TaxTMI Updates e-Newsletter
Apr 14,2023

Determination of tax under Section 74 for fraud, willful misstatement or suppression of facts coupled with intent to evade - requirement to furnish to the assessee material relied upon (SIB report) before adjudication - prohibition on resort to best judgment assessment or Income Tax guidelines while adjudicating under Section 74 - need for reasoned appellate order when substituting or quantifying demand

Determination of tax under Section 74 for fraud, willful misstatement or suppression of facts coupled with intent to evade - requirement to furnish to the assessee material relied upon (SIB report) before adjudication - prohibition on resort to best judgment assessment or Income Tax guidelines while adjudicating under Section 74 - Validity of the assessment and quantification of tax and penalty under Section 74 in absence of supply of the SIB report and on the basis of Income Tax guidelines / best judgment methodology - HELD THAT: - The Court examined the scheme of the UPGST Act distinguishing normal assessment (Section 73) and determination for reasons of fraud, willful misstatement or suppression (Section 74). The sole foundation for issuance of the show cause notice was the SIB report which was never placed on record or shown to have been furnished to the petitioner; the impugned adjudication does not record supply or consideration of that report. Rather than quantifying tax in accordance with the statutory mandate under Section 74 by demonstrating specific supplies, time and value and the requisite culpability, the adjudicating authority applied guidelines issued to Income Tax authorities and adopted an average profit percentage (best judgment approach). The Court held that such best judgment assessment (a method permissible under Section 62 and in cases of non filing) is impermissible in the present context where returns were filed and determination under Section 74 requires specific findings linking non payment to fraud, willful misstatement or suppression with reasoned quantification. For these reasons the assessment and penalty quantified by the adjudicating authority did not conform to the statutory requirements of Section 74 and are unsustainable. [Paras 12, 13, 14, 15, 16]

Adjudicating authority's assessment and quantification under Section 74 quashed for being contrary to the statutory mandate and for relying on guidelines/best judgment and without furnishing the SIB report to the petitioner.

Need for reasoned appellate order when substituting or quantifying demand - requirement to disclose basis when reducing or re quantifying assessed liability - Validity of the appellate authority's order which partially allowed the appeal but re quantified tax and penalty without recording reasons - HELD THAT: - The appellate order disapproved the method adopted by the adjudicating authority but nonetheless proceeded to quantify and impose a reduced demand and penalty without disclosing any basis or reasoning for such quantification. The Court found that an appellate authority must record reasons when it substitutes or re computes the quantum of demand; the absence of any disclosed basis renders the appellate decision legally infirm. Consequently, the appellate order could not stand. [Paras 15, 16, 17]

Appellate authority's order quashed for lack of reasons and unlawful re quantification of liability.

Final Conclusion: Impugned adjudicating and appellate orders are quashed; both writ petitions are allowed. Any amounts deposited by the petitioner shall be refunded on appropriate application in accordance with law.

Grant of bail under Section 439 Cr.P.C. - economic offence - deposit as condition for bail - input tax credit evasion - personal bond and sureties - trial court to record receipt of deposit

Grant of bail under Section 439 Cr.P.C. - economic offence - deposit as condition for bail - input tax credit evasion - personal bond and sureties - trial court to record receipt of deposit - Application for regular bail of the accused-petitioner in proceedings under the Central Goods and Services Tax Act, 2017 - HELD THAT: - The court proceeded on the admitted factual position that the petitioner had evaded tax and obtained input tax credit benefit of nearing Rs.88.33 crores and noted the established principle that economic offenders are not to be treated as ordinary offenders. Without expressing any opinion on the merits, the court balanced these considerations and exercised its discretion under Section 439 Cr.P.C. to enlarge the petitioner on bail subject to a monetary condition. The petitioner was directed to deposit a sum of Rs.5 crores before the respondent Department 'under protest' as a condition precedent to the grant of bail. The court further required the furnishing of a personal bond with two sureties and stipulated attendance at trial, and directed the trial court to take on record the receipt for the deposit before attesting the bail bonds. The order was framed as a supervisory grant of bail while leaving the merits of the prosecution to trial. [Paras 7, 8, 9, 10]

Bail allowed under Section 439 Cr.P.C. on condition that the petitioner deposits Rs.5 crores 'under protest', furnishes a personal bond with two sureties, attends trial as required, and the trial court records the receipt of the deposit before attesting the bail bonds.

Final Conclusion: Bail application allowed; petitioner enlarged on bail subject to deposit of Rs.5 crores under protest, execution of personal bond and sureties, compliance with trial attendance, and recording of the deposit receipt by the trial court.

Refund of excess GST paid on account of erroneous invoice treatment - refund claim limitation under Section 54 of the CGST Act - application accompanied by documentary evidence under Rule 89(2) is not rendered non est by issuance of a deficiency memo - interpretation of Rule 90(3) regarding filing of a fresh refund application and its effect on limitation

Refund of excess GST paid on account of erroneous invoice treatment - refund claim limitation under Section 54 of the CGST Act - application accompanied by documentary evidence under Rule 89(2) is not rendered non est by issuance of a deficiency memo - Whether the petitioner's online refund application filed on 17.01.2020 is to be treated as the application for the purposes of limitation under Section 54 and not as a fresh application filed after rectification of deficiencies - HELD THAT: - The Court found that the petitioner had filed an online refund application on 17.01.2020 within the limitation period prescribed by Section 54 and that the Adjudicating Authority and the Appellate Authority proceeded on a palpably erroneous premise by treating a later filing or the response to the Deficiency Memo as the effective date of filing. Where an application is accompanied by the documentary evidences required by Rule 89(2), issuance of a Deficiency Memo seeking further clarifications does not convert the original application into a non est filing for limitation purposes. Rule 90(3) cannot be applied to treat an application, which is not deficient in material particulars and which contains the documentary evidences specified in Rule 89(2), as requiring a "fresh" application such that the period of limitation starts afresh only on rectification. The limitation stops on filing the application that is complete in the material particulars prescribed by Rule 89(2); further requests for clarification do not postpone the date of filing for the purpose of Section 54. The Court accordingly concluded that the impugned orders rejecting the refund as time-barred were founded on an erroneous application of Rule 90(3) and on a misreading of the online filing on 17.01.2020 (paras. 19, 27-29). [Paras 19, 27, 28, 29]

The petitioner's online refund application dated 17.01.2020 must be treated as the application for the purposes of limitation under Section 54 and cannot be rendered non est merely because a Deficiency Memo sought further documents or clarifications.

Interpretation of Rule 90(3) regarding filing of a fresh refund application and its effect on limitation - Whether Rule 90(3) authorises treating a refund application as non est and requiring filing of a fresh application such that limitation runs from the date of rectification - HELD THAT: - The Court held that Rule 90(3) cannot be applied to the effect that an application which is accompanied by the documentary evidences specified in Rule 89(2) is to be treated as non est solely because the proper officer issues a Deficiency Memo seeking further clarifications. While further clarification may be called for, that does not justify treating the initial application as ineffective for limitation purposes; consequently, the Adjudicating Authority's reliance on Rule 90(3) to treat the date of rectification as the filing date was erroneous (paras. 27-29). [Paras 27, 28, 29]

Rule 90(3) cannot be applied to displace the filing date of an otherwise materially complete refund application by treating it as non est; limitation is not to be restarted merely on rectification demanded by a Deficiency Memo.

Remand for fresh consideration - Whether the matter should be remanded to the Adjudicating Authority for fresh consideration in the light of the Court's observations - HELD THAT: - Having found the Adjudicating Authority and the Appellate Authority to have proceeded on erroneous premises regarding the effective filing date and the application of Rule 90(3), the Court set aside the impugned orders and remanded the matter to the Adjudicating Authority to decide the refund claim afresh in accordance with the observations made in the judgment (para. 31). The Court recorded that the petitioner's counsel did not press challenges to the validity of Rules 89(2) and 90(3), and therefore the Court's decision confines itself to the interpretation and application issues addressed. [Paras 31]

Impugned orders set aside and matter remanded to the Adjudicating Authority for fresh consideration in light of the Court's observations.

Final Conclusion: The orders of the Adjudicating Authority and the Appellate Authority rejecting the petitioner's refund claim as time-barred are set aside. The petitioner's online refund application dated 17.01.2020 is to be treated as the filing for limitation purposes, Rule 90(3) cannot be used to render an otherwise materially complete application non est pending clarification, and the matter is remanded to the Adjudicating Authority to decide the refund claim afresh in accordance with the Court's observations.

Extension of limitation by suo motu orders of the Supreme Court - refund of IGST on export of services - time-bar / limitation under Section 54 - reconsideration on merits after remand

Extension of limitation by suo motu orders of the Supreme Court - time-bar / limitation under Section 54 - Whether the Appellate Authority erred in rejecting the refund claim as time barred without applying the Supreme Court's orders extending limitation - HELD THAT: - The Court found that both the First Authority and the Appellate Authority did not take into account the orders of the Hon'ble Supreme Court in the Suo Motu Writ Petition extending the period of limitation. The petitioner's contention that the limitation period was extended by those orders was not considered in the impugned orders, which merely relied on general effects of the pandemic. Given this omission, the impugned appellate order could not stand. The appropriate remedy is to quash the appellate order and restore the appeal for fresh consideration of the limitation issue in the light of the Supreme Court's extension of limitation, leaving the question of merit to be decided thereafter. [Paras 6, 7, 8]

Impugned appellate order set aside and the appeal restored for fresh consideration of limitation in light of the Supreme Court's suo motu orders; no decision on merits of the refund claim.

Refund of IGST on export of services - reconsideration on merits after remand - Direction for further adjudication once limitation is determined and timeline for disposal - HELD THAT: - The Court directed that if the Appellate Authority finds the claim to be within the extended limitation period, it should proceed to adjudicate the refund claim on its merits. The matter is remanded for fresh adjudication by Respondent No.3, with the appellate authority required to decide the appeal afresh and on its own merits after applying the Supreme Court's orders on limitation. A time-bound direction was given to dispose of the appeal within 12 weeks from the date of uploading of this order, subject to earlier time bound commitments. [Paras 8, 9]

Appellate Authority to decide the appeal afresh on limitation and, if within limitation, on merits; decision to be rendered within 12 weeks from upload of this order.

Final Conclusion: The appellate order dated 29 October 2021 is quashed and set aside; the petitioner's appeal is restored for fresh consideration of limitation in the light of the Supreme Court's suo motu orders and, if found within limitation, for adjudication on merits by the Appellate Authority within 12 weeks from upload of this order.

Speaking order - power under section 25 of the MVAT Act, 2002 - revision-like power - opportunity under section 25(3) of the MVAT Act, 2002 - reliance on administrative Circular No. 35A - notice under Rule 142(1) of the CGST Rules, 2017 - Form 309 under the MVAT Rules, 2005 - quash and remit

Power under section 25 of the MVAT Act, 2002 - speaking order - reliance on administrative Circular No. 35A - Validity of the impugned order dated 4 October 2022 passed under section 25 of the MVAT Act, 2002 - HELD THAT: - The Court held that exercise of power under section 25 is akin to a revisionary power exercisable by the Commissioner over orders of subordinate officers and therefore may have consequences for the taxpayer; consequently the order must be a speaking order specifying the reasons for the exercise of that power. The impugned order relied solely on Circular No. 35A without any discussion or statutory reasoning as to why transitional VAT credit declared in a revised return was impermissible; that reliance alone did not satisfy the requirement that the Commissioner state the reason for exercising power under section 25. Because the foundational basis of the impugned order was confined to the Circular and the order lacked independent, reasoned findings applying the statutory scheme, it could not stand. [Paras 7, 8, 9, 10, 11]

Impugned order dated 4 October 2022 quashed for being non-speaking and for relying solely on Circular No. 35A without independent statutory reasoning.

Opportunity under section 25(3) of the MVAT Act, 2002 - revision-like power - Procedural safeguards and future exercise of section 25 power - HELD THAT: - The Court emphasised that because the Commissioner's power under section 25 can affect the taxpayer, the statutory safeguard of opportunity to be heard under section 25(3) must be respected and any subsequent order must set out reasons. The parties acknowledged that the re-exercise of section 25 in relation to the order in question would be within the period of limitation. The Court directed that if the respondents proceed afresh they must issue notice as required by law and pass a reasoned order after hearing the petitioner. [Paras 8, 10, 11, 12]

If respondents re-exercise power under section 25 they must issue notice, afford the statutorily mandated opportunity, and pass a reasoned order.

Notice under Rule 142(1) of the CGST Rules, 2017 - Form 309 under the MVAT Rules, 2005 - Status of earlier show cause notice dated 18 September 2019 and identification of the operative notice - HELD THAT: - The respondents clarified that the show cause notice dated 18 September 2019 under Rule 142(1) of the CGST Rules, 2017 was not pursued and the operative proceedings were founded on the notice dated 21 June 2022 issued under Rule 30 of the MVAT Rules, 2005 in Form 309. In view of this clarification the Court found it unnecessary to set aside the earlier notice which was effectively abandoned. [Paras 6]

Show cause notice dated 18 September 2019 was not proceeded with and is regarded as abandoned; the notice dated 21 June 2022 (Form 309) is the relevant notice underpinning the impugned order.

Quash and remit - Remedial direction following quashing of the impugned order - HELD THAT: - Having quashed the impugned order, the Court remitted the matter to the respondents with a direction that, if they choose to proceed under section 25 of the MVAT Act, 2002, they shall issue fresh notice to the petitioner, afford the opportunity contemplated by the statute, and pass reasoned orders. The respondents undertook to complete any fresh proceedings under section 25 within six weeks from the date of the order. [Paras 11, 12]

Order quashed and matter remitted; respondents to complete any fresh proceedings under section 25 within six weeks after issuing appropriate notice and hearing.

Final Conclusion: The impugned order dated 4 October 2022 passed under section 25 of the MVAT Act, 2002 is quashed for being non-speaking and for relying solely on Circular No. 35A; the earlier show cause notice dated 18 September 2019 is abandoned; respondents may, within limitation, re-exercise section 25 only after issuing fresh notice, affording the petitioner the statutory opportunity to be heard and passing a reasoned order, the respondents undertaking to complete such proceedings within six weeks.

Provisional release of goods on bank guarantee - Movement of goods under Section 130 of the Central Goods and Services Tax Act, 2017 - Tax and penalty demand following MOV-11 order - Deposit of bank guarantee to secure tax demand - Appealability of MOV-11 order to the First Appellate Authority

Provisional release of goods on bank guarantee - Deposit of bank guarantee to secure tax demand - Tax and penalty demand following MOV-11 order - Direction for provisional release of the goods upon deposit of a bank guarantee equal to the tax and penalty demand quantified in MOV-11. - HELD THAT: - The Court noted that a final order in MOV-11 had been passed on 20.02.2023 assessing tax and penalty and creating a demand of the stated amount. The petitioner offered to deposit a bank guarantee corresponding to that demand and sought release of the goods. In view of the pendency of statutory remedy (the MOV-11 order being appealable to the First Appellate Authority) and the petitioner's undertaking to furnish security, the Court directed the competent authority to provisionally release the goods upon deposit of a bank guarantee for the amount of the demand. The order effects a conditional relief without adjudicating the merits of the MOV-11 assessment.

If the petitioner deposits a bank guarantee for the amount of the demand in MOV-11, the competent authority shall provisionally release the goods in question.

Final Conclusion: Writ petition disposed of by directing provisional release of the goods upon deposit of a bank guarantee equal to the demand quantified in MOV-11; the MOV-11 order remains appealable to the First Appellate Authority.

Detention of goods - E-Way Bill - wrong description of vehicle class - tax and penalty for mis-declaration - bank guarantee - appeal to Appellate Authority - consideration of issue pending before the Supreme Court

Detention of goods - E-Way Bill - wrong description of vehicle class - tax and penalty for mis-declaration - Writ petition challenging detention of goods and demand of tax and penalty disposed of by granting liberty to file an appeal before the Appellate Authority. - HELD THAT: - The High Court noted that the vehicle was intercepted after an E-Way Bill showed the vehicle class as 'ODC' though the vehicle was a normal truck; tax and penalty were imposed on the transporter for the mis-description. Rather than adjudicating the merits, the court disposed of the writ petition by permitting the petitioner to file an appeal against the impugned action. The Court directed that the Appellate Authority, when deciding the appeal, shall consider the matter in its entirety, including the legal question that is pending before the Hon'ble Supreme Court. The order therefore leaves the substantive controversy to the appellate process while ensuring that the appellate forum takes into account all relevant aspects and pending higher court proceedings. [Paras 5]

Liberty granted to the petitioner to file an appeal; Appellate Authority to consider the matter in its entirety including the issue pending before the Supreme Court.

Bank guarantee - appeal to Appellate Authority - Prayer for release of the bank guarantee rejected; bank guarantee to remain in force pending disposal of the appeal. - HELD THAT: - The petitioner sought release of the bank guarantee furnished for release of goods. The High Court declined to direct release and ordered that the bank guarantee furnished by the petitioner shall continue until the appeal filed before the Appellate Authority is decided. This preserves the existing security while the appellate forum examines the challenge to detention, tax and penalty. [Paras 5]

Bank guarantee to continue in force until the appeal is decided.

Final Conclusion: Writ petition disposed of by granting liberty to the petitioner to file an appeal; the Appellate Authority directed to consider the matter fully, including the issue pending before the Supreme Court; the bank guarantee furnished by the petitioner to remain in force until the appeal is decided.

Abatement of assessment proceedings - application of Section 153A - application of Section 153C - effective date for abatement - stay of demand in income tax proceedings - prima facie consideration in stay applications - reconsideration of stay terms

Abatement of assessment proceedings - application of Section 153A - application of Section 153C - effective date for abatement - prima facie consideration in stay applications - reconsideration of stay terms - Whether the first respondent correctly addressed, for the purpose of granting stay, whether the assessment proceedings in respect of the petitioner stood abated and which provision-Section 153A or Section 153C-governed the effective date for abatement. - HELD THAT: - The Court held that the question of abatement and the correct effective date (whether the date of search under the proviso to Section 153A or the date of receipt of seized/requisitioned books/documents under Section 153C) is material to the terms on which a stay of demand should be granted. A prima facie opinion on this legal question was necessary when deciding the petitioner's stay application because the petitioner was both the searched person's secretary and an independent assessee whose scrutiny assessment was pending as on the date of search. The first respondent's order merely recorded conclusions without examining whether abatement arose under Section 153A or under Section 153C (and if under Section 153C, the date on which the AO received seized books/documents), and therefore failed to consider relevant determinative legal aspects that could have moderated the terms of stay. For these reasons the Court found interference justified and directed reconsideration of the stay petition in light of the observations, permitting the petitioner an opportunity of hearing and preserving his liberty to press other grounds before the first respondent.

Impugned order quashed and the matter restored to the first respondent for fresh consideration of the stay petition with specific examination of whether abatement applies under Section 153A or Section 153C (and the effective date), with opportunity of hearing to the petitioner and liberty to advance other grounds.

Final Conclusion: The petition is allowed in part: the impugned order dated 17.02.2023 is quashed and the matter is remanded to the first respondent for reconsideration of the stay application in the light of the Court's observations on abatement under Sections 153A/153C and the effective date; the petitioner is granted a hearing and liberty to urge additional grounds, and no precipitative recovery action shall be taken until reconsideration.

Unexplained investments - treatment of closing stock in income assessment - application of Section 69 of the Income Tax Act, 1961 - proof of source for investment in house property - admissibility of valuation report not placed before first appellate authority

Treatment of closing stock in income assessment - unexplained investments - application of Section 69 of the Income Tax Act, 1961 - Deletion of addition of Rs.6,90,876 made on account of alleged undisclosed investment in stock. - HELD THAT: - The Commissioner (Appeals) found that the assessee had shown a higher value of closing stock in the books (thus admitting more income) than the value computed by the Assessing Officer, and therefore the Assessing Officer was not justified in treating the difference as investment from undisclosed sources. The Tribunal reached an opposite conclusion by presuming suppressed sales were invested in stock, but there was no material to support that inference. Section 69 applies to investments not recorded in the books; where the closing stock is reflected in the assessee's books, it cannot be treated as unexplained investment not recorded in the books. In absence of material justifying the Tribunal's presumption, the addition could not be sustained. [Paras 12, 13, 14, 15, 16]

Addition of Rs.6,90,876 on account of alleged undisclosed investment in stock deleted; Tribunal's finding reversed.

Proof of source for investment in house property - admissibility of valuation report not placed before first appellate authority - unexplained investments - Validity of partial addition of Rs.2,56,772 upheld by Tribunal in respect of alleged unexplained investment in house property, and whether that addition should stand. - HELD THAT: - The Commissioner (Appeals) accepted the assessee's explanations and documentary sources (bank loan, amounts declared under VDIS and disclosed income) and observed that the Assessing Officer could have referred the matter to the departmental Valuation Cell. The Tribunal relied on extracts from a valuation report filed before it (without showing how a valuation report not produced to the first appellate authority was placed before the Tribunal or furnished to the assessee) and arrived at a residual unexplained amount. The High Court held that reliance on valuation extracts not placed before the first appellate authority and not furnished to the assessee was improper. Further, the amounts accepted as explained by CIT(A) (bank loan, VDIS disclosure and admitted income) together exceeded the alleged unexplained investment, so the Tribunal's partial addition was unsustainable. [Paras 17, 18, 19, 20]

Tribunal's partial restoration of the Assessing Officer's addition of Rs.2,56,772 is set aside; the addition deleted.

Final Conclusion: Both substantial questions answered in favour of the assessee; the Tribunal's reinstatement of the additions (in relation to closing stock and house property) is set aside and the additions deleted; appeal allowed.

Maintainability of appeal under Section 253(1) of the Income Tax Act - definition of "assessee" for locus to appeal - appealability of orders under Sections 246 and 253 - revision proceedings under Section 263 - scope and maintainability - tax deduction at source under Section 192 - deduction at the time of payment - taxability of foregone or waived accrued salary

Maintainability of appeal under Section 253(1) of the Income Tax Act - definition of "assessee" for locus to appeal - Whether the appellant had locus to prefer an appeal to the Tribunal against the order dated 07.01.2021 passed in revision proceedings. - HELD THAT: - The Tribunal examined the statutory scheme defining who may file an appeal. Section 253(1) permits appeals before the Tribunal by an "assessee" aggrieved by specified orders. The Act's definition of "assessee" was analysed to include persons by whom tax or any other sum is payable or those in respect of whom proceedings under the Act have been taken, including an assessee in default. The record showed that the proceedings before the lower authority were directed against the bank as the deductor and that the appellant was neither the deductor nor an "assessee" or assessee in default in those proceedings. Consequently the appellant lacked the statutory locus to file the appeal under Section 253(1) against the revision order dated 07.01.2021 and the appeal was not maintainable on that ground. [Paras 8, 9, 10, 11]

Appeal dismissed as not maintainable for want of locus of the appellant to challenge the revision order under Section 253(1).

Tax deduction at source under Section 192 - deduction at the time of payment - taxability of foregone or waived accrued salary - Whether the employer had a liability to deduct TDS on the portion of salary that was foregone pursuant to the settlement agreement. - HELD THAT: - The Tribunal applied the settled statutory rule that Section 192 requires deduction of tax at source at the time of actual payment of salary. On the admitted facts there was no actual payment of the foregone amounts under the settlement; the amounts were not paid to the appellant but were foregone. While the Bench observed that a foregone salary, after accrual, may be chargeable to tax in the hands of the employee, that possibility does not impose upon the employer an obligation to deduct TDS on an accrual basis. Thus there was no default by the deductor in deducting TDS where no payment was made, and the grounds asserting employer's liability to have deducted TDS on accrual were unsustainable. [Paras 12, 13]

No liability on the employer to deduct TDS on the foregone amount because Section 192 mandates deduction at the time of payment and there was no payment.

Final Conclusion: The appeal is dismissed: it is not maintainable because the appellant lacked statutory locus to challenge the revision order, and on the merits there was no obligation on the employer to deduct TDS on the foregone amounts since Section 192 requires deduction at the time of actual payment.

Validity of approval under section 153D of the Income-tax Act - Quashing of assessment under section 153A for invalid 153D approval - Requirement of independent application of mind by the approving authority - Binding effect of coordinate Bench decisions (stare decisis)

Validity of approval under section 153D of the Income-tax Act - Requirement of independent application of mind by the approving authority - Quashing of assessment under section 153A for invalid 153D approval - Approval granted under section 153D was not in accordance with law and, being vitiated, rendered the assessment framed under section 153A void and liable to be quashed. - HELD THAT: - The Tribunal examined the consolidated approval relied upon by the Revenue and the findings of coordinate benches which scrutinised identical approval formats. Those decisions held that the approving authority must apply independent, judicial or quasi judicial mind to the material before it; where approval is given mechanically (for example, on the same day without assessment records or verification of figures) it is not in accordance with law. Applying the principle that an approval which goes to the root of jurisdiction cannot be exercised casually, and following the cited coordinate Bench decisions which found non application of mind in materially similar circumstances, the Tribunal concluded that the approval under section 153D was invalid. Consequentially, the assessment framed under section 153A, which depended on that approval, was quashed. Because the assessment was set aside for lack of valid approval, the Tribunal did not adjudicate the merits of the additions and treated the Revenue's substantive appeal as infructuous. [Paras 10]

The section 153D approval is invalid for want of application of mind and the assessment under section 153A is quashed; the Revenue's appeal is dismissed as infructuous.

Final Conclusion: Cross objection allowed; assessment for AY 2015 16 framed under section 153A quashed on account of invalid approval under section 153D; Revenue's appeal dismissed as infructuous.

Penalty under section 272A(1)(d) - failure to comply with notice under section 142(1) - reasonable cause for non-compliance - electronic service of notices / e-filing portal - deletion of penalty on bonafide / non-deliberate default

Penalty under section 272A(1)(d) - failure to comply with notice under section 142(1) - reasonable cause for non-compliance - electronic service of notices / e-filing portal - Whether the penalty under section 272A(1)(d) for non-compliance with section 142(1) notices could be sustained where the assessee failed to notice electronically-served notices but subsequently complied and participated in assessment proceedings. - HELD THAT: - The Tribunal noted that the assessee ultimately participated in assessment proceedings and the assessment order was passed under section 143(3). The assessee's explanation that she was not computer literate, notices were served electronically in the transitional year 2019, and that she came to know of the proceedings only after her CA informed her, was found to be consistent and bonafide. The Tribunal relied on a coordinate bench decision which held that in the initial year of transition to electronic service, failure to notice online notices may constitute reasonable cause where compliance was not deliberate and the assessee subsequently furnished the required information and the AO completed assessment on merits. The Tribunal found these circumstances analogous and held that the penalty, levied for non compliance on two occasions, was unsustainable given the reasonable cause and subsequent compliance; accordingly the levy was deleted. [Paras 9, 10]

Penalty under section 272A(1)(d) deleted as the non-compliance was held to be bonafide and reasonable cause established in the context of electronic service transition.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty imposed under section 272A(1)(d) for AY 2017-18, holding that the assessee showed reasonable cause for initial non-compliance with electronically-served section 142(1) notices and subsequently participated in the assessment proceedings.

Rectification under section 154 - mistake apparent on the face of the record - no roving inquiry in rectification proceedings - condonation of delay for prosecuting regular appeal

Rectification under section 154 - mistake apparent on the face of the record - no roving inquiry in rectification proceedings - condonation of delay for prosecuting regular appeal - Whether the assessee's section 154 rectification petition seeking annulment of the addition made in the assessment could be entertained or was liable to be rejected as not involving a mistake apparent on the face of the record. - HELD THAT: - The Tribunal found no merit in the assessee's contention that the addition made during the course of assessment required rectification under section 154. Relying on the settled principle that rectification proceedings are confined to correcting mistakes apparent on the face of the record and are not a forum for re-opening issues by means of roving inquiries, the Tribunal upheld the lower authorities' rejection of the section 154 petition. The Tribunal referred to the authority cited by the parties to reinforce that section 154 is not intended to permit substantive re-assessment under the guise of rectification. Recognising the procedural posture of the assessee, the Tribunal nonetheless permitted the assessee to pursue regular appeal proceedings against the assessment and directed that any delay in prosecuting such appeal would be condoned because the assessee had pursued the section 154 remedy under an erroneous belief. [Paras 3, 4]

The rejection of the section 154 rectification petition was upheld; the assessee may initiate regular appeal proceedings and any delay in filing the appeal shall be condoned.

Final Conclusion: Appeal dismissed; section 154 rectification petition rightly rejected for lack of a mistake apparent on the face of the record, with liberty granted to the assessee to file a regular appeal and condonation of any delay.

Rectification under section 154 - mistake apparent from record - computation of long term capital gains - cost of acquisition as fair market value as on 01.04.1981 - condonation of delay in the interest of substantial justice

Condonation of delay in the interest of substantial justice - Collector, Land Acquisition vs. MST Katiji - Condonation of delay of 16 days in filing the appeal. - HELD THAT: - The Tribunal, applying the principle of substantial justice as adverted to in Collector, Land Acquisition v. MST Katiji, examined the petitioner's explanation and, in the interest of justice, exercised its discretion to condone the 16 days' delay in filing the appeal. The application for condonation was therefore allowed to enable adjudication on merits. [Paras 2]

Delay of 16 days in filing the appeal is condoned and the appeal admitted for hearing.

Rectification under section 154 - mistake apparent from record - computation of long term capital gains - cost of acquisition as fair market value as on 01.04.1981 - Maintainability of the assessee's rectification application under section 154 seeking recomputation of long term capital gains by adopting FMV as on 01.04.1981 as cost of acquisition. - HELD THAT: - The Tribunal found that the question whether the original computation of long term capital gains was erroneous for not adopting the fair market value as on 01.04.1981 and whether such error qualifies as a "mistake apparent from record" for rectification under section 154 required fresh consideration and factual verification. Noting a coordinate bench decision holding that correct cost/indexation computation can be subject-matter of section 154 rectification, and observing that co-owner's gains had been computed on the said basis, the Tribunal reversed the lower authorities' refusal to entertain rectification as not maintainable. The matter was remitted to the Assessing Officer to decide the rectification application afresh as per law, after due factual verification and preferably within three effective opportunities of hearing. [Paras 4, 5]

Impugned refusal of rectification under section 154 set aside; matter remitted to the Assessing Officer for fresh decision after verification and hearing.

Final Conclusion: The appeal is allowed: the short delay in filing is condoned and the NFAC's denial of maintainability of the section 154 rectification is set aside; the rectification claim is remitted to the Assessing Officer for fresh adjudication after factual verification and hearing.

Validity of penalty notice under section 274 read with section 271(1)(c) - Omnibus notice and duty to strike off inapplicable limbs - Strict construction of penal provisions - Principles of natural justice and prejudice in penalty proceedings

Validity of penalty notice under section 274 read with section 271(1)(c) - Omnibus notice and duty to strike off inapplicable limbs - Principles of natural justice and prejudice in penalty proceedings - Whether the penalty proceedings and penalty under section 271(1)(c) are vitiated where the statutory notice under section 274 did not specify or strike off the inapplicable limb (concealment of particulars of income or furnishing inaccurate particulars) and thus was omnibus and vague. - HELD THAT: - The Tribunal found that the notice issued under section 274 read with section 271(1)(c) was a stereotyped omnibus notice which did not strike off the irrelevant limb or clearly state the charge for which penalty proceedings were initiated. Relying on the reasoning of the Hon'ble Bombay High Court Full Bench in Mr. Mohd. Farhan A. Shaikh v. ACIT, the Tribunal held that the statutory notice alone must inform the assessee of the grounds of penalty proceedings and an omnibus notice suffers from vagueness. The Court observed that penalty provisions are penal in nature and must be strictly construed; ambiguity in the notice must be resolved in favour of the assessee and non-deletion of inapplicable portions evidences non-application of mind and implies prejudice. The Tribunal also noted agreement with the jurisdictional High Court decision which held that a notice which does not specify the limb under section 271(1)(c) is bad in law. Applying these principles to the facts, the Tribunal concluded that the penalty order could not stand when founded on such an omnibus notice and therefore quashed the penalty. As the preliminary legal ground disposed of the matter, the Tribunal did not examine the other merits-based grounds. [Paras 7, 8, 9, 10, 11]

Penalty levied under section 271(1)(c) is quashed because the section 274 notice was omnibus, did not strike off the inapplicable limb and thus was vague, betraying non-application of mind and implied prejudice.

Final Conclusion: Following the established principle that a statutory notice under section 274 must specify the limb of section 271(1)(c) relied upon and that omnibus notices are vitiated by vagueness and non-application of mind, the Tribunal allowed the appeal and quashed the penalty order.

Revisionary jurisdiction under section 263 of the Income-tax Act - limitation for initiating revisionary proceedings - effect of reassessment on timing of revision - plausibility of Assessing Officer's view and unsustainability test - onus of proof under section 68 of the Income-tax Act

Effect of reassessment on timing of revision - limitation for initiating revisionary proceedings - Whether the Principal Commissioner of Income Tax validly invoked revisionary jurisdiction under section 263 in respect of issues not subject to reassessment and whether the revisionary proceedings were time barred. - HELD THAT: - The Tribunal accepted the uncontroverted factual position that the return for A.Y. 2010-11 was processed under section 143(1) on 11.02.2011 and that the Assessing Officer subsequently reopened assessment under section 147 to examine transactions with two specified entities, completed reassessment and made additions under section 68 by order dated 31.12.2017. Applying the principle in Commissioner of Income Tax v. Alagendran Finance Ltd. (para 15 of that decision reproduced in the order), where the Commissioner sought to exercise revisional jurisdiction in relation to matters that were not the subject of the reassessment, the period of limitation under subsection (2) of section 263 runs from the date of the original assessment order and not from the reassessment order. Consequently, revisionary proceedings in respect of new issues not adjudicated in the reassessment must be initiated within two years of the original assessment; here that period expired on 31.03.2013. The PCIT's initiation of revision by notice dated 09.02.2021 and order dated 28.03.2021 in respect of issues beyond the scope of reassessment was therefore held to be barred by limitation and a nullity. [Paras 11, 12]

Impugned revisionary order set aside as time barred and nullity in so far as it seeks to revise issues not subject to the reassessment.

Revisionary jurisdiction under section 263 of the Income-tax Act - plausibility of Assessing Officer's view and unsustainability test - onus of proof under section 68 of the Income-tax Act - Whether the revisionary order was justified in relation to the matters that were the subject of reassessment, on the ground that the assessment order was erroneous and prejudicial to the revenue. - HELD THAT: - The Tribunal found that during reassessment the AO had called for and examined voluminous documentary evidence in respect of all investors, concluded that the receipts from two specified entities were not genuine and made additions under section 68, and accepted the assessee's explanation in respect of the remaining investors. The PCIT, when revising the reassessment order, did not demonstrate that the view taken by the AO was unsustainable in law; instead the PCIT merely disagreed with the AO's conclusions and noted alleged documentary gaps without identifying any legal defect rendering the AO's conclusion perverse. Applying the settled principle that a revisional jurisdiction under section 263 cannot be exercised merely because the commissioner disagrees with a plausible view taken by the AO, the Tribunal held that the AO's approach was a tenable one and not vitiated, so as to render the assessment erroneous and prejudicial to the revenue. Accordingly the revisionary order was quashed as bad in law insofar as it sought to interfere with the assessment that the AO had reached after enquiry. [Paras 16, 17]

Impugned revisionary notice and order quashed insofar as they sought to upset the AO's plausible and sustainable view; revision could not be invoked merely on disagreement.

Final Conclusion: The appeal is partly allowed: the PCIT's revisionary order dated 28.03.2021 is set aside as a nullity to the extent it sought to revise matters not subject to reassessment (time barred) and is quashed insofar as it attempted to overturn the Assessing Officer's tenable conclusions; other grounds were held to be academic.

Allowability of interest as income attributable to a co-operative society's business under section 80P(2)(a)(i) - characterisation of bank interest as business income versus income from other sources - interest on credit balances arising from regular business transactions - application of antecedent authorities including Totgars Co-operative Sale Society Ltd. and Vavveru Co-operative Rural Bank Ltd.

Allowability of interest as income attributable to a co-operative society's business under section 80P(2)(a)(i) - interest on credit balances arising from regular business transactions - characterisation of bank interest as business income versus income from other sources - Interest credited by banks on credit balances arising from the society's regular business transactions is deductible under section 80P(2)(a)(i) of the Act and is not taxable as income from other sources. - HELD THAT: - The undisputed facts show that the assessee, an employees' co-operative credit society, routed loan disbursements and repayments through its bank accounts, resulting in credit balances on which banks credited interest. The authorities below treated such interest as income from other sources, relying on Totgars Co-operative Sale Society Ltd., where investments represented monies belonging to members retained and invested by the society. The Tribunal, however, followed the exposition in Vavveru Co-operative Rural Bank Ltd., which explained that where the original source of amounts retained or invested in banks is the income derived from activities listed in clause (a) and such income is attributable to those activities, the character of the income is not lost by temporary retention or bank crediting. Applying that principle, the interest here arose in the regular course of the society's business and therefore retains the character of business income attributable to activities covered by section 80P(2)(a)(i). Consequently, the disallowance of such interest by the Assessing Officer was not warranted and must be deleted. [Paras 8, 9, 10]

The disallowed interest is eligible for deduction under section 80P(2)(a)(i); the Assessing Officer's disallowance is to be deleted.

Final Conclusion: All appeals are allowed; the Assessing Officer shall delete the disallowance of interest and give effect to this order.

Deduction under section 80P(2)(d) - Character of income determines eligibility for Chapter VIA deduction - Interest on surplus or idle funds treated as income from other sources - Distinction between a co-operative bank and a co-operative society for section 80P purposes - Condonation of delay

Condonation of delay - Condonation of delay of 57 days in filing the appeal before the Tribunal was considered and decided. - HELD THAT: - The Tribunal considered the assessee's affidavit explaining non-receipt of the CIT(A) order (it was found in the e mail 'Promotions' folder) and held that there was sufficient and reasonable cause for the delay. Applying the established test in Collector, Land Acquisition v. Mst. Katiji, the Tribunal exercised its discretion to condone the 57 day delay and admitted the appeal for adjudication on merits. [Paras 3]

Delay of 57 days condoned and appeal admitted.

Deduction under section 80P(2)(d) - Character of income determines eligibility for Chapter VIA deduction - Interest on surplus or idle funds treated as income from other sources - Distinction between a co-operative bank and a co-operative society for section 80P purposes - Whether interest earned on fixed deposits with The Mysore and Chamarajanagar District Co op. Central Bank Ltd. and Punjab National Bank is eligible for deduction under section 80P(2)(d). - HELD THAT: - The Tribunal, following the detailed reasoning of the jurisdictional High Court, held that the character and nature of the interest income determine its eligibility for deduction under section 80P. Interest earned on surplus or idle funds invested in banks does not change its character merely because the depository happens to be a co operative bank; such interest is income from other sources when not attributable to the assessee's business operations. The High Court's analysis - that co operative banks carry on the banking business regulated by the Banking Regulation Act and that section 80P(4) excludes co operative banks (other than primary agricultural credit societies) from the benefit - was adopted. Applying these principles to the facts (surplus funds invested in fixed deposits), the Tribunal concluded the interest was not allowable as a deduction under section 80P(2)(d). The Tribunal noted that if it were established that the assessee carried on banking as its business, the result might differ, but on the material before it the interest was surplus/idle funds and not operational income. [Paras 10, 11]

Appeal dismissed on merits; interest on the fixed deposits is not deductible under section 80P(2)(d).

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the merits, dismissed the appeal by following the jurisdictional High Court's conclusion that interest on surplus/idle funds invested in banks (including a co operative bank regulated as a bank) does not qualify for deduction under section 80P(2)(d).

Rectification under section 154 - mistake apparent from record - scope of rectification limited to errors of fact or law on the basis of material on record - where two reasonable views are possible rectification is impermissible - adjustment to book profits for MAT/Section 115JC - AO cannot go beyond net profit shown in the Profit & Loss account except as permitted by the statutory explanation

Rectification under section 154 - mistake apparent from record - where two reasonable views are possible rectification is impermissible - adjustment to book profits for MAT/Section 115JC - Validity of the order passed by the Assessing Officer under section 154 rectifying computation of book profit/MAT by enhancing deduction claimed under section 80IB. - HELD THAT: - The Tribunal examined whether the Assessing Officer correctly invoked section 154 to enhance the assessee's income by treating the claimed deduction as erroneously allowed when computing book profits for MAT. The Tribunal accepted the CIT(A)'s conclusion that there was no mistake apparent from the record warranting rectification where the position gives rise to two plausible views. The Tribunal noted the settled scope of rectification is confined to correcting errors of fact or law on the basis of material already on record and may not be used to reopen debatable issues which require adjudication. Reliance was placed on precedent of coordinate benches and the jurisdictional High Court reasoning that the AO cannot alter book profits beyond the profit & loss account except as expressly permitted by the statutory explanation, and that adjustments to book profits under the MAT provision raise debatable questions not amenable to summary rectification under section 154. Having regard to those principles and the material on record, the Tribunal found no basis to hold that a mistake apparent from the record existed and therefore upheld the CIT(A)'s allowance of the appeal. [Paras 7, 8, 9]

The rectification order passed by the AO under section 154 enhancing the assessee's book profits/MAT computation was invalid; the revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s quashing of the AO's order under section 154, holding that rectification cannot be invoked where two reasonable views exist and no mistake apparent from the record is shown in the MAT/book profit computation for AY 2017-18.

Limitation for passing order under section 92CA(3A) read with section 153 - transfer pricing order barred by limitation - eligible assessee under section 144C(15)(b) - effect of time barred TPO order on extendibility of limitation and validity of assessment - quashing of assessment order as barred by limitation

Limitation for passing order under section 92CA(3A) read with section 153 - transfer pricing order barred by limitation - eligible assessee under section 144C(15)(b) - effect of time barred TPO order on extendibility of limitation and validity of assessment - Validity of transfer pricing officer's orders and consequence on maintainability of assessments for AYs 2011-12, 2012-13 and 2013-14 where TPO orders were passed after the outer time limit prescribed under section 92CA(3A) read with section 153. - HELD THAT: - The Tribunal held that section 92CA(3A) requires the transfer pricing officer to pass the order any time before sixty days prior to the date on which the period of limitation under section 153 expires. Applying that rule to the facts of the three assessment years, the respective TPO orders were passed after the outer limit computed in accordance with section 92CA(3A) read with section 153 and therefore were beyond the prescribed time. A time barred TPO order renders the assessee not an "eligible assessee" within the meaning of section 144C(15)(b), with the consequence that the special twelve month extension of limitation under section 153(4) (by reason of reference to the TPO) is not available. Following the consequent legal sequence, where the TPO order is quashed as time barred, the AO loses the jurisdictional basis for the extended limitation and the regular assessment completed under section 143(3) read with section 144C becomes barred by limitation and unsustainable. The Tribunal applied this reasoning to AY 2011 12, 2012 13 and 2013 14 and, relying on the precedents it followed, quashed the TPO orders and the consequential assessment orders as time barred. [Paras 9, 10, 11, 16, 21]

The TPO orders for the three assessment years were held to be passed beyond the time permitted by section 92CA(3A) read with section 153; accordingly the assessee ceased to be an "eligible assessee" under section 144C(15)(b), the extended limitation was unavailable, and the assessments under section 143(3) read with section 144C were quashed as barred by limitation.

Final Conclusion: For AYs 2011-12, 2012-13 and 2013-14 the Tribunal allowed the assessee's additional ground that the transfer pricing orders were time barred, held that the assessee was not an "eligible assessee" for extended limitation under section 144C(15)(b), and quashed the impugned assessments as barred by limitation; the Revenue's cross appeal was dismissed.

Characterisation of compensation versus interest - payment for delayed allotment - TDS liability under section 194A - assessee in default under section 201(1)/201(1A)

Characterisation of compensation versus interest - payment for delayed allotment - TDS liability under section 194A - assessee in default under section 201(1)/201(1A) - Whether payments made by the assessee to allottees for delayed allotment are interest within the meaning of section 2(28A) and therefore subject to TDS under section 194A, and whether the assessee can be held an assessee in default under section 201(1)/201(1A) for non-deduction. - HELD THAT: - The Tribunal accepted the assessee's factual case that the payments were made as compensation/damages for delayed allotment of plots/flats and not as interest arising from any borrowing or debt. Reliance was placed on the decision of the Calcutta High Court in PCIT v. West Bengal Housing Infrastructure Development Corporation and the coordinate view of this Tribunal in Delhi Development Authority v. ITO, under similar facts, which held that delayed-allotment payments by a builder/developer are compensatory in nature and do not fall within the definition of interest under section 2(28A). The Revenue did not point to any distinguishing material facts that would take the present case outside those precedents. The Tribunal noted that earlier entries in the assessee's books describing such payments as interest were corrected on professional advice and that such earlier treatment did not alter the true nature of the payments. Applying the legal principle that only payments properly characterised as interest fall within the scope of TDS under section 194A, the Tribunal concluded that the payments in question are not interest and hence do not attract TDS. Consequently, the imposition of default liability under section 201(1)/201(1A) premised on non-deduction was unsustainable. [Paras 6, 8, 9, 10, 11]

Payments for delayed allotment are compensation/damages and not interest; TDS under section 194A is not attracted and the assessee cannot be treated as an assessee in default under section 201(1)/201(1A).

Final Conclusion: The Tribunal allowed the appeal, set aside the orders of the authorities below, and held that payments made to allottees for delayed allotment are compensatory and not interest; accordingly TDS under section 194A did not apply and no default liability under section 201(1)/201(1A) could be sustained.

Fees for Technical Services - Royalty - Taxability under Double Taxation Avoidance Agreement - Reimbursement of expenses at cost - Reliance on earlier Tribunal precedents - Prematurity of penalty proceedings

Fees for Technical Services - Royalty - Taxability under Double Taxation Avoidance Agreement - Reliance on earlier Tribunal precedents - Receipts from provision of IT support services and management services are not taxable in India as Royalty or Fees for Technical Services for A.Y. 2020-21. - HELD THAT: - The Tribunal examined the service arrangement with the Indian associated enterprise and the continuity of the service agreement dated 3-1-2011. The Dispute Resolution Panel had relied on its findings for earlier years. The Tribunal placed decisive reliance on its own earlier orders in the assessee's case (including A.Y. 2011-12, A.Y. 2017-18 and A.Y. 2019-20) where identical receipts were held neither to be Royalty nor Fees for Technical Services. The Revenue did not place any contrary documentary evidence before the Tribunal, and no contrary order of the jurisdictional High Court was on record. On the parity of reasoning with those earlier Tribunal decisions, the Tribunal concluded that the receipts are not taxable in India as Royalty or Fees for Technical Services under the Act or the relevant DTAA for the assessment year before it.

Grounds pertaining to taxability of IT support and management service receipts as Royalty or Fees for Technical Services are allowed in favour of the assessee for A.Y. 2020-21.

Reimbursement of expenses at cost - Grounds relating to receipts claimed as reimbursement of expat salary (recharge) and the time-barred assessment issue were not pressed by the assessee and are dismissed as not pressed. - HELD THAT: - The assessee expressly chose not to press the contentions concerning the reimbursement of expat salary and the contention regarding time-barred assessment. The Tribunal recorded that those grounds (grounds Nos. 1 and 4) are not pressed and accordingly dismissed them as not pressed without adjudicating their merits.

Grounds Nos. 1 and 4 are dismissed as not pressed.

Prematurity of penalty proceedings - The challenge to initiation of penalty proceedings is premature. - HELD THAT: - The Tribunal observed that the challenge to initiation of penalty under section 270A (as raised in ground No. 5) is premature. The order records that penalty-related contentions cannot be finally adjudicated at this stage and that initiation of penalty proceedings is not ripe for determination in the present appeal.

Ground No. 5 is held to be premature and not finally adjudicated.

Final Conclusion: The appeal is partly allowed: the Tribunal, following its own earlier precedents and on the factual parity of the service agreement, held that the receipts for IT support and management services are neither Royalty nor Fees for Technical Services and are not taxable in India for A.Y. 2020-21; the time-bar and reimbursement grounds were not pressed and dismissed as not pressed; the penalty challenge was held to be premature.

Violation of principles of natural justice - right to copies of relied documents - denial of opportunity for cross-examination - burden to establish allegations in show cause notice by evidence - confirmation of demand for duty based on manipulated documents - setting aside demand for lack of evidence

Violation of principles of natural justice - right to copies of relied documents - denial of opportunity for cross-examination - burden to establish allegations in show cause notice by evidence - Whether the demand of duty and penalties could be sustained where the department did not furnish all relied shipping bills and denied cross-examination of witnesses, thereby allegedly violating principles of natural justice and failing to prove the allegations in the show cause notice. - HELD THAT: - The Tribunal found that the department relied upon alleged manipulation of 162 shipping bills but supplied only a limited number of originals/duplicates to the appellants, leaving the appellants without access to the relied upon documents necessary to meet the allegations. The department also relied on statements of third party exporters but refused the appellants' request for cross-examination, recording only a conclusion that cross-examination would not achieve any purpose without stating reasons. The Tribunal held that a noticee must be furnished with documents relied upon so as to be put on notice and given a fair opportunity to defend. Denial of cross-examination without recorded reasons and confirmation of the demand on assumptions and uncorroborated statements amounted to a breach of the principles of natural justice. Since the allegations in the show cause notice were not established by admissible evidence and procedural fairness was violated, the demand could not be sustained. [Paras 6, 7, 8, 9]

The demand and penalties were set aside because the department failed to furnish the relied documents and improperly denied cross-examination, resulting in breach of natural justice and lack of evidence to sustain the demand.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned order confirming duty and penalties, and granted consequential reliefs as per law because the department failed to supply relied documents and denied cross-examination, thereby violating principles of natural justice and not proving the allegations.

Penalty under Section 114AA for use of false or incorrect material - Attribution of liability for sale and use of fraudulently obtained export authorisations - Distinction between penalty provisions and precedents decided under different sections

Penalty under Section 114AA for use of false or incorrect material - Attribution of liability for sale and use of fraudulently obtained export authorisations - Imposition of penalty on the appellant under Section 114AA for his role in creation, sale and use of DEPB licences obtained by forged documents. - HELD THAT: - The Tribunal found on the admitted statements and the findings in the original order that the appellant prepared/created forged Bank Realisation Certificates, participated in a syndicate that obtained DEPB licences on the basis of forged documents and sold those licences to importers. Such conduct resulted in fraudulently obtained DEPB certificates being used in Bills of Entry by the importer. Section 114AA penalises knowingly or intentionally making, using or causing to be made or used any declaration, statement or document which is false or incorrect in any material particular for the purposes of the Act. Applying this provision to the appellant's recorded role, the Tribunal held that his acts fall squarely within the scope of Section 114AA and sustain the penalty imposed by the adjudicating authority. [Paras 8, 10]

The penalty imposed on the appellant under Section 114AA is justified and is upheld.

Distinction between penalty provisions and precedents decided under different sections - Applicability of earlier authority decided before insertion of Section 114AA - Whether the authorities relied upon by the appellant (Gujarat High Court in Sanjay Agarwal and Tribunal in Fast Cargo Movers) required setting aside the penalty. - HELD THAT: - The Tribunal distinguished the Gujarat High Court decision in Sanjay Agarwal on the ground that it concerned penalty under a different provision (Section 112) and pre-dated the insertion of Section 114AA (introduced with effect from 13.7.2006), therefore it was not applicable to the present case. The decision in Fast Cargo Movers was also found distinguishable: there the appellant was a Customs Broker who filed Shipping Bills in good faith on documents provided by the exporter and the Tribunal found no culpability; by contrast, in the present case the appellant himself created forged documents and sold DEPB licences which were used in imports. Accordingly, the earlier precedents did not advance the appellant's case and did not militate against the penalty. [Paras 10, 11]

The precedents relied upon by the appellant are distinguishable and do not warrant interference with the penalty under Section 114AA.

Final Conclusion: The Tribunal finds the impugned order sustaining the penalty under Section 114AA to be just and fair, upholds the penalty imposed on the appellant and dismisses the appeal.

Limitation for review under Section 129D(3) of the Customs Act, 1962 - time-bar of departmental appeal - delay in passing review order - onus on appellant to prove date of communication of order

Limitation for review under Section 129D(3) of the Customs Act, 1962 - time-bar of departmental appeal - onus on appellant to prove date of communication of order - Whether the appeal filed by the Department was rightly dismissed as time barred for want of proof of the date of receipt/communication of the Order in Original and whether the Tribunal should interfere with that finding. - HELD THAT: - The Tribunal examined the record and noted a handwritten entry on the Order in Original indicating receipt by the Review Cell on 14.07.2010. The Commissioner (Appeals) had found that the Reviewing Authority passed the review order beyond the three month period prescribed by Section 129D(3) and that the Department failed to produce evidence of the date on which the Reviewing Authority actually received the Order in Original despite repeated requests. The Tribunal observed that the Department did not substantiate its contention with evidence that would establish a later date of receipt, and that in the absence of such proof the inference of delay in passing the review order was justified. Having considered the Commissioner (Appeals)'s reasoning and the departmental omission to place on record the required particulars, the Tribunal found no basis to take a different view and declined to interfere with the limitation finding. [Paras 6, 7, 8]

The Commissioner (Appeals)'s dismissal of the departmental appeal as time barred for want of proof of the date of communication of the Order in Original is upheld; no interference by the Tribunal.

Final Conclusion: The departmental appeal is dismissed; the impugned order upholding that the review orders were time barred (and dismissing the appeal for lack of evidence as to date of communication) is sustained.

Necessity and propriety of impleadment in oppression and mismanagement proceedings - nominee director's continuity dependent on nominating group's support - scope of Section 405 of the Companies Act, 1956 - adding directors or any person as party - dominuis litis / control of petitioner over nomination and representation - effect of transfer of shareholding on party-necessity - Articles of Association and nominee-director removal by nominating group

Necessity and propriety of impleadment in oppression and mismanagement proceedings - nominee director's continuity dependent on nominating group's support - scope of Section 405 of the Companies Act, 1956 - adding directors or any person as party - The Company Law Board did not err in refusing to implead the appellant as a party to the company petition. - HELD THAT: - The Court upheld the CLB's conclusion that impleadment is discretionary and permissible only upon satisfaction of sufficient cause to add a director or any other person under Section 405. A nominee director continues on the board only so long as she enjoys the support of the nominating group under the Articles; where that support is withdrawn and the nominating group seeks interim relief to protect its representation, suspension of the nominee's directorship and refusal to implead her does not deprive her of any individual right essential to the adjudication of the company petition. The CLB found that the appellant had begun acting contrary to the DKJ Group's interests, that the DKJ Group had withdrawn its support and appointed replacements, and that the presence of the appellant was not essential for deciding the issues between the rival shareholder groups. In those circumstances, no sufficient cause for impleadment under Section 405 was made out and the CLB's exercise of discretion was sustainable. [Paras 7, 9, 11, 16]

Application for impleadment dismissed; CLB's refusal sustained.

Effect of transfer of shareholding on party-necessity - Articles of Association and nominee-director removal by nominating group - The appellant's claim of necessity to be impleaded on the ground of her shareholding failed because her shares had been transferred. - HELD THAT: - The Court noted that the appellant's past minority shareholding was immaterial to her claim of entitlement to participate in the petition once those shares were transferred. The transfer of the appellant's entire shareholding was recorded and sanctioned in separate proceedings, and the order directing registration of the transferee and recording payment was treated as disposing of that company petition. Consequently, the appellant's asserted stake in the company no longer furnished a basis to compel her impleadment in the oppression and mismanagement petition. [Paras 13, 14, 15]

Appellant's shareholding no longer made her a necessary party; reliance on shareholding to seek impleadment rejected.

Final Conclusion: The appeal is dismissed. The CLB's order refusing impleadment is upheld: the appellant lacked the nominating group's support and had transferred her shares, and no sufficient cause under Section 405 was shown to add her as a party to the oppression and mismanagement petition.

Limitation under Article 113 of the Limitation Act, 1963 (three-year period) - transfer of shares - compliance with Section 56 and Articles of Association (delivery, registration and related formalities) - genuineness of share certificates and evidentiary weight of certificates under Section 46(1) - rectification of register of members and remedy under Section 59 - refusal of registration and remedies under Section 58 - maintainability of oppression and mismanagement petition - locus as a member under Section 241/244

Limitation under Article 113 of the Limitation Act, 1963 (three-year period) - Whether the petition was barred by limitation - HELD THAT: - The Tribunal found that the alleged transfer of shares occurred on 18.04.2015 while the petition was filed on 09.11.2018. Applying Article 113 of the Limitation Act, 1963 (three-year period), the Tribunal concluded that the petition was filed after the statutory limitation. This Appellate Tribunal, on review of the impugned order and the chronology, found no error in that conclusion and upheld the Tribunal's holding that the petition was time-barred. [Paras 52]

Petition held to be barred by limitation; Tribunal's finding on limitation upheld.

Transfer of shares - compliance with Section 56 and Articles of Association (delivery, registration and related formalities) - genuineness of share certificates and evidentiary weight of certificates under Section 46(1) - refusal of registration and remedies under Section 58 - Whether the alleged share transfers and share certificates were valid and whether statutory and article based formalities for transfer were complied with - HELD THAT: - The Tribunal found no documentary evidence or communications establishing that the statutory and articles based formalities for transfer (including delivery of the duly executed instrument of transfer and corresponding certificates within the prescribed period) were complied with. Photocopies of share transfer forms and share certificates produced by the appellants were held to contain material discrepancies and to be prima facie fabricated. The Tribunal had directed production of original share certificates by order dated 18.02.2021, which the appellants did not comply with; on that basis the Tribunal concluded that transfers were not lodged with the company and the alleged certificates were not genuine. This Appellate Tribunal concurred: there was no material to show compliance with Section 56/Section 58 or the Articles of Association, the acknowledgements on transfer forms were blank, and the alleged certificates differed from the company's issued format; accordingly the Tribunal's findings on non-compliance and fabricated documents were affirmed. [Paras 53, 54, 55, 56]

No valid transfer established; alleged share certificates held to be not genuine; statutory transfer and registration formalities not complied with.

Rectification of register of members and remedy under Section 59 - maintainability of oppression and mismanagement petition - locus as a member under Section 241/244 - Whether the appellants had locus as members to seek rectification and to maintain a petition under Sections 241/242/244 (oppression and mismanagement) - HELD THAT: - Sections 59 and 241/244 permit only a person who is a member to seek rectification of the register or relief for oppression and mismanagement. The Tribunal found, on the evidence (or lack thereof), that the appellants had not proved they were registered members: transfers were not shown to have been effected or registered, and the alleged payments were not established to be consideration for share acquisition. Given the absence of proof of membership, the Tribunal held the petition not maintainable under Section 241. This Appellate Tribunal found no error in that reasoning and affirmed that without establishing member status (locus) the appellants could not maintain the oppression/mismanagement petition or seek rectification of the register. [Paras 57, 58]

Appellants lack locus as members; petitions under Sections 59 and 241 et seq. not maintainable.

Final Conclusion: The Appellate Tribunal found no error in the impugned order: the petition was time barred, the alleged share transfers and certificates were not proved or compliant with statutory and articles' requirements, and the appellants were not shown to be members entitled to seek relief under Sections 59/241 et seq.; the appeal is dismissed and the impugned order is upheld.

Maintainability of writ petition in presence of a statutory appellate remedy - scope of interim injunction granted by High Court in relation to disciplinary proceedings - exercise of Article 226 jurisdiction when a statutory appeal under Section 62 of the IBC is available

Maintainability of writ petition in presence of a statutory appellate remedy - exercise of Article 226 jurisdiction when a statutory appeal under Section 62 of the IBC is available - Whether the writ petition under Article 226 is maintainable against orders of the NCLT/NCLAT when a statutory appeal to the Supreme Court under Section 62 of the IBC is available. - HELD THAT: - The Court held that ordinarily where a statutory appeal to the Supreme Court is provided by the IBC, High Court writ jurisdiction under Article 226 is not an appropriate forum to challenge orders of the NCLT/NCLAT. The Court relied on the settled principle that availability of a statutory appellate remedy ordinarily bars exercise of extraordinary writ jurisdiction and cited analogous authority to caution High Courts against entertaining such petitions. Consequently, the writ petition cannot be entertained insofar as it seeks to challenge the NCLT/NCLAT orders that are subject to appeal under Section 62 of the IBC. This reasoning was applied as a determinative bar to the petition and the Court declined to decide the merits of the impugned orders on that basis. [Paras 3, 4]

Writ petition dismissed as not maintainable in view of the statutory appeal remedy under Section 62 of the IBC; petitioner granted liberty to file appeal before the Supreme Court.

Scope of interim injunction granted by High Court in relation to disciplinary proceedings - prohibition of coercive action pursuant to disciplinary orders - Whether the interim injunction previously granted by this High Court restrained the respondents from taking coercive action in the removal proceedings before the NCLT/NCLAT. - HELD THAT: - The Court examined the terms of the interim order earlier passed in W.P.Nos.4458 and 4463 of 2021 and held, prima facie, that the injunction was confined to restraining coercive action arising from disciplinary proceedings under the relevant professional regulations. The Court found that the present application before the NCLT, being founded on allegations of disclosure of valuation reports and lack of authorization under the regulations, did not plainly fall within the prohibition of the interim injunction which was limited to disciplinary coercive measures. This finding was rendered for the limited purpose of assessing whether the injunction created an extraordinary reason to entertain the writ petition; it was not an adjudication on the merits of the allegations or orders of the tribunals. [Paras 3]

Prima facie conclusion that the interim injunction relates only to disciplinary coercive action; the NCLT/NCLAT proceedings challenging the petitioner's continuance as Liquidator are not covered by that injunction.

Final Conclusion: The writ petition is dismissed as not maintainable in view of the statutory appellate remedy under Section 62 of the IBC; liberty is granted to the petitioner to agitate all grounds by filing an appeal before the Supreme Court. No costs.

Financial creditor - financial debt - guarantee as financial debt - debt and default under Section 7 - debenture trustee and debenture holders' enforceable rights - corporate debtor as guarantor and co-obligor - enforceability of demand certificate

Financial creditor - financial debt - debenture trustee and debenture holders' enforceable rights - Respondents No.1 and 2 (debenture holders) are Financial Creditors under the IBC. - HELD THAT: - The Tribunal examined the Debenture Trust Deed (DTD) and the Deed of Irrevocable and Unconditional Guarantee and found that the DTD contemplates subscription and disbursement by the Debenture Holders (clause 3.4 and clauses in recitals), payment obligations to be made to the Debenture Holders (clause 8.12(a)), and specific rights on default (clauses 8.6(d), 17 and 18.1). The Deed of Guarantee obliges the Guarantors to make payment on first demand pursuant to a Demand Certificate (clause 4), and the recitals record that the Debenture Holders subscribed to NCDs relying on these securities and undertakings. In light of Section 5(8)(c) and Section 5(8)(i) of the IBC (which include amounts raised by debentures and liabilities in respect of guarantees), and the definition of a financial creditor in Section 5(7), the Tribunal held that the contractual architecture of the DTD and the Guarantee establishes that amounts are owed to the Debenture Holders as financial debt and that the Debenture Holders qualify as financial creditors entitled to invoke the IBC remedies. The Tribunal rejected the contention that appointment of a debenture trustee or the existence of trustee rights alone precluded the debenture holders from being financial creditors, observing that the Transaction Documents expressly preserve enforcement rights for the Debenture Holders (including clause 18.1(c)). [Paras 33, 34, 41, 56, 57]

Respondents No.1 and 2 are Financial Creditors of B & M Infra under the IBC.

Guarantee as financial debt - corporate debtor as guarantor and co-obligor - enforceability of demand certificate - debt and default under Section 7 - The Debenture Holders can claim repayment on the basis of the Demand Certificate and B & M Infra is a Corporate Debtor for purposes of the Section 7 application. - HELD THAT: - The Tribunal found that Event of Default notices were issued and the Debenture Trustee issued a Demand Certificate on 14.05.2019 invoking the Guarantee dated 06.10.2016. Clause 4 of the Deed of Guarantee requires the Guarantors to pay, on first demand and within two days of receipt of a Demand Certificate, amounts mentioned therein to the Debenture Holders. Given that clause (i) of Section 5(8) of the IBC treats liabilities in respect of guarantees as financial debt, and having regard to the combined effect of the DTD and the Deed of Guarantee, the Tribunal held that the liability of B & M Infra is direct and enforceable. Applying the statutory test under Section 7 (existence of debt and default) and the precedents explaining the adjudicating authority's role to ascertain default from records/evidence, the Tribunal concluded that a debt was due and unpaid and that the Adjudicating Authority correctly admitted the Section 7 petition and initiated CIRP against B & M Infra. [Paras 40, 41, 55, 56, 58]

The Demand Certificate establishes a recoverable financial debt under the Guarantee and B & M Infra is the Corporate Debtor for the Section 7 petition; the admission of the Section 7 application was valid.

Final Conclusion: On the facts and the Transaction Documents, the Debenture Holders are financial creditors and the amount claimed in the Demand Certificate is a financial debt enforceable against B & M Infra as guarantor and co-obligor; the Tribunal found no error in the Adjudicating Authority's admission of the Section 7 petition and dismissed the appeal.

Sufficient service - absence of respondent and ex parte proceeding - order without reasons / non-speaking order - requirement of reasoned order by adjudicating authority - setting aside and remand for fresh adjudication - payment of costs as condition for restoration

Sufficient service - absence of respondent and ex parte proceeding - Service on the respondent at the address shown in tribunal and Ministry records was sufficient and the appeal proceeded in the respondent's absence. - HELD THAT: - The Tribunal found that the notice sent to the respondent was addressed to the proper and correct address as per the Adjudicating Authority's/Ministry of Corporate Affairs records. The registry's endorsement that the notice was returned 'Left without Instructions-Returned to Sender' did not render service ineffective. On that basis the respondent was treated as absent and the appeal was heard and disposed in their absence.

Service held sufficient; appeal proceeded despite respondent's absence.

Order without reasons / non-speaking order - requirement of reasoned order by adjudicating authority - setting aside and remand for fresh adjudication - payment of costs as condition for restoration - The impugned order dismissing the restoration application was vitiated for want of qualitative and quantitative reasons and was set aside; the matter was remanded for fresh disposal on merits subject to payment of costs. - HELD THAT: - The Tribunal examined the impugned order and found that the Adjudicating Authority had not adverted to or recorded any consideration of the memo filed by the appellant explaining counsel's medical emergency and the request for adjournment. The absence of any express or implied evaluation of the medical evidence rendered the order bereft of reasons and amounted to a miscarriage of justice. For these reasons the Tribunal set aside the impugned order and directed restoration of the IA to the Adjudicating Authority's file for a reasoned fresh decision on merits. The Tribunal imposed a condition that the appellant pay costs to the Prime Minister's National Relief Fund within the specified period and produce the receipt before restoration; on compliance the registry is to restore the file and the Adjudicating Authority is to decide afresh in a fair and dispassionate manner within the stipulated time.

Impugned order set aside; IA restored for fresh, reasoned adjudication on merits on payment of specified costs and compliance with restoration directions.

Final Conclusion: Notice was held sufficient and the appeal proceeded in the respondent's absence; the impugned non-speaking order dismissing the restoration application was set aside for want of reasons, the IA was ordered restored for fresh, reasoned disposal on merits, subject to the appellant's payment of costs and compliance with the Tribunal's directions.

Effect of acknowledgment under Section 18 of the Limitation Act, 1963 - residuary Article 137 of the Limitation Act as applicable to applications under Sections 7 and 9 of the IBC - co-extensive liability of surety under Section 128 of the Indian Contract Act, 1872 - operative effect of One Time Settlement (OTS) proposals as acknowledgements extending limitation - remand for fresh consideration to the Adjudicating Authority to decide petition on merits

Effect of acknowledgment under Section 18 of the Limitation Act, 1963 - residuary Article 137 of the Limitation Act as applicable to applications under Sections 7 and 9 of the IBC - operative effect of One Time Settlement (OTS) proposals as acknowledgements extending limitation - Whether the Section 7 application against the guarantor was barred by limitation or saved/extended by acknowledgements arising from OTS proposals and other documents. - HELD THAT: - The Tribunal examined the date(s) of default and the sequence of acknowledgements and OTS communications. It accepted that the original defaults occurred in March and May 2012, but found material acknowledgements by the principal borrower (and deemed acknowledgements by the guarantor) in revival letters and successive OTS proposals submitted between 13.03.2014 and 18.05.2016, and further conduct including sanction and later cancellation of an OTS. Applying Section 18 of the Limitation Act and the authorities cited, an acknowledgement in writing made before the prescribed period expires restarts the limitation period; the Tribunal held that multiple OTS proposals and related acknowledgements operated to extend the limitation period and, therefore, the Section 7 application could not be treated as time barred on the sole ground relied upon by the Adjudicating Authority. The Tribunal noted that the Adjudicating Authority erred in reckoning limitation only from 01.06.2012 and in failing to consider the earlier OTS proposals and acknowledgements. [Paras 31, 32, 33, 38, 39]

The Adjudicating Authority's finding that the Section 7 application was barred by limitation was incorrect; acknowledgements arising from OTS proposals extended the limitation period and the application is not time barred on that ground.

Co-extensive liability of surety under Section 128 of the Indian Contract Act, 1872 - operative effect of One Time Settlement (OTS) proposals as acknowledgements extending limitation - Whether acknowledgements and OTS proposals of the principal borrower operate as deemed acknowledgements by the corporate guarantor. - HELD THAT: - Relying on Section 128 of the Indian Contract Act, the Tribunal held that the surety's liability is co extensive with that of the principal debtor unless contractually varied. Given that the principal borrower furnished repeated OTS proposals and made acknowledgements of liability and that the guarantor had executed revival/indemnity documents and the financial statements reflected the guarantee, the Tribunal concluded that the acknowledgements by the principal borrower were also to be treated as acknowledgements by the guarantor for limitation purposes. The Adjudicating Authority failed to apply this principle in its limitation analysis. [Paras 32, 33, 39]

Acknowledgements and OTS-related admissions by the principal borrower are to be treated as corresponding acknowledgements by the corporate guarantor; therefore the guarantor's liability is not time barred for the reasons given above.

Remand for fresh consideration to the Adjudicating Authority to decide petition on merits - principles of natural justice and requirement of speaking reasoned order - What relief should follow from the Tribunal's findings on limitation and acknowledgements. - HELD THAT: - The Tribunal set aside the impugned order which dismissed the Section 7 application solely on limitation grounds and remitted the matter to the Adjudicating Authority for de novo consideration on merits. It directed that the Adjudicating Authority examine all factual and legal aspects, afford adequate opportunity of hearing to the parties, adhere to principles of natural justice, and pass a speaking, reasoned order preferably within twelve weeks. The Tribunal expressly refrained from expressing any opinion on the merits of the underlying claim, leaving those issues to be adjudicated afresh by the Adjudicating Authority. [Paras 42, 43]

Impugned order set aside and the petition remanded to the Adjudicating Authority for fresh, de novo adjudication on merits with directions to afford adequate hearing and pass a reasoned order.

Final Conclusion: The Tribunal set aside the Adjudicating Authority's order dismissing the Section 7 petition on limitation grounds, held that acknowledgements arising from OTS proposals (and attendant documents) extended the limitation period and operated for the guarantor by virtue of co extensive liability, and remitted the matter to the Adjudicating Authority for fresh, de novo consideration of the petition on merits after providing adequate opportunity and passing a speaking reasoned order.

Expunction of adverse findings - Failure/default - Initiation of proceedings under Section 74(3) of the I & B Code, 2016 - Implementation of Resolution Plan - Conditions precedent and responsibility for non implementation - Waiver/foregoing of claim to restoration of Bank Guarantee

Expunction of adverse findings - Failure/default - Initiation of proceedings under Section 74(3) of the I & B Code, 2016 - Implementation of Resolution Plan - Conditions precedent and responsibility for non implementation - Whether the adverse observations and directions recorded in paragraph Nos. 6, 9, 10, 11 and 14 of the Impugned Order dated 08.04.2022, including directions to initiate proceedings under Section 74(3) of the I & B Code, 2016, should be expunged. - HELD THAT: - The Tribunal considered the Appellant's explanation that the Resolution Plan could not be implemented because NHAI declined to accept the Terms of the Resolution Plan and would not execute the Supplementary Agreement which was an integral condition precedent to implementation. The Appellant asserted it had taken all reasonable and commercially possible steps to fulfil the Conditions Precedent and therefore could not be held responsible for the non implementation. The Appellant also placed on record a concession in its Rejoinder Affidavit that, without admitting liability or the legality of invocation of the bank guarantee, it was willing to forgo relief restoring the bank guarantee or amounts recovered, on the condition that the adverse observations (other than directions relating to invocation of the bank guarantee) be set aside and no further proceedings be initiated against it or its officers. The Respondents raised no objection to expunging the said observations. Having regard to the attendant facts, the Appellant's concession, the absence of opposition from the Respondents, and to prevent an aberration of justice, the Tribunal concluded that the impugned observations and directions (including those referring to initiation of proceedings under Section 74(3) I&B Code) recorded in paragraph Nos. 6, 9, 10, 11 and 14 of the Impugned Order ought to be expunged. [Paras 10]

The observations and findings in paragraph Nos. 6, 9, 10, 11 and 14 of the Impugned Order dated 08.04.2022 (including the aspect of initiation of proceedings under Section 74(3) of the I & B Code, 2016) are expunged; the appeal is disposed of; no costs; connected interlocutory applications, if any, are closed.

Final Conclusion: The Tribunal expunged specified adverse observations and directions in the Impugned Order dated 08.04.2022, disposed of the appeal, directed no costs and closed connected interlocutory applications.

Discretionary nature of Section 44(1)(c) of the PMLA - Commital to designated court under the PMLA - Directory interpretation of 'shall' in procedural provision - Independence of trial for money laundering offence and predicate/scheduled offences - Scope of Section 43(2) of the PMLA regarding trial of connected offences - Limits of inherent jurisdiction under Section 482 Cr.P.C.

Discretionary nature of Section 44(1)(c) of the PMLA - Directory interpretation of 'shall' in procedural provision - Whether Section 44(1)(c) of the PMLA obliges the authorised PMLA authority to mandatorily move for committal of the pending scheduled offence trial to the designated PMLA court. - HELD THAT: - The court construed Section 44(1)(c) in the context of the PMLA scheme and held that the provision does not make committal invariably obligatory on the authorised officer. The existence of separate proceedings for the scheduled offence and for the offence under the PMLA indicates that committal is contingent upon an application by the PMLA authority and is to be exercised by that authority in appropriate cases. The use of the word 'shall' in Section 44(1)(c) is not to be read as converting the provision into a mandate requiring the authority, in every case, to seek committal; rather the provision confers a discretion to apply for committal where committal would not defeat prosecution or frustrate speedy disposal and would further the objects of the Act. Thus Section 44(1)(c) is directory in operation and requires a case sensitive exercise of discretion by the PMLA authority. [Paras 8, 9, 11]

Section 44(1)(c) does not impose an absolute obligation on the authorised PMLA officer to move for committal; the power to seek committal is discretionary and directory in nature.

Commital to designated court under the PMLA - Independence of trial for money laundering offence and predicate/scheduled offences - Limits of inherent jurisdiction under Section 482 Cr.P.C. - Whether the Special court is bound to commit every scheduled offence case to the designated PMLA court on an application, and whether the petitioners can compel such committal or quash PMLA proceedings for lack of committal. - HELD THAT: - The court held that even if the PMLA authority moves an application for committal, the Special court must examine the application judicially and exercise its discretion; committal is not to be mechanically granted in every case. Because no application for committal was made in the present matter, and because the statutory scheme does not envisage mandatory joint trial in every case, the petitioners have no right to demand committal as of right or to stay the PMLA proceedings merely because the scheduled offence trial remains in the Vigilance court. Further, the inherent jurisdiction under Section 482 Cr.P.C. is not to be used to compel the PMLA authority to exercise its discretion in a particular manner; such extraordinary relief was not warranted here. The court, however, advised that the PMLA authority should consider the petitioners' plea and, if in its judgment committal is appropriate, move the Special Judge for committal under Section 44(1)(c). [Paras 11, 12]

The Special court is not bound to allow every committal application; petitioners cannot compel committal or quash the PMLA summons for absence of committal, though the PMLA authority should consider exercising its discretion and may move for committal if fit.

Final Conclusion: The petitions are dismissed on merits; absence of an application for committal under Section 44(1)(c) of the PMLA does not invalidate the PMLA proceedings nor entitle the petitioners to mandatory committal, though the PMLA authority may, in appropriate cases, exercise its discretion and move the Special court for committal.

Regular bail under the Prevention of Money Laundering Act, 2002 - predicate offence requirement for prosecution under PMLA - continuity of money laundering offence despite final form in some predicate cases - Section 45(1) PMLA - threshold exception for offences involving less than one crore - medical grounds for grant of bail

Predicate offence requirement for prosecution under PMLA - continuity of money laundering offence despite final form in some predicate cases - Whether final form/closure in two FIRs upon which the ECIR was initially based precludes prosecution under the PMLA and entitlement to bail. - HELD THAT: - The Court accepted the prosecution case that the ECIR was not confined to only the two FIRs in which final form was submitted; there exists a wider matrix of illegal mining cases (including many registered offences in the same area) and ongoing investigations into scheduled offences. The offence of money laundering is continuous in nature and the fact that final form has been submitted in two predicate cases does not foreclose continued investigation or prosecution under PMLA where other linked scheduled offences remain under investigation. On the material before it the Court found a prima facie case of large scale illegal mining and related proceeds being laundered, and therefore the petitioner was not entitled to bail on the ground that predicate offences had been finally closed.

Petition for bail rejected insofar as it rested on the contention that final form in two predicate FIRs precluded PMLA prosecution.

Section 45(1) PMLA - threshold exception for offences involving less than one crore - Whether the exception under Section 45(1) of the PMLA (for offences involving less than one crore) entitled the petitioner to bail. - HELD THAT: - The Court examined the prosecution material indicating freezes and larger transactions through the petitioner's bank accounts and found that the investigation was not confined to the seized amount of approximately Rs.83 lakhs. Given the revealed larger transactions and ongoing probe into extensive illegal mining operations, the plea that Section 45(1) applies because alleged crime proceeds were less than one crore was held unsustainable. The Court therefore declined to treat the Section 45(1) threshold as a ground for bail in the present factual matrix.

Claim of entitlement to bail under Section 45(1) PMLA rejected.

Medical grounds for grant of bail - Whether the petitioner's medical condition justified grant of bail. - HELD THAT: - The Court noted the petitioner's medical complaints and directed that jail authorities provide medical facilities and treatment in accordance with the Jail Manual. However, it found no exceptional or special ground warranting release on bail on health grounds at this stage, observing that the described conditions did not persuade the Court to enlarge the petitioner.

No grant of bail on medical grounds; jail authorities directed to provide treatment as per Jail Manual.

Final Conclusion: Considering the gravity of the allegations, prima facie material of large scale illegal mining and alleged laundering of proceeds, and absence of special grounds on health, the petition for regular bail is rejected.

Scheduled offence - offence of money-laundering - jurisdiction of the Enforcement Directorate to initiate proceedings - threshold monetary value for Part B scheduled offences - provisional attachment and confirmation by Adjudicating Authority

Scheduled offence - threshold monetary value for Part B scheduled offences - jurisdiction of the Enforcement Directorate to initiate proceedings - Whether the Enforcement Directorate had jurisdiction to initiate proceedings and the Special Court to take cognizance under the PMLA in view of the monetary threshold for scheduled offences. - HELD THAT: - The Court examined the definition of scheduled offence and noted that offences under Part B of the Schedule attract the PMLA only if the total value involved is one crore rupees or more. While the predicate charge sheet against the petitioner recorded a lesser amount, the complaint and material before the Court supplied a different picture. The private complaint alleged aggregate proceeds exceeding Rs. 9 crores against all accused, and the petitioner's own voluntary statements recorded under the Act attributed to him receipts totaling Rs. 1,05,66,288/-, which meets the statutory threshold for a Part B scheduled offence. The Adjudicating Authority had confirmed provisional attachment of the petitioner's properties as proceeds of crime and further investigation remained pending as to individual attributes. In these circumstances the Court held that there was no jurisdictional defect in the ED initiating proceedings or in the Special Court taking cognizance; the question of individual culpability and quantification of proceeds is a matter for trial and further investigation. [Paras 8, 9, 10, 11]

The challenge to the Special Court's cognizance on jurisdictional grounds is rejected and there is no warrant for interference at this stage.

Final Conclusion: The petition is dismissed for lack of merit; the Enforcement Directorate had jurisdiction to initiate proceedings and the Special Court rightly took cognizance, subject to outcomes of further investigation and trial.

Condonation of delay - Limitation and condonation principles - Non-suiting on technical grounds versus adjudication on merits - Remand for fresh consideration on merits

Condonation of delay - Limitation and condonation principles - Non-suiting on technical grounds versus adjudication on merits - Whether the delay of 109 days in preferring the appeal to the CESTAT ought to be condoned. - HELD THAT: - The Supreme Court examined the circumstances of the 109-day delay and the conduct of the appellant. Finding no apparent mala fide intention in the delay and observing that the short delay should not result in the appellant being non-suited on a technical ground, the Court exercised its discretionary power to set aside the orders of the High Court and the CESTAT which had refused condonation. The Court emphasised that in these facts it was appropriate to enable the appellant to have the appeal adjudicated on its merits rather than be dismissed for delay.

Delay of 109 days condoned; the impugned orders refusing condonation set aside.

Remand for fresh consideration on merits - Non-suiting on technical grounds versus adjudication on merits - Whether the appeal remitted to the CESTAT should be heard and decided on merits after condonation of delay. - HELD THAT: - Having condoned the delay, the Supreme Court directed that the appeal be placed before the CESTAT for hearing, decision and disposal in accordance with law and on its own merits. The appellate tribunal's earlier refusal to admit the appeal on the ground of delay was set aside so that the substantive contentions in the appeal may be considered afresh by the CESTAT.

Matter remitted to the CESTAT to hear, decide and dispose of the appeal on merits.

Final Conclusion: The appeal is allowed: the Supreme Court condoned the 109-day delay, set aside the orders of the High Court and the CESTAT refusing condonation, and remitted the matter to the CESTAT for adjudication on merits; no order as to costs.

Cosmetic and Plastic Surgery Services - Taxable Service - exclusion for surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma - service tax liability for cosmetic procedures

Cosmetic and Plastic Surgery Services - exclusion for surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma - Taxable Service - service tax liability for cosmetic procedures - Classification of Hair Transplantation as taxable under the category of Cosmetic and Plastic Surgery Services and applicability of the exclusion for restorative surgery. - HELD THAT: - The Tribunal examined whether hair transplantation falls within the exclusion to the definition of taxable service, namely surgeries undertaken to restore or reconstruct anatomy or functions affected by congenital defects, developmental abnormalities, degenerative diseases, injury or trauma. The court held that ordinary hair loss (including androgenetic alopecia) is a common, gradual condition affecting many persons later in life and is not, in general, a congenital defect or a developmental/degenerative disease, injury or trauma. Hair transplantation does not restore body anatomy or function in the sense contemplated by the exclusion; rather it is performed primarily to improve or enhance outward appearance. The Tribunal noted that the procedure is not universally adopted by all affected persons, is often promoted as an enhancement of physical appearance, and that only rare conditions manifesting at birth (for example congenital atrichia or hypotrichosis) could fall within the exclusion. The Board's clarification was relied upon by Revenue but the Tribunal applied the statutory definition and facts of the case to conclude that the appellant's hair transplantation services do not satisfy the restorative surgery exception and therefore fall within the scope of taxable cosmetic and plastic surgery services.

Hair Transplantation is a cosmetic surgery liable to service tax and does not fall within the restorative-surgery exclusion.

Final Conclusion: The impugned order confirming service tax liability and appropriating amounts paid under protest is upheld; the appeals are dismissed.

Renting of immovable property - reverse charge mechanism - service provided by a director to the company - person liable for paying service tax - service tax deposited by the service provider

Renting of immovable property - reverse charge mechanism - service provided by a director to the company - service tax deposited by the service provider - Whether the appellant was liable to pay service tax on reverse charge basis for rent paid to persons who, though directors of the appellant, let out property in their individual capacity. - HELD THAT: - The notifications relied upon impose reverse charge liability where the service is provided by a director of a company to the said company, making the recipient (the company) liable to pay service tax. The undisputed facts show that the premises were owned by the landlords in their individual capacities and rent was collected by them as owners; it was not the case that the properties were owned or let out by them in their capacity as directors of the appellant. Mere fact that the landlords also happened to be directors of the appellant does not convert a transaction entered into by them in their individual capacity into a service provided by them as directors. Further, service tax on the rent had been charged in the invoices raised by the landlords and deposited by them. On these facts the condition precedent for application of the notification (service provided by a director to the company attracting reverse charge on the recipient) is not satisfied, and the Commissioner (Appeals) was in error in holding the appellant liable under reverse charge.

The appellant was not liable to pay service tax under reverse charge on the rent paid to the landlords; the demand confirmed by the Commissioner (Appeals) is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that rent paid to the owners (who also happened to be directors) was not a service provided by them as directors to the company and therefore the reverse charge notifications did not apply; the impugned order is set aside.

Reversal of CENVAT credit amounts to non-availment - Applicability of rule 6 of the CENVAT Credit Rules to common input services - Classification of electrical energy as excisable or exempted goods - Business auxiliary service - Statutory functions and non-taxability of fees

Reversal of CENVAT credit amounts to non-availment - When the appellant reversed and paid back the entire CENVAT credit earlier availed, it amounted to non availment of CENVAT credit and the demand for recovery of such credit could not be sustained. - HELD THAT: - The Tribunal applied the principle in Chandrapur Magnets and following decisions (as reproduced in the impugned reasoning) that reversal of credit already availed operates as non availment. The appellant deposited the amount of credit availed by way of challans and therefore the foundation for a demand to recover the CENVAT credit did not survive. In consequence, the requirement to invoke provisions directed at availed credit did not arise and the recovery of CENVAT credit confirmed by the Commissioner could not be sustained. [Paras 17, 18]

Demand for recovery of CENVAT credit set aside as the credit had been reversed and paid, amounting to non availment.

Applicability of rule 6 of the CENVAT Credit Rules to common input services - Rule 6(3) of the CENVAT Credit Rules, which prescribes options for common input services used for both excisable and exempted products, was not applicable once the appellant had reversed the entire CENVAT credit. - HELD THAT: - The Tribunal observed that rule 6(3) applies where an assessee intends to avail and utilize CENVAT credit attributable to common input services for both taxable and exempted outputs. Since the appellant had already reversed the entire credit (thereby amounting to non availment), the options and liabilities under rule 6(3)-including payment of prescribed percentages-did not arise. Reliance was placed on the Tribunal's earlier decision in Star Agriwarehousing to the same effect. [Paras 19]

Confirmation of demand under rule 6(3) could not be sustained in view of complete reversal of CENVAT credit.

Classification of electrical energy as excisable or exempted goods - Electrical energy is not an excisable good under the Central Excise enactments and therefore cannot be treated as an 'exempted good' for the purposes of rule 6 of the CENVAT Credit Rules. - HELD THAT: - The Tribunal examined the definition of 'excisable goods' and the tariff entry for electrical energy (Chapter Heading 2716 00 00) and held that electrical energy is not specified in the First or Second Schedule as being subject to a duty of excise; the rate column is blank and it is not subject even to a nil rate. The Tribunal also relied upon precedent of the Allahabad High Court holding electrical energy not to be excisable nor an 'exempted good' as defined under the Credit Rules. Consequently, the scheme of rule 6-which addresses credit apportionment between excisable and exempted goods-had no application to electricity in the present facts. [Paras 21, 22, 23]

Electricity is not excisable or an 'exempted good' under the Credit Rules; rule 6 does not apply to the appellant's electricity activities.

Business auxiliary service - Statutory functions and non-taxability of fees - Amounts collected by the appellant as one time accreditation charges, annual accreditation charges and forfeiture of security deposit were not liable to service tax as Business Auxiliary Services where they were collected in discharge of mandatory statutory functions and not for the specified activities under the statutory definition of BAS. - HELD THAT: - The Tribunal analysed the nature of the appellant's role as State Nodal/Designated Agency and the character of charges collected for accreditation and forfeiture. It found that the charges did not fall within the activities enumerated under the definition of Business Auxiliary Service-there was no promotion or marketing of third party goods or services, no customer care services, no production/processing or procurement of goods/services on behalf of claimants. The forfeiture amount was a security deposit consequence and not consideration for a service; the accreditation fees arose in discharge of statutory/regulatory functions. The Tribunal placed reliance on Tribunal and High Court decisions holding that fees collected while discharging statutory functions are not exigible to service tax. [Paras 24, 25, 26]

Demand of service tax on accreditation charges and forfeiture of security deposit set aside; such receipts are not taxable as Business Auxiliary Services.

Final Conclusion: The Commissioner's order dated 22.01.2015 confirming the show cause demand is set aside and Service Tax Appeal No. 51569 of 2015 is allowed; the appeal against rejection of the Voluntary 2013 Scheme declaration is rendered infructuous and disposed of accordingly.

Scientific or technical consultancy service - Intellectual property service - temporary transfer versus permanent transfer of intellectual property - service tax liability on transfer of business as going concern - slump sale

Scientific or technical consultancy service - Intellectual property service - temporary transfer versus permanent transfer of intellectual property - service tax liability on transfer of business as going concern - slump sale - Whether transfer of patents and technical know how as part of sale of the Polymer Division as a going concern amounted to taxable scientific or technical consultancy service or intellectual property service under the Finance Act, 1994. - HELD THAT: - The Tribunal examined the statutory definitions and the factual matrix. The definition of scientific or technical consultancy service requires rendering of advice, consultancy or scientific/technical assistance by a person or institution to another; the revenue did not demonstrate any advice, consultancy or technical assistance rendered by the seller to the buyer. The definition of intellectual property service contemplates either temporary transfer of an intellectual property right or permitting its use or enjoyment; the record does not disclose any temporary transfer or licence. On the facts the entire Polymer Division was transferred as a going concern by way of a lump sum transfer (slump sale) without allocation of values to individual assets. The recorded statement of the seller's manager and the nature of the transaction support that the transfer was a sale of the undertaking (slump sale) and not a provision of services. The Tribunal further noted the concept of slump sale as a transfer for a lump sum consideration without values being assigned to individual assets, and held that transfers of patents and technical know how pursuant to such a sale are not services taxable under the cited service categories. Applying these legal principles to the material facts, the demand of service tax was held unsustainable.

The disputed transfer does not fall within the definitions of scientific or technical consultancy service or intellectual property service; the service tax demand is set aside.

Final Conclusion: The appeal is allowed: the Tribunal set aside the service tax demand, holding that the transfer of the Polymer Division (including patents and technical know how) as a slump sale/going concern did not attract service tax under the cited service categories.

Construction service - residential complex - personal use - exclusion from levy for complexes constructed for personal use - service tax levy - construction for government sponsored housing schemes

Construction service - residential complex - personal use - construction for government sponsored housing schemes - service tax levy - Construction service provided to Surat Municipal Corporation under the Jawaharlal Nehru National Urban Renewal Mission is taxable or not. - HELD THAT: - The Tribunal examined whether construction of residential complexes under JnNURM falls within taxable construction service of a residential complex. Applying the statutory definition of residential complex and the Explanation which treats personal use as including permitting residence by another person on rent or without consideration, the bench held that construction undertaken for the urban poor under the government scheme amounts to personal use and is excluded from the levy. The Tribunal relied on consistent earlier decisions (including Jethanand Arjundas & Sons, Khurana Engineering, Santosh Katiyar and related authorities) which held that residential construction under such government-sponsored schemes is not liable to service tax. On that basis the demand in respect of construction services provided to Surat Municipal Corporation under JnNURM was found unsustainable.

Demand in respect of construction services provided to Surat Municipal Corporation under JnNURM is not sustainable; impugned order set aside and appeal allowed.

Construction service - residential complex - personal use - exclusion from levy for complexes constructed for personal use - service tax levy - Construction service provided to Gujarat State Police Housing Corporation Limited (GSPHCL) for quarters for police personnel is taxable or not. - HELD THAT: - The Tribunal considered whether construction of residential accommodation for police personnel by the appellant falls within taxable construction service. Applying the definition of residential complex and the Explanation excluding complexes constructed by a person engaging another for design/layout where the complex is intended for personal use, the bench followed precedents (notably Sima Engineering, Nithesh Estates, Lanco Tanjore, and C R Patel) which held that residential complexes built for use by an employer or a government entity for its personnel are excluded from levy. The principle that a complex constructed for the personal use of the owner or service recipient (including use by employees or personnel) is not taxable was applied; accordingly the demand in respect of services to GSPHCL was held unsustainable.

Demand in respect of construction services provided to GSPHCL for police quarters is not sustainable; impugned order set aside and appeal allowed.

Final Conclusion: Both categories of demand - construction services provided to Surat Municipal Corporation under JnNURM and to GSPHCL - were held not liable to service tax in view of the exclusion for residential complexes intended for personal use; the impugned order is set aside and the appeal is allowed.

Service tax on gross amount charged - Determination of taxable value - inclusion of rebates and concessions - Application of Rule 3(a) of Service Tax (Determination of Value) Rules, 2006 where value is not ascertainable under Section 67 - Remand for fresh adjudication in view of subsequent tribunal decision

Service tax on gross amount charged - Determination of taxable value - inclusion of rebates and concessions - Application of Rule 3(a) of Service Tax (Determination of Value) Rules, 2006 where value is not ascertainable under Section 67 - Remand for fresh adjudication in view of subsequent tribunal decision - Whether the demands confirmed by the adjudicating authority for the stated periods require reconsideration in light of the tribunal's subsequent decision in M/s Essar Bulk Terminal Limited - HELD THAT: - The Tribunal noted that the impugned orders had confirmed service tax liability on the rebate/concession granted in wharfage charges. The appellant contended that service tax was correctly discharged on the amount actually collected (20% of notified wharfage) and that uncharged portions could not be included in value under Section 67, with Rule 3(a) applying only where value is not ascertainable. However, the Tribunal observed that the issue raises mixed questions of fact and law and that a later tribunal decision in M/s Essar Bulk Terminal Limited (2022) addresses the same controversy. Given this change in circumstances of law, the Tribunal found it appropriate to remit the matters to the adjudicating authority for fresh consideration, directing that reasonable opportunity of hearing be granted and that the Essar Bulk Terminal Ltd. decision and corresponding facts be taken into account. All issues were expressly kept open for determination by the adjudicating authority on remand. [Paras 8, 9, 10]

Matter remanded to the adjudicating authority for fresh adjudication after granting opportunity of hearing and in view of the tribunal's decision in M/s Essar Bulk Terminal Ltd.; all issues kept open and the appeals are allowed by way of remand.

Final Conclusion: The Tribunal remitted the appeals to the adjudicating authority for fresh consideration and decision in light of the subsequent tribunal decision in M/s Essar Bulk Terminal Ltd., after affording both parties a reasonable opportunity of hearing; all issues were left open and the appeals were allowed by way of remand.

Consultancy services incidental to transmission and distribution of electricity - liquidated damages / penalty not exigible to service tax - manpower recruitment / supply agency services taxable - legal services taxable - bundled services as contemplated under section 66F(3) of the Finance Act

Consultancy services incidental to transmission and distribution of electricity - bundled services as contemplated under section 66F(3) of the Finance Act - Demand of service tax confirmed on amounts collected as consultancy charges set aside. - HELD THAT: - The Tribunal held that the appellant's consultancy activities were incidental to its core transmission activities and therefore fall within services related to transmission and distribution of electricity. Relying on earlier Division Bench reasoning and the Gujarat High Court decision cited therein, the Tribunal treated such ancillary activities as bundled with the exempted service of transmission and distribution of electricity and accordingly not exigible to service tax. The demand confirmed by the Commissioner on consultancy charges could not be sustained and was set aside. [Paras 11]

Demand on consultancy charges cancelled.

Liquidated damages / penalty not exigible to service tax - Demand of service tax on amounts collected as liquidated damages or penalties set aside. - HELD THAT: - The Tribunal followed its earlier Division Bench conclusion, after referring to precedent accepted by the Board, that amounts recovered as liquidated damages or penalties for breach of contract are not subject to service tax. Applying that reasoning, the confirmation of demand by the Commissioner on liquidated damages/penalties was held unsustainable and set aside. [Paras 12]

Demand on liquidated damages/penalties cancelled.

Manpower recruitment / supply agency services taxable - Demand of service tax on manpower recruitment/supply services upheld. - HELD THAT: - The Tribunal accepted the Commissioner's finding that the appellant failed to substantiate that purported service providers were independent entities discharging their own liabilities. In the absence of documentary proof from the appellant to support its contention, there was no error in confirming the demand relating to manpower supply services. [Paras 13]

Demand on manpower recruitment/supply services upheld.

Legal services taxable - Demand of service tax on legal services upheld. - HELD THAT: - The Tribunal noted that the appellant did not demonstrate that amounts charged as legal fees included stamp duty or otherwise establish a basis to exclude such receipts from service tax. Given the lack of substantiation, the Commissioner's confirmation of demand in respect of legal services was sustained. [Paras 14]

Demand on legal services upheld.

Final Conclusion: The appeal is allowed in part: the Commissioner's demand insofar as it relates to consultancy charges and liquidated damages/penalties is set aside, while the demands in respect of manpower recruitment/supply services and legal services are upheld; the impugned order dated 30.11.2018 is modified accordingly.

Extended period of limitation under the proviso to section 73(1) of the Finance Act - suppression of facts with intent to evade tax - rebuttable presumption as to absence of mala fide in government companies - prohibition on taxing a single activity under multiple service heads - requirement of clarity in show cause notice to identify the taxable service (section 65A context)

Extended period of limitation under the proviso to section 73(1) of the Finance Act - suppression of facts with intent to evade tax - rebuttable presumption as to absence of mala fide in government companies - Invocation of the five-year extended period of limitation under the proviso to section 73(1) could not be sustained in the present case. - HELD THAT: - The Tribunal held that the proviso to section 73(1) requires deliberate suppression of facts with intent to evade payment of service tax; mere omission or failure to pay is insufficient. Precedents establish that suppression must be wilful and deliberate. When the assessee is a government company, there is a rebuttable presumption against existence of the proviso's ingredients; the Department must rebut this with specific evidence. The show cause notice and the adjudicating order only alleged non-disclosure in returns and reliance on departmental investigation but did not produce evidence of deliberate suppression or mala fide intent to evade tax. Consequently, the extended five-year period could not be invoked and the demand confirmed solely on that basis was unsustainable. [Paras 20, 21, 22, 23]

Extended period of limitation under the proviso to section 73(1) cannot be invoked on the facts; the show cause did not rebut the rebuttable presumption applicable to a government company.

Prohibition on taxing a single activity under multiple service heads - requirement of clarity in show cause notice to identify the taxable service (section 65A context) - Demand and confirmation of service tax under two distinct service categories for the same single activity is unsustainable where the show cause notice and order fail to identify clearly which service was intended to be taxed. - HELD THAT: - The Tribunal relied on earlier decisions which require the show cause notice to clearly specify the particular category of service sought to be taxed; absence of such clarity causes confusion and infirmity in the adjudication. The show cause notice in this case proposed demand under both 'BSS' and 'OIDARS' for the same fees and the impugned order confirmed both classifications. As the show cause and order do not distinctly and intelligibly indicate which single service-head was being invoked, the demand cannot be sustained on dual classification. [Paras 24, 25, 26, 27, 28]

Demand confirmed under two different service heads for the same activity is invalid for want of requisite clarity in the show cause notice and order.

Final Conclusion: For the reasons given, the order dated 22.05.2017 confirming the demand is set aside and the appeal is allowed.

Eligibility for Cenvat credit on waste/sludge removal as an integral part of manufacturing - denial of credit for invoices not bearing registered premises address - procedural/technical lapse - exclusion of services used for construction/fabrication of building from input service - reverse charge mechanism and prohibition of double taxation where service provider has paid tax - taxability of fees/charges paid to government authorities as consideration for services - invocation of extended period of limitation - requirement of suppression or positive action - remand for quantification to original authority

Eligibility for Cenvat credit on waste/sludge removal as an integral part of manufacturing - Appellant entitled to Cenvat credit on sludge/waste removal services - HELD THAT: - The Tribunal accepted the appellant's contention that disposal of waste generated out of manufacturing is a statutory obligation and an integral part of the manufacturing process. Relying on the Tribunal's earlier decision in Lupin Ltd., transportation and clearance of waste were held to be activities of the manufacturing business and therefore qualify as input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant's claim for credit on the sludge/waste removal service is allowed. [Paras 21]

Credit on sludge/waste removal service allowed

Denial of credit for invoices not bearing registered premises address - procedural/technical lapse - Appellant entitled to Cenvat credit despite invoices bearing head office address instead of registered premises - HELD THAT: - The Tribunal held that the invoices in question were issued inadvertently with the head office address though services were availed at Baddi. Following earlier Tribunal decisions, substantial benefit cannot be denied on mere technical or procedural lapses in invoice particulars. On that basis the appellant is entitled to credit for services received from D.K. Chajjar & Co. [Paras 22, 23]

Credit allowed despite invoice address discrepancy

Exclusion of services used for construction/fabrication of building from input service - Appellant not entitled to Cenvat credit for services held to be for fabrication/construction of building structure - HELD THAT: - The department's case that services from Chhtrapati Engineering and Sai Engineering Works related to fabrication/construction of plant building falls within the exclusion to the definition of input service. The appellant failed to produce material or a chartered engineer's certificate to demonstrate that the services were for repair and maintenance of plant and machinery. On this absence of evidence the Tribunal held the services are excluded and disallowed credit. [Paras 24]

Credit disallowed for services used in building construction/fabrication

Reverse charge mechanism and prohibition of double taxation where service provider has paid tax - Demand under reverse charge for services where the service provider has already paid tax is not sustainable - HELD THAT: - The Tribunal found that Sai Enterprises collected and deposited service tax on the full value to the Government. Relying on precedents, it held that demand from the recipient in such circumstances would amount to double taxation and is not maintainable even if the liability prima facie lies under reverse charge. Accordingly, demand under reverse charge in respect of such services cannot be sustained. [Paras 25]

Reverse charge demand unsustainable where provider has paid tax

Taxability of fees/charges paid to government authorities as consideration for services - Fees paid to government departments are taxable under service tax and not eligible for reversal; demand sustained - HELD THAT: - Applying Circular No.192/02/2016 ST (13.4.2016), the Tribunal accepted the Revenue's position that payments to Government or local authorities in return for an activity constitute consideration for a service and are liable to service tax. The appellant failed to explain why the fees were paid if not for some activity in return. Therefore, the demand in respect of fees paid to government departments is sustained. [Paras 26]

Demand sustained for fees paid to government departments

Invocation of extended period of limitation - requirement of suppression or positive action - Extended period cannot be invoked in absence of suppression, positive action or willful misstatement; demand restricted to normal period - HELD THAT: - Relying on Supreme Court authority and consistent Tribunal precedents, the Tribunal held that invocation of the extended period requires positive action, suppression of facts or willful misstatement with intent to evade duty. Audit objections alone do not justify the larger period. Consequently, the demand is confined to the normal limitation period except insofar as the appellant accepted certain liabilities. [Paras 27, 28, 29]

Extended period not invoked; demand restricted to normal period

Remand for quantification to original authority - Matter remanded to original authority for quantification of duty for the normal period - HELD THAT: - Having allowed or disallowed credit on specific services and restricted the demand to the normal period, the Tribunal remanded the matter to the original authority to compute and quantify the duty payable for the normal period. Penalties under the cited provisions were dropped in the circumstances. [Paras 29, 30]

Appeal disposed of by remand for quantification; penalties dropped

Final Conclusion: The appeal is allowed in part: Cenvat credit on sludge/waste removal and for invoices bearing head office address is permitted; credit is denied for services found to be for construction/fabrication of building; reverse charge demand is unsustainable where the provider has paid tax; fees paid to government departments are taxable and demand in respect thereof is sustained; extended period cannot be invoked and the demand is confined to the normal period. Penalties are dropped and the matter is remanded to the original authority for quantification for the normal period.

Entitlement to interest on delayed refund from date of deposit till date of payment - interest at 12% per annum on delayed refund - amounts deposited during investigation treated as deposit under protest - judicial discipline to follow binding decision of jurisdictional High Court - pari-materia treatment of provisions relating to interest on refunds

Entitlement to interest on delayed refund from date of deposit till date of payment - amounts deposited during investigation treated as deposit under protest - Appellant entitled to interest on the refund of amounts deposited during investigation - HELD THAT: - The Tribunal considered whether the refund sanctioned to the appellant for amounts deposited during investigation attracts interest. Applying consistent precedents of this Tribunal and following the binding decision of the Punjab and Haryana High Court in Riba Textiles, the Bench held that amounts deposited while adjudication or investigation is pending are in the nature of deposits made under protest and therefore attract interest. The Tribunal rejected the Revenue's contention that the deposits were voluntary and distinguished contrary decisions, noting judicial authority treating such deposits as protest deposits and directing interest. On that basis the appellant was held entitled to interest on the refunded amount from the date of deposit until actual payment.

Interest on the refund is payable; appellant entitled to interest for amounts deposited during investigation from date of deposit until date of payment.

Interest at 12% per annum on delayed refund - judicial discipline to follow binding decision of jurisdictional High Court - pari-materia treatment of provisions relating to interest on refunds - Rate of interest on delayed refund fixed at 12% per annum - HELD THAT: - The Tribunal examined the appropriate rate to be applied to the delayed refund. Relying on precedent (including Riba Textiles and Parle Agro) and the reasoning that the relevant provisions are pari-materia with other refund provisions where higher judicial authority fixed the rate, the Bench held that 12% per annum is the appropriate and consistent rate to be applied from the date of deposit till the date of payment. The Revenue's submissions favouring a lower statutory rate were rejected in light of Tribunal and High Court decisions holding 12% to be appropriate in such circumstances.

Interest on the delayed refund is to be calculated and paid at 12% per annum from the date of deposit till the date of payment.

Final Conclusion: Impugned order denying interest is set aside; appeal allowed and refundantitled interest directed to be paid at 12% per annum from date of deposit until payment.

Service Tax on construction of residential complexes - Works Contract Service - Service simpliciter (construction of complex services) - Taxability prior to 01.07.2010 - Larsen & Toubro precedent

Works Contract Service - Taxability prior to 01.07.2010 - Service Tax on construction of residential complexes - Demand of Service Tax under Works Contract Service for the period October 2007 to April 2010 is unsustainable. - HELD THAT: - The Tribunal considered the consistent view of CESTAT Benches, as reflected in the decision extracted from M/s. Pragati Edifice Pvt. Ltd., and the judicial approach following the Apex Court in Larsen & Toubro, that construction of residential complexes was not subject to Service Tax prior to 01.07.2010 whether treated as a service simpliciter or as a composite works contract. The period in dispute falls wholly within October 2007 to April 2010, which is before 01.07.2010. No distinguishing or contrary order was placed on record by the Revenue. Applying the cited precedents and the principle that no Service Tax could be levied on construction of residential complexes prior to 01.07.2010, the Tribunal held that the demand under Works Contract Service could not be sustained and set aside the impugned adjudication. [Paras 7, 8, 9]

The demand of Service Tax under Works Contract Service for October 2007 to April 2010 is set aside.

Final Conclusion: The appeal is allowed; the impugned order is set aside and consequential benefits, if any, shall follow as per law.

Limitation under Section 73(1) - time-barred demand - knowledge of the revenue from returns and correspondence - service tax on Commercial or Industrial Construction Service - abatement - classification as works contract

Limitation under Section 73(1) - time-barred demand - knowledge of the revenue from returns and correspondence - The demand for differential service tax for the period 16.06.2005 to 30.09.2007 is time-barred and liable to be set aside. - HELD THAT: - The Tribunal found that the Department had actual knowledge of the appellant's mode of charging tax (abatement @67% till 31.05.2007 and payment on gross @2% thereafter) from the ST-3 returns and the Superintendent's letter dated 17.01.2008 which pointed out short payment and sought details of abatement. Those facts were on record and were undisputed. Consequently the extended period of limitation was not available to the revenue. The show cause notice was issued on 02.03.2010, which was beyond the one-year normal limitation period under Section 73(1) calculated from the time the Department had requisite information. There was no finding of suppression by the appellant that would justify invoking a longer period. In view of these circumstances the demand was held to be barred by limitation and could not be sustained. [Paras 15, 16]

Impugned demand set aside as time barred; appeal allowed for the assessee and revenue's appeal dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeal and set aside the confirmed demand (period 16.06.2005 to 30.09.2007) on the ground that the show cause notice issued on 02.03.2010 was time barred, the Department having had knowledge of the relevant facts from returns and correspondence; consequential relief granted and the revenue's cross appeal dismissed.

Compliance with Rule 6(2) of the Cenvat Credit Rules, 2004 - validity and sufficiency of a Chartered Accountant's certificate for determining proportionate Cenvat credit - burden of proof on revenue to demonstrate incorrectness of reversal/calculation of credit - condonation of delay - relevance of precedent decision pending adjudication (Tiara Advertising) to departmental appeals

Condonation of delay - Application for condonation of delay in filing the appeals - HELD THAT: - The Court considered the affidavit in support of the application for condonation and held that sufficient cause was shown for the delay of 137 days in filing the appeals. The application for condonation was allowed and the delay in filing the appeals was condoned.

Delay of 137 days in filing the appeals is condoned and the appeals are entertained.

Compliance with Rule 6(2) of the Cenvat Credit Rules, 2004 - validity and sufficiency of a Chartered Accountant's certificate for determining proportionate Cenvat credit - burden of proof on revenue to demonstrate incorrectness of reversal/calculation of credit - Whether the assessee fulfilled obligations under Rule 6(2) by taking only 85% credit on common input services based on the Chartered Accountant's certificate - HELD THAT: - The Court examined the factual findings of the Tribunal which accepted the Chartered Accountant's certificate showing that the assessee did not exceed 15% exempted clearances and had taken credit on common inputs/input services only to the extent of 85%. The Commissioner had earlier concluded that non-availment up to 15% equated to attributable use for exempted goods and that payment (where applicable) was within due date. The Tribunal found that the revenue produced no evidence or alternative calculation to show the certificate's figures were incorrect or that proportionate credit was wrongly reversed. Given the absence of contrary evidence and the certificate produced by the assessee, the Tribunal's factual conclusion that the assessee satisfied Rule 6(2) was held to be correct. The Court observed that subsequent departmental communications indicate the Department is examining the certificate's contents, which implicitly accepts the Tribunal's answer to this issue.

The Tribunal rightly held that the assessee complied with Rule 6(2) by taking only 85% credit; question decided in favour of the assessee.

Relevance of precedent decision pending adjudication (Tiara Advertising) to departmental appeals - Whether the Tribunal ought to have decided appeals by relying on Tiara Advertising when that decision is under challenge before the Supreme Court - HELD THAT: - The Court held that the question of relevance of Tiara Advertising arises only if question (c) in the Tribunal (compliance with Rule 6(2)) is decided for the revenue. Since question (c) was decided against the revenue on facts and accepted the CA certificate, the Court found it unnecessary to examine the effect of the Tiara Advertising judgment in these appeals. Consequently, the Tribunal's reliance on authorities was not required to be addressed in the present proceedings.

Effect of Tiara Advertising not gone into as unnecessary once question of factual compliance under Rule 6(2) is answered against the revenue.

Scope of remand for de novo consideration - Whether the Commissioner in remand proceedings acted within scope in examining compliance under Rule 6(2) and dropping proceedings - HELD THAT: - The factual sequence showed an earlier remand, followed by the Commissioner conducting de novo consideration and dropping proceedings after concluding compliance with Rule 6 based on the certificate and related factual material. The Tribunal re-examined the factual record and upheld the Commissioner's conclusion. Given the Tribunal's factual findings and the absence of contrary evidence from the revenue, the Court answered issues arising from remand against the revenue.

Commissioner's de novo examination and consequent dropping of proceedings was upheld by the Tribunal and the Court answered related questions against the revenue.

Final Conclusion: The appeals filed by the revenue are dismissed. The Tribunal correctly found on the facts that the assessee complied with Rule 6(2) of the Cenvat Credit Rules, 2004 based on the Chartered Accountant's certificate and the absence of contrary departmental proof; substantial questions (a), (b) and (d) are answered against the revenue, question (e) is left open, and connected stay applications stand closed.

Liability of scrap or waste generated in the course of manufacture to central excise duty - treatment of scrap/waste as incidental by-product not exigible to excise duty - interpretation of Section 2(f) and classification of by-products in excise law - precedential effect of Supreme Court ruling upholding non-exigibility of scrap (UOI v. Hindalco)

Liability of scrap or waste generated in the course of manufacture to central excise duty - treatment of scrap/waste as incidental by-product not exigible to excise duty - Scrap generated during the process of manufacture is not liable to excise duty. - HELD THAT: - The Tribunal applied the binding precedent in which the High Court of Bombay's view that scrap and waste emerging incidentally during manufacture are not exigible to excise duty was upheld by the Supreme Court. The Bench noted that such scrap constitutes by-products or waste arising in the course of manufacturing other excisable goods and therefore does not attract central excise. In consequence, the departmental demand for duty on scrap cleared by the assessee could not be sustained in view of the settled law as affirmed by the Supreme Court. [Paras 10]

Demand of excise duty on scrap generated during manufacture set aside; impugned order quashed.

Final Conclusion: Appeal allowed; the confirmed demand for excise duty on scrap cannot be sustained in view of the Supreme Court's decision upholding non-exigibility of waste/scrap generated in the course of manufacture and the impugned order is set aside with consequential reliefs as per law.

CENVAT credit on inputs used for foundation of plant and machinery - Chartered Engineer's certificate

CENVAT credit on inputs used for foundation of plant and machinery - Chartered Engineer's certificate - Entitlement to CENVAT credit on cement, MS angles, channels, beams, bars and similar items used for foundation and fabrication of plant and machinery in the factory stood established on the basis of the revised Chartered Engineer's certificate. - HELD THAT: - The Tribunal noted that, in the earlier round, the matter had been remanded only for addressing the Chartered Engineer's certificate regarding consumption of the materials for fabrication of silos, without any objection in principle to the admissibility of credit on such goods. On examining the revised certificate and its annexure, the Tribunal found that it gave a more elaborate, plant-and-machinery-wise quantification of the materials and showed the actual purpose and location of consumption. Since the certificate established that the goods were used for capital goods in the factory, there was no reason to deny the credit. [Paras 4, 5]

The denial of CENVAT credit was set aside and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal held that the only matter left for verification in the remanded proceedings was the Chartered Engineer's certification of consumption of the materials, and the revised certificate satisfactorily established their use for capital goods in the factory. The denial of CENVAT credit was therefore set aside and the appeal was allowed with consequential relief.

Prescribed period under Section 34(3) of the Arbitration and Conciliation Act, 1996 - statutory condonable period / further period of thirty days but not thereafter - period of limitation (prescribed period) as defined in Section 2(j) of the Limitation Act, 1963 - expiry of prescribed period when court is closed - Section 4 of the Limitation Act, 1963 - computation of time when court is closed - Section 10 of the General Clauses Act, 1897 - express exclusion of Limitation Act provisions by proviso to Section 34(3) - application of the Limitation Act to arbitration proceedings (Section 43(1) of the Arbitration Act)

Prescribed period under Section 34(3) of the Arbitration and Conciliation Act, 1996 - period of limitation (prescribed period) as defined in Section 2(j) of the Limitation Act, 1963 - expiry of prescribed period when court is closed - Section 4 of the Limitation Act, 1963 - Whether the benefit of Section 4 of the Limitation Act, 1963 is available when the discretionary 30 day condonable period under the proviso to Section 34(3) falls on a day when the court is closed. - HELD THAT: - The Court held that the term "prescribed period" in Section 4 of the Limitation Act denotes the period of limitation as defined by Section 2(j). The three month timeline in Section 34(3) is the "prescribed period" (period of limitation); the further 30 day period in the proviso is a discretionary condonable period and is not part of the period of limitation. Consequently, Section 4, which preserves rights when the prescribed period expires on a day the court is closed, applies only to the statutory period of limitation and does not extend to the discretionary 30 day period. The decision in Assam Urban was held to be directly on point and determinative; therefore, where the condonable period expires during vacation, filing on reopening does not attract Section 4 in respect of that discretionary period. [Paras 7, 8, 11]

Section 4 of the Limitation Act, 1963 does not apply to the discretionary 30 day condonable period in proviso to Section 34(3); the benefit of Section 4 is available only in respect of the prescribed period of limitation.

Computation of time when court is closed - Section 10 of the General Clauses Act, 1897 - express exclusion of Section 10 by proviso where the Limitation Act applies - application of the Limitation Act to arbitration proceedings (Section 43(1) of the Arbitration Act) - Whether Section 10 of the General Clauses Act, 1897 can be relied upon to permit filing on reopening when the condonable period under Section 34(3) expires during court vacation. - HELD THAT: - The Court rejected the contention that Section 10 applies independently to fill any alleged vacuum. Section 10 contains a proviso excluding its application to acts or proceedings to which the Indian Limitation Act applies; by virtue of Section 43(1) of the Arbitration Act and the definition of "period of limitation," the Limitation Act applies to arbitration proceedings save to the extent expressly excluded. Given that the Limitation Act governs the prescribed period and that the discretionary 30 day period is not a period of limitation, Section 10 cannot be invoked to extend the discretionary period when the Limitation Act applies; moreover, the scheme of Section 34(3) (including the phrase "but not thereafter") evidences an express exclusion of wider indulgences. [Paras 9]

Section 10 of the General Clauses Act, 1897 is not available to extend or salvage the discretionary 30 day condonable period under Section 34(3) where the Limitation Act applies; Section 10 is excluded by its proviso in such proceedings.

Final Conclusion: Applying the binding precedent in Assam Urban, the Court dismissed the appeal: the trial Court and High Court were right to refuse condonation where the Section 34(3) condonable period expired during court vacation and the petition was filed on reopening; neither Section 4 of the Limitation Act nor Section 10 of the General Clauses Act aids extension of the discretionary 30 day period.

Rejection of plaint under Order VII Rule 11 of the Code of Civil Procedure - right to institute fresh suit under Order VII Rule 13 of the Code of Civil Procedure - mixed question of fact and law - trial on merits - power under Order VII Rule 11 to be exercised sparingly - plaint not to be rejected on merits

Rejection of plaint under Order VII Rule 11 of the Code of Civil Procedure - mixed question of fact and law - trial on merits - right to institute fresh suit under Order VII Rule 13 of the Code of Civil Procedure - power under Order VII Rule 11 to be exercised sparingly - Validity of the Trial Court's order rejecting the plaint under Order VII Rule 11 of CPC and whether the suit should have been tried on merits. - HELD THAT: - The Trial Court rejected the plaint on limitation grounds and by relying on the earlier partition suit, without adjudicating the mixed questions of fact and law raised by the parties. Where determination involves mixed questions of fact and law, it is preferable to frame issues and try the suit rather than reject the plaint summarily under Order VII Rule 11. Order VII Rule 11 permits rejection only on specific technical grounds and should be exercised sparingly; it is not a provision for deciding merits. Order VII Rule 13 preserves the plaintiff's entitlement to present a fresh plaint where rejection occurred for such defects. The Court held that the plaint as a whole must be read and a mere infirmity in pleading or disputed facts do not justify rejection on merits under Rule 11. Given the factual complexity and the earlier court's finding of title dispute, the matter required adjudication on merits and could not be finally disposed of by an interlocutory rejection.

The order rejecting the plaint under Order VII Rule 11 is set aside and the suit is to be adjudicated on merits.

Final Conclusion: The decree rejecting the plaint dated 24.03.2022 is set aside; the appeal is allowed and the plaintiffs' suit shall proceed to be tried on merits. No order as to costs.