TaxTMI Updates e-Newsletter
Apr 07,2022

Impugned order beyond scope of show-cause notice - right to fair opportunity to reply - remand for fresh show-cause notice and reconsideration - procedural fairness in adjudicatory process

Impugned order beyond scope of show-cause notice - procedural fairness in adjudicatory process - Whether the impugned order could be sustained when it dealt with matters and made findings beyond the scope of the show-cause notice. - HELD THAT: - The Court found that the show-cause notice only alleged non-furnishing of certain documents and sought to reject the refund application on that limited ground. The final order, however, traversed minutiae of the assessee's transactions and recorded doubts about those transactions which were not foreshadowed in the notice. Having proceeded to decide issues not put to the writ-applicant and without affording a further opportunity to explain the alleged dubious transactions, the authority acted beyond the scope of the show-cause notice and failed procedural fairness. The impugned order therefore could not be sustained and was quashed on that ground. [Paras 5, 6, 7]

Impugned order quashed as it travelled beyond the scope of the show-cause notice and denied a fair opportunity to the writ-applicant to meet newly raised doubts.

Right to fair opportunity to reply - remand for fresh show-cause notice and reconsideration - What remedial course should follow after quashing the impugned order. - HELD THAT: - The Court directed that the matter be remitted to the authority which shall issue a fresh show-cause notice containing all particulars including the transactional details which the authority considers doubtful, thereby enabling the writ-applicant to file an appropriate reply. Timelines were fixed: fresh notice within fifteen days, reply within eight days of receipt, a personal hearing to be afforded, and final decision to be taken within three months. This remand was for fresh consideration and afforded an opportunity to the writ-applicant to explain the matters now sought to be relied upon. [Paras 8]

Matter remitted for issuance of a fresh show-cause notice with particulars, opportunity to reply and personal hearing, and decision to be completed within the prescribed timelines.

Final Conclusion: Writ allowed; impugned order set aside for exceeding the scope of the show-cause notice and remitted to the authority to issue a fresh detailed show-cause notice, afford reply and hearing, and decide afresh within the fixed timelines.

Opportunity of being heard - personal hearing - natural justice - refund application under Rule 92 - speaking order - audit history / audit trail

Opportunity of being heard - personal hearing - natural justice - audit history / audit trail - Impugned rejection of the refund application was vitiated for failure to grant the opportunity of personal hearing as required by the proviso to sub rule (3) of Rule 92 of the CGST Rules. - HELD THAT: - The respondent bore the onus to demonstrate that a personal hearing had been fixed. The audit history generated by the respondent did not record fixation of a hearing on the date relied upon by the respondent. Since the proviso to sub rule (3) of Rule 92 mandates that no refund application shall be rejected without giving the applicant an opportunity of being heard, the absence of evidence of a hearing amounted to breach of the principles of natural justice. The deficiency in record and the failure to show that the statutory opportunity had been granted rendered the impugned order flawed.

Impugned rejection set aside; matter remitted for fresh personal hearing and consideration in accordance with law.

Speaking order - refund application under Rule 92 - Adequacy of reasons in the impugned order and requirement of a speaking order on fresh consideration of the refund claim. - HELD THAT: - The impugned order did not state reasons articulating why the refund was inadmissible or not payable; it merely referred to the supplier being reported as 'risky' without further explanation. On fresh consideration after affording personal hearing, the respondent is required to pass a speaking order setting out the legal and factual basis for allowing or rejecting the refund claim and furnish a copy to the petitioner.

Respondent directed to hear the petitioner, pass a speaking order and supply a copy to the petitioner within the timeline specified by the Court.

Refund application under Rule 92 - Validity of the shorter time (seven days) allowed to file reply to the show cause notice under sub rule (3) of Rule 92 and the petitioner's response thereto. - HELD THAT: - Though sub rule (3) requires a fifteen day period to furnish a reply to FORM GST RFD 08, the petitioner filed its reply within the seven day period that had been afforded. The petitioner did not press any grievance in Court regarding the shorter time allowed; accordingly the Court did not grant relief on this ground. The determinative defect found was the absence of a personal hearing rather than the duration of time allowed for reply.

No relief granted on the ground of the shorter reply period as the petitioner did not complain; primary relief granted is remand for personal hearing and fresh speaking order.

Final Conclusion: Writ petition allowed in part: the rejection order dated 30.12.2020 is set aside for failure to grant the statutory opportunity of personal hearing; respondent to issue written notice within ten days, hear the petitioner on the refund claim for September, 2020, and pass a speaking order within two weeks after the personal hearing, furnishing a copy to the petitioner.

Concession of bail under Section 439 Cr.P.C. - Delay in framing of charges and stalled trial as ground for bail - Interim orders in writ petitions affecting progress of criminal trial - Parity with co-accused's grant of bail - Absence of involvement in other criminal cases - No expression on merits

Concession of bail under Section 439 Cr.P.C. - Delay in framing of charges and stalled trial as ground for bail - Interim orders in writ petitions affecting progress of criminal trial - Parity with co-accused's grant of bail - Absence of involvement in other criminal cases - Whether the petitioner should be granted bail in Complaint Case No. COMA-2015/GST/PNP/01 in view of the stalled trial, delay in framing of charges, and other attendant facts. - HELD THAT: - The Court noted that the petitioner has been in custody since 12.09.2020, that challan was presented but charges have not been framed and the trial is not proceeding due to interim orders passed by a Division Bench in related writ petitions. The Court observed that a co-accused, said to be the alleged kingpin, has been granted bail by a Coordinate Bench and that the petitioner is not involved in any other criminal case. Having considered these facts, including the prolonged custody and likelihood that the trial will take considerable time to conclude, the Court held that continued incarceration would not serve any useful purpose. The Court expressly clarified that the order granting bail does not express any view on the merits of the case.

Petition allowed; petitioner admitted to bail to the satisfaction of the trial Court/Duty Magistrate, without any expression on merits.

Final Conclusion: Bail granted under Section 439 Cr.P.C. because charges are not framed and the trial is stalled by interim litigation; continued custody would be unproductive, while observations do not decide merits.

Reopening of assessment - reasons to believe - sanction for issuance of notice - application of mind by sanctioning authority - prima facie material for reopening - authentication of documents under Section 282A

Sanction for issuance of notice - application of mind by sanctioning authority - authentication of documents under Section 282A - Validity of notice under Section 148 insofar as sanction/approval under Section 151 was concerned (timing, application of mind and authentication). - HELD THAT: - The Court examined whether prior sanction under Section 151 was accorded before issuance of notice under Section 148 and whether the approving authority applied its mind or accorded approval mechanically. Respondents placed on record ITBA portal screen-shot showing 'print approval' with a DIN dated 31.3.2021 and supplied the sanction order bearing the same DIN. In view of the portal entry and the sanction document, the Court held that prima facie there was sanction/approval before issuance of notice and repelled the petitioners' challenge that no sanction existed. As to contention of non-application of mind, the Court observed that the wording 'fit case' in the sanction must be tested along with the reasons recorded by the Assessing Officer and the record of proceedings; mere allegation of mechanical approval at this stage does not suffice to invalidate issuance of notice and petitioners have opportunity to raise such grounds before the assessing and appellate authorities. With respect to absence of digital signature or explicit date on the sanction, the Court relied on Section 282A which deems a document authenticated if name and office of designated authority is printed/stamped/written, and noted the sanction bore a DIN and complied with office authentication and the Departmental procedures (Notification No.4/2017), thus rejecting the contention that lack of digital signature rendered the sanction invalid. [Paras 12, 14, 15, 20]

Sanction under Section 151 was prima facie accorded before issuance of notice; challenge based on timing, lack of application of mind or absence of digital signature is repelled.

Reopening of assessment - reasons to believe - prima facie material for reopening - Whether there was prima facie material available with the Assessing Officer to initiate reassessment proceedings under Sections 147/148. - HELD THAT: - The Court considered the reasons recorded by the Assessing Officer which relied on suspicious transaction reports, summons and statements obtained during survey and Section 131(1A) proceedings indicating bogus purchase bills and routing of funds. Applying settled principles that at the stage of issuance of notice the court's role is limited to whether there was prima facie material to form a reason to believe (not to probe sufficiency or correctness), the Court found that the Assessing Officer had recorded elaborated reasons and there was prima facie material to reopen the assessments. The Court referred to relevant Supreme Court authorities holding that fresh information or information exposing untruthfulness of previously disclosed facts can justify reopening, and that sufficiency of material is to be examined subsequently by the assessing/appellate authorities. [Paras 16, 17, 18]

There was prima facie material to justify initiation of reassessment proceedings; challenge to reopening on merits is premature.

Final Conclusion: Petitions challenging notices under Section 148 for AY 2016-17 dismissed; court finds prima facie sanction under Section 151 and prima facie material for reopening, leaving factual and merits issues to assessment and appellate proceedings.

Service of notice by electronic means under Rule 127 - system-generated communications - e-mail address registered in the Income Tax Portal - violation of principles of natural justice for non service of notice - remand for fresh assessment after hearing

Service of notice by electronic means under Rule 127 - system-generated communications - e-mail address registered in the Income Tax Portal - violation of principles of natural justice for non service of notice - Whether the assessment order (Ext.P6) could stand where notices were sent to an e mail id different from the primary/secondary e mail ids shown in the taxpayer's Income Tax Portal, resulting in denial of opportunity to be heard. - HELD THAT: - The Court examined Rule 127 which permits service of communications by electronic means to specified e mail addresses and noted that the petitioner produced a copy of personal details in the Income Tax Portal showing primary and secondary e mail ids. The notices and assessment order were, however, sent to an e mail id of the erstwhile auditors and not to the e mail ids recorded in the portal. The petitioner did not receive the notices and therefore had no opportunity to respond. While the Court did not determine in exhaustive detail which party was at fault for the non service, it found that, on the facts before it, the absence of effective service and consequent failure to provide the petitioner an opportunity to be heard amounted to a breach of the principles of natural justice. Consequently the assessment order founded on those notices could not be sustained.

Ext.P6 assessment order set aside on grounds of defective service and denial of opportunity to be heard.

Remand for fresh assessment after hearing - opportunity to be heard - What remedial course should be adopted after setting aside the assessment order. - HELD THAT: - To meet the ends of justice, the Court directed that the petitioner be given a limited opportunity to submit responses to Ext.P3 and subsequent notices. The petitioner was ordered to furnish its response within two weeks of receipt of the judgment, and the assessing officer was directed to consider the petitioner's submissions and pass a fresh assessment order within one month thereafter after hearing the petitioner. This is a remand for fresh consideration and decision on the notices after affording the petitioner an effective hearing.

Assessment remitted to the assessing officer for fresh adjudication after hearing the petitioner; timelines specified for filing response and disposal.

Final Conclusion: Writ petition allowed: the assessment order (Ext.P6) set aside for defective service and denial of opportunity to be heard; matter remitted to the assessing officer for fresh consideration after the petitioner files responses within the time prescribed; no order as to costs.

Violation of principles of natural justice - faceless assessment and compliance with principles of natural justice - consideration of reply to draft assessment order in faceless proceedings - quashing and remand for fresh consideration - right to be heard / personal hearing in assessment proceedings

Consideration of reply to draft assessment order in faceless proceedings - violation of principles of natural justice - Impugned assessment order was vitiated because the Assessing Officer proceeded on the erroneous premise that the assessee had not filed a reply to the draft show cause notice and therefore failed to consider the reply. - HELD THAT: - The Court found on the record, including the Revenue's own averments, that the assessee had filed a detailed reply by way of an e-proceeding acknowledgment dated 26.07.2021 to the draft show cause notice issued on 14.07.2021. Despite this, the Assessing Officer's assessment order records that there was no response from the assessee. This demonstrates a failure to consider the filed reply and a consequent breach of the principles of natural justice in faceless assessment proceedings where responses to the draft order must be taken into account before finalising assessment. The High Court expressly refrained from expressing any opinion on the merits of the additions, limiting interference to the procedural defect of non-consideration and denial of opportunity to be heard. [Paras 11]

Assessment order quashed for failure to consider the assessee's reply and for breach of principles of natural justice.

Quashing and remand for fresh consideration - right to be heard / personal hearing in assessment proceedings - Remittal for fresh consideration with directions to consider the reply and hear the assessee before passing a fresh assessment order. - HELD THAT: - Having quashed the impugned order on procedural grounds, the Court remitted the matter to the Assessing Officer for a fresh exercise of assessment. The Assessing Officer is directed to take into consideration the reply already filed by the assessee and to afford the assessee an opportunity of being heard (including personal hearing) prior to passing any final order. The Court limited its interference to this procedural remit and clarified that it has not adjudicated the merits of the proposed additions. The Court further directed that the fresh exercise be completed at the earliest and in any event within two months from receipt of the order. [Paras 12]

Matter remitted to the Assessing Officer for fresh consideration; assessee's reply to be considered and the assessee to be heard; fresh exercise to be completed within two months.

Final Conclusion: Writ petition allowed: the assessment order dated 30.07.2021 for A.Y. 2018-19 is quashed for breach of natural justice for non-consideration of the assessee's reply; matter remitted to the Assessing Officer to consider the filed reply and hear the assessee, with the fresh assessment to be completed within two months.

Penalty under section 271(1)(b) for non-compliance of notice - Service of notice and change of address - Reasonable cause for non-compliance - Best judgment assessment under section 144

Penalty under section 271(1)(b) for non-compliance of notice - Service of notice and change of address - Reasonable cause for non-compliance - Whether the penalty imposed under section 271(1)(b) for non-compliance of notice under section 142(1) is sustainable where the assessee did not receive the notices due to change of address and furnished documentary evidence of the new address - HELD THAT: - The Tribunal held that section 271(1)(b) applies to specified defaults including non-compliance with notices under section 142(1). The Assessing Officer imposed penalty for non-compliance after passing an ex parte assessment under section 144 because notices issued were not complied with. The assessee produced documentary evidence (Aadhaar and an affidavit) showing change of address and explained that notices were sent to the previous employer's address and therefore were not received. Applying the reasonable-cause principle, the Tribunal found the assessee's explanation to be bona fide and reasonable in the circumstances and noted that the assessee had furnished the current address in correspondence. On this basis the Tribunal concluded that imposition of penalty for non-compliance was not justified and the order of the CIT(A) upholding the penalty was set aside. [Paras 9]

Penalty imposed under section 271(1)(b) for non-compliance of notice under section 142(1) deleted.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(A)'s order and deleted the penalty under section 271(1)(b) for AY 2008-09 on the ground that the assessee established a bona fide change of address and reasonable cause for non-receipt of the notices.

Revisionary jurisdiction under Section 263 - Erroneous and prejudicial to the interests of Revenue - Scope of inquiry and application of mind by the Assessing Officer - Requirement of a valid and specific show-cause notice under Section 263 - Invocation of Explanation 2 to Section 263 in cases of inadequacy of inquiry - Cryptic or brief assessment order not ipso facto erroneous

Revisionary jurisdiction under Section 263 - Erroneous and prejudicial to the interests of Revenue - Scope of inquiry and application of mind by the Assessing Officer - Invocation of Explanation 2 to Section 263 in cases of inadequacy of inquiry - Cryptic or brief assessment order not ipso facto erroneous - Validity of the PCIT's exercise of jurisdiction under Section 263 to set aside the AO's assessment for AY 2015-16 - HELD THAT: - The Tribunal held that powers under Section 263 are supervisory and require satisfaction of twin conditions: the order must be erroneous and, by reason of that error, prejudicial to the revenue. The AO's assessment arose from a limited scrutiny under CASS; the AO issued notices under sections 143(2) and 142(1), raised queries and the assessee furnished detailed replies (computation of capital gains, purchase details, PANs, bank statements, broker notes, DMAT records and other evidences) on multiple dates. The AO examined these materials, applied his mind and accepted the short-term capital gains as correctly computed - a view the Tribunal characterised as a possible and sustainable one in law. The PCIT's observations that inquiries were lacking or that the AO's order was cryptic were rejected: the Tribunal emphasised that a brief or cryptic order does not, by itself, establish non-application of mind where the record of proceedings shows inquiries and responses. Explanation 2 to Section 263 permits interference only in very gross cases of inadequacy of inquiry or where inquiry was mandatorily required by the record and was not conducted; that threshold was not met. The PCIT's tentative remark that the scrip was "apparently" a penny stock demonstrated lack of a conclusive adverse finding and the Revenue did not demonstrate that the AO's view was wholly unsustainable in law. On these grounds the Tribunal concluded that the conditions for valid exercise of revisionary jurisdiction under Section 263 were not satisfied. [Paras 20, 21, 22, 25, 26]

PCIT's invocation of Section 263 to set aside the AO's assessment was unjustified; the order passed by the AO could not be branded erroneous and prejudicial to the revenue and the PCIT's order was set aside.

Requirement of a valid and specific show-cause notice under Section 263 - Revisionary jurisdiction under Section 263 - Validity of the show-cause notices issued by the PCIT under Section 263 - HELD THAT: - The Tribunal examined the notices issued by PCIT and found the notice dated 24.02.2021 to be general and vague, asking the assessee to produce supporting documents without specifying the reasons or the exact errors alleged in the assessment order. Section 263 requires that the assessee be given an opportunity of being heard and that the reason for exercising revisional jurisdiction be communicated; precedents require the notice to state the grounds which would justify withdrawal of the order. The Tribunal held that issuance of a valid notice is not a mere procedural formality and that a vague notice failing to indicate the alleged error is liable to be quashed. This deficiency reinforced the conclusion that the revisionary proceedings were not validly initiated. [Paras 23, 24]

The first show-cause notice was vague and inadequate for invoking revisional jurisdiction under Section 263; the defect in notice contributed to invalidating the PCIT's action.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the PCIT's order under Section 263 and held that the conditions for valid exercise of revisionary jurisdiction were not satisfied (the AO had applied his mind and taken a possible view; and the show-cause notice was vague), accordingly restoring the assessment order for AY 2015-16.

Revision under section 263 - Erroneous and prejudicial to the interests of the revenue - Disallowance under section 40(a)(ia) for failure to deduct TDS - Requirement to deduct TDS under section 194A irrespective of deductee's taxability - Claim of exemption under section 54EC and qualification of specified asset - Assessing Officer's failure to apply mind / non-examination of claim

Disallowance under section 40(a)(ia) for failure to deduct TDS - Requirement to deduct TDS under section 194A irrespective of deductee's taxability - Whether the Principal Commissioner was justified in directing disallowance of interest paid for non-deduction of TDS under section 40(a)(ia) by invoking revisionary powers under section 263. - HELD THAT: - The Tribunal upheld the Principal Commissioner's conclusion that the Assessing Officer had failed to disallow interest paid aggregating Rs. 2,85,632 despite audit report noting non-deduction of tax at source. The court recorded that the payer's obligation to deduct under the relevant TDS provisions is not dependent on whether the payee has taxable income; non-deduction attracts the disallowance provision. The Assessing Officer did not examine or disallow the interest in the assessment order, which the Principal Commissioner found to be an error prejudicial to revenue. Reliance was placed on the settled principle that absence of enquiry or non-application of mind by the Assessing Officer renders the order amenable to revision under section 263. Applying these principles, the Tribunal held the revision was properly invoked and affirmed the direction to the Assessing Officer to make the disallowance under section 40(a)(ia). [Paras 13, 14, 17]

The direction to disallow the interest under section 40(a)(ia) on account of non-deduction of TDS is sustained and the matter is remitted to the Assessing Officer for fresh assessment in accordance with that direction.

Claim of exemption under section 54EC and qualification of specified asset - Assessing Officer's failure to apply mind / non-examination of claim - Revision under section 263 - Whether the Principal Commissioner was justified in directing disallowance of the assessee's claim of exemption under section 54EC in respect of STDRs with State Bank of India by exercising powers under section 263. - HELD THAT: - The Tribunal agreed with the Principal Commissioner that the Assessing Officer allowed the section 54EC exemption without adequate examination of whether the STDR produced by the assessee qualified as a 'long term specified asset' within the meaning of section 54EC. The Principal Commissioner found no proper application of mind in the assessment order and, after giving the assessee an opportunity to be heard, directed that the claim be disallowed and the assessment modified. The Tribunal relied on established authority holding that where an Assessing Officer has not applied his mind or made no enquiry before allowing a claim, the revisional jurisdiction under section 263 is properly invoked. On that basis the Tribunal held the revision and the directions to the Assessing Officer to disallow the 54EC claim with respect to the STDR were valid. [Paras 13, 14, 17]

The direction to the Assessing Officer to examine and disallow the claim of deduction under section 54EC in respect of the STDR, and to pass fresh assessment accordingly, is upheld.

Final Conclusion: The Tribunal dismissed the assessee's appeal, upholding the Principal Commissioner's exercise of revisionary jurisdiction under section 263 to direct the Assessing Officer to disallow interest for non-deduction of TDS under section 40(a)(ia) and to disallow the claimed exemption under section 54EC in respect of the STDR, and remitted the matter to the Assessing Officer for fresh assessment in accordance with those directions.

Revision under section 263 - prejudicial to the interest of the revenue - allowability of donation to another trust - application of section 13(2) - denial of exemption under section 11 - Explanation (1)(c) of section 263(1) - two views possible doctrine

Allowability of donation to another trust - denial of exemption under section 11 - application of section 13(2) - prejudicial to the interest of the revenue - Whether the assessment order was erroneous insofar as prejudicial to the revenue because the Assessing Officer allowed a donation to another trust while denying exemption under section 11 after invoking section 13(2). - HELD THAT: - The Tribunal found that the Assessing Officer held that the assessee had contravened section 13(2) by advancing funds to another trust where a common trustee existed and consequently denied all exemptions under section 11, adding back the entire surplus. Despite that finding, the assessment order also allowed a claim of donation (part of expenses) to the other trust, which was directly inconsistent with the AO's own conclusion that exemption under section 11 was not available. That contradiction rendered the assessment order erroneous insofar as it was prejudicial to the revenue. However, the question of the ultimate allowability of the donation is contingent on the final outcome of the pending appeal on denial of exemption under section 11; hence the Tribunal did not decide the merits of the donation claim but directed reconsideration. The Tribunal therefore endorsed the Commissioner's view of error in the assessment but modified the relief by remitting the specific issue of the donation's allowability to the Assessing Officer for fresh independent adjudication rather than ordering a de novo reassessment. [Paras 7, 8, 10]

Assessment was erroneous insofar as it allowed the donation despite denying section 11 exemption; the matter of allowability of the donation is remitted to the Assessing Officer for fresh consideration.

Revision under section 263 - Explanation (1)(c) of section 263(1) - two views possible doctrine - Whether the Commissioner could invoke revision under section 263 while the related question (denial of exemption under section 11) was pending in appeal before the CIT(A). - HELD THAT: - The Tribunal observed that Explanation (1)(c) to section 263(1) permits the Commissioner to exercise revisional jurisdiction in respect of matters that have not been considered and decided in an appeal. Where the AO had allowed the donation without examining its consistency with his own finding that the assessee was not entitled to section 11 exemption, that aspect could not be treated as merely pending in appeal for the purposes of ousting the Commissioner's jurisdiction. The Tribunal therefore rejected the assessee's contention that pendency of appeal before the CIT(A) precluded invocation of section 263 in the circumstances of the case. At the same time, the Tribunal clarified that it was not expressing any final view on the substantive question of denial of exemption under section 11 or on the allowability of the donation. [Paras 9]

The Commissioner was entitled to invoke section 263 in respect of matters not considered and decided in appeal; the objection based on pendency before the CIT(A) was overruled.

Final Conclusion: The appeal is partly allowed: the Tribunal upholds that the assessment was erroneous insofar as it allowed a donation while denying section 11 exemption, but instead of directing de novo assessment it remits the specific issue of allowability of the donation to the Assessing Officer for fresh consideration; the Commissioner's invocation of revisionary jurisdiction under section 263 was held to be permissible notwithstanding the pendency of related appeal.

Ad-hoc disallowance - Section 37(1) - allowability of business expenditure - Burden of proof on the assessee to produce genuine and satisfactory proof - Onus shifts to the revenue to negativate deduction by clear findings - Disallowance cannot be made on surmise or conjecture - Comparative period adjustment in assessing abnormal increases in expenses

Ad-hoc disallowance - Disallowance cannot be made on surmise or conjecture - Comparative period adjustment in assessing abnormal increases in expenses - Validity of the ad-hoc disallowance of freight expenses made by the Assessing Officer and confirmed by the CIT(A). - HELD THAT: - The Tribunal found that neither the AO nor the CIT(A) specified vouchers, amounts or particular defects and did not place any deprecative material on record to show that any part of the freight expenditure was bogus, fictitious or not incurred wholly and exclusively for business. The AO compared figures without adjusting for unequal periods of operation and applied an unexplained percentage disallowance. The Court held there is no statutory authority for arriving at ad-hoc disallowances without specific findings and rationale; therefore such a disallowance founded on surmise and conjecture is not tenable. The Tribunal relied on the need for adequate, specific findings before denying expenditure and on authority holding that adhoc deletions without pointing to particular vouchers are legally unsustainable. [Paras 6, 7, 8, 13, 14]

The ad-hoc disallowance of freight charges is set aside and directed to be deleted in entirety.

Section 37(1) - allowability of business expenditure - Burden of proof on the assessee to produce genuine and satisfactory proof - Onus shifts to the revenue to negativate deduction by clear findings - Legal burden and evidentiary standard for claiming and disputing business expenditure under Section 37(1). - HELD THAT: - The Tribunal explained that where expenditure is debited to the profit & loss account and claimed in the return, the primary burden lies on the assessee to substantiate deductibility by producing genuine and satisfactory proof and reasonable explanation. Once this is done, the burden shifts to the revenue to negativate the claim by placing clear, specific findings and deprecative material to show the expenditure fails the Section 37(1) litmus test. Absent such negating findings, the AO is precluded from making percentage disallowances. The Tribunal cited precedent supporting the assessee's primary onus and reiterated that revenue must not rely on conjecture but on recorded reasons to disallow expenses. [Paras 9, 10, 11, 12]

Assessee's production of books, vouchers and explanations having not been negatived by specific findings, the claimed freight expenditure stands allowable; revenue failed to discharge its onus.

Final Conclusion: The appeal is allowed; the ad-hoc disallowance of freight charges is deleted and the assessment/order of the CIT(A) is set aside for AY 2012-2013.

Revision under section 263 - Erroneous and prejudicial to the interest of the Revenue - Deduction under section 80P(2)(d) - Assessing Officer's view as a reasonable and possible view - When two views are possible Commissioner cannot invoke section 263 - Binding effect of co-ordinate bench precedent

Revision under section 263 - Erroneous and prejudicial to the interest of the Revenue - Assessing Officer's view as a reasonable and possible view - When two views are possible Commissioner cannot invoke section 263 - Validity of exercise of jurisdiction under section 263 where assessing officer passed assessment after making enquiries and did not allow any erroneous claim. - HELD THAT: - The Tribunal found on the facts that the assessee had not claimed the deduction in respect of the disputed interest amount and that the Assessing Officer had made enquiries during assessment and addressed the issue before passing the order. Relying on the principle that where the Assessing Officer has made full enquiry and taken a reasonable and possible view the Commissioner cannot substitute his own view by invoking section 263, the Tribunal held that the condition of the order being "erroneous" was not satisfied. In these circumstances the requirement that the order be both erroneous and prejudicial to the interest of the Revenue under section 263 was not met and revision could not be sustained.

Order under section 263 quashed as the assessing officer had examined the issue and taken a permissible view; the revision was not justified.

Deduction under section 80P(2)(d) - Assessing Officer's view as a reasonable and possible view - Binding effect of co-ordinate bench precedent - Whether interest received from a co-operative bank qualifies for deduction under section 80P(2)(d). - HELD THAT: - The Tribunal noted precedents of the co-ordinate Bench and relevant High Court decisions holding that interest earned by a co-operative society from deposits with a co-operative bank is eligible for deduction under section 80P(2)(d). It observed that even assuming the deduction had been claimed, the Assessing Officer's allowance was consistent with those decisions and therefore constituted a tenable view. Having regard to binding co-ordinate-bench authority on the identical issue, the Tribunal held that the assessing officer's order could not be characterised as erroneous for the purposes of section 263.

Deduction in respect of interest from co-operative bank is allowable under section 80P(2)(d); assessing officer's view was tenable and not susceptible to reversal under section 263.

Final Conclusion: The appeal is allowed: the order passed by the Principal Commissioner under section 263 is quashed because the assessing officer had examined the issue and taken a reasonable view, and co-ordinate-bench precedent supports allowability of deduction under section 80P(2)(d) for interest from cooperative banks.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - requirement to specify the limb of Section 271(1)(c) in the statutory notice issued under Section 274 - penalty proceedings must stand on their own; assessment order cannot cure a defective penalty notice - non-application of mind in framing penalty notice vitiates penalty proceedings - condonation of delay where sufficient cause is shown

Condonation of delay where sufficient cause is shown - Section 253(5) - admission of appeal/C.O. beyond limitation where sufficient cause exists - Whether the delay in filing the Cross Objections should be condoned and the Cross Objections admitted. - HELD THAT: - The Tribunal applied the established principle that 'sufficient cause' is an elastic concept to be liberally construed so as to sub-serve substantial justice and avoid defeating meritorious matters at the threshold. The assessee explained that the effective delay, excluding the period covered by the Supreme Court's extension of limitation, was 32 days and that the delay arose from bona fide legal advice and circumstances beyond its control. There was no finding of culpable negligence or mala fides. In exercise of powers under the relevant provision permitting admission of appeals beyond limitation upon sufficient cause being shown, the Tribunal found the explanation satisfactory and condoned the delay, admitting the Cross Objections for adjudication. [Paras 4, 5, 6]

Delay in filing the Cross Objections is condoned and the Cross Objections are admitted.

Requirement to specify the limb of Section 271(1)(c) in the statutory notice issued under Section 274 - penalty proceedings must stand on their own; assessment order cannot cure a defective penalty notice - non-application of mind in framing penalty notice vitiates penalty proceedings - penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Whether the penalty orders under section 271(1)(c) for A.Y. 2012-13 and A.Y. 2013-14 are sustainable where the statutory notices did not strike out the irrelevant limb (concealment or furnishing inaccurate particulars). - HELD THAT: - The Tribunal examined the penalty notices and found that the Assessing Officer did not strike out the irrelevant limb so as to indicate whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars. The Tribunal reiterated the principle that the two limbs of section 271(1)(c) are distinct and a penal notice must clearly inform the assessee of the specific charge so that an informed response can be made; a generic omnibus notice suffers from vagueness. The Tribunal further held that assessment proceedings cannot cure a defective statutory notice under section 274 and that such non-application of mind in framing the notice vitiates the penalty proceedings. Reliance was placed on earlier coordinate bench and High Court authority to the same effect. Applying that reasoning to the present years, the Tribunal quashed the penalty orders and allowed the assessee's Cross Objections, rendering the revenue appeals infructuous. [Paras 7, 8, 9, 10, 11]

Penalties under section 271(1)(c) for A.Y. 2012-13 and A.Y. 2013-14 are quashed for failure to specify the relevant limb in the statutory notices; Cross Objections allowed and revenue appeals dismissed as infructuous.

Final Conclusion: The Tribunal condoned the delay in filing the Cross Objections and, on the merits, quashed the penalty orders for A.Y. 2012-13 and A.Y. 2013-14 because the statutory notices under section 274 did not specify which limb of section 271(1)(c) was invoked; Cross Objections allowed and revenue appeals dismissed.

Allowability of employee's contribution to PF and ESI under section 36(1)(va) - interaction of section 43B with deductions under section 36(1)(va) - prospective operation of the Finance Act, 2021 amendment to section 36(1)(va) and section 43B - condonation of delay and sufficient cause under section 5 of the Limitation Act

Condonation of delay and sufficient cause under section 5 of the Limitation Act - Application for condonation of two days' delay in filing the appeal - HELD THAT: - The Tribunal found that the assessee attempted to file the appeal on 29-12-2021 but was prevented by a technical fault on the ITAT e-filing portal, filed online successfully on 30-12-2021 and submitted hard copy on 31-12-2021. There was no mala fide or deliberate delay. Applying the principle of 'sufficient cause' and the liberality endorsed by the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji, the Tribunal held that the delay was occasioned by reasons beyond the assessee's control and merited condonation to secure substantial justice. [Paras 4]

Application for condonation of delay allowed and appeal admitted despite two days' delay.

Allowability of employee's contribution to PF and ESI under section 36(1)(va) - interaction of section 43B with deductions under section 36(1)(va) - prospective operation of the Finance Act, 2021 amendment to section 36(1)(va) and section 43B - Whether employees' contributions to PF and ESI deposited after statutory due date but before filing return under section 139(1) are allowable for AY 2019-20 - HELD THAT: - The Tribunal recorded that it is undisputed the assessee deposited employees' contributions to PF and ESI before the due date for filing the return under section 139(1) for AY 2019-20. Prior to the Finance Act, 2021 amendment, binding decisions of the Rajasthan High Court and several Co-ordinate Benches of the Tribunal held such deposits made before filing the return are allowable and not disallowable under section 43B read with section 36(1)(va). The Tribunal examined the explanatory memorandum to the Finance Act, 2021 which expressly states the amendments take effect from 1 April 2021 and apply to AY 2021-22 onwards. In view of the prospective operation of the amendment and binding precedent of the jurisdictional High Court and Coordinate Benches, the Tribunal held the amended provisions are not applicable to AY 2019-20 and directed deletion of the disallowance made by CPC/Assessing Officer. [Paras 5, 6, 7]

Addition disallowing employees' contribution to PF and ESI (deposited before filing return) deleted; appeal allowed on this ground.

Final Conclusion: The Tribunal allowed the assessee's application for condonation of delay and, on the merits, set aside the disallowance of employees' PF and ESI contributions deposited before filing the return for AY 2019-20, holding the Finance Act, 2021 amendment operates prospectively from AY 2021-22 and is not applicable to the assessment year under consideration.

Revision under Section 263 - order erroneous and prejudicial to the interests of revenue - Applicability of Section 50C to valuation adopted by sub-registrar for computation of short-term capital gains - Characterisation of income: business income versus short-term capital gains - Non-application of mind / mechanical acceptance of assessee's claim in scrutiny assessment (CASS) - Requirement of speaking order, verification and enquiries in scrutiny assessments - Use of assessment record and audit observations in forming opinion under Section 263

Non-application of mind / mechanical acceptance of assessee's claim in scrutiny assessment (CASS) - Characterisation of income: business income versus short-term capital gains - Requirement of speaking order, verification and enquiries in scrutiny assessments - Whether the order passed under Section 143(3) treating the receipts as business income (instead of short-term capital gains) was erroneous and prejudicial to the interests of revenue so as to justify revision under Section 263. - HELD THAT: - The Tribunal upheld the finding of the Pr. CIT that the AO accepted the assessee's changed characterisation of receipts as business income without adequate enquiry, verification or discussion in the assessment order, notwithstanding that the return (ITR-2) and earlier assessment year records showed declaration as capital gains and that the case was selected under CASS to examine capital gains. The AO did not record requisite enquiries or rationale for treating the declared capital gains as business receipts, and the assessment order is therefore non-speaking and amounted to mechanical acceptance of the assessee's submissions. Audit observations and records available to the Commissioner may be considered in forming an independent opinion under Section 263; those observations here supplemented the conclusion that the assessment was erroneous and prejudicial. On these materials the Pr. CIT rightly concluded that the assessment was erroneous and prejudicial to revenue. [Paras 9, 10, 11, 12]

The order under Section 143(3) was held to be erroneous and prejudicial to the interests of revenue for want of necessary enquiries and application of mind; the invocation of revision under Section 263 was sustained and the assessment order set aside on this ground.

Applicability of Section 50C to valuation adopted by sub-registrar for computation of short-term capital gains - Revision under Section 263 - order erroneous and prejudicial to the interests of revenue - Whether the matter should be remitted to the AO for fresh adjudication including application of Section 50C for computation of short-term capital gains. - HELD THAT: - Having held the assessment to be erroneous and prejudicial, the Pr. CIT set aside the assessment and directed de novo assessment. The Tribunal sustained that direction: the AO is to re-open the scrutiny, examine the returns and audited books, consider earlier assessment-year records indicating sale of investments, and apply the provisions of Section 50C for computation of short-term capital gains where applicable. The assessee is to be given opportunity of being heard and the AO to make necessary enquiries, examination and verification before finalising the assessment afresh. [Paras 10, 11]

Assessment set aside and remanded to the AO for fresh assessment in accordance with law, including consideration and, if applicable, invocation of Section 50C for computing short-term capital gains, after making necessary enquiries and affording the assessee an opportunity.

Final Conclusion: The Tribunal dismissed the assessee's appeal, sustained the Pr. CIT's exercise of power under Section 263, held the assessment under Section 143(3) to be erroneous and prejudicial for lack of enquiry and application of mind, and directed de novo reassessment by the AO with specific direction to consider the applicability of Section 50C while affording the assessee an opportunity of being heard.

Assumption of jurisdiction under Section 147/148 - reason to believe - application of the first proviso to Section 147 regarding reassessment after four years - requirement of minimum inquiry upon receipt of investigational information - accommodation entries / bogus billing - double addition and applicability of Section 68

Assumption of jurisdiction under Section 147/148 - reason to believe - application of the first proviso to Section 147 regarding reassessment after four years - requirement of minimum inquiry upon receipt of investigational information - Validity of the Assessing Officer's reopening of the completed assessment by issuing notice under Section 148/147 - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the reassessment notice was without jurisdiction. The reasons recorded by the Assessing Officer were founded on advisory information received from the investigative wing (DDIT (Inv.)) which suggested possible accommodation entries but expressly advised further enquiries. The Assessing Officer issued the Section 148 notice shortly after receipt of that information without conducting the suggested or any independent preliminary inquiry to form a definite prima facie belief of escapement of income. Where information is tinged with suspicion and expressly calls for verification, an Assessing Officer must undertake minimal inquiries before forming the statutory reason to believe. Further, because the original assessment under Section 143(3) was completed and the reassessment was initiated after four years, the conditions of the first proviso to Section 147 applied; the Assessing Officer also failed to show that the alleged escapement was due to the assessee's failure to disclose fully and truly all material facts. The reasons recorded did not identify any specific non-disclosure and thus did not satisfy the twin conditions required by the proviso. On these grounds the notice under Section 148/147 was held to be non est and rightly quashed by the CIT(A). [Paras 9, 10]

Reopening of assessment set aside for lack of valid reason to believe and failure to meet the requirements of the first proviso to Section 147.

Accommodation entries / bogus billing - double addition and applicability of Section 68 - Legitimacy of the addition made under Section 68 by treating part of the declared turnover as unexplained cash credits - HELD THAT: - On merits the Tribunal declined to interfere with the CIT(A)'s deletion of the addition. The Assessing Officer had accepted the turnover in the original assessment but in reassessment treated a portion of that same turnover as unexplained receipts and added it again under Section 68, effectively producing a double addition. The CIT(A) found that if sales were to be treated as bogus the corresponding goods would reflect in closing stock and the Assessing Officer had not pointed to any discrepancy in purchases; having accepted purchases and turnover in original assessment, it was unsustainable to make an alternate addition under Section 68 without reconciling the accounting and evidentiary position. The Tribunal found the CIT(A)'s reasoning sound and saw the Assessing Officer's action as manifestly unsustainable in law. [Paras 11, 12]

Addition under Section 68 deleted as constituting an impermissible double addition and unsupported on merits.

Final Conclusion: The Revenue's appeal is dismissed: the reopening under Section 147/148 was invalid for want of a proper reason to believe and non-compliance with the first proviso to Section 147, and the addition under Section 68 was deleted as an unsustainable double addition.

Revisionary power under section 263 - Limitation and effect of communication of order - Doctrine of merger in revision proceedings - Ad hoc/estimated disallowance and implied rejection of books of account - Obligation to consider written reply to show cause notice - Remand for reassessment with direction to examine evidence

Limitation and effect of communication of order - Doctrine of merger in revision proceedings - Grounds challenging the validity of the revisionary order on limitation and merger were previously adjudicated and are not to be re opened. - HELD THAT: - The Tribunal observed that Grounds Nos. 1 to 3 of the assessee, which challenged the section 263 order as time barred and raised related communication/contention, had already been adjudicated by the Tribunal in the form of the assessee's additional ground and were dismissed by its earlier order. For the doctrine of merger, the CIT relied on Explanation (c) to section 261(1) to show that matters not considered in the first appeal remained open to revision; the Tribunal accepted that the issues raised in the show cause were not the subject matter of the earlier appeal and hence the doctrine of merger did not preclude revision. Consequently, those grounds need not be re adjudicated in the recalled proceeding. [Paras 8]

Grounds 1-3 already adjudicated earlier and are not to be re adjudicated; doctrine of merger does not bar revision in respect of matters not decided in appeal.

Ad hoc/estimated disallowance and implied rejection of books of account - An ad hoc 10% disallowance of expenses by the Assessing Officer did not amount to rejection of the assessee's books of account and did not preclude further enquiry or additions on the same basis. - HELD THAT: - The Tribunal examined the assessment order and found that the AO had made a 10% disallowance because the assessee failed to produce bills and vouchers; this was an estimation of particular claims and not a formal rejection of the books of account. Reliance placed by the assessee on authorities holding that estimation implies rejection was held not applicable on the facts, since the AO had not rejected the accounts. Accordingly, the contention that no further addition could be made on the basis of the same accounts was rejected. [Paras 13]

The AO's ad hoc disallowance did not amount to rejection of books of account; the contention that no further addition could be made is dismissed.

Obligation to consider written reply to show cause notice - Revisionary power under section 263 - The Commissioner did give consideration to the assessee's written reply to the show cause notice under section 263 and reasonably concluded that the explanations were not specific; the challenge that the reply was not judicially considered is unsustainable. - HELD THAT: - On reading the revision order, the Tribunal found that the CIT had noted the assessee's submissions and specifically observed that the assessee had not furnished specific explanations addressing the issues raised in the show cause. The Tribunal therefore concluded that the legal contention that the reply was not considered and that the section 263 order was void ab initio was without merit. [Paras 14]

The CIT did consider the assessee's reply and lawfully set aside the assessment for further examination; the plea of non consideration is dismissed.

Remand for reassessment with direction to examine evidence - The matter was set aside and restored to the file of the Assessing Officer for reassessment, with a direction to consider the assessee's explanations and documentary evidence and to afford opportunity of hearing. - HELD THAT: - In the interest of justice the Tribunal directed that on reassessment pursuant to the section 263 order the AO shall examine, verify and enquire into the issues raised in the show cause notice and take into account the explanations and relevant documentary evidence; the CIT(A) was also to consider these matters in any ensuing first appeal. The direction was made to ensure that the assessee is afforded a fair opportunity during reassessment and appellate proceedings. [Paras 15]

Assessment restored to the AO for reassessment with directions to consider the assessee's contentions and evidence and to afford opportunity of hearing.

Final Conclusion: The appeal is dismissed; the Tribunal upheld the Commissioner's exercise of revisionary power under section 263 on the recorded facts, rejected the contention that the AO's ad hoc disallowance amounted to rejection of books, found that the assessee's written reply was considered, and directed reassessment by the AO with a mandate to examine the explanations and documentary evidence and to afford hearing.

Correction of arithmetic error in computation - Revising return vs correction of mistake in assessment proceedings - Admissibility of ledger entries as evidence for cost of acquisition - Direction to Assessing Officer to recompute capital gains

Correction of arithmetic error in computation - Revising return vs correction of mistake in assessment proceedings - Admissibility of ledger entries as evidence for cost of acquisition - Direction to Assessing Officer to recompute capital gains - Whether the Assessing Officer and the CIT(A) were justified in refusing to correct the wrongly punched cost of acquisition in the computation of capital gains where the assessee sought correction of an inadvertent arithmetic/data-entry error and produced ledger evidence showing the correct cost. - HELD THAT: - The Tribunal found that the assessee did not make a fresh claim but sought correction of an inadvertent error in the computation where cost of acquisition was wrongly recorded as Rs. 2,02,500 instead of Rs. 20,25,000. The assessee produced the ledger account from the sister (the transferor) showing the correct cost, and that ledger was reproduced by the CIT(A) though not acted upon. The Tribunal held that the ledger constituted confirmation from the sister regarding the correct cost of acquisition and that no further proof was necessary. The mere expiry of time for filing a revised return did not preclude correcting an obvious arithmetic/data-entry mistake so as to tax the correct income. In view of these findings, the Tribunal concluded that the lower authorities erred in not accepting the corrected cost and therefore directed that capital gains on sale of the shares be recomputed by the Assessing Officer taking the cost of acquisition as Rs. 20,25,000 instead of Rs. 2,02,500. [Paras 11, 12]

The orders of the lower authorities are reversed; the matter is remitted to the Assessing Officer with direction to compute capital gains by adopting the cost of acquisition at Rs. 20,25,000 for the shares in question.

Final Conclusion: Appeal allowed; Tribunal reversed the CIT(A) and directed the Assessing Officer to recompute capital gains on sale of the shares adopting the corrected cost of acquisition as shown in the ledger, thereby restoring the assessee's claim.

Release of seized goods subject to payment of part of the customs duty and furnishing of bank guarantee for balance - Adjudication under the Customs Act to determine entitlements and intention - Prima facie inference of concerted import requiring additional security

Release of seized goods subject to payment of part of the customs duty and furnishing of bank guarantee for balance - Seized gold bangles to be released on deposit of 50% of the customs duty and furnishing bank guarantee for the remaining 50%. - HELD THAT: - The Court noted a consistent view in its earlier decisions permitting release of seized gold ornaments on payment of 50% of the customs duty. Observing striking similarities in timing, weight and circumstances of importation by the petitioners, and a prima facie appearance that the imports may have been made in concert for a third party, the Court exercised its supervisory jurisdiction to direct conditional release. The petitioners were ordered to pay 50% of the customs duty in cash and to furnish a bank guarantee covering the remaining 50% as security. Upon production of the bank guarantee and payment, the seized gold bangles are to be released forthwith. [Paras 9, 10]

Petitioners ordered to deposit 50% of the customs duty and furnish bank guarantee for the balance; seized gold to be released on compliance.

Adjudication under the Customs Act to determine entitlements and intention - Ongoing adjudication proceedings to be completed by the customs authorities within a specified time-frame. - HELD THAT: - While directing conditional release, the Court recognised that whether the petitioners were entitled to duty-free import as long term residents and whether there was an intention to evade duty are matters that require detailed adjudication under the Customs Act. The Court therefore directed the respondents to complete the adjudication proceedings within six months from receipt of the order and required petitioners to cooperate in those proceedings. This preserves the authority's power to determine merits while allowing interim release subject to security. [Paras 9, 10]

Respondents directed to conclude adjudication under the Customs Act within six months; petitioners to cooperate.

Final Conclusion: Writ petitions disposed of by directing payment of 50% of customs duty in cash and furnishing of bank guarantee for the remaining 50% for release of the seized gold; adjudication by the customs authorities to be completed within six months.

Validity of appellate remand to original adjudicating authority - Jurisdiction of Commissioner of Customs (Preventive) / Directorate of Revenue Intelligence to issue show cause notice - Decision on merits by the appellate authority - Effect of a stayed High Court judgment on subsequent proceedings

Validity of appellate remand to original adjudicating authority - Effect of a stayed High Court judgment on subsequent proceedings - Setting aside of CESTAT's order remanding the matter to the original adjudicating authority to await the Supreme Court decision in the Mangli Impex matter. - HELD THAT: - The CESTAT had set aside the impugned order and remanded the matter to the original adjudicating authority to decide jurisdiction after the Supreme Court decision in the Mangli Impex case. The High Court observed that the Supreme Court has stayed the operation of the Mangli Impex judgment and that coordinate benches have, in several matters, set aside similar remands and proceeded to decide appeals on merits. Consequently, the High Court set aside the CESTAT order of remand and directed the CESTAT to decide the appeals on merits rather than await the outcome of the stayed High Court judgment. The Court expressly refrained from expressing any opinion on the merits themselves and confined its direction to the appropriate course of adjudication by the appellate forum. [Paras 6, 7]

CESTAT's remand order set aside and CESTAT directed to decide the appeals on merits instead of awaiting the Mangli Impex decision.

Jurisdiction of Commissioner of Customs (Preventive) / Directorate of Revenue Intelligence to issue show cause notice - Decision on merits by the appellate authority - Requirement that CESTAT decide, on merits, the jurisdictional question whether the Commissioner of Customs (Preventive)/DRI is competent to issue the show cause notice, uninfluenced by the Mangli Impex judgment. - HELD THAT: - While not determining the merits, the High Court directed that the CESTAT must decide the question of jurisdiction - specifically whether the Commissioner of Customs (Preventive)/DRI had competence to issue the show cause notice - on merits. The Court clarified that this determination should be made without being influenced by the Mangli Impex decision, the operation of which is stayed by the Supreme Court. The appellate authority is free to take any view on the merits after affording the parties an opportunity to be heard. [Paras 5, 6, 7]

CESTAT to decide the jurisdictional question on merits, uninfluenced by the stayed Mangli Impex judgment.

Final Conclusion: The High Court set aside the CESTAT order of remand and directed the CESTAT to decide the appeals on merits, including the question of the preventive authority's jurisdiction to issue the show cause notice, without being influenced by the Mangli Impex judgment whose operation is stayed; no opinion was expressed on the merits.

Reasonable belief for confiscation - limitation and time-bar for issuance of show cause notice under Section 110 of the Customs Act - judicial discipline and obedience to High Court directions - penalty liability despite vacated confiscation - retracted confession and need for corroborative evidence - insufficiency of investigation to fasten liability on co-noticees

Reasonable belief for confiscation - retracted confession and need for corroborative evidence - Validity of the seizure and whether the impugned gold was liable for confiscation on merits - HELD THAT: - The Tribunal found that on the merits there were reasons to believe that the seized gold was liable for confiscation. The primary incriminating material was the statement(s) of Shri Jitendra Kumar Mishra, which contained inconsistencies-initially alleging receipt of gold in Calcutta from employees of the appellant and later claiming purchase from Jaipur. The Department's call-record enquiries weighed against the Jaipur-purchase version and the chemical examiner certified the sample purity consistent with the disputed embossing. Although the Department did not pursue enquiries with the purported Jaipur vendor (Indian Art Gallery) and thus lost an opportunity to comprehensively test the claimant's version, the Tribunal held that in a sensitive smuggling context the claimant failed to discharge the burden of proof and, on merits, the goods were rendered liable for confiscation. [Paras 8]

On merits the impugned gold was liable for confiscation.

Limitation and time-bar for issuance of show cause notice under Section 110 of the Customs Act - judicial discipline and obedience to High Court directions - Effect of the Calcutta High Court orders on the validity of the show cause notice dated 11.02.2016 and consequent confiscation order - HELD THAT: - The Division Bench of the Calcutta High Court set aside the order that had extended time for issuance of a show cause notice and directed issuance of a fresh notice; that order became final and no stay of the High Court decision was shown on the record. The Department nevertheless proceeded to issue the show cause notice dated 11.02.2016 proposing confiscation. The Tribunal held that because the High Court had set aside the extension order and there was no shown stay or appeal suspending that direction, the show cause notice issued post-extension was non est and, therefore, time barred. The Tribunal emphasised the principle of judicial discipline that subordinate authorities must comply with higher court directions unless their operation is stayed by a competent court. [Paras 12]

The show cause notice dated 11.02.2016 and the confiscation based thereon are time barred and invalid; confiscation is set aside.

Penalty liability despite vacated confiscation - insufficiency of investigation to fasten liability on co-noticees - retracted confession and need for corroborative evidence - Sustainability of penalties imposed on the several noticees and quantum of penalty - HELD THAT: - The Tribunal found that, except for Shri Jitendra Kumar Mishra, the investigation failed to establish distinct roles of the other noticees: key persons allegedly handing over the gold were not examined and many incriminating links rested solely on the retracted statement of Shri Jitendra Kumar Mishra. Reliance on a lone retracted statement without corroboration was held insufficient to sustain penalties on co-noticees. Nonetheless, since Shri Jitendra Kumar Mishra had rendered the goods liable for confiscation on merits, he remained liable for penalty under Section 112; the Tribunal, however, applied the principle that penalty must be commensurate with the individual's role and any pecuniary gain, and accordingly reduced his penalty. [Paras 9, 14]

Penalties on all noticees except Shri Jitendra Kumar Mishra are quashed; penalty on Shri Jitendra Kumar Mishra is sustained but reduced.

Final Conclusion: The Tribunal set aside the confiscation of the seized gold as the show cause notice leading to confiscation was time barred in view of the Calcutta High Court's orders and principles of judicial discipline; on merits the goods were found liable for confiscation but the confiscation could not be upheld due to limitation. Penalties imposed on co-noticees are quashed for lack of corroborative evidence, while the penalty on Shri Jitendra Kumar Mishra is sustained but reduced to Rs. 2,00,000; appeals by the other appellants are allowed and the appeal of Shri Jitendra Kumar Mishra is partly allowed.

Confiscation and fine in lieu under the Customs Act - wrong declaration / bona fide mistake in export documents - admission as evidence - Section 52, Indian Evidence Act - probative value of admissions - Chemical Examiner's report as determinative evidentiary material - restricted export requiring licence - due diligence obligation of Customs House Agent

Chemical Examiner's report as determinative evidentiary material - admission as evidence - Section 52, Indian Evidence Act - probative value of admissions - wrong declaration / bona fide mistake in export documents - Whether the exported consignment declared as Jasmine Sambac oil was in fact sandalwood oil and whether the appellant's plea of inadvertent/bona fide mistake was established. - HELD THAT: - The Tribunal accepted the Chemical Examiner's analysis which identified the exported sample as sandalwood oil rather than Jasmine Sambac oil. The proprietor's recorded acknowledgement that the consignment was sandalwood oil was treated as an admission; admissions being reliable proof under Section 52 of the Indian Evidence Act require no further proof. The appellant did not produce any documentary evidence - such as sale/purchase invoices, balance sheets or other records - to support a contention of a bona fide or inadvertent error despite repeated requests. In the absence of any material explaining how an inadvertent mis-declaration occurred, the acknowledgement and the Chemical Examiner's report together established that the export was of sandalwood oil and not a mistaken entry of Jasmine Sambac oil. [Paras 5, 6]

The Tribunal held that the consignment was sandalwood oil and the appellant failed to prove that the wrong declaration was a bona fide inadvertent mistake.

Confiscation and fine in lieu under the Customs Act - restricted export requiring licence - Whether the order of confiscation of the exported goods and fine in lieu thereof was liable to be set aside. - HELD THAT: - Confiscation and the imposition of fine in lieu were founded on the finding that sandalwood oil - a restricted export permitted only under licence - had been exported contrary to the export policy and the provisions relied upon by the Authorities. Given the accepted identification of the goods as sandalwood oil and the absence of licence or justification for export, the legal basis for confiscation and fine remained intact. The Tribunal found no infirmity in the adjudicating authorities' reliance on the chemical report and the appellant's admission to uphold confiscation and fine. [Paras 5]

Confiscation of the goods and the fine in lieu were upheld.

Due diligence obligation of Customs House Agent - confiscation and fine in lieu under the Customs Act - Whether the penalty imposed upon the Customs House Agent was liable to be disturbed. - HELD THAT: - The record showed that the CHA did not respond to summonses and was not found at the declared business address, and was alleged to have failed to exercise due diligence when submitting the shipping bills. In those circumstances the adjudicating authority's imposition of penalty on the CHA was based on failure to discharge the required responsibilities. No contrary material or compliance was produced by the CHA to rebut the departmental findings. [Paras 6]

The Tribunal upheld the penalty imposed upon the Customs House Agent for failure to exercise due diligence.

Final Conclusion: The appeal is dismissed; the Tribunal upheld the findings that the exported consignment was sandalwood oil (not Jasmine Sambac), rejected the claim of a bona fide mistake, affirmed confiscation and fine in lieu, and sustained the penalty on the Customs House Agent.

Appointment of an observer to an AGM and videography of proceedings - inspection of company records by a former director/shareholder vis-a -vis inspection rights under Section 128(3) - judicial restraint on criminal proceedings arising from corporate disputes - remand for fresh consideration where parties were not afforded opportunity to be heard

Remand for fresh consideration where parties were not afforded opportunity to be heard - Whether the Impugned Order dated 22/11/2021 should be set aside for lack of opportunity to the Appellants and for having been passed when the main application was still pending. - HELD THAT: - The Tribunal found that CA 522/2021 was first taken up on 22/11/2021, one day before the scheduled AGM, without notice to the Appellant and without an opportunity to file reply or to be heard. The main application before the NCLT remained pending and only some reliefs were addressed by the ad interim order. In view of these procedural deficiencies and the chequered history of the case, the Tribunal did not adjudicate the substantive merits but set aside the Impugned Order and remitted the matter to the NCLT for fresh disposal. The Tribunal directed that the matter be decided after full opportunity to complete pleadings and file objections and imposed a timeline of three months for disposal from the date of the order. [Paras 11, 12]

Impugned Order set aside and matter remitted to NCLT for fresh consideration with directions to permit completion of pleadings and to decide the matter within three months.

Inspection of company records by a former director/shareholder vis-a -vis inspection rights under Section 128(3) - appointment of an observer to an AGM and videography of proceedings - judicial restraint on criminal proceedings arising from corporate disputes - Whether the specific directions in the Impugned Order (appointment of observer, videography and inspection rights, and restraint on criminal proceedings) were to be sustained without affording parties an opportunity for full adjudication. - HELD THAT: - The Tribunal noted that the NCLT had directed appointment of an observer, allowed videography of the AGM and inspection of statutory records/financial statements (including inspection through professionals), and restrained respondents from proceeding with criminal proceedings. However, because the main application remained pending, some prayers were unaddressed, and the Appellant had not been given notice or a chance to plead, the Tribunal refrained from deciding these specific reliefs on merits. The Tribunal observed that the observer's role, as framed in the Impugned Order, included inspection of financial records, but did not uphold or reject the several operative directions substantively. Instead, these matters were remitted to the NCLT to be considered afresh with full opportunity to the parties. [Paras 8, 10, 11]

The directions in the Impugned Order regarding appointment of an observer, videography, inspection rights and restraint on criminal proceedings were not finally sustained and are remitted to the NCLT for fresh decision after permitting parties to complete pleadings.

Final Conclusion: The Appeals are allowed in part: the Impugned Order dated 22/11/2021 is set aside and the matter is remitted to the NCLT for fresh adjudication after affording all parties an opportunity to complete pleadings and file objections; the NCLT is directed to dispose the matter expeditiously, and in any event within three months from the date of this Order.

Power of Registrar to remove name of company from register - Notice under Section 248(1) - sufficiency and proof of service - Carrying on business or operation for two immediately preceding financial years - Restoration of company name under Section 252(3) - justness, equity and restitution - Restoration subject to satisfaction of statutory dues

Notice under Section 248(1) - sufficiency and proof of service - Power of Registrar to remove name of company from register - Sufficiency of notice issued under Section 248(1) and compliance with procedural requirement of proof of service. - HELD THAT: - The Tribunal examined the notice relied upon by the Registrar and observed that the notice was undated and sent by ordinary post without proof of service. While public notices and a website link were published for thousands of companies, publication in a newspaper referred only to the website link and did not itself identify the companies. The Tribunal held that, in the facts of this case, a notice in proper form which is dated and sent by a mode establishing proof of service is required to constitute sufficient notice. The Registrar's invocation of Section 248 was therefore assessed having regard to both the specific notice served on the company and the general publications made by the Registrar.

Notice lacked the form of dated communication with proof of service; sufficiency of notice required closer scrutiny in the circumstances.

Carrying on business or operation for two immediately preceding financial years - Restoration of company name under Section 252(3) - justness, equity and restitution - Whether the company was carrying on business or in operation in the two years preceding the striking-off (relevant period 30.06.2015 to 30.06.2017) and whether restoration is 'just'. - HELD THAT: - The Tribunal considered documentary material including income-tax return acknowledgements for AY 2016-17 and 2017-18 showing current losses, notices of AGMs dated 2.9.2015 and 2.9.2016 falling within the relevant two-year period, a Letter of Intent dated 15.04.2017 and an MOU dated 02.05.2017 relating to use/development of the company's registered property, and the appellant's affidavits stating the hotel was running on the company-owned premises. The Registrar did not dispute ownership of the immovable property. On this composite material the Tribunal found reasonable cause to conclude that the company was carrying on business or in operation during the relevant two-year period and that, applying the equitable concept of 'just', restoration of the company's name was warranted.

The company was carrying on business during the relevant period and it is just, equitable and reasonable that the company's name be restored.

Restoration of company name under Section 252(3) - justness, equity and restitution - Restoration subject to satisfaction of statutory dues - Whether restoration should be ordered and on what terms. - HELD THAT: - Having found that restoration is just on the material before it, the Tribunal allowed the appeal, set aside the NCLT order and directed restoration of the company's name in the register. The Tribunal qualified restoration by stating that dues payable to the Income Tax Department must be complied with and that the Department remains at liberty to proceed in accordance with law if dues are not cleared. The Income Tax Department's willingness to support revival subject to payment of outstanding dues was noted.

Appeal allowed; name of the company to be restored in the Register of Companies, subject to compliance with dues payable to the Income Tax Department.

Final Conclusion: The appeal is allowed: the impugned NCLT order is set aside and the name of the appellant company is ordered to be restored in the Register of Companies. Restoration is directed on the basis that the company was carrying on business during the relevant two-year period and is subject to satisfaction of outstanding statutory dues to the Income Tax Department.

Expunction of observations recorded without affording notice - right to be heard / audi alteram partem - restoration of company name to the Register of Companies subject to compliance - prejudice in collateral proceedings from untested factual imputations

Expunction of observations recorded without affording notice - right to be heard / audi alteram partem - prejudice in collateral proceedings from untested factual imputations - Whether the observations in the NCLT order recording that an amount of Rs. 5 crores was paid to respondent no. 6, that the land is in possession of the company and flats were to be delivered to homebuyers should be expunged because the appellant was not put to notice or heard on that point. - HELD THAT: - The Tribunal confined itself to the narrow question of whether the impugned observational statements should be expunged, and did not decide the merits of the underlying Joint Development Agreement, possession or payment disputes. It noted that the appellant had no objection to restoration of the company's name and that the Registrar of Companies did not prefer an appeal. The Tribunal found that the impugned statements were recorded on the early-hearing date without giving the appellant notice or an opportunity to be heard; such untested factual imputations could cause harm if used in collateral proceedings. In these circumstances the Tribunal held that the appropriate remedy was to delete the specific observational passage from the NCLT order while leaving the restoration order intact, since the appellant's grievance related solely to those observations and not to the restoration itself. [Paras 8, 9]

The impugned observations concerning payment of Rs. 5 crores, possession of the land and delivery of flats are expunged from the NCLT order; the restoration of the company's name remains unaffected.

Final Conclusion: Appeal allowed in part: the Tribunal expunged specific observational statements made by the NCLT that were recorded without putting the appellant to notice, while upholding the restoration of the company's name to the Register of Companies subject to compliance.

Appointment of fact-finding commissioner - power of Tribunal to appoint a commissioner on a fact-finding mission under Sections 241 and 242 - prohibition on reliance upon a commissioner's report until completion of pleadings - status quo pending adjudication - remand for fresh consideration to the adjudicating authority - directive for expeditious adjudication

Prohibition on reliance upon a commissioner's report until completion of pleadings - status quo pending adjudication - Whether the report of the Independent Commissioner appointed by the NCLT could be relied upon, quoted or used before completion of pleadings and adjudication by the Tribunal. - HELD THAT: - This Tribunal held that the contents of the Commissioner's report shall not be quoted, relied upon or utilized by any party or by the NCLT itself until pleadings are completed and the Appellant is afforded an opportunity to file objections. The Tribunal recorded that it had earlier directed status quo to be maintained and emphasised that the report must not be acted upon before completion of the pleadings; the NCLT may, after pleadings are complete and opportunities afforded, decide whether to place reliance on the report. The restraint is procedural and protective of the parties' right to contest and respond to the report before it is used in adjudication. [Paras 12, 16]

Commissioner's report shall not be relied upon, quoted or used by any party or by the NCLT until pleadings are completed and the Appellant has been given an opportunity to file objections; status quo to be maintained.

Appointment of fact-finding commissioner - power of Tribunal to appoint a commissioner on a fact-finding mission under Sections 241 and 242 - remand for fresh consideration to the adjudicating authority - directive for expeditious adjudication - Whether the appeals should be remitted to the NCLT for fresh hearing and decision on merits, and the consequent directions to the NCLT. - HELD THAT: - Without expressing any view on the merits, this Tribunal exercised its supervisory jurisdiction to remit the matters to the NCLT for hearing and decision on merits. The Tribunal noted the procedural posture and that the parties should have opportunity to complete pleadings, including filing a detailed reply by the second Respondent. In the exercise of appellate supervision the Tribunal directed that the NCLT hear the matter afresh, give due opportunity to all parties, and decide the case as expeditiously as practicable but not later than three months from receipt of this order. The Tribunal explicitly refrained from adjudicating the substantive correctness of the NCLT's earlier appointment of the commissioner and left to the NCLT the question of reliance upon the report once procedural prerequisites are satisfied. [Paras 16, 17]

Appeals disposed by remitting the matters to the NCLT for fresh hearing on merits with directions to complete adjudication within three months from receipt of this order; the Tribunal did not express any view on the merits.

Final Conclusion: The Appellate Tribunal remitted the matters to the NCLT for fresh hearing and decision on merits, directed that the Commissioner's report shall not be used or relied upon until pleadings are complete and parties are afforded opportunity to file objections, ordered maintenance of status quo, and directed the NCLT to decide the case expeditiously but within three months from receipt of this Order.

Binding effect of an approved resolution plan under Section 31 - extinguishment of claims on approval of a resolution plan - maintainability of proceedings after approval of resolution plan - finality of adjudicating authority's approval of resolution plan

Binding effect of an approved resolution plan under Section 31 - extinguishment of claims on approval of a resolution plan - maintainability of proceedings after approval of resolution plan - Whether the National Company Law Tribunal rightly dismissed the interlocutory applications as infructuous following approval and execution of the resolution plan. - HELD THAT: - The Tribunal applied the legal principle in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., holding that once a resolution plan is duly approved by the Adjudicating Authority, claims not included in the approved plan stand frozen and extinguished and no person is entitled to initiate or continue proceedings in respect of such claims. The Resolution Plan in the present proceedings was approved by the Adjudicating Authority on 25.03.2021. In view of that approval and the binding effect accorded to an approved resolution plan under Section 31, the interlocutory applications challenging the Resolution Professional's verification/rejection of claims became infructuous. The Appellants' contentions that their I.A.s were pending at the time of approval and that the NCLT ought to have adjudicated those I.A.s were considered and rejected because the statutory consequence of approval - namely, freezing and extinguishment of claims not incorporated in the plan - defeats continuation of such proceedings after approval. Having heard parties and applying the cited Supreme Court precedent, the Appellate Tribunal found no illegality in the Adjudicating Authority's dismissal of the I.A.s as infructuous. [Paras 8, 9, 10, 11]

The Adjudicating Authority correctly dismissed the interlocutory applications as infructuous in view of the approval and execution of the resolution plan; the dismissal is affirmed.

Final Conclusion: The appeals are dismissed; the impugned order of the Adjudicating Authority dismissing the interlocutory applications as infructuous on account of the approved resolution plan is affirmed.

Maintainability of an application before the Adjudicating Authority in lieu of an appeal against the Liquidator's decision - time barred or belated claim in insolvency liquidation - obligation to file claims during the Corporate Insolvency Resolution Process - effect of failure to file claim within the stipulated insolvency timeline having regard to Ebix Singapore (P) Ltd. v. Educomp

Maintainability of an application before the Adjudicating Authority in lieu of an appeal against the Liquidator's decision - The application (I.A. No. 2387 of 2020) filed by the appellant challenging the Liquidator's rejection of its claim was not maintainable in place of a direct appeal against the Liquidator's order. - HELD THAT: - The Tribunal recorded that the appellant did not prefer a separate appeal against the Liquidator's decision and instead filed an interlocutory application before the Adjudicating Authority. The Tribunal held that such an application is not maintainable as a substitute for the appropriate remedy of appeal against the Liquidator's order. The finding treats the procedural route chosen by the appellant as improper and supports dismissal on that ground. [Paras 14]

I.A. No. 2387 of 2020 was not maintainable as a substitute for an appeal against the Liquidator's order.

Time barred or belated claim in insolvency liquidation - obligation to file claims during the Corporate Insolvency Resolution Process - effect of failure to file claim within the stipulated insolvency timeline having regard to Ebix Singapore (P) Ltd. v. Educomp - The appellant's claim, filed after liquidation and not during the CIRP, was belated and could not be entertained for realization of the claimed amounts. - HELD THAT: - The Tribunal found as an admitted fact that the appellant did not file its claim during the Corporate Insolvency Resolution Process and only submitted the claim after receiving a demand notice post-liquidation. Emphasising the time bound nature of the IBC process and following the ratio of Ebix Singapore (P) Ltd. v. Educomp, the Tribunal concluded that failure to lodge the claim within the stipulated timeline disentitles the claimant from seeking realization of the amounts at a belated stage. The Tribunal treated the belated filing as an afterthought and a ground for refusal to entertain the claim. [Paras 14]

The belated claim filed after the CIRP/liquidation is not maintainable and cannot be realised; the impugned rejection is affirmed on this ground.

Final Conclusion: The impugned order dismissing I.A. No. 2387 of 2020 is affirmed: the application was not maintainable as a substitute for an appeal against the Liquidator's decision, and the claim filed belatedly after the CIRP/liquidation cannot be entertained; the appeal is dismissed.

Appeal rendered infructuous by subsequent liquidation - CIRP failure and Committee of Creditors resolution for liquidation - Effect of post-admission liquidation on challenge to admission order

Appeal rendered infructuous by subsequent liquidation - CIRP failure and Committee of Creditors resolution for liquidation - Effect of post-admission liquidation on challenge to admission order - Whether the appeal challenging admission of the Section 7 petition and appointment of an Interim Resolution Professional is maintainable or must be dismissed as infructuous in view of the subsequent resolution for liquidation and order directing liquidation. - HELD THAT: - The Tribunal recorded that the Corporate Debtor's CIRP had effectively failed, the Committee of Creditors in its 21st meeting on 24.08.2021 passed a resolution for liquidation which was approved by e voting on 27.08.2021 with 79.75% votes in favour, and the Adjudicating Authority allowed I.A. No. 2179/2021 and ordered liquidation of the Corporate Debtor on 16.12.2021. Given these intervening developments, the challenge to the earlier order dated 20.12.2019 admitting the Section 7 petition and appointing an Interim Resolution Professional no longer subsists in practical effect. The Tribunal therefore held that the appeal has become infructuous in view of the liquidation order and dismissed the appeal accordingly. [Paras 19, 20]

Appeal dismissed as infructuous in view of the Committee of Creditors' resolution for liquidation and the Adjudicating Authority's order directing liquidation; no order as to costs.

Final Conclusion: The Appellate Tribunal dismissed the appeal as infructuous because the CIRP had failed, the CoC approved liquidation by requisite majority, and the Adjudicating Authority ordered liquidation of the Corporate Debtor; no costs were awarded.

Approval of resolution plan - compliance with Section 30(2) of the Code - commercial wisdom of the Committee of Creditors - limited judicial review under Sections 30 and 31 of the Code - treatment of operational creditors - inclusion of property in the corporate debtor's estate - service of notice and communication of resolution plan to operational creditors - rights under a higher purchase agreement and necessity of following due process for revocation

Approval of resolution plan - compliance with Section 30(2) of the Code - commercial wisdom of the Committee of Creditors - limited judicial review under Sections 30 and 31 of the Code - Whether the Adjudicating Authority was justified in approving the Resolution Plan by applying the tests under Section 30(2) of the Code. - HELD THAT: - The Tribunal held that the Adjudicating Authority has a limited jurisdiction to examine only whether the Resolution Plan meets the essential requirements of Section 30(2) and that the commercial decision of the Committee of Creditors (CoC) is not amenable to routine judicial re-appraisal. Reliance was placed on Supreme Court precedents emphasising that interference with the CoC's commercial wisdom is permissible only within the four corners of Section 30(2) and Section 31(1). The record showed that the Resolution Plan was approved by 96.07% of the CoC, the RP certified compliance with clause (b) and (c) of Section 30(2) in Form H, and the Adjudicating Authority found equitable treatment of creditors and provision for post-approval management. In light of these findings and settled law that quantitative dissatisfaction alone does not warrant interference, the Tribunal found no illegality in the Adjudicating Authority's approval of the plan. [Paras 2, 13, 14, 15]

The Adjudicating Authority was justified in approving the Resolution Plan; no interference with the CoC's commercial decision was warranted as the plan satisfied the requirements of Section 30(2).

Treatment of operational creditors - inclusion of property in the corporate debtor's estate - service of notice and communication of resolution plan to operational creditors - rights under a higher purchase agreement and necessity of following due process for revocation - Whether the Appellant (an operational creditor claiming rights over a plot) was unfairly dealt with-specifically whether the property could be treated as part of the corporate debtor's assets, whether the Appellant was improperly classified, and whether it was denied notice or access to the Resolution Plan. - HELD THAT: - The Tribunal found that the Appellant had been allotted the plot and executed a Higher Purchase Agreement in favour of the corporate debtor, thereby creating rights in the corporate debtor which could not be extinguished without following due process. The record showed multiple allotment letters, the hire purchase agreement, and subsequent notices and court proceedings; the Tribunal noted that the Appellant did not cancel the agreement before the insolvency commencement date and had admitted its claim by filing Form B as an operational creditor. The RP had included the admitted claim in the information memorandum and the successful resolution applicant proposed a payment (10% of the admitted claim) despite the liquidation value being NIL; distribution and haircut decisions fall within CoC's commercial domain. On service, the Tribunal observed that the correct email ID was on record and emails were sent on several dates and that the RP informed the Appellant of the plan's approval. The Tribunal therefore rejected the contention that the Appellant was unfairly treated either by exclusion of the property from the estate, by misclassification after filing Form B, or by want of communication of the plan. [Paras 7, 8, 9, 10, 14]

The Appellant was not unfairly dealt with; the property formed part of the corporate debtor's assets by virtue of the Higher Purchase Agreement, the Appellant's claim stood admitted as an operational creditor, and there was sufficient communication regarding meetings and approval of the Resolution Plan.

Final Conclusion: The appeal is dismissed. The Tribunal found no infirmity in the Adjudicating Authority's approval of the Resolution Plan, the limited reviewable requirements of Section 30(2) were satisfied, and the Appellant's grievances regarding asset inclusion, classification and notice were rejected; no interference with the CoC's commercial decision was warranted.

Service of process in pending matters - Ex parte interim order - Maintenance of status quo in liquidation distributions - Time bound proceedings under the Insolvency and Bankruptcy Code and its overriding effect - Regulation 43 - obligation to return excess distribution - Locus to challenge admission of claims by the liquidator

Service of process in pending matters - Ex parte interim order - Application I.A. No. 368 of 2020 was filed and an ex parte interim order was passed without service of the application on affected parties - HELD THAT: - The Tribunal examined Rule 25(5) (presentation of applications in pending matters) and the record. The Adjudicating Authority itself noted on 21.10.2020 that notices had not been served by the applicant. The application had been filed in a pending matter seeking interim relief against financial creditors (including the appellant) and more than a month was available for service prior to the ex parte order dated 09.09.2020. The Tribunal concludes that the application was filed and the interim order obtained without serving copies on the parties who would be affected by the order, rendering the order ex parte. [Paras 22, 23, 24]

The Tribunal found that I.A. No. 368 of 2020 was filed without serving the affected parties and that the interim order dated 09.09.2020 was ex parte.

Maintenance of status quo in liquidation distributions - Time bound proceedings under the Insolvency and Bankruptcy Code and its overriding effect - Regulation 43 - obligation to return excess distribution - Whether the pendency of a counter claim before the DRT permits staying distribution to financial creditors in liquidation and whether the ex parte interim order restraining distribution should continue - HELD THAT: - The Tribunal held that pendency of proceedings before the DRT cannot, as a matter of course, be a ground to stay distributions in liquidation under the IBC, which are time bound and enjoy overriding effect under Section 238. The Tribunal observed that Regulation 43 provides a mechanism for return of any monies subsequently found to have been wrongly distributed, thereby addressing concerns of excess disbursement. Given the prolonged non decision of the recall application and the need to protect the time bound nature of IBC proceedings, the Tribunal found no justification for continuing the interim order restraining distributions. [Paras 25, 26, 27]

The Tribunal concluded that pendency of the DRT proceedings is not a valid reason to continue the interim stay on distributions and that the recall application (I.A. No. 555 of 2020) ought to be allowed.

Locus to challenge admission of claims by the liquidator - Ex parte interim order - Disposition of I.A. No. 368 of 2020 and the extent of the Tribunal's intervention - HELD THAT: - While the Tribunal has modified and recalled the interim order passed on 09.09.2020 by allowing I.A. No. 555 of 2020, it refrained from expressing any final view on the merits of the challenges made in I.A. No. 368 of 2020 to the liquidator's admission of claims. The Tribunal noted that hearing on I.A. No. 368 of 2020 has commenced before the Adjudicating Authority and directed that the Adjudicating Authority proceed to decide that application on merits after hearing the parties at the earliest. [Paras 27, 28]

The interim order is recalled/vacated; I.A. No. 368 of 2020 is left for final adjudication on merits by the Adjudicating Authority.

Final Conclusion: I.A. No. 555 of 2020 is allowed and the ex parte interim order dated 09.09.2020 (directing the liquidator to maintain status quo with regard to distribution to certain financial creditors) is recalled/vacated. The Adjudicating Authority is directed to proceed to decide I.A. No. 368 of 2020 on merits expeditiously; no final opinion is expressed on the merits of that application.

Scheme of Amalgamation - Section 230-232 of the Companies Act, 2013 - sanction by Company Court - approval by shareholders and creditors - Official Liquidator report - compliance with accounting standards - Mihir H. Mafatlal principles - procedural fairness (opportunity to be heard)

Scheme of Amalgamation - Section 230-232 of the Companies Act, 2013 - approval by shareholders and creditors - Mihir H. Mafatlal principles - Official Liquidator report - compliance with accounting standards - Validity of the NCLT sanction of the Scheme of Amalgamation challenged as void on account of sequential/simultaneous filings and whether the statutory and supervisory requirements for sanction were satisfied. - HELD THAT: - The Tribunal held that the NCLT properly considered that meetings were held and the scheme had unanimous approval of the stakeholders, statutory auditors certified conformity with accounting standards and the Official Liquidator raised no objection. Applying the criteria laid down in Mihir H. Mafatlal, the Tribunal examined (a) compliance with requisite statutory procedure and meetings, (b) requisite majority approval, (c) availability of relevant material enabling an informed decision, (d) placement of necessary material before the Court, and (e) absence of any contravention of law or public policy. The Tribunal found these parameters satisfied and observed that no loss to the exchequer or contravention of public policy was established. The Registrar of Companies filings (INC-28) and changes in status were noted. The Tribunal therefore concluded there was no illegality or infirmity in the NCLT's sanction of the Scheme under Sections 230-232. [Paras 10, 11, 15, 16, 17]

The NCLT's sanction of the Scheme of Amalgamation is valid and sustainable; the impugned order is not vitiated by the alleged sequential filing or by any failure to meet the supervisory parameters for sanction.

Procedural fairness (opportunity to be heard) - Whether the Appellant was denied an opportunity to be heard by the NCLT on 16.03.2020. - HELD THAT: - The Tribunal examined the record and found that counsel for the Appellant and for the Regional Director were present and their arguments were heard before the NCLT reserved its order. The contention of non-hearing was therefore rejected on the basis of the material on record. [Paras 7]

The Appellant was heard by the NCLT; there was no denial of opportunity to be heard.

Final Conclusion: The appeal is dismissed; the NCLT order sanctioning the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 is upheld and the impugned order stands affirmed. No order as to costs.

Corporate insolvency application under section 9 of IBC, 2016 - existence of operational debt and default - limitation and acknowledgement restarting limitation - service of application and maintainability - appointment of Interim Resolution Professional - deposit for IRP expenses - interim moratorium under section 14

Corporate insolvency application under section 9 of IBC, 2016 - existence of operational debt and default - The section 9 application against the corporate debtor was maintainable and admitted on the ground of established operational debt and default. - HELD THAT: - The Tribunal found that the applicant and the corporate debtor had entered into a contract for advertising services and that the corporate debtor had not paid the sum reflected in the confirmation of accounts. The operational creditor filed the application under section 9 and furnished the required affidavit under section 9(3)(b). The corporate debtor did not file a reply or appear and was proceeded with ex parte. On the material on record the Tribunal concluded that the debt remained uncontroverted and that default in payment was established. [Paras 2, 3, 6, 8, 10]

Application under section 9 is admitted as the operational debt and default are established.

Limitation and acknowledgement restarting limitation - The claim was held not to be time-barred in view of an acknowledgement of debt after the date of default. - HELD THAT: - Although the date of default as per Form V was earlier, the Tribunal noted that the corporate debtor, through its director, had acknowledged the debt in the confirmation of accounts dated 01.04.2019. On that basis the Tribunal held that the debt was not barred by limitation and that the section 9 application was filed within the permissible period. [Paras 3, 7]

Limitation objection is negatived; the application is within time on account of the post-default acknowledgement.

Service of application and maintainability - Service of the section 9 application on the corporate debtor was valid and the Tribunal had jurisdiction to entertain the application. - HELD THAT: - The Tribunal recorded service by email to the registered email on the MCA website and by speed post to the registered office address, with delivery confirmed. The registered office being in Delhi, the Tribunal held that it had territorial jurisdiction to try the application and that the application was properly before it. [Paras 5, 9]

Service was valid and the Tribunal has jurisdiction to entertain the application.

Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed by the Tribunal because the operational creditor did not propose a name. - HELD THAT: - The operational creditor had not proposed an IRP in the prescribed part of the application. The Tribunal therefore appointed Ms. Gunjan Mittal as Interim Resolution Professional, subject to the conditions that no disciplinary proceedings be pending and that statutory disclosures and consent in Form 2 be filed, as required under the Code and Regulations. [Paras 11]

Ms. Gunjan Mittal is appointed as Interim Resolution Professional subject to statutory conditions.

Deposit for IRP expenses - The operational creditor was directed to deposit an amount to meet IRP expenses, recoverable subject to adjustment by the Committee of Creditors. - HELD THAT: - To enable the IRP to perform statutory functions, the Tribunal directed the operational creditor to deposit a sum with the IRP within one week of receipt of the order. The Tribunal clarified that the amount will be accounted for by the IRP and is subject to adjustment by the Committee of Creditors and refundable as per accounts. [Paras 12]

Operational creditor to deposit the directed sum with the IRP within one week, subject to subsequent adjustment.

Interim moratorium under section 14 - On admission, the moratorium under section 14(1) of the IBC is applicable to the corporate debtor. - HELD THAT: - Consequent upon admission of the section 9 application under section 9(5), the Tribunal applied the moratorium envisaged by section 14(1), with the provisos (a) to (d) operating, and directed that the relevant provisions of sections 14(2) to 14(4) will apply during the moratorium period in accordance with the Code. [Paras 13]

Moratorium under section 14 is declared as a consequence of admission of the CIRP.

Final Conclusion: The Tribunal admitted the section 9 corporate insolvency application against the corporate debtor on the ground of an established operational debt and default, held the claim not time barred in view of a post-default acknowledgement, validated service and jurisdiction, proceeded ex parte against the corporate debtor, appointed an Interim Resolution Professional subject to statutory conditions, directed an interim deposit to meet IRP expenses, and declared the moratorium under section 14 consequent to admission.

Summary order. Appearances and submissions recorded; prayers noted (status quo and remand to NCLT); application to expunge deceased respondent's name recorded. Judgment reserved.

Classification of services as mining service - transport of goods by road service - service provided in relation to mining - definition of "mines" under the Mines Act, 1952 - precedential effect of Singh Transporters

Classification of services as mining service - transport of goods by road service - service provided in relation to mining - precedential effect of Singh Transporters - Whether the services rendered by M/s N.P. Earth Movers Pvt. Ltd. fall under the taxable category of "mining service" or are classifiable as "transport of goods by road service". - HELD THAT: - The Tribunal examined the Commissioner's acceptance of the respondent's plea that the activities of loading, handling and movement of coal within the mine area do not merit classification as a "mining service" under section 65(105)(zzzy) of the Finance Act, 1994. The Tribunal relied on the Supreme Court decision in Singh Transporters which held that transportation of coal from pit-heads to railway sidings is more appropriately classifiable as "transport of goods by road service" and does not constitute a service in relation to mining as contemplated by the definition. The Tribunal noted that reliance on the statutory definition of "mines" does not establish a necessary nexus between the place where activity occurs and the nature of the service for attracting the "mining service" category. Applying that precedent and reasoning, the Tribunal found the Commissioner's conclusion to drop proceedings-accepting that the services were not "mining services"-to be in conformity with law. [Paras 9, 10, 11, 12]

The services rendered by the respondent are not classifiable as "mining service" and the Commissioner's order dropping the proceedings is upheld.

Final Conclusion: The appeal is dismissed; the Commissioner's order dropping proceedings against M/s N.P. Earth Movers Pvt. Ltd. is affirmed on the basis that the activities in question are not "mining services" but fall within transport classification in line with Singh Transporters.

Service tax on maintenance, repair and management services - consideration for services - maintenance deposit held in custody / held as liability to be transferred - chargeability of amounts collected as security deposits

Service tax on maintenance, repair and management services - consideration for services - maintenance deposit held in custody / held as liability to be transferred - Maintenance deposit collected by the respondent pending formation of a society was not taxable as consideration for maintenance services. - HELD THAT: - The Tribunal found on the record that the respondent collected a lump-sum maintenance deposit from buyers which was recorded in its books as a liability to be transferred in full to the society once formed. The respondent did not utilize any part of the deposit for upkeep of the complex, maintained the complexes at its own expense during the intervening period and did not charge separate maintenance fees out of the deposit. Consequently the amounts collected were held in custody for the benefit of the future society and were not consideration received by the respondent for providing maintenance services. On these factual and legal findings the Commissioner (Appeals) was correct in setting aside the demand confirmed by the Joint Commissioner, since no service consideration had been received by the respondent that could be subjected to service tax. [Paras 9, 10]

Demand for service tax on the maintenance deposit was rightly set aside; the deposit was not consideration for taxable maintenance services.

Final Conclusion: Revenue's appeal challenging the Commissioner (Appeals)'s setting aside of the demand for service tax on maintenance deposits is dismissed; the Tribunal upholds that the deposits were held as liabilities to be transferred to the society and did not constitute consideration for services.

Refund under Rule 5 read with Notification No.27/2012-CE - compliance of Condition No.2(h) of Notification No.27/2012-CE - debit of refund claim in cenvat credit account prior to adjudication - interest on delayed refund - doctrine of merger - contempt for failure to comply with Tribunal order

Refund under Rule 5 read with Notification No.27/2012-CE - compliance of Condition No.2(h) of Notification No.27/2012-CE - debit of refund claim in cenvat credit account prior to adjudication - interest on delayed refund - Debit of the amount of refund claim in the cenvat credit account suo moto before adjudication satisfies Condition No.2(h) of Notification No.27/2012-CE and entitles the appellant to refund with interest. - HELD THAT: - The Tribunal examined whether the appellant's act of debiting the refund amount in the cenvat credit account after filing the refund claim but prior to adjudication met Condition No.2(h) of Notification No.27/2012-CE. Relying on the reasoning recorded in the final order, the Tribunal held that such suo moto debit before adjudication constituted sufficient compliance with the condition. The Tribunal also relied on the precedent of the Hon'ble Supreme Court in Hari Chand Shri Gopal & Ors. to conclude that the Commissioner (Appeals) had misconceived the law by ignoring that precedent. Consequently, the Tribunal set aside the impugned order(s) and directed grant of refund with interest, specifying the period for payment in the final order. [Paras 10, 11, 12]

Both appeals allowed; debit before adjudication held to satisfy Condition No.2(h); adjudicating authority directed to grant refund with interest within the time prescribed in the Tribunal's order.

Doctrine of merger - contempt for failure to comply with Tribunal order - interference with justice delivery system by issuing fresh show cause notice - Issuance of fresh show cause notices by the Assistant Commissioner instead of giving effect to the Tribunal's final order was held to be impermissible interference and warranted show cause action for contempt or immediate compliance. - HELD THAT: - After the Tribunal's final order allowing refund, the appellant made representations for compliance. Instead of complying, the Assistant Commissioner issued fresh show cause notices proposing disallowance. The Tribunal found this conduct to be interference in the justice delivery system, noted that Revenue had not preferred an appeal against the Commissioner (Appeals) order, and observed that the Assistant Commissioner appeared to disregard the doctrine of merger and the order of the superior forum. On that basis the Tribunal directed that the Assistant Commissioner be called upon to show cause why contempt proceedings should not be initiated, and alternatively granted a final opportunity to comply with the Tribunal's order and file proof of compliance by the specified date. Directions were given for service of the order on the Officer and for further listing. [Paras 4, 5, 6]

Assistant Commissioner directed to show cause why proceedings for contempt should not be initiated, alternatively to comply with the Tribunal's final order and file compliance by the stated deadline; copy of the order to be served on the Officer.

Final Conclusion: The appeals were allowed; the debit made before adjudication satisfied the statutory condition and refund was directed to be granted with interest, and the Assistant Commissioner was directed to either show cause for his failure to comply or to carry out the Tribunal's order within the time stipulated.

Business Support Services - taxable service - Association of Persons - joint venture - principal-to-principal basis - revenue sharing arrangement - infrastructural support services

Association of Persons - joint venture - principal-to-principal basis - Whether the contractual arrangement between the exhibitor and distributors resulted in the constitution of an Association of Persons or joint venture such that the exhibitor rendered services to that AOP. - HELD THAT: - The Tribunal examined the licence/revenue sharing agreements and the nature of the parties' relationship. It held that the agreements granted the exhibitor a non exclusive licence to exploit theatrical rights and required the exhibitor to decide screening, shows and pricing, while the exhibitor paid revenue share to the distributor. Relying on the principles in Faqir Chand Gulati and the Tribunal's reasoning in Mormugao Port Trust, the Bench concluded that the arrangement was a revenue sharing commercial collaboration where co venturers acted as entrepreneurs sharing risks and rewards rather than as service provider and service recipient. Consequently, the element of a contractually fixed quid pro quo for services - an essential ingredient of a taxable service - was absent, and the arrangement did not create an AOP in a manner that would render the exhibitor as providing services to such AOP. [Paras 22, 24]

Arrangement does not amount to an Association of Persons/joint venture that attracts service tax on the exhibitor as provider of services to the AOP; the relationship is on a revenue sharing/principal to principal basis.

Business Support Services - taxable service - infrastructural support services - revenue sharing arrangement - Whether the activities of the exhibitor in screening films fall within the definition of Business Support Services and are exigible to service tax under BSS. - HELD THAT: - The Tribunal considered the statutory definition of Business Support Services and the contractual matrix showing that the exhibitor bore operational control over exhibition and paid the distributor a share of box office. Prior Division Bench precedents (Moti Talkies, PVS Multiplex, Inox Leisure and others) were examined to determine whether screening constituted support to the distributor's business or an independent principal activity of the exhibitor. The Tribunal held that where the exhibitor screens films on a revenue sharing basis and pays the distributor (rather than receiving consideration from the distributor), there is no service in the nature of BSS rendered by the exhibitor to the distributor; screening is an activity on the exhibitor's own account and the necessary service provider/service recipient relationship is absent. [Paras 16, 22, 23]

Screening of films under the revenue sharing licence agreements does not qualify as Business Support Services liable to service tax; the demand under BSS cannot be sustained.

Business Support Services - taxable service - Effect of departmental circulars and precedents on levy of service tax in such exhibitor distributor arrangements. - HELD THAT: - The Tribunal analysed Circulars dated 23.02.2009 and 13.12.2011. It observed that the 2009 Circular supports the view that screening is not a support service and is not taxable except where rent is paid. The 2011 Circular, which addresses revenue sharing arrangements that may create a distinct entity, would not assist the Department for periods prior to 13.12.2011 and does not alter the conclusion where the factual matrix shows no service relationship. Further, the Tribunal relied on its earlier decisions (including Mormugao Port Trust and the Division Bench decision in Inox Leisure) and the Supreme Court's agreement with the Tribunal in Inox Leisure to conclude that the departmental demand cannot be sustained. [Paras 20, 21, 24]

Circular dated 23.02.2009 supports non taxability of screening; the 13.12.2011 Circular is not retrospectively applicable to assist the Department for the relevant period, and judicial precedents disfavour the levy of BSS in the facts of this case.

Final Conclusion: The Commissioner's demand of service tax under Business Support Services for the period 2009-10 to 2013-14 was set aside: the exhibitor's screening of films under the revenue sharing licence agreements does not constitute a taxable service to the distributors or to an AOP, and the impugned order confirming tax, interest and penalty is quashed.

Provisional assessment - finalisation of provisional assessments - limitation under Section 11A(1) - extended period of limitation - relevant date - quantification of duty - penalty under Rule 173Q

Provisional assessment - finalisation of provisional assessments - relevant date - limitation under Section 11A(1) - Whether the duty demand for the period 01.03.73 to 28.02.83 could be adjudicated prior to finalisation of provisional assessments and whether the demand confirmed by the impugned order is sustainable. - HELD THAT: - The Tribunal found that the Order-in-Original No. 02/BGP/02 dated 29.08.02 relied upon by the Commissioner does not establish that the provisional assessments for the period 01.03.73 to 28.02.83 had been finally determined. The question of finalisation remained pending in remand proceedings described in this Tribunal's order dated 12.05.2016. Applying the statutory scheme governing proceedings under Section 11A(1), and following the Supreme Court's ruling in CCE v. ITC Ltd., a proceeding under Section 11A can be initiated only after completion of assessment proceedings where the duty was provisionally assessed and the relevant date in such cases is the date of adjustment after final assessment. Because the provisional assessments for the period remain unfinalised, the demand confirmed by the impugned order for this period is premature and unsustainable. [Paras 10]

Demand for the period 01.03.73 to 28.02.83 is premature and set aside; matter to be adjudicated only after finalisation of the provisional assessments.

Limitation under Section 11A(1) - extended period of limitation - quantification of duty - Whether demands in respect of clearances from March 1, 1983 to December 27, 1990 are barred by limitation and whether the extended five-year period applies. - HELD THAT: - The Tribunal examined the statutory notifications applicable during the period and held that clearances in the spans covered by Notification No. 36/83-CE, Notification No. 201/85-CE and Notification No. 34/87-CE were effected on the basis of prescribed retail-sale-price slabs or length-based rates, leaving no scope for provisional assessment; such clearances were on final assessment basis. Consequently, the extended period in the proviso to Section 11A(1) is inapplicable where no provisional assessment exists and there is no allegation of suppression or fraud. The Tribunal therefore held that demands beyond the normal six-month limitation period are barred and cannot be sustained. The Tribunal directed that quantification of duty for the six-month normal period (and any determinations after finalisation of provisional assessments for the earlier period) be carried out by the jurisdictional original authority in remand proceedings. [Paras 11, 14, 15, 17]

For March 1, 1983 to December 27, 1990 demands are sustainable only to the extent within the normal six-month period; demands beyond six months are barred by limitation and must be quantified by the adjudicating authority.

Penalty under Rule 173Q - provisional assessment - Whether penalty under Rule 173Q is imposable on the appellant in the facts of this case. - HELD THAT: - Applying the Supreme Court's reasoning in Commissioner of Central Excise v. Grasim Industries Ltd., and having regard to the existence of conflicting tribunal decisions and the history of provisional assessments and bona fide positions taken by the appellant, the Tribunal held that penalty should not be imposed. The Tribunal found no material to conclude that the appellant acted fraudulently or with intent to evade duty, especially where questions of excisability were the subject of earlier contrary tribunal views and subsequent appellate determinations. Accordingly, the penalty imposed by the impugned order was held to be illegal and was set aside. [Paras 16, 18]

Penalty under Rule 173Q is set aside; no penalty is imposable in the instant case.

Final Conclusion: The impugned adjudication order is set aside; the demand for 01.03.73 to 28.02.83 is premature and cannot be adjudicated until provisional assessments are finalised, demands for March 1, 1983 to December 27, 1990 are sustainable only within the normal six month limitation and must be quantified by the adjudicating authority, and the penalty under Rule 173Q is deleted; the matter is remanded to the original adjudicating authority for de novo adjudication and quantification after affording personal hearing and completing actions directed herein.

Manufacture - benefit of concessional excise notification - clearances by 100% EOU to DTA liable to duty equivalent to customs duty - effective rate of duty (and not tariff rate) for levy of additional duty/CVD on EOU clearances

Manufacture - benefit of concessional excise notification - effective rate of duty (and not tariff rate) for levy of additional duty/CVD on EOU clearances - Segregation of imported scrap undertaken by the appellant amounts to manufacture and entitles the appellant to clearances to DTA at the concessional rate under Notification No. 23/2003-CE dated 31.03.2003. - HELD THAT: - The Tribunal found that the appellant's unit was established prior to 01.04.2002 with a valid Letter of Permission for segregation of ferrous and non-ferrous scrap and that such segregation activity has been treated as manufacture by the competent authorities and by DGFT circulars. Relying on its earlier decisions and on the settled principle that additional duty (CVD) or duty on clearances by EOUs to DTA is to be reckoned with reference to the effective rate rather than the tariff rate, the Tribunal concluded that the unit's activity falls within the scope of manufacture and therefore the appellant is entitled to the concessional rate under Notification No. 23/2003-CE. The Tribunal rejected the lower authorities' view denying the notification benefit and held that certified end-use evidence produced by the appellant cannot be narrowly dismissed where the legal conditions for the notification are satisfied. Applying these legal principles to the material facts, the demand of differential duty was held unsustainable and the impugned order was set aside. [Paras 5, 6, 7]

Appeal allowed; the appellant's segregation activity is manufacturing and entitlement to Notification No. 23/2003-CE is sustained, impugned order set aside with consequential relief, if any.

Final Conclusion: The Tribunal allowed the appeal, holding that the segregation activity undertaken by the 100% EOU amounts to manufacture and that the appellant was entitled to clearances to DTA at the concessional rate under Notification No. 23/2003-CE; the demand of differential duty was set aside.

Show cause notice - limitation - extended period of limitation - suppression or fraud - cenvat credit on CVD paid through DEPB

Show cause notice - limitation - extended period of limitation - suppression or fraud - cenvat credit on CVD paid through DEPB - Validity of the show cause notice qua limitation and whether the proviso to Section 11A was invocable on account of alleged suppression/fraud in respect of cenvat credit taken on CVD paid through DEPB - HELD THAT: - The Tribunal found that the appellant was a registered manufacturer who maintained regular books of account and filed periodical returns. The Department did not contend that returns were not filed or that any column was left blank; the SCN was based on information derived from the appellant's records. The appellant's claim of cenvat credit for CVD debited through the DEPB pass book was held to be bona fide. The Tribunal noted precedent of this Tribunal in Precision Pipes and Profiles Ltd. 2019 (2) TMI 1097 - CESTAT ALLAHABAD, and earlier decisions including Havels India and Neel Kanth Rubber Mills , which supported that non-disclosure in returns of information not required to be declared does not amount to suppression or fraud. Having regard to these facts and authorities, the Tribunal concluded there was no element of suppression or fraud to invoke the extended period; consequently the SCN is hit by limitation. [Paras 13, 14]

SCN barred by limitation; extended period under proviso to Section 11A not invocable as there was no suppression or fraud; appeal allowed and impugned order set aside with consequential reliefs.

Final Conclusion: The appeal is allowed: the show cause notice issued invoking the extended period is time barred because there was no suppression or fraud in respect of cenvat credit claimed for CVD paid through DEPB; the impugned orders are set aside and consequential relief to the appellant is directed.

Amnesty Scheme - Benefit of amnesty for pending arrears and disputes - Revised and modified assessment orders - Portal malfunction defeating statutory option - Obligation to accept option exercised within 30 days of communication of order

Amnesty Scheme - Benefit of amnesty for pending arrears and disputes - Portal malfunction defeating statutory option - Whether the petitioner was entitled to claim the benefit of the Amnesty Scheme, 2020 despite being unable to file the amnesty application on the department's web portal after receipt of the modified assessment order. - HELD THAT: - The Court found on the material before it that the petitioner received the modified assessment order on 01-02-2021 and, within 30 days thereafter, sought to exercise the option under the Amnesty Scheme 2020. The petitioner attempted to file the option but was denied access by the department's online portal and produced contemporaneous communications evidencing the refusal. The system refusal was contrary to the terms of the Amnesty Scheme and the petitioner cannot be faulted for being unable to access the portal. Consequently, the denial of the petitioner's application on the ground of expiry of time, when the rejection resulted from the portal error, was without basis. The Court therefore held that the petitioner was entitled to the benefit of the Amnesty Scheme 2020 and that the respondents were bound to accept the petitioner's application exercising the option under that scheme. [Paras 10, 11, 12, 13]

Petitioner entitled to claim benefit of the Amnesty Scheme 2020; denial by portal was invalid and respondents were bound to accept the petitioner's option.

Revised and modified assessment orders - Obligation to accept option exercised within 30 days of communication of order - Relief to be granted to the petitioner to effectuate acceptance of the amnesty option and payment despite prior portal rejection. - HELD THAT: - Having held that the petitioner was entitled to the Amnesty Scheme 2020, the Court directed respondents to accept the petitioner's exercise of option and to permit payment either online or physically. The Court prescribed a time-bound remedy, permitting the petitioner to make payment within 30 days from receipt of a copy of the judgment, thereby enabling the petitioner to obtain the scheme's benefit notwithstanding earlier technical denial. [Paras 13, 14]

Respondents directed to accept the petitioner's option for Amnesty Scheme 2020 and permit payment within 30 days from receipt of this judgment.

Final Conclusion: Writ petition disposed of by directing the respondents to accept the petitioner's exercise of option under the Amnesty Scheme 2020 and permit payment (online or physically) within 30 days from receipt of a copy of this judgment, on account of the department's portal having wrongly denied access.

Repeal and savings - saving clause - revisional jurisdiction - limitation on revisional powers - reasonable time doctrine

Repeal and savings - saving clause - Whether Section 64(3) of the Himachal Pradesh Value Added Tax Act, 2005 saved revisional proceedings under the repealed HPGST Act which were not pending on the date of commencement of the VAT Act. - HELD THAT: - The Court held that Sub section (3) of Section 64 saves only those assessments, appeals, revisions or other proceedings arising under the HPGST Act and the rules made thereunder which were pending before a competent authority immediately preceding the commencement of the VAT Act. On the date the VAT Act came into force no proceedings under the HPGST Act were pending against the petitioner; consequently Section 64(3) did not operate to validate revisional proceedings which were initiated after commencement of the VAT Act and which were not in existence on that date. The Tribunal's reading that Section 64(3) saved such subsequently initiated proceedings was erroneous. [Paras 10]

Section 64(3) does not save revisional proceedings under the HPGST Act which were not pending immediately before the VAT Act commenced; the Tribunal's contrary conclusion cannot stand.

Revisional jurisdiction - limitation on revisional powers - Whether the limitation prescribed by Section 46(1) of the VAT Act applies to bar the Revisional Authority from reopening the order dated 10.10.2002 by initiating revision after more than five years. - HELD THAT: - The Court found that the bar of limitation contained in Section 46(1) of the VAT Act, which requires initiation of revisional proceedings within five years of the notice of the order sought to be revised, applied to the facts of this case. The Revisional Authority initiated suo motu revision in 2009, seven years after the Appellate Authority's order of 10.10.2002; that exercise of revisional power was therefore beyond the prescribed five year period and impermissible. The Revisional Authority could not lawfully revise the earlier order once the statutory period had lapsed. [Paras 11, 15]

The limitation in Section 46(1) of the VAT Act barred the Revisional Authority from reopening the 10.10.2002 order after more than five years; the revisional exercise was impermissible.

Revisional jurisdiction - reasonable time doctrine - Even if no statutory limitation existed, whether exercise of revisional power after seven years was unreasonable and liable to be struck down. - HELD THAT: - The Court reiterated settled law that where a statute prescribes no time limit for exercise of revisional power, such power must be exercised within a reasonable time and cannot be exercised in perpetuity. Reliance was placed on the Supreme Court's decision in Santosh Kumar Shivgonda Patil (supra) to the effect that undue delay may cause grave prejudice and unsettle settled rights. Applying that principle, exercise of revisional jurisdiction by the Revisional Authority after seven years was held not to be within a reasonable period and therefore unjustified. [Paras 12, 13, 14]

Exercise of revisional jurisdiction after seven years was not within a reasonable time and, even absent a statutory limitation, was liable to be set aside.

Final Conclusion: The Tribunal's order affirming the Revisional Authority was set aside; the Revisional Authority's suo motu reopening of the Appellate Authority's order of 10.10.2002 (relating to years 1995-96, 1996-97 and 1997-98) was impermissible both under the statutory five year limitation and as an unreasonable belated exercise of revisional power. Revision petition allowed and disposed of with no order as to costs.

Maintainability of prosecution under Section 138 of the Negotiable Instruments Act against directors without arraigning the company - vicarious liability of directors - arraignment of the company as a necessary party under Section 141 - conditions precedent in the proviso to Section 138 - requirement of specific averments as to role of directors - magistrate's duty to scrutinize preliminary evidence (Pepsi Foods principle) - power of High Court under Section 482 Cr.P.C. to quash proceedings

Maintainability of prosecution under Section 138 of the Negotiable Instruments Act against directors without arraigning the company - arraignment of the company as a necessary party under Section 141 - requirement of specific averments as to role of directors - conditions precedent in the proviso to Section 138 - Complaint under Section 138 NI Act against directors is not maintainable where the company is not arraigned and there are no specific averments showing commission of the offence by the company or the role of the directors as persons in charge and responsible. - HELD THAT: - The Court held that commission of the offence by the company is an express condition precedent to attract vicarious liability of others; the words "as well as the company" in the deeming provision mean that the company must be capable of being prosecuted before vicarious liability of directors can be invoked. The proviso to Section 138 prescribes distinct conditions which must be pleaded and proved. Reliance was placed on the ratio in Aneeta Hada and subsequent decisions which require arraignment of the company as an accused and specific, clear averments as to how the directors were in charge of and responsible for the conduct of the company's business. Where cheques are shown to have been issued on behalf of the company and the company is not impleaded, a prosecution simplicitor against directors without particularised allegations as to their role is unsustainable. [Paras 4, 9, 11, 13]

The complaint against the directors without arraigning the company and without specific averments as to their role is not maintainable.

Magistrate's duty to scrutinize preliminary evidence (Pepsi Foods principle) - power of High Court under Section 482 Cr.P.C. to quash proceedings - quashing of proceedings where lower courts failed to apply binding law - High Court entertained petitions under Section 482 Cr.P.C. and quashed the criminal proceedings because the magistrate and the Sessions Judge failed to apply the binding legal principles requiring arraignment of the company and specific averments against directors. - HELD THAT: - The Court observed that at the stage of framing charges the Magistrate is required to scrutinize the evidence and not be a silent spectator; where the Magistrate summoning the accused and the Sessions Judge in revision failed to take into account the settled Supreme Court precedents on arraignment and requisite averments, exercise of inherent jurisdiction under Section 482 was justified. Applying the Pepsi Foods principle and the precedents cited, the High Court concluded that the lower courts erred in law in permitting continuance of prosecutions against the directors without impleading the company and without prescribed averments. [Paras 14, 15]

Petitions allowed and the impugned orders and the criminal proceedings pending before the JMFC, Raipur, are quashed.

Final Conclusion: The High Court allowed the petitions under its inherent jurisdiction, holding that prosecutions under Section 138 NI Act against directors cannot be maintained without arraigning the company and without specific averments as to the directors' role; therefore the impugned summoning orders and the criminal proceedings against the petitioners were quashed.