TaxTMI Updates e-Newsletter
Apr 06,2022

Provisional attachment under Section 83 of the Central Goods and Services Tax Act - expiry of provisional attachment after one year - protection of Government revenue - lifting of provisional attachment

Provisional attachment under Section 83 of the Central Goods and Services Tax Act - expiry of provisional attachment after one year - lifting of provisional attachment - Whether the provisional attachment order dated 26.03.2021 remains efficacious beyond one year and whether the attachment must be lifted. - HELD THAT: - The Court noted that Section 83 permits provisional attachment of property, including bank accounts, during the pendency of specified proceedings to protect Government revenue, and that every such provisional attachment "shall cease to have effect after the expiry of a period of one year from the date of the order." The impugned order dated 26.03.2021 was issued under Section 83. Having regard to the statutory provision that provisional attachments cease after one year, the Court held that the impugned order had lost its efficacy. The Court recorded that adjudication proceedings referred to in the rejoinder had since concluded and that an appeal with deposit had been filed, but the determinative point was that the provisional attachment could not remain operative beyond the one-year period prescribed by Section 83(2). Consequently the attachment was ordered to be lifted. [Paras 6, 7, 8]

Impugned provisional attachment dated 26.03.2021 has lost efficacy as it has exceeded the one-year period under Section 83(2) and the attachment is ordered to be lifted; writ petition disposed accordingly.

Final Conclusion: Writ petition allowed; the provisional attachment under the order dated 26.03.2021 is held to have ceased by efflux of time and is directed to be lifted. Registry to dispatch the order to the petitioner and respondents to ensure service on the bank; parties may act on the digitally signed copy.

Detention of goods and conveyance - penalty under Section 129(3) of the CGST Act - technical breach - intention to evade tax - ex post facto amendment of GST registration - release of detained goods and consignment

Detention of goods and conveyance - wrong declaration in E-way bill - Validity of detention of the consignment and vehicle where the E-way bill declared a different place though consignor and consignee were the same entity (head office and branch). - HELD THAT: - The Court held that the authorities were justified in detaining the goods and the conveyance because the E-way bill contained an incorrect declaration regarding the place of business, which warranted detention under the statutory scheme. However, the factual matrix showed that the consignor and consignee were the same legal entity (head office and branch), and the incorrect entry was a technical inaccuracy rather than an act indicating tax evasion. The petitioner had taken steps to amend the GST registration to include the new place of business and the registration certificate had been amended, demonstrating absence of ulterior motive. The detention therefore was sustainable as an exercise of powers but did not by itself establish malafide or intention to evade tax. [Paras 6]

Detention was justified on account of wrong declaration, but the surrounding facts showed only a technical breach without intention to evade tax.

Penalty under Section 129(3) of the CGST Act - technical breach - intention to evade tax - ex post facto amendment of GST registration - release of detained goods and consignment - Whether imposition of penalty under Section 129(3) was warranted where the incorrect consignee address was a technical error and registration was subsequently amended. - HELD THAT: - The Court found that in the facts of the case the petitioner committed only a technical breach by declaring an incorrect consignee address while the consignor and consignee were the same entity. There was no finding of intention to evade tax; on the contrary, the petitioner promptly took steps to amend the GST registration to include the new place of business and the registration certificate was amended. In view of these circumstances, the Court concluded that imposing the statutory penalty under Section 129(3) was unwarranted. Exercising writ jurisdiction, the Court quashed the impugned order imposing penalty and directed release of the vehicle and consignment, if not already released. [Paras 6, 7]

Imposition of penalty under Section 129(3) quashed and respondent directed to release the detained vehicle and consignment.

Final Conclusion: Writ petition allowed; impugned order imposing penalty under Section 129(3) quashed and the respondent directed to release the detained vehicle and consignment, the petition disposed of with no costs.

Quashing of show cause notice - Maintainability of writ petition after adjudicatory orders - Judicial review rendered unnecessary where statutory orders have been passed - Right to challenge final orders by statutory remedy

Quashing of show cause notice - Maintainability of writ petition after adjudicatory orders - Petition praying for quashment of show cause notices was not entertained because consequential orders had already been passed. - HELD THAT: - The petition sought quashment of the show cause notices dated 20.03.2020 (Annexures P/5 and P/6). The respondents placed on record orders dated 02.03.2021 and 03.03.2022 passed consequent to those notices. In view of those subsequent adjudicatory orders, the Court declined to entertain the petition challenging the notices. The Court recorded that it was unnecessary to proceed with the writ petition once the statutory authorities had passed orders on the subject matter of the notices, and therefore refused to exercise writ jurisdiction in respect of the reliefs sought against the show cause notices.

Writ petition not entertained; petitioner granted liberty to challenge the impugned orders in the manner known to law; pending interlocutory applications disposed of.

Final Conclusion: The High Court declined to entertain the petition seeking quashment of the show cause notices since consequential orders had been passed; the petitioner was left free to pursue statutory remedies against those orders and interlocutory applications were disposed of.

Deduction under Section 80IC - Initial assessment year for 80IC - Income derived from eligible business - Allowability of deduction on ancillary receipts (AMC/service charges)

Initial assessment year for 80IC - Deduction under Section 80IC - Precedent in assessee's own case - Initial assessment year for claiming deduction under Section 80IC is 2006-07; assessment years 2011-12 and 2012-13 are the 6th and 7th years respectively for the purposes of Section 80IC. - HELD THAT: - The Tribunal noted its earlier decision in the assessee's own case holding that 2006-07 is the 'initial year' for Section 80IC and expressly followed that precedent. Applying that conclusion, the Tribunal held that 2011-12 corresponds to the sixth year and 2012-13 to the seventh year for claiming the Section 80IC benefit, and directed the Assessing Officer to treat 2006-07 as the initial year when determining the allowance of deduction for the years under appeal. [Paras 6]

2006-07 is the initial year for Section 80IC; treat 2011-12 as 6th year and 2012-13 as 7th year for entitlement under Section 80IC.

Deduction under Section 80IC - Income derived from eligible business - Allowability of deduction on ancillary receipts (AMC/service charges) - AMC/service charges are eligible for deduction under Section 80IC as income derived from the assessee's business; duty drawback, interest on FDRs, other interest and interest on refund are not derived from the business and are not eligible for deduction under Section 80IC. - HELD THAT: - Relying on the Tribunal's earlier decision in the assessee's appeals for assessment years 2006-07 and 2007-08, which held that AMC charges constitute income derived from the assessee's business and are therefore eligible for Section 80IC deduction, the Tribunal directed the Assessing Officer to allow the deduction in respect of AMC charges. The Tribunal distinguished duty drawback and various interest receipts as not being derived from the business and accordingly held that those receipts do not qualify for deduction under Section 80IC. [Paras 10]

Allow Section 80IC deduction in respect of AMC/service charges; disallow Section 80IC deduction in respect of duty drawback and interest receipts.

Final Conclusion: Both appeals are partly allowed: the Tribunal directs the Assessing Officer to treat 2006-07 as the initial year for Section 80IC (making 2011-12 the 6th year and 2012-13 the 7th year) and to allow deduction under Section 80IC for AMC/service charges while rejecting Section 80IC deduction for duty drawback and interest receipts.

Deduction under Section 80P - Section 148 reopening - obligation to furnish reasons - right to file objections to Section 148 notice and disposal by passing a speaking order - keeping proceedings in abeyance pending disposal of higher court proceedings - effect of withdrawal of Special Leave Petition leaving questions of law open

Section 148 reopening - obligation to furnish reasons - right to file objections to Section 148 notice and disposal by passing a speaking order - keeping proceedings in abeyance pending disposal of higher court proceedings - Validity of the High Court's order directing that the impugned notices under Section 148 be kept in abeyance and directing a procedure for furnishing reasons and disposal of objections. - HELD THAT: - The Court declined to interfere with the learned Judge's order which kept the impugned notices in abeyance pending the outcome of the Special Leave Petitions filed by the Revenue against the Division Bench judgment holding cooperative societies entitled to benefit under Section 80P. The Court directed a specific procedural course: the Assessing Officer shall furnish the reasons for reopening under Section 148 within two weeks of receipt of this judgment; the respondents shall file objections within four weeks of receipt of those reasons; and the Assessing Officer shall consider and dispose of such objections by passing appropriate orders in accordance with law, expeditiously. The Court relied on the settled principle that a noticee may seek reasons for issuance of a Section 148 notice and is entitled to have objections disposed of by a speaking order before further assessment proceedings are proceeded with.

The High Court's order was upheld with directions that the Assessing Officer furnish reasons within two weeks, the respondents submit objections within four weeks, and the Assessing Officer decide those objections expeditiously; meanwhile the impugned notices remain in abeyance as indicated.

Deduction under Section 80P - effect of withdrawal of Special Leave Petition leaving questions of law open - Consequences of the Division Bench's earlier decision on entitlement under Section 80P and the subsequent withdrawal of the Special Leave Petition before the Supreme Court. - HELD THAT: - The Court noted the Division Bench judgment holding cooperative credit societies entitled to benefit under Section 80P and recorded that the Revenue filed SLP(s) before the Supreme Court which were permitted to be withdrawn with questions of law left open. In view of the changed position, the Revenue accepted that it would follow the Division Bench order in proceeding further in the cases of the respondents. The High Court did not decide the substantive question of entitlement on merits afresh; rather it recognised the precedential posture and left the legal question open as per the Supreme Court's order while confining its directions to the procedural course for the Section 148 notices.

The Court did not reopen substantive adjudication on entitlement under Section 80P but recorded the effect of the Division Bench judgment and the Supreme Court's order permitting withdrawal of the SLPs while leaving questions of law open, and proceeded to give procedural directions accordingly.

Final Conclusion: The writ appeals are dismissed; the High Court's order is maintained with directions that the Assessing Officer furnish reasons for reopening within two weeks, the cooperative societies file objections within four weeks, and the Assessing Officer decide those objections expeditiously; the substantive question of entitlement under Section 80P remains open in view of earlier orders and the Supreme Court's disposition of the SLPs.

Principles of natural justice - show cause notice with draft assessment order under Section 144B - faceless assessment procedure - quash and remit for de novo assessment - opportunity of hearing (including video-conferencing)

Principles of natural justice - opportunity of hearing (including video-conferencing) - Whether the assessment order dated 30.07.2021 was passed in violation of the principles of natural justice by not considering the assessee's replies and not affording an opportunity of hearing. - HELD THAT: - The Court accepted the assessee's contention that its replies had been filed and that no opportunity by way of video-conferencing was afforded before the final order was passed. The judgment holds that an order under Section 143(3) read with Section 144B must conform to principles of natural justice by permitting the assessee to respond to the material relied upon; absence of such opportunity renders the order vulnerable. Applying these principles to the facts, the Court found the impugned assessment to be passed without adequate opportunity to the assessee. [Paras 9, 11]

Assessment order dated 30.07.2021 was vitiated for breach of principles of natural justice and was set aside.

Show cause notice with draft assessment order under Section 144B - quash and remit for de novo assessment - faceless assessment procedure - Whether the assessment should be quashed and remitted for fresh proceedings requiring issuance of a show-cause notice with the draft assessment order and an opportunity to reply. - HELD THAT: - The Court noted the settled requirement that a show-cause notice together with the draft assessment order is a prerequisite before finalising an order under Section 144B. Finding that no such show-cause with draft was issued in this case, the Court concluded that the final order was without jurisdiction. Consequently, the Court remitted the matter to the Assessing Officer directing issuance of a show-cause notice accompanied by the draft assessment order, an opportunity for the assessee to file a reply, and the passing of a fresh assessment after hearing, to be completed at the earliest. [Paras 11, 12]

Impugned assessment quashed and matter remitted to the Assessing Officer for de novo proceedings by issuing the requisite show-cause with draft and affording an opportunity to the assessee.

Final Conclusion: Writ petition allowed; impugned assessment order for A.Y. 2018-19 quashed and set aside, and matter remitted to the Assessing Officer to issue a show-cause notice with draft assessment order and to complete fresh assessment after affording the assessee an opportunity of hearing.

Issue of notice under Section 148 after the Finance Act, 2021 amendments - mandatory pre-issue enquiry and opportunity under Section 148A - applicability of newly inserted Explanations to reassessment proceedings - power to initiate fresh reassessment subject to statutory compliance and limitation

Issue of notice under Section 148 after the Finance Act, 2021 amendments - applicability of newly inserted Explanations to reassessment proceedings - Validity of reassessment notices under Section 148 served on or after 1.4.2021 where notices were issued in reference to the pre-amendment provisions. - HELD THAT: - The Division Bench examined the impact of the Finance Act, 2021 amendments to the reassessment provisions and concluded that reassessment notices under Section 148 of the Income-tax Act, 1961 which were served on or after 1.4.2021 but were issued with reference to the unamended law stood vitiated. The Court held that the newly inserted Explanations and the procedural safeguards introduced by Section 148A must be treated as operative for proceedings commenced under the amended scheme, and that notices served after the amendment which do not reflect the amended statutory regime cannot be sustained. The court read the Explanations as applicable to reassessment proceedings initiated on or prior to 31.3.2021 only insofar as those proceedings were initiated under the pre-amendment law, and set aside notices served after 1.4.2021 that proceeded as if no amendment had taken place. [Paras 19]

Reassessment notices under Section 148 served on or after 1.4.2021 that were issued referring to the pre-amendment provisions are set aside.

Mandatory pre-issue enquiry and opportunity under Section 148A - power to initiate fresh reassessment subject to statutory compliance and limitation - Whether assessing authorities may initiate reassessment afresh after complying with the amended provisions and subject to limitation. - HELD THAT: - The Court clarified that its setting aside of the impugned notices does not prohibit assessing authorities from initiating reassessment proceedings afresh under the amended statute. However, any such initiation must conform to the procedural requirements introduced by the Finance Act, 2021 including the enquiry and show-cause opportunity under Section 148A and obtaining prior approvals where mandated. Fresh proceedings are permissible only if the period of limitation for reassessment survives. This preserves the statutory safeguards of the amended regime while allowing reassessment consistent with law and limitation. [Paras 19]

Assessing authorities are at liberty to initiate reassessment proceedings in accordance with the amended law after making the requisite compliances, provided limitation for such proceedings survives.

Final Conclusion: Writ petitions allowed; impugned reassessment notices served on or after 1.4.2021 issued under the unamended scheme are set aside, with liberty to tax authorities to initiate fresh reassessment in accordance with the Finance Act, 2021 amendments and after observing the prescribed procedural safeguards, if limitation permits.

Reopening of assessment on reasons to believe that income has escaped assessment - Requirement of independent application of mind by Assessing Officer before issuance of reassessment notice - Borrowed satisfaction based on investigation report - Reopening cannot be used to make additions on issues unrelated to grounds of reopening - Principle barring assessment when reason for reopening is disproved

Reopening of assessment on reasons to believe that income has escaped assessment - Requirement of independent application of mind by Assessing Officer before issuance of reassessment notice - Borrowed satisfaction based on investigation report - Validity of reopening the assessment under section 147/148 in view of the material relied upon by the Assessing Officer - HELD THAT: - The Tribunal considered the basis for reopening - large bank deposits which the assessee explained as fixed deposit maturities and which explanation the AO accepted for that issue - and the allegation that the AO proceeded on the basis of information from the investigation wing without independent enquiry. The Tribunal noted that no addition was in fact made on the very issue for which the assessment was reopened. Applying the principle that reopening must be founded on tangible material and an independent satisfaction of the AO, the Tribunal observed that when the reason for reopening is disproved on facts, reassessment cannot be sustained merely because the AO proceeds to make unrelated additions. The Tribunal relied on the binding precedent where, if the issue which prompted reopening is shown to be unfounded, any addition made on a different issue in the reassessment is unsustainable. For these reasons the Tribunal held that the reassessment could not stand as the underpinning satisfaction had been negated by the evidence accepted in the assessment order. [Paras 8, 9]

Reopening was not sustainable in the circumstances; the reassessment based on those reasons was invalid.

Reopening cannot be used to make additions on issues unrelated to grounds of reopening - Principle barring assessment when reason for reopening is disproved - Sustainability of the addition of expenses disallowance made in reassessment when the reopening reason was not the subject of the addition - HELD THAT: - The Tribunal recorded that the AO made disallowances on expenses although no addition was made on the matter which occasioned the reopening. Following the Division Bench view affirmed by the Supreme Court in the cited authorities, the Tribunal concluded that where the ground for reopening is shown to be wrong or the AO accepts the assessee's explanation on that ground, the AO cannot independently assess some other income in the reassessment proceedings. Applying that principle, the Tribunal directed deletion of the impugned addition which was not linked to the reason for reopening. [Paras 9]

The addition is deleted as it was made on an issue unrelated to and inconsistent with the basis of reopening.

Final Conclusion: The appeal is allowed; the addition sustained in reassessment is deleted and the reassessment cannot be sustained where the foundational reason for reopening was disproved and the AO made an unrelated addition.

Assessment of undisclosed bank deposits - burden of proof regarding source of bank deposits - treatment of regular deposits and withdrawals as indicative of business activity - presumptive taxation for trading receipts - enhancement of addition by appellate authority

Assessment of undisclosed bank deposits - burden of proof regarding source of bank deposits - treatment of regular deposits and withdrawals as indicative of business activity - presumptive taxation for trading receipts - enhancement of addition by appellate authority - Whether the total deposits in the joint Axis Bank account can be treated as undisclosed income of the assessee and the appropriate tax treatment where regular deposits and concomitant withdrawals are shown. - HELD THAT: - The Tribunal found as an undisputed fact that deposits totalling the impugned amount were made into a joint savings account. The assessee's explanation was that the receipts arose from sale of seasonal vegetables carried on by his wife; the AO rejected this for lack of documentary proof and made a partial addition, while the CIT(A) enhanced the addition to include the entire deposits. The Tribunal examined the bank transactions and observed regular inflows and corresponding regular withdrawals, with no single lump-sum deposit establishing a one time unexplained receipt. That pattern lends credibility to the claim of trading activity rather than a single concealed income. In these circumstances the Tribunal held it was not permissible to treat the entire deposits as the assessee's undisclosed income. Applying a pragmatic remedy to tax the receipts demonstrably attributable to trading activity, the Tribunal confirmed tax on a presumptive basis at 8% of the total deposits and directed deletion of the balance. The Tribunal noted the appellate enhancement but, on the merits of the bank statement and transactional pattern, declined to sustain taxation of the whole amount. [Paras 4, 5]

Total deposits in the joint account are not entirely assessable as the assessee's undisclosed income; tax is confirmed on a presumptive basis at 8% of the deposits and the balance is deleted, resulting in partly allowing the appeal.

Final Conclusion: Appeal partly allowed: addition confirmed only to the extent of presumptive income at 8% of the total deposits in the Axis Bank joint account for AY 2009-10; the remaining addition deleted.

Addition on unexplained/on-money receipts - sharing of undisclosed receipts between partners - search and seizure evidence as basis for assessment - deletion of addition for want of evidence/conjecture and surmise - assessment under section 143(3) read with 153C/153A - burden of proof and inference drawn by assessing officer

Addition on unexplained/on-money receipts - sharing of undisclosed receipts between partners - search and seizure evidence as basis for assessment - Whether the addition made by the AO in respect of on-money receipts, restricted by the CIT(A) to the firm's share after allowing the partner's offer, was correctly confirmed. - HELD THAT: - Seized documents and the sworn statement of the partner recorded during search showed the sale at Rs. 175 per sq.ft. for the area in question and indicated that amounts were to be shared between the two 50% partners. The CIT(A) reduced the AO's addition by 50% on the basis that one partner had offered his 50% share to tax. The Tribunal noted that the assessee did not dispute the sale rate recorded in the seized material and failed to rebut the evidence gathered during search. On that basis the Tribunal held that the AO had rightly made the addition in respect of the firm's unexplained receipts and confirmed the orders of the lower authorities in relation to the balance addition retained in the hands of the firm. [Paras 5]

Addition confirmed in part; the Tribunal upheld the addition as sustained against the firm after allowing the reduction corresponding to the partner's taxed share.

Deletion of addition for want of evidence/conjecture and surmise - burden of proof and inference drawn by assessing officer - Whether the AO could make an addition by treating the firm as having repurchased plots (thereby assessing the rate difference) in the absence of any seized material or other evidence of such repurchase. - HELD THAT: - The AO's finding that the firm had repurchased land sold earlier to a third party was based on inference without any seized material or concrete evidence that such repurchase occurred. The Tribunal observed that while the sale by the firm to the third party was recorded in the seized documents, there was no iota of evidence of a subsequent repurchase. An addition cannot be sustained on conjecture or surmise; where the AO's conclusion rests on inference alone and no evidence is produced to substantiate the alleged repurchase, the addition must be deleted. Applying this principle, the Tribunal deleted the addition made on account of the alleged rate difference. [Paras 10]

Addition deleted for lack of evidence; AO's inference of repurchase set aside.

Final Conclusion: The appeal is partly allowed: the Tribunal confirmed the addition made in respect of unexplained/on-money receipts as upheld against the firm after allowing the portion already offered by a partner, and deleted the addition based on the alleged repurchase and rate-difference for want of evidence.

Jurisdiction to exercise revisionary powers under section 263 of the Income tax Act - order erroneous in so far as it is prejudicial to the interests of the revenue - requirement of materials on record before suo motu exercise of revisionary power - distinction between lack of enquiry and inadequate enquiry for invoking section 263 - obligation to record satisfaction and reasons before remitting assessment under section 263

Jurisdiction to exercise revisionary powers under section 263 of the Income tax Act - requirement of materials on record before suo motu exercise of revisionary power - order erroneous in so far as it is prejudicial to the interests of the revenue - obligation to record satisfaction and reasons before remitting assessment under section 263 - Validity of Principal Commissioner of Income Tax's invocation of section 263 and consequent setting aside of assessment order for A. Y. 2015-16 - HELD THAT: - The Tribunal held that the PCIT's exercise of revisionary power was without jurisdiction because the foundational material on the record did not support the PCIT's premise that a claim under section 54B had been made and left unverified. The PCIT recorded a conclusion that exemption under section 54B had been claimed and, since there was "no reflection of agriculture income or loss" in the return, the long term capital gain should be added back. The return and computation filed in the assessment records, however, showed no claim of deduction under section 54B and identified the amount instead under exempt income. Section 263 permits suo motu examination, but the revising authority must have materials on record to form a prima facie satisfaction that the assessment is "erroneous in so far as it is prejudicial to the interests of the revenue." Where the AO has made enquiries (even if those enquiries are argued to be inadequate), the PCIT must itself examine and record clear, non debatable reasons showing error before remitting; he cannot merely remit for the AO to decide whether the order was erroneous. On the facts, the PCIT proceeded on a misconception of fact, did not conduct or record independent verification to establish error, and simply set aside the assessment directing a fresh assessment. That approach contravened the statutory requirement and judicial dicta emphasising that initiation of suo motu revision must be based on verifiable materials on record and not on arbitrary satisfaction. Accordingly, the exercise of power under section 263 was held illegal and without jurisdiction. [Paras 11, 12, 14]

The PCIT's order under section 263 setting aside the assessment for A. Y. 2015 16 was quashed as being illegal and without jurisdiction.

Final Conclusion: Impugned order passed under section 263 dated 19.02.2021 for A. Y. 2015 16 is quashed; appeal allowed.

Deduction under section 10A/10AA - Realisation of export proceeds within six months and extension by competent authority (Reserve Bank of India) - Computation of export turnover and treatment of amounts pending realisation (Form No.56F) - Chapter VI A deduction on profits enhanced by disallowances under sections 32, 40(a)(ia), 40A(3) and 43B - Exclusion of telecommunication expenses from export turnover and total turnover - Sales between SEZ/EOU units as export or deemed export under the SEZ Act - Recognition of provisions for marked to market losses - test of present obligation, probability of outflow and reliable estimate (Rotork Controls)

Deduction under section 10A/10AA - Realisation of export proceeds within six months and extension by competent authority (Reserve Bank of India) - Computation of export turnover and treatment of amounts pending realisation (Form No.56F) - Whether export proceeds not realised within six months from the end of the previous year are eligible for deduction under section 10A by reason of RBI circulars extending or removing the six month stipulation. - HELD THAT: - The Tribunal examined section 10A(3) together with its Explanations, and relevant RBI circulars (AP(DIR Series) Circular No.28/30.03.2001 and Circular No.91/01.04.2003). It held that section 10A(3) permits the competent authority (RBI) to allow a further period for bringing export proceeds into India and that the RBI circulars applicable to the year in issue either extended the six month period or removed the specified time limit for SEZ units. The undisputed auditor certification (Form No.56F) showed an amount pending realisation at the end of six months; accordingly the Tribunal held that the assessee was entitled to claim deduction under section 10A in respect of the amount so pending realisation, subject to verification by the AO whether those proceeds were realised within one year from the year end as permitted by the RBI circulars, and directed the AO to verify at the stage of giving effect to the order. [Paras 7]

Claim under section 10A allowed for the amount shown as pending realisation at the end of six months, subject to AO's verification whether realised within one year as per RBI circulars.

Chapter VI A deduction on profits enhanced by disallowances under sections 32, 40(a)(ia), 40A(3) and 43B - Whether disallowances under sections 32, 40(a)(ia), 40A(3), 43B etc., which enhance business profits, must be taken into account for computing Chapter VI A deductions. - HELD THAT: - The Tribunal considered the AO's additions and the CIT(A)'s reliance on judicial authority and noted CBDT Circular No.37/2016 which accepts the settled position that disallowances related to the business activity against which Chapter VI A deduction is claimed operate to enhance the profits of the eligible business and that the deduction is admissible on the enhanced profits. The Department did not controvert the applicability of the Circular. In view of the CBDT Circular and the authorities it references, the Tribunal affirmed the CIT(A)'s deletion of the disallowance and dismissed the Revenue's appeal on this ground. [Paras 10, 11]

Order of CIT(A) deleting the disallowance affirmed; Revenue's appeal dismissed on this issue.

Exclusion of telecommunication expenses from export turnover and total turnover - Deduction under section 10A/10AA - Whether telecommunication expenses excluded from export turnover must also be excluded from total turnover for computing deduction under section 10A. - HELD THAT: - The Tribunal applied binding decisions of the Bombay High Court (CIT v. GEM Plus Jewellery India Ltd.) and the Special Bench of the ITAT Chennai (Sak Soft Ltd.), which hold that where an item is reduced from export turnover, the same item must be reduced from total turnover. Following those authorities, the Tribunal confirmed the CIT(A)'s direction to exclude telecommunication expenses from both export turnover and total turnover while computing the deduction under section 10A. [Paras 13]

CIT(A)'s exclusion of telecommunication expenses from both export and total turnover confirmed.

Deduction under section 10A/10AA - Whether the assessee is entitled to 100% deduction under section 10A or only 50% because commercial production commenced after 01.04.2003. - HELD THAT: - The Tribunal considered the uncontroverted documentary record of incorporation, approvals and the stated date of commencement of commercial production in 1999 2000, and the provisions restricting 100% deduction for units commencing production on or after 01.04.2003. As the assessee's commercial production date precedes 01.04.2003 and the facts are verifiable from the record, the Tribunal held that the assessee is eligible for 100% deduction under section 10A for the relevant period and confirmed the CIT(A)'s finding. [Paras 15, 16]

CIT(A)'s allowance of 100% deduction upheld; Revenue's ground dismissed.

Sales between SEZ/EOU units as export or deemed export under the SEZ Act - Deduction under section 10A/10AA - Whether sales made to other SEZ/EOU units located in India qualify as export turnover for the purpose of claiming deduction under section 10AA. - HELD THAT: - The Tribunal examined Explanation 1(i) to section 10AA and the SEZ Act provisions, and applied the decision of the Madras High Court in Preludesys India Ltd., which held that supplies from one Unit to another Unit in the same or different SEZ are within the definition of 'export' for SEZ purposes and that the SEZ Act's scheme must be read into the Income tax provisions. Given that the sales were penultimate to exports, consideration was received in convertible foreign exchange and the assessee acted as deemed exporter, the Tribunal held that such inter SEZ/EOU sales qualify as export/deemed export for section 10AA and allowed the claim. [Paras 21, 23]

Sales to other SEZ/EOU units treated as export/deemed export; claim under section 10AA allowed.

Recognition of provisions for marked to market losses - test of present obligation, probability of outflow and reliable estimate (Rotork Controls) - Whether the provision for marked to market (MTM) losses on forward foreign exchange contracts made by the assessee qualifies as an allowable provision for computing profits eligible for deduction under section 10AA/10A. - HELD THAT: - The Tribunal considered the assessee's illustrative charts and submissions but found that the assessee failed to demonstrate how the MTM provision satisfied the three conditions laid down by the Supreme Court in Rotork Controls (present obligation from past event; probable outflow; reliable estimate). There was no sufficient evidence of historical trend or reliable estimation methodology. The Tribunal therefore agreed with the AO and CIT(A) that the provision lacked the necessary basis and rejected the assessee's claim. [Paras 24, 25, 26, 27]

Disallowance of provision for MTM losses upheld; assessee's claim dismissed.

Final Conclusion: For AY 2009 10 the assessee's appeal is allowed for statistical purposes in respect of the export proceeds pending realisation subject to AO's verification of realisation within the RBI permitted period; the Revenue's appeal is dismissed on issues of disallowances (in light of CBDT Circular No.37/2016), telecommunication expenses exclusion and commencement date for 100% deduction. For AY 2010 11 the assessee's appeal is partly allowed (inter SEZ/EOU sales treated as export/deemed export) and the claim for MTM provision is rejected.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - Assessing Officer's discretion to refer valuation to Valuation Officer under section 50C(2) - deeming operation of section 50C - period of holding for capital gains - computation of long-term/short-term status for leasehold/allotment rights - plausible view/absence of lack of inquiry

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - plausible view/absence of lack of inquiry - Whether the Pr. CIT was justified in invoking section 263 to set aside the assessment order of the AO. - HELD THAT: - The Tribunal found that the AO had issued specific queries during assessment about computation of capital gains and the discrepancy between declared sale consideration and stamp duty value, and that the assessee furnished multiple written explanations which the AO considered and accepted. The Tribunal relied on precedent that where the AO has made reasonable enquiry and taken a plausible view, the revisional power under section 263 cannot be invoked merely because the Commissioner prefers another view. The PCIT also failed to conduct basic minimum enquiries herself before assuming jurisdiction. Applying the settled test that an order under section 263 can be sustained only if it is both erroneous and prejudicial to revenue, the Tribunal concluded that the twin conditions were not fulfilled since the AO had made enquiries and taken a tenable view. [Paras 32, 33, 34, 39, 43]

Section 263 proceedings initiated by the Pr. CIT were unjustified and the revisional order setting aside the assessment is quashed.

Assessing Officer's discretion to refer valuation to Valuation Officer under section 50C(2) - deeming operation of section 50C - Whether the AO was obliged to substitute stamp duty value under section 50C or to refer the matter to the Valuation Officer, and whether failure to do so rendered the assessment erroneous. - HELD THAT: - The Tribunal observed that the statutory provision permits the AO to refer valuation to the Valuation Officer where the assessee claims that stamp duty valuation exceeds fair market value, but the use of the word 'may' makes such reference discretionary. In the present case the AO raised queries, considered the assessee's replies and accepted the declared sale consideration; therefore the AO adopted one of the possible plausible views and was not obliged to mechanically invoke section 50C or refer to the DVO. The Tribunal held that the Pr. CIT could not invalidate the assessment by substituting his view where the AO had conducted enquiries and reached a tenable conclusion. [Paras 31, 32, 33, 34, 39]

AO's refusal to substitute stamp duty value or to refer the matter to the Valuation Officer did not make the assessment order erroneous; section 50C substitution was not warranted on the facts.

Period of holding for capital gains - computation of long-term/short-term status for leasehold/allotment rights - Whether the leasehold/allotment rights were to be treated as long-term capital asset (period of holding reckoned from allotment/payment) or short-term (from possession/lease deed execution). - HELD THAT: - On the material, the assessee applied for allotment and made payments in earlier years, was allotted the plot in F.Y. 2003-04 (allotment dated 02.01.2004) and made complete payments by F.Y. 2004-05; physical possession and formal lease deed occurred later. Tribunal followed authority holding that 'held by the assessee' embraces the date from which the assessee acquired the right to hold the asset (beneficial/allotment/right of tenancy), and therefore the period of holding for capital gains may be reckoned from allotment/when the assessee acquired beneficial interest and made full payment. Applying these principles, the assessee's computation taking indexed cost from F.Y. 2004-05 was a plausible view and supported by precedent. [Paras 40, 41, 42]

The leasehold/allotment rights were properly treated as long-term on the facts; the AO's view in this regard was a plausible one and not erroneous.

Deeming operation of section 50C - Assessing Officer's discretion to refer valuation to Valuation Officer under section 50C(2) - Whether section 50C could be invoked where the transfer was impermissible under the lease deed and effected only by an unregistered agreement to sell. - HELD THAT: - The Tribunal noted that the lease deed contained restrictions making the sale impermissible without prior consent and provided for payment of a share of unearthed increase to the lessor; the transaction here was effected by an unregistered Agreement to Sell and, therefore, prima facie not a valid transfer under Transfer of Property Act and section 2(47) of the Income Tax Act. Section 50C's deeming operation applies to transfers of 'land or building' for income-tax purposes and presupposes a valid transfer; where transfer is impermissible or not effected by requisite conveyance, substituting stamp duty value would be inappropriate. Even if transfer were held valid, the applicability of section 50C to leasehold rights is debatable and not a matter where revisional jurisdiction could be invoked when the AO took a plausible view. [Paras 13, 15, 18, 32, 39]

Section 50C substitution was not correctly invoked by the Pr. CIT on the facts; the question of applicability to leasehold rights was debatable and did not render the assessment erroneous.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the Pr. CIT's order passed under section 263 for A.Y. 2016-17, and held that the Assessing Officer had conducted adequate enquiry, taken plausible views on stamp duty valuation and period of holding of leasehold/allotment rights, and therefore the revisional jurisdiction could not be exercised.

Jurisdiction under Section 153C (pre-amendment) - Belonging requirement for seized documents - Distinction between 'belongs to' and 'pertains to/relates to' - Presumption that documents found in search belong to the searched person - Requirement to rebut presumption by cogent material - Quashing of assessment for lack of jurisdiction

Jurisdiction under Section 153C (pre-amendment) - Belonging requirement for seized documents - Presumption that documents found in search belong to the searched person - Requirement to rebut presumption by cogent material - Distinction between 'belongs to' and 'pertains to/relates to' - Validity of assumption of jurisdiction under pre amendment Section 153C for A.Y. 2004 05 where no incriminating material belonging to the assessee was seized during search on a third party. - HELD THAT: - Under the pre amended Section 153C the Assessing Officer could assume jurisdiction in respect of a person other than the searched person only where the books or documents seized "belong" to that other person. Statutory presumptions in Sections 132(4A)(i) and 292C(1)(i) operate to presume that documents found in the possession of the searched person belong to that searched person; the AO must rebut this presumption by recording cogent material showing that the seized documents belong to some other person. The amended post 2015 provision widened the test to documents that "pertain to" or "relate to" another person, but that amendment is not applicable to searches conducted prior to 01.06.2015. Applying these legal principles and the cited High Court authorities, the Tribunal found that no incriminating material or documents belonging to the assessee were seized during the search on 23.02.2006; the AO therefore lacked the jurisdictional satisfaction required by the pre amended Section 153C and his assumption of jurisdiction was invalid. [Paras 10, 11]

Assessment for A.Y. 2004 05 framed under Section 143(3) read with Section 153C is quashed for want of jurisdiction; appeal allowed.

Jurisdiction under Section 153C (pre-amendment) - Quashing of assessment for lack of jurisdiction - Validity of assessment for A.Y. 2005 06 framed under Section 143(3) read with pre amended Section 153C, insofar as it depends on the same jurisdictional premise as A.Y. 2004 05. - HELD THAT: - The facts and jurisdictional defect in the assumption of jurisdiction for A.Y. 2004 05 apply mutatis mutandis to A.Y. 2005 06. Because the assessment for 2004 05 (which formed the basis for disallowance of interest in 2005 06) was quashed for want of jurisdiction under pre amended Section 153C, the consequent assessment actions for A.Y. 2005 06 founded on the same notice are also invalid. The Tribunal therefore refrained from deciding the merits of additions or disallowances and quashed the assessment framed for A.Y. 2005 06 on jurisdictional grounds. [Paras 15, 16]

Assessment for A.Y. 2005 06 framed under Section 143(3) read with Section 153C is quashed for want of jurisdiction; appeal allowed.

Final Conclusion: Both appeals for A.Y. 2004 05 and A.Y. 2005 06 are allowed: the assessments framed under Section 143(3) read with pre amended Section 153C are quashed for want of jurisdiction because no seized documents belonging to the assessee were found in the third party search and the jurisdictional "belonging" requirement of the pre 2015 Section 153C was not satisfied.

Restriction of disallowance to the profit element of alleged bogus purchases - treatment of alleged bogus purchases as unexplained expenditure under section 69C - relevance of corresponding sales in assessing genuineness of purchases - application and scope of N.K. Proteins precedent - estimation of gross profit to quantify taxable income where purchases are supported by sales and documentary evidence

Restriction of disallowance to the profit element of alleged bogus purchases - relevance of corresponding sales in assessing genuineness of purchases - application and scope of N.K. Proteins precedent - estimation of gross profit to quantify taxable income where purchases are supported by sales and documentary evidence - Whether the addition of the entire amount of purchases held to be 'bogus' could be made, or whether the disallowance should be restricted to an estimated profit element (10%) in view of corresponding sales and supporting documents. - HELD THAT: - The Tribunal examined the factual matrix and relevant findings: the Assessing Officer and PCIT had held purchases to be 'bogus' based on information from investigation/sales tax authorities, and the Post-Revision Assessment treated the entire purchases as unexplained expenditure under section 69C. However, the Tribunal noted that the assessing officer had also recorded the existence of corresponding sales and that the assessee had filed bills, ledgers and bank payment proofs. Coordinate Bench decisions were considered where, on similar facts, the Tribunal restricted the addition to the profit element after quantitative reconciliation of stock and acceptance of sales. The Tribunal distinguished the scope of the N.K. Proteins decision relied upon by Revenue on the ground that in the present case the element of corresponding sales and documentary proof was not dealt with in applying that precedent; therefore N.K. Proteins was not held to be determinative. Applying these principles, the CIT(A)'s estimate restricting the addition to 10% of the alleged bogus purchases (as the profit element) was found to be a reasonable quantification of taxable income in addition to profits already offered, and no infirmity was found in holding that the entire purchase amount need not be brought to tax. [Paras 10, 11, 12, 13]

The CIT(A)'s order restricting the addition to 10% of the alleged bogus purchases is upheld and the Revenue's appeal is dismissed.

Final Conclusion: On the facts where corresponding sales were accepted and documentary evidence was presented, the Tribunal upheld the CIT(A)'s restriction of the addition to 10% of the alleged bogus purchases as the taxable profit element; the Revenue's appeal seeking addition of the entire purchases was dismissed.

Reopening of assessment under section 147/148 of the Income-tax Act - reasons to believe - independent application of mind by the Assessing Officer - borrowed satisfaction - AIR information not being tangible material without independent verification - link between tangible material and formation of reasons to believe

Reopening of assessment under section 147/148 of the Income-tax Act - reasons to believe - AIR information not being tangible material without independent verification - borrowed satisfaction - link between tangible material and formation of reasons to believe - Validity of reopening assessment proceedings under section 147/148 where reasons recorded are based solely on AIR information without independent corroboration or application of mind by the Assessing Officer. - HELD THAT: - The Tribunal examined the reasons recorded by the AO which primarily reproduced AIR information that the assessee had deposited cash in his bank account and noted the assessee's non-compliance with a verification letter. Reliance on authorities of the jurisdictional High Court, including decisions which hold that information received from investigation wings or AIR does not constitute tangible material per se, led to the conclusion that the AO must make an independent application of mind and demonstrate a link between the tangible material and the formation of the reasons to believe. The Tribunal found that, other than issuing a verification letter (to which the assessee did not respond), the AO made no independent efforts to verify or corroborate the AIR information and merely acted on the information, producing a conclusion that amounted to a "borrowed satisfaction." Although the assessee had an obligation to reply to the verification letter, that fact did not cure the absence of corroborative inquiry or evidential linkage by the AO. For these reasons the recorded reasons were held to be insufficient, vague and unsubstantiated and thus did not satisfy the statutory requirement for reopening under section 147/148. [Paras 6]

Reopening of assessment proceedings under section 147/148 quashed as the reasons recorded were based on uncorroborated AIR information and amounted to a borrowed satisfaction; appeal allowed.

Final Conclusion: The Tribunal quashed the reopening of assessment for the Assessment Year 2009- 10 on the ground that the reasons recorded by the AO were based on uncorroborated AIR information without independent application of mind and therefore amounted to a borrowed satisfaction; the appeal is allowed and merits were not adjudicated.

Penalty under Section 271E for contravention of Section 269T - Penalty under Section 271D for contravention of Section 269SS - Admissibility and evidentiary value of loose papers seized during survey - Relevance of assessment under Section 143(3) r.w. Section 147 to penalty proceedings

Penalty under Section 271E for contravention of Section 269T - Admissibility and evidentiary value of loose papers seized during survey - Relevance of assessment under Section 143(3) r.w. Section 147 to penalty proceedings - Whether penalty under Section 271E could be sustained for alleged cash repayment in contravention of Section 269T based on loose paper no.98 impounded during survey. - HELD THAT: - The Tribunal found that the loose paper relied upon did not disclose the alleged amount of Rs. 2 lakh in respect of the year in question, was unsigned, not prepared by the assessee, and did not identify the corresponding party to the entries. The assessment completed under Section 143(3) r.w. Section 147 did not make any addition on this account and the Assessing Officer himself recorded that no addition was required insofar as the alleged cash loan related to a different year. In view of the vagueness, absence of authentication and the assessment record, the material was insufficient to sustain imposition of penalty under Section 271E for contravention of Section 269T.

Penalty under Section 271E imposed for alleged contravention of Section 269T is cancelled and the order of the Assessing Officer is reversed.

Penalty under Section 271D for contravention of Section 269SS - Admissibility and evidentiary value of loose papers seized during survey - Temporal nexus of alleged cash receipts to the assessment year - Whether penalty under Section 271D could be sustained for alleged cash receipts (loans/deposits) shown in loose papers nos.94 and 98 for Assessment Year 2011-12. - HELD THAT: - The Tribunal observed that loose paper no.98 related to an alleged receipt on 12.09.2009 (FY 2009-10) and the AO in assessment proceedings had not made additions on that basis; therefore that entry did not pertain to AY 2011-12. Loose paper no.94, on its face, included calculations of interest indicating the alleged receipt related back about 21 months earlier (around July 2008), i.e., to FY 2008-09 (AY 2009-10), and thus lacked the necessary temporal nexus with AY 2011-12. Further, the documents were unsigned, not authenticated, and the assessee was deceased so their authenticity could not be established. On these grounds the material was prima facie inadequate to sustain penalty under Section 271D for contravention of Section 269SS in respect of AY 2011-12.

Penalty under Section 271D imposed for alleged contravention of Section 269SS is cancelled and the Assessing Officer is directed to withdraw the penalty.

Final Conclusion: Both appeals are allowed: penalties imposed under Section 271E and Section 271D (for alleged contraventions of Sections 269T and 269SS respectively) are quashed in view of the inadequate, unsigned and temporally unrelated loose-paper material and the assessment record which did not support additions for the years in question.

Rectification under section 154 of the Income-tax Act - limitation and mistake apparent from record - deduction under section 35(1)(iv) - capitalised research and development expenditure - treatment of reimbursement and book profit - taxability and prevention of double taxation - remand for fresh verification and de novo adjudication

Rectification under section 154 of the Income-tax Act - limitation and mistake apparent from record - Whether the rectification order under section 154 could be set aside on grounds of limitation or absence of any mistake apparent from record - HELD THAT: - Grounds 1 and 2, which challenged the validity of the order passed under section 154 as being time-barred and as lacking any mistake apparent from record, were not pressed before the Tribunal. The Tribunal recorded that these grounds were not pursued by the assessee and accordingly did not adjudicate them on merits. [Paras 6]

Grounds 1 and 2 were not pressed and stand dismissed.

Deduction under section 35(1)(iv) - capitalised research and development expenditure - treatment of reimbursement and book profit - taxability and prevention of double taxation - remand for fresh verification and de novo adjudication - Whether the profit of Rs. 3,67,14,142 recorded on realization from Ford Motor Company was correctly added to income and whether the reimbursement of Rs. 15,80,36,317 was offered to tax - HELD THAT: - The assessing officer disallowed the profit on sale of research and development, treating the amount reimbursed by Ford as fully taxable and asserting that there was no element of profit. The assessee contended that the expenditure had earlier been capitalised and claimed as deduction under section 35(1)(iv), that the entire reimbursement had been offered to tax in the year under consideration, and that the profit shown in books was merely an accounting entry. The assessee placed documents and detailed submissions in the paper book to support its claim. The Tribunal, after reviewing the material on record and the paper book, observed that the lower authorities did not undertake proper examination/verification of the documents relied upon by the assessee. Given the documentary material placed by the assessee, the Tribunal considered it appropriate to remit the matter to the assessing officer for fresh de novo consideration and verification of the documents after affording the assessee an opportunity of being heard. [Paras 5, 6]

Addition of profit is set aside for fresh adjudication; the issue is remanded to the assessing officer for de novo decision after verification of documents - ground allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed for statistical purposes: Grounds 1 and 2 are dismissed as not pressed; Ground 3 (addition of profit and correctness of tax treatment of reimbursement) is remitted to the assessing officer for de novo verification and decision after affording the assessee an opportunity.

Exit from Special Economic Zone - Grant of No Objection Certificate (NOC) - Provisional NOC subject to reservation of rights - Liability for VAT/GST on exit - Application of Rule 74 of the SEZ Rules, 2006 - State's claim of tax dues prior to de-notification

Provisional NOC subject to reservation of rights - Grant of No Objection Certificate (NOC) - Whether the State may grant a provisional NOC to the unit for exit from the SEZ, reserving its rights to determine and claim any tax liability - HELD THAT: - The Court granted the State liberty to consider and, if it deems fit, grant a provisional NOC to the writ applicant so as to provide interim relief from commercial exigencies, subject to the State's rights and contentions regarding any claim for VAT/GST. The order directed the State to take instructions on whether it will grant a provisional NOC and indicated that such provisional grant would not prejudice the State's entitlement to determine and pursue tax liabilities in accordance with law. The matter was adjourned to enable the State to decide on issuing a provisional NOC and to communicate its position. [Paras 11]

State may consider granting a provisional NOC subject to reservation of its rights; matter adjourned for further instructions and listing.

Application of Rule 74 of the SEZ Rules, 2006 - Liability for VAT/GST on exit - State's claim of tax dues prior to de-notification - Whether the tax liability as asserted by the State can be sustained under Rule 74 of the SEZ Rules, 2006 - HELD THAT: - The Court noted the State's reliance on Rule 74 of the SEZ Rules, 2006 for claiming VAT/GST liability prior to granting NOC. No final adjudication on the merits of the applicability of Rule 74 was made at this stage; the Court observed that if the matter is to be contested on merits it will examine whether the liability sought to be raised by the Government is sustainable in law under Rule 74. The State was granted time to obtain instructions on its position, after which the Court will proceed to consider the legal question. [Paras 9, 11]

Merits of the claim under Rule 74 not decided; reserved for future adjudication if contested after State gives its instructions.

Procedural record - Admission of the affidavit filed by respondent Nos.2,5,6,7 and 8 - HELD THAT: - The Court ordered that the affidavit in reply filed on behalf of respondent Nos.2,5,6,7 and 8 be taken on record. [Paras 12]

Affidavit on behalf of respondent Nos.2,5,6,7 and 8 taken on record.

Final Conclusion: The Court permitted the State to seek instructions on whether to grant a provisional NOC (subject to reservation of its rights to determine tax liability), declined to decide the applicability of Rule 74 on the present record and reserved that legal question for future adjudication if contested; the affidavit filed by certain respondents was taken on record and the matter was listed for further hearing.

Retest of seized goods - classification: GTL Light Paraffin vs Light Diesel Oil - priority testing by Central Excise and Customs Laboratory (CRCL) - duty of agency to comply with court direction - provisional release under Section 110A of the Customs Act

Retest of seized goods - duty of agency to comply with court direction - priority testing by Central Excise and Customs Laboratory (CRCL) - Direction to forward samples for retest and allocation of responsibility for obtaining the report - HELD THAT: - The Court recorded its earlier direction to have the samples retested (order dated 03.03.2022) and found non-compliance by the DRI in not forwarding the samples. Acting on that failure, the Court directed that the samples shall, by the following day, be dispatched to the CRCL, Delhi with a request that testing be accorded top priority and the report be furnished within one week of receipt. The Court specifically placed responsibility on Mr. Vikram Meena, Senior Intelligence Officer of the DRI, to pursue transmission of the samples to CRCL, obtain the test report and produce it by the next date of hearing. The Court also stated that if the DRI receives the report earlier it must be shared with the writ applicants. The instruction for prompt compliance and prioritisation of testing was imposed because of the prior non-compliance and the centrality of the retest to resolution of the dispute. [Paras 1, 4, 5, 6, 14]

Samples to be dispatched to CRCL, Delhi by tomorrow with request for top-priority testing; Mr. Vikram Meena to ensure receipt of report within one week and to produce it on next hearing; DRI to share any earlier report with the writ applicants.

Classification: GTL Light Paraffin vs Light Diesel Oil - Scope of retest and remand for determination of product classification - HELD THAT: - The core controversy concerns whether the imported product is GTL Light Paraffin (HSN: 27101990) as claimed by the writ applicants or Light Diesel Oil as concluded by the Chemical Examiner in the Vadodara laboratory. The Court directed that the samples forwarded to CRCL, Delhi for retest must expressly request verification on that precise question - whether the samples are GTL Light Paraffin or Light Diesel Oil. The determination of classification is left for adjudication after receipt of the retest report; the matter is adjourned for further hearing and the Court indicated it would proceed to pass an appropriate order on the next date of hearing whether or not the retest report is available. [Paras 3, 9, 10, 11, 12]

Reclassification issue referred to CRCL, Delhi for retest to verify whether product is GTL Light Paraffin or Light Diesel Oil; final decision deferred to the next hearing (21.04.2022) after consideration of the report.

Provisional release under Section 110A of the Customs Act - Status of prior provisional release order and requirement of security - HELD THAT: - The Court took note of an earlier order dated 03.12.2021 granting provisional release of the seized vessel under Section 110A of the Customs Act, which remains subject to the writ applicants furnishing a bond for the insured value and a bank guarantee. The Court observed that the applicants have practical difficulties in furnishing a bond while being a foreign company, and permitted the applicants to consider the issue and revert to the Court on the next date of hearing. [Paras 7, 8]

Existing provisional release under Section 110A stands recorded as subject to the prescribed bond and bank guarantee; applicants to address practical difficulty in furnishing the bond and inform the Court on the next date.

Final Conclusion: Court directed immediate dispatch of seized-goods samples to CRCL, Delhi for top-priority retest expressly to determine whether the goods are GTL Light Paraffin or Light Diesel Oil; responsibility placed on the Senior Intelligence Officer to secure the report within one week and produce it at the next hearing; the classification question is reserved for decision after the retest, and the existing provisional release under Section 110A remains subject to the security conditions with applicants to address bond-related difficulties.

Amendment of documents - conversion of shipping bills into advance license shipping bills - discretion of the proper officer under Section 149 - documentary evidence in existence at the time of export - physical examination requirement under Board Circulars - conversion where level of examination is same (Para 3 of Board Circular No.36/2010)

Conversion of shipping bills into advance license shipping bills - amendment of documents - documentary evidence in existence at the time of export - physical examination requirement under Board Circulars - conversion where level of examination is same (Para 3 of Board Circular No.36/2010) - Denial of appellant's request to convert 'free' shipping bills into Advance License shipping bills was not justified. - HELD THAT: - The Court examined Section 149 which permits amendment of documents at the discretion of the proper officer subject to the provisos, read along with Board Circular No.36/2010 and Circular No.6/2002 which prescribe that post-export amendment is permissible on the basis of documentary evidence existing at the time of export and within the time-limit specified by the circulars. The record showed that the appellant had exported goods manufactured using imports under an Advance License, the invoices indicated intent to claim export incentives, and there was no dispute about existence or genuineness of documents at the time of export. The absence of physical examination by Customs cannot be attributed to the appellant where the relevant circulars set out the scale of examination and where, for the relevant schemes, the prescribed level of examination is the same. Para 3 of Circular No.36/2010 permits conversion where the level of examination is the same; applying that principle the request for conversion should have been allowed. The Principal Commissioner erred in rejecting the conversion solely on the ground that requirements of Section 149 were not satisfied, especially when documentary evidence existed and the prescribed examination regime did not disentitle the appellant to conversion. [Paras 5, 6, 7]

Impugned order denying conversion is set aside and the appeal is allowed; the appellant is entitled to consequential benefits as per law.

Final Conclusion: The order refusing conversion of the shipping bills into Advance License shipping bills is set aside; appeal allowed and consequential benefits granted in accordance with law.

Provisional release under Section 110A of the Customs Act - bond for full value of seized goods - bank guarantee/security for provisional release - discretion under Circular No. 35/2017-Cus to increase or decrease security - differential duty, fine and penalties as components of security - excessive security reduced

Provisional release under Section 110A of the Customs Act - bank guarantee/security for provisional release - discretion under Circular No. 35/2017-Cus to increase or decrease security - differential duty, fine and penalties as components of security - bond for full value of seized goods - excessive security reduced - Appropriateness of the terms of provisional release imposed by the Competent Authority, specifically (a) bond equal to value of goods and (b) bank guarantee fixed at 2.5 times the differential duty. - HELD THAT: - The Circular No. 35/2017-Cus contemplates provisional release under Section 110A subject to a bond for the full/estimated value of seized imported goods and a Bank Guarantee or security to cover differential duty, potential fine in lieu of confiscation and penalties, with express discretion to increase or decrease the security depending on case-specific reasons. In the present case the goods had been cleared from Customs and were lying in the appellant's premises; part were further processed and 75% of the detained quantity was found to be of domestic origin, while proceedings in respect of the balance were pending investigation. The seizure itself was not challenged before the authorities and the appeal relates solely to relaxation of provisional release conditions. Applying the Circular and exercising the discretion recorded in writing, the Tribunal found the security fixed at 2.5 times the differential duty excessive in these factual circumstances and reduced the bank guarantee/security requirement to an amount equal to the quantified differential duty, while preserving the requirement of a bond equal to the value of the goods. [Paras 6, 8]

Bank guarantee/security fixed at 2.5 times the differential duty is excessive and is reduced to an amount equal to the differential duty; bond to remain equal to the value of the goods; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: the Competent Authority's requirement of bank guarantee equal to 2.5 times the differential duty is reduced to a bank guarantee equal to the quantified differential duty, while the bond equal to the value of the goods is upheld.

Condonation of delay under section 128 of the Customs Act - scope of proviso empowering Commissioner (Appeals) to extend time by thirty days - exclusion of Section 5 of the Limitation Act insofar as statutory proviso prescribes condonable period

Condonation of delay under section 128 of the Customs Act - scope of proviso empowering Commissioner (Appeals) to extend time by thirty days - exclusion of Section 5 of the Limitation Act insofar as statutory proviso prescribes condonable period - The Commissioner (Appeals) cannot condone delay beyond the further period of thirty days permitted by the proviso to section 128; an appeal filed after that condonable period is time barred. - HELD THAT: - Section 128 permits an appeal to the Commissioner (Appeals) within sixty days of communication of the order and, by proviso, authorises the Commissioner (Appeals) to allow presentation within a further period of thirty days only if satisfied that the appellant was prevented by sufficient cause. The Tribunal applied the determinative reasoning of the Supreme Court in Singh Enterprises that the legislative language confines the appellate authority's power to condone delay to the statutory thirty day extension and thereby excludes reliance on Section 5 of the Limitation Act to extend time beyond that period. The Tribunal further noted consistent judicial exposition (including Diamond Construction and Uttam Sucrotech International ) holding that any delay beyond the statutory extended period is not susceptible to condonation by the appellate authority. Applying this principle to the facts found in the order, the impugned order was received on 09.01.2015, and the appeal was filed on 05.01.2016, well beyond the sixty day period plus the thirty day condonable extension; the Commissioner (Appeals) was therefore justified in dismissing the appeal as barred by limitation. [Paras 7, 8, 9, 12, 13]

Appeal dismissed as time barred; no power to condone delay beyond thirty days after the sixty day period under section 128.

Final Conclusion: The Tribunal dismissed the appeal, holding that under section 128 the Commissioner (Appeals) may condone delay only up to thirty days beyond the initial sixty day period and that an appeal filed after that condonable period is barred by limitation.

Penalty for facilitating export of prohibited goods by mis-declaration - jurisdiction to issue show cause notice in customs enforcement - confession and retracted statement - corroboration by co-accused and material evidence - reduction of penalty in exercise of discretionary power

Jurisdiction to issue show cause notice in customs enforcement - Jurisdiction of the Additional Commissioner (SIIB) to issue the show cause notice was not in question and the notice was validly issued. - HELD THAT: - The Tribunal found that the matter did not concern a demand of duty under Section 28(4) and therefore the competence of the Additional Commissioner (SIIB) to issue the show cause notice was not challenged on a proper legal basis. The show cause notice was issued on allegations of mis-declaration and bringing prohibited goods into the customs area for export, matters squarely within the enforcement jurisdiction of customs authorities. On this basis the Tribunal held that no jurisdictional objection prevented issuance of the show cause notice. [Paras 22]

The show cause notice was rightly issued and jurisdictional objection is not sustained.

Penalty for facilitating export of prohibited goods by mis-declaration - confession and retracted statement - corroboration by co-accused and material evidence - reduction of penalty in exercise of discretionary power - Whether the appellant knowingly connived in the fraudulent export of prohibited non-basmati rice and whether penalty under the Customs Act was justified; if so, whether quantum of penalty required modification. - HELD THAT: - The Tribunal examined the appellant's recorded statements in which he admitted knowledge of the true contents of containers, detailed the modus operandi, and disclosed remuneration received. Those admissions, though a retracted statement was later made before a magistrate, were present in multiple statements recorded on different dates and were corroborated by statements of others, the intercepted consignments, and evidence of forgery on export documents. The Tribunal held that the retraction before the Court of Duty Magistrate did not negate the probative value of the appellant's other statements nor the corroborative material found by the customs officers. On the facts the appellant was found to have connived with other persons in mis-declaring and exporting prohibited goods. However, exercising its discretion having regard to the facts and circumstances, the Tribunal reduced the penalty originally imposed on the appellant. [Paras 22, 23]

Penalty under the Customs Act is confirmed but reduced from the amount imposed by the adjudicating authority to a lesser sum.

Final Conclusion: Appeal allowed in part: jurisdictional objection rejected; findings of connivance and liability for penalty upheld but the penalty imposed on the appellant is reduced (from the original quantum to a reduced amount).

Reliability of retracted confessional statement under Section 108 - Corroboration requirement for confessional statements - Burden of proof under Section 123 - Standards for confiscation of goods and import of foreign-origin goods - Imposition and setting aside of penalties under Sections 112 and 114AA

Reliability of retracted confessional statement under Section 108 - Corroboration requirement for confessional statements - Evidentiary value of the statement recorded under Section 108 which was subsequently retracted by the arrested person and whether that statement could form the main basis for confiscation. - HELD THAT: - The Tribunal accepted the appellate authority's conclusion that the statement recorded under Section 108 was retracted by the intercepted person via a 'Bandi Aawedan Patra' and that retraction materially affected its evidentiary value. The adjudicating authority had treated the original statement as inculpatory, but the appellate authority found that the retraction, coupled with the documents enclosed with the retraction and the bail petition (bearing the intercepted person's signatures dated before incarceration), undermined reliance on the earlier confession. The Tribunal noted the settled rule that a statement under Section 108 is substantive evidence but requires some corroboration before being acted upon; a retracted confession, unless corroborated in material particulars, is not sufficient to sustain confiscation or conviction. The Tribunal agreed that the Department failed to produce cogent corroborative evidence to sustain the confessional statement as reliable proof of smuggling. [Paras 9, 10, 11, 12, 14]

The retracted statement could not, without corroboration, be made the main basis for confiscation; its evidentiary value was diminished by the retraction and accompanying documents.

Burden of proof under Section 123 - Standards for confiscation of goods and import of foreign-origin goods - Whether the Department discharged the burden under Section 123 to prove that the seized gold was smuggled and liable to confiscation. - HELD THAT: - The Tribunal reviewed the appellate authority's findings that the claimant produced purchase documents and that the gold dealer produced bills, stock registers and GST records. The Department's attempts to disprove the claim (relying on toll plaza records, cell tower data, timing of payments and alleged first-time trade between parties) were held to be speculative and not supported by further inquiry or cogent documentary evidence. The Tribunal emphasised that suspicion or strong presumption cannot substitute for evidence; where a claimant produces prima facie credible documents, the Department must rebut them by concrete proof or further investigation. Given the absence of material evidence disproving licit purchase and the failure to trace or confront alleged third parties or investigate alternative routes, the Tribunal found the Department did not meet the standard required under Section 123 to establish smuggling and confiscation under Section 111. [Paras 15, 16, 17, 19, 20]

The Department failed to discharge the burden under Section 123; confiscation was not justified on the available evidence.

Imposition and setting aside of penalties under Sections 112 and 114AA - Whether penalties imposed on the other appellants could stand once the claim to the gold by the claimant succeeded on merits. - HELD THAT: - The appellate authority held that once the claimant's entitlement to return of the gold was established on merits, penalties imposed on other appellants under the cited provisions could not be sustained. The Tribunal concurred: where confiscation is set aside because the Department failed to prove smuggling, consequential penalties imposed under the Customs Act were also required to be set aside, since they flowed from the finding of smuggling and were not supportable independently on the record. [Paras 21]

Penalties imposed under Sections 112 and 114AA were correctly set aside once the confiscation order was quashed.

Final Conclusion: The Tribunal upheld the appellate authority's decision: the Department failed to produce cogent corroborative evidence to rebut the claimant's documentary proof or to establish smuggling; the confiscation order and consequential penalties were set aside and the appeals by the Department are dismissed.

Beneficial owner - deeming fiction - goods-currency as goods and distinction from baggage - jurisdiction of the Appellate Tribunal under section 129A - scope of Customs authority vis-a -vis FEMA-carrying out of India versus acquisition/possession/use

Beneficial owner - deeming fiction - scope of Customs authority vis-a -vis FEMA-carrying out of India versus acquisition/possession/use - Appellant is not a "beneficial owner" under section 2(3A) of the Customs Act in respect of the seized foreign currency. - HELD THAT: - The Court examined the definition of "beneficial owner" as a deeming fiction introduced in 2017 to cover situations where the actual owner is not available and acts are done at the behest of another. When the actual owner is identified, the deeming fiction does not apply. The statements recorded under section 108 showed that the foreign currency belonged to SEMPL, was acquired and maintained by SEMPL for corporate event expenses, and was handed to Amit Bali from SEMPL's accounts for discharging contractual obligations. The Additional Commissioner had found HMC and the appellant to be mere recipients of SEMPL's services and that the appellant was unaware of cash being carried by Amit Bali. The Commissioner (Appeals) relied on an earlier inconsistent statement by Amit Bali but did not give adequate weight to subsequent clarifying statements and documentary indicia that SEMPL was the owner and that invoices were raised on HMC with payments made by HMC. The Tribunal held that the Commissioner (Appeals) erred in reversing the finding that the concept of "beneficial owner" would not arise once the actual owner (SEMPL) is identified, and that treating corporate-purpose foreign exchange as personal expenses of the appellant was conjectural. Consequently, the imposition of penalties on the appellant as beneficial owner could not be sustained. [Paras 15, 27, 29, 39]

Order treating the appellant as "beneficial owner" set aside and penalties/fines imposed on that basis quashed.

Goods-currency as goods and distinction from baggage - jurisdiction of the Appellate Tribunal under section 129A - Appeal is maintainable before the Appellate Tribunal despite the proviso to section 129A concerning goods imported or exported as baggage. - HELD THAT: - The Tribunal considered the proviso to section 129A which bars appeals to the Appellate Tribunal in respect of orders relating to goods imported or exported as baggage. The Court examined statutory definitions of "baggage" and "goods" (which expressly include "currency and negotiable instruments") and relied on earlier Tribunal and High Court decisions which treated currency as distinct within the definition of "goods" and held that appeals concerning currency seizures are maintainable. Applying that precedent and the statutory scheme, the Tribunal found no merit in the Department's contention that the appeal is barred and held the appeal to be within the Tribunal's jurisdiction. [Paras 31, 38]

Objection to maintainability overruled; appeal admitted and heard on merits.

Final Conclusion: The Commissioner (Appeals) order holding the appellant to be the "beneficial owner" and imposing penalties and fines is set aside; the appeal is allowed and the penalties/fines imposed on the appellant quashed. The Tribunal also ruled that the appeal was maintainable before it.

Sanction of Scheme of Amalgamation under Section 230 read with Section 232 - Transfer and vesting of assets and liabilities with effect from the Appointed Date - Allotment of shares by Transferee Company in consideration of amalgamation - Dissolution of Transferor Company without winding up upon filing of certified copy - Continuation of pending proceedings by or against Transferee Company - Compliance with accounting treatment and applicable accounting standards in relation to scheme - Payment of applicable stamp duty on transfer of immovable properties pursuant to amalgamation - Filing of Schedule of Assets in prescribed form and related post-sanction formalities

Sanction of Scheme of Amalgamation under Section 230 read with Section 232 - Transfer and vesting of assets and liabilities with effect from the Appointed Date - Sanction of the Scheme of Amalgamation and legal effect of the Appointed Date - HELD THAT: - The Tribunal examined the petition, statutory notices, advertisements and representations and concluded that the Scheme of Amalgamation between the Transferor Company and the Transferee Company is bona fide and in the interests of all concerned. The Scheme is sanctioned to be binding with effect from the Appointed Date stated in the Scheme. Pursuant to the sanction, all property, rights, powers, debts, liabilities, duties and obligations of the Transferor Company stand transferred to and vest in the Transferee Company from the Appointed Date without further act or deed, subject to existing charges and as provided in the Scheme. [Paras 1, 4, 8]

The Scheme is sanctioned and assets and liabilities of the Transferor Company are transferred and vested in the Transferee Company with effect from the Appointed Date.

Allotment of shares by Transferee Company in consideration of amalgamation - Continuation of pending proceedings by or against Transferee Company - Engagement of employees of Transferor Company by Transferee Company - Post-sanction operational consequences as provided in the Scheme - HELD THAT: - The Tribunal directed that the Transferee Company shall, without further application, issue and allot to the shareholders of the Transferor Company the shares to which they are entitled under the Scheme. It was directed that employees of the Transferor Company shall be engaged by the Transferee Company as provided in the Scheme. Further, all proceedings, suits and appeals pending by or against the Transferor Company shall be continued by or against the Transferee Company in accordance with the Scheme. [Paras 8]

The Transferee Company shall effect the allotment of shares, engage the Transferor Company's employees as per the Scheme, and continue pending proceedings as the Transferee Company.

Dissolution of Transferor Company without winding up upon filing of certified copy - Filing of Schedule of Assets in prescribed form and related post-sanction formalities - Procedural steps to be taken consequent to sanction including filing and dissolution - HELD THAT: - The Tribunal granted leave to file the Schedule of Assets in the form prescribed in Form No. CAA7 within a stipulated time and directed that each company shall within thirty days cause a certified copy of the order to be delivered to the Registrar of Companies for registration. Upon filing of certified copies, the Transferor Company shall be dissolved without winding up with effect from the date of filing of the certified copy and Registrar shall consolidate files as prescribed. The Petitioners were also directed to supply legible printouts of the scheme and schedule for departmental appendage to certified copy upon verification. [Paras 8, 9]

Petitioners to file the Schedule of Assets and deliver certified copies to the Registrar; Transferor Company to be dissolved without winding up upon filing.

Compliance with accounting treatment and applicable accounting standards in relation to scheme - Payment of applicable stamp duty on transfer of immovable properties pursuant to amalgamation - Acceptance of undertakings given in response to Regional Director's observations regarding accounting and stamp duty - HELD THAT: - The Regional Director raised points seeking undertakings on compliance with the requirement of section 232(3)(i), payment of applicable stamp duty on transfer of immovable properties, and passing of necessary accounting entries to comply with applicable accounting standards. The Petitioners, by rejoinder, affirmed that they will comply with section 232(3)(i), will pay applicable stamp duty consequent to approval of the Scheme, and will pass such accounting entries as may be necessary to comply with applicable Accounting Standards. The Tribunal, having considered the RD's observations and the Petitioners' undertakings, proceeded to allow the petition. [Paras 7, 8]

Petitioners' undertakings on statutory compliance, stamp duty and accounting treatment accepted and recorded; petition allowed.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation to be effective from the Appointed Date, directed transfer and vesting of assets and liabilities in the Transferee Company, ordered implementation steps including allotment of shares, engagement of employees, continuation of proceedings, filing of the Schedule of Assets and delivery of certified copies to the Registrar leading to dissolution of the Transferor Company, and recorded acceptance of the Petitioners' undertakings on accounting and stamp duty compliance.

Sanction of Scheme of Amalgamation - Appointed Date - Transfer of assets and liabilities by virtue of amalgamation - Continuation of pending proceedings by or against transferee - Filing of schedule of assets and statutory filings post sanction - Payment of applicable stamp duty on transfer of immovable property - Adjustment of fees on clubbing of authorized share capital - Statutory compliance with Section 230(6) and Section 232(3) of the Companies Act, 2013

Sanction of Scheme of Amalgamation - Appointed Date - Statutory compliance with Section 230(6) and Section 232(3) of the Companies Act, 2013 - The Scheme of Amalgamation between the transferor companies and Planet Commodities Private Limited is sanctioned and made binding with effect from 1st April, 2019. - HELD THAT: - The Tribunal examined the petition filed under the Companies Act seeking sanction of the Scheme and the attendant corporate approvals, auditors' certificates and valuation report. Having considered the affidavits of compliance, the report of the Official Liquidator and the representations filed by the Regional Director with the rejoinder by the petitioners addressing the concerns raised, the Tribunal concluded that statutory formalities had been complied with and that the Scheme was bona fide and in the interest of all concerned. The Tribunal accordingly sanctioned the Scheme to operate with effect from the appointed date 1st April, 2019. [Paras 5]

Scheme sanctioned and ordered to be binding with effect from 1st April, 2019.

Transfer of assets and liabilities by virtue of amalgamation - Continuation of pending proceedings by or against transferee - All properties, rights, liabilities and pending proceedings of the transferor companies stand transferred to and vested in Planet Commodities Private Limited, and pending suits or proceedings shall be continued by or against the transferee. - HELD THAT: - Pursuant to the sanction, the Tribunal directed that all estates, rights and interests of the transferor companies be transferred to and vested in the transferee without further act or deed, subject to existing charges. It further directed that all liabilities and duties transfer to the transferee and that any pending suits, appeals or proceedings by or against the transferor companies shall be continued by or against the transferee company in the same manner and to the same extent. [Paras 5]

Assets, liabilities and pending proceedings of transferor companies transferred to and to be enforced against the transferee company.

Filing of schedule of assets and statutory filings post sanction - Adjustment of fees on clubbing of authorized share capital - Payment of applicable stamp duty on transfer of immovable property - Post sanction compliance directions were issued: schedule of assets to be filed, certified copies to be delivered to ROC, transferee to increase authorised capital if necessary and to comply with adjustment of fees and payment of applicable stamp duty. - HELD THAT: - In exercise of its supervisory powers the Tribunal directed that the schedule of assets be filed within 60 days and that the companies cause certified copies of the order to be delivered to the Registrar of Companies within 30 days of obtaining the certified copy. The transferee was directed to issue and allot shares as envisaged in the Scheme and increase authorised share capital if necessary. In response to Regional Director's representations, the transferee gave undertakings to comply with the requirement to adjust fees upon clubbing of authorised capital and to pay applicable stamp duty on transfer of immovable properties; the Tribunal recorded these undertakings and imposed the filing and compliance directions as conditions of sanction. [Paras 4, 5]

Directions issued for filing schedule of assets, statutory filings, adjustment of fees on clubbing of authorised capital and payment of stamp duty; undertakings by transferee recorded.

Official Liquidator's report - Regional Director's representations - Representations of the Official Liquidator and the Regional Director were considered; no objection from the Official Liquidator and RD's concerns were addressed by undertakings and compliance recorded. - HELD THAT: - The Tribunal noted the Official Liquidator's report which recorded no complaints and observed that the affairs of the transferor companies did not appear to have been conducted prejudicially. The Regional Director had queried the justification for the appointed date and raised ancillary compliance points; the petitioners filed a rejoinder furnishing the timeline and gave specific undertakings (including compliance with fee adjustment, payment of stamp duty and identity of the Scheme document). Having considered these responses and the absence of objections from statutory authorities (including no observations from Income Tax authorities on service), the Tribunal found the concerns satisfactorily addressed and proceeded to sanction the Scheme. [Paras 3, 4, 5]

Official Liquidator's report recorded no objection; Regional Director's observations were met by petitioners' undertakings and compliance, and the Tribunal accepted the same.

Final Conclusion: The Company Petition is allowed: the Scheme of Amalgamation is sanctioned with effect from 1st April, 2019; assets, liabilities and pending proceedings of the transferor companies are transferred to the transferee; directions and undertakings regarding statutory filings, schedule of assets, adjustment of fees, payment of stamp duty and delivery of certified copies to the Registrar of Companies are recorded and made conditions of the sanction.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings - consent affidavits of shareholders and creditors - accounting treatment in conformity with Section 133 of Companies Act, 2013 - service of notice on regulatory authorities - appointed date

Dispensing with convening of meetings - consent affidavits of shareholders and creditors - Dispensation of convening/holding of meetings of shareholders, secured creditors and unsecured creditors of the Transferor Companies and the Transferee Company was allowed as specified. - HELD THAT: - The Tribunal recorded that each applicant company filed certificates from chartered accountants identifying shareholders and creditors and placed on record affidavits evidencing unanimous consent of all equity shareholders and the relevant unsecured creditors. The Tribunal noted there were no secured creditors for any of the companies. On that basis, and having regard to the affidavits and accompanying certifications, the Tribunal directed that convening of meetings of shareholders and unsecured creditors is dispensed with for Transferor Company 1 through Transferor Company 5 and for the Transferee Company, as particularised in the order, and observed that meetings for secured creditors did not arise because there are no secured creditors. [Paras 14, 15, 16, 17, 21]

Convening of meetings of shareholders and unsecured creditors dispensed with for all applicant companies; no meetings required for secured creditors as none exist.

Accounting treatment in conformity with Section 133 of Companies Act, 2013 - The accounting treatment proposed in the Scheme of Amalgamation was accepted as being in conformity with the applicable provisions and supported by certificates from the statutory auditors. - HELD THAT: - The petitioner companies filed certificates from their respective statutory auditors certifying that the accounting treatment proposed under the Scheme conforms with the applicable accounting provisions as prescribed under Section 133 of the Companies Act, 2013. The Tribunal recorded the filing of these certificates and accepted that the accounting treatment in the Scheme was in conformity with the said provisions. [Paras 18]

Accounting treatment as provided in the Scheme accepted as conforming with the applicable accounting provisions.

Service of notice on regulatory authorities - Directions were issued for service of notice of the application on specified regulatory and governmental authorities. - HELD THAT: - The Tribunal directed that notice of the application be served on the Regional Director (MCA), Registrar of Companies, the Official Liquidator and the Income Tax Department (with disclosure of sufficient details for response), and on any other sectoral regulators as required. The Tribunal recorded these service directions to enable regulatory scrutiny and responses as may be appropriate. [Paras 22]

Notice to be served on the Regional Director (MCA), ROC, Official Liquidator, Income Tax Department and any other requisite sectoral regulators.

Final Conclusion: The joint application for sanction of the Scheme of Amalgamation was allowed on the terms recorded (including dispensation of meetings where consents were filed, acceptance of the accounting treatment, and directions for service of notice); the application is disposed of accordingly.

Limited judicial review of Committee of Creditors' commercial wisdom - treatment of operational creditors under a resolution plan - priority of payments in insolvency and adequacy vis-a -vis liquidation value - judicial review under Section 30(2) of the Code - finality and implementation of an approved resolution plan

Treatment of operational creditors under a resolution plan - priority of payments in insolvency and adequacy vis-a -vis liquidation value - limited judicial review of Committee of Creditors' commercial wisdom - judicial review under Section 30(2) of the Code - finality and implementation of an approved resolution plan - Whether the Resolution Plan adequately protected the interests of operational creditors and complied with the Code such that the Tribunal should not interfere with the commercial decision of the Committee of Creditors. - HELD THAT: - The Tribunal applied the limited scope of judicial review available under the Code and relevant precedents, holding that it cannot supplant the commercial wisdom of the Committee of Creditors except where there is material irregularity or non-compliance with statutory requirements. The plan's distributions to operational creditors were examined against the liquidation-value benchmark; the Tribunal observed that the plan provided amounts not less than what operational creditors would receive on liquidation and noted the Assessee's liquidation value was assessed as nil. In view of these findings, the distributions were held to be in accordance with the statutory order of priority and the requirements that the Committee must have considered maximisation of asset value and interests of stakeholders under Section 30(2). The Tribunal also emphasized the concluded and implemented nature of the approved plan and declined to direct the CoC to revisit its commercial decision at a belated stage absent substantial evidence of material irregularity. Accordingly, there was no jurisdictional basis to set aside or remit the plan on the facts before the Tribunal. [Paras 6, 7, 8, 10]

The Tribunal dismissed the appeal, finding no basis to interfere with the Committee of Creditors' commercial wisdom and holding that the Resolution Plan met the statutory requirements with respect to operational creditors and priority of payments; the approved and implemented plan would not be reopened.

Final Conclusion: Appeal dismissed. The Tribunal, applying the limited judicial review under Section 30(2), held that the Resolution Plan complied with the Code in its treatment of operational creditors and with the order of priority; having been approved and implemented, it will not be reopened in the absence of material irregularity.

Substantive consolidation of corporate insolvency proceedings - substantial consolidation as an exceptional remedy - mere shareholding not constituting group companies - separate dates of default and separate causes of action precluding consolidation - assets and liabilities consolidation limited by statutory scheme of the Code - limited judicial review of the commercial wisdom of the Committee of Creditors under Sections 30 and 31 - finality of liquidation proceedings and impossibility of setting back the liquidation clock

Substantive consolidation of corporate insolvency proceedings - mere shareholding not constituting group companies - separate dates of default and separate causes of action precluding consolidation - finality of liquidation proceedings and impossibility of setting back the liquidation clock - limited judicial review of the commercial wisdom of the Committee of Creditors under Sections 30 and 31 - Whether the Adjudicating Authority was justified in dismissing the liquidator's application for substantive consolidation of the Corporate Debtor with Respondents Nos. 2-6. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's conclusion that consolidation was not maintainable on the facts. The Court recorded that there were distinct admission orders, different identities, different dates of default and separate causes of action for the companies sought to be consolidated; two of the entities (Respondents 2 and 3) were already in liquidation and Respondents 4-6 were solvent companies against whom no default under the Code had been established. The Tribunal accepted the Adjudicating Authority's finding that mere cross shareholding or common directors, without more, does not establish that companies are 'group companies' for the purpose of substantive consolidation, and that the Code does not provide for consolidation merely because entities hold substantial shares in each other. The Bench emphasised that substantial consolidation is an exceptional remedy and cannot be used to unsettle completed liquidation steps or to set back liquidation processes already underway. Further, the Tribunal applied the settled principle that the commercial wisdom of the Committee of Creditors and the limited scope of judicial review under the Code (as expounded in the Supreme Court authorities reproduced in the judgment) restrict the Tribunal's intervention in matters affecting resolution plans and related commercial decisions. Having regard to these factors and the stage of proceedings, the Tribunal found no illegality or infirmity in the Adjudicating Authority's refusal to order consolidation. [Paras 5, 6, 7, 8, 9]

The Adjudicating Authority rightly dismissed the application for substantive consolidation; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that on the admitted facts-distinct CIRP/liquidation orders, different dates of default, lack of pleaded defaults against certain respondents, and the exceptional nature of substantial consolidation-consolidation was not maintainable and there was no interference warranted with the Adjudicating Authority's order.

Definition of 'financial debt' under Section 5(8) - definition of 'financial creditor' under Section 5(7) - commercial effect of borrowing under the explanation to sub-clause (f) of Section 5(8) - status of 'allottee' under RERA

Definition of 'financial debt' under Section 5(8) - definition of 'financial creditor' under Section 5(7) - Whether amounts invested by the appellant in the joint venture/ memorandum of understanding qualify as 'financial debt' and the appellant as a 'financial creditor' under the Code. - HELD THAT: - The Tribunal examined the Memorandum of Understanding and Joint Venture Agreement and held that the contractual relationship between the parties was that of promoter and developer, with the appellant classified as 'Promoter' entrusted with project development. Clause 3 of the MoU allocated the cost of land, development and construction to the Promoter and Clause 15 permitted the Promoter to raise loans in its own name, absolving the Developer of repayment liability. Having regard to these terms and the commercial substance of the transaction, the amounts advanced by the appellant were investments in the joint venture/project and not disbursed against consideration for the time value of money. The advances therefore did not possess the essential characteristic of a financial debt as envisaged by Section 5(8), and consequently the appellant could not be treated as a 'financial creditor' under Section 5(7). The Tribunal relied on the contractual allocation of risks and profits and relevant precedent reasoning that profit-share or joint development investments are not financial debt where no sum is owed as money borrowed with commercial effect of borrowing. [Paras 6, 8, 9]

The advances made by the appellant in its capacity as Promoter do not constitute 'financial debt' and the appellant is not a 'financial creditor' under the Code; the Section 7 petition was rightly dismissed on this ground.

Commercial effect of borrowing under the explanation to sub-clause (f) of Section 5(8) - status of 'allottee' under RERA - Whether the appellant qualifies as an 'allottee' under RERA so as to bring the advances within the explanation to sub-clause (f) of Section 5(8) as amounts having the commercial effect of borrowing. - HELD THAT: - The Tribunal considered the explanation to sub-clause (f) that deems amounts raised from an allottee in a real estate project to have the commercial effect of borrowing. It examined the definition of 'allottee' in RERA and the contractual matrix showing the appellant acted as Promoter and joint development partner rather than as an allottee who acquires a plot, apartment or building. Given the nature of the MoU and the allocation of development and financing responsibilities, the appellant could not be regarded as an allottee for the purpose of the explanation. Consequently, the deeming provision was inapplicable to the advances made by the appellant. [Paras 6, 8, 9]

The appellant is not an 'allottee' under RERA for the purposes of the explanation to sub-clause (f) of Section 5(8); the deeming provision does not render the advances a financial debt.

Final Conclusion: The appeal is dismissed; the amounts invested by the appellant in the joint venture/project do not qualify as 'financial debt' and the appellant is not a 'financial creditor' under the Code, and the appellant is not an 'allottee' for the purposes of the explanation to sub-clause (f) of Section 5(8).

Maintainability of interlocutory application after commencement of liquidation - termination of sub-lease and effect of acceptance of part payments/waiver - relief against forfeiture under Section 114 of the Transfer of Property Act - scope of moratorium under Section 14 where termination and dispossession occurred prior to admission - jurisdiction of NCLT in relation to leases and proprietary rights during CIRP/liquidation - inherent powers under Rule 11 of NCLT Rules to pass interim status quo orders

Maintainability of interlocutory application after commencement of liquidation - inherent powers under Rule 11 of NCLT Rules to pass interim status quo orders - I.A. No. 127/2021 seeking the same reliefs as pending I.A. No. 17/2020 is maintainable. - HELD THAT: - I.A. No. 17/2020 filed during CIRP had been granted an ad interim status quo order; thereafter the corporate debtor was ordered into liquidation and the Resolution Professional became Liquidator. The earlier interlocutory application therefore became infructuous for the changed role of the office-holder and a fresh application was competent. The Tribunal also observed that it may invoke its inherent power under Rule 11 of the NCLT Rules to pass interim orders in the interest of justice and that the authorities cited by the respondent concerning notice at admission under Section 9 of the Code were not apposite to the power to pass interim status quo orders in the present factual matrix. I.A. No. 17/2020 being pending does not bar filing the present application and the maintainability point is answered in favour of the applicant.

Maintainable; I.A. No. 127/2021 is competent.

Termination of sub-lease and effect of acceptance of part payments/waiver - relief against forfeiture under Section 114 of the Transfer of Property Act - scope of moratorium under Section 14 where termination and dispossession occurred prior to admission - The subleases dated 06.03.2013 and 18.03.2014 were terminated prior to admission of the insolvency application and are not in force as on the date of this application. - HELD THAT: - The respondent issued a termination notice dated 22.02.2019 stating that the subleases would be terminated on expiry of three months from receipt; a subsequent letter of 08.11.2019 recorded that the subleases were deemed terminated from 23.05.2019 and steps to realize dues (including asserting lien/charge over equipment) would follow. The Tribunal found that the respondent acted on the termination, having taken possession of part of the leased land and allotted it to a third party, which demonstrates that termination was effected before admission and before the moratorium under Section 14 commenced. Acceptance of part payments by the respondent does not amount to waiver sufficient to negate forfeiture because the arrears were not paid together with interest and costs in the manner contemplated by Section 114 of the Transfer of Property Act; other disputed charges remained sub judice. Since both the notice and acts of dispossession occurred prior to admission, the moratorium under Section 14 could not revive the subleases. On these grounds the subleases were held to be terminated and not subsisting.

Subleases terminated prior to admission and are not in force.

Jurisdiction of NCLT in relation to leases and proprietary rights during CIRP/liquidation - The Tribunal's jurisdiction over lease disputes is limited; where the corporate debtor is not in possession of the leased property the moratorium does not protect renewal or restoration of lease rights and the NCLT's powers are confined to safeguarding possession during moratorium rather than creating new proprietary rights. - HELD THAT: - Relying on the reasoning in the cited Supreme Court authority, the Tribunal observed that Section 60(5) of the Code and the statutory scheme must be read narrowly so as not to convert the Tribunal into a forum for all public law disputes. The Explanation to Section 18 and Section 25 indicate that assets not in the corporate debtor's possession or rights lying in the public law domain may fall outside the Tribunal's remedial ambit. Consequently, where the respondent had already taken possession prior to admission, the protection of Section 14 is limited to preventing dispossession during moratorium and cannot be invoked to claim renewal or to reverse a pre admission termination; thus the Tribunal's jurisdiction to grant reliefs in respect of such leases is correspondingly circumscribed.

Tribunal's jurisdiction is limited; it cannot restore or create lease rights where termination and dispossession occurred before moratorium.

Final Conclusion: Application dismissed; the interim status quo order granted earlier stands vacated.

Liquidation on CoC approval by not less than sixty-six percent voting share under Section 33(2) of the IBC, 2016 - Appointment of Resolution Professional as Liquidator with written consent (Form AA) and Authorization for Assignment - Cessation of moratorium under Section 14 and commencement of fresh moratorium under Section 33(5) - Liquidator's duties under Chapter III of Part II and Insolvency and Bankruptcy (Liquidation Process) Regulations - Investigation of financial affairs including preferential, undervalued and fraudulent transactions under Section 35(1) - Requirement of public announcement, statutory intimation to regulatory and fiscal authorities, and submission of preliminary report under regulation 13

Liquidation on CoC approval by not less than sixty-six percent voting share under Section 33(2) of the IBC, 2016 - Corporate Debtor placed under liquidation pursuant to the Committee of Creditors' resolution satisfying the statutory voting threshold. - HELD THAT: - The Tribunal examined the minutes of the 11th CoC meeting dated 07.12.2020 and other records which show a unanimous vote to place the Corporate Debtor in liquidation. The resolution thus satisfies the mandate of a decision approved by not less than sixty-six percent of the voting share as required by Section 33(2) of the Insolvency and Bankruptcy Code, 2016. In view of the absence of any resolution plan received during the CIRP and the recorded bleak prospects of revival, the Tribunal concluded that a liquidation order is warranted under Section 33(2). [Paras 9, 10, 13]

IA/1202/CHE/2021 allowed and the Corporate Debtor is ordered to be liquidated.

Appointment of Resolution Professional as Liquidator with written consent (Form AA) and Authorization for Assignment - The Resolution Professional, Mrs. R. Lalitha, is appointed as Liquidator subject to compliance with statutory requirements. - HELD THAT: - The applicant placed on record the written consent (Form AA) to act as Liquidator and the Authorization for Assignment issued by the Insolvency Professional Agency. Having regard to the CoC's authorization in the 11th meeting and the required consents and authorizations, the Tribunal appointed the Resolution Professional as Liquidator to carry out the liquidation process. [Paras 8, 11, 12, 13]

Mrs. R. Lalitha is appointed as Liquidator to conduct the liquidation process.

Cessation of moratorium under Section 14 and commencement of fresh moratorium under Section 33(5) - The earlier moratorium under Section 14 ceases and a fresh moratorium under Section 33(5) commences on liquidation. - HELD THAT: - On passing the liquidation order, the Tribunal directed that the moratorium previously in place under Section 14 of the Code shall cease to have effect and that a fresh moratorium under Section 33(5) shall commence, aligning the process with the statutory scheme for liquidation once a liquidation order is made. [Paras 12, 13]

The moratorium under Section 14 stands terminated and a fresh moratorium under Section 33(5) commences.

Liquidator's duties under Chapter III of Part II and Insolvency and Bankruptcy (Liquidation Process) Regulations - Investigation of financial affairs including preferential, undervalued and fraudulent transactions under Section 35(1) - Requirement of public announcement, statutory intimation to regulatory and fiscal authorities, and submission of preliminary report under regulation 13 - Directions issued to the Liquidator concerning announcement, investigation, statutory intimation, conduct of liquidation and timelines for reporting. - HELD THAT: - The Tribunal directed the Liquidator to act strictly in accordance with the Code and relevant rules and regulations, to issue the public announcement that the Corporate Debtor is in liquidation, and to treat this order as notice of discharge to officers/employees in terms of Section 33(7). The Liquidator was directed to investigate the corporate debtor's financial affairs with particular attention to preferential, undervalued and potentially fraudulent transactions and to file appropriate applications. Further directions included intimation to the Registrar of Companies, the Insolvency and Bankruptcy Board of India and the Income Tax Department, and the submission of a preliminary report within seventy-five days from the liquidation commencement date as prescribed by regulation 13. [Paras 12, 13]

The Liquidator is to carry out the specified duties, make required statutory intimations, investigate financial affairs and submit reports within the prescribed timelines.

Final Conclusion: The Tribunal allowed the liquidation application, ordered liquidation of Empee Power Company (India) Limited pursuant to the CoC resolution meeting the sixty-six percent threshold, appointed the Resolution Professional as Liquidator subject to statutory consents, terminated the prior moratorium and directed commencement of the moratorium under Section 33(5), and issued detailed directions as to the Liquidator's duties, investigations, statutory intimations and reporting obligations.

Personal hearing via video-conferencing - opportunity of hearing - ex parte order - revised CBIC (Judicial Cell) guidelines dated 21.08.2020 - communication of virtual hearing link

Personal hearing via video-conferencing - opportunity of hearing - ex parte order - Whether the impugned order-in-original dated 02.02.2021 was passed in contravention of the revised CBIC guidelines by denying the petitioner an opportunity of personal hearing through video-conferencing, and the consequent course of action. - HELD THAT: - The petitioner alleged that the respondent passed the impugned order ex parte contrary to the revised CBIC (Judicial Cell) guidelines dated 21.08.2020 which mandated offering a personal hearing by video-conferencing. The respondent contended that notice had been issued for a hearing fixed on 09.12.2020 and relied on an email sent by an advocate, which the respondent submitted could not be acted upon in absence of a vakalatnama. The Court observed that the respondent was unable to confirm whether it possessed the petitioner's email-id and noted that, if the petitioner's email-id had been available, the respondent could have sent intimation along with the virtual hearing link. The Court did not adjudicate the merits of the grievance or set aside the impugned order; instead it required the respondent to revert with instructions as to the manner in which it wished to proceed, thereby directing fresh consideration of compliance with the guidelines and the opportunity of hearing before further action is taken. [Paras 3, 5]

Directed the respondent to revert with instructions as to how it proposes to proceed so that compliance with the revised guidelines and the question of opportunity of hearing can be considered; no final adjudication on the merits.

Final Conclusion: The petition challenges an alleged denial of video-conferencing personal hearing and an ex parte order; the Court has not decided the merits but directed the respondent to state how it proposes to proceed (including consideration of compliance with the CBIC guidelines and provision of hearing) and listed the matter for further hearing.

Limitation under Section 73 of the Finance Act, 1994 - time-bar of show cause notices - conditioned exemption under Section 102 of the Finance Act, 2016 and Notification No.9/2016 ST - withdrawal and re introduction of exemption notifications - duty to register and file returns as affecting suppression of facts - remedial adjudication under the Finance Act, 1994

Limitation under Section 73 of the Finance Act, 1994 - time-bar of show cause notices - duty to register and file returns as affecting suppression of facts - Extent to which the show cause notices are time barred and effect of non registration/non filing of returns on limitation. - HELD THAT: - The Court examined the dates for filing Sales Tax-3 returns and found that only part of the demand in the impugned show cause notices fell beyond the five year statutory period; hence the entirety of the demands could not be held time barred. The Court held that where petitioners had not obtained registration nor filed returns, the Department's invocation of extended limitation based on information from other sources could not be rejected at the threshold as suppression of facts. Conversely, had petitioners been registered and filed returns claiming non liability, they could have relied on bona fides to contest limitation. The Court therefore declined to quash the show cause notices on a blanket ground of time bar but directed that petitioners may establish before the adjudicating authority the portion, if any, that is time barred under Section 73 read with Rule 7 of the Service Tax Rules, 1994. [Paras 27, 28, 33]

Part of the demands may be time barred but the writ petitions cannot be allowed on the sole ground of limitation; petitioners must raise limitation contentions before the adjudicating authority.

Conditioned exemption under Section 102 of the Finance Act, 2016 and Notification No.9/2016 ST - withdrawal and re introduction of exemption notifications - clarificatory notification versus conditional exemption - Whether re introduction of exemption by Section 102/Notification No.9/2016 ST affords automatic protection to the petitioners or requires meeting specified conditions. - HELD THAT: - The Court analysed the sequence: Notification No.25/2012 ST granted exemption; Notification No.6/2015 ST withdrew specified entries from 01.03.2015; Parliament enacted Section 102 of the Finance Act, 2016 and Notification No.9/2016 ST re introduced a limited exemption effective 01.03.2016. The Court held that the protection under Section 102 and Notification No.9/2016 is a specific, conditional exemption confined to contracts entered into prior to 01.03.2015 with stamp duty (where applicable) paid before that date. Unlike a purely clarificatory retrospective notification, the present arrangement is conditional and not a blanket restoration of prior policy. Consequently, petitioners who assert entitlement to the exemption must establish compliance with the conditions before the adjudicating authority. [Paras 29, 30, 31, 32]

Exemption under Section 102/Notification No.9/2016 ST is available only subject to its conditions; petitioners must establish eligibility before the respondents.

Remedial adjudication under the Finance Act, 1994 - prematurity of writ challenging show cause notices - Whether the writ petitions are premature or should be dismissed without adjudication on merits. - HELD THAT: - The respondents contended that the petitions were premature because the show cause notices were pending adjudication. The Court observed that multiple disputed questions of fact and records are involved and that petitioners have alternative remedies by engaging in the statutory adjudicatory process. Rather than dismissing the petitions as premature, the Court directed the petitioners to file detailed replies to the show cause notices and for the respondents to decide them on merits after hearing. The Court emphasised that its observations were prima facie and that respondents must pass independent orders uninfluenced by the interim views. [Paras 25, 26, 33]

Writ petitions not entertained to preclude adjudication; petitioners directed to reply and respondents to adjudicate the show cause notices after hearing.

Final Conclusion: Writ petitions disposed by directing petitioners to file detailed replies to the respective show cause notices within 45 days and directing respondents to pass speaking orders after hearing within 45 days thereafter; petitions not quashed and parties to pursue their contentions, including limitation and conditional exemption under Section 102/Notification No.9/2016 ST, before the adjudicating authority.

Rebate claim under Notification No. 12/2005-ST and conversion of refund claim into rebate - consistency of Revenue's stand / estoppel by previous relief - time-bar under rebate/refund claims (one year from end of relevant quarter) - nexus between input services and exported output services - precedential effect of earlier orders of Revenue and appellate authorities

Rebate claim under Notification No. 12/2005-ST and conversion of refund claim into rebate - consistency of Revenue's stand / estoppel by previous relief - precedential effect of earlier orders of Revenue and appellate authorities - Rejection of appellant's claim on the ground that rebate could not be allowed by converting the earlier refund application was unsustainable. - HELD THAT: - The Tribunal found the adjudicating authority's refusal to convert the appellant's claim into a rebate impermissible in view of Revenue's own earlier grant of relief for identical claims which was affirmed on appeal. Reliance was placed on the principle that Revenue cannot adopt inconsistent stands in identical matters, as illustrated by the Apex Court decision in Birla Corporation Ltd. , which disallows permitting Revenue to take opposite positions in identical cases. Accordingly, the rejection of conversion of the refund claim into rebate was held bad in law. [Paras 3]

Rejection of the conversion of refund claim into rebate set aside; claim allowed on this ground.

Time-bar under rebate/refund claims (one year from end of relevant quarter) - The adjudication rejecting the claim as time-barred was unsustainable. - HELD THAT: - The Tribunal recorded that the appellant's claim was within one year from the end of the relevant quarter and that the Larger Bench's view in C.C.E., Cus. & S.T., Bengaluru Vs. Span Infotech (India) Pvt. Ltd. supports the view that the claim was not time-barred. On that basis the finding of time-bar by the lower authorities was reversed. [Paras 3]

Time-bar objection rejected; claim not barred by limitation.

Nexus between input services and exported output services - The finding that certain input services lacked nexus with the exported services was not sustained. - HELD THAT: - After hearing submissions, the Tribunal noted that the question of nexus in respect of the services relied upon by the appellant has been consistently decided in favour of export-oriented units by various Benches of CESTAT. On that basis the lower authorities' conclusion denying nexus was disapproved. [Paras 3]

Nexus objection rejected; services held to be linked with exported services.

Final Conclusion: Impugned order of rejection is set aside; appeal allowed and the appellant's rebate claims for the stated periods are accepted with consequential benefits as per law.

Utilisation of Cenvat/Service Tax credit beyond prescribed apportionment limits - Rule 3(5) of Service Tax Credit Rules, 2002 and Rule 6(3) of Cenvat Credit Rules, 2004 - Applicability of Board circular dated 21/11/2008 on restriction of utilisation versus admissibility of credit - Production and verification of credit registers and supporting records - Remand for de novo adjudication - Determination of limitation

Utilisation of Cenvat/Service Tax credit beyond prescribed apportionment limits - Production and verification of credit registers and supporting records - Whether the appellant utilised Cenvat/Service Tax credit in excess of the limits prescribed under Rule 3(5) of the Service Tax Credit Rules, 2002 and Rule 6(3) of the Cenvat Credit Rules, 2004 for the periods in question and whether lower authorities could reject the appellant's records on the stated grounds. - HELD THAT: - The Tribunal found material contradictions in the findings of the Adjudicating Authority and the first appellate authority regarding production and examination of the appellant's credit registers and supporting records. The lower orders alternately recorded non-production of registers, production of self attested registers which were rejected for want of Chartered Accountant attestation, and failure to produce records during investigations; these inconsistent findings undermine the completeness and reliability of the adjudication. The Tribunal observed documentary assertions by the appellant (including communications and ST 3 returns) indicating submission of records for the relevant periods, which the lower authorities did not independently and conclusively reconcile. Given these procedural and evidentiary lacunae, the Tribunal did not decide the merits on excess utilisation but concluded that the impugned orders cannot stand and that the matter requires fresh enquiry and determination with proper opportunity to produce and verify records. [Paras 5, 7]

Orders of the Authorities below on excess utilisation and rejection of registers are set aside and the matter remanded to the Adjudicating Authority for de novo adjudication with opportunity to produce and have verified all relevant documents.

Applicability of Board circular dated 21/11/2008 on restriction of utilisation versus admissibility of credit - Whether the Board circular dated 21/11/2008 has bearing on the controversy, specifically the proposition that prior to 01/04/2008 the restriction related to utilisation of credit and did not render the credit inadmissible per se, and whether this contention can be considered notwithstanding that it was not raised before lower authorities. - HELD THAT: - The Tribunal noted that the appellant raised for the first time before it the contention that the circular may preclude re demand of service tax paid by utilising credit in excess of the apportionment limit. The Tribunal refrained from expressing any view on the merits of that legal contention but observed that the circular might materially affect the outcome and that the lower authorities had not been given an opportunity to consider it. In view of its potential relevance and the absence of prior adjudication on the point, the Tribunal directed that the circular and its applicability be considered afresh by the Adjudicating Authority during de novo proceedings. [Paras 6]

The question of applicability of the circular is remanded for fresh consideration by the Adjudicating Authority; no final determination is made by the Tribunal.

Determination of limitation - Whether the demand is barred by limitation and whether the lower authorities correctly dealt with limitation in confirming the demand. - HELD THAT: - The Tribunal directed that the Adjudicating Authority should decide all issues afresh including the question of limitation after giving the appellant proper opportunity of hearing. The order records that limitation was one of the matters to be decided in the de novo adjudication but does not contain any appellate conclusion on the point; accordingly the Tribunal remitted the limitation issue for determination in the fresh proceedings. [Paras 7]

The issue of limitation is remanded to the Adjudicating Authority to be decided on merits in the de novo proceedings with full opportunity to the appellant.

Final Conclusion: The appeals are allowed by way of remand: the orders of the Adjudicating Authority and the first appellate authority are set aside and the matters are remitted to the Adjudicating Authority for de novo adjudication of all issues (including excess utilisation of credit for April, 2004 to August, 2004 and September, 2004 to September, 2007, applicability of the Board circular dated 21/11/2008, and limitation) after giving the appellant a proper opportunity to produce and have verified relevant documents.

Clarificatory amendment - retrospective operation of an amendment - treatment of supplies from DTA to SEZ unit/SEZ developer as export under the SEZ Act - application of Rule 6(6) of the CENVAT Credit Rules - liability to pay 10% for clearances to SEZ developers

Clarificatory amendment - retrospective operation of an amendment - application of Rule 6(6) of the CENVAT Credit Rules - liability to pay 10% for clearances to SEZ developers - Amendment made by Notification No.50/2008-CE (NT) dated 31.12.2008 is clarificatory and operates retrospectively, thereby affecting liability under Rule 6(6) for the period in dispute. - HELD THAT: - Tribunal applied the decision of the jurisdictional High Court in CCE Chennai v. M/s. S.P. Fabricators Pvt. Ltd., which held that the amendment effected by Notification No.50/2008 is clarificatory and has retrospective effect. The High Court relied on precedents, including the Karnataka High Court decision in FOSROC Chemicals, and answered the substantial questions of law in favour of the assessee, observing that the amendment must be treated as retrospective and that rights and contentions would remain open only if the Revenue obtained a contrary view from pending appeals before the Supreme Court. On the facts before the Tribunal, and in view of the binding High Court ruling, the demand based on a 10% liability for exempt clearances to SEZ developers for the disputed period could not be sustained. [Paras 6, 7]

Demand under Rule 6(6) for the period 06.04.2006 to 19.06.2008 quashed as the amendment by Notification No.50/2008 is retrospective/clarificatory and therefore the imposition of the 10% liability cannot be sustained.

Treatment of supplies from DTA to SEZ unit/SEZ developer as export under the SEZ Act - Supplies made from DTA to an SEZ unit or SEZ developer are to be construed as 'export' under the SEZ Act for the purposes of the dispute. - HELD THAT: - The adjudicating authority had held, and the Tribunal accepted for the purposes of this appeal, that clearances from DTA to SEZ units or SEZ developers constitute exports under the SEZ Act. That characterization informed the application of exemption notifications and the analysis of whether CENVAT credit availed on final products could be disallowed for such clearances. Coupled with the High Court's conclusion on the retrospective, clarificatory nature of the amendment, the Tribunal found that claims of liability premised on non-export treatment could not be maintained. [Paras 2, 7]

Clearances from DTA to SEZ units or SEZ developers are to be treated as exports under the SEZ Act and, in the context of this case and the applicable retrospective clarification, do not attract the asserted 10% liability.

Final Conclusion: Appeal allowed; impugned order confirming demand set aside and the demand for the disputed period (06.04.2006 to 19.06.2008 / April 2006 to June 2008) quashed in view of the jurisdictional High Court's finding that Notification No.50/2008 is a retrospective clarificatory amendment, with consequential relief as per law.

First charge on property - charge by operation of law - distinction between attachment and charge - special mode of recovery - provisional attachment - recovery as arrears of land revenue

First charge on property - charge by operation of law - Whether a charge in favour of the State arises over the assessee's immovable property by operation of law on account of an assessment determining tax liability, and whether an entry in revenue records reflecting that charge is permissible. - HELD THAT: - The Court held that upon passing of an assessment determining a dealer's liability, Section 48 operates by a non-obstante clause to create a first charge in favour of the State on the dealer's property. A charge under Section 48 does not create an interest in or title to a specific immovable property but constitutes a security for payment of money. The State's communication to the Talati-cum-Mantri requesting information and entry of an encumbrance is a step to publicize the existence of that charge in revenue records so that the State's right is recorded and can be acted upon in the event recovery proceedings resume after appellate remedies are exhausted. The Court explained that such an entry notifies the existence of the statutory charge and is a permissible consequence of Section 48. [Paras 9, 10, 15, 18, 20]

A statutory first charge in favour of the State arises by operation of law on passing the assessment and an entry in the revenue records reflecting that charge is permissible and valid.

Distinction between attachment and charge - attachment of property - Whether the mutation/entry made by the Talati-cum-Mantri amounts to an attachment of the assessee's property. - HELD THAT: - The Court observed and reiterated the established legal distinction that attachment merely prevents alienation and does not confer title or create a charge, whereas a charge is a security right to receive money. Citing authoritative propositions, the Court found that the entry made in the village records to note the Government's charge is not an attachment. The recordation notifies the existence of a statutory charge; it does not effect an attachment under the Code of Civil Procedure or confer on the State the attributes of an attaching creditor. [Paras 6, 7, 11, 12, 21]

The mutation/entry in the revenue records does not amount to attachment of the property.

Special mode of recovery - provisional attachment - recovery as arrears of land revenue - Whether provisions relating to special recovery, provisional attachment or recovery as arrears of land revenue (as separately provided) applied to justify attachment or precluded the statutory charge in the present facts. - HELD THAT: - The Court noted that Sections dealing with special modes of recovery and provisional attachment are distinct and were not applicable to the present facts: the assessment order had already been passed and no provisional attachment provision was triggered; the special machinery for recovery as arrears of land revenue had not been invoked. Thus those statutory provisions did not alter the consequence that Section 48 created a charge by operation of law. The Court rejected the submission that the entry in revenue records constituted an unlawful attachment under those provisions. [Paras 5, 6, 8, 19]

Sections concerning special recovery, provisional attachment and recovery as arrears of land revenue have no application to the present facts and do not convert the statutory charge into an attachment.

Final Conclusion: The writ petition is dismissed: the entry recording the Government's statutory charge on the petitioner's immovable property is valid and does not amount to attachment, and there is no ground for judicial interference at this stage.

Disallowance of Input Tax Credit for goods consumed for manufacture for inter-state transfer - applicability of Section 18(8)(ix) of the JVAT Act - burden on Revenue to prove existence of manufacturing activity - strict interpretation of a taxing statute - trader versus manufacturer in input tax credit claims - remand futile where essential precondition for applicability is absent and remand may worsen appellant's position

Applicability of Section 18(8)(ix) of the JVAT Act - disallowance of Input Tax Credit for goods consumed for manufacture for inter-state transfer - trader versus manufacturer in input tax credit claims - burden on Revenue to prove existence of manufacturing activity - strict interpretation of a taxing statute - Section 18(8)(ix) of the JVAT Act is not applicable to the petitioner which is a trader and not a manufacturer, and therefore the Input Tax Credit disallowance under that provision cannot be sustained. - HELD THAT: - The Court examined the language of Section 18(8)(ix) and held that the provision applies only where goods are "consumed for manufacture of goods for Inter-State transfer of stock or for sale outside the State." The petitioner's registration and undisputed averments established that it carried on only trading activities in Jharkhand and did not undertake manufacturing there. The burden lay on the Revenue to prove that the petitioner was engaged in manufacturing activity in the State; that burden was not discharged and there was no allegation in the assessment, appellate or revision proceedings that manufacturing took place in Jharkhand. Applying the well-settled rule that taxing statutes must be construed strictly, the Court rejected the Tribunal's inference that the provision could apply where goods were merely "likely to be used" in manufacture or on the premise that scrap batteries could only be used for processing. Such an extension would impermissibly stretch the statutory language and would unfairly deprive traders of ITC. Consequently, the disallowance under Section 18(8)(ix) could not be sustained. [Paras 11, 12, 13, 14, 16]

The assessment, appellate and revision orders disallowing the Input Tax Credit under Section 18(8)(ix) are quashed insofar as they apply to the petitioner for the period 2012-13.

Remand futile where essential precondition for applicability is absent and remand may worsen appellant's position - burden on Revenue to prove existence of manufacturing activity - Remand to the Tribunal for verification of supplementary affidavits and documents was declined as futile because the essential precondition (manufacturing activity in the State) for invoking Section 18(8)(ix) was absent and a remand could place the petitioner in a worse position absent any cross-appeal by the Revenue. - HELD THAT: - The Court noted that the Revenue consistently maintained applicability of Section 18(8)(ix) but never alleged or proved manufacturing activity in Jharkhand. Since the first mandatory condition of the provision - that the dealer undertake manufacturing in the State - was not met, further enquiries on the secondary condition would be pointless. The Court also invoked the principle that an appellant should not be put in a worse position by reason of filing an appeal in the absence of any cross-appeal by the Revenue. For these reasons, remand for fresh enquiry was held not appropriate. [Paras 15]

Prayer for remand was refused; the matter was disposed on merits by quashing the impugned orders rather than remitting for verification.

Final Conclusion: Writ petition allowed. The Assessment order dated 05.10.2015, the appellate order dated 19.10.2016 and the Tribunal's order dated 28.07.2021 insofar as they disallowed the Input Tax Credit under Section 18(8)(ix) for the period 2012-13 are quashed and set aside, the Court holding that the provision does not apply to the petitioner who is a trader and not a manufacturer and that remand was unnecessary and potentially prejudicial.

Section 44 of the GVAT Act - Garnishee proceedings - Attachment of debts - Debtor-creditor relationship - Requirement of notice under Section 44(5) - Interpretation of a taxing statute - Personal liability and attachment of directors' property

Section 44 of the GVAT Act - Garnishee proceedings - Debtor-creditor relationship - Attachment of debts - Whether personal properties of persons having no debtor-creditor relationship with the dealer can be attached under Section 44 of the GVAT Act for recovery of the dealer's tax liability. - HELD THAT: - Section 44 of the GVAT Act is in substance a machinery for garnishee proceedings to reach monies due to a dealer which are in the hands of a third person; the power is exercisable where there exists a debtor-creditor relationship and monies are due to or held for the dealer. A plain reading confines the power to persons from whom money is due or may become due to the dealer or who hold money for or on account of the dealer. In the present case the company and the two writ-applicants (the director and his brother) did not stand in a debtor-creditor relationship such that the latter had monies due to or held for the company; consequently the statutory precondition for attachment under Section 44 was absent and the provision could not be invoked to attach their personal properties. [Paras 11, 15, 16, 17]

Attachment of the personal properties of the writ-applicants could not be sustained under Section 44 of the GVAT Act in the absence of a debtor-creditor relationship and monies being due or held for the dealer.

Requirement of notice under Section 44(5) - Personal liability and attachment of directors' property - Interpretation of a taxing statute - Whether the proceedings and attachment effected against the personal properties of the writ-applicants were valid in view of the statutory requirement of notice and opportunity to object under Section 44. - HELD THAT: - Proceedings under Section 44 proceed by issuance of notice to the person from whom money is due or who holds monies for the dealer, and sub section (5) confers a right to object and be heard. The initiation of garnishee proceedings without serving the notice contemplated by the statute deprives the action of jurisdiction; where the person sought to be charged has not been given the notice and opportunity to object, recovery cannot be lawfully effected against him. The record shows no notice was served on the two writ-applicants in the manner prescribed and the authorities proceeded to attach their properties without granting the statutory mechanism of objection and inquiry. [Paras 24, 25, 26, 27, 33]

The attachment effected without issuing the statutory notice and providing opportunity to object was without jurisdiction; the orders of attachment are quashed and set aside and the attachments removed.

Final Conclusion: Writ-application allowed. The orders of attachment against the personal properties of the writ-applicants are quashed and set aside and the attachments are removed. The question of the company's tax liability remains open and the authorities are at liberty to proceed against the company in accordance with law.

Revision under Section 115 (Orissa amendment) - Power to vary or reverse interlocutory orders where variation would finally dispose of the suit - Order VII Rule 11 CPC - Rejection of plaint as a decree - Declaratory reliefs and the proviso to Section 34, Specific Relief Act - Prohibition on injunction to restrain prosecution or institution of criminal or NI Act proceedings - Interaction between declaratory reliefs and remedies under the Negotiable Instruments Act

Revision under Section 115 (Orissa amendment) - Power to vary or reverse interlocutory orders where variation would finally dispose of the suit - Whether the revisional court (District Court) had jurisdiction under the Orissa amendment to Section 115 CPC to allow the revision and reject the plaint, and whether the High Court was justified in setting aside that order as an excess of jurisdiction. - HELD THAT: - The Court examined the Orissa amendment to Section 115 CPC and held that, unlike the unamended provision, the Orissa amendment expressly empowers the High Court or the District Court, as the revisional court, to vary or reverse an order deciding an issue made in the course of a suit where the order, if so varied or reversed, would finally dispose of the suit or proceedings (second proviso). Applying that provision to the facts, the revisional court was entitled to allow the revision and reject the plaint under Order VII Rule 11 CPC because such an order would finally dispose of the suit. The High Court's setting aside of the revisional court's order on the premise that the revisional court had exceeded its jurisdiction was contrary to the Orissa amendment and therefore unsustainable. The Court further observed that rejection of a plaint by a revisional court, although amounting in substance to a decree, does not preclude the aggrieved party from invoking constitutional jurisdiction under Article 227; accordingly the plaintiff had resorted to such remedy before the High Court. [Paras 18, 19, 21, 24]

The High Court erred in holding that the revisional court exceeded its jurisdiction; the revisional court was competent under the Orissa amendment to Section 115 to reverse the order and reject the plaint.

Order VII Rule 11 CPC - Rejection of plaint as a decree - Declaratory reliefs and the proviso to Section 34, Specific Relief Act - Interaction between declaratory reliefs and remedies under the Negotiable Instruments Act - Prohibition on injunction to restrain prosecution or institution of criminal or NI Act proceedings - Whether the plaint in C.S. No.1065 of 2009 disclosed a cause of action and was maintainable, or whether it was liable to be rejected under Order VII Rule 11 CPC as barred by law (including the Specific Relief Act and insofar as it sought to frustrate remedies available under the N.I. Act). - HELD THAT: - The Court read the plaint as a whole, including the MoU relied upon, and accepted that the plaint did disclose a cause of action. However, the Court proceeded to examine the reliefs sought and their substance. It found that the three declaratory prayers were, in substance, an attempt to prevent the defendants from prosecuting remedies available under law (notably proceedings under Section 138 of the N.I. Act) and to obtain relief equivalent to an injunction restraining the defendant from instituting or prosecuting criminal or NI Act proceedings. The proviso to Section 34 SRA does not preclude a declaration where consequential reliefs are appropriately omitted only in the sense explained; but a plaintiff cannot obtain declaratory relief framed so as to frustrate statutory remedies. Reliance was placed on Sections 118(a) and 138 N.I. Act and Section 41(b)/(d) SRA and prior precedents holding that civil courts should not grant injunctions restraining prosecution or otherwise fetter criminal or statutory remedies. On that basis the Court concluded that the declaratory reliefs claimed were barred by law and that the plaint was properly rejectable under Order VII Rule 11 CPC because, in substance, it sought to frustrate the defendants' remedies under the N.I. Act and was therefore not maintainable. [Paras 34, 35, 36, 37, 38]

Although the plaint disclosed a cause of action, the declaratory reliefs claimed were barred as they would in substance frustrate the defendants' remedies under the N.I. Act and amounted to seeking injunctive relief barred by the Specific Relief Act; the plaint was therefore rightly rejected under Order VII Rule 11 CPC.

Final Conclusion: The judgment of the High Court is set aside. The order of the revisional court in C.R.P. No.5 of 2012 dated 23.02.2013 is restored and the plaint in C.S. No.1065 of 2009 is rejected. The rejection does not preclude the plaintiff from instituting appropriate proceedings in accordance with law; parties to bear their respective costs.