TaxTMI Updates e-Newsletter
Apr 05,2022

Provisional attachment - principle of natural justice - quash and remit for fresh adjudication - furnish relied upon documents and opportunity of hearing

Provisional attachment - principle of natural justice - quash and remit for fresh adjudication - furnish relied upon documents and opportunity of hearing - Impugned final order in MOV-07 passed without furnishing relied documents and without affording opportunity of hearing was examinable for breach of natural justice and remedy by quashing and remanding to the authority for fresh consideration. - HELD THAT: - The show-cause notice (Form GST DRC-01 dated 24.08.2020) referred to certain documents which the writ applicant specifically requested; those documents were not furnished by the authority before passing the final order in MOV-07. The writ applicant also alleges that no opportunity of hearing was afforded prior to passing the final order. On these facts the Court found that the impugned final order could not stand. The Court quashed and set aside the order in MOV-07 and remitted the matter to the concerned authority for fresh consideration. The authority is directed to furnish all documents demanded by the writ applicant, permit the applicant to file an appropriate reply, afford an opportunity of hearing, and thereafter decide the matter on merits. The Court mandated that this entire exercise be completed within two months from receipt of the writ of the order. The Court clarified that its earlier interim direction lifting provisional attachment of the bank account did not decide the tax liability, and the present order confines itself to quashing the final order and directing a fresh adjudication with adherence to principles of natural justice. [Paras 8, 9, 10, 12]

Impugned order in MOV-07 is quashed and set aside; matter remitted to the authority with directions to furnish relied documents, receive reply, afford hearing and pass a fresh speaking order within two months.

Final Conclusion: The writ petition is allowed by quashing the impugned final order in MOV-07 and remitting the matter to the concerned authority for fresh adjudication in accordance with natural justice; the connected application is similarly allowed.

Rectification of GSTR-1 under Section 37(3) - deemed export classification - proviso to Section 37(3) - time bar for rectification - verification with recipient and technical facilitation by GSTN

Rectification of GSTR-1 under Section 37(3) - proviso to Section 37(3) - time bar for rectification - deemed export classification - Whether the writ applicant could be permitted to amend its GSTR 1 to mark specified invoices as 'Deemed Export' despite the proviso to Section 37(3) limiting rectification after the prescribed period. - HELD THAT: - The Court did not adjudicate on the factual question whether there was an initial mistake but proceeded on the admitted position that amendment of some invoices had been permitted earlier while five invoices remained unamended. In the peculiar facts of the case the Court exercised its discretionary supervisory jurisdiction under Article 226 to grant one final opportunity to the writ applicant to effect the amendments in respect of the remaining invoices. The respondents were directed to process the applicant's request for amendment notwithstanding the restriction in the proviso to Section 37(3). The direction is subject to the respondents' liberty to verify the amendments with the recipient as may be necessary. [Paras 10, 11, 13]

One last opportunity granted to the writ applicant to amend GSTR 1 to tick the 'Deemed Export' column for the remaining invoices and respondents directed to process the request despite the proviso to Section 37(3), subject to verification with the recipient.

Verification with recipient and technical facilitation by GSTN - rectification of GSTR-1 under Section 37(3) - Procedural mechanism for effecting the permitted amendment where technical restrictions prevent online amendment. - HELD THAT: - The Court directed that respondents may undertake necessary verification with the recipient of the supplies in relation to the amendments. Further, in case of any technical difficulty in executing the directions on the portal, the respondents, including the GSTN Network, shall either make appropriate arrangements to enable the amendment or accept the amendment request in physical form for further processing. The writ applicants were directed to undertake any compliance consequences arising from the revised filing post amendment. [Paras 11, 12, 13]

Respondents permitted to verify with the recipient; GSTN or respondents to provide technical facilitation or accept physical amendment requests; writ applicants to complete any post amendment compliances.

Final Conclusion: In the exercise of its discretionary jurisdiction the High Court allowed a final opportunity for the petitioner to amend its GSTR 1 for invoices of June/other months in 2019 to reflect 'Deemed Export', directed the authorities to process the amendment notwithstanding the time bar in the proviso to Section 37(3), permitted necessary verification, and required the authorities to provide technical or physical facilitation where needed.

Stay of recovery - mandatory pre-deposit for appeal - deemed stay on deposit under Section 112(9) of the CGST/SGST Act - notice under Section 79 in Form DRC-13 - availability of appellate remedy before Appellate Tribunal

Stay of recovery - deemed stay on deposit under Section 112(9) of the CGST/SGST Act - notice under Section 79 in Form DRC-13 - mandatory pre-deposit for appeal - availability of appellate remedy before Appellate Tribunal - Direction to stay operation of the notice in Form DRC-13 issued under Section 79 of the CGST/SGST Act until the next date of hearing. - HELD THAT: - Petitioner challenged assessment-related recovery effected pursuant to a notice in Form DRC-13 and sought stay of further recovery, relying on the remedy of statutory appeal to the Appellate Tribunal. The Court noted that the Appellate Tribunal under the CGST/SGST Act is not functioning in the State, and that a deposit of 20% of the disputed tax component together with the memorandum of appeal would, by operation of Section 112(9), attract a deemed stay of the balance recovery. Records placed before the Court showed that the petitioner had already deposited the amounts required for the first appeal and that the department had recovered a further amount from the petitioner's bank account, resulting in an overall recovery exceeding the mandatory pre-deposit total. Balancing the availability of the appellate remedy (albeit the Tribunal not currently constituted), the statutory provision creating a deemed stay on making the specified deposit, and the fact of substantial recovery already made, the Court exercised its discretionary jurisdiction to restrain enforcement of the impugned DRC-13 notice pending further hearing.

Effect and operation of the notice under Section 79 in Form DRC-13 are stayed until the next date of hearing; matter listed in the week commencing 25.04.2022.

Final Conclusion: Writ petition granted limited interim relief by staying operation of the departmental recovery notice in Form DRC-13 until the next date of hearing, in view of the unavailability of the Appellate Tribunal and the statutory scheme under which a specified pre-deposit attracts a deemed stay.

Interim stay of coercive action - coercive steps - principles of natural justice - requirement of adjudication before determination of tax liability - show cause notice under Section 73 of the CGST Act - liability to pay interest under Section 50(1) of the CGST Act

Interim stay of coercive action - coercive steps - principles of natural justice - show cause notice under Section 73 of the CGST Act - liability to pay interest under Section 50(1) of the CGST Act - Respondents restrained from taking coercive steps pursuant to letter dated 25.03.2022 (Annexure P 7) until the next date of hearing. - HELD THAT: - The petitioner contended that the impugned communication directing deposit of balance interest for the period July 2017 to June 2020 was issued without issuance of a show cause notice as required for determination of liability under the CGST scheme and thus violated the principles of natural justice; reliance was placed on earlier High Court authorities. Respondents pleaded that an earlier demand in August 2021 had been replied to and, after service of the writ petition, gave an assurance in writing that no coercive action pursuant to Annexure P 7 would be taken until disposal of the interim application. In light of these contentions and the respondents' written undertaking, the court, without adjudicating the substantive correctness of the demand, directed that no coercive steps be taken pursuant to Annexure P 7 pending further hearing, and listed the matter after three weeks for further consideration.

Interim protection granted: respondents shall not take coercive steps pursuant to Annexure P 7 until the next date of hearing; matter listed after three weeks.

Final Conclusion: Interim relief granted restraining respondents from taking any coercive action pursuant to the impugned letter dated 25.03.2022 (Annexure P 7) until the next date of hearing; matter posted after three weeks for further proceedings.

Summary order. Respondents directed to file reply within four weeks and petitioner permitted to file rejoinder within two weeks; petitioner granted leave to file an amended Memo of Parties; matter listed for hearing on 22.07.2022.

Cancellation of GST registration for non-filing of returns - Revocation/Revival of GST registration - Condonation of delay and limitation for revocation/revival - Equitable relief to reinstate taxpayers into the GST fold subject to safeguards - Restriction on utilization of Input Tax Credit pending departmental scrutiny

Cancellation of GST registration for non-filing of returns - Revocation/Revival of GST registration - Equitable relief to reinstate taxpayers into the GST fold subject to safeguards - Restriction on utilization of Input Tax Credit pending departmental scrutiny - Impugned order cancelling the petitioner's GST registration was quashed and revival of registration was allowed subject to conditions and safeguards. - HELD THAT: - The Court found the present case materially similar to the batch of matters decided in W.P.Nos.25048, 25877, 12738 of 2021 and others (Tvl.Suguna Cutpiece Center and batch), where cancellation orders issued for non-filing of returns were quashed and revival permitted with safeguards because keeping such assessees permanently out of the GST regime would not serve revenue interest and would defeat the purpose of bringing taxable persons into the GST fold. In exercise of writ jurisdiction and applying the principles and directions in the earlier order, the Court allowed revival subject to conditions including: filing of pending returns and payment of tax, interest, fine/fee within a stipulated period; disallowance of adjustment of such payments from any unutilized Input Tax Credit unless scrutinized and approved by competent officers; only approved ITC to be utilized thereafter; payment in cash for liabilities declared for periods post-cancellation; imposition of such restrictions as necessary to prevent misuse or bill-trading; and revival of registration on compliance and uploading of returns. The Court therefore quashed the cancellation and directed revival on compliance with these safeguards.

Writ petition allowed; cancellation quashed and registration revived subject to the safeguards and conditions as set out in the cited batch order.

Condonation of delay and limitation for revocation/revival - Delay in replying to the show cause notice and in seeking revocation was not a bar to relief; the petition was allowed despite the time-bar in the particulars of the case. - HELD THAT: - Although the petitioner did not reply to the Show Cause Notice dated 15.10.2019 and the subsequent application for revocation was rejected as time barred, the Court took note of the factual matrix (health issues of the petitioner and pandemic-related lockdown affecting knowledge and compliance) and of the departmental clarification allowing consideration of appeals/applications beyond the statutory period by excluding the period from 15.03.2020 to 14.03.2021. Applying the rationale of the earlier batch decision, the Court exercised discretion to grant relief notwithstanding delay, subject to the protective conditions designed to safeguard revenue and prevent misuse.

Delay condonation effectively granted in the exercise of discretion; petitioner permitted to revive registration subject to compliance with the prescribed safeguards.

Final Conclusion: The writ petition is allowed: the cancellation order dated 07.11.2019 is quashed and the petitioner's GST registration is directed to be revived provided the petitioner complies with the conditions and safeguards (filing returns, payment of tax, interest, penalties/fees, restrictions and departmental scrutiny of Input Tax Credit) as set out in the precedent relied upon; no costs.

Blocking of electronic credit ledger under Rule 86A - electronic credit ledger - insertion of negative balance in electronic credit ledger - reasoned order requirement for invoking Rule 86A - right to file returns despite provisional blocking - participation in adjudication proceedings and payment of any confirmed demand

Insertion of negative balance in electronic credit ledger - electronic credit ledger - Removal of the negative balance inserted in the electronic credit ledger and restoration of available balance to enable filing of returns. - HELD THAT: - The Court noted that a negative balance of Rs. 25,58,831/- had been inserted in the writ applicant's electronic credit ledger although the actual available balance at the time of blocking was Rs. 10,68,613/-. Finding that no reasons for the blocking had been communicated, the Court directed respondent No.3 to remove the negative balance so that the petitioner may file its returns. The order to remove the negative balance is immediate and the negative entry is to be removed within one week from receipt of the writ of this order. The direction is remedial and aimed at preserving the petitioner's ability to comply with statutory return-filing obligations pending adjudication.

Directed respondent No.3 to remove the negative balance in the electronic credit ledger within one week and thereby restore the petitioner's ability to file returns.

Reasoned order requirement for invoking Rule 86A - blocking of electronic credit ledger under Rule 86A - participation in adjudication proceedings and payment of any confirmed demand - Requirement that respondent furnish reasons for invoking Rule 86A and consequent preservation of the existing available balance until a reasoned order is passed. - HELD THAT: - The Court observed that respondent No.3 had not assigned reasons for blocking the electronic credit ledger under Rule 86A. In order to enable the petitioner to meet the grounds for blocking, the Court directed respondent No.3 to furnish reasons for invoking Rule 86A. Until such a reasoned order is passed, the petitioner shall retain the existing balance of Rs. 10,68,613/- in its electronic credit ledger. The Court recorded the petitioner's acceptance to participate in adjudication proceedings and to pay any amount ultimately held payable, thereby preserving procedural rights while ensuring administrative action is accompanied by reasons.

Directed respondent No.3 to furnish reasons for invoking Rule 86A and ordered that until a reasoned order is passed the petitioner shall retain the available balance in the electronic credit ledger.

Final Conclusion: Writ application disposed of by directing removal of the negative balance from the electronic credit ledger within one week and by directing respondent No.3 to furnish reasons for invoking Rule 86A; petitioner to retain the existing electronic credit balance until a reasoned order is passed, without prejudice to adjudication and payment of any confirmed demand.

Principle of natural justice - right to effective opportunity of hearing - supply of seized digital data and inspection rights - alternative statutory remedy by way of appeal - writ jurisdiction under Article 226 where alternative remedy is efficacious

Supply of seized digital data and inspection rights - principle of natural justice - right to effective opportunity of hearing - Whether non-supply of the digital data seized in search amounted to denial of effective opportunity of hearing and warranted quashing of the adjudicating order. - HELD THAT: - The court found that the documents and digital data relied upon in the show-cause notice were supplied to the petitioner. The petitioner did not actively participate in the adjudication proceedings and instead repeatedly sought supply of the entire seized data by correspondence. Most other noticees appeared, recorded statements and produced documents. The High Court held that where the relied material has been supplied and the noticee could have effectively participated (including through a representative), mere non-supply of additional non-relied materials does not automatically vitiate the adjudication. The appellate authority remains competent to examine any alleged prejudice from non-supply of non-relied documents. Having regard to these facts, the court declined to quash the final order on the ground of alleged violation of natural justice. [Paras 8]

The writ petition challenging the adjudicating order on grounds of non-supply of seized digital data and breach of natural justice is dismissed.

Alternative statutory remedy by way of appeal - writ jurisdiction under Article 226 where alternative remedy is efficacious - Whether the writ petition was maintainable despite the availability of an alternative statutory remedy of appeal, and whether amendment to challenge the subsequent final order could be permitted. - HELD THAT: - The Court allowed the interlocutory application for amendment to enable the petitioner to challenge the final adjudication order passed during pendency of the petition. However, on the maintainability of the writ the Court observed that an efficacious alternative remedy of appeal was available and that the High Court should not ordinarily entertain a petition where such remedy exists. In the circumstances, and having not expressed any opinion on the merits, the Court dismissed the petition with liberty to the petitioner to pursue remedy before the appellate authority.

The application to amend the writ petition is allowed; the writ petition is dismissed on maintainability grounds with liberty to pursue the statutory appeal.

Final Conclusion: Amendment to the writ petition permitted to challenge the final adjudication order; on merits the High Court declined to quash the order for alleged non-supply of seized digital data and breach of natural justice, and dismissed the petition while leaving the petitioner free to pursue the statutory appeal; no opinion expressed on the merits.

Classification of services as support services to exploration, mining or drilling of petroleum crude or natural gas - Classification as other professional, technical and business services relating to exploration, mining or drilling - Residual classification under other professional, technical and business services (Sr. No. 21(ii)) attracting 18% GST - Scope governed by Explanatory Notes to service codes 998621, 998622, 998341 and 998343 - Circular No. 114/33/2019-GST as clarificatory guidance on classification

Classification of services as support services to exploration, mining or drilling of petroleum crude or natural gas - Scope governed by Explanatory Notes to service code 998621 - The applicant's PMC services do not fall under SI No. 24(ii) of heading 9986 (SAC 998621) as 'support services to oil and gas extraction'. - HELD THAT: - The Authority examined the nature and scope of the PMC services and the Explanatory Notes to service code 998621. The Explanatory Notes indicate that 998621 covers services that involve actual participation in oil and gas extraction (for example derrick erection, well services, operation of extraction units on a fee/contract basis) and specifically distinguishes geological/geophysical consulting services. The factual matrix shows that the EPC contractor is responsible for engineering, procurement and construction activities and provides the direct support to extraction. The applicant's role is to review, monitor, manage and control project execution on behalf of the client (PMC functions) rather than to perform activities that the Explanatory Notes identify as support services to extraction. On that basis the impugned services do not meet the scope of SAC 998621 and cannot be classified under SI No. 24(ii). [Paras 5]

Answered in the negative; services are not classifiable under SI No. 24(ii) of heading 9986 (SAC 998621).

Classification as other professional, technical and business services relating to exploration, mining or drilling - Scope governed by Explanatory Notes to service codes 998341 and 998343 - Circular No. 114/33/2019-GST - The applicant's PMC services do not fall under SI No. 21(ia) of heading 9983 (SAC 998341/998343) as 'other professional, technical and business services relating to exploration, mining or drilling'. - HELD THAT: - The Authority considered the applicant's contract scope (continuous review, monitoring, management and control of EPC works, quality, schedule, cost and risk management) and the Circular which directs that the scope of SI No. 21(ia) be governed by the Explanatory Notes to codes 998341 (geological and geophysical consulting) and 998343 (mineral exploration and evaluation). Those Explanatory Notes are confined to geological/geophysical consulting and mineral exploration/evaluation activities. The applicant's PMC services, although professional/technical/business in character, do not fall within the specific activities described in 998341 or 998343. Consequently the services are not covered by SI No. 21(ia). [Paras 5]

Answered in the negative; services are not classifiable under SI No. 21(ia) of heading 9983.

Residual classification under other professional, technical and business services (Sr. No. 21(ii)) attracting 18% GST - In absence of classification under SI No. 24(ii) (9986) or SI No. 21(ia) (9983), the applicant's PMC services are classifiable under the residuary entry SI No. 21(ii) of Notification No. 11/2017-CT(R) attracting GST at 18%. - HELD THAT: - Having held that the impugned services do not fall within the Explanatory Notes governing SAC 998621 or SAC 998341/998343 and noting that the services remain professional, technical and business services, the Authority applied the residual rate-entry under Sr. No. 21(ii) of the Rate Notification. The residuary entry covers other professional, technical and business services not falling under the specified sub-entries, and prescribes the applicable rate. On that basis the PMC services are taxable under Sr. No. 21(ii) at the prescribed rate for residuary services. [Paras 5]

Subject services are covered under Sr. No. 21(ii) of Notification No. 11/2017-CT(R) as amended, attracting GST at 18%.

Final Conclusion: The Advance Ruling holds that the PMC services rendered by M/s Worley Services India Pvt. Ltd. to Vedanta Limited are neither 'support services to oil and gas extraction' under SI No. 24(ii) (SAC 998621) nor 'other professional, technical and business services relating to exploration, mining or drilling' under SI No. 21(ia) (SAC 9983); consequently the services are classifiable under the residuary entry SI No. 21(ii) of the Rate Notification and attract GST at 18%.

Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both - Explanatory Notes to the Scheme of Classification of Services - Heading 9983 (Other professional, technical and business services) - Residual entry under Sr. No. 21(ii) of Notification No. 11/2017 - CTR - Classification governed by Circular No. 114/33/2019-GST

Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both - Explanatory Notes to the Scheme of Classification of Services - Classification governed by Circular No. 114/33/2019-GST - Residual entry under Sr. No. 21(ii) of Notification No. 11/2017 - CTR - Whether the applicant's project management consultancy services supplied to Vedanta Limited (Division: Cairn Oil & Gas) fall within Sr. No. 21(ia) of Notification No. 11/2017-CT(R) (SAC 9983) and attract 12% GST, or are to be classified under Sr. No. 21(ii) attracting 18% GST. - HELD THAT: - Circular No. 114/33/2019-GST clarifies that the scope of Sr. No. 21(ia) under heading 9983 is to be governed by the Explanatory Notes to service codes 998341 (Geological and geophysical consulting services) and 998343 (Mineral exploration and evaluation). Those Explanatory Notes are confined to geological/geophysical consulting and mineral exploration/evaluation activities. The applicant's contractual scope comprises integrated project management, planning, monitoring, validation, functional assurance, field support and supervisory/management activities performed by a multidisciplinary PMC team to manage Execution Contractors' work from detailed design to commissioning. The impugned services do not fall within the activities described in service codes 998341 or 998343 and therefore are not covered by Sr. No. 21(ia). Having determined they are professional, technical and business services outside the specific contours of Sr. No. 21(ia), the services fall within the residual entry Sr. No. 21(ii) of Notification No. 11/2017-CT(R) as amended, and attract the rate applicable to that residual entry. [Paras 5, 6]

Impugned project management consultancy services do not fall under Sr. No. 21(ia) (SAC 9983) and are classifiable under Sr. No. 21(ii) of Notification No. 11/2017-CT(R) as amended, attracting 18% GST.

Final Conclusion: The Advance Ruling holds that the applicant's project management consultancy services supplied to Vedanta Limited (Division: Cairn Oil & Gas) are not covered by the specific entry for services relating to exploration, mining or drilling under heading 9983 and are taxable under the residual entry Sr. No. 21(ii) of Notification No. 11/2017-CT(R) as amended, at 18% GST.

Bail under Section 439 Cr.P.C. - offence under Section 132(1) of the Central Goods & Services Tax Act, 2017 - charge-sheet filed - retracted statement under Section 70 of the Central Goods & Services Tax Act - admissibility of statements recorded under the GST Act - gravity of offence

Bail under Section 439 Cr.P.C. - charge-sheet filed - retracted statement under Section 70 of the Central Goods & Services Tax Act - admissibility of statements recorded under the GST Act - gravity of offence - Application for regular bail by accused charged under Section 132(1) CGST Act. - HELD THAT: - The court considered the contentions that the petitioner was wrongly implicated, had been in custody since 24.12.2021, that a charge-sheet had been filed, that there was no incriminating material against him, and that he had retracted his statement recorded under Section 70 of the GST Act. Reliance placed on earlier decisions was noted and the prosecution's contention regarding alleged large tax evasion and the admissibility of statements recorded during investigation was also considered. Having regard to the facts and circumstances, the absence of expressed opinion on merits, the maximum punishment prescribed and the likely length of trial, the court found it just and proper to enlarge the petitioner on bail while leaving the merits of the prosecution's case to trial. [Paras 5, 6]

Bail allowed; petitioner to be enlarged on furnishing a personal bond and two sureties to the satisfaction of the trial court.

Final Conclusion: The petition for bail is allowed and the accused is directed to be released on bail subject to furnishing the specified bond and sureties; the court expressly refrained from expressing any opinion on the merits of the case.

Abuse of process of law - permissibility of filing a supplementary complaint under Section 299 Cr.P.C. - stay of proceedings in respect of a subsequent complaint - interim protection from coercive action - obligation to cooperate with investigation

Permissibility of filing a supplementary complaint under Section 299 Cr.P.C. - abuse of process of law - Whether filing a second or supplementary complaint under the nomenclature of a supplementary report while the earlier complaint is pending is permissible and whether the subsequent complaint prima facie amounts to abuse of process of law. - HELD THAT: - The Court observed that a subsequent complaint styled as a supplementary report filed during the existence of the first complaint is not permissible in law. The Division Bench's interim order had directed the petitioners to join investigation and protected them from arrest under the warrant issued earlier; the petitioners thereafter cooperated, attended, were interrogated and had their statements recorded. In those circumstances, initiation of a fresh complaint by invoking Section 299 Cr.P.C., particularly when it declares the accused to be absconders despite material showing their appearance and cooperation, prima facie appears perfunctory and tantamount to an abuse of process. The Court emphasised that the filing of a second report in the garb of a supplementary complaint, when the first complaint continues and the accused have not absconded, calls for serious consideration and is not a legally unfettered act by the agency.

Held that filing the subsequent/supplementary complaint during the pendency of the first complaint is not permissible in law and prima facie amounts to an abuse of process.

Stay of proceedings in respect of a subsequent complaint - interim protection from coercive action - obligation to cooperate with investigation - Relief to be granted pending consideration of the challenge to the subsequent complaint and the conduct expected of the petitioners in the interim. - HELD THAT: - In view of the prima facie finding on impermissibility and abuse, the Court admitted the petition and directed that further proceedings pursuant to the supplementary complaint dated 23.04.2021 shall remain stayed insofar as they relate to the petitioners. The Court reiterated that this interim relief is granted without expressing final opinion on merits, and concurrently recorded that the petitioners are expected to cooperate with the agency in connection with the first complaint dated 21.02.2021. The matter was listed for further consideration on the specified date.

Admitted the petition; stayed further proceedings under the subsequent/supplementary complaint against the petitioners and required them to cooperate with the investigation into the first complaint.

Final Conclusion: Petition admitted; on a prima facie view the subsequent/supplementary complaint filed during the pendency of the earlier complaint is not permissible and appears to be an abuse of process, and further proceedings under that subsequent complaint against the petitioners are stayed meanwhile subject to their cooperation with the investigation into the first complaint.

Reopening of assessment - reasons to believe - Section 147 and Section 148 of the Income Tax Act - unexplained credit under Section 68 - opportunity to be heard / show cause notice - alternative remedy by appeal under Section 246

Reopening of assessment - reasons to believe - Section 147 and Section 148 of the Income Tax Act - unexplained credit under Section 68 - Writ challenge to the notice issued under Section 148 read with Section 147 for assessment year 2015-16 was considered but not allowed; the petition was dismissed without quashing the reassessment notices. - HELD THAT: - The Court noted the reasons recorded by the assessing officer (letter dated 27.10.2021) which referred to information from the INSIGHT portal and an Addl. DIT (I&CI) report alleging reverse trades and a bogus profit treated as unexplained credit under Section 68. The petitioner had been issued statutory notices and a show cause calling for response. The Court observed that an order under Section 147 is appealable under Section 246(i)(b) and that the petitioner had available statutory remedies. Rather than adjudicating the merits of the formation of 'reasons to believe', the Court declined to interfere by writ and dismissed the petition, leaving the departmental process and appellate remedy intact. [Paras 11, 12, 15, 16]

Writ petition dismissed; reassessment proceedings under Section 147/148 not quashed and petitioner left to departmental process and appellate remedies.

Opportunity to be heard / show cause notice - alternative remedy by appeal under Section 246 - Whether the petitioner should be afforded additional time to respond to the show cause notice dated 25.03.2022. - HELD THAT: - The Court observed that the show cause notice fixed a compliance deadline giving the petitioner only two days to respond. In view of that short time and the fact that the assessment if finalized could be challenged on appeal, the Court exercised supervisory jurisdiction to afford the petitioner a fair opportunity to file his response before the departmental action is finalized. The Court therefore granted an enlargement of time to enable the petitioner to participate in the ongoing reassessment process. [Paras 14, 15]

Respondents directed to grant the petitioner a further ten days from the date of the order to file his reply to the show cause notice.

Final Conclusion: The writ petition challenging issuance of the notice under Section 148/147 for AY 2015-16 is dismissed; the petitioner is granted ten days to file his reply to the show cause notice, and may pursue statutory appellate remedies thereafter.

Power of transfer under Section 127 of the Income Tax Act - public interest - requirement to record reasons for transfer - affording reasonable opportunity before transfer - wide discretionary power of the competent authority - financial nexus between assessee and searched party not a prerequisite - centralization for coordinated investigation - judicial review limited to cogency and relevance of reasons

Power of transfer under Section 127 of the Income Tax Act - requirement to record reasons for transfer - affording reasonable opportunity before transfer - wide discretionary power of the competent authority - judicial review limited to cogency and relevance of reasons - Validity of the order transferring assessment proceedings from Central Circle 1, Raipur to Central Circle 08, New Delhi under Section 127 of the Income tax Act. - HELD THAT: - The Court held that Section 127 is founded on public interest and empowers wide discretion to ensure expeditious, fair and coordinated search and investigation. The discretion is subject to three aspects: (a) affording the assessee a reasonable opportunity of being heard; (b) recording reasons for transfer; and (c) transfer by a higher competent authority where required. The impugned order complied with natural justice by issuance of a show cause notice and taking the petitioner's reply into account, and set out cogent reasons for centralizing the PAN in Delhi to enable coordinated assessment. The Court emphasised that sufficiency of reasons is amenable to limited judicial review confined to whether reasons are cogent, relevant and not mala fide; it found the reasons in the present order to satisfy that test and to have nexus with the public interest underlying Section 127. [Paras 5, 6, 7, 8, 11]

The transfer order under Section 127 is valid; the requirements of reasoned order and opportunity to be heard were satisfied and the order withstands limited judicial scrutiny.

Financial nexus between assessee and searched party not a prerequisite - centralization for coordinated investigation - public interest - Whether existence of a financial nexus between the assessee and the searched parties is a mandatory precondition for exercise of power under Section 127. - HELD THAT: - The Court rejected the contention that a palpable financial nexus is an absolute precondition for transfer. It observed that incriminating material recovered during searches of related groups indicated involvement of the petitioner, and even if a financial nexus were not otherwise obvious, that does not preclude the Revenue from exercising Section 127 in the interest of effective and expeditious completion of investigations. The Court noted that precedents relied upon by the petitioner were fact specific and did not undermine the cogent reasons recorded in the impugned order. [Paras 10]

A specific financial nexus is not a sine qua non for transfer under Section 127; the transfer may be sustained where cogent reasons connected with coordinated investigation and public interest exist.

Final Conclusion: Writ petition dismissed. The High Court upheld the transfer order passed under Section 127 as containing cogent reasons and complying with the requirement of opportunity to be heard; the exercise of power was within the wide discretion of the competent authority and was liable to only limited judicial interference.

Reason to believe - information in possession - search and seizure under Section 132 - notice under Section 153A - notice under Section 142(1) - requirement of recording reasons - judicial review under Article 226 - non-application of mind / speaking order

Reason to believe - information in possession - search and seizure under Section 132 - requirement of recording reasons - judicial review under Article 226 - Validity of the searches under Section 132 of the Income Tax Act in respect of the petitioners - HELD THAT: - The Court applied the principles distilled by the Supreme Court in DGIT (Investigation) v. Spacewood Furnishers P. Ltd. and earlier authorities: the authorized officer must have information in its possession on which a bona fide and honest application of mind forms a reasonable belief that one of the contingencies in Section 132 exists; such information must pre exist formation of opinion; reasons for the belief should be recorded (though not required to be communicated at the authorization stage) and may be examined by the Court on challenge. The High Court examined the satisfaction notes and records produced by the revenue and found that the competent authority had considered relevant material and reached a reasonable belief in compliance with the statutory mandate. The Court emphasised that judicial interference under Article 226 is confined to cases of mala fide exercise, collateral purpose, absence of the statutory condition or extraneous consideration; mere error of judgment by the officer does not vitiate bona fide action. Applying these parameters to the material on record, the Court held that the requirement for conducting the searches was fulfilled and interference was not warranted.

Searches under Section 132 were valid; no relief granted against the searches.

Notice under Section 153A - notice under Section 142(1) - non-application of mind / speaking order - judicial review under Article 226 - Validity of the consequential notices under Section 153A and Section 142(1), and challenge to the order rejecting objections as non speaking - HELD THAT: - The Court treated the validity of notices under Sections 153A and 142(1) as contingent upon the fulfillment of requirements for authorization of the search. Having concluded that the Section 132 mandate was satisfied, the Court found no basis to quash the subsequent notices issued for the block period 2015-16 to 2020-21. Although petitioners contended that objections were rejected by a cryptic, non speaking order without application of mind, the High Court, on the material produced and in view of its finding that statutory prerequisites for search and consequent proceedings were met, declined to interfere with the impugned rejection orders and directed dismissal of the petitions. The Court cautioned that its limited review did not amount to any opinion on merits of the assessment proceedings.

Notices under Sections 153A and 142(1) and the rejection of objections were upheld; writ petitions dismissed.

Final Conclusion: The High Court found that the statutory conditions for conducting searches under Section 132 were fulfilled on the material produced, declined to interfere with the consequential notices under Sections 153A and 142(1) or with the rejection of objections, and dismissed the writ petitions while reserving opinion on the merits of assessment proceedings.

Method of accounting - Mercantile (accrual) system of accounting - Tax deducted at source treated as income - Deeming provision in collection and recovery chapter not to override charging provisions - Section 198 read with section 190 as machinery provision for tax collection

Method of accounting - Mercantile (accrual) system of accounting - Tax deducted at source treated as income - Section 198 read with section 190 as machinery provision for tax collection - Whether TDS deducted on advance contract receipts is exigible to tax as income of the year of deduction where the assessee follows mercantile (accrual) system of accounting. - HELD THAT: - Section 145 requires income chargeable under business heads to be computed according to the method of accounting regularly employed by the assessee; where mercantile (accrual) system is followed, income is recognised on accrual and not on receipt. Provisions in Chapter XVII (including the deeming in section 198) are machinery provisions for collection and recovery of tax and must be read with section 190, which preserves the charging mechanism under section 4 and the relevant heads (such as section 28). Consequently, the deeming in section 198 that sums deducted are 'deemed to be income received' cannot be applied in isolation so as to override the method of accounting that determines chargeability. In the present case the Assessing Officer and the CIT(A) brought the TDS credit to tax on the basis of its utilization in the year, without recording dissatisfaction with the correctness or completeness of accounts or invoking section 145(3) to disregard the assessee's mercantile system. That approach is contrary to the statutory scheme and settled principle that tax collection machinery provisions do not create an independent charging fiction to treat TDS shown in Form 26AS as business income irrespective of the accounting method; therefore the addition could not be sustained. [Paras 7, 8, 10]

The addition of TDS on advance contract receipts as income in the year of utilization is unsustainable; orders of authorities below set aside and the issue decided in favour of the assessee.

Final Conclusion: The Tribunal allowed the appeal, holding that TDS on advance receipts cannot be brought to tax as business income in the year of deduction where the assessee follows mercantile (accrual) accounting, since chapter XVII deeming provisions are machinery for collection and do not override the method of accounting; the assessment and appellate orders are set aside.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - requirement of inquiry and opportunity of being heard - assessment framed under section 143(3) - genuineness of donations and supporting records - scope of exemption under section 10(23C)(iiiab) - application of Malabar principle

Scope of exemption under section 10(23C)(iiiab) - revisionary jurisdiction under section 263 - Whether an assessment accepting an exemption under section 10(23C)(iiiab) is immune from revision under section 263 - HELD THAT: - The Tribunal held that the nature or extent of an exemption claim does not by itself oust the jurisdiction of the revisionary authority. Section 263 requires that the order of the Assessing Officer be both erroneous and prejudicial to the interests of revenue; the mere fact that the assessment order allowed an exemption under section 10(23C)(iiiab) does not make the order non-reviewable. Therefore validity or legality of the assessment order, not the type of claim allowed, governs the exercise of revisionary jurisdiction. The Tribunal rejected the appellant's contention that blanket exemption under section 10(23C)(iiiab) excludes the applicability of section 263 and applied settled authorities to conclude that revision is permissible where the statutory conditions are satisfied (paras 11.2, 12.1). [Paras 11, 12]

Claim of exemption under section 10(23C)(iiiab) does not preclude exercise of revisionary jurisdiction under section 263.

Erroneous and prejudicial to the interests of the revenue - requirement of inquiry and opportunity of being heard - genuineness of donations and supporting records - application of Malabar principle - assessment framed under section 143(3) - Whether the assessment orders for AY 2015-16 and 2016-17 were erroneous and prejudicial to the revenue for want of inquiry/verification into donations, building fund receipts and cash expenditures, thereby justifying revision under section 263 - HELD THAT: - The Tribunal examined records including the survey report under section 133A and the materials placed before the PCIT which indicated large voluntary donations, building fund receipts and cash payments lacking proper supporting documents. It noted absence of adequate inquiry or verification by the Assessing Officer despite queries raised during assessment and found that the PCIT had validly called for further inquiry and afforded opportunity to the assessee. Applying the principle in Malabar Industrial Co. (that an erroneous order causing loss to revenue is prejudicial), and the Tribunal's synthesized procedural steps (paras 11.3-11.5), the Tribunal concluded that the assessments were rendered without necessary inquiry into genuineness and substantiation and thus were erroneous and prejudicial. Consequently the PCIT's direction to the AO to examine records and frame fresh assessment de novo was held sustainable (paras 8.2, 12.2, 13). [Paras 8, 11, 12, 13]

Assessments were erroneous and prejudicial for lack of inquiry/verification into donations/building fund and cash expenditure; revision under section 263 and direction for fresh assessment de novo sustained.

Final Conclusion: The appeals are dismissed. The Tribunal upheld the PCIT's exercise of revisionary jurisdiction under section 263 for AY 2015-2016 and 2016-2017, holding that exemption under section 10(23C)(iiiab) does not bar revision and that the assessment orders were erroneous and prejudicial for want of necessary inquiries, warranting framing of fresh assessments.

Concealment of particulars of income - furnishing of inaccurate particulars of income - penalty under section 271(1)(c) - notice under section 274 read with section 271(1)(c) - non-application of mind - principles of natural justice / audi alteram partem

Notice under section 274 read with section 271(1)(c) - non-application of mind - principles of natural justice / audi alteram partem - penalty under section 271(1)(c) - Validity of penalty proceedings and penalty imposed under section 271(1)(c) in view of a notice that did not specify which limb-concealment or furnishing inaccurate particulars-was invoked. - HELD THAT: - The Tribunal found that section 271(1)(c) contemplates two distinct limbs-concealment of particulars of income and furnishing of inaccurate particulars of income-and the assessee must be made aware which limb is alleged so that effective defence can be put forward. Relying on the reasoning in Dilip N. Shroff and authorities of various High Courts, the Tribunal held that issuance of a standard form notice without deleting inapplicable paragraphs or without specifying the particular limb amounted to non-application of mind by the Assessing Officer. The notice dated 14/01/2015 merely referred to initiation of penalty proceedings under section 271(1)(c) without indicating whether the charge was concealment or furnishing inaccurate particulars; that defect, viewed against the Assessing Officer's own observations in the assessment order, demonstrated an absence of a clear, crystallised charge. As quasi criminal proceedings, penalty proceedings under section 271(1)(c) must comply with the principles of natural justice, including adequate notice of the specific charge; failure to do so renders the proceedings invalid. Consequently, the penalty imposed could not be sustained and had to be quashed. [Paras 7, 8, 10]

The notice was invalid for not specifying the limb of section 271(1)(c); the penalty imposed under section 271(1)(c) is quashed.

Final Conclusion: The appeal is allowed: the show-cause notice issued under section 274 read with section 271(1)(c) was defective for failing to specify whether concealment or inaccurate particulars was alleged; penalty under section 271(1)(c) is therefore quashed.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - unexplained cash expenditure under section 69C - assessment under section 153A r.w.s. 143(3) - requirement of inquiry and opportunity of hearing under section 263 - Queen Principle (five-step test) for exercise of revisionary power

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - unexplained cash expenditure under section 69C - requirement of inquiry and opportunity of hearing under section 263 - Queen Principle (five-step test) for exercise of revisionary power - Whether the assessing officer's order framed under section 153A r.w.s. 143(3) was erroneous and prejudicial to the interests of the revenue for omitting to tax a cash advance of Rs.1,00,000 to Subba Rao and whether the Principal Commissioner was justified in exercising revisionary jurisdiction under section 263 to direct reframing of assessment on that issue. - HELD THAT: - The Tribunal examined whether both limbs required for invocation of section 263 - error in the assessing officer's order and prejudice to the revenue - were satisfied, and whether the statutory riders of making inquiry and affording the assessee an opportunity of being heard were observed. The seized incriminating material (inventory B/4) showed cash payments including an advance to Subba Rao claimed as wages and subsequently appropriated as expenditure. The assessing officer, though having raised specific queries and issued notices under section 142(1) to verify the transactions, failed to bring the Rs.1,00,000 advance to tax as unexplained cash expenditure under section 69C in the assessment order; that omission was held to be an apparent and grievous error in computation. Applying the Tribunal's adopted five-step "Queen Principle" - explicit query by the adjudicating authority, a clear reply by the assessee, detailed inquiry by authorities, even handed application of mind, and correct application of law observing natural justice - the PCIT's conclusion that the AO lost sight of the advance and that the assessment was erroneous and prejudicial to revenue was found to be irresistible. The Tribunal noted that the revisionary authority had issued a show-cause notice, considered the assessee's contentions, and directed reframing for limited purpose; accordingly the exercise of section 263 power was sustained as falling within the scope of the precedent relied upon by the PCIT. [Paras 8, 9, 10, 11]

The Tribunal upheld the Principal Commissioner's order under section 263 setting aside the assessment insofar as it failed to tax the Rs.1,00,000 advance as unexplained expenditure under section 69C and dismissed the assessee's appeal.

Final Conclusion: The Tribunal found that the assessing officer's omission to tax the cash advance amounted to an erroneous order prejudicial to revenue; the PCIT validly invoked section 263 after giving opportunity of hearing and directing reframing of assessment on that limited issue. The appeal is dismissed.

Deemed dividend under section 2(22)(e) - disallowance under section 40A(2) - explanation of creditworthiness and genuineness under section 68 - capital-versus-revenue treatment of interest expense

Deemed dividend under section 2(22)(e) - Deletion of addition treated as deemed dividend under section 2(22)(e). - HELD THAT: - The Assessing Officer treated amounts transferred from M/s Samara India Pvt. Ltd. to the assessee as deemed dividend. The appellate authority found on the evidence - including bank statements and loan ledgers of the assessee and the related company - that the transfers were made on the directions of Shri Rajnish Wadhawan by debiting his loan account and that the funds were effectively loans from Shri Rajnish Wadhawan to the assessee credited in his name. The Tribunal noted that Revenue did not point out any fallacy in the CIT(A)'s factual findings and, on that basis, found no reason to interfere with the conclusion that the transaction was not a loan from Samara India Pvt. Ltd. attracting section 2(22)(e). [Paras 9]

Addition under section 2(22)(e) was deleted; Revenue's ground dismissed.

Disallowance under section 40A(2) - Deletion of disallowance of excess interest under section 40A(2). - HELD THAT: - The AO compared interest on an unsecured related party loan with rate on secured bank borrowings and disallowed the difference. The CIT(A) allowed relief by reference to the Benchmark Prime Lending Rate (BPLR) as the appropriate comparator. The Tribunal examined the nature of secured versus unsecured lending, noted submissions and SBI benchmarking data relied upon by the assessee, and observed that Revenue produced no material to show that the rate charged by the associated concern was excessive compared to market rates for unsecured loans. Applying the principle that reasonableness must be demonstrated by the Revenue and that unsecured loans typically bear higher rates, the Tribunal concluded the 16.34% charged was not excessive and directed deletion of the disallowance. [Paras 14]

Disallowance under section 40A(2) deleted; Revenue's ground dismissed and assessee's cross objection allowed.

Explanation of creditworthiness and genuineness under section 68 - Deletion of addition under section 68 in respect of loan from Shri Avinash Wadhwan. - HELD THAT: - The AO regarded Rs.2,02,38,000 received from Shri Avinash Wadhwan as unexplained and added it under section 68. The CIT(A) reviewed documentary evidence submitted by the assessee - PAN, ITRs, bank statements, audited financials, ledger accounts for multiple years and the lender's balance sheet - and found that the assessee discharged the onus of proving identity, creditworthiness and genuineness, including that the funds originated from withdrawals of loan balances in associated companies and that the lender had substantial funds and prior investments. The Tribunal observed that Revenue did not point to any error in these findings and declined to interfere. [Paras 19]

Addition under section 68 deleted; Revenue's ground dismissed.

Capital-versus-revenue treatment of interest expense - Deletion of addition disallowing interest expense as capital in nature. - HELD THAT: - The AO treated interest paid on borrowings used to make advances for property bookings as capital and disallowed it. The CIT(A) found the assessee's business to be trading in real estate and letting properties, held that advances for booking/purchase fell within the line of business, and observed that utilization of funds for business purposes, supported by consistent treatment in the assessee's earlier year, did not warrant capitalisation of the interest. The Tribunal found no fault in the CIT(A)'s reasoning and declined to disturb the deletion. [Paras 24]

Interest disallowance as capital expenditure deleted; Revenue's ground dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal in its entirety and allowed the assessee's cross objection; additions and disallowances under sections 2(22)(e), 40A(2), 68 and the capital treatment of interest were deleted for A.Y. 2014-15.

Deduction of tax at source under section 195 - Liability to deduct tax on payments to non-residents - Remand for fresh determination by the Assessing Officer - Allowability of delayed PF and ESI contributions if paid before filing return - Application of the precedent in CIT v. AIMIL Ltd. to late PF/ESI payments - Dismissal of a ground as not pressed

Deduction of tax at source under section 195 - Liability to deduct tax on payments to non-residents - Nature of payments (commission/advertisement/consideration) as determinative of s.195 - Whether payments made to non-resident platform providers attracted liability to deduct tax under section 195 and whether the additions could be sustained without a determination of the nature of those payments. - HELD THAT: - The Tribunal found that the authorities below did not address the core contention of the assessee regarding the nature of the payments and whether they were chargeable to tax in India under the Act. Because the applicability of section 195 depends on the character of the income payable to the non-resident recipients, the Tribunal set aside the orders on this issue and restored the matter to the file of the Assessing Officer. The Assessing Officer is directed to verify facts, determine applicability of section 195, dispose of the assessee's objections, and afford adequate opportunity to the assessee by way of a speaking order. [Paras 6]

Order set aside and matter remanded to the Assessing Officer for fresh determination on applicability of section 195 with directions to decide objections by speaking order and to afford opportunity to the assessee; allowed for statistical purposes.

Allowability of delayed PF and ESI contributions if paid before filing return - Application of the precedent in CIT v. AIMIL Ltd. to late PF/ESI payments - Whether the disallowance of employer's contribution to PF and ESI, deposited after the prescribed due date but before filing the income-tax return, was justified. - HELD THAT: - Relying on and following the binding precedent of the Jurisdictional Delhi High Court in CIT v. AIMIL Ltd. and the subsequent view in Pr. CIT v. Pro Interactive Services (India) Pvt. Ltd., the Tribunal held that where the employer makes the actual payment of employees' contributions before filing the return, the payment qualifies for deduction under the Income-tax Act despite being deposited belatedly under the respective statutes (subject to statutory consequences such as interest or penalty under those statutes). Applying that precedent, the Tribunal deleted the addition made by the Assessing Officer. [Paras 10, 11, 12, 13]

Addition deleted; grounds 2 and 2.1 allowed.

Dismissal of a ground as not pressed - Whether the claim of prior period expenses of Rs. 37,868 required adjudication. - HELD THAT: - At the hearing the assessee expressly declined to press this ground. The Tribunal therefore did not decide the substantive merit and treated the ground as not pressed. [Paras 15]

Ground dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: the addition for non-deduction of tax under section 195 is set aside and remanded to the Assessing Officer for fresh determination with directions; the disallowance for delayed PF/ESI deposit is deleted following Delhi High Court precedent; the prior period expenses ground is dismissed as not pressed.

Deduction under section 80P(2)(d) - deduction under section 80P(2)(a)(i) - interest income from investments/deposits with co-operative banks - co-operative society as defined in section 2(19) - parking of surplus funds as part of business of providing credit facilities

Deduction under section 80P(2)(d) - interest income from investments/deposits with co-operative banks - co-operative society as defined in section 2(19) - Interest income earned by the assessee on deposits with co-operative banks is eligible for deduction under section 80P(2)(d). - HELD THAT: - The Tribunal held that the term "co-operative society" in the Act includes co-operative banks as they are societies registered under the relevant State Co-operative Societies Act (section 2(19)). Consequently, interest derived by an assessee co-operative society from investments made with any other co-operative society (including co-operative banks) falls within the scope of section 80P(2)(d). The Tribunal relied on coordinate authority and High Court decisions favourable to the assessee and rejected the lower authorities' view that the subsection (4) amendment excluded co-operative banks from the scope of section 80P(2)(d). The Assessing Officer's original view admitting the deduction was held to be a possible and sustentative view; therefore the contrary conclusion of the lower authorities was not sustainable. [Paras 8, 9]

Allowed the claim that interest on deposits with co-operative banks is deductible under section 80P(2)(d).

Deduction under section 80P(2)(a)(i) - parking of surplus funds as part of business of providing credit facilities - interest income attributable to primary business of providing credit - Interest income on short-term deposits of surplus funds is deductible under section 80P(2)(a)(i) as income from carrying on the business of providing credit facilities to members. - HELD THAT: - The Tribunal accepted the assessee's submission, supported by jurisdictional High Court decisions, that amounts deposited short term with banks represent simpliciter parking of surplus funds arising in the course of its business of providing credit to members. Such interest income is inextricably interlinked with and attributable to the primary business of providing credit facilities and therefore falls within the deduction permitted by section 80P(2)(a)(i). The CIT(A)'s denial on this point was set aside and the matter was remitted to the Assessing Officer to allow the deduction accordingly. [Paras 11, 12]

Allowed the claim that interest on short-term deposits of surplus funds is deductible under section 80P(2)(a)(i).

Final Conclusion: The appeal is allowed: interest on deposits with co-operative banks is deductible under section 80P(2)(d), and interest on short term deposits of surplus funds deposited with co-operative and scheduled banks is deductible under section 80P(2)(a)(i); the lower authorities' contrary findings are set aside and the Assessing Officer directed to allow the deductions.

Disallowance under section 14A read with Rule 8D - deletion of addition under section 57(iii) - deemed dividend under section 2(22)(e) - beneficial shareholder versus registered shareholder - inter-corporate deposits advanced in the ordinary course of business

Disallowance under section 14A read with Rule 8D - exempt dividend income - Validity and extent of disallowance under section 14A r.w. Rule 8D in relation to dividend income - HELD THAT: - The Assessing Officer computed section 14A disallowance by allocating proportionate interest and loan processing charges across investments. The Commissioner (Appeals) restricted the disallowance to the extent of exempt dividend income earned by the assessee, applying the ratio of the decision in Joint Investments P. Ltd. v. CIT. The Tribunal, after hearing parties and perusing the record, found no infirmity in the CIT(A)'s approach of limiting the section 14A disallowance to the amount of exempt dividend and accordingly sustained the restriction for the assessment years under appeal. [Paras 2]

The restriction of the section 14A disallowance to the amount of exempt dividend income is upheld and the Revenue's ground is dismissed for the assessment years 2010-11, 2011-12 and 2012-13.

Deletion of addition under section 57(iii) - interest expenditure attributable to taxable interest income - Sustenance of addition under section 57(iii) by deducting direct interest expenditure against exempt income - HELD THAT: - The Assessing Officer reduced total interest expenditure by excluding expenditure attributable to exempt income and treated the net interest as income from other sources under section 57(iii). The assessee demonstrated that loans obtained from IFCI were fully utilised to advance funds to an associate and that the interest income was offered to tax; the total interest expenditure was not disputed. The CIT(A) deleted the addition, holding that the AO had no justification to reduce the interest expenditure by reference to exempt income for the purposes of section 14A or to make the impugned addition. The Tribunal found no reason to interfere with the CIT(A)'s deletion of the addition. [Paras 3]

The deletion of the addition under section 57(iii) is sustained and the Revenue's ground is dismissed for the assessment years under appeal.

Deemed dividend under section 2(22)(e) - beneficial shareholder versus registered shareholder - inter-corporate deposits advanced in the ordinary course of business - Whether loans received from related companies could be treated as deemed dividend under section 2(22)(e) in the hands of the assessee-company - HELD THAT: - The AO treated loans received from two group concerns as deemed dividend under section 2(22)(e) because of common shareholders holding in excess of 10%. Before the CIT(A) the assessee contended it was not a shareholder of the lending companies and that the amounts were inter-corporate deposits with interest charged in the ordinary course of business. The CIT(A) examined the shareholding pattern and held that deemed dividend, if any, would arise in the hands of the substantial individual shareholders and not the assessee-company which was not a registered or beneficial shareholder; the question whether the amounts were inter-corporate deposits to be treated as ordinary business transactions required looking to the lenders' balance-sheets. The Tribunal agreed with the CIT(A), relied on the jurisdictional authority that deemed dividend under section 2(22)(e) applies to a substantial shareholder (registered or beneficial) and not to a non-shareholder, and upheld the deletion of the addition for the assessment years 2011-12 and 2012-13. [Paras 4]

Loans received from the related concerns cannot be brought to tax as deemed dividend in the hands of the assessee-company under section 2(22)(e); the Revenue's grounds on this issue are dismissed for assessment years 2011-12 and 2012-13.

Final Conclusion: All appeals filed by the Revenue are dismissed and the orders of the Commissioner (Appeals) are confirmed.

Concealment of particulars of income - furnishing of inaccurate particulars of income - penalty under section 271(1)(c) - show cause notice - opportunity of being heard - non-application of mind - quash for want of jurisdiction

Concealment of particulars of income - furnishing of inaccurate particulars of income - show cause notice - non-application of mind - opportunity of being heard - penalty under section 271(1)(c) - quash for want of jurisdiction - Validity of the show cause notice and consequent jurisdiction to impose penalty under section 271(1)(c). - HELD THAT: - The A.O.'s show cause notice failed to strike off the irrelevant limb and did not specify whether penalty proceedings under section 271(1)(c) were initiated for 'concealment of particulars of income' or for 'furnishing inaccurate particulars of income'. The two limbs are separate and distinct and, being quasi criminal in nature, penalty proceedings require that the assessee be clearly informed of the exact charge so as to afford a meaningful opportunity of being heard under section 274(1). Non specification of the limb reflected non application of mind by the A.O and defeated the purpose of the show cause notice, thereby vitiating jurisdiction. Judicial precedents (including decisions of higher courts and coordinate benches) recognise that failure to indicate the specific limb renders the notice bad in law. In view of this infirmity the penalty imposed could not be sustained and had to be quashed; the Tribunal therefore set aside the CIT(A)'s order upholding the penalty and declined to examine the merits of the penalty on account of want of jurisdiction. [Paras 8, 9, 12, 13]

The show cause notice was invalid for not specifying the limb of section 271(1)(c); the penalty of Rs. 13,94,460 imposed under section 271(1)(c) is quashed for want of jurisdiction.

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) for AY 2009-10 is quashed on account of the A.O.'s failure to specify the particular charge in the show cause notice, and the Tribunal refrained from considering merits of the penalty.

Unexplained investment assessed as unexplained money under section 69A - evidentiary value of seized materials and loose sheets - benami transaction inference and adverse inference from seized documents - penalty under section 271(1)(c) linked to quantum enhancement - proof of source for purchase consideration - unexplained cash credits in bank account

Unexplained investment assessed as unexplained money under section 69A - evidentiary value of seized materials and loose sheets - benami transaction inference and adverse inference from seized documents - Validity of enhancement by the Commissioner (Appeals) for A.Y. 2014-15 by relying on seized loose papers and rejecting the assessee's explanation that the advance was made by a third party and made over to the assessee. - HELD THAT: - The Tribunal examined the Assessing Officer's addition and the CIT(A)'s enhancement which rested on inferences drawn from jottings and loose sheets seized during search and the conclusion that the purported earlier agreement was a "make believe" device showing the transaction was really in the assessee's hands. The Tribunal found that the assessee had produced documentary evidence, including the agreement between the purported prior purchaser and confirmation from that party, and had explained repayment of the advance from sale proceeds. The CIT(A) drew adverse inferences without examining or verifying the other parties or adducing independent evidence to contradict the documents produced by the assessee. The Tribunal held that additions or enhancements cannot be sustained solely on the basis of loose jottings in incriminating material when the assessee has furnished contemporaneous agreements, confirmation and bank evidence to explain source and application. Applying these principles, the Tribunal reversed the CIT(A)'s enhancement, deleted the enhancement made on A.Y. 2014-15 and allowed the appeal. [Paras 9, 10, 11, 12]

Enhancement by the CIT(A) for A.Y. 2014-15 set aside and enhancement deleted; appeal allowed.

Penalty under section 271(1)(c) linked to quantum enhancement - penalty linked to deleted addition - Sustainability of penalty under section 271(1)(c) imposed by the CIT(A) for A.Y. 2014-15 which was predicated on the enhancement. - HELD THAT: - The Tribunal noted that the CIT(A) had imposed penalty based on the enhancement of assessment. Having deleted the enhancement in the quantum appeal, the foundational addition on which the penalty was levied ceased to exist. Consequently the penalty could not survive independently in the absence of the addition that formed its basis. [Paras 13, 14, 15]

Penalty levied under section 271(1)(c) for A.Y. 2014-15 deleted; appeal allowed.

Unexplained investment assessed as unexplained money under section 69A - proof of source for purchase consideration - unexplained cash credits in bank account - Sustainability of additions for A.Y. 2015-16: (a) additions treating balance of property consideration as unexplained investment; and (b) additions for unexplained cash deposits in the assessee's bank account. - HELD THAT: - For the property-related additions the Tribunal examined bank loan documents, loans from relatives and bankers' records which showed credits to the assessee's bank account and payments to the vendor. The Tribunal found that the assessee had satisfactorily explained and evidenced sources for a substantial part of the consideration and for specific cash payments (including the advance shown as made over by the third party). Consequently the Assessing Officer's additions to the extent sustained by the CIT(A) were not sustainable and were deleted; the Tribunal directed deletion of the additions amounting to the investment portion contested. However, with regard to multiple cash deposits shown in the bank account on various dates, the assessee failed to furnish satisfactory documentary explanation for those deposits distinct from the investments already explained; the Tribunal therefore upheld the addition in respect of unexplained cash credits. The result was a partly allowed appeal for A.Y. 2015-16. [Paras 18, 19, 20, 21, 22]

Additions in respect of unexplained investments in property for A.Y.2015-16 deleted to the extent explained by documented sources; additions in respect of unexplained cash deposits in bank account upheld; appeal partly allowed.

Final Conclusion: The Tribunal allowed the appeals for A.Y. 2014-15 by deleting the CIT(A)'s enhancement and the consequent penalty; for A.Y.2015-16 the Tribunal partly allowed the appeal by deleting additions relating to unexplained investments in the property to the extent supported by documented sources, while sustaining additions relating to unexplained cash deposits in the bank account.

Onus of proof to establish identity, creditworthiness and genuineness of transactions - addition under section 68 - enhancement of income by appellate authority - direction under section 150(1) for examination under sections 147/148 - remand for fresh verification to the Assessing Officer

Onus of proof to establish identity, creditworthiness and genuineness of transactions - addition under section 68 - Disposition of additions made under section 68 in respect of amounts received from Pearl Creation, Shri Amul Aggarwal and Shri Sudhir Kumar. - HELD THAT: - The Tribunal examined the findings of the Assessing Officer and the CIT(A). The appellate authority recorded that the assessee had not discharged the statutory onus to prove identity, creditworthiness and genuineness in respect of the amounts in question, noting absence of addresses, lack of bank statements of the lenders, unauthenticated photocopies of confirmations, and inconsistencies in signatures and ledger descriptions. The Tribunal found no infirmity in the reasoning of the CIT(A) in confirming the addition where supporting evidence was lacking and, where the CIT(A) directed the AO to examine transactions alleged to relate to earlier years, accepted that direction as appropriate. On this basis the Tribunal affirmed the conclusions of the authorities below and dismissed the grounds relating to these additions. [Paras 10]

Findings of the authorities below confirming/additionally directing verification in relation to the additions under section 68 are affirmed and the grounds relating to these additions are dismissed.

Addition under section 68 - direction under section 150(1) for examination under sections 147/148 - Enhancement sustained in respect of amount received from M/s. Mithilanchal Investment & Finance Pvt. Ltd. and consequential directions issued. - HELD THAT: - The CIT(A) enhanced income in respect of the amount received from M/s. Mithilanchal Investment & Finance Pvt. Ltd. while observing the assessee's averment that part of the amount related to an earlier year; the CIT(A) directed the AO under section 150(1) to examine the relevant earlier assessment year under sections 147/148 and stated that if those amounts are assessed and attain finality, corresponding relief could be granted in the present year. The Tribunal found the CIT(A)'s approach and directions to the AO to be well reasoned, concluded that no prejudice would be caused to the assessee, and declined to disturb the finding. [Paras 11]

The finding of the CIT(A) in respect of the transaction with M/s. Mithilanchal Investment & Finance Pvt. Ltd. and the directions to the AO are upheld.

Remand for fresh verification to the Assessing Officer - enhancement of income by appellate authority - Enhancement made by the CIT(A) in respect of amounts received from M/s. Hirise Hospitality Pvt. Ltd. - HELD THAT: - The Tribunal reviewed the materials relied upon by the appellant and the CIT(A)'s detailed reasons for enhancement, including discordant ledger entries, absence of lender's cooperation, lack of authenticated bank statements and mismatching signatures. Noting also the existence of subsequent litigation and an FIR, the Tribunal concluded that the transaction warranted further factual enquiry. Rather than finally adjudicating the taxability on the existing record, the Tribunal set aside the CIT(A)'s enhancement insofar as it related to Hirise Hospitality Pvt. Ltd. and restored the issue to the Assessing Officer with directions to make requisite enquiries, verify the true facts, and decide the issue afresh while affording adequate opportunity to the assessee to represent its case. [Paras 12]

Issue remanded to the Assessing Officer for fresh verification and decision; ground relating to this transaction is allowed for statistical purposes.

Final Conclusion: The Tribunal partly allowed the appeal: it affirmed the lower authorities' treatment of the additions relating to the specified unsecured loans where the assessee failed to discharge the statutory onus, upheld the CIT(A)'s direction and enhancement in respect of M/s. Mithilanchal Investment & Finance Pvt. Ltd., and set aside and remanded the enhancement concerning M/s. Hirise Hospitality Pvt. Ltd. to the Assessing Officer for fresh inquiry and decision.

Allowability of club membership fees as business expenditure under section 37(1) - disallowance under section 14A in absence of exempt income - computation of book profit under section 115JB - addback of capital expenditure debited to profit and loss account - scope of limited scrutiny selection (CASS) - power to verify items relevant to determination of total income including book profit under section 115JB

Allowability of club membership fees as business expenditure under section 37(1) - Deletion of addition of club membership fees made by the assessing officer - HELD THAT: - The Tribunal found as an undisputed fact that the club membership was taken in the name of the assessee company and was used by its top executives to improve and extend business relations, and to hold business meetings, seminars and conferences. In view of binding decisions of High Courts including the jurisdictional High Court and the Supreme Court authority cited by the assessee, club membership fees paid in the normal course of business are allowable as business expenditure under section 37(1). Reliance on contrary Tribunal decisions by the AO was held to be of no relevance in face of higher court precedents. The CIT(A)'s deletion of the addition was therefore sustained. [Paras 3]

Addition on account of club membership fees deleted; Revenue's ground dismissed.

Disallowance under section 14A in absence of exempt income - Legitimacy of disallowance under section 14A where the assessee had not earned any exempt income during the year - HELD THAT: - The Tribunal noted that the assessee did not earn any exempt income in the year. The AO applied the mechanistic computation under Rule 8D(2) to make a large disallowance. The CIT(A) relied on higher court precedents, including the Supreme Court's decision in Maxopp Investments and other authorities, holding that section 14A disallowance cannot be invoked in the absence of exempt income. The Tribunal found this settled law applicable and upheld the CIT(A)'s deletion of the disallowance. [Paras 4]

Disallowance under section 14A deleted; Revenue's grounds dismissed.

Computation of book profit under section 115JB - addback of capital expenditure debited to profit and loss account - scope of limited scrutiny selection (CASS) - power to verify items relevant to determination of total income including book profit under section 115JB - Whether the loan/processing (syndication/structuring) fees debited as an exceptional item in P&L (capital in nature) had to be added back while computing book profit under section 115JB, and whether the AO exceeded the scope of limited scrutiny by making that adjustment - HELD THAT: - The Tribunal recorded that the case was selected under CASS for limited scrutiny to verify large P&L expenses; limited scrutiny was held to extend to determination of total income under both normal provisions and under section 115JB, and therefore the AO did not exceed his jurisdiction by examining book profit. The fees paid to IFC related to an ECB for expansion of business and were capital in nature. Because Part II/III of Schedule VI does not permit capital expenditure to be debited to the P&L, the AO was entitled to adjust audited accounts where a capital item had been charged to P&L even if it is not listed in Explanation 1 to section 115JB(2). The Tribunal applied analogous reasoning from earlier Tribunal precedent (JSW Steel) and held that an item not allowable from inception cannot be permitted to reduce book profit; consequently the addback was justified and CIT(A)'s confirmation sustained. [Paras 6, 7]

AO's adjustment adding back the loan processing fees to compute book profit under section 115JB was sustained; assessee's grounds dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for A.Y.2010-11 by upholding deletion of club membership fee addition and deletion of section 14A disallowance; and dismissed the assessee's appeal for A.Y.2015-16 by upholding the addback of capital loan-processing fees to compute book profit under section 115JB and holding that limited scrutiny empowered the AO to examine book profit computation.

Penalty under Section 112A of the Customs Act - deliberate mis-declaration - rejection of declared transaction value and re-valuation under Rule 12 - confiscation and abandonment of goods - absolute confiscation of counterfeit branded goods - consequential relief on successful appeal

Penalty under Section 112A of the Customs Act - deliberate mis-declaration - abandonment of goods - Whether the penalty imposed under Section 112A was justified in view of the importer's explanation and the abandonment of the goods. - HELD THAT: - The Tribunal found no case of deliberate mis-declaration by the appellant. The Bill of Entry was filed in accordance with the packing list and Bill of Lading, and the shipper admitted that goods not in the purchase order were mistakenly packed. The appellant surrendered/abandoned the goods and had already suffered financial loss. The adjudicating and appellate authorities' imposition of penalty did not account for the cogent explanation and admitted mistake by the shipper. On these facts the Tribunal concluded that penal action under Section 112A was not warranted and set aside the penalty, while allowing consequential benefits in accordance with law. [Paras 12, 13]

Penalty under Section 112A set aside; appeal allowed and appellant entitled to consequential benefits.

Final Conclusion: The Tribunal allowed the appeal by setting aside the penalty imposed under Section 112A of the Customs Act, finding no deliberate mis-declaration and noting the shipper's admitted packing error and the appellant's abandonment of the goods; consequential relief granted in accordance with law.

Right to cross examination - audi alteram partem - confessional statement/admission - prejudice requirement for cross examination - natural justice in adjudication proceedings - non compellability to self incriminate - admissibility of investigative statements

Right to cross examination - audi alteram partem - prejudice requirement for cross examination - confessional statement/admission - Denial of permission to cross examine departmental officers and panch witnesses in adjudication proceedings. - HELD THAT: - The Tribunal held that the adjudicating authority did not err in refusing the appellant's request to cross examine departmental and panch witnesses. The Show Cause Notice allegations were supported by physical examination of consignments in the presence of the appellant and his proprietor, and the proprietor's own statement admitted facts relied upon. Documentary evidence recovered from the appellant's email and storage matched the descriptions and prices of complete LED TVs and SKD supply, and the appellant did not show any prejudice in his written reply to the Show Cause Notice. The Court applied the settled principle that an application for cross examination must show grounds that such cross examination is necessary and that prejudice would result if it is denied. Where statements amount to confessions or admissions relied upon, they bind the party and do not necessarily require cross examination; Customs officers conducting investigations are not police officers and confessional admissions to them are admissible. The Tribunal also relied on precedent holding that cross examination of officials is not required where the case is developed on documentary evidence and recovered material rather than solely on officer testimony. Having found no prima facie falsification of the Show Cause Notice allegations, no involuntariness or retraction on record regarding the proprietor's statement, and no articulated prejudice, the refusal to permit cross examination was upheld. [Paras 11, 12, 13, 16, 17]

The adjudicating authority's refusal to allow cross examination of investigating officers and panch witnesses is upheld and the appeal is dismissed.

Final Conclusion: The Tribunal found no violation of principles of natural justice in denying cross examination where admissions, documentary recoveries and examination reports supported the Show Cause Notice and no prejudice to the appellant was demonstrated; the order refusing cross examination is affirmed and the appeal dismissed.

Principles of natural justice - opportunity of personal hearing - requirement of Section 17(5) of the Customs Act, 1962 - change in tariff classification - remand for de novo adjudication

Requirement of Section 17(5) of the Customs Act, 1962 - opportunity of personal hearing - principles of natural justice - change in tariff classification - Original authority failed to comply with the procedural requirement under Section 17(5) by not granting a personal hearing before changing the tariff classification, resulting in breach of natural justice and necessitating fresh adjudication. - HELD THAT: - The Tribunal examined the record and the appellant's contention that no show-cause notice was issued and no personal hearing was afforded before the original authority changed the classification of the goods. It found that the requirement of sub-section (5) of Section 17 had not been strictly complied with because no opportunity of personal hearing was granted in support of the change in classification. The Tribunal held that this omission amounted to non-observance of the principles of natural justice. Given the defect in the procedure adopted by the original authority, the Tribunal concluded that the matter could not be sustained and must be remitted for de novo adjudication. The Tribunal directed that the original authority should grant the appellant an opportunity of hearing, consider the appellant's submissions on classification, and pass a fresh adjudication order accordingly, preferably within three months of receipt of the Tribunal's order.

Impugned order set aside; matter remanded to the original authority for fresh adjudication after affording personal hearing and considering submissions on correct classification, to be completed preferably within three months.

Final Conclusion: The appeal is allowed by way of remand: the order changing tariff classification is set aside for want of compliance with Section 17(5) and principles of natural justice, and the original authority is directed to conduct a de novo adjudication after granting a personal hearing and considering the appellant's submissions, preferably within three months.

Status quo of shareholding - no interim relief which prejudices final adjudication - board's power to determine capital raising - corporate governance and role of directors in capital decisions - permission to raise borrowings to service debt

Status quo of shareholding - no interim relief which prejudices final adjudication - Direction to respondents to deposit their alleged share of contribution for allotment of equity shares was not warranted. - HELD THAT: - The Tribunal noted an existing order directing maintenance of the 50-50 shareholding pattern and that the resolutions and the Offer Letter dated 18.07.2021 for issuance of shares were themselves under challenge in related proceedings. Granting the applicants' prayer to direct deposit of respondents' share application money would effectively enforce an allotment and alter the shareholding while the main petition and related applications are pending. Applying the principle that an interim relief should not be the same as the final relief and must not pre-empt final adjudication, the Tribunal held that no direction should be issued to require respondents to deposit Rs. 75,00,000/- towards share contribution, since that would prejudge matters under active consideration in the main proceedings. [Paras 16, 17]

No direction to respondents to deposit the alleged share application money; prayer refused.

Board's power to determine capital raising - corporate governance and role of directors in capital decisions - no interim relief which prejudices final adjudication - Prayer permitting applicants to raise further share capital by issuing shares either to themselves or to third parties was refused. - HELD THAT: - The Tribunal observed that decisions on whether the company requires additional capital and the appropriate route to obtain it fall within the prerogative of the Board of Directors, subject to the Articles. Given that disputes regarding directorship and control between equal groups of shareholders are pending and that the resolutions authorising the Rights Issue are under adjudication, any interim order permitting allotment of further shares would likely alter the existing shareholding and pre-empt the main petition. Consequently, the prayer to raise further share capital by issuing shares to the applicants or third parties was declined to avoid prejudging the substantive controversy. [Paras 16, 17]

Request to raise further share capital by allotting shares to applicants or third parties denied; CA No.135/2021 dismissed.

Permission to raise borrowings to service debt - no interim relief which prejudices final adjudication - Applicants were permitted to raise additional loans to regularise the company's loan accounts with banks, subject to observations regarding shareholding and directorship. - HELD THAT: - Having perused the management certified balance sheets and related material, the Tribunal found a prima facie liquidity crunch and immediate requirement for infusion of funds to service the company's debt obligations. While refusing reliefs that would affect shareholding or pre-empt governance disputes, the Tribunal recognised the limited and urgent need to regularise bank accounts and allowed the applicants to raise additional borrowings for that purpose. This permission was granted expressly subject to the Tribunal's earlier observations on shareholding pattern and directorship. [Paras 1, 2]

CA No.19/2022 allowed to the extent of permitting additional loans to regularise bank accounts, subject to prior observations.

Final Conclusion: The Tribunal refused directions that would enforce or effectuate a Rights Issue and alter the 50-50 shareholding pending adjudication of the main petition, but allowed limited relief enabling the company to raise additional borrowings to regularise its loan accounts, while leaving all governance and shareholding disputes to be finally decided in the main proceedings.

Sanction of a scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - vesting of assets and liabilities in the transferee company with effect from the appointed date - appointed date effect - continuation of pending suits, proceedings and appeals by or against the transferee company - issue and allotment of shares by transferee company pursuant to the scheme - dissolution of the transferor company upon filing of certified copy with the Registrar of Companies - dispensing with convening of meetings where unanimous written consents are filed - adjustment of fees on clubbing of authorised share capital and Registrar of Companies fees - applicability of stamp duty on transfer of immovable property pursuant to amalgamation - compliance with applicable accounting standards (including AS-14 / IND AS 103) in accounting treatment for the scheme - competence of an Association of Persons to be a registered member/shareholder - service of notices to statutory authorities under Section 230(5) and effect of decisions of those authorities

Sanction of a scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - vesting of assets and liabilities in the transferee company with effect from the appointed date - appointed date effect - continuation of pending suits, proceedings and appeals by or against the transferee company - issue and allotment of shares by transferee company pursuant to the scheme - dissolution of the transferor company upon filing of certified copy with the Registrar of Companies - Sanction of the Scheme of Amalgamation and consequential orders giving effect to the scheme from the appointed date - HELD THAT: - The Tribunal examined the Scheme of Amalgamation between the transferor and transferee companies, the statutory compliance, affidavits of consent of shareholders and creditors, reports/representations by the Official Liquidator and Regional Director, and submissions of the petitioners. The Tribunal found that statutory formalities requisite for sanction had been complied with, the scheme was bona fide and in the interest of all concerned, and that the Official Liquidator's report contained no adverse finding warranting refusal. The Scheme, annexed to the petition, was sanctioned to be binding from the Appointed Date. Consequential directions were made that, with effect from the Appointed Date, all properties, rights, powers, debts, liabilities, duties and obligations of the transferor shall vest in the transferee; pending proceedings shall continue by or against the transferee; employees of the transferor shall be engaged by the transferee; the transferee shall issue and allot shares to transferor shareholders as per the scheme; the petitioners are to file the schedule of assets in prescribed Form No. CAA7 format within three weeks; and each company shall file a certified copy of the order with the Registrar of Companies within 30 days, upon which the transferor company shall be dissolved and records consolidated.

The Scheme is sanctioned and directions given for vesting of assets and liabilities, continuation of proceedings, allotment of shares, filing of schedule of assets and filing of certified copy with ROC leading to dissolution of the transferor company.

Dispensing with convening of meetings where unanimous written consents are filed - service of notices to statutory authorities under Section 230(5) and effect of decisions of those authorities - Validity of dispensing with meetings of shareholders and creditors and adequacy of service on statutory authorities - HELD THAT: - The Tribunal noted that by an earlier order it had dispensed with the convening of meetings of equity shareholders and creditors of both companies because all equity shareholders and unsecured creditors had given written consent by affidavit. The petitioners had served notices to the Regional Director, Registrar of Companies, Income Tax authorities, Official Liquidator and other sectoral regulators and had published advertisements as required; affidavits of compliance and acknowledgements were placed on record. The Tribunal accepted the petitioners' compliance with notice requirements and the prior dispensation of meetings as satisfying the statutory scheme.

Dispensation of meetings was upheld and service on statutory authorities held to be in order for purposes of sanctioning the scheme.

Adjustment of fees on clubbing of authorised share capital and Registrar of Companies fees - Requirement regarding ROC fees upon clubbing of authorised share capital - HELD THAT: - The Regional Director observed that adjustment of fees on clubbing of authorised share capital under the Act should be complied with. The petitioners replied that pursuant to the Scheme the authorised share capital of the transferor will be added to that of the transferee and that any fees previously paid by the transferor would be set off against fees payable by the transferee; the petitioners undertook to pay ROC fees if any on sanction. The Tribunal, having considered the undertaking and the scheme provision, accepted the petitioners' position and recorded compliance with the requirement subject to payment where applicable.

Petitioners' undertaking regarding adjustment/payment of ROC fees on clubbing of authorised share capital accepted; compliance directed.

Applicability of stamp duty on transfer of immovable property pursuant to amalgamation - Liability to pay stamp duty on transfer of immovable property - HELD THAT: - The Regional Director sought direction that applicable stamp duty be paid on transfer of immovable properties. The petitioners produced the audited financial statement as on 31 March 2020 and stated there were no immovable properties in the transferor company as on that date. On the record before the Tribunal, the petitioners' affirmation that no immovable property existed as on the appointed date was accepted and no direction for stamp duty payment in respect of transferor's immovable property was required.

No stamp duty payable by the transferee in respect of immovable property of the transferor as none existed as on the appointed date; petitioners' statement accepted.

Compliance with applicable accounting standards (including AS-14 / IND AS 103) in accounting treatment for the scheme - Requirement to comply with applicable accounting standards in accounting treatment of the scheme - HELD THAT: - The Regional Director recommended that accounting entries be passed in compliance with applicable accounting standards including AS-14/IND AS 103 and other relevant standards. The petitioners furnished an auditor's certificate confirming conformity with the Accounting Standards under Section 133 and gave an undertaking to comply with AS-14. The Tribunal recorded this compliance and the undertaking, thereby addressing the RD's concern.

Petitioners' auditor certificate and undertaking to comply with applicable accounting standards accepted; compliance directed.

Competence of an Association of Persons to be a registered member/shareholder - Whether an Association of Persons (AOP) can be a registered shareholder - HELD THAT: - The Regional Director queried the status of 'Vaishnavi & Co.' which held shares in the transferor company. The petitioners explained with reference to statutory definitions and the General Clauses Act that an AOP or unincorporated association can be a 'person' and thus competent to be a member and hold shares. The petitioners placed an Income Tax return of Vaishnavi & Co. on record. The Tribunal accepted the explanation that an AOP holding shares is within the four corners of the law.

The status of Vaishnavi & Co. as an AOP competent to hold shares was accepted; no impediment to issuing shares under the scheme on that account.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Shadhu Vanijya Private Limited and Hornbill Infratech Private Limited with effect from the appointed date, directed vesting of assets and liabilities and other consequential actions (continuation of proceedings, allotment of shares, engagement of employees), accepted petitioners' compliance with accounting and fee-related requirements and the status of the AOP shareholder, and ordered filing of the certified copy of the order with the ROC leading to dissolution of the transferor company.

Validity of service of demand notice under Section 8 of the IBC - Existence of operational debt and default - Admissibility of Section 9 petition under the Insolvency and Bankruptcy Code, 2016 - Declaration of moratorium - Appointment of Interim Resolution Professional - Obligation to deposit CIRP expenses by Operational Creditor - Duties of the Interim Resolution Professional and cooperation by directors - Updation of corporate status by Registrar of Companies

Validity of service of demand notice under Section 8 of the IBC - Service of the demand notice dated 04.12.2018 on the Corporate Debtor (and its directors) was valid and effective notwithstanding a subsequent change in the registered office intimated by the Corporate Debtor. - HELD THAT: - The Tribunal found that the demand notice in terms of Section 8 was sent by speed post and by e-mail on 04.12.2018 and stood delivered. The petitioner relied on contemporaneous proof of dispatch, tracking reports and non-bounce of the e-mail. The Tribunal accepted the principle that a change of registered office filed subsequently with the Registrar of Companies does not invalidate a demand notice already delivered at the previous registered address prior to the recordal of such change. On these facts the service requirement under the Code was satisfied and there was no dispute raised by the Corporate Debtor regarding service or the invoices. [Paras 5, 8, 9, 10, 12]

Demand notice dated 04.12.2018 validly served; service requirement under Section 8 satisfied.

Existence of operational debt and default - The Operational Creditor established the existence of operational debt and default by the Corporate Debtor for services rendered between April 2017 and November 2017. - HELD THAT: - The Tribunal recorded that the Operational Creditor produced the Letter of Intent for property management services, invoices for services rendered (Annexure P-6) and a computation of the outstanding amount. The last payment by the Corporate Debtor was on 26.10.2017 after which payments ceased; the Corporate Debtor did not dispute the services rendered or the invoices. On these materials the Tribunal concluded that debt and default were established for the purpose of Section 9(5) of the Code. [Paras 1, 2, 3, 12, 13]

Existence of operational debt and default established; requirements of Section 9(5) satisfied.

Admissibility of Section 9 petition under the Insolvency and Bankruptcy Code, 2016 - The Section 9 petition filed by the Operational Creditor is admissible and is admitted to initiate the corporate insolvency resolution process (CIRP) against the Corporate Debtor. - HELD THAT: - Having found valid service of the demand notice and that the debt and default were established, the Tribunal held that the petition complied with the statutory requirements of Section 9(5). There being no dispute raised by the Corporate Debtor on the merits of the claim, the Tribunal exercised its power to admit the petition and initiate CIRP. [Paras 12, 14]

Section 9 petition admitted and CIRP initiated against the Corporate Debtor.

Appointment of Interim Resolution Professional - Duties of the Interim Resolution Professional and cooperation by directors - An Interim Resolution Professional (IRP) was appointed and directed to take charge, make public announcement and call for claims; the directors and persons associated with management were directed to cooperate with the IRP. - HELD THAT: - Pursuant to admission of the Section 9 petition the Tribunal appointed the named Insolvency Professional as IRP and directed immediate takeover of management, public announcement under section 15, and calling for claims as prescribed. The IRP was required to comply with statutory duties under sections 13(2), 15, 17 and 18, and the directors, promoters and persons associated with the Corporate Debtor were ordered to extend assistance and cooperation as stipulated under section 19 so that the IRP could discharge functions under section 20. [Paras 15, 19]

IRP appointed; directed to take charge, make public announcement and invite claims; directors and management to cooperate.

Obligation to deposit CIRP expenses by Operational Creditor - Declaration of moratorium - Operational Creditor ordered to deposit an amount to meet immediate CIRP expenses; moratorium declared with the statutory prohibitions under Section 14 effective from the order. - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a specified amount with the IRP to meet immediate CIRP expenses, subject to adjustment by the Committee of Creditors. The Tribunal also declared the moratorium as provided under section 14, prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of property in possession of the Corporate Debtor; and clarified continuity of supply of essential goods or services during the moratorium as per the Code. [Paras 16, 17, 18]

Operational Creditor to deposit CIRP expenses; moratorium declared and its statutory effects imposed.

Updation of corporate status by Registrar of Companies - Registry directed to serve the order on the Registrar of Companies to update the Corporate Debtor's status on the MCA website and to file a compliance report. - HELD THAT: - To ensure public notice of the CIRP initiation, the Tribunal directed service of the order on the Registrar of Companies, Delhi & Haryana for appropriate updating of the Corporate Debtor's status on the Ministry of Corporate Affairs website and required the RoC to file a compliance report with the Adjudicating Authority. [Paras 21]

RoC directed to update corporate status on MCA website and file compliance report.

Final Conclusion: The Tribunal admitted the Section 9 petition, holding that the demand notice was validly served and that operational debt and default were established; CIRP is initiated, an Interim Resolution Professional appointed, the Operational Creditor directed to deposit CIRP expenses, a moratorium declared, and the Registrar of Companies ordered to update the corporate status.

Provisional attachment under Section 5(1) of the PML Act, 2002 - definition of "proceeds of crime" - requirement of "reason to believe" and application of mind - presumption under Section 24 of the PML Act - attachment of untainted property as "value equivalent" - availability of alternative remedy and writ maintainability under Article 226

Provisional attachment under Section 5(1) of the PML Act, 2002 - requirement of "reason to believe" and application of mind - definition of "proceeds of crime" - Validit y of the provisional attachment order where attached properties were purchased before the alleged criminal activity and whether the authority had sufficient material and applied its mind to form a 'reason to believe' that the properties were proceeds of crime. - HELD THAT: - The Court held that Section 5(1) empowers provisional attachment where an officer has a recorded "reason to believe", based on material in possession, that a person is in possession of proceeds of crime and such proceeds are likely to be concealed or transferred. The authorities must have a live link or close nexus between material and the belief. Applying the established principle and the decision in Seema Garg, the Court found that the impugned order was passed mechanically without proper application of mind: the attached properties had been acquired prior to the alleged offence, and the agency itself admitted it could not trace tainted property. Hence there was no material to show the properties were derived or obtained from criminal activity and the foundational facts required for invoking Section 5(1) were not established. The Court rejected the contention that the presumption under Section 24 could substitute for proof of foundational facts at the provisional-attachment stage. [Paras 18, 21, 22, 23, 24]

Provisional attachment quashed because the authorities lacked sufficient material and failed to apply their mind to form the requisite 'reason to believe' that the properties were proceeds of crime.

Definition of "proceeds of crime" - attachment of untainted property as "value equivalent" - Whether properties purchased before the commission of the alleged offence can be treated as 'proceeds of crime' or attached as value-equivalent in the absence of traceable tainted property. - HELD THAT: - The Court adopted the reasoning of the Division Bench in Seema Garg and reviewed authorities which distinguish three limbs of the definition of 'proceeds of crime' (tainted property, value of such property, and property equivalent in value where tainted property is held abroad). The Court observed that where tainted property is untraceable the concept of attaching value-equivalent property may apply in limited circumstances, but that does not justify attaching properties which were acquired prior to the offence absent material showing conversion or derivation from criminal activity. In the present case, the authorities could not trace tainted property and there was no material linking the properties attached to proceeds of crime; hence such properties could not be treated as proceeds of crime merely because the proceeds could not be traced. [Paras 15, 19, 20, 21, 24]

Properties acquired before the commission of the offence cannot be treated as 'proceeds of crime' in the absence of material showing they are derived or obtained from criminal activity; attachment as value-equivalent is not justified on the facts.

Presumption under Section 24 of the PML Act - requirement of "reason to believe" and application of mind - Whether the presumption under Section 24 relieves the enforcement authority of the obligation to establish foundational facts before provisional attachment is ordered or confirmed. - HELD THAT: - The Court held that Section 24 creates a statutory presumption only after it is shown that the properties fall within the definition of proceeds of crime; it cannot be read to displace the initial duty of the authority to establish foundational facts. The authority must first demonstrate on the materials that the property is ascribable to money laundering; only thereafter can the statutory presumption operate against the accused. Thus, Section 24 does not obviate the need for material justifying the recorded 'reason to believe' required under Section 5(1). [Paras 11, 23]

Section 24's presumption does not substitute for proving foundational facts; the authority must satisfy the Section 5(1) threshold before the presumption operates.

Availability of alternative remedy and writ maintainability under Article 226 - Maintainability of the writ petition despite the existence of a statutory appellate remedy under Section 26, given alleged vacancy of the Appellate Tribunal and arbitrariness in the attachment order. - HELD THAT: - Recognising that writ jurisdiction is discretionary and that courts normally expect alternative remedies to be exhausted, the Court applied settled exceptions where the statutory authority has acted contrary to the enactment or in an arbitrary manner. The Court accepted the petitioners' averment that the appellate authority was not available at the relevant time and found that the enforcement authorities acted contrary to statutory requirements in passing the provisional attachment without material. On these grounds the Court held it was appropriate to exercise Article 226 jurisdiction. [Paras 26, 27, 28, 29]

Writ petition maintainable: alternative remedy under Section 26 is not an absolute bar where the Appellate Tribunal was unavailable and the authority acted arbitrarily.

Nature of provisional attachment proceedings - availability of criminal process remedies - Whether the petition could be entertained as a Special Criminal Application despite the primarily civil character of provisional attachment proceedings. - HELD THAT: - The Court noted that Article 226 is not constrained by classification of proceedings and that the PML Act envisages Special Court proceedings and possible confiscation; consequently the High Court properly registered the petition as a Special Criminal Application. The Court rejected the objection that invoking criminal jurisdiction was inappropriate merely because provisional attachment is civil in character. [Paras 30, 31]

The writ petition could properly be entertained as a Special Criminal Application; the objection to maintainability on purely civil-character grounds is rejected.

Final Conclusion: The provisional attachment order No.5/2020 dated 17.12.2020, the notice dated 01.09.2021 and consequential proceedings are quashed for failure to establish the foundational material required by Section 5(1); the authorities must release the properties and restore possession forthwith. The High Court exercised writ jurisdiction because the appellate remedy was unavailable and the attachment was arbitrary.

Place of provision of service - export of services under Rule 6A - services provided in respect of goods - physical availability of goods by the recipient - definition of 'goods' under the Sale of Goods Act

Place of provision of service - services provided in respect of goods - physical availability of goods by the recipient - export of services under Rule 6A - definition of 'goods' under the Sale of Goods Act - Services rendered by the assessee qualify as export of service and are not taxable as services provided in respect of goods. - HELD THAT: - The place of provision of service is determined by Rule 3 of the POPS Rules, which makes the location of the recipient the place of provision. The exception in Rule 4 applies only where services are provided in respect of goods that are required to be physically made available by the recipient to the provider (or a person acting on behalf of the provider). In the present case the foreign recipients did not make any goods (samples) physically available to the appellant; the appellant procured samples independently from hospitals and research centres and merely transmitted the analysis report electronically to the foreign recipients. The samples (blood/tissue) were not purchased by the appellant nor are they marketable saleable goods; the amounts paid to the institutes were reimbursements for sample-drawing services. Consequently the condition in Rule 4 that would localise the place of provision to India is not satisfied. Applying Rule 6A of the Service Tax Rules, 1994, the provider is located in India, the recipient is located outside India, the place of provision of service is outside India, the service is not specified in the excluded list, payment was received in convertible foreign exchange and the establishments are not merely distinct establishments of the same person. Therefore the service meets the statutory conditions for export of service and is not chargeable to service tax. The Tribunal so holds and declines to engage further with the cited precedents since the conclusion follows from the facts and statutory interpretation in this case. [Paras 4, 5]

Appeal allowed; services held to be export of service and not taxable; consequential relief granted.

Final Conclusion: On the facts and statutory scheme, the appellant's diagnostic/genomic analysis services delivered electronically to foreign recipients satisfy the conditions of export of service and are not taxable; the appellant's appeal is allowed and the Revenue's appeal is dismissed.

Refund of wrongly paid service tax - Goods Transport Agency service - consignment note "by whatever name called" - composite service - predominant/principal service test - ancillary services (loading/unloading) form part of transportation - abatement applicable to GTA - penalties under Sections 76, 77 and 78 governed by Section 80 - bona fide belief / reasonable cause

Refund of wrongly paid service tax - Goods Transport Agency service - consignment note "by whatever name called" - composite service - predominant/principal service test - ancillary services (loading/unloading) form part of transportation - Whether the payments made to individual truck owners for movement of iron ore (01-01-2006 to 28-02-2007) entitled the assessee to refund of the service tax paid on the ground that such payments were not GTA services or were non-taxable components. - HELD THAT: - The Tribunal held that the assessee, having engaged individual truck owners for transportation from mine to port, was the recipient of GTA service. The adjudicating authority's finding that the assessee issued documents styled as "pay slips" was upheld because the contents matched the statutory explanation of a consignment note and the definition in Section 65(50b) contemplates consignment notes by whatever name called. The Tribunal applied the predominant-service test for composite contracts and concluded that transportation was the principal service; loading/unloading and related activities are ancillary to transportation and form part of the GTA service. Reliance on Rule 4B and the recorded contents of the pay slips supported the conclusion that the transactions fell within GTA and were taxable, so the claim for refund was not maintainable. The Tribunal therefore found no infirmity in the Commissioner(Appeals)'s order dismissing the refund claim. [Paras 4]

Appeal dismissed and refund claim rejected; payments constituted GTA service and were not eligible for refund.

Penalties under Sections 76, 77 and 78 governed by Section 80 - bona fide belief / reasonable cause - Whether penalties under Sections 76, 77 and 78 should be imposed for the period 2005 despite the adjudicating authority having dropped them under Section 80. - HELD THAT: - The Tribunal agreed with the adjudicating authority that imposition of penalties under the cited provisions is not automatic and falls to be considered under Section 80. On appreciation of facts, the authority had recorded that the assessee entertained a bona fide belief that it was not liable to pay service tax (noting that trucks were owned by transporters) and had made out sufficient cause for non-payment. No mala fide was found by the Revenue. In exercise of discretion under Section 80, penalties were rightly dropped, and the Tribunal found no reason to interfere with that discretionary relief. [Paras 5]

Revenue's appeal dismissed; penalties under Sections 76, 77 and 78 appropriately dropped under Section 80 on findings of bona fide belief/reasonable cause.

Final Conclusion: Both the assessee's appeal against rejection of refund for the period 01-01-2006 to 28-02-2007 and the Revenue's appeal seeking restoration of penalties for 2005 are dismissed; the Tribunal upheld that the transactions amounted to GTA service (no refund) and that penalties were correctly dropped under Section 80 on facts establishing bona fide belief/reasonable cause.

Exemption under Serial No.29(h) of Notification No.25/2012 ST (sub contractor works contract services) - negative list exclusion for transmission or distribution of electricity under Section 66D(k) of the Finance Act, 1994 - bundled service / natural bundling under Section 66F(3) of the Finance Act, 1994 - treatment of a subcontractor vis a vis main contractor for exemption purposes - eligibility under Entry No.12 / 12A of Notification No.25/2012 ST (governmental authority) - invocation of extended period of limitation and imposition of penalty

Exemption under Serial No.29(h) of Notification No.25/2012 ST (sub contractor works contract services) - treatment of a subcontractor vis a vis main contractor for exemption purposes - Whether the works contract services rendered by the appellant as sub contractor to APDCL/CAEDCL are exempt under Serial No.29(h) of Notification No.25/2012 ST. - HELD THAT: - The Tribunal accepted the appellants' contention that services performed by them (erection, commissioning, shifting, installation of lines and sub stations) are activities closely connected with, and essential to, the transmission and distribution of electricity carried out by APDCL/CAEDCL. The authority's narrow view that a sub contractor is not covered was rejected: 'sub contractor' is to be understood in ordinary parlance and the exemption must be given effect according to its plain language. Applying the bundling principle under Section 66F(3), the Tribunal held that where such works are naturally bundled with the single service whose essential character is transmission and distribution of electricity, the sub contractor's works contract services fall within the exemption at Serial No.29(h). The Tribunal thus accepted that, whether labelled contractor or sub contractor, services performed in relation to the exempted main service are not exigible to service tax. [Paras 12, 13, 14]

Appellant's works contract services as sub contractor are covered by exemption under Serial No.29(h) of Notification No.25/2012 ST and hence not exigible to service tax.

Bundled service / natural bundling under Section 66F(3) of the Finance Act, 1994 - negative list exclusion for transmission or distribution of electricity under Section 66D(k) of the Finance Act, 1994 - Whether the related/ancillary works performed by the appellant form part of a bundled service that takes the character of the exempted service (transmission and distribution) under Section 66F(3) and the negative list. - HELD THAT: - Relying on the statutory concept of 'bundled service' and authorities analyzing Section 66F(3), the Tribunal held that the impugned works are elements naturally bundled with transmission and distribution of electricity in the ordinary course of business and thus must be treated as part of the single service which gives the bundle its essential character. The Tribunal followed reasoning that components such as electric lines and plant are mandatorily provided by a distribution licensee under the Electricity Act and therefore the ancillary activities have direct and close nexus with the exempted main service. Consequently, the negative list exclusion and the bundling rule operate to exempt those ancillary works. [Paras 13, 14]

Related/ancillary works undertaken by the appellant are naturally bundled with transmission and distribution of electricity and are exempt under the negative list/bundling provisions.

Eligibility under Entry No.12 / 12A of Notification No.25/2012 ST (governmental authority) - Whether APDCL/CAEDCL qualify as 'Governmental Authority' so as to make the appellant eligible under Entry No.12 / 12A of Notification No.25/2012 ST. - HELD THAT: - The Tribunal examined the statutory definition of 'Governmental Authority' and the corporate status of APDCL/CAEDCL. The adjudicating and appellate authorities had found, and the Tribunal agreed, that APDCL/CAEDCL are companies incorporated under the Companies Act and do not perform functions entrusted to a municipality under Article 243W; consequently they do not meet the definition of a governmental authority for the purposes of Entry No.12 / 12A. The Tribunal observed that this conclusion is correctly reached on facts and law. [Paras 15, 16]

APDCL/CAEDCL do not qualify as 'Governmental Authority' under Entry No.12 / 12A and the exemption under those entries is not available to the appellant.

Invocation of extended period of limitation and imposition of penalty - Whether extended period of limitation could be invoked and whether penalties were correctly imposed on the appellants. - HELD THAT: - The Tribunal noted that the appellants had registered for service tax but filed nil returns and did not disclose material facts to the Department, and that no service tax had been paid. On these findings the authorities invoked the extended period and imposed penalties for omission and commission. The Tribunal held that invocation of the extended period and the imposition of penalties were correctly made on the factual record. However, since the Tribunal has held that the services are exempt under Serial No.29(h), the question of limitation and penalties does not affect the ultimate outcome in favour of the appellants. [Paras 17]

Extended period was rightly invoked and penalties were rightly imposed on the factual findings, but these do not alter the result once exemption under Serial No.29(h) is accepted.

Remand for quantification / computation of tax and related matters - Remand for further proceedings limited to computation/verification after acceptance of exemption. - HELD THAT: - The order records a partial allowance by way of remand. Earlier submissions by the appellant had pointed to omission by authorities to consider the value of services, abatement and material component while arriving at taxability. In the result the Tribunal accepted the exemption on merits but remitted the matter for consequential action consistent with its findings, which necessarily includes verification/quantification of taxable value, adjustment in light of allowed exemption and any consequential actions by the authorities. [Paras 4, 18]

Matter remanded for further proceedings limited to computation, verification and consequential action consistent with the Tribunal's acceptance of exemption.

Final Conclusion: The appeal is partly allowed: on merits the Tribunal holds that the appellant's works contract services rendered to APDCL/CAEDCL are exempt under Serial No.29(h) of Notification No.25/2012 ST by reason of natural bundling with transmission and distribution of electricity (Section 66F(3)/Section 66D(k)); claims under Entry No.12/12A as services to a governmental authority are negatived; extended period and penalties were held to have been invoked correctly on the factual findings, but the exemption renders those issues immaterial to the final entitlement; the matter is remanded for quantification/verification and consequential action consistent with these conclusions.

Mandatory pre-deposit for statutory appeals - Waiver of pre-deposit post-amendment - High Court's power under Article 226 to waive pre-deposit - Legislative intention and statutory mandate - Judicial restraint in contravention of statutory amendment

Mandatory pre-deposit for statutory appeals - Waiver of pre-deposit post-amendment - High Court's power under Article 226 to waive pre-deposit - Legislative intention and statutory mandate - Whether the High Court can, under Article 226, grant waiver of the mandatory pre-deposit required under Section 35F of the Central Excise Act read with Section 86 of the Finance Act, 1994 after the statutory amendment - HELD THAT: - The Court examined the statutory amendment to Section 35F read with Section 86 and held that the legislature intended to make the pre-deposit mandatory to curb frequent judicial waivers. In view of the amendment and subsequent judicial pronouncements emphasising adherence to statutory mandates, the High Court has no discretion to grant a general waiver of the pre-deposit even where financial hardship is claimed. Reliance on earlier decisions permitting waiver was considered in light of the amendment and rejected to the extent they are inconsistent with the amended statutory scheme. The Court noted that entertaining pleas for waiver contrary to the statute would undermine the legislative scheme and the object of the amendment. The Court referred to higher court authority underscoring that High Courts cannot disregard explicit statutory mandates. [Paras 8, 9, 10]

Relief in the form of waiver of the mandatory pre-deposit was refused and the petition is dismissed on this ground.

Judicial restraint in contravention of statutory amendment - Mandatory pre-deposit for statutory appeals - Whether any interim or ancillary relief should be granted to enable the petitioner to pursue the statutory appeal despite refusal to waive the pre-deposit - HELD THAT: - While declining to waive the statutory pre-deposit, the Court exercised limited equitable discretion to afford the petitioner a short opportunity to comply with the statutory requirement. The petitioner, having already deposited a portion of the mandated pre-deposit, was granted time to make the balance payment. The Court emphasised that if the balance pre-deposit is paid within the time granted and the appeal is otherwise in order, the Tribunal must consider and dispose of the appeal on merits.

Liberty granted to the petitioner to deposit the balance of the pre-deposit within one month; upon payment, the Tribunal shall consider and dispose of the appeal on merits.

Final Conclusion: Writ petition dismissed; no waiver of the mandatory pre-deposit can be granted under the amended statutory scheme, but petitioner is permitted one month to pay the balance pre-deposit, failing which statutory consequence will follow; if paid and the appeal is otherwise in order, the Tribunal will decide the appeal on merits.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - payment within 30 days / time limit for settlement under Form No.3 - extension of limitation to 30.06.2020 - discharge certificate issuance under the scheme - revival of demand for non-compliance with settlement timeline

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - payment within 30 days / time limit for settlement under Form No.3 - extension of limitation to 30.06.2020 - discharge certificate issuance under the scheme - revival of demand for non-compliance with settlement timeline - Entitlement to benefit under the Sabka Vishwas Scheme and issuance of discharge certificate where Form No.3 directed payment but payment was not made within 30 days nor by the extended date, and whether departmental demand could be sustained. - HELD THAT: - The Court examined the petitioner's claim for benefit under the scheme arising from issuance of Form No.3 dated 21.01.2020 which required payment within 30 days. The statutory timeline of 30 days expired on 21.02.2020, a date antecedent to the Covid-19 lockdown; the petitioner did not pay within that period. Although a later Ordinance substituted a fixed date of 30.06.2020 for certain limitation purposes, the petitioner made no effort to effect payment up to that extended date. The petitioner's eventual payment was made on 16.11.2021, long after both the original and the extended timelines. The Court relied on the assessees' lack of contemporaneous steps to secure a discharge certificate or to communicate receipt of payment to the department and on decisions of other benches in similar cases which rejected relief where payment had not been made within the prescribed/extended period. In these circumstances the Court concluded that the scheme's requirement of timely payment and consequent issuance of a discharge certificate were not satisfied, and that the department was entitled to treat the original demand as subsisting and to issue demand notices.

Petition dismissed; no interference with departmental demand or obligation to issue a discharge certificate where payment was not made within the prescribed or extended timeline.

Final Conclusion: The writ petition is dismissed: the petitioner failed to make payment within the scheme's prescribed 30 day period or within the extended timeline up to 30.06.2020, and accordingly was not entitled to discharge under the Sabka Vishwas scheme or to quash the departmental demand.

Sabka Vishwas Legacy Dispute Resolution Scheme - rejection of declaration under SVLDRS - writ under Article 226 - adjudication of Central Excise demand - appeal to Tribunal - expeditious disposal / priority in appellate hearing

Appeal to Tribunal - expeditious disposal / priority in appellate hearing - Permissibility of permitting the Tribunal to proceed with and decide the appeal against the Commissioner's order and the Court's direction regarding expedition and priority. - HELD THAT: - The High Court declined to adjudicate the appeal against the Commissioner's order itself and instead directed that the Tribunal be permitted to proceed with the hearing of the appeal and decide it on its merits. The Court requested that the Tribunal give some priority to the appeal filed by the writ applicants and endeavour to dispose of it expeditiously. This course was taken to allow the appellate forum to examine the adjudication order which is already under challenge before it, rather than the High Court determining the same issue in the writ proceedings at this stage. [Paras 10]

The Tribunal is to be allowed to proceed with the appeal and the Court requested the Tribunal to give priority to and expeditiously dispose of the appeal.

Sabka Vishwas Legacy Dispute Resolution Scheme - rejection of declaration under SVLDRS - writ under Article 226 - Whether the High Court will adjudicate the challenge to the Designated Committee's rejection of the SVLDRS declaration at this stage. - HELD THAT: - The Court did not decide the legality or merits of the Designated Committee's rejection of the declaration under the SVLDRS. Instead, it deferred consideration of that challenge to the time of final hearing of the writ petition. The rejection of the declaration dated 15.12.2019 was not quashed or upheld; the Court expressly stated that the matter shall be examined when the writ petition is finally heard, thereby leaving the question open for adjudication on merits in these proceedings. [Paras 11]

Challenge to the Designated Committee's rejection of the SVLDRS declaration is reserved for determination at the final hearing of the writ petition.

Final Conclusion: The High Court declined immediate interference with the adjudication order and directed that the statutory appellate forum (the Tribunal) be permitted to proceed with the appeal and to give it priority for expeditious disposal; the separate challenge to the Designated Committee's rejection of the SVLDRS declaration is reserved for consideration at the final hearing (rule returnable 22nd June, 2022).

Supplies to Special Economic Zone developers treated as export - retrospective amendment of Rule 6 of the CENVAT Credit Rules, 2004 by Section 144 of the Finance Act, 2012 - non applicability of sub rules (1), (2), (3) and (4) of Rule 6 for supplies to SEZ developers - waiver/neutralisation of reversal obligation under Rule 6 for exempted clearances to SEZ

Retrospective amendment of Rule 6 of the CENVAT Credit Rules, 2004 by Section 144 of the Finance Act, 2012 - supplies to Special Economic Zone developers treated as export - non applicability of sub rules (1), (2), (3) and (4) of Rule 6 for supplies to SEZ developers - Whether the demand under Rule 6 of the CENVAT Credit Rules, 2004 for reversal (10% of value) on goods cleared to SEZ developers is sustainable. - HELD THAT: - The Tribunal held that Section 144 of the Finance Act, 2012 retrospectively amended Rule 6 to the effect that sub rules (1), (2), (3) and (4) shall not apply in case of supplies to SEZ developers (retrospective effect from 10.02.2006 as specified in the Eighth Schedule). Independently, earlier decisions of this Tribunal and other authorities treat supplies from DTA to SEZ developers as 'export', thereby excluding such clearances from the neutralisation/reversal obligation in Rule 6. Applying the retrospective amendment together with the established view that supplies to SEZ developers constitute export, the demand for reversal of CENVAT credit, and the corresponding interest and penalty confirmed in the impugned order, cannot be sustained. The Tribunal therefore set aside the demand, interest and penalty. [Paras 4, 6, 7]

Demand of reversal under Rule 6, and the consequent interest and penalty, set aside; appeal allowed.

Final Conclusion: In view of the retrospective amendment by Section 144 of the Finance Act, 2012 and precedents treating supplies to SEZ developers as export, the demand under Rule 6 of the CENVAT Credit Rules, 2004 (and related interest and penalty) was held unsustainable and the appeal was allowed.

Cenvat credit on warranty repair and maintenance services - input service 'means' clause - services used, directly or indirectly, in or in relation to the manufacture of final products - per incuriam

Cenvat credit on warranty repair and maintenance services - input service 'means' clause - services used, directly or indirectly, in or in relation to the manufacture of final products - per incuriam - Whether the appellants are entitled to avail Cenvat credit of service tax paid on repair and maintenance services provided by authorised dealers/franchises to customers during the warranty period, where such services are provided free to customers but paid for by the appellants - HELD THAT: - The Tribunal held that the repair and maintenance services provided by authorised dealers during the warranty period, though rendered free to the end customers, were paid for by the appellants and are linked to sale and the manufacture of the final products. Such services fall within the 'means' clause of the definition of 'input service' as services used, directly or indirectly, in or in relation to the manufacture and clearance of final products. The Tribunal applied its prior decisions (including Carrier Airconditioning & Refrigeration, Honda Motorcycle & Scooter India and Samsung India Electronics) which treated dealer-provided warranty services as input services, and found that a later Division Bench decision distinguishing those precedents did so on a mistaken premise that an amendment affected the 'means' clause. That later decision was held to be rendered per incuriam because it ignored the relevant part of the statutory definition. Applying the earlier precedents, the Tribunal concluded the appellants were correctly entitled to Cenvat credit of the service tax paid on such warranty services and the demand was unsustainable. [Paras 4, 5]

Credit on warranty services provided through third parties during the warranty period is admissible; the demand is set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that Cenvat credit of service tax paid on warranty repair and maintenance services provided by authorised dealers/franchises (free to customers but paid by the appellants) is admissible under the 'means' clause of 'input service'; the demand and penalties were set aside.

Cenvat credit of service tax on outward transportation (GTA) as input service - extended period of limitation for demand - suppression, mis representation or intent to evade tax - discovery of inadmissible credit during audit - divergent judicial views and administrative guidance (CBIC circular)

Extended period of limitation for demand - divergent judicial views and administrative guidance (CBIC circular) - Whether the demand for reversal of cenvat credit of service tax on outward GTA is barred by limitation and whether extended period is invokable - HELD THAT: - The Tribunal found that the appellant had maintained proper records and had disclosed the credit in periodical returns (ER 1). The issue of allowability of credit for outward GTA has generated divergent judicial decisions and was the subject of administrative guidance by CBIC; consequently the question was open to more than one interpretation. The alleged inadmissible credit was noticed in audit and reflected in statutory returns, and therefore the facts do not establish a situation warranting invocation of the extended period of limitation. On these grounds the extended period was held not available to Revenue and the show cause notice was held to be hit by limitation. [Paras 8]

Extended period of limitation is not invokable; show cause notice is barred by limitation.

Suppression, mis representation or intent to evade tax - discovery of inadmissible credit during audit - Whether the appellant suppressed facts or acted with intent to evade tax so as to sustain penalty and extended limitation - HELD THAT: - The Tribunal recorded that the appellant had regularly filed returns showing the cenvat credit and maintained proper records. The credit entries were discoverable in statutory returns and were noticed during audit. In view of the disclosure in returns and the existence of bona fide, debatable legal position supported by divergent authorities and administrative instruction, there was no finding of suppression, mis representation or fraud by the appellant. [Paras 8]

No suppression, mis representation or intent to evade tax is established; penalty and extended limitation cannot be sustained on that basis.

Final Conclusion: Appeal allowed; impugned orders disallowing cenvat credit and imposing penalty (invoking extended limitation) set aside as barred by limitation and unsupported by any suppression; appellant entitled to consequential relief in accordance with law.

Mandatory issuance of declaration in Form "C" by the purchasing dealer under the CST regime - grounds for refusal of Form "C" under Rule 5(4) of the CST Rules - inadvertent misdescription in returns is not equivalent to concealment or default - administrative or electronic system incapacity cannot defeat substantive entitlement - extension of DVAT provisions to CST by operation of law

Mandatory issuance of declaration in Form "C" by the purchasing dealer under the CST regime - administrative or electronic system incapacity cannot defeat substantive entitlement - Entitlement of the petitioner to issuance of Form "C" for interstate purchases despite the department's electronic system not permitting download of the form. - HELD THAT: - The Court found on the assessment record that the interstate purchases were correctly reflected in the petitioner's books and accepted in the assessment order for Financial Year 2016-2017; the only defect was an inadvertent misdescription of those purchases as High Seas purchases. Once entitlement to Form "C" is established on merits, the respondent cannot deny issuance merely on the ground that the electronic system does not permit downloading. The Court accepted that technological facilitation cannot be allowed to defeat a substantive right and directed issuance of the Form "C" within three months. [Paras 13, 15, 18, 19, 20]

Petitioner entitled to Form "C"; respondent directed to furnish Form "C" for Financial Year 2016-2017 within three months.

Grounds for refusal of Form "C" under Rule 5(4) of the CST Rules - inadvertent misdescription in returns is not equivalent to concealment or default - Whether refusal to issue Form "C" was justified under the statutory grounds in Rule 5(4) on account of default, non-payment, failure to file utilization account or concealment. - HELD THAT: - Rule 5(4) sets out specific contingencies permitting refusal after hearing, including default in furnishing returns or payment, failure to maintain utilization accounts, or adverse material suggesting concealment. The Court found none of these contingencies attracted: there was no failure to furnish returns or pay tax (assessment resulted in nil demand) and no adverse material indicating concealment; the misdescription was inadvertent and acknowledged in the assessment order. Consequently Rule 5(4)(i) and related clauses were inapplicable to justify refusal. [Paras 11, 12, 13, 16]

Refusal under Rule 5(4) was not justified as the statutory grounds for withholding Form "C" were not attracted.

Extension of DVAT provisions to CST by operation of law - Whether the petitioner's claim is barred by the limitation under the DVAT Act (requiring filing of revised returns within one year) as applied to CST matters. - HELD THAT: - Respondent relied on Section 28 of the DVAT Act (and its applicability to CST matters) to contend that discrepancies must be rectified by revised return within one year and that the period had expired. The Court, however, dealt with entitlement on merits based on the assessment outcome and the administrative inability to issue Form "C"; the decision records the respondent did not demonstrate that the statutory bar extinguished the petitioner's entitlement where the assessment had accepted the purchases and recorded nil demand. The Court did not remand this issue for fresh consideration. [Paras 5, 13, 18]

Limitation under DVAT as relied upon by respondent did not defeat the petitioner's entitlement in the circumstances; no remand ordered on this ground.

Final Conclusion: Writ petition allowed: respondent directed to furnish Form "C" for Financial Year 2016-2017 to the petitioner within three months; refusal based solely on electronic/systemic inability to generate the form was held impermissible where entitlement had been established on the assessment record.

Classification of goods for tax rate - handicrafts - predominantly made by hand - visual appeal or ornamentation test - specific entry prevails over general entry

Handicrafts - predominantly made by hand - visual appeal or ornamentation test - classification of goods for tax rate - specific entry prevails over general entry - Whether marble stone articles sold by the petitioner are 'handicrafts' and hence liable to tax at the lower rate applicable to handicrafts rather than as stone articles at the higher rate. - HELD THAT: - The Tribunal reversed the first appellate authority without examining the characteristics of the petitioner's marble articles. Applying the tests laid down by the Supreme Court in Collector of Central Excise v. Louis Shoppe - that handicrafts are predominantly made by hand and possess substantial visual ornamentation or artistic improvement - the Court held that the Tribunal's conclusion could not be sustained without such examination. Further, the Court relied on the departmental clarification (ACAAR No.109/2015-16) which recognises 'handmade stone works, sculptures and stone reliefs, stone inlay work' as handicrafts and noted that where a product meets the general definition of handicrafts and is not specifically listed under another schedule entry, it should be treated as such; and where there is an express contrary specific entry, the specific entry prevails. On the material before it and the departmental clarification, the Court concluded that the petitioner's marble articles fall within the category of handicrafts and are not properly classifiable solely as stone articles attracting the higher rate. [Paras 8, 9, 10, 11, 12]

The order of the Tribunal dated 05.06.2007 in STA No.382/2003 is set aside and the marble stone articles of the petitioner are held to be 'handicrafts' for the purposes of taxation.

Final Conclusion: Writ petition allowed; Tribunal order set aside and petitioner's marble stone articles held to be handicrafts and not stone articles for the disputed classification; no costs.

Manufacture - misuse of declaration in Form 17 - concessional rate of tax on inputs used in manufacture - interpretation of the expression "does not sell the goods so manufactured" - scope of export sale vis-a -vis State sales tax - Article 286 - tax on inter-State and export transactions

Manufacture - conversion of wet blue leather into finished leather - Conversion of wet blue leather into finished leather amounts to manufacture within the meaning of Section 3 of the Tamil Nadu General Sales Tax Act, 1959. - HELD THAT: - The Court applied earlier binding reasoning in which the series of processes (splitting, shaving, washing, rechroming, neutralization, retanning, dyeing, drying, staking, trimming, buffing/stuffing, dedusting, finishing) effect a change in identity of wet blue leather to finished leather. Where the processed product no longer retains the identity of the input and becomes a distinct marketable commodity, the activity constitutes manufacture. The Court accepted the view in the cited earlier decision that these processes satisfy the tests applied by higher authorities to determine manufacture and thus attract the statutory treatment applicable to manufacturing activity.

Held that the conversion constitutes manufacture; the Tribunal was justified in so holding.

Misuse of declaration in Form 17 - concessional rate of tax on inputs used in manufacture - There was no misuse of declaration in Form 17 and the assessee was entitled to the concessional rate on purchases of materials used in processing leather. - HELD THAT: - Relying on the conclusion that the activity is manufacture, the Court held that purchases of chemicals and inputs against declaration were used in connection with manufacturing within the State and therefore the concessional rate prescribed under Section 3(3) applies. The Tribunal's allowance of the assessee's appeal on this ground was affirmed as consistent with the precedent which found no misuse of declarations where inputs are employed in manufacture.

Held that the assessee did not misuse Form 17 and was not liable to pay the higher rate on such purchases.

Interpretation of the expression "does not sell the goods so manufactured" - scope of export sale vis-a -vis State sales tax - Article 286 - tax on inter-State and export transactions - The substantial questions raised by Revenue concerning whether the expression includes export sales and whether a levy would contravene Article 286 were answered in favour of the assessee and against the Revenue. - HELD THAT: - Although the petition raised multiple points about whether Section 3(4) can be read to include export sales, the Court found the controversy squarely covered by the earlier decision relied upon by the respondent. Applying that precedent, the Court concluded against the Revenue's contentions (including the argument that taxing export sale would amount to a direct levy on export contravening Article 286) and upheld the Tribunal's order in favour of the assessee.

Answered in favour of the assessee; Revenue's contentions on inclusion of export sales and Article 286 were rejected.

Final Conclusion: The Revenue's revision petition was dismissed. The Tribunal's order allowing the assessee's appeal (holding the conversion to be manufacture and rejecting misuse of Form 17 and the Revenue's contention on export taxation) is affirmed; the tax case stands dismissed, no costs.

Abuse of process of court - Quashing of criminal proceedings as a counterblast to proceedings under the Negotiable Instruments Act - Maintainability of criminal complaint where parallel proceedings under the Negotiable Instruments Act are pending

Abuse of process of court - Quashing of criminal proceedings as a counterblast to proceedings under the Negotiable Instruments Act - Whether Complaint Case No.1154C/2018 under Sections 420/406/34 IPC is liable to be quashed as an abuse of the process of court being a counterblast to pending proceedings under the Negotiable Instruments Act. - HELD THAT: - The Court found that the criminal complaint filed in Malda arose as a counterblast to the earlier instituted proceedings under Sections 138/141 of the Negotiable Instruments Act in Calcutta. Relying on the principle recognised by the Supreme Court in Sunil Kumar v. Escorts Yamaha Motors Ltd. and Mahindra & Mahindra Financial Services Ltd. & Anr., the Court held that where an FIR or criminal complaint is lodged to pre-empt or retaliate against a party who has initiated proceedings under the Negotiable Instruments Act, continuation of such criminal proceedings would amount to an abuse of the process of the court. Having examined the record, the Court concluded that the Malda complaint was instituted in those circumstances and that permitting the proceedings to continue would be an abuse of process; accordingly, interference by quashing was warranted rather than permitting the complainant's evidence to be adduced at trial.

Complaint Case No.1154C/2018 under Sections 420/406/34 IPC pending before the Judicial Magistrate, 3rd Court, Malda, and the orders passed therein are quashed as an abuse of the process of the court.

Final Conclusion: The revisional application is allowed; the criminal complaint in Malda is quashed as a counterblast to prior Negotiable Instruments Act proceedings and continuation would be an abuse of process.