TaxTMI Updates e-Newsletter
Apr 07,2020

Review under Order XLVII Rule 1 CPC - Vested right to carry forward unutilized input tax credit - Permissibility of filing Form TRAN-1 after extended date - Procedural or technical grounds cannot defeat substantive tax rights - Remedy by way of appeal to the Supreme Court

Review under Order XLVII Rule 1 CPC - Permissibility of filing Form TRAN-1 after extended date - Vested right to carry forward unutilized input tax credit - Review application by the Union of India seeking review of the High Court's direction permitting filing of Form TRAN-1 by extended date was dismissed. - HELD THAT: - The Court applied the settled standards for review under Order XLVII Rule 1 CPC and found no ground to disturb its earlier judgment directing respondents to permit filing of Form TRAN-1 by the extended date. The Court recorded that on introduction of the GST regime registered persons were allowed to carry forward unutilized credit from erstwhile statutes and that such unutilized credit constitutes a vested right which cannot be taken away on mere procedural or technical grounds. The Court noted practical difficulties with electronic filing of TRAN-1 forms and accepted that various plausible reasons for non-filing exist. Although the judgment of the Gujarat High Court relied upon is under review and implementation stayed in that review, the Court held that a stay in another High Court's review does not constitute a ground for reviewing its own judgment. The Court observed that it had also relied on the view of the Delhi High Court and indicated that the appropriate course for the Revenue, if aggrieved, is to approach the Supreme Court by way of appeal rather than seek review. [Paras 1, 3, 4]

Review application dismissed; earlier direction permitting filing of Form TRAN-1 by extended date stands and the Revenue's remedy is by appeal to the Supreme Court.

Final Conclusion: The Review Application filed by the Union of India is dismissed; the High Court's earlier order permitting the petitioner to file Form TRAN-1 by the extended date remains operative and the Revenue's appropriate remedy is to pursue an appeal to the Supreme Court.

Suspension of registration during cancellation proceedings - Cancellation of registration under Rule 21 and Rule 22 (CGST Rules) - Assessment under Section 62 for non-filing of returns - Filing of returns (including Nil returns) while GST portal remains active - Duty to disclose material facts in writ proceedings - Availability of statutory appeal as alternate remedy

Suspension of registration during cancellation proceedings - Cancellation of registration under Rule 21 and Rule 22 (CGST Rules) - Assessment under Section 62 for non-filing of returns - Whether the pendency of the petitioner's application for cancellation of GST registration precluded assessment and demand under the provisions relating to assessment for non-filing of returns. - HELD THAT: - The Court rejected the petitioner's contention that submission of a request for cancellation automatically prevented applicability of the provisions for assessment under Section 62. The reasoning notes that suspension on account of a cancellation request would have had force only if no show cause notice had been issued and the portal was not active. Here, the revenue had issued a show cause notice dated 14.05.2019 and the GST portal showed the petitioner as active (portal activity continued till September 2019). The petitioner filed Nil returns for April 2018 to March 2019 but did not file returns after April 2019 and subsequently sought cancellation. The Court observed that filing Nil returns does not negate the consequence of non-compliance or the imposition of demand/penalty where the portal remained active and show cause proceedings were initiated. The Court also observed that the Rules (including the obligation on authorities to pass orders on cancellation applications within a specified period) could not be invoked to defeat the revenue's initiation of proceedings once show cause was issued and the statutory machinery for assessment under Section 62 remained available to the revenue.

The petitioner's plea that the cancellation application suspended enforcement of assessment under Section 62 was repelled and the assessment/demand was not held to be barred by the cancellation request.

Duty to disclose material facts in writ proceedings - Availability of statutory appeal as alternate remedy - Whether the writ petition should be entertained despite the petitioner's omission to disclose issuance of the show cause notice and availability of statutory appeal. - HELD THAT: - The Court held that the writ petition was liable to be dismissed on account of nondisclosure of the show cause notice dated 14.05.2019 in the petitioner's pleadings; this omission undermined the petitioner's entitlement to equitable relief under Article 226. The judgment records that no explanation was furnished for withholding the material fact, and that the petitioner had an alternative statutory remedy of appeal under the Act. In these circumstances the Court found no scope for interference by writ jurisdiction.

The writ petition was dismissed for nondisclosure of material facts and because an alternative remedy of appeal under the statute exists.

Final Conclusion: The writ petition seeking quashing of the assessment orders and demand notice was dismissed: the Court found that the petitioner's cancellation request did not bar assessment where a show cause notice had been issued and the GST portal remained active, and the petition was also liable to be dismissed for nondisclosure of the show cause notice; the petitioner retains the statutory remedy of appeal under the Act.

Detention, seizure and release of goods - notice specifying the tax and penalty payable - order of detention or seizure - adjudication under Section 129(3) and (5) - opportunity of being heard - appeal under Section 107 - amendment to an appeal to challenge subsequent adjudication

Adjudication under Section 129(3) and (5) - order of detention or seizure - notice specifying the tax and penalty payable - Characterisation of Ext.P4 dated 28.09.2018 - whether it amounted to an adjudication order under Section 129 of the Act and was immediately appealable. - HELD THAT: - The Court examined the statutory scheme in Section 129 and noted that sub section (3) contemplates that the proper officer shall issue a notice specifying the tax and penalty payable and thereafter pass an order for payment under the clauses. The expression 'order' in sub section (3) can in ordinary language be regarded as an order, and the use of the word 'order' in the provision may lead a lay litigant to treat the notice as an order. The Court recognised that litigants may lack technical legal acumen to distinguish between a notice of demand and a formal adjudication, and therefore the mere presence of the term 'order' in the statutory provision can reasonably cause confusion about appealability. [Paras 6]

Ext.P4's form and language could be construed by the assessee as an order under Section 129, and the authorities ought to have treated the matter with less rigidity rather than rejecting an appeal as non maintainable on that basis.

Appeal under Section 107 - amendment to an appeal to challenge subsequent adjudication - Whether the rejection of the appeal as not maintainable (Ext.P8) was correct and whether the remedy to challenge the later adjudication (Ext.P9) should have been permitted by amendment or other procedural concession. - HELD THAT: - The appeal was filed against Ext.P4 on 11.10.2018; an adjudication order (Ext.P9) was passed on 21.11.2018 during the pendency of that appeal. The Court held that instead of adopting a rigid approach to maintainability, the authorities should have permitted amendment of the appeal to make it directly challenge the adjudication order, or otherwise treated the petitioner's recourse more liberally. Accordingly, the impugned order rejecting the appeal solely on the ground that Ext.P4 was not appealable was not sustained. [Paras 7, 8]

Impugned order Ext.P8 is set aside; the appeal is restored and the petitioner is granted liberty to challenge Ext.P9 in accordance with law.

Final Conclusion: The writ petition is allowed: Ext.P8 dated 14.08.2019 is set aside, the appeal is restored, and the petitioner is granted liberty to challenge the adjudication order Ext.P9 dated 21.11.2018 in accordance with law.

Cancellation of registration and continuing tax liability - remedy of statutory appeal under Section 107 - assessment after closure of business - failure to file returns and consequential assessment - non-waiver of liability on cancellation

Remedy of statutory appeal under Section 107 - Availability of writ remedy when statutory appeal is available under Section 107. - HELD THAT: - The Court held that the petitioner has an alternate statutory remedy by way of appeal under Section 107 of the Act and therefore there was no ground for interference by writ at this stage. The observation reflects the view that where a statutory appellate forum exists and is effective for adjudication of grievances arising from assessments or cancellations, extraordinary writ relief is not ordinarily appropriate. [Paras 4]

Writ petition dismissed because the petitioner has remedy by appeal under Section 107.

Cancellation of registration and continuing tax liability - non-waiver of liability on cancellation - Effect of cancellation of registration on past tax liabilities. - HELD THAT: - On a plain reading of Section 29 of the Act, the Court concluded that cancellation of registration consequent to cessation of business does not extinguish or diminish tax liabilities that accrued prior to cancellation. The liability that arose while the registration was in force survives the cancellation and cannot be waived by reason of the registration having been cancelled. [Paras 2, 4]

Cancellation of registration does not affect liabilities accrued prior to cancellation.

Assessment after closure of business - failure to file returns and consequential assessment - Validity of assessment orders issued where the assessee had intimated business closure but returns for certain periods were not filed. - HELD THAT: - The Court noted the factual position that the petitioner had intimated closure and had filed monthly returns for the period during which business was carried out, but also that returns for periods 'with effect from April 2018 to June 2019' were not filed according to the State. In view of the availability of appeal and the principle that liabilities survive cancellation, the Court found no basis to interfere with the assessment orders for the years 2017-2018 and 2018-2019. The Court recorded that cancellation under Section 29 does not relieve the person of liability and, given the factual assertions, declined to set aside the impugned orders. [Paras 3, 4]

No interference with the assessment orders; assessments for 2017-2018 and 2018-2019 sustained subject to statutory appeal.

Final Conclusion: The writ petition was dismissed: the Court held that cancellation of registration does not extinguish pre-cancellation tax liabilities, the petitioner possesses a statutory remedy under Section 107, and there was no ground to interfere with the assessment orders in respect of the periods in question.

Detention and release of goods and conveyance - bank guarantee for stay of detention - E-way bill Part B requirement - finalization of adjudication after notice and hearing - remand for fresh adjudication

Detention and release of goods and conveyance - bank guarantee for stay of detention - Petition for release of detained vehicle and goods pending adjudication. - HELD THAT: - The Court observed that the adjudication proceedings arising from the detention order (Ext.P5) had not been finalized and that the demand shown in the detention order amounts to Rs. 20,274/-. Taking into account the present stage of proceedings (detention) and the need to avoid continued deprivation of the petitioner pending final adjudication, the Court directed immediate release of the goods and vehicle on the petitioner furnishing a bank guarantee for the amount noted in Ext.P5. The Court further directed that once the guarantee is furnished, the respondent shall release the conveyance and goods forthwith and proceed to conclude the adjudication in accordance with law. [Paras 14, 15]

Goods and vehicle released on petitioner furnishing a bank guarantee for the amount shown in Ext.P5; respondent to finalize adjudication thereafter.

E-way bill Part B requirement - finalization of adjudication after notice and hearing - remand for fresh adjudication - Whether the Court should decide the substantive question regarding obligation to update Part B of the E-way bill or remit the matter to the authorities for adjudication. - HELD THAT: - The Court noted competing contentions on the legal effect of Rule 138 and related departmental guidance but considered that, given the matter is at the detention stage and adjudication remains pending, it was not appropriate to decide the substantive legal controversy in the writ petition. Instead, the Court required the 2nd respondent to issue notice of hearing to the petitioner, permit written submissions, afford a reasonable opportunity of oral hearing, and then meticulously consider the petitioner's contentions while finalizing the adjudication. A time-frame was imposed for disposal of the adjudication proceedings to ensure expedition. [Paras 13, 14, 15]

Substantive dispute on Part B of the E-way bill not adjudicated by the Court; matter remitted to the 2nd respondent for adjudication after notice, written submissions and hearing, to be completed preferably within four weeks from production of certified copy of the judgment.

Final Conclusion: Writ petition disposed: detained goods and vehicle ordered released on bank guarantee; substantive questions concerning obligation to update Part B of the E-way bill left open and remitted to the respondent for adjudication with directions to hear the petitioner and decide preferably within four weeks.

Remand for fresh consideration - limitation in assessment proceedings - constitutional validity of Section 174 of the KSGST Act - interim order revival

Remand for fresh consideration - limitation in assessment proceedings - constitutional validity of Section 174 of the KSGST Act - Writ petition remanded to the Single Judge for fresh consideration on questions other than the validity of Section 174 of the KSGST Act. - HELD THAT: - The Single Judge had disposed of the writ petition by addressing the constitutional validity of Section 174 of the KSGST Act, a question which is the subject matter of other pending appeals. The Government conceded that the earlier decision in W.P.(C). No.11335 of 2018 and connected matters dealt only with the constitutional validity of Section 174. In view of that concession and because other grounds (including the plea that assessment proceedings were time barred) were not considered by the Single Judge, the High Court held that justice required remand for fresh consideration of those remaining questions while excluding reconsideration of the issue already canvassed as to Section 174. [Paras 5]

Writ petition restored to the file for fresh consideration by the Single Judge on issues other than the constitutional validity of Section 174; impugned judgment set aside.

Interim order revival - Status of any interim order previously in force at the time of dismissal. - HELD THAT: - The Court directed that any interim order which existed as on the date when the writ petition had been dismissed shall stand revived upon restoration of the petition for fresh consideration. This preserves the procedural status quo pending the Single Judge's fresh disposal of the remaining issues. [Paras 6]

Any interim order in existence at the time of dismissal is revived and shall continue to be in force.

Final Conclusion: Appeal allowed; impugned judgment dated 11.1.2019 in W.P.(C). No.21629 of 2018 set aside; writ petition restored for fresh consideration by the Single Judge on issues other than the constitutional validity of Section 174 of the KSGST Act; any interim order as of the date of dismissal revived and to continue in force.

Summary order. Petition challenging rejection of refund claim adjourned for two weeks; petitioner to file affidavit of service by 21st August, 2019 and serve respondents with copy of this order; matter to be taken up on 29th August, 2019 and, if Revenue remains unrepresented, to be considered on its merits on that date.

Interim relief in aid of appeal - stay of recovery pending appellate decision - deposit to obtain interim protection against encashment - garnishee notice and encashment - direction to appellate tribunal to decide appeals within time-frame

Deposit to obtain interim protection against encashment - garnishee notice and encashment - interim relief in aid of appeal - Whether the recovery officer should be restrained from encashing the demand drafts issued pursuant to the garnishee notices pending disposal of appeals, subject to deposit by the petitioner. - HELD THAT: - The Court found that, having regard to the facts that appeals were filed and the petitioner had prepared demand drafts which, if encashed, would cripple the working capital of the cooperative society, interim protection was appropriate. Rather than permanently stayed, conditional interim relief was imposed to balance the interest of revenue and the petitioner's need to continue operations. The petitioner was required to demonstrate bonafides by depositing a substantial part of the demanded tax; on such deposit the revenue's immediate right to encash the drafts is to be held in abeyance and the drafts cancelled so that the petitioner may operate its accounts and carry on business. [Paras 6]

Recovery officer directed not to press for encashment of the demand drafts provided the petitioner deposits at least 30% of the demanded tax within one week; on receipt the demand drafts shall be cancelled.

Interim relief in aid of appeal - stay of recovery pending appellate decision - Whether the petitioner should be permitted to transact the bank account maintained with the Bank during the interim period. - HELD THAT: - The Court recognised that restraint on encashment of the drafts without permitting access to banking facilities would effectively halt the society's business. In the interests of continuity of operations and employee welfare, and as part of the interim protective regime conditioned on deposit, the petitioner was allowed to transact the bank account so long as the deposit condition is complied with and the arrangement remains in force. [Paras 6]

Petitioner permitted to transact the Bank account maintained with the Bank while the interim arrangement continues.

Direction to appellate tribunal to decide appeals within time-frame - interim relief in aid of appeal - Whether the Income Tax Appellate Tribunal should be directed to decide the appeals within a specified period. - HELD THAT: - The Court recorded that appeals were filed and, to secure final adjudication of the disputes while the interim protective measures operate, it was appropriate to direct expedition by the Tribunal. The Court directed the Tribunal to endeavour to decide the appeals, in the circumstances, within six months so that the substantive controversy may be finally determined and the interim arrangement appropriately reviewed. [Paras 6]

Tribunal directed to endeavour to decide the appeals within a period of six months.

Final Conclusion: Writ petition disposed by granting conditional interim relief: the revenue shall not encash the demand drafts if the petitioner deposits 30% of the demanded tax within one week, the petitioner's bank account shall remain operable, and the Income Tax Appellate Tribunal is directed to endeavour to decide the appeals within six months.

Principles of natural justice - Exercise of writ jurisdiction where statutory appeal is available - Remand to appellate authority for consideration of additional grounds - Filing of additional grounds before the Commissioner of Income Tax (Appeals)

Exercise of writ jurisdiction where statutory appeal is available - Filing of additional grounds before the Commissioner of Income Tax (Appeals) - Appropriate procedural course where an appeal before the Commissioner of Income Tax (Appeals) has been filed against an assessment order. - HELD THAT: - The Court noted that appeals against the assessment orders for assessment year 2017 - 2018 had been filed before the Commissioner of Income Tax. Rather than adjudicating the writ petitions on merits, the Court directed that the petitioners should seek to raise the grounds now urged before the appellate authority by filing additional grounds of appeal. The Court provided a timetable for the filing and consideration of those additional grounds, recognising the appellate forum as the proper initial forum to examine the contentions raised, including allegations of violation of principles of natural justice. [Paras 13, 14]

Writ petitions disposed with directions to the petitioners to file additional grounds before the Commissioner of Income Tax (Appeals) by 17.03.2020 and for the Commissioner to consider those grounds in the first instance.

Principles of natural justice - Remand to appellate authority for consideration of additional grounds - Allegation that assessment orders passed without service/upload of notice and without considering reply - whether such allegation should be examined by the appellate authority. - HELD THAT: - The Court observed that the petitioners alleged non-service/non-uploading of notice and non-consideration of their explanations, raising a potential violation of principles of natural justice. The Court did not decide these allegations on merits; instead it remitted the matter to the Commissioner of Income Tax (Appeals) to examine the additional grounds (including the alleged violation) if the petitioners file them within the prescribed timeline. The Commissioner is to determine whether there was a breach of natural justice and, if so, pass appropriate orders; otherwise the Commissioner may proceed to examine the appeals on merits. [Paras 6, 7, 8, 13]

Allegations of violation of principles of natural justice remitted to the Commissioner of Income Tax (Appeals) for fresh consideration upon filing of additional grounds by the petitioners.

Final Conclusion: The writ petitions have been disposed of by directing the petitioners to file additional grounds before the Commissioner of Income Tax (Appeals) by 17.03.2020; the Commissioner is to consider those grounds (including alleged breaches of principles of natural justice) in the first instance and, if appropriate, pass orders, failing which the Commissioner may proceed to examine the appeals; connected miscellaneous petitions are closed and no costs awarded.

Allowability of business expenses - wholly and exclusively for business - disallowance for lack of documentary evidence - driver's salary - fuel and lubricant expenses - business conference expenses - apportionment of disallowance - travel expenses of employees

Driver's salary - fuel and lubricant expenses - wholly and exclusively for business - Disallowance of driver's salary and fuel and lubricant expenses - HELD THAT: - The AO disallowed amounts claimed as driver's salary and fuel and lubricant on the basis that the assessee did not own a car and failed to furnish any explanation or evidence to show these expenses were wholly and exclusively incurred for business. The Tribunal found that no documentary or other material was produced before it to establish that these expenses were for the assessee's business. In view of the absence of satisfactory explanation or supporting evidence and having regard to the reasons recorded by the AO, the disallowances were held to be justified.

Disallowance of driver's salary and fuel and lubricant expenses upheld.

Business conference expenses - disallowance for lack of documentary evidence - apportionment of disallowance - Extent of disallowance of business conference expense - HELD THAT: - The AO treated business conference expense as incidental to the assessee's direct selling business but disallowed 50% for want of bills and vouchers. The Tribunal accepted that organising business conferences is incidental to the assessee's business but noted the absence of supporting documentary evidence. On the facts and in the interest of fairness, the Tribunal found the AO's 50% disallowance excessive and reduced the disallowance to 20%, applying a moderated apportionment rather than complete acceptance or complete rejection of the claim.

Disallowance of business conference expense reduced to 20%.

Travel expenses of employees - allowability of business expenses - disallowance for lack of documentary evidence - Disallowance of certain flight booking expenses shown in assessment details - HELD THAT: - The AO disallowed portions of flight booking expenses on two grounds: (i) certain bookings in the details furnished related to other persons and were treated as not the assessee's expenditure, and (ii) a portion of the total claimed flight expense was undocumented. The Tribunal accepted the submission that specific flight bookings (identified in the assessment) related to the assessee's employees and were incurred wholly and exclusively for business. Having regard to the nature of the assessee's business and the particulars before it, the Tribunal found no justification to disallow the employee-related flight bookings and directed deletion of that part of the disallowance, while leaving the remainder as assessed.

Disallowance relating to flight bookings for employees deleted; remaining disallowance on undocumented portion left intact as assessed.

Final Conclusion: The appeal is partly allowed: disallowances on driver's salary and fuel and lubricant expenses are upheld for lack of evidence; the business conference disallowance is reduced from 50% to 20%; and the disallowance in respect of flight bookings attributable to employees is deleted.

Admissibility of statement recorded under section 133A - Corroboration by seized documents - Treatment of on-money/booking amounts as business receipts - Assessment of profit element embedded in gross receipts - Deletion of addition where offered amount covers taxable profit element

Admissibility of statement recorded under section 133A - Corroboration by seized documents - Whether the statement recorded during survey under section 133A and the papers seized could be relied upon to make an addition for undisclosed on-money disclosed as Rs. 68,50,000 and partly admitted as Rs. 23,00,000 - HELD THAT: - The Tribunal recognised that a statement under section 133A is ordinarily information and not conclusive evidence; however, where independent material (papers and diaries inventorised as Annexures) were found and the assessee did not dispute the disclosure and in fact admitted Rs. 23,00,000, the statement and seized material could be appreciated as corroborative evidence. On that foundation the assessee could not invoke the principle in S. Khader Khan Son to preclude assessment, since there was sufficient corroboration and partial acceptance by the assessee itself. [Paras 8]

Statement recorded under section 133A together with seized papers and the assessee's partial admission constituted sufficient evidence to support inquiry; the first fold of contentions seeking to exclude the statement was rejected.

Treatment of on-money/booking amounts as business receipts - Assessment of profit element embedded in gross receipts - Deletion of addition where offered amount covers taxable profit element - Whether the addition of Rs. 45,50,000 made by the AO should be sustained, or deleted/quantified by reference to the profit element on the disclosed on-money - HELD THAT: - The Tribunal accepted the principle that on-money received on booking of flats forms part of business receipts and the taxable element is the profit embedded in such receipts. The assessee produced a chart showing its profit rate (5.4% for 2010-11) and had already offered Rs. 23,00,000 (33.57% of the disclosed amount). Applying the profit rate to the total disclosed amount of Rs. 68,50,000, the profit element would be approximately Rs. 3,07,565, which is substantially less than the Rs. 23,00,000 already offered. Having accepted this alternative contention, the Tribunal found no necessity to sustain the addition of Rs. 45,50,000 and deleted the addition. Because the deletion was grounded on acceptance of this alternative, the Tribunal did not adjudicate the separate contention regarding partners' remuneration and interest. [Paras 9]

Addition of Rs. 45,50,000 deleted as the assessee had already offered an amount in excess of the profit element; no further addition required.

Final Conclusion: The appeal was partly allowed: the Tribunal held that the survey statement and seized papers, together with the assessee's partial admission, furnished sufficient corroboration, and on the alternative basis that the taxable profit element on the disclosed booking amounts was already more than covered by the amount declared by the assessee, the addition of Rs. 45,50,000 was deleted.

Condonation of delay - section 263 review of assessment - speculative loss v. business loss in derivatives - retrospective operation of amendment to section 43(5)(d) - remand for fresh adjudication

Condonation of delay - Kolte Patil Developers Ltd. - Whether the delay of 884 days in filing appeals against the Pr.CIT's revision orders is liable to be condoned. - HELD THAT: - The Tribunal examined the reasons advanced by the assessee for the 884 day delay in filing appeals against the Pr.CIT's revision orders. The bench found the explanations lacking merit, observing that an adverse revision order existed and the assessee could and should have filed the appeals within time; reliance on a possibly favourable outcome in a related first appeal was not a sufficient cause. The Tribunal applied the principle in Kolte Patil Developers Ltd. (as relied upon by the Revenue) and held that the delay was not condonable. [Paras 6, 7]

Delay of 884 days is not condoned and the appeals arising from the Pr.CIT's revision orders are dismissed as time barred.

Section 263 review of assessment - speculative loss v. business loss in derivatives - retrospective operation of amendment to section 43(5)(d) - remand for fresh adjudication - Whether losses from Futures & Options trading are speculative losses or business losses for the assessment years, and whether the matters require fresh adjudication in light of Tribunal precedent. - HELD THAT: - The Tribunal noted that the Assessing Officer, following the Pr.CIT's direction under section 263, treated the F&O losses as speculative and denied set off. The assessee relied on a recent Tribunal decision in the case of the assessee's spouse, which held that losses from derivative transactions constitute business losses and that the amendment to clause (d) of section 43(5) should be read to avoid anomalous results (thereby permitting set off). The Tribunal found prima facie that the issue is covered in favour of the assessee by that decision, and that the CIT(A) had not adjudicated the matter on merits but merely followed the Pr.CIT's directions. In view of these considerations and the need for comparability of facts, the Tribunal directed remand to the CIT(A) for fresh adjudication and compliance with the Tribunal's reasoning in the related case, allowing the appeals for statistical purposes. [Paras 12]

Appeals arising from the fresh assessments are remanded to the CIT(A) for fresh consideration on merits (with directions to consider the Tribunal's decision in the related case and for the assessee to demonstrate factual comparability); appeals allowed for statistical purposes.

Final Conclusion: All ten appeals disposed: five appeals against the Pr.CIT's revision orders dismissed as time barred for want of condonation of delay; the remaining five appeals against the fresh assessment orders are remanded to the CIT(A) for fresh adjudication on the question whether F&O losses are speculative or business losses, in conformity with the Tribunal's decision in the related case, and are allowed for statistical purposes.

Unexplained cash credit under section 68 - onus on assessee to prove identity, genuineness and creditworthiness of lenders - genuineness of transaction evidenced through banking channel - insufficiency of vernacular confirmations and 7/12 extract to establish creditworthiness - admission of additional evidence before appellate authority and scope of remand

Unexplained cash credit under section 68 - onus on assessee to prove identity, genuineness and creditworthiness of lenders - genuineness of transaction evidenced through banking channel - Addition made under section 68 in respect of cash and cheque deposits in the assessee's bank account - HELD THAT: - The Tribunal examined cheque and cash components separately. As to cheque deposits, although transactions passed through banking channels and genuineness of the transactions could not be doubted, the assessee furnished only book-entries signed by himself without counter-signed confirmations or independent evidence of the lenders' identity and creditworthiness; hence the assessee did not discharge the statutory onus under section 68. As to cash deposits, the assessee produced vernacular confirmations and 7/12 extracts, but these documents did not establish identity, address, PAN or documentary proof of the lenders' creditworthiness or the source of funds; accordingly the statutory requirements under section 68 remained unfulfilled. The Tribunal held that the AO's omission to verify some third parties did not relieve the assessee of his primary burden to prove identity, genuineness and creditworthiness, and on these grounds upheld the additions made by the AO and confirmed by the CIT(A). [Paras 8]

Assessee failed to discharge onus under section 68; additions confirmed and ground of appeal dismissed.

Admission of additional evidence before appellate authority and scope of remand - Tin Box principle on remand for additional evidence - Whether filing of additional evidence before the CIT(A) required setting aside to the AO for fresh adjudication under the Tin Box principle - HELD THAT: - The Tribunal noted that the CIT(A) sought remand reports from the AO twice and considered the additional documents filed by the assessee before reaching a conclusion that those documents were insufficient to discharge the onus under section 68. Therefore, there was no failure to afford the AO an opportunity to verify the additional evidence and no breach of the principle in Tin Box Co. v. CIT requiring automatic remand. The appellate authority's evaluation of the additional material was held adequate and the contention for mandatory remand was rejected. [Paras 8]

No violation of Tin Box principle; no remand required and the appellate evaluation stands.

Final Conclusion: The Tribunal affirmed the findings of the authorities below that the assessee did not discharge the burden under section 68 in respect of both cheque and cash deposits; the additions were upheld and the appeal dismissed. The Tribunal also held that the appellate authority had properly considered the additional evidence and that remand was not warranted.

Long Term Capital Gains exemption - exemption under section 10(38) - treating sale proceeds as unexplained income under section 68 - addition under section 69C for commission - bogus accommodation entries / pre arranged LTCG modus operandi - onus of proof - natural justice - disclosure of investigation report and right to cross examine - preponderance of probabilities versus admissible evidence - disallowance under section 14A read with Rule 8D - interest under sections 234A and 234B

Long Term Capital Gains exemption - exemption under section 10(38) - treating sale proceeds as unexplained income under section 68 - bogus accommodation entries / pre arranged LTCG modus operandi - onus of proof - natural justice - disclosure of investigation report and right to cross examine - preponderance of probabilities versus admissible evidence - addition under section 69C for commission - Whether the claimed LTCG on sale of Cressanda Solutions Ltd. shares was bogus and liable to be assessed as unexplained income, and whether the related addition for commission under section 69C was sustainable. - HELD THAT: - The Tribunal examined the documentary evidence furnished by the assessee - application/allotment papers, bank payments by account payee cheques, demat statements, contract notes, sale through a recognised stock exchange, and proof of STT - and noted that these records were neither controverted nor found to be defective by the AO or CIT(A). The AO relied on a general investigation report describing a widespread modus operandi of pre arranged LTCG but did not furnish the investigation material to the assessee, did not identify any live link or specific nexus between the assessee and the alleged entry operators/brokers/paper companies, and did not confront the assessee with third party statements or afford opportunity of cross examination. The Tribunal applied the settled principle that suspicion, conjecture or generalised modus operandi reports cannot displace direct documentary proof; the burden to prove that a transaction is bogus rests on the revenue and evidence relied upon must be placed before the assessee. Relying on jurisdictional and other authorities to the same effect, the Tribunal held that in absence of specific material establishing collusion or cash trail implicating the assessee, the LTCG claim had to be accepted as bona fide and exempt under section 10(38). Consequentially, the addition treated as unexplained income was deleted and the related commission addition under section 69C was also removed.

Claim of LTCG allowed; addition of sale proceeds deleted and addition on account of commission under section 69C deleted.

Disallowance under section 14A read with Rule 8D - burden of proof for dividend related expenses - Whether disallowance under section 14A read with Rule 8D of the Rules was rightly made by the AO and confirmed by the CIT(A). - HELD THAT: - The CIT(A) upheld a computed disallowance under section 14A read with Rule 8D by applying the formula in the Rules (attributing a portion of interest and 0.5% of average investments). The assessee before the Tribunal did not press detailed contest on this point and the Tribunal noted that neither the AO nor the assessee had specified dividend income details in the proceedings; the assessee's written contention that no expense was incurred was not developed at the hearing. In view of the limited and sketchy record on this issue and absence of substantive challenge before the Tribunal, the CIT(A)'s computation was sustained.

Disallowance under section 14A read with Rule 8D confirmed.

Interest under sections 234A and 234B - Whether interest under sections 234A and 234B should be charged in respect of the assessment. - HELD THAT: - The ground challenging interest was consequential to the primary tax additions. As the principal addition in respect of LTCG was deleted, the challenge to interest stood rendered infructuous and required no separate adjudication.

Ground dismissed as consequential / infructuous.

Final Conclusion: The Tribunal allowed the appeal in part: it accepted the assessee's documentary evidence, held that the AO/CIT(A) could not impugn the LTCG claim on the basis of a general investigation report and suspicion without specific evidence or opportunity to confront third party material, deleted the addition of the LTCG and the related commission addition, confirmed the disallowance under section 14A (Rule 8D) and dismissed the ground on interest as consequential.

Long-term capital gains exemption under section 10(38) - Assessment addition as unexplained cash credit under section 68 - Burden of proof on revenue to establish bogus or sham share transactions - Admissibility of third party/investigation statements and principle of natural justice (disclosure and opportunity to cross examine) - Evidentiary value of transactions executed through recognized stock exchange/broker, demat accounts and banking channels - Suspicion, surmise or preponderance of probability cannot substitute legal evidence

Long-term capital gains exemption under section 10(38) - Evidentiary value of transactions executed through recognized stock exchange/broker, demat accounts and banking channels - Suspicion, surmise or preponderance of probability cannot substitute legal evidence - Claim of long term capital gains on sale of Essar India Ltd. shares and entitlement to exemption under section 10(38) was allowable. - HELD THAT: - The Tribunal examined documentary evidence produced by the assessee - online trades through a recognized broker on BSE, contract notes, demat statements showing delivery, bank statements evidencing payments and receipt, and STT paid - and found no defect in those documents. Absent any legal evidence showing manipulation specifically attributable to the assessee, mere abnormal rise in share price or generalized investigation reports did not justify treating the transactions as not genuine. The Tribunal relied on precedents and reasoned that transactions supported by contract notes, demat credits and banking channel payments cannot be brushed aside on suspicion and surmise. Consequently the assessee discharged the onus to claim exemption and the LTCG claim was allowed. [Paras 5, 6]

Claim of LTCG on sale of Essar India Ltd. shares allowed and exemption under section 10(38) granted.

Assessment addition as unexplained cash credit under section 68 - Burden of proof on revenue to establish bogus or sham share transactions - Suspicion, surmise or preponderance of probability cannot substitute legal evidence - Addition of sale proceeds as unexplained income under section 68 was unjustified and was deleted. - HELD THAT: - The AO treated the LTCG as unexplained cash credit relying on an investigation report and third party statements to infer prearranged transactions. The Tribunal held that the revenue must bring relevant material/evidence to disprove genuineness of the transactions once the assessee has placed valid documentary proof. The AO did not produce any direct material against the assessee nor point out defects in the documents; generalized features of alleged modus operandi could not supplant legally admissible evidence to sustain an addition under section 68. Therefore the addition was not sustainable and was directed to be deleted. [Paras 5]

Addition under section 68 deleted; assessment treating LTCG as unexplained income set aside.

Admissibility of third party/investigation statements and principle of natural justice (disclosure and opportunity to cross examine) - Burden of proof on revenue to establish bogus or sham share transactions - AO's reliance on third party/investigation statements without disclosing them to the assessee or giving opportunity for cross examination rendered the adverse inference unsustainable. - HELD THAT: - The Tribunal observed that the AO referred to statements and investigation material relied upon to impugn the transactions but did not furnish copies to the assessee nor afforded opportunity to confront or cross examine such witnesses. Citing principles of natural justice and binding authorities, the Tribunal held that such undisclosed third party statements cannot be used to draw adverse inference against the assessee. In the absence of disclosed, admissible evidence, reliance on those statements was impermissible. [Paras 5]

Adverse inference based on undisclosed investigation/third party statements rejected; reliance on such material held improper.

Long-term capital gains exemption under section 10(38) - Evidentiary value of transactions executed through recognized stock exchange/broker, demat accounts and banking channels - Identical claims by other family member assessee appellants in respect of the same scrip and similar documentary evidence were allowed on the same reasoning. - HELD THAT: - For the other six appeals arising from family members, the Tribunal noted identical factual matrix - purchases and sales through the same broker on online platform, dematerialisation, holding period of more than one year, payments through banking channels and STT paid. Applying the reasoning in the lead case, the Tribunal held that those claimants similarly discharged the onus and their LTCG claims and exemptions under section 10(38) were allowable. [Paras 7]

All other family member appeals allowed and exemptions under section 10(38) granted for their respective LTCG claims.

Procedural irregularity - duplicate appeals and withdrawal - Later filed duplicate appeals (ITA Nos. 856-862/Kol/2019) were allowed to be withdrawn. - HELD THAT: - Registry defects resulted in a second set of appeals being filed inadvertently. The Tribunal permitted withdrawal of the mistakenly filed later appeals, leaving the original appeals to be adjudicated. [Paras 2]

Duplicate appeals permitted to be withdrawn; original appeals proceeded on merits.

Final Conclusion: The Tribunal allowed the appeals, held that the assessees had discharged the onus to claim LTCG exemption under section 10(38) on sale of Essar India Ltd. shares, rejected the addition of the sale proceeds as unexplained income under section 68 for lack of admissible evidence and for breach of natural justice in relying on undisclosed investigation statements, directed deletion of the additions and allowed all family member appeals accordingly.

Genuineness of share transactions - bogus long term capital gain - unexplained cash credits under section 68 of the Income tax Act - exemption of long term capital gain under section 10(38) of the Income tax Act - reliance on investigation wing/SEBI findings - opportunity for cross examination of third party statements - burden of proof on revenue to disprove claimed transactions - documentary evidence: contract notes, demat statements and bank records

Genuineness of share transactions - bogus long term capital gain - unexplained cash credits under section 68 of the Income tax Act - reliance on investigation wing/SEBI findings - opportunity for cross examination of third party statements - documentary evidence: contract notes, demat statements and bank records - burden of proof on revenue to disprove claimed transactions - Whether the long term capital gain claimed on sale of shares was bogus and liable to be treated as unexplained cash credit under section 68, or whether the claim of LTCG supported by documentary evidence should be accepted. - HELD THAT: - The Tribunal examined the assessee's documentary evidence - purchase bills, share certificates, scheme of amalgamation, allotment records, demat statements, contract notes, broker statements and bank receipts - showing acquisition, allotment and sale of the relevant shares through a registered broker on a recognised exchange and receipt of sale proceeds through banking channels. The Assessing Officer based the addition principally on information from the Investigation Wing and excerpts of a third party statement; however no copy of the relied statement was placed before the assessee nor was any opportunity given to cross examine the declarant. Further, SEBI's interim directions in the matter were subsequently revoked and SEBI cleared the entities so listed. In these circumstances the Tribunal applied the principle that suspicion, surmise or untested third party statements cannot substitute for legal evidence and that once an assessee furnishes credible documentary proof of transactions, the onus lies on revenue to disprove them. The Tribunal also followed consistent coordinate Bench and jurisdictional High Court precedents holding that transactions recorded by contract notes, demat entries and bank channels and not shown to be fabricated cannot be treated as bogus merely on the basis of generalised investigation reports. For these reasons the addition treating the sale proceeds as unexplained cash credit under section 68 was held unsustainable and deleted. [Paras 8, 9, 26]

Addition on account of alleged bogus long term capital gain deleted; LTCG accepted as genuine and not to be treated as unexplained cash credit under section 68.

Final Conclusion: The appeal is allowed: the Tribunal set aside the orders below and deleted the addition treating the claimed long term capital gain as unexplained cash credit under section 68 for AY 2014-15.

Export Promotion Capital Goods Scheme - Export obligation - Redemption certificate - Demand of customs duty and interest - Detention and sale of goods - Opportunity of personal hearing

Redemption certificate - Consideration of documentary compliance - Opportunity of personal hearing - Petitioner permitted to submit the redemption certificate and respondent directed to consider it and pass appropriate orders after affording personal hearing. - HELD THAT: - The petitioner, having imported capital goods under the EPCG scheme and having been proceeded against for non-fulfilment of export obligation, sought leave to produce the redemption certificate which was represented as available. The Court, in view of the limited relief sought and with the respondent's consent on that limited relief, allowed the petitioner a time-bound opportunity to submit the redemption certificate. The respondent was directed to consider the submitted document and to pass orders in accordance with law after granting the petitioner a personal hearing. The directions are procedural and limited to fresh consideration of the documentary compliance and do not decide the merits of the original demand or the detention and sale proceedings.

Petitioner to submit the redemption certificate within two weeks; on receipt respondent to consider and pass appropriate orders after personal hearing within four weeks.

Final Conclusion: Writ petitions disposed by directing time-bound submission of the redemption certificate and mandating the authority to consider it and decide the matter after hearing; no decision on merits of demand or detention.

Writ jurisdiction - Alternative remedy and efficaciousness - Appellate remedy - Power to place entities on Denied Entity List under Rule 7(1) - Surrender of MEIS scrips or payment and production of customs receipts

Writ jurisdiction - Alternative remedy and efficaciousness - Appellate remedy - Maintainability of writ petitions challenging DGFT orders where an alternative appellate remedy exists - HELD THAT: - The Court held that the impugned orders of the Joint Director General of Foreign Trade, which called for surrender of unutilized MEIS scrips or production of customs receipts and threatened placement on the Denied Entity List, do not exhibit jurisdictional error such as to warrant exercise of writ jurisdiction. Because an appellate remedy is available, the petitioners are required to invoke that statutory appellate forum. The court rejected the submission that the alternative remedy was ineffective merely because the DGFT had taken a similar stand in other matters; each case must depend on its own facts and the availability of the alternative remedy precludes entertaining the writ petitions at this stage. [Paras 4]

Writ petitions not entertained; petitioners directed to avail the appellate remedy before the Appellate Authority.

Power to place entities on Denied Entity List under Rule 7(1) - Surrender of MEIS scrips or payment and production of customs receipts - Direction to the Appellate Authority to consider the appellants' contentions on the DGFT orders and to allow filing of appeals within a limited period - HELD THAT: - The Court directed that the petitioners shall file their appeals before the Appellate Authority within three weeks and expressly recorded that the Appellate Authority should consider all contentions raised by the petitioners while adjudicating the appeal. The High Court did not decide the merits of the DGFT's orders (including the requirement to surrender MEIS scrips, payment of equivalent value with interest, or placement on the Denied Entity List) but remitted those matters for adjudication by the appellate forum. [Paras 4]

Appeals to be preferred within three weeks; appellate authority to examine all contentions-matters remitted for fresh consideration by the appellate forum.

Final Conclusion: Writ appeals dismissed for non-interference where an effective statutory appellate remedy exists; parties directed to file appeals within three weeks and the appellate authority directed to consider all raised contentions; merits of the DGFT orders left to the appellate process.

Implementation of appellate orders under the Customs Act, 1962 - refund of excess duty - failure to implement orders / inaction by authority - direction to process refund applications within a stipulated time - reassessment of bills of entry

Implementation of appellate orders under the Customs Act, 1962 - refund of excess duty - failure to implement orders / inaction by authority - Petition challenging non-implementation of four orders dated 29 October 2009 by the Commissioner of Customs (Appeals) and claiming entitlement to refund of excess duty. - HELD THAT: - The petition established that four appellate orders dated 29 October 2009 entitled the petitioner to a refund of excess duty and that, despite the petitioner filing refund applications on 13 September 2016 and repeated requests, Respondent Nos. 2 and 3 had not commenced processing those applications. The court recognised the petitioner's entitlement flowing from the appellate orders and found that the respondents' inaction required remedial direction. Exercising its supervisory jurisdiction, the court directed Respondent Nos. 2 and 3 to process the petitioner's refund applications within four weeks from the date of the order and to reassess the bills of entry if such reassessment is required under law in the course of processing the refunds.

Petition allowed; respondents directed to process the refund applications within four weeks including reassessment of bills of entry if required.

Final Conclusion: The petition was disposed of by directing the respondents to process the refund applications of the petitioner within four weeks from the order, including reassessment of the bills of entry if required, thereby providing substantive relief to the petitioner for non-implementation of the appellate orders.

Pre-deposit requirement for grant of stay or suspension of recovery pending appeal - protection from recovery pending disposal of statutory appeal subject to deposit - lifting of attachment on bank accounts upon deposit of specified sum

Pre-deposit requirement for grant of stay or suspension of recovery pending appeal - protection from recovery pending disposal of statutory appeal subject to deposit - lifting of attachment on bank accounts upon deposit of specified sum - Whether the attachment on the petitioner's bank accounts should be lifted pending disposal of the appeal on deposit of a further sum. - HELD THAT: - The Court recorded that the first appellate authority's order rejecting the petitioner's appeal for non-payment of the required pre-deposit has attained finality. The petitioner had already remitted an amount in excess of the statutory 7.5% pre-deposit threshold required for filing the appeal before the appellate tribunal and had filed an appeal with an application for condonation of delay which remains undecided. In exercise of its supervisory jurisdiction, and as an interim protective measure pending adjudication of the appeal, the Court directed that upon receipt of an additional specified deposit within a fixed time the provisional attachment on the bank accounts would be lifted. The Court made clear that the lifting of attachment was conditional and limited to the interim period, being subject to the final decision on the appeal before the appellate tribunal. [Paras 3, 5]

Attachment on the bank accounts to be lifted upon deposit of a further sum of Rs. 5 lakhs within four weeks, such payment to be subject to the outcome of the pending appeal.

Final Conclusion: Writ petition disposed by directing the petitioner to deposit an additional sum within four weeks, upon which the bank attachment shall be lifted; the interim relief is conditional and subject to the decision on the appeal pending before the appellate tribunal.

Oppression and mismanagement - transmission of shares by succession and Will - binding effect of concurrent High Court and Supreme Court judgments - succession certificate does not establish title - maintainability of petition under Sections 397/398 of the Companies Act - delay and laches

Transmission of shares by succession and Will - binding effect of concurrent High Court and Supreme Court judgments - Whether Rajkumar Devraj and Rajkumari Lalitya acquired title to the original 5050 shares of Late Maharaj Jagat Singh on his death (05.02.1997) such as to enable them to challenge allotments made in 2001. - HELD THAT: - The Tribunal's conclusion that the contesting respondents inherited the original 5050 shares on the death of Late Maharaj Jagat Singh is contrary to the final and binding determinations of the Delhi High Court and the Supreme Court. Those courts found that LMJS executed a Will in favour of GD, that GD derived the rights and had executed transfer deeds in favour of the DR Group, and that the DR Group followed due procedure and obtained succession documentation and transfer deeds from GD. The appellate court held that, for the purposes of the 2001 events, Maharani Gayatri Devi was the absolute legatee and legal heir in terms of the Will dated 23.06.1996 and that the Tribunal could not disregard the High Court and Supreme Court findings to hold otherwise. Consequently the contesting respondents could not claim title by inheritance to the original 5050 shares as at 05.02.1997. [Paras 52, 53, 54, 57, 58]

The Tribunal erred in holding that the contesting respondents inherited the original 5050 shares on 05.02.1997; the High Court and Supreme Court findings that GD was the legatee and that the DR Group derived rights through GD are binding.

Succession certificate does not establish title - maintainability of petition under Sections 397/398 of the Companies Act - Whether the company petition under Sections 397/398 was maintainable by the contesting respondents when they were not shareholders of record in 2001 and relied upon a succession certificate dated 19.02.2009. - HELD THAT: - Applying the settled law that a succession certificate facilitates collection of debts but does not by itself establish title, the court held that the succession certificate dated 19.02.2009 could not be the basis for asserting title to shares as at 2001. The contesting respondents were not shareholders nor had legal title to the original 5050 shares for the purpose of challenging the 2001 allotment. Further, the Tribunal improperly relied on a purported affidavit of GD's secretary (which was not on record) to negate GD's letter dated 10.04.2001 in which she declined to subscribe to further allotment. In these circumstances the grounds taken in the company petition were inadequate to invoke the Tribunal's equity jurisdiction under Sections 397/398 and the petition should have been dismissed. [Paras 55, 56, 60, 61, 62]

The company petition was not maintainable on the basis of the succession certificate and the contesting respondents' lack of title in 2001; the Tribunal's contrary approach was erroneous.

Delay and laches - maintainability of petition under Sections 397/398 of the Companies Act - Whether the company petition filed in 2006 was barred by delay and laches in relation to alleged acts occurring around 2001. - HELD THAT: - The court noted that the alleged acts of oppression related to events in 2001 and that the contesting respondents became shareholders only much later (by documents dated 14.11.2008/19.02.2009). In the absence of any satisfactory explanation for the delay, the petition filed in 2006 was fit to be dismissed on the ground of delay and laches. This finding formed an independent ground for setting aside the Tribunal's order which entertained the challenge to past and concluded actions of 2001. [Paras 64, 65]

The company petition was liable to be dismissed on the ground of delay and laches in prosecuting challenges to acts completed in 2001.

Oppression and mismanagement - Whether the Tribunal's order dated 01.08.2018 in Company Petition No.30/2006 granting reliefs (including setting aside resolutions, reconstituting the Board, ordering rectification and special audit) could be sustained. - HELD THAT: - Given that the contesting respondents lacked title to the original 5050 shares at the material time, that GD's letter of 10.04.2001 was not effectively rebutted on record, and that the petition was tainted by delay, the Tribunal's substantive reliefs (setting aside resolutions, restoring position ante, ordering reconstitution of board, rectification of register and special audit) could not be upheld. On these combined legal and factual grounds the appellate court set aside the Tribunal's order and allowed the company appeals relating to Jai Mahal Hotels Pvt Ltd. [Paras 2, 62, 64, 66]

The impugned Tribunal order dated 01.08.2018 in CP No.30/2006 cannot be upheld and is set aside; Company Appeals (AT) No.270/2018 and No.271/2018 are allowed.

Binding effect of concurrent High Court and Supreme Court judgments - Whether the findings in this judgment would govern Company Petition No.59(ND)/2008 (Rambagh Palace Hotel (P) Ltd). - HELD THAT: - The court observed that no specific clarification was sought or given in respect of CP-59/2008 and therefore it did not make independent findings in that appeal. However, it recorded that the legal findings expressed in relation to the Jai Mahal Hotels disputes will govern the claims and counterclaims in CP-59/2008, and disposed of Company Appeal (AT) No.329/2018 with that observation. [Paras 3, 67]

No specific finding is given in respect of CP-59/2008; the observations and findings in this judgment will govern CP-59/2008, and Company Appeal (AT) No.329/2018 is disposed of with that direction.

Final Conclusion: The Tribunal's order dated 01.08.2018 in Company Petition No.30/2006 was set aside: the appellate court held that the contesting respondents did not possess title to the original 5050 shares as at 05.02.1997 (GD was the legatee and her dealings were binding), a succession certificate does not by itself establish title, the petition was not maintainable and was time-barred by delay and laches; Company Appeals concerning Jai Mahal Hotels Pvt Ltd were allowed, and the parallel appeal relating to Rambagh Palace Hotel (P) Ltd was disposed of with the observation that the findings in this judgment will govern CP-59/2008.

Deemed service of notice - delivery of demand notice under section 8 of the IBC - pre condition for filing under section 9 of the IBC - applicability of General Clauses Act and Section 114, Indian Evidence Act - mode of service prescribed by Rules - admission of application under section 9

Delivery of demand notice under section 8 of the IBC - pre condition for filing under section 9 of the IBC - mode of service prescribed by Rules - deemed service of notice - Whether the Adjudicating Authority correctly rejected the Section 9 application for non establishment of service of the demand notice and whether deemed service was sufficient to trigger proceedings under Section 9 of the IBC. - HELD THAT: - The Tribunal examined the statutory text of Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016 together with the procedural rules (Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and Rule 38 of the NCLT Rules) and held that delivery of the demand notice in the prescribed manner is a necessary pre condition to initiate CIRP under Section 9. The Adjudicating Authority rejected the petition on the ground that service was not established and declined to apply general presumptions under the General Clauses Act or Section 114, Indian Evidence Act, on the basis that the IBC is a complete code. On the record, however, the corporate debtor did not specifically deny receipt of the demand notice; its reply before the Adjudicating Authority referred to having replied to the demand notice and complained only about non compliance with applicable rules. The Tribunal found that the appellant produced sufficient evidence of delivery (including postal tracking/returns and the corporate debtor's own reply acknowledging a response to the demand notice) and that there was no evidence of a pre existing dispute before issuance of the demand notice. In those circumstances the Adjudicating Authority erred in rejecting the Section 9 application for non service. Applying the statutory scheme and the documentary record, the Tribunal concluded that the petition ought to have been admitted. [Paras 9, 12, 13, 14, 15]

Impugned order rejecting the Section 9 application on the ground of non service set aside; Adjudicating Authority directed to admit the application and proceed with CIRP.

Final Conclusion: Appeal allowed. The rejection of the Section 9 petition for alleged non service was held to be erroneous on the material before the Tribunal; the impugned order is set aside and the Adjudicating Authority is directed to admit the petition and proceed accordingly.

Admission of petition under section 7 of the Insolvency and Bankruptcy Code - Existence of financial debt and occurrence of default - Last payment / limitation for filing section 7 petition - Effect of pending SARFAESI/DRT proceedings on initiation of CIRP - Moratorium under sections 13 and 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional and duties of IRP - Disposal of interlocutory challenges to maintainability

Admission of petition under section 7 of the Insolvency and Bankruptcy Code - Existence of financial debt and occurrence of default - Last payment / limitation for filing section 7 petition - Whether the IB Petition filed by the Financial Creditor under section 7 is complete and liable to be admitted. - HELD THAT: - The Adjudicating Authority found that the Financial Creditor produced loan documents, sanctions, charge registrations, statement of account and a certificate under the Banker's Books Evidence Act to substantiate the existence of debt and default. The Tribunal recorded that the corporate debtor had availed credit facilities from the applicant bank and consortium lenders, the debt exceeded the statutory threshold, default occurred on 29-6-2012 and the petition was filed within limitation since the last payment into the account was on 25-9-2017 and the petition was filed on 21-5-2018. The audited balance sheet, CIBIL report and statement of account as on 21-5-2018 were held to confirm liability and default. On these findings the petition was held to be complete for initiation of CIRP and admitted. [Paras 24, 25, 27, 28, 31]

The petition under section 7 is admitted; existence of debt and default established and petition held within limitation.

Effect of pending SARFAESI/DRT proceedings on initiation of CIRP - Whether pendency of SARFAESI or DRT proceedings prevents initiation of CIRP under the IBC. - HELD THAT: - The Tribunal applied settled law that pendency of SARFAESI proceedings or other recovery proceedings does not preclude a financial creditor from initiating CIRP because the remedy under the IBC is in rem in respect of the corporate debtor. On the material before it, including invocation of SARFAESI steps and DRT proceedings, the pendency of such actions did not bar admission of the section 7 petition. [Paras 26]

Pendency of SARFAESI/DRT proceedings does not bar initiation of CIRP; petition may be admitted notwithstanding those proceedings.

Disposal of interlocutory challenges to maintainability - Determination of interlocutory applications filed by the corporate debtor challenging maintainability and seeking rejection/deferral of the section 7 petition. - HELD THAT: - Two interlocutory applications by the corporate debtor seeking dismissal/rejection or deferral of the petition and ancillary reliefs were considered. Having heard arguments and examined documents, the Tribunal found no reason to accept the reliefs sought by the corporate debtor in IA 237 of 2019 and IA 571 of 2019, and accordingly disposed of those applications without granting the reliefs prayed for. [Paras 29, 30]

IA 237 of 2019 and IA 571 of 2019 are dismissed/ disposed of; the challenges to maintainability and requests for rejection/deferral are refused.

Moratorium under sections 13 and 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional and duties of IRP - Declaration of moratorium and appointment of Interim Resolution Professional consequent to admission of the petition. - HELD THAT: - Upon admission, the Tribunal declared the statutory moratorium with effect from the date of the order, prohibiting institution or continuation of suits or proceedings, transfer or disposition of assets, enforcement of security interests including actions under the SARFAESI Act, and recovery of property occupied by the corporate debtor. The Tribunal appointed the proposed IRP, directed him to make the public announcement of moratorium and to perform duties under the Code (including sections 15, 17-21) and to adhere to CIRP time-limits. The IRP was further directed to protect and preserve the corporate debtor's assets and to receive claims from stakeholders including the Income Tax Department. [Paras 33, 34, 36, 37, 38]

Moratorium declared and Mr. Brijendra Kumar Mishra appointed as Interim Resolution Professional with directions to act as per the Code.

Final Conclusion: The Tribunal admitted the section 7 petition on 13-1-2020, holding that existence of debt, default and limitation requirements were satisfied; interlocutory challenges to maintainability were rejected; a moratorium under the IBC was declared and an Interim Resolution Professional was appointed to conduct the CIRP.

Limitation under Article 137 of the Limitation Act - date of default / classification as Non-Performing Asset (NPA) as trigger for limitation - time-barred debts cannot be revived by the Insolvency and Bankruptcy Code - acknowledgement of debt and extension of limitation - Section 7 of the Insolvency and Bankruptcy Code, 2016

Limitation under Article 137 of the Limitation Act - date of default / classification as Non-Performing Asset (NPA) as trigger for limitation - time-barred debts cannot be revived by the Insolvency and Bankruptcy Code - Whether the Section 7 petition filed on 15-9-2017 was barred by limitation having regard to the date of default 30-6-2012 and applicable law - HELD THAT: - The Adjudicating Authority applied the law laid down by the Supreme Court in B.K. Educational Services v. Parag Gupta and Associates and subsequent Supreme Court decisions (including Vashdeo R. Bhojwani and Gaurav Hargovindbhai Dave), holding that applications under Section 7 are governed by the residuary Article 137 of the Limitation Act and that the right to initiate proceedings accrues on the date of default (date of NPA). Article 62 (twelve-year period for suits to enforce mortgage-related liabilities) does not govern Section 7 applications. In the present case the account was declared NPA on 30-6-2012; the Section 7 petition was filed on 15-9-2017, beyond three years from the date of default. Following the binding Supreme Court precedent that the Code does not revive time-barred debts and that limitation runs from the date of default, the petition was held to be time-barred and liable to be rejected. The Authority considered and rejected the petitioner's contentions based on registration of charge and other proceedings as insufficient to displace the operation of Article 137 in light of the cited Supreme Court rulings. [Paras 33, 36, 37, 38, 40]

The Section 7 petition is time-barred and is accordingly rejected.

Final Conclusion: The petition filed by the financial creditor under Section 7 of the IBC was dismissed as barred by limitation: the cause of action arose on the date of default (30-6-2012), Article 137 of the Limitation Act governs Section 7 applications, and the Code cannot revive time barred debts.

Locus standi of suspended directors in challenging CIRP processes - duty of the Resolution Professional to place only compliant resolution plans (section 30(2) read with Regulation 37 of IBBI CIRP Regulations) - eligibility criteria for prospective resolution applicants (net worth requirement) - inadmissibility of objections raised by ineligible or unauthorised prospective applicants - relevance of pending criminal proceedings against persons connected with a resolution applicant to plan consideration - timing and furnishing of performance guarantee at approval stage - dismissal of misconceived applications under section 60(5)(c) of the Code

Locus standi of suspended directors in challenging CIRP processes - inadmissibility of objections raised by ineligible or unauthorised prospective applicants - The suspended directors lack locus to maintain the application challenging the Resolution Plan where they have not shown authorization from homebuyers and the homebuyers themselves are not before the Tribunal. - HELD THAT: - The applicants (suspended directors) alleged that the Resolution Plan and related processes would prejudice homebuyers, but they did not identify or produce any homebuyer who had authorised them to represent their interests. No material was placed to demonstrate any authorisation by homebuyers. The Tribunal noted that the purported grievances relate to assumed interests of unnamed third parties and, in the absence of authorised representation or direct interest, the suspended directors have no locus to press the objections raised in MA/1347/2019. Consequently, those grounds lack merit.

Application dismissed as misconceived for lack of locus and absence of authorised homebuyers' representation.

Duty of the Resolution Professional to place only compliant resolution plans (section 30(2) read with Regulation 37 of IBBI CIRP Regulations) - eligibility criteria for prospective resolution applicants (net worth requirement) - The RP was correct in not placing plans of prospective applicants before the CoC where those applicants did not meet the eligibility criteria; the RP's obligation under section 30(2) read with Regulation 37 is to place only plans that meet prescribed requirements. - HELD THAT: - The RP stated that the Information Memorandum was prepared by him and that certain prospective applicants (MIY Constructions and Pelicon Realty) were not placed before the CoC because they failed to meet the net worth criterion (minimum Rs. 10 crore) set out in the EOI and Regulations. The Tribunal accepted that the RP is duty-bound to place before the CoC only those resolution plans that satisfy the statutory and regulatory requirements under section 30(2) of the Code read with Regulation 37 of the IBBI CIRP Regulations. Where prospective applicants do not meet eligibility thresholds, the RP has no obligation to place their proposals before the CoC.

Objections based on omission to place ineligible applicants' proposals before the CoC are without merit; RP acted within his statutory duty.

Relevance of pending criminal proceedings against persons connected with a resolution applicant to plan consideration - Allegations of pending criminal proceedings against the Managing Director of the Resolution Applicant were not supported by material and therefore were not a ground to disturb the process. - HELD THAT: - The applicants referred to a criminal case against the Managing Director of the Resolution Applicant but did not furnish documents to demonstrate how that case would affect the Resolution Plan. The Tribunal observed that, in absence of material establishing relevance or impact of such proceedings on the plan's admissibility or fairness, the contention could not be sustained.

The allegation of pending criminal proceedings is not a ground to interfere in the CIRP process in the absence of supporting material.

Timing and furnishing of performance guarantee at approval stage - The question of performance guarantee was deferred to the stage of final consideration of the Resolution Plan and not adjudicated on merits in the present application. - HELD THAT: - The RP counsel stated that the Resolution Applicant was willing to furnish the performance guarantee but expressed apprehension about funds being held up if litigation followed. The Tribunal noted that issues relating to the performance guarantee would be addressed when the Resolution Plan is taken up for approval and therefore declined to decide that question in the present application.

Performance guarantee to be dealt with at the time of approval of the Resolution Plan (matter deferred for decision at that stage).

Dismissal of misconceived applications under section 60(5)(c) of the Code - MA/1347/2019 filed under section 60(5)(c) was dismissed as misconceived on the grounds recorded by the Tribunal. - HELD THAT: - After considering submissions and materials (or lack thereof) placed by the applicants and the RP's responses - including the RP's preparation of the Information Memorandum, ineligibility of certain prospective applicants, lack of authorised homebuyer representation, and absence of material on alleged criminal proceedings - the Tribunal concluded that the contentions raised did not warrant interference with the CIRP process at this stage. The Tribunal also noted other proceedings initiated by the RP regarding alleged siphoning, but these did not alter the decision on MA/1347/2019.

MA/1347/2019 dismissed as misconceived.

Final Conclusion: The application under section 60(5)(c) (MA/1347/2019) filed by the suspended directors was dismissed as misconceived: the applicants lacked authorised representation of homebuyers, failed to place material to substantiate objections (including alleged criminal proceedings), and the RP acted within his duty in not placing proposals of ineligible prospective applicants before the CoC; issues relating to performance guarantee were reserved for determination at the plan approval stage.

Cooperation with Resolution Professional - access to books of the corporate debtor - duty of directors to hand over company records - assistance under section 429 of the Companies Act, 2013 - powers to seek police assistance to secure documents

Cooperation with Resolution Professional - access to books of the corporate debtor - duty of directors to hand over company records - Respondents' obligation to produce books, records and information to the Resolution Professional and their failure to do so - HELD THAT: - The Tribunal found that the respondents (mother and daughter directors) have not furnished the books and information of the Corporate Debtor sought by the Resolution Professional despite multiple opportunities. The record shows that one respondent entered the company in 2016 and the other continued as director, but neither provided the documents or sufficient information enabling the RP to carry out statutory functions under CIRP. The RP stated that the prolonged non-cooperation has impeded the progress of CIRP despite numerous hearings and an elapsed period of 268 days. The Tribunal rejected the respondents' mutual allegations as inadequate to discharge their duty to hand over company records when sought by the RP and held that continued non-production prevents the RP from performing his functions. [Paras 5, 6, 7]

Respondents are under an obligation to produce the books and information to the Resolution Professional; their failure to do so is unacceptable and has hindered the CIRP.

Assistance under section 429 of the Companies Act, 2013 - powers to seek police assistance to secure documents - Whether the Tribunal may direct police assistance under section 429 to enable the Resolution Professional to obtain documents and information - HELD THAT: - Given the respondents' continued non-cooperation and the RP's inability to proceed with CIRP, the Tribunal exercised its supervisory jurisdiction to recommend involvement of the local police under section 429 of the Companies Act, 2013 to assist the RP in obtaining the required information and securing the site and materials. The Tribunal identified the competent police station and suggested that the police be requested to assist in securing documents and facilitating compliance so that the RP can discharge his statutory duties. This direction was framed as a necessary step to overcome obstruction and enable the CIRP to progress. [Paras 8]

Police assistance under section 429 of the Companies Act, 2013 is suggested to assist the Resolution Professional in obtaining the requisite information and documents and in protecting the site and materials.

Final Conclusion: MA/1060/2019 is disposed of with a direction that respondents must cooperate and produce the books and information to the Resolution Professional, and with a suggestion that the concerned police authorities be requested under section 429 of the Companies Act, 2013 to assist the RP in securing documents and the site so that the CIRP may proceed.

Initiation of corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016 - opportunity of hearing to the corporate debtor - existence of default and threshold for admission

Opportunity of hearing to the corporate debtor - appearance of counsel - Whether the admission order dated 08-11-2019 under section 7 was passed without giving the corporate debtor an opportunity of hearing. - HELD THAT: - The adjudicating authority's order records that learned counsel for the corporate debtor advanced numerous arguments in opposition to admission (recorded at paragraph 10 of the impugned order). The Appellate Tribunal finds nothing on the record to suggest that the appellant was absent on the date of admission and expressly rejects the contention that no one appeared for the corporate debtor. On this basis the plea that the admission order was passed without hearing is negatived. [Paras 3, 4]

The plea of denial of hearing is rejected and the admission is not vitiated on that ground.

Existence of default and threshold for admission - merits of admission under section 7 - Whether, on merits, there was sufficient default to warrant admission of the section 7 petition. - HELD THAT: - The Tribunal records that the total amount sanctioned and disbursed in various tranches by the financial creditor and the default amount are set out in the record. The default amount as found exceeds the statutory threshold (more than Rs. 1 lakh) and this fact is not disputed. Having considered the material, the Tribunal finds no ground to interfere with the adjudicating authority's admission order dated 08-11-2019. [Paras 5, 6]

On merits the admission under section 7 is sustained; there is no interference with the impugned order.

Final Conclusion: The appeal is dismissed; the admission order dated 08-11-2019 is upheld. No costs.

Initiation of corporate insolvency resolution process - default in payment of financial debt - prima facie evidence of bankers' books - limited role of adjudicating authority in section 7 proceedings - moratorium under the Code - duties and powers of Interim Resolution Professional

Default in payment of financial debt - initiation of corporate insolvency resolution process - limited role of adjudicating authority in section 7 proceedings - The Financial Creditor has established default and the application under section 7 is complete, warranting initiation of CIRP. - HELD THAT: - The Tribunal found that the loan was sanctioned, disbursed and the loan documents were executed; the Corporate Debtor utilized the loan facilities and the Financial Creditor produced records of charge creation. The adjudicating authority's function under section 7 is limited to ascertaining existence of debt and occurrence of default in a summary manner, not to quantify the money claim. The application complied with the prescribed form and requirements and no disciplinary proceedings existed against the proposed resolution professional. On these foundations the Tribunal was satisfied that a default had occurred and the section 7 petition was complete. [Paras 13, 14, 21, 22, 24]

Section 7 petition admitted and CIRP initiated on the basis that default in payment of financial debt was established and the application was complete.

Prima facie evidence of bankers' books - Certified copies of entries in the banker's books constitute sufficient prima facie evidence of the financial debt claimed. - HELD THAT: - Relying on Section 4 of the Bankers' Books Evidence Act, 1891, the Tribunal held that certified copies of the statement of account maintained in the ordinary course of banking business amount to prima facie evidence of the existence of the entries and are sufficient to support the claim of financial debt in a section 7 petition. Challenges to particulars of interest or alleged discrepancies in rate charged were not found to be a substantial dispute fit to defeat admission. [Paras 15, 16, 17, 18]

Statement of accounts certified under the Bankers' Books Evidence Act is sufficient prima facie evidence to support the financial creditor's claim.

Initiation of corporate insolvency resolution process - limited role of adjudicating authority in section 7 proceedings - Objections based on alleged incorrect classification as NPA or on disputed transaction particulars do not preclude admission of a section 7 petition where default is established. - HELD THAT: - The Tribunal observed that classification as NPA pertains to other fora and statutory schemes and is not determinative under the Code. The objection that the account was not declared NPA according to RBI norms does not negate the existence of default for the purposes of section 7. Further, detailed quantification or resolution of accounting discrepancies is beyond the summary admission exercise and not a ground to reject the petition where prima facie default is proved. [Paras 20, 21, 32]

Objections regarding NPA classification and disputed account particulars do not defeat the section 7 admission when prima facie default is shown.

Duties and powers of Interim Resolution Professional - moratorium under the Code - Appointment of Interim Resolution Professional, declaration of moratorium and ancillary directions were issued. - HELD THAT: - On admission, the Tribunal appointed the proposed Interim Resolution Professional who was found free of disqualification and directed him to make the public announcement within the timeframe specified by the regulations. A moratorium was declared in terms of the Code, with the consequent prohibitions on suits, asset transfers, enforcement of security and recovery of property. The Tribunal directed cooperation from ex-management and auditors, required the Financial Creditor to deposit an initial sum to meet IRP expenses subject to adjustment by the Committee of Creditors, and authorised the IRP to seek corrections to account statements if necessary. [Paras 27, 29, 30, 31, 32]

Mr. Umesh Garg appointed as Interim Resolution Professional; moratorium imposed; IRP directed to act in accordance with the Code and regulations and ancillary directions issued including deposit for IRP expenses and cooperation from ex-management.

Final Conclusion: The petition under section 7 is admitted; corporate insolvency resolution process is initiated against the Corporate Debtor, an Interim Resolution Professional is appointed, moratorium declared and directed steps issued for public announcement, cooperation by ex-management and provision of initial funds to the IRP.

Show cause notice - maintainability - jurisdiction - preliminary objections - opportunity of hearing - repeal and saving - continuance of proceedings despite repeal

Show cause notice - writ jurisdiction - preliminary objections - Challenge to the impugned show cause notice was not entertained by quashing it; court exercised supervisory jurisdiction but declined to decide merits in absence of final adjudication. - HELD THAT: - The petition sought quashing of the show cause notice dated 28.11.2019. The Court noted that Ext.P4 is a pre-adjudicatory show cause notice to which the petitioner had not yet filed written objections and that proceedings were not finally concluded by the respondent. Although Article 226 jurisdiction exists to entertain challenges to administrative orders, the Court held that it would not prematurely quash an unadjudicated show cause notice. Instead, the petitioner was directed to file detailed written submissions/objections (preferably within ten days of receipt of certified copy of the judgment) and the respondent was directed to afford a reasonable and personal hearing through authorised counsel and to decide the matter after considering the preliminary objections and the merits. The Court emphasised that the respondent must consider maintainability and lack of jurisdiction as the first issue before entering into merits, and only if jurisdiction is found to exist may the respondent proceed to decide merits.

Writ petition disposed by directing petitioner to file written objections and respondent to afford hearing and decide maintainability/jurisdiction before addressing merits; no quashing of the show cause notice.

Jurisdiction - maintainability - repeal and saving - continuance of proceedings despite repeal - Validity of the notifications and the respondent's jurisdiction were not finally adjudicated and were remitted for decision by the 2nd respondent after hearing the petitioner. - HELD THAT: - The petitioner contended that the parent statute under which the notifications were issued had been repealed and, therefore, the notifications referred to in the show cause notice were not in force. The Court refrained from deciding this contention on merits. Instead, it directed the 2nd respondent to examine and decide, as the primary issue, whether jurisdiction exists and whether the proceedings are maintainable in view of the repeal and saving provisions relied upon by the parties. The remand requires the 2nd respondent to consider preliminary objections including those based on the repeal of the parent statute and the effect of saving clauses, and to take a considered view on jurisdiction before adjudicating merits.

Issue of jurisdiction and validity of notifications remitted to the 2nd respondent for fresh consideration after affording the petitioner an opportunity of hearing.

Final Conclusion: The writ petition is disposed of without quashing the show cause notice; the petitioner is directed to file written objections and the 2nd respondent is directed to afford a hearing, consider preliminary objections on maintainability and jurisdiction (including contentions based on repeal and saving), decide whether jurisdiction exists, and thereafter proceed to decide the merits if appropriate.

Remand for fresh enquiry - mismatch of input tax credit - opportunity to the dealer to establish entitlement to set-off - assessing officer to consult other end dealer and other circles - administrative mechanism to keep mismatch cases alive and centralized handling - plea of limitation not available when matter remanded for fresh show cause

Remand for fresh enquiry - mismatch of input tax credit - assessing officer to consult other end dealer and other circles - Impugned notices proposing reversal of input tax credit and levy of tax and penalty were set aside and the matters were remitted to the assessing authority for fresh consideration. - HELD THAT: - The writ petitions were allowed on the basis that the issues fall within the scope of the Court's earlier decision in JKM Graphics Solutions Private Limited v. Commercial Tax Officer, wherein orders were set aside and matters remanded for a fresh, thorough enquiry. The remand contemplates that the Assessing Officer shall undertake fresh adjudication in consultation with the Assessing Officers of the other end dealer and, where necessary, seek information from other circles, so as to enable a fair and reasoned decision on the claim of input tax credit where a mismatch has been alleged.

Notices set aside and matters remitted for fresh enquiry to the assessing authority to be conducted in accordance with the Court's earlier directions.

Administrative mechanism to keep mismatch cases alive and centralized handling - opportunity to the dealer to establish entitlement to set-off - plea of limitation not available when matter remanded for fresh show cause - Respondent directed to follow the procedural instructions in the Commissioner's circular and the Court's prior order when proceeding on remand, including maintaining lists of mismatch cases and issuing notices to keep issues alive. - HELD THAT: - The Court applied the guidance in the prior decision and noted the subsequent Commissioner of State Tax circular dated 18.01.2019, which instructs that where Enforcement/ISIC proposals involve ITC mismatch, non-mismatch issues may be finalized while mismatch remains pending; however, notices must be issued to keep mismatch cases alive and a list maintained, together with monthly abstracts for higher authorities. The remand is therefore to be conducted strictly in accordance with those directions, ensuring that the dealer is afforded an opportunity to explain and establish entitlement to set-off; consistent with the prior ruling, dealers cannot interpose a limitation defence to defeat fresh show cause proceedings arising from the remand.

Respondent to act in conformity with the Court's earlier directions and the Commissioner's circular; notices to be issued and procedural safeguards observed while remanding the matters for fresh consideration.

Final Conclusion: Writ petitions allowed; impugned notices dated 10.09.2012 set aside and matters remitted to the respondent for fresh adjudication in accordance with this Court's earlier order in JKM Graphics and the Commissioner's circular dated 18.01.2019; no costs.

Works Contract Composition Scheme - classification of composite contract - Works Contract Service - abatement for material component - change of classification

Works Contract Composition Scheme - change of classification - Works Contract Service - Appellant's entitlement to pay service tax under the Works Contract Composition Scheme with effect from 1st June, 2007 despite having paid earlier under the head 'Construction of Complex Service'. - HELD THAT: - The Tribunal held that the appellant, who paid tax with abatement for material component until 31st May, 2007, validly opted from 1st June, 2007 to pay service tax under the Works Contract Composition Scheme on the gross value including materials. The Tribunal applied the legal principle laid down by the Apex Court in L&T, 2015-TIOL-187-SC-ST, which treats a composite contract as classified under the head Works Contract Service. On that basis the appellant's change in classification and payment under the Composition Scheme from 1st June, 2007 is permissible and cannot be disallowed by Revenue merely because the same work was earlier taxed under a different head prior to that date.

Tribunal allowed the appeal and set aside the demand raised by Revenue for alleged short payment of service tax in respect of the period from 1st June, 2007 onwards.

Final Conclusion: Appeal allowed; impugned order demanding short-paid service tax set aside and appellant's payment under the Works Contract Composition Scheme from 1st June, 2007 upheld in view of the Supreme Court ruling in L&T, with consequential benefits if any.

Service tax on construction services - abatement on commercial and industrial construction services - inclusion or exclusion of value of approach roads in taxable value - interpretation of Board circular on taxable value of construction

Service tax on construction services - inclusion or exclusion of value of approach roads in taxable value - abatement on commercial and industrial construction services - interpretation of Board circular on taxable value of construction - Whether the value of approach roads constructed by the appellant at site forms part of the taxable value of construction services and is liable to service tax for the period April 2007 to September 2007. - HELD THAT: - The Tribunal held that the approach roads in question were constructed solely to facilitate movement of transport vehicles to the weigh bridges and do not form part of residential complexes or similar constructions envisaged by the Board's Circular. Consequently, the value of such roads could be legitimately excluded from the gross taxable value while claiming the prescribed abatement for commercial and industrial construction services. The Revenue's reliance on the Board's Circular in respect of inclusion of roads in the taxable value of residential construction was found inapposite to the facts of the present case, where the roads are ancillary to installation of weigh bridges and not integral to residential complex construction. On this basis the demand of service tax on the value of approach roads was unsustainable. [Paras 3, 4]

Impugned demand of service tax in respect of the value of approach roads set aside; appeal allowed with consequential relief.

Final Conclusion: Appeal allowed. The demand of service tax levied on the value of approach roads constructed at site in relation to installation of weigh bridges for the period April 2007 to September 2007 is set aside.

Extended period of limitation - fraud or willful misrepresentation or suppression of facts - active intent to defeat the law - normal period of limitation (six months prior to issuance of show cause notice) - entitlement to recover service tax for the normal limitation period

Extended period of limitation - fraud or willful misrepresentation or suppression of facts - normal period of limitation (six months prior to issuance of show cause notice) - Validity of invocation of the extended period of limitation for recovery of service tax dues - HELD THAT: - The Court held that invocation of the extended period of limitation under the Central Excise code cannot be sustained in the absence of proven allegations showing an active intent to defeat the law, namely 'fraud or willful misrepresentation or suppression of facts'. The mere omission to pay tax, without evidence of the requisite mental element to evade tax, does not justify invoking the extended limitation. The Court relied on earlier Supreme Court authorities [Collector of Central Excise vs. Chempher Drugs & Liniments], [Uniworth Textiles Ltd vs. Commissioner of Central Excise], and [Pushpam Pharmaceuticals Ltd. vs. Collector of Central Excise] to restate that extended limitation is available only where the revenue establishes fraud, willful misrepresentation or suppression of facts. Applying that principle to the facts, the invocation of the extended period was held to be bad in law. Independently, the Court clarified that the revenue remains entitled to assess and recover service tax for the normal limitation period, i.e., the six months immediately preceding the show cause notice.

Invocation of the extended period of limitation quashed for lack of evidence of fraud or willful misrepresentation; revenue may recover service tax for the normal six month period prior to the show cause notice.

Final Conclusion: The appeal is partly allowed: the extended period of limitation cannot be invoked in the absence of proven fraud, willful misrepresentation or suppression of facts, but the revenue is entitled to recover service tax for the normal six month limitation period preceding the show cause notice.

Availment of Cenvat Credit - inputs versus capital goods - goods used as support structures/accessories of capital goods - eligibility of steel plates (HR/MS/Cheq. Plates) as inputs or capital goods

Availment of Cenvat Credit - goods used as support structures/accessories of capital goods - eligibility of steel plates (HR/MS/Cheq. Plates) as inputs or capital goods - Whether Cenvat credit paid on HR Plates/MS Plates/Cheq. Plates used within the factory as supporting structures or for operation and maintenance is admissible to the appellant. - HELD THAT: - The Tribunal, applying its earlier final decision in an appeal by the same appellant for a subsequent period and consistent precedents, held that MS/HR plates used for erection of supporting structures, storage tanks and for coil fitting are of the nature of accessories to capital goods or are otherwise eligible as inputs. The Bench accepted the factual finding that such plates were used within the factory in facilitating manufacture of the final product and noted the Larger Bench view that steel items used as support structures for smooth erection of machines fall within the scope of admissible Cenvat credit under the relevant rules. The Tribunal found the departmental authorities' reliance on earlier Supreme Court authority in a different factual setting inapplicable where the plates functioned as fabricating/supporting structures for machines and equipment. Having regard to the identical issue finally decided in the appellant's earlier tribunal order, the present denial of credit was held not tenable. [Paras 5, 6]

The impugned order rejecting Cenvat credit is set aside and the appeal is allowed; Cenvat credit on the disputed plates is admissible for the period in dispute.

Final Conclusion: The appeal is allowed; the order of the Commissioner (Appeals) is set aside and Cenvat credit on HR/MS/Cheq. Plates used as support structures or accessories within the factory is held admissible for the period 01.09.2011 to 31.08.2012.

Quashing of show-cause notice - Writ jurisdiction under Article 226 - interference at pre-decisional stage - Principle against quashing show-cause notice except in rare or wholly illegal cases - Challenge to notice issued under the Tamil Nadu Goods and Services Tax Act, 2017 - Right to personal hearing - Laches and delay in invoking writ jurisdiction

Quashing of show-cause notice - Writ jurisdiction under Article 226 - interference at pre-decisional stage - Principle against quashing show-cause notice except in rare or wholly illegal cases - Challenge to the impugned show-cause notice at the stage before adjudication - HELD THAT: - The Court declined to quash or interfere with the impugned notice issued under the TNGST Act at the show-cause stage. Relying on the discretionary nature of writ jurisdiction, the Court applied the established principle that ordinarily a High Court should not quash a show-cause notice or charge-sheet at the pre-decisional stage except in very rare or exceptional cases where the notice is wholly without jurisdiction or wholly illegal. No such exceptional circumstance was found to exist in the present facts; hence interference at the SCN stage was inappropriate. [Paras 9]

The challenge to the impugned show-cause notice was rejected and not quashed.

Right to personal hearing - Laches and delay in invoking writ jurisdiction - Challenge to notice issued under the Tamil Nadu Goods and Services Tax Act, 2017 - Effect of the petitioner having availed personal hearing and the delay in filing the writ petition - HELD THAT: - The Court noted that the petitioner had availed the opportunity of personal hearing contemplated by the impugned notice and that final orders were yet to be passed by the authority. The petition was filed more than five months after issuance of the notice and after the personal hearing was taken. In these circumstances the petition was held to be premature and also tainted by laches; these factors weighed against entertaining the pre-adjudicatory challenge to the notice. [Paras 6, 9, 11]

Petition was held to be premature and barred by delay; accordingly no relief was granted on this ground.

Final Conclusion: Writ petition dismissed for lack of merit; no interference with the show-cause notice at the pre-adjudicatory stage; there shall be no order as to costs and the connected miscellaneous petition is dismissed.

Mismatch of transactions in returns - right to personal hearing - levy of penalty without specific proposal in notice - reassessment de novo - directive to follow departmental circular

Mismatch of transactions in returns - directive to follow departmental circular - Assessment adjustments made on account of alleged mismatch of transactions must be examined in accordance with departmental instructions and relevant precedent. - HELD THAT: - The assessments for the periods 2014-15 and 2015-16 were founded on alleged mismatches between the petitioner's returns and those of selling dealers. The Court observed that the merits of such mismatch disputes are prima facie governed by the judgment in J.K.M. Graphics Solutions Private Limited and by Circular No.3 of 2019 issued by the Special Commissioner, Commercial Taxes, which directs Assessing Officers to keep issues of mismatch in abeyance until an internal mechanism is constituted. In view of that guidance, the Assessing Authority cannot proceed to conclusively determine mismatch-related adjustments without adhering to the said circular and precedent. [Paras 2, 4]

Assessments based on mismatch of transactions are to be reconsidered in accordance with Circular No.3 of 2019 and the controlling precedent.

Right to personal hearing - reassessment de novo - Failure to grant a personal hearing after the petitioner sought time to produce particulars renders the impugned orders unsustainable and requires reassessment afresh. - HELD THAT: - The petitioner requested a month's time to produce particulars and there is a reply on record acknowledged by the Sales Tax Collection Inspector. Despite that, the matters were not re-posted and the impugned orders were passed without affording any personal hearing. Procedural fairness mandates that the petitioner be issued notice and be given an opportunity of personal hearing before finalising assessments. Consequently, the Court directed that the assessments for the two periods be set aside and re-done de novo after issuance of notice and personal hearing. [Paras 2, 3, 5]

Impugned orders set aside; Assessing Authority to re-do assessments de novo after issuing fresh notice and affording personal hearing.

Levy of penalty without specific proposal in notice - Imposition of penalty in the impugned orders when pre-assessment notices did not specifically propose penalty is procedurally impermissible in the circumstances of the case. - HELD THAT: - The pre-assessment notices did not specifically propose levy of penalty, yet the final orders imposed penalty. Coupled with the absence of personal hearing and the requirement to follow Circular No.3 of 2019 on mismatch issues, the unilateral imposition of penalty without specific prior proposal and opportunity to be heard is unjustified. This procedural defect contributed to the decision to set aside the impugned orders and remit the matter for fresh consideration. [Paras 3, 5]

Penalty levied in the impugned orders is set aside and to be reconsidered upon reassessment after notice and hearing.

Final Conclusion: Impugned assessments for 2014-15 and 2015-16 set aside; Assessing Authority directed to re-do the assessments de novo in accordance with Circular No.3 of 2019 and relevant precedent, after issuance of fresh notice and affording the petitioner a personal hearing; no costs.

Natural justice - non-speaking order - non-application of mind - de novo assessment - conditional remand - laches - reinstatement of impugned order on non-compliance

Natural justice - non-speaking order - non-application of mind - Impugned assessment order set aside on account of violation of principles of natural justice and being cryptic/non-speaking. - HELD THAT: - The Court found that the Assessing Authority confirmed the pre-assessment proposals without discussing or disposing of the objections filed by the petitioner and issued a subsequent notice to which the petitioner did not reply. The impugned order was therefore held to exhibit non-application of mind and to be cryptic and non-speaking, amounting to a breach of the principles of natural justice; consequently the assessment order dated 30.08.2019 was set aside. [Paras 2]

Impugned order set aside for violation of natural justice and for being non-speaking and non-application of mind.

De novo assessment - conditional remand - laches - reinstatement of impugned order on non-compliance - Assessment remanded for fresh decision on terms: petitioner to pay 10% of the disputed demand and appear on specified date; fresh assessment to be completed within four weeks, failing which the original order shall stand revived. - HELD THAT: - While setting aside the assessment, the Court noted delay on the part of the petitioner and, as a balancing exercise, directed conditional relief. The petitioner was required to remit 10% of the disputed demand by 20.03.2020 and to appear before the Assessing Authority on that date with proof of payment. Upon compliance, the Assessing Authority was directed to proceed with assessment de novo and pass a fresh order after hearing the petitioner within four weeks from 20.03.2020. If the petitioner failed to comply with the condition or to appear, the impugned order would be revived. [Paras 3, 4]

Matter remitted for de novo assessment subject to the specified conditional payment and appearance; failure to comply will revive the impugned order.

Final Conclusion: The assessment order for 2013-14 dated 30.08.2019 is quashed for breach of natural justice; matter is remitted for de novo assessment subject to the petitioner paying 10% of the disputed demand and appearing on the specified date, after which the Assessing Authority shall pass a fresh order within four weeks, failing which the original assessment will be revived.

Input tax credit - proviso to Section 19(1) of the TNVAT Act (pre-amendment) - provisional nature of input tax credit under sub-section (16) of Section 19 - onus on purchasing dealer to establish payment to selling dealer - revenue's remedy against the selling dealer for recovery of tax collected

Input tax credit - proviso to Section 19(1) of the TNVAT Act (pre-amendment) - onus on purchasing dealer to establish payment to selling dealer - Purchasing dealer entitled to claim input tax credit for the period in question upon proof that tax was paid to the selling dealer under the pre-amendment proviso to Section 19(1). - HELD THAT: - The Court held that for the tax period 2009-2010 the law governing input tax credit is the pre-amendment proviso to Section 19(1), which requires the registered (purchasing) dealer to establish that the tax due on such purchase has been paid by him in the prescribed manner. The assessing authority itself recorded that the purchasing dealer had paid tax to the selling dealer. On that admitted fact the purchasing dealer satisfied the statutory requirement and was entitled to the input tax credit claimed at the time of self-assessment. The subsequent amendment to Section 19(1) (effective 29.1.2016) does not govern the period in question and cannot be applied retrospectively to deny credit where the pre-amendment test is met. The Court therefore affirmed that denial of input tax credit to the purchasing dealer on the basis that the selling dealer had not deposited the collected tax was not permissible under the pre-amendment provision. [Paras 7, 9]

Input tax credit must be allowed to the purchasing dealer for 2009-2010 where he established payment to the selling dealer under the pre-amendment proviso to Section 19(1).

Provisional nature of input tax credit under sub-section (16) of Section 19 - revenue's remedy against the selling dealer for recovery of tax collected - Revenue cannot revoke or deny the purchasing dealer's input tax credit under sub-section (16) of Section 19 on the sole ground that the selling dealer did not deposit the collected tax; revenue may proceed against the selling dealer to recover tax collected. - HELD THAT: - The Court observed that sub-section (16) makes the input tax credit provisional in specified circumstances relating to incorrect, incomplete or improper claims by the dealer, but it does not authorize denial of credit to a purchasing dealer who has proved payment to the selling dealer. Where the purchasing dealer has legitimately paid the tax to the seller and claimed credit at self-assessment, the appropriate remedy for the State is to pursue the selling dealer - who holds the collected tax in trust for the State - for recovery of the tax. The record did not show that the selling dealer was a non-existent or ghost dealer; rather identity and collection by the selling dealer were established, so the departmental action invoking sub-section (16) to deny the purchasing dealer's credit was incorrect. [Paras 8, 9]

The department's revision orders denying credit under sub-section (16) are incorrect on the admitted facts; Revenue may initiate proceedings against the selling dealer to recover tax collected but cannot mulct the purchasing dealer who proved payment.

Final Conclusion: The writ petitions were rightly allowed by the Single Judge; the purchasing dealer's input tax credit for 2009-2010 is to be admitted under the pre-amendment proviso to Section 19(1), the departmental revision orders are set aside, and the Revenue remains free to proceed against the selling dealer to recover the tax collected. The appeal is dismissed.

Natural justice - acceptance of returns under Section 22(2) - best judgment assessment - opportunity of personal hearing - taxation of inter-state sales lacking Form C - treatment of order as notice and remand for fresh adjudication

Natural justice - acceptance of returns under Section 22(2) - best judgment assessment - opportunity of personal hearing - Validity of the assessment dated 19.09.2013 which imposed tax at 12.5% on inter state transactions for want of Form C without issuing prior notice or affording a personal hearing. - HELD THAT: - The court found that Section 22(4) permits framing a best judgment assessment but the assessment before it accepted the turnover figures yet altered the tax computation to 12.5% for inter state sales not supported by Form C without issuing any prior notice. The impugned exercise violated the principles of natural justice because no notice was issued enabling the petitioner to show cause or explain the position in person. The court observed that Section 22(2) contemplates acceptance of returns as such and does not permit partial compliance by altering the tax liability without giving an opportunity to the assessee. For these reasons the assessment order could not be sustained. [Paras 5, 6, 7]

Impugned assessment set aside for want of notice and hearing.

Treatment of order as notice and remand for fresh adjudication - opportunity of personal hearing - Relief and procedure to be followed in consequence of setting aside the assessment. - HELD THAT: - The court directed that the impugned order dated 19.09.2013 be treated as a notice and permitted the petitioner to file objections within two weeks of receipt of the order, with liberty to produce evidence and necessary documents (including forms). On receipt of objections the respondent was directed to afford a personal hearing and pass a fresh order on merits and in accordance with law. The court prescribed that the respondent shall complete this exercise within eight weeks from receipt of the objections. [Paras 8]

Order to be treated as notice; petitioner to file objections within two weeks; respondent to afford personal hearing and pass fresh adjudication within eight weeks.

Final Conclusion: The assessment order of 19.09.2013 imposing tax at 12.5% was set aside for breach of natural justice; the order is treated as notice, the petitioner may file objections within two weeks, and the respondent must afford personal hearing and pass a fresh order on merits within eight weeks.

Assessment on best judgment - survey by Special Investigation Bureau (SIB) - non-production of books of account - reliance on inspection findings to make assessment - principles of natural justice - appellate reduction of tax demand

Assessment on best judgment - non-production of books of account - reliance on inspection findings to make assessment - Legitimacy of making an assessment on best judgment where a survey by SIB found a vehicle being loaded with undisclosed goods and books of account were not available at the time of survey. - HELD THAT: - The Court held that the assessment was not founded solely on the non-production of books of account. The SIB survey contemporaneously found a vehicle being loaded with oil cake and that this activity was not reflected in the assessee's books. That factual mismatch, observed during the survey, furnished a permissible basis for the authorities to make an assessment on best judgment. The decision relied upon by the revisionist, where an adverse presumption was raised only because books were not produced, was factually distinguishable and did not govern the present case. The First Appellate Authority's reduction of the demand was noted but did not render the original assessment invalid where the inspection revealed undisclosed activity.

Assessment on best judgment sustained as legitimately based on SIB's inspection finding of undisclosed loading of oil cake despite books not corresponding to that activity; not made solely because books were unavailable.

Survey by Special Investigation Bureau (SIB) - principles of natural justice - Claim that non-supply of the SIB survey report violated principles of natural justice. - HELD THAT: - The Court observed that the plea of non-supply of the SIB report was not raised before the assessing authority or the appellate forum below and was therefore taken for the first time before the High Court. As the contention was not pressed earlier in the proceedings, the Court treated the plea as belated and not deserving of consideration. The coordinate-bench decision relied upon did not establish a categorical rule that a copy of the SIB report must be supplied in all circumstances; in any event, the factual and procedural posture here differed.

Ground of violation of natural justice for non-supply of SIB report rejected as not raised below and therefore not maintainable.

Final Conclusion: Revision dismissed; the High Court upheld the assessment insofar as it was based on contemporaneous SIB inspection showing undisclosed activity and declined to entertain the belated plea of non-supply of the SIB report; no order as to costs.

Limitation for initiation of assessment proceedings - date of making out the case - notice under Section 75(1) of the VAT Act as requisition for production of records - notice under Section 25(1) of the VAT Act - registration of case under Section 61(2) for tax evasion - exclusion of period of stay from computation of limitation

Limitation for initiation of assessment proceedings - date of making out the case - exclusion of period of stay from computation of limitation - Limitation for initiating proceedings under the VAT Act begins only after the assessing authority has made out the case of evasion/avoidance and issued the notice under Section 25(1), and periods of interim stay are excluded from computation of limitation. - HELD THAT: - The court accepted the factual sequence that a survey was conducted on 25.4.2016, follow-up notices under the survey provision were issued to procure records, and only after submission of the inspection report and recommendations did the authority conclude there was a case of evasion and initiate proceedings. The learned Single Bench and this court held that the statutory limitation period for assessment would commence from the date on which the notice under Section 25(1) was issued (i.e., the date of making out the case) and not from the earlier survey or requisition notices. The court further observed that where limitation computation is affected by an interim stay of assessment proceedings passed by the court, the period during which proceedings remained stayed is to be excluded from the limitation period. [Paras 9, 10]

Proceedings were not time barred because limitation runs from the date the assessing authority made out the case and issued the Section 25(1) notice, with any period of judicial stay excluded from computation.

Notice under Section 75(1) of the VAT Act as requisition for production of records - notice under Section 25(1) of the VAT Act - registration of case under Section 61(2) for tax evasion - Notices (Form-14) issued after the survey were requisition notices under Section 75(1) for production of documents and could not be construed as notices under Section 25(1); the decision to register a case under Section 61(2) was taken only after the inspection report and recommendations. - HELD THAT: - The court examined the Form 14 notices issued after the 2016 survey and held they were intended to provide the assessee an opportunity to produce documents and to warn of consequences for non production, thus falling within the survey/inspection regime under Section 75(1). The material on record did not show that those initial notices were issued after the authority had already made out the case; rather, the authority reached the conclusion of evasion only upon receipt of the records and the inspection report, following which the Assistant Commissioner (Administration) directed registration under Section 61(2). Consequently, the earlier requisition notices could not be treated as Section 25(1) notices initiating the limitation clock. [Paras 7, 9]

Form 14 and similar post survey notices were treated as Section 75(1) production/requisition notices, not as Section 25(1) assessment notices, and the case was registered under Section 61(2) only after the inspection report and recommendation.

Final Conclusion: The letters patent appeal is dismissed; the impugned judgment upholding the vires and timing of the notices and the initiation of proceedings does not warrant interference.

Concessional inter-state purchase of High Speed Diesel Oil - Download and use of 'C' forms - Binding effect of a judicial decision in rem - Application of precedent to pending assessments

Concessional inter-state purchase of High Speed Diesel Oil - Download and use of 'C' forms - Binding effect of a judicial decision in rem - Application of precedent to pending assessments - Whether the petitioner is entitled to purchase High Speed Diesel Oil from other States on concessional rate of tax by downloading 'C' forms after introduction of GST, and whether the departmental authorities are bound to permit downloading and apply the Ramco Cements decision to similarly placed dealers and pending assessments. - HELD THAT: - The Court accepted the undisputed factual position that after introduction of GST the petitioner was prevented from downloading 'C' forms and thereby denied concessional inter-state purchases. The Court relied on the earlier single-judge decision in Ramco Cements Ltd., which allowed similar writ petitions and directed the Revenue to permit download of 'C' forms, and on the subsequent order in Southern Cotspinners Coimbatore Private Limited which held that the Ramco Cements decision is in rem and must be applied by assessing authorities to all dealers and pending assessments until stayed or reversed. In view of those binding precedents, and absent any stay or reversal of Ramco Cements, the petitioner falls within the class entitled to the benefit of that decision. The Court therefore directed the Revenue/Respondents to take necessary action forthwith to enable the petitioner (and by implication similarly placed dealers) to download 'C' forms and to apply the rationale of Ramco Cements to pending assessments, with compliance mandated within a short, specified period.

Writ petition allowed; Revenue directed to enable download of 'C' forms and apply the Ramco Cements rationale to pending assessments within five working days of receipt of the order.

Final Conclusion: The writ petition was allowed in view of binding single-judge precedent (Ramco Cements) and the subsequent direction in Southern Cotspinners that such decision operates in rem; respondents were directed to enable downloading of 'C' forms and apply the precedent to pending assessments forthwith (within five working days).

Vires of statutory provisions - validity of definition of "dealer" - doctrine of academic mootness - repeal and savings - constitutional amendment creating GST jurisdiction

Vires of statutory provisions - validity of definition of "dealer" - doctrine of academic mootness - repeal and savings - Whether the Court should adjudicate the challenge to the constitutionality and enforceability of the definition of "dealer" and the Explanation to Section 2(33)(vi) of the Tamil Nadu Value Added Tax Act, 2006, in view of repeal by enactment of GST laws. - HELD THAT: - The petition attacked the definition of "dealer" in Section 2(15)(ix) and the Explanation to Section 2(33)(vi) of the TNVAT Act on grounds of invalidity. The Court noted that Article 246A and the GST enactments brought the Central Goods and Services Tax Act, 2017 into force and that the TNVAT Act has been repealed. While Section 174 of the Central Goods and Service Tax Act contains repeal and saving provisions preserving certain rights, liabilities and proceedings, the Court found that, on the facts, the present challenge raised only an apprehension of future action under a repealed statute. Entertaining a substantive adjudication on the vires of provisions of a statute which has been repealed would be an academic exercise. The Court observed that if actionable proceedings are initiated against the petitioner under the relevant law, the petitioner remains free to raise appropriate legal challenges at that stage. Accordingly, the Court declined to decide the constitutional challenge on merits as not justiciable in the present circumstances. [Paras 8, 9]

Writ petition dismissed as the challenge to provisions of the repealed TNVAT Act would be an academic exercise; petitioner may raise appropriate defences if and when action is taken.

Final Conclusion: The petition seeking declaration of invalidity of the contested definitions in the TNVAT Act is dismissed as academic in view of repeal; no costs.

Promissory estoppel - eligibility under industrial incentive policy - approval by Competent Authority - construction and operation of a statutory policy scheme - quashing of administrative order for want of jurisdiction and reasoned application of mind - effect of procedural change and subsequent policy/legislation on accrued rights under earlier policy

Approval by Competent Authority - eligibility under industrial incentive policy - Validity of rejection of claims solely on the ground that the proposals lacked approval of the 'Competent Authority' as relied upon from a notification issued under the 2006 policy. - HELD THAT: - The Court found no dispute on petitioners' eligibility under the Bihar Industrial Incentive Policy, 2011 and recorded that the Director, Industries relied on a 2006 notification (implementing the 2006 policy) to deny benefits under the 2011 policy. The 2011 policy contains its own machinery for implementation, including Clause 14 which prescribes constitution of committees and the role of Principal Secretary/Director for giving effect to the policy. The 2006 resolution cited by the Industries Department was issued under the old policy and is not preserved or saved by the 2011 policy. Therefore rejection of claims only by reference to the 2006 stipulation, when the units were found eligible under the 2011 scheme and had approvals under the 2011 process (including SIPB recommendations and departmental actions), was arbitrary, amounted to abuse of executive power and was unlawful. The Court treated the SIPB/committee approvals and the prescribed 2011 implementation orders as sufficient for entitlement and held that further reliance on the old 'Competent Authority' formula to deny benefits lacked foundation.

Orders rejecting incentives solely for want of approval under the 2006 notification are quashed; approval under the 2011 policy and its implementing resolutions suffices for entitlements.

Construction and operation of a statutory policy scheme - promissory estoppel - Whether the State can retract from promised incentives under the Industrial Policy, 2011 once units, acting on the policy, made investments and were found eligible. - HELD THAT: - Relying on established authority and the principle that governmental notification and policy promises which induce investment cannot be retracted arbitrarily, the Court held that the State cannot deny benefits to units which fulfilled the policy conditions and were found eligible. The doctrine of promissory estoppel operates to protect petitioners who acted on the promise of the 2011 policy, particularly where the State did not challenge their eligibility and some benefits had already been disbursed. The Court observed that administrative retraction without valid legal basis or reasoned decision-making is impermissible.

State cannot deny incentives to petitioners who fulfilled policy conditions and were held eligible; denial on the impugned grounds violated promissory estoppel principle.

Effect of procedural change and subsequent policy/legislation on accrued rights under earlier policy - eligibility under industrial incentive policy - Whether change of procedure under the Bihar Industrial Investment Promotion Policy, 2016 and the Bihar Industrial Investment Promotion Act, 2016 could be invoked to deny or withhold benefits due under the 2011 policy. - HELD THAT: - The Court held that the procedure introduced by a later policy or statute cannot be used to defeat accrued rights or claims under the 2011 policy where eligibility and entitlement are governed by the 2011 scheme. The Commercial Taxes Department's plea that a changed online procedure under the 2016 scheme absolved it of liability was rejected: the administering departments must follow the payment and claim mechanism applicable to the 2011 policy in respect of claims arising thereunder, or take steps to resolve procedural issues without denying substantive entitlement.

The change in procedure under the 2016 policy/Act does not justify denial of incentives due under the 2011 policy; respondents must process and disburse payments in accordance with the 2011 scheme.

Quashing of administrative order for want of jurisdiction and reasoned application of mind - Appropriate relief and remedial direction where administrative denials were held illegal. - HELD THAT: - Having found the impugned communications and orders refusing incentives to be whimsical, lacking application of mind and bereft of reasons, the Court quashed those orders insofar as they rejected incentives under the 2011 policy. The Court directed the State (Industries Department) and Commercial Taxes Department to ensure that all incentives to which the petitioners are entitled under the 2011 policy are granted within a maximum period of three months, and prohibited resurrecting the same technicalities of approval or procedural change to delay disbursal.

Impugned rejection orders quashed; State directed to disburse all admissible incentives under the 2011 policy to the petitioners within three months.

Final Conclusion: The Court quashed the administrative rejections insofar as they denied incentives under the Bihar Industrial Incentive Policy, 2011, held that approvals under the 2011 scheme (including SIPB/committee action under Clause 14) suffice for entitlement, rejected reliance on the 2006 notification or later procedural changes to defeat those rights, and directed the State and Commercial Taxes Department to accord and disburse the incentives due to the petitioners under the 2011 policy within three months.