to raise all maintainability grounds therein, and instructed the trial court to frame issues without delay. The trial court was directed that if, on consideration of pleadings, legal issues arise which can be decided without evidence the court shall decide those preliminarily without being influenced by the impugned order. [Paras 18]

Defendants to file written statement; trial court to frame issues promptly and decide any pure legal issues preliminarily where possible.

Final Conclusion: The revision is dismissed and the impugned order is maintained; defendants directed to file written statement by the next date fixed, may raise all maintainability objections therein, and the trial court shall promptly frame issues and decide any pure legal questions preliminarily where they are amenable to decision without evidence.

Bona fide purchaser of DFIA licences - fraud vitiates everything - extended period of limitation under Section 28(4) of the Customs Act - demand of customs duty in case of licences obtained on forged export documents - penalty under Section 114A of the Customs Act

Bona fide purchaser of DFIA licences - demand of customs duty in case of licences obtained on forged export documents - penalty under Section 114A of the Customs Act - Validity of demand of customs duty and imposition of equal penalty under Section 114A against appellants who purchased and utilised DFIA licences later alleged to have been obtained by exporters on fake export documents. - HELD THAT: - The Tribunal found that the DFIA licences utilised by the appellants were genuinely issued by DGFT, were transferable under the policy, and were valid and registered with Customs at the time of purchase and utilisation. The Department did not allege that the appellants colluded in the procurement of those licences, wilfully mis-stated material facts, or suppressed information with intent to evade duty; the only allegation was lack of due diligence by the appellants in purchasing licences from the market through brokers. Relying on established precedent that a transferee who purchases licences for value without notice of fraud acquires a good title and cannot be deprived of benefits merely because the original licence-holder obtained the licence by fraud, the Tribunal held that the appellants were bonafide purchasers and that the demand of duty and corresponding penalty could not be sustained in the circumstances of this case. [Paras 31, 33]

Demand of customs duty and penalty under Section 114A against the appellants is set aside as they were bonafide purchasers of licences valid at the time of import and there is no material to show collusion, willful mis-statement or suppression by them.

Extended period of limitation under Section 28(4) of the Customs Act - fraud vitiates everything - Whether the extended period under Section 28(4) was invokable to recover duty from the appellants in absence of alleged collusion, willful mis-statement or suppression by them. - HELD THAT: - Section 28(4) permits extended limitation where duty was not levied or paid by reason of collusion, willful mis-statement or suppression of facts. The Tribunal observed that the Department did not plead or prove any such ingredients against the appellants; the finding against the appellants was limited to non-exercise of due diligence in acquiring licences from brokers. Given that the licences were validly issued and registered at the time of import and the appellants had no role in the alleged fraud of the original licence-holders, the Tribunal held that the extended period could not be invoked to sustain the recovery. [Paras 32, 33]

Extended period of limitation under Section 28(4) is not invokable against the appellants in the facts and is not available to sustain the duty demand.

Final Conclusion: The appeals are allowed on merits: the demand of customs duty and equal penalty under Section 114A is set aside and the extended period under Section 28(4) is held not invokable against these appellants who were bonafide purchasers of licences valid at the time of import.

Penalty under Section 112(a) of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - identity theft - liability of proprietor for fraudulent imports by lending identity/documents - conspiracy and abetment in fraudulent imports - call detail records as corroborative evidence - no separate penalty on proprietorship concern where proprietor penalised for same offence

Identity theft - liability of proprietor for fraudulent imports by lending identity/documents - call detail records as corroborative evidence - penalty under Section 112(a) of the Customs Act, 1962 - no separate penalty on proprietorship concern where proprietor penalised for same offence - Whether penalty under Section 112(a) could be upheld against Shri Sanjay Arora (proprietor of M/s. Pico Trading Co.) for fraudulent imports effected under the firm's IEC and whether a separate penalty could be imposed on the proprietorship concern. - HELD THAT: - The Tribunal found that although the Original Authority described circumstances of identity misuse, the material on record - notably the call detail records showing repeated communication between Shri Sanjay Arora and the alleged mastermind in the relevant period, the absence of a satisfactory explanation for those communications, and corroborative testimony of other noticees - established that Sanjay Arora had provided his documents and was in regular contact during the period the fraudulent Bill of Entry was filed. The FIR lodged by the proprietor after the import was held to be susceptible to being an afterthought and no independent outcome of that FIR was placed on record. On these facts the Tribunal held that Sanjay Arora could not be treated as an innocent victim of identity theft but was party to the fraud by allowing his identity/documents to be used, attracting penalty under Section 112(a). However, in view of settled authorities and the tribunal's reasoning, once penalty was imposed on the proprietor the simultaneous imposition of a separate penalty on the proprietorship concern for the same offence was not warranted, and that separate penalty was rightly dropped. [Paras 13, 14]

Penalty under Section 112(a) sustained against Shri Sanjay Arora; separate penalty on M/s. Pico Trading Co. dropped.

Conspiracy and abetment in fraudulent imports - call detail records as corroborative evidence - penalty under Section 112(a) of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - Whether penalty under Section 112(a) (read with Section 114AA where invoked) could be upheld against Shri Nawal Kishore Singh for his role in the fraudulent imports. - HELD THAT: - The Tribunal accepted the Original Authority's findings that Shri Nawal Kishore Singh, an employee of the CHA operator, had transactional links with the mastermind and actively participated in the established modus operandi of fraudulent clearances. That conclusion was supported by admissions on record, the statement of the mastermind naming Nawal Kishore Singh, corroborative testimony of others and call records showing association during the relevant period. The appellant did not produce evidence to falsify these materials. On this basis the Tribunal found sufficient evidence of conspiracy and active participation to sustain the finding of liability and penalty under the Customs Act provisions relied upon by the Authority. [Paras 15, 16]

Findings and penalties against Shri Nawal Kishore Singh upheld.

Final Conclusion: The appeals are dismissed and the order under challenge is upheld except that the separate penalty on M/s. Pico Trading Co. is set aside while the penalties against the proprietor Shri Sanjay Arora and Shri Nawal Kishore Singh are sustained.

Duty of Custom House Agent to exercise due diligence - obligations of CHA under CBLR Regulation 10(d) - obligations of CHA under CBLR Regulation 10(n) - obligations of CHA under CBLR Regulation 10(j) - restriction on transacting business for more than one firm under CBLR Regulation 7(2) - revocation of CHA licence and imposition of penalty under CBLR - proportionality of punishment and remit to facts

Duty of Custom House Agent to exercise due diligence - obligations of CHA under CBLR Regulation 10(d) - obligations of CHA under CBLR Regulation 10(n) - Whether the appellant breached duties under Regulation 10(d) and 10(n) of CBLR 2018 by failing to advise clients, to verify KYC/addresses and to inform Customs, thereby justifying revocation and penalty. - HELD THAT: - The Tribunal found that the appellant acknowledged verifying quantity and quality of goods but there is no record that she had knowledge of overvaluation; nevertheless the appellant failed to verify the correctness of IEC/GSTIN and the functioning of the exporter at the declared address. Postal returns of summons established that the exporter was not at the declared address and the appellant made no visible efforts to have the exporter available for inquiry. The appellant also filed new shipping bills while old shipping bills remained in the ICES system at stage "Goods registration not done", and facilitated provisional release and re-export. These facts were held to constitute failure to exercise due diligence and a breach of obligations to advise clients and verify KYC, as required by Regulation 10(d) and 10(n). The Tribunal held that the available record sustains the finding of contravention of these Regulations and that the adjudicating authority's conclusions in this regard are not infirm. [Paras 16, 17, 18, 20]

Findings of breach of Regulation 10(d) and 10(n) are upheld and support imposition of sanction.

Obligations of CHA under CBLR Regulation 10(j) - restriction on transacting business for more than one firm under CBLR Regulation 7(2) - Whether the appellant violated Regulation 10(j) and Regulation 7(2) by concealing her interest/association with another CHA firm and by transacting business for more than one firm, warranting revocation and penalty. - HELD THAT: - The record showed that the appellant was a managing partner of another CHA firm (Johar Enterprises) and had earlier given statements in related investigations. While applying for the licence in the name of Online Cargo she swore by affidavit that she did not hold any other CHA licence or was partner/director of any other licensee. The Tribunal treated these facts as concealment and as false deposition inconsistent with Regulation 7(2) and as withholding records in violation of Regulation 10(j). The Tribunal further relied on prior orders indicating the appellant's involvement in serious past offences to conclude that concealment and the earlier findings aggravate the misconduct. On these bases the adjudicating authority's conclusion of contravention of Regulations 10(j) and 7(2) was sustained. [Paras 21, 22, 23]

Findings of violation of Regulation 10(j) and Regulation 7(2) are upheld and justify revocation of licence and penalty.

Revocation of CHA licence and imposition of penalty under CBLR - proportionality of punishment and remit to facts - Whether the adjudicatory action (including timeliness, compliance with principles of natural justice and proportionality of punishment) in revoking licence and imposing penalty was valid. - HELD THAT: - The Tribunal considered contentions on time-bar, denial of opportunity and disproportionality. The department relied on applicable CBLR provisions and on extensions arising from statutory measures; the Tribunal found that proper opportunity was afforded and that time-bar was not established. On proportionality, having regard to the appellant's concealment, facilitation of re-filing of shipping bills while prior bills existed, failure to verify KYC/address, and antecedent involvement in serious offences, the Tribunal held that revocation and penalty were proportionate to the violations. The Tribunal found no infirmity in the original order revoking the licence and imposing penalty. [Paras 10, 11, 12, 23]

The adjudicatory process was valid and the sanction of revocation and penalty was proportionate and is upheld.

Final Conclusion: The appeal is dismissed; the Order-in-Original revoking the CHA licence and imposing penalty is upheld.

Entitlement to DFIA benefits for imported inputs covered by description - Requirement of ITC (HS) number in DFIA - Application of Para 4.12 of FTP regarding generic or alternative inputs - Actual user / pre-import condition for DFIA - Construction of "materials" under Exemption Notification No. 19 of 2015 - Binding effect of coordinate Tribunal precedents

Entitlement to DFIA benefits for imported inputs covered by description - Binding effect of coordinate Tribunal precedents - Construction of "materials" under Exemption Notification No. 19 of 2015 - Import of Vital Wheat Gluten (CTH 11090000) is eligible for DFIA exemption when it falls within the description, value and quantity of the DFIA issued against Wheat Flour for export of biscuits. - HELD THAT: - The Tribunal accepted that the DFIA produced was a transferable licence issued against export of biscuits and that both wheat flour and wheat gluten are mentioned in the DFIA, permitting the inference that both inputs are used in the exported product. The Tribunal followed its consistent precedents which have held that wheat gluten is covered by the description of wheat flour for purposes of DFIA benefits. Under Notification No. 19 of 2015, "materials" for manufacture include items which may be used with processing; hence the imported wheat gluten falls within the definition of materials required for manufacture of the export product. The imported goods were found to be within the description, value and quantity of the DFIA and therefore entitlement to the exemption was sustained. [Paras 4]

The appellant's imported Vital Wheat Gluten is covered by the DFIA description and is eligible for DFIA exemption; the impugned denial on this ground was set aside.

Requirement of ITC (HS) number in DFIA - Absence of an ITC (HS) number in the DFIA is not a valid ground to deny DFIA benefits where the imported goods are otherwise covered by the description, value and quantity in the DFIA. - HELD THAT: - The Tribunal found no stipulation in the policy, procedure or Notification No. 19 of 2015 that an ITC (HS) number must be specified in the DFIA as a precondition for claiming benefits. Reliance was placed on earlier Tribunal decisions holding that specification of ITC (HS) number is not a criterion for entitlement when the description, quantity and value in the DFIA cover the imported item. Consequently, the departmental objection based solely on absence of the ITC (HS) number was rejected. [Paras 4]

Lack of ITC (HS) number in the DFIA does not defeat the claim where the imported item is demonstrably covered by the DFIA description, value and quantity.

Application of Para 4.12 of FTP regarding generic or alternative inputs - Provisions of Para 4.12(i) and (ii) of the FTP, concerning declaration and proportionate quantities for generic or alternative inputs, do not apply where the input is a specific item with a single quantity indicated in the SION/DFIA. - HELD THAT: - The Tribunal observed that Para 4.12(ii) is applicable only when a SION prescribes alternative inputs with quantities against a single entry, requiring proportionate import entitlement. In this case wheat flour/wheat gluten are specific items and the DFIA contains a single quantity; therefore the Para 4.12 mechanism for generic/alternative inputs is inapplicable. The Tribunal accordingly rejected the department's reliance on those FTP provisions to deny benefits. [Paras 4]

Para 4.12(i) and (ii) of the FTP are not applicable to the appellant's claim because the input is a specific item and not a generic/alternative input.

Actual user / pre-import condition for DFIA - No actual user or pre-import condition prevented grant of DFIA benefits in the post-transferable DFIA context where no such condition is specified in the licence and the DFIA is transferable. - HELD THAT: - The Tribunal noted that under transferable DFIAs the exporter may transfer inputs to third parties and that Para 4.27(iv) excludes issuance of DFIA only where a pre-import or actual user condition is prescribed; none existed in the present DFIA. The Tribunal followed higher and coordinate authority holding that absence of an actual user condition in the DFIA and relevant policy means entitlement cannot be withheld on that basis. Board and DGFT circulars further support that no correlation of technical specifications is required unless the item is specified as sensitive. [Paras 4]

Because the DFIA contained no actual user/pre-import condition and was transferable, denial of benefits on that basis was not warranted.

Binding effect of coordinate Tribunal precedents - Coordinate Tribunal decisions holding that wheat gluten is covered by the description of wheat flour are binding on the present bench and were followed in allowing the appellant's claim. - HELD THAT: - The Tribunal recorded that multiple previous orders of co-ordinate benches had consistently taken the view that wheat gluten is covered by wheat flour for DFIA purposes and that such orders had been accepted by the department in practice. Having regard to the consistency of those decisions, the Tribunal held it was bound to follow that ratio and applied it to allow the appellant's claim. [Paras 4]

The Tribunal followed its consistent precedents and allowed the claim as covered by the DFIA description.

Final Conclusion: The impugned order denying DFIA exemption was set aside; the appeal was allowed and the MA disposed of, with the Tribunal concluding that the imported Vital Wheat Gluten fell within the DFIA description and met the conditions for exemption under Notification No. 19 of 2015.

Oppression and mismanagement - relief under Section 241 of the Companies Act, 2013 - misappropriation of funds - burden of proof and evidentiary requirement - equitable jurisdiction to grant relief - statutory meetings and compliance with Registrar of Companies

Oppression and mismanagement - relief under Section 241 of the Companies Act, 2013 - burden of proof and evidentiary requirement - misappropriation of funds - statutory meetings and compliance with Registrar of Companies - Whether the petitioner proved acts of oppression, mismanagement or misappropriation of funds by respondents so as to warrant relief under Section 241 of the Companies Act, 2013 - HELD THAT: - The Tribunal examined the allegations that Respondents 3 and 4 diverted business and funds of the 1st respondent company to other entities and sidelined the petitioner. It held that a petition under Section 241 requires particularised averments and supporting documents showing affairs of the company are being conducted oppressively or prejudicially to public interest. The petitioner produced no documentary evidence of funds routed to Respondent No.2 or of orders diverted; no financial statements or annual returns were placed on record; and no prayer was made for forensic verification of signatures notwithstanding disputed bank transactions. The Tribunal accepted the respondents' contention that all three directors were authorised bank signatories (as per documents filed in reply) and noted absence of proof of continuing oppressive conduct or conduct warranting winding up. While recognising that the Court in appropriate cases may exercise equitable jurisdiction to grant relief (including directing statutory compliance and meetings), the Tribunal found that on the material before it the petitioner had not discharged the evidentiary burden to establish oppression or mismanagement and that isolated acts without corroborative documents could not sustain the petition. [Paras 16, 17, 18, 19, 20]

Petition dismissed for failure to prove oppression or mismanagement; no relief under Section 241 granted.

Final Conclusion: The Company Petition is dismissed without costs for want of requisite documentary proof of oppression, mismanagement or misappropriation; the Tribunal noted the availability of equitable relief in appropriate cases but found no basis to exercise it here.

Approval of resolution plan - judicial review of approval of resolution plan - resolution framework - effect of prior approvals by a judicially appointed authority - inter se remedies between promoters and resolution applicant

Approval of resolution plan - judicial review of approval of resolution plan - The challenge to the Tribunal's approval of the Resolution Plan was not maintainable and did not warrant interference. - HELD THAT: - The Tribunal examined the steps taken under the Resolution Framework, including board approval of the Resolution Plan, the application to and approval by Justice D.K. Jain (Retd.) for sale and acquisitions contemplated by the Plan, and subsequent approval by the Adjudicating Authority. In the exercise of its limited judicial review jurisdiction over an approval order, the Appellate Tribunal found no reason to interfere with the approval which had passed through the stages required by the approved Resolution Framework. The factual and procedural approvals at each stage were treated as having been given effect to, and the Appellate Tribunal declined to reopen or disturb the sanction accorded to the Plan. [Paras 6, 7, 8]

Appeal dismissed insofar as it seeks interference with the approval of the Resolution Plan.

Resolution framework - effect of prior approvals by a judicially appointed authority - inter se remedies between promoters and resolution applicant - The Appellants' contentions as to alleged dilution of their share value and any inter se disputes with the Resolution Applicant do not constitute grounds for setting aside the Plan and are left open for separate legal remedies. - HELD THAT: - The Tribunal noted that the Resolution Framework contemplated the sequence of approvals and that the sale/acquisition was approved by Justice D.K. Jain (Retd.) and thereafter by the Adjudicating Authority, with implementation steps taken. The Appellants' grievance about alleged requirement to infuse further equity and diminution of their share value was not accepted as a basis to invalidate the approved Plan. The Tribunal observed that any inter se rights or disputes between the Appellants and Respondent No.4 are matters for independent remedies under law and do not form a basis for judicially reviewing and setting aside the approval of the Plan under the limited scope of its review. [Paras 6, 8]

Inter se disputes between the Appellants and the Resolution Applicant are not adjudicated in this appeal and the Appellants are left free to pursue available legal remedies; such contentions do not warrant interference with the approval.

Final Conclusion: The appeal is dismissed; the Tribunal's approval of the Resolution Plan is upheld under limited judicial review, and any inter se disputes between the parties are left open for separate legal remedies.

Clean Slate theory - extinguishment of claims under an approved resolution plan - effect of Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - operation of Section 238 of the Insolvency and Bankruptcy Code, 2016 notwithstanding other laws - licensee's power of disconnection under Section 56 of the Electricity Act, 2003 - operational debt under the IBC includes dues payable to a distribution licensee

Effect of Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - Clean Slate theory - extinguishment of claims under an approved resolution plan - operational debt under the IBC includes dues payable to a distribution licensee - Approval of the Resolution Plan for the corporate debtor extinguished pre-existing electricity dues claimed by the distribution licensee and froze claims not part of the Plan. - HELD THAT: - The court applied the principle that upon NCLT approval of a resolution plan under Section 31(1) IBC, all claims not included in the approved plan stand extinguished. The WBSEDCL's dues constituted "operational debt" within the meaning of the IBC and therefore fell within the scheme that freezes and extinguishes claims as articulated in the Supreme Court decisions adopting the "Clean Slate" theory. Consequently, pre-Resolution Plan claims which were not part of the approved plan could not be revived or enforced against the successful resolution applicant. [Paras 30, 31, 32, 33, 35]

Pre-existing electricity dues of the petitioner-company standing outside the approved resolution plan are extinguished and cannot be enforced against the petitioner.

Licensee's power of disconnection under Section 56 of the Electricity Act, 2003 - extinguishment of claims under an approved resolution plan - operation of Section 238 of the Insolvency and Bankruptcy Code, 2016 notwithstanding other laws - The statutory right of the licensee to continue disconnection or to refuse supply, insofar as it is premised on pre-Resolution Plan dues extinguished by the approved plan, is rendered unenforceable. - HELD THAT: - Section 56 confers the right to disconnect and to require payment of outstanding charges as a condition of reconnection. The court held that both the right to recover dues and the right to continue disconnection share a common nucleus-the debt itself. Once the debt is extinguished by the resolution plan, the basis for withholding supply or continuing disconnection is removed. Section 238 IBC gives precedence to the Code where inconsistency exists; accordingly, the extinguishment of the debtor's liability under the IBC nullifies the licensee's consequent entitlement to refuse restoration on that basis. [Paras 36, 37, 38, 41, 46]

The licensee cannot lawfully insist on payment of pre-Resolution Plan dues or continue disconnection on that ground after approval of the resolution plan.

Reconnection charges - licensee's power of disconnection under Section 56 of the Electricity Act, 2003 - Reconnection charges that arise only at the time of actual reconnection remain payable and are not extinguished by the approved resolution plan. - HELD THAT: - Section 56(1) contemplates three components recoverable for reconnection: outstanding electricity charges, disconnection charge and reconnection charge. The court reasoned that outstanding charges and disconnection charges (being pre-Plan) are extinguished by the approved plan, but reconnection charges come into existence only at the time of restoration and therefore are not debts extinguished by the plan. Restoration can be conditioned on payment of such reconnection charges. [Paras 34, 42, 43]

The petitioner must pay only the reconnection charges which arise upon restoration; pre-Plan outstanding and disconnection charges remain extinguished.

Effect of an extinguished debt on civil decree - operation of Section 238 of the Insolvency and Bankruptcy Code, 2016 notwithstanding other laws - A civil court decree founded on pre-Resolution Plan dues becomes inexecutable once those dues are extinguished by the approved resolution plan. - HELD THAT: - The decree merely endorsed the licensee's statutory entitlement to recover dues under Section 56 of the Electricity Act and did not create an independent right separable from the underlying debt. Since the underlying debt was extinguished by the resolution plan, the decree lost its sanction and became inexecutable. The court further observed that instruments or rights flowing from other laws (including decretal relief) must yield to the IBC where inconsistency exists by reason of Section 238. [Paras 44, 45, 46]

The civil decree based on the extinguished dues is rendered inexecutable.

Relief by writ jurisdiction - reconnection upon payment of reconnection charges - Writ relief was granted directing restoration of electricity supply subject to payment of reconnection charges only. - HELD THAT: - Applying the foregoing conclusions, the High Court directed restoration of the petitioner's electricity connection upon payment of reconnection charges, and ordered that the WBSEDCL shall not insist upon payment of past dues or disconnection charges which have been extinguished. The restoration was to be carried out expeditiously and preferably within a fortnight of deposit of the reconnection charges. No costs were awarded. [Paras 41, 43, 47]

Electric supply to the petitioner is to be restored on payment of reconnection charges; pre-Plan dues and disconnection charges shall not be insisted upon.

Final Conclusion: The High Court held that approval of the Resolution Plan under Section 31(1) IBC extinguished pre-existing electricity dues of the corporate debtor and, accordingly, the distribution licensee could not withhold reconnection or enforce a civil decree based on those extinguished dues; reconnection was directed upon payment only of reconnection charges, which arise at the time of restoration.

Classification of creditors - decree-holder as a distinct class of creditor - moratorium on execution of decrees - role and powers of resolution professional in CIRP - admission and valuation of claims of decree-holders - membership of Committee of Creditors and commercial wisdom of financial creditors - compatibility with Article 14

Decree-holder as a distinct class of creditor - classification of creditors - Decree-holders are a separate, intelligible class of creditors under Section 3(10) of the IBC and are not to be treated as financial or operational creditors. - HELD THAT: - Section 3(10) of the IBC expressly includes a "decree-holder" as one of the categories of creditors alongside financial, operational, secured and unsecured creditors. The IBC defines financial and operational creditors elsewhere but does not define "decree-holder"; this absence is not an inadvertent omission rendering the class ill-defined. The Court analysed the nature of a decree-holder's right (primarily a right to execute a decree subject to execution law) and observed that execution is fettered by the moratorium under Section 14 of the IBC. Given that a decree represents a judicial quantification of a debt, the statute reasonably recognises decree-holders as a distinct class whose interest is in the decree itself, not in re characterising the underlying dispute as a financial or operational debt. Treating decree-holders as a separate class is rationally connected to the IBC's objective of preserving and maximising the corporate debtor's assets and is therefore not arbitrary or violative of Article 14.

Decree-holders constitute a separate and sustainable class of creditors under the IBC and are not to be classified as financial or operational creditors.

Moratorium on execution of decrees - role and powers of resolution professional in CIRP - The moratorium under Section 14 bars execution of decrees against the corporate debtor during CIRP; the resolution professional's role is to admit and verify the decree as a claim and not to "look behind" the decree. - HELD THAT: - Section 14(1)(a) expressly prohibits execution of any judgment, decree or order against the corporate debtor on the insolvency commencement date, and Section 14(1)(b) bars transfer or disposition of assets. Consequently, while a decree evidences an admitted claim, its execution is frozen by the moratorium. The resolution professional is empowered only to vet and verify the decree and must accept the decree as an admitted claim unless it has been set aside; the resolution professional cannot re adjudicate or re-characterise the underlying dispute that gave rise to the decree, because such an exercise would amount to "looking behind" the decree which neither the resolution professional nor an executing court may permissibly do within the moratorium regime.

Execution of decrees is stayed by the moratorium and the resolution professional's function is limited to admission and verification of the decree as a claim, not to revisit the merits of the decree.

Admission and valuation of claims of decree-holders - admission and valuation of claims - IBBI CIRP Regulations - estimation of claims - Claims of decree-holders must be admitted and, where not amenable to precise valuation, estimated in accordance with Regulation 14 and related CIRP provisions; Form F is the prescribed mode for such claims. - HELD THAT: - The Court observed that certain decrees (e.g., specific performance, part-payment scenarios) may resist precise valuation, but the CIRP framework addresses this by prescribing procedures for estimation of claims. Regulation 14 of the IBBI (CIRP) Regulations provides the mechanism for such estimation, and Form F (titled "Proof of Claim by Creditors (Other than Financial Creditors and Operational Creditors)") is the appropriate form for filing. The resolution professional should apply these regulatory measures and the overarching object of maximising the corporate debtor's assets in estimating and admitting decree-holder claims.

Decree-holder claims are to be admitted and, where valuation is not precise, estimated under Regulation 14 and filed using the prescribed form in the CIRP Regulations.

Membership of Committee of Creditors and commercial wisdom of financial creditors - compatibility with Article 14 - Exclusion of decree-holders from the Committee of Creditors is not unconstitutional; the statute reasonably vests decisive commercial powers in financial creditors to further the IBC's revival objective. - HELD THAT: - The Court considered the role of the Committee of Creditors (CoC) as the principal decision making body in CIRP, whose members are financial creditors because the process is designed to make key commercial decisions (including whether to revive or liquidate) in the commercial wisdom of those with financial exposure. Decree-holders derive rights by judicial quantification and are adversarial claimants, whereas CIRP is a non adversarial, rescue oriented process. Placing the "steering wheel" of revival with adversarial decree holders would undermine the statutory scheme. Therefore, confining CoC membership to financial creditors is a permissible classification and does not infringe Article 14.

Decree-holders' exclusion from the Committee of Creditors is constitutionally permissible and aligns with the IBC's objective of vesting commercial decision-making in financial creditors.

Final Conclusion: The writ petition challenging the treatment of decree-holders under the IBC is dismissed. The Court upholds the classification of decree-holders as a distinct class of creditors whose claims are to be admitted and processed under the CIRP framework (including valuation under Regulation 14 and filing under Form F), recognition that execution is barred by the moratorium, and the statutory arrangement excluding decree-holders from CoC membership as constitutionally valid.

Undervalued transaction - transactions defrauding creditors - intention to defraud creditors - power to require an independent expert under Section 46(2) - restoration of position as if transaction had not been entered into - protection of victims of fraudulent transactions under Section 49(b)(ii)

Undervalued transaction - intention to defraud creditors - Sale of plant and machinery was an undervalued transaction entered into with intent to keep assets beyond the reach of creditors and was rightly cancelled by the Adjudicating Authority. - HELD THAT: - The Adjudicating Authority recorded that the book value of the machinery was Rs. 1.56 Crore while the sale consideration accepted amounted to about Rs. 21 lakhs, a disparity that establishes the transaction as undervalued. The Tribunal accepted the Adjudicating Authority's finding that the Directors were aware of the pending insolvency application and deliberately entered into the transaction to keep assets beyond creditors' reach, supporting an intention to defraud. On this basis the Adjudicating Authority's cancellation of the sale and direction to restore possession to the Resolution Professional were sustained. [Paras 8]

The finding that the sale was an undervalued transaction entered into with intent to defraud creditors is upheld and the cancellation of the sale is sustained.

Power to require an independent expert under Section 46(2) - Appointment of an independent expert under Section 46(2) is discretionary and not mandatory in every proceeding under Section 46. - HELD THAT: - Section 46(2) uses the expression 'may require', which confers an enabling power on the Adjudicating Authority to call for an independent valuation where it considers necessary. The Tribunal held that this discretionary phraseology does not render appointment of an expert mandatory in all cases, and therefore the absence of such an appointment in the present case did not vitiate the Adjudicating Authority's decision. [Paras 9]

No error in law in not appointing an independent expert; the power is discretionary.

Protection of victims of fraudulent transactions under Section 49(b)(ii) - restoration of position as if transaction had not been entered into - The protection contemplated by Section 49(b)(ii) does not extend to a party who was the beneficiary of the undervalued transaction; the Adjudicating Authority was not required to treat the purchaser as a 'victim'. - HELD THAT: - Section 49 provides powers to restore the pre-transaction position and to protect persons who are victims of undervalued transactions. The Tribunal observed that the purchaser in this case was the beneficiary of the undervalued sale and therefore could not be regarded as a victim entitled to protection under Section 49(b)(ii). The Adjudicating Authority's directions to restore the assets and to protect creditors' interests do not improperly impinge on any right of a bona fide victim because the purchaser did not qualify as such. [Paras 12]

The purchaser cannot claim protection as a 'victim' under Section 49(b)(ii); the Adjudicating Authority's approach was appropriate.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's cancellation of the sale as an undervalued transaction and its directions to restore possession to the Resolution Professional are affirmed; the non-appointment of an independent expert was not mandatory, and the purchaser is not entitled to protection as a victim under Section 49(b)(ii).

Commercial wisdom of the Committee of Creditors - feasibility and viability of a resolution plan - treatment of operational creditors vis-a -vis financial creditors - section 30(2)(b) and section 53 of the Insolvency and Bankruptcy Code - appointment of registered valuers under the CIRP Regulations - assessment of liquidation value - overriding effect of the Insolvency and Bankruptcy Code (section 238)

Commercial wisdom of the Committee of Creditors - feasibility and viability of a resolution plan - treatment of operational creditors vis-a -vis financial creditors - section 30(2)(b) and section 53 of the Insolvency and Bankruptcy Code - overriding effect of the Insolvency and Bankruptcy Code (section 238) - Resolution plan approved by the CoC and the Adjudicating Authority treats operational and financial creditors in accordance with the IBC and is not susceptible to interference on the ground that operational creditors received a meagre payout. - HELD THAT: - The Tribunal examined the distribution under the approved resolution plan against the statutory benchmarks in section 30(2)(b) read with section 53 of the IBC. The liquidation value was assessed at Rs. 6.52 crores which, on the admitted claims, would yield nil to operational creditors in a liquidation scenario. The resolution plan nevertheless provides Rs. 0.14 crore to operational creditors and explicitly states that the payment is not less than amounts contemplated by section 30(2)(b). The CoC discussed and approved the allocations by 82.75% voting share after considering the Resolution Applicant's proposals. The Tribunal applied the settled principle that the commercial wisdom of the CoC is entitled to primacy and is not ordinarily interfered with by courts unless a class of similarly situated creditors is denied fair and equitable treatment. Further, section 238 gives the IBC overriding effect over inconsistent laws, thereby validating distributions under an approved plan even where claims arise under other statutes. On these bases the Tribunal held that the CoC considered feasibility and viability and that the treatment of operational creditors conforms to IBC, so the Adjudicating Authority correctly approved the plan. [Paras 17, 18, 19, 24, 25]

The resolution plan's allocation between operational and financial creditors complies with the requirements of the IBC and the commercial wisdom of the CoC; the appeal on this ground is rejected.

Appointment of registered valuers under the CIRP Regulations - assessment of liquidation value - compliance with CIRP Regulations for valuation - Late appointment of registered valuers by two days did not vitiate the valuation process or the approval of the resolution plan. - HELD THAT: - Regulation 27 requires appointment of two registered valuers within forty-seven days from the insolvency commencement date. Here the valuers were appointed two days after that deadline. The Tribunal found no allegation of any other irregularity in the valuation exercise or in the methodologies applied; the Form-H compliance certificate containing the fair and liquidation values was placed before the Adjudicating Authority and went unchallenged there. In the absence of any material showing that the delayed appointment caused an 'organic' error in determining liquidation value, the mere technical delay was held insufficient to invalidate the valuation or the approved plan. [Paras 20, 21]

The delay in appointing valuers was a technical defect which did not vitiate the liquidation valuation or the approval of the resolution plan; this ground of challenge fails.

Final Conclusion: The appeal is dismissed. The resolution plan approved by the CoC and sanctioned by the Adjudicating Authority complies with the IBC (including section 30(2)(b) and section 53) and the procedural irregularity of a two-day delayed appointment of valuers did not vitiate the valuation or approval; no order as to costs.

Operational debt - claim and default under Section 9 of the I&B Code, 2016 - existence of dispute under Section 8(2) of the I&B Code - limitation - Article 137 and acknowledgment under Section 18 of the Limitation Act, 1963 - admissibility of evidence of forgery/fraud in summary proceedings - jurisdiction of the Adjudicating Authority to inquire into allegations of fraud

Operational debt - claim and default under Section 9 of the I&B Code, 2016 - Whether the claim made by the Operational Creditor falls within the definition of operational debt and whether the application under Section 9 is maintainable on that basis. - HELD THAT: - The question whether the monies claimed arose from provision of services including employment and thus constitute an operational debt was extensively considered. One Member concluded from the correspondence, admissions and course of dealings that the claim is a quantified claim for services and falls within the definition of claim and operational debt, and that the Adjudicating Authority was justified in admitting the Section 9 application. The other Member accepted the factual matrix but addressed limitation as decisive. Because the two Members have expressed divergent opinions on the ultimate disposition of the appeal, the issue is placed for final determination by the Bench to be constituted by the Chairperson/third Member.

Remanded to an appropriate Bench/third Member for final decision.

Limitation - Article 137 and acknowledgment under Section 18 of the Limitation Act, 1963 - Whether the Section 9 application was barred by limitation in view of the date of default(s) pleaded and the alleged acknowledgements. - HELD THAT: - The two Members reached different conclusions on limitation. One Member held that, having regard to the emails and admissions (including the email dated 27.09.2016) and the demand notice of 05.12.2018, the application was within three years and not barred by Article 137. The other Member applied Article 137 with the date of default pleaded as 25.07.2011, found no acknowledgement prior to expiry of the three year period and concluded the Section 9 application was time barred. Given the clear divergence on this determinative legal question, the matter has been referred to the Chairperson for constitution of an appropriate Bench/third Member to decide the point finally.

Remanded to an appropriate Bench/third Member for final decision.

Existence of dispute under Section 8(2) of the I&B Code - admissibility of evidence of forgery/fraud in summary proceedings - jurisdiction of the Adjudicating Authority to inquire into allegations of fraud - Whether there existed a pre existing, plausible dispute (including allegations of forgery/fraud and a pending criminal protest petition) which would preclude admission under Section 9, and whether the Adjudicating Authority could entertain inquiries into allegations of fraud/forgery in the summary admission process. - HELD THAT: - The factual controversy over alleged forgery, control of email/letterheads, and the pendency of criminal proceedings was examined. One Member accepted the CID closure report and other material and concluded that the mis chief alleged by the Corporate Debtor did not establish a pre existing dispute sufficient to defeat admission; the Adjudicating Authority may have regard to such investigative material in a summary scrutiny. The other Member emphasised that allegations of fabrication and pre existing dispute raised factual issues that warranted rejection of the Section 9 application or further scrutiny, particularly in view of the Company law remedies relied upon by the Corporate Debtor. Because the Members differed on whether the dispute was sufficiently bona fide and on the extent to which the Adjudicating Authority should decide alleged fraud in summary proceedings, this issue is referred for final adjudication by the constituted Bench/third Member.

Remanded to an appropriate Bench/third Member for final decision.

Final Conclusion: The two Members of the Bench recorded divergent conclusions on pivotal issues - notably limitation and the existence/tenability of disputed allegations of forgery/fraud - and the record is directed to the Chairperson of NCLAT for constitution of an appropriate Bench/nomination of a third Member to render the final decision. The appeal is therefore not finally disposed of by a unanimous panel and the matters are referred for determination by the constituted Bench.

Non-cooperation under Section 19(1)-(3) of the Insolvency and Bankruptcy Code, 2016 - duty to assist the resolution professional during corporate insolvency resolution process - obligation of suspended directors to furnish books, records and details of creditors and debtors - power of the Adjudicating Authority to direct compliance with resolution professional's instructions

Non-cooperation under Section 19(1)-(3) of the Insolvency and Bankruptcy Code, 2016 - duty to assist the resolution professional during corporate insolvency resolution process - Respondents (suspended directors) failed to comply with the statutory duty to assist the resolution professional and thereby defaulted under Section 19 of the I&B Code. - HELD THAT: - The Tribunal examined the pleadings, communications and minutes of Committee of Creditors meetings and concluded that the suspended directors did not fully furnish information or provide assistance essential to the RP. The record shows that while some documents were handed over earlier to the IRP or provided by e-mail, material information remained unprovided - notably fixed asset registers, machine identification reconciliations, and complete details of foreign debtors and recoverables. The Tribunal observed that these particulars are primarily within knowledge and possession of the directors and are necessary for the RP to discharge duties such as preparing and signing financials, pursuing recoveries, and filing claims. On that basis the Tribunal formed the opinion that there was default in compliance with Section 19 and that the ex-management is required to extend full cooperation to the RP. [Paras 18]

There was default by the suspended directors in complying with Section 19 and they are held responsible for non-submission of information and non-cooperation.

Power of the Adjudicating Authority to direct compliance with resolution professional's instructions - obligation of suspended directors to furnish books, records and details of creditors and debtors - The Tribunal directed the respondents to provide specific assistance and documents to the Resolution Professional within a stipulated time to enable completion of the CIRP. - HELD THAT: - Relying on the mandate of Section 19(2)-(3) which empowers the Adjudicating Authority to direct persons who fail to assist the interim resolution professional, the Tribunal ordered the suspended directors to furnish specified information and assistance. The directions require production of all information and documents needed for completing and signing the financial statements for the period 01.04.2019 to 31.03.2020 and for auditors, accurate details of debtors and advances, all information relating to ECGC and DGFT claims, assistance in identification and reconciliation of machinery with invoices, and cooperation in complying with statutory requirements. The Tribunal fixed a two week period from receipt of the order for compliance, treating these steps as necessary for the RP to proceed with CIRP and to enable resolution plan processes. [Paras 19]

Respondents are directed to assist the Resolution Professional and furnish the enumerated information and cooperation within two weeks.

Final Conclusion: The application under Section 19 was allowed: the Tribunal found default by the suspended directors in cooperating with the Resolution Professional and directed them to provide specified documents and assistance within two weeks to enable completion of the CIRP.

Appointment of Resolution Professional by Committee of Creditors under Section 22(3)(b) of the Insolvency and Bankruptcy Code - Replacement of Interim Resolution Professional by CoC by requisite majority - Written consent in Form AA under Regulation 3(1A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Adjudicating Authority to forward proposed RP's name to the Board for confirmation - Fixation of professional fees by the Committee of Creditors and referral to IBBI for regulation of insolvency professional fees

Appointment of Resolution Professional by Committee of Creditors under Section 22(3)(b) of the Insolvency and Bankruptcy Code - Written consent in Form AA under Regulation 3(1A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Replacement of Interim Resolution Professional by CoC by requisite majority - Appointment of Mr. K. Parameswaran Nair as Resolution Professional in place of the Interim Resolution Professional - HELD THAT: - The Committee of Creditors, in its second meeting dated 10.01.2022, resolved by e-voting (68.47% voting share) to replace the Interim Resolution Professional and to appoint Mr. K. Parameswaran Nair as Resolution Professional. The proposed Resolution Professional furnished his written consent in the specified Form AA. Section 22(3)(b) permits the CoC to file an application before the Adjudicating Authority for appointment of the proposed RP along with the written consent. The Tribunal examined the minutes of the CoC meeting and the Form AA and found the procedural requirements for seeking appointment under Section 22 satisfied. The IRP had notified his unwillingness to continue as RP principally because his fee proposal was not accepted by the CoC; the Tribunal accepted that the CoC is entitled to refuse the IRP's proposed remuneration and to initiate the procedure under Section 22(2) to appoint another professional. Having regard to the CoC resolution, the written consent of the proposed RP and the panel listing by the IBBI for the Bench, the Tribunal appointed Mr. K. Parameswaran Nair as the Resolution Professional, directed the outgoing IRP to hand over charge and records within a week, and required the newly appointed RP to file periodical reports before the Tribunal. [Paras 6, 7, 8, 9, 13]

IA under Section 22(3)(b) allowed; Mr. K. Parameswaran Nair appointed as Resolution Professional and outgoing IRP relieved with direction for handover and reporting.

Fixation of professional fees by the Committee of Creditors and referral to IBBI for regulation of insolvency professional fees - Replacement of Interim Resolution Professional by CoC by requisite majority - Validity of CoC's refusal to accept the IRP's proposed fee and Tribunal's referral to IBBI regarding fee regulation - HELD THAT: - The CoC did not accept the fee quoted by the Interim Resolution Professional and proceeded to select an alternative professional who quoted a lower monthly fee. The Tribunal observed that CIRP is not intended to provide disproportionately high payments to insolvency professionals and considered the CoC's decision to be permissible. While the CoC's resolution to replace the IRP was upheld, the Tribunal noted the broader policy issue of fee fixation and directed the Registry to communicate the order to the IBBI for consideration and appropriate steps concerning determination or regulation of fees of insolvency professionals. [Paras 6, 11, 12]

CoC's refusal of the IRP's proposed remuneration upheld; matter referred to the IBBI for consideration of appropriate steps relating to fee fixation for insolvency professionals.

Final Conclusion: The application under Section 22(3)(b) is allowed; Mr. K. Parameswaran Nair is appointed as the Resolution Professional to continue the CIRP, the outgoing IRP is relieved and directed to hand over records, and the Tribunal has communicated the CoC's concerns about fee fixation to the IBBI for appropriate consideration.

Extension of CIRP period - exclusion of time - unconditional expression of interest - IBBI Regulation 36A(7) requirements - timelines under the Insolvency and Bankruptcy Code (Section 12) - discretion to extend beyond 330 days (Essar Steel principle) - duties of the committee of creditors and the resolution professional

Extension of CIRP period - discretion to extend beyond 330 days (Essar Steel principle) - timelines under the Insolvency and Bankruptcy Code (Section 12) - Application for a further 60-day extension of the CIRP period was untenable and is refused. - HELD THAT: - The Adjudicating Authority applied the parameters laid down by the Supreme Court in Essar Steel and concluded that the present application did not satisfy those exceptional circumstances permitting extension beyond the outer limit. The request was predicated on the conditional demands of two prospective resolution applicants that a renewal clause for the lease be incorporated, and on an unverified assertion that the Government of Telangana was considering such incorporation. The Tribunal found that these grounds do not fall within the permissible parameters for extending time: the delay arose from contingent commercial conditions and actions of the CoC/RP rather than factors exculpatory under Essar Steel. Strict adherence to the Code's timelines is necessary to protect the objective of maximising asset value, and extensions cannot be used to pursue conditions dehors the IBBI Regulations or to perpetuate indecision by stakeholders. [Paras 11, 12, 14, 19, 20]

Relief for 60-day extension is declined.

Unconditional expression of interest - IBBI Regulation 36A(7) requirements - duties of the committee of creditors and the resolution professional - Conditional EOIs should not have been treated as eligible and the CoC/RP must either secure withdrawal of conditions or decide on those conditional plans forthwith; the Tribunal directed immediate steps and granted a suo moto exclusion for time consumed in pursuing this application. - HELD THAT: - The Tribunal held that Regulation 36A(7) requires an unconditional expression of interest accompanied by specified undertakings and records. The two prospective resolution applicants submitted conditional plans contingent on a lease-renewal clause; the RP and CoC erred in treating those conditional EOIs as eligible and in seeking time/extensions to satisfy those conditions. The CoC and RP were held responsible for the loss of prescribed time under the Code. The Tribunal directed the CoC to decide on the conditional plans immediately, and stated that if conditions are withdrawn the RP shall complete the CIRP within the 270-day framework, taking into account exclusions and extensions already granted. To facilitate this, the Tribunal granted exclusion of time consumed in pursuing the instant application from 1 March 2022 until the date of the order. [Paras 15, 16, 17, 21, 22]

CoC to decide on conditional plans forthwith; RP to complete CIRP if conditions withdrawn; exclusion granted suo moto for the period from 1 March 2022 to date of order.

Final Conclusion: The application for a further 60-day extension of the CIRP is refused; the CoC and the Resolution Professional are directed to decide immediately on the conditional resolution plans in compliance with IBBI Regulation 36A(7) and the IBC timelines, and a suo moto exclusion is granted for the time consumed in pursuing the present application from 1 March 2022 until the date of this order.

Entitlement to encashment of fixed deposit receipts despite loss of original instruments - authority of banks to prepare duplicate FDRs from scanned copies and effect encashment - effect of disbandment of BIFR/AAIFR on custody and transfer of records - implementation of settlement between debtor and secured creditor through release of FDR proceeds

Entitlement to encashment of fixed deposit receipts despite loss of original instruments - authority of banks to prepare duplicate FDRs from scanned copies and effect encashment - implementation of settlement between debtor and secured creditor through release of FDR proceeds - Whether, in view of the loss/misplacement of original FDRs and the admitted entitlement of the applicant to the proceeds, the Bank may prepare duplicate FDRs from scanned copies and encash the amounts for payment to the secured creditor as per the settlement. - HELD THAT: - The Tribunal found on the material on record and replies that the original FDRs are not traceable despite efforts by the parties and the banks (para 11). The admitted position is that the applicant is entitled to encash the FDRs and that the applicant and the secured creditor have reached a settlement under which the FDR proceeds are to be paid to the secured creditor (paras 2-7, 10). Having regard to the disbandment of BIFR/AAIFR and the absence of original instruments in bank custody, the Tribunal concluded that, in the interest of justice and to give effect to the settled entitlement, respondents 4 and 5 (the banks) are directed to prepare duplicate FDRs from the scanned copies available in bank records and to encash the same and transfer the amounts to the applicant's bank account, to be paid to the secured creditor pursuant to the settlement (para 12). The Tribunal treated the banks' production of scanned copies and the parties' settlement as sufficient basis for ordering duplicate-documentation and encashment to implement the parties' rights and obligations. [Paras 11, 12, 13]

Application allowed; banks directed to prepare duplicate FDRs from scanned copies and encash the amounts to be transferred to the applicant's bank account for payment to the secured creditor in terms of the settlement; IA disposed of.

Final Conclusion: The application was allowed: on findings that the original FDRs are misplaced, the Tribunal directed the banks to prepare duplicate FDRs from scanned copies and to encash and transfer the proceeds to the applicant (to be paid to the secured creditor) so as to give effect to the settlement, and disposed of IA No. 913/2020.

Withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016 - Form-FA filed by Interim Resolution Professional - approval by Committee of Creditors with 100% voting rights - discharge of Interim Resolution Professional - restoration of powers of Board of Directors on withdrawal of CIRP - presumption of payment of IRP's fees and expenses where not controverted

Withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016 - Form-FA filed by Interim Resolution Professional - approval by Committee of Creditors with 100% voting rights - Validity of withdrawal of the insolvency petition by filing Form-FA and approval by the Committee of Creditors. - HELD THAT: - The Tribunal recorded that the Interim Resolution Professional placed a Form-FA before the Committee of Creditors and the sole member of the CoC, holding 100% voting rights, resolved to approve the withdrawal of the application subject to stated conditions. Having considered the resolution passed by the CoC in its meeting dated 11th February 2022 and the Form-FA filed by the IRP seeking withdrawal, the Tribunal found no further issue to be decided and permitted withdrawal of the petition. The Tribunal treated the CoC's unanimous approval as determinative for allowing the withdrawal under the statutory scheme and Regulations governing cessation of CIRP on settlement reflected in Form-FA. [Paras 5, 6]

Form-FA based withdrawal of CP(IB)/23/KOB/2021 is permitted in view of the CoC resolution approving withdrawal with 100% voting.

Discharge of Interim Resolution Professional - restoration of powers of Board of Directors on withdrawal of CIRP - Consequences of permitting withdrawal on status of IRP and corporate management. - HELD THAT: - Upon allowing the withdrawal of the insolvency petition, the Tribunal held that the Corporate Debtor is relieved from the rigours of the Corporate Insolvency Resolution Process. Consequentially, the Interim Resolution Professional is discharged of his duties and the powers of the Board of Directors are restored, directing the company to operate under the management of its Board. These directions flow from the termination of CIRP on acceptance of the settlement and withdrawal application. [Paras 7]

IRP discharged and powers of the Board of Directors restored; CIRP stands terminated as to the Corporate Debtor.

Presumption of payment of IRP's fees and expenses where not controverted - Treatment of IRP's fees and expenses where payment is not specifically stated in the application. - HELD THAT: - The Tribunal noted that the Interim Resolution Professional had not stated before the Bench whether he had received his fees and expenses. In the absence of any contrary statement or dispute, the Tribunal presumed that the IRP had received the fee and expenses from the Committee of Creditors. This presumption was applied for the purpose of concluding the application and directing withdrawal without requiring further inquiry on that point. [Paras 6]

In the absence of any adverse material, it is presumed the IRP has received his fees and expenses from the CoC.

Final Conclusion: IA(IBC)/34/KOB/2022 is allowed; the applicant is permitted to withdraw CP(IB)/23/KOB/2021 in view of the CoC's unanimous approval, the Corporate Debtor is relieved from CIRP, the IRP is discharged, and the Board of Directors' powers are restored.

Verification of claims - admission and verification of claims in the Corporate Insolvency Resolution Process - time bound nature of the CIRP - duty of the Interim Resolution Professional to examine claims and give opportunity of hearing - powers under Section 60(5) of the Insolvency & Bankruptcy Code, 2016

Verification of claims - admission and verification of claims in the Corporate Insolvency Resolution Process - duty of the Interim Resolution Professional to examine claims and give opportunity of hearing - time bound nature of the CIRP - Claim submitted by the applicant was not verified by the Interim Resolution Professional and was remitted for fresh verification and decision. - HELD THAT: - The Tribunal found from the record that the IRP had neither verified the documents furnished by the applicant nor passed any order admitting or rejecting the claim. Observing that the Corporate Insolvency Resolution Process is time bound and that the IRP is obliged to examine claims promptly while affording claimants an opportunity to respond, the Tribunal declined to adjudicate the merits of the disputed loan or its settlement. Instead, the Tribunal directed a procedural course: the applicant must submit all information and documents in support of its claim within seven days; the IRP must thereafter examine and verify the claim, after giving the applicant an opportunity to be heard, within seven days; and the IRP shall decide the claim in accordance with the provisions of the Code and the records (including books and audited balance sheets) made available. The Tribunal emphasised that it was not expressing any view on whether the loan was given or settled and required the IRP to complete the verification process in a time bound manner to safeguard the CIRP timeline. [Paras 4, 5]

Application disposed of with directions that the applicant supply all supporting documents within seven days; the IRP shall examine, verify and decide the claim after affording opportunity to the applicant within seven days of receipt, and complete the process within 15 days from the date of the order; merits to be decided by the IRP in accordance with the Code.

Final Conclusion: The Tribunal disposed of the application by directing fresh verification and adjudication of the applicant's claim by the IRP within specified short timelines, without expressing any view on the substantive merits of the claim.

Dissolution of corporate debtor under the Insolvency and Bankruptcy Code, 2016 - Compromise or arrangement under Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - Maintainability of combined applications for scheme approval and dissolution - Dispensation of convening meeting of creditors

Dissolution of corporate debtor under the Insolvency and Bankruptcy Code, 2016 - Maintainability of combined applications for scheme approval and dissolution - Application filed under Section 54 of the Code seeking simultaneous approval of a scheme of compromise or arrangement and dissolution of the corporate debtor is not maintainable. - HELD THAT: - The Tribunal examined Section 54 of the Code and Regulation 2B of the Liquidation Process Regulations and concluded that Section 54 pertains to liquidation and dissolution where assets have been completely liquidated and requires an application by the liquidator for dissolution. Regulation 2B deals with compromise or arrangement under the Companies Act during liquidation, with a separate scheme process and specified timelines. On a plain reading, the prayers for approval of a scheme of compromise or arrangement and for dispensation of convening a separate meeting of creditors lie outside the remit of an application under Section 54 and Regulation 2B does not permit grant of both kinds of relief in a single Section 54 application. The Tribunal therefore held that the present consolidated application cannot be entertained under Section 54; the applicant may, however, file separate applications - one for approval of the scheme (with reasons for any delay and for dispensing with separate meetings of creditors) and, if the scheme is sanctioned and assets are completely liquidated, a subsequent application for dissolution complying with the Companies Act requirements. [Paras 2, 3]

Prayers for approval of the scheme and dispensation of convening creditors' meeting do not fall within the application under Section 54/Regulation 2B as filed; the consolidated application is not entertainable and the applicant may file separate applications as indicated.

Final Conclusion: IA 1474/ND/2021 disposed of: consolidated application under Section 54 seeking both scheme approval/dispensation of creditors' meeting and dissolution is not maintainable; liberty granted to file separate applications for sanction of the scheme (with delay justification and meeting dispensation) and thereafter an application for dissolution if conditions are satisfied.

Anticipatory bail under Section 438 CrPC - money laundering offence under Section 3 of the Prevention of Money Laundering Act, 2002 - Section 45(1) of the Prevention of Money Laundering Act - twin conditions for grant of bail and subsequent amendment - presumption of constitutionality of legislative amendment - prima facie satisfaction based on material and organized economic crime

Section 45(1) of the Prevention of Money Laundering Act - twin conditions for grant of bail and subsequent amendment - presumption of constitutionality of legislative amendment - Whether the amended twin-conditions in Section 45(1) of the Prevention of Money Laundering Act apply when considering anticipatory bail and whether the amendment must be treated as having force until declared unconstitutional. - HELD THAT: - The Court noted that after the Supreme Court's partial read-down of Section 45(1), the Legislature amended that provision and the amended twin conditions now stand on the statute book. Both parties accepted that the amended provision is presently under challenge before the Supreme Court, but the settled principle is that legislative enactments carry a presumption of constitutionality until struck down by a competent Constitutional Court. Therefore, the amended twin-conditions in Section 45(1) may be triggered when a prayer for anticipatory bail is made in proceedings under the Act of 2002 and must be given effect unless and until the amendment is declared unconstitutional. [Paras 9, 11]

The amended twin-conditions in Section 45(1) of the PMLA are operative for consideration of anticipatory bail and retain force until set aside by a Constitutional Court.

Anticipatory bail under Section 438 CrPC - money laundering offence under Section 3 of the Prevention of Money Laundering Act, 2002 - prima facie satisfaction based on material and organized economic crime - Whether applicants are entitled to anticipatory bail in the complaint filed under Section 45 of the Act of 2002 in view of the material on record and the nature and magnitude of allegations. - HELD THAT: - On perusal of the complaint and investigation material, the Court found prima facie that applicants, as directors of M/s Prime Ispat Pvt. Ltd., were involved in an organized scheme wherein benami bank accounts were opened and substantial sums routed through shell companies into the company as share capital. The statement of the co-accused recorded under the Act indicated that applicants provided funds to be deposited in benami accounts and paid commission to the co-accused. The allegations disclose an organized economic offence attracting the definition of money laundering under Section 3. The amount involved, as per the complaint, is substantial and the applicants do not fall within the proviso that affords additional leniency. Merely because prosecution proceeded by complaint and cognizance was taken after a period does not, by itself, entitle the applicants to anticipatory bail; each case must be considered on its merits. Having weighed the nature of allegations, documentary material and authorities relied upon, the Court concluded that the case is not fit for grant of anticipatory bail. [Paras 8, 12, 13, 14]

Anticipatory bail is refused; applicants are not entitled to anticipatory bail on the facts and material placed before the Court.

Final Conclusion: The High Court refused the applicants' prayer for anticipatory bail under Section 438 CrPC in proceedings under the Prevention of Money Laundering Act, 2002. The Court held that the amended twin-conditions in Section 45(1) remain operative until set aside by a Constitutional Court and, on the prima facie material disclosing an organized money laundering scheme involving substantial sums, the applicants are not fit for grant of anticipatory bail.

Interpretation of contract - reimbursement of service tax - reverse charge mechanism - scope of contractual liability "in respect of this contract" - patent illegality in arbitral award - reimbursement of statutory levy/cess - award of interest

Reimbursement of service tax - scope of contractual liability "in respect of this contract" - interpretation of contract - Validity of the arbitral award insofar as it awarded reimbursement of Service Tax of Rs. 1,38,58,095/- to the respondent - HELD THAT: - Clause 37(i) of the GCC and Clause 14 of the Instructions to Bidders provide reimbursement of Service Tax paid by the contractor only in respect of Service Tax levied "in respect of this Contract". The Agreement is an item rate contract under which the works executed by the respondent were exempt from Service Tax; there was no stipulation that the respondent would procure services on behalf of the petitioner. The Arbitral Tribunal erred in treating Service Tax paid by the respondent in respect of contracts between the respondent and third party service providers (including amounts paid under the reverse charge mechanism) as falling within Clause 37(i). That interpretation extended reimbursement beyond taxes levied "in respect of this Contract" and is therefore contrary to the express terms of the Agreement, amounting to patent illegality warranting interference with the award. [Paras 44, 45, 46, 47, 48]

The arbitral award insofar as it granted reimbursement of Rs. 1,38,58,095/- is set aside.

Award of interest - interpretation of contract - Whether interest awarded by the Arbitral Tribunal is payable in respect of the sum set aside - HELD THAT: - The Arbitral Tribunal had awarded interest at 10% per annum on the claims it allowed. Since the award of reimbursement of Rs. 1,38,58,095/- has been set aside as contrary to the contract, no interest is payable in respect of that sum. The petitioner could not point to any contractual clause proscribing an award of interest generally, but the court's setting aside of the principal amount entails that interest on that amount must also be disallowed. [Paras 30, 50, 51]

No interest is payable on the sum of Rs. 1,38,58,095/- which has been set aside.

Reimbursement of statutory levy/cess - interpretation of contract - Status of the arbitral award insofar as it allowed reimbursement of Environmental Compensation Cess (ECC) - HELD THAT: - The Arbitral Tribunal found that the ECC arose pursuant to a statutory notification and that Clause 38 of the GCC covered statutory liabilities imposed after the last stipulated date for receipt of tenders. The petitioner has accepted the award in respect of reimbursement of ECC and has not pressed any challenge before this Court. Consequently, the award in favour of the respondent on Claim No.2 stands. [Paras 3, 29, 49]

The arbitral award in respect of reimbursement of ECC is maintained (petitioner accepted that portion of the award).

Final Conclusion: The petition is partly allowed: the arbitral award is set aside insofar as it granted reimbursement of Service Tax of Rs. 1,38,58,095/- and interest thereon; the award in respect of reimbursement of ECC is maintained as accepted by the petitioner; the parties shall bear their own costs and the pending application is disposed of.

Refund of amounts paid under mistake of law - Sanction of refund after tribunal remand - Binding effect and applicability of High Court decisions on refund claims - Non-recoverability of amounts already refunded

Sanction of refund after tribunal remand - Refund of amounts paid under mistake of law - Validity of the adjudicating authority's sanction of refund following this Bench's remand and whether the sanction was correctly set aside by the Commissioner (Appeals). - HELD THAT: - This Bench had previously remitted the matter for fresh consideration including the law in Geojit BNP Paribas (supra). The adjudicating authority considered the remand, recorded satisfaction as to limitation and on merits concluded that the appellant had discharged excess service tax and was eligible for refund (see paragraphs 8 and 9 of the Order-in-Original). The Commissioner (Appeals) set aside that sanction relying on a later High Court decision which characterised Geojit as not good law. Having regard to the jurisdictional High Court decisions subsequently cited by this Bench - holding that amounts paid under a mistaken notion are refundable and that once refunded the Revenue cannot simply recover them as tax due - the adjudicating authority's sanction of refund was legally sustainable. The Commissioner (Appeals) therefore erred in setting aside the sanction of refund; the sanction must be restored and the Revenue restrained from effecting recovery of amounts already refunded as held in the cited High Court authority. [Paras 2, 3, 4]

The adjudicating authority's sanction of refund is upheld; the Commissioner (Appeals) erred in setting it aside.

Final Conclusion: The appeal is allowed; the impugned order of the Commissioner (Appeals) setting aside the sanction of refund is set aside and the sanction restored, the officer's action being consistent with the law that amounts paid under a mistaken notion are refundable and, once refunded, are not recoverable as tax due.

Computation of limitation for refund of accumulated Cenvat credit on export of services - date of receipt of payment in convertible foreign exchange as relevant date for limitation - requirement of notice under Rule 14 of the Cenvat Credit Rules for rejection of Cenvat credit - refund procedure under Rule 5 of the Cenvat Credit Rules read with Notification No. 27/2012-CE (NT) - interest under Section 11BB of the Central Excise Act

Computation of limitation for refund of accumulated Cenvat credit on export of services - date of receipt of payment in convertible foreign exchange as relevant date for limitation - refund procedure under Rule 5 of the Cenvat Credit Rules read with Notification No. 27/2012-CE (NT) - Limitation for filing refund claims was wrongly applied by the Adjudicating Authority leading to rejection of part of the refund. - HELD THAT: - The Tribunal accepted the appellant's contention that, for export of services, the right to claim refund crystallises upon completion of the export transaction which requires receipt of remittance in convertible foreign exchange under Rule 3(2) of the Export of Service Rules, 2005. The Tribunal noted that Notification No. 27/2012-CE (NT) as amended by Notification No. 14/2016-CE (NT) fixes the one-year limitation period for claiming refund and that such period is to be calculated from the date of receipt of payment in convertible foreign exchange (or, as a corollary, from the quarter-end when claims for completed export transactions for that quarter are to be filed). Applying that principle to the facts, the Tribunal found that the Adjudicating Authority erred in rejecting portions of the refund on the ground that invoices/exports were beyond one year, and therefore set aside the limitation-based rejections. [Paras 6]

Part of the refund was wrongly rejected on limitation grounds and that ground is allowed in favour of the appellant.

Requirement of notice under Rule 14 of the Cenvat Credit Rules for rejection of Cenvat credit - procedure for rejection of Cenvat credit - Rejection of Cenvat credit for certain input services (photocopy charges, vehicle parking charges and rent-a-cab) was invalid because the prescribed procedure for rejection was not followed. - HELD THAT: - The Tribunal found that the Adjudicating Authority did not follow the statutory procedure of issuing a notice under Rule 14 of the Cenvat Credit Rules before rejecting the credit claimed on specified input services. As the procedure for adjudicatory action to reject Cenvat credit was not complied with, the partial rejection of credit in respect of those services was held to be procedurally infirm and therefore liable to be set aside. [Paras 8, 9]

The rejection of Cenvat credit in part is set aside and the ground is decided in favour of the appellant.

Final Conclusion: The appeal is allowed; the impugned order is set aside insofar as it rejected part of the refund claim. The appellant is entitled to the balance refund as directed by the Tribunal, and the Adjudicating Authority is directed to grant the balance amount of refund with interest under Section 11BB of the Central Excise Act within 45 days from receipt of the copy of this order.

Cenvat credit admissibility - Requirement of physical receipt of inputs - Compliance with Rule 4 and Rule 9 of the Cenvat Credit Rules, 2004 - Burden of proof on the manufacturer for admissibility of Cenvat credit - Cross-examination under Section 9D of the Central Excise Act, 1944 - Principles of natural justice - right to cross-examine persons whose statements are relied upon - Reliability of statements not subjected to cross-examination

Cenvat credit admissibility - Requirement of physical receipt of inputs - Compliance with Rule 4 and Rule 9 of the Cenvat Credit Rules, 2004 - Burden of proof on the manufacturer for admissibility of Cenvat credit - Whether the Cenvat credit taken by the appellant could be disallowed on the ground that the alleged inputs were not physically received and that credit was availed merely on invoices. - HELD THAT: - The Tribunal found that the appellants had recorded receipt of the inputs in statutory records (RG-23A Part I/II and FORM IV), booked the purchases in their books of account and effected payment through banking channels. Rule 4 and Rule 9 permit credit on basis of invoice where the inputs are received and recorded; the burden of proof for admissibility lies on the manufacturer. The Department failed to prove that the inputs shown in the invoices were not received or that any alternative unaccounted raw material was used in manufacture. There was no evidence disputing the quantity of finished goods produced or showing financial return/undue cash flow to negate the recorded transactions. In these circumstances the confirmation of demand for disallowance of Cenvat credit was not tenable. [Paras 4]

Cenvat credit availed by the appellant is admissible and the demand founded on non-receipt of inputs is not sustainable.

Cross-examination under Section 9D of the Central Excise Act, 1944 - Principles of natural justice - right to cross-examine persons whose statements are relied upon - Reliability of statements not subjected to cross-examination - Whether denial of the appellant's request to cross-examine the director and an employee (whose earlier statements were relied upon) amounted to breach of natural justice and rendered the statements inadmissible. - HELD THAT: - The Tribunal held that statements recorded during investigation which the Department relied upon were required to be placed before the adjudicating authority and the persons whose statements were to be relied upon must be made available for examination and cross-examination as mandated by Section 9D. The adjudicating authority rejected the appellant's application to cross-examine the director and employee, resulting in denial of opportunity and breach of natural justice. In absence of such cross-examination the statements could not be treated as admissible evidence. The Tribunal relied on settled precedents which treat Section 9D compliance and cross-examination as mandatory before reliance on such statements for confirming demand. [Paras 4]

Denial of the request for cross-examination violated principles of natural justice; the reliance on un-cross-examined statements was impermissible.

Reliability of statements not subjected to cross-examination - Burden of proof on the manufacturer for admissibility of Cenvat credit - Whether penalties and interest confirmed alongside the Cenvat demand could be sustained where the foundational demand itself was unsustainable and where reliance was placed on un-cross-examined statements. - HELD THAT: - Because the demand for recovery of Cenvat credit was set aside on the combined grounds that the appellants had complied with statutory requirements and that the Department impermissibly relied on statements which were not properly subjected to cross-examination, consequential imposition of interest and penalties could not stand. The Tribunal observed that the adjudicating authority's approach displayed denial of natural justice and that there was no independent positive evidence to sustain the penalties. Precedents addressing identical factual matrices were followed to hold the penalties unsustainable. [Paras 4, 5]

Penalties and interest imposed in consequence of the disallowed Cenvat credit are not sustainable and are set aside.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned orders denying Cenvat credit and imposing interest and penalties, holding that the appellants had complied with statutory requirements for taking credit, that the Department failed to prove non-receipt of inputs, and that reliance on statements not subjected to cross-examination violated Section 9D and principles of natural justice; consequential reliefs were granted.

Deduction for subcontractor turnover - mandatory electronic filing of returns - verification of e filing records - perversity in administrative finding - revisional jurisdiction under Section 64(1) of the KVAT Act - remand for verification of manual returns

Mandatory electronic filing of returns - verification of e filing records - deduction for subcontractor turnover - Revisional authority cannot deny deduction for subcontractor turnover solely on the basis of non declaration in the departmental e filing system without examining manually filed monthly returns. - HELD THAT: - The court observed that electronic filing of monthly returns became mandatory with effect from 30.09.2010. For periods prior to mandatory e filing (notably May 2010 to August 2010) the revisional authority erred in relying exclusively on the e filing database to conclude that subcontractors had not disclosed turnover. The mandatory nature of e filing from September 2010 onwards does not relieve the revisional authority of its obligation to examine manual returns where those were the operative mode of filing. Denying the assessee's claim without considering the manually filed returns placed on record by the assessee is unsustainable. [Paras 5]

Question Nos.2 and 3 answered in favour of the assessee; the revisional order setting aside the appellate allowance is unsustainable insofar as it did not examine manual returns, particularly for May-August 2010.

Perversity in administrative finding - remand for verification of manual returns - revisional jurisdiction under Section 64(1) of the KVAT Act - Whether the revisional authority's conclusion that subcontractors had not disclosed turnover in their returns was perverse when manual returns were available and electronic filing was not in force for the earlier months. - HELD THAT: - The court found the revisional authority's reliance on the e filing system without examining available manual returns to be perverse. Consequently, the matter was set aside and remitted to the Additional Commissioner for reconsideration. The revisional authority is directed to examine the manually filed monthly returns of subcontractors for the tax periods in question (with specific emphasis on May-August 2010) and, where e filing exists from September 2010 onwards, to take those electronic filings into account when determining the assessee's liability. The reassessment of the appellate order is to be carried out after providing the assessee an opportunity of hearing.

Impugned revisional order set aside and the matter remitted to the Additional Commissioner for fresh consideration with directions to verify manual returns for May-August 2010 and to consider e filed returns from September 2010 onwards.

Final Conclusion: Appeal allowed in part; order of the Additional Commissioner dated 24.06.2021 set aside and matter restored for reconsideration so that manual returns (for May-August 2010) and e filed returns (from September 2010 onwards) are examined and appropriate orders passed after hearing the assessee.

Classification under Entry No.53 of the Third Schedule - scope of notification dated 31.03.2006 - scope of notification dated 09.10.2013 - requirement to accompany goods with e-sugam - penalty under Section 53(12) of the Act

Classification under Entry No.53 of the Third Schedule - scope of notification dated 31.03.2006 - Whether the Spectrum Analyzer is classified as an IT product under the notification dated 31.03.2006 and thereby falls within Entry No.53 of the Third Schedule. - HELD THAT: - The Court noted that notification No.FD116 CSL 2006 (9) dated 31.03.2006 expressly specifies, at Sl.No.22 under heading and sub-heading No.9030, that 'spectrum analysers' are IT (Information Technology) products. That classification is indisputable and places the Spectrum Analyzer within Entry No.53 of the Third Schedule. Having regard to that specific notification, the Spectrum Analyzer must be treated as an IT product for the purposes of the Act. The Tribunal correctly relied on the 31.03.2006 notification in characterising the goods as IT products and the revision does not demonstrate any error in that conclusion. [Paras 9, 12]

Spectrum Analyzer is an IT product covered by the 31.03.2006 notification and included within Entry No.53 of the Third Schedule.

Scope of notification dated 09.10.2013 - requirement to accompany goods with e-sugam - penalty under Section 53(12) of the Act - Whether the Department could treat the Spectrum Analyzer as 'electronic goods of all kinds' under the 09.10.2013 notification to insist on e-sugam and levy penalty under Section 53(12). - HELD THAT: - The Court examined the 09.10.2013 notification which prescribes documents (including e-sugam) to accompany certain goods described in its Part A and specifically lists 'Electronic goods of all kinds' at Entry 13. However, the departmental attempt to reclassify a commodity expressly notified as an IT product under the 31.03.2006 notification into the more general category of 'electronic goods of all kinds' under the 09.10.2013 notification was held to be inconsistent with the earlier specific notification. In addition, the factual finding that the assessee subsequently raised and produced the e-sugam and that the movement was pursuant to a supply order to the Chennai office of Prasar Bharati were materials considered by the Tribunal. On these bases the Tribunal's conclusion-that the department ought not to have insisted on e-sugam to levy the penalty-was upheld as not irregular or perverse. [Paras 10, 12, 13]

The department could not convert the Spectrum Analyzer into 'electronic goods of all kinds' for the purpose of imposing a penalty under Section 53(12); the Tribunal's setting aside of the penalty is upheld.

Final Conclusion: The Tribunal's order setting aside the penalty is confirmed; the questions of law are answered against the revenue and in favour of the assessee, and the revision petition is dismissed.

Conviction and sentence under Section 138 of the Negotiable Instruments Act - service of legal notice and deemed service - presumption as to cheque and admitted signature - burden to rebut evidentiary case of the complainant - forensic report as not conclusive - limited scope of revisional jurisdiction to legality and correctness

Conviction and sentence under Section 138 of the Negotiable Instruments Act - presumption as to cheque and admitted signature - burden to rebut evidentiary case of the complainant - forensic report as not conclusive - Whether the conviction and sentence under Section 138 of the Negotiable Instruments Act are sustainable on the evidence produced. - HELD THAT: - The Court found that the cheque marked Ex. P.2 and the signature thereon were not disputed by the petitioner and that multiple documents (notably Exs.P.18 to P.26 and Ex.P.44) supported the respondent's case, including an acknowledgement of receipt (Ex.P.26). The Trial Court relied on voluminous documentary and oral evidence and the Appellate Court confirmed the findings. The FSL report (Ex.C.1) indicated that ink tint and luster appeared similar but did not rule out earlier issuance; the Court held that the FSL report was not conclusive and did not absolve the petitioner of the onus to rebut the complainant's evidence. The petitioner's defence that he had only received a lesser sum was disbelieved in view of his prior admissions and the documentary trail; the courts below considered and rejected the defence after re-appreciation of evidence. Having regard to the admitted documents, the absence of effective rebuttal and the settled presumptions attaching to an undisputed cheque and signature, the conviction and sentence were held to be legally sustainable. [Paras 9, 10, 11, 12, 13]

The conviction and sentence under Section 138 are upheld; the evidence and admitted documents support the respondent and the defence was not satisfactorily rebutted.

Service of legal notice and deemed service - limited scope of revisional jurisdiction to legality and correctness - Whether the legal notice was validly served and whether this Court should exercise revisional jurisdiction to interfere with the concurrent findings. - HELD THAT: - The Court recorded that postal receipts and certificate of posting together with the petitioner's admission as to one of the addresses supported a finding of service (Exs.P.10-P.17 and P.14-P.17). The Trial Court applied authority on deemed service and the General Clauses Act in reaching the conclusion that the notice was served. On revisional jurisdiction, the Court emphasised that revision is confined to orders suffering from illegality or perversity; having found that both Trial and Appellate Courts examined the documentary and oral evidence and reached concurrent conclusions on service and merits, there was no scope for interference. The petition was therefore dismissed. [Paras 9, 13]

Notice held to have been validly served; revisional jurisdiction not attracted as the orders below do not suffer from illegality or incorrectness.

Final Conclusion: The revision petition is dismissed; the convictions and sentences were affirmed by the courts below on appreciation of documentary and oral evidence, the legal notice was held to have been duly served, the FSL report was not treated as conclusive, and there was no ground to invoke revisional jurisdiction.

Presumption under Section 139 of the Negotiable Instruments Act - onus of proof as to discharge of debt under the Negotiable Instruments Act - validity and service of demand notice under Section 138 of the Negotiable Instruments Act - remand for fresh consideration where essential statutory prerequisites were not examined

Presumption under Section 139 of the Negotiable Instruments Act - onus of proof as to discharge of debt under the Negotiable Instruments Act - Whether the trial Magistrate erred in acquitting the accused without applying the statutory presumption under Section 139 and without shifting the onus to the accused to prove discharge of liability. - HELD THAT: - The Court found that the learned Magistrate failed to apply the legal presumption enacted by Section 139 of the Negotiable Instruments Act, which requires that, unless the contrary is proved, the holder of a cheque is presumed to have received it in discharge, in whole or in part, of any debt or other liability. That presumption is one of law and shifts the burden upon the accused to rebut it. The record showed production and admission of documents (challans and invoices exhibited as exhibit-2) and no challenge to their authenticity in cross-examination; moreover, no suggestion was put to the prosecution witness that the cheques were issued as a security deposit. The Magistrate did not consider these aspects and instead reached a cryptic conclusion that the cheques were issued as security without evidential basis. For these reasons the acquittal resulting from non-application of Section 139 was held to be erroneous.

The acquittal was set aside insofar as it proceeded without applying the statutory presumption under Section 139 and without placing the onus on the accused to disprove liability.

Validity and service of demand notice under Section 138 of the Negotiable Instruments Act - remand for fresh consideration where essential statutory prerequisites were not examined - Whether the trial Court considered the legality, validity and service of the statutory demand notice before recording judgment, and the appropriate remedy where such consideration is absent. - HELD THAT: - The appellate Court observed that the learned Magistrate did not examine or record findings on the legality, validity or service of the demand notice issued by the complainant prior to filing the complaint, a matter that is an essential statutory prerequisite in proceedings under Section 138. Because the lower Court's judgment omitted any discussion of that question, the appellate Court remitted the matter to the trial Court for fresh adjudication on these points and for delivery of a reasoned judgment after hearing the parties. The remand is limited to consideration of the omitted but material issues (validity/service of notice) and for the trial Magistrate to apply the statutory presumption and related evidence rules in reaching a reasoned conclusion.

The complaint case was remitted to the trial Court for fresh judgment within one month, with directions to consider validity and service of the demand notice and to apply Section 139 and related evidentiary principles.

Judicial training where failure to apply statutory law is manifest - Whether the record disclosed such a failure of the Magistrate to apply the law that judicial training should be recommended. - HELD THAT: - Noting the Magistrate's omission to consider Section 139 and the statutory demand notice, the High Court concluded that the learned Magistrate should undergo training at the State Judicial Academy on control of cases under the Negotiable Instruments Act. The Court directed that a copy of the judgment be placed before the Registrar General/Director of the Academy and that the Metropolitan Magistrate, 5th Court, Calcutta, be included as a trainee officer.

The Court directed that the learned Magistrate undergo training at the State Judicial Academy on the control of cases under the Negotiable Instruments Act and that the Registrar General be informed to arrange the same.

Final Conclusion: The appeal was allowed; the impugned judgment and order of acquittal dated 17th March, 2018 was set aside and the complaint case was remitted to the trial Court for fresh adjudication (including consideration of validity and service of the demand notice and application of Section 139) within one month, and the trial Magistrate was directed to undergo training on adjudication under the Negotiable Instruments Act.