TaxTMI Updates e-Newsletter
Mar 26,2021

Provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - pendency of adjudication proceedings under Sections 62, 63, 64, 67, 73 or 74 as a jurisdictional prerequisite - absence of jurisdictional elements renders an attachment order invalid

Provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - pendency of adjudication proceedings under Sections 62, 63, 64, 67, 73 or 74 as a jurisdictional prerequisite - absence of jurisdictional elements renders an attachment order invalid - Validity of the provisional attachment order dated 19.05.2020 and the consequential order dated 10.07.2020. - HELD THAT: - The Court held that exercise of power under Section 83 requires existence of pending proceedings under one of the specified adjudicatory provisions (Sections 62, 63, 64, 67, 73 or 74). The respondents conceded that no such proceedings were pending against the petitioner at the time the impugned attachment order (19.05.2020) was passed. The record further shows that proceedings under Section 74 were initiated only after 10.11.2020. In these circumstances the essential jurisdictional pre-requisites for provisional attachment were absent when the order dated 19.05.2020 was issued. Consequently that order was held to be not valid in law and was quashed; the related order dated 10.07.2020 was also quashed. The Court, however, clarified that the respondents remain at liberty to pass a fresh order of provisional attachment in accordance with law and only when the statutory conditions are satisfied. [Paras 3, 4]

Order dated 19.05.2020 quashed for want of jurisdictional pre-requisites; order dated 10.07.2020 consequentially quashed; respondents may issue fresh order in accordance with law.

Final Conclusion: Writ petition allowed: the provisional attachment order dated 19.05.2020 and the adjudicatory order dated 10.07.2020 are quashed for lack of requisite pending proceedings; liberty granted to respondents to proceed afresh in accordance with law.

Summary order. Union of India directed to file its reply to the petitions challenging the constitutional validity of Sub-rule (10) of Rule-96 of the C.G.S.T. Rules, 2017; matter posted for final disposal on 6th April, 2021.

Vires of provisions concerning search, seizure and arrest under the Central Goods and Services Tax Act, 2017 - parliamentary power under Article 246-A to enact special Goods and Services Tax legislation - application of Section 4 of the Code of Criminal Procedure to special fiscal recovery and enforcement proceedings - interim protection against arrest and non-interference with investigation in writ jurisdiction - cognizable and non-bailable offences under the CGST Act and custodial interrogation

Interim protection against arrest and non-interference with investigation in writ jurisdiction - cognizable and non-bailable offences under the CGST Act and custodial interrogation - Prayer for interim protection from arrest and coercive action during the pendency of the writ petition. - HELD THAT: - The Court considered the petitioner's apprehension arising from issuance of non-bailable warrants and applications for interim relief restraining arrest. After surveying precedents and recent orders of the Supreme Court and other High Courts, the Court observed that interference with an ongoing investigation in writ jurisdiction is not warranted. The Court noted the investigative and enforcement character of the special regime under the CGST Act and the advantages of custodial interrogation in eliciting information, and took note of the status report alleging attempt to defeat the process and serious evasion attracting cognizable and non-bailable treatment. On the limited question of interim relief, the Court declined to grant protection from arrest during the investigation and refused to stay coercive steps.

Petition for interim protection against arrest dismissed; no interim protection granted.

Parliamentary power under Article 246-A to enact special Goods and Services Tax legislation - application of Section 4 of the Code of Criminal Procedure to special fiscal recovery and enforcement proceedings - Validity and applicability of a special enforcement procedure under the CGST Act vis-a -vis Cr.P.C.; whether Parliament could enact special procedural provisions for GST enforcement. - HELD THAT: - The Court was of the prima facie view that Parliament is empowered under Article 246-A of the Constitution to enact a special regime for Goods and Services Tax and that a distinct procedure for recovery and enforcement fashioned by Parliament is permissible. The Court observed that Section 4 of the Cr.P.C. permits application of criminal procedure provisions to special enactments where appropriate, and that the CGST framework represents a fiscal scheme with specially tailored provisions for recovery and enforcement. The Court refrained from expressing any final conclusion on the substantive vires of the impugned provisions, limiting itself to a prima facie endorsement of Parliament's competence to enact such special procedures.

Court recorded a prima facie view upholding Parliament's competence under Article 246-A and the permissibility of a special procedure under Section 4 Cr.P.C., without deciding the final vires of the provisions.

Final Conclusion: The petition for interim protection from arrest is dismissed; the Court declined to interfere with the ongoing investigation and recorded a prima facie view that Parliament may validly enact a special GST enforcement regime under Article 246-A and by application of Section 4 Cr.P.C., while reserving final adjudication on the vires of the impugned provisions.

Applicability of Goods and Services Tax on concession fees - entitlement to refund of input tax credit for duty free shops as zero-rated export supply - procedure to claim refund under Section 54 of the Central Goods and Services Tax Act, 2017 - liability to pay GST pending refund claims - refund by revenue to a collecting agency where tax was discharged by the agency

Applicability of Goods and Services Tax on concession fees - liability to pay GST pending refund claims - Whether the petitioner is required to pay GST on concession fees for the period prior to 28.02.2021 - HELD THAT: - Relying on the approach adopted by the Bombay High Court in Sandeep Patil and followed by the Kerala High Court, the Court held that since duty free shops' supplies to outgoing passengers qualify as export/zero-rated supplies entitling the petitioner to claim full input tax credit and refund, it would serve no purpose to require the petitioner to pay GST and then claim refund for the period prior to 28.02.2021. Consequently the petitioner is not required to pay GST to the airport authority for that period. [Paras 5]

The petitioner need not pay any GST to the fourth respondent for the period prior to 28.02.2021.

Refund by revenue to a collecting agency where tax was discharged by the agency - entitlement to refund of input tax credit for duty free shops as zero-rated export supply - Whether the first respondent must refund GST to the fourth respondent for tax paid in respect of concession fees for 01.01.2018 to 31.03.2018 - HELD THAT: - The record shows the fourth respondent paid GST for the period 01.01.2018 to 31.03.2018 despite the petitioner not having remitted it. Applying the legal conclusion that the petitioner is entitled to ITC/refund in view of the treatment of DFS supplies as zero-rated exports, the Court directed that where the airport authority (fourth respondent) had already paid GST to the first respondent for that period, the first respondent must refund that tax to the fourth respondent. [Paras 5]

The first respondent is directed to refund to the fourth respondent the GST paid for the period 01.01.2018 to 31.03.2018.

Procedure to claim refund under Section 54 of the Central Goods and Services Tax Act, 2017 - liability to pay GST pending refund claims - The treatment to be followed by the petitioner with effect from 01.03.2021 in respect of GST on concession fees - HELD THAT: - For the period commencing 01.03.2021 the Court directed the conventional sequence: the petitioner must pay GST on concession fees to the airport authority and thereafter claim refund in accordance with the statutory procedure under Section 54 of the CGST Act. This preserves the statutory refund mechanism for claims going forward while distinguishing earlier periods where payment need not be made pending entitlement to refund. [Paras 5]

With effect from 01.03.2021 the petitioner shall pay GST on concession fees to the fourth respondent and thereafter claim refund under Section 54 of the CGST Act.

Final Conclusion: The writ petition is disposed of by holding that the petitioner need not pay GST on concession fees for the period prior to 28.02.2021; the Central Government must refund to the airport authority the GST it paid for 01.01.2018 to 31.03.2018; and, with effect from 01.03.2021 the petitioner must pay GST and claim refund by following the statutory procedure under Section 54 of the CGST Act.

Input tax credit entitlement - Reversal of input tax credit on non-payment by supplier - Requirements for availing input tax credit under section 16(2) - Obligation to examine supplier as witness in departmental enquiry - Revenue's duty to initiate recovery from defaulting supplier

Input tax credit entitlement - Reversal of input tax credit on non-payment by supplier - Requirements for availing input tax credit under section 16(2) - Validity of impugned orders that reversed input tax credit and fixed tax liability on the purchasers without confronting or taking recovery action against the sellers. - HELD THAT: - The court examined the statutory scheme governing entitlement to input tax credit, including the condition that tax charged in respect of the supply must have been actually paid to the Government (the proviso in the statutory regime). It found that where tax has not reached the Government, liability may ultimately rest on either seller or buyer, but the departmental action must be consistent with that principle and the facts. In the present cases the authorities reversed ITC and fixed liability on the petitioners although they did not examine the sellers (Charles and his wife Shanthi) nor initiate recovery action against them; the assessment of the sellers had excluded the subject transactions and no recovery proceedings appear to have been taken against the sellers. The court held that omission to confront and examine the sellers and failure to initiate recovery against them rendered the impugned orders fundamentally flawed and unsustainable. [Paras 11, 12, 13, 14, 15]

Impugned orders quashed insofar as they fixed liability on the petitioners without confronting the sellers or initiating recovery against them.

Obligation to examine supplier as witness in departmental enquiry - Revenue's duty to initiate recovery from defaulting supplier - Whether the matters should be remitted for fresh enquiry and what procedural steps the respondent must take on remand. - HELD THAT: - The court directed that the matters be remitted to the respondent for fresh enquiry. The stage reached up to receipt of the petitioners' replies is to be preserved. On remand the respondent must hold a fresh enquiry in which Charles and his wife Shanthi are to be examined as witnesses, and simultaneously initiate recovery action against them in respect of the disputed transactions. These directions follow from the court's finding that the earlier enquiries were defective for not confronting or prosecuting action against the sellers and that examination of the sellers is necessary given disputes about receipt and movement of goods and the genuineness of invoices. [Paras 16]

Matters remitted for fresh enquiry; petitioners' stage up to receipt of their replies to be preserved; sellers to be examined as witnesses and recovery action to be initiated against them.

Final Conclusion: Writ petitions allowed; impugned orders quashed and remitted for fresh enquiry preserving the stage up to petitioners' replies, with directions to examine the sellers Charles and Shanthi as witnesses and to initiate parallel recovery action against them; no costs.

Transfer pricing adjustment - Advertising, marketing and promotion expenditure (AMP) - Obligation to give effect to tribunal order - Effect of pending Supreme Court decision on implementation of orders - Stay of administrative order - Waiver of limitation defence

Transfer pricing adjustment - Obligation to give effect to tribunal order - Effect of pending Supreme Court decision on implementation of orders - Stay of administrative order - Operation of the Transfer Pricing Officer's order giving effect to the Tribunal's deletion of the AMP-related transfer pricing adjustment was stayed and further administrative action conditioned on the Supreme Court's decision in pending appeals. - HELD THAT: - The Tribunal had directed deletion of the TPA in respect of AMP expenditure for AY 2011-2012, referring to concurrent High Court decisions and noting that the matter was pending before the Supreme Court. The TPO thereafter passed the impugned order to protect revenue pending adjudication in the Supreme Court. Having regard to the admitted status of the special leave petitions before the Supreme Court and competing contentions of the parties, the High Court stayed the operation of the impugned TPO order and granted liberty to the TPO to take further steps only after a decision is rendered by the Supreme Court, requiring such steps to be taken in accordance with law and allowing opportunity of being heard where appropriate. The Court thus preserved the parties' positions pending final determination by the apex court while restraining immediate enforcement of the TPO's action.

The impugned TPO order is stayed; the TPO is at liberty to take further action only after the Supreme Court decides the pending appeals, and then in accordance with law.

Waiver of limitation defence - Assessee's undertaking regarding limitation was recorded and accepted by the Court. - HELD THAT: - Counsel for the assessee made an on-record statement that, in the event the revenue succeeds before the Supreme Court, the assessee will not raise any objection based on expiry of limitation under the Act. The Court took this statement on record and declared that the petitioner is bound by it, thereby precluding the assessee from pleading limitation in such eventuality.

The assessee's statement waiving limitation objections is recorded and the petitioner is bound by that statement.

Final Conclusion: Writ petition disposed by staying the operation of the TPO's order; TPO may take further steps only after the Supreme Court disposes of the pending appeals and in accordance with law; the assessee's undertaking as to limitation is recorded and binding.

Filing and amendment of Form 10 for accumulation of income - Acceptance of revised Form 10 during assessment proceedings - Mandatory intimation under Section 11(2) before completion of assessment - Temporal bar on revised Form 10 filed after completion of assessment

Filing and amendment of Form 10 for accumulation of income - Acceptance of revised Form 10 during assessment proceedings - Mandatory intimation under Section 11(2) before completion of assessment - Temporal bar on revised Form 10 filed after completion of assessment - Revised Form 10 for accumulation of income filed during the course of assessment proceedings can be furnished and considered by the Assessing Officer; only revisions filed after completion of assessment cannot be accepted. - HELD THAT: - The High Court affirmed the concurrent conclusions of the Commissioner (Appeals) and the Tribunal that a modified or revised Form 10 submitted within the stipulated time and during the assessment proceedings is admissible and may be acted upon by the Assessing Officer. The court applied the ratio of the Supreme Court in Commissioner of Income Tax v. Nagpur Hotel Owners' Association to hold that the intimation required under Section 11(2) is mandatory and must be furnished before completion of the assessment; where the required particulars are available to the assessing authority before assessment completion, the claim under Section 11 can be considered. The court distinguished revisions filed after assessment completion as being unacceptable because such post-assessment intimation would effectively require reopening the assessment, which the Act does not contemplate. The court also noted that the Punjab & Haryana High Court's approach in the cited decision supports permitting modification of Form 10 during assessment proceedings. Applying these principles to the facts, the court found that the assessee had filed Form 10 within time and furnished a revised Form 10 in the course of assessment seeking enhanced accumulation; therefore the Assessing Officer could consider the revised figures and there was no legal bar to doing so. [Paras 8, 9, 10]

The revised Form 10 filed during assessment proceedings is admissible and the orders of the Tribunal and the Commissioner (Appeals) upholding that position are sustained.

Final Conclusion: The Tax Case Appeal is dismissed; the concurrent findings permitting the assessee to furnish and modify Form 10 during assessment proceedings are upheld.

Disallowance of interest on borrowed capital - attribution of interest to investment in subsidiary - presumption of application of interest-free funds - proviso to Section 36(1)(iii) - capitalization of interest on capital work-in-progress - distinction between expansion and extension of business - rectification under Section 254(2) - issue continuity across assessment years / effect of prior finding

Disallowance of interest on borrowed capital - attribution of interest to investment in subsidiary - presumption of application of interest-free funds - issue continuity across assessment years / effect of prior finding - Disallowance of interest claimed to be attributable to share application money invested in A.N.Coffeeday International Ltd. - HELD THAT: - The Court held that where sufficient interest free funds are available with the assessee to meet the investment, there arises a legal presumption that the investment was made out of those funds and not out of borrowed funds, placing the burden on the revenue to prove otherwise. The assessee had own funds in excess of the investment in the foreign subsidiary and the revenue did not discharge the burden of proving utilisation of borrowed funds. Further, the Assessing Officer/First Appellate Authority for the earlier year had accepted that the investments were made from the assessee's own funds; in the circumstances and having regard to the principle that an established factual position allowed to stand across assessment years should not be lightly disturbed, the tribunal's remand to the Assessing Officer for re-examination was held unwarranted. [Paras 9, 10]

Disallowance in respect of interest attributable to investment in A.N.Coffeeday is set aside and the remand to the Assessing Officer is quashed; decision in favour of the assessee.

Proviso to Section 36(1)(iii) - capitalization of interest on capital work-in-progress - distinction between expansion and extension of business - disallowance of interest on borrowed capital - presumption of application of interest-free funds - Whether interest on borrowed capital attributable to capital work-in-progress required capitalization under the proviso to Section 36(1)(iii) for the Assessment Year 2010-11. - HELD THAT: - The Court examined the scope of the proviso to Section 36(1)(iii) as it stood for the Assessment Year 2010-11 and concluded that the proviso curtailed deduction only insofar as interest related to extension of existing business; the words 'expansion' and 'extension' have different connotations and cannot be read interchangeably. The setting up of new coffee shops in different locations was held to be expansion of business and not an extension within the meaning of the proviso as it existed for the year under consideration. Moreover, the assessee had substantial own funds relative to capital work in progress, giving rise to the presumption that own funds were applied. Consequently, the tribunal's reliance on the proviso to disallow interest for AY 2010-11 was held to be incorrect. [Paras 11, 13, 14]

Disallowance of interest as attributable to capital work-in-progress under the proviso to Section 36(1)(iii) for AY 2010-11 is not sustainable; decision in favour of the assessee.

Rectification under Section 254(2) - disallowance of processing charges / capitalization of loan-related expenses - Validity of the tribunal's invocation of Section 254(2) to rectify its earlier order and the substantive decision on whether loan processing and related charges were to be capitalized. - HELD THAT: - The tribunal identified an omission in its earlier order and invoked Section 254(2) to rectify an error apparent on the record. On rectification the tribunal adjudicated the claim on merits and accepted the assessee's contention, in line with binding precedents, that the processing and related charges need not be capitalized. The High Court found that the tribunal rightly exercised rectification jurisdiction where there had been no prior adjudication of the claim and that the tribunal's decision on merits in favour of the assessee was permissible. [Paras 15]

Tribunal's rectification under Section 254(2) and its decision upholding deletion of disallowance of processing charges is upheld; decision in favour of the assessee.

Final Conclusion: All substantial questions of law raised by the assessee were answered in its favour and against the revenue. The tribunal's orders dated 21.06.2017 and 06.12.2017, to the extent adverse to the assessee, are quashed; the assessee's appeal succeeds and the revenue's appeal is dismissed.

Profits and gains of business - incidental to the attainment of the objectives - maintenance of separate books of account - calculation of accumulation on gross receipts versus net receipts - non-application of mind - remand for fresh consideration

Calculation of accumulation on gross receipts versus net receipts - precedent of Supreme Court - Second substantial question of law regarding application of 15% accumulation on gross receipts instead of net receipts. - HELD THAT: - The Court held that the second substantial question of law is covered by earlier decisions of the Supreme Court and therefore answered against the revenue. The judgments relied upon by the assessee were held to be dispositive, leaving no room for re examination in the present appeal.

Answered against the revenue; benefited the assessee.

Profits and gains of business - incidental to the attainment of the objectives - maintenance of separate books of account - non-application of mind - remand for fresh consideration - First substantial question of law whether pharmacy income of the trust is business income or income of charitable trust in view of Section 11(4A). - HELD THAT: - The Court evaluated Section 11(4A) and its twin conditions: that income being "profits and gains of business" must be incidental to the trust's objects, and that separate books of account must be maintained for such business. The Tribunal's order was found to be cryptic and devoid of reasons on whether the twin conditions were satisfied; it did not record findings on sales to indoor/outdoor patients versus outside public nor apply its mind to the compliance required under Section 11(4A). Consequently the Tribunal's finding on this question was quashed. The matter was remitted to the Tribunal to record a reasoned finding on the substantial question of law, bearing in mind the statutory mandate of Section 11(4A).

Tribunal's finding quashed and matter remitted for fresh consideration in accordance with Section 11(4A).

Final Conclusion: The appeal is disposed of: the second substantial question answered against the revenue in favour of the assessee; the Tribunal's finding on the first substantial question quashed and remitted to the Tribunal for fresh, reasoned consideration pursuant to Section 11(4A).

Claiming depreciation under section 32 read with section 13(6)(c) - requirement to establish that assets were put to use before inclusion in the block of assets - allowability of depreciation notwithstanding absence of income from use of assets - remand for fresh factual inquiry and requirement of a speaking and reasoned order

Claiming depreciation under section 32 read with section 13(6)(c) - requirement to establish that assets were put to use before inclusion in the block of assets - Whether an assessee must establish that assets were actually put to use in the relevant year before claiming depreciation or including them in the block of assets. - HELD THAT: - The High Court considered the Tribunal's view and the competing authorities. While the Tribunal had accepted the proposition advanced for the assessee that depreciation may be allowable even if no income is earned from use of the assets in the relevant year, the Court held that it is a relevant factor for inclusion in the block of assets that the assessee establish that the assets were actually put to use. The Court observed that there is force in the Revenue's reliance on the Apex Court decision in I.C.D.S. Ltd., which requires establishment of actual use before assets can be added to the block. Applying that principle to the facts before it, the Court answered the substantial questions of law against the assessee and in favour of the Revenue. [Paras 11, 12]

The requirement to establish that assets were put to use before inclusion in the block and for claiming depreciation is affirmed; substantial questions of law are answered against the assessee.

Remand for fresh factual inquiry and requirement of a speaking and reasoned order - allowability of depreciation notwithstanding absence of income from use of assets - Whether the Tribunal was justified in remitting the matter to the Commissioner of Income Tax (Appeals) for fresh factual examination of whether the assets were used in the relevant years, and the scope of that remand. - HELD THAT: - The Tribunal had remitted the matter to the Commissioner of Income Tax (Appeals) to examine and decide, with reasons, whether the assets in question were used by the assessee in the relevant years for regular business activity. The High Court found the remand justified in principle given the factual question and the legal requirement to establish use, but constrained the scope of any further inquiry to the assessment years in dispute (2011-12 and 2012-13) to allay the assessee's apprehension of a wider probe. The Court directed that the Commissioner of Income Tax (Appeals) pass a speaking, reasoned order after providing reasonable opportunity of hearing to both sides. [Paras 6, 11]

The Tribunal's remand for factual enquiry is upheld, but the inquiry is to be confined to assessment years 2011-12 and 2012-13 and concluded by a speaking, reasoned order.

Final Conclusion: The appeal is dismissed. The High Court affirms that establishment of actual use of assets before inclusion in the block is a relevant requirement for claiming depreciation and upholds the Tribunal's remand for factual examination, limiting the scope of that inquiry to assessment years 2011-12 and 2012-13.

Treatment of interest on non-performing assets vis-a -vis method of accounting - method of accounting for determining income (Section 145) - provision for non-performing assets treated as provision for bad and doubtful debts - deduction under Section 36(1)(viia) and interaction with actual write-off - reliance on Reserve Bank of India provisioning norms in tax computation - precedent value of UCO Bank and Canfin Homes decisions on NPA provisioning

Treatment of interest on non-performing assets vis-a -vis method of accounting - method of accounting for determining income (Section 145) - Whether interest accrued on non-performing assets could be excluded from taxable income despite the assessee following the mercantile system of accounting. - HELD THAT: - The Court held that the question raised in respect of the assessment year before it had been answered by earlier judicial decisions relied upon in ITA No.137/2015 dated 13.11.2020. The Tribunal and the Commissioner (Appeals) had found that once an asset is shown to be non-performing it is assumed not to be yielding revenue and therefore accounting for interest on such asset on accrual (mercantile) basis would not be appropriate; the assessee could follow cash basis treatment for interest on NPAs. The High Court accepted the concurrent findings of the lower authorities and the reasoning in earlier decisions (including UCO Bank and Canfin Homes) which were held to be applicable and not vitiated by perversity. Consequently, the Tribunal's deletion of interest accrued on NPAs from taxable income was upheld. [Paras 6, 7]

The Tribunal was right to exclude interest on non-performing assets from the computation of taxable income; the finding is affirmed.

Provision for non-performing assets treated as provision for bad and doubtful debts - deduction under Section 36(1)(viia) and interaction with actual write-off - reliance on Reserve Bank of India provisioning norms in tax computation - precedent value of UCO Bank and Canfin Homes decisions on NPA provisioning - Whether provision for non-performing assets made as per RBI guidelines is allowable (in substance as provision for bad and doubtful debts) notwithstanding arguments based on Section 145 and the statutory scheme. - HELD THAT: - The Court observed that the Tribunal and Commissioner (Appeals) correctly concluded that the provision labelled as for non-performing assets was in pith and substance a provision for bad and doubtful debts and had been created following RBI norms. Relying on earlier decisions including UCO Bank and Canfin Homes as considered in ITA No.137/2015, the Court held that when an asset is shown as non-performing, it is to be presumed not to be yielding revenue and that the concurrent findings of the lower authorities on this factual and legal position were not perverse. The revenue's contention that RBI guidelines cannot override the statutory method of accounting under Section 145 was answered by reference to the earlier rulings which permitted such treatment in the circumstances before the Court. [Paras 6, 7]

The provision for non-performing assets, treated as provision for bad and doubtful debts made in accordance with RBI norms, was allowable; the Tribunal's and CIT(A)'s rulings are affirmed.

Final Conclusion: The appeal is dismissed; the Tribunal's order confirming the CIT(A) in respect of interest on NPAs and allowance of the NPA provision is affirmed, following earlier decisions applied to the assessment year 2008-09. No order as to costs.

Section 245 - requirement of prior intimation for set-off of refunds - Validity of adjustment of refunds in presence of stay of recovery - Effect of CBDT instructions and Office Memoranda regarding deposit of 20% for stay and limited adjustment of refunds - Entitlement to refund with interest where adjustment is made without lawful authority

Section 245 - requirement of prior intimation for set-off of refunds - Effect of CBDT instructions and Office Memoranda regarding deposit of 20% for stay and limited adjustment of refunds - Adjustment on 15.04.2020 of the refund for Assessment Year 2018-19 against outstanding demands for Assessment Years 2017-18 and 2008-09 without prior intimation under Section 245 and in excess of the amount permissible under the stay condition was illegal and refundable with interest. - HELD THAT: - The Court held that Section 245 mandates a prior intimation in writing of the proposed set-off before any adjustment of a refund; post-facto intimation or an intimation under Section 143(1) cannot validate an earlier adjustment. The decisions of the Andhra Pradesh and Delhi High Courts were applied to reaffirm that absence of prior Section 245 intimation deprives the assessee of the opportunity to object and renders the adjustment invalid. Further, the CBDT Office Memorandum and Instruction governing grant of stay on deposit of 20% are binding; where the Assessing Officer had communicated that stay would be granted on deposit of 20% and the assessee made part payment and requested adjustment of the balance only to the extent of the permitted 20%, the revenue could not lawfully adjust the entire refund. The respondents admitted omission to issue prior intimation and failed to substantiate dates claimed for adjustment; documentary evidence established the adjustment date as 15.04.2020. The respondents also adjusted amounts purportedly against a non-existent demand for Assessment Year 2008-09. Consequently, the excess amount adjusted must be refunded with interest, and a shortfall in an already-ordered refund must be made good. [Paras 41, 43, 46, 51, 55]

The adjustment of the refund for Assessment Year 2018-19 made on 15.04.2020 without prior intimation under Section 245 and in excess of the amount permissible under the 20% stay condition was illegal; a sum of Rs. 1,06,06,740/- is refundable to the petitioner with interest at 15% per annum from the date of determination until payment, and respondents must also refund the balance shortfall of Rs. 1.13 lakhs already identified.

Validity of adjustment of refunds in presence of stay of recovery - Section 245 - requirement of prior intimation for set-off of refunds - Adjustment on 24.07.2020 of the refund for Assessment Year 2019-20 against the demand for Assessment Year 2017-18 after a stay of recovery was granted was unlawful, and the petitioner is entitled to refund with interest. - HELD THAT: - The Court observed that once an absolute stay of recovery is in subsistence, the Revenue must respect it and cannot recover the taxed amount by adjusting refunds. The Delhi High Court precedent in Maruti Suzuki was followed to the effect that a stay order granted by the competent authority precludes subsequent adjustment in breach of that stay. The respondents' contentions about service of prior intimation and the dates of adjustment were contradicted by the documentary record (Form 26AS and other annexures) which showed adjustment on 24.07.2020 after the stay dated 23.07.2020; the petitioner had lodged timely objections to the proposed adjustment and the respondents offered no justification for making the adjustment before expiry of the 30-day period prescribed under Section 245. In view of the illegal adjustment, the entire refund determined for Assessment Year 2019-20 is refundable to the petitioner with statutory interest. [Paras 56, 57, 58, 61, 62]

The adjustment of the refund for Assessment Year 2019-20 on 24.07.2020 contrary to the stay of recovery was unlawful; the petitioner is entitled to refund of the determined amount of Rs. 6,25,70,390/- (after deducting amounts already refunded) with interest at 15% per annum, and both writ petitions are allowed with costs.

Final Conclusion: Both writ petitions are allowed. The respondents are directed to refund to the petitioner the sums found due (including Rs. 1,06,06,740/- in respect of Assessment Year 2018-19 and the determined refund for Assessment Year 2019-20 after appropriate deduction of amounts already refunded) with interest at 15% per annum from the dates of determination/adjustment until payment, within four weeks, and with costs of Rs. 5,000/- each.

Reopening of assessment - reason to believe - borrowed satisfaction - change of opinion - disclosure of true and full facts - sanction under Section 151 for reopening under Section 147 - acceptance under section 143(1) without scrutiny

Reopening of assessment - reason to believe - acceptance under section 143(1) without scrutiny - Validity of the notice issued under Section 148 to reopen assessment for A.Y. 2012-13 on the basis of material received after the original processing under section 143(1). - HELD THAT: - The Court held that where a return was processed under section 143(1) without scrutiny, the concept of change of opinion is inapplicable and the Assessing Officer need only have a bona fide "reason to believe" that income chargeable to tax has escaped assessment. The material placed before the AO-information and documentary evidence from the investigation into an accommodation-entry provider revealing seizure and affidavits by persons concerned-was specific, reliable and capable of furnishing the AO with a prima facie basis to form such belief. The Court applied settled principles that at the stage of issuing a reopening notice the tribunal will not examine in depth the ultimate merits of proposed additions but will test whether relevant material existed from which a reasonable officer could form the requisite belief. On that test the reopening notice was held valid. [Paras 10, 12, 14, 16]

Notice under Section 148 to reopen assessment for A.Y. 2012-13 was validly issued and not vitiated for want of a bona fide reason to believe.

Borrowed satisfaction - reopening of assessment - Whether the Assessing Officer acted on a mere borrowed satisfaction from the investigating agency, rendering the reopening invalid. - HELD THAT: - The Court examined the material placed before the AO and found that the AO applied his mind to the information received from the Ahmedabad Investigation Wing and analyzed the return and documentary material before recording reasons to believe. Reliance upon investigative material does not render the belief borrowed where the AO has perused and formed his own prima facie belief; judicial precedents permit reopening on the basis of such specific investigative material so long as it is relevant, reliable and specific. The Court rejected the submission that the AO's satisfaction was merely borrowed or that reopening represented a fishing inquiry. [Paras 14, 16]

The AO did not act on a mere borrowed satisfaction; the formation of belief was based on relevant material and was bona fide.

Sanction under Section 151 for reopening under Section 147 - application of mind - Validity of the sanction accorded by the Joint Commissioner and Principal Commissioner for issuance of notice under Section 148. - HELD THAT: - The proposal with reasons recorded by the AO was placed before the Joint CIT and Principal CIT, who perused the material and recorded satisfaction that it was a fit case for reopening. The Court held that the brief recorded approvals (including a 'yes' endorsement) coupled with the fact that reasons and material were before the sanctioning authorities demonstrated application of mind. Reliance was placed on earlier decisions that require only that the sanctioning authority consider the reasons placed before it; a brief recording of satisfaction suffices where application of mind is demonstrable from the record. [Paras 19, 20, 21]

Sanction accorded for reopening was valid and not vitiated for want of application of mind.

Final Conclusion: Writ petition dismissed; the notice of reopening under Section 148 for A.Y. 2012-13 and the consequent proceedings (including rejection of objections) are upheld as valid.

Reassessment proceedings under section 148 - addition under section 68 in respect of unexplained cash credits - acceptance of gross receipts and presumptive income under section 44AD - onus of proof in relation to bank cash deposits - no addition for unexplained cash deposits where declared turnover exceeds bank deposits

Reassessment proceedings under section 148 - Ground challenging validity of reassessment proceedings was not pressed and dismissed as not pressed. - HELD THAT: - The assessee did not press the legal ground impugning validity of reopening. The Revenue raised no objection to treating that ground as not pressed. The Tribunal accordingly recorded that the ground challenging the validity of reassessment proceedings is dismissed as not pressed. [Paras 7]

Ground challenging validity of reassessment proceedings dismissed as not pressed.

Addition under section 68 in respect of unexplained cash credits - acceptance of gross receipts and presumptive income under section 44AD - no addition for unexplained cash deposits where declared turnover exceeds bank deposits - onus of proof in relation to bank cash deposits - Addition of Rs. 3,67,000 sustained by the CIT(A) on account of unexplained cash deposits set aside and deleted. - HELD THAT: - The AO reopened assessment and made additions by treating bank cash deposits as unexplained credits after accepting an amount as gift. The assessee had declared gross receipts of Rs. 19,25,140 and offered presumptive income under section 44AD applying an accepted net profit rate. The Tribunal found that the declared turnover substantially exceeded the total cash deposits in the bank (turnover far greater than deposits - sales being 227% of deposits), and that the assessee's explanations about sales receipts and deposits made while visiting family locations were reasonable. Having regard to the accepted gross receipts and the presumptive income declared, the Tribunal held that no addition should be made merely because deposits were not separately evidenced at the bank branch locations. The CIT(A)'s sustaining of part of the addition was therefore not justified and was set aside, directing deletion of the addition by the AO. [Paras 10, 11]

Addition of Rs. 3,67,000 sustained by the CIT(A) is set aside and deleted.

Final Conclusion: The appeal is partly allowed: the ground impugning reassessment was dismissed as not pressed, and the Tribunal set aside and deleted the addition sustained by the CIT(A) for unexplained cash deposits for AY 2011-12.

Reimbursement of expenses - Deduction of tax at source under section 195 - Disallowance under section 40(a)(i) - Fees for technical services - One-to-one correlation and identical amount without mark-up test for reimbursement - Permanent Establishment and intra-group transactions treated at arm's length - Remand for factual verification of nature of payment

Reimbursement of expenses - One-to-one correlation and identical amount without mark-up test for reimbursement - Disallowance under section 40(a)(i) - Deduction of tax at source under section 195 - Seminar, training, printing and staff welfare payments made by the Indian branch to the Singapore head office are reimbursements and not subject to deduction of tax at source u/s.195, hence not disallowable u/s.40(a)(i). - HELD THAT: - The Tribunal applied the two-fold test for reimbursement: (i) there must be a direct one to one correlation between the outgo incurred by the payee and the inflow recovered from the payer, and (ii) the recovered amount must be identical to the outgo without any profit element or mark up. Documentary evidence showed that seminar, training, printing and staff welfare expenses were incurred by third parties for identifiable benefits of the Indian branch and were recharged by the Singapore head office to the Indian branch at the exact amounts charged by the third parties. The payments therefore lacked any profit element and did not constitute "any other sum chargeable under the provisions of this Act" within the meaning of section 195; consequently no TDS obligation arose and disallowance under section 40(a)(i) could not be sustained in respect of these items. [Paras 9, 10, 11, 12, 13]

Seminar, training, printing and staff welfare expenses held to be reimbursements; no TDS under section 195 and no disallowance under section 40(a)(i).

Fees for technical services - Deduction of tax at source under section 195 - Remand for factual verification - Whether the monthly IT payments are taxable payments requiring TDS under section 195 and consequent disallowance under section 40(a)(i) is undecided and remanded to the Assessing Officer for fresh examination. - HELD THAT: - The IT payments consisted of recurring monthly charges reallocated by the head office and invoiced to the Indian branch. The characterisation of these payments depends on the nature of the underlying IT services and their nexus with the Indian branch's income generating activities. The assessee did not produce the IT services agreement relied upon; the record does not establish that the allocation was without any mark up or that the payments were mere reimbursements. Absent examination of the IT services agreement and related details, the Tribunal found it necessary to remit the matter to the Assessing Officer to determine (a) the true nature of the IT services provided, (b) whether the payments constitute fees for technical services or are otherwise chargeable to tax in the hands of the non resident, and (c) whether tax was required to be deducted under section 195 and any consequent disallowance under section 40(a)(i). The assessee is to be given an opportunity of being heard in the fresh proceedings. [Paras 14, 15, 16]

IT expenses (monthly payments) remanded to the Assessing Officer for verification of the nature of services and determination of TDS and consequential disallowance, with opportunity to the assessee to be heard.

Final Conclusion: Appeal partly allowed: disallowance under section 40(a)(i) set aside in respect of seminar, training, printing and staff welfare reimbursements; IT related monthly payments remitted to the Assessing Officer for fresh factual and legal examination on TDS liability under section 195 and consequential disallowance, with opportunity to the assessee.

Deduction under section 80IA(4) for developing, operating and maintaining an infrastructure facility - precedential effect of Tribunal's order in assessee's own case - binding nature of Tribunal orders in absence of stay by High Court - consistency of findings where facts are identical across assessment years

Deduction under section 80IA(4) for developing, operating and maintaining an infrastructure facility - precedential effect of Tribunal's order in assessee's own case - binding nature of Tribunal orders in absence of stay by High Court - Assessee's entitlement to deduction under section 80IA(4) for assessment year 2014-15 - HELD THAT: - The AO disallowed the claim on the view that the assessee was a works contractor and noted an appeal pending before the High Court; CIT(A) allowed the deduction following earlier Tribunal orders in the assessee's own case. This Tribunal observed that the facts for 2014-15 are identical to earlier years for which the Tribunal has consistently allowed the deduction; no order of the High Court reversing or staying those Tribunal decisions was placed on record. In these circumstances the Tribunal held that the earlier Tribunal rulings in the assessee's own case are binding and that there is no infirmity in the CIT(A)'s conclusion that the assessee is eligible for deduction under section 80IA(4). [Paras 6, 7]

Revenue's appeal is dismissed and the assessee is held entitled to deduction under section 80IA(4) for AY 2014-15.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s allowance of the deduction under section 80IA(4) for the assessment year 2014-15, relying on consistent prior Tribunal orders in the assessee's own case and absence of any stay or contrary order by the High Court.

Incriminating material under search assessments - Revision of non est assessment order

Absence of incriminating material - Jurisdiction under section 153C - Revision under section 263 - The assessments framed under section 153A read with section 153C for Assessment Years 2008-09 and 2010-11, having merely repeated the earlier assessed income and not being founded on any incriminating material found in search, could not furnish a valid basis for revision under section 263. - HELD THAT: - The Tribunal found that the income assessed in the impugned search assessments was the same as that already assessed earlier under section 143(3), which showed that no addition had any nexus with incriminating material found during search. On that basis, it held that the assumption of jurisdiction under section 153C was itself without authority in law. Once the foundational assessment order was void and non est, it could not be treated as an erroneous order prejudicial to the interests of the Revenue so as to sustain revision. Applying the principle that removal of the foundation causes the superstructure to fall, the revisional orders were held unsustainable. [Paras 12, 13, 14, 15, 16]

The orders passed under section 263 for both assessment years were quashed and the assessee's appeals were allowed.

Final Conclusion: The Tribunal held that, in the absence of incriminating material, the assessments made under section 153C were without jurisdiction and void. Consequently, the Principal Commissioner's exercise of revisional power under section 263 against such non est assessments was also invalid, and both appeals were allowed.

Capital receipt - book profit under section 115JB - deduction under section 80IA - income derived from industrial undertaking - interest on fixed deposits - section 14A - Rule 8D - disallowance in absence of exempt income

Capital receipt - book profit under section 115JB - Treatment of proceeds from sale of voluntary Emission Reduction (carbon) credits for taxability and for computation of book profit under section 115JB. - HELD THAT: - The Tribunal held that income realised from sale of carbon credits is capital in nature and therefore not chargeable to tax for the purposes of minimum alternate tax. The Bench followed a coordinate ITAT decision in the assessee's own case for earlier assessment years which had held the same, and applied relevant High Court decisions cited by the parties. Consequently the Tribunal allowed the assessee's claim to exclude net proceeds from the computation of book profit under section 115JB for Assessment Year 2012-13. [Paras 11]

Net receipts from sale of carbon credits are capital receipts and are to be excluded from book profit under section 115JB; the assessee's ground in this regard is allowed.

Deduction under section 80IA - interest on fixed deposits - income derived from industrial undertaking - Whether interest earned on short term fixed deposit receipts is eligible for deduction under section 80IA as income derived from the industrial undertaking. - HELD THAT: - The Tribunal examined the factual claim that fixed deposits were held temporarily to meet loan repayment obligations and that the interest had a direct link with the industrial undertaking. It rejected the assessee's contention, holding the issue to be covered by the Supreme Court precedent in Liberty India, which treats interest on FDRs as not income derived from the industrial undertaking for purposes of section 80IA. On that basis the Tribunal dismissed the assessee's ground seeking allowance of the FDR interest under section 80IA. [Paras 14]

Interest on fixed deposits is not income derived from the industrial undertaking for section 80IA purposes; the assessee's claim for deduction on this interest is dismissed.

Section 14A - Rule 8D - disallowance in absence of exempt income - Validity of disallowance under section 14A read with Rule 8D in respect of investments whose exempt income was not received or receivable in the year. - HELD THAT: - The Tribunal found that the assessee had not received any exempt income (such as dividend) in the relevant year from the investments identified by the Assessing Officer. Relying on a coordinate bench decision in the assessee's own case and the decision of the Delhi High Court in Cheminvest Ltd., it held that no disallowance under section 14A/Rule 8D is leviable where no exempt income is received or receivable for that year. Hence the disallowance made by the AO under Rule 8D was deleted. [Paras 16, 17]

Disallowance under section 14A read with Rule 8D is not sustainable where no exempt income was received or receivable in the year; the AO's disallowance is deleted.

Deduction under section 80IA - income incidental to industrial undertaking - Whether miscellaneous receipts (refund from Power Finance Corporation, written back liabilities, and rent recovery) qualify as income derived from the industrial undertaking for allowance under section 80IA. - HELD THAT: - The Tribunal accepted the CIT(A)'s factual and legal conclusion that the miscellaneous receipts consisted of amounts pertaining to earlier business expenditure (refund and written back liabilities) and rent recovered from plant premises, which are incidental to and arise from the industrial undertaking. Such receipts reduce business expenditure and therefore qualify for deduction under section 80IA. The AO's challenge to the allowance was dismissed. [Paras 18, 19]

Miscellaneous receipts in question are incidental to the industrial undertaking and eligible for deduction under section 80IA; the AO's appeal on this point is dismissed.

Final Conclusion: For Assessment Year 2012 13 the Tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal: (i) proceeds from sale of carbon credits are held to be capital receipts and excluded from book profit under section 115JB; (ii) interest on fixed deposits is not eligible for deduction under section 80IA; (iii) disallowance under section 14A/Rule 8D was deleted as no exempt income was received or receivable; and (iv) the miscellaneous receipts were held to be incidental to the industrial undertaking and allowable under section 80IA.

Depreciation as application of income under section 11 - computation of income of charitable trusts on commercial principles - no double deduction where acquisition treated as application of income and subsequent depreciation - prospective operation of amendment inserting sub section (6) to section 11

Depreciation as application of income under section 11 - computation of income of charitable trusts on commercial principles - Depreciation is allowable as an application of income in computing the income of a charitable trust even where the cost of the asset had earlier been treated as application of income. - HELD THAT: - The Tribunal held that the question is settled by the decisions of higher courts culminating in the Supreme Court's decision in CIT v. Rajasthan And Gujarat Charitable Foundation which followed the view of the jurisdictional High Court in IBPS. The reasoning is that income of a charitable trust must be computed on normal commercial principles and allowance for normal depreciation may be made as an application of income under section 11(1)(a). Section 32 (depreciation for business/profession) is not the exclusive source for allowing depreciation where income is computed under section 11; accordingly depreciation can be allowed in computing the real income of the trust even if the assets are not business assets. [Paras 10]

Depreciation was rightly allowed as an application of income and the CIT(A)'s allowance on this ground is sustained.

No double deduction where acquisition treated as application of income and subsequent depreciation - prospective operation of amendment inserting sub section (6) to section 11 - The amendment which disallows double deduction (treating acquisition as application of income and thereafter disallowing depreciation) operates prospectively and does not affect earlier years under consideration. - HELD THAT: - The Tribunal observed that the Finance Act, 2014 inserted a provision to prohibit double deductions in respect of fixed assets but that the higher judicial decisions have held this amendment to be prospective. Reliance was placed upon High Court decisions and the Supreme Court authority to the same effect. Since the amendment is prospective, it cannot be applied to the assessment years in issue; therefore the claim of depreciation for those years is not barred by the later legislative change. [Paras 11]

The amendment is prospective and does not justify denying depreciation for the assessment years before its effective date.

Final Conclusion: The appeals filed by the Revenue for AYs 2010-11 and 2008-09 are dismissed; the CIT(A)'s orders allowing depreciation as application of income are upheld and the prospective amendment disallowing double deduction does not apply to the years under appeal.

Applicability of DTAA rates over domestic TDS provisions - Interpretation of Section 206AA vis a vis non furnishing of PAN by non resident - Operation of Section 90(2) (DTAA overriding domestic law where beneficial) - Precedence of Article 12 of Indo Czech DTAA - Relevance of CBDT Circular No. 333 - Judicial precedent: Azadi Bachao Andolan

Applicability of DTAA rates over domestic TDS provisions - Precedence of Article 12 of Indo Czech DTAA - Operation of Section 90(2) (DTAA overriding domestic law where beneficial) - Whether tax deducted at source at 10% in accordance with Article 12 of the India-Czech Republic DTAA is valid despite the recipient non resident not furnishing PAN. - HELD THAT: - The Tribunal examined Article 12 of the Indo Czech DTAA which prescribes a 10% rate for the impugned payments and applied the principle in section 90(2) that treaty provisions which are more beneficial to the taxpayer prevail over domestic law. The Tribunal relied on CBDT Circular No. 333 emphasising that specific DTAA provisions prevail over general provisions of the Income tax Act and on the Supreme Court's ruling in Azadi Bachao Andolan that treaty provisions govern the scope/rate of taxation if beneficial. Applying these authorities, the Tribunal held that the DTAA rate of 10% governs the withholding obligation in the present facts and that the charging provisions of the Act (including sections determining scope/rate) are subordinate to section 90(2) where the treaty is beneficial. [Paras 6, 10, 11]

TDS at 10% in terms of Article 12 of the DTAA was correctly applied and is valid.

Interpretation of Section 206AA vis a vis non furnishing of PAN by non resident - Relevance of CBDT Circular No. 333 - Whether Section 206AA mandates deduction of tax at the higher rate (20%) when the non resident payee has not furnished PAN, notwithstanding a more beneficial treaty rate. - HELD THAT: - The Tribunal considered the text of section 206AA and the contention that it compels deduction at the higher rate where PAN is not furnished. It concluded that section 206AA cannot be invoked to override a beneficial treaty rate conferred by a DTAA, particularly in light of section 90(2), CBDT Circular No. 333, and relevant judicial authority. The Tribunal also noted recommendations of the Justice Easwar Committee supporting non imposition of higher domestic withholding on non residents where treaty rates apply. A coordinate Bench decision dealing with analogous facts was followed to hold that processing of TDS returns under domestic higher rates is unsustainable when a treaty prescribes a lower rate. [Paras 7, 8, 12, 13]

Section 206AA cannot be pressed into service to require withholding at 20% where the DTAA prescribes a beneficial 10% rate; the higher withholding under section 206AA is not applicable in the present case.

Final Conclusion: The appeal is allowed: the assessee lawfully deducted TDS at 10% in accordance with Article 12 of the India-Czech Republic DTAA and is not liable to further withholding at the higher rate under section 206AA; the demand for short deduction of TDS is rejected.

Proper officer - power of re assessment under Section 28(4) of the Customs Act - recovery of duties which have escaped assessment - administrative review by the officer who made the original assessment - jurisdictional competence to initiate proceedings - misclassification/misrepresentation of imported goods

Proper officer - power of re assessment under Section 28(4) of the Customs Act - jurisdictional competence to initiate proceedings - Whether proceedings initiated by the Additional Director General, DRI, under Section 28 (show cause and recovery) were authorised when the Additional Director General had not been the officer who made the original assessment and clearance. - HELD THAT: - The Court applied the principle from the Supreme Court in M/s Canon India Pvt. Ltd. v. Commissioner of Customs, holding that the power to re open assessment and recover duties which have escaped assessment is an administrative review power conferred on "the proper officer" who made the original assessment or his successor or an officer assigned the assessment function. Allowing a different officer or another department (here the Additional Director General, DRI) to exercise that power would be impermissible and cause anarchical operation of the statute. The show cause and recovery jurisdiction under Section 28(4) must therefore be exercised by the officer who assessed and cleared the goods (or his successor/assignee), not by the Additional Director General who did not pass the original assessment order. Applying that ratio, the Court found that initiation of proceedings by the Additional Director General was without jurisdiction. [Paras 6, 7]

Proceedings and the impugned order initiated by the Additional Director General, DRI, are without jurisdiction and are quashed.

Final Conclusion: The writ petitions are allowed; the impugned order is quashed for want of jurisdiction as the authority which initiated re assessment and recovery proceedings was not the "proper officer" entitled to exercise the power under Section 28(4). No costs.

Principles of natural justice - non-speaking order - requirement of reasons to be recorded in writing - Refusal under Rule 7 of the Foreign Trade (Regulation) Rules, 1993 - remand for fresh consideration with personal hearing

Refusal under Rule 7 of the Foreign Trade (Regulation) Rules, 1993 - requirement of reasons to be recorded in writing - principles of natural justice - non-speaking order - Whether the impugned Communication placing the petitioner on the Denied Entity List under Rule 7 was sustainable in the absence of recorded reasons and after the petitioner had filed replies to the show cause notice. - HELD THAT: - Rule 7 requires that the Director General or licensing authority, when refusing a licence or taking similar action, must record reasons in writing. The impugned Communication dated 05.10.2020 placed the petitioner on the Denied Entity List by exercising power under Rule 7, but contains no reasons and does not address or consider the petitioner's reply to the show cause notice dated 05.02.2020 (responded to on 20.07.2020). The absence of reasons and failure to consider the objections amount to a non-speaking order and a breach of the principles of natural justice. The Court therefore held that the impugned Communication cannot stand on that basis, while expressly refraining from expressing any view on the merits of the allegations against the petitioner. [Paras 9, 10, 11]

Impugned Communication is quashed for failure to record reasons and for violating principles of natural justice.

Remand for fresh consideration with personal hearing - principles of natural justice - Relief and further procedure following quashment of the impugned Communication. - HELD THAT: - Having quashed the impugned Communication for procedural infirmity, the Court directed that the matter be remitted to the respondents for fresh consideration on merits and in accordance with law. The respondents are to afford the petitioner a fair hearing, including the right to personal hearing, and to pass final orders after considering all contentions available to the petitioner. The Court made clear that it is not commenting on the substantive merits of the matter and imposed a time limit for completion of the exercise. [Paras 11, 12]

Matter remitted to respondents for fresh consideration on merits after affording a fair and personal hearing to the petitioner; final orders to be passed within four weeks of receipt of this order.

Final Conclusion: The impugned Communication dated 05.10.2020 placing the petitioner on the Denied Entity List is quashed for being a non-speaking order and for violating principles of natural justice; the matter is remitted to the respondents to decide afresh on merits after granting the petitioner a fair and personal hearing within four weeks.

Sanctioning a scheme of amalgamation - Appointed date - modification of appointed date by the Company Court/Tribunal - supervisory jurisdiction of the company court - compliance with requisite statutory procedure for scheme sanction - mis-quotation of Regional Director's report

Mis-quotation of Regional Director's report - Impugned order had erroneously mis-quoted the observations of the Regional Director in respect of the Appointed date. - HELD THAT: - The Tribunal examined the text of the Regional Director's report quoted in the impugned order and compared it with the original observations. The charted comparison shows that paragraph 10(e) of the impugned order did not accurately reproduce the RD's wording concerning the Appointed date and related observations. The Court records that the impugned order had therefore mis-quoted the RD report in relation to the Appointed date. [Paras 11]

Finding recorded that the impugned order had erroneously mis-quoted the observations of the Regional Director regarding the Appointed date.

Appointed date - modification of appointed date by the Company Court/Tribunal - supervisory jurisdiction of the company court - compliance with requisite statutory procedure for scheme sanction - Whether NCLT, Mumbai was justified in modifying the Appointed date from 07.10.2017 to 01.04.2018 and whether such modification should be set aside. - HELD THAT: - Applying the established principle that the Company Court/Tribunal's jurisdiction in sanctioning a scheme is supervisory - limited to seeing that statutory procedure is complied with and that the scheme is not violative of law, unconscionable or against public policy - the Court examined the impugned order. The NCLT, Mumbai modified the Appointed date on the basis that the valuation report and board resolution post-dated the proposed Appointed date. The Appellant had fulfilled statutory compliances and the same Appointed date (07.10.2017) had already been approved by NCLT, Delhi. The Bench held that, in these facts, altering the Appointed date was unwarranted, would affect calculations and financial implications, and amounted to overstepping the Tribunal's supervisory role by effectively re-evaluating the commercial decision of the parties. Reliance was placed on the principles in Miheer H. Mafatlal and subsequent authority affirming that the Court should not sit in appeal over commercial wisdom once statutory requirements are met. [Paras 15, 16]

Modification of the Appointed date by the NCLT, Mumbai set aside; Appointed date fixed as 07.10.2017 as per the scheme; directions given to extend the compliance periods as reflected in the subsequent operative paragraph.

Final Conclusion: Appeal allowed: impugned order set aside insofar as it modified the Appointed date; Appointed date restored to 07.10.2017 as per the scheme; mis-quotation of the Regional Director's report noted; period for compliance extended as directed; no order as to costs.

Reduction of share capital - special resolution - writing off accumulated losses against equity capital - protection of creditors' interests - selective reduction of share capital - compliance with statutory procedure for capital reduction - publication and registration of order confirming reduction - confirmation by Tribunal

Reduction of share capital - special resolution - writing off accumulated losses against equity capital - Confirmation of the petitioner company's proposal to reduce and cancel a specified part of issued, subscribed and paid-up equity share capital by writing off accumulated losses - HELD THAT: - The Board and shareholders, representing 100% of the equity share capital, passed the resolution as a special resolution authorising reorganisation by reduction and cancellation of the equity shares held by a shareholder to the extent specified, to write off accumulated losses as at March 31, 2019. The Tribunal recorded that no objector appeared and that the petitioner had followed the statutory procedure for convening the meeting and obtaining unanimous written consent. The Tribunal considered the petitioner's rationale that accumulated losses had substantially eroded capital and that the proposed reduction would lead to a rationalised capital structure commensurate with the company's business and assets, and would not impede the company's ability to meet its liabilities in the ordinary course. [Paras 1, 4, 5, 7, 13]

Petition for reduction and cancellation of the specified portion of equity share capital by writing off accumulated losses is confirmed.

Protection of creditors' interests - selective reduction of share capital - compliance with statutory procedure for capital reduction - Satisfaction of statutory safeguards including protection of creditors and stakeholders and consideration of observations of the Regional Director and ROC - HELD THAT: - The Tribunal considered the Regional Director's observations requesting affidavit evidence that creditors' and stakeholders' interests and statutory dues are protected, noting tax implications are for Income Tax Authorities and that concerns of the ROC were on record. The petitioner filed and accepted an affidavit addressing the Regional Director's observations and clarified the position regarding outstanding payments and liquidity constraints. The petitioner also affirmed there were no pending inspections/inquiries under the cited sections of the Companies Act, and undertook to comply with statutory requirements and directions of the Tribunal. The Tribunal found these submissions satisfactory. [Paras 6, 8, 9, 10, 11]

The Tribunal is satisfied that statutory safeguards and observations raised by the Regional Director/ROC have been addressed and that creditors' interests are not prejudiced; statutory compliance is recorded.

Publication and registration of order confirming reduction - confirmation by Tribunal - Approval of the form of minutes, directions for publication and filing, and consequent administrative steps following confirmation - HELD THAT: - Having made the company petition absolute, the Tribunal approved the form of minutes recording the post-reduction issued, subscribed and paid-up equity share capital. The petitioner undertook to publish the notice of registration of the order and minutes in two local newspapers within 14 days of registration, and to file certified copies of the order and minutes with the Registrar within 30 days of receipt of the certified copy. The Tribunal directed all concerned regulatory authorities to act on the certified copy of the order. [Paras 12, 14, 15]

Form of minutes approved; directions issued for publication, registration and filing of certified copies; regulatory authorities to act on certified copy.

Final Conclusion: The Tribunal confirmed the reduction and cancellation of the specified portion of the petitioner's equity share capital by writing off accumulated losses, having found statutory procedure complied with and Regional Director/ROC observations addressed; the form of minutes was approved and directions issued for publication, registration and filing of certified copies.

Operational debt - Privity of contract - Maintainability of application under Section 9 of the I&B Code - locus standi of an operational creditor - Mobilox test for admission of Section 9 applications

Privity of contract - locus standi of an operational creditor - The applicant does not have locus standi as an operational creditor because there is no privity of contract between the applicant and the corporate debtor. - HELD THAT: - The High Sea Sale Contract dated 31.05.2017 was between the Corporate Debtor and M/s. Thankam Cashew Factory and not with the applicant. Although the applicant paid an advance on behalf of Thankam Cashew Factory and received a cheque purportedly as part of settlement, the Tribunal found that the applicant is a stranger to the underlying contract and, in the absence of assignment or transfer as contemplated for operational creditors, cannot be treated as an operational creditor under the Code. Accordingly the applicant lacks the statutory locus to invoke Section 9 I&B Code. [Paras 11, 13]

Application by the applicant is not maintainable as the applicant is not an operational creditor for want of privity of contract.

Operational debt - Maintainability of application under Section 9 of the I&B Code - The claimed amount does not qualify as an operational debt under Section 5(21) of the I&B Code. - HELD THAT: - The Tribunal examined the nature of the claim and held that the claim arises from non payment of advance money paid on behalf of a third party rather than from provision of goods or services by the Corporate Debtor to the applicant. Since the debt does not fall within the statutory contours of an "operational debt" as defined in the Code, the claim cannot be the basis for triggering CIRP under Section 9. [Paras 16, 19]

The claim is not an operational debt within the meaning of the Code and thus cannot sustain a Section 9 application.

Mobilox test for admission of Section 9 applications - The application fails the Mobilox criteria for admission under Section 9 and therefore is not fit for admission. - HELD THAT: - Applying the threefold test laid down in Mobilox - (i) existence of operational debt, (ii) documentary evidence showing the debt is due and unpaid, and (iii) absence of a pre existing dispute or pending suit/arbitration prior to the demand notice - the Tribunal found that the required conditions are not satisfied. In particular, the absence of privity and the character of the claim as an advance on behalf of a third party meant the threshold for an operational debt was not met, and consequently the application could not be admitted. [Paras 20, 21]

The application does not satisfy the Mobilox requirements and is liable to be dismissed.

Final Conclusion: On the facts and law, the Tribunal held that the applicant is not an operational creditor for want of privity, the claim does not constitute an operational debt, the Mobilox test for admission under Section 9 is not satisfied, and accordingly the Section 9 application is dismissed.

Liquidation upon failure to receive a resolution plan under the Insolvency and Bankruptcy Code - Commercial decision of the Committee of Creditors recommending liquidation - Appointment of liquidator and disqualification criteria under Section 34 of the IBC - Ceasing of moratorium on liquidation - Preclusion of collateral objections after adverse judicial orders

Liquidation upon failure to receive a resolution plan under the Insolvency and Bankruptcy Code - Commercial decision of the Committee of Creditors recommending liquidation - Order for liquidation of the corporate debtor was permissible and is passed. - HELD THAT: - The Adjudicating Authority found that no resolution plan was received by the last date for submission despite issuance of Expression of Interest and that the Committee of Creditors, holding 89.18% voting share, passed a resolution recommending liquidation. The Resolution Professional had complied with the statutory requirements for conduct of CIRP. On this basis the Tribunal concluded that the statutory preconditions for directing liquidation were satisfied and proceeded to pass the liquidation order. [Paras 4, 5, 8, 9, 11]

Liquidation of Varanasi Auto Sales Limited ordered under the Code as no resolution plan was received and the COC recommended liquidation.

Appointment of liquidator and disqualification criteria under Section 34 of the IBC - Role of the Resolution Professional as liquidator - The Resolution Professional was appointed as liquidator and found not to be disqualified. - HELD THAT: - The Adjudicating Authority appointed the then Resolution Professional as liquidator under the Code after observing he was not disqualified under the disqualification criteria. Directions were issued to the liquidator to intimate the Registrar of Companies, make the public announcement and to act in accordance with the Code, including filing progress reports every three months. [Paras 9, 12, 13, 14]

Mr. Yogesh Gupta is appointed as liquidator and directed to perform statutory duties including ROC intimation, public announcement and periodic progress reports.

Preclusion of collateral objections after adverse judicial orders - Effect of prior judicial rulings on maintainability of objections to liquidation - Objections by the prospective resolution applicant were rejected as unsustainable in view of earlier orders. - HELD THAT: - The prospective resolution applicant contended rejection of his candidature and non-provision of the information memorandum. The Tribunal noted earlier proceedings in which the applicant's challenge to the conduct of the RP was rejected by this Tribunal and subsequently affirmed by higher fora including the Supreme Court. Having regard to those adverse orders, the Tribunal held the present objections could not be entertained and were not sustainable. [Paras 6, 7, 10]

The objections raised by the prospective resolution applicant are rejected as unsustainable in view of earlier judicial orders.

Final Conclusion: The Company Insolvency Resolution Process having failed to produce any resolution plan and the Committee of Creditors recommending liquidation, the Tribunal directed liquidation of the corporate debtor, appointed the Resolution Professional as liquidator (not disqualified), ordered statutory formalities and rejected the prospective applicant's objections in view of prior adverse judicial orders.

Initiation of CIRP under Insolvency and Bankruptcy Code - Financial debt arising from advance paid by allottee under RERA - Threshold of 10% of allottees for filing under Section 7 proviso - Availability of alternative remedy of arbitration - Entitlement to possession conditioned on payment of balance consideration

Financial debt arising from advance paid by allottee under RERA - Threshold of 10% of allottees for filing under Section 7 proviso - Whether the amounts remitted under the Agreements for sale and the petitioner's status as allottee satisfy the Code's requirement of a financial creditor meeting the proviso threshold to initiate CIRP. - HELD THAT: - The Tribunal noted the petitioner's contention that sums paid as advance have the commercial effect of a borrowing under the explanation to Section 5(8) and that, holding 10 allotments out of 98, it meets the proviso threshold to Section 7(1). However, on the materials placed before it the petitioner had paid only token advances and had not discharged the balance contractual consideration; the Agreements contemplate execution of sale deed and delivery of possession subject to payment of all dues. The petitioner treated itself as ten separate home buyers for threshold purposes despite having entered identical agreements alone and without showing performance of purchaser obligations. In these circumstances the Tribunal found that the petitioner failed to establish that it was a financial creditor in the sense required to invoke initiation of CIRP under the Code or that the proviso threshold was properly satisfied by the facts pleaded. [Paras 6, 7]

Petitioner has not established entitlement as a financial creditor meeting the proviso threshold; the contention is rejected.

Initiation of CIRP under Insolvency and Bankruptcy Code - Availability of alternative remedy of arbitration - Entitlement to possession conditioned on payment of balance consideration - Whether the Company Petition invoking the Code was maintainable when petitioner had alternative contractual remedies and had not paid the balance consideration. - HELD THAT: - The Tribunal observed that the Agreements contain an arbitration clause and expressly condition delivery of possession and execution of sale deed on payment of the agreed consideration. The petitioner did not disclose any steps taken to offer or tender the balance amount nor any insolvency-related facts regarding the corporate debtor. Given that the petitioner's grievance, as presented, amounted to a claim for refund of advance or breach of contract rather than proof of a financial debt recoverable under the Code, and an alternative remedy of arbitration was available under the contract, the Tribunal held that the Code was not the appropriate forum for the relief sought. On these grounds the Petition was held to be misconceived and not maintainable under the Code. [Paras 6, 7, 8]

The petition invoking initiation of CIRP is not maintainable and is dismissed; petitioner may pursue contractual remedies including arbitration.

Final Conclusion: The Company Petition under Section 7 is dismissed as misconceived: the petitioner failed to establish status and threshold as a financial creditor and, having alternative contractual remedies and not having paid the balance consideration, cannot invoke the Code; liberty is left to pursue remedies in accordance with the Agreements for Sale.

Pre-existing dispute - operational debt - statutory demand under Section 8 of the Insolvency and Bankruptcy Code, 2016 - initiation of corporate insolvency resolution process - adjudicating authority's duty under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Mobilox test for pre-existing dispute

Pre-existing dispute - statutory demand under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Mobilox test for pre-existing dispute - Existence of a pre-existing dispute between the operational creditor and the corporate debtor and its impact on admission of the Section 9 application. - HELD THAT: - The Tribunal examined the correspondence, termination letter and legal notice exchanged between the parties and applied the principle laid down in Mobilox that a dispute must exist prior to receipt of the demand notice. The record shows email communications raising deficiency in services on 01.02.2018, 21.05.2018, 28.05.2018 and 14.06.2018, a termination letter dated 18.07.2018 terminating the five purchase orders for non-performance and a legal notice dated 30.05.2019 followed by the corporate debtor's reply of 25.06.2019 disputing the claimed amount. These materials, which pre-date the statutory demand under Section 8 dated 15.01.2020, establish a real pre-existing dispute regarding performance and deficiency of services. In light of the Mobilox test and the Tribunal's duty under Section 9 to determine existence of a pre-existing dispute, the application could not be admitted.

The application under Section 9 of the Insolvency and Bankruptcy Code, 2016 is rejected on the ground of a pre-existing dispute between the parties.

Final Conclusion: The Tribunal, applying the Mobilox principle, found a pre-existing, genuine dispute evidenced by emails, a termination letter and earlier correspondence, and accordingly dismissed the Section 9 application seeking initiation of CIRP.

Limitation under Article 137 - applicability of Limitation Act to applications under the Insolvency and Bankruptcy Code - acknowledgement of debt and Section 18 of the Limitation Act - existence of real dispute - CIRP initiation under Section 9 of the Insolvency and Bankruptcy Code, 2016

Limitation under Article 137 - acknowledgement of debt and Section 18 of the Limitation Act - applicability of Limitation Act to applications under the Insolvency and Bankruptcy Code - Whether the petition under Section 9 of the IBC is barred by limitation and whether any alleged acknowledgment extends the period of limitation - HELD THAT: - The Tribunal noted that the invoices were raised between April 2016 and July 2016 and the Section 9 petition was filed in November 2019, placing the application beyond three years from the date of default. Applying the view in Ishrat Ali (as adopted by the Tribunal) and the Supreme Court rulings cited by the respondent, the Tribunal held that Article 137 of the Limitation Act governs applications under the Code and that Section 18 (fresh period on acknowledgment) is not available to revive or extend limitation for IBC applications. The respondent's reliance on a disputed acknowledgment (said to be signed by a junior clerk and the subject of a criminal complaint) was treated as contested; until the outcome of that complaint the acknowledgment could not be accepted to cure limitation. In view of these findings the petition was found to be time-barred and unaided by any valid written acknowledgment that would revive limitation. [Paras 7, 9, 10, 11, 14]

The Section 9 petition is barred by limitation and cannot be saved by the disputed acknowledgment; the petition is dismissed as time-barred.

Existence of real dispute - CIRP initiation under Section 9 of the Insolvency and Bankruptcy Code - Whether there exists a real dispute between the parties affecting maintainability of the Section 9 petition - HELD THAT: - The Tribunal observed that the respondent did not admit the claim and raised multiple factual/contention issues - including challenge to the purported acknowledgment, disputed invoices for re-supply of materials, and questions about identity/identification of supplied material and vehicle details. The Tribunal found that these factual controversies could not be resolved in the Section 9 summary proceeding and amounted to a real dispute requiring adjudication. That factual dispute, taken together with the limitation bar, reinforced the conclusion that the petition was not maintainable before the Tribunal under Section 9. [Paras 6, 12, 13]

There exists a real dispute on facts between the parties which precludes admission of the Section 9 petition.

Final Conclusion: The petition under Section 9 of the IBC is dismissed as barred by limitation; the Tribunal also records the existence of a real factual dispute between the parties, and states that the observations made do not prejudice the parties' rights before any other forum.

Condonation of delay in filing claim - liquidator's power to admit or reject claims - timelines for submission of claims under the liquidation process - Section 38(1) of the Insolvency and Bankruptcy Code, 2016 - period for receiving claims - Regulation 12(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - consideration of claims after public announcement - Regulation 16 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - last date for submission of claims - exclusion of creditors who fail to prove claims within prescribed time

Condonation of delay in filing claim - timelines for submission of claims under the liquidation process - Section 38(1) of the Insolvency and Bankruptcy Code, 2016 - period for receiving claims - Regulation 16 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - last date for submission of claims - Whether the tribunal should set aside the liquidator's rejection of the applicant's claim and condone a delay of 540 days in filing the claim - HELD THAT: - The applicant filed Form C 540 days after the commencement of liquidation and well beyond the 30-day period contemplated under Section 38(1) of the IBC and the last date fixed in the public announcement under the liquidation regulations. The Tribunal noted the undisputed abnormal delay and that the applicant did not furnish any justifiable or convincing reasons for such delay. The Tribunal also observed that the amount claimed was substantial and that it was not plausible that a creditor of substantial amount would fail to keep track of the corporate debtor's proceedings. In these circumstances the Tribunal declined to interfere with the liquidator's action of rejecting the belated claim and was not persuaded to condone the delay.

Application dismissed and the liquidator's rejection of the belated claim upheld.

Final Conclusion: The application under Section 42 seeking condonation of delay and direction to the liquidator to accept and verify the claim is dismissed; the Tribunal upheld the liquidator's rejection of the claim filed after an unexplained delay of 540 days.

Commencement of CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial debt - operational debt vs financial debt - default - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Commencement of CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial debt - default - operational debt vs financial debt - Admissibility of petition under Section 7 for initiation of Corporate Insolvency Resolution Process against the corporate debtor on the ground of alleged debt and default. - HELD THAT: - The Tribunal examined the documents filed by the financial creditor including the purchase order, correspondence, reminder letters and the loan agreement executed between the parties. The corporate debtor's plea that the transaction constituted an operational debt and that the claim was disputed was considered but the Bench found no tenable objection that would preclude initiation of CIRP. The Tribunal recorded that the financial creditor demonstrated the existence of a debt and default by producing documentary evidence and that the corporate debtor's contentions concerning inability to pay and requests for waiver did not negate the creditor's claim. The financial creditor also proposed an Interim Resolution Professional and filed his consent in Form-2. On these materials and submissions the petition was held to be complete and fit for admission under Section 7. [Paras 7, 9]

The petition under Section 7 is admitted as the corporate debtor committed default in payment of the claimed financial debt.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Relief and consequential directions consequent to admission of the Section 7 petition. - HELD THAT: - Upon admission, the Tribunal declared the moratorium as contemplated by the Code, restraining institution or continuation of suits, recovery actions and transfers by the corporate debtor, and directed that supply of essential goods or services shall not be terminated during the moratorium. The Bench appointed the proposed Interim Resolution Professional whose consent in Form-2 was on record and directed immediate public announcement of the CIRP and communication to the Registrar of Companies for status change on MCA-21. The moratorium was ordered to take effect from the date specified in the order until completion of CIRP or approval of a resolution plan or liquidation, whichever was earlier. [Paras 9]

Moratorium declared and the proposed Interim Resolution Professional appointed; directions issued for public announcement and statutory filings.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by the financial creditor, holding that documentary evidence established existence of a financial debt and default; moratorium was imposed and the proposed Interim Resolution Professional was appointed with directions for public announcement and statutory compliance.

Grant of bail in economic offences - discretionary nature of bail - conditions for bail - completion of investigation versus further investigation - risk of tampering with witnesses - non fleeing / surrender of passports - reporting as a condition of bail - cancellation of bail on breach of conditions

Grant of bail in economic offences - discretionary nature of bail - conditions for bail - completion of investigation versus further investigation - risk of tampering with witnesses - non fleeing / surrender of passports - reporting as a condition of bail - cancellation of bail on breach of conditions - Whether the petitioners, accused in an alleged economic offences/money laundering case, are entitled to bail and on what conditions. - HELD THAT: - The Court applied the settled principle that grant of bail is discretionary and fact sensitive, with economic offences being grave but not attracting a uniform rule. It noted the competing considerations in the authorities placed before it: gravity of alleged offences and possibility of tampering on the one hand, and the stage of proceedings (complaint filed; investigation substantially completed though further investigation continues), surrender of passports, and the petitioners' undertaking to cooperate on the other. The Court considered relevant indicia specified in precedent - nature of accusations, evidence, possibility of securing attendance, and risk of hampering investigation - and observed that although the complaint has been filed and further investigation is proceeding, the likelihood of abscondence is reduced by surrender of passports and the petitioners' offer to cooperate. Balancing these factors, the Court exercised its discretion to enlarge the petitioners on bail but imposed specific, enforceable conditions (execution of bonds with sureties, periodic reporting to the Investigating Agency, and express provision for cancellation of bail and appropriate action by the trial court/Principal City Civil and Sessions Judge in the event of breach or tampering). The order preserves the respondent's right to pursue further investigation and to move for cancellation of bail if conditions are violated.

Petitions allowed; petitioners enlarged on bail subject to execution of bonds with sureties and specified reporting and other conditions, with liberty to the Enforcement Directorate or trial court to move for cancellation or take action on breach.

Final Conclusion: The High Court allowed the bail petitions of the four accused in the economic offences/money laundering matter, granting bail on execution of bonds with sureties and imposing periodic reporting and provisos for cancellation of bail or other action in case of breach, while noting that further investigation may continue.

Non-impleading of necessary party vitiating proceedings - power to summon under Section 14 of the Central Excise Act - commercial or industrial service - predominant object test for educational institutions - remand for fresh adjudication - failure to take note of payment of disputed tax

Non-impleading of necessary party vitiating proceedings - power to summon under Section 14 of the Central Excise Act - Validity of adjudication when the interested/necessary party (the educational trust) was not impleaded or summoned prior to issuing the impugned order. - HELD THAT: - The Court held that the question whether the petitioner's services to the educational trust constituted a commercial or industrial service could not properly be determined behind the back of the second respondent, who is both a necessary and an interested party. Section 14 of the Central Excise Act (made applicable to service tax proceedings) confers power to summon any person whose attendance is considered necessary to give evidence or produce documents; that power ought to have been invoked. Non-impleading of the second respondent was therefore held to be a serious defect which vitiated the adjudication and required quashing of the order and fresh consideration after affording the trust an opportunity to be heard. [Paras 8, 9]

Impugned adjudication quashed for failure to implead/summon the necessary party; authority directed to invoke Section 14 and associate the second respondent in fresh proceedings.

Failure to take note of payment of disputed tax - Whether the adjudicating authority took account of the petitioner's remittance of service tax in its decision. - HELD THAT: - The Court noted that the petitioner had remitted service tax from 01.07.2012 onward and specifically that payments were made before the impugned order. The adjudicating authority did not appear to have taken this remittance into account. This omission formed one of the two independent grounds on which the impugned order was quashed, necessitating reconsideration of the matter with regard to the payments already made. [Paras 9]

Failure to take note of the petitioner's remittance vitiates the order and requires fresh adjudication with appropriate consideration of the payments.

Commercial or industrial service - predominant object test for educational institutions - remand for fresh adjudication - Remand for fresh determination whether the services rendered to the educational trust are taxable as commercial or industrial services, applying the tests laid down by the Supreme Court in M/s. Queen's Educational Society. - HELD THAT: - The Court directed that the matter be remitted to the adjudicating authority to decide afresh whether the petitioner's construction services supplied to the educational trust amount to a commercial or industrial service. The authority was instructed to summon and associate the second respondent under Section 14 and to apply the predominant object test and the other principles summarized by the Supreme Court in the cited Queen's Educational Society decision (noting that making a surplus does not by itself convert an educational institution into a profit-making entity and that the overall object in the relevant period must be examined). The remand contemplates a fresh adjudication on merits applying those tests and taking into account the payments already made. [Paras 5, 10]

Matter remitted to the first respondent for fresh adjudication, after summoning and associating the second respondent and applying the Supreme Court's tests to determine whether the services are taxable.

Final Conclusion: Writ petition allowed; impugned order quashed on two grounds (non-impleading of the trustee and failure to note payments); matter remitted for fresh adjudication by invoking Section 14, summoning the second respondent and determining whether the services are taxable by applying the Supreme Court's tests in M/s. Queen's Educational Society.

Deduction of pre-deposits while issuing statement under Section 124(2) - Adjustment of deposits not appropriated due to pendency of adjudication - Designated Committee's obligation to verify declarations under SVLDRS - SVLDRS as a self-contained procedure for claiming pre-deposit credit - Board circulars clarifying adjustment of pre-deposits

Deduction of pre-deposits while issuing statement under Section 124(2) - Board circulars clarifying adjustment of pre-deposits - Pre-deposits paid after issuance of show cause notice or during appellate/enquiry proceedings must be deducted/adjusted when the Designated Committee issues the statement indicating the amount payable under SVLDRS. - HELD THAT: - The Court held that Section 124(2) requires any amount paid as pre-deposit at any stage of appellate proceedings or as deposit during enquiry, investigation or audit to be deducted when issuing the statement indicating the amount payable by the declarant. The Board Circulars cited (including Clauses 10(c) of the Circular dated 27.08.2019 and Clauses 2(ii) & (iii) of the Circular dated 12.12.2019) clarify that deposits made after issuance of show cause notice but before adjudication, and deposits not appropriated due to pendency of adjudication, may be deducted/adjusted by the Designated Committee while determining the final amount payable. On this basis the Court concluded that pre-deposits identified by the petitioner ought to have been taken into account in the SVLDRS estimates and statements. [Paras 16, 17]

Section 124(2) and the Board Circulars oblige adjustment/deduction of relevant pre-deposits when issuing the SVLDRS statement; failure to do so was erroneous.

Designated Committee's obligation to verify declarations under SVLDRS - Adjustment of deposits not appropriated due to pendency of adjudication - The estimates and statement issued in Form SVLDRS-2 and SVLDRS-3 which did not take proper account of admitted pre-deposits were set aside and remitted to the Designated Committee for fresh consideration limited to the Scheme's provisions. - HELD THAT: - The Court found that the estimate in Form SVLDRS-2 dated 28.11.2019 and the Statement under Section 127 in Form SVLDRS-3 dated 27.02.2020 failed to advert to certain pre-deposits shown in the RTI response and thereby erred. The Court therefore set aside those documents and directed the respondent Authority to re-work the SVLDRS-3 statement, to credit the admitted deposit already recorded and to examine whether the other specified pre-deposits are available for appropriation. The Authority's reconsideration is constrained to the powers and procedure prescribed by the Scheme and must not amount to an independent adjudicatory exercise. [Paras 4, 15, 21, 22]

SVLDRS-2 and SVLDRS-3 as originally issued are set aside; the Designated Committee is directed to rework the estimate and statement taking appropriate credit for admitted pre-deposits and to reconsider the declaration strictly within the Scheme.

SVLDRS as a self-contained procedure for claiming pre-deposit credit - The petitioner is not relegated to claiming pre-deposit credit through general return-filing procedures where the Scheme provides a specific procedure and declaration format for recording pre-deposits. - HELD THAT: - The Court observed that SVLDRS contains a specific column for pre-deposit in Form SVLDRS-1 and constitutes a self-contained code. Accordingly, the Department's contention that credit should be claimed only by filing ST-3 returns is not a bar to adjusting pre-deposits under the Scheme; the Scheme's dedicated procedure for claiming adjustment must be followed instead of invoking general procedures. [Paras 18]

Where the Scheme prescribes a procedure to record and adjust pre-deposits, the declarant need not be directed to seek adjustment exclusively through general return procedures.

Board circulars clarifying adjustment of pre-deposits - Manual processing of declarations to give effect to High Court directions is permissible in accordance with Board communication where electronic processing is not feasible, subject to stated conditions. - HELD THAT: - The Court accepted the Board communication dated 08.01.2021 which permits manual processing of declarations to give effect to High Court directions, subject to specified conditions (acceptance by the Commissionerate, absence of challenge before the Supreme Court, and Systems Directorate constraints). That clarification addressed the Department's technical objection regarding time-specific electronic processing under SVLDRS. [Paras 19, 20]

Manual processing in accordance with the Board's communication is available to implement favorable High Court directions where electronic processing is technically constrained and conditions are met.

Final Conclusion: The Court set aside the SVLDRS estimate and statement issued earlier and directed the Designated Committee to rework the SVLDRS-3 statement and the declaration by taking credit for the admitted pre-deposit and by considering the other specified pre-deposits for appropriation, strictly within the Scheme's provisions; the Scheme and Board circulars require adjustment of relevant pre-deposits and the Department may permit manual processing as clarified by the Board.

Service tax liability for renting of immovable property - exemption under Notification No. 25/2012-ST - quashing of administrative communication - show cause notice under section 73 of the Finance Act, 1994 - adjudication on merits without being influenced by departmental observations - exclusion of period for limitation - Voluntary Compliance Encouragement Scheme, 2013

Quashing of administrative communication - service tax liability for renting of immovable property - Impugned communication dated 23.03.2016 issued by the first/ fifth respondent is quashed. - HELD THAT: - The Court found that the impugned communication, which concluded that the petitioner was liable to pay service tax and contained observations likely to bind subordinate officers, was rendered in the factual matrix following the petitioner's own invocation of departmental consideration pursuant to an earlier writ direction. The Court held that those observations should not be permitted to operate as binding precedent on the jurisdictional officer and therefore quashed the impugned communication. The Court recorded that the earlier communication of the department (dated 21.11.2013) was an innocuous persuasion to obtain registration or avail the Voluntary Compliance Encouragement Scheme, 2013, and that the petitioner's approach for an individual exemption invited adverse observations; nevertheless the departmental clarification itself could not stand as determinative without adjudication. The quash order does not decide the petitioner's entitlement to exemption on merits. [Paras 8]

The impugned communication dated 23.03.2016 is quashed.

Show cause notice under section 73 of the Finance Act, 1994 - adjudication on merits without being influenced by departmental observations - exemption under Notification No. 25/2012-ST - exclusion of period for limitation - Jurisdictional officer to be permitted to issue show cause notice and to adjudicate the petitioner's liability on merits, with specified timelines and exclusion of certain periods for limitation. - HELD THAT: - The Court granted liberty to the officer within whose jurisdiction the petitioner operates to issue an appropriate show cause notice under section 73 of the Finance Act, 1994 within 60 days from communication of the order. The petitioner is directed to file its reply explaining why it is not liable to pay service tax for renting immovable property to banks in terms of Notification No.25/2012-ST dated 20.6.2012 and may raise all defences including limitation. The adjudicating officer must decide the show cause notice on merits within three months after giving the petitioner opportunity of hearing and considering its written reply, and must do so without being influenced by the quashed observations in the impugned communication. The Court expressly ordered that the period during operation of W.P.No.33773 of 2015, the pendency of this writ petition, and the 60 days allowed for issuing the show cause notice shall stand excluded for the purposes of limitation. [Paras 8, 9]

Liberty granted to issue show cause notice under section 73 within 60 days; petitioner to reply and adjudication to be completed on merits within three months; specified periods excluded for limitation calculation.

Final Conclusion: Impugned departmental communication dated 23.03.2016 is quashed; matter remitted for fresh departmental proceedings - show cause notice under section 73 may be issued within 60 days, the petitioner may file its reply and defence (including claim under Notification No.25/2012 ST and limitation), and the adjudicating officer shall decide the matter on merits within three months uninfluenced by the quashed observations; specified periods are excluded for limitation.

Immunity of services supplied to SEZ from service tax - refund of service tax paid on input services used for authorized operations of SEZ units - procedural defect in Approved/Default List not to defeat substantive refund entitlement - overriding effect of the SEZ Act over other fiscal notifications and the Finance Act

Refund of service tax paid on input services used for authorized operations of SEZ units - procedural defect in Approved/Default List not to defeat substantive refund entitlement - immunity of services supplied to SEZ from service tax - Whether refund of service tax paid on specified input services consumed for authorized operations in SEZ could be denied solely because those services were not mentioned in the Approved/Default List issued by the Development Commissioner. - HELD THAT: - The Tribunal found no dispute that the impugned input services were in fact used for authorized operations in the SEZ. The rejection was founded solely on the absence of those services in the Approved List, which the Tribunal regarded as a technical procedural defect. Applying the governing scheme under the SEZ Act and the relevant notifications, and following earlier Tribunal decisions, the Court held that the SEZ Act confers immunity on services supplied to SEZ units and that the notification mechanism merely prescribes the procedural route for claiming refunds. A procedural non-inclusion in the Approved/Default List does not extinguish the substantive entitlement to refund where the services are demonstrably used for authorized operations. The Tribunal also noted that the Development Commissioner subsequently included the services in the Default List, and relied on consistent precedents holding that notifications create a facilitative mechanism and cannot override the immunity under the SEZ Act. For these reasons the denial of refund on the stated ground was held unsustainable.

Refund cannot be denied merely for non-mention of the services in the Approved List; the impugned denial is unsustainable and the refund claim must be allowed.

Final Conclusion: The impugned order rejecting the refund claim is set aside; appeal allowed and the appellant's claim for refund in respect of the specified input services consumed for authorized SEZ operations is upheld.

Refund of unutilized Cenvat credit - compliance with para 2(h) of Notification No. 27/2012 C.E. (N.T.) - obligatory debit from Cenvat credit ledger - doctrine of substantial compliance - procedural non-compliance and forfeiture of refund

Refund of unutilized Cenvat credit - compliance with para 2(h) of Notification No. 27/2012 C.E. (N.T.) - obligatory debit from Cenvat credit ledger - doctrine of substantial compliance - Whether the appellant's refund claim for unutilized Cenvat credit could be allowed despite not debiting the Cenvat credit ledger in compliance with para 2(h) of Notification No. 27/2012. - HELD THAT: - The Tribunal found on the facts that the appellant had not made any debit entry in the Cenvat credit ledger as required; instead it had recorded the amount in a service tax receivable ledger and relied on an e-mail allegedly sent two days before the Order-in-Original, which was not on record. ST-3 returns showed zero utilization of Cenvat credits for the period, and the appellant conceded that no debit had been made up to the date of arguments while having undertaken to reverse Cenvat credit only after completion of adjudication. The Tribunal held that Notification No. 27/2012 obliges debit from the Cenvat credit ledger at the time of filing the refund application and that attempting to effect the debit later, or recording the amount elsewhere, does not satisfy the procedural condition. The doctrine of substantial compliance was rejected on these facts as insufficient to cure non-compliance with the mandatory procedure prescribed by the notification. [Paras 5]

The refund claim was correctly rejected for non-compliance with para 2(h) of Notification No. 27/2012 and the appeal is dismissed.

Final Conclusion: The Tribunal confirmed the Commissioner (Appeals) order and dismissed the appeal, upholding rejection of the refund claim for non-compliance with the mandatory debit requirement in para 2(h) of Notification No. 27/2012.

Taxability of foreman commission - retrospective non levy prior to statutory amendment - burden of proving incidence of tax not passed on - evidentiary sufficiency of auditor/chartered accountant certificate and books of account

Taxability of foreman commission - retrospective non levy prior to statutory amendment - Levy of service tax on foreman commission arose only with the Finance Act, 2015 and there was no liability to pay service tax on such commission prior to 31/03/2015. - HELD THAT: - The Tribunal finds that the statutory levy of service tax on foreman commission was introduced by the Finance Act, 2015 and therefore no liability for service tax on foreman commission existed up to 31/03/2015. The authorities below and the parties have treated the matter as finally settled by the Apex Court, and the Tribunal accepts that the impugned payment periods fall before the effective levy. Consequently, refund claims for service tax paid for periods prior to 31/03/2015 cannot be denied on the ground that the tax was legitimately leviable during those periods. [Paras 6]

Refund claims for service tax paid on foreman commission for the periods before 31/03/2015 are not barred by liability and must be allowed subject to other conditions.

Burden of proving incidence of tax not passed on - evidentiary sufficiency of auditor/chartered accountant certificate and books of account - The appellant's production of a Chartered Accountant's certificate together with profit & loss account and balance sheet sufficed to prove that the incidence of service tax was not passed on, and denial of refund on the ground of non production of books was unsustainable. - HELD THAT: - The Commissioner(Appeals) rejected the refund solely because the appellant allegedly failed to prove that the tax incidence was not passed on to customers. The appellant had produced a Chartered Accountant's certificate certifying that the tax was not collected from customers and had placed audited financial statements (profit & loss account and balance sheet) on record. The Tribunal holds that the certificate and the accounts on record establish that the incidence of service tax was borne by the service provider and was not passed on, and that the appellate authority's rejection of that evidence lacked legal basis. The Tribunal notes that the Commissioner(Appeals) did not request production of books at hearing and nevertheless rejected the evidence. [Paras 6]

The denial of refund for want of proof that the tax incidence was not passed on is set aside; the appellant's evidence is accepted as sufficient.

Final Conclusion: The appeal is allowed; the impugned order of the Commissioner(Appeals) is set aside and the appellant's refund claim for service tax paid on foreman commission for the specified pre 2015 periods is allowed with consequential relief if any.

Refund of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 read with Notification No.27/2012-CE (NT) - definition of input service and scope of amended Rule 2(l) - requirement of nexus / one-to-one correlation between input services and exported output service - entitlement to interest for delayed refund beyond three months

Refund of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 read with Notification No.27/2012-CE (NT) - definition of input service and scope of amended Rule 2(l) - Appellant entitled to refund of CENVAT credit on claimed input services (except those specifically not pressed) under Rule 5 read with Notification No.27/2012-CE (NT). - HELD THAT: - The Tribunal found that the appellant, being a 100% export-oriented unit, filed refund claims under Rule 5 read with Notification No.27/2012. The Commissioner (A) had rejected refunds on the ground of lack of nexus, relying on an earlier circular; however the definition of 'input service' was amended effective 1.4.2011 and Notification No.27/2012 removed the requirement of one-to-one correlation. The appellant had explained the connection between the input services and the exported output service and the department had not earlier contested the CENVAT credit when availed. Several decisions cited by the appellant had held the impugned services to be input services. Applying this reasoning, the Tribunal held that, except for certain services not pressed in one appeal, the appellant was entitled to refund of the CENVAT credit claimed. [Paras 7, 8]

Allow refund claims for the input services claimed in the appeals, except for the four services not pressed in appeal No.ST/20397/2020.

Requirement of nexus / one-to-one correlation between input services and exported output service - TRU clarification dated 16.3.2012 and effect of Notification No.27/2012-CE (NT) - One-to-one nexus or correlation between specific input services and exported output service is not required for refund under the scheme introduced by Notification No.27/2012-CE (NT) and related TRU clarification. - HELD THAT: - The Tribunal observed that the Commissioner (A) wrongly relied on an older Circular of 2010 which contemplated a nexus test applicable to earlier law. The amended statutory framework (Rule 2(l) and Notification No.27/2012) and the TRU letter dated 16.3.2012 discarded the stringent one-to-one correlation requirement for refund claims; duties/taxes on inputs or input services qualifying as such are refundable in proportion to export turnover to total turnover. Consequently, rejection of refund solely for want of a strict nexus was held to be not sustainable. [Paras 7]

Rejection of refund on the ground that nexus/one-to-one correlation was not established is set aside.

Entitlement to interest for delayed refund beyond three months - interpretation of Section 11BB as applied to delayed refunds - Appellant entitled to interest on delayed refund where sanction was not given within three months of the refund application. - HELD THAT: - Relying on the Supreme Court decision in Ranbaxy Laboratories and subsequent authoritative decisions, the Tribunal held that interest liability under the statutory provision commences from the expiry of three months from the date of receipt of the application for refund if the amount is not refunded within that period. The Tribunal noted that other courts have similarly held entitlement to interest where there is delay beyond the statutory three-month period and therefore allowed interest on the delayed sanction of refund. [Paras 7]

Grant interest on the delayed sanction of the refund, calculated from expiry of three months from the date of receipt of the refund applications.

Final Conclusion: Appeals allowed in part: refunds of unutilized CENVAT credit under Rule 5 read with Notification No.27/2012 are granted in respect of the claimed input services (except four services in Appeal No. ST/20397/2020 which were not pressed), and interest on delayed sanction of refunds is allowed.

Entitlement to special rate under Clause 3(1) of Notification No.20/2008-Central Excise - option to seek fixation of a special rate representing actual value addition - claim for refund of excise duty - preclusion of coercive action pending adjudication of special rate application - restoration of notification by the Supreme Court

Entitlement to special rate under Clause 3(1) of Notification No.20/2008-Central Excise - option to seek fixation of a special rate representing actual value addition - preclusion of coercive action pending adjudication of special rate application - Petitioner's application dated 20.05.2020 under Clause 3(1) for fixation of a special rate based on add ons made to the goods must be considered and coercive measures restrained until decision. - HELD THAT: - The petitioner had invoked Clause 3(1) of the Notification to seek fixation of a special rate reflecting actual value addition. The Notification, having been restored by the Supreme Court, permits an assessee to apply for such a special rate where the actual value addition (as measured by the prescribed ratio) exceeds the table rate. The court held that, in view of this statutory option, it would be inappropriate for the department to proceed with coercive steps based on the table rates without first considering the pending applications seeking fixation of a special rate. Accordingly the Principal Commissioner was directed to consider the petitioner's application and determine the special rate, if any, and only thereafter may any further process be taken in accordance with law. A temporary restraint was imposed on coercive measures until the decision is rendered within a stipulated time. [Paras 7, 8, 9]

Principal Commissioner of GST to consider the petitioner's 20.05.2020 application for fixation of a special rate within six weeks; until such decision no coercive measure pursuant to the impugned communication dated 18.02.2021 shall be taken.

Claim for refund of excise duty - Imposition of interest on amounts to be returned was not decided and is left open for adjudication. - HELD THAT: - The court expressly declined to decide the petitioner's challenge to the imposition of interest in respect of amounts repayable to the department. The petitioner was granted liberty to approach the court again on the question of interest if so advised, leaving the issue undecided by this order. [Paras 11]

Liberty granted to the petitioner to re approach the court on the question of imposition of interest; the issue is left open.

Final Conclusion: Writ petition allowed in part: the Principal Commissioner of GST is directed to decide the petitioner's Clause 3(1) application for fixation of a special rate within six weeks and coercive action is stayed until that decision; the challenge to imposition of interest remains undecided with liberty to re approach the court.

Liability under Section 11D of the Central Excise Act - duty collected representing excise duty - extended arms/single entity treatment of depots - binding precedent and stare decisis

Liability under Section 11D of the Central Excise Act - duty collected representing excise duty - Whether a demand under Section 11D can be sustained against the respondent for amounts collected at depots representing excess excise duty - HELD THAT: - The Court held that the question was resolved by an earlier Division Bench decision of this Court and subsequent higher authority relied upon in that decision. The Tribunal's conclusion that a demand under Section 11D can be made only from the manufacturer where amounts are collected as representing excise duty was treated as determinative. Because the facts in the present case were identical to those considered earlier, the Court declined to take a different view and applied the existing precedent. [Paras 4, 5, 6, 7]

Demand under Section 11D for excess duty collected at the depot cannot be sustained against the respondent; substantial question answered in favour of the assessee.

Extended arms/single entity treatment of depots - binding precedent and stare decisis - Whether depots/installations of the respondent are to be treated as extended arms of the respondent so as to attract liability under the challenged provision - HELD THAT: - The Court observed that the challenge on this ground involved the same factual and legal matrix as in the earlier consolidated matters affecting oil companies. Having regard to the commonality of facts and the earlier decision upholding the position favourable to the assessee, the Court refused to depart from that precedent and applied it to the present appellant. [Paras 4, 6]

The contention that depots should be treated as extended arms so as to attract liability was rejected in light of the applicable precedents; resolved in favour of the assessee.

Duty collected representing excise duty - binding precedent and stare decisis - Whether the admitted fact that invoices raised at the depot reflected excise duty collected renders the amount payable to the Government - HELD THAT: - Although the question of invoices reflecting duty was raised, the Court applied the existing authoritative decisions disposing of the identical controversy and concluded that nothing remains to be considered beyond the precedent. The earlier decisions dealt with the legal significance of collections reflected in invoices and the scope of recovery under the provision; accordingly the present question was answered by applying those rulings. [Paras 5, 6]

The admitted fact regarding invoicing does not alter the outcome; the matter is governed by the cited precedents and is decided in favour of the assessee.

Final Conclusion: The revenue's appeal is dismissed; the substantial questions of law raised are answered in favour of the assessee, the impugned demand cannot be sustained in the circumstances and no costs are awarded.

Obligation to carry prescribed documents under Section 53(2)(b) - discretionary imposition of penalty where sufficient cause is not furnished - penalty under Section 53(12)(a)(ii) - concurrent findings of fact by inspecting officer and first appellate authority - limitations on revisional interference with accepted explanations

Obligation to carry prescribed documents under Section 53(2)(b) - discretionary imposition of penalty where sufficient cause is not furnished - Whether the Revisional Authority was justified in enhancing the penalty to three times the amount of tax despite the assessee having furnished an explanation which was accepted by the inspecting officer and the first appellate authority. - HELD THAT: - Section 53(2)(b) imposes an obligation on the person in charge of the goods vehicle to carry prescribed documents; Section 53(12)(a) confers discretion on the officer in charge of a check post to levy a penalty up to specified multiples of the tax where sufficient cause is not furnished. The power to impose an enhanced penalty is therefore discretionary and not automatic. In the present case the assessee explained that due to a sudden bereavement he was unable to raise a tax invoice or generate e-sugam prior to movement and undertook to produce books and discharge the tax. That explanation was accepted by the Commercial Tax Officer and upheld by the First Appellate Authority. The Revisional Authority, by enhancing the penalty to three times the tax merely on the ground of contravention of Section 53(2)(b), interfered with concurrent findings of fact and exceeded its revisional jurisdiction. Where lower authorities have accepted sufficient cause, revisional interference to impose the maximum penalty is not warranted. [Paras 8, 9]

Revisional enhancement of penalty to three times the tax was unjustified and amounted to excess of power; the accepted explanation disentitled the Revenue from imposing the maximum penalty.

Final Conclusion: The order of the Additional Commissioner dated 04.05.2015 enhancing the penalty to three times the tax is quashed; the appeal is allowed.

Discretionary levy of penalty for failure to report at check-post - penalty under Section 53(12)(a)(i) for contravention of Section 53(2) - stock transfer exemption - compliance by entering details on official e sugam portal - remand for fresh consideration by Tribunal - requirement of reasoned consideration of bonafides and documentary compliance

Discretionary levy of penalty for failure to report at check-post - penalty under Section 53(12)(a)(i) for contravention of Section 53(2) - requirement of reasoned consideration of bonafides and documentary compliance - Levy of penalty was imposed without adequate consideration of the petitioner's contentions and documentary compliance and therefore requires fresh consideration - HELD THAT: - The Court found that the impugned orders of the Check Post Officer, the First Appellate Authority and the Tribunal did not advert to several material contentions raised by the petitioner - including that the transaction was a stock transfer (exempt from tax), that all prescribed documents were carried and e sugam details were entered prior to movement, and that the driver took a wrong route by inadvertence. The Court observed that levy of penalty under the Act is discretionary and not automatic, and that the authorities had not exercised their discretion after considering the petitioner's pleas and supporting facts. For these reasons the Court quashed the Tribunal's order and remitted the matter to the Tribunal to decide afresh after affording the parties an opportunity of hearing and taking into account the petitioner's submissions and documents. [Paras 9, 10, 11]

Order dated 15.12.2017 is quashed and the matter is remitted to the Tribunal for fresh, reasoned disposal after hearing the parties.

Substantial questions of law - remand for fresh consideration by Tribunal - Whether the substantial questions of law admitted by this Court require determination in the present disposal - HELD THAT: - Having quashed the Tribunal's order and remitted the matter for fresh consideration, the Court held that it was unnecessary to answer the substantial questions of law framed at the time of admission. The determinative course is fresh adjudication by the Tribunal on the merits after affording opportunity of hearing. [Paras 11]

The substantial questions of law are not answered by this Court in view of the remand.

Final Conclusion: The Karnataka Appellate Tribunal's order dated 15.12.2017 is quashed and the matter is remitted to the Tribunal for fresh, reasoned consideration and decision after hearing the parties; the substantial questions of law admitted are left unanswered by this Court.

Input tax credit - input as defined under Section 2(25) - claimability of input tax credit under Section 2(27) - penalty for turnover escaping assessment under Section 43(2) - requirement that escapement be 'without any reasonable cause' - discretion of the Assessing Officer in imposing penalty - non-automaticity of penalty

Input tax credit - input as defined under Section 2(25) - claimability of input tax credit under Section 2(27) - Coal, alum, caustic soda and other consumables used for generation of electrical energy in the petitioner's Captive Thermal Plant are inputs and tax paid on such purchases can be claimed as input tax credit against tax on sale of finished aluminium products. - HELD THAT: - The Court had earlier held that consumables purchased from the market, used for generation of electrical energy in the petitioner's captive thermal plant and used in the process of manufacture of finished products taxable under the OVAT Act, fall within the definition of input and that the tax paid on such purchases is eligible to be claimed as input tax credit. That conclusion quashed the disallowance made in the assessment orders dated 31.10.2011 in respect of such input tax credit. The present review proceeds on a limited basis and does not disturb that earlier holding except as relates to the limited observations on penalty made in the earlier judgment. [Paras 5]

The earlier decision in favour of the petitioner on claimability of input tax credit is maintained and the disallowance in the assessment orders is quashed.

Penalty for turnover escaping assessment under Section 43(2) - requirement that escapement be 'without any reasonable cause' - discretion of the Assessing Officer in imposing penalty - non-automaticity of penalty - Imposition of penalty under Section 43(2) of the OVAT Act is not automatic; the Assessing Officer must be satisfied that the escapement or under assessment is 'without any reasonable cause' and only then may direct levy of penalty, exercising discretion. - HELD THAT: - Section 43(2) is headed 'Turnover escaping assessment' and expressly conditions the levy of penalty on the assessing authority being satisfied that the escapement or under assessment is 'without any reasonable cause' and thereafter empowers the authority that he 'may' direct payment of penalty equal to twice the tax additionally assessed. The use of 'may' and the conditional language confer a discretion on the Assessing Officer, unlike Section 42(5) where penalty upon audit assessment is statutorily prescribed and non-discretionary. Consequently, the observations in the earlier judgment that equated penalty treatment with Section 42(5) and suggested automaticity were not warranted. The Court therefore reviews and recalls that part of its earlier order and clarifies that any question of penalty under Section 43(2) arises only if the Department succeeds in appeal and it is finally held that tax is payable; if this Court's ruling on input tax credit is affirmed, the issue of penalty will not arise. [Paras 11, 12, 13, 14]

The earlier observation implying automatic imposition of penalty is recalled; Section 43(2) requires satisfaction of 'without any reasonable cause' and confers discretion on the Assessing Officer to levy penalty.

Final Conclusion: The review petitions are allowed to the limited extent of recalling and clarifying the earlier observation on penalty; the earlier finding in favour of the petitioner on entitlement to input tax credit is preserved, and any imposition of penalty under Section 43(2) is subject to the Assessing Officer's satisfaction that the escapement was without reasonable cause and his discretion to impose penalty.

Continuation of business - lifting the veil - joint and several liability - quantification of closing stock on takeover - recovery of tax arrears - attachment of immovable property pending payment - garnishee proceedings - protection of pre-acquired property

Continuation of business - lifting the veil - joint and several liability - Whether the business carried on by Tmt. M. Saraswathy constituted a continuation of Thiru Muthu's business such as to justify fastening liability on her - HELD THAT: - The Court found that, save for the change of name, the business carried on by Saraswathy at the same premises and as the same dealer was a strong continuation of Muthu's business. The respondents' contention that the veil should be lifted and joint and several liability fastened was recognised by the Court. However, relief was to be exercised subject to the fair undertakings given by Saraswathy in Court accepting that authorities may proceed against the properties transferred to her by Muthu and that she would discharge the quantified value of closing stock and erstwhile assets taken over. The Court therefore balanced the finding of continuity with the petitioner's on record concessions and conditioned its relief on payment/quantification and recovery proceedings.

Continuation was recognised, but fastening of liability on Saraswathy was permitted only subject to the undertaking she furnished and payment/quantification as directed.

Quantification of closing stock on takeover - recovery of tax arrears - Whether the value of closing stock and erstwhile assets taken over by Sree Saraswathy Tyres should be quantified and recovered - HELD THAT: - The petitioner conceded that the entire closing stock of M/s. Iyyappa Tyres was taken over by Sree Saraswathy Tyres and that certain assets of M/s. Iyyappa Tyres remained in Saraswathy's custody. The Court directed that the assessing officer shall quantify the value of such closing stock and assets as on the date of taking over after giving due notice to the petitioner, and effect recovery of the sales tax arrears in terms of the undertaking furnished by Tmt. M. Saraswathy. That direction requires fresh administrative action by the assessing authority to determine monetary liability and proceed with recovery.

Matter remitted to the assessing officer for quantification of the value of closing stock and erstwhile assets and for recovery of the tax arrears in accordance with the undertaking.

Protection of pre-acquired property - garnishee proceedings - attachment of immovable property pending payment - Whether certain properties of Saraswathy and garnishee proceedings against M/s. MRF Limited could be proceeded with - HELD THAT: - The Court accepted the petitioner's submission that properties purchased by Saraswathy in 1981-1984 could not be proceeded against. The Court also ruled that no garnishee order should be passed against M/s. MRF Limited in respect of Sree Saraswathy Tyres. At the same time, the Court clarified that attachments of Saraswathy's immovable properties shall remain in force until the monetary liability, as quantified pursuant to the undertaking, is discharged, and that Saraswathy is at liberty to liquidate the liability and seek lifting of such attachments.

Pre 1981-1984 properties protected from proceedings; no garnishee order against M/s. MRF Limited; attachments of Saraswathy's immovable property to continue until liability is discharged.

Final Conclusion: The impugned order dated 01.12.2016 is quashed; W.P.(MD) No.7805 of 2017 is allowed and W.P.(MD) No.5518 of 2020 is disposed of. The assessing authority is directed to quantify and recover the tax arrears in accordance with the undertaking given by Tmt. M. Saraswathy, with the stated protections for pre acquired properties and prohibition on garnishee proceedings against M/s. MRF Limited, and attachments of Saraswathy's immovable properties to remain until payment.

Writ jurisdiction under Article 226 - Stay of assessment proceedings - Prima facie evidence requirement for invoking reassessment - Reassessment under Section 26 of the Rajasthan Value Added Tax Act read with Section 174 of the Rajasthan Goods & Service Tax Act - Change of opinion doctrine - Fishing and roving enquiry

Writ jurisdiction under Article 226 - Stay of assessment proceedings - Applications under Article 226(3) seeking vacation of the interim order were rejected and the interim stay was directed to continue - HELD THAT: - The Court examined the Department's applications to vacate the interim order which had stayed operation of the impugned notices and summons. The Department had filed only a preliminary reply and did not place material before the Court to show that initiation of reassessment proceedings was justified. The Court reiterated that exercise of writ jurisdiction is subject to self-imposed restraint but is dependent on facts of each case; where the Department seeks to lift a stay it must place material to justify such relief. In absence of any cogent material or response addressing the petitioners' specific assertions, the Court declined to vacate the interim order and retained the stay until further orders. The applications under Article 226(3) were accordingly rejected and the matters listed for further hearing. [Paras 11, 16, 19]

Applications under Article 226(3) to vacate the interim order are rejected and the interim order dated 24.07.2020 shall continue.

Prima facie evidence requirement for invoking reassessment - Reassessment under Section 26 of the Rajasthan Value Added Tax Act read with Section 174 of the Rajasthan Goods & Service Tax Act - Change of opinion doctrine - Fishing and roving enquiry - Reassessment proceedings initiated without prima facie material, and which amount to a mere change of opinion or a fishing and roving enquiry, cannot be sustained - HELD THAT: - The Court found that the Assessing Officer's allegation that the petitioner sold diesel was an assertion of fact for which the initial burden lay on the Department. There was no prima facie evidence placed on record to show sale of diesel; the Assessing Officer had merely issued a notice asking the petitioner to satisfy him. Where a reasoned assessment order had already been passed after examining records, initiation of reassessment must be supported by cogent material and cannot proceed as a change of opinion. Absent such material, the proposed reassessment was characterised as a fishing and roving enquiry and the statutory powers of reassessment or escaped assessment could not be exercised in the manner attempted by the respondents. [Paras 10, 14, 15]

The reassessment proceedings initiated by respondents No.2 to 4 are without requisite prima facie material and amount to an impermissible fishing and roving enquiry; such exercise of reassessment powers cannot be sustained.

Final Conclusion: The Department's applications to vacate the interim stay are dismissed; the interim order dated 24.07.2020 remains in force. The Court found that reassessment was sought without prima facie material and amounted to a fishing enquiry, and directed continued listing for further consideration with liberty to the respondent to file a response by the next date.

Verification of refund and reassessment powers - jurisdiction of assessing authority in the course of refund verification - reassessment incidental to verification of claim - requirement of tax being shown as charged and collected in invoices - scope of judicial review in revision against factual findings

Verification of refund and reassessment powers - jurisdiction of assessing authority in the course of refund verification - reassessment incidental to verification of claim - Whether the assessing authority was authorised to carry out reassessment while verifying the refund claim pursuant to the Commissioner's order. - HELD THAT: - The Commissioner's order directing verification of refund claims conferred authority to take up the listed files for assessment, re-assessment and related statutory proceedings without prescribing the precise method of verification. The assessing authority, in the process of verifying the refund claim, examined the assessee's books of accounts and unearthed irregularities that warranted disallowance of the claimed deduction and levy of tax. The High Court held that absence of a specific procedural direction in the Commissioner's order did not oust the assessing authority's jurisdiction to reassess where such reassessment arose incidentally during the verification of the refund claim. The Court further observed that no provision of the Act was pointed out by the assessee to show that the AA had exceeded statutory powers in carrying out that exercise, and therefore there was no illegality in the AA proceeding to reassess while verifying the refund. [Paras 7, 9, 11]

The reassessment carried out by the assessing authority in the course of verification of the refund claim was within the powers conferred by the Commissioner's order and not illegal or without jurisdiction.

Requirement of tax being shown as charged and collected in invoices - reassessment incidental to verification of claim - Whether the assessing authority erred in disallowing the claimed deduction and levying tax on the ground that taxes were not separately charged and collected in individual invoices. - HELD THAT: - The assessing authority found, on examination of the books of accounts, that the assessee had not shown charging and collection of tax in individual invoices though deductions were claimed in returns. The appellate authority and the Tribunal recorded that the procedure adopted by the assessing authority in reaching that factual conclusion was correct. The High Court declined to re-appraise the factual findings, noting that the revision jurisdiction is limited to patent illegality, improper exercise of jurisdiction or failure to consider relevant law. The counsel for the assessee failed to indicate any legal provision breached by the AA or any patent error in the factual conclusion that supported disallowance of the deduction and levy of tax. [Paras 2, 12]

The disallowance of the claimed deduction and the levy of tax on gross turnover for failure to show tax charged and collected in individual invoices was upheld as factually and legally sustainable.

Scope of judicial review in revision against factual findings - Whether the High Court should interfere with the Tribunal's dismissal of the appeal by reappraising factual findings. - HELD THAT: - The High Court emphasised that its role in the present revision was confined to examining whether any patent error, improper exercise of jurisdiction or illegality had occurred which the appellate authorities ignored. The Court found no such grounds in the record. Counsel for the assessee did not point to any specific illegality or statutory violation committed by the assessing authority. Given the absence of any demonstrable legal error or jurisdictional infirmity, the Court declined to disturb the factual findings recorded by the authorities below. [Paras 13, 14]

No grounds were made out for interference with the Tribunal's order; the revision is dismissed.

Final Conclusion: The Commissioner's order empowering verification of refund claims included authority to undertake assessment/reassessment in the course of such verification; the assessing authority's reassessment and consequent disallowance of deductions for failure to show tax as charged and collected in invoices were factually and legally sustainable; no patent illegality or jurisdictional error was shown and the revision petition is dismissed.

Ongoing project - registration under Real Estate (Regulation and Development) Act, 2016 - handing over of common areas and common amenities to Association of Allottees - conveyance of title in common areas and Club House - prohibition on alienation of undivided share of land and common facilities contrary to construction agreement - maintenance responsibility vested in Association of Allottees - service agreement void insofar as inconsistent with the Act - rectification of defects under warranty

Ongoing project - registration under Real Estate (Regulation and Development) Act, 2016 - Whether Block-A & C (with promised common amenities and facilities) qualify as an on-going project under the Act as of 01.05.2017. - HELD THAT: - The Authority examined documentary material including minutes of meetings and evidence regarding completion of amenities and services. No documentary evidence was produced by the promoter to establish that the project, inclusive of common areas and amenities, was completed on or before 01.05.2017. Electricity supply, commissioning of service lift and other infrastructure timelines demonstrate that the works continued beyond that date. The Authority therefore applied the statutory test and the existing appellate approach that a project must be completed in all respects and in a habitable condition by the crucial date to be excluded. On that basis Block-A & C together with common amenities are held to be an on-going project under the first proviso to Section 3(1) of the Act.

Block-A & C including common amenities are an on-going project and fall under the purview of the Act.

Registration under Real Estate (Regulation and Development) Act, 2016 - Obligation of the promoter to apply for registration of the on-going parts of the project. - HELD THAT: - Having held that Block-A & C with the promised common areas and amenities constitute an on-going project, the promoter is obliged to register those parts with the Authority. The Authority fixed a timeline for compliance to ensure statutory registration is obtained without further delay.

The 1st Respondent is directed to apply for registration of Block-A & C along with common areas, common amenities and facilities with the Authority by 15.02.2021.

Handing over of common areas and common amenities to Association of Allottees - conveyance of title in common areas and Club House - prohibition on alienation of undivided share of land and common facilities contrary to construction agreement - Whether the promoter must execute conveyance and hand over common areas, amenities and the Club House to the Association of Allottees, and the validity of the sale of undivided share/Club House to the service provider. - HELD THAT: - The Construction Agreement and the project brochure identify the Club House and specified amenities as part of the common facilities for allottees. Sale of the undivided share of land and the Club House by the promoter to the service provider after acting as power of attorney holder is inconsistent with the promoter's obligations and the Construction Agreement, and contravenes the relevant provision governing handing over and conveyance of common areas. The Authority directed restitutionary steps: the promoter must ensure that the undivided share and the Club House vest in the Association by arranging repayment to the purchaser (the service provider) of the sale consideration and the construction cost paid, thereby enabling reconveyance to the Association. Specific dates for compliance were fixed to secure timely transfer.

The 1st Respondent shall execute registered conveyance of common areas, amenities and the Club House in favour of the Association of Allottees by 28.02.2021; the promoter must repay the consideration and construction cost to the 2nd Respondent so as to re-acquire and convey the undivided share and Club House to the Association.

Maintenance responsibility vested in Association of Allottees - service agreement void insofar as inconsistent with the Act - Whether the service agreement clause making the service provider responsible for common area maintenance remains effective now that the project is an on-going project under the Act. - HELD THAT: - The Construction Agreement contemplated a separate Services Agreement with the service provider. Once the project falls under the Act as an on-going project and the Association of Allottees is registered, maintenance of common areas and amenities must vest with the Association which alone can enter into service contracts under the statutory scheme. Therefore, the contractual provision purporting to vest maintenance with the service provider (para-21 of the Construction Agreement) is rendered unenforceable to the extent it conflicts with the statutory allocation of maintenance responsibility.

Maintenance responsibility of common areas and amenities is with the Association of Allottees; para-21 of the Construction Agreement is null and void insofar as inconsistent with the Act.

Rectification of defects under warranty - Promoter's liability to rectify defects in individual flats (leakages, plumbing, paint peeling) raised by allottees. - HELD THAT: - The Construction Agreement contains a warranty/defect liability clause. The Authority applied the statutory provision governing rectification of defects, noting that complaints brought to the promoter's notice within the stipulated warranty period are to be attended. The Authority directed the promoter to rectify defects under the statutory provision if the defects were notified within five years of handing over possession, and to comply with that obligation.

The 1st Respondent is directed to rectify reported defects under the defect-liability/warranty provision of the Act where complaints were made within five years from the date of handing over possession.

Final Conclusion: The Authority held that Block-A & C with the promised common amenities are an on-going project under the Act, directed the promoter to register those parts with the Authority, complete outstanding common facilities, execute registered conveyance of common areas and the Club House to the Association of Allottees by specified dates (and to arrange repayment to reverse the sale to the service provider), declared contractual provisions inconsistent with the Act ineffective insofar as they vest maintenance in the service provider, and directed rectification of notified defects under the statutory defect-liability regime; the complaint is disposed of with these directions.