TaxTMI Updates e-Newsletter
Apr 05,2024

Preliminary objections - quasi-judicial adjudication - fair opportunity to be heard - remand for fresh adjudication - compliance with court directions

Preliminary objections - compliance with court directions - fair opportunity to be heard - Validity of the adjudicating officer's decision to decide the show cause notice instead of adjudicating the preliminary objections as directed by the High Court - HELD THAT: - The Court found that its order of 1st December, 2023 expressly allowed the petitioner to raise preliminary objections on 5th December, 2023 and directed that such preliminary objections be considered and decided by the adjudicating officer (see paras. 3 and 5 of the earlier order). The adjudicating officer, however, proceeded to decide the show cause notice on merits by Order-in-Original dated 29th December, 2023 without deciding the preliminary objections and without giving the petitioner notice that final adjudication would be taken up or an opportunity to place relevant documents on record. Such conduct was held inconsistent with the requirements of quasi-judicial adjudication which demand fairness and absence of surprise to a party, particularly when the Court had mandated consideration of preliminary objections. The Court emphasised that where a party is entitled to have preliminary objections decided, the adjudicating authority could not, without clear notice and opportunity, take the matter forward to final adjudication in a manner that takes the party unaware (paras. 11-14). [Paras 11, 12, 13, 14]

The adjudicating officer's decision to decide the show cause notice instead of adjudicating the preliminary objections as directed by this Court was held to be untenable for lack of fair notice and opportunity.

Remand for fresh adjudication - fair opportunity to be heard - quasi-judicial adjudication - Appropriate remedy for the adjudicatory defect and directions for further proceedings - HELD THAT: - Having found the adjudication procedurally unfair, the Court quashed and set aside the Order-in-Original dated 29th December, 2023 and remanded the proceedings to the adjudicating officer for de novo consideration. The adjudicating officer was directed to afford the petitioner an opportunity to place on record all documents it intends to rely upon and to decide all issues, including the preliminary objections, by a fresh order. The Court prescribed timeframes: filing and recording of documents within four weeks, fixation of hearing and endeavour to pass an appropriate order within six weeks after hearing concludes, while keeping all contentions open for adjudication (paras. 15-16). [Paras 15, 16]

Order-in-Original quashed and proceedings remanded for fresh adjudication after granting the petitioner an opportunity to place relevant material and to be heard, with specified timelines.

Final Conclusion: The High Court quashed the adjudicating officer's Order-in-Original dated 29.12.2023 for failure to comply with the Court's direction to decide preliminary objections and for denying the petitioner fair notice and opportunity; the matter is remitted for fresh adjudication after permitting the petitioner to file documents and be heard, with the adjudicating officer directed to decide all issues within specified timeframes.

Non-speaking order - ex-parte demand - failure to apply mind to taxpayer's reply - opportunity of personal hearing - re-adjudication / remand for fresh adjudication - requirement to issue speaking order - intimation to taxpayer to furnish further details - order passed under Section 73 of the CGST Act - fresh disposal within period prescribed under Section 75(3) of the Act

Failure to apply mind to taxpayer's reply - non-speaking order - ex-parte demand - Impugned order set aside for being cryptic and for not considering the detailed reply of the petitioner before creating an ex parte demand. - HELD THAT: - The Show Cause Notice contained distinct heads and the petitioner filed a detailed reply addressing each head. The impugned order records that the taxpayer's reply was 'not satisfactory' without any evaluation of the explanations furnished, stating only that the officer was 'left with no other option to create demand ex parte'. Such a conclusion, with no indication that the Proper Officer applied his mind to the reply or specified deficiencies, renders the order cryptic and unsustainable. If further information was required, the Proper Officer ought to have specifically called for it instead of proceeding to an ex parte demand. For these reasons the impugned order cannot stand and must be remitted for fresh consideration on merits. [Paras 5, 6]

Impugned order dated 28.12.2023 set aside; matter remitted to the Proper Officer for re adjudication.

Intimation to taxpayer to furnish further details - opportunity of personal hearing - requirement to issue speaking order - fresh disposal within period prescribed under Section 75(3) of the Act - Directions for re-adjudication: Proper Officer to intimate required details, permit petitioner to furnish explanations and documents, afford personal hearing and pass a fresh speaking order within statutory period. - HELD THAT: - On remand the Proper Officer is directed to communicate any specific details or documents required from the petitioner. Upon such intimation the petitioner shall furnish the requisite explanations and documents. Thereafter the Proper Officer must re adjudicate the Show Cause Notice after giving an opportunity of personal hearing and pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the Act. The Court has not expressed any view on the merits of the case; all rights and contentions are reserved. [Paras 7, 8, 9]

Proper Officer to re adjudicate after issuing specific intimation, allowing explanation and personal hearing, and to pass a fresh speaking order within the statutory period.

Final Conclusion: Impugned order set aside for being cryptic and not applying mind to the taxpayer's detailed reply; matter remitted to the Proper Officer with directions to seek any specific documents, permit explanations, afford personal hearing and pass a fresh speaking, reasoned order within the period under Section 75(3) of the Act; merits left open.

GST registration suspension - interim modification of suspension to permit specified supplies - protection of revenue by deposit/escrow of receivables - limited relief in peculiar facts and circumstances

Admission of additional documents - Additional documents filed by the petitioner were permitted to be placed on record. - HELD THAT: - The application seeking permission to place additional documents on record was allowed by the Court in view of the counter-affidavit not having been filed by the respondents at that stage. The Court took the additional documents on record to enable consideration of the petition. [Paras 3]

Application to place additional documents on record allowed and the documents taken on record.

GST registration suspension - interim modification of suspension to permit specified supplies - protection of revenue by deposit/escrow of receivables - limited relief in peculiar facts and circumstances - Order suspending/cancelling the petitioner's GST registration was modified to permit completion of specified supplies to BHEL, subject to deposit of receivables with the GST authorities and further orders of the Court. - HELD THAT: - The petitioner claimed non-receipt of the formal suspension/cancellation order, asserted outstanding receivables from BHEL and readiness to make further supplies for which payment would follow delivery. Respondents indicated no objection provided the revenue interest was protected. Balancing those facts and the potential impact on important state projects, the Court modified the suspension/cancellation order to permit the petitioner to execute pending supplies to BHEL. To safeguard revenue, the Court directed BHEL to deposit the entire amount payable to the petitioner with CGST Faridabad, South Division. The Court made clear that such deposit would be subject to further orders and that the relief was granted in the peculiar facts of the case, including that BHEL is a PSU and non-supply could affect significant projects. [Paras 6, 7, 8, 9, 11]

Suspension/cancellation modified to allow supplies to BHEL; BHEL directed to deposit amounts payable with CGST Faridabad, South Division; deposit subject to further orders; relief confined to the case's peculiar facts.

Final Conclusion: Petition granted limited interim relief: additional documents admitted; suspension/cancellation of GST registration modified to permit completion of specified supplies to BHEL with directed deposit of receivables to protect revenue, the deposit being subject to further orders and the relief being confined to the peculiar facts of the case.

Retrospective cancellation of GST registration - cancellation of registration for non-filing of returns - power to cancel GST registration with retrospective effect under Section 29(2) - requirement of objective satisfaction for retrospective cancellation - consequences of retrospective cancellation on input tax credit

Retrospective cancellation of GST registration - cancellation of registration for non-filing of returns - requirement of objective satisfaction for retrospective cancellation - Validity of the Show Cause Notice and the order cancelling registration retrospectively - HELD THAT: - The Show Cause Notice dated 01.09.2020 and the impugned order dated 01.01.2021 were held to be deficient because they did not specify cogent reasons for cancellation or put the petitioner on notice that cancellation would be with retrospective effect; the order even contained an erroneous statement of reason. Cancellation with retrospective effect under Section 29(2) cannot be mechanical or purely subjective; the proper officer must be objectively satisfied that retrospective cancellation is warranted and must record reasons. Merely non-filing of returns for a period does not justify cancelling registration retrospectively to cover periods when the taxpayer was compliant. The documents on record do not disclose any material justifying retrospective cancellation to 01.07.2017 and therefore the impugned retrospective cancellation could not be sustained as drawn. [Paras 8, 12, 13]

Show Cause Notice and cancellation order were unsustainable insofar as they effected retrospective cancellation without adequate reasons; retrospective cancellation to 01.07.2017 is set aside.

Power to cancel GST registration with retrospective effect under Section 29(2) - consequences of retrospective cancellation on input tax credit - Appropriate remedial direction and preservation of recovery rights - HELD THAT: - Both parties desired cancellation of registration, the petitioner by an application dated 06.05.2019 and the respondent by its initiation of proceedings. In view of the petitioner's stated cessation of business and absence of material for retrospective cancellation, the court modified the outcome: the registration is to be treated as cancelled with effect from 06.05.2019 (the date of the petitioner's cancellation application). The petitioner is directed to comply with statutory requirements under Section 29. The court expressly left open the respondents' right to pursue recovery of any tax, penalty or interest in accordance with law, including steps which may require consideration of retrospective cancellation if warranted on proper grounds and after objective satisfaction. [Paras 14, 16, 17]

Registration treated as cancelled with effect from 06.05.2019; petitioner to complete statutory compliances; respondents' rights of recovery preserved.

Final Conclusion: The petition is disposed of by modifying the impugned order: the GST registration of the petitioner is to be treated as cancelled from 06.05.2019, the petitioner shall comply with statutory requirements, and the respondents remain free to pursue recovery of any tax, penalty or interest in accordance with law.

Cancellation of GST registration - Retrospective cancellation - Show Cause Notice requirements - Reasoned order - Objective satisfaction under Section 29(2) - Effect of cancellation on input tax credit - Compliance with Section 29

Show Cause Notice requirements - Reasoned order - Retrospective cancellation - Cancellation of GST registration - Objective satisfaction under Section 29(2) - Effect of cancellation on input tax credit - Compliance with Section 29 - Validity of the Show Cause Notice and the order cancelling GST registration retrospectively, and the appropriate effective date of cancellation - HELD THAT: - The Show Cause Notice dated 20.09.2021 and the impugned order dated 26.10.2021 were found to be deficient because the notice failed to specify cogent reasons, omitted date/time for personal hearing and did not inform the petitioner of the prospect of retrospective cancellation; the cancellation order itself was internally contradictory and gave no reasons for retrospective effect. Cancellation under Section 29(2) can be ordered from a retrospective date only where the proper officer's satisfaction that such retrospective effect is warranted is based on objective criteria and not applied mechanically. Mere non-filing of returns for a period does not automatically justify retrospective cancellation covering periods when the taxpayer had complied. The court noted the consequence that retrospective cancellation may deny input tax credit to customers and observed such consequences should be considered when contemplating retrospective cancellation. As the petitioner no longer sought to continue the registration, the court exercised its remedial power to moderate the defective retrospective order by fixing the effective date of cancellation as 20.09.2021 (date of the Show Cause Notice) while directing the petitioner to comply with statutory requirements under Section 29. The respondents remain entitled to pursue recovery of any tax, interest or penalty in accordance with law, including steps relating to retrospective cancellation if warranted after appropriate consideration. [Paras 8, 9, 10, 12, 13]

Show Cause Notice and cancellation order set aside to the extent they sustain retrospective cancellation; registration treated as cancelled with effect from 20.09.2021 and petitioner directed to make compliances under Section 29; respondents not precluded from lawful recovery action.

Final Conclusion: The Show Cause Notice and the cancellation order were unsustainable insofar as they effected retrospective cancellation without objective reasons; the registration is modified to stand cancelled with effect from 20.09.2021, subject to statutory compliances and without prejudice to respondents' rights to recover dues in accordance with law.

Transition credit under Section 140(1) read with Rule 117(1) - input tax credit carry forward - production of documents in response to show cause notice - assessment set aside for non-consideration of documents - remand for fresh consideration - opportunity of hearing

Transition credit under Section 140(1) read with Rule 117(1) - input tax credit carry forward - production of documents in response to show cause notice - assessment set aside for non-consideration of documents - remand for fresh consideration - opportunity of hearing - Assessment order set aside and remitted for fresh consideration of the petitioner's claim of transition credit and related documents. - HELD THAT: - The petitioner, an assessee under the GST Act, filed a reply to the show cause notice enclosing Tran-1 and returns evidencing carried forward credit. The Assessing Officer passed the impugned assessment order treating the documents as not produced and did not consider the materials placed by the petitioner. The respondent conceded that the documents tendered during the enquiry were not considered by the Assessing Officer. In view of the concession and the failure to consider the material placed on record, the Court set aside the assessment order and remanded the matter for fresh consideration. The petitioner was directed to appear before the respondent with the required materials on the specified date, and the respondent was directed to consider the documents afresh, afford due opportunity of hearing and pass appropriate orders on merits and in accordance with law within two weeks thereafter. [Paras 3, 4, 6]

Impugned assessment order is set aside; matter remanded for fresh consideration of the transition credit claim after allowing the petitioner to produce documents and after providing an opportunity of hearing.

Final Conclusion: Writ petition allowed; assessment order dated 28.12.2023 set aside and matter remanded for fresh consideration of the petitioner's transition credit claim for 2017-18, with directions to produce documents, afford hearing and pass orders within the prescribed time.

Cancellation of GST registration - retrospective cancellation of registration - power to cancel registration retrospectively under Section 29(2) - requirement of objective satisfaction for retrospective cancellation - opportunity to be heard before retrospective cancellation - consequences of retrospective cancellation on input tax credit

Cancellation of GST registration - retrospective cancellation of registration - opportunity to be heard before retrospective cancellation - Validity of the impugned order cancelling the petitioner's GST registration with retrospective effect from 02.07.2017 - HELD THAT: - The Show Cause Notice and the impugned order did not specify any cogent reasons for cancellation and merely used the description "Others"; the order itself did not give reasons explaining why cancellation was to operate retrospectively. The impugned order was internally inconsistent - stating liability to cancel while recording nil dues - and did not put the petitioner on notice that cancellation would be retrospective, thereby denying an opportunity to object to retrospective effect. In these circumstances the order cannot be sustained as an order of retrospective cancellation. Having regard to the petitioner's stated intention to cease business, the court modified the impugned order by treating the registration as cancelled with effect from the date of the order (08.06.2022), while leaving open statutory compliance and recovery proceedings by the respondents. [Paras 5, 7, 8, 12, 13]

Impugned retrospective cancellation from 02.07.2017 set aside; registration treated as cancelled with effect from 08.06.2022; petitioner to comply with Section 29 and respondents free to pursue recovery in accordance with law.

Power to cancel registration retrospectively under Section 29(2) - requirement of objective satisfaction for retrospective cancellation - consequences of retrospective cancellation on input tax credit - Legal principles governing cancellation of GST registration with retrospective effect - HELD THAT: - Section 29(2) permits cancellation from such date, including retrospective dates, if the conditions set out are satisfied; however cancellation with retrospective effect cannot be mechanical or merely consequential to non-filing of returns. The proper officer's satisfaction to order retrospective cancellation must be based on objective criteria and not be purely subjective. While the court did not undertake a full examination of the consequences, it noted that retrospective cancellation has consequential effects (for example on recipients' input tax credit) and therefore such consequences ought to be considered and warranted before imposing retrospective cancellation. [Paras 9, 10]

Retrospective cancellation permissible only upon objective satisfaction of the statutory conditions and with due regard to its consequences; it cannot be applied mechanically.

Final Conclusion: The writ petition is disposed of by setting aside the retrospective cancellation as from 02.07.2017 and treating the GST registration as cancelled with effect from 08.06.2022; the petitioner must comply with statutory requirements under Section 29 and the revenue remains free to pursue recovery or other lawful steps including consideration of retrospective cancellation after due process.

Cancellation of GST registration - Retrospective cancellation - Show Cause Notice requirements - Objective satisfaction for cancellation - Opportunity to be heard on retrospective effect - Consequences of retrospective cancellation on input tax credit - Power to recover tax, penalty and interest

Show Cause Notice requirements - Opportunity to be heard on retrospective effect - Validity of the Show Cause Notice issued for cancellation of GST registration - HELD THAT: - The Show Cause Notice dated 27.06.2023 did not specify cogent reasons, did not identify the officer or place for personal appearance and failed to put the petitioner on notice that cancellation, if ordered, would be retrospective. A Show Cause Notice and the opportunity of personal hearing must furnish sufficient particulars so that the person concerned can effectively meet the case against them, including any proposed retrospective effect. The notice before the Court was therefore deficient and could not sustain the subsequent order of cancellation. [Paras 3, 7, 8]

The Show Cause Notice was held to be invalid and unsustainable.

Cancellation of GST registration - Retrospective cancellation - Objective satisfaction for cancellation - Consequences of retrospective cancellation on input tax credit - Validity of retrospective cancellation of GST registration and the standard for imposing retrospective effect - HELD THAT: - Section 29(2) permits cancellation from such date, including retrospective dates, as the proper officer may deem fit, but the power to impose retrospective cancellation cannot be exercised mechanically or subjectively; it must be founded on objective criteria. Mere non-filing of returns for some periods does not automatically justify cancellation with retrospective effect covering periods of compliance. The proper officer must also consider the consequences of retrospective cancellation - for example, denial of input tax credit to recipients - and ensure such consequences are warranted before directing retrospective cancellation. Because the impugned order gave no reasons and no objective satisfaction for fixing a retrospective effective date, it could not be sustained. [Paras 9, 10, 11]

The retrospective cancellation was held unlawful; the order dated 17.07.2023 was set aside and the registration restored subject to compliance and filing of returns.

Power to recover tax, penalty and interest - Whether respondents are precluded from pursuing statutory recovery or further action following restoration - HELD THAT: - The Court restored the petitioner's GST registration but clarified that restoration does not prevent the respondents from initiating or continuing lawful steps for recovery of tax, penalty or interest that may be due. The respondents retain the statutory power to pursue recovery and to reconsider cancellation, including retrospective cancellation, in accordance with law and after complying with procedural requirements. [Paras 12]

Respondents are not precluded from pursuing recovery or taking further action in accordance with law.

Final Conclusion: The order cancelling the petitioner's GST registration with retrospective effect was quashed for lack of adequate notice and absence of objective reasons; registration is restored subject to required compliance and filing, while respondents remain entitled to pursue recovery or lawful action thereafter.

Cancellation of GST registration with retrospective effect - requirement of objective satisfaction for retrospective cancellation - sufficiency of show cause notice for cancellation - reinstatement of registration pending compliance - re-adjudication of demand after opportunity of personal hearing

Cancellation of GST registration with retrospective effect - requirement of objective satisfaction for retrospective cancellation - sufficiency of show cause notice for cancellation - Impugned Show Cause Notice dated 31.01.2023 and order dated 09.02.2023 cancelling the petitioner's GST registration retrospectively are unsustainable. - HELD THAT: - The Show Cause Notice and the cancellation order are devoid of cogent reasons and do not put the petitioner on notice that cancellation would be retrospective. The cancellation order is internally contradictory by referring both to a reply and to non-filing of a reply, and there is no material demonstrating why retrospective cancellation with effect from 02.07.2017 was warranted. Section 29(2) permits cancellation from such date as the proper officer may deem fit, but such retrospective cancellation cannot be mechanical or solely subjective; it must rest on objective criteria and be justified in light of the consequences (including denial of input tax credit to recipients). In the absence of objective satisfaction and adequate reasons in the notice and order, the cancellation cannot stand and is not a valid exercise of power. [Paras 13, 14, 15, 16, 17]

Order dated 09.02.2023 cancelling registration retrospectively is set aside and the GST registration is restored; petitioner directed to make necessary compliances and file requisite returns.

Reinstatement of registration pending compliance - Order dated 14.03.2024 rejecting the petitioner's application for condonation of delay and revocation of cancellation is unsustainable and is set aside. - HELD THAT: - The rejection recorded reasons including non-functioning of the firm at the registered address and insufficiency of reasons for delay; however, given that the antecedent cancellation order has been set aside for lack of reasons and improper retrospective effect, the order rejecting revocation cannot stand. The Court restores registration and thus quashes the subsequent rejection which flowed from the invalid cancellation. [Paras 8, 17]

Order dated 14.03.2024 is set aside and the registration restored.

Sufficiency of show cause notice for cancellation - re-adjudication of demand after opportunity of personal hearing - Impugned order dated 14.12.2023 disposing Show Cause Notice dated 23.09.2023 under Section 73 and raising demand is set aside and the matter is remitted for fresh adjudication. - HELD THAT: - The Show Cause Notice dated 23.09.2023 alleged incorrect declaration of tax liability for FY 2017-18 and included detailed heads relating to excess claim of ITC and scrutiny of ITC. The petitioner filed a detailed reply, but because the registration previously stood cancelled retrospectively the petitioner may have been unable to access processes on the portal. In view of the quashing of the retrospective cancellation and restoration of registration, the impugned adjudication under Section 73 must be reconsidered. The matter is remitted to the Proper Officer to re-adjudicate after allowing the petitioner to file a response and granting an opportunity of personal hearing. [Paras 9, 10, 11, 18]

Order dated 14.12.2023 is set aside; Show Cause Notice dated 23.09.2023 is remitted for re-adjudication after the petitioner files a response and is given a personal hearing.

Final Conclusion: Orders dated 09.02.2023, 14.12.2023 and 14.03.2024 are set aside; the GST registration of the petitioner is restored; the petitioner shall make requisite compliances and file returns; the Show Cause Notice dated 23.09.2023 is remitted to the Proper Officer for re-adjudication after the petitioner files a response within one week and is given an opportunity of personal hearing.

Cancellation of GST registration - Retrospective cancellation - Show cause notice - Revocation of cancellation of registration - Opportunity of hearing - Direction to decide pending application

Revocation of cancellation of registration - Direction to decide pending application - Opportunity of hearing - Application for revocation of cancellation of GST registration to be decided by the Proper Officer within a specified period - HELD THAT: - The Court recorded that the Show Cause Notice dated 11.10.2023 did not specify cogent reasons and did not put the petitioner on notice that cancellation would be retrospective, and that the cancellation order dated 06.01.2024 merely referred to the show cause notice while fixing the effective date of cancellation as 01/03/2023 without stating reasons. The petitioner filed an application for revocation of cancellation on 16.01.2024 and appeared before the Assistant Commissioner; certain queries raised by the department were responded to but no decision on the revocation application has been taken. The Court refrained from adjudicating the merits of the cancellation or the revocation application and instead directed the Proper Officer to decide the petitioner's application for revocation within two weeks from the date of the order, preserving all rights and contentions of the parties. [Paras 4, 6, 7, 8, 9]

Proper Officer directed to decide the petitioner's application for revocation of cancellation of registration within two weeks; merits not decided and rights reserved.

Final Conclusion: Writ petition disposed of by directing the Proper Officer to decide the petitioner's application for revocation of cancellation of GST registration within two weeks; the Court did not adjudicate the merits of cancellation or revocation and preserved the parties' rights.

Statutory stay under Sub-Section (9) of Section 112 of the CGST/OGST Act - remedy of appeal under Section 112 of the CGST/OGST Act - non-constitution of Appellate Tribunal under Section 109 - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - clarificatory Circular of CBIC dated 18.03.2020 - conditional deposit of 20 percent for grant of stay

Statutory stay under Sub-Section (9) of Section 112 of the CGST/OGST Act - non-constitution of Appellate Tribunal under Section 109 - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - clarificatory Circular of CBIC dated 18.03.2020 - conditional deposit of 20 percent for grant of stay - Extension of statutory stay to the petitioner in view of non-constitution of the Appellate Tribunal and consequent deprivation of the statutory remedy of appeal - HELD THAT: - The Court acknowledged that the impugned order is appealable under Section 112 and that the petitioner has been deprived of the statutory appeal remedy because the Appellate Tribunal envisaged under Section 109 has not been constituted. Relying on the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 and the CBIC clarification dated 18.03.2020 addressing the consequences of non-constitution of the Tribunal, the Court held that the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112. The stay is granted as a matter of justice so that the petitioner is not prejudiced by the respondents' failure to constitute the Tribunal. The Court made the stay conditional on verification and deposit of an amount equal to 20 per cent of the remaining disputed tax (or deposit of the same if not already made) in addition to any earlier deposit under Sub-Section (6) of Section 107, and directed that recovery proceedings shall be stayed accordingly. [Paras 3, 4, 5, 6]

Petitioner granted the statutory stay under Sub-Section (9) of Section 112, subject to verification and deposit of 20 per cent of the remaining disputed tax; recovery stayed.

Remedy of appeal under Section 112 of the CGST/OGST Act - non-constitution of Appellate Tribunal under Section 109 - conditional filing of appeal upon constitution of Tribunal - Filing obligation and future prosecution where the Tribunal is later constituted - HELD THAT: - The Court directed that the statutory relief of stay granted because of non-constitution of the Tribunal is not open-ended. The petitioner is required, once the Appellate Tribunal is constituted and the President or State President enters office, to file an appeal under Section 112 observing statutory requirements within the period to be specified. If the petitioner elects not to file such appeal within the specified period after constitution, the respondent authorities are at liberty to proceed further in accordance with law. This balances the equities by preserving the petitioner's right to appeal while preventing indefinite suspension of recovery. [Paras 6]

Petitioner must file the appeal under Section 112 after constitution of the Tribunal within the period specified; failing which respondents may proceed in law.

Final Conclusion: Writ petition disposed by extending the statutory stay under Sub-Section (9) of Section 112 to the petitioner-subject to verification/deposit of 20% of the remaining disputed tax-on account of non-constitution of the Appellate Tribunal, with a direction to file the appeal once the Tribunal is constituted and a stipulation that failure to avail the appeal will permit respondents to proceed in accordance with law.

Cancellation of GST registration - Suspension of GST registration - Section 29(2)(e) - registration obtained by means of fraud, willful misstatement or suppression of facts - Obligation to furnish details under Section 29 - Validity of show cause notice and personal hearing requirement

Cancellation of GST registration - Validity of show cause notice and personal hearing requirement - Order rejecting the petitioner's application for cancellation of GST registration was set aside and registration cancelled from the date of the application. - HELD THAT: - The Court examined the order rejecting the petitioner's cancellation application and the subsequent show cause notices. The rejection order recorded non-appearance and non-response but the authorities later issued a show cause and suspended registration without adequate specification of the officer or place for personal hearing. Having regard to the petitioner's cessation of business activities, his voluntary deposit towards an identified liability, and procedural defects in the administrative action, the Court concluded that the impugned rejection could not stand. Consequently the Court set aside the order rejecting cancellation and directed that the GST registration be cancelled with effect from the date the petitioner first applied for cancellation, while preserving the respondents' right to pursue recovery and other legal actions. [Paras 5, 6, 9, 10]

Order rejecting cancellation set aside; GST registration cancelled with effect from 23.02.2023 (date of application for cancellation).

Obligation to furnish details under Section 29 - Section 29(2)(e) - registration obtained by means of fraud, willful misstatement or suppression of facts - Petitioner ordered to comply with the requirements of Section 29 and respondents permitted to take further action including recovery of tax, penalty or interest. - HELD THAT: - While cancelling the registration effective from the application date, the Court required the petitioner to comply with Section 29 of the Central Goods and Services Tax Act, 2017 and furnish all details mandated by that provision. The Court made clear that cancellation does not preclude the respondents from initiating or continuing lawful steps for assessment, recovery or other actions if tax, interest or penalty remains payable, including steps founded on allegations under Section 29(2)(e). [Paras 9, 10]

Petitioner to furnish details as required under Section 29; respondents free to take further action for recovery of dues in accordance with law.

Final Conclusion: The High Court set aside the authority's order rejecting the cancellation application and directed that the petitioner's GST registration stand cancelled effective 23.02.2023, subject to the petitioner's compliance with Section 29 and without prejudice to the respondents' right to pursue recovery or other lawful actions.

Condonation of delay - proviso to Rule 23 of the Odisha Goods and Services Tax Rules - revocation of cancellation of registration - acceptance of GSTR-3B return subject to payment of taxes, interest, late fee and penalty - opening of portal by proper officer to enable filing of GST return

Condonation of delay - proviso to Rule 23 of the Odisha Goods and Services Tax Rules - revocation of cancellation of registration - acceptance of GSTR-3B return subject to payment of taxes, interest, late fee and penalty - Delay in invoking the proviso to Rule 23 OGST Rules is condoned and the revocation application is to be considered on compliance with payment and formalities - HELD THAT: - The Court recorded the respondent's concession that if the delay in filing the revocation application is condoned and the petitioner complies with requirements of depositing taxes, interest, late fee and penalty and other formalities, the GSTR-3B return filed by the petitioner will be accepted and the revocation application considered. Applying that position, the Court condoned the delay in invoking the proviso to Rule 23 of the OGST Rules and directed that on the petitioner making the requisite payments and complying with other formalities the revocation application shall be considered in accordance with law. The petitioner is directed to produce a copy of the order before the proper officer, who, subject to the petitioner's compliance with the stated conditions, shall open the portal to enable filing of the GST return. [Paras 2, 3, 4]

Delay in invoking the proviso to Rule 23 is condoned; upon payment of taxes, interest, late fee and penalty and fulfillment of other formalities the revocation application shall be considered and the proper officer shall open the portal to enable filing of the GSTR-3B return.

Final Conclusion: The writ petition is disposed of by condoning the delay in invoking the proviso to Rule 23 OGST Rules and directing that, on the petitioner depositing all taxes, interest, late fee, penalty and complying with other formalities, the revocation application shall be considered and the proper officer shall enable filing of the GST return.

Principles of natural justice - opportunity of personal hearing - consideration of reply filed in statutory proceedings - setting aside administrative order and remand for fresh adjudication

Principles of natural justice - consideration of reply filed in statutory proceedings - Ext.P5 order was passed without considering the appellant's uploaded reply (Ext.P3) and without granting an opportunity of personal hearing, thereby violating principles of natural justice. - HELD THAT: - The record shows that the appellant uploaded a substantive reply in Form GST DRC-06 (Ext.P3) through the department's registered web portal and specifically sought a personal hearing. Despite this, the 1st respondent issued Ext.P5 final order demanding tax and interest without referring to the uploaded reply or affording the requested personal hearing. The Court held that adjudication in such circumstances infringes the principles of natural justice because the authority failed to consider the material placed before it and did not afford the statutory opportunity to be heard before arriving at a final demand. [Paras 3]

Ext.P5 is unsustainable and is set aside on the ground of violation of principles of natural justice.

Setting aside administrative order and remand for fresh adjudication - opportunity of personal hearing - Whether the matter should be remanded for fresh adjudication after considering the appellant's reply and after granting personal hearing. - HELD THAT: - Having concluded that Ext.P5 suffers from a procedural infirmity, the Court did not adjudicate the merits of the demand but directed that the 1st respondent must pass a fresh order. The fresh adjudication must take into account the contentions raised by the appellant in Ext.P3 and must be preceded by an opportunity of personal hearing to the appellant. The Single Judge's dismissal relegating the appellant to alternative appellate remedy was set aside to enable the remand and fresh decision. [Paras 3]

Matter remanded to the 1st respondent to pass a fresh order after considering Ext.P3 and after affording personal hearing; impugned judgment and Ext.P5 set aside.

Final Conclusion: Writ appeal allowed; impugned order (Ext.P5) and the Single Judge's dismissal set aside. The 1st respondent directed to reconsider the demand in accordance with principles of natural justice by taking into account the appellant's reply and by granting an opportunity of personal hearing before passing a fresh order.

Condonation of delay beyond statutory limitation not permissible - extension of filing period by executive notification - deemed filing of pending appeals under notification - pre-deposit / payment conditions for maintainability of appeal under notification - restoration of dismissed appeals subject to compliance with notification conditions - application of special procedure to pending and dismissed appeals

Condonation of delay beyond statutory limitation not permissible - Whether the Appellate Authority or the High Court can condone delay beyond the period specifically provided by the BGST Act. - HELD THAT: - The Court held that when the statute prescribes a specific period within which a delayed appeal may be filed (including any limited further period for filing with explanation), neither the Appellate Authority nor this Court under Article 226 can condone delay beyond the period so provided. The judgment relies on established precedent to the effect that judicial condonation cannot override a statutory time-limit expressly prescribed for filing appeals. [Paras 3]

Judicial condonation beyond the statutory period under the BGST Act is not permissible.

Extension of filing period by executive notification - deemed filing of pending appeals under notification - pre-deposit / payment conditions for maintainability of appeal under notification - application of special procedure to pending and dismissed appeals - Whether Notification No. 53 of 2023 (Central Tax) operates to extend the period for filing appeals under Sections 73 and 74 of the BGST Act and on what conditions such an extension is operative. - HELD THAT: - The Court accepted that the Board's Notification extends the time for filing appeals against orders passed on or before 31.03.2023, permitting appeals to be filed in FORM GST APL-01 on or before 31.01.2024 and deeming certain pending appeals to have been filed in accordance with the notification if they meet its conditions. The notification conditions (paras 2-6) require payment of the admitted portion of tax, interest, fine, fee and penalty and a specified pre-deposit (12.5% of the remaining tax in dispute, subject to a ceiling and with a mandated portion debited from the Electronic Cash Ledger), prohibit refund of amounts paid in excess until disposal, exclude demands not involving tax, and make applicable Chapter XIII of the CGST Rules mutatis mutandis. The Court treated these conditions as material to maintainability and binding for restoration or acceptance of appeals under the notification. [Paras 4, 5, 6, 7]

The Notification validly extends the filing period subject to compliance with its procedural and pre-deposit conditions, and pending appeals that satisfy those conditions are to be treated as properly filed.

Restoration of dismissed appeals subject to compliance with notification conditions - application of special procedure to pending and dismissed appeals - Whether an appeal already dismissed for delay may be restored and what directions should follow. - HELD THAT: - Applying the Notification, the Court set aside the order dismissing the appeal for delay and directed that the appeal be restored to the files of the Appellate Authority provided the petitioner satisfies the conditions specified in paragraph 3 of the Notification by the stipulated date (31.01.2024). The Court construed the requirement of pre-deposit to mean payment of any deficient amounts (noting that on initial filing 10% should have been remitted) and made clear that failure to comply would result in the appeal being rejected or standing rejected. The Court further directed the Commissioner, State Taxes, Bihar to issue instructions to officers to carry out assessments and consider appeals in consonance with the Notification, including cases where this Court previously dismissed writ petitions challenging dismissal for delay. [Paras 8, 9, 10, 11, 12]

The impugned order dismissing the appeal is set aside and the appeal is restored subject to timely satisfaction of the Notification's conditions; administrative instructions are to be issued to give effect to this course.

Final Conclusion: Writ petition allowed: the order dismissing the appeal for delay is set aside and the appeal is to be restored and considered on merits if the petitioner complies with the Notification No. 53 of 2023 (Central Tax) conditions by 31.01.2024; failure to comply will result in rejection, and the State tax administration is directed to issue necessary instructions to implement the Notification in pending and earlier-dismissed cases.

Reference to Transfer Pricing Officer under Section 92CA - arm's length price determination by the Transfer Pricing Officer - Assessing Officer to compute total income in conformity with TPO determination - mandatory nature of CBDT instructions on transfer pricing reference - prohibition on Assessing Officer determining ALP where TPO has jurisdiction

Arm's length price determination by the Transfer Pricing Officer - Assessing Officer to compute total income in conformity with TPO determination - prohibition on Assessing Officer determining ALP where TPO has jurisdiction - Whether the Assessing Officer could make transfer pricing adjustments beyond the ALP determined by the Transfer Pricing Officer - HELD THAT: - The Court held that Section 92CA requires that where the AO refers computation of ALP to the TPO the ALP determination is to be made by the TPO and the AO must compute the total income in conformity with that determination. The legislative scheme, reinforced by CBDT instructions and settled Supreme Court precedent, makes the reference to the TPO mandatory in cases selected on transfer pricing risk parameters and interdicted the AO from independently determining the ALP in such cases. In the present case the TPO had determined aggregate transfer pricing adjustments amounting to the smaller figure (INR 16,84,51,531/-) and only suggested that the AO may examine the taxability of the demerged business value; the TPO did not determine the demerger value as the ALP. The AO, however, added a larger amount purportedly representing the value of the demerged business without it being the ALP determined by the TPO and without affording the assessee an opportunity of hearing on that addition. That course was inconsistent with the mandate of Section 92CA and the governing instructions and thus was impermissible. [Paras 11, 15, 19, 21]

Impugned assessment addition insofar as it goes beyond the ALP determined by the TPO is unsustainable and set aside.

Reference to Transfer Pricing Officer under Section 92CA - remand for fresh consideration - Direction as to further proceedings arising from the invalid assessment addition - HELD THAT: - The Court, having set aside the impugned order, remitted the matter to the Assessing Officer for fresh action in accordance with law and extant regulations. The remit requires the AO to proceed in conformity with the TPO's ALP determination and with applicable CBDT instructions, and to afford the assessee appropriate opportunity of hearing. The remand leaves open such steps as may be permissible within law, including any examination suggested by the TPO, but bars treating any figure as ALP unless so determined by the TPO or otherwise permissible under law. [Paras 22]

Matter remitted to the file of the Assessing Officer with directions to proceed in accordance with law.

Final Conclusion: The assessment order dated 24 April 2021 is set aside to the extent it includes additions not determined as ALP by the TPO; the matter is remanded to the Assessing Officer to proceed afresh in conformity with the TPO determination, applicable CBDT instructions and law. The writ petition is allowed and disposed of.

Service of show cause notice - opportunity of being heard under section 148A(b) - principles of natural justice - substantial compliance - reassessment under section 147/148 - availability of alternative remedy

Service of show cause notice - opportunity of being heard under section 148A(b) - principles of natural justice - substantial compliance - Validity of the order passed under Section 148A(d) in view of alleged non-service of the show cause notice under Section 148A(b). - HELD THAT: - The Court examined whether failure to place on record proof of electronic service of the Section 148A(b) notice vitiated the subsequent order under Section 148A(d). It held that Section 148A(b) prescribes the delivery of a notice to afford the assessee a minimum hearing period and embodies the rule of audi alteram partem. However, the exact mode and dynamics of compliance are to be assessed in light of facts and circumstances. The Revenue produced a speed-post tracking report and proof of delivery to the petitioner's admitted postal address, which remained uncontroverted by any rejoinder. The Court found that service at the recorded address and attendant proof constituted effective compliance with the statutory requirement and satisfied the element of fairness inherent in natural justice; the petitioner's narrow contention that the Department had not effected e-mail service did not establish total non-service or denial of opportunity. Permitting relief on that basis would amount to contravening the statutory scheme when substantial compliance was shown. Accordingly, the challenge to the order under Section 148A(d) on grounds of non-service was rejected. [Paras 11, 12, 13, 14, 15]

The impugned order under Section 148A(d) is not vitiated by the petitioner's plea of non-service of the Section 148A(b) notice; the statutory requirement was substantially complied with and the challenge is dismissed.

Reassessment under section 147/148 - availability of alternative remedy - Whether the writ petition should be entertained despite the existence of an alternative remedy against the assessment order. - HELD THAT: - The Court noted that an assessment order was passed during the pendency of the petition and observed that the petitioner has an efficacious alternative remedy to challenge that order. In view of its findings on service and substantial compliance, and given the availability of alternative legal recourse against the assessment, the Court declined to grant the writ relief while leaving the petitioner free to pursue statutory remedies against the assessment order. [Paras 16, 17]

Writ petition dismissed; petitioner left free to pursue appropriate statutory remedies against the assessment order.

Final Conclusion: Writ petition dismissed; the Court found substantial compliance with service requirements of Section 148A(b) and declined to set aside the order under Section 148A(d), while leaving the petitioner at liberty to challenge the assessment through available statutory remedies.

Quashing of reopening notice - Requirement of reasoned order under Section 148A(d) - Remand for de novo consideration - Right to personal hearing before assessment action - Change of opinion doctrine

Requirement of reasoned order under Section 148A(d) - Quashing of reopening notice - Remand for de novo consideration - Right to personal hearing before assessment action - Change of opinion doctrine - Legality of the order dated 23rd March 2023 passed under Section 148A(d) and the consequential notice dated 23rd March 2023 issued under Section 148 for AY 2016-2017. - HELD THAT: - The Court found that the Assessing Officer's order under Section 148A(d) did not address the petitioner's submissions, including the contention that the disputed issue constituted a change of opinion and that the identical controversy had previously been adjudicated by the ITAT for AY 2011-2012. An order which fails to deal with the submissions made by the assessee cannot be sustained. In consequence, the impugned order and the consequent notice under Section 148 were quashed. The matter was remitted to the Assessing Officer for de novo consideration, with a mandate to pass a reasoned order dealing with all submissions of the petitioner (including any further submissions to be filed), and to afford the petitioner a personal hearing after giving at least seven working days' advance notice. These directions are procedural and intended to ensure that the AO records reasons and engages with the petitioner's contentions before taking further assessment action. [Paras 7, 8, 9]

Impugned order dated 23rd March 2023 and the consequential notice dated 23rd March 2023 quashed; matter remitted to the AO for de novo, reasoned consideration with opportunity of personal hearing.

Final Conclusion: The order under Section 148A(d) and the consequent notice under Section 148 (dated 23rd March 2023) are quashed; the matter is remanded to the Assessing Officer for fresh, reasoned consideration of all submissions and after affording a personal hearing (with at least seven working days' notice).

Jurisdiction of the Jurisdictional Assessing Officer - facilitator role of the Centralized Processing Center - exercise of powers under Section 264 of the Income Tax Act, 1961 - processing of returns under Section 143(1) and Section 143(1A) - transfer of records to the Jurisdictional Assessing Officer for recovery - personal hearing before disposal of an application under Section 264

Jurisdiction of the Jurisdictional Assessing Officer - facilitator role of the Centralized Processing Center - exercise of powers under Section 264 of the Income Tax Act, 1961 - Whether Respondent No.1 (PCIT-5) could reject the assessee's application under Section 264 on the ground that the Deputy Commissioner of Income Tax, Centralized Processing Centre (DCIT, CPC) does not report to him and therefore PCIT-5 has no jurisdiction to entertain the application. - HELD THAT: - The court held that the CPC acts only as a facilitator to the Jurisdictional Assessing Officer (JAO) and processing of a return by CPC does not curtail the regular jurisdiction of the JAO. A demand arising from processing under Section 143(1) is enforced by the JAO; notices under Section 143(2) and framing of assessments remain JAO functions; and, even under the faceless regime, records are transferred to the JAO for recovery and incidental matters. The Board's scheme for centralized processing under Section 143(1A) and the CBDT direction of 18th September 2020, which notes that powers under Sections 263 and 264 will be exercised by the jurisdictional Principal Commissioners, support this position. Accordingly, PCIT-5's reasoning that it lacked jurisdiction because DCIT, CPC did not report to PCIT-1 was incorrect. The impugned order was therefore quashed and the PCIT was directed to decide the Section 264 application on merits, with a personal hearing and without raising the issue of jurisdiction. The court also recorded that delay would not be taken as a ground against the petitioner and directed disposal by a specified date. [Paras 6, 8, 10]

Impugned order dated 25th March 2022 quashed; Respondent No.1 directed to dispose the Section 264 application on merits after personal hearing, without raising jurisdiction or delay.

Final Conclusion: The order of PCIT-5 rejecting the Section 264 application for lack of jurisdiction is set aside. PCIT-5 shall hear and decide the petitioner's Section 264 application on merits, after providing personal hearing with at least five working days' notice, and shall not raise the issues of jurisdiction or delay in the proceeding.

Transfer pricing - arm's length price - comparability - capacity utilization adjustment - transactional net margin method - benchmarking comparables - remand for fresh adjudication

Capacity utilization adjustment - comparability - transactional net margin method - arm's length price - benchmarking comparables - Validity of ITAT's direction to reconsider comparability and to make appropriate capacity utilization adjustment while determining net margin of the tested party - HELD THAT: - The Court accepted the ITAT's conclusion that comparability requires matching of like situations and that the assessee, which commenced production in May 2007 and began sales from July 2007, could not be fairly benchmarked against comparable enterprises with several years of established operations. The ITAT's direction to the TPO to reassess capacity utilisation and reconsider two comparables was supported by findings that, despite low sales in the year under consideration, the assessee's expenses were comparable to the subsequent year and that the business stabilised in the next year when substantially higher turnover was achieved. On these factual findings, the High Court found no infirmity in the ITAT's approach of referring the matter back for fresh adjudication of comparability and capacity utilisation adjustments under the Transactional Net Margin Method to determine the arm's length price.

ITAT's direction to reconsider comparability and to make appropriate capacity utilisation adjustment is upheld; no substantial question of law arises and the remand for fresh adjudication stands.

Final Conclusion: The appeal is dismissed; the order of the ITAT directing the TPO to reconsider comparables and capacity utilisation adjustments in relation to the transfer pricing determination for A.Y.-2008-09 is upheld.

Penalty under section 271DA - Prohibition on cash receipts exceeding Rs. 2,00,000 under section 269ST - Good and sufficient cause - Technical or venial breach - penalty mitigation - Legislative intent to curb cash transactions and promote digital economy

Penalty under section 271DA - Prohibition on cash receipts exceeding Rs. 2,00,000 under section 269ST - Good and sufficient cause - Technical or venial breach - penalty mitigation - Whether penalty under section 271DA is leviable for alleged splitting of bills to evade the restriction in section 269ST - HELD THAT: - The Tribunal examined the seized documents and the assessment record relating to cash receipts allegedly structured by issuing multiple bills to the same customers to keep individual bills below Rs. 2,00,000. The transactions involved sale of distinct marriage-dress items, and the facts did not demonstrate deliberate concealment of identity or an intention to proliferate unaccounted cash. Relying on the principle that penalty should not be imposed for a mere technical or venial breach, as reflected in the cited jurisprudence, and applying the statutory proviso that penalty shall not be imposed if the person proves good and sufficient reasons, the Tribunal found the breach (if any) to be non-deliberate and not warranting penalty. In view of the legislative objective to curb cash dealings, the Court nonetheless applied the established discretion against imposing penalty where sufficient cause exists and a technical default only is shown. Consequently, on the facts and circumstances of this case, the Tribunal held that no penalty is leviable under section 271DA. [Paras 16]

No penalty is leviable under section 271DA; appeal allowed.

Final Conclusion: The Tribunal, applying the principle that penalties should not be imposed for technical or venial breaches and having found good and sufficient cause on the facts, deleted the penalty under section 271DA and allowed the assessee's appeal for AY 2018-19.

Revision under section 263 of the Income Tax Act - Due diligence in assessment - Examination of eligibility and quantum of deduction under section 80IC - Erroneous and prejudicial to the interest of revenue - Limits of revisional jurisdiction based on bald allegations

Revision under section 263 of the Income Tax Act - Due diligence in assessment - Examination of eligibility and quantum of deduction under section 80IC - Limits of revisional jurisdiction based on bald allegations - Whether the Pr. Commissioner of Income Tax was justified in invoking revisional powers under section 263 by holding that the assessment order dated 09.12.2019 was erroneous and prejudicial to the interest of revenue for alleged lack of due diligence in examining the claim of deduction under section 80IC. - HELD THAT: - The Tribunal examined the record of the assessment proceedings and found that the Assessing Officer had issued repeated notices under section 142(1) specifically querying large deductions including those claimed under section 80IC and had sought details regarding sundry creditors and supporting documents (queries dated 09.09.2019, 23.09.2019, 03.10.2019, 17.10.2019 and 02.12.2019). The assessee responded with particulars, bank statements, details of sundry creditors, an audit report and offered to produce books and vouchers at the hearing (reply dated 23.10.2019), and documents were uploaded on the portal. The Tribunal held that these steps demonstrate that the AO had called for and received relevant information and had considered eligibility of deduction; the quantum and eligibility aspects are interrelated and supplement each other. The Pr. CIT's conclusion that the assessment was passed without due diligence rested on a bald assertion that the AO had not made sufficient inquiries despite the record showing specific queries and responses. Mere silence of the assessment order on some aspects, without demonstration that the AO failed to make or pursue material inquiries, does not satisfy the test for invoking section 263. For these reasons the Tribunal found that the revisional order was unsustainable. [Paras 6, 7, 8, 9, 10]

The revisional order under section 263 was set aside; the Pr. CIT erred in holding the assessment order erroneous and prejudicial to the interest of revenue.

Final Conclusion: The appeal is allowed; the order of the Pr. Commissioner of Income Tax dated 24.03.2022 under section 263 revising the assessment for AY 2017-18 is set aside on the ground that the Assessing Officer had made requisite enquiries and the revisional jurisdiction was not properly attracted by mere bald allegations of lack of due diligence.

Evidentiary value of statements recorded during survey under section 133A - corroborative evidence requirement for survey statements - inadmissibility of sworn statements under section 133A - remand for de novo adjudication for lack of opportunity to be heard - penalty under section 271F-sufficient cause and belated return - section 40(a)(ia) inapplicability to TDS under section 194IA

Evidentiary value of statements recorded during survey under section 133A - corroborative evidence requirement for survey statements - inadmissibility of sworn statements under section 133A - Deletion of addition of Rs. 2,50,00,000/- made by AO as deemed income under section 68 based solely on statement recorded during survey. - HELD THAT: - The Tribunal held that statements recorded during survey under section 133A do not carry evidentiary value unless corroborated, and that examination on oath is not authorised under section 133A. Applying precedents and the CBDT circular of 10.3.2003, the Tribunal found no incriminating material/corroborative evidence was placed on record by the AO and that the assessee had retracted the survey admission by not offering the amount in the return. Consequently, the addition made solely on the survey statement was unsustainable and was deleted. [Paras 25, 26, 27, 28]

Addition of Rs. 2,50,00,000/- upheld by lower authorities is deleted.

Section 40(a)(ia) inapplicability to TDS under section 194IA - Deletion of addition framed by AO under section 40(a)(ia) in respect of alleged default in depositing TDS u/s 194IA. - HELD THAT: - The Tribunal agreed with the CIT(A) that section 40(a)(ia) does not apply to the purchase of immovable property and that default in depositing TDS under section 194IA cannot be disallowed under section 40(a)(ia). The assessing officer's invocation of section 40(a)(ia) for such default was held to be contrary to the statutory scheme and the addition was therefore deleted by the CIT(A). [Paras 6, 14]

Addition under section 40(a)(ia) is not justified and is deleted.

Penalty under section 271F-sufficient cause and belated return - Deletion of penalty imposed under section 271F for failure to file return within time. - HELD THAT: - The Tribunal accepted the assessee's explanation that a belated return was filed under section 139(4) and that sufficient cause existed (including claimed business loss) for not filing the original return within the time under section 139(1). In view of sufficient cause and compliance by filing a belated return, the penalty under section 271F was deleted. [Paras 36, 37]

Penalty under section 271F imposed by the AO is deleted.

Remand for de novo adjudication for lack of opportunity to be heard - Remand of the claim of returned business loss of Rs. 6,47,417/- to Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal found merit in the Revenue's contention that the assessee had not furnished explanation before the AO or before the CIT(A). Rather than decide on merits, the Tribunal remitted the issue to the AO directing the assessee to furnish justification and directed the AO to adjudicate the claim in accordance with law after giving opportunity to the assessee. [Paras 30]

Issue of returned business loss is remanded to the Assessing Officer for fresh adjudication.

Remand for de novo adjudication for lack of opportunity to be heard - Setting aside of CIT(A) orders and remand of appeals (ITA Nos.799, 800, 810) to Assessing Officer for de novo adjudication after affording opportunity. - HELD THAT: - The Tribunal found non-delivery of hearing notices and non-compliance at assessment and appellate stages; observed that CIT(A) did not pass orders in accordance with section 250(6) and that principles of natural justice required another opportunity. Without deciding merits, the Tribunal restored the matters to the AO for fresh adjudication and directed the assessee to file evidence; the appeals were treated as allowed for statistical purposes. [Paras 41, 42]

Orders of the CIT(A) in the three appeals are set aside and matters are remitted to the AO for de novo adjudication after affording opportunity to the assessee.

Remand for de novo adjudication for lack of opportunity to be heard - Dismissal of ground alleging CIT(A) passed ex parte order without opportunity where ground was not pressed. - HELD THAT: - The Tribunal recorded that ground No.1 in ITA No.809 (challenge to ex parte order) was not pressed or argued by the assessee and therefore dismissed that ground as not pressed. [Paras 32]

Ground No.1 dismissed as not pressed/not argued.

Final Conclusion: The Tribunal deleted the deemed income addition of Rs. 2.50 crore (survey-based) and deleted the addition under section 40(a)(ia); it remitted the claim of returned business loss to the Assessing Officer for fresh adjudication; the penalty under section 271F was deleted; three appeals (ITA Nos.799, 800 and 810) were set aside and remitted to the Assessing Officer for de novo adjudication after affording opportunity to the assessee; one procedural ground was dismissed as not pressed.

Treatment of composite lease receipts as Income from Other Sources - classification of composite rent under section 56(2)(iii) - allowance of depreciation and expenses under section 57 - finality of scrutiny assessment vis-a -vis intimation under section 143(1) - rectification remedy under section 154 as exclusive forum for 143(1) intimation grievances - credit for taxes paid and verification obligation of assessing officer - prematurity of penalty proceedings under section 270A - mandatory levy of interest under the Income-tax provisions

Treatment of composite lease receipts as Income from Other Sources - classification of composite rent under section 56(2)(iii) - Whether the composite rental receipts are taxable under the head Income from Other Sources and not as Income from House Property - HELD THAT: - The Tribunal examined the assessee's factual parity with earlier assessment years in which coordinate Benches had held identical lease arrangements to be composite and attracted the description in section 56(2)(iii). In the absence of any fresh adverse material, the Tribunal respectfully followed the coordinate-bench decisions, applied the tests referred to in the earlier orders and held that the impugned receipts are composite in nature and must be treated as income from other sources rather than income from house property. The Tribunal also directed the assessing officer to follow the guidance from the earlier decisions regarding admissibility of expenses and depreciation under section 57. [Paras 4]

Allowed in favour of the assessee; receipts to be treated as Income from Other Sources and not Income from House Property; AO to follow earlier decisions on expenses and depreciation.

Allowance of depreciation and expenses under section 57 - Entitlement to proportionate depreciation and expenses in respect of the composite rental receipts - HELD THAT: - Having followed the coordinate-bench findings that the lease is composite, the Tribunal directed the assessing officer to apply the principles laid down in the earlier Tribunal and the Hon'ble Delhi High Court (as extracted in the earlier orders) when considering the claim for proportionate depreciation and expenses under section 57. The Tribunal therefore allowed the assessee's claim subject to verification in accordance with those precedents. [Paras 4]

Allowed with directions to the AO to allow proportionate depreciation and expenses under section 57 in accordance with precedent.

Finality of scrutiny assessment vis-a -vis intimation under section 143(1) - rectification remedy under section 154 as exclusive forum for 143(1) intimation grievances - Whether additions/disallowances made by intimation under section 143(1) can be re-opened or re-adjudicated in the present appeals against the scrutiny assessment - HELD THAT: - The Tribunal held that once a scrutiny assessment under section 143(3) is framed, the earlier intimation under section 143(1) does not survive as a separate adjudicatory basis and that grievance in respect of a 143(1) intimation lies by way of rectification under section 154 or by appeal to the first appellate authority. The assessee had filed a rectification application which remained pending; the Tribunal noted that the available remedy must be pursued and declined to interfere with the DRP's findings in the present appeals. [Paras 5]

Dismissed for the assessee; remedies against a 143(1) intimation to be pursued under section 154 or by appeal, not in this forum.

Credit for taxes paid and verification obligation of assessing officer - Whether the assessing officer must grant full credit for taxes paid by the assessee for the year under consideration - HELD THAT: - The Tribunal recorded the duty of the AO to allow tax credit for taxes paid by the assessee for the relevant year. On verification of the tax payments as per law, the AO was directed to give full tax credit. The direction was issued as part of the appellate relief for the relevant assessment year. [Paras 6]

Allowed for statistical purpose; AO directed to grant full tax credit after due verification.

Prematurity of penalty proceedings under section 270A - Whether penalty proceedings under section 270A should be adjudicated at this stage - HELD THAT: - The Tribunal observed that the matter of initiating penalty proceedings under section 270A was premature in the present proceedings and did not adjudicate the penalty issue on merits. [Paras 7]

Not decided as premature.

Mandatory levy of interest under the Income-tax provisions - Whether interest (including under section 234B as contended) is to be charged in accordance with law upon disposal of appeal - HELD THAT: - In the assessment for A.Y. 2018-19 the Tribunal noted that charging of interest is mandatory as per the statutory provisions and directed the assessing officer to compute and charge interest in accordance with law when making consequential adjustments following disposal of the appeal. [Paras 13]

Directed AO to charge interest as per law.

Final Conclusion: Both appeals were partly allowed. For A.Y. 2017-18 and A.Y. 2018-19 the Tribunal held that the contested composite rental receipts are to be treated as Income from Other Sources (not Income from House Property) and directed the AO to allow proportionate expenses and depreciation under section 57 in accordance with precedent. The Tribunal declined to reopen issues decided by intimation under section 143(1) and directed the assessee to pursue rectification under section 154; directed the AO to grant full tax credit after verification; held penalty proceedings premature; and directed the AO to charge interest as required by law.

Penalty under section 270A for misreporting - Misreporting - failure to record any receipt in books of account - Disallowance of deductions under Chapter-VIA and section 24 not constituting failure to record receipt - Invalid invocation of specific limb of section 270A(9)

Penalty under section 270A for misreporting - Misreporting - failure to record any receipt in books of account - Disallowance of deductions under Chapter-VIA and section 24 not constituting failure to record receipt - Validity of penalty under section 270A(9)(e) levied for A.Y.2017-18 where assessment disallowed claims under Chapter-VIA and section 24 - HELD THAT: - The Assessing Officer disallowed deduction claimed under section 24 and Chapter-VIA in the assessment order. In the consequential penalty order the AO invoked section 270A(9)(e), which applies to cases of misreporting consisting of failure to record any receipt in the books of account. There was no finding or material to show that any receipt was omitted from the books; the additions arose from disallowance of deductions. The Tribunal held that invoking clause (9)(e) was therefore incorrect and the penalty levied under that limb was not maintainable. Applying this legal distinction between omission to record receipts and mere disallowance of deductions, the Tribunal directed deletion of the penalty for A.Y.2017-18. [Paras 4]

Penalty of Rs. 2,60,874 levied under section 270A(9)(e) is deleted and the appeal for A.Y.2017-18 is allowed.

Penalty under section 270A for misreporting - Invalid invocation of specific limb of section 270A(9) - Mutatis mutandis application of precedent within same proceedings - Validity of penalty under section 270A(9)(e) levied for A.Y.2018-19 where additions mirror those in A.Y.2017-18 - HELD THAT: - The facts and the nature of additions for A.Y.2018-19 were the same as for A.Y.2017-18 (disallowance of Chapter-VIA deductions and deduction under section 24). Having found in the earlier part of the order that clause (9)(e) is inapplicable where there is no failure to record receipts, the Tribunal applied the same reasoning mutatis mutandis to A.Y.2018-19 and held the penalty under section 270A(9)(e) to be unsustainable in that year as well. [Paras 5, 6]

Penalty of Rs. 4,10,974 levied under section 270A(9)(e) is deleted and the appeal for A.Y.2018-19 is allowed.

Final Conclusion: Both appeals are allowed: penalties levied under section 270A(9)(e) for A.Y.2017-18 and A.Y.2018-19 are deleted because disallowance of deductions under Chapter-VIA and section 24 did not constitute failure to record any receipt in the books of account within the meaning of clause (9)(e).

Validity of assessment framed u/s 143(3) r.w.s. 153C - Counting of six-year block under Section 153C - date of recording satisfaction versus date of search - Addition founded on statement recorded u/s 132(4) and CCTV evidence - Presumption under section 132(4A) r.w.s. 292C and requirement of corroborative evidence

Validity of assessment framed u/s 143(3) r.w.s. 153C - Counting of six-year block under Section 153C - date of recording satisfaction versus date of search - Assessment order dated 29/12/2019 passed u/s 143(3) r.w.s. 153C is invalid - HELD THAT: - The Tribunal held that for the purposes of section 153C the date from which the six immediately preceding assessment years are to be reckoned is the date of recording of satisfaction in the searched person's assessment proceedings where the other person is not the searched person. In the present case the satisfaction under section 153C(1) was recorded on 24/09/2018; consequently the six-year block relevant to section 153C extended up to AY 2017-18. The Assessing Officer, however, had recorded satisfaction only for AYs 2011-12 to 2016-17 and did not record any satisfaction for AY-2017-18 nor issued any notice u/s 153C for that year. The Tribunal agreed with the view in the jurisdictional authorities (including RRJ Securities and subsequent Supreme Court pronouncements endorsing the approach that the proviso governs reckoning of the six-year block) and with the Ld. Accountant Member that, in absence of satisfaction and initiation of proceedings u/s 153C for AY-2017-18, the framing of assessment purportedly u/s 143(3) r.w.s 153C was in breach of statutory mandate and therefore invalid. The Tribunal rejected the Revenue's contention that section 153C can be ignored because jurisdiction under section 143(3) subsists, observing that such an approach would render section 153C redundant and produce prejudicial consequences. The impugned assessment was accordingly quashed. [Paras 6, 20, 21, 24, 25]

Impugned assessment order is invalid and quashed.

Addition under prima facie reliance on statement u/s 132(4) and CCTV evidence - Presumption under section 132(4A) r.w.s. 292C and requirement of corroborative evidence - Addition of alleged demonetised cash deposits and related commission is unsustainable and deleted - HELD THAT: - The Tribunal considered the evidential foundation of the addition which rested primarily on the statement recorded u/s 132(4) of Shri Mohit Goel and CCTV footage from Kotak Mahindra Bank. It was found that Mohit Goel had ceased to be director and shareholder of RBPL prior to the relevant events and thus had limited locus; his statement could not be the sole basis for charging the assessee. The CCTV footage and deposit slips were examined and found to be inconclusive: deposit slips bore signatures of RBPL personnel, no conclusive proof established that persons seen on CCTV carried demonetised currency, and the Assessing Officer failed to examine key persons or other banks where deposits took place. The Tribunal noted the statutory presumption under section 132(4A) r.w.s. 292C should have been drawn against RBPL and enquiries conducted with RBPL and its representatives, which was not done. Considering the incomplete and circumstantial nature of the material and that enquiries had not been made to establish flow of funds to the assessee, the Tribunal agreed with the Ld. Accountant Member that the addition of the cash deposits (and consequential commission) was based on conjecture and could not be sustained, and therefore deleted. [Paras 29, 31, 33, 35, 39]

Addition of alleged demonetised cash deposits and related commission is deleted.

Addition for labour charges and unexplained trade creditors/purchases - Addition of labour charges sustained; addition for unexplained trade creditors/purchases directed for reconsideration by First Appellate Authority - HELD THAT: - The Tribunal observed there was no difference of opinion between Members on the two consequential additions. The Ld. Judicial Member had sustained the addition representing labour charges; the Ld. Judicial Member had remitted the issue of unexplained trade creditors and purchases to the First Appellate Authority for fresh adjudication. The Third Member agreed with these positions. Notwithstanding these conclusions on merits, the Tribunal emphasised that because the primary assessment order was quashed for want of valid initiation u/s 153C, these consequential additions became academic insofar as the Assessing Officer cannot proceed further; nonetheless the Tribunal recorded its agreement with the Ld. Judicial Member's treatment of these two items. [Paras 15, 40]

Addition of labour charges sustained; addition relating to unexplained trade creditors/purchases restored to the First Appellate Authority for reconsideration, but rendered academic by quashing of assessment.

Final Conclusion: The Tribunal (Third Member) holds that the impugned assessment order dated 29/12/2019 purportedly passed u/s 143(3) r.w.s. 153C is invalid and is quashed; the additions made on account of the alleged demonetised cash deposits and the related commission are deleted for lack of conclusive evidence; while the labour charges addition was sustained and the unexplained creditors/purchases matter was restored to the First Appellate Authority, these consequential findings are academic in view of the quashing of the assessment. Records to be placed before the concerned bench for confirmatory orders in accordance with law.

Addition under section 69A for unexplained cash deposits - burden of proof on assessee to explain source of cash deposits - acceptance of sale agreement and confirmation as proof of receipt - treatment of demonetisation-period cash deposits

Acceptance of sale agreement and confirmation as proof of receipt - addition under section 69A for unexplained cash deposits - Deletion of addition of Rs. 21,50,000 claimed as unexplained cash deposits - HELD THAT: - The Tribunal examined the agreement of sale, the stamp paper bearing the purchaser's name, the books of account showing the receipt and the confirmation letter from the purchaser. The assessee conducts real estate transactions and the material on record established that Rs. 30 lakhs was paid under the sale agreement. Given these facts, the Tribunal found that the assessee had satisfactorily explained the source of the cash deposits to the extent of Rs. 21,50,000 and that the Revenue's objection that the agreement was unsigned by the purchaser did not outweigh the corroborative documentary evidence. Consequently, the addition made under the provision invoked for unexplained cash was held to be unsustained to the extent of Rs. 21,50,000 and directed to be deleted. [Paras 5]

Deletion of the addition of Rs. 21,50,000 upheld in favour of the assessee

Burden of proof on assessee to explain source of cash deposits - addition under section 69A for unexplained cash deposits - Sustenance of addition of Rs. 2,60,000 treated as unexplained cash deposit - HELD THAT: - The assessee claimed the amount represented bank loan proceeds withdrawn and later redeposited. The Tribunal noted the loan was availed and withdrawn on dates in September 2016 but the deposit occurred on 13/11/2016. The assessee failed to satisfactorily explain the reason for the timing gap between withdrawal and deposit and the purpose for which the loan was taken or withdrawn. On this basis, the Tribunal concluded that the assessee did not discharge the evidentiary burden to explain this cash movement and therefore sustained the addition of Rs. 2,60,000 as unexplained cash. [Paras 6, 9]

Addition of Rs. 2,60,000 sustained as unexplained

Treatment of demonetisation-period cash deposits - burden of proof on assessee to explain source of cash deposits - Acceptance of Rs. 90,000 deposited as explained (cash on hand for petty expenses) - HELD THAT: - The assessee's explanation that a small amount of cash on hand held for petty expenses was deposited due to demonetisation was considered in light of his business nature and the material on record. The Tribunal found this explanation plausible and sufficiently supported, and therefore treated the deposit of Rs. 90,000 as explained, rejecting the addition for this portion. [Paras 7]

Cash deposit of Rs. 90,000 treated as explained and no addition sustained

Treatment of demonetisation-period cash deposits - burden of proof on assessee to explain source of cash deposits - Acceptance of Rs. 40,000 deposited as explained (exchange of old notes) - HELD THAT: - The assessee's explanation that the amount represented exchange of old currency notes kept for petty expenses and that the deposited amount was withdrawn on the same date was accepted by the Tribunal after considering the submissions. The Tribunal treated this portion of the deposit as adequately explained and ordered that no addition be made in respect of this amount. [Paras 8]

Cash deposit of Rs. 40,000 treated as explained and no addition sustained

Final Conclusion: The appeal is partly allowed: the Tribunal deleted the addition of Rs. 21,50,000 made under the provision invoked for unexplained cash deposits, upheld the addition of Rs. 2,60,000 as unexplained, and held the deposits of Rs. 90,000 and Rs. 40,000 to be explained.

Deduction under section 80P(2)(d) - Deduction under section 80P(2)(a)(i) - Interest income from investments in co-operative banks - Interpretation of subsection (4) of section 80P - Co-operative society - Revisional jurisdiction under section 263

Deduction under section 80P(2)(d) - Interest income from investments in co-operative banks - Interpretation of subsection (4) of section 80P - Co-operative society - Revisional jurisdiction under section 263 - Claim of deduction under section 80P(2)(a)(i)/80P(2)(d) in respect of interest income from investments/deposits with co-operative/scheduled banks was allowable and the revisional order under section 263 dislodging the assessment order was without justification. - HELD THAT: - The Tribunal held that Sec. 80P(2)(d) permits deduction for interest income derived by a co-operative society from investments with any other co-operative society. The insertion of sub section (4) to Sec. 80P (Finance Act 2006, w.e.f. 01.04.2007) excludes co operative banks from claiming deduction under Sec. 80P themselves, but does not deprive a co operative society of the deduction when it earns interest from investments made with a co operative bank which is, by definition, a "co operative society" under Sec. 2(19). The Tribunal relied on coordinate Tribunal decisions and High Court authorities that treated interest earned on investments with co operative banks as eligible for deduction under Sec. 80P(2)(d), and applied the principle that, where non jurisdictional High Court decisions conflict, a view favourable to the assessee may be preferred. Since the Assessing Officer had taken a plausible view and allowed the deduction in the assessment order, the Principal CIT erred in invoking revisional jurisdiction under Sec. 263 to set aside that view. For these reasons the deduction was restored and the Sec. 263 order set aside. [Paras 2, 3, 4]

The assessee's claim of deduction under Sec. 80P(2)(a)(i)/80P(2)(d) for interest income from investments/deposits with co operative/scheduled banks is allowed and the order under Sec. 263 setting aside the assessment is set aside; the assessment order is restored.

Final Conclusion: The appeal is allowed: the Tribunal restored the Assessing Officer's allowance of the Sec. 80P(2)(a)(i)/80P(2)(d) deduction for interest on investments with co operative/scheduled banks for AY 2018 19 and set aside the revisional order passed under section 263.

Arm's Length Price - Transactional Net Margin Method - Determination of net margin under Rule 10B(1)(e) - TNMM requires transaction-level profit computation - Restriction of transfer pricing adjustments to international transactions with associated enterprises - Segmental/transactional profit analysis - Accounting Standard 7 - recognition of expected losses on construction contracts - ICDS-III impact on recognition of contract revenue and costs - Restoration/remand for verification and fresh consideration

Transactional Net Margin Method - Determination of net margin under Rule 10B(1)(e) - TNMM requires transaction-level profit computation - Segmental/transactional profit analysis - Restriction of transfer pricing adjustments to international transactions with associated enterprises - Whether transfer pricing adjustment should be determined by reference to the segmental/transactional margin for services rendered to associated enterprises or by reference to entity-level margins - HELD THAT: - The Tribunal found that the assessee had furnished detailed segmental margin computation for services provided to associated enterprises (Annexure-A) and that the TPO/AO had relied on entity-level figures instead of considering the AE-segment margins. The Tribunal noted statutory guidance in Rule 10B(1)(e) and relevant judicial and OECD guidance that TNMM requires computation of the net margin attributable to the international transaction and that applying TNMM on a company-wide basis is inappropriate where AE transactions represent a small fraction of total operations. In view of the material on record and the absence of reasons recorded by the authorities for ignoring the segmental analysis, the Tribunal directed restoration of the issue to the AO/TPO for fresh consideration after affording the assessee an opportunity to be heard. [Paras 11]

Issue restored to the file of the AO/TPO for reconsideration; ground No.5 treated as allowed for statistical purposes.

Reimbursement of expatriate costs - Documentary proof of deputation/secondment - Restoration/remand for verification - Whether reimbursement claimed for expatriates' salary, bonus and provident fund should be allowed on the basis that the expenses were incurred by the associated enterprise on behalf of the assessee - HELD THAT: - The TPO had recorded that the assessee did not furnish complete employee-related documents earlier and therefore treated the amounts as not incurred. The DRP recorded that deputation agreement and supporting evidence were not produced and consequently did not accept the assessee's plea. The Tribunal observed that the deputation agreement is now available and that the assessee should be permitted to produce all requisite documents. In the interest of adjudicating the matter on merits, the Tribunal restored the issue to the AO/TPO with a direction to the assessee to produce the documents and cooperate with the proceedings so that the authorities can examine the claim afresh. [Paras 15]

Issue restored to the file of the AO/TPO for fresh adjudication on production of documents; ground No.6 treated as allowed for statistical purposes.

Characterisation of expenditure as prior period/capital vs revenue - Verification of invoices and date of completion of work - Restoration/remand for verification - Whether miscellaneous expenditure incurred for site mobilisation and subcontracted site work is prior period/capital in nature or revenue expenditure of the year under consideration - HELD THAT: - The Tribunal examined invoices on record and observed that, contrary to the DRP's view based on work-order dates, the submitted invoices indicate that the work was completed in the year under consideration. Given the factual nature of the question and the need for verification of the invoices and relevant materials by the assessing authorities, the Tribunal restored the issue to the AO/TPO for verification and appropriate adjudication. [Paras 18]

Issue restored to the file of the AO/TPO for verification of invoices and fresh decision; grounds Nos.8 and 9 treated as allowed for statistical purposes.

Accounting Standard 7 - recognition of expected losses on construction contracts - ICDS-III impact on recognition of contract revenue and costs - Restoration/remand for verification - Whether the provision for loss on a construction project recognised under Accounting Standard 7 and claimed in the profit and loss account is admissible, having regard to ICDS-III and the facts - HELD THAT: - The assessee relied on Accounting Standard 7 which requires recognition of expected losses on a contract immediately when total contract costs are expected to exceed total contract revenue, and also invoked para 22.2 of ICDS-III regarding recognition based on prior practice for contracts commenced before 01/04/2016. The DR observed that the assessee had not placed the ICDS-III stipulation before the DRP earlier and thus the DRP had not considered that plea. The Tribunal considered it appropriate to enable the assessee to present the ICDS-III contention and directed restoration of the issue to the DRP for fresh consideration of the submissions, facts and material in law. [Paras 22]

Issue restored to the file of the DRP for fresh consideration in the light of Accounting Standard 7 and ICDS-III; ground No.10 treated as allowed for statistical purposes.

Final Conclusion: The Tribunal has restored the disputed transfer pricing, reimbursement, miscellaneous expenditure and project-loss provision issues to the assessing authority/DRP for fresh consideration after affording the assessee opportunity to produce relevant documents and submissions; the appeal is treated as allowed for statistical purposes.

Exercise of jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - Explanation to section 11(2) read with section 11(3)(d) - application of accumulated funds to other trusts - deemed income on application of accumulated funds - failure of Assessing Officer to make requisite verification and enquiries

Exercise of jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - failure of Assessing Officer to make requisite verification and enquiries - Validity of CIT(Exemption)'s direction under section 263 to set aside the assessment order dated 26.12.2019 for AY 2017-18 on the ground that the assessment was erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Tribunal examined whether the Assessing Officer had made requisite verification and enquiries regarding application of accumulated funds, as would be necessary in the facts of the case. The CIT(Exemption) found that sums totalling the amounts shown as accumulated under section 11(2) were paid to other educational institutions and, on the material on record, the AO had not adequately examined whether such payments were within the exclusion in the Explanation to section 11(2) and the deeming provision of section 11(3). The Tribunal accepted the view that the assessment order lacked proper inquiry/verification on this issue and that the omission rendered the assessment order erroneous and prejudicial to the revenue within the meaning of section 263. Consequently the Tribunal held that the CIT(Exemption) was justified in setting aside the assessment to the file of the AO for de novo adjudication after appropriate verification and opportunity to the assessee.

CIT(Exemption)'s exercise of jurisdiction under section 263 in setting aside the assessment for fresh adjudication is upheld.

Explanation to section 11(2) read with section 11(3)(d) - application of accumulated funds to other trusts - deemed income on application of accumulated funds - Whether amounts paid out of accumulated funds to other trusts/institutions are excluded from application of income under section 11 and are to be treated as income of the assessee under the Explanation to section 11(2) read with section 11(3)(d). - HELD THAT: - The Tribunal considered the statutory position that amounts credited or paid out of income accumulated or set apart under section 11(2), if paid to other specified trusts or institutions, are not to be treated as application of income and are to be deemed income under section 11(3). On the facts recorded by the CIT(Exemption), amounts accumulated in earlier years were paid to other educational institutions during the relevant previous year. The Tribunal agreed with the CIT(Exemption)'s conclusion that such payments fall within the scope of the Explanation to section 11(2) read with section 11(3)(d) and therefore should have been brought to tax by the AO unless properly shown otherwise by the assessee and verified. The Tribunal thus accepted that the legal effect of such transfers is to treat them as deemed income of the assessee unless the AO, after proper enquiry, reaches a different finding.

Payments made out of accumulated funds to other trusts/institutions are caught by the Explanation to section 11(2) read with section 11(3)(d) and are to be treated as deemed income unless satisfactorily established and verified otherwise; the CIT(Exemption)'s conclusion on this point is upheld.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the CIT(Exemption)'s order under section 263 directing de novo adjudication by the Assessing Officer for AY 2017-18 on the ground that the AO failed to make requisite verification concerning payments from accumulated funds which, prima facie, are covered by the Explanation to section 11(2) read with section 11(3)(d) and hence may be deemed income.

Proper officer - adjudicating officer bound by Supreme Court precedent - reliance on Canon India - authority to adjudicate show cause notice - expeditious adjudication

Proper officer - reliance on Canon India - adjudicating officer bound by Supreme Court precedent - Legality of issuance of the Show Cause Notice dated 31.12.2020 by the officer of the Directorate of Revenue Intelligence - HELD THAT: - The Court did not finally adjudicate the question whether the officer of Respondent No.2 was the "proper officer" to issue the Show Cause Notice. Instead, having noted the Supreme Court's decision in Canon India and the Division Bench decision in Laxmi Organic, the Court held that the legal objection based on Canon India is a matter that the adjudicating officer must consider. The law laid down by the Supreme Court is binding under Article 141 and, if the Petitioners raise the plea before the adjudicating authority, that officer must examine the applicability of Canon India, apply it if applicable, and if not applicable, record reasons for non-application. The Court therefore directed that the contention as to the validity of issuance be canvassed and determined in the adjudication proceedings rather than being decided in the writ petition. [Paras 13, 15]

Objection to competency of the issuing officer is remitted to the adjudicating officer for consideration in the adjudication of the Show Cause Notice, applying Canon India where applicable and recording reasons if not.

Authority to adjudicate show cause notice - expeditious adjudication - Direction for adjudication of the Show Cause Notice dated 31.12.2020 - HELD THAT: - Noting that the Show Cause Notice was issued in December 2020 and significant time has elapsed, the Court directed that the adjudicating authority proceed with adjudication without further delay. The Court emphasized that all contentions of the Petitioners remain open for agitating before the adjudicating officer and ordered completion of adjudication within a stipulated timeframe. The obligation on the adjudicating officer includes considering all submissions made by the Petitioners and passing appropriate reasoned orders in accordance with law. [Paras 14, 15, 16]

Respondents directed to adjudicate the Show Cause Notice as expeditiously as possible and, in any event, within six months from the date of the order, with all contentions kept open for adjudication.

Final Conclusion: Writ petition disposed by remitting the challenge to the adjudicating authority: the validity of issuance is to be considered by the adjudicating officer in light of Canon India and the adjudication of the Show Cause Notice dated 31.12.2020 is directed to be completed within six months; all contentions remain open.

Penalty under section 112(a) of the Customs Act - liability of company directors for acts of separate corporate entity - effect of redemption/clearance on continuing penal consequences for Transfer of Residence (TR) violations - restriction on sale of imported goods claimed under TR scheme when concessional benefit is denied and goods are redeemed - post-clearance adjudication and re-determination of value

Penalty under section 112(a) of the Customs Act - liability of company directors for acts of separate corporate entity - effect of redemption/clearance on continuing penal consequences for Transfer of Residence (TR) violations - Validity of the penalty imposed on the appellants, directors of M/s Mothers Pride, for alleged participation in import violations - HELD THAT: - The Tribunal found that M/s Mothers Pride is an independent limited company and there was no specific charge against the appellants other than their purchase of the vehicle. The adjudication and collection of duty, fine and penalty by the customs authorities at the time of import resulted in clearance of the goods for home consumption; consequently the restrictions and penal consequences that would have applied only if TR concession had been allowed do not survive in respect of persons who purchased the vehicle after redemption. A subsequent penal action based on the same FTDR-related violation noticed at import could not be sustained against the appellants, who were not shown to be the importers or to have been involved in the original importation scheme. The Tribunal distinguished the reliance placed on the Titanide Coating decision in view of the absence of any direct charge against the directors and endorsed the principle (as applied in the cited Kerala High Court decision) that where TR benefit was denied and goods released on payment of redemption fine and duty, prohibition on sale under the TR scheme cannot be imposed thereafter on subsequent purchasers. Applying these conclusions, the penalty imposed on the appellants was held unsustainable. [Paras 7, 8]

The penalty imposed on the appellants is set aside and they are entitled to consequential relief, if any, as per law.

Final Conclusion: The appeals are allowed insofar as they challenge the penalty on the directors; the penalty is set aside because no liability was established against the appellants as directors of a separate corporate entity after the goods had been cleared on payment of duty and redemption fines.

Penalty under section 114(iii) and 114AA - liability of a Customs House Agent for wrongful export filings - initial burden on the noticee to rebut investigation-based allegations - failure to produce evidence of forgery or lodge police complaint - prior suspension of CHA licence as relevant to culpability

Penalty under section 114(iii) and 114AA - liability of a Customs House Agent for wrongful export filings - initial burden on the noticee to rebut investigation-based allegations - failure to produce evidence of forgery or lodge police complaint - prior suspension of CHA licence as relevant to culpability - Penalty under section 114(iii) and 114AA rightly levied on the appellant-CHA - HELD THAT: - The Tribunal found there was no dispute that the four shipping bills were filed by the appellant-CHA and that the exporter's drawback claim and the adjudication against the exporter stood unchallenged. The appellant's assertion that an ex-employee misused his name and signature was unsupported by any contemporaneous documentary evidence or by a police complaint/FIR; no status of any alleged FIR was furnished. Where a statutory notice issues from investigation and the shipping bills were filed by the CHA, the initial burden lies on the noticee to furnish documentary rebuttal. The absence of such evidence, coupled with findings that the appellant's CHA licence had been suspended on earlier occasions, and the inference that the appellant habitually signed documents without adequate verification, justified treating the appellant as an "any person" liable under section 114. The coordinate authorities relied upon by the appellant were held distinguishable on facts, as those cases concerned CHA obligations under KYC/exporter verification whereas the present case turned on statutory liability under CHALR and section 114/114AA. Applying these principles, the Tribunal found no infirmity in the Commissioner (Appeals) order which had reduced but sustained penalty. [Paras 8, 9, 10, 11, 12]

Appeal dismissed; penalty sustained as upheld by the Commissioner (Appeals).

Final Conclusion: The Tribunal dismissed the appeal and upheld the imposition of penalty under section 114(iii) and 114AA on the Customs House Agent, observing that the appellant failed to discharge the initial burden of rebuttal, produced no evidence of forgery or police complaint, and had prior licence suspensions which supported imposition of penalty.

Confiscation for misdeclaration - redemption fine under Section 125 of the Customs Act, 1962 - penalty for misdeclaration - market enquiry for quantification of redemption fine - absence of deliberate intention to import misdeclared goods

Redemption fine under Section 125 of the Customs Act, 1962 - market enquiry for quantification of redemption fine - Validity and quantum of the redemption fine imposed for alleged misdeclaration - HELD THAT: - The adjudicating authority imposed a redemption fine but the order contains no finding or record of any market enquiry conducted to ascertain market price for quantification of the redemption fine. The appellate proceedings did not challenge the enhancement of value, but the question of quantification of the redemption fine was open to scrutiny. In view of the absence of any market survey or factual foundation in the adjudicating order for the quantum of redemption fine, the Tribunal found the redemption fine excessive and reduced it accordingly. [Paras 6]

Redemption fine reduced to Rs.2,50,000/-.

Penalty for misdeclaration - absence of deliberate intention to import misdeclared goods - Sustainability and quantum of the penalty imposed for misdeclaration - HELD THAT: - The record does not contain evidence to conclude that the appellant deliberately imported brass scrap in the guise of aluminium scrap. Purchase order and related documents show that the importer had ordered aluminium scrap and there is no material proving mens rea to import brass. Considering the absence of evidence of deliberate intention and the overall facts, the Tribunal held the penalty to be excessive and reduced it to a lower amount. [Paras 6]

Penalty reduced to Rs.20,000/-.

Final Conclusion: Appeal partly allowed; the redemption fine and penalty imposed by the adjudicating authority (and upheld by Commissioner (Appeals)) are reduced as stated above for lack of market enquiry and absence of material establishing deliberate import of misdeclared goods.

Certificate of Origin - Preferential tariff treatment under AIFTA - Origin criteria / Regional Value Content (RVC) - Verification procedure under Operational Certification Procedures (Clauses 16 & 17) - Burden of verification on the Department - Remand for verification and fresh adjudication

Certificate of Origin - Preferential tariff treatment under AIFTA - Origin criteria / Regional Value Content (RVC) - Validity of claims to concessional customs duty based on Certificates of Origin and compliance with AIFTA origin criteria. - HELD THAT: - The exemption under Notification No. 46/2011-Cus is conditional upon proof to the satisfaction of the Assistant/Deputy Commissioner that the goods originate in the countries specified in Appendix I in accordance with the AIFTA Rules. Rule 5 requires that for goods not wholly obtained, the AIFTA content (RVC) be not less than 35% of FOB and satisfy the tariff change criterion. The appellants produced Form A-1 Certificates of Origin issued by the Malaysian certifying authority showing RVC in excess of the threshold. The Department relied on DRI intelligence alleging diversion and lower regional value addition, but did not obtain confirmation from Malaysian authorities or follow the Operational Certification Procedures before rejecting the Certificates of Origin. In absence of verification from the competent foreign authority, the Certificates of Origin cannot be discarded and the benefit cannot be denied merely on the basis of domestic intelligence or allegations.

Appellants' claims based on the produced Certificates of Origin cannot be rejected without verification; prima facie the Certificates appear authentic and the exemption entitlement cannot be denied on the record before the Tribunal.

Verification procedure under Operational Certification Procedures (Clauses 16 & 17) - Burden of verification on the Department - Remand for verification and fresh adjudication - Whether the adjudicating authority could deny exemption without seeking verification from the Malaysian authorities and the consequent course of action. - HELD THAT: - The Tribunal held that the Department bears the burden of obtaining verification from the Malaysian Government regarding the authenticity of the Certificates of Origin when their genuineness is in doubt. In the present cases the Department did not discharge that burden and proceeded to deny exemption and confirm demands and penalties. In the interest of justice and to remove any doubt, the Tribunal set aside the impugned orders and remanded the matters to the adjudicating authority with a direction to obtain necessary verification from the competent foreign authority and pass fresh orders thereafter, preferably within six months.

Impugned orders set aside and matters remanded to the adjudicating authority for verification of the Certificates of Origin with the Malaysian authorities and for passing fresh orders.

Final Conclusion: Impugned adjudication orders denying exemption and confirming demands/penalties are set aside and appeals are allowed to the extent of remanding the matters to the adjudicating authority to obtain verification from the Malaysian authorities about the genuineness of the Certificates of Origin and to pass fresh orders, preferably within six months.

Country of Origin Certificate - Regional Value Content - Rule 5 of the AIFTA Rules (origin by value addition and tariff change) - preferential tariff treatment - burden of verification on department - remand for fresh adjudication

Country of Origin Certificate - Regional Value Content - Rule 5 of the AIFTA Rules (origin by value addition and tariff change) - preferential tariff treatment - burden of verification on department - Whether the denial of preferential exemption by rejecting the Certificates of Origin issued by the Malaysian exporter was justified without obtaining verification from the Malaysian authorities and whether the adjudicating authority discharged the burden of verification before denying benefit under the Notification. - HELD THAT: - The appellants produced Certificates of Origin in Form A-1 issued by the Government of Malaysia showing RVC above the threshold and claimed origin under Rule 5 of the AIFTA Rules (which requires requisite value addition of 35% and change in tariff sub-heading). The departmental case rested on intelligence and a DRI verification visit to the Malaysian supplier which encountered refusal to share documents; CBIC later recorded concurrence with the verification outcome. The Tribunal found that the Revenue proceeded to deny benefits on the basis that the COOs were not genuine without obtaining direct confirmation from the competent Malaysian authority as to the authenticity of the COOs and the exporting unit's manufacturing activity. The Court observed that the burden lay on the department to secure verification from the Government of Malaysia regarding genuineness of the COOs and that this burden had not been discharged. In view of that lacuna, the Tribunal set aside the impugned order and remitted the matter to the adjudicating authority with directions to obtain verification from the concerned foreign authority and thereafter pass a fresh order. [Paras 4]

Impugned order denying preferential exemption set aside; matter remitted to adjudicating authority to obtain verification from Malaysian authorities about genuineness of the COOs and manufacturing activity and to pass a fresh order.

Final Conclusion: Impugned adjudication confirmed in law was quashed for failure of the department to obtain necessary verification from the exporting country's authorities; appeals allowed by way of remand to the adjudicating authority to verify genuineness of the Certificates of Origin and manufacturing activity and to pass a fresh decision within a directed time.

Deletion of parties from array - Costs for being unnecessarily impleaded - Parallel proceedings and prohibition on multiplicity of litigation - Stay of proceedings and vacation of stay - Irreparable loss to reputation and business as basis for costs

Costs for being unnecessarily impleaded - Deletion of parties from array - Parallel proceedings and prohibition on multiplicity of litigation - Stay of proceedings and vacation of stay - Irreparable loss to reputation and business as basis for costs - Whether the Tribunal erred in directing the petitioner to pay a token amount as costs to Respondents No. 4 to 8 and 13 for having been unnecessarily dragged into the main petition and having suffered business and reputational loss. - HELD THAT: - The Tribunal had earlier granted a stay on 08.05.2017 which continued until it was vacated on 18.12.2019 with the observation that Respondents No. 4 to 8 were not related to the transaction and the recourse lay in the civil court. Respondents No. 4 to 8 and 13 had filed replies and contested the petition, and the stay operated against them during that period. The petitioner thereafter instituted a civil suit on the same cause of action and applied to delete the names of those respondents from the company petition to avoid parallel proceedings. The appellate court accepted the Tribunal's factual finding that Respondents No. 4 to 8 and 13 were unnecessarily dragged into prolonged litigation before the Tribunal, during which a stay against them operated for two years, causing prejudice to their business and reputation. In those circumstances the Tribunal's direction to award a token amount as compensation was a permissible exercise of discretion to redress the respondents' suffering on account of being improperly involved in the company petition and subject to the interim stay. The appellate court found no error in the Tribunal's approach and declined to interfere with the costs direction. [Paras 6, 7, 8, 9]

Tribunal's direction to pay the token amount as costs to Respondents No. 4 to 8 and 13 is upheld and the appeal is dismissed.

Final Conclusion: Appeal dismissed; the National Company Law Tribunal's order deleting the specified respondents and awarding a token amount as compensation for having been unnecessarily impleaded and prejudiced by the stay is sustained.

Priority of payments under escrow/waterfall mechanism - treatment of premium as part of concession fee and separate priority - withdrawals from escrow account - going concern payments - protection of corporate resolution process / restraint on termination - Resolution Framework for stressed assets

Priority of payments under escrow/waterfall mechanism - treatment of premium as part of concession fee and separate priority - withdrawals from escrow account - Whether the premium payable to the Authority has priority over monthly provision for debt service under the Concession Agreement and Escrow Agreement. - HELD THAT: - The Tribunal examined Articles 25.4, 26.1 and 26.2 of the Concession Agreement and Clauses 31.3.1 of the Concession Agreement and 4.1.1 of the Escrow Agreement. Although Clause 26.2 treats the premium as part of 'Concession Fee' for certain purposes, the agreements expressly list both 'Concession Fee' (clause (e)) and 'Premium' (clause (g)) separately in the escrow withdrawal order, with 'monthly proportionate provision of Debt Service' (clause (f)) placed between them. The parties were aware of both terms and deliberately used distinct sub clauses. Applying established rules of contractual construction, the Tribunal held that this separate placement is meaningful and not otiose, and that the priority prescribed in Clause 4.1.1 of the Escrow Agreement must be followed. Consequently, premium/ additional concession fee does not enjoy priority over the monthly provision for debt service under the agreed waterfall mechanism.

The priority of payments as set out in Clause 4.1.1 of the Escrow Agreement governs withdrawals; premium is ranked below the monthly proportionate provision for debt service and does not have priority over lender payments.

Going concern payments - protection of corporate resolution process / restraint on termination - Resolution Framework for stressed assets - Whether NHAI may terminate the Concession Agreement or replace the concessionaire or take coercive steps to recover premium dues while the resolution of the concessionaire is in its final stages. - HELD THAT: - The Tribunal noted that the concessionaire's resolution under the Resolution Framework approved by the Tribunal is at advanced stages and that payments to creditors must be effected in accordance with the resolution. It observed that proceeding to terminate the Concession Agreement or appoint a third party to collect tolls while the resolution is pending would jeopardise the resolution process. Given the stage of the resolution and the Tribunal's earlier orders setting out the resolution framework for 'Red Entities', the Tribunal found it inappropriate for the Authority to take steps that could complicate or frustrate completion of the resolution. Accordingly, the Tribunal granted relief restraining the Authority from taking such coercive measures and directed the parties to take appropriate measures to effect final resolution.

Respondent No.1 (NHAI) is restrained from terminating the Concession Agreement, replacing the concessionaire for toll collection, or initiating legal/ coercive steps for recovery of premium and related dues so as to protect and facilitate completion of the concessionaire's resolution process; parties are directed to take measures for final resolution.

Final Conclusion: IA No.985 of 2023 is allowed: the escrow/waterfall priority in Clause 4.1.1 governs withdrawals (premium is ranked below monthly debt service) and NHAI is restrained from taking actions (termination, replacement for toll collection or coercive recovery steps) that would jeopardise the ongoing resolution of the concessionaire; parties are directed to take appropriate measures to conclude the resolution.

Assignment of financial debt and stepping into the shoes of the assignor - locus to apply for restoration as an applicant under the NCLT Rules - restoration of petition dismissed for non-prosecution - Rule 48 of the NCLT Rules and definition of "applicant"

Assignment of financial debt and stepping into the shoes of the assignor - locus to apply for restoration as an applicant under the NCLT Rules - Rule 48 of the NCLT Rules and definition of "applicant" - Whether the assignee (Appellant), having been assigned the financial debt during the pendency of the Section 7 petition and having that assignment brought to the Adjudicating Authority's notice, had locus to file an application for restoration of the petition. - HELD THAT: - The Tribunal found as an undisputed fact that Bank of Baroda executed a registered assignment in favour of the Appellant during the pendency of the main Company Petition and that the assignment was brought on record before the Adjudicating Authority (including by a pursis and by acknowledgement in the record). The assignment conferred on the Appellant all rights, title and interest in the financing documents and underlying security and included a clause of cooperation in enforcement proceedings. Rule 2(4) of the NCLT Rules defines "applicant" broadly to include any person capable of making an application. Given the Appellant's status as assignee, the Adjudicating Authority itself acknowledged that the Appellant had stepped into the shoes of Bank of Baroda and enjoyed the same rights under the IBC. On these facts, the Tribunal held that the Appellant clearly qualified as an "applicant" and therefore had locus to move for restoration of the dismissed petition. [Paras 6, 7, 15, 17]

The Appellant, as undisputed assignee who had stepped into the shoes of the original petitioner and whose assignment was on record, had locus to apply for restoration of the dismissed petition.

Restoration of petition dismissed for non-prosecution - applicant's diligence and absence of wilful inaction - Whether the Adjudicating Authority erred in rejecting the Appellant's application for restoration of the main Company Petition and whether the Appellant was guilty of negligence or delay such as to disentitle it from restoration. - HELD THAT: - The Tribunal reviewed the chronology and filings: the Appellant had filed interlocutory applications in the main petition, had sought substitution (filed though numbered after dismissal), had caused the assignment to be placed on record, and had filed the restoration application within a month after dismissal. The record did not demonstrate wilful inaction or lack of diligence by the Appellant; attendance and steps taken in the proceedings and filing of substitution and restoration applications evidenced active pursuit of rights. The Adjudicating Authority was therefore incorrect in treating the Appellant as ineligible to seek restoration merely because the original petition had been filed by Bank of Baroda and because the Appellant was not formally substituted before dismissal. The Tribunal concluded that it was not in the interest of justice to deny the Appellant an opportunity to have the main petition decided on merits. [Paras 11, 12, 13, 18]

The Adjudicating Authority erred in dismissing the restoration application; the Appellant was not guilty of such negligence as to forfeit the right to restoration.

Restoration of petition dismissed for non-prosecution - remand for fresh adjudication on merits - What relief should follow from the Tribunal's conclusions on locus and error in rejecting restoration? - HELD THAT: - Having held that the Appellant had locus and that dismissal of the restoration application was incorrect, the Tribunal set aside the impugned order. It directed that the main Company Petition be restored and remitted the matter to the Adjudicating Authority to decide the petition on merits after giving all parties an opportunity of hearing, and to proceed expeditiously. The Tribunal therefore did not itself decide the merits of the main petition but required fresh adjudication by the Adjudicating Authority. [Paras 19]

Impugned order set aside; main Company Petition to be restored and remitted to the Adjudicating Authority for decision on merits after hearing all concerned.

Final Conclusion: The appeal is allowed: the Adjudicating Authority's rejection of the restoration application is set aside. The Appellant, as assignee whose assignment was on record, had locus to seek restoration; the main Company Petition is to be restored and remitted to the Adjudicating Authority for adjudication on merits after hearing the parties.

Financial debt - financial creditor - disbursal against the consideration for the time value of money - default - admission of Section 7 application / initiation of CIRP - commercial effect of borrowing - draft/unexecuted MOU not binding

Financial debt - financial creditor - disbursal against the consideration for the time value of money - default - admission of Section 7 application / initiation of CIRP - The sum of Rs. 5 crore advanced by Respondent No.1 to the Corporate Debtor constituted a financial debt and there was a default entitling Respondent No.1 to file a Section 7 application and for the Adjudicating Authority to admit the same. - HELD THAT: - The Tribunal held that it was an admitted fact that Rs. 5 crore was disbursed to the Corporate Debtor by RTGS on 01.01.2014 and that receipt was not denied nor was any part repayment shown. Respondent No.1 furnished a bank certificate, the RTGS record and relied on the Corporate Debtor's balance sheet which recorded the amount as 'Long Term Borrowings - Unsecured loan from Related Parties', and a demand notice stating the advance was a repayable loan at 15% p.a. The Court applied governing precedents which require disbursal against consideration for the time value of money as the essential element of a financial debt, observing that IBC does not mandate a formal written loan agreement to establish a financial debt. Given the disbursal, the acknowledgments in the Corporate Debtor's accounts and the default evidence filed in Part-V of Form-1, the Adjudicating Authority was correctly satisfied, in summary proceedings under Section 7, that a financial debt existed and that default had occurred. The Tribunal also noted that the Adjudicating Authority afforded the Corporate Debtor opportunity to produce its books to rebut the claim, which was not availed, and therefore there was no error in admitting the Section 7 petition. [Paras 18, 19, 20, 24, 27]

The Tribunal upheld the Adjudicating Authority's finding that a financial debt and default were proved and that admission of the Section 7 petition was justified.

Commercial effect of borrowing - draft/unexecuted MOU not binding - related entities and separate legal personality - The contention that the Rs. 5 crore was a part-payment deposit linked to an alleged MOU between the Corporate Debtor and SKIL (and not a loan from Respondent No.1) was rejected. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that the MOU relied upon by the Appellant was a draft not executed between the Corporate Debtor and SKIL and that SKIL and Respondent No.1 were separate entities with no evidence that Respondent No.1 was party to or bound by that draft. The linkage sought to be drawn between the draft MOU and the present transaction therefore failed. On the facts, there was no material to show the advance was a non-loan part-payment tied to the draft MOU; conversely the record supported the commercial character of the advance as a borrowing for working capital, having the commercial effect of a loan within Section 5(8). The Tribunal found no infirmity in the Adjudicating Authority declining to treat the draft MOU as determinative. [Paras 22, 23]

The Tribunal rejected the Appellant's plea that the transfer was a part-payment under a draft MOU and upheld the Adjudicating Authority's treatment of the transaction as independent borrowing by the Corporate Debtor from Respondent No.1.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority rightly admitted the Section 7 petition after finding financial debt and default; the Corporate Insolvency Resolution Process may continue and I.A. No. 4828 of 2023 is disposed of in the terms recorded.

Bail under Section 439 Cr.P.C. - Prevention of Money Laundering Act, 2002 - twin conditions under Section 45 - Proceeds of crime - Prima facie satisfaction for grant of bail - Presumption under PMLA

Bail under Section 439 Cr.P.C. - Prima facie satisfaction for grant of bail - Grant of bail to the applicant in ECIR No. ECIR/LKZO/05/2019 under PMLA. - HELD THAT: - The High Court examined the material on record and the submissions of both parties and found that the applicant has no role in the BIKEBOT fraud, is not named in the FIRs registered by investors, and has not been charge-sheeted in those criminal complaints. The Court noted that several co-accused have already been granted bail or anticipatory bail and that the applicant has been in custody since 21.07.2023 with no criminal history. The Court observed that there is no corroborative material to establish that the alleged cash sums purportedly given by Mr. Dhirendra Pal Solanki were deposited into the applicant's accounts, and that the Enforcement Directorate has not arrested or made Mr. Solanki an accused despite earlier disclosures implicating him. Balancing the nature of the offence, the evidence on record, detention period, status of trial and absence of risk of absconding or tampering with evidence, the Court concluded that the applicant has made out a case for bail and accordingly allowed release on furnishing bond and sureties subject to specified conditions of cooperation, non-interference with witnesses and verification of sureties. [Paras 6, 9, 10, 11]

Bail granted to the applicant on furnishing personal bond and two sureties with conditions including cooperation in trial, non-tampering with evidence and verification of sureties.

Prevention of Money Laundering Act, 2002 - twin conditions under Section 45 - Proceeds of crime - Presumption under PMLA - Whether the twin conditions under Section 45 of the PMLA are satisfied to justify grant of bail. - HELD THAT: - The Court applied the statutory test under Section 45 PMLA and held that it is not required to record a positive finding that the accused has not committed the PMLA offence; rather the Court must form a reasonable satisfaction with broad probabilities regarding possibility of re-offence or tampering. The Court observed that though proceeds of crime amounting to Rs. 17,94,50,000/- were transferred from GIPL to four accounts of Mr. Dhirendra Pal Solanki, there is no material showing transfer of that amount from those accounts into the applicant's SBI account; only a sum of Rs. 1.76 crores was transferred by Mr. Solanki from a different DSM Infracon account to the applicant, and whether that sum constituted proceeds of crime or repayment of earlier loans is a disputed question of fact for trial. The Court further noted absence of positive corroborative evidence of cash transactions implicating the applicant and found the Enforcement Directorate's explanation for not arresting Mr. Solanki to be vague. On these facts the Court was prima facie satisfied that the twin conditions under Section 45 are met and that bail may be granted subject to conditions. [Paras 7, 8]

Prima facie satisfaction recorded that the twin conditions of Section 45 PMLA are fulfilled, supporting grant of bail subject to conditions.

Final Conclusion: The bail application of the applicant is allowed; the applicant is directed to be released on furnishing personal bond and two sureties, subject to conditions of cooperation in trial, non-interference with witnesses and verification of sureties; observations confined to bail and not to trial merits.

Money laundering as an independent offence - predicate offence requirement under PMLA - simultaneous investigation and joint trial of predicate and PMLA offences - prima facie satisfaction to proceed under PMLA - necessity of a link between impugned property and proceeds of crime

Money laundering as an independent offence - predicate offence requirement under PMLA - simultaneous investigation and joint trial of predicate and PMLA offences - Legality of proceeding under the PMLA against petitioners A6 and A7 notwithstanding that the predicate offence trial is pending. - HELD THAT: - The Court held that the PMLA constitutes a stand alone code directed at the offence of money laundering which is concerned with property derived from specified criminal activity and not with adjudication of the predicate offence per se. While a predicate offence is a pre requisite in concept, it is not necessary that proceedings under PMLA await the final adjudication of the predicate trial. The statutory scheme permits simultaneous investigation and prosecution, and even joint trial, of the predicate and money laundering offences. Reliance was placed on the Supreme Court's decision in Vijay Madanlal Choudhary which affirms that prosecution under the PMLA may proceed independently so long as there is prima facie material to link property with proceeds of specified criminal activity. The petitioners' contention that PMLA proceedings must be deferred until conviction in the predicate case was therefore rejected. [Paras 18, 19, 28]

Quash petitions filed by A6 (Yasar Arabath) and A7 (Rahuman) dismissed; prosecution under PMLA against them may proceed.

Prima facie satisfaction to proceed under PMLA - necessity of a link between impugned property and proceeds of crime - Validity of proceeding under the PMLA against petitioners A14 (Manimegalai) and A15 (Siddique Raja) in respect of the 35 cent property. - HELD THAT: - The Court examined the material relied upon by the Directorate and found an absence of a sufficient link showing that the subject property was in the possession or enjoyment of the alleged tainted person (A1) or that the sale consideration for the deed in favour of A15 was paid by A1 or derived from the predicate offences. Although various earlier transactions and alleged undervaluation were noted, the complaint did not establish that A15 was a mere name lender or benami for A1 or that the funds used were proceeds of the predicate criminality. In the absence of material connecting the property or its enjoyment to the proceeds of the predicate offences, the Court concluded that the requisite prima facie satisfaction to prosecute under the PMLA was lacking as regards A14 and A15. [Paras 24, 25, 26, 27, 29]

Quash petitions by A14 (Manimegalai) and A15 (Siddique Raja) allowed; prosecution under PMLA against them stands quashed.

Final Conclusion: Proceedings under the PMLA against petitioners Yasar Arabath and Rahuman are permitted to continue (quash petitions dismissed); proceedings against Manimegalai and Siddique Raja are quashed for lack of sufficient material linking the impugned property to proceeds of the predicate offences.

Provisional attachment under Section 5 of the Prevention of Money Laundering Act - Attachment and administration of property under the Andhra Pradesh Protection of Depositors of Financial Establishments Act - Protection of depositors and equitable distribution of sale proceeds - Interaction of central PMLA and State depositor-protection statute - Availability of statutory remedy under Section 8 of PMLA

Provisional attachment under Section 5 of the Prevention of Money Laundering Act - Attachment and administration of property under the Andhra Pradesh Protection of Depositors of Financial Establishments Act - Protection of depositors and equitable distribution of sale proceeds - Validity of the Provisional Attachment Orders issued by the Enforcement Directorate insofar as they relate to properties already attached by the investigating agency under the APPDFE Act - HELD THAT: - The Court held that where properties have been attached under the APPDFE Act for the specific purpose of securing and equitably distributing proceeds to depositors, continuation of provisional attachments by the Enforcement Directorate in respect of those same properties would frustrate the primary object of the State Act to protect depositors. Although PMLA is a central enactment with overriding clause, the PMLA does not contain a provision comparable to Section 6(4) of the APPDFE Act which empowers the Special Court to direct equitable distribution to depositors. In the facts of these petitions, and having regard to the orders and supervisory scheme established in PIL No.193 of 2015 (including transfer of proceeds and the Special Court's role), the Court concluded that the provisional attachment orders issued by ED (PAO No.04/2020 and PAO No.12/2021) must be quashed so far as they relate to properties already attached by the investigating agency in the predicate offences, in order to preserve the mechanism for distribution to depositors under the State Act. [Paras 41, 42, 45, 49]

Provisional Attachment Orders 04/2020 and 12/2021 set aside insofar as they relate to properties attached by the investigating agency under the APPDFE Act; consequential Original Complaints in OC Nos.1391 of 2021 and 1598 of 2022 quashed to that extent.

Availability of statutory remedy under Section 8 of PMLA - Interaction of central PMLA and State depositor-protection statute - Whether failure to exhaust the PMLA remedies before the Adjudicating Authority precluded writ jurisdiction in the present factual matrix - HELD THAT: - The Court acknowledged the general principle that writ jurisdiction is ordinarily ousted where efficacious alternative statutory remedies (Section 8 PMLA and appellate remedies) exist. However, given the exceptional factual context - the State's statutory scheme to secure and distribute proceeds to depositors, the supervisory regime established by the High Court in PIL No.193 of 2015, and the risk of frustrating depositor relief - the Court found that the principle of exhaustion did not preclude interference. On that basis the Court proceeded to quash the ED provisional attachments insofar as they affected properties already subject to attachment under the APPDFE Act. [Paras 43, 44, 46]

Although statutory remedies under PMLA exist, the Court entertained the writs in the special circumstances and granted relief as above.

Right of banks and purchasers to pursue claims before the Special Court - Administration of property attached under APPDFE Act - Remedies available to mortgagee bank and purchaser of auctioned property after the setting aside of ED provisional attachments in respect of State-attached properties - HELD THAT: - The Court observed that Union/Corporation Bank and purchasers (for example, M/s. BLG Infra Projects) have existing remedies and proceedings pending before the Special Court constituted under the APPDFE Act. The Bank and purchasers are directed to pursue their claims and defences before that Special Court which has jurisdiction to deal with administration and equitable distribution of attached property and sale proceeds. The decision preserves the Special Court as the forum to adjudicate mortgage, priority and distribution claims in respect of those properties. [Paras 47, 48, 51]

Bank and purchasers may raise all their grounds and pursue remedies before the Special Court; writ petitions concerning those claims are disposed accordingly.

Scope of ED's powers after quashing of provisional attachment - Properties not covered by State attachment may be proceeded with under PMLA - Extent to which the Enforcement Directorate may continue proceedings or deal with properties after the Court's order - HELD THAT: - The Court made clear that the Enforcement Directorate is at liberty to participate in the Special Court proceedings for purposes of claim on any surplus sale proceeds in accordance with PMLA, and is also free to proceed under the PMLA in respect of properties that were not covered by attachments made by the investigating agency in the predicate offences. Thus, ED's authority to investigate and attach other properties under PMLA remains unimpaired so long as those properties are not the subject of State attachments directed to protect depositors. [Paras 50, 51]

ED may participate in Special Court proceedings regarding surplus proceeds and may deal, under PMLA, with properties not covered by State attachments.

Final Conclusion: The Court set aside the Enforcement Directorate's provisional attachment orders dated 24.12.2020 and 30.11.2021 insofar as they relate to properties already attached by the investigating agency under the APPDFE Act, quashed the consequential original complaints to that extent, directed that banks and purchasers pursue their claims before the Special Court constituted under the State Act, and permitted ED to participate in the Special Court for any surplus and to proceed under PMLA in respect of properties not covered by State attachments.

Bail under Section 439 of the Code of Criminal Procedure - beneficiary of proceeds of fraud - money laundering and money trail - attachment by the Enforcement Directorate - investigation concluded and charge sheet submitted - nature and gravity of offence as a factor in bail refusal - rejection of co-accused's bail as relevant circumstance

Bail under Section 439 of the Code of Criminal Procedure - beneficiary of proceeds of fraud - money laundering and money trail - attachment by the Enforcement Directorate - investigation concluded and charge sheet submitted - nature and gravity of offence as a factor in bail refusal - rejection of co-accused's bail as relevant circumstance - Application for enlargement on bail during trial by the applicant was rejected. - HELD THAT: - The Court found on the material on record that the applicant was a director of companies which received substantial transfers from GIPL and its sister concerns, and that he was appointed with financial and administrative powers in a related company. The Enforcement Directorate had attached properties of the applicant, indicating a money trail and satisfaction of money laundering suspicions. The investigation was complete and a composite charge sheet had been filed implicating the applicant under offences including cheating and conspiracy. The applicant was held to be a beneficiary of monies collected from investors under the Bike Bot scheme and the absence of any ground favouring bail was noted. The Court also took into account the magnitude of funds involved, the nature and gravity of the offences, the applicant's alleged criminal antecedents, and prior rejection of bail applications of similarly placed co-accused by this Court and by the Supreme Court. On this cumulative basis the Court exercised its discretion against release on bail.

Bail application rejected.

Final Conclusion: Bail under Section 439 Cr.P.C. was refused: the applicant found to be a beneficiary of funds diverted in the Bike Bot scheme, with a concluded investigation and chargesheet, ED attachments and the gravity of offences and antecedents rendering the case unsuitable for enlargement on bail.

Business Auxiliary Service - Technical Inspection and Certification Service - reverse charge liability for import of services - sale-related discount versus commission - service provider and service receiver located in non-taxable territory - absence of consideration / no payment to alleged service provider - penalty unsustainable where tax demand lacks factual or legal basis

Business Auxiliary Service - Technical Inspection and Certification Service - reverse charge liability for import of services - sale-related discount versus commission - service provider and service receiver located in non-taxable territory - absence of consideration / no payment to alleged service provider - Liability of the appellant to pay Service Tax under Business Auxiliary Service and Technical Inspection and Certification Service (including under reverse charge) - HELD THAT: - The Tribunal found that M/s. JPS Trading Company, Dubai acted as the buying agent for the overseas buyer and, through its Indian presence (Fashion Force), carried out quality checks incidental to procurement for the foreign buyer. The service provider and the ultimate service recipient are located in a non-taxable territory and there was no written or oral contract establishing that JPS rendered commission-type services to the appellant. The deductions in the export invoices represented adjustments in the sale transaction (discounts) to the foreign buyer rather than payments by the appellant to a domestic service provider. No consideration was shown to have been paid by the appellant to Fashion Force or JPS such that a reverse-charge import of service could be sustained. The Tribunal also relied on earlier decisions involving identical facts in which similar demands and penalties were set aside. In these circumstances the demand of Service Tax under BAS and TIC and the penalties imposed were held to be without factual or legal basis and unsustainable. [Paras 6, 7, 8]

The confirmation of the Service Tax demand and imposition of penalties is set aside; the appeal is allowed with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order confirming Service Tax demands under BAS and TIC and the penalties, concluding that the deductions were sale-related adjustments and that no reverse-charge liability arose against the appellant.

Adjustment of excess service tax under Rule 6(3) of Service Tax Rules, 1994 - refund of value of taxable service and service tax as condition for self-adjustment - invocation of extended period of limitation - imposition of penalty under Section 78 and Section 77 of the Finance Act, 1994 and reasonable cause under Section 80

Adjustment of excess service tax under Rule 6(3) of Service Tax Rules, 1994 - refund of value of taxable service and service tax as condition for self-adjustment - Entitlement of the appellant to adjust excess service tax of Rs.10,65,330/- under Rule 6(3) for amounts reflected in ST-3 returns relating to Oct. 2010 & November, 2010 - HELD THAT: - The Tribunal examined Rule 6(3) as it stood for the relevant period and held that the sub-rule permits adjustment of excess service tax paid where the assessee has refunded the value of the taxable service and the service tax to the person from whom it was received, including cases where services were not provided or were only partially provided. The appellant's explanation, supported by the credit note dated 31.03.2010 and the account figures in the balance sheet for F.Y. 2009-10, established that the excess tax related to amounts refunded to the client and was therefore within the scope of Rule 6(3). The Tribunal found the Commissioner (Appeals)'s suspicions regarding the genuineness of the credit note to be speculative and unsupported by evidence on record, and concluded that the view of the lower authorities was without merits. Applying the rule and the material on record, the Tribunal allowed the adjustment claimed by the appellant. [Paras 4]

Adjustment under Rule 6(3) upheld and appeal allowed.

Invocation of extended period of limitation - imposition of penalty under Section 78 and Section 77 of the Finance Act, 1994 - reasonable cause under Section 80 of the Finance Act, 1994 - Limitation and penalty issues were not adjudicated by the Tribunal in this appeal - HELD THAT: - Although limitation and penalty were contested before the Tribunal, the Bench expressly declined to decide those questions because it found the primary adjudication on the merits of the adjustment to be without merit and allowed the appeal on that basis. The Tribunal recorded that it was not discussing the issues of extended period and penalty and therefore did not make any findings on the applicability of extended period provisions or on the imposition of penalties under Sections 77/78 or the applicability of Section 80. [Paras 4]

Limitation and penalty matters left undecided by the Tribunal.

Final Conclusion: The appeal was allowed: the Tribunal held that Rule 6(3) entitled the appellant to self-adjust the excess service tax claimed to have been refunded, set aside the contrary findings of the lower authorities, and did not adjudicate the issues of extended limitation or imposition of penalties, which remain undecided.

Levy of service tax on renting/lease of workwear - deemed sale versus service characterisation - binding effect of earlier Tribunal and Supreme Court decisions

Levy of service tax on renting/lease of workwear - deemed sale versus service characterisation - binding effect of earlier Tribunal and Supreme Court decisions - Whether the activity of leasing/renting workwear is exigible to service tax or is to be treated as a deemed sale, and whether the demands raised for the specified periods are sustainable. - HELD THAT: - The Tribunal found that the question had been authoritatively considered in the assessee's own cases by various Benches which examined the terms of the lease agreements and concluded that the transactions were not services attractable to service tax. The agreements showed that workwear remained the property of the lessor while exclusive possession and effective control lay with the users; the Tribunal earlier held that such arrangements were not in the nature of a service and hence not exigible to service tax. Revenue's appeals against those Tribunal decisions were dismissed by the Hon'ble Supreme Court, rendering the legal question finally settled in favour of the appellant. On that basis and following the binding precedents in the appellant's own cases, the impugned orders raising demands for the periods in dispute were held unsustainable.

Impugned orders confirming service-tax demands for the stated periods are set aside and the appeals are allowed with consequential relief, following the Tribunal's and Supreme Court's prior decisions in the appellant's own cases.

Final Conclusion: The Tribunal allowed the appeals, setting aside the Commissioner's orders and quashing the service-tax demands for the periods specified, in view of earlier Tribunal findings and the Supreme Court's dismissal of Revenue appeals which settled the issue in favour of the appellant.

SSI Exemption - services provided under a brand name or trade name of another person - exclusion in Notification No.06/2005-ST

SSI Exemption - services provided under a brand name or trade name of another person - exclusion in Notification No.06/2005-ST - entitlement to SSI exemption on the value of services rendered by the appellant acting as a franchisee for M/s SITD - HELD THAT: - The Tribunal examined the claim of SSI exemption by the appellant who provided commercial training/coaching services under a franchise arrangement for M/s SITD. The Revenue relied on the proviso to Notification No.06/2005-ST which excludes from the exemption taxable services provided by a person under the brand name or trade name of another. The Tribunal accepted the Revenue's construction of the notification, holding that services rendered under the franchiser's brand do not fall within the SSI exemption. On the facts, the appellant operated courses on behalf of M/s SITD and therefore the exclusion applied. The Tribunal found no misinterpretation of the SSI exemption notification and concluded that the appellant's grounds had no merit. [Paras 9]

The appellant is not entitled to SSI exemption for services rendered under the franchiser's brand; the appeal is dismissed.

Final Conclusion: Appeal dismissed; SSI exemption denied to the appellant for services provided under the brand/trade name of another (M/s SITD) for the period in issue.

Refund of countervailing duty on de-bonded goods - transition of CENVAT credit to GST - eligibility of CVD as Cenvat credit for refund - application of section 11B(2) regarding refund on inputs versus capital goods - decision beyond pleadings / grounds outside pleadings

Decision beyond pleadings / grounds outside pleadings - refund of countervailing duty on de-bonded goods - Whether the Commissioner (Appeals) could deny the refund by holding that the debonded IT infrastructure were capital goods and that CVD paid thereon was not eligible for refund when that question was not raised by the appellant before the Commissioner (Appeals). - HELD THAT: - The Tribunal held that the Commissioner (Appeals) answered the appeal in favour of the appellant on the pleaded ground but then proceeded to decide an additional, unpleaded question - namely, whether the debonded IT infrastructure constituted capital goods and whether CVD paid on them was ineligible for CENVAT credit and hence not refundable. Reliance was placed on established principle that a forum cannot grant or deny relief on grounds outside the pleadings and cannot grant relief not claimed by the parties; the Tribunal cited precedents to that effect (Krishna Priya Ganguly and Om Prakash ). Because the Commissioner (Appeals) went beyond the scope of the appellant's challenge and decided an issue of which the parties were not apprised and which was not the subject-matter of the appeal, that portion of the impugned order was held to be unsustainable. The Tribunal therefore did not examine the merits of whether IT infrastructure are capital goods or the substantive correctness of the view on eligibility of CVD as credit, since the error was procedural and jurisdictional to the extent of being outside the pleadings. [Paras 5, 6, 7]

That part of the impugned order rejecting refund on the unpleaded ground that the debonded IT infrastructure were capital goods and CVD was not eligible for refund is set aside as decision on grounds outside the pleadings; appeal allowed and appellant entitled to consequential relief.

Final Conclusion: The Tribunal modified the impugned order by setting aside the portion based on an unpleaded finding that debonded IT infrastructure were capital goods and CVD was not refundable; the appeal is allowed and the appellant is entitled to consequential relief as per law.

Prospective operation of Rule 11(3) of the CENVAT Credit Rules, 2004 - CENVAT credit in respect of inputs/inputs contained in stock not liable to reversal on subsequent exemption of final product - Refund of accumulated CENVAT credit under Section 142 of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944 - Prior rejection of refund under Rule 5 of CENVAT Credit Rules does not preclude subsequent refund under Section 142 - Vested right in law to lawfully availed CENVAT credit

Prospective operation of Rule 11(3) of the CENVAT Credit Rules, 2004 - CENVAT credit in respect of inputs/inputs contained in stock not liable to reversal on subsequent exemption of final product - Applicability of Rule 11(3) of the CENVAT Credit Rules, 2004 to exemption notifications issued prior to 1-3-2007. - HELD THAT: - The Tribunal held that Rule 11(3), which requires payment equivalent to CENVAT credit for inputs lying in stock when a final product is exempted, was inserted with effect from 1-3-2007 and is therefore prospective. Where the exemption notification in respect of the final product (Notification No. 31/2004-CE dated 09.07.2004) predates the insertion of Rule 11(3), the proviso cannot be applied retrospectively to divest the assessee of CENVAT credit lawfully availed prior to 1-3-2007. The Tribunal relied upon and followed decisions including the Karnataka High Court in Gokaldas Intimate Wear and related authorities (the Gokaldas ratio affirmed by the Supreme Court) and Ramco International, concluding that credit availed on inputs up to the date prior to amendment vests in the assessee and need not be reversed when exemption was granted earlier. [Paras 4]

Rule 11(3) cannot be invoked retrospectively in respect of Notification No. 31/2004; the appellant's CENVAT credit availed prior to 1-3-2007 is not liable to be reversed on that ground.

Prior rejection of refund under Rule 5 of CENVAT Credit Rules does not preclude subsequent refund under Section 142 - Vested right in law to lawfully availed CENVAT credit - Effect of earlier rejection of a refund claim under Rule 5 on the appellant's entitlement to claim refund under Section 142 of the CGST Act, 2017. - HELD THAT: - The Tribunal found that the earlier refund application under Rule 5 was rejected for non-compliance of conditions applicable to that provision and notification. That rejection did not extinguish the CENVAT credit which stood restored in the appellant's CENVAT account and was carried forward in returns. With the advent of GST, the accumulated ADE (TTA) credit could not be utilised in the GST regime and the statutory remedy became refund under Section 142 of the CGST Act, 2017 (read with Section 11B of the Central Excise Act, 1944). The prior rejection under a different provision therefore does not create an embargo to consider and allow a refund claim admissible under Section 142. [Paras 4, 5]

Rejection of the earlier refund under Rule 5 is not a bar to the appellant claiming refund under Section 142; the accumulated ADE(TTA) credit restored in the CENVAT account can be the subject of refund.

Refund of accumulated CENVAT credit under Section 142 of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944 - Vested right in law to lawfully availed CENVAT credit - Whether the appellant is entitled to refund of accumulated ADE(TTA) CENVAT credit under Section 142 of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944. - HELD THAT: - Applying precedent and principles recognising that lawfully availed CENVAT credit is a vested right, the Tribunal held that where such accumulated credit cannot be transitioned or utilised post-GST implementation, the proper remedy is refund under Section 142 read with Section 11B. The Tribunal relied on an array of decisions (including Kirloskar Toyota, Bharat Heavy Electricals, Slovak India line of authority and related Tribunal/High Court precedents) that have allowed refund of unutilised cesses/credits not transitionable into GST. Taking these authorities and the facts that the ADE(TTA) exemption predated Rule 11(3) and the accumulated credit remained unutilised, the Tribunal concluded that the appellant is eligible for refund of the accumulated ADE(TTA) CENVAT credit. [Paras 4, 5]

The appellant is entitled to refund of the accumulated CENVAT credit of ADE(TTA) under Section 142 of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that Rule 11(3) of the CENVAT Credit Rules, 2004 cannot be applied retrospectively to an exemption notified in 2004, that prior rejection of a refund under Rule 5 does not bar a refund claim under Section 142, and that the appellant is entitled to refund of accumulated ADE(TTA) CENVAT credit under Section 142 read with Section 11B; the impugned order is set aside and consequential reliefs granted.

Interim injunction-triple test (prima facie case, balance of convenience, irreparable injury) - mandatory injunction-heightened scrutiny - Article 293-borrowing by States - over-utilization and adjustment of borrowing space - off-budget borrowings and inclusion of Public Account liabilities - judicial review of fiscal policy - fiscal decentralization and federalism

Interim injunction-triple test (prima facie case, balance of convenience, irreparable injury) - mandatory injunction-heightened scrutiny - over-utilization and adjustment of borrowing space - off-budget borrowings and inclusion of Public Account liabilities - Whether the State of Kerala is entitled to an ad interim mandatory injunction restoring pre ceiling borrowing position and permitting immediate additional borrowing - HELD THAT: - The Court applied the established triple test for interim relief, emphasising that mandatory injunctions attract a stricter standard. On the prima facie limb the State failed to show an entitlement to the borrowing claimed, in view of admitted over utilization of prior years' borrowing limits and the Union's case that such over borrowings may be adjusted in succeeding years; accordingly the Court was not persuaded that there remained unutilised fiscal space. On balance of convenience the Court found that permitting interim additional borrowing would risk substantial adverse national fiscal consequences and that the prejudice to the Union and the public fisc would outweigh the State's hardship, which in any event could be remedied by monetary relief if the State succeeded finally. As to irreparable injury, the Court held that financial hardship, arising in part from the State's own fiscal management, does not amount to irreparable injury that cannot be compensated. Taking these factors together the State did not satisfy the heightened requirements for a mandatory interim injunction and the application was dismissed. [Paras 27, 30, 32, 33, 37]

Interim application for mandatory injunction (I.A. No. 6149 of 2024) dismissed; State not entitled to the ad interim relief sought

Article 293-borrowing by States - judicial review of fiscal policy - fiscal decentralization and federalism - off-budget borrowings and inclusion of Public Account liabilities - Reference of substantial constitutional questions for consideration by a Constitution Bench under Article 145(3) - HELD THAT: - The Court identified several substantial and novel questions of constitutional law concerning the meaning and scope of Article 293 (including whether a State has an enforceable right to borrow from the Union or other sources and the extent to which the Union may regulate State borrowings), the inclusion of State Owned Enterprises and Public Account liabilities within Article 293(3), the ambit of judicial review over fiscal policy affecting State borrowings, and related federalism and Article 14 issues. Finding that Article 293 has not previously received authoritative interpretation by this Court and that the questions bear upon the federal structure, the Court referred the formulated questions to a five judge Bench for authoritative pronouncement under Article 145(3). The reference is for final determination by the larger Bench and is without prejudice to the merits of the main suit. [Paras 7, 8, 9, 10]

Questions of law identified in the order are referred to a Constitution Bench (five judge Bench) for authoritative determination

Final Conclusion: The ad interim application for a mandatory injunction restoring the State's pre ceiling borrowing position and permitting immediate additional borrowings is dismissed for failure to satisfy the requisites of prima facie case, balance of convenience and irreparable injury; separately, several substantial constitutional questions concerning Article 293, inclusion of off budget liabilities, judicial review of fiscal policy and related federalism and Article 14 issues are referred to a five judge Bench under Article 145(3) for decision.